FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 1995
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 0-13283
REX Stores Corporation
(Exact name of registrant as specified in its charter)
Delaware 31-1095548
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2875 Needmore Road, Dayton, Ohio 45414
(Address of principal executive offices) (Zip Code)
513-276-3931
(Registrant's telephone number, including area code)
<PAGE>
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 ( )
At the close of business on December 11, 1995, the registrant had
8,984,202 shares of Common Stock, par value $.01 per share,
outstanding.<PAGE>
REX STORES CORPORATION AND SUBSIDIARIES
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets......... 3
Consolidated Statements of Income............. 5
Consolidated Statements of Shareholders'
Equity...................................... 6
Consolidated Statements of Cash Flows......... 7
Notes to Consolidated Financial Statements.... 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K................ 14
2
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
REX STORES CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<CAPTION>
A S S E T S
October 31 January 31 October 31
1995 1995 1994
(In Thousands)
<S> <C> <C> <C>
ASSETS:
Cash and cash equivalents $ 2,084 $ 12,663 $ 2,760
Short-term investments 1,525 1,555 630
Accounts receivable, net 713 1,077 245
Merchandise inventory 183,801 115,347 142,395
Prepaid expenses and other 2,519 1,470 1,059
Prepaid income taxes and future
income tax benefits 4,084 2,860 4,128
---------- --------- ---------
Total current assets 194,726 134,972 151,217
NET LAND, BUILDINGS AND EQUIPMENT 67,648 50,025 43,429
FUTURE INCOME TAX BENEFIT 7,619 7,619 6,709
---------- --------- ---------
Total assets $ 269,993 $ 192,616 $ 201,355
========== ========= =========
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C> <C>
CURRENT LIABILITIES:
Notes payable $ 51,162 $ 0 $ 33,528
Current portion of long-term debt 1,963 1,680 631
Accounts payable, trade 50,059 33,295 36,795
Accrued income taxes 0 3,343 0
Current portion, deferred income
and gain on sale and leaseback 8,521 7,376 7,038
Accrued payroll and related 5,826 6,082 5,053
Other liabilities 5,371 4,499 4,605
--------- --------- ---------
Total current liabilities 122,902 56,275 87,650
--------- --------- ---------
3<PAGE>
Liabilities and Shareholders' Equity (Continued)
LONG-TERM LIABILITIES:
Long-term debt 31,342 25,595 12,685
Deferred income 14,907 13,573 11,937
Deferred gain on sale and
leaseback 7,386 7,779 7,881
--------- --------- ---------
Total long-term liabilities 53,635 46,947 32,503
--------- --------- ---------
SHAREHOLDERS' EQUITY:
Common stock 95 94 94
Treasury stock (3,882) (1,618) (1,618)
Paid-in capital 56,386 56,090 55,794
Retained earnings 40,857 34,828 26,932
--------- --------- ---------
Total shareholders' equity 93,456 89,394 81,202
--------- --------- ---------
Total liabilities and
shareholders' equity $ 269,993 $ 192,616 $ 201,355
========= ========= =========
</TABLE>
[FN]
The accompanying notes are an integral part of
these unaudited consolidated statements.
4
<PAGE>
<TABLE>
REX STORES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
Three Months Ended Nine Months Ended
October 31 October 31
1995 1994 1995 1994
(In Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C>
NET SALES $ 94,914 $ 80,160 $278,799 $230,416
COSTS AND EXPENSES:
Cost of merchandise sold 70,546 60,066 207,632 170,778
Selling, general and
administrative expenses 19,716 16,871 58,187 50,772
-------- -------- -------- --------
Total costs and expenses 90,262 76,937 265,819 221,550
-------- -------- -------- --------
INCOME FROM OPERATIONS 4,652 3,223 12,980 8,866
INVESTMENT INCOME 25 15 159 184
INTEREST EXPENSE 1,467 600 3,177 1,284
-------- -------- -------- --------
Income before income taxes 3,210 2,638 9,962 7,766
PROVISION FOR INCOME TAXES 1,268 1,039 3,933 3,066
-------- -------- -------- --------
NET INCOME $ 1,942 $ 1,599 $ 6,029 $ 4,700
======== ======== ======== ========
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVA-
LENT SHARES OUTSTANDING 9,412 9,532 9,388 8,895
======== ======== ======== ========
NET INCOME PER COMMON AND
COMMON EQUIVALENT SHARE $ 0.21 $ 0.17 $ 0.64 $ 0.53
======== ======== ======== ========
</TABLE>
[FN]
The accompanying notes are an integral part of
these unaudited consolidated statements.
