UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) October 14, 1999
GROW BIZ INTERNATIONAL, INC.
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(Exact Name of Issuer as Specified in Charter)
Minnesota 0-22012 41-1622691
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(State or Other Jurisdiction or (Commission File (I.R.S. Employer
Incorporation or Organization) Number) Identification Number)
4200 Dahlberg Drive, Golden Valley, MN 55422-4837
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(Address of Principal Executive Offices)
(612) 520-8500
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(Registrant's Telephone Number, Including Area Code)
<PAGE>
ITEM 5. Other Events
On October 14, 1999, Grow Biz International, Inc. announced that it recorded an
$11.6 million restructuring charge relating to the Company's It's About
Games(TM) concept. The charge primarily relates to discontinuing operations of
the sixty Company-owned It's About Games(TM) stores.
This event is further described in the Press Release dated October 14, 1999,
which is incorporated herein by reference.
ITEM 7. Financial Statements and Exhibits
(c) Exhibits
99.1 Press Release dated October 14, 1999
1
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GROW BIZ INTERNATIONAL, INC.
Date: October 21, 1999 By: /s/ K. Jeffrey Dahlberg
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K. Jeffrey Dahlberg
Chairman and Chief Executive Officer
Date: October 20, 1999 By: /s/ David J. Osdoba, Jr.
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David J. Osdoba, Jr.
Vice President of Finance and Chief
Financial Officer
2
<PAGE>
GROW BIZ INTERNATIONAL, INC.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
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September 25, 1999 December 26, 1998
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ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ -- $ 2,418,000
Trade receivables, less allowance for doubtful accounts of
$1,019,000 and $1,053,000 8,671,600 13,893,700
Inventories 6,949,800 10,124,400
Prepaid expenses and other 6,919,300 2,459,300
Deferred income taxes 1,699,100 1,699,100
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Total current assets 24,239,800 30,594,500
Notes receivable 1,505,300 1,208,600
Property and equipment, net 4,729,300 5,960,500
Restructuring asset held for sale 111,900 --
Other assets, net 1,929,100 5,377,300
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$ 32,515,400 $ 43,140,900
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable 5,164,400 11,306,600
Accrued liabilities 1,131,000 1,818,700
Accrued restructuring liability 4,643,500 --
Current maturities of long-term debt 7,680,900 14,464,300
Deferred franchise fee revenue 1,280,300 1,901,800
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Total current liabilities 19,900,100 29,491,400
Long-Term Debt 8,764,000 3,484,600
Shareholders' Equity:
Common stock, no par, 10,000,000 shares authorized,
5,329,795 and 5,079,055 shares issued and outstanding -- --
Retained earnings 3,851,300 10,164,900
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Total shareholders' equity 3,851,300 10,164,900
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$ 32,515,400 $ 43,140,900
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</TABLE>
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<PAGE>
GROW BIZ INTERNATIONAL, INC.
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
-------------------------------------------------------------------
Quarter Ended Nine Months Ended
September 25, September 26, September 25, September 26,
1999 1998 1999 1998
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<S> <C> <C> <C> <C>
REVENUE:
Merchandise sales $ 11,223,300 $ 16,638,500 $ 34,165,600 $ 54,037,000
Royalties 4,755,700 4,688,700 14,391,100 14,574,700
Franchise fees 500,600 940,900 1,478,800 2,488,400
Advertising and other 194,000 215,900 438,200 505,000
------------- ------------- ------------- -------------
Total revenue 16,673,600 22,484,000 50,473,700 71,605,100
COST OF MERCHANDISE SOLD 9,846,500 13,451,700 29,195,400 44,210,500
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 7,160,800 6,541,600 21,541,100 22,082,000
RESTRUCTURING CHARGE 11,575,300 -- 11,575,300 --
GAIN ON SALE OF DISC GO ROUND -- -- -- 5,231,500
------------- ------------- ------------- -------------
Income from operations (11,909,000) 2,490,700 (11,838,100) 10,544,100
INTEREST INCOME 61,800 125,100 284,000 345,100
INTEREST EXPENSE (391,200) (143,500) (1,171,900) (351,400)
------------- ------------- ------------- -------------
Income before income taxes (12,238,400) 2,472,300 (12,726,000) 10,537,800
(BENEFIT) PROVISION FOR INCOME TAXES (4,797,500) 969,200 (4,988,600) 4,130,900
------------- ------------- ------------- -------------
NET INCOME (LOSS) $ (7,440,900) $ 1,503,100 $ (7,737,400) $ 6,406,900
============= ============= ============= =============
NET INCOME (LOSS) PER COMMON SHARE -
BASIC $ (1.43) $ .27 $ (1.50) $ 1.09
============= ============= ============= =============
WEIGHTED AVERAGE SHARES OUTSTANDING -
BASIC 5,218,600 5,614,600 5,159,200 5,861,300
============= ============= ============= =============
NET INCOME (LOSS) PER COMMON SHARE -
DILUTED $ (1.43) $ .26 $ (1.50) $ 1.06
============= ============= ============= =============
WEIGHTED AVERAGE SHARES OUTSTANDING -
DILUTED 5,243,000 5,846,800 5,183,600 6,054,700
============= ============= ============= =============
</TABLE>
4
Contact: David J. Osdoba, Jr. EXHIBIT 99.1
612-520-8500
FOR IMMEDIATE RELEASE
GROW BIZ INTERNATIONAL, INC. ANNOUNCES THIRD QUARTER RESULTS
AND RESTRUCTURING CHARGE
Minneapolis, MN (October 14, 1999) -- Grow Biz International, Inc. today
reported results for the third quarter ended September 25, 1999 and a $11.6
million restructuring charge relating to the It's About Games(TM) concept.
