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, 1998
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)
Registrant's telephone number, including area code 937-276-3931
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 11, 1998, the registrant had
7,723,722 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.................................... 11
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
April 30 January 31 April 30
1998 1998 1997
(In Thousands)
<S> <C> <C> <C>
ASSETS:
Cash and cash equivalents $ 2,260 $ 16,937 $ 2,119
Short-term investments 1,700 1,637 1,633
Accounts receivable, net 366 2,775 542
Merchandise inventory 142,737 126,498 156,318
Prepaid expenses and other 3,490 2,078 3,861
Future income tax benefits 7,899 7,899 5,544
--------- --------- --------
Total current assets 158,452 157,824 170,017
PROPERTY AND EQUIPMENT, NET 94,063 93,165 89,480
FUTURE INCOME TAX BENEFITS 9,541 9,541 8,519
--------- --------- --------
Total assets $ 262,056 $ 260,530 $268,016
========= ========= ========
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C> <C>
CURRENT LIABILITIES:
Notes payable $ 11,608 $ 0 $ 25,816
Current portion of long-term debt 3,045 2,959 3,152
Accounts payable, trade 43,548 49,832 41,541
Accrued income taxes 270 1,671 0
Current portion, deferred income
and deferred gain on
sale and leaseback 11,371 11,402 11,101
Accrued payroll 3,649 5,810 3,315
Other liabilities 7,237 7,263 6,254
--------- --------- --------
Total current liabilities 80,728 78,937 91,179
--------- --------- --------
3
<PAGE>
Liabilities and Shareholders' Equity (Continued)
LONG-TERM LIABILITIES:
Long-term debt 52,490 52,661 52,323
Deferred income 17,426 17,886 17,992
Deferred gain on sale and
leaseback 5,028 5,264 5,971
--------- --------- ---------
Total long-term liabilities 74,944 75,811 76,286 --------- --------- ---------
SHAREHOLDERS' EQUITY:
Common stock 97 97 96
Paid-in capital 58,224 57,896 57,336
Retained earnings 65,194 64,175 57,560
Treasury stock (17,131) (16,386) (14,441)
--------- --------- ---------
Total shareholders' equity 106,384 105,782 100,551
--------- --------- ---------
Total liabilities and
shareholders' equity $ 262,056 $ 260,530 $ 268,016
========= ========= =========
</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
1998 1997
(In Thousands, Except Per Share Amounts)
<S> <C> <C>
NET SALES $ 87,964 $ 88,265
--------- ---------
COSTS AND EXPENSES:
Cost of merchandise sold 63,982 63,870
Selling, general and
administrative expenses 21,216 21,573
--------- ---------
Total costs and expenses 85,198 85,443
--------- ---------
INCOME FROM OPERATIONS 2,766 2,822
INVESTMENT INCOME 178 28
INTEREST EXPENSE 1,259 1,532
--------- ---------
Income before provision for
income taxes 1,685 1,318
PROVISION FOR INCOME TAXES 666 521
--------- ---------
NET INCOME $ 1,019 $ 797
========= =========
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVA-
LENT SHARES OUTSTANDING 7,697 7,998
========= =========
BASIC NET INCOME PER SHARE $ 0.13 $ 0.10
========= =========
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING 8,037 8,230
========= =========
DILUTED NET INCOME PER SHARE $ 0.13 $ 0.10
========= =========
</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
April 30, 1997 9,615 $ 96 1,763 $14,441 $57,336 $57,560
Common stock
issued 73 1 0 0 560 0
Treasury stock
acquired 0 0 192 1,945 0 0
Net income 0 0 0 0 0 6,615
----- ------ ----- ------ ------- -------
Balance at
January 31, 1998 9,688 $ 97 1,955 $16,386 $57,896 $64,175
Common stock
issued 47 0 0 0 328 0
Treasury stock
acquired 0 0 70 745 0 0
Net income 0 0 0 0 0 1,019
----- ------ ----- ------ ------- -------
Balance at
April 30, 1998 9,735 $ 97 2,025 $17,131 $58,224 $65,194
===== ====== ===== ====== ======= =======
</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
1998 1997
(In Thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,019 $ 797
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization, net 781 743
Deferred income (491) (30)
Accounts receivable 2,409 935
Merchandise inventory (16,239) (21,285)
Other current assets (1,414) (1,644)
Accounts payable, trade (6,284) 10,276
Other liabilities (3,588) (2,775)
-------- --------
NET CASH USED IN OPERATING ACTIVITIES (23,807) (12,983)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Short-term investments (63) 12
Capital expenditures (1,913) (819)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (1,976) (807)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in note payable 11,608 13,674
Payments of long-term debt (723) (680)
Long-term debt borrowings 638 1,922
Common stock issued 328 107
Treasury stock acquired (745) (3,073)
-------- --------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 11,106 11,950
-------- --------
NET DECREASE IN CASH AND
CASH EQUIVALENTS (14,677) (1,840)
CASH EQUIVALENTS,
beginning of period 16,937 3,959
-------- --------
CASH AND CASH EQUIVALENTS,
end of period $ 2,260 $ 2,119
</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, 1998
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, 1998.
