ITEM 1. BUSINESS
National Record Mart, Inc. (the "Company"), a Delaware corporation, founded in 1937, operates in a single industry segment as a specialty retailer of prerecorded home entertainment products, including compact discs ("CD"), audio cassettes, videos and related accessories. According to Billboard magazine, the Company is the fourth largest specialty retailer of prerecorded music in the country as measured by number of stores. The Company is a leading specialty music retailer in its core western Pennsylvania/eastern Ohio market.
As of March 31, 2001, the Company operated 151 stores in 32 states and the U.S. territory of Guam with the majority of stores in the eastern part of the United States.
On June 19, 2001, an involuntary petition under Title 11 of the United States Bankruptcy Code (the "Bankruptcy Code") was filed against the Company in the United States Bankruptcy Court for the Western District of Pennsylvania requesting relief under Chapter 7 (the "Involuntary Petition"). The Involuntary Petition was filed by five of the Company's major suppliers: Universal Music and Video Distribution, Inc., BMG Distribution, EMI Music Distribution, Sony Music Entertainment, Inc. and Warner/Elektra/Atlantic (WEA) Corporation. The Involuntary Petition indicates that the five suppliers hold an aggregate of approximately $18,753,000 of claims against the Company incurred in the ordinary course of their respective supply relationship with the Company. The Company is required to respond to the petition on or before July 26, 2001. While preparing a response to the Involuntary Petition, the Company continues to use, acquire, and dispose of property as if the Involuntary Petition had not been filed in accordance with Section 303 (f) of the Bankruptcy Code. The Company is in discussions with its current lender in an effort to secure debtor-in-possession financing in the event the Company chooses to file an election to convert to reorganization under Chapter 11 of the Bankruptcy Code ("Chapter 11"). For additional discussion of the impact of the Involuntary Petition on the Company see "Item 7. Management's Discussion and Analysis of Results of Operations and Financial Condition -- Liquidity and Capital Resources."
Certain statements in this annual report on Form 10-K are forward-looking statements concerning the future operations of the Company. Such statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, and there are many important factors that could cause actual results to differ materially from those in the forward-looking statements. Such factors include: developments with respect to the Involuntary Petition, including the Company's ability to convert to a Chapter 11 Reorganization; decisions of the Bankruptcy Court in the proceedings; the pricing and marketing activities of large diversified retailers within the geographic area of the Company's operations; the extent to which recording artists release "hit" recordings; changes in sales and advertising promotion practices by the major music distributors; weather, especially during the Christmas selling season; and interest rates, which affect the Company's financing costs.
INDUSTRY AND COMPETITIVE ENVIRONMENT
The US retail music market was approximately $14.3 billion in 2000, according to the Recording Industry Association of America (RIAA). The music retail industry is highly competitive. The Company competes with national and regional home entertainment product chains, mass merchandisers, electronic retail chains, discount stores, warehouse clubs, music, video and other home entertainment product stores, e-commerce music sites and mail order clubs. Some of the Company's competitors have substantially greater resources than the Company. The largest mail order clubs are affiliated with major manufacturers of prerecorded music and may have advantageous marketing arrangements with their affiliates. In addition, the Company's products may compete with other forms of entertainment, such as movies, concerts, sporting events, cable television and video games.
The Company believes that its ability to compete successfully depends on satisfactory resolution of the bankruptcy proceedings, offering broad product selection, securing convenient sites, maintaining attractive locations, managing merchandise efficiently, establishing and maintaining name recognition, pricing its products competitively and providing effective customer service and management.
SEASONALITY
The Company's business is seasonal, with its highest sales and net income levels historically occurring during the third quarter of its fiscal year, which includes the Christmas selling season.
MERCHANDISING
The Company's stores offer an assortment of CDs, prerecorded audio cassettes and related accessories with a more limited selection of movie and music videos. The following table shows the percentage of the Company's total merchandise sales attributable to each product group:
* Includes DVD
** Includes apparel, blank tapes, cleaning products, storage cases, posters, sheet music, LPs, magazines, books and miscellaneous items.
Prerecorded Music. The Company's stores offer a broad array of CDs and cassettes in all music categories including rock, pop, alternative, adult contemporary, country, easy listening, classical, jazz, religious, new age, rhythm and blues, children's, educational, show tunes, movie soundtracks, world music and others. The Company maintains a broad inventory base, with individual store inventory tailored to serve the particular customer demand in each store. The Company's stores offer from 10,000 to 50,000 titles, with an average of 18,000 titles per store. The selection of prerecorded music offered at the Company's stores includes "hits" which are best selling newer releases, "catalog" items, which are older but still popular releases, and seasonal and promotional items such as Christmas music, developing artist programs, "cut-outs" (low-priced items which have been deleted from a manufacturer's current catalog) and used CDs.
Prerecorded Video Cassettes. The Company's stores offer for sale a varied selection of prerecorded VHS video cassettes and DVD (digital versatile discs). DVD sales continue to increase while the price of the hardware decreases and more titles are offered. Titles are offered in all categories with an emphasis on music and movies.
Accessories and Other Products. The Company's stores carry a variety of accessories such as blank video and audio cassette tapes, maintenance and cleaning products, home and portable storage cases, sheet music, posters, T-shirts, magazines, and other items.
Tickets. To increase customer traffic, the Company offers tickets to entertainment events in many of its stores located in certain states including Pennsylvania, Ohio, Wisconsin, West Virginia, Kentucky, North Carolina, South Carolina and Hawaii. The Company's ticket outlets provide customers with access to tickets offered by Ticketmaster as well as tickets to other local concerts and sporting events.
ADVERTISING
The Company supports its retail sales through its own and various vendor supported marketing and advertising programs. Due to decreased purchasing from the Company's five major suppliers this support has materially decreased in the Company's current fiscal year.
