<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 June 30, 1999
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)
(937) 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 July 23, 1999, 6,159,311
common shares, without par value, were outstanding.
Page 1 of 27
<PAGE> 2
ROBERDS, INC. AND SUBSIDIARY
INDEX
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
PART 1. FINANCIAL INFORMATION:
ITEM 1. Financial Statements:
Condensed Consolidated Balance Sheets -
June 30, 1999 and December 31, 1998 3
Condensed Consolidated Statements Of
Operations - Three and Six Months Ended
June 30, 1999 and 1998 4
Condensed Consolidated Statements
of Cash Flows - Six Months Ended
June 30, 1999 and 1998 5
Notes to Condensed Consolidated
Financial Statements 6
ITEM 2. Management's Discussion
and Analysis of Financial
Condition and Results
of Operations 9
ITEM 3. Quantitative and Qualitative
Disclosures About Market Risk 14
PART II. OTHER INFORMATION:
ITEMS 1-3. Inapplicable 15
ITEM 4. Submission of Matters to Vote of Security Holders 15
ITEM 5. Other Information 15
ITEM 6. Exhibits and Reports
on Form 8-K 16
</TABLE>
Page 2 of 27
<PAGE> 3
ROBERDS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
1999 1998
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $1,559 $932
Receivables:
Customers 660 921
Vendors and other 1,548 2,390
Merchandise inventories 44,915 43,937
Refundable income taxes 58 2,360
Prepaid expenses and other 1,975 1,983
----------- ----------
Total current assets 50,715 52,523
Property and equipment, net 90,423 92,085
Certificates of deposit, restricted 2,346 2,331
Other assets 1,733 1,269
----------- ----------
$145,217 $148,208
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $11,926 $14,130
Accrued expenses 8,550 11,510
Customer deposits 11,793 11,573
Litigation 1,271 1,271
Deferred warranty revenue-current 2,069 2,580
Current maturities of long-term debt 3,536 2,945
----------- -----------
Total current liabilities 39,145 44,009
Long-term debt including capital leases 74,592 70,065
Deferred rent 1,858 1,831
Deferred warranty revenue 1,736 2,631
SHAREHOLDERS' EQUITY:
Common stock 616 611
Additional paid-in capital 32,407 32,332
Deficit (5,137) (3,271)
----------- -----------
Total shareholders' equity 27,886 29,672
----------- -----------
$145,217 $148,208
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
Page 3 of 27
<PAGE> 4
ROBERDS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
1999 1998 1999 1998
<S> <C> <C> <C> <C>
NET SALES AND SERVICE REVENUES $68,950 $73,894 $141,383 $152,406
COST OF SALES 43,636 50,798 90,474 104,629
----------- ----------- ----------- ----------
Gross profit 25,314 23,096 50,909 47,777
SELLING, DELIVERY AND ADMINISTRATIVE EXPENSES 26,793 24,778 53,477 52,466
INTEREST EXPENSE, NET 1,747 1,799 3,436 3,484
FINANCE PARTICIPATION INCOME (736) (743) (1,413) (1,543)
OTHER INCOME, NET (834) (890) (2,725) (1,750)
----------- ----------- ----------- ----------
LOSS BEFORE TAX BENEFIT (1,656) (1,848) (1,866) (4,880)
INCOME TAX BENEFIT (630) (1,690)
----------- ----------- ----------- ----------
NET (LOSS) (1,656) ($1,218) (1,866) ($3,190)
=========== =========== =========== ==========
BASIC AND DILUTED NET (LOSS) PER COMMON SHARE ($0.27) ($0.20) ($0.30) ($0.53)
=========== =========== =========== ==========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
BASIC AND DILUTED 6,159 6,044 6,151 6,037
=========== =========== =========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
Page 4 of 27
<PAGE> 5
ROBERDS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS JUNE 30
1999 1998
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($1,866) ($3,190)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 4,202 4,425
LIFO reserve 166 575
Changes in assets and liabilities, net (4,067) (2,290)
---------- ----------
Net cash used in operating activities (1,565) (480)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (939) (769)
Proceeds from sales of fixed assets 46 42
Other (279) (465)
---------- ----------
Net cash used in investing activities (1,172) (1,192)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt (18,983) (4,139)
Proceeds from long-term debt 22,543 7,000
Net proceeds from issuance of common shares 80 89
Debt issuance costs (276) (31)
---------- ----------
Net cash provided by financing activities 3,364 2,919
---------- ----------
NET INCREASE IN CASH AND CASH EQUIVALENTS
627 1,247
CASH AND CASH EQUIVALENTS - Beginning of period 932 2,494
---------- ----------
CASH AND CASH EQUIVALENTS - End of period $1,559 $3,741
========== ==========
CASH PAID (REFUNDED) FOR:
Interest $3,505 $3,506
========== ==========
Income taxes ($2,130) ($75)
========== ==========
NON-CASH TRANSACTION:
Capital Lease $1,558
==========
</TABLE>
See notes to the condensed consolidated financial statements
Page 5 of 27
<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, 1998 is condensed from the
audited financial statements. The accompanying unaudited condensed consolidated
balance sheet at June 30, 1999, the condensed consolidated statements of
operations for the three and six months ended June 30, 1999 and 1998, and the
condensed consolidated statements of cash flows for the six months ended June
30, 1999 and 1998, 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, 1998 included in Form 10-K. The results of operations for the
six months ended June 30, 1999 may not be indicative of the results for the year
ending December 31, 1999.
B. DEBT
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
1999 1998
<S> <C> <C>
Mortgage notes payable $42,999 $44,138
Revolving line of credit 22,543 17,500
Capital lease obligations 12,586 11,372
----------- -----------
78,128 73,010
Less current maturities 3,536 2,945
----------- -----------
$74,592 $70,065
=========== ===========
</TABLE>
During the second quarter of 1999, the Company took delivery of a new computer
hardware and software system, which was financed by a $1,558 capital lease. The
lease requires payments of $49 per month for 36 months.
In March 1999, the Company refinanced its revolving line of credit. The
refinanced line expires in February 2004. The amount available under the line is
limited to the lesser of: (a) $30,000 or (b) an amount based upon a percentage
of eligible inventory, which varies seasonally. At June 30, 1999, $24,997 was
available under the line, of which $22,543 was outstanding. The line of credit
bears interest at either the bank's base rate (7.75% at June 30, 1999) or LIBOR
plus 2.25% (7.30% at June 30, 1999) at the option of the Company.
