SEC Filing - REX American Resources Corporation

FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (Mark One) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ending April 30, 1995 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from to -------- -------- Commission File Number 0-13283 REX Stores Corporation (Exact name of registrant as specified in its charter) Delaware No. 31-1095548 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 2875 Needmore Road, Dayton, Ohio 45414 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 513-276-3931 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, and (2) has been subject to such filing requirements for at least the past 90 days. Yes (X) No ( ) At the close of business on June 8, 1995, the registrant had 8,925,173 shares of Common Stock, par value $.01 per share, outstanding.

REX STORES CORPORATION AND SUBSIDIARIES INDEX Page PART I. FINANCIAL INFORMATION Item 1. Consolidated Financial Statements Consolidated Condensed Balance Sheets......... 3 Consolidated Statements of Income............. 5 Consolidated Statements of Shareholders' Equity...................................... 6 Consolidated Statements of Cash Flows......... 7 Notes to Consolidated Financial Statements.... 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.................................... 10 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K................ 13 2

PART I. FINANCIAL INFORMATION Item 1. Financial Statements REX STORES CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS A S S E T S April 30 January 31 April 30 1995 1995 1994 (In Thousands) ASSETS: Cash and cash equivalents $ 4,008 $ 12,663 $ 9,597 Short-term investments 1,555 1,555 630 Accounts receivable, net 495 1,077 82 Merchandise inventory 131,284 115,347 97,596 Prepaid expenses and other 1,722 1,470 1,597 Prepaid income taxes and future income tax benefits 2,860 2,860 2,563 ---------- --------- --------- Total current assets 141,924 134,972 112,065 NET LAND, BUILDINGS AND EQUIPMENT 50,931 50,025 25,687 FUTURE INCOME TAX BENEFIT 7,619 7,619 6,709 ---------- --------- --------- Total assets $ 200,474 $ 192,616 $ 144,461 ========== ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Notes payable $ 2,956 $ - $ - Current portion of long-term debt 1,687 1,680 607 Accounts payable, trade 42,931 33,295 39,299 Accrued income taxes 504 3,343 - Current portion, deferred income and gain on sale and leaseback 7,670 7,376 6,658 Accrued payroll and related 4,446 6,082 3,590 Other liabilities 4,758 4,499 4,278 --------- --------- --------- Total current liabilities 64,952 56,275 54,432 --------- --------- --------- 3

Liabilities and Shareholders' Equity (Continued) LONG-TERM LIABILITIES: Long-term debt 25,129 25,595 12,993 Deferred income 13,857 13,573 10,803 Deferred gain on sale and leaseback 7,678 7,779 9,442 --------- --------- --------- Total long-term liabilities 46,664 46,947 33,238 --------- --------- --------- SHAREHOLDERS' EQUITY: Common stock 95 94 80 Treasury stock (3,882) (1,618) (1,915) Paid-in capital 56,243 56,090 35,251 Retained earnings 36,402 34,828 23,375 --------- --------- --------- Total shareholders' equity 88,858 89,394 56,791 --------- --------- --------- Total liabilities and shareholders' equity $ 200,474 $ 192,616 $ 144,461 ========= ========= ========= [FN] The accompanying notes are an integral part of these unaudited consolidated statements. 4

REX STORES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME Three Months Ended April 30 1995 1994 (In Thousands, Except Per Share Amounts) NET SALES $ 87,427 $ 69,134 --------- --------- COSTS AND EXPENSES: Cost of merchandise sold 65,602 50,768 Selling, general and administrative expenses 18,642 16,254 --------- --------- Total costs and expenses 84,244 67,022 --------- --------- INCOME FROM OPERATIONS 3,183 2,112 INVESTMENT INCOME 109 101 INTEREST EXPENSE 691 322 --------- --------- Income before income taxes 2,601 1,891 PROVISION FOR INCOME TAXES 1,027 748 --------- --------- NET INCOME $ 1,574 $ 1,143 ========= ========= WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON EQUIVA- LENT SHARES OUTSTANDING 9,429 8,217 ========= ========= NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE $ .17 $ .14 ========= ========= [FN] The accompanying notes are an integral part of these unaudited consolidated statements. 5

