<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 March 31, 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 April 30, 1999, 6,159,311
common shares, without par value, were outstanding.
Page 1 of 16
<PAGE> 2
ROBERDS, INC. AND SUBSIDIARY
INDEX
PAGE
NUMBER
PART 1. FINANCIAL INFORMATION:
ITEM 1. Financial Statements:
Condensed Consolidated Balance Sheets -
March 31, 1999 and December 31, 1998 3
Condensed Consolidated Statements Of
Operations - Three Months Ended
March 31, 1999 and 1998 4
Condensed Consolidated Statements
of Cash Flows - Three Months Ended
March 31, 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 1-4. Inapplicable 15
ITEM 5. Other Information 15
ITEM 6. Exhibits and Reports
on Form 8-K 15
Page 2 of 16
<PAGE> 3
ROBERDS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
1999 1998
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 3,003 $ 932
Receivables:
Customers 859 921
Vendors and other 1,998 2,390
Merchandise inventories 43,539 43,937
Refundable income taxes 212 2,360
Prepaid expenses and other 1,899 1,983
--------- ---------
Total current assets 51,510 52,523
Property and equipment, net 90,283 92,085
Certificates of deposit, restricted 2,336 2,331
Other assets 2,017 1,269
========= =========
$ 146,146 $ 148,208
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 11,652 $ 14,130
Accrued expenses 8,864 11,510
Customer deposits 10,698 11,573
Litigation 1,271 1,271
Deferred warranty revenue-current 2,264 2,580
Current maturities of long-term debt 3,002 2,945
--------- ---------
Total current liabilities 37,751 44,009
Long-term debt including capital leases 74,782 70,065
Deferred rent 1,852 1,831
Deferred warranty revenue 2,219 2,631
SHAREHOLDERS' EQUITY:
Common stock 616 611
Additional paid-in capital 32,407 32,332
Deficit (3,481) (3,271)
--------- ---------
Total shareholders' equity 29,542 29,672
--------- ---------
$ 146,146 $ 148,208
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
Page 3 of 16
<PAGE> 4
ROBERDS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
1999 1998
<S> <C> <C>
NET SALES AND SERVICE REVENUES $ 72,433 $ 78,512
COST OF SALES 46,838 53,831
-------- --------
Gross profit 25,595 24,681
SELLING, DELIVERY AND ADMINISTRATIVE EXPENSES 26,684 27,688
INTEREST EXPENSE, NET 1,689 1,685
FINANCE PARTICIPATION INCOME (677) (800)
OTHER INCOME, NET (1,891) (860)
-------- --------
LOSS BEFORE TAX BENEFIT (210) (3,032)
INCOME TAX BENEFIT (1,060)
-------- --------
NET LOSS ($ 210) ($ 1,972)
======== ========
BASIC AND DILUTED NET LOSS PER COMMON SHARE ($ 0.03) ($ 0.33)
======== ========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING-
BASIC AND DILUTED 6,142 6,031
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
Page 4 of 16
<PAGE> 5
ROBERDS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS MARCH 31
1999 1998
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($ 210) ($ 1,972)
Adjustments to reconcile net loss to net
cash (used in) provided by operating activities:
Depreciation and amortization 2,098 2,208
LIFO reserve 83 187
Changes in assets and liabilities, net (3,702) 673
-------- --------
Net cash (used in) provided by operating activities (1,731) 1,096
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (289) (390)
Proceeds from sales of fixed assets 23 14
Other (526) (451)
-------- --------
Net cash (used in) investing activities (792) (827)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt (18,216) (3,463)
Proceeds from long-term debt 22,990 3,000
Net proceeds from issuance of common shares 80 89
Debt issuance costs (260) (31)
-------- --------
Net cash provided by (used in) financing activities 4,594 (405)
-------- --------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 2,071 (136)
CASH AND CASH EQUIVALENTS - Beginning of period 932 2,494
-------- --------
CASH AND CASH EQUIVALENTS - End of period $ 3,003 $ 2,358
======== ========
CASH PAID (REFUNDED)FOR:
Interest 1,853 $ 1,680
======== ========
Income taxes $ (1,976) $ (119)
======== ========
</TABLE>
See notes to the condensed consolidated financial statements
Page 5 of 16
<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 March 31, 1999, the condensed consolidated statements of
operations, and the condensed consolidated statements of cash flows for the
three months ended March 31, 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
three months ended March 31, 1999 may not be indicative of the results for the
year ending December 31, 1999.
B. DEBT
MARCH 31 DECEMBER 31
1999 1998
Mortgage notes payable $43,574 $44,138
Revolving line of credit 22,990 17,500
Capital lease obligations 11,220 11,372
------- -------
77,784 73,010
Less current maturities 3,002 2,945
------- -------
$74,782 $70,065
======= =======
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 March 31, 1999, $24,298 was
available under the line, of which $22,990 was outstanding. The line of credit
bears interest at either the bank's base rate (7.75% at March 31, 1999) or LIBOR
plus 2.25% (7.22% at March 31, 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.
