The following items were the
subject of a Form 12b-25 and
are included herein:Items 6,
7, 8 and 14(a)(1).
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(mark one)
* Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended August 31, 1997
Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
____________________
Commission file number: 0-21192
____________________
CAMPO ELECTRONICS, APPLIANCES AND COMPUTERS, INC.
(Exact name of registrant as specified in its charter)
Louisiana 72-0721367
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
109 Northpark Blvd., Covington, Louisiana 70433
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (504) 867-5000
____________________
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, $.10 par value
(Title of class)
____________________
Indicate by check mark whether the Registrant(1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the Registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No ______
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of Registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. _____
____________________
The aggregate market value of the voting stock held by nonaffiliates
(affiliates being considered, for purposes of this calculation only,
directors, executive officers and 5% shareholders) of the Registrant
as of November 25, 1997 was approximately $4,098,985.
____________________
The number of shares of the Registrant's Common Stock, $.10 par
value per share outstanding, as of November 28, 1997 was 5,766,906.
ITEM 6. SELECTED FINANCIAL AND OPERATING DATA
(In thousands, except per share amounts and operating
data)
The following statement of operations and balance sheet data for
fiscal 1993 through fiscal 1997 are derived from the Company's
audited financial statements, which were audited by Coopers & Lybrand
L.L.P., independent certified public accountants. The data set forth
below should be read in conjunction with the financial statements of
the Company and the notes thereto included under Item 8 of this Form
10-K and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included under Item 7 of this Form 10-K.
<TABLE>
<CAPTION>
Years Ended August 31,
<S> <C> <C> <C> <C> <C>
1997 1996 1995 1994 1993
Statement of Operations Data:(1)
Net sales $ 242,278 $ 294,967 $ 294,620 $ 194,621 $ 101,954
Cost of sales 202,501 232,183 232,843 147,813 76,821
Gross profit 39,777 62,784 61,777 46,808 25,133
Selling, general and administrative
expenses 58,005 62,189 61,972 40,367 21,555
Professional services(2) 376 879 ----- ----- -----
Severance costs(2) 410 340 ----- ----- -----
Merger costs ----- ----- 303 ----- -----
--------- --------- --------- --------- ---------
Operating income (loss) (19,014) (624) (498) 6,441 3,578
Other income (expense):
Interest expense (2,447) (2,100) (1,399) (299) (556)
Interest income 92 137 95 125 179
Other, net 212 445 503 409 255
--------- --------- --------- --------- ---------
(2,143) (1,518) (801) 235 (122)
--------- --------- --------- --------- ---------
Income (loss) before income tax and
cumulative effect of change in
accounting principle (21,157) (2,142) (1,299) 6,676 3,456
Income (expense) from
reorganization items:
Gain (loss) on disposal of
assets(3) (5,338) ----- ----- ----- -----
Lease rejection reserve on
closed stores(3) (3,100) ----- ----- ----- -----
Write down of impaired
goodwill(3) (640) ----- ----- ----- -----
Severance costs(4) (351) ----- ----- ----- -----
Restructuring(5) (957) ----- ----- ----- -----
---------- --------- --------- --------- ---------
(10,386) ----- ----- ----- -----
---------- --------- --------- --------- ---------
Income tax expense (benefit) 2,690 (754) (256) 2,519 815
---------- --------- --------- --------- ---------
Income (loss) before cumulative
effect of change in accounting
principle (34,233) (1,388) (1,043) 4,157 2,641
Cumulative effect of change in
accounting principle ----- ----- (1,892) ----- -----
---------- --------- --------- --------- ---------
Net income (loss) $ (34,233) $ (1,388) $ (2,935) $ 4,157 $ 2,641
---------- --------- --------- --------- ---------
---------- --------- --------- --------- ---------
Pro Forma Statement of Operations Data:
Net income (loss) as reported $ (34,233) $ (1,388) $ (2,935) $ 4,157 $ 2,641
Charge in lieu of federal and
state income tax(6) ----- ----- ----- ----- 407
Retroactive application of the
straight-line method ----- ----- ----- 422 357
Cumulative effect of change in
accounting principle ----- ----- (1,892) ----- -----
---------- --------- --------- --------- ---------
Reported pro forma net income(7) $ (34,233) $ (1,388) $ (1,043) $ 3,735 $ 1,877
---------- --------- --------- --------- ---------
---------- --------- --------- --------- ---------
Per Share Data:
Net income (loss) before cumulative
effect of change in accounting
principle $ (6.13) $ (0.25) $ (0.19) $ 0.91 $ 0.80
--------- --------- --------- --------- ---------
Cumulative effect of change in
accounting principle ----- ----- (0.34) ----- -----
--------- --------- --------- --------- ---------
Net income (loss) $ (6.13) $ (0.25) $ (0.53) $ 0.91 $ 0.80
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Pro forma net income (loss) $ ----- $ ----- $ (0.19) $ 0.81 $ 0.57
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Weighted average number of common
shares outstanding 5,584,509 5,566,906 5,565,942 4,590,391 3,306,069
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Selected Operating Data:
Store data(8)
Stores open at beginning of
period 31 31 21 22 12
Stores opened or acquired 0 0 14 6 13
Stores closed or replaced (11) 0 (4) (7) (3)
--------- --------- --------- --------- ---------
Stores open at end of period 20 31 31 21 22
Average sales for stores open for
entire year period(9) $ 8,944 $ 9,334 $ 10,419 $ 9,001 $ 7,892
Percentage change in comparable
sales(9) (14.1%) (13.6%) 5.1% 28.5% 18.4%
Approximate total square feet of
store selling space at period end 309,210 491,000 491,000 252,474 245,184
Sales per weighted average selling
square foot(9) $ 532 $ 590 $ 740 $ 739 $ 658
Balance Sheet Data:
Working capital $ 4,592 $ 15,824 $ 18,535 $ 12,594 $ 8,478
Total assets $ 74,132 $ 119,034 $ 135,710 $ 97,122 $ 71,396
Long-term debt, less current portion $ 18,368(10) $18,191 $ 20,257 $ 982 $ 3,792
Shareholders'equity $ 375 $ 34,129 $ 35,505 $ 38,437 $ 17,775
Dividends paid (11) ----- ----- ----- ----- $ 1,247
</TABLE>
__________
(1) Prior to February 1993, the Company operated as a corporation
taxable as an S Corporation under the Internal Revenue Code.
The Company terminated its S Corporation status immediately
prior to the effective date of its February 1993 initial public
offering. Net income per common share prior to the S
Corporation rescission is not included because management
believes such information is not relevant in light of the
Company's termination of its S Corporation status.
(2) During fiscal 1996, the Company hired a consulting firm to
evaluate and refine its storeline operations. The costs
associated with these consulting services of $879,000 were
expensed during fiscal 1996. Also, in July 1996, two of the
Company's executives resigned from the Company to pursue other
opportunities. The severance packages associated with these
resignations of $340,000 were expensed in July 1996. The
impacts of these costs (net of tax) on net income per share of
the Company for the fiscal year ended August 31, 1996 were
decreases of $0.10 and $0.04 per share, respectively.
Professional services expensed in fiscal 1997 were $376,000.
This includes $303,000 of services related to the acquisition
of new computer software (the implementation of which has been
postponed). Also, consultants were hired to assist in financial
planning for the Company and these charges amounted to $73,000.
In fiscal 1997, severance was paid to an executive of the
Company who resigned and taxable fringe benefits were paid
to another executive who resigned during fiscal 1996. These
payments totaled $410,000 and were expensed in fiscal 1997. The
impacts of these costs on net loss per share of the Company for
the fiscal year ended August 31, 1997 were ($0.07) and ($0.07)
per share, respectively.
(3) As part of the Chapter 11 reorganization, the Company closed
eleven stores and one warehouse during fiscal 1997 and closed
another warehouse in October 1997. A reserve was established to
provide for costs associated with the rejection of leases for
the closed locations of $3,100,000. Loss on the disposal of
assets held at these locations was $5,338,000. These items were
expensed during the fiscal year ended August 31, 1997. It was
determined that goodwill for two locations that were part
of the Company's acquisition of Shreveport Refrigeration, Inc.
was impaired and a write down of goodwill in the amount of
$640,000 was expensed during fiscal 1997. The impacts of these
costs on net loss per share of the Company for the fiscal year
ended August 31, 1997 were ($0.56), ($0.96) and ($0.11) per
share, respectively.
(4) During fiscal 1997, two of the Company's executives resigned
from the Company as part of the reorganization. The severance
packages paid to these executives totaled $114,000 and were
expensed in fiscal 1997. Also, due to the closure of locations,
severance packages paid to the employees at those locations
totaled $237,000 and were expensed in fiscal 1997. The impacts
of these costs on net loss per share of the Company for fiscal
year ended August 31, 1997 were ($0.02) and ($0.04) per share,
respectively.
(5) The Company incurred increased consulting fees, legal fees and
fees associated with the closing of locations. These costs
amounted to $957,000 and were expensed during fiscal 1997. The
impact of these costs on the net loss per share of the Company
for fiscal year ended August 31, 1997 was ($0.17) per share.
(6) Reflects the income taxes, at the applicable statutory rates,
for which provision would have been made if the Company had been
a C Corporation for all periods presented.
(7) Pro forma net income per common share for fiscal 1993 after
giving effect to the acquisition of Shreveport Refrigeration,
Inc. and retirement of the promissory note due the former
majority shareholder was $2,816,863 and $0.79, respectively.
(8) The Company closed 25 stores and opened 24 new Campo Concept
stores during fiscal 1993, 1994, 1995 and 1997. Also reflects
the purchase of nine locations of Shreveport Refrigeration, Inc.
in July 1993 and the September 1993 closing of one of these
locations. Includes the March 1993 opening of a temporary site
in Baton Rouge, Louisiana while awaiting the completion of a
Campo Concept store opened in October 1993.
(9) Includes comparisons of new Campo Concept stores to previously
existing Company stores replaced by such Campo Concept stores.
The Company's comparable store sales calculations include the
effects of certain non-retail sales to commercial buyers and
beginning in 1993, include net sales of extended warranty plans.
If non-retail sales were excluded, the percentage change in
comparable store sales for fiscal 1994 and 1993 would have been
22.1% and 16.8%, respectively. Management believes that prior
to fiscal 1993, non-retail sales did not have a significant
impact on comparable store sales increases. Sales from the
Company's three Sound Trek locations that were closed in
September 1993 and January 1994 have been excluded from the
computation of comparable store sales beginning in the quarter
in which they were closed. Beginning in fiscal 1995, comparable
store sales were calculated using same store format and retail
sales only and begin comparisons in the store's fifteenth month
of operation.
(10) See notes 6 and 7 of the financial statements.
(11) Reflects payments made to shareholders for payment of income
taxes prior to recission of Subchapter S election in conjunction
with the Company's initial public offering.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following should be read in conjunction with the "Selected
Financial and Operating Data" and the notes thereto and the financial
statements and notes thereto of the Company appearing elsewhere
herein.
Fiscal 1997 Overview
Net sales during fiscal 1997 showed an 17.9% decrease from fiscal
1996 levels, and the Company experienced comparable store sales
declines of 14.1% during fiscal 1997 as compared to fiscal 1996,
continuing a trend that began in the third quarter of fiscal 1995.
The decline in comparable store sales reflects the combined impact of
the general weakness in the retail consumer electronics industry,
increased competition in many of the Company's principal markets, a
slowdown in the development of new products in consumer electronic
categories and reduced spending levels of consumers for non-essential
goods due to record high debt levels. The decrease in net sales in
1997 is attributable to the comparable store sales decline together
with the closure of 11 stores in fiscal 1997. The relatively soft
level of consumer demand within the consumer electronics and
appliance industry has created a highly competitive and promotional
climate, which, in turn, has resulted in lower gross profit margins.
Net loss for the fiscal years ended August 31, 1997, 1996 and 1995,
before restructuring charges and certain unusual or non-recurring
items were approximately $10.6 million, $632,000, and $850,000,
respectively. Net losses for each of these periods after the
restructuring charges and unusual or non-recurring items were $34.2
million, $1.4 million and $2.9 million, respectively. The Company
incurred $10.4 million in restructuring charges in fiscal 1997, and
these costs are explained below under "Reorganization Items." In
addition, the Company incurred unusual or non-recurring items of
approximately $8.3 million affecting cost of sales and gross margin,
$1.1 million affecting selling, general and administrative expenses,
$786,000 affecting professional services and severance costs shown
separately on the statements of operations, $305,000 affecting other
income (expenses), net, and $2.7 million in income tax expense.
These items are explained below in the respective titled sections.
