<PAGE>   1

                                  UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549


                                    FORM 10-K

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

                   For the fiscal year ended December 31, 1998

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

                         Commission File Number 0-22702

                                  ROBERDS, INC.

An Ohio Corporation                                        31-0801335
                                            (IRS Employer Identification Number)


                            1100 East Central Avenue
                             Dayton, Ohio 45449-1888
                                 (937) 859-5127

        Securities registered pursuant to Section 12(b) of the Act: None

           Securities registered pursuant to Section 12(g) of the Act:
                        Common Shares, without par value


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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ].

At the close of trading on January 31, 1999, 6,159,311 common shares, without
par value, were outstanding. Of these, 1,911,989 common shares, having an
aggregate market value (based upon the average of the high and low trading
prices on that date) of approximately $3,803,485 were held by non-affiliates of
the Registrant. Common shares held by each executive officer and director, and
by each person who owned five percent or more of the outstanding common shares,
were excluded, in that such persons may be deemed to be affiliates. However,
such calculation does not constitute an admission or determination that any such
officer, director, or holder of more than five percent of the outstanding common
shares is in fact an affiliate of the Registrant.


                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's Proxy Statement for its 1999 annual meeting of
shareholders are incorporated into Part III herein by reference.



                             


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                                TABLE OF CONTENTS
<S>      <C>                                                                                       <C>
ITEM 1.   BUSINESS....................................................................................3


ITEM 2.   PROPERTIES.................................................................................12


ITEM 3.   LEGAL PROCEEDINGS..........................................................................14


ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS........................................16


ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS......................20


ITEM 6.   SELECTED FINANCIAL DATA....................................................................22


ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS......24


ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.................................33


ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA................................................33


ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.......52


ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT.............................................53


ITEM 11.  EXECUTIVE COMPENSATION.....................................................................53


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.............................53


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............................................53


ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K...........................54

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                                     PART I


ITEM 1.           BUSINESS


GENERAL
-------
Roberds, Inc.(1) is a leading retailer of a broad range of home furnishing
products, including furniture, bedding, major appliances, and high technology
consumer electronics. The Company operates in three geographic segments: the
Ohio market, which includes six stores in the greater Dayton, Ohio area and a
single megastore in Cincinnati, Ohio; the greater Atlanta, Georgia market, which
includes nine stores; and the greater Tampa, Florida market, which includes
eight stores.

The Company was incorporated in 1971 under the laws of the State of Ohio. Its
executive offices are located at 1100 East Central Avenue, Dayton, Ohio
45449-1888, and its telephone number is (937) 859-5127. The Company's common
shares trade on the Nasdaq National Market tier of The Nasdaq Stock Market,
under the symbol "RBDS."


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. For discussion of certain of
such risks and uncertainties, see "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Forward-Looking Statements."


OPERATING STRATEGY
------------------
The Company's objective is to be the leading retailer of furniture, bedding,
major appliances, and high technology consumer electronics products in each of
its markets. Key elements of the Company's operating strategy include the
following:

DISTINCTIVE PRODUCT MIX. The Company's product mix is a key element of its
operating strategy. Roberds' product mix is distinctive within the retailing
industry, and management believes it provides Roberds with several competitive
advantages over retailers offering only one or two of the Company's product
categories. The Company's major appliance and consumer electronics product lines
generate significant store traffic, sales volume, and gross profit dollars,
enabling Roberds to price its furniture products more aggressively than
competing furniture retailers. The Company's higher-margin furniture and bedding
products enable it to offer its appliance and consumer electronics products at
prices equal to or below those of its competitors. The Company believes that its
mix of products provides a strategic advantage over certain of its competitors.

Management believes that the Company's product mix generates significant
operating efficiencies. Such efficiencies result from the higher level of sales
per store generated by the Company's diverse product mix, providing Roberds with
significant leverage of its fixed costs, including distribution, warehousing,
store facilities, advertising, and general and administrative expenses. The
Company's product mix enables Roberds to offer complementary products in a
single 
--------
     1  Roberds, Inc. is also referred to herein as "the Company," "Registrant,"
        and "Roberds."


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package in a way in which many of its competitors cannot, and offers
cross-selling opportunities that do not exist for many of the Company's
competitors.


PRODUCT PRICING STRATEGY. The Company's product pricing strategy is to offer its
merchandise at competitive prices throughout the year. Roberds shops its
competition regularly and believes that it sets its prices equal to or below
those of its competitors. At the time of sale, and for 30 days thereafter, the
Company guarantees to its customers that its prices are equal to or below those
of its competitors.

BROAD SELECTION OF NAME-BRAND MERCHANDISE. The Company sells name-brand products
generally recognized by consumers, including many higher quality brands. The
Company's stores, which average approximately 60,000 square feet in size
(excluding the Cincinnati megastore), are larger than the stores of many of its
competitors. This enables the Company to attractively display a wide variety of
products that appeal to a broad range of consumer tastes, incomes, and age
groups. As a result, Roberds can offer its customers "one-stop" shopping for
almost every home furnishing product, thereby facilitating the purchasing
process and reducing the need for comparison shopping. In 1996, the Company
opened Roberds Grand(R) in Cincinnati, Ohio. Roberds Grand features a single
250,000 square foot showroom, with an even larger selection than is offered in
the Company's other stores.

