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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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[X] Annual Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended September 30, 2000
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission File Number 0-14134
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THE GOOD GUYS, INC.
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(Exact name of registrant as specified in its charter)
Delaware 94-2366177
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(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
7000 Marina Boulevard, Brisbane, California 94005-1840
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(Address of principal executive offices)
Registrant's telephone number, including area code: (650) 615-5000
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value
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(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 of the
registrant was approximately $69,452,747 as of December 15, 2000.
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
On December 15, 2000, there were 22,867,055 shares of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of Annual Report to Shareholders for fiscal year ended
September 30, 2000. (Part II of Form 10-K)
(2) Portions of definitive proxy statement filed with Securities and
Exchange Commission relating to the Company's 2001 Annual Meeting of
Shareholders. (Part III of Form 10-K)
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PART I.
ITEM 1. BUSINESS.
General
The Good Guys, Inc. was incorporated in California in 1976. On March 4,
1992, the Company changed its state of incorporation from California to Delaware
by merging into a wholly owned Delaware subsidiary formed for that purpose. In
September 1995, The Good Guys, Inc. transferred substantially all of its assets
and liabilities to The Good Guys - California, Inc., its wholly owned operating
subsidiary. Unless the context otherwise requires, the terms "Company" or "Good
Guys" refers to The Good Guys, Inc., together with its operating subsidiary.
The Company is a leading specialty retailer of consumer electronics
products. The Company currently operates 79 stores: In California, 20 stores are
located in the San Francisco Bay area, 27 in the greater Los Angeles/Orange
County metropolitan area, 3 in Sacramento, 7 in San Diego, and one each in
Bakersfield, Fresno, Modesto and Stockton. In Washington, Oregon and Nevada, the
Company operates nine stores, five stores and four stores, respectively.
In August 2000, the Company completed a private placement of 2,017,647
restricted shares of the Company's common stock in exchange for $4.64 per share,
resulting in net proceeds of approximately $9.93 million. The purchasers of
those shares, which included all of the members of the Company's Board of
Directors, also received warrants to purchase an additional 1,008,822 shares of
common stock at that same price. One of the purchasers was Kenneth R. Weller,
who left his position as Vice President of Sales of Best Buy to become President
of the Company in August 2000.
Change In Fiscal Year
As previously reported, Good Guys has changed its fiscal year end from
September 30 to the last day of February for fiscal years ending after September
30, 2000. The change was made to align Good Guys' financial reporting with that
of other consumer electronics retailers and to allow the investment and vendor
communities to draw more realistic comparisons between the company and its major
competitors. The company will report on the five-month transitional period
ending February 28, 2001.
Information Regarding Forward-Looking Statements and Certain Factors
The Private Securities Litigation Reform Act of 1995 provides companies
with a "safe harbor" when making forward-looking statements. Statements of the
Company that are not historical facts, including statements about management's
expectations for future periods, are forward-looking statements and involve
certain risks and uncertainties. Factors that could cause the Company's actual
results to differ materially from management's projections, forecasts, estimates
and expectations or affect the decision to invest in the Company's securities
include, but are not limited to, the following:
Recent Net Losses and Restructuring. The Company experienced net losses
for the fiscal years ended September 30, 2000 and September 30, 1999,
aggregating approximately $17.3 million and $39.9 respectively. Although the
Company believes it will be able to successfully implement its turn-around
strategy and return to profitability, there can be no assurance that it will be
able to do so. Failure to return to profitability could have a material adverse
effect on the Company's relationships with its vendors and lenders.
Dependence on Key Personnel. The Company's success depends upon the active
involvement of senior management personnel, particularly Ronald Unkefer, the
Chairman and Chief Executive Officer and Kenneth R. Weller, the President. The
loss of the full-time services of Ronald Unkefer, Kenneth R. Weller or other
members of senior management could have a material adverse effect on the
Company's results of operations and financial condition.
Risks Associated With Competition. The retail consumer electronics
industry is highly competitive. The Company competes against a diverse group of
retailers, including several national and regional large format merchandisers
and superstores, such as Circuit City and Best Buy. Those competitors sell,
among other products, audio and video consumer electronics products similar.
Certain of these competitors have substantially greater financial resources than
those of the Company. A number of different competitive factors could have a
material adverse effect on the Company's results of operations and financial
condition, including, but not limited to:
- Increased operational efficiencies of competitors;
- Competitive pricing strategies;
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- Expansion by existing competitors;
- Entry by new competitors into markets in which Good Guys is currently
operating; or
- Adoption by existing competitors of innovative store formats or retail
sales methods.