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 1998 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.
Certain reclassifications have been made to prior year amounts
to conform with their 1998 presentation.
8
<PAGE>
Notes to Consolidated Financial Statements (Continued)
Note 3. Stock Option Plans
The following summarizes options granted, exercised and
cancelled or expired during the quarter ended April 30, 1998:
<TABLE>
<CAPTION>
Shares Under Stock
Option Plans
<S> <C>
Outstanding at January 31, 1998 2,287,464
($3.375 to $18.975 per share)
Exercised ($6.875 to $8.125 per share) (46,945)
---------
Outstanding at April 30, 1998
($3.375 to $18.975 per share) 2,240,519
---------
</TABLE>
Note 4. Net Income Per Share
Effective January 31, 1998, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 128 "Earnings per Share,"
which replaces the calculation of primary and fully diluted
earnings per share under previous accounting standards with basic
and diluted earnings per share. As a result, the Company's
reported net income per share amounts for the quarter ended April
30, 1997 have been restated to conform with the requirements of
SFAS No. 128. The restatement had no impact on the amounts
reported.
The following table reconciles the basic and diluted net
income per share computations for each period presented:
9
<PAGE>
<TABLE>
<CAPTION>
April 30, 1998
Income Shares Per Share
<S> <C> <C> <C>
Basic net income per share $1,019 7,697 $0.13
=====
Effect of stock options - 340
------ ------
Diluted net income per share $1,019 8,037 $0.13
====== ====== =====
</TABLE>
<TABLE>
<CAPTION>
April 30, 1997
Income Shares Per Share
<S> <C> <C> <C>
Basic net income per share $ 797 7,998 $0.10
=====
Effect of stock options - 232
------ ------
Diluted net income per share $ 797 8,230 $0.10
====== ====== =====
</TABLE>
As of April 30, 1998, a total of 1,133,973 shares subject to
outstanding options at exercise prices ranging from $13.00 to
$18.975 per share were not included in the common equivalent shares
outstanding calculation as the exercise prices were above the
average trading price of the Company's stock for the quarter ended
April 30, 1998.
10
<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 with 223 stores in 35 states, operating
predominantly in small to medium sized markets 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
1998 1997
<S> <C> <C>
Net sales 100.0% 100.0%
Cost of merchandise sold 72.7 72.4
----- -----
Gross profit 27.3 27.6
Selling, general and
administrative expense 24.1 24.4
----- -----
Income from operations 3.2 3.2
Interest, net 1.2 1.7
----- -----
Income before income
taxes 2.0 1.5
Provision for income taxes .8 .6
----- -----
Net income 1.2% .9%
===== =====
</TABLE>
11
<PAGE>
Comparison of Three Months Ended April 30, 1998 and 1997
Net sales in the first quarter ended April 30, 1998 were $88.0
million compared to $88.3 million in the prior year's comparable
period, representing a decrease of $300,000 or 0.3%. This decrease
is the result of a 2.4% decline in comparable store sales for the
quarter, partially offset by increased sales in non-comparable
stores. The Company considers a store to be comparable after it
has been open six fiscal quarters.
As of April 30, 1998, the Company had 223 stores compared to
222 stores one year earlier. There was one store opened and none
closed during the first quarter of fiscal 1999. 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 $24.0 million in the first quarter of fiscal
1999 (27.3% of net sales) was 1.7% lower than the $24.4 million
gross profit (27.6% of net sales) recorded in the first quarter of
fiscal 1998. The reduced gross profit margin, as a percent of net
sales, for the first quarter of fiscal 1999 is primarily the result
of a change in the merchandise mix, partially offset by the
recognition of a higher amount of extended service contract
revenues, which generally have a higher gross profit margin.
