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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, 1999
[ ] 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 $141,554,105 as of December 17, 1999.
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
On December 17, 1999, there were 19,654,249 shares of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of Annual Report to Shareholders for fiscal year ended
September 30, 1999. (Part II of Form 10-K)
(2) Portions of definitive proxy statement filed with Securities and
Exchange Commission relating to the Company's 2000 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.
On June 30, 1999, Robert A. Gunst resigned as President, Chief
Executive Officer and a Director of the Company and on July 1, 1999, Ronald A.
Unkefer, the Founder of the Company, became Chairman of the Board and Chief
Executive Officer. At the time of Mr. Unkefer's return to the Company, he
purchased for $4.7 million in cash 1,450,000 shares of restricted common stock
of the Company and received a warrant for 1,435,000 shares exercisable at a
price of $3.39612 per share.
In July 1999, the Company announced its strategy for returning
the Company to profitability, which included as key elements the elimination of
computers and home office products from the Company's overall product mix, cost
reductions, adoption of a new integrated branding and marketing campaign and
focus on providing early adopters, product-savvy consumers and middle and
upper-income customers a distinctive selection of electronics products and
services.
In August 1999, the Company completed a private placement of
3,250,000 shares of the Company's common stock in exchange for net proceeds of
approximately $15,350,000. The purchasers of those shares also received warrants
to purchase an additional 1,625,000 shares of common stock at a price of $6.125
per share.
Information Regarding Forward-Looking Statements
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 fiscal year 2000 and beyond, 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 Operating Losses and Restructuring. The Company
experienced operating losses for the fiscal years ended September 30, 1998 and
September 30, 1999, aggregating approximately $8.9 million and $39.3 million,
respectively. Operating results for fiscal 1999
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include one-time charges of $9.3 million, primarily related to personnel
reduction and inventory and accounts receivable write-offs. Although the Company
believes it will be able to successfully implement its turn-around strategy and
return to profitability in fiscal 2000, 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. The loss of the full-time
services of Ronald Unkefer or other members of senior management could have a
material adverse effect on the Company's results of operations and financial
condition. Except for an employment contract with Ronald Unkefer and severance
agreements with some officers, the Company does not have employment agreements
with any members of its senior management team.
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 and may be identical to those the Company sells. 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:
o Increased operational efficiencies of competitors;
o Competitive pricing strategies;
o Expansion by existing competitors;
o Entry by new competitors into markets in which Good Guys is
currently operating; or
o 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 fourth
calendar quarter, which is the Company's first fiscal quarter and which includes
the December holiday shopping period, has historically contributed, and is
expected to continue to represent, 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:
o Competition;
o General regional and national economic conditions;
o Consumer trends;
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o Changes in the Company's product mix;
o Timing of promotional events;
o New product introductions; and
o 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 our 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 our suppliers, particularly brand-name suppliers of stereo and
video equipment such as Sony, Mitsubishi, JVC, and Panasonic. The loss of any of
these key vendors or our 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. 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, 1999, the
Company had outstanding stock options and warrants to purchase an aggregate of
5,030,607 shares of common stock at exercise prices ranging from $3.00 to
$20.375, of which options and warrants to purchase 2,868,640 shares are
exercisable now. 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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Year 2000 Compliance. The Company presently believes that with
modifications it has made to existing software, as well as conversions it has
made to new hardware and software, the Year 2000 issue is not reasonably likely
to pose significant operational problems. However, if unforeseen difficulties
arise, or if the Company's vendors or suppliers' systems are not modified to
become Year 2000 compliant, the Year 2000 issue may have a material impact on
the results of operations and financial condition of the Company. In addition,
the Company is seeking assurances from vendors, suppliers and other third
parties with whom the Company does significant business to determine their year
2000 compliance readiness and the extent to which the Company is vulnerable to
any third party year 2000 issues. Currently, the Company is unable to assess the
unresolved year 2000 issues of third parties who do business with the Company.
There can be no assurance that other entities will achieve timely year 2000
compliance. If they do not, year 2000 problems could have a material impact on
the Company's operations. Similarly, there can be no assurance that the Company
can timely mitigate its risks related to a supplier's failure to resolve its
year 2000 issues. If such mitigation is not achievable, year 2000 problems could
have a material impact on the Company's operations.
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 sales associates 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 put a moratorium on
opening new stores and remodeling or relocating existing stores. However, when
the Company does reinstitute 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 in existing markets,
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. This
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selection comprises approximately 3,500 products from over 100 vendors and is
intended to cover all of the popular price points within each product category.