REX STORES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY In Thousands Common Shares ------------------------------- Issued Treasury Paid-in Retained Shares Amount Shares Amount Capital Earnings Balance at April 30, 1994 8,039 $ 80 460 $1,915 $35,251 $23,375 Common stock issued 1,381 14 (88) (297) 20,839 - Net income - - - - - 11,453 ----- ------ --- ------ ------- ------- Balance at January 31, 1995 9,420 $ 94 372 $1,618 $56,090 $34,828 Common stock issued 37 1 - - 153 - Treasury stock acquired - - 162 2,264 - - Net income - - - - - 1,574 ----- ------ --- ------ ------- ------- Balance at April 30, 1995 9,457 $ 95 534 $3,882 $56,243 $36,402 ===== ====== === ====== ======= ======= [FN] The accompanying notes are an integral part of these unaudited consolidated statements. 6

REX STORES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Three Months Ended April 30 1995 1994 (In Thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 1,574 $ 1,143 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 502 331 Deferred income 579 437 Accounts receivable 582 592 Merchandise inventory (15,937) (22,634) Other current assets (254) (321) Accounts payable, trade 9,636 11,275 Other liabilities (4,216) (3,014) -------- -------- NET CASH USED IN OPERATING ACTIVITIES (7,534) (12,191) -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (1,508) (913) -------- -------- NET CASH USED IN INVESTING ACTIVITIES (1,508) (913) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Notes payable 2,956 - Payments of long-term debt (459) (137) Long term debt borrowings - 2,366 Common stock issued 154 54 Treasury stock acquired (2,264) - -------- -------- NET CASH PROVIDED BY FINANCING ACTIVITIES 387 2,283 -------- -------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (8,655) (10,821) CASH AND CASH EQUIVALENTS, beginning of period 12,663 20,418 -------- -------- CASH AND CASH EQUIVALENTS, end of period $ 4,008 $ 9,597 ======== ======== [FN] The accompanying notes are an integral part of these unaudited consolidated statements. 7

REX STORES CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS April 30, 1995 Note 1. Consolidated Financial Statements The consolidated financial statements included in this report have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission and include, in the opinion of management, all adjustments necessary to state fairly the information set forth therein. Any such adjustments were of a normal recurring nature. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these unaudited consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the year ended January 31, 1995. Note 2. Accounting Policies The interim consolidated financial statements have been prepared in accordance with the accounting policies described in the notes to the consolidated financial statements included in the Company's 1995 Annual Report on Form 10-K. While management believes that the procedures followed in the preparation of interim financial information are reasonable, the accuracy of some estimated amounts is dependent upon facts that will exist or calculations that will be accomplished at fiscal year end. Examples of such estimates include changes in the LIFO reserve (based upon the Company's best estimate of inflation to date) and management bonuses. Any adjustments pursuant to such estimates during the quarter were of a normal recurring nature. 8

Notes to Consolidated Financial Statements (Continued) Note 3. Equivalent Shares Outstanding The Company follows the treasury method of calculating common equivalent shares outstanding. The following summarizes options granted, exercised and cancelled or expired at April 30, 1995: Shares Under Stock Option Plans Outstanding at January 31, 1995 1,421,574 ($3.25 to $18.975 per share) Exercised ($3.25 to $13.00 per share) (37,432) --------- Outstanding at April 30, 1995 ($3.25 to $18.975 per share) 1,384,142 --------- 9

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. The Company is a leader in the consumer electronics/appliance retailing industry, operating predominantly in small to medium sized markets in the Midwest and Southeast. Results of Operations The following table sets forth, for the periods indicated, the relative percentages that certain income and expense items bear to net sales: Three Months Ended April 30 1995 1994 Net sales 100.0% 100.0% Cost of merchandise sold 75.0 73.4 ----- ----- Gross profit 25.0 26.6 Selling, general and administrative expense 21.3 23.5 ----- ----- Income from operations 3.7 3.1 Interest, net .7 .3 ----- ----- Income before income taxes 3.0 2.8 Provision for income taxes 1.2 1.1 ----- ----- Net income 1.8% 1.7% ===== ===== 10

