[ARTICLE] 5
<TABLE>
<S> <C>
[PERIOD-TYPE] 3-MOS
[FISCAL-YEAR-END] MAR-31-2000
[PERIOD-END] JUN-26-1999
[CASH] 829
[SECURITIES] 0
[RECEIVABLES] 493
[ALLOWANCES] 5
[INVENTORY] 2490
[CURRENT-ASSETS] 4315
[PP&E] 4668
[DEPRECIATION] 1105
[TOTAL-ASSETS] 8509
[CURRENT-LIABILITIES] 1279
[BONDS] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 7188
[OTHER-SE] (505)
[TOTAL-LIABILITY-AND-EQUITY] 8509
[SALES] 4117
[TOTAL-REVENUES] 4117
[CGS] 2472
[TOTAL-COSTS] 2472
[OTHER-EXPENSES] 1866
[LOSS-PROVISION] (221)
[INTEREST-EXPENSE] 5
[INCOME-PRETAX] (216)
[INCOME-TAX] 76
[INCOME-CONTINUING] (140)
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] (140)
[EPS-BASIC] (.03)
[EPS-DILUTED] (.03)
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 26, 1999
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 0-22524
REAL GOODS TRADING CORPORATION
(Exact name of small business issuer as specified in its charter)
California 68-0227324
(State or other jurisdiction of (IRS Employer Identification
incorporation or organization) Number)
3440 Airway Drive, Santa Rosa, California 95403
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code:
(707) 542-2600
Former name, former address and former fiscal year, if changed
since last report.
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the past 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
As of July 26, 1999, there were issued and outstanding 4,080,742
shares of common stock of the issuer.
<PAGE>
REAL GOODS TRADING CORPORATION
INDEX
Page
Form 10-QSB Cover Page 1
Index 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Condensed Consolidated Balance Sheets
at June 26, 1999 and March 31, 1999 3
Condensed Consolidated Statements of
Operations for the three-month periods
ended June 26, 1999 and June 27, 1998 4
Condensed Consolidated Statements of
Cash Flows for the three month periods
ended June 26, 1999 and June 27, 1998 5
Notes to Condensed Consolidated
Financial Statements 6
Item 2. Management's Discussion and
Analysis of Financial Condition and
Results of Operations. 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. 12
Item 2. Changes in Securities.
Item 3. Defaults Upon Senior Securities.
Item 4. Submission of Matters to a Vote
of Security-Holders.
Item 5. Other Information.
Item 6. Exhibits and Reports on Form 8-K.
Signatures 12
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
REAL GOODS TRADING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
(In thousands except share data)
<S> <C> <C>
June 26, March 31,
1999 1999
ASSETS
Current Assets
Cash $ 829 $ 2,048
Accounts receivable,
net of allowance of $6 493 240
Interest receivable from affiliate 5 -
Note receivable - 20
Inventories, net 2,490 2,080
Deferred catalog costs, net 259 272
Prepaid expenses 150 266
Deferred taxes 89 89
Total current assets 4,315 5,015
Property, equipment and
improvements, net 3,563 3,553
Property held for sale 78 78
Note receivable from affiliate 241 196
Other assets 198 198
Deferred taxes & taxes receivable 114 39
TOTAL ASSETS $ 8,509 $ 9,079
LIABILITIES AND SHAREOWNERS' EQUITY
Current Liabilities
Accounts payable $ 705 $ 873
Accrued expenses 427 620
Customer deposits 89 138
Current maturities
of long-term debt 16 16
Other taxes payable 42 57
Total current liabilities 1,279 1,704
Long-term debt 547 552
TOTAL LIABILITIES 1,826 2,256
Shareowners' Equity
Preferred stock, without par value;
Authorized 1,000,000 shares;
None issued or outstanding - -
Common stock, without par value:
Authorized 10,000,000 shares;Issued
and outstanding 4,080,742 shares 7,188 7,188
Accumulated deficit (505) (365)
Total shareowners' equity 6,683 6,823
TOTAL LIABILITIES AND SHAREOWNERS' EQUITY $ 8,509 $ 9,079
See notes to condensed consolidated financial statements
<PAGE>
REAL GOODS TRADING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands except share and per share data)
Three Months Ended
June 26, June 27,
1999 1998
<S> <C> <C>
Net sales $ 4,117 $ 3,333
Cost of sales 2,472 1,918
Gross Profit 1,645 1,415
Selling, general and administrative expenses 1,866 1,740
Loss from operations (221) (325)
Interest and other income and expense, net 5 20
Loss before income taxes (216) (305)
Income tax benefit 76 122
Net loss $ (140) $ (183)
Net loss per share, basic and diluted $ (0.03) $ (0.05)
Weighted average shares outstanding,
basic and diluted 4,080,742 3,910,008
See notes to condensed consolidated financial statements
<PAGE>
REAL GOODS TRADING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Three Months Ended
June 26, June 27,
1999 1998
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (140) $ (183)
Adjustments to reconcile net loss to
net cash provided by (used in)
operating activities:
Depreciation and amortization 97 57
Deferred income taxes (75) (122)
Changes in assets and liabilities:
Accounts receivable (253) 41
Interest receivable from affiliate (5) -
Note receivable 20 -
Inventory (410) (38)
Deferred catalog costs 13 237
