<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 30, 1995
-----------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 1-9308
--------------------------
RHODES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Georgia 58-0536190
- ------------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
4370 Peachtree Road, N.E.
Atlanta, Georgia 30319
----------------------------------------
(Address of principal executive offices)
(Zip Code)
(404) 264-4600
----------------------------------------------------
(Registrant's telephone number, including area code)
NONE
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date: 9,272,853 shares
of common stock without par value at December 30, 1995.
<PAGE> 2
RHODES, INC.
INDEX
Part I. Financial Information
Item 1. Financial Statements
Recent Developments
Condensed Consolidated Balance Sheets - -
November 30, 1995 and February 28, 1995
Condensed Consolidated Statements of Operations
for the Three and Nine Months Ended November 30, 1995
and November 30, 1994
Condensed Consolidated Statements of Cash Flows
for the Nine Months Ended November 30, 1995
and November 30, 1994
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Part II. Other Information
Item 2. Changes in Securities
Item 6. Exhibits and Reports on Form 8-K
I
<PAGE> 3
RHODES, INC.
PART 1
FINANCIAL INFORMATION
RECENT DEVELOPMENTS
On November 1, 1995 Rhodes, Inc. ("Rhodes") and Weberg Enterprises, Inc.
("Weberg") announced the completion of Rhodes' acquisition of 21 store
operations and two distribution center operations from Weberg in the states of
Colorado, Texas and Illinois. The store locations purchased recorded over $100
million in sales for the year ended December 31, 1994. The acquisition was
accomplished through a purchase of the inventory and operating assets for
approximately $31 million, assumption of operating leases on stores owned by
third parties and the execution of new operating leases on stores owned by
Weberg. Financing was provided primarily through bank credit lines. One month
of operations of the Weberg stores is included in the Company's results for the
three months ended November 30, 1995.
On December 15, 1995 Rhodes, Inc. and The Glick Furniture Company
("Glick's") announced the completion of Rhodes' acquisition of the furniture
store operations of The Glick Furniture Company in Columbus, Ohio, consisting of
seven stores and a distribution center. The store locations purchased recorded
over $41 million in sales for the year ended December 31, 1994. The acquisition
was accomplished through a purchase of the inventory and operating assets for
approximately $11 million, assumption of operating leases on stores owned by
third parties and the execution of new operating leases on stores owned by
Glick's. Financing was provided primarily through bank credit lines.
1
<PAGE> 4
RHODES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHETS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
NOVEMBER 30, FEBRUARY 28,
1995 1995
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 267 $ 3,268
Accounts receivable 7,853 3,398
Inventories at LIFO cost 87,664 54,386
Prepaid expenses and other 5,972 5,356
Deferred tax assets 905 861
------------- -------------
Total Current Assets 102,661 67,269
------------- -------------
PROPERTY AND EQUIPMENT, at cost, less accumulated
depreciation and amortization of $37,545 at
November 30, 1995 and $34,007 at February 28, 1995 72,650 55,142
------------- -------------
CAPITALIZED REAL ESTATE LEASES, at cost, less
accumulated amortization of $5,451 at November 30, 1995
and $4,883 at February 28, 1995 6,494 7,062
------------- -------------
INTANGIBLE ASSETS, net
Goodwill 61,300 60,319
Favorable leases 3,156 3,825
Other intangibles 2,367 2,387
------------- -------------
Total Intangible Assets 66,823 66,531
------------- -------------
OTHER ASSETS 1,916 2,406
------------- -------------
TOTAL ASSETS $ 250,544 $ 198,410
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes and loans payable $ --- $ ---
Current maturities of long-term debt
and capital lease obligations 8,454 967
Accounts payable 41,000 35,403
Accrued liabilities 24,899 19,374
Accrued Interest 1,952 781
Deferred income 11,968 9,795
Current income taxes payable --- 460
Current portion deferred gain-sale/leasebacks 318 318
------------- -------------
Total Current Liabilities 88,591 67,098
------------- -------------
DEFERRED INCOME TAXES 7,070 7,070
------------- -------------
LONG-TERM DEBT, less current maturities 68,173 40,000
------------- -------------
OBLIGATIONS UNDER CAPITAL LEASES 13,249 14,035
------------- -------------
DEFERRED GAIN-SALE/LEASEBACKS 2,469 2,707
------------- -------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock, no par value, 20,000 shares
authorized and 9,273 shares issued and outstanding
at November 30, 1995 and 9,463 shares issued and --- ---
outstanding at February 28, 1995
Paid-in-Capital 101,040 103,179
Accumulated deficit (30,048) (35,679)
------------- -------------
Total Shareholders' Equity 70,992 67,500
------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 250,544 $ 198,410
============= =============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
balance sheets.
