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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JANUARY 31, 2002 COMMISSION FILE NO. 0-13283
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REX STORES CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 31-1095548
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2875 Needmore Road, Dayton, Ohio 45414
(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code (937) 276-3931
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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Common Stock, $.01 par value New York Stock Exchange
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
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
At the close of business on April 17, 2002 the aggregate market value
of the registrant's outstanding Common Stock held by non-affiliates of the
registrant (for purposes of this calculation, 2,253,693 shares beneficially
owned by directors and executive officers of the registrant were treated as
being held by affiliates of the registrant), was $154,928,810.
There were 12,453,088 shares of the registrant's Common Stock
outstanding as of April 17, 2002.
Documents Incorporated by Reference
Portions of REX Stores Corporation's definitive Proxy Statement for its
Annual Meeting of Shareholders on June 3, 2002 are incorporated by reference
into Part III of this Form 10-K.
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PART I
Item 1. Business
Overview
We are a leading specialty retailer in the consumer
electronics/appliance industry, serving over 200 small to medium-sized towns and
communities. Since 1980, when our first four stores were acquired, we have
expanded into a national chain operating 262 stores in 37 states under the "REX"
trade name. Our stores average approximately 11,200 square feet and offer a
broad selection of brand name products within selected major product categories,
including big screen and standard-sized televisions, video and audio equipment,
camcorders and major household appliances.
Our business strategy emphasizes depth of selection within key product
categories. Brand name products are offered at everyday low prices combined with
frequent special sales and promotions. We concentrate our stores in small and
medium sized markets where we believe that by introducing a high volume, low
price merchandising concept, we can become a dominant retailer. We support our
merchandising strategy with extensive newspaper advertising in each of our local
markets and maintain a knowledgeable sales force which focuses on customer
service. We believe our low price policy, attention to customer satisfaction and
deep product selection provide customers with superior value.
Our strategy is to continue to open stores in small to medium sized
markets. We will focus on markets with a newspaper circulation which can
efficiently and cost-effectively utilize our print advertising materials and
where we believe we can become a dominant retailer.
REX was incorporated in Delaware in 1984 as a holding company to
succeed to the entire ownership of three affiliated corporations, Rex Radio and
Television, Inc., Stereo Town, Inc. and Kelly & Cohen Appliances, Inc., which
were formed in 1980, 1981 and 1983, respectively. Our principal offices are
located at 2875 Needmore Road, Dayton, Ohio 45414. Our telephone number is (937)
276-3931.
Fiscal Year
All references in this report to a particular fiscal year are to REX's
fiscal year ended January 31. For example, "fiscal 2001" means the period
February 1, 2001 to January 31, 2002. We refer to our fiscal year by reference
to the year immediately preceding the January 31 fiscal year end date.
Business Strategy
Our objective is to be the leading consumer electronics/appliance
retailer in each of our markets. The key elements of our business strategy
include:
Focusing on Small Markets
We traditionally have concentrated our stores in markets with
populations of 20,000 to 300,000. We are currently focusing most of our new
store openings in markets with populations under 85,000, which generally are
underserved by our competitors. We believe our low-overhead store format and our
ability to operate in free-standing as well as strip shopping centers and
regional mall locations makes us well suited to serve these small markets.
2
Maintaining Guaranteed Lowest Prices
We actively monitor prices at competing stores and adjust our prices as
necessary to meet or beat the competition. We guarantee the lowest price on our
products through a policy of refunding 125% of the difference between our price
and a competitor's price on the same item.
Offering a Broad Selection of Brand Name Products
We offer a broad selection of brand name products within key product
categories. We carry most major brands of consumer electronics and appliances.
We offer merchandise in each of our product categories at a range of price
points and generally maintain sufficient product stock for immediate delivery to
customers.
Capitalizing on Our Opportunistic Buying
We frequently purchase large quantities of products directly from
manufacturers on an opportunistic basis at favorable prices. We believe this
buying strategy makes us a unique and attractive customer for manufacturers
seeking to sell cancelled orders and excess inventory and enables us to develop
strong relationships and extended trade credit support with vendors.
Striving to be the Low Cost Operator in Our Markets
Our current prototype store is approximately 12,000 square feet and
provides us with cost and space efficiencies. Our market selection criteria and
operating philosophy allow us to minimize both occupancy and labor costs.
Generally, all of our store employees, including our store managers, sell
products, unload trucks, stock merchandise and process sales, which helps
minimize employee count and overhead within each store. Most stores are staffed
with between three and six employees.
Leveraging Our Strong Operational Controls
Our information systems and point-of-sale computer systems, which are
installed in every store, allow management to monitor our merchandising
programs, sales, employee productivity and in-store inventory levels on a daily
basis. Our operational controls provide us with cost efficiencies which reduce
overhead while allowing us to maintain high levels of in-stock merchandise. Our
three distribution centers, strategically located in Dayton, Ohio, Pensacola,
Florida and Cheyenne, Wyoming, reduce inventory requirements at individual
stores and facilitate centralized inventory and accounting controls.
Store Openings
Site Selection. We select locations for future stores based on our
evaluation of individual site economics and market conditions. When deciding
whether to enter a new market or open another store in an existing market, we
evaluate a number of criteria, including:
o sales volume potential;
o competition within the market area, including size, strength and
merchandising philosophy of former, existing and potential
competitors;
o cost of advertising;
o newspaper circulation; and
o size and growth pattern of the population.
In choosing specific sites, we apply standardized site selection
criteria taking into account numerous factors, including:
3
o local demographics;
o real estate occupancy expense based upon ownership and/or leasing;
o traffic patterns; and
o overall retail activity.
Stores typically are located on high traffic arteries, adjacent to or
in major shopping areas, with adequate parking to support the stores' sales
volume.
We either lease or purchase new store sites depending upon
opportunities available to us and relative costs. Of the ten new stores opened
in fiscal 2001, six were purchased sites and four were leased sites.
Store Economics. For leased stores, we anticipate per store capital
expenditures of $100,000 to $250,000. This amount may increase to the extent we
are responsible for the remodeling or renovation of the new leased site. We
anticipate expenditures of approximately $950,000 to $1,400,000 when we purchase
real estate, which include the cost of the land purchased, building construction
and fixtures. The purchase amount varies depending upon the size and location of
the store. The purchase amount may be higher if we build or purchase a location
larger than our needs and attempt to lease a portion of the store. Historically,
we have normally obtained long-term mortgage financing of approximately 75% of
the land and building cost of opening owned stores. Mortgage financing is
generally obtained after a store is opened, either on a site by site or multiple
store basis. The extent to which we seek mortgage financing for owned stores is
dependent upon mortgage rates, terms, availability and needs.
The gross inventory requirements for new stores are estimated at
$250,000 to $500,000 per store depending upon the season and store size.
Store Operations
Stores. We locate our stores in the general vicinity of major retail
shopping districts and design our stores to generate their own traffic.
Currently, 183 stores are located in free-standing buildings, with the balance
situated in strip shopping centers and regional malls. Stores located in malls
have exterior access and signage rights.
Our stores are designed with minimal interior fixtures to provide an
open feeling and a view of all product categories upon entering the store. The
stores are generally equipped with neon signage above each product category to
further direct the customer to particular products. We believe the interior
layout of our stores provides an inviting and pleasant shopping environment for
the customer.
Our existing stores average approximately 11,200 square feet, including
approximately 7,700 square feet of selling space and approximately 3,500 square
feet of storage. New stores are planned to be approximately 12,000 square feet.
Stores are open seven days and six nights per week, except for certain holidays.
Hours of operation are 10:00 a.m. to 9:00 p.m. Monday through Saturday and
12:00 p.m. to 6:00 p.m., or 1:00 p.m. to 5:00 p.m. in some states, on Sunday.
Our operations are divided into regional districts, containing from two
to 11 stores whose managers report to a district manager. Our 40 district
managers report to one of four regional vice presidents. Each store is staffed
with a full-time manager and one or two assistant managers, commissioned sales
personnel and, in higher-traffic stores, seasonal support personnel. Store
managers are paid on a commission basis and have the opportunity to earn bonuses
based upon their store's sales and gross margins. Sales personnel work on a
commission basis.
4
We evaluate the performance of our stores on a continuous basis and,
based on an assessment of overall profitability, future cash flows and other
factors we deem relevant, will close any store which is not adequately
contributing to our profitability. We closed 10, 6 and 4 stores during fiscal
2001, 2000 and 1999, respectively. Subsequent to January 31, 2002, we closed six
additional stores. In fiscal 2001, we opened 10 new stores: three stores in
Pennsylvania and one store each in Indiana, Iowa, Michigan, Mississippi, New
York, Oklahoma and Wisconsin.
Store Locations. The following table shows the states in which we
operated stores and the number of stores in each state as of January 31, 2002:
State Number of Stores State Number of Stores
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Alabama 13 Nebraska 2
Arkansas 1 New Mexico 1
Colorado 3 New York 23
Florida 26 North Carolina 8
Georgia 8 North Dakota 3
Idaho 5 Ohio 23
Illinois 10 Oklahoma 5
Indiana 4 Pennsylvania 19
Iowa 10 South Carolina 10
Kansas 2 South Dakota 3
Kentucky 3 Tennessee 9
Louisiana 7 Texas 11
Maryland 2 Vermont 1
Massachusetts 1 Virginia 2
Michigan 8 Washington 3
Minnesota 1 West Virginia 6
Mississippi 14 Wisconsin 5
Missouri 3 Wyoming 2
Montana 5
Personnel. We train our employees to explain and demonstrate to
customers the use and operation of our merchandise and to develop good sales
practices. Our in-house training program for new employees combines on-the-job
training with use of a detailed company-developed manual entitled "The REX Way."
Sales personnel attend in-house training sessions conducted by experienced
salespeople or manufacturers' representatives and receive sales, product and
other information in meetings with managers. Management and sales personnel are
compensated on a commission basis.
We also have a manager-in-training program that consists of on-the-job
training of the assistant manager at the store. Our policy is to staff store
management positions with personnel promoted from within REX and to staff new
store management positions with existing managers or assistant managers.
5
Services. Virtually all of the products we sell carry manufacturers'
warranties. Except for our least expensive items, we offer extended service
contracts to customers, usually for an additional charge, which typically
provide one to five years of extended warranty coverage. We also provide a free
two-year warranty on products purchased for over $99 where permitted. We offer
maintenance and repair services for most of the products we sell. These services
are generally subcontracted to independent repair firms.
Our return policy provides that any merchandise may be returned for
exchange or refund within seven days of purchase if accompanied by original
packaging material and verification of sale.
We accept MasterCard, Visa and Discover. We estimate that, during
fiscal 2001, approximately 37.2% of our total sales were made on these credit
cards, and approximately 14.6% were made on revolving or installment credit
contracts arranged through banks or independent finance companies which bear the
credit risk of these contracts. We work with local consumer finance companies in
each of our markets in implementing these credit arrangements and are able to
offer competitive credit packages, generally including interest-free financing
options. During fiscal 2001, we began to offer a REX private label credit card
in approximately 158 stores using a third party finance company.
Merchandising
Products. We offer a broad selection of brand name consumer electronics
and home appliance products at a range of price points. We emphasize depth of
product selection within selected key product categories. We sell approximately
1,000 products produced by approximately 50 manufacturers. Our product
categories include:
Televisions Video Audio Appliances Other
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TVs VCRs Stereo Systems Air Conditioners Extended Service
Big Screen Camcorders Receivers Microwave Ovens Contracts
TVs Digital Satellite Compact Disc Washers Ready to Assemble
TV/VCR Systems Players Dryers Furniture
Combos DVD Players Tape Decks Ranges Recordable Tapes
Speakers Dishwashers Telephones
Car Stereos Refrigerators Audio/Video
Portable Radios Freezers Accessories
Turntables Vacuum Cleaners Radar Detectors
Dehumidifiers CB Radios
Garbage Disposals
Among the leading brands sold by us during fiscal 2001, in alphabetical
order, were General Electric, Hitachi, Hotpoint, JVC, Panasonic, Phillips,
Pioneer, RCA, Sharp, Sony, Toshiba and Whirlpool.
All our stores carry a broad range of televisions, video and audio
products, microwave ovens and air conditioners. In addition, 258 stores carry
major appliances. We do not carry computers, computer software or pre-recorded
music.
6
The following table shows the approximate percent of net sales for each
major product group for the last three fiscal years.
