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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JANUARY 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _________ TO _________
COMMISSION FILE NUMBER 0-14323
SPEC'S MUSIC, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
FLORIDA 59-1362127
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1666 N.W. 82ND AVENUE
MIAMI, FLORIDA 33126
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
(305) 592-7288
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SHARES OF COMMON STOCK OUTSTANDING
AS OF MARCH 12, 1996: 5,245,141
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[ ]
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SPEC'S MUSIC, INC.
FORM 10-Q
TABLE OF CONTENTS
PART I.
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED BALANCE SHEETS....................... 3
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS............... 4
CONSOLIDATED CONDENSED STATEMENTS OF
CASH FLOWS................................................ 5
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS...................................... 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS
OF OPERATIONS............................................ 8
PART II.
OTHER INFORMATION
ITEM 3. DEFAULTS UPON SENIOR SECURITIES............................. 12
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS......... 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K............................ 13
PART I.
ITEM 1. FINANCIAL STATEMENTS
SPEC'S MUSIC, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS
January 31, July 31,
1996 1995
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 4,502,240 $ 552,224
Receivables 298,759 722,945
Inventories 22,494,464 24,464,990
Prepaid expenses 730,387 1,017,706
Prepaid income taxes 621,938 280,000
Deferred tax asset 463,000 537,000
------------- -------------
Total current assets 29,110,788 27,574,865
Video rental inventory, net 558,131 722,899
Property and equipment, net 17,926,107 16,587,026
Other assets 759,610 1,173,371
------------- -------------
Total Assets $ 48,354,636 $ 46,058,161
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturity of long-term debt $ 12,500,000 --
Accounts payable 10,070,967 8,308,785
Accrued expenses 3,126,114 2,751,813
Restructuring charge 31,987 251,203
------------- -------------
Total current liabilities 25,729,068 11,311,801
------------- -------------
Long term debt -- 11,400,000
Capital lease obligations 17,715 34,732
Deferred income taxes 78,000 144,000
STOCKHOLDERS' EQUITY:
Common stock, par value $.01; 10,000,000
shares authorized; 5,330,658 and
5,343,808 shares issued at January, 1996
and July, 1995, respectively 53,307 53,439
Additional paid-in capital 3,725,944 3,835,604
Retained earnings 19,181,107 19,762,157
Less 85,517 and 96,046 shares in treasury
at January, 1996, and July 1995,
respectively, at cost (430,505) (483,572)
------------- -------------
Total stockholders' equity 22,529,853 23,167,628
------------- -------------
Total Liabilities and Stockholders'
equity $ 48,354,636 $ 46,058,161
============= =============
See Notes to Consolidated Condensed Financial Statements.
-3-
SPEC'S MUSIC, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(UNAUDITED)
Three Months Ended Six Months Ended
January 31, January 31,
----------------------------- -----------------------------
1996 1995 1996 1995
---- ---- ---- ----
Product sales $ 24,613,671 $ 25,993,873 $ 42,138,767 $ 42,641,370
Video rentals 365,337 538,814 812,970 1,164,127
------------ ------------ ------------ ------------
TOTAL REVENUES 24,979,008 26,532,687 42,951,737 43,805,497
------------ ------------ ------------ ------------
Cost of goods sold - sales 16,318,631 16,945,520 28,099,229 28,012,032
Cost of goods sold - rental 176,758 238,025 367,485 490,971
------------ ------------ ------------ ------------
TOTAL COST OF SALES 16,495,389 17,183,545 28,466,714 28,503,003
------------ ------------ ------------ ------------
GROSS PROFIT 8,483,619 9,349,142 14,485,023 15,302,494
Store operating, general and
administrative expenses 7,595,324 6,933,558 15,011,395 12,945,510
------------ ------------ ------------ ------------
Operating income 888,295 2,415,584 (526,372) 2,356,984
Other income (expense), net (206,737) (47,300) (411,678) (75,404)
------------ ------------ ------------ ------------
Earnings (loss) before income taxes 681,558 2,368,284 (938,050) 2,281,580
Provision (benefit) for income taxes 258,000 892,000 (357,000) 859,000
------------ ------------ ------------ ------------
NET EARNINGS (LOSS) $ 423,558 $ 1,476,284 $ (581,050) $ 1,422,580
============ ============ ============ ============
EARNINGS (LOSS) PER SHARE $ .08 $ .28 $ (.11) $ .27
============ ============ ============ ============
Weighted average number of
common shares outstanding 5,364,000 5,270,000 5,399,000 5,259,000
============ ============ ============ ============
See Notes to Consolidated Condensed Financial Statements.
