##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-Q
 (Mark One)þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended July 30, 2005
 OR
 o
    
    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 0-19526
 Goodys Family Clothing, Inc.
  Tennessee
    
    62-0793974(State or other jurisdiction of
incorporation or organization)
    
    (I.R.S. Employer
Identification Number)400 Goodys Lane,
Knoxville, Tennessee
    
    37922(Address of principal executive offices)
    
    (Zip Code)
  
  
  þ o
 þ o
 o þ
   ,




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##### Table of Contents



GOODYS FAMILY CLOTHING, INC.
 Index to Form 10-Q
July 30, 2005
 Part I  Financial Information:Item 1.  Condensed Consolidated Financial Statements (Unaudited)Condensed Consolidated Statements of Operations
    
    3Condensed Consolidated Balance Sheets
    
    4Condensed Consolidated Statements of Cash Flows
    
    5Notes to Condensed Consolidated Financial Statements
    
    6 - 9Report of Independent Registered Public Accounting Firm
    
    10Item 2.  Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    11 - 16Item 3.  Quantitative and Qualitative Disclosures about Market Risk
    
    17Item 4.  Controls and Procedures
    
    17Part II  Other Information:Item 4. Submission of Matters to a Vote of Security Holders
    
    18Item 6. Exhibits
    
    18Signatures
    
    19EX-10.108 LIMITED WAIVER AND JOINDER AGREEMENTEX-15 ACCOUNTANT'S AWARENESS LETTEREX-31.1 SECTION 302 CERTIFICATION OF THE CEOEX-31.2 SECTION 302 CERTIFICATION OF THE CFOEX-31.3 SECTION 302 CERTIFICATION OF THE CHIEF ACCOUNTING OFFICEREX-32.1 SECTION 906 CERTIFICATION OF THE CEOEX-32.2 SECTION 906 CERTIFICATION OF THE CFOEX-32.3 SECTION 906 CERTIFICATION OF THE CHIEF ACCOUNTING OFFICER
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##### Table of Contents



PART 1  FINANCIAL INFORMATION
 
 Item 1.  Condensed Consolidated Financial Statements
 Goodys Family Clothing, Inc. and Subsidiaries
 
 Condensed Consolidated Statements of Operations (Unaudited)
 (In thousands, except per share amounts)
 Thirteen
    
    Twenty-sixWeeks Ended
    
    Weeks EndedJuly 31,
    
    
    
    
    
    July 31,2004
    
    
    
    
    
    2004July 30,
    
    (As restated,
    
    July 30,
    
    (As restated,2005
    
    see note 2)
    
    2005
    
    see note 2)Sales
    
    $
    291,668
    
    
    $
    294,632
    
    
    $
    584,373
    
    
    $
    597,510Cost of sales and occupancy expenses
    
    
    209,833
    
    
    
    206,174
    
    
    
    419,575
    
    
    
    415,649Gross profit
    
    
    81,835
    
    
    
    88,458
    
    
    
    164,798
    
    
    
    181,861Selling, general and administrative expenses
    
    
    91,467
    
    
    
    86,497
    
    
    
    177,837
    
    
    
    167,221(Loss) earnings from operations
    
    
    (9,632
    )
    
    
    1,961
    
    
    
    (13,039
    )
    
    
    14,640Investment income
    
    
    438
    
    
    
    206
    
    
    
    841
    
    
    
    391Interest expense
    
    
    (1
    )
    
    
    (130
    )
    
    
    (11
    )
    
    
    (131
    )(Loss) earnings before income taxes
    
    
    (9,195
    )
    
    
    2,037
    
    
    
    (12,209
    )
    
    
    14,900(Benefit) provision for income taxes
    
    
    (3,770
    )
    
    
    759
    
    
    
    (5,006
    )
    
    
    5,551Net (loss) earnings
    
    $
    (5,425
    )
    
    $
    1,278
    
    
    $
    (7,203
    )
    