5<PAGE>
<TABLE>
REX STORES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<CAPTION>
Common Shares
-------------------------------
Issued Treasury Paid-in Retained
Shares Amount Shares Amount Capital Earnings
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance at
October 31, 1994 9,372 $ 94 372 $1,618 $55,794 $26,932
Common stock
issued 48 0 0 0 296 0
Net income 0 0 0 0 0 7,896
----- ------ --- ------ ------- -------
Balance at
January 31, 1995 9,420 $ 94 372 $1,618 $56,090 $34,828
Common stock
issued 63 1 0 0 296 0
Treasury stock
acquired 0 0 162 2,264 0 0
Net income 0 0 0 0 0 6,029
----- ------ --- ------ ------- -------
Balance at
October 31, 1995 9,483 $ 95 534 $3,882 $56,386 $40,857
===== ====== === ====== ======= =======
</TABLE>
[FN]
The accompanying notes are an integral part of
these unaudited consolidated statements.
6<PAGE>
REX STORES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
October 31
1995 1994
(In Thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 6,029 $ 4,700
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 1,610 1,040
Deferred income 2,390 593
Deferred income taxes and
future income tax benefits 0 (1,565)
Accounts receivable 364 429
Merchandise inventory (68,454) (67,433)
Other current assets (2,278) 132
Accounts payable, trade 16,764 8,771
Other liabilities (2,727) (1,143)
-------- --------
NET CASH USED IN OPERATING ACTIVITIES (46,302) (54,476)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Short-term investments 30 0
Capital expenditures (19,561) (19,675)
Capital disposals 29 112
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (19,502) (19,563)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Notes payable 51,162 33,528
Payments of long-term debt (1,361) (421)
Long-term debt borrowings 7,391 2,366
Common stock issued 297 20,908
Treasury stock acquired (2,264) 0
-------- --------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 55,225 56,381
-------- --------
DECREASE IN CASH AND
CASH EQUIVALENTS (10,579) (17,658)
CASH AND CASH EQUIVALENTS,
beginning of period 12,663 20,418
-------- --------
CASH AND CASH EQUIVALENTS,
end of period $ 2,084 $ 2,760
</TABLE> ======== ========
[FN]
The accompanying notes are an integral part of
these unaudited consolidated statements.
7<PAGE>
REX STORES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1995
Note 1. Consolidated Financial Statements
The consolidated financial statements included in this report
have been prepared by the Company, without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission and
include, in the opinion of management, all adjustments necessary to
state fairly the information set forth therein. Any such
adjustments were of a normal recurring nature. Certain information
and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting
principles have been omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are
adequate to make the information presented not misleading. It is
suggested that these unaudited consolidated financial statements be
read in conjunction with the consolidated financial statements and
the notes thereto included in the Company's Annual Report on Form
10-K for the year ended January 31, 1995.
Note 2. Accounting Policies
The interim consolidated financial statements have been
prepared in accordance with the accounting policies described in
the notes to the consolidated financial statements included in the
Company's 1995 Annual Report on Form 10-K. While management
believes that the procedures followed in the preparation of interim
financial information are reasonable, the accuracy of some
estimated amounts is dependent upon facts that will exist or
calculations that will be accomplished at fiscal year end.
Examples of such estimates include changes in the LIFO reserve
(based upon the Company's best estimate of inflation to date) and
management bonuses. Any adjustments pursuant to such estimates
during the quarter were of a normal recurring nature.
8<PAGE>
Notes to Consolidated Financial Statements (Continued)
Note 3. Equivalent Shares Outstanding
The Company follows the treasury method of calculating common
equivalent shares outstanding. The following summarizes options
granted, exercised and cancelled or expired at October 31, 1995:
<TABLE>
<CAPTION>
Shares Under Stock
Option Plans
<S> <C>
Outstanding at January 31, 1995
($3.25 to $18.975 per share) 1,421,574
Granted ($13.875 to $15.262 per share) 167,845
Exercised ($3.25 to $15.25 per share) (63,432)
Expired or cancelled ($6.375 to $17.25
per share) (10,600)
---------
Outstanding at October 31, 1995
($3.25 to $18.975 per share) 1,515,387
---------
</TABLE>
Effective June 2, 1995, shareholders of the Company approved
an amendment and restatement of the Company's 1994 Incentive Stock
Option Plan, renamed the 1995 Omnibus Stock Incentive Plan. Awards
under the amended Plan may be made in the form of incentive stock
options, nonqualified stock options, stock appreciation rights,
restricted stock, other stock-based awards and cash incentive
awards. The amended Plan also provides for automatic yearly grants
of nonqualified stock options to nonemployee directors of the
Company. The maximum number of shares issuable under the amended
Plan was increased from 1,000,000 to 2,000,000 shares.