Fiscal Year
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Product Category 2001 2000 1999
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Televisions................................................... 45% 45% 38%
Appliances.................................................... 19 18 22
Audio......................................................... 16 16 17
Video......................................................... 12 13 16
Other......................................................... 8 8 7
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100% 100% 100%
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Pricing. Our policy is to offer our products at guaranteed lowest
prices combined with frequent special sales and promotions. Our retail prices
are established by our merchandising department, but each district manager is
responsible for monitoring the prices offered by competitors and has authority
to adjust prices to meet local market conditions. Our commitment to offer the
lowest prices is supported by our guarantee to refund 125% of the difference in
price if, within 30 days of purchase, a customer can locate the same item
offered by a local competitor at a lower price.
Advertising. We use a "price and item" approach in our advertising,
stressing the offering of nationally recognized brands at significant savings.
The emphasis of our advertising is our Guaranteed Lowest Price. Our guarantee
states:
"Our prices are guaranteed in writing. If you find any other local
store stocking and offering to sell for less the identical item in a
factory sealed box within 30 days after your REX purchase, we'll refund
the difference plus an additional 25% of the difference."
Advertisements are concentrated principally in newspapers and
preprinted newspaper inserts, which are produced for us by an outside
advertising agency. We supplement our newspaper advertising with television and
radio advertisements in certain markets. Advertisements are also complemented by
in-store signage highlighting special values, including "Value Every Day," "Best
Value," and "Top of the Line." Our advertising strategy includes preferred
customer private mailers, special events such as "Midnight Madness Sales" and
coupon sales to provide shopping excitement and generate traffic.
Purchasing. Our merchandise purchasing and opportunistic buying are
performed predominantly by three members of senior management. Each individual
has responsibility for a specific product category, and two share appliance
buying responsibility. By purchasing merchandise in large volume, we are able to
obtain quality products at competitive prices and advertising subsidies from
vendors to promote the sale of their products. For fiscal 2001, nine vendors
accounted for approximately 70% of our purchases. We typically do not maintain
long-term purchase contracts with vendors and operate principally on an
order-by-order basis.
e-Commerce
In April 1999, we began selling selected televisions, audio and video
products and small appliances on our Web site at www.rexstores.com. We are
currently in a two-year contract with Zengine, Inc. to host our Web site, which
expires on May 31, 2003. We are an Amazom.com Auctions Charter Merchant and also
offer selected products on the eBay auction Web site.
7
Distribution
Our stores are supplied by three regional distribution centers. The
distribution centers consist of:
o a 315,000 square foot owned facility in Dayton, Ohio;
o a 180,000 square foot owned facility in Pensacola, Florida, of
which we lease 30,000 square feet to an outside company; and
o a 145,000 square foot owned facility in Cheyenne, Wyoming.
We also lease a 67,000 square foot auxiliary warehouse in Pensacola,
Florida. In addition, we lease overflow warehouse space as needed to accommodate
seasonal inventory requirements and opportunistic purchases.
Inventory Management
The regional distribution centers reduce inventory requirements at
individual stores, while preserving the benefits of volume purchasing and
facilitating centralized inventory and accounting controls. Virtually all of our
merchandise is distributed through our distribution centers, with the exception
of major appliances which are generally shipped directly by the vendor to the
retail location. All deliveries to stores are made by independent contract
carriers.
Management Information Systems
We have developed a computerized management information system which
operates an internally developed software package. Our computer system provides
management with the information necessary to manage inventory by stock keeping
unit (SKU), monitor sales and store activity on a daily basis, capture marketing
and customer information, track productivity by salesperson and control our
accounting operations.
Our mainframe computer is an IBM A/S 400 model 720. The host computer
is integrated with our point-of-sale system which serves as the collection
mechanism for all sales activity. The combined system provides for next-day
review of inventory levels, sales by store and by SKU and commissions earned,
assists in cash management and enables management to track merchandise from
receipt at the distribution center until time of sale.
Competition
Our business is characterized by substantial competition. Our
competitors include national and regional large format merchandisers and
superstores such as Best Buy Co., Inc. and Circuit City Stores, Inc., other
specialty electronics retailers including RadioShack Corporation, department and
discount stores such as Sears, Roebuck and Co. and Wal-Mart Stores, Inc.,
furniture stores, warehouse clubs, home improvement retailers and Internet and
store-based retailers who sell competitive products online. We also compete with
small chains and specialty single-store operators in some markets, as well as
Sears' dealer-operated units. Some of our competitors have greater financial and
other resources than us, which may increase their ability to purchase inventory
at a lower cost, better withstand economic downturns or engage in aggressive
price competition. Competition within the consumer electronics/appliance
retailing industry is based upon price, breadth of product selection, product
quality and customer service. We expect competition within the industry to
increase.
8
Facilities
We own 153 of our stores. The remaining 109 stores operate on leased
premises, with the unexpired terms of the leases ranging from less than one year
to 23 years, inclusive of options to renew. For fiscal 2001, the total net rent
expense for our leased facilities was approximately $8,162,000.
To date, we have not experienced difficulty in securing leases or
purchasing sites for suitable store locations. We continue to remodel and
upgrade existing stores as appropriate. In addition, to minimize construction
costs, we have developed prototype formats for new store construction.
Employees
At January 31, 2002, we had 155 hourly and salaried employees and 975
commission-based sales employees. We also employ additional personnel during
peak selling seasons. None of our employees are represented by a labor union. We
consider our relationship with our employees to be good.
Service Marks
We have registered our rights in our service mark "REX" with the United
States Patent and Trademark Office. We are not aware of any adverse claims
concerning our service mark.
Item 2. Properties
The information required by this Item 2 is set forth in Item 1 of this
report under "Store Operations--Stores," "Distribution" and "Facilities" and is
incorporated herein by reference.
Item 3. Legal Proceedings
We are involved in various legal proceedings incidental to the conduct
of our business. We believe that these proceedings will not have a material
adverse effect on our financial condition or operations.
Item 4. Submission of Matters to a Vote of Security Holders
None.
9
Executive Officers of the Company
Set forth below is certain information about each of our executive
officers.
Name Age Position
---- --- --------
Stuart Rose ....................................... 47 Chairman of the Board and Chief Executive Officer*
Lawrence Tomchin .................................. 74 President and Chief Operating Officer*
Douglas Bruggeman ................................. 41 Vice President-Finance and Treasurer
Edward Kress ...................................... 52 Secretary*
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*Also serves as a director.
Stuart Rose has been our Chairman of the Board and Chief Executive
Officer since our incorporation in 1984 as a holding company to succeed to the
ownership of Rex Radio and Television, Inc., Kelly & Cohen Appliances, Inc. and
Stereo Town, Inc. Prior to 1984, Mr. Rose was Chairman of the Board and Chief
Executive Officer of Rex Radio and Television, Inc., which he founded in 1980 to
acquire the stock of a corporation which operated four retail stores.
Lawrence Tomchin has been our President and Chief Operating Officer
since 1990. From 1984 to 1990, he was our Executive Vice President and Chief
Operating Officer. Mr. Tomchin has been a director since 1984. Mr. Tomchin was
Vice President and General Manager of the corporation which was acquired by Rex
Radio and Television, Inc. in 1980 and served as Executive Vice President of Rex
Radio and Television, Inc. after the acquisition.
Douglas Bruggeman has been our Vice President - Finance and Treasurer
since 1989. From 1987 to 1989, Mr. Bruggeman was our Manager of Corporate
Accounting. Mr. Bruggeman was employed with the accounting firm of Ernst & Young
prior to joining us in 1986.
Edward Kress has been our Secretary since 1984 and a director since
1985. Mr. Kress has been a partner of the law firm of Chernesky, Heyman & Kress
P.L.L., our legal counsel, since 1988. From 1985 to 1988, Mr. Kress was a member
of the law firm of Smith & Schnacke. Mr. Kress has practiced law in Dayton, Ohio
since 1974.
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PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters
SHAREHOLDER INFORMATION
Common Share Information and Quarterly Share Prices
Our common stock is traded on the New York Stock Exchange under the symbol RSC.
Fiscal Quarter Ended High Low
--------------------------------- --------- -------
April 30, 2000 $12.33 $6.84
July 31, 2000 11.89 7.61
October 31, 2000 10.33 7.39
January 31, 2001 9.06 6.61
April 30, 2001 $ 9.18 $7.98
July 31, 2001 12.24 8.23
October 31, 2001 12.13 8.25
January 31, 2002 19.73 9.17
As of April 15, 2002, there were 194 holders of record of our common stock,
including shares held in nominee or street name by brokers. All share prices
reflect 3 for 2 stock splits paid August 2001 and February 2002.
Dividend Policy
Our revolving credit agreement places restrictions on the payment of dividends.
We did not pay dividends in the current or prior years.
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Item 6. Selected Financial Data
Five Year Financial Summary
January 31,
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(In Thousands, Except
Per Share Amounts) 2002 2001 2000 1999 1998
- ----------------------------- -------- -------- -------- -------- --------
Net sales $464,503 $475,419 $466,386 $418,340 $412,583
Net income $ 22,309 $ 18,736 $ 18,293 $ 11,195 $ 7,412
Basic net income per share $ 1.91 $ 1.32 $ 1.01 $ 0.67 $ 0.42
Diluted net income per share $ 1.65 $ 1.21 $ 0.91 $ 0.64 $ 0.40
Total assets $307,329 $310,885 $304,036 $268,282 $260,530
Long-term debt, net of
current maturities $ 77,203 $ 81,262 $ 46,200 $ 55,478 $ 52,661
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Quarterly Financial Data (Unaudited)
Quarters Ended
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(In Thousands Except Per Share Amounts)
April 30, July 31, October 31, January 31,
2001 2001 2001 2002
-------- -------- -------- --------
Net sales $104,789 $100,542 $107,335 $151,837
Cost of merchandise sold 75,514 70,967 76,220 107,409
Net income 3,105 3,870 4,438 10,897
Basic net income per share (a) $ 0.26 $ 0.34 $ 0.38 $ 0.92
Diluted net income per share (a) $ 0.24 $ 0.29 $ 0.33 $ 0.76
Quarters Ended
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(In Thousands Except Per Share Amounts)
April 30, July 31, October 31, January 31,
2000 2000 2000 2000
-------- -------- -------- --------
Net sales $107,757 $102,139 $105,736 $159,787
Cost of merchandise sold 78,449 72,822 76,611 117,145
Net income 3,246 3,980 2,861 8,649
Basic net income per share (b) $ 0.20 $ 0.27 $ 0.21 $ 0.69
Diluted net income per share (b) $ 0.19 $ 0.24 $ 0.20 $ 0.64
(a) The total of the quarterly net income per share amounts is less than the
annual net income per share amounts due to the combination of rounding
and the impact of higher stock price resulting in higher dilution from
stock options during the fourth quarter than the full year and 49% of the
net income occurring in the fourth quarter of fiscal 2001.
(b) The total of the quarterly net income per share amounts is more than the
annual net income per share amounts due to 46% of our net income
occurring in the fourth quarter of fiscal 2000. In addition, the fourth
quarter per share amounts reflect a disproportionate impact from the
2,653,000 shares repurchased, rather than the annual per share amounts
based upon the average time held in treasury.
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Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
We are a leading specialty retailer in the consumer
electronics/appliance industry. Since acquiring our first four stores in 1980,
we have expanded into a national chain operating 262 stores in 37 states under
the "REX" trade name. By offering a broad selection of brand name products at
guaranteed lowest prices, we believe we have become a leading consumer
electronics/appliance retailer in our markets.
Our comparable store sales declined 7.9% and 5.6% for fiscal 2001 and
2000, respectively, after an increase of 8.2% in fiscal 1999. We believe our
comparable store sales for fiscal 2001 were adversely affected due to the
economy and the increasing competitive environment. The decline in comparable
store sales for fiscal 2000 was largely caused by slower appliance sales due to
an unseasonably cool summer and an increasingly competitive environment. The
increase in comparable store sales for fiscal 1999 was primarily driven by large
screen television sales throughout the year and strong air conditioner sales in
the second quarter of fiscal 1999 due to warm weather conditions. We consider a
store to be comparable after it has been open six full fiscal quarters.
Comparable store sales comparisons do not include sales of extended service
contracts.