During fiscal 1996, the Company also recorded certain non-recurring
charges related to professional consulting fees and severance costs,
which aggregated approximately $756,000 (after reduction for income
taxes). During fiscal 1995, the Company recorded certain non-
recurring charges related to merger costs and the cumulative effect
of the change in accounting principle, which aggregated approximately
$2.1 million (after reduction for income taxes).
Net loss per weighted average common share in fiscal 1997, 1996 and
1995, before the charges discussed above were $1.90, $.11 and $.15,
respectively. Net loss per share in fiscal 1997, 1996 and 1995 were
$6.13, $.25, and $.53, respectively.
As previously disclosed, the poor performance of the retail
industry and the Company over an extended period led management
during fiscal 1996 to review the Company's operations and to explore
methods to improve operational efficiency and reduce costs. To that
end, the Company implemented several initiatives designed to improve
the Company's operations. Although management believed that these
measures, if given enough time, would have had a positive impact, the
Company's comparable store sales continued to decline as retail
industry conditions have continued to deteriorate, leading management
to conclude during the first quarter of fiscal 1997 that a
comprehensive review of the Company's operations was appropriate for
the purpose of developing a long-term strategic plan. As part of
this self-evaluative process, the Company hired a consulting firm in
the third quarter that specializes in turning around financially
troubled companies in consumer retail industries. After evaluating
and discussing with the Board of Directors several different
strategic options, the consulting firm ultimately recommended to the
Board a significant downsizing of the Company's operations;
specifically, the closing of the nine stores, in addition to two
unprofitable stores that had been closed in the second quarter, and
the closure of one distribution center. In addition, in order to
allow the Company to fully realize the operational benefits from the
closing of these facilities, the consulting firm recommended that the
Company seek the protection of the federal bankruptcy laws, which the
Company did by filing a voluntary petition under Chapter 11 on June
4, 1997. The Company's use of this strategic tool was primarily to
allow the Company to terminate on a more favorable basis the long-
term leases of the facilities identified for closure. The Chapter 11
filing was undertaken with the cooperation and support of the
Company's bank group and floor plan lenders.
Following the filing of its Chapter 11 petition, the Company closed
nine stores and one distribution center in July 1997. It also had
previously closed two stores in January 1997, located in Huntsville,
Alabama and in Jackson, Mississippi. The facilities which were
closed in July 1997 were (i) one store each in Tuscaloosa, Alabama;
Longview, Texas, Texarkana, Texas; Jackson, Mississippi; Chattanooga,
Tennessee; Alexandria, Louisiana; and Lafayette, Louisiana, (ii) two
stores in Memphis, Tennessee and (iii) the Bessemer, Alabama
warehouse. The Shreveport, Louisiana warehouse was closed subsequent
to year-end in October 1997. Inventory at the Shreveport warehouse
was moved to a smaller warehouse leased beginning in October 1997
that is adjacent to the Company's remaining warehouse located in
Harahan, Louisiana.
Campo has implemented a number of changes to reduce its variable
expense structure in line with declining sales revenues. The Company
has examined closely its operations at all levels to identify
opportunities for expense reduction. The Company has streamlined its
corporate structure in light of current business conditions through
significant staff reductions in administrative positions. In order
to compensate for increasing paper costs, the Company has reduced the
number of pages and frequency of its advertising tabloids. Campo has
outsourced functions that can be handled by a third party more
efficiently, such as facilities management and extended warranty
claims administration. After the end of fiscal 1997, the Company's
new management team implemented a number of cost reduction measures
and changes which should result in significant savings for the
Company in the future. The sales associate commission program and
the extended warranty commission program were reduced to be
consistent with the commission structures offered by the Company's
competitors. The Shreveport distribution center was closed and the
Company's distribution operations were consolidated in the New
Orleans facility. Store payrolls were put under tighter control and
corporate office payroll was reduced further through additional
position eliminations.
Results of Operations
The following table sets forth, for the periods indicated, the
relative percentages that certain income and expense items bear to
net sales:
Fiscal years ended August 31,
1997 1996 1995
Net sales 100.0% 100.0% 100.0%
Cost of sales 83.6 78.7 79.0
------- ------- -------
Gross profit 16.4 21.3 21.0
Selling, general and administrative
expenses 23.9 21.1 21.1
Professional services .1 0.3 -----
Severance costs .2 0.1 -----
Merger costs ----- ----- 0.1
------- ------- -------
Operating income (loss) (7.8) (0.2) (0.2)
Other income (expense) (.9) (0.5) (0.3)
------- ------- -------
Income (loss) before income taxes and
cumulative effect of change in
accounting principle and
reorgnization items (8.7) (0.7) (0.5)
Income (expense) from reorganization
items:
Loss on disposal of assets (2.2) ----- -----
Lease rejection reserve on closed
stores (1.3) ----- -----
Writedown of impaired goodwill (.3) ----- -----
Severance costs (.1) ----- -----
Restructuring costs (.4) ----- -----
------- ------- -------
(4.3) ----- -----
------- ------- -------
Income tax expense (benefit) 1.1 (0.2) (0.1)
------- ------- -------
Income (loss) before cumulative effect
of change in accounting principle (14.1) (0.5) (0.4)
Cumulative effect of change in accounting
principle ----- ----- (0.6)
------- ------- -------
Net income (loss) before cumulative
effect of change in
accounting principle (14.1) (0.5) (1.0)
Cumulative effect of change in accounting
principle ----- ----- (0.6)
------- ------- -------
Net loss (14.1)% (0.5)% (0.4)%
------- ------- -------
------- ------- -------
Comparison of Fiscal Years Ended August 31, 1997, 1996 and 1995
Net Sales. Net sales were $242.3 million, $295.0 million and
$294.6 million for the fiscal years ended August 31, 1997, 1996, and
1995, respectively, representing a decrease of 17.9% and an increase
of 0.12% in fiscal 1997 and 1996, respectively. Net sales decreased
in fiscal 1997 due to a decline in comparable store sales discussed
below, the effect of closing two stores in the second quarter and
nine stores in the forth quarter of 1997, and a decline in the
recognition of extended warranty revenue applicable to contracts sold
before August 1, 1995 also discussed below. In a period of declining
comparable store sales, net sales increased slightly in fiscal 1996
due primarily to the annualization of sales from the 14 stores opened
during fiscal 1995 and the impact of a full year's effect of the
accelerated recognition of extended warranty contracts revenue
discussed below.
Comparable store sales decreased by 14.1% and 13.6% in fiscal 1997
and 1996, respectively. The decreases in comparable store sales in
both years were due to increased competition in those existing
markets containing the Company's comparable retail stores and poor
economic conditions affecting the retail electronics industry in
general. There has also been considerable price deflation in the
retail market for computers, VCR's, camcorders, and big screen and
super-tube television sets. Comparable store sales were also
negatively affected by the Company's filing for Chapter 11
reorganization in the fourth quarter of fiscal 1997, as this resulted
in vendor supply problems, inventory out-of-stocks, and negative
publicity with the buying public.
Extended warranty revenue recognized under the straight-line method
(applicable to those extended warranty contracts sold prior to August
1, 1995) was $5.8 million, $8.4 million and $10.1 million for the
years ended August 31, 1997, 1996 and 1995, respectively. Extended
warranty expenses for these same periods were $3.7 million, $5.3
million and $5.0 million, respectively, before any allocation of
other selling, general and administrative expenses. Since August 1,
1995, the Company has sold to an unaffiliated third party all
extended warranty service contracts sold by the Company to customers
on and after such date. The Company records the sale of these
contracts, net of any related sales commissions and the fees paid to
the third party, as a component of net sales and immediately
recognizes revenue upon the sale of such contracts. Although the
Company sells these contracts at a discount, the amount of the
discount approximates the cost the Company would incur to service
these contracts, while transferring the full obligation for future
services to a third party. Net revenue from extended warranty
contracts sold to the third party for the entire 1997 and 1996 fiscal
years and the one month of fiscal 1995 that such contracts have been
sold was $7.3 million, $9.4 million, and $927,000, respectively.
Gross Profit. Gross profit for fiscal 1997 was $39.8 million, or
16.4% of net sales as compared to $62.8 million, or 21.3% of net
sales, for fiscal 1996, and $61.8 million, or 21.0% of net sales, for
fiscal 1995. The significant decline in the gross margin percentage
for 1997 was due primarily to the effects of certain unusual or one-
time charges to cost of sales totalling approximately $8.3 million or
3.5% of net sales. Higher than normal inventory shrink at the eleven
stores closed during the year (the going out of business or "GOB"
stores) and selling inventory below cost at GOB sales (instead of at
normal margins) accounted for an approximately $4.1 million decrease
in gross margin dollars or a 1.7% decrease in the overall gross
margin percentage. An increase in the reserve for doubtful vendor
receivables over and above normal provisions accounted for
approximately a $1.8 million decrease in gross margin dollars or a
0.7% decrease in the gross margin percentage. This was due to the
increased difficulty in collecting from vendors amounts due on volume
rebates, returned merchandise, cooperative advertising rebates, and
invoice price differences. As a result of an improvement in its
inventory management system that allows for better control and a
detailed review of inventory and controls at repair service centers
used by the Company, the Company identified and recorded charges for
obsolete and damaged goods in the amount of $2.4 million. This
resulted in a 1.0% decrease in the gross margin percentage.
Other items which contributed to the gross margin decline included
a reduction in the percentage level of vendor rebates, which was
caused by the Company's lower volume of purchases. This resulted in
a 0.3% reduction in the gross margin percentage. Deferred revenue on
company administered warranty contracts issued prior to August 1,
1995 is recognized in sales on a straight line basis over the life of
the contracts, while repair expenses are recognized as incurred.
Revenue recognition declines as individual contracts expire, and this
has resulted in a 0.6% decrease in the gross margin percentage. The
remaining 0.5% decrease in the gross margin percentage was caused by
increased competition (both in number of competitors and
corresponding increased price competition).
The slight increase in the gross margin percentage in fiscal 1996
compared to fiscal 1995 is due primarily to the net margin
contribution of the Company's accelerated recognition of revenues
from sales of its extended warranty contracts to an unaffiliated
third party, which was partially offset by the negative impact of
increased competition and soft demand affecting the retail industry
in general.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for fiscal 1997 were $58.0 million (before
the consulting and severance costs discussed below) or 23.9% of net
sales as compared to $62.2 million, or 21.1% of sales for fiscal 1996
and $62.0 million, or 21.1% of sales for fiscal 1995. Fiscal 1997
selling, general and administrative expenses as a percentage of sales
increased over the prior year due to a number of items including
certain unusual or non-recurring charges totaling $1.1 million or
0.5% of net sales. As a result of a comprehensive review of accrued
advertising liabilities, the Company recorded an additional provision
for advertising expense totaling $822,000 or 0.4% of net sales.
Common Stock awards were granted to certain key executives as an
inducement to join the Company, and this results in an additional
payroll expense provision of $289,000 or 0.1% of net sales.
Excluding the unusual or non-recurring charges above, fiscal 1997
selling, general and administrative expenses as a percentage of net
sales increased over the prior year due to an increase in the
percentage of sales related to advertising costs, certain fixed
payroll costs, depreciation expense and other expenses. These costs
did not decline in proportion to the decline in sales. As a
percentage of sales, advertising costs increased by 0.4%, certain
fixed payroll costs increased by 0.7%, depreciation expense increased
by 0.3%, and all other selling, general & administrative expenses
increased by 0.7%. Promotional income from the Company's private
label credit card, which is included in this category, also declined
by 0.2% of sales. Fiscal 1996 selling, general and administrative
expenses as a percentage of sales remained consistent with fiscal
1995 due primarily to an increase in promotional and other fees
derived from the Company's private label credit card program which
was offset by the effects of additional fixed costs related to the
Company's expansion in fiscal 1995, soft retail sales on fixed cost
ratios and increased advertising costs due primarily to higher paper
costs.
During fiscal 1997, the Company hired a consulting firm to assist
it in strategic and financial planning. It also hired a software
firm to tailor software packages and train all of the Company's
personnel on a new financial and inventory system which was planned
to be installed and implemented during the year. As explained in
Item 1 of this Form 10-K, the project was interrupted prior to full
implementation due to the Chapter 11 Bankruptcy filing and the cash
position of the Company. The costs associated with the services of
both of these firms of $376,000 were expensed in fiscal 1997. Also,
in fiscal 1997, two of the Company's executives resigned from the
Company to pursue other opportunities. Severance packages associated
with these resignations of $410,000 were expensed during the year.
During fiscal 1996, the Company hired a consulting firm to evaluate
and refine its store line operations. Together, the Company's
management and the consulting firm established and implemented the
"Superior Customer Service" strategy, which focuses on improving
customer service and reducing costs by streamlining store operational
procedures. The cost associated with these consulting services of
$879,000 were expensed during fiscal 1996. Also, in fiscal 1996, two
of the Company's executives resigned from the Company, and severance
packages totaling $340,000 were expensed.