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.
Category 1999 1998 1997
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Video.......................................... 43% 41% 38%
Audio and cellular phones...................... 30% 30% 30%
Home office and computers...................... 14% 17% 19%
Other (accessories, repair service, and premier 13% 12% 13%
performance guarantee)......................
...................................... 100% 100% 100%
For the year ended September 30, 1999, 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, Panasonic, Sony and Yamaha. The three leading suppliers of computers and
home office products were, in alphabetical order, Compaq, Hewlett Packard, and
Sony. The Company made the decision in July 1999 to discontinue the home office
category, which included computers, and the discontinuance was completed in
September 1999.
During the fiscal year ended September 30, 1999, 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.
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 Internet screen
phones.
The Company has introduced high-end furniture to complement its large-screen TV
and home theater product offerings. The furniture line primarily emphasizes
shelving units which surround the TV and can store the receiver, DVD player,
CD's, and other entertainment electronics components which integrate with the
home theater. The furniture includes high quality, high style brands, such as
Bell'oggetti International and Great American Oak.
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 sales associates.
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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 and radio advertising. 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 emphasizes 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 radio and television
advertising focus 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.
All of the Company's print and direct mail advertisements are
produced and placed by the Company's advertising staff. The Company believes
that the use of its own personnel maximizes its control over advertising
effectiveness, increases its flexibility, allows quick response to changing
market conditions, and enables it to purchase media on advantageous terms. The
Company also employs Citron, Haligman, Bedecarre ("Citron"), a successful
outside advertising agency that produces and places the Company's radio and
television advertisements. Citron was responsible for creating Good Guys new
logo and image for the new targeted ad campaigns. This new, upscale logo and
image are targeted to high-income, male, higher-end entertainment electronics
enthusiasts between the ages of 30 and 50. The Company believes that this new
logo and image will further differentiate the Company from Best Buy and Circuit
City.
The Company plans to increase its advertising and marketing
budget by more than 20% in the next fiscal year. It has through Citron developed
a new integrated branding and marketing campaign designed to convey the
Company's commitment to provide early adopters, product-savvy consumers and
middle- and upper-income customers with a distinctive selection of entertainment
electronics products and services.
Customer Service
The Company believes that knowledgeable and friendly sales
associates are critical to providing superior customer service. As of September
30, 1999, the Company had over 2,470 highly trained part-time and full-time
sales associates.
All sales associates 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
associates with the knowledge base to explain and demonstrate to shoppers the
use and operation of store merchandise. This training enables associates 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 Premier Performance Guarantee under which a
third party provides extended service coverage beyond the period covered by the
manufacturer's warranty.
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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.
Expansion
In fiscal 1999, Good Guys opened or renovated/relocated eight
stores to its Audio/Video Exposition or WOW! Audio/Video Exposition format.
Pending return to profitability, the Company has canceled all plans for
additional store remodeling and new locations.
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 three categories of store formats: the
original concept, the Generation 21 format, and the EXPO/WOW! format.
o 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.
o 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.
o EXPO/WOW!: 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
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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.
The EXPO/WOW! category of store format includes the Company's
two WOW! and three EXPO/WOW! Multimedia Superstores. These
concept stores, which are jointly operated with Tower Records,
provide the same full range of consumer electronics offered at
all Good Guys stores, as well as a full range of music, video,
computer software and magazines offered by Tower Records. Good
Guys occupies approximately 30,000 square feet in each of the
WOW! stores.
Each store generally has one store manager, at least two to three
sales managers and an operations manager. The store manager oversees the store's
operations and the sales managers supervise the sales associates. Sales
associates are specialized by product category. Sales associates 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.
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, as ordered by the Company's automated
replenishment system. The Company believes that this frequency of delivery
maximizes availability of merchandise at the stores while minimizing store level
and overall inventories.
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 sales
associate 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, Montgomery
Ward, Target, several smaller 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
associates.
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Seasonality
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. Sales
in the Company's first fiscal quarter have previously been between 31% to 33% of
the Company's annual sales.
Employees
At September 30, 1999, the Company employed approximately 4,675
persons, of whom 651 were salaried, 1,554 were hourly non-selling associates and
2,470 were salespeople on commission against a minimum guarantee. At September
30, 1999, approximately 230 of its employees were employed in the Company's
executive offices; the balance were 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 (assuming that lease
options are exercised) in years ranging from 2000 to 2038.