Seasonal and Quarterly Fluctuations in Sales. Like many retailers,
seasonal shopping patterns affect the Company's business. The Good Guys is
changing its fiscal year to end on the last day of February. After a five-month
transitional period ending February 28, 2001, the next complete fiscal year
(fiscal 2002) will begin on March 1, 2001. In the future, the fourth calendar
quarter will include the December holiday shopping period, which has
historically contributed, and is expected to continue to contribute, a
substantial portion of the Company's operating income for the entire fiscal
year. As a result, any factors negatively affecting the Company during such
calendar quarter of any year could have a material adverse effect on results of
operations for the entire year. More generally, the Company's quarterly results
of operations also may fluctuate based upon such factors as:
- Competition;
- General regional and national economic conditions;
- Consumer trends;
- Changes in the Company's product mix;
- Timing of promotional events;
- New product introductions; and
- The Company's ability to execute its business strategy effectively.
Changes In Consumer Demand and Preferences. The Company's success depends
on its ability to anticipate and respond in a timely manner to consumer demand
and preferences regarding audio and video consumer products and changes in such
demand and preferences. Consumer spending patterns, particularly discretionary
spending for products such as those the Company offers, are affected by, among
other things, prevailing economic conditions. In addition, the periodic
introduction and availability of new products and technologies at price levels
which generate wide consumer interest stimulate the demand for audio and video
consumer electronics products. It is possible that these products or other new
products will never achieve widespread consumer acceptance. Furthermore, the
introduction or expected introduction of new products or technologies may
depress sales of existing products and technologies. Significant deviations from
the projected demand for products the Good Guys sells would have a materially
adverse effect on its results of operations and financial condition, either from
lost sales or lower margins due to the need to mark down excess inventory.
Dependence on Suppliers. The success of the Company's business and growth
strategy depends to a significant degree upon its maintaining a good
relationship with its suppliers, particularly brand-name suppliers of stereo and
video equipment such as JVC, Mitsubishi, Panasonic, and Sony. The loss of any of
these key vendors or the Company's failure to establish and maintain
relationships with these or other vendors could have a material adverse effect
on its results of operations and financial condition.
Inventory Purchased from Foreign Vendors. The Company purchases a
significant portion of its inventory from overseas vendors, particularly vendors
headquartered in Japan. Although substantially all the Company's merchandise
inventory purchases are domestically sourced and denominated in U.S. Dollars,
changes in trade regulations, currency fluctuations or other factors may
increase the cost of items purchased from foreign vendors or create shortages of
such items, which could in turn have a material adverse effect on the Company's
results of operations and financial condition. Conversely, significant
reductions in the cost of such items in U.S. dollars may cause a significant
reduction in retail price levels of those products and may limit or eliminate
the ability to successfully differentiate the Company from other competitors,
thereby resulting in an adverse effect on the Company's sales, margin or
competitive position.
Shares Eligible for Future Sale. As of September 30, 2000, the Company had
outstanding stock options and warrants to purchase an aggregate of 6,514,585
shares of common stock at exercise prices ranging from $2.87 to $20.50, of which
options and warrants to purchase 3,893,260 shares are exercisable now. As of
September 30, 2000, the Company had 3,467,647 outstanding restricted shares that
have registration rights. The sale of restricted shares and the sale of shares
covered by such options or warrants by the holders thereof, pursuant to existing
registration statements or registration statements filed upon exercise of
registration rights given them or pursuant to exemptions from registration,
could have an adverse effect on the market price for our common stock.
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Business Strategy
The Company's goal is to be the leading specialty retailer of consumer
entertainment electronics products in each of its markets. The cornerstones of
its business strategy include:
Merchandising. The Company's merchandising strategy is to provide shoppers
with a broad and compelling selection of brand name consumer electronics
products, with an emphasis on more fully featured merchandise. Merchandise is
offered at competitive prices and backed by a low price guarantee.
Marketing. The Company aggressively uses newspaper, direct mail and
broadcast advertising to build name recognition, to position it in its markets,
and to increase store traffic. Stores are designed to be exciting and easy to
shop and are located in high visibility and high traffic commercial areas.
Differentiated customer service. The Company believes that superior
service is an important factor in overall customer satisfaction, and that the
Company differentiates itself from other consumer electronics retailers by
providing superior service to its shoppers. The Company believes that friendly
and knowledgeable product specialists are critical to satisfying customers
interested in more fully featured, middle to high-end consumer electronics
products. The Company's objective is to generate long-term repeat business from
its customers.
Expansion. Currently, the Company has a moratorium on opening new stores
and relocating existing stores, although one store was relocated this year.
However, when the Company does re-institute an expansion program, successful
expansion will depend on, among other things, the Company's ability to continue
to locate suitable store sites and to hire and train skilled personnel. It will
also depend on the Company's ability to open new stores quickly, to achieve
economies of scale in advertising and distribution, and to gain market share
from established competitors.
Merchandising
The Company offers its customers a broad range of high quality consumer
electronics products supplied primarily by manufacturers of nationally known
brands. The following table shows the approximate percentage of sales for each
major product category for the last three fiscal years. Historical percentages
may not be indicative of percentages in future years.
