1
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 September 30, 2001
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-22963
BIG DOG HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 52-1868665
(State or jurisdiction of (IRS employer
incorporation or organization) identification no.)
121 GRAY AVENUE
SANTA BARBARA, CALIFORNIA 93101
(Address of principal executive offices) (zip code)
(805) 963-8727
(Registrant's telephone number, including area code)
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.
X Yes No
--- ----
The number of shares outstanding of the registrant's common stock, par value
$.01 per share, at November 1, 2001 was 8,453,064 shares.
BIG DOG HOLDINGS, INC
INDEX TO FORM 10-Q
PAGE
NO.
PART I. FINANCIAL INFORMATION..............................................3
ITEM 1: FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
September 30, 2001 and December 31, 2000...........................3
CONSOLIDATED STATEMENTS OF OPERATIONS
Three months and nine months ended September 30, 2001 and 2000.....4
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended September 30, 2001 and 2000......................5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.........................6
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS..........................................7
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK........11
PART II. OTHER INFORMATION.................................................11
ITEM 1: LEGAL PROCEEDINGS.................................................11
ITEM 2: CHANGES IN SECURITIES.............................................11
ITEM 3: DEFAULTS UPON SENIOR SECURITIES...................................11
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...............12
ITEM 5: OTHER INFORMATION.................................................12
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K..................................12
SIGNATURES ............................................................13
PART 1. .........FINANCIAL INFORMATION
ITEM 1: .........FINANCIAL STATEMENTS
BIG DOG HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
2001 2000
------------------ ------------------
(Unaudited)
ASSETS (Note 2)
CURRENT ASSETS:
Cash and cash equivalents........................................ $ 250,000 $ 4,376,000
Accounts receivable, net......................................... 533,000 539,000
Inventories...................................................... 38,269,000 26,759,000
Prepaid expenses and other current assets........................ 1,356,000 549,000
Deferred income taxes............................................ 2,170,000 1,429,000
----------- ------------
Total current assets........................................... 42,578,000 33,652,000
PROPERTY AND EQUIPMENT, Net......................................... 6,959,000 9,072,000
INTANGIBLE ASSETS, Net.............................................. 170,000 145,000
OTHER ASSETS........................................................ 193,000 411,000
----------- ------------
TOTAL............................................................... $49,900,000 $ 43,280,000
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings............................................ $16,500,000 $ 6,000,000
Accounts payable................................................. 5,321,000 4,553,000
Income taxes payable............................................. 93,000 1,826,000
Accrued expenses and other current liabilities................... 2,233,000 3,720,000
----------- -----------
Total current liabilities...................................... 24,147,000 16,099,000
DEFERRED RENT....................................................... 656,000 863,000
DEFERRED GAIN ON SALE-LEASEBACK..................................... 419,000 459,000
----------- -----------
Total liabilities................................................ 25,222,000 17,421,000
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 3,000,000 shares authorized, none
issued and outstanding......................................... $ --- $ ---
Common stock, $.01 par value, 30,000,000 shares authorized,
9,686,284 issued at September 30, 2001 and December 31, 2000... 97,000 97,000
Additional paid-in capital....................................... 20,475,000 20,475,000
Retained earnings................................................ 11,312,000 12,367,000
Treasury stock, 1,233,220 and 1,202,200 shares at
September 30, 2001 and December 31, 2000, respectively......... (7,206,000) (7,080,000)
----------- -----------
Total stockholders' equity..................................... 24,678,000 25,859,000
----------- -----------
TOTAL............................................................... $ 49,900,000 $ 43,280,000
============ ============
See accompanying notes.