2
<PAGE> 5
RHODES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
QUARTER QUARTER NINE MONTHS NINE MONTHS
ENDED ENDED ENDED ENDED
NOVEMBER 30, 1995 NOVEMBER 30, 1994 NOVEMBER 30, 1995 NOVEMBER 30, 1994
------------------ ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
NET SALES $ 111,725 $ 95,785 $ 296,543 $ 267,459
COST OF GOODS SOLD 57,566 49,984 153,727 137,251
----------------- ----------------- ----------------- -----------------
GROSS PROFIT 54,159 45,801 142,816 130,208
----------------- ----------------- ----------------- -----------------
FINANCE CHARGES and
INSURANCE COMMISSIONS 1,187 1,322 4,281 3,826
----------------- ----------------- ----------------- -----------------
OPERATING EXPENSES:
Selling 19,566 13,877 49,767 43,578
General and administrative 29,136 23,181 78,457 68,218
Amortization of intangibles 735 767 2,179 2,301
Provision for credit losses 29 32 71 84
Other (income) expense, net (189) (75) (139) (158)
Non-recurring one-time charge 2,400 --- 2,400 ---
----------------- ----------------- ----------------- -----------------
51,677 37,782 132,735 114,023
----------------- ----------------- ----------------- -----------------
INCOME BEFORE INTEREST EXPENSE
AND INCOME TAXES 3,669 9,341 14,362 20,011
Interest expense - net 1,710 1,559 4,817 4,819
----------------- ----------------- ----------------- -----------------
INCOME BEFORE INCOME TAXES 1,959 7,782 9,545 15,192
PROVISION FOR INCOME TAXES 804 3,191 3,914 6,229
----------------- ----------------- ----------------- -----------------
NET INCOME $ 1,155 $ 4,591 $ 5,631 $ 8,963
================= ================= ================= =================
NET INCOME PER SHARE $ 0.12 $ 0.47 $ 0.60 $ 0.92
================= ================= ================= =================
WEIGHTED AVERAGE NUMBER OF SHARES
OF COMMON STOCK OUTSTANDING 9,273 9,779 9,328 9,779
================= ================= ================= =================
</TABLE>
The accompaning notes are an integral part of these condensed sonsolidated
statements.
3
<PAGE> 6
RHODES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
NOVEMBER 30, 1995 NOVEMBER 30, 1994
----------------- -----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,631 $ 8,963
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 5,894 5,052
Change in deferred income taxes (44) (121)
Amortization of intangibles 2,179 2,301
Amortization of gain-sale/leasebacks (238) (238)
Write-off of intangible assets 89 19
Changes in current assets and liabilities, net of acquisition:
Receivables, net (4,455) (2,870)
Inventories (8,959) (4,440)
Prepaid expenses and other (616) (388)
Accounts payable and accrued liabilities 9,575 8,112
Deferred income on warranties, undelivered
sales and credit commissions 2,173 1,460
-------------- ---------------
Net cash from (used in) operating activities $ 11,229 $ 17,850
-------------- ---------------
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:
Purchase of Weberg (30,125) ---
Retirements of property and equipment, net 795 1,080
Additions to property and equipment (17,943) (9,962)
Additions to intangible assets (138) (73)
Decrease (increase) in other assets, net 447 (47)
Decrease in obligations under capital leases (799) (584)
-------------- ---------------
Net cash used in investing activities $ (47,763) $ (9,586)
-------------- ---------------
CASH FLOWS FROM (USED BY) FINANCING ACTIVITIES:
Expenses incurred in stock registration --- (262)
Proceeds from issuance of long-term debt 35,673 (2,406)
Repurchase of stock (2,490) ---
Proceeds from (repayment of) short-term debt, net --- (2,471)
Purchase of stock-employee stock purchase plan 350 ---
Exercise of stock options --- 18
-------------- ---------------
Net cash from (used in) financing activities $ 33,533 $ (5,121)
-------------- ---------------
INCREASE (DECREASE) IN CASH (3,001) 3,143
CASH AT BEGINNING OF PERIOD 3,268 235
-------------- ---------------
CASH AT END OF PERIOD $ 267 $ 3,378
============== ===============
SUPPLEMENTAL DISCLOSURE:
CASH PAYMENTS FOR:
Interest $ 4,817 $ 4,819
============== ===============
Income taxes $ 3,776 $ 3,037
============== ===============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
statements.