STORE CONCENTRATION AND EFFICIENCIES. Roberds operates in metropolitan areas of
at least one million people. In Dayton, Atlanta, and Tampa, the Company has
concentrated multiple stores in order to enhance name recognition, achieve
market penetration, and gain economies of scale in distribution, advertising,
and management costs. The Company advertises in newspapers, on television and
radio, and through direct mail, and is able to benefit from the advertising
efficiencies of locating multiple stores within those three marketing areas. The
Company's "hub and spoke" warehouse and delivery functions also create operating
leverage by serving multiple stores from a regional facility. In Cincinnati,
Ohio, the Company has a single 250,000 square foot "megastore" concept.

CORPORATE COMMITMENT TO CUSTOMER SERVICE. The Company gives managers full
authority to respond to customer issues. Unlike many of its competitors, Roberds
employs commissioned, trained, professional sales associates, who are
knowledgeable about the products they sell, and almost all of whom are employed
full time by the Company. On in-stock merchandise, the Company offers delivery
within two days, for a reasonable charge, six days per week, and adds Sunday
delivery during peak retailing seasons. Roberds offers next-day delivery service
on selected merchandise. Roberds offers delivery on all merchandise sold, and
has a competitive policy on replacements and returns. Roberds also removes the
customer's old merchandise free of charge. In addition, Roberds offers service
contracts that provide additional warranty coverage beyond that which is
provided by the manufacturer.

OPERATIONS. The Company has experienced operating losses in each of the last
three years. The Company is implementing a series of changes in its operating
strategy and the day-to-day execution of its business that are designed to
improve its operating results. These changes are outlined throughout this
Report, and are summarized below in Management's Discussion and Analysis of
Financial Condition and Results of Operations-Outlook.


EXPANSION STRATEGY
------------------

ENTRY INTO NEW MARKETS. In 1996, the Company entered Cincinnati, Ohio with a
single 250,000 square foot megastore known as Roberds Grand. With the
development of the Roberds Grand(R) format, the Company has two formats with
which it can enter new markets--multiple 60,000 square foot stores within a
market or a megastore. The determination of whether to utilize megastore or
multiple-store formats in new markets depends on a variety of factors, including
but not limited to retail shopping patterns, traffic patterns, accessibility,
and the availability of sites. The Company has no plans to enter new markets
during 1999.

RELOCATION OR EXPANSION WITHIN EXISTING MARKETS. The Company believes that the
growth of the Atlanta, Georgia area may present opportunities to relocate one or
more of its existing Atlanta area stores, and may also present opportunities for
new locations. The Company intends to explore such relocations and expansions
during 1999 for possible implementation in 2000.



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STORE RENOVATIONS. The Company periodically renovates and upgrades its existing
stores to keep them fresh and to support changes in its product offerings. In
March 1998, the Company expanded its Forest Park, Georgia store into space that
had been occupied by a third-party tenant, following the vacation of the space
by that tenant. The 18,000 square foot expansion area is utilized as additional
retail space offering clearance merchandise. Because the Forest Park center has
additional vacant tenant space, the Company is exploring how best to utilize
that space and may undertake a further expansion or relocation of its retailing
operations within the center in 1999.

GENERAL. The Company's growth depends, in part, on its ability to expand into
new markets and, to a lesser extent, its ability to open new stores within its
existing market areas. There is no assurance that the Company will be able to
locate favorable store sites and arrange favorable leases for new stores; open
new stores in a timely manner; or hire, train, and integrate employees and
managers in those new stores; or that the Company will have access to sufficient
financial resources to permit further expansion. Similarly, there can be no
assurance that the Company can enter new markets successfully.


MERCHANDISING AND PRODUCT LINES
-------------------------------

DISTINCTIVE FORMAT. Roberds' merchandising format, combining furniture, bedding,
major appliances, and high technology consumer electronics products in the same
store, is an important aspect of the Company's operations and a point of
significant differentiation from its competitors. The Company's traditional
stores are larger than the stores of most of its competitors, averaging
approximately 60,000 square feet in size. These larger stores allow the Company
to attractively display a wide selection of products and allow flexibility in
expanding and contracting merchandise categories to meet changing consumer
tastes and to introduce new products. The Company's Roberds Grand facility, in
Cincinnati, Ohio, is one of the largest home furnishings stores in North
America. Roberds' stores are organized into specialized departments, each
offering a wide selection of merchandise. The breadth of merchandise within each
product line is designed to provide customers with a varied selection and to
reduce the need for customers to comparison shop.

Roberds' furniture merchandise is priced to achieve gross margins that are
attractive for the Company, but competitive with those of other furniture
retailers. The Company's appliance and consumer electronics businesses have
lower margins, higher turnover, and tend to be somewhat more seasonal and
cyclical than furniture sales. However, the competitively priced appliance and
consumer electronics products generate customer traffic for the higher margin
furniture items and allow the Company to spread its operating expenses over a
larger base of sales. In addition, management believes the Company's major
appliance and high technology consumer electronics product offerings increase
the frequency of customer visits and create consumer loyalty, which leads
customers to shop for furniture at Roberds.