-4-
SPEC'S MUSIC, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JANUARY 31, 1996 AND 1995
(UNAUDITED)
1996 1995
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $ (581,050) $ 1,422,580
ADJUSTMENTS TO RECONCILE NET EARNINGS
(LOSS) TO NET CASH PROVIDED BY
OPERATING ACTIVITIES:
Depreciation and amortization of
property and equipment 1,373,613 894,398
Amortization of video rental inventory 400,333 537,153
Gain on disposal of video rental inventory (38,799) (64,523)
Amortization of preopening expenses 440,917 106,982
(Increase) decrease in assets:
Receivables 424,186 48,618
Inventories 1,970,526 (6,314,481)
Prepaid expenses (153,598) (261,672)
Prepaid income taxes (341,938) --
Other assets 328,016 (126,675)
Deferred tax asset 74,000 (82,700)
Increase (decrease) in liabilities:
Accounts payable 1,762,182 5,520,092
Accrued expenses 393,775 665,114
Restructuring charge (219,216) (124,993)
Income taxes -- 887,000
Deferred income taxes (66,000) (30,300)
----------- -----------
Net cash provided by operating activities 5,766,947 3,076,593
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of video rental inventory (364,654) (556,063)
Disposition of video rental inventory 167,888 127,739
Additions to property and equipment (2,763,042) (4,823,801)
Disposition of property and equipment 59,893 238,875
----------- -----------
Net cash used in investing activities (2,899,915) (5,013,250)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings from credit facilities 1,100,000 900,000
Repayments of capital lease (17,016) (15,931)
----------- -----------
Net cash provided by financing activities 1,082,984 884,069
----------- -----------
Net (decrease) increase in cash 3,950,016 (1,052,588)
Cash at beginning of period 552,224 1,339,140
----------- -----------
Cash at end of period $ 4,502,240 $ 286,552
=========== ===========
See Notes to Consolidated Condensed Financial Statements.
-5-
SPEC'S MUSIC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
1. CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
The accompanying consolidated condensed financial statements should be read
in conjunction with the Company's consolidated financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for the fiscal
year ended July 31, 1995.
The consolidated condensed financial statements were prepared from the books
and records of the Company without audit or verification. In the opinion of
management all adjustments, which are of a normal recurring nature and
necessary to present fairly the financial position, results of operations and
cash flows for all the periods presented have been made. Certain information
and footnote disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles have been
condensed or omitted.
The results of operations for the six month period ended January 31, 1996 are
not necessarily indicative of the operating results for the full fiscal year.
Certain items have been reclassified on the Balance Sheets and the Statements
of Earnings to conform to fiscal 1996 classifications. The accompanying
financial statements include the accounts of the Company and its wholly-owned
subsidiary. All significant intercompany balances and transactions have been
eliminated.
2. LONG TERM DEBT
The Company maintains a 10 year credit agreement which includes a $15 million
revolving credit facility (declining to $6 million by 2003) and a $1 million
standby letter of credit facility which expires December 1996. Under its
credit agreement, the Company has agreed not to incur or create certain
additional indebtedness or liens on the Company's assets other than real
estate mortgage financing and unsecured convertible subordinated debt,
without the lender's consent. The Company is further required to maintain
certain financial ratios related to net worth, leverage and fixed charges
coverage and has further agreed to limit the amount of cash dividends paid to
25% of net earnings. Effective July 31, 1995, the Company and its lender
entered into a modification to its credit agreement to ease certain of the
financial covenants contained therein. As of November 30, 1995, the Company
was technically in default under the credit agreement as it had not yet
selected a chief financial officer reasonably acceptable to its lender. As a
result the Company has reclassified all amounts due under the credit
agreement as current liabilities. Borrowings under the credit agreement bear
interest at the LIBOR rate plus 150 basis points, or the Company may fix its
interest rate for periods not to exceed five years at 150 basis points over
the corresponding U.S. Treasury security yield.
On January 2, 1996, the Company's lender declared the Company to be in
default under its unsecured credit agreement due to the Company's failure to
meet the "fixed charge coverage ratio" and the "debt service coverage ratio"
as defined in the credit agreement. Although the Company has failed to meet
these financial covenants, it is continuing to make payments under the credit
agreement. The outstanding amount currently due under the credit line is
approximately $11.5 million as of February 29, 1996.
As a result of the default, the Company's lender has demanded repayment of
all amounts due under the credit agreement. The Company has commenced
discussions with other prospective lenders about refinancing its credit line
on a secured basis. There can be no assurance, however, that the Company will
successfully refinance its credit line.
-6-
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS, CONT'D.
