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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 2004
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File Number 0-13283
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REX STORES CORPORATION
(Exact name of registrant as specified in its charter)
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Delaware 31-1095548
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2875 Needmore Road, Dayton, Ohio 45414
(Address of principal executive offices) (Zip Code)
(937) 276-3931
(Registrant's telephone number, including area code)
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. Yes (X) No ( )
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes (X) No ( )
At the close of business on June 8, 2004 the registrant had 11,331,603 shares
of Common Stock, par value $.01 per share, outstanding.
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REX STORES CORPORATION AND SUBSIDIARIES
INDEX
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Condensed Balance Sheets .............................1
Consolidated Condensed Statements of Income .......................2
Consolidated Condensed Statements of Shareholders' Equity .........3
Consolidated Condensed Statements of Cash Flows ...................4
Notes to Consolidated Condensed Financial Statements ..............5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations .....................................7
Item 3. Quantitative and Qualitative Disclosures About Market Risk .......10
Item 4. Controls and Procedures ..........................................10
PART II. OTHER INFORMATION
Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of
Equity Securities.............................................12
Item 4. Submission of Matters to a Vote of Security Holders ..............12
Item 6. Exhibits and Reports on Form 8-K..................................12
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
REX STORES CORPORATION AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
April 30 January 31 April 30
2004 2004 2003
---- ---- ----
(In Thousands)
Unaudited Unaudited
ASSETS:
Cash and cash equivalents $ 25,052 $ 29,026 $ 1,671
Accounts receivable, net 2,089 2,560 2,495
Synfuel receivable 893 3,098 8,644
Merchandise inventory 136,823 116,755 161,588
Prepaid expenses and other 863 1,481 1,981
Future income tax benefits 8,703 8,703 8,860
--------- --------- ---------
Total current assets 174,423 161,623 185,239
PROPERTY AND EQUIPMENT, NET 131,513 131,409 133,780
OTHER ASSETS 915 3,477 2,437
FUTURE INCOME TAX BENEFITS 14,645 14,645 7,560
RESTRICTED INVESTMENTS 2,259 2,257 2,246
--------- --------- ---------
Total assets $ 323,755 $ 313,411 $ 331,262
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ - $ - $ 8,744
Current portion of long-term debt 5,044 5,258 6,413
Current portion of deferred income
and deferred gain on sale and leaseback 10,347 10,544 11,422
Accounts payable, trade 47,616 32,745 57,855
Accrued income taxes 1,119 806 521
Accrued payroll 3,828 6,602 3,957
Other current liabilities 7,206 7,214 8,315
--------- --------- ---------
Total current liabilities 75,160 63,169 97,227
--------- --------- ---------
LONG-TERM LIABILITIES:
Long-term mortgage debt 47,573 53,548 61,825
Deferred income 12,269 12,762 13,547
Deferred gain on sale and leaseback - - 198
--------- --------- ---------
Total long-term liabilities 59,842 66,310 75,570
--------- --------- ---------
SHAREHOLDERS' EQUITY:
Common stock 286 283 277
Paid-in capital 127,724 126,124 121,286
Retained earnings 189,165 185,080 160,778
Treasury stock (128,422) (127,555) (123,876)
--------- --------- ---------
Total shareholders' equity 188,753 183,932 158,465
--------- --------- ---------
Total liabilities and shareholders' equity $ 323,755 $ 313,411 $ 331,262
========= ========= =========
The accompanying notes are an integral part of these unaudited consolidated
condensed financial statements.
REX STORES CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Income
Unaudited
Three Months Ended
April 30
--------
2004 2003
---- ----
(In Thousands, Except Per Share Amounts)
NET SALES $88,200 $95,411
COSTS AND EXPENSES:
Cost of merchandise sold 62,432 67,573
Selling, general and administrative expenses 24,664 25,922
------- -------
Total costs and expenses 87,096 93,495
------- -------
INCOME FROM OPERATIONS 1,104 1,916
INVESTMENT INCOME 87 17
INTEREST EXPENSE (980) (1,200)
GAIN ON SALE OF REAL ESTATE - 386
INCOME FROM SYNFUEL INVESTMENTS 5,236 3,064
------- -------
Income before provision for income taxes 5,447 4,183
PROVISION FOR INCOME TAXES 1,362 1,045
------- -------
NET INCOME $ 4,085 $ 3,138
======= =======
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC 11,155 10,939
======= =======
BASIC NET INCOME PER SHARE $ 0.37 $ 0.29
======= =======
WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED 12,965 12,632
======= =======
DILUTED NET INCOME PER SHARE $ 0.32 $ 0.25
======= =======
The accompanying notes are an integral part of these unaudited consolidated
condensed financial statements.