Extended Service Contracts
Our extended service contract revenues, net of sales commissions, are
deferred and amortized on a straight-line basis over the life of the contracts
after the expiration of applicable manufacturers' warranty periods. Terms of
coverage, including the manufacturers' warranty periods, are usually for periods
of 12 to 60 months. Extended service contract revenues represented 3.3% of net
sales for fiscal 2001, 3.1% of net sales for 2000 and 3.2% of net sales for
1999, respectively. Service contract costs are charged to operations as
incurred. Gross profit realized from extended service contract revenues was
$11.4 million, $10.9 million and $10.9 million in fiscal 2001, 2000 and 1999,
respectively.
Investment in Limited Partnerships
In fiscal 1998, we invested $3.2 million in two limited partnerships
which own four facilities producing synthetic fuel from coal fines. The
partnerships earn federal income tax credits under Section 29 of the Internal
Revenue Code based on the tonnage and content of solid synthetic fuel sold to
unrelated parties. Our share of the credits generated may be used to reduce our
federal income tax liability down to the alternative minimum tax (AMT) rate.
Under current law, credits under Section 29 are available for qualified fuels
sold before January 1, 2008. The tax credits begin to phase out if the reference
price of a barrel of oil exceeds certain levels adjusted annually for inflation.
The 2001 phase-out started at $49.16 per barrel.
We initially held a 30% interest in one partnership and an 18.75%
interest in the other. Effective February 1, 1999, we sold a portion of our
interest in one partnership, reducing our ownership percentage from 30% to 17%.
We expect to receive cash payments from the sale on a quarterly basis through
2007. These payments are contingent upon and equal to 75% of the federal income
tax credits attributable to the 13% interest sold and are subject to certain
annual limitations. The maximum amount of cash that can be received varies by
year. The maximum that could be received for calendar 2001 was approximately
$7.1 million. The maximum that can be received for calendar 2002 is
approximately $7.4 million. We received approximately $7.0 million and $6.5
million for fiscal 2001 and 2000, respectively.
Effective July 31, 2000, we sold an additional portion of our interest
in the one partnership, reducing our ownership percentage from 17% to 8%. We
expect to receive cash payments from the sale on a quarterly basis through 2007.
These payments are contingent upon and equal to the greater of 82.5% of the
federal income tax credits attributable to the 9% interest sold subject to
annual limitations or 74.25% of the federal income tax credits amounts
attributable to the interest sold with no annual limitations. The amount earned
and received for fiscal 2001 was approximately $5.3 million. The amount earned
and received for fiscal 2000 was approximately $4.2 million, including a down
payment of $1.6 million.
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Effective May 31, 2001, we sold our remaining 8% ownership in the one
partnership. We expect to receive cash payments from the sale on a quarterly
basis through 2007. These payments are contingent upon and equal to the greater
of 82.5% of the federal income tax credits attributable to the 8% interest sold
subject to annual limitations or 74.25% of the federal income tax credits
amounts attributable to the interest sold with no annual limitations. The amount
earned and received for fiscal 2001 was approximately $3.5 million, including a
down payment of $355,000.
We are a limited partner in the one remaining partnership which is
currently not operating. The limited partnerships have received favorable
private letter rulings from the IRS that the synthetic fuel produced by their
facilities and sold to unrelated parties qualify for the tax credits under
Section 29 of the Internal Revenue Code. The tax credits applied to reduce
taxable income are approximately $2.9 million, $9.9 million and $3.8 million in
fiscal 2001, 2000 and 1999, respectively.
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:
Fiscal Year Ended January 31,
---------------------------------------
2002 2001 2000
--------- --------- ---------
Net sales 100.0% 100.0% 100.0%
Cost of merchandise sold................ 71.1 72.6 72.3
--------- --------- ---------
Gross profit........................ 28.9 27.4 27.7
Selling, general and administrative
expenses.............................. 24.1 22.8 22.0
--------- --------- ---------
Income from operations.............. 4.8 4.6 5.7
Investment income....................... 0.1 0.2 0.1
Interest expense (1.8) (1.7) (1.1)
Gain on sale of real estate............. - - 0.2
Income from limited
partnerships.......................... 3.4 2.2 0.6
--------- --------- ---------
Income before provision for income
taxes and extraordinary item...... 6.5 5.3 5.5
Provision for income taxes.............. 1.6 1.3 1.4
--------- --------- ---------
Income before extraordinary item.... 4.9 4.0 4.1
Extraordinary loss from early
extinguishment of debt................ 0.1 - 0.2
--------- --------- ---------
Net Income 4.8% 4.0% 3.9%
========= ========= =========
Comparison of Fiscal Years Ended January 31, 2002 and 2001
Net sales. Net sales in fiscal 2001 were $464.5 million, a 2.3%
decrease from $475.4 million in fiscal 2000. This decrease was primarily due to
a decline in comparable store sales of 7.9% for fiscal 2001. Partially
offsetting this was the sales contribution from 10 new stores in fiscal 2001 and
the first full year of sales from the 30 stores opened in fiscal 2000. During
fiscal 2001, we opened 10 stores and closed 10 stores, while during fiscal 2000
we opened 30 stores and closed six. We had 262 stores open at January 31, 2002
and 2001.
All product categories contributed to the decline in comparable store
sales for fiscal 2001. The television category contributed 2.6%, the video
category contributed 2.3%, the audio category contributed 1.4%, the appliance
category contributed 1.2% and the other category contributed 0.4%. Within the
product categories our strongest products were larger screen televisions (35
inch and larger), DVD players and ready to assemble
15
furniture. The products with the largest decline for comparable store sales were
smaller screen televisions (32 inch and smaller) and VCR's.
Gross Profit. Gross profit was $134.4 million in fiscal 2001, or 28.9%
of net sales, versus $130.4 million for fiscal 2000, or 27.4% of net sales. The
increase in gross profit as a percentage of sales was primarily caused by a
shift in sales toward higher gross profit margin categories such as large screen
televisions, additional vendor allowances and less aggressive retail pricing in
the stores.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for fiscal 2001 were $112.2 million, or 24.1% of net
sales, a 3.2% increase from $108.7 million, or 22.8% of net sales, in fiscal
2000. The increase in expense was primarily caused by the increased store
expenses associated with the first full year of operations of the 30 new stores
opened in fiscal 2000. The increase in selling, general and administrative
expense as a percentage of sales was also impacted by the decline of 7.9% in
comparable store sales.
Income from Operations. Income from operations was $22.2 million, or
4.8% of net sales, for fiscal 2001, a 2.3% increase from $21.7 million, or 4.6%
of net sales for fiscal 2000. The increase was primarily caused by the increase
in gross profit margin for fiscal 2001.
Investment Income. Investment income decreased to $210,000 in fiscal
2001 from $933,000 in fiscal 2000. In fiscal 2000 we recorded a $640,000 gain on
the sale of stock warrants held in an outside company.
Interest Expense. Interest expense was approximately $8.2 million for
fiscal 2001 and $8.1 million for fiscal 2000. Interest expense on mortgage debt
had a net increase of approximately $2.7 million due to higher average
outstanding mortgage debt throughout the year partially offset by a reduction of
interest rates through debt refinancing. Average borrowings outstanding on
mortgage debt increased from $57.6 million in fiscal 2000 to $88.1 million in
fiscal 2001. This was partially offset by a decline of approximately $2.6
million in interest expense on the line of credit primarily due to lower
outstanding borrowings on the line of credit. Average borrowings on the line of
credit declined from approximately $40.0 million in fiscal 2000 to approximately
$8.7 million in fiscal 2001.
Income from Limited Partnerships. Results for fiscals 2001 and 2000
also reflect the impact of our equity investment in two limited partnerships
which produce synthetic fuels. Effective February 1, 1999, we entered into an
agreement to sell a portion of our investment in one of the limited
partnerships, which resulted in the reduction in our ownership interest from 30%
to 17%. Effective July 31, 2000, we sold an additional portion of our ownership
interest in that partnership, reducing our ownership percentage from 17% to 8%.
Effective May 31, 2001, we sold our remaining 8% ownership interest. We expect
to receive cash payments from the sales on a quarterly basis through 2007 which
will range from 74.25% to 82.5% of the federal income tax credits attributable
to the interest sold. Below is a table summarizing the income from the sales,
net of certain expenses.
Year Ended January 31,
--------------------------
2002 2001
------- -------
February 1, 1999 sale $ 6,950 $ 6,493
July 31, 2000 sale 5,261 4,242
May 31, 2001 sale 3,505 -
Share of partnership losses - (298)
------- -------
$15,716 $10,437
======= =======
Income Taxes. Our effective tax rate was 24.8% and 25% in fiscal 2001
and 2000, respectively, after reflecting our share of federal tax credits earned
by the limited partnerships.
16
Extraordinary Loss from Early Extinguishment of Debt. In fiscal 2001,
we recorded an extraordinary loss from the early extinguishment of debt of
$245,000, net of the income tax effect of $160,000, as a result of paying off
approximately $7.7 million of mortgage debt and refinancing approximately $21.5
million of mortgage debt.
Net Income. As a result of the foregoing, net income was $22.3 million
in fiscal 2001 versus $18.7 million in fiscal 2000.
Comparison of Fiscal Years Ended January 31, 2001 and 2000
Net sales. Net sales in fiscal 2000 were $475.4 million, a 1.9%
increase from $466.4 million for fiscal 1999. This increase was primarily due to
the addition of 30 new stores in fiscal 2000 and the first full year of sales
for 14 stores opened in fiscal 1999. During fiscal 2000, we opened 30 stores and
closed six stores, while during fiscal 1999 we opened 14 stores and closed four.
We had 262 and 238 stores open at January 31, 2001 and 2000, respectively. Sales
were negatively impacted by a decline of 5.6% in comparable store sales for
fiscal 2000.
The decline in comparable store sales was primarily caused by the
appliance category, which negatively impacted comparable store sales by 5.3%.
The decline in appliance sales was caused by unseasonably cool weather during
the summer months in the northeastern and midwestern parts of the United States
which depressed air conditioner sales and an increasingly competitive
environment for appliances. Other categories which negatively impacted
comparable store sales were video by 2.6%, smaller screen televisions (27 inch
and smaller) by 2.3% and audio by 1.7%. These categories have been impacted by
declining average selling prices and increased competition. Our strongest
product category was larger screen televisions (30 inch and larger), which
positively impacted comparable store sales by 6.4%.
Gross Profit. Gross profit was $130.4 million in fiscal 2000, or 27.4%
of net sales, versus $129.0 million for fiscal 1999, or 27.7% of net sales. The
decline in gross profit as a percentage of sales was primarily caused by the
increasingly competitive retail and promotional environment.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for fiscal 2000 were $108.7 million, or 22.8% of net
sales, a 5.7% increase from $102.7 million, or 22.0% of net sales, in fiscal
1999. The increase in expense was primarily caused by an increase of $3.4
million in advertising expenditures associated with the 30 new stores opened and
increased usage of radio and television advertising. The remaining increase was
primarily caused by increased occupancy and utility costs of approximately $1.5
million associated with the 30 new stores and higher utility costs.
Income from Operations. Income from operations was $21.7 million, or
4.6% of net sales, for fiscal 2000, a 17.3% decline from $26.3 million, or 5.7%
of net sales for fiscal 1999. The decrease was primarily caused by the decline
in comparable store sales, the increased advertising expenditures in new and
existing markets and higher occupancy costs associated with the additional
number of stores.
Investment Income. Investment income increased to $933,000 in fiscal
2000 from $420,000 in fiscal 1999. In fiscal 2000 we recorded a $640,000 gain on
the sale of stock warrants held in an outside company.
Interest Expense. Interest expense increased to $8.1 million for fiscal
2000 from $5.1 million for fiscal 1999. The increase in interest expense was
primarily caused by increased borrowings on the line of credit. Average
outstanding borrowings on the line of credit were approximately $40.0 million in
fiscal 2000 versus approximately $3.2 million in fiscal 1999.
Income (Equity in Losses) from Limited Partnerships. Results for the
fiscal year ended January 31, 2001 also reflect the impact of our investment in
two synthetic fuel limited partnerships. We reported income from the limited
partnerships of approximately $10.4 million for fiscal 2000. This consisted of
approximately $6.5 million from the 1999 sale of a portion of our interest in
one partnership and approximately $4.2 million
17
from the 2000 sale of an additional portion of the interest, partially offset by
a charge of $300,000 to reflect our equity share of the partnerships' losses.
Income Taxes. Our effective tax rate was 25% in fiscal 2000 and 1999,
after reflecting our share of federal tax credits earned by the limited
partnerships.