Prepaid expenses 116 43
Accounts payable (168) (77)
Accrued expenses (193) (7)
Other taxes payable (15) 48
Customer deposits (49) 73
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (1,062) 72
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment, improvements,
and construction in progress (107) (115)
Note receivable from affiliate (45) (59)
NET CASH USED IN INVESTING ACTIVITIES (152) (174)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of debt (5) (4)
Proceeds from issuance of
common stock, net - 344
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES (5) 340
NET (DECREASE) INCREASE IN CASH (1,219) 238
CASH AT BEGINNING OF PERIOD 2,048 1,301
CASH AT END OF PERIOD $ 829 $1,539
See notes to condensed consolidated financial statements
<PAGE>
REAL GOODS TRADING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
FOR THE THREE MONTH PERIOD ENDED JUNE 26, 1999
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial
statements have been prepared from the records of the Company
and, in the opinion of management, include all adjustments
(consisting of only normal recurring accruals) necessary to
present fairly the financial position at June 26, 1999 and the
interim results of operations and cash flows for the three months
ended June 26, 1999 and June 27, 1998. Certain reclassifications
have been made to the prior year amounts to conform to the June
1999 presentation (see Note 2 below). The balance sheet as of
March 31, 1999 was derived from the Company's audited
consolidated financial statements included in the Company's
Annual Report on Form 10ksb for the year ended March 31, 1999.
Accounting policies followed by the Company are described in Note
1 to the audited financial statements for the fiscal year ended
March 31, 1999 included in the Company's fiscal 1999 Annual
Report to Shareowners. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have
been condensed or omitted for purposes of the condensed financial
statements. The condensed consolidated financial statements
should be read in conjunction with the audited financial
statements, including notes thereto, for the year ended March 31,
1999.
The results of operations for the three month period herein
presented are not necessarily indicative of the results to be
expected for the full year.
NOTE 2 - CHANGE OF PRESENTATION
Included in net sales and cost of sales for the three month
periods ended June 26, 1999 and June 27, 1998 are shipping and
handling fees collected from customers of $253,000 and $278,000
and freight out expense of $226,000 and $219,000, respectively.
Previously these amounts were presented as a net amount in
selling, general and administrative expenses. Such sales and
cost of sales have been reclassified into net sales and cost of
sales for the periods presented because management believes this
more accurately represents its true sales and cost of sales
amounts.
NOTE 3 - RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities. SFAS No. 133 requires that an entity
recognize all derivatives as either assets or liabilities in the
statement of financial position and measure these instruments at
fair value. This statement is expected to be effective for the
Company's fiscal 2002. The Company believes that this statement
will not have a material effect on its financial statements.
NOTE 4 - LINE OF CREDIT
The Company has a line of credit agreement for $1,500,000 with
National Bank of the Redwoods (the "Bank"). Borrowings bear
interest at 1.5% over the prime rate, payable in monthly
installments. The line is personally guaranteed by the Company's
Chairman and largest shareowner. At June 26, 1999 no amounts
were outstanding on the Company's line of credit. Effective in
April 1999, the line was extended through August 31, 1999. The
Company is currently in the process of reviewing the line.
The line of credit agreement contains restrictive covenants
including debt to net worth, current ratios, restrictions on
capital expenditures, positive cash flow at a certain point in
the fiscal year and prohibitions on payment of cash dividends
without the Bank's approval. The line is collateralized by
substantially all of the Company's assets, including inventory,
accounts receivable and mailing lists as well as a key person
life insurance policy on the life of the Company's Chairman and
largest shareowner. At June 26, 1999 the Company was in
compliance with all covenants of the line of credit agreement.
NOTE 5 - SHAREOWNERS' EQUITY
In August 1998, the Board of Directors authorized the Company to
purchase up to $100,000 of common stock in open market and
private transactions. In fiscal 1999, 3,900 shares were
purchased for $14,850 and retired. From inception of this
purchase program through June 26, 1999, a total of 13,084 shares
had been purchased and retired at an average price of $4.88 per
share. During the first quarter of fiscal 2000 and fiscal 1999,
there was no activity under this program.