More than 1.8 million store customers participate in the Company's Passport program. Passport allows a customer to earn points on every CD, tape or video purchase, which may be redeemed for a free CD, cassette, or video of choice. The program combines the standard customer loyalty incentives of frequent buyer programs, opportunities for discount on music and video products and other products sold by other retailers. Passport also provides for database marketing directly to consumers on a sophisticated, targeted basis. The Company believes that Passport has the potential to differentiate its stores from the competition, while creating incremental sales and increasing the average purchase per transaction.
E-COMMERCE
In December 1998, the Company launched its Internet commerce sites www.nrmmusic.com and www.wavesmusic.com. Due to decreased sales the Company ceased the operations of its commerce sites during its third fiscal quarter.
CUSTOMER SERVICE
Customer service continues to be a primary focus of every employee of the Company; including the field supervisory team, corporate operations department and the human resources area.
STORE RESTRUCTURING STRATEGY
The Company plans to continue its restructuring efforts by focusing on closing stores that are below the Company's expectations and changing the product mix in the stores that remain open to focus on product groups with higher margins. As a result of this effort, the Company does not anticipate any new store openings during the fiscal year 2002. The Company closed 29 stores during fiscal 2001, and through the first quarter of 2002 the Company closed an additional 22 stores. During fiscal 2000, the Company opened 18 locations, and closed 13 stores.
INVENTORY MANAGEMENT
The Company utilizes a proprietary interactive management information and point of sale system, FOCUS 1000. This combined system permits complete sales data and customer transactions to interact with the Company's purchasing, inventory control and accounting functions.
Inventory Management System. FOCUS 1000 integrates the Company's purchasing, warehousing, distribution, pricing and sales information, enabling the Company to set the appropriate quantity and mix of products in each of its stores, turn over inventory more quickly, minimize returns to suppliers and limit out-of-stock situations. Individual store sale profiles are utilized to set overall purchase quantities and store-by-store allocations of new releases, current hits and catalog products. These parameters are periodically updated based on sales trends and demand patterns. In addition to utilizing FOCUS 1000, stock levels are also monitored by the Company's product distribution group to further assure appropriate store inventory levels. The system segments the Company's products into over forty specific music categories and tracks sales in each store by category, so as to optimize sales/inventory ratios in each store.
In November 1999 the Company installed a new point of sale (POS) system. The adoption of the new software and equipment along with greatly enhanced data switching relay equipment permitted the two way transfer of significantly more information in less time and at a lower cost than the previous POS system.
Substantially all of the products sold by the Company are bar-coded. Retail transactions and inventory shipped by vendors directly to stores are captured through point-of-sale terminals at each store with data transmitted nightly to the Company's central computer. This perpetual inventory system, coupled with FOCUS 1000's replenishment system, determines target in-stock levels for each store.
Distribution. The Company operates one distribution center from which store inventories are replenished and items are returned to manufacturers. FOCUS 1000 also permits inter-store transfers of inventory to achieve improved stock balancing without requiring products to be routed through the Company's distribution facility.
Shipments from the distribution center and between stores are normally made weekly, with more frequent shipments made to stores having very high inventory turnover and to most stores during the Christmas shopping season. Shipments are made by Company vehicles and by commercial shipping services such as United Parcel Service. Certain new releases and other products are shipped directly by manufacturers to the Company's stores.
SUPPLIERS AND PURCHASING
Approximately 66% of the Company's music products were purchased directly from the five major music distributors in fiscal 2001. They included: Sony Music; Warner/Elektra/Atlantic (subsidiary of Time Warner); BMG Music (subsidiary of Bertelsman); UNI Distribution; and EMD (EMI Music Distribution). As is typical in its industry, the Company has no material long-term purchase agreements with its suppliers.
During its fourth fiscal quarter the Company was on credit hold with its major suppliers and purchased, its additional purchasing needs on a cash basis. Since January 2001, the Company has been operating without shipments from two of its major suppliers and has decreased its purchasing from the remaining three. The Company has increased the amount of purchases made through other suppliers at higher cost in order to maintain inventory levels. These five major suppliers filed the Involuntary Petition against the Company as discussed above in this Item I.
Four of the five major music vendors offer retailers a returns incentive/disincentives plan that has in the past been beneficial for the Company. To encourage retailers to buy carefully by limiting returns, an incentive payment is issued on most purchases and a penalty restocking fee is charged on only the product returned. If the retailer returns-to-purchases ratio with the major vendors is below a certain point, (generally 14% to 17%) the retailer will benefit. The Company's return percentages have been lower than the break-even with the majority of its major vendors allowing the Company to benefit from their returns policies.
TRADEMARKS AND SERVICE MARKS
The Company operates its stores under various names and service marks, including National Record Mart, NRM Music, Waves Music, Music Oasis, Vibes Music, Waves Music and Gifts, Music X, House of Music and Tempo Music. The Company has obtained federal registrations of its trademarks and service marks for Waves Music, NRM Music, Oasis Music & Video, Music Oasis, Music X and Vibes Music. The trade name Tempo Music was acquired through an acquisition in November 1998.
PERSONNEL
As of March 31, 2001, the Company employed 1,238 persons, 111 of whom worked at the Company's headquarters (including 7 part-time employees) or were area supervisors and 1,127 of whom worked at the Company's stores (including 769 part-time employees). The Company also adds part-time personnel during the Christmas season. In December 2000, the Company employed approximately 222 seasonal employees. None of the Company's employees are represented by a union.
ITEM 2.
ITEM 2. PROPERTIES
Corporate Headquarters and Distribution Facility. The Company's headquarters and distribution center is located in Carnegie, Pennsylvania, a suburb of Pittsburgh. This leased facility consists of approximately 60,000 square feet of distribution and warehouse space and 10,000 square feet of office space on approximately 3.5 acres of land. Management believes that its distribution center can service up to 350 stores with a minimal increase in personnel and fixtures. The Company's lease expires on April 30, 2005 and provides for rental payments of an average of approximately $148,000 per year.