Extraordinary Loss from Early Extinguishment of Debt. In fiscal 1999,
we recorded an extraordinary loss from the early extinguishment of debt of
$717,000, net of the income tax effect of $239,000, as a result of paying off
approximately $18.9 million of mortgage debt.
Net Income. As a result of the foregoing, net income was $18.7 million
in fiscal 2000 versus $18.3 million, after extraordinary item, in fiscal 1999.
Liquidity and Capital Resources
Our primary sources of financing have been cash flow provided by
operations and our investment in synthetic fuel limited partnerships,
supplemented by mortgages on owned properties. We also use borrowings under our
revolving line of credit to fund our seasonal working capital needs. In
addition, during fiscal 1999 we received approximately $44.7 million after
expenses from the sale of 3,375,000 (split adjusted) shares of common stock.
Operating Activities. Net cash provided by operating activities was
$42.3 million and $1.0 million for fiscal 2001 and 2000, respectively. For
fiscal 2001, operating cash flow was provided by net income of $22.3 million
adjusted for the impact of a $15.7 million gain on sales of partnership interest
and non-cash items of $2.5 million, which consist of deferred income, the
deferred income tax provision and depreciation and amortization. The primary
source of cash was a reduction in inventory of $43.1 million, offset by a
corresponding reduction in accounts payable of $15.1 million. This reduction in
inventory was partially due to a shortage of inventory available in the consumer
electronics portion of the business. Cash was also provided by a reduction in
accounts receivable of $2.0 million, a reduction in other current assets of $1.6
million and an increase in other current liabilities of $1.4 million.
For fiscal 2000, operating cash flow was provided by net income of
$18.7 million adjusted for the impact of a $10.7 million gain on sale of
partnership interest and non-cash items of $3.4 million, which consist of
deferred income, the deferred income tax provision and depreciation and
amortization. Cash was used by an increase in inventory of $4.9 million,
primarily due to the net increase of 24 additional stores. Other uses of cash
were a decrease in other liabilities of $2.7 million, an increase in other
assets of $2.1 million and an increase in receivables of $2.1 million. The
change in other assets and liabilities was primarily caused by the timing of
income tax payments, a decrease in accrued wages and related taxes and an
increase in prepaid bank fees related to mortgage debt acquired in fiscal 2000.
The increase in receivables was primarily due to an increase in the vendor
receivable on digital satellite systems. Cash was provided by an increase in
accounts payable of $1.4 million due to the timing of inventory purchases and
payments to vendors.
Investing Activities. Capital expenditures in fiscal 2001 totaled $9.9
million. Expenditures included approximately $5.4 million to acquire the Dayton,
Ohio distribution center previously leased, approximately $3.4 million to open
10 new retail stores in addition to $3.8 million spent in fiscal 2000, and
approximately $1.1 million for equipment and improvements to existing stores.
Capital expenditures in fiscal 2000 totaled $27.7 million. Expenditures
included approximately $22.5 million to open 30 new stores, approximately $3.8
million for four stores to open in fiscal 2001 and approximately $1.4 million
for equipment and improvements to existing stores.
Financing Activities. Cash used in financing activities was $10.2
million for fiscal 2001. During fiscal 2001, we purchased 1,550,588 (split
adjusted) shares of our common stock for approximately $16.7 million. During
fiscal 2000, we purchased 5,969,025 (split adjusted) shares of our common stock
for approximately $48.5
18
million. At January 31, 2002 we had authorization from the Board of Directors to
purchase an additional 1,158,300 shares of our common stock. All acquired shares
will be held in treasury for possible future use.
At January 31, 2002, we had approximately $82.2 million of mortgage
debt outstanding at a weighted average interest rate of 6.49%, with maturities
from January 15, 2004 to October 1, 2019. We have balloon payments due totaling
approximately $0.6 million over the next two fiscal years, which we plan to
either refinance with long-term mortgage debt or satisfy through cash payment or
borrowings on our revolving credit agreement. During fiscal 2001 we obtained
mortgage financing of approximately $8.2 million to finance nine retail store
locations. We also paid off $12.2 million of long-term mortgage debt from
scheduled repayments and the early extinguishment of debt for 14 retail
locations.
We received proceeds of approximately $10.1 million and $777,000 for
fiscal 2001 and 2000, respectively, from the exercise of stock options by
employees and directors. The exercise of non-qualified stock options resulted in
a tax benefit of approximately $1.0 million and $355,000 for fiscal 2001 and
2000, respectively, which was reflected as an increase in additional paid-in
capital. In October 1999, we completed the sale of 3,375,000 (split adjusted)
shares of common stock with net proceeds to the Company of approximately $44.7
million after expenses.
During fiscal 1999 we renewed our revolving credit agreement. The
revolving credit agreement is with six banks through July 31, 2005 with interest
at prime or LIBOR plus 1.875% and commitment fees of 1/4% payable on the unused
portion. Amounts available for borrowing are equal to the lesser of (1) $100
million for the months of January through June and $130 million for the months
of July through December or (2) the sum of specific percentages of eligible
accounts receivable and eligible inventories, as defined. Amounts available for
borrowing are reduced by any letter of credit commitments outstanding.
Borrowings on the revolving credit agreement are secured by certain fixed
assets, accounts receivable, inventories and the capital stock of our
subsidiaries.
At January 31, 2002 and 2001, we had borrowings outstanding of $66,000
and $742,000, respectively, on the revolving credit agreement. A total of
approximately $63.6 million was available at January 31, 2002. Borrowing levels
vary during the course of a year based upon our seasonal working capital needs.
The maximum direct borrowings outstanding during fiscal 2001 were approximately
$23.4 million, which existed immediately prior to the Christmas selling season
due to the build-up of seasonal inventory requirements. The weighted average
interest rate was 6.3% (9.1% including commitment fees) for fiscal 2001. The
revolving credit agreement contains restrictive covenants which require us to
maintain specified levels of consolidated tangible net worth and limit capital
expenditures and the incurrence of additional indebtedness. The revolving credit
agreement also places restrictions on common stock repurchases and the payment
of dividends.
Seasonality and Quarterly Fluctuations
Our business is seasonal. As is the case with many other retailers, our
net sales and net income are greatest in our fourth fiscal quarter, which
includes the Christmas selling season. The fourth fiscal quarter accounted for
32.7% and 33.6% of net sales and 57.6% and 47.4% of income from operations in
fiscal 2001 and 2000, respectively. Year to year comparisons of quarterly
results of operations and comparable store sales can be affected by a variety of
factors, including the duration of the holiday selling season, weather
conditions and the timing of new store openings.
Impact of Inflation
The impact of inflation has not been material to our results of
operations for the past three fiscal years.
19
Critical Accounting Policies
Defective Inventory Reserve. Reserves for defective inventory are
determined by applying historical performance, age of the inventory, condition
of the inventory and current manufacturer relationships and terms.
Net Realizable Value of Inventory. Reserves for net realizable value
are determined based upon current retail prices and trends and cost to sell the
merchandise compared to our cost for the merchandise.
Recoverability of Long-Lived Assets. Determined in accordance with SFAS
No. 121 by determining whether the amortization of the assets over their
remaining lives can be recovered through projected undiscounted cash flows.
Recently Issued Accounting Standards
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities", which requires companies to
recognize all derivative contracts at their fair values, as either assets or
liabilities on the balance sheet. Changes in the fair value of derivatives are
recorded each period in current earnings or other comprehensive income,
depending on whether a derivative is designed as part of a hedge transaction
and, if it is, the type of hedge transaction. In June 1999, the FASB issued
Statement No. 137, which amended SFAS No. 133 such that the effective date of
adoption will be for fiscal quarters beginning after June 15, 2000. The adoption
of SFAS No. 133 did not have a material impact on the consolidated financial
statements because we do not currently hold any derivative instruments.
In June 2001, the Financial Accounting Standards Board (FASB) issued
SFAS No. 141, "Business Combinations", which requires that the purchase method
of accounting be used for all business combinations initiated after June 30,
2001. The FASB also issued SFAS No. 142, "Goodwill and Other Intangible Assets",
in June, which requires that goodwill and intangible assets with indefinite
useful lives no longer be amortized, but instead be tested for impairment. This
standard is effective for fiscal years beginning after December 15, 2001. We
currently have no material goodwill or other intangibles; therefore, the
provisions of SFAS 142 that became effective for us on February 1, 2002 will
have no material effect on our results of operations and financial position.
The FASB also issued, SFAS No. 143, "Accounting for Asset Retirement
Obligations" in July 2001. SFAS No. 143 addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated assets retirement costs. It applies to all legal
obligations associated with the retirement of long-lived assets that result from
the acquisition, construction, development and/or the normal operation of a
long-lived asset. This Statement is effective for financial statements issued
for fiscal years beginning after June 15, 2002. We believe that the
implementation of the statement will not have a material impact on our results
of operations and financial position.
In August 2001, SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" was issued. SFAS 144 provides new guidance on the
recognition of impairment losses on long-lived assets to be held and used or to
be disposed of and also broadens the definition of what constitutes a
discontinued operation and how the results of a discontinued operation are to be
measured and presented. SFAS 144 supersedes SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" and
APB Opinion No. 30, while retaining many of the requirements of these two
statements. Under SFAS 144, assets held for sale that are a component of an
entity will be include in discontinued operations if the operations and cash
flows will be or have been eliminated from the ongoing operations of the entity
and the entity will not have any significant continuing involvement in the
operations prospectively. SFAS 144 is effective for fiscal years beginning after
December 15, 2001, with early adoption encouraged. SFAS 144 is not expected to
materially change the methods we use to measure impairment losses on long-lived
assets, but may result in future
20
dispositions being reported as discontinued operations to a greater extent than
is currently permitted. We adopted SFAS 144 on February 1, 2002.
Forward-Looking Statements
This Form 10-K contains or may contain forward-looking statements as
defined in the Private Securities Litigation Reform Act of 1995. The words
"believes", "estimates", "plans", "expects", "intends", "anticipates" and
similar expressions as they relate to REX or its management are intended to
identify such forward-looking statements. Forward-looking statements are
inherently subject to risks and uncertainties. Factors that could cause actual
results to differ materially from those in the forward-looking statements are
set forth in Exhibit 99 to this report.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
As of January 31, 2002, we had financial instruments which were
sensitive to changes in interest rates. These financial instruments consist of a
revolving credit agreement and various mortgage notes payable secured by certain
land, buildings and leasehold improvements.
The revolving credit agreement is with six banks through July 31,
2005, with interest at prime or LIBOR plus 1.875% and commitment fees of 1/4%
payable on the unused portion. Amounts available for borrowing are equal to the
lesser of (1) $100 million for the months of January through June and $130
million for the months of July through December or (2) the sum of specific
percentages of eligible accounts receivable and eligible inventories, as
defined. Amounts available for borrowing are reduced by any letter of credit
commitments outstanding. Borrowings on the revolving credit agreement are
secured by certain fixed assets, accounts receivable, inventories and the
capital stock of our subsidiaries. At January 31, 2002, a total of approximately
$63.6 million was available for borrowings under the revolving credit agreement.
We had outstanding borrowings of $66,000 under the revolving credit agreement at
January 31, 2002.
Approximately $41.6 million of the mortgage debt consists of fixed
rate debt. The interest rates range from 4.75% to 9.0%. The remaining $40.6
million of mortgage debt is variable rate mortgage debt. In general, the rate on
the variable rate debt ranges from prime to prime plus 0.625%. Principal and
interest are payable monthly over terms which generally range from 10 to 15
years. Substantially all of the notes payable require balloon payments at the
end of the scheduled term. The fair value of our long-term fixed mortgage debt
at January 31, 2002 was approximately $43.0 million. The fair value was
estimated based on rates available to us for debt with similar terms and
maturities.