The line of credit includes certain restrictive covenants including, among
others, limitations on capital expenditures, and the aggregate amount of funded
debt. The line prohibits the payment of dividends. The line also requires the
maintenance of a minimum fixed-charge-coverage ratio, which becomes increasingly
restrictive over time. In order to comply with this covenant, the Company must
improve operations significantly during 1999 over the actual results experienced
during 1998. Several of the Company's mortgage notes payable also include
restrictive covenants, including the maintenance of maximum debt to net worth
ratios and a requirement to maintain a minimum of $25,000 of tangible net worth.
Page 6 of 27
<PAGE> 7
C. NET SALES AND SERVICE REVENUE
Net sales and service revenue includes the following products:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Furniture $29,264 $28,137 $59,822 $59,070
Bedding 9,535 10,282 18,884 20,683
Appliances 15,690 19,928 30,552 37,790
Electronics 9,719 10,387 22,719 24,442
Other 4,742 5,160 9,406 10,421
============= ============== ================= ================
$68,950 $73,894 $141,383 $152,406
============= ============== ================= ================
</TABLE>
D. BUSINESS SEGMENTS
The Company has identified the three geographic market areas in which it
operates as segments. A summary of the Company's operations by segment follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
EARNINGS NET SALES EARNINGS
(LOSS) BEFORE (LOSS)
NET SALES INCOME TAXES BEFORE
INCOME TAXES
1999
- ----
<S> <C> <C> <C> <C>
Ohio $32,280 $438 $65,658 $1,632
Georgia 22,392 (969) 45,777 (1,126)
Florida 14,278 (1,125) 29,948 (2,372)
------------------- --------------- ---------------- -------------
$68,950 ($1,656) $141,383 ($1,866)
=================== =============== ================ =============
1998
- ----
Ohio $36,607 $1,552 $75,343 $1,609
Georgia 22,557 (1,085) 46,025 (2,517)
Florida 14,730 (2,315) 31,038 (3,972)
------------------- --------------- ---------------- -------------
$73,894 ($1,848) $152,406 ($4,880)
=================== =============== ================ =============
</TABLE>
Included in the operating results of the Company's segments are certain
corporate and non-segment expenses that have been allocated to the segments. For
the six months ended June 30, 1999, segment earnings (loss) before income taxes
include $1,102 of life insurance proceeds from the death of the Company's
chairman. The proceeds were allocated to each segment utilizing the same
methodology that is utilized to allocate corporate and non-segment expenses. For
the three and six months ended June 30, 1998, the Ohio segment earnings include
a refund of premiums of $1,053 to all participants in the State of Ohio's
workers' compensation fund.
Page 7 of 27
<PAGE> 8
E. INCOME TAXES
Income tax benefit for the six months ended June 30, 1998 consists of the
following:
<TABLE>
<S> <C>
Currently refundable:
Federal $(2,016)
State and Local (70)
-----------
(2,086)
Deferred 396
===========
$(1,690)
===========
</TABLE>
A tax benefit was not recognized on the loss for the three and six months ended
June 30, 1999 because a valuation reserve was provided for all deferred tax
benefits, including the net operating loss carryforward generated during 1999.
The reserve was deemed necessary as a result of the uncertainty of the
recoverability of such tax benefits.
Page 8 of 27
<PAGE> 9
ROBERDS, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLAR AMOUNTS IN THOUSANDS)
RESULTS OF OPERATIONS
The first six months of 1999 resulted in a loss before tax benefit of $(1,866)
as compared to a loss before tax benefit of $(4,880) for the first six months of
1998. Sales for the three months ended June 1999 declined to $68,950 from
$73,894 for the three months ended June 1998, a 6.7 percent decrease. Sales for
the first half of 1999 declined to $141,383 from $152,406 for the six months
ended June 1998, a 7.2 percent decrease. All stores were comparable in 1999.
The percentage decreases in total and comparable sales by market area were as
follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
<S> <C> <C>
Ohio (12%) (13%)
Georgia (1) (1)
Florida (3) (4)
</TABLE>
Sales by major product category as a percentage of total sales were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Furniture 42% 38% 42% 39%
Bedding 14 14 13 14
Appliances 23 27 22 25
Electronics 14 14 16 16
Other 7 7 7 6
============== ============= ============ =============
100% 100% 100% 100%
============== ============= ============ =============
</TABLE>
Furniture sales continued to increase as a percentage of total sales as the
Company continued to increase its emphasis of this high margin category. The
major appliance decline as a percentage of total sales reflects a highly
competitive retailing environment and a lack of new products in this category.
Appliance sales may represent a reduced portion of its total sales for the
foreseeable future as the Company continues to focus on expanding the higher
margin furniture and bedding categories.
For the three months ended June 1999, gross profit was $25,314, or 36.7 percent
of sales, as compared to $23,096, or 31.3 percent of sales, for the three months
ended June 1998. For the six months ended June 1999, gross profit was $50,909,
or 36.0 percent of sales, as compared to $47,777, or 31.3 percent of sales, for
the six months ended June 1998. Gross margin percentages by category were as
follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Furniture 42% 32% 41% 33%
Bedding 46 44 47 44
Appliances 24 22 23 21
Electronics 19 16 20 17
</TABLE>
The increase in gross profit margin percentage of 5.4 and 4.7 percent of sales
for the three and six months ended June 1999, as
Page 9 of 27
<PAGE> 10
compared to 1998, reflects the sales floor controls and disciplines that were
implemented during the first quarter of 1999, a focus on higher margin products,
a reduction in inventory shrinkage, and a decrease in the provision for LIFO.
The overall gross margin percentage in 1998, and the furniture category gross
margin in particular, was adversely affected by the aggressive liquidation at
reduced selling prices of certain aged inventories and inventories from vendors
that were being de-emphasized or discontinued. This liquidation was completed in
the fourth quarter of 1998. The Company expects that the increase in gross
margin as a percentage of sales will be maintained through 1999.