    $
    9,349(Loss) earnings per common share:Basic
    
    $
    (0.16
    )
    
    $
    0.04
    
    
    $
    (0.22
    )
    
    $
    0.28Diluted
    
    $
    (0.16
    )
    
    $
    0.04
    
    
    $
    (0.22
    )
    
    $
    0.28Cash dividends declared per common share
    
    $
    0.03
    
    
    $
    0.03
    
    
    $
    0.06
    
    
    $
    0.05Weighted average common shares outstanding:Basic
    
    
    33,039
    
    
    
    32,961
    
    
    
    32,978
    
    
    
    32,926Diluted
    
    
    33,039
    
    
    
    33,893
    
    
    
    32,978
    
    
    
    33,897
 See accompanying Notes to Condensed Consolidated Financial Statements and Report of Independent
Registered Public Accounting Firm.
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Goodys Family Clothing, Inc. and Subsidiaries
 
 Condensed Consolidated Balance Sheets (Unaudited)
 (In thousands, except per share amounts)
 July 31,2004July 30,
    
    January 29,
    
    (As restated,2005
    
    2005
    
    see Note 2)ASSETSCurrent AssetsCash and cash equivalents
    
    $
    88,997
    
    
    $
    121,614
    
    
    $
    108,354Inventories
    
    
    237,885
    
    
    
    230,637
    
    
    
    240,729Accounts receivable and other current assets
    
    
    24,244
    
    
    
    19,932
    
    
    
    14,364Total current assets
    
    
    351,126
    
    
    
    372,183
    
    
    
    363,447Property and equipment, net
    
    
    135,917
    
    
    
    126,229
    
    
    
    120,706Other assets
    
    
    4,781
    
    
    
    4,988
    
    
    
    5,278Total assets
    
    $
    491,824
    
    
    $
    503,400
    
    
    $
    489,431LIABILITIES AND SHAREHOLDERS EQUITYCurrent LiabilitiesAccounts payable  trade
    
    $
    134,646
    
    
    $
    136,116
    
    
    $
    140,911Accounts payable  other
    
    
    12,398
    
    
    
    17,716
    
    
    
    12,297Accrued expenses
    
    
    49,397
    
    
    
    46,413
    
    
    
    46,290Current deferred income taxes
    
    
    26,560
    
    
    
    27,847
    
    
    
    23,176Total current liabilities
    
    
    223,001
    
    
    
    228,092
    
    
    
    222,674Long-term liabilities
    
    
    30,626
    
    
    
    26,032
    
    
    
    18,386Deferred income taxes
    
    
    6,703
    
    
    
    10,375
    
    
    
    12,584Total liabilities
    
    
    260,330
    
    
    
    264,499
    
    
    
    253,644Commitments and Contingencies (Note 5)Shareholders EquityPreferred stock, par value $1.00 per share;Authorized - 2,000,000 shares; issued and outstanding  noneClass B Common stock, no par value;Authorized - 50,000,000 shares; issued and outstanding  noneCommon stock, no par value;Authorized - 50,000,000 shares;Issued and outstanding  33,107,881; 32,842,019; and
32,969,952 shares, respectively
    
    
    36,397
    
    
    
    34,619
    
    
    
    35,839Retained earnings
    
    
    195,097
    
    
    
    204,282
    
    
    
    199,948Total shareholders equity
    
    
    231,494
    
    
    
    238,901
    
    
    
    235,787Total liabilities and shareholders equity
    
    $
    491,824
    
    
    $
    503,400
    
    
    $
    489,431
 See accompanying Notes to Condensed Consolidated Financial Statements and Report of Independent
Registered Public Accounting Firm.
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Goodys Family Clothing, Inc. and Subsidiaries
 
 Condensed Consolidated Statements of Cash Flows (Unaudited)
 (In thousands)
 Twenty-six Weeks EndedJuly 31,2004July 30,
    
    (As restated,2005
    
    see note 2)Cash Flows from Operating ActivitiesNet (loss) earnings
    
    $
    (7,203
    )
    