Other Income (Expense). Interest expense increased by
approximately $346,000 and $700,000 in fiscal years 1997 and 1996,
respectively. Interest expense is net of discount income received
from floor plan lenders, who pass along certain of the vendor
discounts on floor plan purchases to the Company. Interest expense
increased in fiscal 1997 due to a decrease in this discount income
caused by a reduction in inventory purchases. The increase in fiscal
1996 was due primarily to the Company using fixed and short-term
borrowing arrangements to restructure the debt incurred to fund the
Company's expansion in fiscal 1995. Other income (expense) in 1997
also included an unusual or one-time loss on the sale of certain
marketable securities totaling approximately $305,000.
Reorganization Items. The Company closed eleven stores and one
warehouse in fiscal 1997 and closed an additional warehouse in
October 1997, as discussed in Item 1 of this Form 10-K. As a result
of the closures in fiscal 1997, leasehold improvements were written
off and furniture and fixtures were either written off or sold
resulting in a loss on disposal of assets of $4.5 million. In
addition, the Company provided a reserve for expected write-downs
related to the additional warehouse closed in October 1997 totaling
$468,000. $383,000 in deferred software costs were written off due
to a decision to delay indefinitely a conversion to a new financial
and inventory management computer system. As part of the Bankruptcy
process, the Company has rejected certain closed store leases with
Court approval. The Bankruptcy law provides for a specific formula
calculation of the rejected lease liability which must be recognized
as an unsecured liability. As a result of this calculation, the
Company has recorded a lease rejection reserve of $3.1 million for
fiscal year 1997. During fiscal 1997, goodwill was reduced by
$640,000 due to the closure of two store locations in Texas that were
part of the 1993 Shreveport Refrigeration, Inc. acquisition. The
resignation of two executives as part of the reorganization process
and severance amounts paid related to closed stores resulted in the
$351,000 severance pay expense in this category. Restructuring
charges recorded by the Company totaled $957,000 and include
professional and consulting fees directly related to the Chapter 11
filing and reorganization. Of this amount, $331,000 was paid to one
consulting firm hired in fiscal 1997 to assist the Company in
restructuring the organization and its debt. $210,000 was paid to
several legal firms involved in the Chapter 11 filing and bankruptcy
process, and $97,000 was paid to a professional employment agency
related to the Company's search for a new Chief Executive Officer.
$50,000 was paid in credit fees related to establishing the Company's
debtor-in-possession line of credit of $3 million. The remaining
amount was paid for various expenses and consultants involved in the
going out of business sales at closed stores.
Income Taxes. The Company's effective income tax rate was (8.5%),
35.2%, and 19.7% for the fiscal years ended August 31, 1997, 1996 and
1995, respectively. The effective rate of the income tax benefit for
fiscal 1997 was negatively impacted by the recording of a valuation
allowance related to deferred tax assets. This resulted in an
unusual net charge to income tax expense of $2.7 million. Excluding
the valuation allowance, the effective income tax rate would be
36.9%.
Liquidity and Capital Resources
Historically, the Company's primary sources of liquidity have been
from cash from operations, revolving lines of credit, and from the
Company's initial and secondary public offerings. Net cash used in
operating activities was ($4.4) million in fiscal 1997 compared to
$3.2 million provided by operations in fiscal 1996 and ($2.1) million
used by operations in fiscal 1995. The increase in cash used in
operating activities in fiscal 1997 reflects the large decrease in
earnings as adjusted for non-cash charges and reorganization items,
which was partially offset by the effect of decreases in inventories
and receivables. Total assets at August 31, 1997 were $74.1 million,
a decrease of $44.9 million (37.7%) from August 31, 1996. The
decrease in assets includes decreases of $6 million in receivables,
$24.4 million in inventories, $4.3 million in deferred tax assets,
and $8.6 million in net property and equipment.
The Company incurred capital expenditures of $1.7 million and
$949,000 during the years ended August 31, 1997 and 1996,
respectively. These expenditures were primarily in connection with
new computer equipment and software purchases and leasehold
improvements funded with mostly short-term borrowings.
Virtually all of the 1997 capital expenditure amount above was
incurred prior to the Chapter 11 Bankruptcy filing on June 4, 1997.
The Company also purchased $500,000 in U. S. Treasury Bills during
the year. At August 31, 1997, there was a balance of $421,000 in
U.S. Treasury Bills which were pledged to support certain executive
employment and severance agreements.
Long-term debt as of August 31, 1997, consisted of three term
loans, one with a bank group, and the others with financial
institutions. Effective June 1, 1996, the loan agreement with the
banks was amended such that the term loan and a previously existing
line of credit would bear interest at the Prime Rate. On December 1,
1996, the term loan and line of credit facility with the banks was
further amended to (i) to accelerate the maturity date on both
facilities from August 31, 1998 to September 1, 1997, (ii) decrease
the amount available under the line of credit to $5 million from
January 1, 1997 through maturity, (iii) provide waivers of the
Company's non-compliance with certain financial covenants for August
31, 1996 and the first quarter of fiscal 1997, suspend certain
financial covenants through maturity and amend other financial
covenants in line with the Company's fiscal 1997 budget and (iv) add
certain inventory collateral to secure both facilities. The Company
paid a small fee to secure the waivers and also agreed to an
increase in the quarterly commitment fee payable on the unfunded
amounts under the line of credit facility. The loan agreement with
the banks was further amended on June 25, 1997 to consolidate the
note with the outstanding balance on the then existing line of
credit, extend the term of the note to 36 months, and change the
interest rate to 9%. Interest only payments are due quarterly for
the first year, with nine fixed quarterly principal payments of
$223,000 plus accrued interest to begin after one year. A balloon
payment is due on the remaining balance of the note at June 27, 2000.
Outstanding amounts pursuant to this agreement are collateralized
by the Company's real estate. The outstanding principal balance
and applicable interest rate on this loan as of August 31, 1997
were $18.4 million and 9%, respectively.
The term loan with the banks contains certain reporting
requirements and restrictive covenants which require the Company to
maintain certain minimum annual earnings levels and working capital
levels. This term loan also contains a cross default provision with
all other debt instruments of the Company and a provision which
prohibits the Company from paying dividends on its common stock. As
of August 31, 1997, the Company was not in compliance with certain of
the covenants contained in the bank term loan, and was in default of
this agreement due to these violations as well as certain cross
default provisions. However, on December 12, 1997 the Company obtained
the agreement of the lenders to forebear through September 1, 1998
the enforcement of their rights and remdies under the term loan
agreement contingent upon the approval of this forebearance agreement
and an agreement requiring the payment of certain professional fees
to the banks by the Bankruptcy Court. The Company believes it is
probable that the Bankruptcy Court will approve these agreements. The
forebearance agreement also provides that the lenders will forebear
the enforcement of their rights and remedies through September 1,
1998 if the Company were to violate certain financial covenants
relating to minimum annual earnings and working capital levels during
that period, which the Company does not expect to comply with in the
upcoming fiscal year.
The principal balance of the first of the other term loans was $3.8
million as of August 31, 1997 and accrues interest at 7.19% (the
average weekly yield of 30 Day Commercial paper plus 1.8%), with the
balance of all outstanding principal due and payable at maturity on
August 30, 2002. The furniture, fixtures and equipment at various
locations leased by the Company collateralize outstanding amounts
pursuant to this agreement. The balance on this note is carried as a
liability subject to compromise. The second of the other term loans
was $297,000 as of August 31, 1997, and accrues interest payable
monthly at an annual rate of 9%. The note is divided equally between
two instruments, one with a maturity date of September 1, 1999, and
the second with a maturity date of December 1, 1999. The note is
secured by certain computer software.
As of August 31, 1997, the Company also uses several "floor plan"
finance companies to finance the majority of its inventory purchases.
In addition, the Company finances some of its inventory purchases
through open-account arrangements with various vendors. The Company
has an aggregate borrowing limit with the floor plan finance
companies of approximately $43.5 million with outstanding borrowings
being collateralized with merchandise inventory and vendor
receivables. Payment terms under these agreements are on a "pay as
sold" basis, with the Company being required to pay down indebtedness
on a daily basis as the financed goods are sold. Each of the floor
plan financing agreements contains cross default clauses with all
other debt instruments of the Company. As of August 31, 1997, the
Company was not in compliance with several covenants contained in the
floor plan agreements and was also in default of those floor plan
agreements due to its failure to make certain payments required by
the agreements relating to inventory shortages and obsolescence
identified by the Company. The Company obtained waivers for some of
these violations and as of December 11, 1997 had obtained the
agreement of each of the floor plan lenders to forebear their rights
and remedies pursuant to the floor plan agreements subject to: (i)
the Company's payment of approximately $1,654,000 in principal, plus
interest at the prime rate plus 3%, to the floor plan lenders at
various dates through December 15, 1998; and (ii) the approval of
these forebearance agreements by the Bankruptcy Court. Management
believes that sufficient liquidity will exist during the upcoming
year to fund those required payments and that it is probable that the
Bankruptcy Court will approve these forebearance agreements.
The Company has also obtained debtor in possession ("DIP")
financing from two of its floor plan lenders in the form of a $3
million line of credit. The line of credit matures at December 31,
1998 and bears interest at prime plus 3%, payable monthly,
with two principal payments of $1.5 million each due December 31,
1997 and December 31, 1998. The primary use of the line of credit is
to finance inventory purchases during peak periods. This line of
credit, together with amounts owed under such lenders' floor plan
financing arrangements, is collateralized by merchandise inventory
and the Company's anticipated federal income tax refund, as well as
by a broad lien on all of the Company's other assets. The line
of credit financing agreement contains certain covenants, a cross
default clause with all other debt instruments of the Company, and it
prohibits the Company from spending more than $50,000 per year on
capital expenditures without approval. As of August 31, 1997, the
Company was not in compliance with certain reporting requirements
and covenants contained in this agreement, but the Company has
obtained the forebearance agreements discussed above.
Net cash provided by financing activities was $4.8 million in
fiscal 1997, compared to $(2.1) million used in financing activities
in fiscal 1996 and $21.5 million provided in fiscal 1995. The source
of cash in 1997 resulted from long-term borrowings, net of payments,
of $1.8 million from term loans, and short-term borrowings, net of
payments, of $3.0 million from the new DIP line of credit. The
primary use of cash in fiscal 1996 consisted of principal payments on
the term loans. The primary source of cash during fiscal 1995 was
derived from short-term borrowings, which were refinanced in August
1995 through term loans with three banks and a financial institution.
Since the Company filed for Chapter 11 reorganization, it has
closed nine stores and two warehouses, has cut corporate overhead
expenses and store operating expenses, and has initiated several
strategies designed to improve operating performance (as more fully
explained in Item 1 of this Form 10-K). Based upon projections of
its operating results, the Company believes that its existing funds,
its operating cash flows, the available DIP line of credit discussed
above, and the vendor and inventory financing arrangements discussed
above are sufficient to satisfy expected cash requirements in fiscal
1998. However, there is no assurance that the Company's projected
operating results will be achieved during fiscal 1998. The Company
may require additional working capital financing in fiscal 1999 when
the balance of the line of credit becomes due on December 31, 1998.
Based upon the financial statements at August 31, 1997, the Company
does not meet all of the listing requirements of the Nasdaq National
Market. If the Company's Common Stock were to be delisted, the
Company's common shareholders would likely experience a reduction in
the liquidity of their shares.
Seasonality
Seasonality affects the Company's financial results as it does with
most retail businesses. Net sales and gross margin on a quarterly
basis are impacted by fluctuations in the level of consumer
purchases, seasonal demand for certain product categories, timing of
Company promotional programs and fluctuations in manufacturer's
rebate programs. Net sales tend to be highest during the Company's
second and fourth fiscal quarters. The second quarter, commencing
December 1, is favorably impacted by the Christmas selling season and
during the fourth quarter the Company benefits from the summer peak
in sales of room air conditioners and other refrigeration products.
