UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 1998

OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 0-22702

ROBERDS, INC.

(Exact name of registrant as specified in its charter)

Ohio 31-0801335
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)

1100 East Central Avenue
Dayton, Ohio 45449-1888

(Address of principal executive offices)

(937) 859-5127

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such requirements
for the past 90 days.

Yes X No
------ ------

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. On July 30, 1998, 6,043,615
common shares, without par value, were outstanding.

PAGE 1

ROBERDS, INC. AND SUBSIDIARY

INDEX

PAGE
NUMBER
------

PART 1. FINANCIAL INFORMATION:

ITEM 1. Financial Statements:

Condensed Consolidated Balance Sheets -
June 30, 1998 and December 31, 1997 3

Condensed Consolidated Statements Of
Earnings - Three and Six Months Ended
June 30, 1998 and 1997 4

Condensed Consolidated Statements
of Cash Flows - Six Months Ended
June 30, 1998 and 1997 5

Notes to Condensed Consolidated
Financial Statements 6

ITEM 2. Management's Discussion
and Analysis of Financial
Condition and Results
of Operations 8

ITEM 3. Quantitative and Qualitative
Disclosures About Market Risk 13

PART II. OTHER INFORMATION

ITEMS 1-3. Inapplicable 14

ITEM 4. Submission of Matters to a
Vote of Security Holders 14

ITEM 5. Inapplicable 14

ITEM 6. Exhibits and Reports
on Form 8-K 14

Page 2

ROBERDS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

JUNE 30 DECEMBER 31
1998 1997
---- ----

ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 3,741 $ 2,494
Receivables:
Customers 1,127 1,311
Vendors and other 1,836 2,693
Merchandise inventories 43,089 51,173
Refundable income taxes 4,037 2,025
Prepaid expenses and other 2,556 1,792
Deferred tax assets 3,217 3,375
-------- --------
Total current assets 59,603 64,863

Property and equipment, net 95,748 99,364
Deferred tax assets 4,143 4,381
Certificates of deposit, restricted 2,917 2,541
Other assets 1,605 1,542
-------- --------
$164,016 $172,691
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 12,654 $ 16,871
Accrued expenses 8,545 8,885
Customer deposits 10,317 11,686
Litigation 2,270 2,992
Current maturities of long-term debt 2,836 2,731
-------- --------
Total current liabilities 36,622 43,165

Long-term debt including capital leases 76,065 73,309
Deferred warranty revenue and other 8,661 10,448

SHAREHOLDERS' EQUITY:
Common stock 604 601
Additional paid-in capital 32,177 32,091
Retained earnings 9,887 13,077
-------- --------
Total shareholders' equity 42,668 45,769
======== ========
$164,016 $172,691
======== ========

See notes to condensed consolidated financial statements.

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4

ROBERDS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share data)

THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
1998 1997 1998 1997
---- ---- ---- ----

NET SALES AND SERVICE REVENUES $ 73,894 $ 80,235 $ 152,406 $ 163,387

COST OF SALES 50,798 53,629 104,629 110,140
-------- -------- --------- ---------
Gross profit 23,096 26,606 47,777 53,247

SELLING, DELIVERY AND ADMINISTRATIVE EXPENSES 24,778 28,362 52,466 54,788
INTEREST EXPENSE, NET 1,799 1,961 3,484 3,834
FINANCE PARTICIPATION INCOME (743) (788) (1,543) (1,380)
OTHER INCOME, NET (890) (906) (1,750) (1,757)
-------- -------- --------- ---------

LOSS BEFORE TAX BENEFIT (1,848) (2,023) (4,880) (2,238)

INCOME TAX BENEFIT (630) (710) (1,690) (780)
-------- -------- --------- ---------

NET (LOSS) ($ 1,218) ($ 1,313) ($ 3,190) ($ 1,458)
======== ======== ========= =========

BASIC AND DILUTED NET (LOSS) PER COMMON SHARE ($ 0.20) ($ 0.22) ($ 0.53) ($ 0.24)
======== ======== ========= =========

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
BASIC 6,044 5,965 6,037 5,962
======== ======== ========= =========
DILUTED 6,044 5,965 6,037 5,962
======== ======== ========= =========

See notes to condensed consolidated financial statements.