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 maintains executive offices in Brisbane, California
at 7000 Marina Boulevard under a lease, the term of which expires (assuming that
lease options are exercised) in 2011.
ITEM 3. LEGAL PROCEEDINGS.
On January 13, 1999, the Company was named as a defendant in an
action entitled Johnson v. Circuit City Stores, et al., filed in Contra Costa
County Superior Court. The primary allegation is that a number of consumer
electronics retailers have sold computer hardware and software products that
allegedly will not properly process dates after December 31, 1999. Plaintiff
claims that the actions of the defendants violate the prohibitions in the
California Business and Professionals Code on unfair business practices and
false and misleading advertising, and seeks injunctive relief, restitution and
attorneys' fees. The defendants have removed the case to federal court and the
plaintiff has filed a motion to remand the case to state court. Discovery in the
case is at an early stage, and it is too early to be able to express any opinion
as to the likely outcome of the matter. The Company, however, believes it has
meritorious defenses to the claims alleged in the lawsuit and that the ultimate
outcome of this proceeding will not have a material impact on the financial
position or results of operations of the Company.
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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 55 Chairman and Chief Executive Officer
Paul N. Erickson 64 Chief Financial Officer
Vance R. Schram 46 Vice President/Finance, Controller and
Secretary
Cathy A. Stauffer 40 Vice President, Merchandising
Jonathan K. Wylie 55 Vice President, Advertising
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.
Paul N. Erickson became interim Chief Financial Officer of the
Company in July 1999. From 1988 to July 1999, Mr. Erickson has, through a
consulting firm owned by him, served as a strategic consultant to middle market
companies, banks and professional firms in matters of strategic development,
profit improvement and market positioning. From 1984 to 1988 he was Chief
Financial Officer for Consolidated Fibres, Inc. Previously, he has served in a
number of senior financial positions primarily in the banking and heavy
construction engineering industries.
Vance R. Schram became Vice President of Finance, Controller and
Secretary in September 1999. Mr. Schram began with the Good Guys in July 1990 as
Assistant Controller and rejoined the Company in February 1998 as Controller.
From May 1995 through January 1998 he was the Chief Financial Officer of
Stonebridge Cellars, which is the parent company of Joseph Phelps Vineyards and
Oakville Grocery.
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.
Jonathan K. Wylie became Vice President, Advertising in October
1999. From August 1991 to October 1999, he was Vice President of Advertising
with Lucky Stores. From June 1977 to August 1991 Mr. Wylie served in various
positions, most recently as the Senior Vice President Management Supervisor,
with the advertising firm of Campbell-Mithun-Esty.
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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 27 of the Company's 1999
Annual Report to Shareholders.
ITEM 6. SELECTED FINANCIAL DATA.
Incorporated by reference from page 14 of the Company's 1999
Annual Report to Shareholders.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Incorporated by reference from pages 10 through 13 of the
Company's 1999 Annual Report to Shareholders.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Incorporated by reference from pages 15 through 25 of the
Company's 1999 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, 1999 (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."
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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."
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 1998 Annual Report to Shareholders:
Independent Auditors' Report (page 26 of the 1999
Annual Report to Shareholders)
Consolidated statements of operations for each of
the three years in the period ended September 30,
1999 (page 16 of the 1999 Annual Report to
Shareholders)
Consolidated balance sheets as of September 30,
1999 and 1998 (page 15 of the 1999 Annual Report to
Shareholders)
Consolidated statements of shareholders' equity for
each of the three years in the period ended
September 30, 1999 (page 17 of the 1999 Annual
Report to Shareholders)
Consolidated statements of cash flows for each of
the three years in the period ended September 30,
1999 (page 18 of the 1999 Annual Report to
Shareholders)
Notes to consolidated financial statements (pages
19 through 25 of the 1999 Annual Report to
Shareholders)
(2) Financial Statement Schedules.
All schedules are omitted because they are not required
(in some cases because the information is not material),
or are not applicable, or the information is included in
the financial statements.
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(3) 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 Letter Agreement with Robert A. Gunst, dated March 30,
1990.* (Exhibit 10.14 to the Company's Form 10-K
Annual Report for its fiscal year ended September 30, 1990;
incorporated herein by reference.)
10.4 Employee Stock Purchase Plan, as amended.*
10.5 Amended and Restated 1994 Stock Incentive Plan.*
10.6 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.)