Note 4. Revolving Line of Credit
Effective July 31, 1995, the Company entered into an amended
and restated revolving credit agreement with seven participating
banks/lenders which expires July 31, 2000. Under the terms of the
agreement, available revolving credit borrowings are equal to the
lesser of: (i) $100 million for the months of January through June
and $150 million for the months of July through December or (ii)
the sum of specific percentages of eligible accounts receivable and
eligible inventories. Borrowings available are reduced by any
letter of credit commitments outstanding (see Note 7 of the
Company's 1995 Annual Report on Form 10-K). At October 31, 1995,
there was approximately $51.2 million outstanding on the line of
credit with additional availability of approximately $61.5 million.
The interest rate on borrowings is at prime or LIBOR plus
1.875% (approximately 7.8%) and commitment fees of 1/4% are payable
9<PAGE>
on the unused portion. Borrowings are secured by certain fixed
assets, accounts receivable and inventories.
The revolving credit agreement contains restrictive covenants
which require the Company to maintain certain financial ratios,
limit capital expenditures and limit the incurrence of additional
indebtedness. The Company is also restricted on paying dividends.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
The Company is a leader in the consumer electronics/appliance
retailing industry, operating predominantly in small to medium sized
markets in the Midwest and Southeast. The Company opened its first
two stores in the West during the third quarter of fiscal 1996 and
anticipates further expansion into this region in the future.
Results of Operations
The following table sets forth, for the periods indicated, the
relative percentages that certain income and expense items bear to
net sales:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
October 31 October 31
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of merchandise sold 74.3 74.9 74.5 74.1
----- ----- ----- -----
Gross profit 25.7 25.1 25.5 25.9
Selling, general and
administrative expense 20.8 21.1 20.8 22.1
----- ----- ----- -----
Income from operations 4.9 4.0 4.7 3.8
Interest, net 1.5 .7 1.1 .5
----- ----- ----- -----
Income before income
taxes 3.4 3.3 3.6 3.3
Provision for income taxes 1.3 1.3 1.4 1.3
----- ----- ----- -----
Net income 2.1% 2.0% 2.2% 2.0%
===== ===== ===== =====
</TABLE>
10<PAGE>
Comparison of Nine Months Ended October 31, 1995 and 1994
Net sales in the third quarter ended October 31, 1995 were
$94.9 million compared to $80.2 million in the prior year's
comparable period, representing an increase of $14.7 million or
18.3%. This increase is primarily a result of 33 additional stores
in the current year's third quarter compared to the prior year's
third quarter, offset by a decline in comparable store merchandise
sales of 4.1% for the quarter. Net sales for the first nine months
of fiscal 1996 were $278.8 million compared to $230.4 million in
the first nine months of fiscal 1995, representing an increase of
$48.4 million or 21.0%. This increase is primarily a result of 33
additional store locations in the current year, offset by a decline
in comparable store merchandise sales of 3.5% on a year to date
basis. As of October 31, 1995, the Company had 175 stores compared
to 142 stores one year earlier. The Company considers a store to
be comparable after it has been open six fiscal quarters.
The Company opened ten stores and closed none during the first
nine months of fiscal 1996 and 1995. During the fourth quarter of
the current fiscal year, the Company will open an additional 24
stores bringing the total opened for the year to 34 stores. The
Company anticipates opening an additional 35 to 40 new stores in
fiscal 1997 and will continue to evaluate stores and markets and
will close store locations that are not adequately contributing to
Company profitability.
Gross profit of $24.4 million in the third quarter of fiscal
1996 (25.7% of net sales) was 21.3% higher than the $20.1 million
gross profit (25.1% of net sales) recorded in the third quarter of
fiscal 1995. The improved gross profit margin in the fiscal 1996
third quarter is primarily the result of lower merchandise cost on
certain products due to opportunistic purchasing. In the first
nine months of fiscal 1996 gross profit was $71.2 million (25.5% of
net sales), a 19.3% increase over gross profit of $59.6 million
(25.9% of net sales) for the first nine months of fiscal 1995. The
lower gross profit margin for the first nine months of fiscal 1996
is primarily a result of increased competition in certain markets,
the introduction of personal computers into 94 stores, which have
a lower gross profit margin, and a decline in extended service
contract revenues as a percentage of net sales, which generally
have a higher gross profit margin.
Selling, general and administrative expenses for the third
quarter of fiscal 1996 were $19.7 million (20.8% of net sales), a
16.9% increase over the $16.9 million (21.1% of net sales) for the
third quarter of fiscal 1995. Selling, general and administrative
expenses for the first nine months of fiscal 1996 were $58.2
million (20.8% of net sales), a 14.6% increase over the $50.8
million (22.1% of net sales) for the first nine months of fiscal
1995. The increase in expense was primarily attributable to higher
payroll costs related to the increased number of stores and
increased sales, and higher advertising and general costs
11<PAGE>
associated with more store locations. The reduction of selling,
general and administrative expense as a percent of net sales was
primarily a result of more efficient advertising for existing
stores and lower occupancy cost as a result of the increased number
of owned stores versus leased stores.