YEAR ENDED SEPTEMBER 30
CATEGORY 2000 1999* 1998*
- -------- ---- ----- -----
Video ............................................... 53% 45% 43%
Audio ............................................... 18% 16% 16%
Computer and home office ............................ 0% 14% 17%
Mobile and wireless ................................. 11% 9% 10%
Other (accessories, repair service, and extended
service plans) ................................... 18% 16% 14%
Total Company .................................... 100% 100% 100%
*Certain reclassifications have been made to the 1999 and 1998 financial
data in order to conform to the current year's presentation.
For the year ended September 30, 2000, the Company's three leading
suppliers for video products were, in alphabetical order, Mitsubishi, Panasonic
and Sony, and for audio and cellular products were, in alphabetical order,
Denon, Sony and Yamaha.
During the fiscal year ended September 30, 2000, the Company's ten largest
suppliers accounted for approximately 70% of the merchandise purchased by the
Company. One of the Company's suppliers, Sony, accounted for more than 10% of
its merchandise mix.
As part of the Company's new strategic initiatives, Good Guys is
introducing new technology driven digital products and plans on establishing a
distinct area to showcase these new products from various manufacturers.
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With the increasing growth and adoption of the Internet, consumer
entertainment electronics retailers are poised to showcase "new" technology for
personal applications. As part of the Company's strategy, Good Guys is
developing strategic relationships with a number of companies involved with the
invention of "cutting edge" digital products. The Company intends to capitalize
on leading in the introduction of these new products, such as e-mail terminals,
personal communication devices, Internet gaming machines and wireless Internet
phones.
Marketing and Advertising
Good Guys aggressively uses newspaper, direct mail and broadcast
advertising to build name recognition, to position the Company in its markets
and drive store traffic. The Company's advertisements promote the Company as an
entertainment electronics specialist and emphasize competitive prices, extensive
selection, and superior customer service from knowledgeable product specialists.
To support its marketing strategy, Good Guys promotes its merchandise
through an advertising program which emphasizes the print media (consisting of
newspaper advertising, catalogs and other customer mailings) and, to a lesser
extent, television. The Company's primary advertising channel is in weekly
newspaper advertisements which highlight specific products and their prices and
specific financing plans, many times in connection with specific promotions. The
Company targets the bulk of these advertisements to run on Fridays and Sundays
in order to drive "impulse" weekend purchases. These advertisements include some
low-priced products to draw attention, but also emphasize the Company's more
fully featured models and higher-end entertainment electronics products. Also,
Good Guys has an active customer database, which is used for targeted mailings
of catalogs and other promotional advertisements and materials. The Company's
television advertising focuses primarily on "image" ads which consist of name
recognition advertising emphasizing Good Guys name and its broad and
high-quality name brand product selection, its knowledgeable sales force,
customer-oriented stores, and competitive prices. The Company believes that its
direct mail activities leverage and complement its general media advertising
campaigns.
The Company plans and directs all print, direct mail and television
advertisements. The advertisements are produced by outside vendors in order to
control costs and give maximum flexibility. The Company has increased its
advertising and marketing budgets in fiscal 2000 by more than 20% in order to
promote an integrated branding and marketing campaign. This campaign is designed
to convey the Company's commitment to provide early adopter, tech-savvy
consumers and middle and upper income customers with a distinctive selection of
consumer entertainment electronics.
Customer Service
The Company believes that knowledgeable and friendly product specialists
are critical to providing superior customer service. As of September 30, 2000,
the Company had 1,994 highly trained part-time and full-time product
specialists.
All product specialists attend a full-time, in-house initial training
program. The Company's training program is continually updated and is designed
to develop good sales practices and techniques and to provide specialists with
the knowledge base to explain and demonstrate to shoppers the use and operation
of store merchandise. This training enables specialists to better understand
customer needs and to help them select products that meet those needs.
The Company's satisfaction guarantee policy provides that a product
generally may be returned within 30 days of purchase for a full refund or an
exchange for another product. When purchasing a product from the Company,
customers may elect to purchase a Extended Service Plan under which a third
party provides extended service coverage beyond the period covered by the
manufacturer's warranty.
All merchandise purchased from the Company and in need of repair may be
returned to any of the Company's stores for service. Such merchandise is sent to
either a Company-operated or an independent factory authorized repair facility
and is returned to the store after repair. The Company has its own regional
service facilities, which service all of its stores. The Company also operates
car audio and car cellular phone installation facilities at almost all of its
locations.
The majority of the Company's sales are made through credit cards. The
Company currently honors MasterCard, VISA, American Express and various other
credit cards, as well as the Company's "Preferred Customer Card" issued by an
independent third party. Because of the relatively high cost of many of the
consumer electronics products sold by the Company, its business could be
affected by consumer credit availability.
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Store Operations
The Company's stores range in size from approximately 9,000 to 38,000
square feet. The Company's stores are predominantly located in high visibility,
high traffic commercial areas and are open seven days a week, including most
holidays.
Stores are designed to be exciting and easy to shop.
The Company has developed store formats which emphasize mid-to-upscale
products. Each store has displays designed to provide the customer with a full
spectrum of the Company's products upon entering the store. These displays allow
customers to make extensive side-by-side product comparisons. The Company's new
stores have substantially larger selling space, providing customers with an
uncluttered presentation of the latest technology and featuring multiple
demonstration rooms dedicated to home theater and mobile electronics products.
