<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0-22702
ROBERDS, INC.
(Exact name of registrant as specified in its charter)
Ohio 31-0801335
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
1100 East Central Avenue
Dayton, Ohio 45449-1888
(Address of principal executive offices)
(513) 859-5127
(Registrant's telephone number, including area code)
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 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.
On October 31, 1996, 5,946,109 common shares, without par value, were
outstanding.
Page 1 of 18
<PAGE> 2
ROBERDS, INC. AND SUBSIDIARY
INDEX
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C> <C>
PART 1. FINANCIAL INFORMATION:
ITEM 1. Financial Statements:
Condensed Consolidated Balance Sheets -
September 30, 1996 and December 31, 1995 3
Condensed Consolidated Statements of
Operations - Three Months and Nine
Months Ended September 30, 1996 and 1995 4
Condensed Consolidated Statements
of Cash Flows - Nine Months Ended
September 30, 1996 and 1995 5
Notes to Condensed Consolidated
Financial Statements 6
ITEM 2. Management's Discussion
and Analysis of Financial
Condition and Results
of Operations 8
PART II. OTHER INFORMATION:
ITEM 1. Legal Proceedings 16
ITEM 2-5. Inapplicable 17
ITEM 6. Exhibits and Reports
on Form 8-K 17
</TABLE>
Page 2 of 18
<PAGE> 3
ROBERDS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
- ------
Current Assets:
Cash and cash equivalents $ 6,140 $ 2,410
Receivables:
Customers 2,513 2,591
Vendors and other 2,783 2,865
Merchandise inventories 58,025 41,377
Prepaid expenses and other 2,076 1,632
Deferred tax assets 1,338 1,200
-------- --------
Total current assets 72,875 52,075
Property and equipment, net 103,331 81,310
Deferred tax assets 6,067 4,540
Certificates of deposit-restricted 2,855 2,566
Other assets 1,416 1,558
-------- --------
$186,544 $142,049
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Accounts payable $ 23,754 $ 13,246
Accrued expenses 7,750 6,556
Customer deposits 10,249 6,354
Accrued income taxes 621 112
Current maturities of
long term debt 3,345 2,747
-------- --------
Total current liabilities 45,719 29,015
Construction payables 639 860
Long term debt including capital leases 80,234 54,448
Deferred warranty revenue
and other 12,517 10,527
Shareholders' Equity:
Common shares 595 591
Additional paid-in capital 31,793 31,520
Retained earnings 15,047 15,088
-------- --------
Total shareholders' equity 47,435 47,199
-------- --------
$186,544 $142,049
======== ========
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Page 3 of 18
<PAGE> 4
ROBERDS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30
------------------ -----------------
1996 1995 1996 1995
------- ------- -------- --------
<S> <C> <C> <C> <C>
Net sales and service revenues $94,471 $76,238 $238,340 $215,776
Cost of sales 65,372 52,780 166,245 149,227
------- ------- -------- --------
Gross profit 29,099 23,458 72,095 66,549
Selling, delivery and
administrative expenses 27,654 20,623 72,550 59,548
Interest expense, net 1,447 914 4,018 2,495
Finance participation income (532) (630) (1,886) (1,816)
Other income, net (915) (914) (2,581) (2,553)
------- ------- -------- --------
Earnings (loss) before
income taxes 1,445 3,465 (6) 8,875
Income taxes 560 1,385 35 3,520
------- ------- -------- --------
Net earnings (loss) $ 885 $ 2,080 $ (41)$ 5,355
======= ======= ======== ========
Net earnings (loss)
per Common Share $ .15 $ .35 $ (.01)$ .91
======= ======= ======== ========
Weighted average Common
Shares outstanding 5,940 5,903 5,929 5,894
======= ======= ======== ========
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Page 4 of 18
<PAGE> 5
ROBERDS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
INCREASE (DECREASE) IN CASH AND NINE MONTHS ENDED
CASH EQUIVALENTS SEPTEMBER 30,
------------------
1996 1995
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) earnings $ (41) $ 5,355
Adjustments to reconcile net (loss)
earnings to net cash provided by
operating activities:
Depreciation and amortization 5,169 3,930
Loss on sale of fixed assets 102 (162)
Changes in assets and liabilities, net (501) (2,858)
-------- --------
Net cash provided by operating activities 4,729 6,265
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (27,593) (26,055)
Proceeds from sales of fixed assets 154 60
Other, net (155) 493
-------- --------
Net cash used in investing activities (27,594) (20,231)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt (2,316) (1,598)
Borrowings of long-term debt 28,700 22,775
Issuance of common shares through
stock option plans 277 213
Debt issuance costs (66) (593)
-------- --------