2
REX STORES CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Shareholders' Equity
Unaudited
Common Shares
---------------------------------------
Issued Treasury Total
------ -------- Paid-in Retained Shareholders'
Shares Amount Shares Amount Capital Earnings Equity
(In Thousands)
Balance at January 31, 2004 28,308 $283 17,214 $127,555 $126,124 $185,080 $ 183,932
Net income 4,085 4,085
Treasury stock acquired 119 1,768 (1,768)
Stock options exercised
and related tax effects 271 3 (122) (901) 1,600 2,504
------ ---- ------ -------- -------- -------- ---------
Balance at April 30, 2004 28,579 $286 17,211 $128,422 $127,724 $189,165 $188,753
====== ==== ====== ======== ======== ======== ========
The accompanying notes are an integral part of these unaudited consolidated
condensed financial statements.
3
REX STORES CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows
Unaudited
Three Months Ended
April 30
--------
2004 2003
---- ----
(In Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,085 $ 3,138
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization, net 1,000 1,031
Income from synfuel investments (5,236) (3,064)
(Gain) Loss on disposal of fixed assets 89 (396)
Deferred income (561) (131)
Changes in assets and liabilities:
Accounts receivable 471 918
Merchandise inventory (20,068) (19,525)
Other current assets 618 585
Other long term assets 2,563 (781)
Accounts payable, trade 14,871 30,438
Other current liabilities (2,470) (2,627)
-------- --------
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES (4,638) 9,586
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1,321) (844)
Proceeds from sale of synfuel investments 7,440 1,040
Proceeds from sale of real estate and fixed assets - 843
Restricted investments (2) (5)
-------- --------
NET CASH PROVIDED BY INVESTING ACTIVITIES 6,117 1,034
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in notes payable - (4,707)
Payments of long-term debt (6,189) (1,845)
Stock options exercised and related tax effects 545 4
Treasury stock issued 901 55
Treasury stock acquired (710) (3,836)
-------- --------
NET CASH USED IN FINANCING ACTIVITIES (5,453) (10,329)
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (3,974) 291
CASH AND CASH EQUIVALENTS,
beginning of period 29,026 1,380
-------- --------
CASH AND CASH EQUIVALENTS,
end of period $ 25,052 $ 1,671
======== =======
The accompanying notes are an integral part of these unaudited consolidated
condensed financial statements.
4
REX STORES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
April 30, 2004
Note 1. Consolidated Condensed Financial Statements
The consolidated condensed financial statements included in this report
have been prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission and include, in the
opinion of management, all adjustments necessary to state fairly the information
set forth therein. Any such adjustments were of a normal recurring nature.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America have been omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are adequate to
make the information presented not misleading. It is suggested that these
unaudited consolidated condensed financial statements be read in conjunction
with the consolidated financial statements and the notes thereto included in the
Company's Annual Report on Form 10-K for the year ended January 31, 2004 (fiscal
2003). The results of operations for the interim periods are not necessarily
indicative of the results to be expected for the year.
Note 2. Accounting Policies
The interim consolidated condensed financial statements have been
prepared in accordance with the accounting policies described in the notes to
the consolidated financial statements included in the Company's 2003 Annual
Report on Form 10-K. While management believes that the procedures followed in
the preparation of interim financial information are reasonable, the accuracy of
some estimated amounts is dependent upon facts that will exist or calculations
that will be accomplished at fiscal year end. Examples of such estimates include
changes in the LIFO reserve (based upon the Company's best estimate of inflation
to date), management bonuses and the provision for income taxes. Any adjustments
pursuant to such estimates during the quarter were of a normal recurring nature.
The provision for income taxes could vary based upon full year synthetic fuel
production levels, federal income tax law changes and Internal Revenue Service
audits.
The Company accounts for vendor allowances in accordance with Emerging
Issues Task Force (EITF) 02-16 "Accounting by a Customer for Certain
Consideration Received from a Vendor," which addresses how and when to reflect
consideration received from vendors in the consolidated financial statements.
Vendors often fund, up front, certain advertising costs and exposure to general
changes in pricing to customers due to technological change. Allowances are
deferred as received from vendors and recognized into income as an offset to the
cost of merchandise sold when the related product is sold or expense incurred.