4
<PAGE> 7
RHODES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
NOVEMBER 30, 1995
1. BASIS OF PRESENTATION
The financial statements included herein have been prepared by
the Company pursuant to the rules and regulations of the Securities and
Exchange Commission. This information reflects all adjustments
(consisting of normal recurring adjustments) which are, in the opinion
of management, necessary to a fair statement of the financial position
of the Company as of November 30, 1995 and February 28, 1995, the
results of operations for the three and nine months ended November 30,
1995 and November 30, 1994, and cash flows for the nine months ended
November 30, 1995 and November 30, 1994. Certain information and
footnote disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although
the Company believes that the disclosures are adequate to make the
information presented not misleading. Certain reclassifications of
prior years' amounts have been made to conform with fiscal 1996
amounts. These financial statements should be read in conjunction with
the historical financial statements and the notes thereto included in
the Company's latest annual report on Form 10-K.
2. INTERIM LIFO PROVISIONS
The actual valuation of inventory under the LIFO method can be
made only at the end of each year based on inventory levels, price
indices and costs at that time. Therefore, the interim provisions must
be considered as estimates subject to a final year-end LIFO inventory
calculation.
5
<PAGE> 8
3. NON-RECURRING ONE-TIME CHARGE
In the quarter ended November 30, 1995 the Company recorded a
non-recurring one-time charge to reflect the cost of changing the names
of 33 stores, eighteen of which were acquired in the Weberg
acquisition, to "Rhodes", to take place over an eighteen month period,
and the cost of closing four stores in the fourth quarter of this
fiscal year. The aggregate amount of the charge was $2,400,000, less
income tax benefit of $984,000, for a net charge of $1,416,000, or
approximately $.15 per share.
4. ACQUISITION OF WEBERG STORES
On November 1, 1995, Rhodes completed the acquisition of Weberg
Furniture, Inc. ("Weberg"). Rhodes purchased net assets from Weberg in
the aggregate amount of approximately $28.5 million for approximately
$31.2 million. The cost of the acquisition has been allocated on a
preliminary basis to the estimated fair market value of the assets
acquired and the liabilities assumed. The results of operations of
Weberg are included in the accompanying financial statements since the
date of acquisition. The following unaudited pro forma information was
prepared assuming the transaction was consummated on the first day of
each fiscal period presented:
($1,000's)
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
November 30, 1995 November 30, 1994
----------------- -----------------
<S> <C> <C>
Revenue $372,558 $351,008
Net Income $4,588 $8,993
Earnings Per Share $.49 $0.92
</TABLE>
6
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
-------------------- -------------------
NOVEMBER 30, NOVEMBER 30
------------ -----------
1995(1) 1994 1995(1) 1994
------- ---- ------- ----
<S> <C> <C> <C> <C>
Net Sales 100.0% 100.0% 100.0% 100.0%
Cost of Goods Sold 51.5% 52.2% 51.8% 51.3%
----- ----- ----- -----
Gross Profit 48.5% 47.8% 48.2% 48.7%
----- ----- ----- -----
Finance Charge and Insurance Commissions 1.1% 1.4% 1.4% 1.4%
----- ----- ----- -----
Operating Expenses:
Selling 17.5% 14.5% 16.8% 16.3%
General and Administrative 26.1% 24.2% 26.5% 25.5%
Provision for Credit Losses 0.0% 0.0% 0.0% 0.0%
Amortization of Intangibles 0.7% 0.8% 0.7% 0.9%
Other (income) Expense, Net -0.2% -0.1% 0.0% -0.1%
----- ----- ----- -----
44.1% 39.4% 44.0% 42.6%
----- ----- ----- -----
Operating Income 5.4% 9.8% 5.7% 7.5%
Interest Expense, Net 1.5% 1.6% 1.6% 1.8%
----- ----- ----- -----
Income Before Income Taxes 3.9% 8.1% 4.0% 5.7%
Provision for Income Taxes 1.6% 3.3% 1.7% 2.3%
----- ----- ----- -----
Net Income 2.3% 4.8% 2.4% 3.4%
===== ===== ===== =====
</TABLE>
(1) Excludes the non-recurring one-time charge of $2,400,000 recorded in
the quarter ended November 30, 1995.
