<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, 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 November 12, 1999, 6,240,958
common shares, without par value, were outstanding.
Page 1 of 23
<PAGE> 2
ROBERDS, INC. AND SUBSIDIARY
INDEX
PAGE
NUMBER
------
PART 1. FINANCIAL INFORMATION:
ITEM 1. Financial Statements:
Condensed Consolidated Balance Sheets -
September 30, 1999 and December 31, 1998 3
Condensed Consolidated Statements Of
Operations - Three and Nine Months Ended
September 30, 1999 and 1998 4
Condensed Consolidated Statements
of Cash Flows - Nine Months Ended
September 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 15
PART II. OTHER INFORMATION:
ITEMS 1-4. Inapplicable 16
ITEM 5. Other Information 16
ITEM 6. Exhibits and Reports
on Form 8-K 16
Page 2 of 23
<PAGE> 3
ROBERDS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
SEPTEMBER 30 DECEMBER 31
1999 1998
ASSETS
- ------
CURRENT ASSETS:
Cash and cash equivalents $ 750 $ 932
Receivables:
Customers 784 921
Vendors and other 2,156 2,390
Merchandise inventories 43,160 43,937
Refundable income taxes 66 2,360
Prepaid expenses and other 1,771 1,983
--------- ---------
Total current assets 48,687 52,523
Property and equipment, net 89,700 92,085
Certificates of deposit, restricted 2,353 2,331
Other assets 1,748 1,269
========= =========
$ 142,488 $ 148,208
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 15,089 $ 14,130
Accrued expenses 7,934 11,510
Customer deposits 11,649 11,573
Litigation 1,271 1,271
Deferred warranty revenue-current 1,825 2,580
Current maturities of long-term debt 6,755 2,945
--------- ---------
Total current liabilities 44,523 44,009
Long-term debt including capital leases 70,072 70,065
Deferred rent 1,850 1,831
Deferred warranty revenue 1,361 2,631
SHAREHOLDERS' EQUITY:
Common stock 624 611
Additional paid-in capital 32,542 32,332
Deficit (8,484) (3,271)
--------- ---------
Total shareholders' equity 24,682 29,672
--------- ---------
$ 142,488 $ 148,208
========= =========
See notes to condensed consolidated financial statements.
Page 3 of 23
<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
1999 1998 1999 1998
<S> <C> <C> <C> <C>
NET SALES AND SERVICE REVENUES $ 70,810 $ 78,696 $ 212,193 $ 231,102
COST OF SALES 46,857 53,236 137,331 157,865
--------- --------- --------- ---------
Gross profit 23,953 25,460 74,862 73,237
SELLING, DELIVERY AND ADMINISTRATIVE EXPENSES 26,963 27,096 80,440 79,562
INTEREST EXPENSE, NET 1,765 1,794 5,201 5,278
FINANCE PARTICIPATION INCOME (594) (816) (2,007) (2,359)
OTHER INCOME, NET (834) (884) (3,559) (2,634)
--------- --------- --------- ---------
LOSS BEFORE TAX BENEFIT (3,347) (1,730) (5,213) (6,610)
INCOME TAX BENEFIT (580) (2,270)
--------- --------- --------- ---------
NET (LOSS) (3,347) ($1,150) ( $5,213) ($4,340)
========= ========= ========= =========
BASIC AND DILUTED NET (LOSS) PER COMMON SHARE ($ 0.54) ($0.19) ($0.84) ($0.72)
========= ========= ========= =========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
BASIC AND DILUTED 6,214 6,076 6,172 6,050
========= ========= ========= =========
</TABLE>
See notes to condensed consolidated financial statements.