    $
    9,349Adjustments to reconcile net (loss) earnings to net cash
(used in) provided by operating activities:Depreciation and amortization
    
    
    13,045
    
    
    
    12,188Net loss on asset sales, disposals and write-downs
    
    
    2,720
    
    
    
    413Changes in assets and liabilities:Inventories
    
    
    (7,248
    )
    
    
    (42,003
    )Accounts payable  trade
    
    
    (1,470
    )
    
    
    21,500Accounts payable  other
    
    
    (5,222
    )
    
    
    298Other assets, liabilities and income tax accounts
    
    
    (2,909
    )
    
    
    2,459Net cash (used in) provided by operating activities
    
    
    (8,287
    )
    
    
    4,204Cash Flows from Investing ActivitiesAcquisitions of property and equipment
    
    
    (25,817
    )
    
    
    (18,277
    )Proceeds from sale of property and equipment
    
    
    2,022
    
    
    
    19Net cash used in investing activities
    
    
    (23,795
    )
    
    
    (18,258
    )Cash Flows from Financing ActivitiesDividends paid to shareholders
    
    
    (1,976
    )
    
    
    (1,316
    )Proceeds from exercise of stock options
    
    
    1,441
    
    
    
    691Net cash used in financing activities
    
    
    (535
    )
    
    
    (625
    )Net decrease in cash and cash equivalents
    
    
    (32,617
    )
    
    
    (14,679
    )Cash and cash equivalents, beginning of period
    
    
    121,614
    
    
    
    123,033Cash and cash equivalents, end of period
    
    $
    88,997
    
    
    $
    108,354Supplemental Disclosures:Net income tax (refunds) payments
    
    $
    (34
    )
    
    $
    689Interest payments
    
    
    11
    
    
    
    1Sale/leaseback of property and equipment
    
    
    1,797
    
    
    
    3,257
 See accompanying Notes to Condensed Consolidated Financial Statements and Report of Independent
Registered Public Accounting Firm.
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Goodys Family Clothing, Inc. and Subsidiaries
 
 Notes to Condensed Consolidated Financial Statements
 (Unaudited)
 (1) Basis of presentation
  (2) Restatement
   Condensed ConsolidatedStatement of OperationsAs Previously
    
    
    
    
    
    AsReported
    
    Adjustments
    
    RestatedFor the thirteen weeks ended July 31, 2004Cost of sales and occupancy expenses
    
    $
    206,669
    
    
    $
    (495
    )
    
    $
    206,174Gross profit
    
    
    87,963
    
    
    
    495
    
    
    
    88,458Selling, general and administrative expenses
    
    
    86,037
    
    
    
    460
    
    
    
    86,497Earnings from operations
    
    
    1,926
    
    
    
    35
    
    
    
    1,961Earnings before income taxes
    
    
    2,002
    
    
    
    35
    
    
    
    2,037Provision for income taxes
    
    
    746
    
    
    
    13
    
    
    
    759Net earnings
    
    
    1,256
    
    
    
    22
    
    
    
    1,278
 Condensed ConsolidatedStatement of OperationsAs Previously
    
    
    
    
    
    AsReported
    
    Adjustments
    
    RestatedFor the twenty-six weeks ended July 31, 2004Cost of sales and occupancy expenses
    
    $
    416,592
    
    
    $
    (943
    )
    
    $
    415,649Gross profit
    
    
    180,918
    
    
    
    943
    
    
    
    181,861Selling, general and administrative expenses
    
    
    166,327
    
    
    
    894
    
    
    
    167,221Earnings from operations
    
    
    14,591
    
    
    
    49
    
    
    
    14,640Earnings before income taxes
    
    
    14,851
    
    
    
    49
    
    
    
    14,900Provision for income taxes
    
    
    5,532
    
    
    
    19
    
    
    
    5,551Net earnings
    
    
    9,319
    
    
    
    30
    
    
    
    9,349
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Condensed Consolidated Balance SheetAs Previously
    