The Company's unaudited quarterly operating results for each quarter
of fiscal 1997 and 1996 were as follows:
The Company's unaudited quarterly operating results for each
quarter of fiscal 1997 and 1996 were as follows:
Fiscal 1997
(In thousands, except per share amounts)
First Second Third Fourth
Quarter Quarter Quarter Quarter
Ended Ended Ended Ended
Nov. 30, Feb. 28, May 31, Aug.31,
Net sales $ 65,763 $ 78,295 $ 51,030 $ 47,191
Gross profit 12,870 11,683 8,207 7,017
Net income (loss) (806) (14,391) (8,502) (10,533)
Per Share Data:
Net income (loss) $ (0.14) $ (2.59) $ (1.53) $ (1.87)
Fiscal 1996
(In thousands, except per share amounts)
First Second Third Fourth
Quarter Quarter Quarter Quarter
Ended Ended Ended Ended
Nov. 30, Feb. 29, May 31, Aug. 31,
Net sales $ 78,955 $ 89,865 $ 60,189 $ 65,958
Gross profit 17,877 18,298 12,919 13,690
Net income (loss) 275 468 (1,402) (729)
Per Share Data:
Net income (loss) $ 0.05 $ 0.08 $ (0.25) $ (0.13)
Impact of Inflation
In management's opinion, general inflation has not had a material
impact on the Company's financial results for the past three years.
However, technological advances coupled with increased competition
have caused retail prices on many of the Company's product catagories
to decline requiring the Company to sell more units of product to
maintain the same sales dollars. Those products that have increased
in price have in most cases done so in proportion to current
inflation rates. Management does not anticipate that inflation will
have a material impact on the Company's financial results in the
future.
Impact of Accounting Standards
In February 1997, the Financial Accounting Standards Board ("FASB")
issued two Statements of Financial Standards, Statement No. 128,
"Earnings Per Share" and Statement No. 129, "Disclosure of
Information About Capital Structure," both effective for financial
statements issued for periods ending after December 15, 1997. In
June 1997, the FASB issued two Statements of Financial Accounting
Standards, Statement No. 130 "Reporting Comprehensive Income" and
Statement No. 131 "Disclosures about Segments of an Enterprise and
Related Information," both effective for fiscal years beginning after
December 15, 1997. Management believes adoption of these statements
will have a financial statement disclosure impact only and will not
have a material effect on the Company's financial position,
operations or cash flows.
Forward-Looking Statements
This report contains forward-looking statements (as defined in the
Private Securities Litigation Reform Act of 1995) representing the
Company's current expectations, beliefs, estimates or intentions
concerning the Company's future performance and operating results,
its products, services, markets and industry, and/or future events
relating to or effecting the Company and its business and operations.
When used in this report, the words "believes," "estimates," "plans,"
"expects," "intends," "anticipates," and similar expressions as they
relate to the Company are intended to identify forward-looking
statements. Although the Company believes that the expectations
reflected in such forward-looking statements are reasonable, it can
give no assurance that such expectations will prove to have been
correct. Important factors that could cause actual results or
achievements of the Company to differ materially from those indicated
by the forward-looking statements include, without limitation, the
effectiveness of the Company's business and marketing strategies, the
product mix sold by the Company, customer demand, availability of
existing and new merchandise from, and the establishment and
maintenance of relationships with, suppliers, price competition for
products and services sold by the Company, management of expenses,
gross profit margins, availability and terms of financing to
refinance or repay existing financings or to fund capital needs, the
continued and anticipated growth of the retail home entertainment and
consumer electronics industry, a change in interest rates, exchange
rate fluctuations, the seasonality of the Company's business and the
other risks and factors detailed in this report and in the Company's
other filings with the SEC. These risks and uncertainties are beyond
the ability of the Company to control. In many cases, the Company
cannot predict all of the risks and uncertainties that could cause
actual results to differ materially from those indicated by the
forward-looking statements. All forward-looking statements in this
report are expressly qualified in their entirety by the cautionary
statements in this paragraph.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CAMPO ELECTRONICS, APPLIANCES AND COMPUTERS, INC.
INDEX TO FINANCIAL STATEMENTS
Page
Campo Electronics, Appliances and Computers, Inc. - Financial Statements
Report of Independent Accountants 14
Balance Sheets as of August 31, 1997 and 1996 15
Statements of Operations for the Years Ended August 31,
1997, 1996, and 1995 16
Statements of Shareholders' Equity for the Years Ended
August 31, 1997, 1996, and 1995 17
Statements of Cash Flows for the Years Ended August 31,
1997, 1996 and 1995 18
Notes to Financial Statements 19
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders
Campo Electronics, Appliances and Computers, Inc.
We have audited the accompanying balance sheets of Campo Electronics,
Appliances and Computers, Inc. (the "Company") as of August 31, 1997
and 1996, and related statements of operations, shareholders' equity
and cash flows for each of the three years in the period ended August
31, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
our audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Campo
Electronics, Appliances and Computers, Inc. as of August 31, 1997 and
1996, and the results of its operations and its cash flows for each
of the three years in the period ended August 31, 1997 in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. The Company has
suffered recurring losses from operations and incurred a net loss of
$34.2 million for the year ended August 31, 1997. Additionally, as
discussed in Note 2 to the financial statements, on June 4, 1997, the
Company filed a petition for reorganization under Chapter 11 of the
U.S. Bankruptcy Code. The Company has not yet prepared or submitted
a plan of reorganization. These items, among others, raise
substantial doubt about the Company's ability to continue as a going
concern. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
New Orleans, Louisiana
November 14, 1997, except as to Note six and Note seven, as to which
the date is December 12, 1997.
CAMPO ELECTRONICS, APPLIANCES AND COMPUTERS, INC.
(DEBTOR-IN-POSSESSION)
BALANCE SHEETS
AUGUST 31,1997 AND 1996
1997 1996
ASSETS
Current assets:
Cash and cash equivalents $ 1,640,849 $ 3,303,822
Investments in marketable securities 421,431 129,788
Receivables (net of an allowance of $1.6
million in 1997 and $2.9 million in 1996) 8,603,894 14,561,102
Merchandise inventory 31,951,502 56,387,842
Deferred income taxes ------ 3,033,000
Other 873,200 471,399
------------ ------------
Total current assets 43,490,876 77,886,953
------------ ------------
Property and equipment, net 27,741,034 36,376,959
Deferred income taxes ------ 1,234,000
Intangibles and other 2,899,774 3,535,639
------------ ------------
$ 74,131,684 $119,033,551
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities not subject to compromise:
Current liabilities:
Current portion of long-term debt $ 350,438 $ 2,478,179
Short-term borrowings 3,000,000 ------
Post-petition accounts payable 1,311,816 3,844,201
Accounts payable-floor plan 23,661,531 43,949,585
Post-petition accrued expenses 7,861,586 7,169,218
Deferred revenue 2,713,040 4,621,294
------------ ------------
Total current liabilities 38,898,411 62,062,477
------------ ------------
Long-term debt, less current portion 18,368,005 18,191,371
Deferred revenue 1,937,256 4,650,296
------------ ------------
Total long-term liabilities 20,305,261 22,841,667
------------ ------------
Liabilities subject to compromise 14,552,674 ------
------------ ------------
Total liabilities 73,756,346 84,904,144
------------ ------------
Commitments and contingencies
Shareholders' equity:
Common shock, $.10 par value, 20,000,000
shares authorized, 5,791,906 and
5,566,906 issued and outstanding at
August 31,1997 and 1996, respectively 579,191 556,691
Paid-in capital 32,639,856 32,373,306
Retained earnings (deficit) (32,843,709) 1,388,849
Less: Unrealized loss on marketable
securities ------ (189,439)
------------- ------------
Total shareholders' equity 375,338 34,129,407
------------- ------------
$ 74,131,684 $119,033,551
------------- ------------
The accompanying notes are in integral part of these financial statements.
CAMPO ELECTRONICS, APPLIANCES AND COMPUTERS, INC.
(DEBTOR-IN-POSSESSION)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED AUGUST 31,1997,1996 AND 1995
1997 1996 1995
-------------- -------------- --------------
Net Sales $ 242,278,066 $ 294,967,168 $ 294,619,960
Cost of sales 202,501,396 232,182,625 232,842,703
-------------- -------------- --------------
Gross profit 39,776,670 62,784,543 61,777,257
Selling, general and
administrative expenses 58,005,013 62,188,708 61,972,378
Professional services 376,000 879,368 ------
Severance costs 410,104 340,430 ------
Merger costs ------ ------ 303,413
-------------- -------------- --------------
Operating loss (19,014,447) (623,963) (498,534)
Other income (expense):
Interest expense (2,446,894) (2,100,590) (1,399,388)
Interest income 92,229 137,386 94,602
Other, net 213,317 445,106 504,075
-------------- -------------- --------------
(2,141,348) (1,518,098) (800,711)
-------------- -------------- --------------
Loss before income taxes,
cumulative effect of change
in accounting principle and
reorganization items (21,155,795) (2,142,061) (1,299,245)
Income (expense) from
reorganization items:
Loss on disposal of assets (5,338,472) ------ ------
Lease rejection reserve on
closed facilities (3,100,000) ------ ------
Write down of impaired goodwill (640,000) ------ ------
Severance costs (351,105) ------ ------
Other restructuring charges (957,186) ------ ------
-------------- -------------- --------------
(10,386,763) ------ ------
-------------- -------------- --------------
Income tax expense (benefit) 2,690,000 (754,000) (256,000)
-------------- -------------- --------------
Net loss before cumulative
effect of change in
accounting principle (34,232,558) (1,388,061) (1,043,245)
Cumulative effect of change
in accounting principle
(Note 3) ------ ------ (1,891,948)
-------------- -------------- --------------
Net loss $ (34,232,558) $ (1,388,061) $ (2,935,193)
Per share data:
Net loss before cumulative
effect of change in
accounting principle ($6.13) ($0.25) ($0.19)
Cumulative effect of
change in accounting
principle ------ ------ ($0.34)
-------------- -------------- --------------
Net loss ($6.13) ($0.25) ($0.53)
============== ============== ==============
Weighted average number of
common shares outstanding 5,584,509 5,566,906 5,565,942
The accompanying notes are an integral part of the financial statements.
<TABLE>
<CAPTION>
CAMPO ELECTRONICS, APPLIANCES AND COMPUTERS, INC.
(DEBTOR-IN-POSSESSION)
STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED AUGUST 31,1997, 1996 AND 1995
Retained
Common Stock Earnings Total
Shares Paid-in (Accumulated Unearned Shareholders'
Outstanding Amount Capital Deficit) Compensation Other Equity
------------ ----------- ------------ ------------ ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, September 1,1994 5,558,906 $ 555,891 $32,310,606 $ 5,712,103 $ (141,750) $ ------ $ 38,436,850
Stock options exercised 8,000 800 62,700 ------ ------ ------ 63,500
Unrealized loss on marketable
securities ------ ------ ------ ------ ------ (134,767) (134,767)
Amortization of stock awards ------ ------ ------ ------ 74,250 ------ 74,250
Net loss ------ ------ ------ (2,935,193) ------ ------ (2,935,193)
----------- ----------- ------------ ------------ ------------- ----------- -------------
Balance, August 31,1995 5,566,906 556,691 32,373,306 2,776,910 (67,500) (134,767) 35,504,640
Unrealized loss on marketable
securities ------ ------ ------ ------ ------ (54,672) (54,672)
Amortization of stock awards ------ ------ ------ ------ 67,500 ------ 67,500
Net loss ------ ------ ------ (1,388,061) ------ ------ (1,388,061)
---------- ---------- ----------- ------------ ------------ ---------- -------------
Balance, August 31,1996 5,566,906 556,691 32,373,306 1,388,849 ------ (189,439) 34,129,407
Stock awards 75,000 7,500 87,800 ------ ------ ------ 95,300
Restricted stock awards 150,000 15,000 178,750 ------ ------ ------ 193,750
Realized loss on securities ------ ------ ------ ------ ------ 189,439 189,439
Net loss ------ ------ ------ (34,232,558) ------ ------ (34,232,558)
---------- ---------- ----------- ------------ ------------ ---------- -------------
Balance, August 31,1997 5,791,906 $ 579,191 $32,639,856 $(32,843,709) $ ------ $ ------ $ 375,338
---------- ---------- ----------- ------------ ------------ ---------- -------------
---------- ---------- ----------- ------------ ------------ ---------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
CAMPO ELECTRONICS, APPLIANCES AND COMPUTERS, INC.