As a result of the foregoing, income from operations was $4.7
million (4.9% of net sales) in the third quarter of fiscal 1996, a
44.3% increase over $3.2 million (4.0% of net sales) for the third
quarter of fiscal 1995. Income from operations was $13.0 million
(4.7% of net sales) for the first nine months of fiscal 1996, a
46.4% increase over $8.9 million (3.8% of net sales) for the first
nine months of fiscal 1995.
Interest expense increased to $1.5 million (1.5% of net sales)
for the quarter ended October 31, 1995 from $600,000 (.7% of net
sales) for the previous year's third quarter. Interest expense for
the first nine months of fiscal 1996 increased to $3.2 million
(1.1% of net sales) from $1.3 million (.5% of net sales) for the
first nine months of fiscal 1995. This increase is primarily a
result of additional mortgage debt of $20.0 million (at an average
interest rate of approximately 9.5%) since October 31, 1994 and
higher borrowings on the line of credit during the current fiscal
year.
The effective tax rate approximates 39.5% for all periods
presented.
As a result of the foregoing, net income for the third quarter
of fiscal 1996 was $1.9 million, a 21.5% increase over $1.6 million
for the third quarter of fiscal 1995. Net income for the first
nine months of fiscal 1996 was $6.0 million, a 28.3% increase over
$4.7 million for the first nine months of fiscal 1995.
Liquidity and Capital Resources
Net cash used in operating activities was $46.3 million for
the nine months ended October 31, 1995. The primary use of cash
was an increase in inventory of $68.5 million due to preparations
for additional store locations and the Christmas selling season, as
well as opportunistic buying. This was partially offset by an
increase in trade payables of $16.8 million.
At October 31, 1995, working capital was $71.9 million
compared to $78.7 million at January 31, 1995. The ratio of
current assets to current liabilities was 1.6 to 1 at October 31,
1995, and 2.4 to 1 at January 31, 1995.
Effective July 31, 1995, the Company entered into an amended
and restated revolving credit agreement with seven participating
banks/lenders which expires July 31, 2000. Under the terms of the
agreement, available revolving credit borrowings are equal to the
lesser of: (i) $100 million for the months of January through June
12<PAGE>
and $150 million for the months of July through December or (ii)
the sum of specific percentages of eligible accounts receivable and
eligible inventories. The Company had outstanding borrowings of
$51.2 million on its revolving line of credit at October 31, 1995
at an average interest rate of 7.8%. At October 31, 1995, the
Company had approximately $61.5 million borrowing availability on
the revolving line of credit after reduction for outstanding
letters of credit.
During fiscal 1996, the Company has opened 34 new REX stores.
Capital expenditures for the first nine months of fiscal 1996 were
$19.6 million with additional expenditures of approximately $2
million to $3 million expected in the fourth quarter. The Company
has obtained long-term mortgage financing of $7.4 million for 13
stores during the nine months ended October 31, 1995. The Company
believes it will be able to obtain long-term mortgage financing on
a site-by-site basis for Company built or Company purchased store
locations.
13<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits. The following exhibits are filed with this
report:
10(a) Employment Agreement dated September 1, 1995
between Rex Radio and Television, Inc. and Stuart
A. Rose
10(b) Employment Agreement dated September 1, 1995
between Rex Radio and Television, Inc. and
Lawrence Tomchin
27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter
ended October 31, 1995.
14<PAGE>
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.
REX STORES CORPORATION
Registrant
December 11, 1995 Stuart A. Rose
Stuart A. Rose
Chairman of the Board
(Chief Executive Officer)
December 11, 1995 Douglas L. Bruggeman
Douglas L. Bruggeman
Vice President, Finance and
Treasurer
(Principal Financial and
Chief Accounting Officer)
15
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into as of the 1st day of September,
1995 between Rex Radio and Television, Inc. (the "Corporation"),
and Stuart A. Rose (the "Employee").
Recitals
A. The Corporation and Employee entered into an
Employment Agreement dated January 1, 1994, of which the
Corporation and the Employee now desire to agree to
substantially the same terms and to cause Employee's
continued employment with the Corporation.
B. Employee desires to accept such employment on
the basis of the mutual benefits and covenants contained
herein.
NOW, THEREFORE, in consideration of the mutual promises and
covenants contained herein, the parties agree as follows:
ARTICLE I - DUTIES OF EMPLOYEE
1.1 Duties of Employee. Employee shall be employed as Chief
Executive Officer of the Corporation, for the period set forth in
Article II below. Employee shall be subject to the supervision of
the Board of Directors of the Corporation, and shall perform those
executive, operational and administrative duties normally performed
by the Chief Executive Officer of a corporation.