NOTE 6 - LEGAL ACTION
The Company has been named as the defendant in an EEOC complaint
by a former employee. The Company believes that the complaint is
without merit and intends to defend the matter vigorously. No
reserves for this action have been established as of June 26,
1999.
NOTE 7 - SEGMENT INFORMATION
The Company has three divisions (Catalog, Retail and Renewables),
all of which sell products purchased from other suppliers
directly to customers. The customer bases of all three divisions
overlap to some extent, and the purchases and delivery processes
to customers overlap as well.
Each of the three divisions qualifies as a reportable segment
because each is more than 10% of the combined revenue of all
operating segments. Financial information for the Company's
business segments was as follows:
June 26, June 27,
1999 1998
<S> <C> <C>
Net Sales:
Catalog Division $ 2,312 $ 2,000
Retail Division 790 762
Renewables Division 1,015 571
Consolidated Net Sales 4,117 3,333
Gross Margin:
Catalog Division 1,032 906
Retail Division 303 307
Renewables Division 310 202
Consolidated Gross Margin 1,645 1,415
Reconciliation of Gross Margin to
Net Loss:
Selling, general &
administrative expenses
Catalog Division 1,029 1,097
Retail Division 442 404
Renewables Division 395 239
Consolidated S G & A expenses 1,866 1,740
Interest income 17 13
Interest expense (12) (12)
Gain on sale of assets - 19
Income tax benefit 76 122
Net Loss $ (140) $ (183)
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SALES
Net sales of $4,117,000 for the first quarter of fiscal 2000 were
up 24% over the first quarter of fiscal 1999 (net sales of
$3,333,000) primarily due to stronger sales of renewable energy
products and internet sales within the catalog division.
Catalog net sales in the first quarter of fiscal 2000 increased
by 16% to $2,312,000 from $2,000,000 in the first quarter of
fiscal year 1999 as a result of stronger response rates to the
Company's catalogs and higher average orders. Catalog sales,
including internet orders, were 56% of total net sales as
compared to 60% in the first quarter of fiscal 1999. Sales via
the internet increased 231% to $235,000 in the first quarter of
Fiscal 2000 from $71,000 in the first quarter of fiscal 1999.
Retail store net sales increased 4% to $790,000 from $762,000 in
the first quarter last year. Sales improved in the Hopland, CA
and Eugene, OR stores but decreased in the Berkeley, CA store.
Retail sales amounted to 19% of total net sales in the first
quarter of fiscal 2000 as compared with 23% of total net sales in
the same period last year.
Renewable energy sales increased 78% to $1,015,000 in the first
quarter of fiscal 2000 from $571,000 in the same period in fiscal
1999. These revenues include a $182,000 sale of a solar system
to a winery in Northern California in the first quarter of fiscal
2000. Additionally, the increase in sales is due to continuing
success of the Company's utilization of the incentive program
being provided by the California Energy Commission (CEC) to
encourage use of renewable energy in connection with the
deregulation of California utilities. Renewable energy sales
amounted to 25% of total net sales in the first quarter of fiscal
2000 as compared with 17% of the total in the same period last
year. The CEC program, begun in March 1999, is mandated by the
California legislature to continue for a minimum of four years
from inception.
GROSS PROFIT
Gross profit for the three months ended June 26, 1999 was
$1,645,000 or 40% of sales as compared with $1,415,000 or 43% in
the same period last year. Overall margins declined with the
relatively lower proportion of catalog sales, which are
historically produce the Company's highest gross profit as a
percentage of sales, and a higher proportion of lower margin
renewable energy sales in the first quarter of fiscal year 2000
as compared with the first quarter of the prior year.
Catalog sales had a gross profit of 45% or $1,033,000 and
$906,000, respectively for the first quarters of fiscal 2000 and
fiscal 1999. Retail stores' margins for the first quarter of
fiscal 2000 were 38% or $302,000 and were down slightly from the
40% margin level or $307,000 of the same period in fiscal 1999.
This slight decrease reflects a higher percentage of renewable
product sales in the sales mix. Renewable energy sales,
including design and consulting fees for solar, wind and hydro
projects, had a gross margin of 31% or $310,000 as compared to a
gross margin of 31% or $202,000 in the same period of the prior
fiscal year.
Renewable energy sales typically have lower associated gross
margins which tend to reduce the Company's overall average gross
margin.
OPERATING EXPENSES
Selling, general and administrative expenses were $1,866,000, or
45% of net sales and were significantly lower as a percentage of
sales compared with the first three months of the prior year,
$1,740,000 and 52%, respectively. This decrease in percentage
reflects percentage decreases in the areas of labor and benefits,
catalog costs, advertising, repairs and maintenance. Decreases
in these areas were offset by increases in postage and freight,
utilities, and purchased services (legal, accounting and contract
labor services).