Advertising costs are expensed as incurred.
Cost of sales includes the cost of merchandise, markdowns and inventory
shortage, receiving, warehousing and freight charges to get merchandise to
retail stores, service repair bills as well as cash discounts and rebates. The
Company classifies purchasing costs as selling and administrative expenses. Due
to this classification, the Company's gross margins may not be comparable to
those of other retailers that include costs related to their distribution
network in selling and administrative expense.
The Company includes store expenses (such as payroll and occupancy
costs), advertising, buying, depreciation, insurance, and overhead costs in
selling and administrative expenses.
Interest expense of $980,000 for the quarter ended April 30, 2004
includes approximately $22,000 related to the early termination of mortgage
debt. Interest expense of $1,200,000 for the quarter ended April 30, 2003 is net
of interest capitalized of approximately $14,000. There was no interest
capitalized in the first quarter of fiscal 2004. Cash paid for interest for the
three months ended April 30, 2004 and 2003 was approximately $891,000 and
$1,147,000, respectively.
During the first quarter of fiscal 2004 the Company did an early
payoff of eight mortgages totaling $5.1 million. The scheduled payment on
these notes included approximately $0.3 million for the last nine months of
fiscal 2004, $2.8 million for fiscal 2005, $1.5 million for fiscal 2006 and
$0.5 million for fiscal 2007.
5
The Company paid income taxes of approximately $1,083,000 and $225,000
for the three months ended April 30, 2004 and 2003, respectively.
Certain reclassifications have been made to prior year amounts to
conform with their fiscal 2004 presentation.
Note 3. Stock Option Plans
The Company has stock-based compensation plans under which stock
options are granted to officers, directors and key employees at the market price
on the date of the grant.
The following summarizes options granted, exercised and canceled or
expired during the three months ended April 30, 2004:
Outstanding at January 31, 2004 ($3.61 to $16.04 per share)........ 6,391,069
Exercised ($3.61 to $10.14 per share).............................. (392,661)
Canceled or expired ($13.01 to $14.745 per share).................. (4,400)
---------
Outstanding at April 30, 2004 ($3.61 to $16.04 per share).......... 5,994,008
=========
Pursuant to SFAS No. 123, "Accounting for Stock-Based Compensation,"
the Company has elected to account for its employee stock option plans under APB
Opinion No. 25, "Accounting for Stock Issued to Employees," which recognizes
expense based on the intrinsic value at date of grant. As stock options have
been issued with exercise prices equal to grant date fair value, no compensation
cost has resulted. Had compensation cost for all options granted been determined
based on the fair value at grant date consistent with SFAS No. 123, the
Company's net earnings and earnings per share would have been as follows:
Three Months Ended
April 30
--------
2004 2003
---- ----
Net Income As Reported $4,085 $3,138
Compensation Cost 753 734
Pro forma 3,332 2,404
Basic net income per share As Reported $ 0.37 $ 0.29
Compensation Cost .07 .07
Pro forma 0.30 0.22
Diluted net income per share As Reported $ 0.32 $ 0.25
Compensation Cost .06 .06
Pro forma 0.26 0.19
The assumptions used to calculate the fair value of options granted are
evaluated and revised, as necessary, to reflect market conditions and
experience.
Note 4. Net Income Per Share
The following table reconciles the basic and diluted net income per
share computation for each period presented:
6
Three Months Ended
April 30, 2004
--------------
Per
Income Shares Share
Basic net income per share...................... $4,085 11,155 $0.37
Effect of stock options......................... 1,810 =====
------ ------
Diluted net income per share.................... $4,085 12,965 $0.32
====== ====== =====
Three Months Ended
April 30, 2003
--------------
Per
Income Shares Share
Basic net income per share...................... $3,138 10,939 $0.29
Effect of stock options......................... 1,693 =====
------ ------
Diluted net income per share .................... $3,138 12,632 $0.25
====== ====== =====
For the three months ended April 30, 2004 and 2003, a total of 335,936
shares and 341,936 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
that period.