(DEBTOR-IN-POSSESSION)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED AUGUST 31,1997,1996 AND 1995
1997 1996 1995
Cash flow from operating activities:
Net loss $(34,232,558) (1,388,061) (2,935,193)
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 4,451,800 5,454,334 5,393,961
Cumulative effect of change in
accounting principle ------ ------ 1,891,948
Deferred taxes 4,267,000 3,388,470 (2,490,244)
Provision for uncollectible
receivables 3,921,227 2,294,000 2,140,000
Stock awards 289,050 67,500 74,250
Loss on disposal of investments 317,170 ------ ------
Loss (gain) on disposal of assets 1,768,122 ------ (7,507)
(Increase) decrease in assets:
Receivables 2,035,981 2,548,573 (9,331,613)
Merchandise inventory 24,436,340 3,870,565 (11,082,489)
Other assets (572,055) 212,834 (2,727,339)
Increase (decrease) in liabilities:
Accounts payable (16,441,180) (6,509,981) 12,479,915
Accrued expenses 787,676 (50,287) (140,853)
Deferred revenue (4,621,294) (6,693,674) 4,675,018
Adjustments due to reorganization
items:
Lease rejection reserve on closed
stores 3,100,000 ------ ------
Loss on disposal of assets 5,338,472 ------ ------
Write down of impaired goodwill 640,000 ------ ------
Increase in accrued expenses for
restructuring items 957,186 ------ ------
Payment of restructuring charges (866,158) ------ ------
------------ ------------ ------------
Net cash provided by (used in)
operating activities (4,423,221) 3,194,273 (2,060,146)
------------ ------------ ------------
Cash flow from investing activities:
Purchase of property and equipment (1,696,440) (948,695) (19,389,098)
Purchase of investments (500,000) ------ ------
Proceeds from sale of assets 105,341 ------ 92,747
Proceeds from sales of assets due
to reorganization 60,600 ------ ------
------------ ------------ ------------
Net cash used in investing
activities (2,030,499) (948,695) (19,296,351)
------------ ------------ ------------
Cash flow from financing activities:
Borrowings under long-term debt 3,804,338 ------ 21,775,159
Repayments under long-term debt (2,013,591) (2,047,076) (320,996)
Borrowings under line of credit 31,850,000 65,300,000 ------
Repayments under line of credit (31,850,000) (65,300,000) ------
Proceeds from redemption of stock
options ------ ------ 63,500
Borrowings under DIP line of credit 4,750,000 ------ ------
Repayments under DIP line of credit (1,750,000) ------ ------
------------ ------------ ------------
Net cash provided by (used in)
financing activities 4,790,747 (2,047,076) 21,517,663
------------ ------------ ------------
Net increase (decrease) in cash
and cash equivalents (1,662,973) 198,502 161,166
Cash and cash equivalents at
beginning of period 3,303,822 3,105,320 2,944,154
------------ ------------ ------------
Cash and cash equivalents at
end of period $ 1,640,849 3,303,822 3,105,320
------------ ------------ ------------
------------ ------------ ------------
Supplemental disclosures of cash
flow information:
Cash paid during the period for:
Interest $ 2,205,535 1,767,496 1,235,439
------------ ------------- -----------
------------ ------------- -----------
Income taxes $ 26,000 118,240 3,874,187
------------ ------------- -----------
------------ ------------- -----------
Supplemental schedule of noncash
investing and financing activities:
Assets acquired under capital lease $ 285,701 ------ ------
------------ ------------- -----------
------------ ------------- -----------
The accompanying notes are an integral part of these financial statements.
CAMPO ELECTRONICS, APPLIANCES AND COMPUTERS, INC.
(DEBTOR-IN-POSSESSION)
NOTES TO FINANCIAL STATEMENTS
1. Organization and Summary of Significant Accounting Policies:
a. Organization
The Company is a specialty retailer of name brand consumer
electronics, major appliances, computers and home office products
with 20 stores in Louisiana, Alabama, Mississippi and Florida as of
August 31, 1997.
b. Basis of Presentation
The financial statements have been prepared in accordance with
the American Institute of Certified Public Accountants Statement of
Position 90-7, "Financial Reporting by Entities in Reorganization
Under the Bankruptcy Code." The financial statements have been
prepared using accounting principles applicable to a going concern,
which assumes realization of assets and settlement of liabilities
in the normal course of business. The appropriateness of using the
going concern basis is dependent upon, among other things, the
ability to comply with debtor in possession financing agreements,
confirmation of a plan of reorganization, the ability to achieve
profitable operations, and the ability to generate sufficient cash
flows from operations to meet obligations. See Note 2.
c. Marketable Securities
During fiscal year 1995 the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." The Company
has classified its investments as available for sale in accordance
with SFAS No. 115. As such, these investments are carried at fair
value with net unrealized gains or losses reported net of tax, as a
separate component of shareholders' equity.
Marketable securities at August 31, 1997 included approximately
$421,000 in six month U.S. Government Treasury Bills. These
investments which are held in a general corporate account, are
designated to fund certain potential obligations related to
employment agreements. Of this amount, $300,000 is collateral for
certain bonuses for two former executives pursuant to the
agreements which are currently disputed in bankruptcy court. There
was no unrealized gain or loss associated with these securities.
Marketable securities at August 31, 1996 consist of common stock
with a cost basis of approximately $435,000. At August 31, 1996,
the Company had unrealized holding losses of $305,547 and during
the fiscal year ended August 31, 1997 the Company realized a loss
of $317,000 on this common stock. Gains and losses are calculated
using the specific identification method.
d. Merchandise Inventory
Merchandise inventory is stated at the lower of cost or market,
whereby cost is determined using the average cost method.
During fiscal 1997, the Company recorded a valuation allowance in
the amount of $672,000 primarily for distressed merchandise at
outside service locations and inventory shrinkage.
e. Property and Equipment
Property and equipment is stated at cost less accumulated
depreciation and amortization. Depreciation and amortization are
calculated using the straight-line method over the assets'
estimated useful lives, which range from three to nineteen years.
Property held under capital leases is stated at the lower of the
present value of the minimum lease payments at the lease or market
value and is amortized over the lease term or the estimated useful
life of the asset, whichever is shorter.
Expenditures for maintenance, repairs and minor renewals are
charged to operating expenses as incurred. Major renewals and
betterments are capitalized. Upon sale or disposal of depreciable
assets, the related cost and related accumulated depreciation are
removed from the accounts with resulting gains or losses being
reflected as other income (expense).
f. Intangibles
Goodwill arose from the acquisition of Shreveport Refrigeration
Inc. in July 1993 and is being amortized over a 35 year period on a
straight-line basis. The Company assesses goodwill on a periodic
basis to determine if goodwill has been impaired. In the third
quarter of fiscal year 1997, goodwill was reduced by $640,000 due
to the closure of two locations (Texarkana and Longview) that were
part of the Shreveport Refrigeration, Inc. acquisition. Goodwill
at August 31, 1997 and 1996 in the amounts of $2,126,000 and
$2,856,000, respectively (net of accumulated amortization of
$364,000 and $274,000) is included in intangibles and other assets.
g. Deferred Revenues
The Company sells extended warranty contracts which cover periods
beyond the warranty period covered by the manufacturers'
warranties. Effective September 1, 1994, the Company changed its
method of accounting for these revenues and expenses to recognize
extended warranty contract sales and the associated sales
commissions over the term of each contract on a straight-line
basis. Expenses such as administrative, advertising and repairs
are charged to operations as incurred. (See Note 3.)
Effective August 1, 1995, the Company agreed to sell to an
unaffiliated third party all extended warranty service contracts
sold by the Company subsequent to July 31, 1995. Revenue is
recognized from the sale of these contracts at the time of sale,
net of any related sales commissions and fees paid to the third
party, as a component of net sales.
h. Income Taxes
The Company accounts for income taxes in accordance with SFAS No.
109, "Accounting for Income Taxes". SFAS No. 109 requires
recognition of deferred tax liabilities and assets for the expected
future tax consequences of events that have been included in the
financial statements or tax returns, as well as requiring the
gross-up of assets and liabilities for the effects of deferred
taxes in connection with purchase business combinations. Under
this method, deferred tax assets and liabilities are determined
based on the difference between the financial statement and tax
bases of assets and liabilities using enacted tax rates in effect
for the year in which the differences are expected to reverse. The
Company recognizes a valuation allowance for deferred tax assets if
it determines that it is not probable that a benefit will be
realized. During the fiscal year ended August 31, 1997, the
Company recorded a valuation allowance against the deferred tax
asset of $14.3 million.
i. Earnings per Share
Earnings per share is computed using the weighted average number
of shares of common stock and common stock equivalents outstanding
during the year.
j. Statement of Cash Flows
For purposes of the Statement of Cash Flows, the Company
considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents.
k. Revenue Recognition
Revenue is recognized at the time the customer either takes
possession of the merchandise or such merchandise is delivered to
the customer. Net sales, which includes warranty revenue, consist
of gross sales less discounts and returns and allowances.
l. Advertising Costs
Advertising costs are expensed as incurred and included in
selling, general and administrative expenses in the accompanying
statement of operations. Net advertising expense was $13.0
million, $13.6 million and $14.0 million for the years ended August
31, 1997, 1996 and 1995, respectively. These costs relate to
advertising the Company's name and promoting the products it sells
in newspapers and on radio and television.
m. Impairment of Long-Lived Assets
In 1997, the Company adopted Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of" (SFAS No. 121).
SFAS No. 121 establishes accounting standards for the impairment of
long-lived assets, certain identifiable intangibles, and goodwill
related to those assets to be held and used for long-lived assets
and certain identifiable intangibles to be disposed of. Under
provisions of SFAS No. 121, impairment losses are recognized when
expected future cash flows are less than the related assets'
carrying value. Accordingly, when indicators of impairment are
present, the Company evaluates the carrying value of property,
plant and equipment and intangibles in relation to the operating
performance and future undiscounted cash flows of the underlying
business. The Company adjusts the net book value of the underlying
assets if the sum of expected future cash flows is less than book
value.
n. Risk and Uncertainties
The diversity of the Company's products, customers, suppliers,
and geographic operations significantly reduces the risk that a
severe impact will occur in the near term as a result of changes in
its customer base, competition, sources of supply or markets.
Financial instruments which potentially expose the Company to
concentration of credit risk, as defined by SFAS No. 105, consist
primarily of cash and cash equivalents and accounts receivable.
The Company's cash equivalents consist principally of overnight
investments with financial institutions which exceed balances
insured by the Federal Deposit Insurance Corporation. A
significant portion of the Company's vendor related receivables are
with its leading manufacturers. Although the Company does not
currently foresee a credit risk associated with these receivables,
repayment is dependent upon the financial stability of these
manufacturers.
The preparation of financial statements in conformity with
generally accepted accounting principles requires that management
make estimates and assumptions that affect the reported amounts of
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 these estimates.
o. New Financial Accounting Standards
In February 1997, the Financial Accounting Standards Board issued
two Statements of Financial Accounting Standards, Statement No. 128
"Earnings Per Share" and Statement No. 129 "Disclosure of
Information About Capital Structure," both effective for financial
statements issued for periods ending after December 15, 1997. In
June 1997, the Financial Accounting Standards Board issued two
Statements of Financial Accounting Standards, Statement No. 130
"Reporting Comprehensive Income" and Statement No. 131 "Disclosures
about Segments of an Enterprise and Related Information," both
effective for fiscal years beginning after December 15, 1997.
Management believes adoption of these statements will have a
financial statement disclosure impact only and will not have a
material effect on the Company's financial position, operations or
cash flows.
p. Fair Value of Financial Instruments
Cash and cash equivalents, trade accounts receivable, trade
accounts payable and accrued liabilities are financial instruments
for which the carrying value approximates fair value because of the
short-term maturity of these instruments. Investments in
marketable securities are carried at their fair market value, which
is determined using quoted market prices. The Company's long-term
debt approximates fair value due to the interest rates included in
the debt which approximates current market rates for similar
instruments.
q. Reclassifications
Certain amounts in prior years have been reclassified to conform
to classifications adopted in fiscal 1997 with no impact on net
loss or shareholders' equity.
2. Chapter 11 Bankruptcy Proceedings and Restructuring
On June 4, 1997, the Company filed a voluntary petition in the U.
S. Bankruptcy Court for the Eastern District of Louisiana for
reorganization under Chapter 11 of the U. S. Bankruptcy Code (the
"Bankruptcy Code"), and is currently operating its business as
debtor-in-possession under the supervision of the Bankruptcy Court
(the "Bankruptcy Court").
As of the petition date, actions to collect pre-petition
indebtedness are stayed and other contractual obligations may not
be enforced against the Company. In addition, under the Bankruptcy
Code, the Company may reject executory contracts, including lease
obligations. Parties affected by these rejections may file claims
with the Bankruptcy Court in accordance with the reorganization
process. Substantially all liabilities as of the petition date are
subject to settlement under a plan of reorganization to be voted
upon by creditors and equity security holders and approved by the
Bankruptcy Court. The Company has not yet prepared or submitted a
plan of reorganization. As provided by the Bankruptcy Code, the
Company has the exclusive right for a period of time to submit a
plan of reorganization. This period has been extended by the
Bankruptcy Court to January 15, 1998, and further extensions may be
sought and may be granted or rejected by the Bankruptcy Court.
