<PAGE>
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, 2000
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)
<TABLE>
<S> <C>
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)
</TABLE>
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 the past 90 days. Yes (X) No ( )
At the close of business on June 8, 2000, the registrant had 6,499,779 shares of
Common Stock, par value $.01 per share, outstanding.
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REX STORES CORPORATION AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page
<S> <C> <C>
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.......................... 14
</TABLE>
2
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
REX STORES CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
April 30 January 31 April 30
2000 2000 1999
(In Thousands)
<S> <C> <C> <C>
ASSETS:
Cash and cash equivalents $ 3,963 $ 25,609 $ 9,349
Accounts receivable, net 2,013 2,569 1,030
Merchandise inventory 160,176 139,267 144,827
Prepaid expenses and other 3,236 2,097 2,390
Equity investment in limited
partnerships -- -- 1,364
Future income tax benefits 9,837 9,837 9,366
-------- -------- --------
Total current assets 179,225 179,379 168,326
PROPERTY AND EQUIPMENT, NET 116,942 113,802 99,304
FUTURE INCOME TAX BENEFITS 8,835 8,835 8,109
RESTRICTED INVESTMENTS 2,037 2,020 1,919
-------- -------- --------
Total assets $307,039 $304,036 $277,658
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 15,075 $ -- $ --
Current portion of long-term debt 3,458 3,303 3,165
Current portion, deferred income
and deferred gain on
sale and leaseback 11,151 11,219 11,440
Accounts payable, trade 58,559 46,252 61,031
Accrued income taxes -- 1,572 --
Accrued payroll 4,668 6,947 4,574
Other current liabilities 9,440 9,330 9,639
-------- -------- --------
Total current liabilities 102,351 78,623 89,849
-------- -------- --------
</TABLE>
3
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Liabilities and Shareholders' Equity (Continued)
<TABLE>
LONG-TERM LIABILITIES:
<S> <C> <C> <C>
Long-term debt 46,717 46,200 55,904
Deferred income 16,368 16,423 16,263
Deferred gain on sale and
leaseback 2,747 2,953 3,571
-------- -------- --------
Total long-term liabilities 65,832 65,576 75,738
-------- -------- --------
SHAREHOLDERS' EQUITY:
Common stock 115 115 98
Paid-in capital 105,490 105,303 55,715
Retained earnings 96,909 93,663 77,457
Treasury stock (63,658) (39,244) (21,199)
-------- -------- --------
Total shareholders' equity 138,856 159,837 112,071
-------- -------- --------
Total liabilities and
shareholders' equity $307,039 $304,036 $277,658
======== ======== ========
</TABLE>
The accompanying notes are an integral part of
these unaudited consolidated statements.
4
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REX STORES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended
April 30
2000 1999
(In Thousands, Except Per Share Amounts)
<S> <C> <C>
NET SALES $ 107,183 $ 99,056
--------- ---------
COSTS AND EXPENSES:
Cost of merchandise sold 78,449 72,613
Selling, general and
administrative expenses 24,649 22,785
--------- ---------
Total costs and expenses 103,098 95,398
--------- ---------
INCOME FROM OPERATIONS 4,085 3,658
INVESTMENT INCOME 185 149
INTEREST EXPENSE (1,172) (1,303)
INCOME FROM LIMITED PARTNERSHIPS 1,230 280
--------- ---------
Income before income taxes 4,328 2,784
PROVISION FOR INCOME TAXES 1,082 697
--------- ---------
NET INCOME $ 3,246 $ 2,087
========= =========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 7,100 7,380
========= =========
BASIC NET INCOME PER SHARE $ 0.46 $ 0.28
========= =========
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING 7,770 7,638
========= =========
DILUTED NET INCOME PER SHARE $ 0.42 $ 0.27
========= =========
</TABLE>
The accompanying notes are an integral part of
these unaudited consolidated statements.
5
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REX STORES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<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, 1999 9,781 $ 98 2,221 $21,199 $ 55,715 $77,457
Common stock
issued 1,714 17 -- -- 49,588 --
Treasury stock
acquired -- -- 1,205 18,045 -- --
Net income -- -- -- -- -- 16,206
-------- -------- -------- -------- -------- -------
Balance at
January 31, 2000 11,495 115 3,426 39,244 105,303 93,663
Common stock
issued 16 -- (2) (18) 187 --
Treasury stock
acquired -- -- 1,358 24,432 -- --
Net income -- -- -- -- -- 3,246
-------- -------- -------- ------- -------- -------
Balance at
April 30, 2000 11,511 $115 4,782 $63,658 $105,490 $96,909
======== ======== ======== ======= ======== =======
</TABLE>
[FN]
The accompanying notes are an integral part
of these unaudited consolidated statements.