Page 4
5

ROBERDS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

SIX MONTHS ENDED
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS JUNE 30
1998 1997
---- ----

CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) ($ 3,190) ($ 1,458)
Adjustments to reconcile net (loss) to net cash
(used in) provided by operating activities:
Depreciation and amortization 4,425 4,535
(Gain) loss on sales of fixed assets (25) 19
Changes in assets and liabilities, net (1,690) 4,742
------- --------
Net cash (used in) provided by operating activities (480) 7,838

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (769) (2,726)
Proceeds from sales of fixed assets 42 48
Other (465) (83)
------- --------
Net cash (used in) investing activities (1,192) (2,761)

CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt (4,139) (14,806)
Proceeds from long-term debt 7,000 8,080
Net proceeds from issuance of common shares 89 131
Debt issuance costs (31) (128)
------- --------
Net cash (used in) provided by financing activities 2,919 (6,723)
------- --------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,247 (1,646)
CASH AND CASH EQUIVALENTS - Beginning of period 2,494 2,794
------- --------
CASH AND CASH EQUIVALENTS - End of period $ 3,741 $ 1,148
======= ========
CASH PAID (REFUNDED)FOR:
Interest, net of $38 capitalized in 1997 $ 3,506 $ 3,985
======= ========
Income taxes $ (75) $ 863
======= ========

See notes to the condensed consolidated financial statements

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6

ROBERDS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT SHARE DATA)

A. BASIS OF PRESENTATION

The consolidated balance sheet at December 31, 1997 is condensed from the
audited financial statements. The accompanying unaudited condensed consolidated
balance sheet at June 30, 1998, the condensed consolidated statements of
operations for the three and six months ended June 30, 1998 and 1997, and the
condensed consolidated statements of cash flows for the six months ended June
30, 1998 and 1997, have been prepared by the Company in accordance with
generally accepted accounting principles and in the opinion of management
include all adjustments (which consist only of normal recurring adjustments)
necessary for a fair presentation of results of operations for the periods
presented.

Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted or condensed. These financial statements should be read in
conjunction with the financial statements and the notes thereto for the year
ended December 31, 1997 included in Form 10-K. The results of operations for the
six months ended June 30, 1998 may not be indicative of the results for the year
ending December 31, 1998.

B. DEBT

JUNE 30 DECEMBER 31
1998 1997
---- ----

Mortgage notes payable $45,140 $46,308
Revolving line of credit 22,000 15,000
Term loan agreement 2,800
Capital lease obligations 11,761 11,932
------- -------
78,901 76,040
Less current maturities 2,836 2,731
------- -------
$76,065 $73,309
======= =======

In February 1998, the Company utilized the revolving line of credit to repay the
balance outstanding under the term loan prior to its maturity.

The revolving bank line of credit, which was amended as of June 30, 1998,
expires in January 2000. The amount available under the line is limited to the
lesser of: (a) $30,000 or (b) an amount based upon a percentage of eligible
accounts receivable and inventory less excess customer deposits. At June 30,
1998, $26,298 was available under the line of which $22,000 was outstanding. The
line of credit bears interest at the prime rate plus 1% (9.50% at June 30,
1998).

The line of credit includes certain restrictive covenants including, among
others, limitations on capital expenditures and the payment of dividends,
maintenance of minimum current, fixed-charge-coverage, funded-debt-to-earnings,
and debt-to-tangible-net-worth ratios. Certain of the covenants contained in the
revolving credit agreement become increasingly restrictive over time.