BIG DOG HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------------- --------------------------------------
2001 2000 2001 2000
---------------- ---------------- ----------------- ------------------
NET SALES.......................................... $ 30,204,000 $ 31,505,000 $ 72,384,000 $ 74,296,000
COST OF GOODS SOLD................................. 12,884,000 12,974,000 31,606,000 31,086,000
---------------- ------------- -------------- ---------------
GROSS PROFIT....................................... 17,320,000 18,531,000 40,778,000 43,210,000
---------------- ------------- -------------- ---------------
OPERATING EXPENSES:
Selling, marketing and distribution........... 12,720,000 13,350,000 37,998,000 37,673,000
General and administrative.................... 1,181,000 1,252,000 3,953,000 3,923,000
---------------- ------------- -------------- --------------
Total operating expenses.................. 13,901,000 14,602,000 41,951,000 41,596,000
---------------- ------------- -------------- --------------
INCOME (LOSS) FROM OPERATIONS...................... 3,419,000 3,929,000 (1,173,000) 1,614,000
OTHER INCOME....................................... --- --- (334,000) ---
INTEREST EXPENSE (INCOME), NET..................... 370,000 144,000 957,000 (71,000)
---------------- ------------- -------------- --------------
INCOME (LOSS) BEFORE PROVISION FOR (BENEFIT FROM)
INCOME TAXES....................................... 3,049,000 3,785,000 (1,796,000) 1,685,000
PROVISION FOR (BENEFIT FROM) INCOME TAXES.......... 1,174,000 1,506,000 (741,000) 698,000
---------------- ------------- -------------- --------------
NET INCOME (LOSS).................................. $ 1,875,000 $ 2,279,000 $ (1,055,000) $ 987,000
================ ============= ============ ==============
NET INCOME (LOSS) PER SHARE
BASIC......................................... $ 0.22 $ 0.21 $ (0.12) $ 0.09
================ ============= ============= ==============
DILUTED....................................... $ 0.22 $ 0.21 $ (0.12) $ 0.08
================ ============= ============= ==============
WEIGHTED AVERAGE SHARES OUTSTANDING:
BASIC......................................... 8,453,000 10,801,000 8,455,000 11,587,000
================ ============= ============ ==============
DILUTED....................................... 8,462,000 10,915,000 8,455,000 11,697,000
================ ============= ============ ==============
See accompanying notes.
BIG DOG HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended
September 30,
--------------------------------------
2001 2000
---------------- -------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income........................................ $ (1,055,000) $ 987,000
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization........................ 2,775,000 3,330,000
Provision for losses on receivables.................. 416,000 27,000
Gain on disposition of property and equipment........ (74,000) (34,000)
Gain on sale of investment........................... (334,000) ---
Deferred income taxes................................ (741,000) (677,000)
Changes in operating assets and liabilities:
Receivables..................................... (411,000) 386,000
Inventories..................................... (11,510,000) (17,039,000)
Prepaid expenses and other assets............... (807,000) (51,000)
Accounts payable................................ 768,000 1,945,000
Accrued expenses and other current liabilities.. (1,487,000) (1,252,000)
Deferred rent................................... (207,000) (25,000)
Deferred gain on sale-leaseback................. (40,000) (40,000)
-------------- -----------------
Net cash used in operating activities....... (14,439,000) (12,736,000)
-------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures..................................... (741,000) (1,353,000)
Proceeds from sale of investment......................... 334,000 ---
Proceeds from sale of property and equipment............. 178,000 90,000
Principal repayments of notes receivable................. 107,000 573,000
Other.................................................... 61,000 (161,000)
-------------- -----------------
Net cash used in investing activities....... (61,000) (851,000)
-------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term borrowings, net............................... 10,500,000 19,875,000
Repurchase of common stock............................... (126,000) (22,049,000)
Dividend payment......................................... --- (1,200,000)
Proceeds from exercise of stock warrants................. --- 25,000
-------------- -----------------
Net cash provided by (used in) financing activities.. 10,374,000 (3,349,000)
-------------- -----------------
NET DECREASE IN CASH.......................................... (4,126,000) (16,936,000)
CASH, BEGINNING OF PERIOD..................................... 4,376,000 17,925,000
-------------- -----------------
CASH, END OF PERIOD........................................... $ 250,000 $ 989,000
=============== =================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for:
Interest............................................. $ 958,000 $ 26,000
Income taxes......................................... $ 1,732,000 $ 1,667,000
See accompanying notes.
BIG DOG HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTE 1. Basis of Presentation:
The accompanying unaudited financial consolidated statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulations S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
In the opinion of management, all adjustments, consisting only of
normal recurring entries necessary for a fair presentation have been included.