Maturities of long-term debt are as follows (in thousands):
Year Ending January 31, Amount
----------------------------------------- ---------------
2003 $ 5,012
2004 5,885
2005 10,102
2006 9,445
2007 11,131
Thereafter 40,640
---------------
$82,215
===============
21
Item 8. Financial Statements and Supplementary Data
REX Stores Corporation and Subsidiaries
Consolidated Balance Sheets
January 31, 2002 and 2001
2002 2001
--------- --------
ASSETS (In Thousands)
CURRENT ASSETS:
Cash and cash equivalents (Note 1) $ 39,441 $ 687
Accounts receivable, net of allowance for doubtful accounts of
$852 and $410 in 2002 and 2001, respectively (Note 5) 2,665 4,707
Merchandise inventory (Notes 1 and 5) 101,017 144,150
Prepaid expenses and other 2,554 4,173
Future income tax benefits 12,614 9,837
--------- --------
Total current assets 158,291 163,554
PROPERTY AND EQUIPMENT, NET (Notes 1, 5 and 6) 139,496 135,643
FUTURE INCOME TAX BENEFITS 7,320 9,523
RESTRICTED INVESTMENTS (Note 1) 2,222 2,165
--------- --------
Total assets $ 307,329 $310,885
========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable (Note 5) $ 66 $ 742
Current portion of long-term debt (Note 6) 5,012 4,923
Accounts payable, trade 32,619 47,680
Accrued income taxes 1,373 -
Current portion of deferred income and deferred gain on sale and
leaseback (Notes 1 and 8) 11,790 11,355
Accrued payroll 5,856 6,369
Other current liabilities 9,319 8,737
--------- --------
Total current liabilities 66,035 79,806
LONG-TERM LIABILITIES:
Long-term mortgage debt (Note 6) 77,203 81,262
Deferred income (Note 1) 15,173 16,494
Deferred gain on sale and leaseback (Note 8) 945 2,129
--------- --------
Total long-term liabilities 93,321 99,885
COMMITMENTS AND CONTINGENCIES (Notes 8 and 10)
SHAREHOLDERS' EQUITY (Notes 4 and 7):
Common stock, 45,000 shares authorized, 27,358 and 26,001
shares issued, at par 274 260
Paid-in capital 116,701 106,161
Retained earnings 134,708 112,399
Treasury stock, 15,113 and 13,653 shares (103,710) (87,626)
--------- --------
Total shareholders' equity 147,973 131,194
--------- --------
Total liabilities and shareholders' equity $ 307,329 $310,885
========= ========
The accompanying notes to consolidated financial statements
are an integral part of these consolidated balance sheets.
22
REX Stores Corporation and Subsidiaries
Consolidated Statements of Income
For the Years Ended January 31, 2002, 2001, and 2000
2002 2001 2000
-------- -------- --------
(In Thousands,
Except Per Share Amounts)
--------------------------------------
NET SALES $464,503 $475,419 $466,386
-------- -------- --------
COSTS AND EXPENSES:
Cost of merchandise sold 330,110 345,026 337,418
Selling, general and administrative expenses 112,157 108,661 102,675
-------- -------- --------
Total costs and expenses 442,267 453,687 440,093
-------- -------- --------
INCOME FROM OPERATIONS 22,236 21,732 26,293
INVESTMENT INCOME 210 933 420
INTEREST EXPENSE (8,155) (8,121) (5,136)
GAIN ON SALE OF REAL ESTATE - - 787
INCOME OF LIMITED PARTNERSHIPS 15,716 10,437 2,996
-------- -------- --------
INCOME BEFORE PROVISION FOR
INCOME TAXES 30,007 24,981 25,360
PROVISION FOR INCOME TAXES 7,453 6,245 6,350
-------- -------- --------
INCOME BEFORE EXTRAORDINARY ITEM 22,554 18,736 19,010
EXTRAORDINARY LOSS FROM EARLY
EXTINGUISHMENT OF DEBT, NET OF TAX (245) - (717)
-------- -------- --------
NET INCOME $ 22,309 $ 18,736 $ 18,293
======== ======== ========
WEIGHTED AVERAGE SHARES OUTSTANDING-
BASIC 11,698 14,141 18,049
======== ======== ========
BASIC NET INCOME PER SHARE BEFORE
EXTRAORDINARY ITEM $ 1.93 $ 1.32 $ 1.05
EXTRAORDINARY ITEM (0.02) - (0.04)
-------- -------- --------
BASIC NET INCOME PER SHARE $ 1.91 $ 1.32 $ 1.01
======== ======== ========
WEIGHTED AVERAGE SHARES OUTSTANDING-
DILUTED 13,509 15,489 20,017
======== ======== ========
DILUTED NET INCOME PER SHARE BEFORE
EXTRAORDINARY ITEM $ 1.67 1.21 $ 0.95
EXTRAORDINARY ITEM (0.02) - (0.04)
-------- -------- --------
DILUTED NET INCOME PER SHARE $ 1.65 $ 1.21 $ 0.91
======== ======== ========
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
23
REX Stores Corporation and Subsidiaries
Consolidated Statements of Cash Flows
For the Years Ended January 31, 2002, 2001, and 2000
2002 2001 2000
-------- -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 22,309 $ 18,736 $ 18,293
Adjustments to reconcile net income to net cash
provided by operating activities-
Depreciation and amortization, net 4,198 3,917 3,469
Income of limited partnerships (15,716) (10,700) (5,100)
Gain on sale of real estate - - (787)
(Gain) loss on disposal of fixed assets 155 (21) (166)
Equity in losses of limited partnerships - - 2,100
Deferred income (1,265) 207 (534)
Deferred income tax provision (574) (688) (770)
Changes in assets and liabilities--
Accounts receivable 2,043 (2,138) (272)
Merchandise inventory 43,133 (4,883) (7,265)
Other current assets 1,612 (2,083) (485)
Accounts payable, trade (15,062) 1,428 (6,422)
Other current liabilities 1,442 (2,743) 2,996
-------- -------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 42,275 1,032 5,057
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (9,948) (27,696) (20,213)
Proceeds from sale of partnership interest 15,716 10,700 5,100
Proceeds from sale of real estate and fixed assets 943 1,142 1,962
Equity investment in limited partnerships - - (262)
Restricted investments (56) (145) (192)
-------- -------- --------
NET CASH USED IN INVESTING ACTIVITIES 6,655 (15,999) (13,605)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in note payable (676) 742 -
Proceeds from long-term debt 8,200 41,505 13,192
Payments of long-term debt (12,170) (4,823) (22,281)
Common stock issued 10,554 1,003 49,717
Treasury stock issued 579 130 1,728
Treasury stock acquired (16,663) (48,512) (20,111)
-------- -------- --------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (10,176) (9,955) 22,245
-------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 38,754 (24,922) 13,697
CASH AND CASH EQUIVALENTS, beginning of year 687 25,609 11,912
-------- -------- --------
CASH AND CASH EQUIVALENTS, end of year $ 39,441 $ 687 $ 25,609
======== ======== ========
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
24
REX Stores Corporation and Subsidiaries
Consolidated Statements of Shareholders' Equity
For the Years Ended January 31, 2002, 2001, and 2000
Common Shares
---------------------------------------------
Issued Treasury
---------------- ----------------------
(In Thousands)
Paid-In Retained
Shares Amount Shares Amount Capital Earnings
Balance at January 31, 1999 21,976 $221 5,821 $ 23,854 $ 58,473 $ 75,370
Net income - - - - - 18,293
Treasury stock acquired - - 3,040 20,111 - -
Common stock issued 3,888 38 (1,152) (4,721) 46,686 -
------ ---- ------ -------- -------- --------
Balance at January 31, 2000 25,864 259 7,709 39,244 105,159 93,663
Net income - - - - - 18,736
Treasury stock acquired - - 5,969 48,512 - -
Common stock issued 137 1 (25) (130) 1,002 -
------ ---- ------ -------- -------- --------
Balance at January 31, 2001 26,001 260 13,653 87,626 106,161 112,399
Net income - - - - - 22,309
Treasury stock acquired - - 1,550 16,663 - -
Common stock issued 1,357 14 (90) (579) 10,540 -
------ ---- ------ -------- -------- --------
Balance at January 31, 2002 27,358 $274 15,113 $103,710 $116,701 $134,708
====== ==== ====== ======== ======== ========
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
25
REX Stores Corporation and Subsidiaries
Notes to Consolidated Financial Statements
For the Years Ended January 31, 2002 and 2001
- --------------------------------------------------------------------------------
(1) Summary Of Significant Accounting Policies-
-------------------------------------------
(a) Principles of Consolidation--The accompanying financial statements
consolidate the operating results and financial position of REX
Stores Corporation and its wholly-owned subsidiaries (the
Company). All significant intercompany balances and transactions
have been eliminated. The Company operates 262 retail consumer
electronics and appliance stores under the REX name in 37 states.
The Company operates in one segment.
(b) Fiscal Year--All references in these financial statements to a
particular fiscal year are to the Company's fiscal year ended
January 31. For example, "fiscal 2001" means the period February
1, 2001 to January 31, 2002.
(c) Use of Estimates--The preparation of financial statements in
conformity with accounting principles generally accepted in the
United States requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
(d) Reclassifications--Certain reclassifications have been made to the
January 31, 2001 and 2000 financial statements to conform to the
current year presentation.
(e) Cash Equivalents--Cash equivalents are principally short-term
investments with original maturities of less than three months.
The carrying amount of cash equivalents is a reasonable estimate
of fair value.
(f) Merchandise Inventory--Substantially all inventory is valued at
the lower of average cost or market, which approximates cost on a
first-in, first-out (FIFO) basis, including certain costs
associated with purchasing, warehousing and transporting
merchandise. The inventory of an acquired subsidiary, Kelly &
Cohen Appliances, Inc. (K&C), is valued at the lower of cost or
market using the last-in, first-out (LIFO) method. Following the
lower of cost or market principle, the K&C inventory value using
the LIFO method ($29,969,000 and $39,018,000 at January 31, 2002
and 2001, respectively) is equivalent to the FIFO value in all
years presented. Nine suppliers accounted for approximately 70% of
the Company's purchases in fiscal 2001.
(g) Property and Equipment--Property and equipment is recorded at
cost. Depreciation is computed using the straight-line method.
Estimated useful lives are 15 to 40 years for buildings and
improvements, and 3 to 12 years for fixtures and equipment.
Leasehold improvements are depreciated over 10 to 12 years. The
components of property and equipment at January 31, 2002 and 2001
are as follows:
2002 2001
---------- ---------
(In thousands)
Land $ 38,986 $ 36,866
Buildings and improvements 98,916 93,582
Fixtures and equipment 20,177 19,716
Leasehold improvements 10,976 11,362
-------- --------
169,055 161,526
Less: accumulated depreciation (29,559) (25,883)
-------- --------
$139,496 $135,643
======== ========
26
REX Stores Corporation and Subsidiaries
Notes to Consolidated Financial Statements
For the Years Ended January 31, 2002 and 2001
- --------------------------------------------------------------------------------
In accordance with SFAS No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of",
the carrying value of long-lived assets is assessed for
recoverability by management when changes in circumstances
indicate that the carrying amount may not be recoverable, based on
an analysis of undiscounted future expected cash flows from the
use and ultimate disposition of the asset. There were no material
impairment losses incurred in the fiscal years ended January 31,
2002, 2001 and 2000.
(h) Restricted Investments--Restricted investments, which are
principally marketable securities, are stated at cost plus accrued
interest, which approximates market. The carrying amount of
restricted investments approximates fair value. Restricted
investments at January 31, 2002 and 2001 are restricted by two
states to cover possible future claims under product service
contracts.
(i) Revenue Recognition--The Company recognizes sales of products upon
receipt by the customer. The Company will honor returns from
customers within seven days from the date of sale. The Company
establishes liabilities for estimated returns at the point of
sale.
The Company also sells product service contracts covering periods
beyond the normal manufacturers' warranty periods, usually with
terms of coverage (including manufacturers' warranty periods) of
between 12 to 60 months. Contract revenues, net of sales
commissions, are deferred and amortized on a straight-line basis
over the life of the contracts after the expiration of applicable
manufacturers' warranty periods. The Company retains the
obligation to perform warranty services and such costs are charged
to operations as incurred.
The Company recognizes amounts billed to a customer for shipping
and handling as revenue and actual costs incurred for shipping as
selling, general and administrative expense in the income
statement.
(j) Interest Cost--Interest expense of $8,155,000, $8,121,000 and
$5,136,000 for the years ended January 31, 2002, 2001 and 2000,
respectively, is net of approximately $30,000, $469,000 and
$310,000 of interest capitalized related to store construction.
Total interest expense approximates interest paid for all years
presented.
(k) Deferred Financing Costs--Direct expenses and fees associated with
obtaining notes payable or long-term mortgage debt are capitalized
and amortized to interest expense over the life of the loan.
(l) Advertising Costs--Advertising costs are expensed as incurred.
Advertising expense was approximately $34,775,000, $35,281,600 and
$31,914,000 for the years ended January 31, 2002, 2001 and 2000,
respectively.