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7

C. INCOME TAXES

Income tax benefit consists of the following:

SIX MONTHS ENDED
JUNE 30
1998 1997
---- ----
Currently payable (refundable):
Federal $(2,016) $(495)
State and local (70) 78
------- -----
(2,086) (417)
Deferred 396 (363)
======= =====
($1,690) ($780)
======= =====

The disproportionate provision for income taxes reflects minimum taxes imposed
by certain jurisdictions, and a valuation reserve for certain state operating
loss carryforwards for which the Company has determined that it is more likely
than not will not yield a benefit in the future.

D. WORKERS' COMPENSATION DISPUTE

During 1994, the Ohio Bureau of Workers' Compensation ("Bureau") completed an
examination of the Company's 1992 and 1993 Ohio workers' compensation tax
returns. As a result of that audit, the Bureau issued an assessment against the
Company for approximately $1,000. As a result of the Company's appeals and an
adjustment received in 1995, the assessment was reduced to $871. The assessment
was based on the Bureau's reclassification of the majority of the Company's Ohio
employees into higher rate classifications. In January 1997, the Company lost
its appeal of the assessment in the Ohio Court of Appeals. The Company has filed
another appeal of right with the Ohio Supreme Court. If the Company is
unsuccessful in this final appeal, the Company would likely be liable not only
for the $871 assessment but also for a similar adjustment for the years
subsequent to 1993.

In May 1998, Bureau declared a one-time refund of premiums to all participants
in the workers' compensation fund. As part of the refund process, any
outstanding balances due to the Bureau were set off against the refund,
including the $871 assessment against the Company. As a result, the amount
accrued by the Company for the 1992-1993 assessment has been paid. The Company
continues to accrue the estimated amount of additional taxes that would be
caused by a reclassification of employees for the periods subsequent to 1993.

Page 7
8

ROBERDS, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLAR AMOUNTS IN THOUSANDS)

RESULTS OF OPERATIONS

The first six months of 1998 resulted in a net loss of $(3,190), compared to a
net loss of $(1,458) for the first six months of 1997. Sales for the three
months ended June 1998 declined to $73,894 from $80,235 for the three months
ended June 1997, a 7.9 percent decrease. Sales for the first half of 1998
declined to $152,406 from $163,387 for the first half of 1997, a 6.7 percent
decrease. The decline in total sales includes the effect of closing the Decatur,
Georgia store in December 1997 and, to a much lesser extent, the withdrawal from
the personal computer business in Dayton and Cincinnati. These factors will
continue to have an unfavorable effect on total store sales throughout 1998.

Comparable store sales decreased 5.9 percent for the three months ended June
1998, and decreased 4.8 percent for the first six months of 1998. The percentage
increases (decreases) in sales by market area were as follows:

THREE MONTHS SIX MONTHS
ENDED JUNE 30 ENDED JUNE 30
TOTAL COMPARABLE TOTAL COMPARABLE
STORES STORES STORES STORES
------ ------ ------ ------
Dayton (6)% (6)% (2)% (2)%

Cincinnati (15) (15) (16) (16)

Atlanta (5) 3 (5) 3

Tampa (10) (10) (8) (8)

Overall, the Company believes that a highly competitive retail environment for
big ticket goods, combined with an industry wide softness in consumer
electronics and high consumer debt, also contributed to the decrease in
comparable store sales.

Sales by major product category as a percentage of total sales follows:

THREE MONTHS SIX MONTHS
ENDED JUNE 30 ENDED JUNE 30
1998 1997 1998 1997
---- ---- ---- ----

Furniture 39% 38% 40% 38%

Bedding 14 13 14 13

Major Appliances 27 27 25 25

Consumer Electronics 14 17 16 18

Extended Warranty Contracts and Other 6 5 5 6
=== === === ===
100% 100% 100% 100%
=== === === ===

Sales of consumer electronics products continued to decline as a percentage of
total Company sales due to rapidly declining retail prices in that product
category, continued industry softness, a highly competitive retailing
environment, continuing technological

Page 8
9

advances resulting in lower product prices, and the lack of new products, at
higher prices, to offset the effect of mature products with declining prices.
The Company expects retail price declines in the electronics category to
continue for the foreseeable future.