FURNITURE PRODUCTS. Roberds carries a broad selection of name-brand furniture
products. In addition, the Company offers a broad range of special-order
products. Unlike many other retailers, Roberds uses the same pricing formula for
special-order merchandise as it does for in-stock merchandise. Furniture sold by
the Company includes traditional, American country, eighteenth century, and
contemporary styles, and includes living room, dining room, and bedroom
furniture, tables, lamps, dinettes, reclining furniture, sleep sofas, desks, and
chairs. The Company offers extensive selections of both upholstered and leather
furniture, as well as casegoods. Roberds also sells furniture accessory items
including pictures, mirrors, vases, mantle pieces, wall hangings, and related
goods. Furniture brands carried by Roberds represent the middle to upper-middle
range of price, and include Action by Lane, Broyhill, Chromcraft, Flexsteel,
Kincaid, Natuzzi, and Pennsylvania House, among others. In the Roberds Grand
format, the Company offers an even broader and deeper selection of furniture
products, including many higher-end products such as Lexington, and the
Timberlake, Arnold Palmer, and Alexander Julian collections.

BEDDING PRODUCTS. The Company offers products from Sealy, Serta, and Simmons,
the three largest manufacturers of bedding sold in the United States, as well as
Stearns & Foster. Bedding products include wooden and brass bed frames,
mattresses, box springs, water beds, and futons. The brand names sold by the
Company cover the full range of bedding quality, except that the Company does
not compete in the private-label segment.


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MAJOR APPLIANCE PRODUCTS. Roberds' major appliance products include
refrigerators, freezers, ranges, washers, dryers, dishwashers, trash compactors,
disposals, room air conditioners, microwave ovens, dehumidifiers, and vacuum
cleaners. The Company also sells some specialty appliance products such as
under-counter refrigerators, built-in appliances, and cooktops. Roberds carries
the major appliance brands sold in the United States, ranging in price from
moderately low to very high. Major appliance brands carried by the Company
include Amana, Frigidaire, General Electric, JennAir, KitchenAid, Maytag,
SubZero, and Whirlpool, among others.

HIGH TECHNOLOGY CONSUMER ELECTRONICS PRODUCTS. High technology consumer
electronics products sold by the Company include portable, console, and big
screen televisions; VCRs; camcorders; stereo systems and audio components; and
satellite systems. The Company focuses its efforts on large, big-ticket
electronics products, in particular, home theater systems and components, rather
than the small-ticket items carried by many mass merchants. The Company offers
products from most of the major consumer electronics manufacturers, ranging in
price from lower-middle to high. Consumer electronics brands carried by the
Company include Bose, JVC, Mitsubishi, Pioneer, RCA, Sony, Toshiba, and Zenith,
among others. During 1998, the Company withdrew from the sale of personal
computers and related home-office products in the Ohio market. Those products
had been withdrawn from the Atlanta and Tampa markets in prior years.

Roberds has dedicated "home theater" displays in its stores. This merchandising
concept blends stereo televisions with supplemental audio equipment, to give the
consumer a movie viewing experience comparable to that enjoyed in theaters.
Because of its ability to offer these products together with complementary
furniture products, particularly entertainment centers and recliners and other
"motion" furniture, Roberds believes that it is well positioned to capitalize on
the home theater merchandising concept. The Company is adding high-definition
television ("HDTV") and plasma television to its product line.

OTHER. Selected floor-covering products are offered in the Ohio market. The
Company does not sell draperies, wallpaper, or tabletop merchandise.


ADVERTISING AND PROMOTION
-------------------------

Roberds employs a combination of newspaper, broadcast, and direct mail
advertisements. Newspaper advertisements typically account for the majority of
gross advertising expenditures, with broadcast, direct mail, and other forms of
advertising constituting the balance. The Company uses a combination of
newspaper "run of press" advertising, contained in the body of the newspaper,
and "preprint" advertising, which is inserted into the newspaper. The Company
advertises continuously during the year, but most heavily during peak retailing
seasons such as Thanksgiving and Christmas and for other special promotional
programs. Roberds utilizes broadcast advertising primarily Wednesday through
Sunday, in newspapers primarily Friday through Sunday, and runs direct mail
programs periodically. Roberds runs a variety of promotional programs that range
in duration from one to fourteen days.

The Company has an in-house advertising department for the planning,
preparation, and production of advertising, and for coordinating advertising
with the Company's merchandising policies and programs. The Company employs an
advertising agency for the production of broadcast advertising and for
assistance in developing its overall advertising strategy. Advertising for all
market areas is developed around common themes and promotions, but product
prices are varied by market to meet each market's needs and to maintain Roberds'
commitment to be competitively priced.


CUSTOMER PROFILE
----------------

Roberds targets consumers who are 25 to 54 years of age, have annual household
incomes greater than $30,000, are married, and have owned their own homes for
less than five years. The Company believes such customers are typically
interested in purchasing high-quality merchandise at prices that provide good
value. Management also believes that Roberds has a high proportion of repeat
shoppers.

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CUSTOMER SERVICE AND CONVENIENCE
--------------------------------

The Company stresses superior customer service. Store managers have broad
discretion to meet customers' needs. Roberds' stores are open 362 days each
year. The stores are open from 10:00 a.m. to 9:00 p.m., Monday through Saturday,
and 11:00 a.m. to 6:00 p.m., Sundays, providing ample opportunity for customers,
including two-income families, to shop. Store hours are extended during peak
selling seasons. Roberds employs commissioned, trained, professional sales
associates who are knowledgeable about the products they sell, and almost all of
whom are employed full time by the Company.