Page 4 of 23
<PAGE> 5
ROBERDS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS SEPTEMBER 30
1999 1998
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($5,213) ($4,340)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 6,297 6,607
LIFO reserve 200 650
Changes in assets and liabilities, net (983) 217
-------- --------
Net cash provided by operating activities 301 3,134
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (2,409) (1,145)
Proceeds from sales of fixed assets 160 47
Other (348) 126
-------- --------
Net cash used in investing activities (2,597) (972)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt (19,842) (4,828)
Proceeds from long-term debt 22,101 1,200
Net proceeds from issuance of common shares 131 164
Debt issuance costs (276) (31)
-------- --------
Net cash provided by (used in) financing activities 2,114 (3,495)
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS (182) (1,333)
CASH AND CASH EQUIVALENTS - Beginning of period 932 2,494
-------- --------
CASH AND CASH EQUIVALENTS - End of period $ 750 $ 1,161
======== ========
CASH PAID (REFUNDED) FOR:
Interest $ 5,278 $ 5,265
======== ========
Income taxes ($2,294) ($2,239)
======== ========
NON-CASH TRANSACTIONS:
Issuance of common shares to the Roberds, Inc. Employee
Profit Sharing and Retirement Savings Plan $ 94 $ 87
======== ========
Capital Lease $ 1,558
======== ========
</TABLE>
See notes to the condensed consolidated financial statements
Page 5 of 23
<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 September 30, 1999, the condensed consolidated statements of
operations for the three and nine months ended September 30, 1999 and 1998, and
the condensed consolidated statements of cash flows for the nine months ended
September 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
nine months ended September 30, 1999 may not be indicative of the results for
the year ending December 31, 1999.
The accompanying condensed financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. The Company has incurred
operating losses in each of the three prior years and the current year. These
factors among others may indicate that the Company will be unable to continue as
a going concern for a reasonable period of time.
The financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or the amounts and
classification of liabilities that might be necessary should the Company be
unable to continue as a going concern. The Company's continuation as a going
concern is dependent upon its ability to generate sufficient cash flow to meet
its obligations on a timely basis, to comply with the terms and covenants of its
financing agreements, to obtain additional financing or refinancing as may be
required, and ultimately to attain successful operations. Management of the
Company believes improved controls over selling prices and an increased focus on
add-on services to customers combined with expense reductions will result,
ultimately, in operating profits. However, management cannot provide any
assurance that these events will occur or that the Company will return to
profitability.
Page 6 of 23
<PAGE> 7
B. DEBT
SEPTEMBER 30 DECEMBER 31
1999 1998
Mortgage notes payable $42,415 $44,138
Revolving line of credit 22,100 17,500
Capital lease obligations 12,312 11,372
------- -------
76,827 73,010
Less current maturities 6,755 2,945
------- -------
$70,072 $70,065
======= =======
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 September 30, 1999, $24,075
was available under the line, of which $22,100 was outstanding. The line of
credit bears interest at either the bank's base rate (8.25% at September 30,
1999) or LIBOR plus 2.25% (7.73% at September 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. 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 tangible net worth.
During the third quarter of 1999, at the Company's request, two of the mortgage
holders reduced the required minimum tangible net worth to $20,000.
At September 30, 1999, the Company was in violation of the minimum fixed-charge
coverage ratio related to the line of credit. In November 1999, the bank waived
the violation of the minimum fixed charge-coverage ratio, eliminated the
covenant for October and November 1999, and relaxed the requirement for the
periods subsequent to November 1999. The bank also increased the rate of
interest the line bears by .25%. In order to comply with the amended
fixed-charge coverage covenant, the Company must improve operations from those
experienced in the third quarter of 1999. The Company also failed to meet the
tangible net worth minimum required by one of its mortgage loans. In November
1999, the required minimum net worth was reduced to $20,000 by the mortgage
lender. Accordingly, the above borrowings have been included in long-term
obligations in accordance with their scheduled maturities.