Comparison of Three Months Ended April 30, 1995 and 1994 Net sales in the first quarter ended April 30, 1995 were $87.4 million compared to $69.1 million in the prior year's comparable period, representing an increase of $18.3 million or 26.5%. This increase is a result of 33 additional stores in the current quarter compared to the prior year's first quarter and an increase in comparable store merchandise sales of 1% for the quarter. The Company considers a store to be comparable after it has been open six fiscal quarters. As of April 30, 1995, the Company had 165 stores compared to 132 stores one year earlier. There were no stores opened or closed during the first quarter of fiscal 1996 or 1995. The Company anticipates opening 30 to 35 new stores in fiscal 1996. The Company evaluates the performance of its stores on a continuous basis and, based on an assessment of factors it deems relevant, will close any store which is not adequately contributing to company profitability. Gross profit of $21.8 million in the first quarter of fiscal 1996 (25.0% of net sales) was 18.8% higher than the $18.4 million gross profit (26.6% of net sales) recorded in the first quarter of fiscal 1995. The decline in gross profit margin percentage is primarily a result of increased competition in certain markets, the introduction of personal computer sales into 34 stores, which have a lower gross profit margin, and a decline in extended service contract revenues as a percentage of net sales, which generally have a higher gross profit margin. Selling, general and administrative expenses for the quarter ended April 30, 1995 were $18.6 million (21.3% of net sales), a 14.7% increase over the $16.3 million (23.5% of net sales) for the quarter ended April 30, 1994. The increase in expenses was primarily attributable to higher payroll costs related to the increased number of stores and increased sales, higher advertising costs and general costs associated with more store locations. The reduction of selling, general and administrative expenses from 23.5% in the first quarter of fiscal 1995 to 21.3% in the first quarter of fiscal 1996 was primarily a result of more efficient advertising for existing stores (expense as a percent of sales) and the increase in the number of owned stores compared to leased stores. Income from operations was $3.2 million (3.7% of net sales) in the first quarter of fiscal 1996, a 50.7% increase over $2.1 million (3.1% of net sales) for the first quarter of fiscal 1995. This improvement was primarily a result of increased sales volume from new stores and lower advertising and occupancy costs relative to sales for the first quarter of fiscal 1996. 11

Interest expense increased to $691,000 in the first quarter of fiscal 1996 from $322,000 in the first quarter of fiscal 1995. This increase is primarily a result of additional mortgage debt of $13.2 million since April 30, 1994 associated with more Company owned store locations. The effective tax rate was approximately 39.5% in the first quarter of fiscal 1996 and 1995. As a result of the foregoing, net income for the first quarter of fiscal 1996 was $1.6 million, a 37.7% increase over $1.1 million for the first quarter of fiscal 1995. Liquidity and Capital Resources Net cash used in operating activities was $7.5 million for the first quarter of fiscal 1996. Operating cash flow was provided by net income of $1.6 million adjusted for non-cash charges of $1.1 million. The primary use of cash was an increase in inventory of $15.9 million due to opportunistic buying and the addition of seasonal air conditioning inventory. This increase was partially offset by increased accounts payable of $9.6 million. Changes in other working capital items also served to decrease cash by approximately $3.9 million. At April 30, 1995, working capital was $77.0 million compared to $78.7 million at January 31, 1995. The ratio of current assets to current liabilities was 2.2 to 1 at April 30, 1995, and 2.4 to 1 at January 31, 1995. The Company had outstanding borrowings of $3.0 million on its revolving line of credit at April 30, 1995 at an interest rate of 9.0%. At April 30, 1995, the Company had approximately $52.0 million borrowing availability on the revolving line of credit after reduction for outstanding letters of credit. During fiscal 1996, the Company plans to open 30 to 35 REX stores with anticipated capital expenditures of approximately $16 to $20 million. Capital expenditures for the first quarter of fiscal 1996 were $1.5 million and were primarily in-process store construction costs. The Company believes it will be able to obtain long-term mortgage financing on a site-by-site basis for Company built or Company purchased store locations as stores are completed. 12

PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits. The following exhibits are filed with this report: 27 Financial Data Schedule...................... 15 (b) Reports on Form 8-K. No reports on Form 8-K were filed during the quarter ended April 30, 1995. 13

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. REX STORES CORPORATION Registrant June 8, 1995 Stuart A. Rose Stuart A. Rose Chairman of the Board (Chief Executive Officer) June 8, 1995 Douglas L. Bruggeman Douglas L. Bruggeman Vice President, Finance and Treasurer (Principal Financial and Chief Accounting Officer) 14

5 0000744187 REX STORES CORPORATION 1,000 U.S. DOLLARS 3-MOS JAN-31-1996 FEB-1-1995 APR-30-1995 1 4,008 1,555 1,283 788 131,284 141,924 58,143 7,212 200,474 64,952 25,129 95 0 0 88,763 200,474 87,427 87,427 65,602 65,602 0 0 691 2,601 1,027 1,574 0 0 0 1,574 .17 .17