</FN>
6
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REX STORES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
April 30
2000 1999
(In Thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,246 $ 2,087
Adjustments to reconcile net
income to net cash used in
operating activities:
Depreciation and amortization, net 942 829
Equity in losses of limited
partnerships -- 474
Deferred income (123) (1,136)
Changes in assets and liabilities:
Accounts receivable 556 1,267
Merchandise inventory (20,909) (12,825)
Other current assets (1,139) (353)
Accounts payable, trade 12,307 8,357
Other current liabilities (3,741) (733)
------- -------
NET CASH USED IN OPERATING ACTIVITIES (8,861) (2,033)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (4,350) (1,713)
Capital disposals 62 1,023
Restricted investments (17) (91)
------- -------
NET CASH USED IN INVESTING ACTIVITIES (4,305) (781)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in notes payable 15,075 --
Payments of long-term debt (1,512) (1,203)
Proceeds from long-term debt 2,184 1,680
Common stock issued 187 112
Treasury stock issued 18 1,728
Treasury stock acquired (24,432) (2,066)
------- -------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES (8,480) 251
------- -------
NET DECREASE IN CASH AND
CASH EQUIVALENTS (21,646) (2,563)
CASH AND CASH EQUIVALENTS,
beginning of period 25,609 11,912
------- -------
CASH AND CASH EQUIVALENTS,
end of period $ 3,963 $ 9,349
======= =======
</TABLE>
The accompanying notes are an integral part of
these unaudited consolidated statements.
7
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REX STORES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2000
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 accounting principles generally accepted in the
United States 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 fiscal year ended January 31, 2000 (fiscal 1999).
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 1999 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), management bonuses and the provision for income taxes. 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 fiscal 2000 presentation.
8
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Notes to Consolidated Financial Statements (Continued)
Note 3. Stock Option Plans
The following summarizes options granted, exercised and canceled or
expired during the three months ended April 30, 2000:
<TABLE>
<CAPTION>
Shares Under Stock
Option Plans
<S> <C>
Outstanding at January 31, 2000
($8.125 to $22.6875 per share) 2,649,517
Granted ($22.8125 per share) 203,000
Exercised ($8.125 to $17.25 per share) (18,097)
---------
Outstanding at April 30, 2000
($8.125 to $22.8125 per share) 2,834,420
=========
</TABLE>
9
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Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
We are a leading specialty retailer in the consumer
electronics/appliance industry. As of April 30, 2000 we operated 235 stores in
35 states, predominantly in small to medium sized markets under the trade name
"REX".
Fiscal Year
All references in this report to a particular fiscal year are to REX's
fiscal year ended January 31. For example, "fiscal 1999" means the period
February 1, 1999 to January 31, 2000. In the past, we referred to this period as
"fiscal 2000."
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
2000 1999
<S> <C> <C>
Net sales 100.0% 100.0%
Cost of merchandise sold 73.2 73.3
----- -----
Gross profit 26.8 26.7
Selling, general and
administrative expenses 23.0 23.0
----- -----
Income from operations 3.8 3.7
Interest, net (0.9) (1.2)
Income from limited partnerships 1.1 0.3
----- -----
Income before income
taxes 4.0 2.8
Provision for income taxes 1.0 0.7
----- -----
Net income 3.0% 2.1%
===== =====
</TABLE>
10
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Comparison of Three Months Ended April 30, 2000 and 1999
Net sales in the first quarter ended April 30, 2000 were $107.2 million
compared to $99.1 million in the prior year's comparable period, representing an
increase of $8.1 million or 8.2%. This increase is due to the sales contribution
from 14 new stores opened in fiscal 1999 and an increase in comparable store
sales of 3.6%. Fiscal 2000 includes a leap year and therefore sales for the
first quarter of fiscal 2000 were positively impacted by including one
additional day.
The largest product contributors to the increase in comparable store
sales were large screen televisions (30 inch and larger) by approximately
11.0% and DVD players by approximately 1.5%. Offsetting the increase was
smaller screen television sales (27 inch and smaller) which negatively
impacted comparable store sales by approximately 2.9%. We believe DVD players
serve to replace certain VCR sales. As a result of this and falling average
selling prices, VCR sales negatively impacted comparable store sales by
approximately 3.6%. Other products negatively impacting comparable store
sales were car stereos and microwaves, each by approximately 0.8%.
As of April 30, 2000 we had 235 stores compared to 227 stores one year
earlier. There was one store opened and four closed during the first quarter of
fiscal 2000. During the first quarter of fiscal 1999 no stores were opened and
one was closed.
Gross profit of $28.7 million (26.8% of net sales) in the first quarter
of fiscal 2000 was 8.7% higher than the $26.4 million (26.7% of net sales)
recorded in the first quarter of fiscal 1999. The improvement in gross profit
margin is a result of the shift of merchandise sales into more large screen
televisions which generally have a higher gross profit margin than smaller
screen televisions. This was slightly offset by the recognition of a smaller
percentage of extended service contract revenues, which generally have a higher
gross profit margin.