The Company operates: Original Concept stores, Generation 21 format, and
EXPO format.
- Original Concept: The original concept stores sell the full range of
Good Guys merchandise, such as television, video and stereo
components, car stereos, cameras, tapes, and related accessories. The
original concept stores typically range from 15,000 to 20,000 square
feet. The Company currently has 37 original concept stores.
- Generation 21: In fiscal 1995, Good Guys introduced its first
Generation 21 stores. These store formats are large and brighter than
the original concept stores and feature more interactive displays,
easily accessible merchandise, and vibrant graphics. The Generation 21
stores typically range in size from 20,000 to 25,000 square feet. The
Company currently has 25 Generation 21 stores.
- EXPO: In November 1996, the Company introduced its EXPO store design.
The EXPO format provides greater merchandise flexibility and
connectivity between existing categories of product, featuring
hands-on demonstrations of product interactivity throughout the store
and a central area for customers to meet with sales consultants to
design system solutions for their homes. The EXPO stores typically
range from 25,000 to 30,000 square feet. The Company currently has 17
EXPO stores.
Good Guys jointly operates 5 locations with Tower Records which are
promoted as WOW! Stores. These include 2 Generation 21 style formats and 3 EXPO
formats. These stores offer the exact same entertainment electronics assortments
as other Good Guys locations as well as a full range of music, video and books
offered by Tower Records. Good Guys occupies approximately 30,000 square feet in
each of the WOW! Stores. The Company is planning to test the licensing of
approximately 3,000 square feet in other of our locations to Tower Records,
which would offset occupancy costs and increase traffic. Two locations in Las
Vegas will be fully operational in the first quarter of fiscal 2001. If
successful, the concept has the potential to be expanded to most Good Guys
locations.
Each store generally has one store manager, sales managers and an
operations manager. The store manager oversees the store's operations and the
sales managers supervise the product specialists. Product specialists are
specialized by product category. Product specialists handle all aspects of the
customer interface: providing customers with the information necessary to
determine the best product for their specific need, tendering the invoice and
handling the payment, and bringing the goods from the stockroom to the customer.
Cashiers have been re-introduced to all locations to give customers a grab and
go (grab-n-go) option on impulse purchases and also to assist the product
specialists in transactions.
Store operations are overseen by a senior management team, which holds
frequent meetings with the store managers. Merchandising and store operation
policies for all stores are established by senior management.
Distribution
The Company operates a 460,000 square foot operations center in Hayward,
California. Deliveries are generally made to each store from three to seven days
a week depending on the season, location of stores, and store sales volumes.
Quantities are determined by the Company's automated replenishment system. The
Company believes that this frequency and method of delivery maximizes
availability of merchandise at the stores while minimizing store level and
overall inventories.
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Management Information Systems
The Company's management information system is a distributed, on-line
network of computers that links all stores, delivery locations, service centers,
credit providers, the distribution facility and the corporate offices into a
fully integrated system. Each store has its own system, which allows store
management to track sales and inventory at the product, customer or product
specialist level. The Company's point of sale system allows the capture of sales
data and customer information and allows the tracking of merchandising trends
and inventory levels on a daily basis.
Competition
The business of the Company is highly competitive. The Company competes
primarily with other specialty stores, independent electronics and appliance
stores, department stores, mass merchandisers, discount stores and catalog
showrooms. To some extent, the Company also competes with drugstores,
supermarkets and others that make incidental sales of electronics products.
Competitors of the Company include Circuit City, Best Buy, Sears, Walmart,
Target, Radio Shack and many regional and local electronics chains and
independent stores.
The Company's strategy is to compete by being a value-added retailer,
offering a broad selection of top national brand name merchandise sold at
competitive prices by a friendly, knowledgeable and motivated team of
specialists.
Seasonality
The Good Guys is changing its fiscal year to end on the last day of
February. After a five-month transitional period ending February 28, 2001, the
next complete fiscal year (fiscal 2002) will begin on March 1, 2001. In the
future, the fourth calendar quarter will include the December holiday shopping
period, which has historically contributed, and is expected to continue to
contribute, a substantial portion of the Company's operating income for the
entire fiscal year. As is the case with many other retailers, the Company's
sales are higher during the Christmas season than during other periods of the
year, and have previously been between 31% to 33% of the Company's annual sales.
Employees
At September 30, 2000, the Company employed approximately 4,190 persons,
of whom 554 were salaried, 1,642 were hourly non-selling associates and 1,994
were salespeople on commission against a minimum guarantee. At September 30,
2000, approximately 175 of its employees were employed in the Company's
executive offices; the balance was employed in its stores, distribution center,
home delivery center, and service centers. There are no collective bargaining
agreements covering any of the Company's employees. The Company has never
experienced a strike or work stoppage and management believes that relations
with its employees are excellent.