Net cash provided by financing activities 26,595 20,797
-------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS 3,730 1,560
CASH AND CASH EQUIVALENTS-beginning of period 2,410 110
-------- --------
CASH AND CASH EQUIVALENTS-end of period $ 6,140 $ 1,670
======== ========
CASH PAID FOR:
Interest, net of capitalized amount $ 4,105 $ 2,613
of $540 in 1996 and $710 in 1995 ======== ========
Income taxes $ 1,191 $ 4,457
======== ========
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Page 5 of 18
<PAGE> 6
ROBERDS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT SHARE DATA)
A. BASIS OF PRESENTATION
The consolidated balance sheet at December 31, 1995 is condensed from the
audited financial statements. The accompanying unaudited condensed consolidated
balance sheet at September 30, 1996, the condensed consolidated statements of
operations for the three and nine months ended September 30, 1996 and 1995, and
the condensed consolidated statements of cash flows for the nine months ended
September 30, 1996 and 1995, have been prepared by the Company in accordance
with generally accepted accounting principles and in the opinion of management
include all adjustments (which consist only of normal recurring adjustments)
necessary for a fair presentation of results of operations for the periods
presented.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted or condensed. These financial statements should be read in
conjunction with the financial statements and the notes thereto for the year
ended December 31, 1995 included in Form 10-K. The results of operations for the
nine months ended September 30, 1996 may not be indicative of the results for
the year ending December 31, 1996.
B. DEBT
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
<S> <C> <C>
Mortgage notes payable $40,480 $28,416
Revolving line of credit 26,000 10,300
Term loan agreement 4,550 5,600
Capital lease obligations 12,549 12,879
------- -------
83,579 57,195
Less current maturities 3,345 2,747
------- -------
$80,234 $54,448
======= =======
</TABLE>
The revolving line of credit expires in January 1998. The amount available under
the line is limited to the lesser of (i) $40,000 or (ii) an amount based upon a
percentage of eligible accounts receivable and inventory plus any expenditures
for leasehold improvements and store expansion for which the Company has
commitments for permanent financing. At September 30, 1996, approximately
$33,923 was available under the line of which $26,000 was outstanding.
Page 6 of 18
<PAGE> 7
The line, the term loan agreement, and one of the mortgage notes contain certain
restrictive covenants including, among others, limitations on capital
expenditures and the payment of dividends, maintenance of minimum current and
fixed charge coverage ratios, and limitations on the amount of debt to net
worth.
C. INCOME TAXES
Deferred tax assets relate principally to the deferral of extended warranty
revenues over the lives of the contracts for financial reporting purposes versus
recognizing the revenues in the year of sale for income tax purposes.
Income taxes consists of:
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------
1996 1995
------- -------
<S> <C> <C>
Currently payable:
Federal $ 1,406 $ 3,837
State and local 294 835
------- -------
1,700 4,672
Deferred (1,665) (1,152)
------- -------
$ 35 $ 3,520
======= =======
</TABLE>
The disproportionate provision for income taxes for the nine months ended
September 30, 1996 reflects minimum taxes imposed by certain jurisdictions and
the effect of items which are not deductible for income tax purposes.
D. CONTINGENCY
During 1994, the Ohio Bureau of Workers' Compensation ("the Bureau") completed
an examination of the Company's 1992 and 1993 Ohio workers' compensation tax
returns. As a result of that audit, the Bureau issued an assessment against the
Company for approximately $1,000. As a result of the Company's appeals and an
adjustment received in September 1995, the assessment was reduced to $871. The
assessment is based on the Bureau's reclassification of the majority of the
Company's Ohio employees into higher-rate classifications. The Company, in
consultation with legal counsel, believes it has meritorious defenses against
the assessment and is defending the assessment vigorously. At this time, it is
not possible to determine the final resolution of the assessment or its
financial impact, if any. If the Bureau is successful, the Company would likely
be liable for a similar adjustment, estimated to be approximately $1,400, for
the years subsequent to 1993. No amount has been accrued in the financial
statements for this contingency.