The Company has obtained the approval of the Bankruptcy Court to
continue to pay for utility services, certain consumer practices
(including the continuation of service on existing extended
warranty contracts), payroll and employee benefits, and property
and liability insurance coverage. These items are recorded as
accrued expenses not subject to compromise. The Company is also
allowed to continue normal business practices, including purchasing
inventory and payment of normal operating expenses incurred after
the filing of the bankruptcy petition.
As part of the reorganization process, the Company closed eleven
stores and one distribution center in fiscal 1997. It also closed
an additional distribution center in October, 1997, after its
fiscal year-end. The facilities which were closed were (i) one
store each in Huntsville, Alabama; Tuscaloosa, Alabama; Longview,
Texas; Texarkana, Texas; Chattanooga, Tennessee; Alexandria,
Louisiana; and Lafayette, Louisiana, (ii) two stores each in
Jackson Mississippi; and Memphis, Tennessee and (iii) the Bessemer,
Alabama warehouse. The Shreveport, Louisiana warehouse was closed
subsequent to year-end in October, 1997. Inventory at the
Shreveport warehouse was moved to a smaller leased warehouse
adjacent to the Company's remaining warehouse located in Harahan,
Louisiana.
The Company has liabilities, not subject to compromise, owed to
its floor plan lenders and its bank group. The liabilities owed to
the floor plan lenders are collateralized by the Company's
merchandise inventory. The amount due on the bank note is
collateralized by the Company's real estate holdings. The Company
is in default of these agreements but has obtained the agreement of
the lenders to forebear the enforcement of their rights and
remedies subject to the terms of the forbearance agreements
discussed in notes 6 and 7. Unsecured vendor claims are included
in the amounts listed as liabilities subject to compromise.
Since the Company filed for Chapter 11 reorganization, it has cut
corporate overhead expenses and store operating expenses, and has
initiated several strategies designed to improve operating
performance (as more fully explained in Item 1 of this Form 10-K).
Based upon its projections, the Company believes that its existing
funds, its operating cash flows, and the available line of credit
and the vendor and inventory financing arrangements discussed above
are sufficient to satisfy expected cash requirements in fiscal
1998. However, there is no guarantee that the Company's projected
operating results will be achieved during fiscal 1998. The Company
may require additional working capital financing in fiscal 1999
when the balance of the line of credit becomes due on December 31,
1998.
Based upon the financial statements at August 31, 1997, the
Company does not meet all of the listing requirements of the Nasdaq
National Market. If the Company's common stock were to be
delisted, the Company's common shareholders would likely experience
a reduction in the liquidity of their shares.
3. Change in Accounting
In the third quarter of fiscal 1995, the Company changed its
method of recognizing extended warranty contract revenue and direct
expenses, primarily commissions paid for the sale of the contracts,
from recognizing such revenues and expenses over the life of the
contracts based on historical patterns of expenses incurred to the
straight-line method. The new method, adopted effective September
1, 1994, is the alternative prescribed by the Financial Accounting
Standards Board Technical Bulletin No 90-1, and is currently being
used by the Company's major competitors. The change was made due
primarily to continuing changes in the Company's product mix and
warranty expense patterns that resulted in its prior method of
amortizing extended warranty contract revenue not always reflecting
current patterns at which warranty expenses were incurred. This
change in accounting has no impact on the Company's cash flow, and
expenses not directly associated with the acquisition of the
extended warranty contracts, such as repair costs and
administrative expenses, are expensed as they are incurred. The
cumulative effect of change in accounting principle in the amount
of $1,891,948 reflects the retroactive effect of applying the
straight-line method to prior years after reduction for income
taxes in the amount of $1,159,581.
4. Receivables
Receivables at August 31, 1997 and 1996 consist of the following:
1997 1996
Consumer Receivables $ 2,086,505 $ 2,841,889
Vendor Receivables 2,638,876 5,914,114
Income Tax Receivables 1,542,999 3,083,172
Other Receivables 2,335,514 2,721,927
----------- -----------
$ 8,603,894 $14,561,102
----------- -----------
----------- -----------
The above receivables are net of allowances of $1.6 million at
August 31, 1997 and $2.9 million at August 31, 1996.
5. Property and Equipment:
Property and equipment less accumulated depreciation and
amortization is as follows:
August 31,
1997 1996
Land $ 7,180,594 $ 7,646,594
Buildings (19 year life) 13,488,424 15,022,521
Leasehold improvements (10 to 15 year life) 6,937,593 11,793,602
Furniture, fixtures and equipment
(5 to 7 year life) 13,079,521 15,153,794
Automobiles and trucks (3 to 5 year life) 474,592 506,713
------------ ------------
41,160,724 50,123,224
Less accumulated depreciation and
amortization 13,419,690 13,746,265
------------ ------------
$ 27,741,034 $ 36,376,959
------------ ------------
------------ ------------
Depreciation expense related to property and equipment for the
years ended August 31, 1997, 1996, and 1995 was $4.1 million, $4.2
million and $3.3 million, respectively. Equipment and vehicles
with a cost of approximately $1,078,000 was held under capital
lease as of August 31, 1997 and $798,000 as of August 31, 1996 and
1995. Accumulated amortization related to these capital lease
assets was approximately $764,000 and $632,000 as of August 31,
1997 and 1996, respectively.
6. Accounts Payable-Floor Plan:
The Company has approximately $23.6 million and $43.9 million as
of August 31, 1997 and 1996, respectively, outstanding under "floor
plan" agreements with finance companies. These floor plan
agreements have aggregate borrowing limits of approximately $43.5
million with repayment on a pay-as-sold basis with interest
accruing on outstanding balances at various fixed and variable
rates. The agreements provide no specific termination date and are
cancellable at the option of either party. Outstanding amounts
pursuant to these agreements are collateralized by merchandise
inventory and certain receivables of the Company. As of August 31,
1997 the Company was not in compliance with several covenants
contained in the floor plan agreements and was also in default of
those floor plan agreements due to its failure to make certain
payments required by the agreements relating to inventory shortages
and obsolescence identified by the Company. The Company obtained
waivers for some of these violations and as of December 11, 1997
had obtained the agreement of each of the floor plan lenders to
forebear their rights and remedies pursuant to the floor plan
agreements subject to: (i) the Company's payment of approximately
$1,654,000 in principal, plus interest at the prime rate plus 3%,
to the floor plan lenders at various dates through December 15,
1998; and (ii) the approval of these forebearance agreements by the
Bankruptcy Court. Management believes that sufficient liquidity
will exist during the upcoming year to fund those required payments
and that it is probable that the Bankruptcy Court will approve
these forebearance agreements. The existing floor plan agreements
were renegotiated during the bankrtupcy reorganization process.
The agreements continue on a "pay as sold" basis, whereby the
Company pays for the excess of the accrued liability to the floor
plan lender over the required inventory collateral value. These
payments, which were formerly made on a weekly basis, are now
paid daily, two banking days in arrears.
7. Debt:
Long-term obligations
Long-term obligations as of August 31, 1997 and 1996 consist of
the following:
August 31,
1997 1996
Long-term debt, with interest payable at
various rates $ 18,718,443 $ 20,521,182
Capital lease obligations ----- 148,368
------------ ------------
$ 18,718,443 $ 20,669,550
Less current maturities 350,438 2,478,179
------------ ------------
$ 18,368,005 $ 18,191,371
------------ ------------
------------ ------------
Long-term debt as of August 31, 1997, consisted of three term
loans, one with a bank group consisting of three banks, and the
others with financial institutions. Effective June 1, 1996, the
loan agreement with the banks was amended such that the term loan
and a previously existing line of credit would bear interest at the
Prime Rate. On December 1, 1996, the term loan and line of credit
facility with the banks was further amended to (i) accelerate the
maturity date on both facilities from August 31, 1998 to September
1, 1997, (ii) decrease the amount available under the line of
credit to $5 million from January 1, 1997 through maturity, (iii)
provide waivers of the Company's noncompliance with certain
financial covenants for August 31, 1996 and the first quarter of
fiscal 1997, suspend certain financial covenants through maturity
and amend other financial covenants in line with the Company's
fiscal 1997 budget and (iv) add certain inventory collateral to
secure both facilities. The Company paid a small fee to secure the
waivers and also agreed to an increase in the quarterly commitment
fee payable on the unfunded amounts under the line of credit
facility. The loan agreement was further amended on June 25, 1997
to consolidate the term loan with the outstanding balance on the
line of credit, extend the term of the loan to 36 months, and
change the interest rate to 9%. Interest only payments are due
quarterly for the first year, with nine fixed quarterly principal
payments of $223,000 plus accrued interest to begin one year from
the amendment date. A balloon payment is due on the remaining
balance of the note at June 27, 2000. Outstanding amounts pursuant
to this agreement are collateralized by the Company's real estate.
The outstanding principal balance and applicable interest rate on
this loan as of August 31, 1997 were $18.4 million and 9%,
respectively. Based on management's estimate of the market value
of the property collateralizing this term loan, it has been
recorded as a liability not subject to compromise. The amended term
loan with the banks contains certain reporting requirements and
restrictive covenants which require the Company to maintain certain
minimum annual earnings levels and working capital levels. This
term loan also contains a subjective acceleration clause as well as
a cross default provision with all other debt instruments of the
Company and a provision which prohibits the Company from paying
dividends on its common stock. As of August 31, 1997, the Company
was not in compliance with certain of the covenants contained in
the bank term loan, and was in default of this agreement due to
these violations as well as certain cross default provisions.
However, on December 12, 1997 the Company obtained the agreement of
the lenders to forebear through September 1, 1998 the enforcement
of their rights and remedies under the term loan agreement
contingent upon the approval of this forebearance agreement and an
agreement requiring the payment of certain professional fees to the
banks by the Bankruptcy Court. The Company believes it is probable
that the Bankruptcy Court will approve these agreements. The
forebearance agreement also provides that the lenders will forebear
the enforcement of their rights and remedies through September 1,
1998 if the Company were to violate certain financial covenants
relating to minimum annual earnings and working capital levels
during that period, which the Company does not expect to comply
with in the upcoming fiscal year.
The principal balance of the first of the other term loans was
$3.8 million as of August 31, 1997 and accrues interest at 7.19%
(the average weekly yield of 30 Day Commercial paper plus 1.8%),
with the balance of all outstanding principal due and payable at
maturity on August 30, 2002. Outstanding amounts pursuant to this
agreement are collateralized by the furniture, fixtures and
equipment at various locations leased by the Company. The balance
on this note is recorded as a liability subject to compromise.
The second of the other term loans was $297,000 as of August 1997
and accrues interest payable monthly at an annual rate of 9%. The
note is divided equally between two instruments, one with maturity
at September 1, 1999, and the second with a maturity of December 1,
1999. The note is collateralized by certain computer software and
is recorded as a liability not subject to compromise.
Annual maturities on long-term debt not subject to compromise
during the next five years are as follows:
Years Ending Not Subject
August 31, to
Compromise
1998 350,438
1999 1,060,178
2000 17,307,827
2001 -----
2002 -----
Thereafter -----
------------
$ 18,718,443
------------
------------
Also, as of August 31, 1997, the Company has a $3 million line of
credit available provided jointly by two of the Company's floor
plan lenders. The available credit line reduces to $1.5 million on
December 31, 1997 and the balance is due on maturity at December
31, 1998. The outstanding balance on the line at August 31, 1997
was $3.0 million. The outstanding balance on the line of credit
bears interest at an annual rate of prime plus 3% (11.5% at August
31, 1997), payable monthly, and is collateralized by a pending
federal income tax refund and certain of the Company's inventories
and all other assets not serving as collateral under other
agreements. The proceeds were used to fund general operating
expenses, including purchases of inventory during peak periods.
The Company anticipates that pending federal and state income tax
refunds will be adequate to repay the line of credit by the
required $1.5 million due in December 1997. The line of credit
financing agreement contains certain covenants, a cross default
clause with all other debt instruments of the Company, and it
prohibits the Company from spending more than $50,000 per year on
capital expenditures without approval. As of August 31, 1997, the
Company was not in compliance with certain reporting requirements
and covenants contained in this agreement, but the Company
obtained the forebearance agreements discussed in note 6 from the
two floor-plan lenders. This line requires a facility fee in the
amount of $150,000. A payment in the amount of $50,000 was made
upon entry of an Emergency Order approving this agreement by the
Bankruptcy Court, and two equal payments of $50,000 each are due on
November 30, 1997 and 1998. The weighted average interest rates
applicable for short term borrowings during fiscal 1997 and 1996
were 8.91% and 8.02%, respectively.