ITEM 2. PROPERTIES.
Of the Company's stores in California, 20 are located in the San Francisco
Bay area, 27 in the greater Los Angeles/Orange County metropolitan area, 3 in
Sacramento, 7 in San Diego; and one each in Bakersfield, Fresno, Modesto and
Stockton, California. In addition, Good Guys operates 9 stores in the State of
Washington, 5 stores in Oregon and 4 stores in Nevada. All of the stores are
leased under leases that have expiration dates in years ranging from 2002 to
2019.
The Company's operations center is located in a 460,000 square foot
facility in Hayward, California under a lease, the term of which expires
(assuming that lease options are exercised) in 2011.
The Company currently maintains approximately 35,000 square foot executive
offices under lease in Brisbane, California at 7000 Marina Boulevard. The
Company has entered into a lease amendment and termination agreement for the
executive offices and will relocate its executive offices in early 2001 to more
economic space leased from a new landlord.
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ITEM 3. LEGAL PROCEEDINGS.
The Company is involved in various legal proceedings arising during the
normal course of business. Management believes that the ultimate outcome of
these proceedings, individually and in the aggregate, will not have a material
impact on the financial position or results of operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS.
Not Applicable.
ITEM 4A. EXECUTIVE OFFICERS OF THE COMPANY.
The executive officers of the Company and their respective ages and
positions with the Company are as follows:
NAME AGE POSITION
---- --- --------
Ronald A. Unkefer ........ 56 Chairman and Chief Executive Officer
Kenneth R. Weller ........ 52 President
Cathy A. Stauffer ........ 41 Vice President, Merchandising
George J. Hechtman ....... 50 Vice President, Administration
Robert A. Stoffregen ..... 51 Vice President and Chief Financial
Officer
All executive officers are elected by and serve at the discretion of the
Board of Directors.
Ronald A. Unkefer founded the Company on July 1, 1973. From 1973 to 1993,
he served as Chairman and Chief Executive Officer. In January 1993, he retired
from the position of Chief Executive Officer to pursue venture capital and
broadcasting interests and continued to serve as Chairman of the Company until
January 1996. Mr. Unkefer returned to the Company as its Chairman and Chief
Executive Officer on July 1, 1999.
Kenneth R. Weller become President of the Company in August, 2000. From
April 1993 to August 2000, Mr. Weller served as Vice President of Sales of Best
Buy and from July 1982 to April 1993 he served as Vice President of Stores of
the Company.
Cathy A. Stauffer became Vice President, Merchandising in July 1999. From
January 1989 to April 1993, Ms. Stauffer served as Vice President, Advertising
of the Company. From May 1993 to December 1996 Ms. Stauffer pursued personal
interests. She returned to the Company as a consultant in January 1997 and was
named Vice President, Quality in August 1997.
George J. Hechtman was appointed as the Vice President of Administration
of the Company in April 2000. Mr. Hechtman was Senior Vice President of Store
Operations for Office Max from 1994 to 1999 and Vice President of Merchandising
and Franchise Operations for BizMart from 1991 to 1993. From July 1999 until
joining the Company, he was Executive Vice President and Chief Operating Officer
of Blue Dot Services, a heating and air conditioning contractor. A 25-year
veteran of retail operations and consumer product merchandising, Mr. Hechtman
has held various positions in consumer electronic merchandising at Circuit City,
Montgomery Ward and Pacific Stereo and has provided consulting services to
retailers ranging from McDonalds to Tandy Corporation.
Robert A. Stoffregen, CPA, JD was appointed Vice President of Finance and
Chief Financial Officer in October 2000. From 1991 to 1994, Mr. Stoffregen
served as Senior Vice President/Chief Financial Officer for The Sharper Image
and from 1994 to October 2000, he served in various capacities for companies
that included the California Culinary Academy, Radical Entertainment and Zap Me!
Corporation. He began his career with Deloitte & Touche in 1976 where he rose to
the level of partner in the firm's retail specialty group.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS.
Incorporated by reference from page 32 of the Company's 2000 Annual Report
to Shareholders.
ITEM 6. SELECTED FINANCIAL DATA.
Incorporated by reference from page 12 of the Company's 2000 Annual Report
to Shareholders.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Incorporated by reference from pages 13 through 17 of the Company's 2000
Annual Report to Shareholders.
ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk
Incorporated by reference from page 17 of the Company's 2000 Annual Report
to Shareholders.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Incorporated by reference from pages 18 through 30 of the Company's 2000
Annual Report to Shareholders.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not Applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information relating to directors of the Company required to be
furnished pursuant to this item is incorporated by reference from portions of
the Company's definitive Proxy Statement for its annual meeting of shareholders
to be filed with the Securities and Exchange Commission pursuant to Regulation
14A within 120 days after September 30, 2000 (the "Proxy Statement") under the
caption "Election of Directors." Certain information relating to executive
officers of the Company is set forth in Item 4A of Part I of this Form 10-K
under the caption "Executive Officers of Registrant."