7
<PAGE> 10
OPERATING RESULTS
THREE MONTHS AND NINE MONTHS ENDED NOVEMBER 30, 1995
AND 1994 - COMPARED
Net sales increased 16.6% to $111,725,000 from $95,785,000 for the three
months ended November 30, 1995 compared with the same period last year and
increased 10.9% to $296,543,000 from $267,459,000 for the nine months compared
with last year. Comparable store sales growth was 1.4% and 4.2% for the three
and nine months ended November 30, 1995, respectively. Comparable store sales
represent furniture and services sold and delivered by stores open for the same
months in each comparative period. Net income for the third quarter ended
November 30, 1995 before the non-recurring one-time charge decreased 44.0% to
$2,571,000, or $.28 per share, compared with $4,591,000, or $.47 per share for
the same quarter last year. Net income for the nine months ended November 30,
1995 before the non-recurring charge decreased 21.4% to $7,047,000, or $.76 per
share, compared with $8,963,000, or $.92 per share for the nine months last
year.
During the quarter Rhodes opened two new stores in Kansas City, Missouri
(a new market), and one new store in Charlotte, North Carolina. Also, the
Nashville, Tennessee store which was damaged by a tornado in May, 1995 was re-
opened in October, bringing the number of stores in operation (excluding the
Weberg acquisition) at November 30, 1995 to 83, compared with 78 at November 30,
1994. The Weberg acquisition of 21 stores brought the total to 104 in operation
at November 30, 1995. Subsequent to the end of the third quarter, the Company
acquired seven stores from Glick's, opened its first store in Cincinnati, Ohio,
opened new stores in Charlotte, North Carolina and Atlanta, Georgia and closed
two older stores in the Atlanta, Georgia market, bringing the total stores
presently in operation to 112. In the fourth quarter, the Company also plans to
open one more Atlanta, Georgia store and close the stores in Venice and
Bradenton, Florida. The cost of closing the four stores above has been provided
for in the non-recurring one-time charge. Additionally, two Texas stores and
one Colorado store which were acquired from Weberg will be closed in the fourth
quarter with no adverse effect expected on the Company's financial statements.
Nine new stores are planned for fiscal 1997.
8
<PAGE> 11
No stores were remodeled or refurbished in the third quarter, but four
are planned for the fourth quarter for a total of 15 for the year. One store,
in Orlando, Florida, will be relocated in the fourth quarter. The 28 stores
just acquired from Weberg and Glick's, except for the three to be closed, are
being reviewed for remodeling and the Company expects to begin the first
remodelings on acquired stores in March, 1996.
Gross profit as a percentage of net sales for the three months ended
November 30, 1995, increased to 48.5%, from 47.8%, compared with the same period
last year and for the nine months ended November 30, 1995 decreased to 48.2%
from 48.7%, compared with the same period last year. The gross profit
percentage improvement for the three months ended November 30, 1995 is
attributable to minimizing price promotions while aggressively advertising and
offering credit promotions, as discussed below. For the nine months ended
November 30, 1995, the gross profit percentage decreased compared with the same
period last year due to price promotions early in the year.
Finance charge and insurance commission income derives from commissions
earned from BNB under the Merchant Agreement and from commissions on credit
insurance on credit customer balances. For the three month period ended
November 30, 1995, income decreased due to lower collections on customer
accounts with credit insurance. The balances for customers with deferred
payment plans has increased substantially since last year deferring the credit
insurance income until customers' payments begin. For the nine months, the
amounts earned are more than last year due to an increase in the amounts paid to
Rhodes from BNB for origination of new credit accounts.