In late March 1997, the Company entered into an agreement to sell third-party
extended warranty contracts. Revenues and the related costs of the contracts
entered into after the effective date of the agreement are being recognized at
the time the third-party contracts are sold. Revenues and selling costs related
to contracts sold prior to the effective date of the agreement will be
recognized over the remaining lives of the contracts, and the expenses related
to service costs will be recognized as incurred. Total sales were positively
affected by this agreement by approximately 1.0 percent during the first six
months of 1998. Sales of third-party warranty contracts became comparable in the
second quarter of 1998.

For the three months ended June 1998, gross profit was $23,096, or 31.3 percent
of sales, as compared to $26,606, or 33.2 percent of sales, for the three months
ended June 1997. Gross profit for the six months ended June 1998 was $47,777, or
31.3 percent of sales, as compared to $53,247, or 32.6 percent of sales, for the
six months ended June 1997. The majority of the decline in gross profit margin
percentage in 1998 reflects the liquidation at reduced selling prices of certain
aged inventories and inventories from certain vendors that are being
de-emphasized or discontinued. Partially offsetting the decline in gross margin
percentage were the above-mentioned sales of third-party extended warranty
contracts, which favorably affected gross margins as a percentage of sales by
approximately 0.5 percent in the first six months of 1998. The effect of the
sale of third-party warranty contracts on gross margin as a percentage of sales
became comparable in the second quarter of 1998.

Gross margin percentages for the first six months of 1998 by category were
approximately 35 percent for furniture, 44 percent for bedding, 21 percent for
major appliances and 17 percent for consumer electronics. The gross margin
percentages for the first half of 1998, as compared to the first half of 1997,
remained steady for bedding, while furniture, major appliances and consumer
electronics gross margins declined considerably. Contributing to the decline in
gross margin percentage for furniture and consumer electronics was the above
mentioned liquidation of certain aged and de-emphasized merchandise. Although
progress in liquidating the inventory associated with the discontinued vendors
and product lines has been somewhat slower than anticipated, the majority has
been liquidated. The Company expects these lower margins to continue through the
third quarter of 1998, as it continues to further reduce aged and de-emphasized
merchandise, and to begin to return more normal levels later in the year.
Product prices and margins in consumer electronics and appliances continued to
be under pressure during the first half of 1998, as a result of competitive
conditions in these categories.

For the three months ended June 1998, selling, delivery, and administrative
expenses, which include occupancy costs, were $24,778, or 33.5 percent of sales,
as compared to $28,362, or 35.3 percent of sales, for the comparable period in
1997. Selling, delivery, and administrative expenses for the six months ended
June 1998 were $52,466, or 34.4 percent of sales, as compared to $54,788, or
33.5 percent of sales, for the comparable period in 1997. The decrease in
expenses as a percentage of sales for the three months ended June 30 1998, as
compared to the comparable period in 1997, was primarily due to a one-time
refund of premiums of $1,053 and a 75 percent rate reduction to all participants
in the State of Ohio workers' compensation fund. Selling, delivery and
administrative expenses for the three months ended June 1998 reflect reduced
levels of advertising and the use of different media mixes; reduced use of
same-as-cash financing programs; and reduced property and casualty premiums due
to a change in insurance carriers. These decreases were offset in part for both
the three and six months ended June 1998 by increases in warehouse expense, net
of delivery fees, and increases in sales commissions to support the sale of aged
and discontinued merchandise. Selling, delivery and administrative expenses for
the six months ended June 1998 increased as a percentage of sales due to
increased finance charges for extended financing programs offered during the
first quarter of 1998, which were offset in part by a decrease in advertising
and promotion expenses.