When a customer is interested in an item of merchandise that is carried in
stock, sales associates determine the item's availability from real-time
computer terminals located throughout the selling area. Similarly, if a customer
special-orders merchandise, the Company's computer system allows the customer to
know at any time the status of the order and the expected delivery date.
Customer inquiries after the sale are generally referred first to the
salesperson who made the sale, so as to maintain a friendly customer
relationship and encourage customer satisfaction and loyalty.

For furniture, major appliances, and consumer electronics products, Roberds
offers third-party service contracts that provide additional warranty coverage
beyond that which is provided by the manufacturer. The terms of the extended
warranty contracts range from nine months to ten years. Roberds provides service
for everything it sells. Roberds performs its own furniture and bedding repair
service in all markets. Appliance and electronics repair services are provided
with a combination of in-house staff and outside providers with whom Roberds has
working relationships.


HOME DELIVERY SYSTEM
--------------------

Roberds believes that its system for delivery of merchandise to its customers is
convenient for the customer and a strategic advantage. At the time of purchase,
customers can elect to take in-stock merchandise with them or schedule it for
delivery. Over 80 percent of the merchandise sold is delivered. If the customer
wants to arrange a delivery, it is scheduled at the time of sale, on the sales
floor, when the customer specifies a date for delivery. Full delivery service is
available Monday through Saturday, to provide maximum convenience for the
customer. Sunday delivery service is offered during peak retailing seasons.
Typically, the customer can schedule deliveries of in-stock merchandise within
two days after the sale, and the Company offers next-day delivery on selected
products.

Roberds operates a delivery fleet with distinctive trucks displaying the Roberds
logo. All delivery crews are Roberds employees wearing Company uniforms.
Delivery teams operate on a commissioned pay system. Management believes that,
as a result of the commission system, the Company's delivery personnel are
highly motivated to complete the delivery successfully on the first attempt and
to satisfy the customer.


PURCHASING AND VENDOR RELATIONS
-------------------------------

Roberds' buying operations are organized along its four major merchandise lines.
The buyers review inventory and sales reports on a daily basis and place orders
based on analysis of past sales and existing inventory levels in the geographic
market areas. The buyers also adjust product pricing and advertising to meet
competitive needs in each geographic region.

Virtually all furniture, bedding, and major appliances are purchased from North
American manufacturers. Consumer electronics products are purchased either from
domestic manufacturers or domestic suppliers representing European or Asian
manufacturers. Roberds is a member of NATM Buying Corp., a large national buying
group organized to purchase consumer electronics and major appliances. Roberds
believes its membership in NATM enables it to obtain better product pricing,
larger volume discounts, and more advertising rebates than it could obtain
independently.

Vendors provide the Company with substantial incentives in the form of cash
discounts, volume rebates, and cooperative advertising funds. The aggregate
amount of these incentives was approximately $16.4 million in 1998, $16.7
million in 1997, and $18.5 million in 1996. The decline in 1997, as compared to
1996, was principally due to a decrease in vendor incentives and cash discounts
as the Company reduced its volume of purchases and inventory levels to better
match consumer demand for its products. There can be no assurance that such
vendor 

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incentives will continue at such levels. A reduction in, discontinuance of, or
delay in receiving these vendor incentives could have a material adverse effect
on the Company.

Access to certain vendors and brand names is important to the Company's
continued success. The loss of a significant or well-known vendor, such as
General Electric or Broyhill, could have a material adverse effect on the
Company.


DISTRIBUTION
------------

The Company operates a distribution center in each of its three market areas.
All merchandise is initially received into, and controlled in, a central
warehouse in each market. Smaller merchandise items, such as small televisions
and VCRs, which can be picked up by the customer, are then redistributed to the
stores for customer pick-up. Each store maintains warehouse space to facilitate
such customer pick-ups. Management believes this "hub and spoke" arrangement
allows for prompt product delivery and efficient distribution.

The Company tags and barcodes all merchandise at the time of arrival in its
warehouse centers. The movement of merchandise through the warehouse is tracked
by the Company's barcode process. The Company cycle-counts inventory on a
scheduled basis and performs physical inventories periodically.


MANAGEMENT INFORMATION SYSTEMS
------------------------------

Roberds utilizes a fully integrated, enterprise-wide management information
system for inventory, merchandising, and certain accounting functions. The
system was purchased from, and is maintained by, the largest software provider
to the furniture retailing industry. The Company is in the process of upgrading
its hardware and software to accommodate growth, gain efficiencies, and become
Year 2000 compliant.

Each store is equipped with a system allowing Company sales personnel and buyers
to track merchandise inventories on a real-time basis. In addition, the
merchandising systems are designed to integrate fully the key retailing
functions of merchandise planning, purchase order management, merchandise
distribution, receiving, order entry, and inventory control.

Sales data is captured at the time of sale by the Company's sales personnel,
using point-of-sale terminals on the showroom floor, and is transmitted to the
Company's regional processing centers, where it is compiled to produce daily and
weekly management reports. The data is organized by department class, item,
style, and store, and enables management to regularly monitor the sales
performance of all products within each store and market. The system also
captures data regarding the customer, and maintains an on-line customer data
base with addresses and purchasing history for each customer.