Page 7 of 23
<PAGE> 8
C. NET SALES AND SERVICE REVENUE
Net sales and service revenue includes the following products:
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
1999 1998 1999 1998
Furniture $ 28,802 $ 29,909 $ 88,624 $ 88,978
Bedding 9,850 11,036 28,734 31,719
Appliances 15,982 19,321 46,534 57,111
Electronics 11,468 13,078 34,187 37,521
Other 4,708 5,352 14,114 15,773
======== ======== ======== ========
$ 70,810 $ 78,696 $212,193 $231,102
======== ======== ======== ========
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:
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
EARNINGS (LOSS) EARNINGS (LOSS)
BEFORE INCOME BEFORE
NET SALES TAXES NET SALES INCOME TAXES
1999
- ----
Ohio $ 32,329 ($1,064) $ 97,987 $ 568
Georgia 23,786 (1,188) 69,562 (2,314)
Florida 14,695 (1,095) 44,644 (3,467)
--------- --------- --------- ---------
$ 70,810 ($3,347) $ 212,193 ($5,213)
========= ========= ========= =========
1998
- ----
Ohio $ 37,594 $ 555 $ 112,936 $ 2,164
Georgia 25,229 (951) 71,255 (3,468)
Florida 15,873 (1,334) 46,911 (5,306)
--------- --------- --------- ---------
$ 78,696 ($1,730) $ 231,102 ($6,610)
========= ========= ========= =========
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 nine months ended September 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. The
Ohio segment earnings for the nine months ended September 30, 1998 include a
refund of premiums of $1,053 to all participants in the State of Ohio's workers'
compensation fund.
Page 8 of 23
<PAGE> 9
E. INCOME TAXES
Income tax benefit for the nine months ended September 30, 1998 consists of the
following:
Currently refundable:
Federal ($2,489)
State and Local (96)
-------
(2,585)
Deferred 315
=======
($2,270)
=======
No tax benefit was recognized on the loss for the three and nine months ended
September 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.
F. LITIGATION
In 1994, the Ohio Bureau of Workers' Compensation ("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 1995, the assessment was reduced to $871. The assessment
was based on the Bureau's reclassification of the majority of the Company's Ohio
employees into higher rate classifications. In January 1997, the Company lost
its appeal of the assessment in the Ohio Court of Appeals, and in August 1999
the Ohio Supreme Court ruled against the Company in its final appeal.
The Company paid the 1992 -1993 assessment in May 1998 as part of a one-time
refund of premiums to all participants in the workers' compensation fund. The
Company has accrued the interest owed on the 1992-1993 assessment and the
estimated amount of additional taxes that would be caused by a reclassification
of employees for the period from January 1994 through June 1996 consistent with
the Bureau's position.
Page 9 of 23
<PAGE> 10
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 nine months of 1999 resulted in a loss before tax benefit of $(5,213)
as compared to a loss before tax benefit of $(6,610) for the first nine months
of 1998. Sales for the three months ended September 1999 declined to $70,810
from $78,696 for the three months ended September 1998, a 10.0 percent decrease.
Sales for the first nine months of 1999 declined to $212,193 from $231,102 for
the first nine months of 1998, a 8.9 percent decrease. All stores were
comparable in 1999.
The percentage decreases in total and comparable sales by market area were as
follows:
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
Ohio (14%) (13%)
Georgia (6) (2)
Florida (7) (5)
During the third quarter of 1999, the Company was involved in negotiation of a
labor contract with its sales force in the Ohio region, the Company's largest
region. During the negotiations, the union called for a boycott of the Company's
Ohio stores, and the sales associates were distracted by the bargaining. In
addition, the Company mounted a significant promotion in August 1999 that was
not successful. These factors contributed to the decline in comparable store
sales in Ohio for the three months ended September 1999.
Sales by major product category as a percentage of total sales were as follows:
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
1999 1998 1999 1998
Furniture 41% 38% 42% 38%
Bedding 14 14 13 14
Appliances 22 24 22 25
Electronics 16 17 16 16
Other 7 7 7 7
=== === === ===
100% 100% 100% 100%
=== === === ===
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
decline in major appliances 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 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 September 1999, gross profit was $23,953, or 33.8
percent of sales, as compared to $25,460, or 32.4 percent of sales, for the
three months ended September 1998. For the nine months ended September 1999,
gross profit was $74,862, or 35.3 percent of sales, as compared to $73,237, or
31.7 percent of sales, for the nine months ended September 1998.