8.Liabilities Subject to Compromise
The liabilities subject to compromise include vendor payables and
accrued expenses incurred up to the date of the filing for
reorganization under Chapter 11 of the U.S. Bankruptcy Code, with
the exception of liabilities specifically exempted by certain first
day orders filed with the Bankruptcy Court. These first day orders
obtained with the approval of the Bankruptcy Court, allowed for the
payment of utility services, certain consumer practices (including
the continuation of service on existing extended warranty
contracts), payroll and employee benefits, and property and
liability insurance coverage. Liabilities relating to these items
are recorded as accrued expenses not subject to compromise. Also
included in liabilities subject to compromise are: $3.8 million
balance on note payable (see Note 7); capital lease obligations of
$242,000; a provision for settlements payable to landlords of
closed stores where the Company has rejected the leases of $3.1
million; and $7.5 million made up of various liabilities resulting
from purchases of inventory and supplies delivered and services
rendered prior to the Bankruptcy Filing.
9. Lease Commitments:
The Company's retail operations are conducted principally in
leased facilities under agreements which expire at various dates
through 2012. In addition to base rent, certain lease agreements
require the Company to pay executory costs such as real estate
taxes, utilities and common area maintenance. For certain
locations, the Company pays rent based upon a specified percentage
of sales. Generally, the leases provide for renewals for various
periods at stipulated rates. (See Note 12 for a description of
operating leases with related parties.)
Future minimum lease payments under the above non-cancellable
operating leases as of August 31, 1997 are as follows:
1998 $ 2,549,264
1999 2,469,134
2000 2,464,156
2001 2,281,998
2002 1,810,315
Thereafter 4,011,822
-------------
$ 15,586,689
-------------
-------------
The future minimum lease payments related to the closed stores is
excluded from the above table.
Rental expense, including common area maintenance, insurance and
real estate taxes, pursuant to the above operating leases, net of
sublease rental income, amounted to approximately $8.9 million,
$5.7 million and $4.7 million for the years ended August 31, 1997,
1996 and 1995, respectively. The Company has a sublease agreement
for one of its properties that expires on May 31, 1998 and provided
sublease income of $138,000.
As debtor-in-possession, the Company has the right, subject to
Bankruptcy Court approval and certain other limitations, to assume
or reject executory contracts and unexpired leases. In this
context, "assume" means that the Company agrees to perform its
obligations and cure all existing defaults under the contract or
lease and "reject" means that the Company is relieved from its
obligations to perform further under the contract or lease but is
subject to a claim of damages for the breach thereof. Damages
resulting from rejection are treated as pre-petition unsecured
claims in the reorganization. At August 31, 1997 the Company has a
reserve for estimated lease damage claims related to closed stores
included in liabilities subject to compromise of $3,100,000, which
was provided for in restructuring charges in the year ended August
31, 1997.
10. Impairment Loss on Long-Lived Assets
The Company wrote-down leasehold improvements, furniture,
fixtures and equipment, and any associated goodwill of eleven
stores and a distribution warehouse which were closed in fiscal
1997 and accrued the cost of the closure of a second warehouse that
was closed in October 1997. Pretax charges of $5.3 million were
recorded for the closed locations and a $640,000 write-down of
goodwill associated with these locations. The amount of the
charges recorded was determined by the net book value of the
respective items. The reorganization charges are recorded in the
Income Statement on the line "Loss on disposal of assets" and the
goodwill write-down is included on the line item "Write down of
impaired goodwill."
11. Income Taxes:
The components of the provision for income taxes for the years
ended August 31, 1997, 1996 and 1995 are as follows:
1997 1996 1995
Current $(1,576,800) $(4,142,470) $ 2,234,244
Deferred (10,077,883) 3,388,470 (2,490,244)
Valuation allowance for
deferred tax asset 14,344,683 ----- -----
----------- ----------- -----------
Income tax expense (benefit) $ 2,690,000 $ (754,000) $ (256,000)
----------- ----------- -----------
----------- ----------- -----------
The provisions (benefits) for income taxes as reported are
different from the provisions (benefits) computed by applying the
statutory federal income tax rate. The differences are reconciled
as follows:
1997 1996 1995
Federal income taxes at statutory
rate $(10,724,470) $ (728,301) $ (441,743)
State income taxes net of federal
benefit (1,192,309) (80,970) (42,875)
Adjustment to prior year provision ----- ----- 173,366
Valuation allowance for deferred
taxes 14,344,683 ----- -----
Other 262,096 55,271 55,252
------------ ----------- -----------
Income tax expense (benefit) $ 2,690,000 $ (754,000) $ (256,000)
------------ ----------- -----------
Effective tax rate (8.53%) 35.2% 19.7%
------------ ----------- -----------
------------ ----------- -----------
The components of the Company's net deferred tax asset as of
August 31, 1997 and 1996 are as follows:
1997 1996
Deferred tax assets:
Unrealized loss on marketable
securities $ ----- $ 116,100
Receivables, net 1,798,300 1,032,600
Merchandise inventory 729,200 785,500
Deferred revenue 1,756,900 3,502,800
Alternative minimum tax credit 256,000 173,000
Cumulative effect of change in
accounting principle - deferred
revenue ----- -----
Net operating loss 11,239,000 -----
Other 167,200 307,900
----------- -----------
Total deferred tax asset 15,946,600 5,917,900
----------- -----------
Deferred tax liabilities:
Preopening costs ----- 66,000
Property and equipment, net 932,740 924,300
Trade discounts 611,200 592,900
Other 57,977 67,700
----------- -----------
Total deferred tax
liabilities 1,601,917 1,650,900
Valuation allowance 14,344,683 -----
----------- -----------
Net deferred tax asset $ 0 $ 4,267,000
----------- -----------
----------- -----------
The Company recorded a valuation allowance in the amount of $14.3
million during the year ended August 31, 1997 for that portion of
the net deferred tax asset that cannot be realized by carrybacks or
offsetting deferred tax liabilities. The valuation allowance is
based upon the fact that sufficient positive evidence does not
exist, as defined in Statement of Financial Accounting Standards
No. 109, Accounting for Income Taxes, regarding the Company's
ability to realize certain deferred tax assets and carryforward
items. As a result of the valuation allowance, income tax expense
was approximately $2.7 million for the year ended August 31, 1997.
12. Related Party Transactions:
The Company conducts a portion of its business in property leased
by the heirs of its former majority shareholder. During the years
ended August 31, 1997, 1996 and 1995, the Company made payments to
such heirs or former shareholder (or on behalf of such former
shareholder) in the approximate amounts of $173,000, $161,000 and
$189,000, respectively, representing rentals under the above
arrangements.
Notes payable to former shareholder, which terminated upon his
death in January 1997, related to personal service contracts, and
was $569,782 as of August 31, 1996. These notes accrue interest,
payable monthly, at 8.50% and such interest amounted to
approximately $20,000, $53,000 and $60,000 during fiscal years
1997, 1996 and 1995, respectively.
Notes payable to a director, major shareholder and former
executive of the Company related to personal service contracts were
$85,776 as of August 31, 1997. These notes accrue interest,
payable monthly, at 8.50% and such interest amounted to
approximately $3,000 during fiscal 1997.
A Director of the Company is the managing partner of the law firm
which serves as the Company's general counsel. During fiscal 1997,
1996 and 1995, $142,000, $173,000 and $205,000, respectively, were
paid in fees to this firm.
A Director of the Company, appointed during fiscal 1997, is a
partner of the law firm which serves as the Company's special
counsel. During fiscal 1997, $62,000 were paid in fees to this
firm.
13. Employee Incentive Compensation and Benefit Plans
Stock Incentive Plan
The Company has a Stock Incentive Plan (the "Plan"), which was
adopted by the Board of Directors in 1993, for the benefit of
officers and key employees of the Company. The Plan, as amended,
authorized the issuance of incentive stock options covering up to
850,000 shares of common stock exercisable at prices equal to the
fair market value of the stock on the date of grant.
The Company in fiscal years 1996 and 1997 granted stock options and
issued shares of restricted Common Stock under the Plan. The Company applies
APB Opinion 25 and related Interpretations in accounting for the Plan. In
1995, the FASB issued FASB Statement No. 123 "Accounting for Stock-Based
Compensation" ("SFAS 123") which, if fully adopted by the Company, would
change the methods the Company applies in recognizing the cost of the Plan.
Adoption of the cost recognition provisions of SFAS 123 is optional and the
Company has decided not to elect these provisions of SFAS 123. However, pro
forma disclosures as if the Company adopted the cost recognition provisions of
SFAS 123 in 1995 are required by SFAS 123 and are presented below.
Under the Plan, the Company is authorized to issue shares of Common
Stock pursuant to "Awards" granted as incentive stock options (intended to
qualify under Section 422 of the Internal Revenue Code of 1986, as amended),
non-qualified stock options, restricted shares, and stock awards. The Company
granted nonqualified stock options in fiscal 1996 and 1997 under the Plan and
shares of restricted Common Stock in fiscal 1997 under the Plan.
The Company granted nonqualified stock options in fiscal 1996 and 1997
to employees. The stock options granted in fiscal 1996 and 1997 have
contractual terms of 10 years. All of the options granted to the employees
and have an exercise price equal to or greater than the fair market value of
the stock at grant date. The options granted in fiscal 1996 and 1997 vest
over various vesting schedules. Approximately one-half of these stock options
vest ratably over a period of five years or less. The balance vest fully
on the ninth anniversary of the date of grant, but allow for accelerated
vesting in 25% increments as the per share stock price increases to be
$3, $4, $5, and $6, respectively.
A summary of the status of the Company's stock options as of August 31,
1996 and August 31, 1997 and the changes during the year ended on those dates
is presented below:
<TABLE>
<CAPTION>
Stock Options
---------------------------------------------------------------
1997 1996
------------------------------- ------------------------------
No. Shares of Weighted No. Shares of Weighted
Underlying Average Underlying Average
Options Exercise Options Exercise
Prices Prices
<S> <C> <C> <C> <C>
Outstanding at beginning
of the year 252,257 $ 7.98 316,372 $10.63
Granted 524,000 $ 1.72 96,000 $ 2.58
Forfeited 331,500 $ 2.55 65,050 $ 9.11
Expired 157,757 $10.50 95,065 $10.60
_________ ________ _________ ________
Outstanding at end of
year 287,000 $ 1.43 252,257 $ 7.98
_________ ________ _________ ________
_________ ________ _________ ________
Exercisable at end of
year 75,000 $ 1.32 158,907 $10.72
_________ ________ _________ ________
_________ ________ _________ ________
Weighted average fair
value of options granted ---- $ 0.85 --- $ 1.28
_________ ________ _________ ________
_________ ________ _________ ________
</TABLE>
The fair value of each stock option granted is estimated on the date of
grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions for grants in fiscal 1996 and 1997: dividend
yield of 0%; risk-free interest rates range from 5.79% to 6.64%; an expected
life of 5 years for all grants; and a volatility of 47.0% for all grants.
Options outstanding as of August 31, 1997 are summarized below:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
___________________________________________ ___________________________
Range of Number Wgtd. Avg. Wgtd. Avg. Number Wgtd. Avg.
Exercise Outstanding Remaining Exercise Exercisabled Exercise
Prices at 8-31-97 Contr. Life Price at 8-31-97 Price
<S> <C> <C> <C> <C> <C>
$1.19 - $2.00 225,000 9.87 $1.26 75,000 $1.32
$2.01 - $2.88 62,000 9.02 $2.06 --- $ ---
$1.19 - $2.88 287,000 9.69 $1.43 75,000 $1.32
</TABLE>
Under the Plan, the Company also granted shares of restricted Common
Stock to selected employees. Shares of restricted stock generally vest at the
rate of 20% per year on the first through the fifth anniversaries of the date
of grant. In 1997, the Company granted 225,000 shares of restricted stock to
selected employees. No cash consideration was paid for such shares. In
accordance with APB 25, the Company has recognized a compensation charge equal
to the fair market value of these shares on the date issued. The SFAS 123
charge for these shares is equal to the APB 25 charge. Compensation expense
of $289,050, $67,500 and $74,250 relating to the restricted shares and stock
awards was recorded during the fiscal years ended August 31, 1997, 1996 and
1995, respectively.
Had the compensation cost for the Company's stock-based compensation
plans been determined consistent with SFAS 123, the Company's net loss (in
thousands) and net loss per common share for 1996 and 1997 would approximate
the pro forma amounts below:
As Reported Pro Forma As Reported Pro Forma
8/31/97 8/31/97 8/31/96 8/31/96
SFAS 123 Charge $ --- $ 54 $ --- $ 9
Net Loss $(34,233) $(34,287) $(1,388) $(1,397)
Net Loss Per
Common Share $ (6.13) $ (6.14) $ (.25) $ (.25)
The effects of applying SFAS 123 in this pro forma disclosure are not
indicative of future amounts. SFAS 123 does not apply to awards granted prior
to the 1996 fiscal year.