Revenue for the third quarter ended September 25, 1999 was $16.7 million
compared to revenue of $22.5 million for the same period in 1998. The net loss
for the quarter ended September 25, 1999 was $7.4 million, or $1.42 per share
diluted, compared to net income of $1.5 million, or $.26 per share diluted, for
the comparable period in 1998.
The Company recorded a pre-tax restructuring charge of $11.6 million in the
third quarter and expects to incur approximately $1.8 million in additional
operating costs, severance, and other restructuring costs in the fourth quarter.
This charge primarily relates to discontinuing operations of the sixty
Company-owned It's About Games stores. The concept has posted year-to-date
operating losses in excess of $3.4 million and has had a significant impact on
the overall financial performance of the Company.
Further investment in this business is not consistent with the Company's current
strategy of reducing the number of Company-owned stores and focusing on
franchised store development. The objective is to close or sell all the stores
in the chain by year-end. We expect this will result in a work force reduction
of approximately 230 employees.
The Company has completed an internal restructuring plan which included an in
depth evaluation of each of its businesses and their proper positioning for
future growth. In general, the activities of all its businesses are being
decentralized to reduce overhead costs and make each business a more effective
competitor in its industry segment. Management teams have been revamped where
necessary and industry specific business plans have been developed for each
concept.
According to Chairman and CEO, K. Jeffrey Dahlberg, " Grow Biz International has
been a solid and profitable company without It's About Games(TM). The core
concepts - Play It Again Sports(R), Once Upon A Child(R), Computer
Renaissance(R) and Music Go Round(R) - have in the aggregate delivered a
consistent revenue stream. The newest concepts - Retool(R) and Plato's Closet(R)
- - have begun franchising and are developing. Although 1999 has been a difficult
year, management has confidence in each business model. We believe the
restructuring will allow us to focus the growth and profitability of these
business concepts."
Grow Biz International, Inc. develops franchises and operates value-oriented
retail concepts for stores that buy, sell, trade and consign used and new
merchandise. At September 25, 1999, the Company had 1,216 stores in operation
and an additional 102 franchises awarded but not open. Of the stores in
operation, there were 624 Play It Again Sports(R), 225 Once Upon A Child(R), 218
Computer Renaissance(R), 72 Music Go Round(R), 64 It's About Games(TM), 8
ReTool(R) and 5 Plato's Closet(R) stores.
This press release contains, in addition to historic information,
forward-looking statements that involve risks and uncertainties. All such
forward-looking statement are based on management's current expectations and are
subject to a number of uncertainties and risks that could cause actual results
to differ materially from those described in the forward-looking statements.
Among the most important factors that would cause actual results to differ
materially from those indicated by such forward-looking statements include the
Company's ability to attract qualified franchisees, the Company's ability to
collect its receivables, the Company's ability to open stores, each store's
ability to acquire high-quality, used merchandise, the Company's ability to
control selling, general and administrative expenses, the Company's ability to
operate the Company-owned retail stores profitably, the Company's ability to
obtain competitive financing to fund its growth, and the other risk factors
detailed from time to time in the Company's periodic reports filed with the
Securities and Exchange Commission.