1.2 Engaging in Other Employment. Employee shall devote a
substantial portion of his business time, energies, attention and
abilities to the business of the Corporation; provided, however,
that Employee shall not be prohibited from: (i) making investments
in other businesses; and (ii) actively participating in the
operation of any business within which he has invested.
1.3 Additional Duties. In addition to the foregoing duties,
Employee shall perform such other work as may be assigned to him
from time to time subject to the instructions, directions and
control of the Board of Directors.
ARTICLE II - TERM OF EMPLOYMENT
2.1 Term. The Corporation shall employ Employee commencing
as of the 1st day of January, 1997, and continuing for a period of
three (3) years through December 31, 1999 (the "Employment Period")
and any renewal period provided for in Section 2.2 below unless
earlier terminated by Employee's: (i) resignation; (ii) death;
(iii) total disability; or (iv) termination of employment, as
provided in Article VI. "Total disability" shall mean such
disability as shall render Employee incapable of performing
<PAGE>
substantially all of his duties for the Corporation as determined
by any two qualified physicians chosen by the Corporation.
2.2 Renewal Term. The terms and conditions of this Employ-
ment Agreement shall automatically renew, without any further
action by either party required, upon the expiration of the
Employment Period and any period of renewal for subsequent one (1)
year periods unless (i) notice of termination is provided to the
other party at least 180 days prior to the expiration of the
Employment Period or any period of renewal or (ii) this Employment
Agreement is otherwise terminated pursuant to Article VI.
ARTICLE III - COMPENSATION AND EXPENSES
3.1 Compensation. Employee shall receive as compensation for
services rendered under this Agreement a base salary of One Hundred
Fifty Four Thousand Five Hundred Dollars ($154,500.00) per year,
payable in equal monthly installments of Twelve Thousand Eight
Hundred Seventy Five Dollars ($12,875.00) per month on the last
working day of each month (or such more frequent dates as the
Corporation may choose), and prorated for any partial monthly
period.
3.2 Expenses. Employee is authorized to incur reasonable
expenses in connection with the performance of his duties for the
Corporation, including expenses for entertainment of customers,
travel, and similar business purposes. The Corporation will
reimburse Employee for all such expenses upon the presentation of
an itemized account of such expenditures and approval of the
expenditures by a designated officer. In incurring reasonable
business expenses, Employee shall conform to the policies of the
Corporation as adopted by the Board of Directors from time to time.
ARTICLE IV - EMPLOYEE BENEFITS AND BONUSES
4.1 Employee Benefit Plans. Employee shall be entitled to
participate in any qualified pension plan, qualified profit-sharing
plan, medical and dental reimbursement plan, group term life
insurance plan, and any other employee benefit plan which may be
established by the Corporation, such participation to be in
accordance with the terms of any such plan.
4.2 Bonus. In addition to Employee's salary as provided in
Section 3.1, Employee may be paid a cash bonus as determined in the
sole discretion of the Board of Directors of the Corporation, any
such bonus to be commensurate with the effort and achievement of
Employee on behalf of the Corporation.
4.3 Vacation. Employee shall be entitled to eight (8) weeks
of vacation during each 12-month period of the Employment Period or
any period of renewal at full pay; provided, however, that no
portion of a vacation not taken in any 12-month period may be taken
in any other 12-month period. The time for such vacation shall be
selected by Employee. Employee shall not be entitled to vacation
pay in lieu of vacation.
2<PAGE>
ARTICLE V - NONDISCLOSURE AND NONCOMPETITION
5.1 Confidential Information. Employee agrees to keep secret
and confidential the Confidential Information (as defined below)
and shall not use or disclose said information, either during or
after his employment with the Corporation, for any purpose not
authorized by the Corporation. Upon termination of his employment
with the Corporation, Employee shall leave with the Corporation all
records, including all copies thereof, containing any Confidential
Information, including, but not limited to, such documents as memo-
randa, notes, records, reports, customer lists, manuals, drawings,
blueprints and maps. "Confidential Information" means information
about the Corporation and any of its subsidiaries which is dis-
closed to Employee or known by him as a consequence of or through
his work with or on behalf of the Corporation (including informa-
tion conceived, originated, discovered, or developed by him) not
generally known about the Corporation, including, but not limited
to, matters of a technical nature, such as "know-how," innovations,
research projects, methods, and matters of a business nature, such
as information about costs, profits, markets, sales, lists of cus-
tomers, suppliers, business processes, computer programs, account-
ing methods, information systems, business or marketing financial
plans and reports, and any other information of a similar nature.