Page 7 of 18
<PAGE> 8
ROBERDS, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLAR AMOUNTS IN THOUSANDS)
RESULTS OF OPERATIONS
For the first nine months of 1996, sales increased by 10.5 percent over the nine
months ended September 1995. Operations for the first nine months of 1996
resulted in a net loss of $(41) as compared to net earnings of $5,355 for the
first nine months of 1995.
Sales for the three months ended September 1996 increased to $94,471 from
$76,238 for the three months ended September 1995, an increase of 23.9 percent.
Comparable store sales decreased 9.0 percent for the three months ended
September 1996. Sales for the first nine months of 1996 increased to $238,340
from $215,776 for the first nine months of 1995, an increase of 10.5 percent.
Comparable store sales decreased 8.1 percent for the first nine months of 1996.
Sales for the third quarter of 1996 were positively affected by the opening of
the new Cincinnati megastore on Fourth of July weekend, 1996. Comparable store
sales for the third quarter of 1996 were affected by unusually mild weather
which resulted in very weak sales of air conditioning and refrigeration products
compared to record sales of such products in the third quarter of 1995.
Additional volume from four new showrooms opened during 1995, of which two were
opened during the third quarter of 1995, contributed to the increase in sales
for the three and nine months ended September 1996. Comparable store sales for
the three and nine months ended September 1996 were adversely affected by the
slowdown in consumer spending on big ticket goods that began in the fourth
quarter of 1995 and continued through the third quarter of 1996.
The percentage increase (decrease) in sales in the Company's three established
market areas (excluding Cincinnati) follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- --------------------
Total Comparable Total Comparable
Store Store Store Store
----- ----- ----- -----
<S> <C> <C> <C> <C>
Dayton (9)% (9)% (3)% (9)%
Atlanta (7) (15) 2 (9)
Tampa 0 0 (2) (5)
</TABLE>
Page 8 of 18
<PAGE> 9
In addition to the slowdown in big ticket spending mentioned above, comparable
store sales in the Atlanta market appear to have been disrupted by the Olympics
during the second and third quarters of 1996. Sales in the Dayton and Atlanta
market areas for the nine months ended September 1996 were adversely affected by
the severe winter weather experienced during the first quarter of 1996. The
Beavercreek, Ohio store, which opened in April 1995, and the Fayetteville,
Georgia store, which opened in September 1995, appear to have taken some sales
from the other Dayton and Atlanta area stores, and adversely affected the
comparable store sales for the first nine months of 1996. Comparable store sales
in the Tampa market area improved in the third quarter of 1996 as compared to
the first half of 1996. The average store sales in Tampa; however, remain below
the Company's average and the Tampa market was not profitable during the
three and nine months ended September 1996.
For the three months ended September 1996, gross profit was $29,099, or 30.8
percent of sales, as compared to $23,458, also 30.8 percent of sales, for the
three months ended September 1995. Gross profit for the nine months ended
September 1996 was $72,095, or 30.2 percent of sales, as compared to $66,549, or
30.8 percent of sales, for the nine months ended September 1995. The gross
margin percentage for the third quarter of 1996 held steady despite a highly
competitive retail environment. The percentage also reflects a larger portion of
total sales from the furniture and bedding categories, primarily as a result of
a higher percentage of such sales in the new Cincinnati megastore. The decrease
in gross profit margin percentage for the nine months ended September 30, 1996
resulted from the Company emphasizing a heavily promotional merchandising
strategy combined with extended financing in an attempt to attract additional
store traffic during the first half of 1996 and the Company's response to
competitive conditions, particularly in the consumer electronics and appliance
categories.
Gross margin percentages for the first nine months of 1996 by category were
approximately 37 percent for furniture, 44 percent for bedding, 21 percent for
major appliances and 17 percent for consumer electronics. Gross margins for the
first nine months of 1996, as compared to the first nine months of 1995,
decreased for furniture, increased slightly for bedding, and decreased slightly
for appliances and electronics. The decrease in the furniture gross margin
percentage reflects more aggressive product prices in this category,
particularly in the Cincinnati market.