For the three months ended June 1999, selling, delivery, and administrative
expenses, which include occupancy costs, were $26,793, or 38.9 percent of sales,
as compared to $24,778, or 33.5 percent of sales, for the comparable period in
1998. Selling, delivery, and administrative expenses for the six months ended
June 1999 were $53,477, or 37.8 percent of sales, as compared to $52,466, or
34.4 percent of sales, for the comparable period in 1998. The increase in
expenses as a percentage of sales for the three and six months ended June 1999,
as compared to 1998, resulted from (a) increased workers compensation expense as
the result of a refund of premiums of $1,053 from the State of Ohio workers'
compensation fund in 1998, (b) increased advertising and promotional credit
expenses, (c) increased commissions to sales associates for sales of higher
margin products, (d) increased warehouse and store management salaries required
to institute various warehouse and store based initiatives and, (e) the effect
of fixed costs in light of the Company's decline in comparable store sales.
These increases were offset in part by an increase in the collection of delivery
fees and an overall expense reduction and containment program.
Interest expense, net of interest income, remained relatively steady for the
three and six months ended June 1999, as compared to 1998, as a result of the
average outstanding borrowings remaining relatively constant during those
periods.
Finance participation income, which consists of income from participation in the
Company's private label credit card program, was $736, or 1.1 percent of sales,
for the three months ended June 1999, as compared to $743, or 1.0 percent of
sales, for the comparable period in 1998, and was $1,413, or 1.0 percent of
sales, for the six months ended June 1999, as compared to $1,543, or 1.0 percent
of sales, for the comparable period in 1998. While participation for the three
and six months ended June 1999 as compared to 1998 remained constant, ongoing
changes in the use of income-generating finance programs compared to longer
- -term, same-as-cash programs that generate financing expense, may affect the
Company's finance participation income in the future.
Other income decreased to $834, or 1.2 percent of sales, for the three months
ended June 1999 as compared to $890, or 1.2 percent of sales, for the comparable
period in 1998. For the six months ended June 1999, other income increased to
$2,725 or 1.9 percent of sales, as compared to $1,750, or 1.1 percent of sales,
for the comparable period in 1998. The majority of other income for the three
months ended June 1999 and June 1998 consists of cash discounts and rental
income from tenants. Other income in the first six months of 1999 includes
$1,102 of life insurance proceeds received as a result of the death of the
Company's chairman.
Loss before income taxes was $1,866 for the first six months of 1999, compared
to a loss before income taxes of $4,880 in 1998. No income tax benefit was
provided for 1999, compared to $1,690, or 35% of the loss before taxes, in 1999.
A tax benefit was not recognized on the loss for 1999 because a valuation
reserve was provided for all deferred tax benefits, including the net operating
loss carryforward generated during 1999. The reserve was deemed necessary as
result of the uncertainty of the recoverability of such tax benefits.
LIQUIDITY AND CAPITAL RESOURCES
Cash increased to $1,559 at June 30, 1999, compared to $932 at December 31,
1998. The Company utilized $1,565 of cash for operating activities during the
first six months of 1999. Cash of $2,204 was utilized to reduce the outstanding
accounts payable balance as the Company reduced levels of purchasing and took
advantage of various cash discounts offered by its vendors. Additionally, $2,960
was utilized to reduce accrued liabilities, reflecting the payment of a portion
of the disputed premiums to the Ohio Bureau of Workers Compensation, lower
premium rates for Ohio workers compensation for the first six months of 1999,
and a seasonal reduction in accrued sales tax. Seasonal purchases of air
conditioning inventories also utilized $1,144. Cash flow from operating
activities benefited by the receipt of $2,302 of refundable income taxes in the
first six months of 1999. Cash utilized in operating activities in the first six
months of 1999 was financed through the Company's revolving line of credit.
Based on the Company's operating plan, the Company expects to generate positive
cash flow from operating activities for the remaining portion of 1999.
Page 10 of 27
<PAGE> 11
During the first six months of 1999, the Company's capital expenditures,
excluding capitalized leases, totaled $939. These expenditures primarily
represented normal replacement and upgrade projects. During the second quarter
of 1999, the Company took delivery of a new computer hardware and software
system, which was financed by a $1,558 capital lease. The installation of that
system is approaching completion. The lease requires payments of $49 per month
for 36 months. The Company also has outstanding commitments to acquire delivery
vehicles and warehouse equipment totaling approximately $3,400. A majority of
these vehicles were received during the first half of 1999 with the balance to
be received in the third quarter of 1999. These vehicles and equipment will be
financed through operating leases. The Company has no other significant
expansion or capital expenditure plans for 1999 other than normal replacement,
repair, and upgrade projects, and existing store refurbishment.
In March 1999, the Company refinanced its revolving line of credit. The
refinanced line expires in February 2004. The amount available under the line is
limited to the lesser of: (a) $30,000 or (b) an amount based upon a percentage
of eligible inventory, which varies seasonally. At June 30, 1999, $24,997 was
available under the line, of which $22,543 was outstanding. The line of credit
bears interest at either the bank's base rate (7.75% at June 30, 1999) or LIBOR
plus 2.25% (7.30% at June 30, 1999).
The line of credit includes certain restrictive covenants including, among
others, limitations on capital expenditures and the aggregate amount of funded
debt. The line prohibits the payment of dividends. The line also requires the
maintenance of a minimum fixed-charge-coverage ratio, which becomes increasingly
restrictive over time. In order to comply with this covenant, the Company must
improve operations significantly during 1999 over the actual results experienced
during 1998. Such improvements in operations are expected based upon the
Company's 1999 business plan. If such improvements are not achieved, the Company
will have to renegotiate the covenants in order to remain in compliance.
Several of the Company's mortgage notes payable also include restrictive
covenants, including the maintenance of maximum debt to net worth ratios and a
requirement to maintain a minimum of $25,000 of tangible net worth. If these
covenants can not maintained, the Company will have to renegotiate the covenants
in order to remain in compliance.
The Company has no assurance that the renegotiations discussed above, if
necessary, will be successful. If such renegotiations are not successful, the
Company will seek alternative financing sources. While the Company believes that
such financing can be obtained, there can be no assurance that it can be
obtained at all, or that it can be obtained on terms or at rates comparable to
those in the existing agreement or acceptable to the Company.
SEASONALITY
The Company typically experiences an increase in 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. As a
result, operating results for the full year are highly dependent upon the
success of the Company's operations in the fourth quarter.