3. STATEMENT OF CASH FLOWS INFORMATION
The following is supplemental disclosure of cash flow information:
Six months ended
January 31,
-------------------------
1996 1995
---- ----
Interest paid $ 447,000 $ 94,309
Income tax paid -0- 85,000
Supplemental noncash financing activities information:
During the six months ended January 31, 1996, no restricted stock awards were
granted and awards totaling $76,200 were canceled. During the six months
ended January 31, 1995, Restricted Stock Awards totaling $131,850 were
granted and $40,124 were canceled.
The Company contributed $19,474 and $27,866 in common stock to the Company's
401(k) Plan during the six months ended January 31, 1996 and 1995,
respectively.
4. EARNINGS PER SHARE
Earnings per share are computed based on net earnings for each period,
divided by the weighted average number of common shares and equivalents
outstanding during each period. Stock options have been included in the
earnings per share computation.
-7-
PART I.
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is an analysis of the Company's results of operations, liquidity
and capital resources. To the extent that such analysis contains statements
which are not of a historical nature, such statements are forward-looking
statements, which involve risks and uncertainties. These risks include changes
in the competitive environment for the Company's products, including the entry
or exit of non-traditional retailers of the Company's products to or from its
markets; the ability of the Company to refinance its credit line, and the terms
of any such refinanced line; the release by the music industry of an increased
or decreased number of "hit releases"; unfavorable developments with respect to
a lease; general economic factors in markets where the Company's products are
sold; and other factors discussed in the Company's filings with the Securities
and Exchange Commission.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JANUARY 31, 1996 AND 1995
REVENUES
Total revenues decreased by $1,554,000, or 5.9%, during the second quarter of
fiscal 1996 compared to the second quarter of fiscal 1995. On a same-store basis
(stores open for more than one year), revenues decreased by 10.3% over last
year.
Revenues from product sales decreased by 5.5% for the chain as a whole and
decreased by 10.1% on a same-store basis. This percentage presents same-store
sales using a method consistently applied by the Company in the past. In a
recent earnings release, the Company reported that same-store sales had declined
by 15% during this period. In deriving such percentage, the Company
inadvertently applied a different method of computing same-store sales. Total
and same-store revenues declined due to increased competition and fewer hit
releases which contribute to greater in-store traffic. In the past two years
mass merchandisers have begun to sell compact discs and cassettes at or near
cost to attract customers to their stores, and, late in fiscal 1995, a national
electronic mass merchandiser entered several of the Company's markets,
increasing the retail space devoted to music. In general, as a result of the
increased competition, market prices of music product have declined producing
lower revenues and lower margins.
The Company has elected to compete on the basis of innovation, selection,
merchandising and customer service while taking actions to neutralize pricing
moves by competition. Nevertheless, the Company believes that in the foreseeable
future same-store revenues may decline.
Video rental revenue decreased by 32% for the chain as a whole and by 24% on a
same-store basis as compared to fiscal 1995. The closing of two video rental
departments, and lower demand contributed to lower revenue.
GROSS PROFIT
Gross profit from product sales, which is net of product management and
distribution costs, was 33.7% and 34.8% during the second quarters of fiscal
1996 and 1995, respectively. Gross profit, as a percentage of revenue, declined
primarily because of promotional markdowns and the continued shift in the sales
mix to compact discs and laser discs, which have lower gross margins than audio
cassettes and VHS tapes.
Gross profits from video rentals were 51.6% and 55.8% during the second quarters
of fiscal 1996 and 1995, respectively, primarily due to the closure of three
video rental departments since the first quarter of fiscal 1995.
-8-
Total gross profit was 34.0% and 35.2% of revenue during the second quarters of
fiscal 1996 and 1995, respectively. The Company expects total gross profit, as a
percentage of revenues, to decline in the foreseeable future because of the
continued shift in the sales mix to compact and laser discs, the continued
decline of video rental revenues and the increased pricing pressures due to a
heightened competitive environment, as described above.
STORE OPERATING, GENERAL AND ADMINISTRATIVE EXPENSES
Store operating, general and administrative expenses, as a percentage of
revenue, were 30.4% and 26.1% during the second quarters of fiscal 1996 and
1995, respectively. Store occupancy costs, as a percentage of revenue, increased
significantly because of a decline in same-store revenue and because of the
impact of eleven new store openings during the last three quarters of fiscal
1995, and two new store openings in the first quarter of fiscal 1996, whose
expenses are higher relative to revenue in their initial year of operation. In
addition, depreciation and amortization during the second quarter of fiscal
1996, increased as a percentage of revenue because of capital investment
associated with new stores. This increase was offset in part by lower general
and administrative expenses, as a result of lower labor costs.