Operating results for the nine-month period ended September 30, 2001 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2001. For further information, refer to the financial statements
and footnotes thereto for Big Dog Holdings, Inc. and its wholly owned
subsidiary, Big Dog USA, Inc. (the "Company") included in the Company's Annual
Report on Form 10-K for the year ended December 31, 2000.
NOTE 2. Short-term Borrowings
The Company had a $25.0 million revolving credit facility ("Credit
Agreement") with Bank of America and other lenders. The Credit Agreement had a
three-year term and has scheduled annual commitment reductions. The maximum
commitment balance was $25.0 million, $20.0 million and $15.0 million on
December 31, 2001, June 30, 2002 and December 31, 2002, respectively. The
Credit Agreement was secured by substantially all assets of the Company,
required the compliance of various financial affirmative and negative covenants
and prohibited the payment of dividends. This Credit Agreement provided for a
performance-pricing structured interest charge, ranging from LIBOR plus 1.75%
to 2.75%, based on the results of certain financial ratios. As of September
30, 2001, the Company had $16.5 million outstanding under this Credit
Agreement. Additionally, the Company had $0.3 million of letters of credit
outstanding as of September 30, 2001. The letters of credit expired through
October 2001.
In October 2001, the Company entered into a new $30.0 million three-
year line of credit facility with Wells Fargo Retail Finance. In November 2001,
the Company paid off and terminated its existing relationship and drew down
approximately $18.0 million on the new facility. This facility is secured by
substantially all of the Company's assets and requires daily, weekly and
monthly financial reporting as well as compliance of financial, affirmative and
negative covenants. This credit agreement provides for a performance-pricing
structured interest charge, ranging up to LIBOR plus 1.75% which is based on
excess availability levels.
NOTE 3. Stockholder's Equity
In March 1998, the Company announced that its Board authorized the
repurchase of up to $10,000,000 of its common stock. Between January 1, 2001
and September 30, 2001, the Company repurchased 31,020 shares of common stock
totaling $126,000.
NOTE 4. Recently Issued Accounting Standards
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities." SFAS No.133 establishes
accounting and reporting standards for derivative instruments, including
certain derivative instruments embedded in other contracts and for hedging
activities. The statement requires that the Company recognize all derivatives
as either assets or liabilities in the balance sheet and measure those
instruments at fair value. The Company adopted SFAS No. 133 effective January
1, 2001. The adoption of
In July 2001, the FASB issued SFAS No. 141, "Business Combinations"
and SFAS No. 142, "Goodwill and Other Intangible Assets". SFAS No. 141 requires
that all business combinations be accounted for under the purchase method. The
statement further requires separate recognition of intangible assets that meet
one of two criteria. The statement applies to all business combinations
initiated after June 30, 2001.
SFAS No. 142 requires that an intangible asset that is acquired shall
be initially recognized and measured based on its fair value. The statement also
provides that goodwill should not be amortized, but shall be tested for
impairment annually, or more frequently if circumstances indicate potential
impairment, through a comparison of fair value to its carrying amount. SFAS No.
142 is effective for fiscal periods beginning after December 15, 2001. The
Company is currently evaluating the impact of adopting SFAS Nos. 141 and 142.
In August 2001, the FASB issued SFAS No.144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS No. 144 supercedes SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets
to be Disposed of" and Accounting Principles Board Opinion ("APB") No. 30,
"Reporting the Results of Operations - Reporting the Effects of the Disposal of
a Segment Business and Extraordinary, Unusual and Infrequently Occurring Events
and Transactions." SFAS No.144 establishes a single accounting model for assets
to be disposed of by sale whether previously held and used or newly acquired.
SFAS No. 144 retains the provisions of APB No. 30 for presentation of
discontinued operations in the income statement, but broadens the presentation
to include a component of an entity. SFAS No. 144 is effective for fiscal years
beginning after December 15, 2001. The Company is currently evaluating the
impact of adopting SFAS No. 144.
ITEM 2:
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's discussion and analysis should be read in conjunction with
the Company's financial statements and notes related thereto. Certain minor
differences in the amounts below result from rounding of the amounts shown in
the consolidated financial statements.
This quarterly report on Form 10-Q contains forward-looking statements
within the meaning of federal securities laws, which are intended to be covered
by the safe harbors created thereby. Those statements include, but may not be
limited to, the discussions of the Company's operating and growth strategy.