Selling, general and administrative expenses for the quarter ended
April 30, 2000 were $24.6 million (23.0% of net sales), an 8.2% increase from
$22.8 million (23.0% of net sales) for the first quarter of fiscal 1999. The
increase in expense is primarily due to increased advertising, compensation and
other expenses associated with increased sales and earnings.
Interest expense was $1.2 million for the first quarter of fiscal 2000
versus $1.3 million for the first quarter of fiscal 1999. This reduction
reflects the benefit of lower outstanding mortgage debt as a result of paying
11
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off certain higher rate mortgage debt in the third quarter of fiscal 1999.
Results for the first quarter of fiscals 2000 and 1999 also reflect the
impact of our equity investment in two limited partnerships which produce
synthetic fuels. Effective February 1, 1999, we entered into an agreement to
sell a portion of our investment in one of the limited partnerships, which
resulted in the reduction in our ownership interest from 30% to 17%. We expect
to receive cash payments from the sale on a quarterly basis through 2007. These
payments are contingent upon and equal to 75% of the federal income tax credits
attributable to the 13% interest sold.
Income from the limited partnerships was $1.2 million for the first
quarter of fiscal 2000, all of which was income generated from the above
identified sale. We reported income from the limited partnerships of $280,000
for the first quarter of fiscal 1999, which consisted of $734,000 of income
generated from the above identified sale, partially offset by a pre-tax charge
of $454,000 to reflect our equity share in the losses of the partnerships. Our
initial investment has been reduced to zero as of January 31, 2000 because
of cumulative losses recorded using the equity method of accounting.
Consequently, we have ceased recording our share of equity losses beginning
in fiscal 2000.
Our effective tax rate was 25% for the first quarter of fiscal 2000 and
1999 after reflecting our share of federal income tax credits earned by the
limited partnerships under Section 29 of the Internal Revenue Code.
As a result of the foregoing, net income was $3.2 million for the first
quarter of fiscal 2000, versus $2.1 million for the first quarter of fiscal
1999.
Liquidity and Capital Resources
Net cash used in operating activities was $8.9 million for the first
quarter of fiscal 2000, compared to usage of $2.0 million for the first quarter
of fiscal 1999. For the first quarter of fiscal 2000, operating cash flow was
provided by net income of $3.2 million adjusted for the net impact of non-cash
items of $819,000, which consist primarily of depreciation and deferred income.
The primary use of cash was an increase in inventory of $20.9 million primarily
due to an increase of seasonal air conditioner inventories and to support
planned store openings. The other uses of cash were a decrease in other
liabilities and an increase in other assets due to timing of payments of income
taxes and compensation. Cash was also provided by a decrease in receivables of
$556,000 and an increase in accounts payable of $12.3 million primarily due
to the increase in inventory and timing of payments to vendors.
12
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At April 30, 2000, working capital was $76.9 million compared to $100.8
million at January 31, 2000. The ratio of current assets to current liabilities
was 1.8 to 1 at April 30, 2000 and 2.3 to 1 at January 31, 2000.
Capital expenditures through April 30, 2000 totaled $4.4 million and
primarily relate to the acquisition of store sites and other construction
expenditures associated with planned fiscal 2000 store openings. We plan to open
30 to 35 new stores for fiscal 2000 with anticipated capital expenditures of
approximately $25.0 to $30.0 million. We plan to fund the new store openings
with cash generated from operations and additional mortgage debt.
Cash used in financing activities totaled approximately $8.5 million
for the first three months of fiscal 2000. We purchased a total of 1,358,000
shares of our common stock for $24.4 million during the first quarter of fiscal
2000. As of April 30, 2000 we had authorization from our board of directors to
purchase an additional 1,000,000 shares. Cash was provided by borrowings of
$15.1 million on the line of credit during the first quarter of fiscal 2000. A
total of approximately $84.9 million was available for borrowings on the line of
credit as of April 30, 2000. We also received proceeds of $2.2 million from
long-term debt borrowings related to mortgage financing for two stores. Cash was
used for payments on long-term debt of $1.5 million, including a $770,000
balloon payment on one mortgage.
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 Annual Report on Form 10-K for the
fiscal year ended January 31, 2000 (File No. 0-13283).
Item 3. Quantitative and Qualitative Disclosure About Market Risk
No material changes since January 31, 2000.
13
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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) 1999 Omnibus Stock Incentive Plan
27 Financial Data Schedule
(b) Reports on Form 8-K. No reports on Form 8-K were filed during the
quarter ended April 30, 2000.
14
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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 9, 2000 /s/ Stuart A. Rose
Stuart A. Rose
Chairman of the Board
(Chief Executive Officer)
June 9, 2000 /s/ Douglas L. Bruggeman
Douglas L. Bruggeman
Vice President, Finance and
Treasurer
(Principal Financial and
Chief Accounting Officer)
15