5.2 Restrictions on Competition. During the term of this
Agreement and for a period of two years after termination, for any
reason, of Employee's employment with the Corporation, Employee
shall not directly or indirectly, either as an employee, employer,
consultant, agent, principal, partner, stockholder, corporate
officer, director, or in any other individual or representative
capacity, engage or participate in any business that is (i) in
competition in any manner whatsoever with the business of the Cor-
poration within 100 miles of any store operated by the Corporation
or its subsidiaries at the time of Employee's termination; or (ii)
the owner or operator of a retail business similar to that of the
Corporation within 100 miles of any store operated by the Corpo-
ration or its subsidiaries at the time of Employee's termination.
5.3 Saving. In the event any provision of this Article V
shall be held invalid, illegal, or unenforceable, the remaining
provisions shall in no way be affected thereby, and shall continue
in full force and effect. If, moreover, any one or more of the
provisions contained in this Article V shall for any reason be held
to be excessively broad as to time, duration, geographical scope,
activity or subject, it shall be construed, by limiting and
reducing it, so as to be enforceable to the extent compatible with
the applicable law as it shall then appear.
ARTICLE VI - TERMINATION
6.1 Termination of Employment with Cause. The Corporation
may at any time terminate Employee's employment with cause. Such
termination of employment with cause shall not prejudice any other
remedy to which the Corporation may be entitled either at law, in
equity, or under this Agreement. "Termination of employment with
3<PAGE>
cause" shall mean termination upon: (i) Employee's repeated
failure or refusal to perform his duties hereunder faithfully,
diligently, competently and to the best of his ability for reasons
other than serious disability or other incapacity; (ii) Employee's
violation of any material provision of this Agreement; or (iii)
Employee's clear and intentional violation of a state or federal
law of which he is aware or should have been aware: (a) involving
the commission of a felonious crime against the Corporation which
has a materially adverse effect upon the Corporation; or (b)
involving a felony other than against the Corporation having a
materially adverse effect upon the Corporation, as determined in
either case in the reasonable judgment of the Board of Directors.
6.2 Termination by Either Party. This Agreement may be
terminated by either party with or without cause upon 180 days
notice.
6.3 Effect of Termination on Compensation. In the event this
Agreement is terminated prior to the completion of the Employment
Period or any period of renewal, Employee shall be entitled to the
compensation earned by him prior to the date of termination as
provided for in this Agreement computed pro rata up to and
including that date; Employee shall be entitled to no further
compensation as of the date of termination.
6.4 Effect of Termination on Bonus Plans. In the event of
the termination of this Agreement prior to the completion of the
Employment Period or any period of renewal, Employee shall
automatically and completely forfeit any rights which he may have
under any bonus plan established by the Corporation.
ARTICLE VII - WAIVER OF BREACH
7.1 Effect of Waiver. Waiver by the Corporation of any
condition, or of the breach of Employee of any term or covenant
contained in this Agreement, whether by conduct or otherwise, in
any one or more instances shall not be deemed to be or construed as
a further or continuing waiver of any such condition or to be a
waiver either of any other condition or of the breach of any other
term or covenant of this Agreement. The failure of the Corporation
at any time or times to require performance of any provision hereof
shall in no manner affect its rights at a later time to require the
same.
ARTICLE VIII - MISCELLANEOUS
8.1 Notices. All notices and other communications by any
party hereto shall be made in writing to the other party and shall
be deemed to have been duly given when mailed by United States
certified mail, with postage prepaid, addressed as the parties
hereto may designate from time to time in writing.
8.2 Entire Agreement. This Agreement supersedes any and all
other agreements, either oral or in writing, between the parties
hereto with respect to the employment of Employee by the
4<PAGE>
Corporation, and contains all of the covenants and agreements
between the parties with respect to such employment in any manner
whatsoever.
8.3 Assignability. Neither this Agreement, nor any duties or
obligations hereunder shall be assignable by Employee without the
prior written consent of the Board of Directors of the Corporation.
8.4 Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective
heirs, executors, administrators, successors and assigns.
8.5 Captions. The captions in this Agreement are inserted
for convenience only and shall not be considered part of or affect
the construction or interpretation of any provision of this
Agreement.
8.5 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Ohio.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first set forth above.
REX RADIO AND TELEVISION, INC.
Edward M. Kress
Edward M. Kress, Secretary
EMPLOYEE:
Stuart A. Rose
STUART A. ROSE
5
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into as of the 1st day of September,
1995 between Rex Radio and Television, Inc. (the "Corporation"),
and Lawrence Tomchin (the "Employee").
Recitals
A. The Corporation and Employee entered into an
Employment Agreement dated January 1, 1994, of which the
Corporation and the Employee now desire to agree to
substantially the same terms and to cause Employee's
continued employment with the Corporation.
B. Employee desires to accept such employment on
the basis of the mutual benefits and covenants contained
herein.