ITEM 11. EXECUTIVE COMPENSATION.
Incorporated by reference from portions of the Proxy Statement under the
captions "Compensation of Directors and Executive Officers" and "Certain
Relationships and Related Transactions."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Incorporated by reference from portions of the Proxy Statement under the
captions "Certain Shareholders" and "Compensation of Directors and Executive
Officers."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Incorporated by reference from portions of the Proxy Statement under the
caption "Compensation of Directors and Executive Officers" and "Certain
Relationships and Related Transactions."
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) (1) Financial Statements.
Included in Part II of this report by incorporation by reference from the
2000 Annual Report to Shareholders:
Independent Auditors' Report (page 31 of the 2000 Annual
Report to Shareholders)
Consolidated statements of operations for each of the three
years in the period ended September 30, 2000 (page 19 of the
2000 Annual Report to Shareholders)
Consolidated balance sheets as of September 30, 2000 and 1999
(page 18 of the 2000 Annual Report to Shareholders)
Consolidated statements of shareholders' equity for each of
the three years in the period ended September 30, 2000 (page
20 of the 2000 Annual Report to Shareholders)
Consolidated statements of cash flows for each of the three
years in the period ended September 30, 2000 (page 21 of the
2000 Annual Report to Shareholders)
Notes to consolidated financial statements (pages 22 through
30 of the 2000 Annual Report to Shareholders)
(2) Financial Statement Schedules.
Independent Auditor's Report on Financial Statement Schedule
Schedule II Valuation and Qualifying Accounts
All other schedules are omitted because they are not required or are not
applicable, or the information is included in the financial statements.
(b) REPORTS ON FORM 8-K.
A Report on Form 8-K for the quarter ended September 30, 2000 was filed on
August 28, 2000 (appointment of Kenneth R. Weller as President and completion of
private placement).
(c) Exhibits.
3.1 Certificate of Incorporation. (Exhibit 3.1 to the Company's
Form 8-K Report for March 4, 1992; incorporated herein by
reference.)
3.2 Bylaws. (Exhibit 3.2 to the Company's Form 8-K Report for
March 4, 1992; incorporated herein by reference.)
10.1 1985 Stock Option Plan, as amended.* (Exhibit 10.1 to the
Company's Form 10-K Annual Report for the fiscal year ended
September 30, 1998; incorporated herein by reference.)
10.2 Form of Nonqualified Stock Option Agreements.* (Exhibit 4.3 to
the Company's Registration Statement on Form S-8 as filed on
January 28, 1991, registration number 33-38749; incorporated
herein by reference.)
10.3 Employee Stock Purchase Plan, as amended.* (Exhibit 10.4 to
the Company's Form 10-K Annual Report for the fiscal year
ended September 30, 1999, incorporated herein by reference).
10.4 Amended and Restated 1994 Stock Incentive Plan.*
- ----------------
* Compensatory plan or arrangement.
10
11
10.5 Assignment and Assumption Agreement, dated September 26, 1995,
by and between The Good Guys, Inc. and The Good Guys -
California, Inc. (Exhibit 10.18 to the Company's Form 10-K
Annual Report for the fiscal year ended September 30, 1995;
incorporated herein by reference.)
10.6 Form of Operating Agreement, for WOW! Stores between MTS,
Inc., dba Tower Records/Book/Video, and The Good Guys, Inc.,
used in connection with all existing WOW! stores. (Exhibit
10.20 to the Company's Form 10-K Annual Report for the fiscal
year ended September 30, 1995; incorporated herein by
reference.)
10.7 Loan Agreement between Good Guys-California, Inc. and Bank of
America and GE Capital, dated as of September 30, 1999.
(Exhibit 10.9 to the Company's Form 10-K for the fiscal year
ended September 30, 1999; incorporated herein by reference.)
10.8 Stock Purchase Agreement, dated June 1, 1999, between Ronald
A. Unkefer and the Company. (Exhibit 10.15 to the Company's
Report on Form 10-Q for the quarter ended June 30, 1999;
incorporated herein by reference.)
10.9 Employment Agreement dated June 2, 1999, between Ronald A.
Unkefer and the Company. (Exhibit 10.16 to the Company's
Report on Form 10-Q for the quarter ended June 30, 1999;
incorporated herein by reference)*
10.10 Form of severance agreement entered into with Cathy Stauffer
in June 1999. (Exhibit 10.17 to the Company Form 10-Q for the
quarter ended June 30, 1999, incorporated herein by
reference)*
10.11 Stock Purchase Agreement dated as of August 19, 1999, together
with the forms of Warrant to Purchase Shares of Common Stock
and Registration Rights Agreement executed in connection with
private placement. (Exhibit 10.18 to the Company's Report on
Form 8-K for August 20, 1999; incorporated herein by
reference).
10.12 Executive Employment Agreement with Kenneth R. Weller, dated
August 15, 2000. (Exhibit 10.14 to the Company's Report on
Form 8-K filed on August 29, 2000; incorporated herein by
reference.)