OUTLOOK
During 1999, the Company will continue to focus on improving business operations
and customer service. Areas of focus include imposing new selling-floor
disciplines, improving warehouse operations and delivery performance, improving
the management of inventory, improving asset utilization, reducing store
operating expenses, and turning around comparable store sales. The Company
believes these initiatives will yield improvement in the Company's operations
during 1999 and beyond.
The Company's principal focus during the second half of 1999 will be the
strengthening of its sales force. The Company believes that an experienced,
professional sales force is one of the primary elements necessary for its
success, and will be a long-term competitive advantage. Therefore the Company
will be focussing its efforts on implementing sales-floor disciplines that will
attract, support, motivate, and retain professional sales associates. These
changes are planned to occur throughout 1999.
In May 1999 the commissioned sales associates in the Company's Ohio region voted
to be represented by the United Food and Commercial Workers, Local 1099
("UFCW"), at an election supervised by the National Labor Relations Board. The
Company and the UFCW are bargaining toward an agreement. It is not possible to
predict when an agreement might be reached with the employees and the effect, if
any, on the Company's financial position, operating results, or the plans to
strengthen the sales force described above.
Page 11 of 27
<PAGE> 12
The Company's financial performance is influenced by consumer confidence,
interest rates, consumer debt, the general level of housing activity, and the
general level of economic activity in the United States. Consumers continue to
respond best to deep-discount price and finance promotions. This situation is
expected to continue to put pressure on comparable store sales, promotional
finance expenses, and operating results. If the economy slows, the competition
can be expected to be even more aggressive.
There are a number of changes occurring in the competitive situation in the
Company's market areas. During the first quarter of 1999, a regional furniture
retailer has entered the Dayton market and a regional appliance and electronics
retailer entered the Cincinnati market area. These expansions will likely
continue to put pressure on comparable store sales.
YEAR 2000 READINESS DISCLOSURE
The Company has reviewed its primary and secondary information systems for Year
2000 issues. The Company's primary management information and credit-card
processing systems are provided by third-party vendors that have assured the
Company that their systems will be Year 2000 compliant. The Company believes
that its costs related to the conversion of the credit-card processing system
will be insignificant. The costs to upgrade the software and hardware for its
primary management information system will be approximately $1,700, of which
$1,558 was expended in the second quarter of 1999. This expenditure was financed
through a capital lease. The majority of the expenditures are for hardware
upgrades to accommodate new software. The Company expects to make all of the
expenditures by the third quarter of 1999.
The Company has identified several secondary information systems, such as
payroll, delivery, telephone, personal computer, and service department systems,
that will require software and hardware upgrades and conversions to be Year 2000
compliant. The Company expects these costs to be less than $600. The majority of
the costs are expected to be incurred on software to incorporate the Company's
service departments into the primary management information system. Only a small
portion of these expenditures has occurred to date. The Company expects to make
all such expenditures by late 1999.
Because the Company is engaged in the sale of consumer products, it does not
believe that it has any material risk with respect to Year 2000 issues for its
customers. The Company has not assessed the impact of Year 2000 issues on its
merchandise suppliers; however, the Company is not aware of any material Year
2000 risks with respect to them. The Company does not rely on electronic data
interchange ("EDI") systems to transact business with its suppliers. Because no
single merchandise supplier represents more than approximately nine percent of
the Company's purchases, the Company does not believe that there is any material
Year 2000 risk with respect to its suppliers, but is monitoring its suppliers'
compliance activities.
The expenditures for the hardware upgrades to the primary management information
system will be financed through leasing arrangements. The remaining capital
expenditures described above will be funded from the Company's on-going
maintenance and replacements budget, and are not expected to result in the
deferral of any planned expenditures. Based on its assessment of the Year 2000
issue to date, the Company has not developed any contingency plans for the most
likely worst case scenario for the failure of major or secondary information
systems. In the event one or more merchandise suppliers are not Year 2000
compliant, the Company would shift its purchasing to those suppliers that can
supply the Company.
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 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.
Page 12 of 27
<PAGE> 13
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 tornadoes, that interrupt the Company's
ability to sell or deliver merchandise, interrupt consumers' 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 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.
Page 13 of 27
<PAGE> 14
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 or
workers' compensation arrangements.
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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Not
applicable.
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<PAGE> 15
PART II-OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS Not applicable.
ITEM 2. CHANGES IN SECURITIES None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of the Company's shareholders was held on April 30, 1999.
Three of the Company's directors were re-elected to two-year terms ending in
2001 upon a vote as follows:
NAME FOR AGAINST ABSTAIN
Melvin H. Baskin 4,971,236 1,325 454,057
Robert M. Wilson 4,972,136 1,325 453,157
Dr. James F. Robeson 4,974,736 1,325 450,557
The following directors' terms of office continue until the annual meeting of
the Company's shareholders to be held in 2000: Messrs. Jerry L. Kirby, Howard W.
Smith, Gilbert P. Williamson, and Donald C. Wright. Additionally, an amendment
to the Roberds Inc. Stock Incentive Plan to increase the number of shares
subject to the plan was approved upon a vote as follows:
For 3,765,951
Against 593,245
Abstain 23,770
Broker Non-Vote 1,043,652
ITEM 5. OTHER INFORMATION
In October 1998, The Nasdaq Stock Market ("Nasdaq") informed the Company that it
failed to meet one of the requirements for continued listing on the Nasdaq
National Market tier, specifically the requirement that at least $5 million of
stock be held by individuals other than officers, directors, and those who own
more than ten percent of the Company's outstanding shares. The Company appealed
the Nasdaq's determination, and requested additional time to meet the
requirement. On June 21, 1999, Nasdaq ruled that the Company failed to present a
definitive plan that will enable it to regain compliance with the market value
of public float requirements within a reasonable period of time. As a result of
Nasdaq's determination, trading of the Company's stock was moved from the Nasdaq
National Market tier to the Nasdaq SmallCap Market. In order to remain listed on
that market, the Company was required to complete an application for listing and
demonstrate to Nasdaq that the Company meets the SmallCap requirements. The
Company has submitted the required application and believes that it meets the
requirements for continued listing on the SmallCap Market, though Nasdaq has not
yet ruled on the application.
On May 15, 1999 the commissioned sales associates in the Company's Ohio region
voted to be represented by the United Food and Commercial Workers, Local 1099
("UFCW"), at an election supervised by the National Labor Relations Board. The
Company and the UFCW are bargaining toward an agreement. It is not possible to
predict when an agreement might be reached with the employees and the effect, if
any, on the Company's financial position or operating results.