Page 10 of 23
<PAGE> 11
Gross margin percentages by category were as follows:
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
1999 1998 1999 1998
Furniture 38% 36% 40% 34%
Bedding 46 45 46 45
Appliances 23 21 23 21
Electronics 16 16 18 17
The increase in gross profit margin percentage of 1.4 and 3.6 percent of sales
for the three and nine months ended September 1999, as 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 gross margin
percentage for the three months ended September 1999 reflects several
price-based promotions, which adversely affected the gross margin percentage
and, in the later part of the third quarter of 1999, intense price competition
in the Ohio region. 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 September 1999, selling, delivery, and administrative
expenses, which include occupancy costs, were $26,963, or 38.1 percent of sales,
as compared to $27,096, or 34.4 percent of sales, for the comparable period in
1998. Selling, delivery, and administrative expenses for the nine months ended
September 1999 were $80,440, or 37.9 percent of sales, as compared to $79,562,
or 34.4 percent of sales, for the comparable period in 1998. The increase as a
percentage of sales for the three months ended September 1999, as compared to
1998, resulted from (a) increased advertising and promotional expenses, (b)
increased warehouse and store management salaries required to institute various
warehouse and store based initiatives, (c) increased commissions to sales
associates for sales of higher margin products, (d) increased workers
compensation expense, 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 increased delivery fees. In addition to the items mentioned above, selling,
delivery, and administrative expenses for the nine months ended September 1999,
as compared to 1998, increased due to 1998 including a refund of premiums of
$1,053 from the State of Ohio workers' compensation fund.
Interest expense, net of interest income, remained relatively steady for the
three and nine months ended September 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 $594, or 0.8 percent of sales,
for the three months ended September 1999, as compared to $816, or 1.0 percent
of sales, for the comparable period in 1998, and was $2,007, or 0.9 percent of
sales, for the nine months ended September 1999, as compared to $2,359, or 1.0
percent of sales, for the comparable period in 1998. Participation for the three
and nine months ended September 1999 as compared to 1998 declined as a result of
ongoing changes in the use of income-generating finance programs compared to
longer-term, same-as-cash programs that generate financing expense. These
changes 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 September 1999 as compared to $884, or 1.1 percent of sales, for the
comparable period in 1998. For the nine months ended September 1999, other
income increased to $3,559 or 1.7 percent of sales, as compared to $2,634, or
1.1 percent of sales, for the comparable period in 1998. The majority of other
income for the three months ended September 1999 and September 1998 consists of
cash discounts and rental income from tenants. Other income in the first nine
months of 1999 includes $1,102 of life insurance proceeds received as a result
of the death of the Company's chairman.
Page 11 of 23
<PAGE> 12
Loss before income taxes was $5,213, for the first nine months of 1999, compared
to a loss before income taxes of $6,610 in 1998. No income tax benefit was
provided for 1999, compared to $2,270, or 35% of the loss before taxes, in 1998.
No tax benefit was 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 decreased to $750 at September 30, 1999, compared to $932 at December 31,
1998. The Company generated $301 of cash from operating activities during the
first nine months of 1999. Cash of $3,576 was utilized to reduce accrued
expenses reflecting the payment of a portion of the disputed premiums to the
Ohio Bureau of Workers Compensation, the timing of the payment of payroll, and a
seasonal reduction in accrued sales tax. Cash flow from operating activities
benefited by the receipt of $2,294 of refundable income taxes in the first nine
months of 1999. The Company expects to generate positive cash flow from
operating activities for the remaining portion of 1999.
During the first nine months of 1999, the Company's capital expenditures,
excluding capitalized leases, totaled $2,409. These expenditures primarily
represented normal replacement and upgrade projects, including the conversion of
the former clearance space in the Norcross, Georgia store into an expanded
bedding center, the renovation of the electronics area in that store into a
state-of-the-art electronics display and, the consolidation of the Company's two
existing clearance centers in Atlanta, Georgia into the Forest Park center.
During the second quarter of 1999, the Company took delivery of a new
enterprise-wide computer hardware and software system, which was financed by a
$1,558 capital lease. The installation of that system was completed during the
third quarter. The lease requires payments of $49 per month for 36 months.