10.13 Stock and Warrant Subscription Agreement, dated as of August
15, 2000, between The Good Guys, Inc. and Kenneth R. Weller.
(Exhibit 10.15 to the Company's Report on Form 8-K filed on
August 29, 2000; incorporated herein by reference.)
10.14 Stock Purchase Agreement, dated as of August 15, 2000, between
The Good Guys, Inc. and the persons listed on Schedule A
thereto. (Exhibit 10.16 to the Company's Report on Form 8-K
filed on August 29, 2000; incorporated herein by reference.)
10.15 Registration Rights Agreement, dated as of August 16, 2000,
between The Good Guys, Inc. and the persons listed on Schedule
A thereto. (Exhibit 10.17 to the Company's Report on Form 8-K
filed on August 29, 2000; incorporated herein by reference.)
10.16 Form of Warrant to Purchase Shares of Common Stock of The Good
Guys to be issued pursuant to the Stock Purchase Agreement,
dated as of August 16, 2000, between The Good Guys and the
persons listed on Schedule A thereto. (Exhibit 10.18 to the
Company's Report on Form 8-K filed on August 29, 2000;
incorporated herein by reference.)
10.17 Letter agreement between George J. Hechtman and the Company,
dated April 12, 2000.*
10.18 Letter agreement between Robert A. Stoffregen and the Company,
dated September 29, 2000.*
10.19 Option Agreement between George Hechtman and the Company,
dated April 26, 2000.*
10.20 Option Agreement between Robert A. Stoffregen and the Company,
dated October 6, 2000.*
10.21 Option Agreement between the Company and Stanley R. Baker,
dated July 27, 2000.*
13.1 Annual Report to Shareholders for fiscal year ended September
30, 2000 (pages incorporated by reference).
21.1 List of Subsidiaries.
23.1 Independent Auditors' Consent.
24.1 Power of Attorney.
11
12
27.1 Financial Data Schedule.
12
13
INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Shareholders
of The Good Guys, Inc.:
We have audited the consolidated financial statements of The Good Guys, Inc. and
subsidiaries (the "Company") as of September 30, 2000 and 1999, and for each of
the three fiscal years in the period ended September 30, 2000 (as restated), and
have issued our report thereon dated December 5, 2000; such financial statements
and report are included in your 2000 Annual Report to Shareholders and are
incorporated herein by reference. Our audits also included the financial
statement schedule of The Good Guys, Inc. and subsidiaries listed in Item
14(a)(2). This financial statement schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/s/ Deloitte & Touche LLP
San Francisco, California
December 5, 2000
SCHEDULE II
THE GOOD GUYS, INC. & SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(Dollars in Thousands)
Column A Column B Column C Column D Column E
----------- ----------- ------------ ------------ -----------
Additions
Balance at Charged to Balance at
Beginning Costs and End of
Description of Period Expenses Deductions Period
----------- ----------- ------------ ------------ -----------
Period Ended September 30, 1998:
Allowance for Doubtful Accounts $1,196 $ 47 $1,149
Period Ended September 30, 1999:
Allowance for Doubtful Accounts $1,149 $400 $ 86 $1,463
Period Ended September 30, 2000:
Allowance for Doubtful Accounts $1,463 $488 $468 $1,483
13
14
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Dated: December 29, 2000 THE GOOD GUYS, INC.
By: /s/ RONALD A. UNKEFER
-------------------------------------
Ronald A. Unkefer
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ RONALD A. UNKEFER Chairman and Chief Executive Officer December 29, 2000
- ----------------------------------------- (Principal Executive Officer)
(Ronald A. Unkefer)
/s/ ROBERT A. STOFFREGEN Chief Financial Officer December 29, 2000
- ----------------------------------------- (Principal Financial and Accounting Officer)
(Robert A. Stoffregen)
/s/ STANLEY R. BAKER* Director December 29, 2000
- -----------------------------------------
(Stanley R. Baker)
/s/ RUSSELL M. SOLOMON* Director December 29, 2000
- -----------------------------------------
(Russell M. Solomon)
/s/ JOHN E. MARTIN* Director December 29, 2000
- -----------------------------------------
(John E. Martin)
/s/ W. HOWARD LESTER* Director December 29, 2000
- -----------------------------------------
(W. Howard Lester)
/s/ GARY M. LAWRENCE* Director December 29, 2000
- -----------------------------------------
(Gary M. Lawrence)
/s/ JOSEPH P. CLAYTON* Director December 29, 2000
- -----------------------------------------
(Joseph P. Clayton)
/s/ JOSEPH M. SCHELL* Director December 29, 2000
- -----------------------------------------
(Joseph M. Schell)
/s/ KENNETH R. WELLER* Director December 29, 2000
- -----------------------------------------
(Kenneth R. Weller)
*By /s/ ROBERT A. STOFFREGEN
--------------------------------------
Robert A. Stoffregen, Attorney-in-Fact
14
15
EXHIBIT INDEX
3.1 Certificate of Incorporation. (Exhibit 3.1 to the Company's
Form 8-K Report for March 4, 1992; incorporated herein by
reference.)