Store Leases. All of the Company's stores are subject to operating leases with various remaining terms, including renewal options, through the year 2010. The leases have initial terms ranging from 5 to 15 years, with the average initial term being 8 years. The Company's store leases typically provide for a fixed minimum rental, payable monthly, plus payment of a percentage of gross receipts in excess of certain sales levels and common area maintenance, real estate taxes and other charges. Certain of the Company's mall store leases contain provisions permitting the landlord to relocate the Company's store or terminate the lease upon failure to achieve specified minimum sales levels or upon certain other conditions. In addition, many leases restrict the Company from opening new stores within a specified mileage radius. The following table lists the number of leases for the Company's stores due to expire in each calendar year, including renewal options:
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
On June 19, 2001, an involuntary petition under Title 11 of the United States Bankruptcy Code (the "Bankruptcy Code") was filed against the Company in the United States Bankruptcy Court for the Western District of Pennsylvania requesting relief under Chapter 7 (the "Involuntary Petition"). The Involuntary Petition was filed by five of the Company's major suppliers: Universal Music and Video Distribution, Inc., BMG Distribution, EMI Music Distribution, Sony Music Entertainment, Inc. and Warner/Elektra/Atlantic (WEA) Corporation. The Involuntary Petition indicates that the five suppliers hold an aggregate of approximately $18,753,000 of claims against the Company
incurred in the ordinary course of their respective supply relationship with the Company. The Company is required to respond to the petition on or before July 26, 2001. While preparing a response, the Company continues to use, acquire, and dispose of property as if the Involuntary Petition had not been filed in accordance with Section 303 (f) of the Bankruptcy Code. The Company is in discussions with its current lender in an effort to secure debtor-in-possession financing in the event the Company chooses to file an election to convert to reorganization under Chapter 11 of the Bankruptcy Code ("Chapter 11"). For additional discussion of the impact of the Involuntary Petition on the Company see "Item 7. Management's Discussion and Analysis of Results of Operations and Financial Condition -- Liquidity and Capital Resources."
There are no other legal proceedings pending to which the Company is a party or to which any of its properties is subject, other than routine litigation incidental to its business which is covered by insurance or which is not expected to have a material adverse effect on the Company's financial condition or results of operations..
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth quarter of fiscal 2001.
SUPPLEMENTARY ITEM.
IDENTIFICATION OF EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information with respect to the executive officers of the Company as of July 10, 2001.
William Teitelbaum has served as Chairman of the Company since 1986 and served as President since 1991. In January of 1997 Mr. Teitelbaum resigned as President while retaining the position of Chairman and Chief Executive Officer. In January of 1998, Mr. Teitelbaum resumed the position of President. He also served as Vice President and Treasurer from 1986 to 1991. From 1980 to 1985, he was a partner of Bear Stearns & Co. In addition, since 1985, Mr. Teitelbaum has been the sole shareholder and Chairman of Remsen Funding Corp., a New York investment firm.
Theresa Carlise joined the Company in July of 1986 as a financial systems consultant and subsequently became Controller of the Company in 1987. She served as Vice President of Finance of the Company from April 1990 to April 1993, when she became Senior Vice President, Chief Financial Officer and a Director of the Company. Since January of 1991, she has also served as Treasurer of the Company.
Scott Bargerstock is Vice President of Business Development and has served the Company since 1971 in various positions including Store Manager, District Manager and Regional Manager. Mr. Bargerstock was promoted in February of 1998 to his current position.
Charles Michael Stephenson started his career at NRM with a music retail background of twenty years with Camelot Music in Canton, Ohio. In April of 1996 he joined NRM as Director of Marketing. In February of 1998, Mr. Stephenson became Vice President of Marketing for the Company.
Officers are elected annually to serve until the ensuing year or until their successors are duly elected.
PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
The Company's common stock is traded on the OTC bulletin Board under the symbol NRMI.OB. For common stock price information, see Note 9 of Notes to Consolidated Financial Statements.
As of July 10, 2001, the approximate number of common stockholders of record was 89. The approximate number of total stockholders as of that date was 2,100.
DIVIDEND POLICY
In conjunction with the Company's senior credit facility, the Company is prohibited from paying cash dividends on its common stock.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
NATIONAL RECORD MART, INC. SELECTED CONSOLIDATED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA AND SELECTED OPERATING DATA)
(1) Each fiscal year consisted of 52 weeks except the fiscal year ended March 31, 2001, which consisted of 53 weeks. Each fiscal year is hereafter referred to by the year in which it ended, e.g., the fiscal year ended March 25, 2001 is "fiscal 2001"
(2) The Company adopted Financial Accounting Standards Board Statement No. 121, "Accounting for the Impairment of Long-Lived Assets to be Disposed of," in fiscal 1996. In connection with this adoption, the Company wrote down $1,843,788 of assets, which increased its net loss by $1,204,931 or $0.24 per share for fiscal year ended March 31, 2001.
(3) A store is included in comparable store sales calculations at the beginning of its 13th full month of operation.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated certain items in the Consolidated Statements of Operations as a percentage of net sales:
Net Sales. Net sales decreased during fiscal 2001 by $16.8 million or 11.7% compared to fiscal 2000. Factors that contributed to the decrease in total sales are the closing of 29 stores and a net comparable store decrease of 14.9%. The decrease in comparable store sales is related to an increase in competition, an increase in consumer preference for downloading prerecorded digital music over the Internet and the Company's decreased ability to successfully maintain product selection of the higher ranking music product. Net sales increased during fiscal 2000 by $12.7 million or 9.8% compared to fiscal 1999. Factors that contributed to the increase in total sales are the opening of 18 new stores and the closing of 13 stores, which was partially, offset by the decrease in comparable store sales of 3.4%.