Note 5. Synthetic Fuel
Net income for the first quarter ended April 30, 2004 includes
approximately $4.8 million of pre-tax investment income from the sales of the
Company's entire Partnership interest in Colona SynFuel Limited Partnership,
L.L.L.P., a synthetic fuel limited partnership. The Internal Revenue Service has
completed an audit on the Colona partnership. The audit was finalized in
February 2004 and a closing agreement was signed with the Internal Revenue
Service which provides that the Colona facility was placed in service before
July 1, 1998, and that the fuel produced by the Colona facilities in 2001 is a
"qualified fuel" for purposes of the Section 29 tax credits. Beginning in fiscal
2002, certain quarterly payments from the sales were being held in escrow
pending the results of the audit. All remaining funds were released from escrow
upon the completion of the audit.
Net income for the first quarter ended April 30, 2004 also includes
approximately $477,000 of pre-tax investment income from the sale of our
membership interest in the limited liability company that owns a synthetic fuel
facility in Gillette, Wyoming. The Company received $2,750,000 at the time of
sale on March 30, 2004 along with a secured contingent payment note that could
provide additional investment income to the Company if certain tax issues are
favorably resolved for the buyer with the Internal Revenue Service and/or the
facility resumes commercial operation. If the issues are favorably resolved
prior to January 1, 2005, or the facility resumes commercial operations, the
Company is eligible to receive an additional $3.5 million; in addition the
Company is eligible to receive $1.50 per Ton of Qualified Production produced
by the facility and sold.
The Company remains a limited partner in Somerset SynFuel, L.P. from
which we are currently receiving Section 29 income tax credits. The Internal
Revenue Service is auditing this partnership as part of its audit program of the
general partner. In addition, a U.S. Senate Subcommittee has initiated an
investigation into income tax credits involving synthetic fuel operations.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
We are a specialty retailer in the consumer electronics/appliance
industry. As of April 30, 2004 we operated 245 stores in 37 states,
predominantly in small to medium-sized markets under the trade name "REX".
7
Fiscal Year
All references in this report to a particular fiscal year are to REX's
fiscal year ended January 31. For example, "fiscal 2004" means the period
February 1, 2004 to January 31, 2005.
Results of Operations
The following table sets forth, for the periods indicated, the relative
percentages that certain income and expense items bear to net sales:
Three Months Ended
April 30
--------
2004 2003
---- ----
Net sales.............................................. 100.0% 100.0%
Cost of merchandise sold............................... 70.8 70.8
---- ----
Gross profit...................................... 29.2 29.2
Selling, general and administrative expenses........... 28.0 27.2
---- ----
Income from operations............................ 1.2 2.0
Investment income...................................... 0.1 -
Interest expense....................................... (1.1) (1.2)
Gain on sale of real estate............................ - 0.4
Income from synfuel investments........................ 5.9 3.2
---- ----
Income before provision for income taxes.......... 6.1 4.4
Provision for income taxes............................. 1.5 1.1
---- ----
Net income............................................. 4.6% 3.3%
==== ====
Comparison of Three Months Ended April 30, 2004 and 2003
Net sales in the first quarter ended April 30, 2004 were $88.2 million
compared to $95.4 million in the prior year's first quarter, representing a
decrease of $7.2 million or 7.6%. This decrease was primarily due to a 7.0%
decrease in comparable store sales. There has also been a reduction in store
count from 252 stores at April 30, 2003 to 245 stores as of April 30, 2004. We
did not open any stores and closed three stores in the first quarter of fiscal
2004. We did not open or close any stores in the first quarter of fiscal 2003.
The decline in comparable store sales was primarily caused by the
television and audio categories which negatively impacted comparable store sales
by 5.4% and 1.7%, respectively.
The following table reflects the approximate percent of net sales for
each product category group for the periods presented.
Three Months Ended
April 30
--------
Product Category 2004 2003
---------------- ---- ----
Televisions 50.1% 51.7%
Appliances 19.8 18.0
Audio 14.3 15.0
Video 7.1 6.8
Other 8.7 8.5
----- -----
100.0% 100.0%
===== =====
Gross profit of $25.8 million (29.2% of net sales) for the first
quarter of fiscal 2004 was 7.4% lower than the gross profit of $27.8 million
(29.2% of net sales) for the first quarter of fiscal 2003. The
8
reduction in gross profit dollars is primarily due to lower sales as the gross
profit margin was consistent between the first quarter of fiscals 2004 and 2003.
Selling, general and administrative expenses were $24.7 million (28.0%
of net sales) for the first quarter of fiscal 2004 compared to $25.9 million
(27.2% of net sales) for the first quarter of fiscal 2003. This represents a
decrease of approximately $1.2 million or 4.9%. The reduction in expenditures
was primarily due to lower salespeople commission costs due to lower sales and
lower advertising expenditures primarily due to reduced television advertising
cost. The increase as a percentage of net sales for the first quarter of fiscal
2004 is primarily due to the reduced sales.