401(k) Savings Plan
The Company has adopted a 401(k) Savings Plan for the benefit of
substantially all employees. The Plan provides for both employee
and employer contributions. The Company matches 25% of the
employee's contribution limited to 1.0% of the employee's annual
compensation subject to limitations set annually by the Internal
Revenue Service. The Company's contributions were approximately
$60,000 and $69,000 for the years ended August 31, 1997 and 1996,
respectively.
14. Other Matters:
Private Label Credit Card Agreement
The Company has an agreement whereby an independent credit card
bank has agreed to provide financing to qualified customers of the
Company under the Company's "Campo" store private label credit card
program. The agreement provides for a financing line of up to $125
million and the Company earns promotional and other fees as a part
of this agreement.
15. Preferred Stock
The Company has 500,000 shares of preferred stock authorized with
no par value. No shares have been issued or are outstanding.
16. Contingencies and Commitments:
In the normal course of business, the Company is involved in
various legal proceedings. Based upon the Company's evaluation of
the information presently available, management believes that the
ultimate resolution of any such proceedings will not have a
material adverse effect on the Company's financial position,
liquidity or results of operation.
Under Chapter 11, substantially all pending litigation and
collection of outstanding claims against the Company at the date of
the filings are stayed while the Company continues business
operations as debtor-in-possession. As debtor-in-possession under
Chapter 11, the Company is authorized to operate its business, but
it may not engage in transactions outside the ordinary course of
business without first complying with the notice and hearing
provisions of the Bankruptcy Code and obtaining Bankruptcy Court
approval where and when necessary.
The Bankruptcy Court approved the formation of the official
unsecured creditors committee ("Creditors Committee"). The
Bankruptcy Court allowed the Creditors Committee to employ legal
counsel. The Company is required to pay certain expenses of this
committee, including counsel, to the extent allowed by the
Bankruptcy Court.
The Company entered into an employment agreement with the current
Chief Executive Officer dated June 15, 1997 which has a term
expiring on August 31, 2000.
During fiscal year 1998, the Company's existing computer software
systems will need to be evaluated and computer programs upgraded or
amended to be year 2000 compliant. The cost of this effort has not
yet been determined.
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) The following documents are filed as part of this report:
1. Financial Statements
The Company's financial statements listed below have
been filed as part of this report:
Page
Report of Independent Accountants 14
Balance Sheets as of August 31, 1997 and 1996 15
Statements of Operations for the Years Ended August
31, 1997, 1996 and 1995 16
Statements of Shareholders' Equity for the Years
Ended August 31, 1997, 1996 and 1995 17
Statements of Cash Flows for the Years Ended August
31, 1997, 1996 and 1995 18
Notes to Financial Statements 19
2. Financial Statement Schedules
All schedules have been omitted because they are not
applicable or not required, or the information appears in
the financial statements or notes thereto.
3. Exhibits
3.1 Amended and Restated Articles of Incorporation of the
Company(1), as amended by Articles of Amendment dated
January 3, 1995.(2)
3.2 Composite By-laws of the Company, as of October 4, 1996.(3)
10.1 Master Lease of 2201 S. Claiborne Avenue, 110 Terry Parkway
and 800 Distributors Row dated as of August 1, 1991 by and
between Anthony J. Campo and Giant TC, Inc., as terminated
with respect to Terry Parkway by Partial Termination of
Master Lease dated as of December 30, 1992 by and between
Anthony J. Campo and Giant TC, Inc.(1)
10.2 Lease of 5015 Bloomfield dated March 15, 1977, by and
between Elmwood Development Co. and Campo Appliance Co. of
Clearview, Inc., as amended by Supplemental and Amended
Lease Agreement dated 1977, together with Sublease of 5015
Bloomfield dated as of August 1, 1991 by and between Campo
Appliance Co. of Clearview, Inc. and Giant TC, Inc.(1)
10.3 Non-Competition Agreement dated September 1, 1991 by and
between Giant TC, Inc. and Anthony J. Campo.(1)
10.4 Personal Services Contract dated September 1, 1991 by and
between Giant TC, Inc. and Anthony J. Campo.(1)
10.5 Amendment and Restatement of Non-Competition Agreement and
Personal Services Contract dated June 29, 1992 by and
between Anthony J. Campo and Giant TC, Inc.(1)
10.6 Credit Card Program Agreement dated as of May 29, 1992 by
and between Giant TC, Inc. and Monogram Credit Card Bank of
Georgia(1), as amended by Amendment to Credit Card Program
Agreement dated as of May 29, 1992 by and between Monogram
Credit Card Bank of Georgia and Campo Electronics,
Appliances and Computers, Inc. (formerly Giant TC, Inc.),
dated October 29, 1993.(4)
10.7 Giant TC, Inc. 1992 Stock Incentive Plan(1), as amended by
Amendment No. 1 to Campo Electronics, Appliances and
Computers, Inc. 1992 Stock Incentive Plan dated October 13,
1993(5), as amended by Amendment No. 2 to Campo Electronics,
Appliances and Computers, Inc. 1992 Stock Incentive Plan
dated May 20, 1994(6), as amended by Amendment No. 3 and the
Amended and Restated Campo Electronics, Appliances and
Computers, Inc. 1992 Stock Incentive Plan dated December 7,
1994(2), as amended by the Second Amended and Restated Campo
Electronics, Appliances and Computers, Inc. 1992 Stock
Incentive Plan dated January 12, 1996,(7) as amended by
Amendment No. 1 thereto dated October 4, 1996,(3) as further
amended and restated by the Third Amended and Restated 1992
Stock Incentive Plan dated August 8, 1997. *
10.8 Form of Indemnity Agreement by and between Giant TC, Inc.
and each of Anthony P. Campo, Joseph E. Campo, Barbara
Treuting Casteix, L. Ronald Forman, Donald T. Bollinger,
Anthony J. Correro, III, David L. Ducote, William E.
Wulfers, Michael G. Ware, John Watson and Malcolm
Ballinger.(1) *
10.9 Employment Agreement dated June 29, 1992 by and between
Giant TC, Inc. and Anthony P. Campo , as amended December
30, 1992(1) as terminated and replaced by Employment
Agreement dated December 16, 1993 by and between Campo
Electronics, Appliances and Computers, Inc. and Anthony P.
Campo(5), as amended by the Amendment to Employment
Agreement dated May 16, 1996,(7) as terminated by the
Severance Agreement and Personal Services Contract and Non-
Competition Agreement dated March 19, 1997.(8)
10.10 Employment Agreement dated June 29, 1992 by and between
Giant TC, Inc. and Donald E. Galloway(1) as terminated and
replaced by Employment Agreement dated December 16, 1993 by
and between Campo Electronics, Appliances and Computers,
Inc. and Donald E. Galloway(5), as amended by the Amendment
to Employment Agreement dated May 16, 1996, as terminated by
letter agreement dated July 12, 1996.(7)
10.11 Acquisition and Interim Servicing Agreement dated November
22, 1993 by and between Monogram Credit Card Bank of Georgia
Item 14 and Campo Electronics, Appliances and Computers,
Inc.(4)
10.12 Loan Agreement dated August 30, 1995 by and between Hibernia
National Bank and Campo Electronics, Appliances and
Computers, Inc.(9), as amended by the First Amendment to
Loan Agreement as of August 30, 1995 by and between Hibernia
National Bank and Campo Electronics, Appliances and
Computers, Inc.(3), as amended by the Second Amendment to
Loan Agreement dated May 31, 1996 by and between Hibernia
National Bank and Campo Electronics, Appliances and
Computers, Inc.(10), as amended by the Third Amendment to
Loan Agreement dated December 1, 1996 by and between
Hibernia National Bank and Campo Electronics, Appliances and
Computers, Inc., as amended by Amendment to Loan Agreement
dated June 25, 1997. *
10.13 Loan Agreement dated August 30, 1995 by and between Met Life
Capital Corporation and Campo Electronics, Appliances and
Computers, Inc.(9)
10.14 Sale Agreement dated August 30, 1995 by and between Federal
Warranty Service Corporation and Campo Electronics,
Appliances and Computers, Inc.(9)
10.15 Change of Control Agreement dated as of August 29, 1996 by
and between Campo Electronics, Appliances and Computers,
Inc. and Anthony P. Campo.(7)
10.16 Campo Electronics, Appliances and Computers, Inc. Severance
Pay Plan dated as of August 29, 1996.(7)
10.17 Employment Agreement, dated March 21, 1997, by and between
the Company and Rex O. Corley, Jr., as terminated by
Severance Agreement dated June 19, 1997.(8)
10.18 Employment Agreement, dated March 21, 1997, by and between
the Company and Charles S. Gibson, Jr., as amended on June
24, 1997,(8) as terminated upon resignation of the officer.
10.19 Employment Agreement, dated March 21, 1997, by and between
the Company and Wayne J. Usie, as amended on June 24,
1997,(8) as terminated upon resignation of the officer.
10.20 Employment Agreement, dated April 14, 1997, by and between
the Company and John K. Ross,(8) as terminated upon
resignation of the officer.
10.21 Employment Agreement, dated April 23, 1997, by and between
the Company and James B. Warren,(8) as terminated upon
resignation of the officer.
10.22 Employment Agreement, dated June 15, 1997, by and between
the Company and William E. Wulfers.(8)
10.23 Consultation Agreement, dated April 17, 1997, by and between
the Company and York Management Services, Inc. *
23 Consent of Coopers & Lybrand L.L.P.
27 Financial Data Schedule
__________
* Previously filed.
(1) Incorporated by reference from the Company's Registration Statement on
Form S-1 (Registration No. 33-56796) filed with the Commission on
January 6, 1993.
(2) Incorporated by reference from the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended February 28, 1995.
(3) Incorporated by reference from the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended November 30, 1996.
(4) Incorporated by reference from the Company's Annual Report on Form 10-K
for the fiscal year ended August 31, 1993.
(5) Incorporated by reference from the Company's Registration Statement on
Form S-1 (Registration No. 33-76184) filed with the Commission on March
8, 1994.
(6) Incorporated by reference from the Company's Annual Report on Form 10-K
for the fiscal year ended August 31, 1994.
(7) Incorporated by reference from the Company's Annual Report on Form 10-K
for the fiscal year ended August 31, 1996.
(8) Incorporated by reference from the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended May 31, 1997.
(9) Incorporated by reference from the Company's Annual Report on Form 10-K
for the fiscal year ended August 31, 1995.
(10) Incorporated by reference from the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended May 31, 1996.
____________________
b) Reports on Form 8-K
A Current Report on Form 8-K was filed on June 4, 1997 to report
the Company's filing of a voluntary petition to reorganize under
Chapter 11 of the Federal Bankruptcy Code.
(c) Exhibits
All exhibits required by Item 601 of Regulation S-K have been
filed.
(d) Financial Statement Schedules
All schedules have been omitted because they are not applicable or
not required, or the information appears in the financial
statements or notes thereto.
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Amendment to be
signed on its behalf by the undersigned, therunto duly authorized.
CAMPO ELECTRONICS, APPLIANCES AND
COMPUTERS, INC.
Dated: December 15, 1997 By: /s/ Michael G. Ware
Michael G. Ware
Senior Vice President and
Chief Financial Officer
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statement of
Campo Electronics, Appliances and Computers, Inc. on Form S-8 (File No. 33-
56796) of our report, which includes an explanatory paragraph regarding the
Company's ability to continue as a going concern, dated November 14, 1997,
except as to Note six and Note seven, as to which the date is December 12,
1997, on our audits of the financial statements of Campo Electronics,
Appliances and Computers, Inc. as of August 31, 1997 and 1996, and for each of
the three years in the period ended August 31, 1997, which report is included
in this Annual Report on Form 10-K.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
New Orleans, Louisiana
December 12, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> AUG-31-1997
<CASH> 1,641
<SECURITIES> 421
<RECEIVABLES> 8,604
<ALLOWANCES> 1,600
<INVENTORY> 31,952
<CURRENT-ASSETS> 43,491
<PP&E> 27,741
<DEPRECIATION> 13,420
<TOTAL-ASSETS> 74,132
<CURRENT-LIABILITIES> 38,898
<BONDS> 0
<COMMON> 579
0
0
<OTHER-SE> (204)
<TOTAL-LIABILITY-AND-EQUITY> 74,132
<SALES> 242,278
<TOTAL-REVENUES> 242,278
<CGS> 202,501
<TOTAL-COSTS> 202,501
<OTHER-EXPENSES> 64,952
<LOSS-PROVISION> 3,921
<INTEREST-EXPENSE> 2,447
<INCOME-PRETAX> (31,543)
<INCOME-TAX> 2,690
<INCOME-CONTINUING> (34,233)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (34,233)
<EPS-PRIMARY> (6.13)
<EPS-DILUTED> (6.13)
</TABLE>