Gross Profit. Gross profit expressed as a percentage of net sales decreased from 36.4% in fiscal 2001 to 36.9% in fiscal 2000. A primary reason for the decrease in margin as a percentage of sales was the continued shift of consumer preference from higher margin cassettes to lower margin CDs and a more competitive shelf pricing environment. Gross profit expressed as a percentage of net sales, increased from 37.1% in fiscal 1999 to 38.4% in fiscal 2000. A primary reason for the increase in gross profit was due to the Company wide increase in shelf pricing. This was offset slightly by the continued shift in consumer preference from higher profit margin cassettes to lower profit margin CDs.
Expenses. Selling, general and administrative expenses, (SG&A) expressed as a percentage of net sales increased from 35.9% in fiscal 2000 to 39.5% in fiscal 2001. The increase as a percentage of sales is primarily attributable to the decrease in comparable store sales of 14.9%. As a percentage of sales, SG&A increased from 33.7% in fiscal 1999 to 35.9% in fiscal 2000. This increase expressed as a percentage of net sales, is largely attributable to approximately 50 non-comp stores (stores not open for one full year) which sales have not proportionally matured to their selling, general and administrative expenses.
Depreciation and amortization increased from $4.7 million in fiscal 2000 to $4.9 million in fiscal 2001, primarily due to the annualized effect of the prior year additions. Depreciation and amortization increased from $3.5 million in fiscal 1999 to $4.7 million in fiscal 2000 primarily due to the addition of 18 new stores and the amortization of the costs associated with the private placement of its subordinated debt. Depreciation and amortization increased from $2.8 million in fiscal 1998 to $3.5 million in fiscal 1999 due to the addition of 33 new stores.
Interest Expense. Interest expense expressed as a percentage of net sales was 4.2% or $5.3 million for fiscal 2001 compared to 3.2% or $4.5 million for fiscal 2000. The increase in interest expense of approximately $800 thousand in fiscal 2001 is primarily due to an increase in borrowings. Interest expense expressed as a percentage of net sales was 3.2% or $4.5 million for fiscal 2000 compared to 2.4% or $3.2 million for fiscal 1999. The increase in interest
expense of approximately $1.3 million in fiscal 2000 is due to an increase in borrowings relating to the addition of 18 new stores.
Income Taxes. The Company's effective tax rate in fiscal 2001, 2000, and 1999 was 0%, 35% and 34%, respectively.
The Company recorded a valuation allowance in fiscal 2000 to reduce its deferred income tax balances of approximately $4.2 million. See Note 5 of Notes to Consolidated Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity are cash generated by operations, trade credit, and amounts available under its credit facility. Net cash provided by operating activities was $2.9 million in fiscal 2001 compared to net cash provided by operating activities of $2.7 million in fiscal 2000 and $2.3 million in fiscal 1999. During fiscal 2001, the $2.9 million provided by operating activities was primarily due to a decrease in inventory, and a loss from the disposal of property & equipment, while being offset by the net loss.
In fiscal 2000 the net cash provided by operating activities was primarily attributable to increases in depreciation and amortization, accounts payable, and the recording of a deferred tax valuation allowance, while being offset by the net loss and an increase in inventory.
During fiscal 2001, 2000 and 1999, the Company used approximately $917 thousand, $9.8 million and $14.9 million, respectively, to purchase property and equipment. The Company opened 1 new store and closed 29 stores in fiscal 2001, 18 new stores and closed 13 stores in fiscal 2000, and 33 new stores and 7 closed stores in fiscal 1999. In fiscal 1999, the 33 new stores included two acquisitions. The Company acquired 4 stores from Record Den Inc. and DJK Records & Video Inc. for approximately $933,000 and 13 stores from Happy Town and Tempo for approximately $3.6 million. The Company has closed 22 stores in fiscal 2002.
On February 17, 1998 the Company renewed its revolving line of credit from an institutional lender through June 10, 2003. Under the line, the Company is permitted to borrow up to $35 million, subject to a borrowing base calculation based upon inventory levels. Between the months of October 1 and December 31 an overadvance of $1.5 million is available to the Company in addition to its borrowing base calculation, not to exceed in total the borrowing limit of $35 million. As of February 6, 2001, the Company's institutional lender increased its interest rates. Borrowings under the amended facility bear interest at a floating rate equal to the lender's base rate (8.0% at March 31, 2001) plus two percentage points, or at the Company's option, the 30-day LIBOR rate (5.078% at March 31, 2001) plus four percentage points.
As of March 31, 2001, the Company's outstanding credit balance on its revolver was approximately $25.7 million. The Company's borrowing availability at March 31, 2001 was approximately $1.1 million. The revolver balance and the Company's cash requirements peak in February when the Company's trade payables become due from the Christmas selling season. A bankruptcy filing by the Company (which would include an election to convert the involuntary petition filed against the Company on June 19, 2001 to a Chapter 11 reorganization) constitutes an event of default under the revolver.
On April 16, 1998, the Company completed a private placement of $15,000,000 of senior subordinated notes to a group of institutional lenders. The notes carry an interest rate of 11.75% payable semi-annually. In consideration of the placement the Company issued warrants to purchase 400,000 shares of common stock at $.01 per share. The Company used the funds to expand its store base, update its point of sale equipment and general working capital purposes. On April 13, 2001, the Company reached an agreement with the holders of its senior subordinated notes to extend the maturity date of the notes, which were due on April 15, 2001. Under this agreement, the maturity of the notes was extended to October 15, 2001, the interest payment due on April 15, 2001 was deferred until October 15, 2001, certain financial covenants were waived and the noteholders agreed to forbear from the enforcement of remedies resulting from the failure to make interest payments through but not including October 15, 2001. The forbearance obligation terminates upon certain events of default, including a bankruptcy filing by the Company (which would include an election to convert the involuntary petition filed against the Company on June 19, 2001 to a Chapter 11 reorganization).
On February 23, 1994, the Board of Directors approved a program for the Company to purchase up to $1,000,000 in value of its common stock. On September 17, 1998 the Board of Directors approved the Company to purchase up to 500,000 additional shares of the Company's common stock. Such purchases will be made from time to time in the marketplace at the Company's discretion. Since the inception of the programs, the Company has purchased 446,817 shares of its stock.