Selling expense for the three months ended November 30, 1995 increased
as a percentage of net sales to 17.5% compared with 14.5% last year due to
higher net costs for credit promotion charges and higher advertising expense.
Selling expense varies as a percentage of sales due to a number of factors
including the level of advertising, credit promotions and the opening of new
stores. The increased expense in the third quarter this year for interest free
and deferred payment credit promotions was partially offset by improved gross
profit on sales. For the nine months ended November 30, 1995, selling expense
increased as a percentage of net sales to 16.8% compared with 16.3% for the same
period last year primarily as a result of more extensive use of credit
promotions and aggressive advertising in the third quarter.
9
<PAGE> 12
General and administrative expenses for the quarter ended November 30,
1995 increased to $29,137,000 (26.1% of net sales) from $23,181,000 (24.2% of
net sales) for the three months last year, and for the nine months ended
November 30, 1995 increased to $78,458,000 (26.5% of net sales) from $68,218,000
(25.5% of net sales) for the same period last year. The increased expense for
the three and nine month periods ended November 30, 1995 is due principally to
having 30 new and acquired stores this year, plus increases in employee
expenses. The increase in the percentage of net sales compared to the prior
year is due principally to the declining same store sales growth and the higher
relative sales expense in the nine new stores.
The Company also recorded a non-recurring one-time charge to reflect the
cost of changing the names of 33 stores, 18 of which have been recently
acquired, to "Rhodes" over the next 18 months and the cost of closing four
stores. The aggregate amount of the charge was $2,400,000, before income tax
benefit of $984,000, for a net charge of $1,416,000. Net income after deducting
the non-recurring charge was $1,155,000 ($.12 per share) and $5,631,000 ($.60
per share) for the three and nine months ended November 30, 1995, respectively.
Interest expense on the Company's indebtedness is expected to increase
in future periods due to the debt incurred to finance the acquisitions of the
Weberg and Glick's store and distribution center operations.
The retail furniture sales environment has slowly deteriorated for the
past year, a situation that management expects to continue, at least through the
fourth quarter, if not longer. Management's strategy is to continue acquiring
and opening new stores, on a sound fiscal basis, in order to profit from the
next economic cycle of growth from a much larger platform of stores.
INCOME TAXES
The Company adopted SFAS No. 109 during fiscal 1992 and recorded the
effect of the adoption retroactive to March 1, 1991, in a manner similar to the
cumulative effect of a change in accounting principle. SFAS No. 109 requires
the determination of deferred income taxes using the liability method under
which deferred tax assets and liabilities are determined based on the
differences between the financial accounting and tax basis of assets and
liabilities. Deferred tax assets or liabilities at the end of each period are
determined using the
10
<PAGE> 13
currently enacted tax rate expected to apply to taxable income in the periods in
which the deferred tax asset or liability is expected to be settled or
realized. Accordingly, the Company recorded a provision for income taxes for
the nine months ended November 30, 1995 in the amount of $3,914,000 compared
with a provision of $6,229,000 for income taxes recorded for the nine months
ended November 30, 1994.
LIQUIDITY AND CAPITAL RESOURCES
Currently, the Company's principal sources of liquidity are cash flow
from operations and additional borrowing capacity under its Revolving Credit
Agreement described below. Net cash provided by operating activities for the
nine months ended November 30, 1995 was approximately $11.2 million compared
with $17.9 million cash provided for the nine months last year. The Company's
principal uses of cash are capital expenditures, working capital needs and debt
service obligations.
Inventories increased by $35.0 million at November 30, 1995 compared
with November 30, 1994 due to the Weberg acquisition, which included $24.3
million in inventory, and the new larger stores opened by the Company. For the
three and nine months ended November 30, 1995 FIFO inventory turns were 3.3x for
both periods, compared with 3.7x and 3.6x, respectively, for last year.
Inventory turns have declined due to the increase in inventories noted above and
the decline in comparable store sales growth. The Company has historically had
low or negative working capital, primarily as a result of its tight inventory
controls, low cash balances and the inclusion in current liabilities of deferred
revenues, such as merchandise sold but not delivered and deferred warranty
revenue. The Company had working capital at November 30, 1995 of approximately
$14.1 million, reflecting the reclassification of the revolving loan facility
from short term to long term debt.