Interest expense was approximately $1.0 million (1.1% of net sales) for
the first quarter of fiscal 2004 compared to $1.2 million (1.2% of net sales)
for the first quarter of fiscal 2003. Interest expense was reduced primarily due
to lower outstanding mortgage debt and lower borrowings on the line of credit.
There were no properties sold in the first quarter of fiscal 2004. In
the first quarter of fiscal 2003 we sold one property for a gain of
approximately $386,000.
Results for the first quarter of fiscals 2004 and 2003 also reflect the
impact of our equity investment in two limited partnerships, Colona SynFuel
Limited Partnership, L.L.L.P., and Somerset SynFuel, L.P., which produce
synthetic fuels. We remain a limited partner in the Somerset limited partnership
but have sold our ownership interest in the Colona limited partnership through a
series of three sales. Effective February 1, 1999, we entered into an agreement
to sell a portion of our investment in the Colona limited partnership, 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 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.
The Colona partnership had been under audit by the Internal Revenue Service with
certain proceeds from the sales being put into escrow beginning in fiscal 2002
pending the results of the audit. The audit was finalized and a closing
agreement signed with the Internal Revenue Service in February 2004 and all
remaining proceeds released from escrow or letters of credit cancelled. Below is
a table summarizing the income from the sales, net of certain expenses. The
higher income for the current year primarily reflects higher production levels
compared to the previous year comparable period.
Three Months Ended
April 30
--------
2004 2003
---- ----
(In Thousands)
February 1, 1999 sale............... $1,846 $1,222
July 31, 2000 sale.................. 1,560 958
May 31, 2001 sale................... 1,352 884
------ ------
$4,758 $3,064
====== ======
Income from synfuel investments for the first quarter of fiscal 2004
also reflects income of approximately $477,000 from our sale of our membership
interest in the limited liability company that owns a synthetic fuel facility
in Gillette, Wyoming. We also received a secured contingent payment note that
could provide additional investment income for us if certain tax issues are
favorably resolved for the buyer with the Internal Revenue Service and/or the
facility resumes commercial operation. If the issues are favorably resolved
prior to January 1, 2005, or the facility resumes commercial operations, we are
eligible to receive an additional $3.5 million; in addition we are eligible to
receive $1.50 per Ton of Qualified Production produced by the facility and sold.
Our effective tax rate was approximately 25.0% for the first quarter of
fiscal 2004 and 2003 after reflecting our share of federal income tax credits
earned by the Somerset limited partnership under Section 29 of the Internal
Revenue Code.
As a result of the foregoing, net income for the first quarter of
fiscal 2004 was $4.1 million, a 30.2% increase from $3.1 million for the first
quarter of fiscal 2003.
9
Liquidity and Capital Resources
Net cash used in operating activities was approximately $4.6 million
for the first quarter of fiscal 2004 compared to cash provided by operating
activities of approximately $9.6 million in the first quarter of fiscal 2003.
For the first quarter of fiscal 2004 cash was provided by net income of $4.1
million, adjusted for the impact of a $5.2 million gain on our synfuel
investments and non-cash items of approximately $528,000 which consisted
primarily of depreciation and amortization and deferred income. The primary use
of cash was an increase in inventory of $20.1 million primarily due to seasonal
fluctuations and inventory availability. Cash was also used by a decrease in
other liabilities of $2.5 million. The primary source of cash for the first
quarter of fiscal 2004 was an increase in accounts payable of $14.9 million due
to timing of inventory purchases and terms of payments with manufacturers. Cash
was also provided by a decrease in other assets of $3.2 million and a decrease
in accounts receivable of $471,000.
At April 30, 2004, working capital was $99.3 million compared to $98.5
million at January 31, 2004. The ratio of current assets to current liabilities
was 2.3 to 1 at April 30, 2004 and 2.6 to 1 at January 31, 2004.
We received proceeds of approximately $7.4 million from installment
sales of our ownership interest in the Colona synfuel facility. We had capital
expenditures of $1.3 million primarily towards the relocation of seven retail
stores.