Interest expense, net of interest income, decreased to $1,799, or 2.4 percent of
sales, for the three months ended June 1998 compared to $1,961, or 2.5 percent
of sales, for the comparable period in 1997. For the six months ended June 1998
and 1997, net interest expense was $3,484, or 2.3 percent of sales, and $3,834,
or 2.3 percent of sales. The decrease in 1998 resulted primarily from a
reduction in merchandise inventories, which resulted in a decrease in the
related indebtedness incurred to carry such inventories. No interest expense was
capitalized in 1998, while net expense was partially offset by the
capitalization of $38 of interest during the first quarter of 1997.

Finance participation income, which consists of income from participation in the
Company's private label credit card program, was $743, or 1.0 percent of sales,
for the three months ended June 1998, as compared to $788, or 1.0 percent of
sales, for the

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comparable period in 1998, and was $1,543, or 1.0 percent of sales, for the six
months ended June 1998, as compared to $1,380, or 0.8 percent of sales, for the
comparable period in 1998. The increase in participation for the six months
ended June 1998, as compared to 1997, resulted from the Company's decision to
reduce its use of core financing programs offered to customers during the first
three months of 1998. This shift between financing programs reduced the balances
that do not yield income during the initial grace period, which increased the
Company's participation income for the first three months of 1998. Such shifts
may occur again in the future, thereby affecting the Company's finance
participation income and the relative mix of income-generated finance programs
compared to longer-term, same-as-cash programs that generate financing expense.

Other income decreased to $890, or 1.2 percent of sales, for the three months
ended June 1998 as compared to $906, or 1.1 percent of sales, for the comparable
period in 1997. For the six months ended June 1998, other income decreased to
$1,750, or 1.1 percent of sales, as compared to $1,757, or 1.1 percent of sales,
for the comparable period in 1996. The majority of other income consists of cash
discounts and rental income from tenants.

Income tax benefit for the six months ended June 1998 was $1,690, or
approximately 35% of the loss before taxes, as compared to $780, or 35% of the
loss before taxes, in 1997. The disproportionate provision for income taxes
reflects minimum taxes imposed by certain jurisdictions, and a valuation reserve
for certain state operating loss carryforwards for which the Company has
determined that it is more likely than not will not yield a benefit in the
future.

LIQUIDITY AND CAPITAL RESOURCES

The Company utilized $480 of cash in operating activities during the first six
months of 1998. Cash of $8,084 was provided from a reduction in merchandise
inventories as the Company continued to review its assortment and stocking
requirements in an effort to better match consumer demand and increase inventory
turns. Funds generated from the reduction of merchandise inventories were offset
in part by a decline in accounts payable and customer deposits, a reduction in
the balance of deferred warranty revenue, and an increase in refundable income
taxes. The Company's accounts payable balance has declined as the result of
reduced levels of purchasing and as the Company has taken advantage of various
cash discount offers made by its vendors. As the result of the Company's
operating losses, the changes in the balance sheet described above, and the
Company's decision to pay off its term loan prior to its maturity, the balance
outstanding on the Company's bank line of credit has increased during the first
six months of 1998.

During the first six months of 1998, capital expenditures totaled $769. These
expenditures primarily represented normal replacement and upgrade projects. The
Company has no significant expansion or capital expenditure plans for 1998 other
than normal replacement, repair, and upgrade projects, and existing store
refurbishment. Capital expenditures in the first half of 1997 included those for
the completion of the expansion of the West Carrollton store.

In order to extend the maturity and to reduce the rate of interest, the Company
refinanced the mortgage on its Vandalia, Ohio store in February 1998. The
refinanced amount requires monthly principal and interest payments of $29 over a
15 year period, and bears interest at 7.64%.

The revolving bank line of credit agreement, which was amended as of June 30,
1998, expires in January 2000. The amount available under the line is limited to
the lesser of: (a) $30,000, or (b) an amount based upon a percentage of eligible
accounts receivable and inventory less excess customer deposits. At June 30,
1998, $26,298 was available under the line of which $22,000 was outstanding. The
line of credit bears interest at the prime rate plus 1% (9.50% at June 30,
1998).