For the three months ended September 1996, selling, delivery, and administrative
expenses, which include occupancy costs, were $27,654, or 29.3 percent of sales,
as compared to $20,623 or 27.1 percent of sales, for the comparable period in
1995. Selling, delivery, and administrative expenses for the nine months ended
September 1996 were $72,550, or 30.4 percent of sales, as compared to $59,548 or
27.6 percent of sales, for the comparable period in 1995. The increase in
selling, delivery, and administrative
Page 9 of 18
<PAGE> 10
expenses as a percentage of sales for the three months ended September 1996 is
primarily attributed to additional wages and operating expenses incurred in the
warehouse and delivery functions to support the start-up of the Cincinnati
market, and an increase in finance charges for extended financing programs
offered to customers. In addition to the above, selling, delivery, and
administrative expenses as a percentage of sales for the nine months ended
September 1996 increased as a result of: (i) pre-opening costs associated with
the entry into the Cincinnati market; (ii) costs associated with the new
warehouse in Fairborn, Ohio, that were absorbed by the Dayton market until
additional volume was generated by the entry into the Cincinnati market during
the second half of 1996; (iii) increased expenses associated with advertising
and promotion; and (vi) expenses related to the consolidation of warehouse
operations in the Dayton market during the first quarter of 1996.
Interest expense, net of interest income, increased to $1,447 for the three
months ended September 1996 compared to $914 for the comparable period in 1995.
For the nine months ended September 1996 and 1995, net interest expense was
$4,018 and $2,495 respectively. The increase in interest expense for the three
and nine months ended September 1996 over the comparable period for 1995
reflects additional indebtedness incurred to finance new stores, including the
Cincinnati megastore, and the new regional warehouse located in Fairborn, Ohio.
The increase in interest expense for the three months ended September 1996 was
partially offset by the capitalization of $207 of interest as compared to $217
for the comparable period in 1995. Net interest expense for the first nine
months of 1996 was reduced by $540 of capitalized interest, compared to $710 in
the first nine months of 1995.
Finance participation income, which consists of income from participation in the
Company's private label credit card program, was $532, or 0.6 percent of sales,
for the three months ended September 1996, as compared to $630, or 0.8 percent
of sales, for the comparable period in 1995, and was $1,886, or 0.8 percent of
sales, for the nine months ended September 1996, as compared to $1,816, or 0.8
percent of sales, for the comparable period in 1995. Finance participation
declined during the third quarter of 1996 as the result of the initial influx of
accounts into the private label credit card program generated from the
Cincinnati market entry. The balances on these accounts result in costs to the
Company but do not yield participation to the Company during an initial period,
thus resulting in the decrease in the Company's participation for the third
quarter of 1996. This trend is likely to continue through the fourth quarter of
1996.
Other income was $915, or 1.0 percent of sales, for the three months ended
September 1996 as compared to $914, or 1.2 percent of sales, for the comparable
period in 1995. For the nine months ended September 1996, other income was
$2,581, or 1.1 percent of
Page 10 of 18
<PAGE> 11
sales, as compared to $2,553, or 1.2 percent of sales for the comparable period
in 1995. The majority of other income consists of cash discounts and rental
income from tenants. Other income for the three months ended September 1995
included $153 of gains from the sale of fixed assets.
LIQUIDITY AND CAPITAL RESOURCES
Cash increased to $6,140 at September 30, 1996 as compared to $2,410 at December
31, 1995. During the first nine months of 1996, inventories increased $16,648
primarily related to the entry into the Cincinnati market area. The increase in
inventories was partially funded through a $10,508 increase in accounts payable
as certain vendors offered the Company extended payment terms for inventory
purchased for the Cincinnati market entry. The majority of the payables under
these extended terms will become due during the fourth quarter of 1996. Cash of
$3,895 was generated from increased customer deposits primarily related to
products that have been sold but were not yet delivered.