    
    
    
    
    AsReported
    
    Adjustments
    
    RestatedAs of July 31, 2004Property and equipment, net
    
    $
    111,627
    
    
    $
    9,079
    
    
    $
    120,706Total assets
    
    
    480,352
    
    
    
    9,079
    
    
    
    489,431Accrued expenses
    
    
    46,024
    
    
    
    266
    
    
    
    46,290Current deferred income taxes
    
    
    23,192
    
    
    
    (16
    )
    
    
    23,176Total current liabilities
    
    
    222,424
    
    
    
    250
    
    
    
    222,674Long-term liabilities
    
    
    6,633
    
    
    
    11,753
    
    
    
    18,386Deferred income taxes
    
    
    13,712
    
    
    
    (1,128
    )
    
    
    12,584Total liabilities
    
    
    242,769
    
    
    
    10,875
    
    
    
    253,644Retained earnings
    
    
    201,744
    
    
    
    (1,796
    )
    
    
    199,948Total shareholders equity
    
    
    237,583
    
    
    
    (1,796
    )
    
    
    235,787Total liabilities and shareholders equity
    
    
    480,352
    
    
    
    9,079
    
    
    
    489,431
 (3) Stock-Based Compensation
   Thirteen
    
    Twenty-sixWeeks Ended
    
    Weeks EndedJuly 30,
    
    July 31,
    
    July 30,
    
    July 31,2005
    
    2004
    
    2005
    
    2004Net (loss) earnings, as reported
    
    $
    (5,425
    )
    
    $
    1,278
    
    
    $
    (7,203
    )
    
    $
    9,349Deduct: Total stock-based employee
compensation expense determined
under fair value based-method for
all awards, net of related tax
effects
    
    
    1,810
    
    
    
    270
    
    
    
    3,511
    
    
    
    459Pro forma net (loss) earnings
    
    $
    (7,235
    )
    
    $
    1,008
    
    
    $
    (10,714
    )
    
    $
    8,890(Loss) earnings per common shareBasic  as reported
    
    $
    (0.16
    )
    
    $
    0.04
    
    
    $
    (0.22
    )
    
    $
    0.28Basic  pro forma
    
    
    (0.22
    )
    
    
    0.03
    
    
    
    (0.32
    )
    
    
    0.27Diluted  as reported
    
    $
    (0.16
    )
    
    $
    0.04
    
    
    $
    (0.22
    )
    
    $
    0.28Diluted  pro forma
    
    
    (0.22
    )
    
    
    0.03
    
    
    
    (0.32
    )
    
    
    0.26
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(4) Credit arrangements
  (5) Contingencies
 Class Action Proceeding
   8




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Other Matters
  (6) Intangible Assets
  (7) Non-Qualified Deferred Compensation Plan and Agreement
  (8) Asset Held for Sale
  (9) New Accounting Pronouncements
  9




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Item 2.  Managements Discussion and Analysis of Financial Condition and Results of Operations
  Forward-looking Statements
  (i)
    
    customer demand and trends in the apparel and retail industry and to the acceptance of the
Companys merchandise offerings, including the Companys private-label and exclusive lines;(ii)
    
    the ability to reverse the negative trend in comparable-store sales;(iii)
    
    weather conditions;(iv)
    
    the effectiveness of advertising and promotional events;(v)
    
    the ability to avoid excess promotional pricing;(vi)
    
    the effectiveness of merchandising, advertising, pricing, and operational strategies;(vii)
    
    the ability to predict fashion trends;(viii)
    
    the ability to achieve business plan targets;(ix)
    
    the timely availability of branded and private-label merchandise in sufficient quantities to satisfy customer demand;(x)
    
    the ability to achieve business plans for the Duck Head line, which call for continued
growth;(xi)
    
    the impact of competitors pricing and store expansion;(xii)
    
    individual store performance, including new stores;(xiii)
    
    the ability to negotiate acceptable lease terms for new store locations and existing store
locations to be remodeled or relocated;(xiv)
    