The amendments to the bank line of credit relaxed certain covenants in order for
the Company to remain in compliance with those covenants. At the Company's
request, the maximum amount of the line was reduced from $35,000 to $30,000,
because the additional capacity was no longer needed in light of the Company's
reduced capital expenditures and it reduced the Company's fees on the unused
portion of the line. The amendment increased the interest rate from: the lower
of (a) the prime rate or (b) various LIBOR rates plus 1.55 percent, to prime
plus 1%.

Page 10
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The line includes certain restrictive covenants including, among others,
limitations on capital expenditures and the payment of dividends, maintenance of
minimum current, fixed-charge-coverage, funded-debt-to-earnings, and
debt-to-tangible-net-worth ratios. Certain of the covenants become increasingly
restrictive over time. In order to remain in compliance with the amended
covenants, the Company's operations and cash flow will have to improve over the
actual results experienced during the first half of 1998. If the Company is
unable to improve its operating results in the third quarter of 1998 over those
experienced in the first half of 1998, it is likely that the Company would need
to seek amended covenants in order to remain in compliance at September 30,
1998. The Company has no assurance that such approvals, if necessary, will be
granted. If such approvals are not obtained, the Company will seek alternative
financing sources. While the Company believes that such financing can be
obtained, there can be no assurance that it can be obtained at all, or that it
can be obtained on terms or at rates comparable to those in the existing
agreement or acceptable to the Company.

SEASONALITY

The Company typically experiences an increase in overall sales in the fourth
quarter. This increase is driven by an increase in the sales of consumer
electronics and furniture products associated with the holiday season. At the
same time, major appliance sales typically decline in the fourth quarter. The
Company's operating results for the full year are highly dependent upon the
success of the Company's operations in the fourth quarter.

OUTLOOK

The Company engaged one of the national management consulting firms to review
its operations and identify opportunities for performance improvement, and the
firm delivered its report in November 1997. Since then, the Company has devoted
considerable time and attention to the implementation of many of the
recommendations put forth in the report. A number of the initiatives have been
completed; however, the Company is still actively assessing many of the
recommendations and actively implementing many others. These efforts are
expected to continue into 1999.

Since there are no expansion plans for 1998, the Company will continue to focus
on improving business operations and customer service. Areas of focus include
improving the management of inventory, improving warehouse operations and
reducing expenses, improving asset utilization, reducing store operating
expenses, and turning around comparable store sales. Many of these efforts have
required operating expenditures that adversely affected the Company's financial
results for the first six months of 1998 and will continue to affect them
through the second half of 1998. Thus, the Company expects to sustain a loss in
the third quarter of 1998. The Company believes these initiatives will
eventually yield significant improvement in the Company's operations and
profitability. They will, however, take time to implement and may require
capital and operating expenditures to implement.

The Company's financial performance is influenced by consumer confidence,
interest rates, consumer debt, the general level of housing activity, and the
general level of economic activity in the United States. Consumer demand for
big-ticket goods has continued to be sluggish. Although the Company has seen a
modest reduction in our competitors' use of same-as-cash promotions, consumers
continue to respond best to deep-discount price and finance promotions. This
competitive situation is expected to continue to put pressure on comparable
store sales, product prices and margins, and operating results.

There are a number of changes occurring in the competitive situation in the
Company's market areas. A national retailer of furniture is completing its
withdrawal from the Cincinnati and Atlanta markets, and has announced its
withdrawal from the Tampa market. A regional furniture retailer has announced
its expansion in the Cincinnati market and entry into the Dayton market. These
expansions will likely continue to put pressure on sales and gross margins.
Further, the labor strike in the automotive industry, which was settled in late
July 1998, could have a continuing adverse effect on the Company's operating
results, particularly in the Dayton market.