OTHER INCOME (EXPENSE)
The Company incurred interest expenses of $242,000 and $54,000 during the second
quarter of fiscal 1996 and 1995, respectively. The increase is due to capital
investment and working capital related to new store expansion and renovations in
fiscal 1995 and the first quarter of fiscal 1996, which required the Company to
increase its borrowings to $12.5 million at January 31, 1996.
INCOME TAXES
The effective income tax rate, as a percentage of earnings before income taxes,
was 37.9% and 37.7% during the second quarter of fiscal 1996 and 1995,
respectively. The effective income tax rate did not vary significantly from the
first quarter in the prior fiscal year.
NET EARNINGS (LOSS)
During the second quarter of fiscal 1996, the Company earned $424,000 or $.08
per share compared to $1,476,000 or $.28 per share during the second quarter of
fiscal 1995. Earnings declined significantly because of lower sales, lower gross
margins resulting from increased competition and higher store operating costs
associated with new store openings.
SIX MONTHS ENDED JANUARY 31, 1996 AND 1995
REVENUES
Total revenues decreased by $854,000, or 2%, in the first six months of fiscal
1996, compared to the same period in fiscal 1995. On a same-store basis,
revenues decreased by 9%, when applying the method traditionally used by the
Company to compute same-store sales, as opposed to 14%, as reported in a recent
earnings release when applying an alternate method, described previsouly herein.
Revenues from product sales decreased by 1.2% for the chain as a whole and by
8.9% on a same-store basis during the first six months of fiscal 1996. This
decrease is due in part to the lack of significant new hit release titles and
increased competition, as described above.
Video rental revenues decreased by 30% for the chain as a whole and by 24% on a
same-store basis. The closing of three video rental departments since the second
quarter of fiscal 1995 and a lower demand for video rentals contributed to lower
rental revenues.
-9-
GROSS PROFIT
Gross profit from product sales, which is net of product management and
distribution costs, was 33.3% and 34.3% during the first six months of fiscal
1996 and 1995, respectively. Gross profit, which is expressed as a percentage of
revenues, declined primarily because of promotional markdowns and the continued
shift in sales mix to compact and laser discs, which have a lower gross margin
than audio cassettes and VHS tapes. Gross profit for video rentals was 54.8% and
57.8% during the first six months of fiscal 1996 and 1995, respectively.
Total gross profit was 33.7% and 34.9% of revenue during the first six months of
fiscal 1996, and 1995, respectively. The Company expects total gross profit, as
a percentage of revenue, to decline in the foreseeable future because of the
continued shift in sales mix to compact and laser discs, the continued decline
of video rental revenues and increased promotional markdowns due to a heightened
competitive environment, all as described previously herein.
STORE OPERATING, GENERAL AND ADMINISTRATIVE EXPENSES
Store operating, general and administrative expenses, as a percentage of
revenue, were 34.9% and 29.6% during the first six months of fiscal 1996 and
1995, respectively. Store operating expenses increased due to higher occupancy
and depreciation costs associated with the capital spending described above and
a decline in same-store sales. General and administrative expenses as a
percentage of revenue decreased from the prior year as a result of lower labor
and advertising costs.
OTHER INCOME (EXPENSE)
Other expenses include interest expense of $455,000 and $95,000 during the first
six months of fiscal 1996 and 1995, respectively. This increase in interest
expense is due to a significant increase in new store expansion during fiscal
1995 and the first quarter of fiscal 1996, which required the Company to
increase its borrowings to $12.5 million at the end of the second quarter of
fiscal 1996.
NET EARNINGS (LOSS)
For the six month period ended January 31, 1996, net loss was ($581,000) or
($.11) per share, compared to earnings of $1,423,000 or $.27 per share for the
first six months of fiscal 1995. Reduced sales and lower margins due to
increased competition and costs associated with the new Spec's stores during the
first half of the year contributed to lower earnings for the first six months in
fiscal 1996.
LIQUIDITY AND CAPITAL RESOURCES
As of January 31, 1996, working capital was $3.4 million compared to $16.3
million at July 31, 1995. The decrease in working capital during the first six
months of fiscal 1996 was primarily the result of the reclassification of
long-term debt to current debt. Cash balances as of January 31, 1996 were $4.5
million up from $.6 million at July 31, 1995.
Cash flow used in investing activities decreased from $5 million in fiscal 1995
to $2.9 million in fiscal 1996. The primary reason for the decrease is the
capital investment related to property and equipment for five new stores that
opened during the first six months of fiscal 1995.