3.2 Bylaws. (Exhibit 3.2 to the Company's Form 8-K Report for
March 4, 1992; incorporated herein by reference.)
10.1 1985 Stock Option Plan, as amended.* (Exhibit 10.1 to the
Company's Form 10-K Annual Report for the fiscal year ended
September 30, 1998; incorporated herein by reference.)
10.2 Form of Nonqualified Stock Option Agreements.* (Exhibit 4.3 to
the Company's Registration Statement on Form S-8 as filed on
January 28, 1991, registration number 33-38749; incorporated
herein by reference.)
10.3 Employee Stock Purchase Plan, as amended.* (Exhibit 10.4 to
the Company's Form 10-K Annual Report for the fiscal year
ended September 30, 1999, incorporated herein by reference).
10.4 Amended and Restated 1994 Stock Incentive Plan.*
10.5 Assignment and Assumption Agreement, dated September 26, 1995,
by and between The Good Guys, Inc. and The Good Guys -
California, Inc. (Exhibit 10.18 to the Company's Form 10-K
Annual Report for the fiscal year ended September 30, 1995;
incorporated herein by reference.)
10.6 Form of Operating Agreement, for WOW! Stores between MTS,
Inc., dba Tower Records/Book/Video, and The Good Guys, Inc.,
used in connection with all existing WOW! stores. (Exhibit
10.20 to the Company's Form 10-K Annual Report for the fiscal
year ended September 30, 1995; incorporated herein by
reference.)
10.7 Loan Agreement between Good Guys-California, Inc. and Bank of
America and GE Capital, dated as of September 30, 1999.
(Exhibit 10.9 to the Company's Form 10-K for the fiscal year
ended September 30, 1999; incorporated herein by reference.)
10.8 Stock Purchase Agreement, dated June 1, 1999, between Ronald
A. Unkefer and the Company. (Exhibit 10.15 to the Company's
Report on Form 10-Q for the quarter ended June 30, 1999;
incorporated herein by reference.)
10.9 Employment Agreement dated June 2, 1999, between Ronald A.
Unkefer and the Company. (Exhibit 10.16 to the Company's
Report on Form 10-Q for the quarter ended June 30, 1999;
incorporated herein by reference)*
10.10 Form of severance agreement entered into with Cathy Stauffer
in June 1999. (Exhibit 10.17 to the Company Form 10-Q for the
quarter ended June 30, 1999, incorporated herein by
reference)*
10.11 Stock Purchase Agreement dated as of August 19, 1999, together
with the forms of Warrant to Purchase Shares of Common Stock
and Registration Rights Agreement executed in connection with
private placement. (Exhibit 10.18 to the Company's Report on
Form 8-K for August 20, 1999; incorporated herein by
reference).
10.12 Executive Employment Agreement with Kenneth R. Weller, dated
August 15, 2000. (Exhibit 10.14 to the Company's Report on
Form 8-K filed on August 29, 2000; incorporated herein by
reference.)
10.13 Stock and Warrant Subscription Agreement, dated as of August
15, 2000, between The Good Guys, Inc. and Kenneth R. Weller.
(Exhibit 10.15 to the Company's Report on Form 8-K filed on
August 29, 2000; incorporated herein by reference.)
10.14 Stock Purchase Agreement, dated as of August 15, 2000, between
The Good Guys, Inc. and the persons listed on Schedule A
thereto. (Exhibit 10.16 to the Company's Report on Form 8-K
filed on August 29, 2000; incorporated herein by reference.)
10.15 Registration Rights Agreement, dated as of August 16, 2000,
between The Good Guys, Inc. and the persons listed on Schedule
A thereto. (Exhibit 10.17 to the Company's Report on Form 8-K
filed on August 29, 2000; incorporated herein by reference.)
- ----------------
* Compensatory plan or arrangement.
15
16
10.16 Form of Warrant to Purchase Shares of Common Stock of The Good
Guys to be issued pursuant to the Stock Purchase Agreement,
dated as of August 16, 2000, between The Good Guys and the
persons listed on Schedule A thereto. (Exhibit 10.18 to the
Company's Report on Form 8-K filed on August 29, 2000;
incorporated herein by reference.)
10.17 Letter agreement between George J. Hechtman and the Company,
dated April 12, 2000.*
10.18 Letter agreement between Robert A. Stoffregen and the Company,
dated September 29, 2000.*
10.19 Option Agreement between George Hechtman and the Company,
dated April 26, 2000.*
10.20 Option Agreement between Robert A. Stoffregen and the Company,
dated October 6, 2000.*
10.21 Option Agreement between the Company and Stanley R. Baker,
dated July 27, 2000.*
13.1 Annual Report to Shareholders for fiscal year ended September
30, 2000 (pages incorporated by reference).
21.1 List of Subsidiaries.
23.1 Independent Auditors' Consent.
24.1 Power of Attorney.
27.1 Financial Data Schedule.
16