(m) Store Opening and Closing Costs--Store opening costs are expensed
as incurred. The costs associated with closing stores are accrued
when the decision is made to close a location. Store closing costs
incurred in fiscal year ended January 31, 2002 were $1,460,000.
Store closing costs incurred in the fiscal years ended January 31,
2001 and 2000 were not material.
27
REX Stores Corporation and Subsidiaries
Notes to Consolidated Financial Statements
For the Years Ended January 31, 2002 and 2001
- --------------------------------------------------------------------------------
(2) Investments In Limited Partnerships-
-------------------------------------------
During fiscal 1998, the Company invested $3,150,000 in two limited
partnerships which produce synthetic fuels. The limited partnerships earn
Federal income tax credits under Section 29 of the Internal Revenue Code
based upon the quantity and content of synthetic fuel production. Under
current law, credits under Section 29 are available for qualified fuels
sold before January 1, 2008. The tax credits begin to phase out if the
price of a barrel of oil exceeds certain levels adjusted annually for
inflation. The 2001 phase-out started at $49.16 per barrel. The Company
accounts for its share of the income tax credits as a reduction of the
income tax provision in the period earned and such credits totaled
approximately $2,900,000 and $9,900,000 and $3,800,000 in fiscal 2001,
2000 and 1999, respectively (see Note 9).
Effective February 1, 1999, the Company sold a 13% interest in one of the
limited partnerships reducing its initial 30% ownership interest to 17%.
The Company expects to receive cash payments from the sale on a quarterly
basis through December 31, 2007. These payments are contingent upon and
equal to 75% of the Federal income tax credits attributable to the 13%
interest sold and are subject to certain annual limitations, as specified
in the sale agreement. The maximum amount that could be received for
calendar years 2001 and 2000 was approximately $7,100,000 and $6,800,000,
respectively, of which the Company earned and received approximately
$6,900,000 and $6,800,000, respectively. The maximum that can be received
for calendar 2002 is approximately $7,400,000.
Effective July 31, 2000, the Company sold an additional portion of its
interest in the above partnership, reducing its ownership percentage from
17% to 8%. The Company expects to receive cash payments from the sale on
a quarterly basis through December 31, 2007. These payments are
contingent upon and equal to the greater of 82.5% of the federal income
tax credits attributable to the 9% interest sold, subject to annual
limitations or 74.25% of the federal income tax credits attributable to
the 9% interest sold with no annual limitations. The amount earned and
received for fiscal 2001 was approximately $5,300,000. For fiscal 2000
the Company recorded income of $1,600,000 for the down payment on the
sale and $2,700,000 for the quarterly installment payments as income of
limited partnerships.
Effective May 31, 2001, the Company sold its remaining 8% ownership in
the above partnership. The Company expects to receive cash payments from
the sale on a quarterly basis through December 31, 2007. These payments
are contingent upon and equal to the greater of 82.5% of the federal
income tax credits attributable to the 8% interest sold, subject to
annual limitations or 74.25% of the federal income tax credits
attributable to the 8% interest sold with no annual limitations. The
amount earned and received for fiscal 2001 was approximately $3,500,000,
including a down payment of $355,000.
The Company recorded a charge of approximately $300,000 and $2,100,000 in
fiscal 2000 and 1999 to reflect the Company's share of the partnerships'
losses. No charge was incurred for fiscal 2001.
We are a limited partner in the one remaining partnership which is
currently not operating. The limited partnerships have received favorable
private letter rulings from the IRS that the synthetic fuel produced by
their facilities and sold to unrelated parties qualify for the tax
credits under Section 29 of the Internal Revenue Code.
28
REX Stores Corporation and Subsidiaries
Notes to Consolidated Financial Statements
For the Years Ended January 31, 2002 and 2001
- --------------------------------------------------------------------------------
(3) Net Income Per Share-
---------------------
The Company reports net income per share in accordance with Statement of
Financial Accounting Standards (SFAS) No. 128 "Earnings per Share."
Basic net income per share is computed by dividing net income available
to common shareholders by the weighted average number of common shares
outstanding during the year. Diluted net income per share is computed by
dividing net income available to common shareholders by the weighted
average number of shares outstanding and dilutive common share
equivalents during the year. Common share equivalents for each year
include the number of shares issuable upon the exercise of outstanding
options, less the shares that could be purchased with the proceeds from
the exercise of the options, based on the average trading price of the
Company's common stock for fiscal 2001, 2000 and 1999.
The following table reconciles the basic and diluted net income per share
computations for each year presented:
January 31, 2002
----------------------------------------------
Income Shares Per Share
------ ------ ---------
Basic net income per share $22,309 11,698 $1.91
=====
Effect of stock options 1,811
------- ======
Diluted net income per share $22,309 13,509 $1.65
======= ====== =====
January 31, 2001
----------------------------------------------
Income Shares Per Share
------ ------ ---------
Basic net income per share $18,736 14,141 $1.32
=====
Effect of stock options - 1,348
------- ------
Diluted net income per share $18,736 15,489 $1.21
======= ====== =====
January 31, 2000
----------------------------------------------
Income Shares Per Share
------ ------ ---------
Basic net income per share $18,293 18,049 $1.01
=====
Effect of stock options - 1,968
------- ------
Diluted net income per share $18,293 20,017 $ .91
======= ====== ======
For the years ended January 31, 2002, 2001 and 2000, a total of 0,
220,000 and 0 shares, respectively, subject to outstanding options were
not included in the common equivalent shares outstanding calculation as
the exercise prices were above the average trading price of the Company's
common stock for those periods.
On both August 10, 2001 and February 11, 2002, the Company effected a
3-for-2 stock split. All per share data shown above has been
retroactively restated to reflect these splits.
29
REX Stores Corporation and Subsidiaries
Notes to Consolidated Financial Statements
For the Years Ended January 31, 2002 and 2001
- --------------------------------------------------------------------------------
(4) Common Stock Transactions-
-------------------------
In October 1999, the Company completed the sale of 3,375,000 shares of
common stock and received net proceeds of approximately $44.7 million,
net of expenses.
During the years ended January 31, 2002, 2001 and 2000, the Company
purchased 1,550,000, 5,969,000 and 3,040,000 shares of its common stock
for $16,663,000, $48,512,000 and $20,111,000, respectively. During the
year ended January 31, 2002, the Company issued common stock totaling
approximately $11,100,000. At January 31, 2002, the Company was
authorized by its Board of Directors to purchase an additional 1,158,000
shares of its common stock.
(5) Revolving Line Of Credit-
------------------------
The revolving credit agreement is with six banks which expires on July
31, 2005. Under the terms of the agreement, available revolving credit
borrowings are equal to the lesser of: (i) $100 million for the months of
January through June and $130 million for the months of July through
December or (ii) the sum of specific percentages of eligible accounts
receivable and eligible inventories, as defined. Borrowings available are
reduced by any letter of credit commitments outstanding. The Company had
outstanding borrowings under the revolving credit agreement of $66,000
and $742,000 at January 31, 2002 and 2001, respectively. At January 31,
2002, a total of approximately $63.6 million was available for borrowings
under the revolving credit agreement.
The interest rate charged on borrowings is prime or LIBOR plus 1.875%
(4.75% at January 31, 2002) and commitment fees of 1/4% are payable on
the unused portion. Borrowings are secured by certain fixed assets,
accounts receivable and inventories.
The revolving credit agreement contains restrictive covenants which
require the Company to maintain specified levels of consolidated tangible
net worth and limits capital expenditures and the incurrence of
additional indebtedness. The revolving credit agreement also places
restrictions on the amount of common stock repurchases and the payment of
dividends. The Company was in compliance with all covenants as of January
31, 2002.
(6) Long-Term Mortgage Debt-
-----------------------
Long-term mortgage debt consists of notes payable secured by certain
land, buildings and leasehold improvements. During fiscal 2001, the
Company refinanced certain of its variable rate debt. Interest rates
currently range from 4.75% to 9.0% in fiscal 2001 and 6.89% to 9.25% in
fiscal 2000. Principal and interest are payable monthly over terms which
generally range from 10 to 15 years. Substantially all of the notes
payable require balloon payments at the end of the scheduled term.
30
REX Stores Corporation and Subsidiaries
Notes to Consolidated Financial Statements
For the Years Ended January 31, 2002 and 2001
- --------------------------------------------------------------------------------
Maturities of long-term debt are as follows (in thousands):
Year Ending
January 31, Amount
----------- ------
2003 $ 5,012
2004 5,885
2005 10,102
2006 9,445
2007 11,131
Thereafter 40,640
-------
$82,215
=======
In fiscal 2001, the Company paid off approximately $7.7 million in
mortgage debt and refinanced approximately $21.5 million in mortgage
debt. As a result, the Company expensed unamortized financing costs of
approximately $400,000 as an extraordinary loss before an income tax
benefit of approximately $160,000.
A portion of the proceeds from the October 1999 stock offering were used
to extinguish approximately $18,900,000 of higher interest rate mortgage
debt (see Note 4). As a result of the early extinguishment of mortgage
debt, the Company paid prepayment penalties of approximately $643,000 and
expensed unamortized financing costs of approximately $313,000. The
Company recorded an extraordinary loss of $717,000, net of an income tax
effect of $239,000 for fiscal 1999.
The fair value of the Company's long-term debt at January 31, 2002 and
2001 was approximately $83.6 and $83.1 million, respectively. At January
31, 2002, the Company had approximately $41.6 million of fixed rate
mortgage debt and approximately $40.6 million of variable rate mortgage
debt. At January 31, 2001, virtually all of the Company's mortgage debt
of $86.2 million was fixed rate debt. The fair value was estimated based
on rates available to the Company for debt with similar terms and
maturities.
(7) Employee Benefits-
-----------------
Stock Option Plans--The Company maintains the REX Stores Corporation 1995
Omnibus Stock Incentive Plan and the REX Stores Corporation 1999 Omnibus
Stock Incentive Plan (the Omnibus Plans). Under the Omnibus Plans, the
Company may grant to officers and key employees awards in the form of
incentive stock options (1995 Plan only), non-qualified stock options,
stock appreciation rights, restricted stock, other stock-based awards and
cash incentive awards. The Omnibus Plans also provides for yearly grants
of non-qualified stock options to directors who are not employees of the
Company. The exercise price of each option must be at least 100% of the
fair market value of the Company's common stock on the date of grant. A
maximum of 4,500,000 shares of common stock are authorized for issuance
under each of the Omnibus Plans. On January 31, 2002, 101,260 and
2,930,009 shares remain available for issuance under the 1995 and 1999
Plans, respectively.
On October 14, 1998, the Company's Board of Directors approved a grant of
non-qualified stock options to two key executives for 1,462,500 shares at
an exercise price of $4.42, which represented the market price
31
REX Stores Corporation and Subsidiaries
Notes to Consolidated Financial Statements
For the Years Ended January 31, 2002 and 2001
- --------------------------------------------------------------------------------
on the date of grant. These options vest over a three-year period with
the first one-third vested as of December 31, 2000 and second one-third
vested as of December 31, 2001. All of these options remained outstanding
at January 31, 2002.
On April 17, 2001, the Company's Board of Directors approved a grant of
non-qualified stock options to two key executives for 1,462,500 shares at
an exercise price of $8.01, which represented the market price on the
date of grant. These options vest over a three-year period with the first
one-third vested as of December 31, 2003 and second one-third vested as
of December 31, 2004. All of these options remained outstanding at
January 31, 2002.
The Company accounts for its stock-based compensation plans under APB
Opinion No. 25, "Accounting for Stock Issued to Employees", under which
no compensation cost has been recognized. Had compensation cost for these
plans been determined at fair value consistent with SFAS No. 123,
"Accounting for Stock-Based Compensation", the Company's net income and
net income per share would have been reduced to the following pro forma
amounts for the years ended January 31, 2002, 2001 and 2000:
2002 2001 2000
------- ------- -------
Net income (000's): As reported $22,309 $18,736 $18,293
Pro forma 19,155 16,627 16,428
Basic net income per share: As reported $ 1.91 $ 1.32 $ 1.01
Pro forma 1.64 1.18 .91
Diluted net income per share: As reported $ 1.65 $ 1.21 $ .91
Pro forma 1.42 1.08 $ .88
The fair values of options granted were estimated as of the date of grant
using a Black-Scholes option pricing model with the following weighted
average assumptions used for grants in fiscal years ended January 31,
2002, 2001 and 2000, respectively: risk-free interest rate of 5.1%, 6.2%
and 5.4%, expected volatility of 68.9%, 60.3% and 55.6%, and a weighted
average stock option life of 9 years for all years. In accordance with
the provisions of SFAS No. 123, the fair value method of accounting was
not applied to options granted prior to February 1, 1995 in estimating
the pro forma amounts. Therefore, the pro forma effect on net income and
net income per share may not be representative of that to be expected in
future years.