Under Chapter 7 of the Bankruptcy Code, the relief requested in the Involuntary Petition, the Company's operations would cease and a trustee or trustees would be elected or appointed to liquidate the assets of the Company. The proceeds of the liquidation would then be distributed to the creditors of the Company in accordance with the priorities established by the Bankruptcy Code. No assurance can be given that there would be funds generated to pay every creditor. The Company's shareholders may receive no money in a Chapter 7 liquidation. It is not possible at this time to predict the effect of a Chapter 7 liquidation on the interest of creditors or stockholders.
The Company is in discussions with its current lender in an effort to secure debtor-in-possession financing in the event the Company chooses to file an election to convert to reorganization under Chapter 11. If an election to convert to reorganization under Chapter 11 is made, the Company would continue to conduct normal business operations as a debtor-in-possession subject to the jurisdiction of the Bankruptcy Court. As a debtor-in-possession, the Company could not engage in transactions outside the ordinary course of business without approval of the Bankruptcy Court.
Under Chapter 11, actions to enforce certain claims against the Company are stayed if the claims arose, or are based on, events that occurred on or before the date of the Involuntary Petition. The ultimate terms of settlement of these claims will be determined in accordance with a plan of reorganization, which requires voting of the impaired prepetition creditors and stockholders and confirmation by the Bankruptcy Court. Other liabilities may arise or be subject to compromise as a result of rejection of executory contracts, or unexpired leases, or the Bankruptcy Court's resolution of claims for contingencies and disputed amounts. The ultimate resolution of such liabilities, all of which are subject to compromise, will be a part of the reorganization plan filed with the Bankruptcy Court under Chapter 11.
A plan of reorganization would include a capital structure that will enable the Company to generate sufficient cash flow after reorganization to meet its restructured obligations. Accordingly, the rights of prepetition creditors and the ultimate payment of their claims may be substantially changed, or even eliminated under the Bankruptcy Code. It is not possible at this time to predict the ultimate outcome of a reorganization under Chapter 11 or its effects on the Company's business or on the interest of creditors or stockholders.
SEASONALITY
The Company's business is seasonal in nature, with the highest sales and earnings occurring in the third quarter of its fiscal year, which includes the Christmas selling season. Approximately 32% of the Company's net sales for fiscal 2001 were generated in the third quarter. (See Note 9 of Notes to the Consolidated Financial Statements for quarterly financial data.) Year-to-year comparisons of quarterly results and comparable store net sales can be affected by a variety of factors, including the success and timing of new releases by manufacturers, the timing and duration of the holiday selling seasons and the timing of new store openings and sales promotions.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements and related notes are included in Item 14 of this report. See Index to Consolidated Financial Statements contained in Item 14 herein.
ITEM 9.
ITEM 9. CHANGES OR DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Disclosure of the information required under this Item 9 has been previously reported, as that term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, and therefore is not required to be included herein.
ITEM 10.
ITEM 10. (a) AND (b) DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by these items of Part III will be set forth in the Company's Proxy Statement for its 2001 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days after March 31, 2001 under similar captions and is incorporated herein by reference, except that the information required with respect to the executive officers of the Company under Item 10 (b) is set forth immediately following Item 4.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORT ON FORM 8-K
(a) DOCUMENTS FILED AS A PART OF THIS REPORT:
(1) CONSOLIDATED FINANCIAL STATEMENTS
See Index to Consolidated Financial Statements on Page 13.
(2) FINANCIAL STATEMENT SCHEDULES
None of the schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are required.
(3) EXHIBITS
See Exhibit Index on pages 27 through 29
(b) REPORTS ON FORM 8-K
On February 27, 2001, the Company filed a Form 8-K to report the engagement of BDO Seidman, LLP to act as the principal accountant to audit the Company's financial statements.
(c) EXHIBITS:
See Exhibit Index on pages 27 through 29.
(d) OTHER FINANCIAL STATEMENTS
Not applicable.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.
NATIONAL RECORD MART, INC.
BY: /s/ William A. Teitelbaum ---------------------------------- William A. Teitelbaum Chairman of the Board, President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
NATIONAL RECORD MART, INC.
INDEX TO CONSOLIDATED (UNAUDITED) FINANCIAL STATEMENTS
Rider 18A Statement Regarding Absence of Audit
The accompanying consolidated balance sheet of National Record Mart, Inc. and subsidiary as of March 31, 2001 and March 25, 2000, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended March 31, 2001 have not been audited.
As reported under Items 1 and 3 of this Form 10-K, on June 19, 2001 an involuntary petition under Title 11 of the United States Bankruptcy Code was filed against the Company in the United States Bankruptcy Court for the Western District of Pennsylvania requesting relief under Chapter 7. The Company received no advance warning that this filing was about to be made. The Company is required to respond to the petition on or before July 26, 2001.
The unexpected filing of this petition has caused the small number of Company personnel who are responsible for the preparation of the Company's financial statements, including working with the Company's auditors with respect to the audit of such financial statements, to be diverted from such tasks in order to focus upon the immediate and critical steps which the Company must take to respond to the filing of the petition. In addition, as part of its response to the petition, the Company has determined to take a variety of actions to conserve available cash for vital operational needs. This has resulted in the Company not making certain payments to its auditors, which the auditors have indicated would be required to be made as a condition of delivery of any audit report.
As a result, in order to provide the fullest information in this Form 10-K which is available at this time, the Company has determined to file this Form 10-K containing the accompanying financial statements, which have not been audited and should not be relied upon.