NOW, THEREFORE, in consideration of the mutual promises and
covenants contained herein, the parties agree as follows:
ARTICLE I - DUTIES OF EMPLOYEE
1.1 Duties of Employee. Employee shall be employed as
President and Chief Operating Officer of the Corporation, for the
period set forth in Article II below. Employee shall be subject to
the supervision of the Board of Directors of the Corporation, and
shall perform those executive, operational and administrative
duties normally performed by the President and Chief Operating
Officer of a corporation.
1.2 Engaging in Other Employment. Employee shall devote a
substantial portion of his business time, energies, attention and
abilities to the business of the Corporation; provided, however,
that Employee shall not be prohibited from: (i) making investments
in other businesses; and (ii) actively participating in the
operation of any business within which he has invested.
1.3 Additional Duties. In addition to the foregoing duties,
Employee shall perform such other work as may be assigned to him
from time to time subject to the instructions, directions and
control of the Board of Directors.
ARTICLE II - TERM OF EMPLOYMENT
2.1 Term. The Corporation shall employ Employee commencing
as of the 1st day of January, 1997, and continuing for a period of
three (3) years through December 31, 1999 (the "Employment Period")
and any renewal period provided for in Section 2.2 below unless
earlier terminated by Employee's: (i) resignation; (ii) death;
(iii) total disability; or (iv) termination of employment, as
provided in Article VI. "Total disability" shall mean such
disability as shall render Employee incapable of performing<PAGE>
substantially all of his duties for the Corporation as determined
by any two qualified physicians chosen by the Corporation.
2.2 Renewal Term. The terms and conditions of this Employ-
ment Agreement shall automatically renew, without any further
action by either party required, upon the expiration of the
Employment Period and any period of renewal for subsequent one (1)
year periods unless (i) notice of termination is provided to the
other party at least 180 days prior to the expiration of the
Employment Period or any period of renewal or (ii) this Employment
Agreement is otherwise terminated pursuant to Article VI.
ARTICLE III - COMPENSATION AND EXPENSES
3.1 Compensation. Employee shall receive as compensation for
services rendered under this Agreement a base salary of One Hundred
Fifty Four Thousand Five Hundred Dollars ($154,500.00) per year,
payable in equal monthly installments of Twelve Thousand Eight
Hundred Seventy Five Dollars ($12,875.00) per month on the last
working day of each month (or such more frequent dates as the
Corporation may choose), and prorated for any partial monthly
period.
3.2 Expenses. Employee is authorized to incur reasonable
expenses in connection with the performance of his duties for the
Corporation, including expenses for entertainment of customers,
travel, and similar business purposes. The Corporation will
reimburse Employee for all such expenses upon the presentation of
an itemized account of such expenditures and approval of the
expenditures by a designated officer. In incurring reasonable
business expenses, Employee shall conform to the policies of the
Corporation as adopted by the Board of Directors from time to time.
ARTICLE IV - EMPLOYEE BENEFITS AND BONUSES
4.1 Employee Benefit Plans. Employee shall be entitled to
participate in any qualified pension plan, qualified profit-sharing
plan, medical and dental reimbursement plan, group term life
insurance plan, and any other employee benefit plan which may be
established by the Corporation, such participation to be in
accordance with the terms of any such plan.
4.2 Bonus. In addition to Employee's salary as provided in
Section 3.1, Employee may be paid a cash bonus as determined in the
sole discretion of the Board of Directors of the Corporation, any
such bonus to be commensurate with the effort and achievement of
Employee on behalf of the Corporation.
4.3 Vacation. Employee shall be entitled to eight (8) weeks
of vacation during each 12-month period of the Employment Period or
any period of renewal at full pay; provided, however, that no
portion of a vacation not taken in any 12-month period may be taken
in any other 12-month period. The time for such vacation shall be
selected by Employee. Employee shall not be entitled to vacation
pay in lieu of vacation.
2<PAGE>
ARTICLE V - NONDISCLOSURE AND NONCOMPETITION
5.1 Confidential Information. Employee agrees to keep secret
and confidential the Confidential Information (as defined below)
and shall not use or disclose said information, either during or
after his employment with the Corporation, for any purpose not
authorized by the Corporation. Upon termination of his employment
with the Corporation, Employee shall leave with the Corporation all
records, including all copies thereof, containing any Confidential
Information, including, but not limited to, such documents as memo-
randa, notes, records, reports, customer lists, manuals, drawings,
blueprints and maps. "Confidential Information" means information
about the Corporation and any of its subsidiaries which is dis-
closed to Employee or known by him as a consequence of or through
his work with or on behalf of the Corporation (including informa-
tion conceived, originated, discovered, or developed by him) not
generally known about the Corporation, including, but not limited
to, matters of a technical nature, such as "know-how," innovations,
research projects, methods, and matters of a business nature, such
as information about costs, profits, markets, sales, lists of cus-
tomers, suppliers, business processes, computer programs, account-
ing methods, information systems, business or marketing financial
plans and reports, and any other information of a similar nature.
