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 ending April 30, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the transition period from to
-------- --------
Commission File Number 0-13283
REX Stores Corporation
(Exact name of registrant as specified in its charter)
Delaware No. 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)
Registrant's telephone number, including area code 513-276-3931
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, and
(2) has been subject to such filing requirements for at least the
past 90 days. Yes (X) No ( )
At the close of business on June 13, 1996, the registrant had
9,051,031 shares of Common Stock, par value $.01 per share,
outstanding.<PAGE>
REX STORES CORPORATION AND SUBSIDIARIES
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Consolidated 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................ 13
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
April 30 January 31 April 30
1996 1996 1995
(In Thousands)
<S> <C> <C> <C>
ASSETS:
Cash and cash equivalents $ 1,931 $ 685 $ 4,008
Short-term investments 1,565 1,525 1,555
Accounts receivable, net 408 1,604 495
Merchandise inventory 164,920 146,566 131,284
Prepaid expenses and other 1,997 1,825 1,722
Future income tax benefits 3,818 3,818 2,860
---------- --------- ---------
Total current assets 174,639 156,023 141,924
PROPERTY AND EQUIPMENT, NET 71,316 70,307 50,931
FUTURE INCOME TAX BENEFITS 8,269 8,269 7,619
---------- --------- ---------
Total assets $ 254,224 $ 234,599 $ 200,474
========== ========= =========
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C> <C>
CURRENT LIABILITIES:
Notes payable $ 27,150 $ 9,327 $ 2,956
Current portion of long-term debt 2,058 2,050 1,687
Current portion, deferred income
and deferred gain on
sale and leaseback 9,570 9,083 7,670
Accounts payable, trade 44,327 39,525 42,931
Accrued income taxes 789 4,121 504
Accrued payroll 4,696 6,570 4,446
Other liabilities 5,521 5,331 4,758
--------- --------- ---------
Total current liabilities 94,111 76,007 64,952
--------- --------- ---------
3
<PAGE>
Liabilities and Shareholders' Equity (Continued)
LONG-TERM LIABILITIES:
Long-term debt 32,090 32,590 25,129
Deferred income 16,835 16,506 13,857
Deferred gain on sale and
leaseback 6,914 7,150 7,678
--------- --------- ---------
Total long-term liabilities 55,839 56,246 46,664
--------- --------- ---------
SHAREHOLDERS' EQUITY:
Common stock 96 95 95
Paid-in capital 56,903 56,732 56,243
Retained earnings 51,157 49,401 36,402
Treasury stock (3,882) (3,882) (3,882)
--------- --------- ---------
Total shareholders' equity 104,274 102,346 88,858
--------- --------- ---------
Total liabilities and
shareholders' equity $ 254,224 $ 234,599 $ 200,474
========= ========= =========
</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
April 30
1996 1995
(In Thousands, Except Per Share Amounts)
<S> <C> <C>
NET SALES $ 97,384 $ 87,427
--------- ---------
COSTS AND EXPENSES:
Cost of merchandise sold 72,503 65,602
Selling, general and
administrative expenses 20,798 18,642
--------- ---------
Total costs and expenses 93,301 84,244
--------- ---------
INCOME FROM OPERATIONS 4,083 3,183
INVESTMENT INCOME 22 109
INTEREST EXPENSE 1,203 691
--------- ---------
Income before provision for
income taxes 2,902 2,601
PROVISION FOR INCOME TAXES 1,146 1,027
--------- ---------
NET INCOME $ 1,756 $ 1,574
========= =========
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVA-
LENT SHARES OUTSTANDING 9,389 9,429
========= =========
NET INCOME PER SHARE $ 0.19 $ 0.17
========= =========
</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>
In Thousands
Common Shares
-------------------------------
Issued Treasury Paid-in Retained
Shares Amount Shares Amount Capital Earnings
<S> <C> <C> <C> <C> <C> <C>
Balance at
April 30, 1995 9,457 $ 95 534 $3,882 $56,243 $36,402
Common stock
issued 64 - - - 489 -
Net income - - - - - 12,999
----- ------ --- ------ ------- -------
Balance at
January 31, 1996 9,521 $ 95 534 $3,882 $56,732 $49,401
Common stock
issued 47 1 - - 171 -
Net income - - - - - 1,756
----- ------ --- ------ ------- -------
Balance at
April 30, 1996 9,568 $ 96 534 $3,882 $56,903 $51,157
===== ====== === ====== ======= =======
</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>
Three Months Ended
April 30
1996 1995
(In Thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,756 $ 1,574
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization, net 717 502
Deferred income 683 579
Accounts receivable 1,196 582
Merchandise inventory (18,354) (15,937)
Other current assets (173) (254)
Accounts payable, trade 4,802 9,636
Other liabilities (5,016) (4,216)
-------- --------
NET CASH USED IN OPERATING ACTIVITIES (14,389) (7,534)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Short-term investments (40) -
Capital expenditures (1,830) (1,508)
Capital disposals 2 -
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (1,868) (1,508)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in note payable 17,823 2,956
Payments of long-term debt (492) (459)
Common stock issued 172 154
Treasury stock acquired - (2,264)
-------- --------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 17,503 387
-------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 1,246 (8,655)
CASH AND CASH EQUIVALENTS,
beginning of period 685 12,663
-------- --------
CASH AND CASH EQUIVALENTS,
end of period $ 1,931 $ 4,008
</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
April 30, 1996
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, 1996.