On July 10, 1998, the Company announced the appointment of Mr. Melvin H. Baskin
as Chief Executive Officer and President, succeeding Mr. James F. Robeson, who
had served as interim Chief Executive Officer and President since December 1997.

Page 11
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YEAR 2000 ISSUE

The Company has reviewed its primary and secondary information systems for Year
2000 issues. The Company's primary management information and credit-card
processing systems are provided by third-party vendors that have assured the
Company that their systems will be Year 2000 compliant by the end of 1998. The
Company believes that the costs related to the conversion of the credit-card
processing system will be insignificant. The Company expects the costs to
upgrade the software and hardware for its primary management information system
to be less than $100,000. The majority of the expenditures will be for hardware
upgrades to accommodate new software. No expenditures have occurred to date. The
Company expects to make all of the expenditures in 1998.

The Company has identified several secondary information systems, such as
payroll, delivery, telephone, personal computer, and service department systems,
that will require software and hardware upgrades and conversions to be Year 2000
compliant. The Company expects these costs to be less than $400,000. The
majority of the costs are expected to be incurred on software to incorporate the
Company's service departments into the primary management information system. No
expenditures have occurred to date. The Company expects to make all such
expenditures by mid-1999.

Because the Company is engaged in the sale of consumer products, it does not
believe that it has any material risk with respect to Year 2000 issues for its
customers. The Company has not assessed the impact of Year 2000 issues on its
merchandise suppliers; however, the Company is not aware of any material Year
2000 risks with respect to them. The Company does not rely on electronic data
interchange ("EDI") systems to deal with its suppliers. Because no single
merchandise supplier represents more than approximately six percent of the
Company's purchases, the Company does not believe that there is any material
Year 2000 risk with respect to its suppliers, but is assessing its suppliers'
compliance activities.

The capital expenditures described above will be funded from the Company's
on-going maintenance and replacements budget, and are not expected to result in
the deferral of any planned expenditures. Based on its assessment of the Year
2000 issue to date, the Company has not developed any contingency plans for the
failure of major or secondary information systems. In the event one or more
merchandise suppliers are not Year 2000 compliant, the Company would shift its
purchasing to those suppliers that are compliant.

FORWARD LOOKING STATEMENTS

In the interest of providing the Company's shareholders and potential investors
with information concerning management's assessment of the outlook for the
Company, this report contains certain "forward-looking" statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Readers should bear in
mind that statements relating to the Company's business prospects, as distinct
from historical facts, are forward-looking statements which, by their very
nature, involve numerous risks and uncertainties. Factors that could cause the
Company's actual results to differ materially from management's expectations
include, but are not limited to:

A. Changes in economic conditions in the United States, including but not
limited to the general level of economic activity, levels of housing activity,
interest rates, the availability of consumer credit, consumer confidence, and
inflation.

B. Changes in the economic conditions in the market areas in which the Company
operates, such as a strike or shutdown of a major employer or industry.

C. Unusual weather patterns, such as unusually hot or cool summers, which can
affect the sale of refrigeration products, or unusually cold winters, which can
affect consumers' desire and ability to shop for the Company's products. Acts of
God, such as floods, hurricanes, or tornadoes, that interrupt the Company's
ability to sell or deliver merchandise, interrupt consumers' ability to shop, or
destroy a major Company facility, in particular a warehouse or computer
facility.

D. Changes in the competitive environment in the Company's market areas,
including the bankruptcy or liquidation of existing competitors.

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13

E. The entry into the Company's lines of business and market areas by new,
larger, well-financed competitors, which may have the ability to withstand
intense price competition over extended periods of time.

F. The availability and cost of adequate, appropriate newspaper, television, and
pre-printed advertising. A strike or work stoppage affecting the Company's media
outlets.

G. Adverse results in litigation matters.

H. Difficulties in hiring, training, and retaining a capable work force at
reasonable levels of compensation, in both existing market areas and in
expansion locations. Difficulties in hiring and retaining an effective senior
management group, particularly as the Company expands. An attempt to organize a
significant portion of the Company's work force.