Page 6 of 16
<PAGE> 7
C. NET SALES AND SERVICE REVENUE
Net sales and service revenue includes the following products:
THREE MONTHS ENDED
MARCH 31
1999 1998
Furniture $30,557 $30,932
Bedding 9,349 10,401
Appliances 14,862 17,862
Electronics 13,000 14,055
Other 4,665 5,262
======= =======
$72,433 $78,512
======= =======
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
MARCH 31
EARNINGS
(LOSS)
BEFORE
NET SALES INCOME TAXES
1999
- ----
Ohio $ 33,378 $ 1,194
Georgia 23,385 (157)
Florida 15,670 (1,247)
-------- --------
$ 72,433 ($ 210)
======== ========
1998
- ----
Ohio $ 38,736 $ 57
Georgia 23,468 (1,432)
Florida 16,308 (1,657)
-------- --------
$ 78,512 ($ 3,032)
======== ========
Included in the operating results of the Company's segments are certain
corporate and non-segments expenses that have been allocated to the segments.
For the three months ended March 31, 1999, segment earnings (loss) before income
taxes include $1,102 of life insurance proceeds. The proceeds were allocated to
each segment utilizing the same methodology that is utilized to allocate
corporate and non-segment expenses.
Page 7 of 16
<PAGE> 8
E. INCOME TAXES
Income tax benefit for the three months ended March 31, 1998 consists of the
following:
Currently refundable:
Federal $(987)
State and local (15)
-------
(1,002)
Deferred (58)
-------
($1,060)
=======
A tax benefit was not recognized on the loss for the three months ended March
31, 1999 since 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 16
<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 three months of 1999 resulted in a loss before tax benefit of $(210)
as compared to a loss before tax benefit of $(3,032) for the first three months
of 1998. Sales for the three months ended March 1999 declined to $72,433 from
$78,512 for the three months ended March 1998, a 7.7 percent decrease. All
stores were comparable in 1999. Sales in the first quarter of 1999 were
adversely affected in the Ohio market area by severe weather in January 1999.
The percentage decreases in total and comparable sales by market area for the
first three months of 1999 were as follows:
Ohio (14)%
Georgia (1)
Florida (4)
Sales by major product category as a percentage of total sales were as follows:
THREE MONTHS ENDED
MARCH 31
1999 1998
Furniture 42% 40%
Bedding 13 13
Appliances 21 23
Electronics 18 18
Other 6 6
=== ===
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
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 March 1999, gross profit was $25,595, or 35.3 percent
of sales, as compared to $24,681, or 31.4 percent of sales, for the three months
ended March 1998. Gross margin percentages by category were as follows:
THREE MONTHS ENDED
MARCH 31
1999 1998
Furniture 40% 34%
Bedding 47 44
Appliances 22 20
Electronics 20 17
The increase in gross profit margin percentage of 3.9 percent for the three
months ended March 1999, as compared to 1998 reflects many of the sales floor
controls and disciplines that were installed during the first quarter of 1999
and a focus on higher margin products. The overall gross margin percentage for
the three months ended March 1998, and the furniture category gross margin
percentage in particular, was adversely affected by the liquidation at reduced
selling prices of certain aged inventories and inventories from certain vendors
that were being de-emphasized or discontinued. This liquidation was completed in
the
Page 9 of 16
<PAGE> 10
fourth quarter of 1998. The Company expects that the increase in gross margin as
a percentage of sales will continue throughout 1999.
For the three months ended March 1999, selling, delivery, and administrative
expenses, which include occupancy costs, were $26,684, or 36.8 percent of sales,
as compared to $27,688, or 35.3 percent of sales, for the comparable period in
1998. The increase in expenses as a percentage of sales for the first three
months of 1999, as compared to 1998, resulted from (a) increased advertising and
promotion expenses, (b) increased commissions to sales associates for sales of
higher margin products, (c) increased warehouse and store management salaries
required to institute various warehouse and store based initiatives, (d) the
effect of fixed costs in light of the Company's decline in comparable store
sales. Selling, delivery and administrative expenses for the first three months
of 1999 declined in total, as compared to 1998, as a result of a 75% rate
reduction for the first half of 1999 to all participants in the State of Ohio
workers' compensation fund, a reduction in worker's compensation expense as a
result of a change to insured programs in Georgia and Florida, and the effect of
an overall expense reduction and containment program.
Interest expense, net of interest income, remained relatively steady for the
three months ended March 1999 compared to the comparable period in 1998. No
interest expense was capitalized in the first three months of 1999 or 1998.
Finance participation income, which consists of income from participation in the
Company's private label credit card program, was $677, or 0.9 percent of sales,
for the three months ended March 1999, as compared to $800, or 1.0 percent of
sales, for the comparable period in 1998. Finance participation decreased in
1999 as compared to 1998 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. Such shifts may occur again in the
future, thereby affecting the Company's finance participation income.
Other income increased to $1,891 for the three months ended March 1999, compared
to $860 for the comparable period in 1998. Other income in the first three
months of 1999 included $1,102 of life insurance proceeds received as a result
of the death of the Company's chairman. The remainder of other income consists
of cash discounts and rental income from tenants that remained constant as a
percentage of sales for the three months ended March 1999, compared to 1998.