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<PAGE> 16
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) See exhibit index.
(b) There were no reports filed by the Company on Form 8-K during the
quarter ended June 30, 1999.
Page 16 of 27
<PAGE> 17
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 July 29, 1999 /s/ Robert M. Wilson
----------------------------- ---------------------
Robert M. Wilson
President
Chief Administrative Officer
Date July 29, 1999 /s/ Michael A. Bruns
----------------------------- ---------------------
Michael A. Bruns
Vice President
Controller
Chief Accounting Officer
Page 17 of 27
<PAGE> 18
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Description
- -------------- -----------
<S> <C>
10.1 First Amendment to Loan and Security Agreement
10.11 Amended and Restated Employment Agreement, dated as of April 30, 1999, between
Registrant and Billy D. Benton, Executive Vice President - General Merchandise
Manager
27.1 Financial data schedule
</TABLE>
Page 18 of 27
<PAGE> 1
EXHIBIT 10.1
FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT
This FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT entered into as of
May 14, 1999, between ROBERDS, INC., an Ohio corporation with its principal
executive offices at 1100 East Central Avenue, Dayton, Ohio 45449-1888 (the
"BORROWER") and BANKBOSTON RETAIL FINANCE INC., a Delaware corporation with an
address of 40 Broad Street, Boston 02109 (the "AGENT") as agent for the ratable
benefit of "LENDERS", who are, at present, those financial institutions
identified on the signature pages of this First Amendment to Loan and Security
Agreement ("Agreement") and who in the future are those Persons (if any) who
become "Lenders" in accordance with the provisions of Section 2.21 of that
certain Loan and Security Agreement by and between the Lenders and the Borrower
dated as of March 3, 1999 (the "Loan Agreement").
WHEREAS, the Lenders established a revolving line of credit pursuant to the Loan
Agreement for Borrower respecting which Lenders agreed to lend to Borrower upon
Borrower' request, but subject to the terms and conditions set forth in the Loan
Agreement, up to Thirty Million Dollars and Zero Cents ($30,000,000.00).
WHEREAS, the Borrower has requested the Lenders to amend the Borrowing Base to
permit advances against credit card receivables as set forth herein; and
WHEREAS, subject to the terms, and conditions in this Agreement, the Lenders are
willing to modify the terms of the Loan Agreement as set forth herein. NOW
THEREFORE, for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Lenders and the Borrower mutually agree as
follows:
1. DEFINITIONS. All capitalized terms used herein shall have the same
meaning as set forth in the Loan Agreement, unless otherwise defined herein.
2. EFFECTIVE DATE. This Agreement shall be effective upon receipt by the Agent
of an original executed copy of this Agreement signed by the Borrower and
Lenders and a fully executed Notice and Account Settlement Agreement with GE
Capital Consumer Card Co. in form and substance satisfactory to Agent in its
sole discretion.
3. MODIFICATIONS TO LOAN AGREEMENT.
(a) The definition of "ACCEPTABLE FEDERAL TAX REFUND" shall
be deleted from Article 1 of the Loan Agreement.
(b) The definition of "FEDERAL TAX REFUND" shall be deleted
from Article 1 of the Loan Agreement.
(c) The definition of "IRS" shall be deleted from Article 1
of the Loan Agreement.
(d) The definition of "REFUND ADVANCE RATE" shall be
deleted from Article 1 of the Loan Agreement.
(e) The definition of "TRIPARTY AGREEMENT" shall be deleted
from Article 1 of the Loan Agreement.
(f) Section 2.1(e) of the Loan Agreement shall be deleted.
(g) The words "and the Federal Tax Refund" shall be deleted
from the end of the first sentence in Section 4.24(c)
of the Loan Agreement.
(h) The following definitions shall be inserted in Article
I of the Loan Agreement: "ACCEPTABLE CREDIT CARD
ACCOUNTS": Such of the Borrower's Accounts which are
receivables from credit card processors that are
outstanding no more than five (5) days from the date of
purchase by the retail consumer, as Lender in its sole
discretion from time to time determines to be
acceptable for borrowing, as to which Accounts, the
Agent has a perfected security interest which is prior
to and superior to all security interests, claims and
all Encumbrances." "CREDIT CARD ACCOUNTS ADVANCE RATE":
Seventy five Percent (75%).
(i) The text of Section 2.1(b)(ii)(B) of the Loan Agreement
shall be deleted and re-
Page 19 of 27
<PAGE> 2
placed with the following:
"(B) is the result of the following:
(I) The Inventory Advance Rate of the Cost of Acceptable
Inventory (net of Inventory Reserves).
Plus
(II) The Credit Card Accounts Advance Rate of the Acceptable
Credit Card Accounts up to a maximum of Two Million Two
Hundred Thousand Dollars ($2,200,000.00).
Minus
(III) The then aggregate of the Availability Reserves."
(j) A new Section 5.5 shall be inserted into the Loan Agreement which
reads as follows:
"5.5 Accounts Receivable Aging Reports. As Agent may request from time
to time, Borrower shall provide the Agent with original counterparts
of an Accounts Receivable Aging certified as to the accuracy thereof
by any one of the following persons: President, Treasurer, Chief
Financial Officer, or Controller of Borrower."
(k) The text of Section 6.5 of the Loan Agreement shall be deleted and
replaced with the following: "6.5 NOTIFICATION TO ACCOUNT DEBTORS AND
OTHER ACCOUNTS COVENANTS.
(a) The Borrower shall notify the Agent promptly of any event or
circumstance which, to the Borrower's knowledge would cause the Agent
to consider any then existing Accounts as no longer constituting
Acceptable Credit Card Accounts.
(b) The Agent shall have the right at any time or times, in the
Agent's name or in the name of a nominee of the Agent, to verify the
validity, amount or any other matter relating to any Account or other
Collateral, by mail, telephone, facsimile transmission or otherwise.
(c) The Agent may, at any times that a Suspension Event exists or has
occurred and is continuing, take whatever action the Agent may deem
necessary or desirable for the protection of its interests.
4. AMENDMENT TO BORROWING BASE CERTIFICATE. Exhibit 5-4 to the Loan Agreement
shall be deleted and replaced with the form of Borrowing Base Certificate
attached hereto as EXHIBIT 5-4.