The Company expended $27,593 on capital expenditures during the first nine
months of 1996. These expenditures primarily related to (i) the renovation of a
former warehouse facility in Cincinnati, Ohio into a 314,000 square foot
megastore, (ii) the purchase and renovation of an existing retail facility in
the Buckhead area of Atlanta, Georgia which is planned to open just before
Thanksgiving, 1996, (iii) the completion of construction of a new warehouse
facility in Fairborn, Ohio which is designed to support the Company's planned
growth in the Ohio area; and (vi) the renovation of former warehouse space at
the Vandalia, Ohio store into a clearance center which opened in the third
quarter of 1996.
During October 1996, the Company began expansion of its West Carrollton, Ohio
store into space formerly used for warehousing. This expansion, which is
expected to be completed in the first quarter of 1997, will broaden the
furniture offerings in the Dayton market and permit the display of some of the
higher-end merchandise that is already in stock to support the Cincinnati
market. In connection with the new Buckhead showroom and West Carrollton
expansion plans, the Company expects to incur approximately $5,700 in capital
expenditures during the balance of 1996 and the first quarter of 1997.
A significant portion of the Company's capital expenditures during 1996 have
been financed under the Company's revolving bank line of credit agreement which
expires in January 1998. The line provides that availability under the line is
limited to the lesser of (i) $40,000 or (ii) an amount based upon a percentage
of eligible accounts receivable and inventory plus any expenditures for
leasehold improvements and store expansion for which the Company has commitments
for permanent financing. At September 30, 1996, $33,923 was available under the
line, of which $26,000 was
Page 11 of 18
<PAGE> 12
outstanding. The line includes certain restrictive covenants including, among
others, limitations on capital expenditures and the payment of dividends,
maintenance of minimum current and fixed charge coverage ratios, and limitations
on the amount of debt to tangible net worth.
The Company expects to fund a portion of its working capital requirements and
the expansion plans described above through a combination of cash flow from
operations, normal trade credit, utilization of its revolving line of credit,
and long-term mortgage financing. The Company is in the process of pursuing
commitments for long-term financing for a portion of the capital expenditures
described above, including mortgage financing for the Buckhead facility and
long-term financing for leasehold improvements related to the Cincinnati
megastore. Approval is required from the Company's primary lender prior to the
funding of any long-term financing. In addition, certain covenants contained in
the Company's revolving line of credit agreement may need to be modified in
order for the Company to remain in compliance with such covenants. The inability
to obtain long-term financing, or approvals and covenant modifications from the
Company's primary lender, could have an adverse effect on the Company's
liquidity. Based on the Company's past working relationship with its primary
lender, it is expected that such approvals and modifications will be obtained.
The Company has announced plans to enter the Columbus, Ohio market with a
facility similar in size and design to the Cincinnati store. The Columbus
market, which would represent the Company's fifth marketing area, would enable
the further leveraging of the Fairborn, Ohio warehouse facility. The Company has
identified a number of suitable sites in Columbus; however, it has not made any
formal commitments for a site. While management is comfortable with the extent
to which the Company's balance sheet has been leveraged, it does not believe
that the Company should take on the additional debt obligations necessary to
enter the Columbus market without additional equity. As a result, the Company
does not plan to move forward with the Columbus entry until it has identified a
source for that additional equity.
SEASONALITY
The Company typically experiences an increase in its overall sales in the
fourth quarter. This increase is driven by an increase in the sales of consumer
electronics and furniture products associated with the holiday season. At the
same time, major appliance sales typically decline in the fourth quarter.
Operating results for the year ended December 31, 1996 are highly dependent upon
the success of the Company's operations in the fourth quarter.
Page 12 of 18
<PAGE> 13
OUTLOOK
The Company will focus the majority of its resources over the next few quarters
on the renovation and opening of a new showroom in the Buckhead area of Atlanta,
Georgia and the expansion of the West Carrollton showroom. Additionally, it will
continue to refine the product mix, the staffing and the systems in the
Cincinnati megastore to serve the customer more effectively.
The Company's financial performance is influenced by consumer confidence,
interest rates, the general level of housing activity, and the general level of
economic activity in the United States. Since the fourth quarter of 1995
consumers have been buying big ticket goods very cautiously, and then only when
there have been very attractive prices and financing packages offered to them.
This has led to a very sharp competitive situation, as the major retailers have
struggled to build volume in a difficult retailing environment. This situation
will continue to put pressure on comparable store sales and product prices and
margins, particularly in the electronics and appliance categories.