Loss before income taxes was ($210) in the first three months of 1999, compared
to a loss of ($3,032) in 1998. No income tax benefit was provided for 1999,
compared to $1,060, or 35% of the loss before taxes, in 1998. A tax benefit was
not recognized on the loss for the three months of 1999 since 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.
LIQUIDITY AND CAPITAL RESOURCES
Cash increased to $3,003 at March 31, 1999, compared to $932 at December 31,
1998. The Company utilized $1,731 of cash for operating activities during the
first three months of 1999. Cash of $2,478 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, $2,330 was utilized to reduce accrued liabilities, reflecting the
payment of previously disputed workers compensation premiums to the Ohio Bureau
of Workers compensation and a seasonal reduction in accrued sales tax. Cash flow
from operating activities benefited by the receipt of $2,148 of refundable
income taxes in the first quarter of 1999. Cash utilized in operating activities
in the first three months of 1999 was financed through the Company's revolving
line of credit. Based on the Company's operating plan, the Company may utilize
cash for operating activities in the second quarter of 1999; however, the
Company expects to generate positive cash flow from operating activities for the
remaining portion of 1999.
During the first three months of 1999, the Company's capital expenditures
totaled $289. These expenditures primarily represented normal replacement and
upgrade projects. The Company has outstanding commitments to acquire delivery
vehicles and warehouse equipment totaling approximately $3,400. A portion of
these vehicles was received during the first quarter of 1999 with the balance to
be received in the second quarter of 1999. These vehicles and equipment will be
financed through operating leases. Additionally, the Company has a commitment to
acquire approximately $1,700 of computer hardware and software that will be
financed under a capital lease. The computer hardware will be received in the
second quarter of 1999. The Company
Page 10 of 16
<PAGE> 11
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 March 31, 1999, $24,298 was
available under the line, of which $22,990 was outstanding. The line of credit
bears interest at either the bank's base rate (7.75% at March 31, 1999) or LIBOR
plus 2.25% (7.22% at March 31, 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. The
Company has no assurance that such approvals, if necessary, will be granted. If
such approvals are not obtained, 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 for the second quarter 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 bring 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 in the second and third quarters of 1999.
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 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
Page 11 of 16
<PAGE> 12
processing system will be insignificant. The costs to upgrade the software and
hardware for its primary management information system will be approximately
$1,700, which will be financed through a capital lease. The majority of the
expenditures will be for hardware upgrades to accommodate new software. No
significant expenditures have occurred to date. 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 $400. 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 deal 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 are
compliant.
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.
Page 12 of 16
<PAGE> 13
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.
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.
Page 13 of 16
<PAGE> 14
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
Page 14 of 16
<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 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. The Company has
appealed the Nasdaq's determination, and has requested additional time to meet
the requirement. The appeal was heard in March 1999 but a decision has not yet
been issued. It is not possible to predict the outcome of the appeal. If Nasdaq
rules that the Company's shares do not qualify for listing on the National
Market tier, the Company will explore other alternatives so that it can remain
listed. However, it is possible that the Company's shares may become de-listed
from the Nasdaq National Market tier, and that they would trade on The Nasdaq
Small Cap Market, or that they would become de-listed altogether and that they
would trade on the OTC Bulletin Board or on what is generally known as the "pink
sheets." Such an outcome could adversely affect the price of the Company's
shares and investors' ability to readily trade shares.
The United Food and Commercial Workers, Local 1099 ("UFCW") has petitioned the
Company for the right to represent commissioned sales associates in the Ohio
region. The Company and the UFCW have agreed to hold a secret ballot election,
supervised by the National Labor Relations Board, on May 15, 1999, to determine
whether a majority of the commissioned sales associates wish to have the UFCW
represent them. If the outcome of the election is in favor of collective
bargaining, 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.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
There were no reports filed by the Company on Form 8-K during the quarter ended
March 31, 1999.
Page 15 of 16
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Roberds, Inc.
(Registrant)
Date April 30, 1999 /s/ Robert M. Wilson
--------------- ------------------------------
Robert M. Wilson
President
Chief Financial Officer
Date April 30, 1999 /s/ Michael A. Bruns
--------------- -------------------------------
Michael A. Bruns
Vice President
Controller
Chief Accounting Officer
Page 16 of 16
<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
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 3,003
<SECURITIES> 0
<RECEIVABLES> 2,857
<ALLOWANCES> 0
<INVENTORY> 43,539
<CURRENT-ASSETS> 51,510
<PP&E> 129,915
<DEPRECIATION> 39,632
<TOTAL-ASSETS> 146,146
<CURRENT-LIABILITIES> 37,751
<BONDS> 74,782
0
0
<COMMON> 616
<OTHER-SE> 28,926
<TOTAL-LIABILITY-AND-EQUITY> 146,146
<SALES> 72,433
<TOTAL-REVENUES> 72,433
<CGS> 46,838
<TOTAL-COSTS> 46,838
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,689
<INCOME-PRETAX> (210)
<INCOME-TAX> 0
<INCOME-CONTINUING> (210)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (210)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
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