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CUSTOMER CREDIT PROGRAMS
------------------------

The Company offers qualified customers a private-label charge card administered
by Banc One Private Label Credit Services ("Banc One"). According to Banc One,
at December 31, 1998, the Company had over 360,000 private-label charge card
accounts that generated sales of approximately $131 million in 1998. Such sales
represent approximately 41 percent of the Company's net sales and service
revenues for 1998. The credit approval and servicing process is administered by
Banc One, which issues customer account cards embossed with the Roberds logo.
Roberds receives income from such accounts, based on the difference between: (i)
the interest rate charged to the customer, and (ii) Banc One's cost of funds
plus an administrative charge. As part of its arrangement with Banc One, Roberds
funds a reserve account designed to cover a portion of the bad debt losses
incurred by Banc One. All credit losses in excess of the reserve account are the
responsibility of Banc One. To the extent the Company utilizes Banc One for
programs other than its standard 90-days, same-as-cash program, the Company pays
a fee to Banc One for such programs.

As a result of this arrangement, Roberds holds no significant consumer
receivables and bears no credit risk beyond the fixed amount contributed to Banc
One's bad debt reserve. Because a significant portion of the Company's sales are
financed by consumers, the lack of availability of consumer credit programs, or
a significant increase in the cost of such programs, could have a material
adverse effect on the Company.

From time to time, the Company has also arranged financing through other sources
for customers not qualifying for credit under the Banc One program. Under some
of these programs, the Company paid a fee to the providers for the use of the
program; under others, it earned a participation fee. However, under all of
these other programs, there was no recourse to Roberds for bad debts. During
1998, the Company's secondary financing source terminated its financing
arrangements with the Company. Following that termination, the Company and Banc
One agreed to certain changes in the Banc One program, and Banc One became the
sole provider of consumer financing to the Company's customers. The Company also
renewed its agreement with Banc One for a five-year period.

Roberd Insurance Agency, Inc., a wholly owned subsidiary of the Company, is
qualified as an insurance agency under Ohio law. It earns a commission on credit
insurance sold by the Company to its customers.


COMPETITION
-----------

The retail sale of furniture, bedding, major appliances, and consumer
electronics products in the United States is highly competitive and, for
furniture and bedding products, is highly fragmented. There are large numbers of
local, regional, and national chains of department stores, specialty retailers,
and mass and catalog merchandisers, as well as mail-order and internet
merchandisers, competing in each of the Company's product categories and within
its geographic markets. Many of these competitors are publicly held and have
financial and other resources substantially greater than those of the Company.
Further, many of the Company's competitors, particularly in the appliance and
electronics product categories, have suffered severe financial problems. From
time to time, this has caused the Company to have to compete against retailers
that are liquidating merchandise or operating under the protection of the
bankruptcy laws. In the major appliance and consumer electronics categories,
there has been significant expansion into the Company's markets by publicly held
national "superstore" chains, which has greatly increased the competitive
environment in those product categories. In general, these competitive
conditions have led to heavy advertising, severe price competition, and
extensive use of "same-as-cash" programs. The Company expects such competition
to continue. As a result of these highly competitive conditions, during 1996,
the Company withdrew from the personal computer and home-office categories in
its Atlanta and Tampa markets, and during 1998 withdrew those products from its
Ohio market. The liquidation of such inventories had an adverse impact on the
Company's sales.

One national furniture retailer entered the Dayton market in January 1999 and
has announced plans to open another store in Dayton later in 1999. A regional
appliance and electronics retailer is entering the Cincinnati, Ohio market in
1999. Several national retailers operating in the Company's markets have
continued to expand within those markets. Several national department store
chains are experimenting with freestanding furniture, appliance, and electronics
formats, and some of those retailers have entered the Company's markets. These
competitors may generate additional competition in 

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the furniture segment. One national furniture retailer, operating under
bankruptcy protection, has withdrawn from all of the Company's market areas.
While this withdrawal created additional competition during 1997 and 1998, it
has now been completed.

The industry competes on the basis of price; credit offerings; merchandise
selection, presentation, and availability; and service. The Company competes on
price by constantly shopping its competition within its geographic markets and
maintaining a competitive pricing approach. Because of its distinctive product
mix, Roberds can price its merchandise on the sales floor at or below the
competition. The Company believes it competes favorably on merchandise selection
because, at an average of 60,000 square feet of showroom size, its stores are
larger than those of many of its competitors, thus enabling Roberds to
attractively display a broader range of merchandise in each of its four product
categories. Management believes Roberds' product availability is good because of
its strong vendor relations and its regional distribution facilities, which are
located near its stores. The Company believes that it provides superior customer
service through its full-time, commissioned sales staff, effective delivery of
merchandise, and effective handling of special orders.


SEASONALITY
-----------

The Company typically experiences an increase in its overall sales and
profitability 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. Operating results for the full year are highly dependent upon
the success of the Company's operations in the fourth quarter.


CYCLICALITY
-----------

The market for furniture, bedding, major appliances, and consumer electronics
products has historically been cyclical, fluctuating significantly with general
economic cycles. During economic downturns, these product lines tend to
experience longer periods of recession and greater declines than the general
economy. The Company believes that the industry is significantly influenced by
economic conditions generally and particularly by the level of housing activity,
interest rates, consumer confidence, personal discretionary spending, and credit
availability. There can be no assurance that a prolonged economic downturn would
not have a material adverse effect on the Company.