During the first nine months of 1999, the Company acquired approximately $2,800
of vehicles and warehouse equipment, which were financed by operating leases.
The Company has outstanding commitments to acquire additional delivery vehicles
totaling approximately $1,300. These vehicles are expected to be financed
through operating leases. The Company has no other significant expansion or
capital expenditure plans for the balance of 1999 other than normal replacement,
repair, and upgrade projects.
One of the mortgage note payable contains a balloon payment, which is due in
September 2000. The Company intends to either refinance the obligation with the
existing lender or seek alternative financing. Accordingly, the balance of the
note payable, $3,229, has been included in current maturities of long-term debt.
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 September 30, 1999, $24,075
was available under the line, of which $22,100 was outstanding. The line of
credit bears interest at either the bank's base rate (8.25% at September 30,
1999) or LIBOR plus 2.25% (7.73% at September 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. 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 tangible net worth.
During the third quarter of 1999, at the Company's request, two of the Company's
mortgage holders reduced the required minimum tangible net worth to $20,000.
At September 30, 1999, the Company was in violation of the minimum fixed-charge
coverage ratio related to the line of credit. In November 1999, the bank waived
the violation of the minimum fixed charge-coverage ratio, eliminated the
covenant for October and November 1999, and relaxed the requirement for the
periods subsequent to November 1999. The bank also increased the rate of
interest the line bears by .25%. In order to comply with the amended
fixed-charge coverage covenant, the Company must improve operations from those
experienced in the third quarter of 1999. Such improvements in operations are
expected based upon the Company's business plan. If such improvements are not
achieved, the Company will have to renegotiate the covenants in order to remain
in compliance. The Company failed to meet the tangible net worth minimum
required by one of its mortgage loans. In November 1999, the required minimum
net worth was reduced to $20,000 by the mortgage lender. Accordingly, the above
borrowings have been included in long-term obligations in accordance with their
scheduled maturities.
Page 12 of 23
<PAGE> 13
The Company has no assurance that the contemplated refinancing and
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 the remainder of 1999, the Company will continue to focus on improving
business operations and customer service. Areas of focus include improving
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 balance 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 continue to focus its efforts on implementing sales-floor disciplines that
will attract, support, motivate, and retain professional sales associates.
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 and interest rates
continue to rise, 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 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 and gross margins. In the
later part of the third quarter of 1999, the Company began to be impacted by
severe price-cutting by several of its competitors in its Ohio region. This
situation could adversely affect sales and gross margins.
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 are Year 2000 compliant. The costs related to the
conversion of the credit-card processing system were insignificant. The costs to
upgrade the software and hardware for its primary management information system
were approximately $1,800, of which $1,558 was financed through a capital lease.
The majority of the expenditures were for hardware upgrades to accommodate new
software.
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.
Approximately $500 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;
Page 13 of 23
<PAGE> 14
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 have been 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.
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.
Page 14 of 23
<PAGE> 15
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.
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.
Page 15 of 23
<PAGE> 16
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 None.
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. In June 1999,
following an appeal by the Company, trading of the Company's stock was moved
from the Nasdaq National Market tier to the Nasdaq SmallCap Market. In August
1999, Nasdaq formally approved the Company's stock for listing on the Nasdaq
SmallCap Market.
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"). Effective October 3, 1999, the Company and the UFCW entered into a
three-year agreement covering wages and working conditions for approximately 180
commissioned sales associates in the Ohio region. The Company does not believe
that the contract will have any significant effect on the Company's financial
position or operating results.
In November 1999, Teamsters Local 957 petitioned the National Labor Relations
Board to hold an election to decide whether the Teamsters should represent the
drivers and helpers at the Company's Fairborn, Ohio distribution center. The
election will be held November 19, 1999. It is not possible to predict the
outcome of the vote or the effect, if any, on the Company's financial position
or operating results if the employees vote to be represented by the Teamsters.
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 September 30, 1999.