Cash used in financing activities totaled approximately $5.5 million
for the first quarter of fiscal 2004. Cash of $6.2 million was used to reduce
mortgage debt including the early payoff of eight mortgages totaling $5.1
million. Cash was also used to acquire 50,000 shares of our common stock for
$710,000. During the first quarter of fiscal 2004 we extended the share
repurchase authorization by an additional 1,000,000 shares. At April 30, 2004 we
had approximately 1,120,000 authorized shares remaining under the stock buy-back
program. We received proceeds of approximately $1.4 million from the exercise of
stock options by employees during the first quarter of fiscal 2004.
Forward-Looking Statements
This Form 10-Q 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 the Company 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(a) to the Company's Annual Report on Form 10-K for the
fiscal year ended January 31, 2004 (File No. 0-13283).
Item 3. Quantitative and Qualitative Disclosures About Market Risk
No material changes since January 31, 2004.
Item 4. Controls and Procedures
The Company's management evaluated, with the participation of the
Company's Chief Executive Officer and Chief Financial Officer, the effectiveness
of the Company's disclosure controls and procedures, as of the end of the period
covered by this report. Based on that evaluation, the Chief Executive Officer
and Chief Financial Officer concluded that the Company's disclosure controls and
procedures are effective to ensure that information required to be disclosed by
the Company in the reports that it files or submits under the Securities
Exchange Act of 1934 is recorded, processed, summarized and reported within the
time periods specified in the Securities and Exchange Commission's rules and
forms.
10
There were no changes in the Company's internal control over financial
reporting that occurred during the Company's last fiscal quarter that have
materially affected, or are reasonably likely to materially affect, the
Company's internal control over financial reporting.
11
PART II. OTHER INFORMATION
Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases
of Equity Securities
Issuer Purchases of Equity Securities
Total Number of Maximum Number
Shares Purchased of Shares that May
Total Number as Part of Publicly Yet Be Purchased
of Shares Average Price Announced Plans Under the Plans
Period Purchased(1) Paid per Share or Programs(2)(3) or Programs(2)(3)
- ------ ------------ -------------- ----------------- -----------------
February 1-29, 2004 - $ - - 1,170,480
March 1-31, 2004 25,000 $14.22 25,000 1,145,480
April 1-30, 2004 93,990 $15.02 25,000 1,120,480
------- ------ ------ ---------
Total 118,990 $14.85 50,000 1,120,480
======= ====== ====== =========
- ------------------------
(1) A total of 68,990 shares of common stock were purchased by the Company
other than through a publicly announced plan or program. These shares were
acquired on April 7, 2004 in payment of the exercise price of stock options
exercised by Stuart A. Rose, Chairman, President and Chief Executive
Officer of the Company. The purchase price was $15.34 per share.
(2) On January 14, 2003, the Company announced it had authorized the purchase
of up to 1,000,000 shares of its common stock from time to time in private
or market transactions at prevailing market prices. At January 31, 2004, a
total of 170,480 shares remained available to purchase under this
authorization.
(3) On February 27, 2004, the Company announced it had increased its share
repurchase authorization up to an additional 1,000,000 shares.
Item 4. Submission of Matters to a Vote of Security Holders.
The annual meeting of shareholders of REX Stores Corporation was held
on May 27, 2004, at which the following matter was submitted to a vote of
shareholders:
1. Election of seven directors.
Nominee For Withheld
------- --- --------
Stuart A. Rose............................. 9,079,802 1,624,735
Lawrence Tomchin........................... 9,079,802 1,624,735
Robert Davidoff............................ 10,424,755 279,782
Edward M. Kress............................ 9,079,802 1,624,735
Lee Fisher................................. 10,469,530 235,007
Charles A. Elcan........................... 9,124,577 1,579,960
David S. Harris............................ 10,469,530 235,007
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits. The following exhibits are filed with this report:
31 Rule 13a-14(a)/15d-14(a) Certifications
32 Section 1350 Certifications
(b) Reports on Form 8-K.
On April 6, 2004, the Company filed a Form 8-K reporting under
Item 12 the issuance of a press release announcing financial
results for the fourth quarter and year ended January 31, 2004.
12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
REX STORES CORPORATION
Registrant
Signature Title Date
--------- ----- ----
STUART A. ROSE Chairman of the Board June 9, 2004
- ---------------------- (Chief Executive Officer)
(Stuart A. Rose)
DOUGLAS L. BRUGGEMAN Vice President, Finance and Treasurer June 9, 2004
- ---------------------- (Chief Financial Officer)
(Douglas L. Bruggeman)
13