5. REPRESENTATIONS AND WARRANTIES. The Borrower hereby represents and warrants
to the Lenders as follows:
(a) REPRESENTATIONS AND WARRANTIES: NO EVENT OF DEFAULT. The
representations and warranties herein, in the Loan Agreement and in
each other Loan Document and certificate or other writing delivered to
Agent pursuant to the Loan Agreement on or prior to the Effective Date
of this Agreement shall be correct and accurate as to the Borrower on
and as of the Effective Date of this Agreement as though made on and
as of such date; and no Default or Event of Default shall have
occurred and be continuing as of the Effective Date of this Agreement
or would result from this Agreement becoming effective in accordance
with its terms.
(b) ORGANIZATION, GOOD STANDING, ETC. The Borrower (i) is a corporation,
duly organized, validly existing and in good standing under the laws
of its state of organization, (ii) has all requisite power and
authority to execute, deliver and perform this Agreement, and to
perform the Loan Agreement, as amended hereby, and (iii) is duly
qualified to do business and is in good standing in each jurisdiction
in which the character of the properties owned or leased by it or in
which the transaction of its business makes such qualification
necessary.
(c) AUTHORIZATION, ETC. The execution, delivery and performance by the
Borrower of this Agreement, and the performance by the Borrower of the
Loan Agreement, as amended hereby, (i) have been duly authorized by
all necessary action, (ii) do not
Page 20 of 27
<PAGE> 3
and will not contravene the Borrower's charter or by-laws, any
applicable law or any contractual restriction binding on or
otherwise affecting it or any of its properties, (iii) do not and
will not result in or require the creation of any lien or other
encumbrance (other than pursuant to any Loan Documents) upon or
with respect to any of its properties, and (iv) do not and will
not result in any suspension, revocation, impairment, forfeiture
or nonrenewal of any permit, license, authorization or approval
applicable to its operations or any of its properties.
(d) GOVERNMENTAL APPROVALS. No authorization or approval of other
action by, and no notice to or filing with, any governmental
authority or agency or other regulatory body is required in
connection with the due execution, delivery and performance by
the Borrower of this Agreement, or for the performance of the
Loan Agreement, as amended hereby.
(e) ENFORCEABILITY OF LOAN DOCUMENTS. This Agreement, the Loan
Agreement, as amended hereby, and each other Loan Document to
which the Borrower is a party is a legal, valid and binding
obligation of Borrower, enforceable against Borrower in
accordance with its terms, except as such enforceability may be
limited by or subject to any bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting
creditors' rights generally.
6. MISCELLANEOUS.
(a) CONTINUED EFFECTIVENESS OF THE LOAN DOCUMENTS. Except as
otherwise expressly provided herein, the Loan Agreement and the
other Loan Documents are, and shall continue to be, in full force
and effect and are hereby ratified and confirmed in all respects,
except that on and after the date hereof (i) all references in
the Loan Agreement to "this Agreement", "hereto", "hereof",
"hereunder" or words of like import referring to the Loan
Agreement shall mean the Loan Agreement as amended by this
Agreement and (ii) all references in the other Loan Documents to
the "Loan Agreement", "thereto", "thereof", "thereunder" or words
of like import referring to the Loan Agreement shall mean the
Loan Agreement as amended by this Agreement. Except as expressly
provided herein, the execution, delivery and effectiveness of
this Agreement shall not operate as an amendment of any right,
power or remedy of the Lenders under the Loan Agreement or any
other Loan Document, nor constitute an amendment of any provision
of the Loan Agreement or any other Loan Documents.
(b) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate
counterparts (including, without limitation, by telecopy), each
of which shall be deemed to be an original, but all of which
taken together shall constitute one and the same agreement.
(c) HEADINGS. Section headings herein are included for convenience of
reference only and shall not constitute a part of this Agreement
for any other purpose.
(d) GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the law of the Commonwealth of Massachusetts.
(e) COSTS AND EXPENSES. The Borrower agrees to pay on demand all
fees, costs and expenses of the Lenders (including, without
limitation, the reasonable fees, costs and other client charges
of legal counsel to the Lenders) in connection with the
preparation, execution and delivery of this Agreement and the
other related agreements, instruments and documents.
(f) FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT AS LOAN DOCUMENT.
The Borrower hereby acknowledges and agrees that this First
Amendment to Loan and Security Agreement constitutes a "Loan
Document" under the Loan Agreement. Accordingly, it shall be an
Event of Default under the Loan Agreement if (i) any
representation or warranty made by the Borrower under or in
connection with this Agreement shall have been untrue, false or
misleading in any material respect when made, or (ii) the
Borrower shall fail to perform or observe any term, covenant or
agreement contained in this Agreement.
(g) WAIVER OF JURY TRIAL. BORROWER AND LENDERS EACH HEREBY
IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
Page 21 of 27
<PAGE> 4
PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
ACTIONS OF THE LENDERS IN THE NEGOTIATION, ADMINISTRATION,
PERFORMANCE OR ENFORCEMENT HEREOF.
INTENTIONALLY LEFT BLANK
Page 22 of 27
<PAGE> 5
Executed under seal as of the date written above.
ROBERDS, INC. ("BORROWER")
/s/ Robert M. Wilson
-----------------------------------
By: Robert M. Wilson
Title: President
NATIONAL CITY COMMERCIAL FINANCE, INC.
("LENDER")
/s/ Kathryn C. Ellero
------------------------------------
By: Kathryn C. Ellero
Title: Assistant Vice President
BANKBOSTON RETAIL FINANCE INC.
("AGENT" and "LENDER")
/s/ Mary E. Abbott
------------------------------------
By: Mary E. Abbott
Title: Assistant Vice President
GUARANTOR ACKNOWLEDGMENT
For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the undersigned guarantor hereby irrevocably and
unconditionally acknowledges and confirms to the Lenders that its guaranty of
the liabilities pursuant to the Unlimited Guaranty dated as of March 3, 1999 of
the Borrower continues in full force and effect and is a valid and binding
obligation of the undersigned guarantor in accordance with its terms, and that
no defenses, offsets, claims, counterclaims exist with respect to such guaranty.
Executed under seal as of the date written above.
Guarantor:
ROBERD INSURANCE AGENCY, INC.