32
REX Stores Corporation and Subsidiaries
Notes to Consolidated Financial Statements
For the Years Ended January 31, 2002 and 2001
- --------------------------------------------------------------------------------
The following summarizes stock option activity for the years ended
January 31, 2002, 2001 and 2000:
2002 2001 2000
-------------------- -------------------- ---------------------
Weighted Weighted Weighted
Average Average Average
Shares Exercise Shares Exercise Shares Exercise
(000's) Price (000's) Price (000's) Price
------- ------- ------- ----- ------- ------
Outstanding at beginning of year 6,224 $5.99 5,963 $ 5.62 7,189 $4.88
Granted 2,120 8.05 488 10.10 477 5.42
Exercised (1,446) 7.01 (164) 4.73 (1,665) 2.35
Canceled or expired (16) 7.22 (63) 6.89 (38) 5.72
------ ----- ----- ------ ----- -----
Outstanding at end of year 6,882 $6.40 6,224 $ 5.99 5,963 $5.62
====== ===== ===== ====== ===== =====
Exercisable at end of year 3,430 $5.47 3,816 $ 6.10 2,876 $6.60
====== ===== ===== ====== ===== =====
Weighted average fair value of
options granted $6.15 $6.97 $3.81
====== ===== =====
Price ranges and other information for stock options outstanding as of
January 31, 2002 were as follows:
Outstanding Exercisable
--------------------------------------------- -----------------------------
Weighted Weighted Weighted
Range of Exercise Shares Average Average Shares Average
Prices (000's) Exercise Price Remaining Life (000's) Exercise Price
------------------ ------- -------------- --------------- ------ --------------
$3.61 to $5.42 2,772 $ 4.61 6.4 yrs. 1,817 $4.56
$5.56 to $8.34 3,609 7.27 6.8 yrs. 1,515 6.27
$9.51 to $10.37 501 10.11 8.2 yrs. 98 10.09
----- ------ -------- ----- -----
6,882 $ 6.40 6.7 yrs. 3,430 $5.47
===== ====== ======== ===== =====
Profit Sharing Plan--The Company has a qualified, noncontributory profit
sharing plan covering full-time employees who meet certain eligibility
requirements. The Plan also allows for additional 401(k) savings
contributions by participants, along with certain Company matching
contributions. Aggregate contributions to the Plan are determined
annually by the Board of Directors and are not to exceed 15% of total
compensation paid to all participants during such year. The Company
contributed approximately $40,000, $45,000 and $36,000 for the years
ended January 31, 2002, 2001 and 2000, respectively, under the Plan.
(8) Leases And Commitments-
----------------------
The Company is committed under operating leases for certain warehouse and
retail store locations. The lease agreements are for varying terms
through 2011 and contain renewal options for additional periods. Real
estate taxes, insurance and maintenance costs are generally paid by the
Company. Contingent rentals based on sales volume are not significant.
Certain leases contain scheduled rent increases and rent expense is
recognized on a straight-line basis over the term of the leases.
On August 30, 1989, the Company completed a transaction for the sale and
leaseback of the corporate office, distribution center and certain stores
under an initial 15-year lease term. This transaction resulted in
33
REX Stores Corporation and Subsidiaries
Notes to Consolidated Financial Statements
For the Years Ended January 31, 2002 and 2001
- --------------------------------------------------------------------------------
a pre-tax financial statement gain of $15,600,000, which was deferred and
is being amortized as a reduction to lease expense over the term of the
leases. The unamortized deferred gain at January 31, 2002 was $1,500,000.
During the year ended January 31, 1999, the Company purchased three store
locations that were leased pursuant to the sale/leaseback. For financial
statement purposes, the purchase of these three stores resulted in
approximately $660,000 of the deferred gain associated with the
sale/leaseback being recorded as a reduction in the carrying value of
properties purchased.
During the year ended January 31, 2002, the Company repurchased the
building which contains the corporate office, distribution center and
retail store in Dayton, Ohio for approximately $6.0 million. For
financial statement purposes, the purchase of this facility resulted in
approximately $600,000 of the deferred gain associated with the
sale/leaseback being recorded as a reduction in the carrying value of the
property.
The following is a summary of rent expense under operating leases (in
thousands):
Years ended Minimum Gain Sublease
January 31, Rentals Amortization Income Total
----------- ------- ------------ -------- ------
2002 $10,280 $(805) $(1,313) $8,162
2001 9,992 (824) (1,376) 7,792
2000 9,644 (824) (1,409) 7,411
Future minimum annual rentals and gain amortization on non-cancellable
leases as of January 31, 2002 are as follows (in thousands):
Gain Sublease
Years ended January 31, Minimum Rentals Amortization Income
----------------------- --------------- ------------ --------
2003 $ 8,348 $ 597 $1,235
2004 7,448 597 1,162
2005 4,912 348 922
2006 2,372 - 381
2007 836 - 109
Thereafter 148 - 97
------- ------ ------
$24,064 $1,542 $3,906
======= ====== ======
34
REX Stores Corporation and Subsidiaries
Notes to Consolidated Financial Statements
For the Years Ended January 31, 2002 and 2001
- --------------------------------------------------------------------------------
(9) Income Taxes-
------------
The provision for income taxes for the years ended January 31, 2002, 2001
and 2000 consists of the following (in thousands):
Years Ended January 31,
-------------------------------------------
2002 2001 2000
------ ------ -----
Federal:
Current $3,219 $4,935 $5,875
Deferred 3,154 45 (887)
------ ------ ------
6,373 4,980 4,988
------ ------ ------
State and Local:
Current 250 2,189 1,006
Deferred 671 (924) 117
------ ------ ------
921 1,265 1,123
------ ------ ------
$7,294 $6,245 $6,111
====== ====== ======
For the fiscal years ended January 31, 2002 and 2000, the tax provision
currently payable shown above includes the tax benefit associated with
the extraordinary loss on debt extinguishment of $159,000 and $239,000,
respectively.
The tax effects of significant temporary differences representing
deferred tax assets and liabilities are as follows:
January 31,
------------------------
2002 2001
------- -------
Assets:
Deferral of service contract income $ 9,264 $ 9,739
Sale and leaseback deferred gain 539 1,034
Accrued liabilities 2,260 2,087
Inventory accounting 2,451 2,003
AMT credit carryforward 9,508 9,900
Valuation allowance (6,100) (6,100)
Other items 2,012 1,504
------- -------
19,934 20,167
Liabilities:
Depreciation - (807)
------- -------
Total net future income tax benefits $19,934 $19,360
======= =======
For the fiscal year ended January 31, 2002 and 2001, the Company was
subject to the alternative minimum tax (AMT) rules due to the Section 29
tax credits generated from the limited partnerships (see Note 2). The
Company's AMT liability was approximately $4,300,000 and $6,100,000 for
the years ended January 31, 2002 and 2001, respectively. The AMT
liability in excess of the regular tax liability results in AMT credit
35
REX Stores Corporation and Subsidiaries
Notes to Consolidated Financial Statements
For the Years Ended January 31, 2002 and 2001
- --------------------------------------------------------------------------------
carryforwards which can be used to offset future regular income tax,
subject to certain limitations. Therefore, for financial statements
purposes, the required AMT payment has been recorded as an AMT credit
carryforward with a valuation allowance of $6,100,000. The AMT credit
carryforwards have no expiration date.
The Company paid income taxes of $4,540,000, $9,395,000 and $3,235,000 in
the years ended January 31, 2002, 2001 and 2000, respectively.
The effective income tax rate on consolidated pre-tax income differs from
the federal income tax statutory rate as follows:
Years Ended January 31,
--------------------------------
2002 2001 2000
---- ---- ----
Federal income tax at statutory rate 35.0% 35.0% 35.0%
Tax credits from investment in limited partnership (9.6) (15.0) (15.0)
State and local taxes, net of federal tax benefit 2.0 3.3 2.9
Other (2.6) 1.7 2.1
---- ---- ----
24.8% 25.0% 25.0%
==== ==== ====
(10) Contingencies-
-------------
The Company is involved in various legal actions arising in the normal
course of business. After taking into consideration legal counsels'
evaluation of such actions, management is of the opinion that their
outcome will not have a material effect on the Company's consolidated
financial statements.
The Company has filed a lawsuit against Big Sandy SynFuel LLC, Somerset
Newco LLC and Sempra Energy Company. The suit arises from the Company's
participation as a limited partner in a business venture to produce
synthetic fuel which qualify for tax credits under Section 29 of the
Internal Revenue Code. The Company alleges breach of contract, breach of
fiduciary duty, conspiracy, gross negligence, fraud and willful
misconduct by the defendants in connection with operation of the
facility. It is anticipated the case will be set for trial in late 2002.
36
Report of Independent Public Accountants
To the Shareholders and Board of Directors
of REX Stores Corporation:
We have audited the accompanying consolidated balance sheets of REX Stores
Corporation (a Delaware corporation) and subsidiaries as of January 31, 2002 and
2001, and the related consolidated statements of income, shareholders' equity
and cash flows for each of the three fiscal years in the period ended January
31, 2002. These consolidated financial statements and the schedule referred to
below are the responsibility of the Company's management. Our responsibility is
to express an opinion on these consolidated financial statements and the
schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of REX Stores
Corporation and subsidiaries as of January 31, 2002 and 2001, and the results of
their operations and their cash flows for each of the three fiscal years in the
period ended January 31, 2002 in conformity with accounting principles generally
accepted in the United States.
Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The schedule listed under
Part IV, Item 14(a)(2) is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
consolidated financial statements. This schedule has been subjected to the
auditing procedures applied in our audit of the basic consolidated financial
statements and, in our opinion, fairly states in all material respects the
financial data required to be set forth therein in relation to the basic
consolidated financial statements taken as a whole.
Cincinnati, Ohio,
March 26, 2002
/s/ Arthur Andersen LLP
37
REX Stores Corporation and Subsidiaries
Schedule II - Valuation and Qualifying Accounts
For the Years Ended January 31, 2002, 2001 and 2000
- --------------------------------------------------------------------------------
(In Thousands)
Additions Deductions
--------- ----------
Balance Charges for Which
Beginning Charged Cost Reserves Were Balance End
of Year and Expenses Created of Year
------------------ ---------------------- ----------------------- --------------------
2002
- ----
Allowance for doubtful accounts $410 $1,003 $561 $852
================== ====================== ======================= ====================
2001
- ----
Allowance for doubtful accounts $483 $ 404 $477 $410
================== ====================== ======================= ====================
2000
- ----
Allowance for doubtful accounts $430 $ 500 $447 $483
================== ====================== ======================= ====================
38
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
The information required by this Item 10 is incorporated herein by
reference to the Proxy Statement for our Annual Meeting of Shareholders on June
3, 2002, except for certain information concerning our executive officers which
is set forth in Part I of this report.
Item 11. Executive Compensation
The information required by this Item 11 is set forth in the Proxy
Statement for our Annual Meeting of Shareholders on June 3, 2002 and is
incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
The information required by this Item 12 is set forth in the Proxy
Statement for our Annual Meeting of Shareholders on June 3, 2002 and is
incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
The information required by this Item 13 is set forth in the Proxy
Statement for our Annual Meeting of Shareholders on June 3, 2002 and is
incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a)(1) Financial Statements.
--------------------
The following consolidated financial statements of REX Stores Corporation
and subsidiaries are incorporated by reference as part of this report at Item 8
hereof.
Consolidated Balance Sheets as of January 31, 2002 and 2001
Consolidated Statements of Income for the years ended January 31, 2002,
2001 and 2000
Consolidated Statements of Cash Flows for the years ended January 31,
2002, 2001 and 2000
Consolidated Statements of Shareholders' Equity for the years ended
January 31, 2002, 2001 and 2000
Notes to Consolidated Financial Statements
Report of Independent Public Accountants
(a)(2) Financial Statement Schedules
The following financial statement schedule is incorporated by reference
as part of this report at Item 8 hereof.
39
Schedule II - Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable or not
required, or because the required information is included in the consolidated
financial statements or notes thereto.
(a)(3) Exhibits.