I. The availability of appropriate sites for expansion, on favorable terms, and
the long-term receptivity of consumers to new store formats and locations.

J. Access to bank lines of credit and real estate mortgage financing sources at
favorable rates of interest, terms, and conditions.

K. Access to additional equity capital to fund the Company's long-term
expansion.

L. Access to extended-payment financing sources (e.g., "twelve months same as
cash") at a favorable cost to the Company and with favorable rates of approval
by the financing source. Access to private-label financing sources (e.g.,
"Roberds charge card") that provide favorable rates of interest to the customer,
favorable rates of return to the Company, and favorable rates of approval by the
financing source.

M. Rapid changes in products, particularly electronics products, such that the
Company bears the risk of obsolescence or the consumer withdraws from the market
until such time as the product category has stabilized.

N. Shifts in the mix of the Company's sales between its higher-margin products
(bedding and furniture) and its lower-margin products (electronics and
appliances), which may result from changes in consumer priorities, competitive
factors, or other factors.

O. The absence of new products in the Company's product categories that would
drive additional consumer interest and purchases.

P. Adverse changes in the cost or availability of the products the Company
sells. Rapid increases in the price of the Company's products, which cannot be
passed on to consumers as the result of competitive pressures.

Q. The loss, or significant reduction in the availability, of certain key
name-brand products. Decisions by vendors to curtail the availability of certain
product presently sold by the Company, or to make products that are presently
sold by the Company available to certain competitors that do not presently have
access to such products. Changes in import duties or restrictions affecting the
Company's ability to import certain products.

R. Changes in income tax rates or structures that may affect the Company's tax
burden or consumers' ability to purchase or finance big-ticket goods or new
housing. Significant increases in real estate tax rates affecting the Company's
properties.

S. Changes in government regulations affecting the Company, its products, its
advertising, or its work force, including changes in the minimum wage. Changes
in government regulations affecting the Company's employee benefit plans or
workers' compensation arrangements.

T. New competition from alternative sales media and channels of distribution,
such as catalog mail order, telemarketing, television shopping services, and
online media.

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U. Changes in highway or street configurations such that the Company's stores
become less accessible to consumers. Changes in consumer use or ownership of
"second homes," particularly in the Tampa, Florida market.

V. Changes in the cost or availability of liability, property, and health
insurance.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.

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PART II-OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS Not applicable.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The annual meeting
of the Company's shareholders was held on May 5, 1998. Four of the Company's
directors were re-elected to two-year terms ending in 2000 upon a vote as
follows:

NAME FOR WITHHELD ABSTAIN BROKER NON-VOTE
---- --- -------- ------- ---------------

Jerry L. Kirby 3,861,603 None 48,440 2,133,572

Howard W. Smith 3,862,103 None 47,940 2,133,572

Gilbert P. 3,858,803 None 51,240 2,133,572
Williamson

Donald C. Wright 3,861,303 None 48,740 2,133,572

The following directors' terms of office continue until the annual meeting of
the Company's shareholders to be held in 1999: Messrs. Kenneth W. Fletcher, C.E.
Gunter, James F. Robeson, and Robert M. Wilson.

ITEM 5. OTHER INFORMATION None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) See exhibit index.

(b) There were no reports filed by the Company on Form 8-K during
the quarter ended June 30, 1998.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

Roberds, Inc.
(Registrant)

Date August 3, 1998 /s/ Robert M. Wilson
---------------------- ---------------------
Robert M. Wilson
Executive Vice President
Chief Financial Officer

Date August 3, 1998 /s/ Michael A. Bruns
---------------------- ---------------------
Michael A. Bruns
Vice President
Controller
Chief Accounting Officer

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EXHIBIT INDEX

Exhibit Number Description
- -------------- -----------

10.1 Amendment to credit agreement

10.2 Amended and Restated Private Label
Revolving Credit Plan Agreement

27.1 Financial data schedule

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