NATIONAL RECORD MART, INC. and Subsidiary CONSOLIDATED STATEMENTS OF OPERATIONS For the years ended March 31, 2001, March 25, 2000 and March 27, 1999
See accompanying notes to consolidated financial statements
NATIONAL RECORD MART, INC. and Subsidiary CONSOLIDATED BALANCE SHEETS As of March 31, 2001 and March 25, 2000
See accompanying notes to consolidated financial statements
NATIONAL RECORD MART, INC. and Subsidiary CONSOLIDATED STATEMENTS OF CASH FLOWS For the years ended March 31, 2001, March 25, 2000 and March 27, 1999
See accompanying notes to consolidated financial statements
NATIONAL RECORD MART, INC. and Subsidiary CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY For the years ended March 31, 2001, March 25, 2000 and March 27, 1999
See accompanying notes to consolidated financial statements
NATIONAL RECORD MART, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
National Record Mart, Inc. (the "Company") is a specialty retailer of home entertainment products, including compact discs, audio and video cassettes, and related accessories. As of March 31, 2001, the Company operated 151 stores in 32 states and the U.S. territory of Guam. The stores are primarily in the eastern part of the United States and operate under five distinct store concepts, National Record Mart or NRM Music, Waves Music, Vibes Music, Music Oasis and Music X, each of which targets a different customer base. The Company's fiscal year is the 52 or 53 weeks ending on the Saturday in March closest to March 31. Fiscal years 2001, 2000, 1999 ended on March 31 (53 weeks), March 25 (52 weeks), and March 27 (52 weeks), respectively.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, National Record Mart Investments, Inc., a Delaware holding company. All intercompany accounts and transactions have been eliminated in consolidation.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.
MERCHANDISE INVENTORY
Inventory is comprised of records, cassettes, compact discs, video tapes and accessories and is stated at the lower of average cost or market. Market is net realizable value.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Equipment and major improvements to existing locations are capitalized. Expenditures for repairs and maintenance which do not extend the useful life of assets are charged to expense as incurred. Provisions for depreciation are computed using the straight-line method for book purposes and accelerated methods for tax purposes based upon the estimated useful lives of the assets. Leasehold improvements are amortized over the shorter of the useful life of the improvement or the lease term which includes anticipated renewal periods. Property and equipment of the Company consist of the following:
Depreciation expense for the years ended March 31, 2001, March 25, 2000, and March 27, 1999 was approximately $4,430,000, $4,209,000, and $3,096,000, respectively.
INTANGIBLE ASSETS
Intangible assets recorded by the Company are being amortized using the straight-line method over their estimated useful lives. Goodwill represents the excess of the purchase price over the fair value of the net assets acquired in the original acquisition of the Company and the acquisitions of businesses in fiscal 1994, fiscal 1999 and fiscal 2000 and is
being amortized over periods of 40 years for acquisitions taking place in fiscal 1994 and 15 years for acquisitions taking place in fiscal 1999 and fiscal 2000. The amortization period is determined by taking into consideration the following factors: the amortization periods generally used in the retail music business, the highly competitive nature of the business including emerging forms of competition and the overall history of profitability of the acquired business. The estimated useful life of other intangible assets is five years. Accumulated amortization as of March 31, 2001 and March 25, 2000 was approximately $1,633,000 and $1,177,000, respectively. Amortization expense for the years ended March 31, 2001, March 25, 2000, and March 27, 1999 was approximately $456,000, $438,000, and $444,000, respectively.
VALUATION OF LONG-LIVED ASSETS
The Company monitors the recoverability of long-lived assets, based on factors such as current market value, future asset utilization, business climate and future undiscounted cash flows expected to result from the use of the related assets. The Company's policy is to record an impairment loss in the period when it is determined that the carrying amount of the asset may not be recoverable. The impairment loss is calculated as the amount by which the carrying amount of the asset exceeds the fair value of the asset.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts reported in the consolidated balance sheets for the Company's financial instruments approximate their fair value.
STORE OPENING COSTS AND CLOSING COSTS
The expenses associated with the opening of new stores and closing stores are charged to expense as incurred.
ADVERTISING COSTS
Advertising and sales promotional programs are charged to expense during the periods in which they are run. Total advertising and sales promotional expenses for the fiscal years ended March 31, 2001, March 25, 2000, and March 27, 1999 were approximately $1,353,000, $2,202,000, and $2,046,000, respectively.
STOCK OPTION PLANS
In October 1995, the Financial Accounting Standards Board (FASB) issued Statement No. 123, "Accounting for Stock-Based Compensation," which establishes financial accounting and reporting standards for stock-based employee compensation plans. The Company continues to account for its stock-based employee compensation plans using the intrinsic value method under Accounting Principles Board Opinion No. 25. See pro forma disclosures required under FASB Statement No. 123 in Note 4.
REVENUE RECOGNITION
Revenue from sales of merchandise is recognized at the point of sale to the consumer, at which time payment is tendered. There are no provisions for uncollectible amounts since payment is received at the time of sale. In connection with gift certificates, a deferred revenue amount is established upon purchase of the gift certificate by the customer and revenue is recognized upon redemption and purchase of merchandise.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates.
RECENT FINANCIAL ACCOUNTING STANDARDS BOARD PRONOUNCEMENT
FAS 133, Accounting for Derivative Instruments and Hedging Activities
In 1998, the FASB issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," which establishes standards for the recognition and measurement of derivatives and hedging activities. The standard is effective for fiscal 2002. The Company does not currently engage in these types of risk management or investment activities. Based upon current business practices, the statement is not anticipated to have any impact on the Company's financial statements.
EARNINGS PER SHARE
The following table shows the share amounts used in computing basic and diluted earnings per share.
RECLASSIFICATION
Certain reclassifications have been made to the Consolidated Financial Statements for prior periods in order to conform to the March 25, 2000 presentation.