BACKLOG
-------

The Company's backlog of sales (sales orders written but not yet delivered) was
approximately $8.9 million at December 31, 1998 as compared to $9.5 million at
December 31, 1997.


EMPLOYEES
---------

At January 31, 1999, the Company had approximately 1,900 employees,
substantially all of whom were full time, including approximately 640 in sales
and sales management, 500 in office and administrative capacities, and 760 in
warehouse, service, and delivery functions. The Company has never experienced a
work stoppage due to labor difficulties and is not a party to any collective
bargaining arrangements. The Company considers its relations with its employees
to be good.


MERGERS; SUBSIDIARIES
---------------------

In 1994, Roberds Service Company was merged into Roberds, Inc. Roberd Insurance
Agency, Inc. is a wholly owned subsidiary of the Company, is a licensed
insurance agency under Ohio law, and earns a commission on credit insurance sold
by the Company.


                                   10 of 116
<PAGE>   11

TRADEMARKS AND LICENSES
-----------------------

The trademarks ROBERDS(R), AMERICA'S NAME BRAND HEADQUARTERS(R), THE BIG ONE(R),
EMPLOYEE PRICE SALE(R), and BACK DOOR SALE(R), ROBERDS GRAND FURNITURE
APPLIANCES ELECTRONICS(R), BOTTOM LINE . . . IT COSTS LESS AT ROBERDS(R), and
DOUBLE THE DIFFERENCE(R) are registered by the Company with the United States
Patent and Trademark Office. Roberds has an application pending to register HOME
THEATER SOLUTIONS @ ROBERDS(TM). Roberds does not license any intellectual
property to other parties. Roberds does not license any intellectual property
from others, except for computer software, principally for use in the Company's
management information system described elsewhere in this Report, and the
trademarks of certain of its vendors that permit Roberds to utilize their
trademarks in connection with the promotion and sale of the vendors' products.

                                   11 of 116
<PAGE>   12


ITEM 2.           PROPERTIES


Roberds' facilities are strategically located on major thoroughfares and many
are near interstate highways. Many stores are free-standing facilities, and all
have ample parking. The following table sets forth information regarding the
Company's stores and warehouses in each of its markets, at December 31, 1998:

<TABLE>
<CAPTION>

                                                  SHOWROOM    WAREHOUSE
                                                   SIZE IN      SIZE IN     OWNED/
REGION                         DATE OPENED         SQ. FT.      SQ. FT.     LEASED
------                         -----------         -------      -------     ------

OHIO
----
<S>                          <C>               <C>          <C>           <C>
West Carrollton, Ohio(1)       June 1971           145,000      15,000      Leased(2)
West Carrollton, Ohio(1)(6)    June 1974                        20,000      Leased(2)
Piqua, Ohio(3)                 March 1983           56,000       4,000      Leased(2)
Springfield, Ohio              May 1985             50,000      16,000      Leased(2)
Richmond, Indiana              March 1988           55,000       4,000      Leased(2)
Vandalia, Ohio(7)              July 1989           139,000      20,000      Owned
Beavercreek, Ohio              April 1995           63,000       5,000      Owned
Fairborn, Ohio                 January 1996                    480,000      Owned
Springdale, Ohio               July 1996           250,000      64,000      Leased

GEORGIA
-------
Norcross, Georgia(4)           March 1979           60,000      28,000      Leased
Marietta, Georgia(8)           July 1984            59,000       4,000      Leased(2)
Forest Park, Georgia(8)        October 1987         75,000       4,000      Leased(2)
Roswell, Georgia               September 1990       56,000       4,000      Leased
Doraville, Georgia             January 1994                    217,000      Leased
Gainesville, Georgia           September 1994       71,000      10,000      Leased
Douglasville, Georgia(9)       November 1994        64,000       4,000      Owned
Athens, Georgia                August 1995          62,000       4,000      Owned
Fayetteville, Georgia          September 1995       62,000       4,000      Owned
Atlanta (Buckhead), Georgia    November 1996        70,000       6,000      Owned

FLORIDA
-------
Tampa, Florida(5)              March 1985           73,000       9,000      Owned
Bradenton, Florida             June 1986            53,000       4,000      Leased
Clearwater, Florida            September 1986       52,000       4,000      Leased
North Tampa, Florida           March 1990           50,000       5,000      Owned
Brandon, Florida               November 1990        49,000       5,000      Leased
Seminole, Florida              November 1993        81,000       6,000      Leased
Brandon, Florida               May 1994                        159,000      Leased
Sarasota, Florida              July 1994            50,000       5,000      Leased
Port Richey, Florida           March 1995           60,000       6,000      Owned
                                                            ----------  ----------

         Total                                               1,805,000   1,116,000
                                                             =========   =========
</TABLE>