Page 16 of 23
<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 November 17, 1999 /s/ Robert M. Wilson
----------------------- ------------------------------
Robert M. Wilson
President
Chief Administrative Officer
Date November 17, 1999 /s/Gearry Davenport
----------------------- ------------------------------
Gearry Davenport
Chief Financial Officer
Date November 17, 1999 /s/ Michael A. Bruns
----------------------- -------------------------------
Michael A. Bruns
Vice President
Controller
Chief Accounting Officer
Page 17 of 23
<PAGE> 18
EXHIBIT INDEX
Exhibit Number Description
-------------- -----------
10.1 First Modification Agreement to the Loan and
Security Agreement between Registrant and
BankBoston Retail Finance Inc
Page 18 of 23
<PAGE> 1
EXHIBIT 10.1
SECOND MODIFICATION AGREEMENT
This SECOND MODIFICATION AGREEMENT entered into at Boston as of
November 17, 1999, between ROBERDS, INC., an Ohio corporation with its principal
executive offices at 1100 East Central Avenue, West Carrollton Ohio 45449
(hereinafter, the "Borrower"), and BANKBOSTON RETAIL FINANCE INC., a Delaware
corporation with an address of 40 Broad Street, Boston, MA 02109 as agent (the
"Agent") for a syndicate of lenders (the "Lenders").
WHEREAS, Agent established a revolving line of credit (the "Revolving
Credit") pursuant to a Loan and Security Agreement dated as of March 3, 1999 (as
amended and modified from time to time, the "Loan Agreement") for the Borrower
under which the Agent and the Lenders agreed to make advances to, and other
financial accommodations for the benefit of, the Borrower until the Maturity
Date subject to the terms and conditions of the Loan Agreement. All initially
capitalized terms shall have the definitions ascribed to them in the Loan
Agreement, unless otherwise defined herein.
WHEREAS, the Borrower has requested that the Agent waive certain
defaults under the Loan Agreement; namely, the Borrower's failure to comply with
the Fixed Charge Coverage Ratio covenant (the "Existing Events of Default") and
to make other accommodations to the Borrower as set forth herein.
WHEREAS, subject to the terms and conditions in this Agreement, the
Agent is willing to modify the terms of the Loan Agreement in order to
accommodate the Borrower's request.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Agent and the Borrower
mutually agree as follows:
1. EFFECTIVE DATE: The "Effective Date" of this Agreement shall
be the date upon which the Agent receives this Second
Modification Agreement, duly executed by the Borrower and the
Agent, and the Modification Fee, defined below.
2. AMENDMENTS TO LOAN AGREEMENT. The Loan Agreement is hereby
amended as follows:
a) The words "Zero Percent (0.0%)" shall be deleted
from the definition of Base Margin Rate and the words
"one quarter percent (0.25%)" shall be substituted
therefor.
b) The number "250" shall be substituted for the
number "225" in the definition of Libor Margin.
c) The words "one quarter of one percent (0.25%)"
shall be deleted from Section 2.12 and the words "one
half of one percent (0.50%)" shall be substituted
therefor.
d) The Fixed Charge Coverage Ratio set forth in
Section 5.12.1 of the Loan Agreement shall be deleted
and the following shall be substituted therefor:
"The Borrower will not suffer or permit its Fixed
Charge Coverage Ratio as measured on a
rolling/trailing 12-month basis, to be measured on
the last day of each of the Borrower's fiscal months
commencing with its month ending December, 1999, to
be less than as follows:
Page 19 of 23
<PAGE> 2
December, 1999 0.78
January, 2000 0.84
February, 2000 0.74
March, 2000 0.78
April, 2000 0.83
May, 2000 0.83
June, 2000 0.84
July, 2000 0.85
August, 2000 0.91
September, 2000 0.84
October, 2000 0.96
November, 2000 0.98
December, 2000 0.97
Thereafter on a
rolling/trailing
12-month basis"
e) The following shall be added as a new Section 5.12.3:
"5.12.3 Excess Availability. The Borrower will not
suffer or permit Availability at any time during the
month of December, 1999, to be less than
$2,000,000.00, after giving effect to rents which are
currently payable under Leases and overdrafts.