10.7 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.)
10.8 Letter Agreement with Jayne Spiegelman, dated August 15,
1997.* (Exhibit 10.9 to the Company's Form 10-K
Annual Report for its fiscal year ended September 30, 1990;
incorporated herein by reference.)
10.9 Loan Agreement between Good Guys-California, Inc. and Bank
of America and GE Capital, dated as of September
30, 1999.
10.10 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.)
- --------
*Compensatory plan or arrangement.
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15
10.11 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)*
10.12 Form of severance agreement entered into with Kevin
McNeill, John Duken, Gregory Steele, Cathy Stauffer,
Gera Vaz and Brad Bramy in June 1999 and Vance Schram in
August 1999. (Exhibit 10.17 to the Company Form 10-Q for
the quarter ended June 30, 1999, incorporated herein by
reference)*
10.13 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).
13.1 Annual Report to Shareholders for fiscal year ended
September 30, 1999 (pages incorporated by reference).
21.1 List of Subsidiaries.
23.1 Independent Auditors' Consent.
24.1 Power of Attorney.
27.1 Financial Data Schedule.
(b) REPORTS ON FORM 8-K.
Reports on Form 8-K for the quarter ended September 30, 1998 were filed
on August 20, 1999 (completion of private placement) and September 9,
1999 (credit facility commitment).
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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 22, 1999 THE GOOD GUYS, INC.
By
--------------------------------
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.
- ------------------------------------ Chairman and Chief Executive December 22, 1999
(Ronald A. Unkefer) Officer (Principal Executive
Officer)
- ------------------------------------ Chief Financial Officer December 22, 1999
(Paul N. Erickson) (Principal Financial Officer)
- ------------------------------------ Vice President of Finance, December 22, 1999
(Vance R. Schram) Controller and Secretary
(Principal Accounting
Officer)
/s/ STANLEY R. BAKER* Director December 22, 1999
- ------------------------------------
(Stanley R. Baker)
/S/ RUSSELL M. SOLOMON* Director December 22, 1999
- ------------------------------------
(Russell M. Solomon)
/S/ JOHN E. MARTIN* Director December 22, 1999
- ------------------------------------
(John E. Martin)
/S/ W. HOWARD LESTER* Director December 22, 1999
- ------------------------------------
(W. Howard Lester)
/S/ HORST H. SCHULZE* Director December 22, 1999
- ------------------------------------
(Horst H. Schulze)
/S/ GARY M. LAWRENCE* Director December 22, 1999
- ------------------------------------
(Gary M. Lawrence)
/S/ JOSEPH P. CLAYTON* Director December 22, 1999
- ------------------------------------
(Joseph P. Clayton)
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/S/ JOSEPH M. SCHELL* Director December 22, 1999
- ------------------------------------
(Joseph M. Schell)
*By
- ------------------------------------
Vance R. Schram
Attorney-in-Fact
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18
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 Letter Agreement with Robert A. Gunst, dated March 30, 1990.*
(Exhibit 10.14 to the Company's Form 10-K Annual Report for its
fiscal year ended September 30, 1990; incorporated herein by
reference.)
10.4 Employee Stock Purchase Plan, as amended.*
10.5 Amended and Restated 1994 Stock Incentive Plan.*
10.6 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.)
10.7 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.)
10.8 Letter Agreement with Jayne Spiegelman, dated August 15, 1997.*
(Exhibit 10.9 to the Company's Form 10-K Annual Report for its
fiscal year ended September 30, 1990; incorporated herein by
reference.)
10.9 Loan Agreement between Good Guys-California, Inc. and Bank of
America and GE Capital, dated as of September 30, 1999.
10.10 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.)
- --------
*Compensatory plan or arrangement.
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19
10.11 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)*
10.12 Form of severance agreement entered into with Kevin McNeill, John
Duken, Gregory Steele, Cathy Stauffer, Gera Vaz and Brad Bramy in
June 1999 and Vance Schram in August 1999. (Exhibit 10.17 to the
Company Form 10-Q for the quarter ended June 30, 1999, incorporated
herein by reference)*
10.13 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).
13.1 Annual Report to Shareholders for fiscal year ended September 30,
1999 (pages incorporated by reference).
21.1 List of Subsidiaries.
23.1 Independent Auditors' Consent.
24.1 Power of Attorney.
27.1 Financial Data Schedule.
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