The Company's capital expenditures for equipment and expansion and
remodeling or refurbishing of stores are estimated at $27.0 million for fiscal
1996, including the two completed acquisitions, compared with $14.1 million for
fiscal 1995. The increase reflects the cost of the Company's plan to remodel or
refurbish 15 stores and open 10 new stores during fiscal 1996 and also reflects
the acquisitions. The Company plans to have capital expenditures of
approximately $18 million in fiscal 1997 to fund the remodeling, refurbishing or
relocation of approximately 18 stores and the opening of approximately nine new
stores.
11
<PAGE> 14
The Company maintains a Revolving Credit Agreement with Wachovia
National Bank for the lesser of $45.0 million or 50% of eligible inventory plus
a three year term loan of $20.0 million. The loan agreement expires on January
12, 1999 and therefore has been classified in the financial statements as long
term debt. The agreement is secured by substantial all of the inventory of the
Company. As of January 12, 1996, there was $32.2 million outstanding under the
Revolving Credit Agreement and approximately $26.3 million remains available
under the agreement. See Part II, Item 2.
In connection with the two completed acquisitions (see "Recent
Developments") the Company assumed or executed operating leases for an aggregate
of 28 store locations and three distribution centers and paid additional
consideration for inventory and operating assets aggregating approximately $42.0
million. Funding was provided primarily through bank debt.
12
<PAGE> 15
RHODES, INC.
PART I1
OTHER INFORMATION
Item 2. Changes in Securities
On January 12, 1996, the Company entered into a loan and security
agreement with Wachovia Bank of Georgia, N.A. ("Wachovia") and the Fleet Capital
Corporation, which provides a term loan of $20 million and a revolving credit
facility of the lesser of $45 million or 50% of eligible inventory. The loan
and security agreement replaces the Company's prior banking borrowing facility,
expires January 12, 1999 and is secured by substantially all of the inventory of
the Company. In accordance with the loan and security agreement, the Company
may not declare or pay any dividends without the consent of Wachovia, and the
Company must maintain certain minimum cash flow levels, fixed charge coverage
and leverage ratios and consolidated net worth levels.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
2.1 Asset Purchase Agreement between Weberg Enterprises,
Inc., John P. Weberg and Rhodes, Inc. dated October 2, 1995, as amended
by the first amendment thereto dated October 31, 1995 (incorporated by
reference to Exhibit 2.1 to the Company's Current Report on Form 8-K
dated October 31, 1995).
4.1 Credit Agreement dated as of January 12, 1996 by and
among Rhodes, Inc., Wachovia Bank of Georgia, N.A. and Fleet Capital
Corporation.
27 Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K, dated October
31, 1995, in which it reported the consummation of the acquisition of
store locations operated by Weberg Enterprises, Inc.
13
<PAGE> 16
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.
RHODES, INC.
--------------------
(Registrant)
DATE: January 16, 1996 By: /s/Joel H. Dugan
---------------- ----------------
Joel H. Dugan
Senior Vice President--
Finance and Administration
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENT OF RHODES, INC. FOR THE YEAR/QUARTER ENDED NOVEMBER 30, 1995
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-28-1996
<PERIOD-START> SEP-01-1995
<PERIOD-END> NOV-30-1995
<CASH> 267
<SECURITIES> 0
<RECEIVABLES> 7,853
<ALLOWANCES> 0
<INVENTORY> 87,664
<CURRENT-ASSETS> 102,661
<PP&E> 110,195
<DEPRECIATION> 37,545
<TOTAL-ASSETS> 250,544
<CURRENT-LIABILITIES> 88,591
<BONDS> 68,173
0
0
<COMMON> 0
<OTHER-SE> 70,992
<TOTAL-LIABILITY-AND-EQUITY> 250,544
<SALES> 296,543
<TOTAL-REVENUES> 296,543
<CGS> 153,727
<TOTAL-COSTS> 153,727
<OTHER-EXPENSES> 132,664
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<INCOME-TAX> 3,914
<INCOME-CONTINUING> 5,631
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<CHANGES> 0
<NET-INCOME> 5,631
<EPS-PRIMARY> 0.60
<EPS-DILUTED> 0.60
</TABLE>