    the timing, magnitude and costs of opening new stores;(xv)
    
    growth of the Companys store base;(xvi)
    
    relations with vendors, factors and employees;(xvii)
    
    the general economic conditions within the Companys markets, including gasoline and energy
prices, and an improvement in the overall retail environment;(xviii)
    
    global political unrest, including terrorism and war;(xvix)
    
    the continued availability of adequate credit support from vendors and factors;(xx)
    
    the Companys compliance with loan covenants and the availability of sufficient eligible collateral for borrowing;(xxi)
    
    the unanticipated needs for additional capital expenditures;(xxii)
    
    trends affecting the Companys financial condition, results of operations or cash flows;(xxiii)
    
    the success of the Companys information technology systems; and(xxiv)
    
    the success of the Companys e-commerce initiative.
 www.goodysonline.com SEC Filings
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Overview
  Outlook
      Critical Accounting Policies
  12




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Results of Operations
  Thirteen
    
    Twenty-sixWeeks Ended
    
    Weeks EndedJuly 30,
    
    July 31,
    
    July 30,
    
    July 31,2005
    
    2004
    
    2005
    
    2004Sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales and occupancy expenses
    
    
    71.9
    
    
    
    70.0
    
    
    
    71.8
    
    
    
    69.6Gross profit
    
    
    28.1
    
    
    
    30.0
    
    
    
    28.2
    
    
    
    30.4Selling, general and administrative
expenses
    
    
    31.4
    
    
    
    29.4
    
    
    
    30.4
    
    
    
    28.0(Loss) earnings from operations
    
    
    (3.3
    )
    
    
    0.6
    
    
    
    (2.2
    )
    
    
    2.4Investment income
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.1Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (Loss) earnings before income taxes
    
    
    (3.2
    )
    
    
    0.7
    
    
    
    (2.1
    )
    
    
    2.5(Benefit) provision for income taxes
    
    
    (1.3
    )
    
    
    0.3
    
    
    
    (0.9
    )
    
    
    0.9Net (loss) earnings
    
    
    (1.9
    )%
    
    
    0.4
    %
    
    
    (1.2
    )%
    
    
    1.6
    %
 Thirteen Weeks Ended July 30, 2005 Compared with Thirteen Weeks Ended July 31, 2004
 Overview
 Sales.
 Gross profit.
 Selling, general and administrative (SG&A) expenses.
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Income taxes.
 Twenty-six Weeks Ended July 30, 2005 Compared with Twenty-six Weeks Ended July 31, 2004
 Overview
 Sales.
 Gross profit.
 Selling, general and administrative (SG&A) expenses.
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Income taxes.
 Liquidity and Capital Resources
 Financial Position.
     15




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Cash Flows. .
   New Accounting Pronouncement
   Contractual Obligations
  16




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Item 3.  Quantitative and Qualitative Disclosures about Market Risk
  
 Item 4.  Controls and Procedures
      17




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PART II  OTHER INFORMATION
 
 Item 4.  Submission of Matters to a Vote of Security Holders
  1.
    
    To elect two directors to serve for terms of three years;2.
    
    To consider, approve and adopt the Goodys Family Clothing, Inc. 2005 Stock Incentive
Plan.
      
 Item 6.  Exhibits
 10.108
    
    Limited Waiver and Joinder Agreement.15
    
    Accountants Awareness Letter.31.1
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.3
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32.2
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32.3
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
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GOODYS FAMILY CLOTHING, INC.(Registrant)Date: August 24, 2005
    
    /s/ Robert M. GoodfriendRobert M. GoodfriendChairman of the Board andChief Executive OfficerDate: August 24, 2005
    
    /s/ Edward R. CarlinEdward R. CarlinExecutive Vice President,Chief Financial Officer andSecretary(Principal Financial Officer)Date: August 24, 2005
    
    /s/ David G. PeekDavid G. PeekSenior Vice President andChief Accounting Officer(Principal AccountingOfficer)
 19