Investors are cautioned that all forward-looking statements involve risks and
uncertainties including, without limitation, those set forth under the caption
"risk factors" in the business section of the Company's annual report on Form
10-K for the year ended December 31, 2000. Although the Company believes that
the assumptions underlying the forward-looking statements contained herein are
reasonable, any of the assumptions could prove to be inaccurate, and therefore,
there can be no assurance that the forward-looking statements included in this
quarterly report on Form 10-Q will prove to be accurate. In light of the
significant uncertainties inherent in the forward-looking statements included
herein, the inclusion of such information should not be regarded as a
representation by the Company or any other person that the objectives and plans
of the company will be achieved. The Company undertakes no obligation to
publicly release any revisions to any forward-looking statements contained
herein to reflect events and circumstances occurring after the date hereof or to
reflect the occurrence of unanticipated events.
The following discussion should be read in conjunction with the
Company's unaudited financial statements and notes thereto included elsewhere in
this quarterly report on form 10-Q, and the annual audited financial statements
and notes thereto included in the Company's annual report on Form 10-K for the
year ended December 31, 2000 filed with the Securities and Exchange Commission.
RESULTS OF OPERATIONS
Three Months Ended September 30, 2001 and 2000
NET SALES. Net sales consist of sales from the Company's stores,
catalog, internet website, and wholesale accounts, all net of returns and
allowances. Net sales decreased to $30.2 million for the three months ended
September 30, 2001 from $31.5 million for the same period in 2000, a decrease of
$1.3 million, or 4.1%. Of the decrease, $2.0 million was attributable to a 7.0%
comparable stores sales decrease. This was offset by $0.1 million from new
stores (not yet qualifying as comparable stores), a $0.2 million increase in the
Company's wholesale business, and a $0.4 million increase in catalog and
internet sales. The decrease in sales reflects a continual softening in the
retail environment and resulting decreased customer traffic at the Company's
retail store locations.
GROSS PROFIT. Gross profit decreased to $17.3 million for the three
months ended September 30, 2001 from $18.5 million for the same period in 2000,
a decrease of $1.2 million, or 6.5%. This decrease was due in part to lower
product sales. As a percentage of net sales, gross profit decreased to 57.3% in
the three months ended September 30, 2001 from 58.8% in the same period in 2000.
This 1.5% decrease was primarily due to increased sales promotions during the
third quarter of 2001.
SELLING, MARKETING AND DISTRIBUTION EXPENSES. Selling, marketing and
distribution expenses consist of expenses associated with creating, distributing
and selling products through all channels of distribution, including occupancy,
payroll and catalog costs. Selling, marketing and distribution expenses
decreased to $12.7 million in the three months ended September 30, 2001 from
$13.4 million in the same period for 2000, a decrease of $0.7 million, or 5.2%.
As a percentage of net sales, these expenses decreased to 42.1% in the three
months ended September 30, 2001 from 42.4% in the same period in 2000, a
decrease of 0.3%. The decrease in selling, marketing and distribution expenses
is attributable to reduced depreciation expense of $0.3 million and store
operating expenses of $0.4 million.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses consist of administrative salaries, corporate occupancy costs and other
corporate expenses. General and administrative expenses decreased to $1.2
million for the three months ended September 30, 2001 from $1.3 million for the
same period 2000, a decrease of $0.1 million, or 7.7%. As a percentage of net
sales, these expenses decreased to 3.9% in the three months ended September 30,
2001 from 4.0% in the same period in 2000.
INTEREST EXPENSE. Interest expense increased to $0.4 million in the
three months ended September 30, 2001 from $0.1 million in the same period in
2000, principally due to interest on the higher outstanding short-term
borrowings during the period.
Nine Months Ended September 30, 2001 and 2000
NET SALES. Net sales decreased to $72.4 million for the nine months
ended September 30, 2001 from $74.3 million for the same period in 2000, a
decrease of $1.9 million or 2.6%. Of the decrease, $3.6 million was attributable
to a 5.3% comparable stores sales decrease and $0.7 million from a decrease in
the Company's wholesale business. This was offset by $1.5 million from new
stores (not yet qualifying as comparable stores) and a $0.9 million increase in
catalog and internet sales. The decrease in sales reflects a continual softening
in the retail environment and resulting decreased customer traffic at the
Company's retail store locations.