Selling, general and administrative expenses for the quarter
ended April 30, 1998 were $21.2 million (24.1% of net sales), a
1.7% decrease from $21.6 million (24.4% of net sales) for the
quarter ended April 30, 1997. The decrease in expense is primarily
attributable to lower advertising expenditures in certain markets,
partially offset by an increase in incentive commissions for sales
personnel.
Interest expense decreased to $1.3 million in the first
quarter of fiscal 1999 from $1.5 million in the first quarter of
fiscal 1998. This decrease is a result of lower borrowings on the
line of credit primarily due to lower inventory levels.
The effective tax rate was approximately 39.5% in the first
quarter of fiscal 1999 and 1998.
As a result of the foregoing, net income for the first quarter
of fiscal 1999 was $1.0 million, a 27.9% increase from $797,000 for
the first quarter of fiscal 1998.
12
<PAGE>
Liquidity and Capital Resources
Net cash used in operating activities was $23.8 million for
the first quarter of fiscal 1999, compared to $13.0 million for the
prior year first quarter. Cash flow was provided by net income of
$1.0 million adjusted for non-cash charges of $290,000. The
primary use of cash was an increase in inventory of $16.2 million
primarily due to the addition of seasonal air conditioner inventory
and a decrease in accounts payable of $6.3 million due to timing
of payments with vendors. Changes in other working capital items
also served to decrease cash by approximately $2.6 million.
At April 30, 1998, working capital was $77.7 million compared
to $78.9 million at January 31, 1998. The ratio of current assets
to current liabilities was 2.0 to 1 at April 30, 1998 and January
31, 1998.
The Company had outstanding borrowings of $11.6 million on its
revolving line of credit at April 30, 1998 at a average interest
rate of 8.5%. At April 30, 1998, the Company had approximately
$77.4 million borrowing availability on the revolving line of
credit.
Forward-Looking Statements
This Form 10-Q contains or may contain forward-looking
statements as defined in the Private Securities Litigation Reform
Act of 1995. The words "believes", "estimates", "plans",
"expects", "intends", "anticipates" and similar expressions as they
relate to the Company or its management are intended to identify
such forward-looking statements. Forward-looking statements are
inherently subject to risks and uncertainties. Factors that could
cause actual results to differ materially from those in the
forward-looking statements are set forth in Exhibit 99 to the
Company's Form 10-Q for the quarter ended October 31, 1997 (File
No. 0-13283).
Item 3. Quantitative and Qualitative Disclosure About Market Risk
None.
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:
27 Financial Data Schedule
(b) Reports on Form 8-K. No reports on Form 8-K were filed
during the quarter ended April 30, 1998.
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
June 12, 1998 STUART A. ROSE
Stuart A. Rose
Chairman of the Board
(Chief Executive Officer)
June 12, 1998 DOUGLAS L. BRUGGEMAN
Douglas L. Bruggeman
Vice President, Finance and
Treasurer
(Principal Financial and
Chief Accounting Officer)
15
<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-31-1999
<PERIOD-START> FEB-1-1998
<PERIOD-END> APR-30-1998
<EXCHANGE-RATE> 1
<CASH> 2,260
<SECURITIES> 1,700
<RECEIVABLES> 834
<ALLOWANCES> 468
<INVENTORY> 142,737
<CURRENT-ASSETS> 158,452
<PP&E> 110,060
<DEPRECIATION> 15,997
<TOTAL-ASSETS> 262,056
<CURRENT-LIABILITIES> 80,728
<BONDS> 52,490
<COMMON> 97
0
0
<OTHER-SE> 106,287
<TOTAL-LIABILITY-AND-EQUITY> 262,056
<SALES> 87,964
<TOTAL-REVENUES> 87,964
<CGS> 63,982
<TOTAL-COSTS> 63,982
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,259
<INCOME-PRETAX> 1,685
<INCOME-TAX> 666
<INCOME-CONTINUING> 1,019
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,019
<EPS-PRIMARY> .13
<EPS-DILUTED> .13
<PAGE>
</TABLE>