f) The Interest Rate Pricing Grid shall be deleted
and the following grid shall be substituted therefor:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
FIXED CHARGE RATIO ROLLING 12 MONTH BASE MARGIN LIBOR MARGIN
AVERAGE EXCESS (Basis (Basis
AVAILABILITY Points) Points)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
I Equal to or greater Equal to or greater 25 200
than 2.3 than $7,500,000
- ------------------------------------------------------------------------------------------------
II Equal to or greater Less than $7,500,000 25 225
than 2.3
- ------------------------------------------------------------------------------------------------
III Equal to or greater N/A 25 250
than 1.8 but less
than 2.3
- ------------------------------------------------------------------------------------------------
IV Less than 1.8 N/A 50 275
- ------------------------------------------------------------------------------------------------
</TABLE>
3. WAIVER OF EXISTING DEFAULTS. The Agent hereby waives the Existing
Events of Default, which the Borrower represents to be all the defaults
existing under the Loan Agreement as of the date of this Modification
Agreement. Agent's waiver of the Existing Events of Default is not a
waiver of any other presently existing or future arising Events of
Defaults.
Page 20 of 23
<PAGE> 3
4. MODIFICATION FEE. In consideration of the willingness of the Agent to
enter into this Agreement, the Borrower shall pay the Agent for the
ratable benefit of the Lenders a Modification Fee of $30,000.00. The
Modification Fee shall be fully earned and payable upon the Agent's
execution of this Agreement. The Borrower authorizes the Agent to
charge the Loan Account for such fee.
5. ENFORCEABILITY, ETC. 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 Effective 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 Agent or
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.
6. GENERAL PROVISIONS
a) INTEGRATION; AMENDMENT; WAIVERS. This Agreement and the
Loan Documents set forth in full are terms of agreement
between the parties and are intended as the full, complete and
exclusive contract governing the relationship between the
parties, superseding all other discussions, promises,
representations, warranties, agreements and the understandings
between the parties with respect thereto. No term of the Loan
Documents may be modified or amended, nor may any rights
thereunder be waived, except in a writing signed by the party
against whom enforcement of the modification, amendment or
waiver is sought. Any waiver of any condition in, or breach
of, any of the foregoing in a particular instance shall not
operate as a waiver of other or subsequent conditions or
breaches of the same or a different kind. The exercise or
failure to exercise any rights under any of the foregoing in a
particular instance by the Agent or the Lenders shall not
operate as a waiver of their right to exercise the same or
different rights in subsequent instances. Except as expressly
provided to the contrary in this Agreement, or in another
written agreement, all the terms, conditions, and provisions
of the Loan Documents shall continue in full force and effect.
If in this Agreement's description of an agreement between the
parties, rights and remedies of Agent or Lenders, or
obligations of the Borrower, are described which also exist
under the terms of the other Loan Documents, the fact that
this Agreement may omit or contain a briefer description of
any rights, remedies and obligations shall not be deemed to
limit any of such rights, remedies and obligations contained
in the other Loan Documents.
b) PAYMENT OF EXPENSES. Without limiting the terms of the Loan
Documents, the Borrower shall pay all costs and expenses
(including reasonable attorneys' fees) arising under or in
connection with the Loan Documents, including without
limitation, in connection with the negotiation, preparation,
execution, delivery, and enforcement of this Agreement and any
and all consents, waivers or other documents or instruments
relating thereto.
c) NO THIRD PARTY BENEFICIARIES. Except as may be otherwise
expressly provided for herein, this Agreement does not create,
and shall not be construed as creating, any rights enforceable
by any person not a party to this Agreement.
d) SEPARABILITY. If any provision of this Agreement is held by
a court of competent jurisdiction to be invalid, illegal or
unenforceable, the remaining provisions of this Agreement
shall nevertheless remain in full force and effect.
e) COUNTERPARTS. This Agreement may be executed in any number
of counterparts, which together shall constitute one and the
same agreement.
f) TIME OF ESSENCE. Time is of the essence in each of the
Liabilities of the Borrower and with respect to all conditions
to be satisfied by the Borrower.