                                   12 of 116
<PAGE>   13

(1)      Original store has been relocated and expanded several times since its
         opening, and was remodeled and expanded again in 1994 and again in
         1997.
(2)      Facilities leased from entities controlled by one or more of the
         Initial Shareholders. See Item 13 of this Report, Certain
         Relationships and Related Transactions.
(3)      Original store was relocated and expanded to the present facility in
         1988.
(4)      Remodeled and expanded in 1994.
(5)      Relocated and expanded in 1995.
(6)      Approximately 20,000 square feet in the former West Carrollton, Ohio
         showroom/warehouse was used as a warehouse for the carpet division;
         however, that space was abandoned in 1998 and the carpet warehouse was
         relocated into the West Carrollton store facility. The former carpet
         warehouse is available for lease to third parties. The remaining 40,000
         square feet is used for corporate offices.
(7)      Expanded in 1996.
(8)      The Marietta and Forest Park, Georgia facilities include approximately
         14,000 and 42,000 square feet, respectively, not included in the table
         above, portions of which are currently leased to third party commercial
         and retail tenants, and other portions of which are available for lease
         to third parties.
(9)      The Douglasville, Georgia store includes approximately 17,000 square
         feet not included in the table above, which is leased to third
         parties.


The Company operated a store in Decatur, Georgia through December 31, 1997, when
retailing operations ceased. The Company's lease on the facility expired in
January 1998, when the space was returned to the landlord.

In March 1998, the Company expanded its Forest Park, Georgia store into space
that had been occupied by a third-party tenant, following the vacation of the
space by that tenant. The 18,000 square foot expansion area is utilized as
additional retail space offering clearance merchandise.

The stores leased from unaffiliated third parties generally involve a base lease
term of ten to fifteen years, followed by a series of options to extend. While
most of these leased stores have rent escalation clauses, the majority have no
percentage-rent clauses.

As indicated in the table above, the Company leases seven of its properties from
the Initial Shareholders or entities controlled by one or more of them. These
properties include many of the Company's highest volume stores. The leases on
these properties expire in the years 2004 through 2017. Upon the expiration of
these leases, there can be no assurance that the Company can reach agreement
with the Initial Shareholders on the terms for the renewal of the leases or that
the Initial Shareholders will be willing to renew the leases.



                                   13 of 116
<PAGE>   14

ITEM 3.           LEGAL PROCEEDINGS


GENERAL
-------

In February 1994, the Company announced its earnings for the fourth quarter and
year ended December 31, 1993. Following that announcement, the Company's stock
price declined substantially. Four lawsuits were filed against the Company,
certain of its directors, certain of its officers, and its co-managing
underwriters, in U.S. District Court for the Southern District of Ohio, case
numbers C-3-94-86, 99, 100, and 127. The suits were consolidated into a single
suit, In re Roberds Securities Litigation. In December 1996, the Company reached
an agreement to settle the class-action securities litigation and such agreement
was approved by the court in 1997. A total of $1.6 million was paid into an
escrow account to satisfy the plaintiffs' legal expenses and claims for damages
to the class. In 1997, Roberds paid $342,500 into escrow as its share of the
settlement, and the insurance carrier for its officers and directors paid
$1,257,500. No portion of the funds paid into escrow can revert to the Company.
In 1998, the escrow agent distributed the funds to the claimants, and the matter
came to a close.

The Ohio Bureau of Workers' Compensation Fund has issued an assessment against
the Company for approximately $871,000 in connection with an audit of the
Company's workers' compensation tax returns. In the fourth quarter of 1996, the
Company accrued $2.6 million to cover its estimated liability resulting from the
State's assessment. Such assessment, and certain subsequent developments, are
discussed more fully in the Notes to the Consolidated Financial Statements,
which are included elsewhere in this Report.

In 1996, a former employee of the Company filed suit in the Court of Common
Pleas for Montgomery County, Ohio, Rouch, et. al. vs. Roberds Furniture &
Appliances, et. al., case number 96-1512. The complaint alleged that the Company
permitted certain unsafe conditions to exist in one of its Ohio warehouses,
which allegedly led to certain personal injuries sustained by the plaintiff. The
suit sought $825,000 in compensatory damages and $800,000 in punitive damages
from the Company. In January 1997, the plaintiffs voluntarily dismissed the
complaint, without explanation. In January 1998, the suit was re-filed as case
number 1998-CV-00125, making the same allegations that were made in the initial
complaint. During 1998, the Company's insurance carrier settled the lawsuit. The
Company did not contribute to the settlement.

In the ordinary course of its business, the Company is from time to time a party
in certain legal proceedings. In the opinion of management, the Company is not
party to any litigation, other than those described in this Item 3, that would
have a material adverse effect on its operations or financial condition if the
proceeding was determined adversely to the Company.


ENVIRONMENTAL
-------------

In 1985, a partnership between Kenneth W. Fletcher and Donald C. Wright (two of
the Company's Initial Shareholders(2), acquired a 21-acre parcel of land in
Springfield, Ohio ("Parcel") from an unaffiliated party. The Parcel included a
building 

-------------------


         2  The Company's Initial Shareholders were Messrs. Kenneth W. Fletcher,
         Donald C. Wright, and Howard W. Smith, who held all of the Company's
         outstanding common shares immediately prior to the initial public
         offering in 1993. Upon Mr. Fletcher's death in January 1999, his shares
         moved into the hands of his estate and into a trust for the benefit of
         his spouse. Further references in this Report to the Initial
         Shareholders include the estate and trust as the context requires. See
         also Item 12 of this Report, Security Ownership of Certain Beneficial
         Owners and Management.