GROSS PROFIT. Gross profit decreased to $40.8 million for the nine
months ended September 30, 2001 from $43.2 million for the same period in 2000,
a decrease of $2.4 million or 5.6%. The decrease is primarily attributable to
lower product sales. As a percentage of net sales, gross profit decreased to
56.3% in the nine months ended September 30, 2001 from 58.2% in the same period
in 2000. This 1.9% decrease was primarily due to increased sales promotions
during the first three quarters of 2001.
SELLING, MARKETING AND DISTRIBUTION EXPENSES. Selling, marketing and
distribution expenses increased to $38.0 million in the nine months ended
September 30, 2001 from $37.7 million in the same period for 2000, an increase
of $0.3 million, or 0.8%. As a percentage of net sales, these expenses increased
to 52.5% in the nine months ended September 30, 2001 from 50.7% in the same
period in 2000, a increase of 1.8%. During the nine months ended September 30,
2001, the Company had an average of 199 stores in operation, compared to an
average of 194 stores open in the same period in 2000. The increase in selling,
marketing and distribution expenses is primarily attributable to $0.3 million of
additional store operating costs and a $0.4 million provision for losses on
wholesale receivables due to the bankruptcy filing of a significant wholesale
account, Casual Male. For the nine months ended September 30, 2000, selling,
marketing and distribution expenses were offset by insurance proceeds of
approximately $0.3 million.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses increased to $4.0 million for the nine months ended September 30, 2001
from $3.9 million for the same period 2000, an increase of $0.1 million, or
2.6%. As a percentage of net sales, these expenses increased to 5.5% in the nine
months ended September 30, 2001 from 5.3% in the same period in 2000.
OTHER INCOME. In the nine months ended September 30, 2001, other income
resulted from a $0.3 million gain on the sale of PETsMART.com stock. After
careful consideration of the internet and capital markets, the Company wrote-off
its entire $3,000,000 investment in PETsMART.com stock at December 31, 2000.
Subsequently, in June 2001, a proposal and acceptance occurred whereby the
Company sold this stock for $334,000.
INTEREST EXPENSE. Interest expense increased to $1.0 million in the
nine months ended September 30, 2001 from $0.1 million interest income in the
same period in 2000, principally due to interest on the outstanding short-term
borrowings.
LIQUIDITY AND CAPITAL RESOURCES
During the third quarter of 2001, the Company's primary uses of cash
were for merchandise inventories, taxes and accrued expenses. The Company
satisfied its cash requirements primarily from existing cash balances and
short-term borrowings under its credit agreement.
Cash used in operating activities was $14.4 million and $12.7 million
for the nine months ended September 30, 2001 and 2000, respectively.
Cash used in investing activities for the nine months ended September
30, 2001 and 2000 were $61,000 and $0.9 million, respectively. Cash flows used
in investing activities in the first nine months of 2001 primarily related to 8
new store openings and capital additions to the Company's existing stores,
offset by proceeds received from the sales of the PETsMART.com investment,
property, and equipment. Cash flows used in investing activities in the first
nine months of 2000 primarily related to 12 new store openings and capital
additions to the Company's existing stores.
Cash provided by financing activities in the nine months ended
September 30, 2001 were $10.4 million, compared to $3.3 million of cash used in
the same period in 2000. In the nine months ended September 30, 2001, the
Company had net borrowings of $10.5 million under its revolving credit facility
and used $0.1 million to repurchase common stock. In the nine months ended
September 30, 2000, the Company paid an annual dividend of $0.10 per share to
stockholders for a total dividend payment of $1.2 million. Additionally, in the
nine months ended September 30, 2000, the Company repurchased approximately
$22.0 million of common stock.
The Company had a $25.0 million revolving credit facility ("Credit
Agreement") with Bank of America and other lenders. The Credit Agreement had a
three-year term and has scheduled annual commitment reductions. The maximum
commitment balance was $25.0 million, $20.0 million and $15.0 million on
December 31, 2001, June 30, 2002 and December 31, 2002, respectively. The Credit
Agreement was secured by substantially all assets of the Company, required the
compliance of various financial affirmative and negative covenants and
prohibited the payment of dividends. This Credit Agreement provided for a
performance-pricing structured interest charge, ranging from LIBOR plus 1.75% to
2.75%, based on the results of certain financial ratios. As of September 30,
2001, the Company had $16.5 million outstanding under this Credit Agreement.