2. REVOLVING CREDIT FACILITY AND TERM DEBT
Long-term debt consisted of the following as of:
The Company has a revolving credit facility (the "Revolver") which expires on June 10, 2003. The maximum borrowings under the Revolver are $35,000,000 and are based upon eligible inventory levels as defined therein. During the months of October through December 31 of each year, an overadvance is available in addition to the borrowing base as calculated by levels of inventory in the amount of $1.5 million. In any event, the total borrowings under this facility shall not exceed the limit of $35 million. As of March 31, 2001, approximately $26,750,000 was available and approximately $1,068,000 was unused under the revolving line of credit facility. The Company is required to pay a monthly commitment fee of .25% per annum on the unused portion of the Revolver and a monthly collateral monitoring fee of $3,500.
The Revolver also contains various financial and other covenants that place restrictions or limitations on the Company and its subsidiaries, the more restrictive of which include: (i) maintenance of a number of financial ratios, as defined, (ii) a restriction on dividends, and (iii) limitation on capital expenditures. The covenants have been waived through August 15, 2001. A bankruptcy filing by the Company (which would include an election to convert the involuntary petition filed against the Company on June 19, 2001 to a Chapter 11 reorganization) constitutes an event of default under the revolver.
On April 16, 1998, the Company secured a private placement of $15,000,000 in senior subordinated notes. Originally, the notes carried an interest rate of 11.75% payable semiannually and matured April 15, 2001. By agreement dated April 13, 2001, the maturity of the notes was extended to October 15, 2001, the interest payment date on April 15, 2001 was deferred until October 15, 2001, certain financial covenants were waived and the noteholders agreed to forebear from the enforcement of remedies resulting from the failure to make interest payments through but not including October 15, 2001. The forbearance obligation terminates upon certain events of default, including a bankruptcy filing by the Company (which would include an election to convert the involuntary petition filed against the Company on June 19, 2001 to a Chapter 11 reorganization) In consideration of the placement, the Company issued 400,000 common stock warrants with an exercise price of $0.01. The Company has allocated $1,600,000 of value for accounting purposes to the warrants, which has been recorded as a reduction of the $15,000,000. This reduction will be accreted as additional interest expense over the term of the note. The Company has issued 39,990 warrants for an additional expense of $205,000 in the third quarter of fiscal 1999. The additional warrants are a settlement for the delay in the effective date of registering the 400,000 warrants noted above with the SEC. During the year ended March 27, 1999, both the 400,000 and 39,990 warrants were exercised.
Future scheduled maturities of long-term debt are as follows:
Interest payments of $5,305,000, $3,874,000, and $1,918,000 were made during the fiscal years ended March 31, 2001, March 25, 2000, and March 27, 1999, respectively.
3. EMPLOYEE BENEFIT PLANS
Profit Sharing Plan. The Company sponsors a qualified, noncontributory profit sharing plan for eligible employees. Contributions to the plan, as determined by the Board of Directors, are discretionary but generally may not exceed 15% of the defined annual compensation paid to all participating employees. No contributions were made to the plan for any of the years presented.
401(k) Plan. The Company sponsors a 401(k) plan for eligible employees. Employees who have attained age 21 and are paid for 1,000 or more hours of service within the twelve months from the date hired are eligible to participate. Under provisions of the plan, participants may contribute up to 15% of their eligible compensation to the plan. These contributions are made through payroll deductions and are partially matched by the Company. Contributions made by the Company to its 401(k) plan were $68,000, $72,000, and $64,000 for the years ended March 31, 2001, March 25, 2000, and March 27, 1999, respectively.
4. STOCK OPTION PLANS
The National Record Mart, Inc. 1993 Stock Option Plan (the "Plan") provides for the grant of 185,000 incentive or non-statutory stock options to purchase common stock. Employees who share the responsibility for the management growth or protection of the business of the Company are eligible to receive options which are approved by a committee of the Board of Directors. These options primarily vest over five years and are exercisable for a ten-year period from the date of the grant.
Additionally, the Company's Board of Directors adopted the National Record Mart, Inc. 1993 Non-Employee Director Stock Option Plan (the "Director Plan"). The Director Plan provides for the grant of 15,000 stock options to purchase common stock to all independent members of the Board of Directors who are not employees of the Company and who are disinterested persons (as used in Rule 16b-3 promulgated under the Securities Exchange Act of 1934). These options vest over five years and are exercisable for a ten-year period from the date of grant.
On June 10, 1996, the Company's Board of Directors granted Mr. William A. Teitelbaum the option to purchase 200,000 shares of common stock par value $.01 per share of the Company at an option exercise price of $2.50 per share. The right to exercise such option vests in four equal installments over a period of four years beginning on June 15, 1997, and all options will vest automatically upon (i) acquisition by a third party or group of a majority of the Company's outstanding equity securities, or a sale of the Company, or all or substantially all of its assets, (ii) termination of Mr. Teitelbaum's employment without proper cause, (iii) a reorganization, merger or consolidation which results in a change in control of the Company or (iv) Mr. Teitelbaum's death. If Mr. Teitelbaum ceases to be employed by the Company for any other reason, the unvested portion of the options will be extinguished. The option expires on June 15, 2007.
On June 30, 1997, the Company's Board of Directors approved the 1997 Non-Employee Directors Stock Option Plan. The 1997 Directors' Plan provides for the grant of 25,000 shares to all independent members of the Board of Directors who are not employees. The options are vested as of grant date and are exercisable over a ten-year period from the date of grant at an exercise price of $2.50.
The Company's Board of Directors approved on July 1, 1997 the issuance of options to purchase 200,000 shares of the Company's common stock to William A. Teitelbaum. The options vest over twenty years and are exercisable at $0.10, with an expiration date of July 1, 2024. The options have a vesting event to automatically vest in full upon termination, death, merger, acquisition or liquidation.
Pro forma information regarding net income and earnings per share is required by FASB Statement No. 123, which also requires that the information be determined as if the Company has accounted for its employee stock options granted beginning in the fiscal year subsequent to December 31, 1994 under the fair value method of that Statement. The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions for the year ended March 31, 2001: risk free rate of (*)%; no dividend yield; volatility factors of the expected market price of the Company's common stock of (*); and weighted-average expected life of the option of four or five years depending on terms of grant. For the year ended March 25, 2000: risk free rate of 5.25%; no dividend yield; volatility factors of the expected market price of the Company's common stock of 1.283; and weighted-average expected life of the option of four or five years depending on terms of grant. For the year ended March 27, 1999: risk-free interest rate of 5.48%; no dividend yield; volatility factors of the expected market price of the Company's common stock of 1.283; and weighted-average expected life of the option of five years.