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 1996 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 April 30, 1996:
<TABLE>
<CAPTION>
Shares Under Stock
Option Plans
<S> <C>
Outstanding at January 31, 1996 2,068,558
($3.25 to $18.975 per share)
Exercised ($3.25 to $13.00 per share) (46,969)
Cancelled or expired ( 3,000)
---------
Outstanding at April 30, 1996
($3.25 to $18.975 per share) 2,018,589
---------
</TABLE>
Note 4. Subsequent Events
On June 10, 1996, the Company received $8.5 million in
mortgage financing at an interest rate of 8.69%. The funds were
used to pay down outstanding borrowings on the revolving line of
credit. The mortgages are for a term of ten years, with a balloon
payment at the end of the scheduled term. The interest rate is
fixed for the first five years.
Note 5. Accounting Change
On February 1, 1996, the Company adopted the provisions of
Statement of Financial Accounting Standards (SFAS) No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of," which addresses the identification
and measurement of asset impairments and requires the recognition
of impairment losses on long-lived assets when carrying values
exceed expected future cash flows. The application of this
accounting standard did not have a material impact on the Company's
financial position or result of operations.
9
<PAGE>
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 under the trade name "REX."
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
April 30
1996 1995
<S> <C> <C>
Net sales 100.0% 100.0%
Cost of merchandise sold 74.4 75.0
----- -----
Gross profit 25.6 25.0
Selling, general and
administrative expense 21.4 21.3
----- -----
Income from operations 4.2 3.7
Interest, net 1.2 .7
----- -----
Income before income
taxes 3.0 3.0
Provision for income taxes 1.2 1.2
----- -----
Net income 1.8% 1.8%
===== =====
</TABLE>
10
<PAGE>
Comparison of Three Months Ended April 30, 1996 and 1995
Net sales in the first quarter ended April 30, 1996 were $97.4
million compared to $87.4 million in the prior year's comparable
period, representing an increase of $10.0 million or 11.4%. This
increase is a result of 32 net additional stores in the current
quarter compared to the prior year's first quarter which was
partially offset by a decline of 5% in comparable store merchandise
sales for the quarter. The Company considers a store to be
comparable after it has been open six fiscal quarters.
As of April 30, 1996, the Company had 197 stores compared to
165 stores one year earlier. There were no stores opened and two
closed during the first quarter of fiscal 1997. The Company
anticipates opening 35 to 40 new stores in fiscal 1997. The
Company evaluates the performance of its stores on a continuous
basis and, based on an assessment of factors it deems relevant,
will close any store which is not adequately contributing to
company profitability.
Gross profit of $24.9 million in the first quarter of fiscal
1997 (25.6% of net sales) was 14.0% higher than the $21.8 million
gross profit (25.0% of net sales) recorded in the first quarter of
fiscal 1996. The improved gross profit margin for the first
quarter of fiscal 1997 is primarily the result of lower merchandise
cost on certain products due to opportunistic purchasing. Extended
service contract revenues, which generally have a higher gross
profit margin, were consistent as a percent of net sales.
Selling, general and administrative expenses for the quarter
ended April 30, 1996 were $20.8 million (21.4% of net sales), an
11.6% increase over the $18.6 million (21.3% of net sales) for the
quarter ended April 30, 1995. The increase in expenses was
primarily attributable to higher payroll costs related to the
increased number of stores and increased sales, higher advertising
costs and general costs associated with more store locations. As
a percent of net sales, selling, general and administrative
expenses were consistent between periods.