INTEREST EXPENSE AND OTHER INCOME
In the first quarter of fiscal 2000, the Company had net other
income of $5,000 as compared with net other income of $20,000 in
the first quarter of fiscal 1999. The net other income figure of
$5,000 in fiscal 2000 consists primarily of interest income. In
the same period last year, net other income was primarily a gain
on the sale of equipment.
EARNINGS
For the first three months of fiscal 2000, the Company incurred a
pre-tax loss of $216,000 and a net loss of $140,000, or $.03 per
share compared to a pre-tax loss in the first quarter of fiscal
1999 of $305,000, and a net loss of $183,000 or $.05 per share.
The Company's first fiscal quarter, which ends at the end of
June, is historically a weak quarter and is almost never
profitable. The Company typically experiences a moderate degree
of seasonality with sales and earnings building toward the third
quarter (the holiday season) which is historically the Company's
strongest quarter.
INCOME TAX BENEFIT
The income tax benefit was 35% in the first quarter of fiscal
2000 compared with 40% in the first quarter of fiscal 1999. These
rates represent the projected rates expected by management for
each fiscal year.
LIQUIDITY AND CAPITAL RESOURCES
For the quarter ended June 26, 1999, cash used in operations was
$1,062,000 primarily due to increases in accounts receivable and
inventory and decreases in accounts payable and accrued
liabilities. Accounts receivable increased $253,000 largely as a
result of the solar system sale to the winery and associated CEC
credits. The Company used $410,000 for net increases to
inventory to support a higher sales volume. Overall, the Company
used $152,000 on net investing activities.
The net effect of these activities was to decrease cash from
$2,048,000 at March 31, 1999 to $829,000 at June 26, 1999.
The Company believes that cash from operations and available
borrowings will be adequate to meet anticipated requirements for
working capital, capital expenditures and debt service for the
foreseeable future.
EFFECTS OF INFLATION
The overall effects of inflation on the Company's business during
the periods discussed were not believed to be material.
YEAR 2000 PREPAREDNESS
The Company continues to address the Year 2000 ("Y2K") problem
through a comprehensive evaluation of its hardware, software,
communications and key external vendors and suppliers. At June
26, 1999 the Company estimates that it has completed
substantially all of the necessary hardware upgrades and a large
portion of its software upgrades. Costs of the evaluation and
upgrades approximate $233,000 most of which has been incurred in
the normal course of business as periodic software and hardware
upgrades through June 26, 1999.
During the first quarter of fiscal 2000, the Company upgraded its
Ukiah facility server and related hardware and software.
The Company continues its software upgrades and vendor
evaluations and certifications. The Company's Y2K initiatives are
on schedule and no major problems have been encountered to this
time. However, there can be no assurance that the systems of
other companies on which the Company and its systems rely will be
converted in a timely fashion, or that any such failure to
convert by another company would not have an adverse effect on
the Company's systems. Furthermore, there can be no guarantee
that these schedules will be achieved, and actual results could
differ materially from these estimates. Specific factors that
might cause such material differences include, but are not
limited to, the availability of personnel trained in this area
and the cost of such personnel, and the ability to locate and
correct all relevant computer codes and similar uncertainties.
While the Company cannot accurately predict a "worst case
scenario" with regard to its Y2K issues, the failure by the
Company and/or vendors to complete Y2K compliance work in a
timely manner could have a materially adverse effect on the
Company's operations. The Company is in the process of assessing
these risks and uncertainties and developing appropriate courses
of action.
*****
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
Incorporated by reference; see Note 5 - "Legal Action" in
accompanying Notes to Condensed Consolidated Financial
Statements.
Item 2. Changes in Securities.
Not Applicable.
Item 3. Defaults Upon Senior Securities.
Not Applicable.
Item 4. Submission of Matters to a Vote of Security-Holders.
Not Applicable
Item 5. Other Information.
Not Applicable
Item 6. Exhibits and Reports on Form 8-K.
July, 8, 1999 - Real Goods provides Fetzer vineyards
with 40 kW solar-power system
July 8, 1999 - Real Goods announces affiliation with
Working Assets Shopforchange.com
June 29, 1999 - Real Goods announces Internet sales up
501% in fiscal 1999.
June 28, 1999 - Real Goods elects Mark Swedlund as
President.
April 30, 1999 - Real Goods announces resignation of Ron
Zell as CEO - - John Schaeffer to reassume CEO
position.
SIGNATURES
In accordance with the requirements of the Securities Exchange
Act, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
REAL GOODS TRADING CORPORATION
(Registrant)
DATED: August 6, 1999
by:<S> LESLIE B. SEELY
Leslie B. Seely
Chief Financial Officer
</TABLE>