Additionally, the Company had $0.3 million of letters of credit outstanding as
of September 30, 2001. The letters of credit expired through October 2001.
In October 2001, the Company entered into a new $30.0 million
three-year line of credit facility with Wells Fargo Retail Finance. In November
2001, the Company paid off and terminated its existing relationship and drew
down approximately $18.0 million on the new facility. This facility is secured
by substantially all of the Company's assets and requires daily, weekly and
monthly financial reporting as well as compliance of financial, affirmative and
negative covenants. This credit agreement provides for a performance-pricing
structured interest charge, ranging up to LIBOR plus 1.75% which is based on
excess availability levels.
SEASONALITY
The Company believes its seasonality is somewhat different than many
apparel retailers since a significant number of the Company's stores are located
in tourist areas and outdoor malls that have different visitation patterns than
urban and suburban retail centers. The third and fourth quarters (consisting of
the summer vacation, back-to-school and Christmas seasons) have historically
accounted for the largest percentage of the Company's annual sales and profits.
The Company has historically incurred operating losses in its first quarter and
may be expected to do so in the foreseeable future.
STATEMENT REGARDING FORWARD LOOKING DISCLOSURE
Certain sections of this Quarterly Report on Form 10-Q, including the
preceding "Management's Discussion and Analysis of Financial Condition and
Results of Operations," contain various forward looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E
of the Securities Exchange Act of 1934, as amended, which represents the
Company's expectations or beliefs concerning future events. These forward
looking statements involve risk and uncertainties, and the Company cautions that
these statements are further qualified by important factors that could cause
actual results to differ materially from those in the forward looking
statements. Primary factors that could cause actual results to differ include
those listed in the Company's Form 10-K for the year ended December 31, 2000
filed with the Securities and Exchange Commission.
ITEM 3:
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company does not believe it has material exposure to losses from
market-rate sensitive instruments. The Company has not invested in derivative
financial instruments. The Company has a new credit facility with a
performance-pricing structured interest charge, ranging up to LIBOR plus 1.75%
based on excess availability levels. See "Item 2. Management's Discussion and
Analysis of Financial Condition and Results of Operations-Liquidity and Capital
Resources."
PART II. OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
On February 28, 2001, World Wrestling Federation Entertainment
Inc. ("WWF") filed a complaint against the Company. The
complaint, as amended, alleges that certain graphics on
T-shirts and other products sold by the Company that parodied
WWF wrestlers violated, trademark, copyright and other
intellectual property rights of the WWF. The complaint seeks
injunctive relief, unspecified damages and attorney's fees.
The Company believes the subject graphics are protected under
the First Amendment of the US constitution and do not infringe
the rights of the plaintiff. The Company has answered the
complaint and is defending the action. The outcome of this
action cannot be predicted; however, in the opinion of
management, the resolution of this matter is not expected to
have a material adverse effect on our results of operations or
financial condition.
The Company is involved in various other legal proceedings
arising in the normal course of its business. In the opinion
of management, any ultimate liability arising out of such
proceedings will not have a material adverse effect on the
Company's financial position or results of operations.
ITEM 2: CHANGES IN SECURITIES
Not applicable
ITEM 3: DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
ITEM 5: OTHER INFORMATION
Not applicable
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit
Exhibit No. Document Description
10.1 Loan and Security among Big Dog
Holdings, Inc., Big Dog USA, Inc., CSI
Acquisition Corporation and Wells Fargo
Retail Finance, LLC dated as of October
23, 2001.
(b) Reports on Form 8-K
Not applicable
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.
BIG DOG HOLDINGS, INC.
November 14, 2001 /s/ ANDREW D. FESHBACH
----------------------
Andrew D. Feshbach
President and Chief Executive Officer
(Principal Executive Officer)
November 14, 2001 /s/ ROBERTA J. MORRIS
---------------------
Roberta J. Morris
Chief Financial Officer and Treasurer
(Principal Financial Officer)