--------
See Exhibit Index at page 42 of this report.
Management contracts and compensatory plans and arrangements filed as
exhibits to this report are identified by an asterisk in the exhibit
index.
(b) Reports on Form 8-K.
-------------------
No reports on Form 8-K were filed during the quarter ended January 31,
2002.
40
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
By /s/ Stuart A. Rose
-------------------------
Stuart A. Rose
Chairman of the Board and
Chief Executive Officer
Date: April 18, 2002
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Capacity Date
- --------- -------- ----
/s/ Stuart A. Rose Chairman of the Board )
- ---------------------------------- and Chief Executive )
Stuart A. Rose Officer (principal )
executive officer) )
)
/s/ Douglas L. Bruggeman Vice President-Finance )
- ---------------------------------- and Treasurer (principal )
Douglas L. Bruggeman financial and accounting )
officer) )
)
LAWRENCE TOMCHIN* President, Chief Operating )
- ---------------------------------- Officer and Director )
Lawrence Tomchin )
) April 18, 2002
)
/s/ Edward M. Kress Secretary and Director )
- ----------------------------------
Edward M. Kress )
)
)
ROBERT DAVIDOFF* Director )
- ---------------------------------- )
Robert Davidoff )
)
)
LEE FISHER* Director )
- ---------------------------------- )
Lee Fisher )
)
)
ALEXANDER C. SCHWARTZ, JR.* Director )
- ---------------------------------- )
Alexander C. Schwartz, Jr. )
)
)
)
*By /s/ Stuart A. Rose )
---------------------------------- )
(Stuart A. Rose, Attorney-in-Fact) )
41
EXHIBIT INDEX
Page
----
(3) Articles of incorporation and by-laws:
3(a) Certificate of Incorporation, as amended (incorporated by reference to
Exhibit 3(a) to Form 10-K for fiscal year ended January 31, 1994, File
No. 0-13283)
3(b)(1) By-Laws, as amended (incorporated by reference to Registration Statement
No. 2-95738, Exhibit 3(b), filed February 8, 1985)
3(b)(2) Amendment to By-Laws adopted June 29, 1987 (incorporated by reference to
Exhibit 4.5 to Form 10-Q for quarter ended July 31, 1987, File No.
0-13283)
(4) Instruments defining the rights of security holders, including indentures:
4(a) Amended and Restated Loan Agreement dated July 31, 1995 among Rex Radio
and Television, Inc., Kelly & Cohen Appliances, Inc., Stereo Town, Inc.
and Rex Kansas, Inc. (the "Borrowers"), the lenders named therein, and
NatWest Bank N.A. as agent (incorporated by reference to Exhibit 4(a) to
Form 10-Q for quarter ended July 31, 1995, File No. 0-13283)
4(b) Form of Amended and Restated Revolving Credit Note (incorporated by
reference to Exhibit 4(b) to Form 10-Q for quarter ended July 31, 1995,
File No. 0-13283)
4(c) Guaranty of registrant dated July 31, 1995 (incorporated by reference to
Exhibit 4(c) to Form 10-Q for quarter ended July 31, 1995, File No.
0-13283)
4(d) Borrowers Pledge Agreement as amended and restated through July 31, 1995
(incorporated by reference to Exhibit 4(d) to Form 10-Q for quarter
ended July 31, 1995, File No. 0-13283)
4(e) Borrowers General Security Agreement as amended and restated through
July 31, 1995 (incorporated by reference to Exhibit 4(e) to Form 10-Q
for quarter ended July 31, 1995, File No. 0-13283)
4(f) Parent Pledge Agreement as amended and restated through July 31, 1995
(incorporated by reference to Exhibit 4(f) to Form 10-Q for quarter
ended July 31, 1995, File No. 0-13283)
4(g) Parent General Security Agreement as amended and restated through July
31, 1995 (incorporated by reference to Exhibit 4(g) to Form 10-Q for
quarter ended July 31, 1995, File No. 0-13283)
4(h) Amendment Agreement dated April 1, 1997 to Amended and Restated Loan
Agreement dated July 31, 1995 and to Guaranty of registrant dated July
31, 1995 among the Borrowers, the registrant, the lenders named therein
and Fleet Bank, N.A. (as successor to NatWest Bank N.A.) as agent
(incorporated by reference to Exhibit 4(h) to Form 10-Q for quarter
ended April 30, 1997, File No. 0-13283)
4(i) Amendment No. 2 dated October 19, 1999 to Amended and Restated Loan
Agreement dated July 31, 1995 among the Borrowers, the registrant, the
lenders named therein and Fleet Bank, N.A. (as successor to NatWest Bank
N.A.) as agent (incorporated by reference to Exhibit 4(i) to Form 10-Q
for quarter ended October 31, 1999, File No. 0-13283)
42
4(j) Amendment No. 3 dated January 11, 2000 to Amended and Restated Loan
Agreement dated July 31, 1995 among the Borrowers, the registrant, the
lenders named therein and Fleet Bank, N.A. (as successor to NatWest Bank
N.A.) as agent (incorporated by reference to Exhibit 4(j) to Form 10-K
for fiscal year ended January 31, 2000, File No. 0-13283)
4(k) Amendment No. 4 dated March 10, 2000 to Amended and Restated Loan
Agreement dated July 31, 1995 among the Borrowers, the registrant, the
lenders named therein and Fleet Bank, N.A. (as successor to Natwest Bank
N.A.) as agent (incorporated by reference to Exhibit 4(k) to Form 10-K
for fiscal year ended January 31, 2000, File No. 0-13283)
4(l) Amendment No. 5 dated December 31, 2000 to Amended and Restated Loan
Agreement dated July 31, 1995 among the Borrowers, the registrant, the
lenders named therein and Fleet Bank, N.A. (as successor to NatWest Bank
N.A.) as agent (incorporated by reference to Exhibit (4)(1) to Form 10-K
for fiscal year ended January 31, 2001, File No. 0-13283)
4(m) Amendment No. 6 dated April 16, 2001 to Amended and Restated Loan
Agreement dated July 31, 1995 among the Borrowers, the registrant, the
lenders named therein and Fleet Bank, N.A. (as successor to NatWest Bank
N.A.) as agent (incorporated by reference to Exhibit 4(m) to Form 10-K
for fiscal year ended January 31, 2001, File No. 0-13283)
Pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K, the registrant has
not filed as an exhibit to this Form 10-K certain instruments with
respect to long-term debt where the total amount of securities
authorized thereunder does not exceed 10% of the total assets of the
registrant and its subsidiaries on a consolidated basis. The registrant
agrees to furnish a copy of such instruments to the Commission upon
request.
(10) Material contracts:
10(a)* Employment Agreement dated October 14, 1998 between Rex Radio and
Television, Inc. and Stuart Rose (incorporated by reference to Exhibit
10.1 to Form 10-Q for quarter ended October 31, 1998, File No. 0-13283)
10(b)* Employment Agreement dated October 14, 1998 between Rex Radio and
Television, Inc. and Lawrence Tomchin (incorporated by reference to
Exhibit 10.2 to Form 10-Q for quarter ended October 31, 1998, File No.
0-13283)
10(c)* Employment Agreement dated April 17, 2001 between Rex Radio and
Television, Inc. and Stuart Rose......................................
10(d)* Employment Agreement dated April 17, 2001 between Rex Radio and
Television, Inc. and Lawrence Tomchin.................................
10(e)* Executive Stock Option dated October 14, 1998 granting Stuart Rose an
option to purchase 500,000 shares of registrant's Common Stock
(incorporated by reference to Exhibit 10.3 to Form 10-Q for quarter
ended October 31, 1998, File No. 0-13283)
43
10(f)* Executive Stock Option dated October 14, 1998 granting Lawrence Tomchin
an option to purchase 150,000 shares of registrant's Common Stock
(incorporated by reference to Exhibit 10.4 to Form 10-Q for quarter
ended October 31, 1998, File No. 0-13283)
10(g)* Executive Stock Option dated April 17, 2001 granting Stuart Rose an
option to purchase 500,000 shares of registrant's Common Stock..........
10(h)* Executive Stock Option dated April 17, 2001 granting Lawrence Tomchin an
option to purchase 150,000 shares of registrant's Common Stock..........
10(i)* Subscription Agreement dated December 1, 1989 from Stuart Rose to
purchase 300,000 shares of registrant's Common Stock (incorporated by
reference to Exhibit 6.5 to Form 10-Q for quarter ended October 31,
1989, File No. 0-13283)
10(j)* Subscription Agreement dated December 1, 1989 from Lawrence Tomchin to
purchase 140,308 shares of registrant's Common Stock (incorporated by
reference to Exhibit 6.6 to Form 10-Q for quarter ended October 31,
1989, File No. 0-13283)
10(k)* 1995 Omnibus Stock Incentive Plan, as amended and restated effective
June 2, 1995 (incorporated by reference to Exhibit 4(c) to
Post-Effective Amendment No. 1 to Form S-8 Registration Statement No.
33-81706)
10(l)* 1999 Omnibus Stock Incentive Plan (incorporated by reference to Exhibit
10(a) to Form 10-Q for quarter ended April 30, 2000, File No. 0-13283)
10(m) Real Estate Purchase and Sale Agreement (the "Agreement") dated March 8,
1989 between registrant as Guarantor, four of its subsidiaries (Rex
Radio and Television, Inc., Stereo Town, Inc., Kelly & Cohen Appliances,
Inc., and Rex Radio Warehouse Corporation) as Sellers and Holman/Shidler
Investment Corporation as Buyer (incorporated by reference to Exhibit
(b)(5)(1) to Amendment No. 1 to Schedule 13E-4 filed March 15, 1989,
File No. 5-35828)
The Table of Contents to the Agreement lists Exhibits A through P to the
Agreement. Each of the following listed Exhibits to the Agreement is
incorporated herein by reference as indicated below. The registrant
will, upon request of the Commission, provide any of the additional
Exhibits to the Agreement.
10(n) Form of Full Term Lease (incorporated by reference to Exhibit (b)(5)(2)
to Amendment No. 1 to Schedule 13E-4 filed March 15, 1989, File No.
5-35828)
10(o) Form of Divisible Lease (incorporated by reference to Exhibit (b)(5)(3)
to Amendment No. 1 to Schedule 13E-4 filed March 15, 1989, File No.
5-35828)
10(p) Form of Terminable Lease (incorporated by reference to Exhibit (b)(5)(4)
to Amendment No. 1 to Schedule 13E-4 filed March 15, 1989, File No.
5-35828)
10(q) Continuing Lease Guaranty (incorporated by reference to Exhibit
(b)(5)(5) to Amendment No. 1 to Schedule 13E-4 filed March 15, 1989,
File No. 5-35828)
44
10(r) Agreement Regarding Leases and Amending Amended and Restated Real
Property Purchase and Sale Agreement dated May 17, 1990 among
Shidler/West Finance Partners I (Limited Partnership); Rex Radio and
Television, Inc., Stereo Town, Inc., Kelly & Cohen Appliances, Inc. and
Rex Radio Warehouse Corporation; and registrant (incorporated by
reference to Exhibit (a)(10) to Form 10-Q for quarter ended April 30,
1990, File No. 0-13283)
10(s) Lease dated December 12, 1994 between Stuart Rose/Beavercreek, Inc. and
Rex Radio and Television, Inc. (incorporated by reference to Exhibit
10(q) to Form 10-K for fiscal year ended January 31, 1995, File No.
0-13283)
(21) Subsidiaries of the registrant:
21(a) Subsidiaries of registrant..............................................
(23) Consents of experts and counsel:
23(a) Consent of Arthur Andersen LLP to use its report dated March 26, 2002
included in this annual report on Form 10-K into registrant's
Registration Statements on Form S-8 (Registration Nos. 33-3836,
33-81706, 33-62645, 333-69081, 333-69089, 333-35118 and 333-69690)......
(24) Power of attorney:
Powers of attorney of each person whose name is signed to this report on
Form 10-K pursuant to a power of attorney...............................
(99) Additional exhibits:
99(a) Risk Factors............................................................
99(b) Arthur Andersen LLP assurances letter...................................
Copies of the Exhibits not contained herein may be
obtained by writing to Edward M. Kress, Secretary,
REX Stores Corporation, 2875 Needmore Road, Dayton,
Ohio 45414.
- ------------
Those exhibits marked with an asterisk (*) above are management
contracts or compensatory plans or arrangements for directors or executive
officers of the registrant.
45