The Company maintains a 10 year credit agreement which includes a $15 million
revolving credit facility (declining to $6 million by 2003) and a $1 million
standby letter of credit facility which
-10-
expires December 1996. Under its credit agreement, the Company has agreed not to
incur or create certain additional indebtedness or liens on the Company's assets
other than real estate mortgage financing and unsecured convertible subordinated
debt, without the lender's consent. The Company is further required to maintain
certain financial ratios related to net worth, leverage and fixed charges
coverage and has further agreed to limit the amount of cash dividends paid to
25% of net earnings. Effective July 31, 1995, the Company and its lender entered
into a modification to its credit agreement to ease certain of the financial
covenants contained therein. As of November 30, 1995, the Company was
technically in default under the credit agreement as it had not yet selected a
chief financial officer reasonably acceptable to its lender. As a result the
Company has reclassified all amounts due under the credit agreement as current
liabilities. Borrowings under the credit agreement bear interest at the LIBOR
rate plus 150 basis points or the Company may fix its interest rate for periods
not to exceed five years at 150 basis points over the corresponding U.S.
Treasury security yield.
On January 2, 1996, the Company's lender declared the Company to be in default
under its unsecured credit agreement due to the Company's failure to meet the
"fixed charge coverage ratio" and the "debt service coverage ratio" as defined
in the credit agreement. Although the Company has failed to meet these financial
covenants, it is continuing to make payments under the credit agreement. The
outstanding amount currently due under the credit line is approximately $11.5
million as of February 29, 1996.
As a result of the default, the Company's lender has demanded repayment of all
amounts due under the credit agreement. The Company has commenced discussions
with other prospective lenders about refinancing its credit line on a secured
basis. There can be no assurance, however, that the Company will successfully
refinance its credit line.
The Company substantially completed its expansion program during the first
quarter of fiscal 1996. The Company's future liquidity and its ability to reduce
its debt level depends upon its ability to refinance its outstanding credit
line, and to generate sufficient cash flow from operating activities by reducing
its store operating, general and administrative expenses as a percentage of
revenue and increasing its inventory turnover rate. The Company's future
profitability or the lack thereof, will have a substantial impact on its
liquidity and the availability of capital resources necessary to conduct its
business, renovate its stores and open additional new stores.
-11-
PART II. OTHER INFORMATION
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
On January 2, 1996, the Company's lender declared the Company to be in
default under its unsecured credit agreement due to the Company's failure to
meet the "fixed charge coverage ratio" and the "debt service coverage ratio"
as defined in the credit agreement. Although the Company has failed to meet
these financial covenants, it is continuing to make payments under the credit
agreement. The outstanding amount currently due under the credit line is
approximately $11.5 million as of February 29, 1996.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Annual Meeting of Shareholders was held on Wednesday, December 12,
1995 at the Radisson Mart Plaza Hotel, Salon H., 711 N.W. 72nd Avenue,
Miami, Florida 33126.
(b) The following individuals were elected directors until the next annual
meeting of shareholders or until their successors are elected and
qualified:
Votes Votes Abstentions and
For Withheld Broker non-votes
--- -------- ----------------
Barry J. Gibbons 4,960,122 39,712 -0-
Arthur H. Hertz 4,960,572 39,262 -0-
Ann S. Lieff 4,938,639 61,195 -0-
Dorothy J. Spector 4,937,814 62,020 -0-
Martin W. Spector 4,938,014 61,820 -0-
Cynthia Cohen Turk 4,960,672 39,162 -0-
Rosalind S. Zacks 4,939,289 60,545 -0-
All members of the previous Board of Directors were nominees and there has
been no change in the Board of Directors as a result of this election.
-12-
Item 6. Exhibits and Reports on Form 8-K
(a) (10.1) Revised Agreement effective January 1, 1996 between the Company
and Barry Gibbons d/b/a Festina. (10.2) Agreement effective January 23,
1996 between the Company and Jeffrey J. Fletcher d/b/a Transition
Strategies, Inc. ("TSI").
(b) Reports on Form 8-K
The Company filed a Form 8-K dated January 8, 1996, which included an
Item 5 (Other Events) disclosure regarding the Company's default under
its credit agreement.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SPEC'S MUSIC, INC.
-----------------------------------
(Registrant)
MARCH 15, 1996 /s/ ANN S. LIEFF
- ------------------------------- -----------------------------------
Date ANN S. LIEFF
President and Chief
Executive Officer
(Principal Executive Officer)
MARCH 15, 1996 /s/ JEFFREY J. FLETCHER
- -------------------------------- -----------------------------------
Date JEFFREY J. FLETCHER
Executive Vice President,
Chief Operating and Financial
Officer
(Principal Financial and
Accounting Officer)
-13-