/s/ Robert M. Wilson
-----------------------------------
Robert M. Wilson, Executive Vice President
Page 23 of 27
<PAGE> 1
EXHIBIT 10.11
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT ("Agreement") is made and
effective as of April 30, 1999, by and between BILLY D. BENTON ("Employee"),
residing at 3919 Sable Ridge Drive, Bellbrook, Ohio 45305, and ROBERDS, INC., an
Ohio corporation ("Employer"), with its principal place of business at 1100 East
Central Avenue, Dayton, Ohio 45449-1888. This Agreement is entered into under
the following circumstances:
WHEREAS, Employee and Employer entered into that certain Employment Agreement
dated May 27, 1997 ("Employment Agreement"), and that Employment Agreement has
governed the relationship of the parties through the effective date of this
Agreement;
WHEREAS, the business and structure of Employer has changed significantly since
the Employment Agreement was entered into by the parties; and
WHEREAS, the parties hereto now desire to clearly define their relationship in
the context of Employer's current business and structure and Employee's current
duties, and wish to enter into this Amended and Restated Agreement.
NOW, THEREFORE, the parties hereto, in consideration of the mutual covenants and
promises contained herein, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, do hereby enter into
the following agreement:
SECTION I. EMPLOYMENT. Employer hereby agrees to employ Employee as an executive
officer, elected by the Board of Directors, in such duties, capacities, and
responsibilities as Employer may from time to time assign Employee, and Employee
accepts such employment with Employer, subject to the terms and conditions set
forth in this Agreement. Employee is expected to be and remain an "executive
officer" of Employer during the term of his employment. Employee will report
directly to Employer's Chief Executive Officer. Upon the effective date of this
Agreement, Employee will be named Employer's Executive Vice President-General
Merchandise Manager, and is expected to remain in that position for the
foreseeable future. However, the parties hereto acknowledge and expect that
Employee's title, duties, and responsibilities will change from time to time,
upon approval of the Board of Directors, consistent with the provisions of this
section.
SECTION II. TERM OF EMPLOYMENT. This Agreement, and the employment under it,
shall commence on the day and date first written above and continue until
terminated under the provisions set forth herein. Employee may terminate this
Agreement at any time, upon 30 days written notice to Employer. The payments due
under Section IV of this Agreement will terminate upon the effectiveness of such
termination.
Employer may terminate this Agreement at any time upon 30 days written notice.
If it is terminated for Cause, as defined below, then the payments due under
Section IV of this Agreement will terminate upon the effectiveness of such
termination. If it is terminated for any reason other than Cause, then the
payments provided under Section IV shall continue for one year following the
effectiveness of such termination.
SECTION III. DUTIES OF EMPLOYEE. Employee will serve Employer faithfully and to
the best of his ability, under the direction of the Chief Executive Officer of
Employer. Employee will devote all of his time, energy, and skill during regular
Page 24 of 27
<PAGE> 2
business hours to such employment. Employee shall perform such services and act
in such executive capacity as the Chief Executive Officer shall direct.
SECTION IV. COMPENSATION. A. Through the term of this Agreement, Employee's
salary shall be set at the rate of not less than $250,000 per year from the day
and date first written above.
B. Employer shall pay Employee's salary in accordance with the pay practices of
Employer, as applied to all executive officers.
C. Employee shall participate in the Roberds, Inc. Executive Compensation Plan,
as amended from time to time, and any other compensation plans or arrangements
provided to Employer's executive officers.
D. Employer shall provide Employee with a late-model automobile for Employee's
use. Employee hereby acknowledges that any personal use of such automobile shall
be taxable to him pursuant to current income tax law and regulations.
E. Employer shall grant Employee options on 25,000 shares of Employer's common
stock, pursuant to its Amended and Restated 1993 Stock Incentive Plan.
SECTION V. FAILURE TO PAY EMPLOYEE. The failure of Employer to pay Employee's
compensation as provided in Section IV may, in Employee's sole discretion, be
deemed a breach of this Agreement, and unless such breach is cured within ten
days after written notice to Employer, this Agreement shall terminate, including
the provisions of Section IX.
SECTION VI. REIMBURSEMENT OF EXPENSES. Employer shall reimburse Employee for
reasonable out-of-pocket expenses which Employee shall incur in connection with
his services for Employer rendered under this Agreement, upon presentation by
Employee of appropriate vouchers to Employer, and if in accordance with
Employer's travel and reimbursement policies.
SECTION VII. RULES AND REGULATIONS OF EMPLOYER. Employee hereby agrees to abide
by, and observe, the written policies, rules, regulations, and restrictions
imposed on employees and executive officers of Employer, as amended from time to
time, and as provided to Employee, as well as those set forth in this Agreement.
Violation of any such policies, rules, or regulations may be cause for Employer
invoking the provisions of Section VIII of this Agreement.
SECTION VIII. TERMINATION. The Chief Executive Officer of Employer may terminate
Employee, by giving written notice to Employee of such termination, at any time
with or without Cause (as defined below). Cause is defined as one or more of the
following acts or conditions taken by or created by Employee:
1. Employee's failure to strictly adhere to the terms of this
Agreement or any of Employer's written policies, rules, or
regulations, as amended from time to time and provided to
Employee.
2. Commission by Employee of a felony or any crime involving
moral turpitude; commission by Employee of any act that
exposes Employer, or any of its officers or directors, to any
criminal liability for such act of Employee; or any gross
negligence or willful misconduct in the performance of
Employee's duties that results in any detriment to Employer or
its officers or directors.
3. The death of Employee during the term of this Agreement;
provided, however, that Employer shall pay to Employee's
estate any amounts that are owed to Employee under this
Agreement at the date of death.
In the event that Employer proposes to invoke one or more of the provisions of
subsection C.1 or 2 above, Employer shall provide written notice to Employee
setting forth the specific reasons for the proposed termination and shall permit
Employee a thirty-day period in which to address and resolve the points raised
in such notice. In the event such points are not resolved to the reasonable
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<PAGE> 3
satisfaction of the Chief Executive Officer of Employer, then Employee shall be
given written notice of his termination for Cause and this Agreement shall
terminate as of the date of the written notice of such termination to Employee;
provided, however, that Employer shall be liable to Employee for any amounts
owed to Employee through the date of such termination for Cause, that the
provisions of Sections IX through X shall survive such termination for Cause,
and that no further payments will be made to Employee under Section IV
subsequent to termination for Cause.