FORWARD-LOOKING STATEMENTS
In the interest of providing the Company's shareholders and potential investors
with information concerning management's assessment of the outlook for the
Company, this report contains certain "forward-looking" statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Readers should bear in
mind that statements relating to the Company's business prospects, as distinct
from historical facts, are forward-looking statements which, by their very
nature, involve numerous risks and uncertainties. Factors that could cause the
Company's actual results to differ materially from management's expectations
include, but are not limited to:
A. Changes in general economic conditions in the United States, including but
not limited to the general level of economic activity, levels of housing
activity, interest rates, the availability of consumer credit, consumer
confidence, and inflation.
B. Changes in the economic conditions in the market areas in which the Company
operates, such as a strike or shutdown of a major employer or industry.
C. Unusual weather patterns, such as unusually hot or cool summers, which can
affect the sale of refrigeration products, or unusually cold winters, which can
affect consumers' desire and ability to shop for the Company's products. Acts of
God, such as floods, hurricanes, or tornados, that interrupt the Company's
ability to sell or deliver merchandise, interrupt consumers'
Page 13 of 18
<PAGE> 14
ability to shop, or destroy a major Company facility, in particular a warehouse
or computer facility.
D. Changes in the competitive environment in the Company's market areas,
including the bankruptcy or liquidation of existing competitors.
E. The entry into the Company's lines of business and market areas by new,
larger, well-financed competitors, which may have the ability to withstand
intense price competition over extended periods of time.
F. The availability and cost of adequate, appropriate newspaper, television, and
pre-printed advertising. A strike or work stoppage affecting the Company's media
outlets.
G. Adverse results in litigation matters.
H. Difficulties in hiring, training, and retaining a capable work force at
reasonable levels of compensation, in both existing market areas and in
expansion locations. Difficulties in hiring and retaining an effective senior
management group, particularly as the Company expands. An attempt to organize a
significant portion of the Company's work force.
I. The availability of appropriate sites for expansion, on favorable terms, and
the long-term receptivity of consumers to new store formats and locations.
J. Access to bank lines of credit and real estate mortgage financing sources at
favorable rates of interest, terms, and conditions.
K. Access to additional equity capital to fund the Company's long-term
expansion.
L. Access to extended-payment financing sources (e.g., "twelve months same as
cash") at a favorable cost to the Company and with favorable rates of approval
by the financing source. Access to private-label financing sources (e.g.,
"Roberds charge card") that provide favorable rates of interest to the customer,
favorable rates of return to the Company, and favorable rates of approval by the
financing source.
M. Rapid changes in products, particularly electronics products, such that the
Company bears the risk of obsolescence or the consumer withdraws from the market
until such time as the product category has stabilized.
N. Shifts in the mix of the Company's sales between its higher-margin products
(bedding and furniture) and its lower-margin products (electronics and
appliances), which may result from
Page 14 of 18
<PAGE> 15
changes in consumer priorities, competitive factors, or other factors.
O. The absence of new products in the Company's product categories that would
drive additional consumer interest and purchases.
P. Adverse changes in the cost or availability of the products the Company
sells. Rapid increases in the price of the Company's products, which cannot be
passed on to consumers as the result of competitive pressures.
Q. The loss, or significant reduction in the availability, of certain key
name-brand products. Decisions by vendors to curtail the availability of certain
product presently sold by the Company, or to make products that are presently
sold by the Company available to certain competitors that do not presently have
access to such products. Changes in import duties or restrictions affecting the
Company's ability to import certain products.
R. Changes in income tax rates or structures that may affect the Company's tax
burden or consumers' ability to purchase or finance big-ticket goods or new
housing. Significant increases in real estate tax rates affecting the Company's
properties.
S. Changes in government regulations affecting the Company, its products, its
advertising, or its work force, including changes in the minimum wage. Changes
in government regulations affecting the Company's employee benefit plans.
T. New competition from alternative sales media and channels of distribution,
such as catalog mail order, telemarketing, television shopping services, and
online media.
U. Changes in highway or street configurations such that the Company's stores
become less accessible to consumers. Changes in consumer use or ownership of
"second homes," particularly in the Tampa, Florida market.
V. Changes in the cost or availability of liability, property, and health
insurance.