g) CONSTRUCTION; VOLUNTARY AGREEMENT; REPRESENTATION BY
COUNSEL. This Agreement has been prepared through the joint
efforts of all the parties. Neither its provisions nor any
alleged ambiguity shall be interpreted or resolved against
Page 21 of 23
<PAGE> 4
any party on the ground that such party's counsel was the
draftsman of this Agreement. Each of the parties declares that
such party has carefully read this Agreement and the
agreements, documents and instruments being entered into in
connection herewith and that such party knows the contents
thereof and sign the same freely and voluntarily. The parties
hereto acknowledge that they have been represented in
negotiations for and preparation of this Agreement and the
agreements, documents and instrument being entered into in
connection herewith by legal counsel of their own choosing,
and that each of them has read the same and had their contents
fully explained by such counsel and is fully aware of their
contents and legal effect.
h) GOVERNING LAW; FORUM SELECTION. This Agreement has been
entered into and shall be governed by the laws of the
Commonwealth of Massachusetts.
i) FURTHER ASSURANCES. The Borrower agrees to take all further
actions and execute all further documents as the Agent may
from time to time reasonably request to carry out the
transactions contemplated by this Agreement.
j) NOTICES. All notices, requests and demands to or upon the
respective parties hereto shall be given in accordance with
the Loan Agreement.
k) MUTUAL WAIVER OF RIGHT TO JURY TRIAL. THE AGENT AND BORROWER
EACH HEREBY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR
PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING
TO: (I) THIS AGREEMENT, OR ANY OF THE AGREEMENTS, INSTRUMENTS
OR DOCUMENTS REFERRED TO HEREIN; OR (II) ANY OTHER PRESENT OR
FUTURE INSTRUMENT OR AGREEMENT BETWEEN THEM; OR (III) ANY
CONDUCT, ACTS OR OMISSIONS OF THE AGENT, THE LENDERS OR OF THE
BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH THEM;
IN EACH OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT
OR TORT OR OTHERWISE.
l) COPIES AND FACSIMILES. This Agreement and all documents
which have been or may be hereinafter furnished by the
Borrower to the Agent may be reproduced by the Agent or the
Lenders by any photographic, photostatic, microfilm,
xerographic or similar process, and any such reproduction
shall be admissible in evidence as the original itself in any
judicial or administrative proceeding (whether or not the
original is in existence and whether or not such reproduction
was made in the regular course of business).
This Agreement is executed under seal as November 17, 1999.
Intentionally Left Blank
Page 22 of 23
<PAGE> 5
This Second Modification Agreement is executed under seal as of the
date written above.
Witness
Roberds, Inc., the "Borrower"
/S/ Gearry Davenport By:/S/ Robert M. Wilson
- --------------------------- ----------------------------------------
Robert M. Wilson, President
Witness Accepted: BankBoston Retail Finance Inc.,
the "Agent"
/S/ D.M. Murray By: /S/ James R. Dore
- --------------------------- ----------------------------------------
Name: James Dore
Title: Vice President
Agreed to by:
Witness
Roberds Insurance Agency, Inc.
/S/ Gearry Davenport By:/S/ Robert M. Wilson
- --------------------------- ----------------------------------------
Robert M. Wilson, President
Page 23 of 23
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AND THE CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 750
<SECURITIES> 0
<RECEIVABLES> 2,940
<ALLOWANCES> 0
<INVENTORY> 43,160
<CURRENT-ASSETS> 48,687
<PP&E> 129,758
<DEPRECIATION> 40,058
<TOTAL-ASSETS> 142,488
<CURRENT-LIABILITIES> 44,523
<BONDS> 70,072
0
0
<COMMON> 624
<OTHER-SE> 24,058
<TOTAL-LIABILITY-AND-EQUITY> 142,488
<SALES> 212,193
<TOTAL-REVENUES> 212,193
<CGS> 137,331
<TOTAL-COSTS> 137,331
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,201
<INCOME-PRETAX> (5,213)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,213)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,213)
<EPS-BASIC> (.84)
<EPS-DILUTED> (.84)
</TABLE>