SECTION IX. SOLICITATION AFTER TERMINATION. Employee agrees that in addition to
any other limitation, for the period time after the termination of his
employment with Employer that any payment is made to Employee pursuant to this
or any other agreement or arrangement with Employee, plus one year (except a
termination caused by Employer in violation of the terms of this Agreement) and
unless otherwise specified, he will not, on behalf of himself or on behalf of
any other person, firm, or corporation, call on any of the employees of
Employer, or any of its affiliates or subsidiaries, for the purpose of
recruiting such employees to employment with Employee, his then-current
employer, or affiliates of his then-current employer. Further, Employee agrees
that, for such period, if any employee of Employer contacts Employee about
employment with Employee, his then-current employer, or any of its affiliates or
subsidiaries, Employee shall contact Employer prior to employing the prospective
employee, and shall permit Employer to discuss the matter with the prospective
employee.
SECTION X. USE OF CONFIDENTIAL INFORMATION. Employee agrees that in addition to
any other limitation, for a period of one year after termination of his
employment, regardless of the circumstances of the termination of employment, he
will not communicate to any person, firm, or corporation any information
relating to customer lists, retail prices, secrets, advertising, vendor product
pricing, nor any confidential knowledge or secrets which he might from time to
time acquire with respect to the business of the Employer, or any of its
affiliates or subsidiaries. Employee acknowledges that Employer has other
confidentiality rules set forth in its employee handbook, and other rules
imposed by NATM Buying Corp., which also apply to Employee. Except as
specifically provided elsewhere herein, this Section XII shall survive the
expiration or termination of this Agreement.
SECTION XI. INJUNCTIVE RELIEF. Employee acknowledges that the services to be
rendered are of a unique, special, and extraordinary character which would be
difficult or impossible for Employer to replace, so Employee agrees that, in the
event of a violation of any of the provisions of this Agreement, Employer shall,
in addition to any other rights and remedies available under this Agreement, at
law or otherwise, be entitled to an injunction to be issued by any court of
competent jurisdiction enjoining and restraining Employee from committing any
violation of this Agreement, and Employee hereby consents to the issuance of
such injunction.
SECTION XII. COMMUNICATIONS TO EMPLOYER. From the time this Agreement commences
until its termination, Employee shall communicate and channel to Employer all
knowledge, business, and any other matters of information which could concern or
be in any way beneficial to the business of Employer, whether acquired by
Employee before or during the term of this Agreement; provided, however, that
nothing in this Agreement shall be construed as requiring such communications
when the information is lawfully protected from disclosure as a trade secret of
a third party. Any such information communicated to Employer shall be and remain
the property of Employer, notwithstanding the subsequent termination of this
Agreement.
SECTION XIII. BINDING EFFECT; MISCELLANEOUS. A. This Agreement shall be binding
on and shall inure to the benefit of any successor or successors of Employer and
the personal representatives of Employee.
B. This Agreement constitutes the entire Agreement between the parties hereto,
and supersedes all prior discussions, drafts, negotiations, proposals, and
agreements between the parties, whether written or oral. This Agreement may not
be amended except by a written instrument executed by the parties hereto.
C. If any provision of this Agreement is ultimately determined to be invalid or
unenforceable, by a final non-appealable ruling of a court of competent
jurisdiction, the remaining provisions of this Agreement shall not be affected
by such determination, shall remain in full force and effect, and shall be
construed in manner most likely to carry out the original intent of the parties.
Page 26 of 27
<PAGE> 4
D. This Agreement may be executed in any number of counterparts, each of which
shall be an original, and all of which, taken together, constitute one single,
binding, enforceable agreement.
E. Any notice given, or required to be given, under this Agreement, shall be
deemed to have been duly given if it is delivered to the addresses shown above
by either: (1) first-class mail, postage prepaid or (2) a nationally recognized
courier service. The parties may change such addresses at any time by giving
written notice to the other partly to this Agreement in the manner set forth
herein.
SECTION XIV. LAW TO GOVERN CONTRACT. This Agreement shall be governed by the
laws of the State of Ohio. The parties hereby agree that any lawsuit brought
under, by, or through this Agreement shall be brought only in a court of
competent jurisdiction in Montgomery County, Ohio.
SECTION XV. INDEMNIFICATION. Employee has informed Employer that he has certain
agreements with his former employer, Levitz Furniture Incorporated, or its
subsidiaries or affiliates ("LFI"), that may restrict certain of his activities
with respect to Employer. Employee hereby agrees to hold Employer harmless, and
to unconditionally indemnify Employer, from any cost, loss, or expense,
including professional fees, incurred by Employer as the result of a breach, or
alleged breach, of any agreements between Employee and LFI, and he will promptly
reimburse Employer for any such costs, losses, expenses, or fees, upon
presentation of evidence and written request by Employer.
SECTION XVI. REPRESENTATIONS. Each party hereto hereby represents and warrants
that as of the effective date of this Agreement, the Employment Agreement
between them, dated as of May 17, 1997, was and is in full force and effect and
that there has been no event, action, or condition that constitutes or could
constitute a breach of, or condition of default under, such Employment
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and date first stated above.
ROBERDS, INC., by
/s/ MELVIN H. BASKIN
- ------------------------------
Melvin H. Baskin, its
Chief Executive Officer
/s/ BILLY D. BENTON
- ------------------------------
BILLY D. BENTON
Page 27 of 27
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM the
Consolidated Balance Sheet and the Consolidated Statement of Operations AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENT.
</LEGEND>
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> 1,559
<SECURITIES> 0
<RECEIVABLES> 2,208
<ALLOWANCES> 0
<INVENTORY> 44,915
<CURRENT-ASSETS> 50,715
<PP&E> 131,777
<DEPRECIATION> 41,354
<TOTAL-ASSETS> 145,217
<CURRENT-LIABILITIES> 39,145
<BONDS> 74,592
0
0
<COMMON> 616
<OTHER-SE> 27,270
<TOTAL-LIABILITY-AND-EQUITY> 145,217
<SALES> 141,383
<TOTAL-REVENUES> 141,383
<CGS> 90,474
<TOTAL-COSTS> 90,474
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,436
<INCOME-PRETAX> (1,866)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,866)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,866)
<EPS-BASIC> (.30)
<EPS-DILUTED> (.30)
</TABLE>