The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company's employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the option's vesting period. The Company's pro forma information follows:
- --------------- * To be calculated and submitted in an amended Form 10K.
Stock options granted prior to March 26, 1995 are excluded from the determination of pro forma net income.
A summary of the Company's stock option activity follows:
5. INCOME TAXES
The provision (benefit) for income taxes, as shown in the accompanying Consolidated Statements of Operations, includes the following components:
A reconciliation of the Company's effective income tax rate with the federal statutory rate is as follows:
For income tax purposes, National Record Mart, Inc. and its subsidiary have approximately $26.8 million of net operating losses available to offset against future taxable income, subject to certain limitations. Such losses expire beginning in 2019 - 2021.
Tax refunds of approximately $0, $175,000 and $9,300 were received during the fiscal years ended March 31, 2001, March 25, 2000, and March 27, 1999, respectively.
Significant components of the Company's deferred tax assets and liabilities as of March 31, 2001 and March 25, 2000 are as follows:
Based on assessment of all available evidence as of March 31, 2001 and March 25, 2000, including the fact that the Company is in a cumulative loss position, management has concluded that the deferred tax asset should be reduced by a valuation allowance equal to the net deferred tax asset.
6.COMMITMENTS AND CONTINGENCIES
The Company leases its retail stores and distribution center under operating leases. The lease agreements, including renewal options, expire on various dates through 2011. Most leases provide for additional contingent rents based on a percentage of sales and increases in real estate taxes. Future minimum annual lease payments under noncancellable lease agreements in excess of one year at March 31, 2001 are as follows:
Rent expense for the years ended March 31, 2001 March 25, 2000, and March 27, 1999 was $16,105,000, $15,884,000, and $13,168,000 respectively, including contingent rentals of $5,700, $263,000 and $197,000, respectively.
7. CONCENTRATION OF BUSINESS RISKS
The Company purchases inventory for its stores from approximately 250 suppliers, with approximately 66% of purchases being made from five suppliers. As of January of 2001, the Company has been operating without shipments from two of its major suppliers and has decreased its purchasing from the remaining three. The Company has increased the amount of purchases made through other suppliers at a higher cost in order to maintain inventory levels. The Company's advertising programs for the same period, have been adversely effected by the decrease in purchases from its five major suppliers. These five major suppliers filed the Involuntary Petition against the Company as discussed in Note 9.
8. ASSET PURCHASES
On May 4, 1998, the Company purchased certain of the assets of Record Den Inc. and DJK Records & Video Inc., totaling four stores. The acquisition was accounted for using the purchase method of accounting for a purchase price of approximately $933,000 resulting in $195,000 of goodwill which is being amortized using the straight-line method over 15 years, $708,000 for purchased assets and a $30,000 consulting and noncompete agreement for a period of three years. The purchase price was paid in cash upon completion of the agreement.
On November 13, 1998, the Company purchased certain of the assets of Happy Town Inc. and Tempo One Stop Records Inc., totaling twelve stores. The acquisition was accounted for using the purchase method of accounting for a purchase price of approximately $3,574,000 resulting in $869,000 of goodwill which is being amortized using the straight-line method over 15 years, $2,648,000 for purchased assets and a $57,000 consulting and noncompete agreement for a period of three years. The purchase price was paid in cash upon completion of the agreement.
On May 5, 1999, the Company amended its asset purchase agreement with Tempo One Stop Records Inc. and Happy Town Inc. to provide for the additional purchase of two stores located in Guam. The acquisition was accounted for using the purchase method of accounting for a purchase price of approximately $540,000 resulting in $200,000 of goodwill, which is being amortized using the straight-line method over 15 years, and $340,000 for purchased assets. The purchase price is being paid through monthly installments equal to 7% of sales of the store with the highest sales for the applicable month.
9. LITIGATION
On June 19, 2001, an involuntary petition under Title 11 of the United States Bankruptcy Code (the "Bankruptcy Code") was filed against the Company in the United States Bankruptcy Court for the Western District of Pennsylvania requesting relief under Chapter 7 (the "Involuntary Petition"). The Involuntary Petition was filed by five of the Company's major suppliers: Universal Music and Video Distribution, Inc., BMG Distribution, EMI Music Distribution, Sony Music Entertainment, Inc. and Warner/Elektra/Atlantic (WEA) Corporation. The Involuntary Petition indicates that the five suppliers hold an aggregate of approximately $18,753,000 of claims against the Company incurred in the ordinary course of their respective supply relationship with the Company. The Company is required to respond to the petition on or before July 26, 2001. While preparing a response to the Involuntary Petition, the Company continues to use, acquire, and dispose of property as if the Involuntary Petition had not been filed in accordance with Section 303 (f) of the Bankruptcy Code. The Company is in discussions with its current lender in an effort to secure debtor-in-possession financing in the event the Company to file an election to convert to reorganization under Chapter 11 of the Bankruptcy Code ("Chapter 11"). For additional discussion of the impact of the Involuntary Petition on the Company see "Item 7. Management's Discussion and Analysis of Results of Operations and Financial Condition -- Liquidity and Capital Resources."
Additionally, the Company is involved, from time to time, in lawsuits that arise in the normal course of business. The Company actively and vigorously defends all lawsuits. Management believes there are no such lawsuits that will have a material effect on the Company's financial position.
10. QUARTERLY RESULTS OF OPERATIONS IN THOUSANDS (UNAUDITED)
* data rounded in quarterly calculations
INDEX TO EXHIBITS
The following documents are filed as part of this 10K for the year ended March 31, 2001