Income from operations was $4.1 million (4.2% of net sales) in
the first quarter of fiscal 1997, a 28.3% increase over $3.2
million (3.7% of net sales) for the first quarter of fiscal 1996.
This improvement was primarily a result of increased sales volume
from new stores and an improved gross profit margin resulting from
opportunistic purchasing.
Interest expense increased to $1.2 million in the first
quarter of fiscal 1997 from $0.7 million in the first quarter of
fiscal 1996. This increase is primarily a result of additional
11
<PAGE>
borrowings on the revolving line of credit (average outstanding
borrowings of approximately $17.0 million for the first quarter of
fiscal 1997 compared to $0.4 million for the first quarter of
fiscal 1996) to support higher inventory levels associated with
store expansion and opportunistic purchasing and for fixed asset
additions. The increase in interest expense is also attributable to
additional mortgage debt of approximately $7.3 million (at an
average interest rate of approximately 9.1%) since April 30, 1995
associated with more Company owned store locations.
The effective tax rate was approximately 39.5% in the first
quarter of fiscal 1997 and 1996.
As a result of the foregoing, net income for the first quarter
of fiscal 1997 was $1.8 million, an 11.6% increase over $1.6
million for the first quarter of fiscal 1996.
Liquidity and Capital Resources
Net cash used in operating activities was $14.4 million for
the first quarter of fiscal 1997. Operating cash flow was provided
by net income of $1.8 million adjusted for non-cash charges of $1.4
million. The primary use of cash was an increase in inventory of
$18.4 million primarily due to the addition of seasonal air
conditioner inventory. This increase was partially offset by
increased accounts payable of $4.8 million. Changes in other
working capital items also served to decrease cash by approximately
$4.0 million.
At April 30, 1996, working capital was $80.5 million compared
to $80.0 million at January 31, 1996. The ratio of current assets
to current liabilities was 1.9 to 1 at April 30, 1996, and 2.1 to
1 at January 31, 1996.
The Company had outstanding borrowings of $27.1 million on its
revolving line of credit at April 30, 1996 at an average interest
rate of 7.7%. At April 30, 1996, the Company had approximately
$68.6 million borrowing availability on the revolving line of
credit after reduction for the outstanding letter of credit.
During fiscal 1997, the Company plans to open 35 to 40 REX
stores with anticipated capital expenditures of approximately $20
to $24 million. Capital expenditures for the first quarter of
fiscal 1997 were $1.8 million and were primarily in-process store
construction costs. 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.
Accounting Standards
During the first quarter of fiscal 1997, the Company adopted
the provisions of SFAS No. 121 "Accounting for the Impairment of
12
<PAGE>
Long-Lived Assets and for Long-Lived Assets to be Disposed Of."
The application of this accounting standard did not have a material
impact on the Company's financial position or results of
operations.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. The following exhibits are filed with this
report:
27 Financial Data Schedule...................... 15
(b) Reports on Form 8-K. No reports on Form 8-K were filed
during the quarter ended April 30, 1996.
13
<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
June 14, 1996 Stuart A. Rose
Stuart A. Rose
Chairman of the Board
(Chief Executive Officer)
June 14, 1996 Douglas L. Bruggeman
Douglas L. Bruggeman
Vice President, Finance and
Treasurer
(Principal Financial and
Chief Accounting Officer)
14
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000744187
<NAME> REX STORES CORPORATION
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-START> FEB-1-1996
<PERIOD-END> APR-30-1996
<EXCHANGE-RATE> 1
<CASH> 1,931
<SECURITIES> 1,565
<RECEIVABLES> 810
<ALLOWANCES> 402
<INVENTORY> 164,920
<CURRENT-ASSETS> 174,639
<PP&E> 80,752
<DEPRECIATION> 9,436
<TOTAL-ASSETS> 254,224
<CURRENT-LIABILITIES> 94,111
<BONDS> 32,090
<COMMON> 96
0
0
<OTHER-SE> 104,178
<TOTAL-LIABILITY-AND-EQUITY> 254,224
<SALES> 97,384
<TOTAL-REVENUES> 97,384
<CGS> 72,503
<TOTAL-COSTS> 72,503
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,203
<INCOME-PRETAX> 2,902
<INCOME-TAX> 1,146
<INCOME-CONTINUING> 1,756
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,756
<EPS-PRIMARY> .19
<EPS-DILUTED> .19
<PAGE>
</TABLE>