5.2 Restrictions on Competition. During the term of this
Agreement and for a period of two years after termination, for any
reason, of Employee's employment with the Corporation, Employee
shall not directly or indirectly, either as an employee, employer,
consultant, agent, principal, partner, stockholder, corporate
officer, director, or in any other individual or representative
capacity, engage or participate in any business that is (i) in
competition in any manner whatsoever with the business of the Cor-
poration within 100 miles of any store operated by the Corporation
or its subsidiaries at the time of Employee's termination; or (ii)
the owner or operator of a retail business similar to that of the
Corporation within 100 miles of any store operated by the Corpo-
ration or its subsidiaries at the time of Employee's termination.
5.3 Saving. In the event any provision of this Article V
shall be held invalid, illegal, or unenforceable, the remaining
provisions shall in no way be affected thereby, and shall continue
in full force and effect. If, moreover, any one or more of the
provisions contained in this Article V shall for any reason be held
to be excessively broad as to time, duration, geographical scope,
activity or subject, it shall be construed, by limiting and
reducing it, so as to be enforceable to the extent compatible with
the applicable law as it shall then appear.
ARTICLE VI - TERMINATION
6.1 Termination of Employment with Cause. The Corporation
may at any time terminate Employee's employment with cause. Such
termination of employment with cause shall not prejudice any other
remedy to which the Corporation may be entitled either at law, in
equity, or under this Agreement. "Termination of employment with
3<PAGE>
cause" shall mean termination upon: (i) Employee's repeated
failure or refusal to perform his duties hereunder faithfully,
diligently, competently and to the best of his ability for reasons
other than serious disability or other incapacity; (ii) Employee's
violation of any material provision of this Agreement; or (iii)
Employee's clear and intentional violation of a state or federal
law of which he is aware or should have been aware: (a) involving
the commission of a felonious crime against the Corporation which
has a materially adverse effect upon the Corporation; or (b)
involving a felony other than against the Corporation having a
materially adverse effect upon the Corporation, as determined in
either case in the reasonable judgment of the Board of Directors.
6.2 Termination by Either Party. This Agreement may be
terminated by either party with or without cause upon 180 days
notice.
6.3 Effect of Termination on Compensation. In the event this
Agreement is terminated prior to the completion of the Employment
Period or any period of renewal, Employee shall be entitled to the
compensation earned by him prior to the date of termination as
provided for in this Agreement computed pro rata up to and
including that date; Employee shall be entitled to no further
compensation as of the date of termination.
6.4 Effect of Termination on Bonus Plans. In the event of
the termination of this Agreement prior to the completion of the
Employment Period or any period of renewal, Employee shall
automatically and completely forfeit any rights which he may have
under any bonus plan established by the Corporation.
ARTICLE VII - WAIVER OF BREACH
7.1 Effect of Waiver. Waiver by the Corporation of any
condition, or of the breach of Employee of any term or covenant
contained in this Agreement, whether by conduct or otherwise, in
any one or more instances shall not be deemed to be or construed as
a further or continuing waiver of any such condition or to be a
waiver either of any other condition or of the breach of any other
term or covenant of this Agreement. The failure of the Corporation
at any time or times to require performance of any provision hereof
shall in no manner affect its rights at a later time to require the
same.
ARTICLE VIII - MISCELLANEOUS
8.1 Notices. All notices and other communications by any
party hereto shall be made in writing to the other party and shall
be deemed to have been duly given when mailed by United States
certified mail, with postage prepaid, addressed as the parties
hereto may designate from time to time in writing.
8.2 Entire Agreement. This Agreement supersedes any and all
other agreements, either oral or in writing, between the parties
hereto with respect to the employment of Employee by the
4<PAGE>
Corporation, and contains all of the covenants and agreements
between the parties with respect to such employment in any manner
whatsoever.
8.3 Assignability. Neither this Agreement, nor any duties or
obligations hereunder shall be assignable by Employee without the
prior written consent of the Board of Directors of the Corporation.
8.4 Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective
heirs, executors, administrators, successors and assigns.
8.5 Captions. The captions in this Agreement are inserted
for convenience only and shall not be considered part of or affect
the construction or interpretation of any provision of this
Agreement.
8.5 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Ohio.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first set forth above.
REX RADIO AND TELEVISION, INC.
Edward M. Kress
Edward M. Kress, Secretary
EMPLOYEE:
Lawrence Tomchin
LAWRENCE TOMCHIN
5
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