Page 15 of 18
<PAGE> 16
PART II-OTHER INFORMATION
ITEM 1-LEGAL PROCEEDINGS
On February 28, 1994, the Company announced its earnings for the fourth quarter
and year ended December 31, 1993. Following that announcement, the Company's
stock price declined substantially. In March and April 1994, four lawsuits were
filed against the Company, certain of its directors, certain of its officers,
and its co-managing underwriters, in U.S. District Court for the Southern
District of Ohio. The suit alleges that investors were misinformed as to the
Company's prospects. Upon a motion by the Company, the suits were consolidated
into a single suit. As the result of motions by the Company and agreements
reached with the plaintiffs in the fourth quarter of 1995, the scope of the
plaintiffs' suit has been reduced to claims under sections 11 and 15 of the
Securities Act of 1933. The parties have agreed that the class of plaintiffs
includes all individuals who bought the Company's stock from the time of the
initial public offering in November 1993 through February 28, 1994, excluding
the defendants, their affiliates, any officers or directors of any of the
defendants and their affiliates, and members of the immediate families of such
officers and directors. The parties have also agreed on the representatives for
the class. The Company's initial public offering was completed at $13.00 per
share, and during the period from the completion of the offering through
February 28, 1994, the stock price ranged from $15.25 to $7.25. Discovery in the
suit is nearly complete and trial is scheduled for early in December 1996. At
this time, it is not possible to predict the outcome of the suit or to estimate
the amount, if any, of the Company's liability.
In April 1996, a former employee of the Company filed suit in the Court of
Commons Pleas for Montgomery County, Ohio, ROUCH, ET. AL. VS. ROBERDS FURNITURE
& APPLIANCES, ET. AL., case number 96-1512. The complaint alleges that the
Company permitted certain unsafe conditions to exist in one of its Ohio
warehouses, which allegedly led to certain personal injuries sustained by the
plaintiff. The suit seeks $825,000 in compensatory damages and $800,000 in
punitive damages from the Company. The Company has referred the matter to its
insurance carriers. At this time, discovery has not commenced and it is not
possible to predict the outcome of the suit or to estimate the amount of the
Company's liability, if any.
In the ordinary course of its business, the Company is from time to time a party
in certain legal proceedings. In the opinion of management, the Company is not a
party to any litigation, other than as described above, that would have a
material adverse effect on its operations or financial condition if the
proceeding was determined adversely to the Company.
Page 16 of 18
<PAGE> 17
ITEM 2-CHANGES IN SECURITIES None
ITEM 3-DEFAULTS UPON SENIOR SECURITIES None
ITEM 4-SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None
ITEM 5-OTHER INFORMATION None
ITEM 6-EXHIBITS AND REPORTS ON FORM 8-K
There were no reports filed by the Company on Form 8-K during the quarter ended
September 30, 1996.
Page 17 of 18
<PAGE> 18
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.
Roberds, Inc.
(Registrant)
Date November 1, 1996 /s/ Robert M. Wilson
------------------------ ---------------------
Robert M. Wilson
Executive Vice President
Chief Financial Officer
Date November 1, 1996 /s/ Michael A. Bruns
------------------------ ---------------------
Michael A. Bruns
Vice President
Controller
Chief Accounting Officer
Page 18 of 18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONDENSED
CONSOLIDATED BALANCE SHEET AND CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STAEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-1-1996
<PERIOD-END> SEP-30-1996
<CASH> 6,140
<SECURITIES> 0
<RECEIVABLES> 5,296
<ALLOWANCES> 0
<INVENTORY> 58,025
<CURRENT-ASSETS> 72,875
<PP&E> 124,849
<DEPRECIATION> 21,518
<TOTAL-ASSETS> 186,544
<CURRENT-LIABILITIES> 45,719
<BONDS> 80,234
<COMMON> 595
0
0
<OTHER-SE> 46,840
<TOTAL-LIABILITY-AND-EQUITY> 186,544
<SALES> 238,340
<TOTAL-REVENUES> 238,340
<CGS> 166,245
<TOTAL-COSTS> 166,245
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,018
<INCOME-PRETAX> (6)
<INCOME-TAX> 35
<INCOME-CONTINUING> (41)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (41)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