                                   14 of 116
<PAGE>   15

and parking area previously operated by an unaffiliated party as a retail store.
In 1985, the Company remodeled the building and leased the Parcel from the
partnership as the location of its Springfield, Ohio store.

In 1990, the partnership was informed by the United States Environmental
Protection Agency ("EPA") that the Parcel had been operated by a previous owner
as an industrial landfill and that the EPA intended to investigate the Parcel.
In 1990, a contractor for the EPA examined the Parcel and took surface and
shallow soil samples but, contrary to the work plan that had been prepared by
EPA, did not take groundwater samples. Testing of the soil samples revealed
elevated concentrations of certain semi-volatile organic compounds. The Ohio EPA
subsequently criticized the contractor's soil testing methods and its failure to
take groundwater samples.

In 1993, the Company and the partnership engaged an environmental consultant to
conduct certain tests of the Parcel to attempt to determine the location of the
landfill, its proximity to the Company's store, and certain other information.
The consultant issued its report in April 1994. Among other things, it concluded
that the building in which the store operates is not located on, or immediately
adjacent to, the site of the former landfill.

In 1994, Messrs. Fletcher and Wright withdrew the Springfield property from the
Fletcher-Wright partnership and contributed it to Springfield Properties, Inc.,
an Ohio corporation owned by Messrs. Fletcher and Wright. The lease between
Roberds, Inc. and Fletcher-Wright was assigned to, and assumed by, Springfield
Properties, Inc.

In 1995, Springfield Properties, Inc. was contacted by a consultant to the EPA
and informed that the consultant had been engaged by the EPA to "re-score" the
Parcel for purposes of determining its priority for potential clean-up. In 1996,
the Company obtained a copy of the consultant's report. That report summarized
the history of the Parcel and the work of the various environmental consultants
to date. It concluded that the Parcel poses certain risks of contamination, but
did not recommend any further action with respect to the Parcel. The Company has
not yet obtained the new "score" for the Parcel.

It is not possible to predict whether the EPA will take further action, whether
remediation will be required, or the costs of remediation if required. The EPA
takes the position that a tenant can be liable for remediation costs, even if
the tenant did not contribute to the contamination of a site. However, the
Company is not aware of any circumstances in which a court has found a tenant
liable for remediation costs when the tenant did not contribute to the
contamination or fail to report contamination known to the tenant. At this
point, neither the Company, the partnership, nor Springfield Properties, Inc.
plans to take any further action with respect to the environmental issues
associated with the Parcel, unless the EPA initiates additional activity.

The Springfield site also includes a gas station and car wash that were operated
for many years by a third-party tenant. In December 1998, that operator
abandoned the facilities and informed Springfield Properties, Inc. that it did
not intend to upgrade the underground gasoline tanks that were on the site to
comply with federal and state regulations requiring such an upgrade. Springfield
Properties, Inc. has not yet determined how it will address the abandoned tanks
and facilities.

Certain other properties leased by the Company may contain, or have contained,
asbestos materials or petroleum underground storage tanks, but the Company does
not believe that any such circumstances are likely to have a material adverse
effect on the Company, and there are no active EPA investigations of these
facilities. The Company has removed asbestos and underground storage tanks in
connection with its acquisition and renovation of certain of its properties. To
the best of the Company's knowledge, such work has been done in compliance with
applicable environmental regulations and protocols.


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 the fiscal year ended December 31, 1998.


                                   15 of 116
<PAGE>   16

                        EXECUTIVE OFFICERS OF REGISTRANT



The following information concerning executive officers of the Company is
provided pursuant to Instruction 3(b) of item 401 of Regulation S-K. The
following table sets forth certain information regarding the Company's executive
officers at January 31, 1999. The Company is not aware of any family
relationship between any executive officers or directors of the Company.
Executive officers serve at the discretion of the Board of Directors.
<TABLE>
<CAPTION>

NAME                    AGE      POSITION
----                    ---      --------
<S>                     <C>       <C>
Melvin H. Baskin        55       Chief Executive Officer

Robert M. Wilson        46       President, Chief Administrative Officer,
                                 Chief Financial Officer, General Counsel, 
                                 Secretary, and Director

Billy D. Benton         47       Executive Vice President-Operations

R. Brian Good           40       Senior Vice President-Stores

Michael A. Bruns        36       Vice President, Controller, and Chief 
                                 Accounting Officer

Wayne B. Hawkins        45       Treasurer and Assistant Secretary

Jonathan W. House       54       Vice President-Warehousing, Distribution and 
                                 Logistics

Wayne P. McCollum       59       Chief Information Officer

Charles H. Palko        47       Vice President-Appliances and Electronics

M. Scott Taylor         39       Vice President-Human Resources

Michael Van Autreve     51       Vice President-Bedding

</TABLE>

MELVIN H. BASKIN was elected Chief Executive Officer in July 1998. He also
served as President from July through October 1998. From July 1997 through July
1998, he was Chief Operating Officer, Farm Stores, Inc., Miami, Florida. From
May 1997 through July 1997, he was President, Breuner's Home Furnishings Corp.,
Lancaster, Pennsylvania, and from June 1996 through July 1997 was
President-Eastern Division of Breuner's. From 1993 through May 1996, he was
President, Alex & Ivy Country Division, The Bombay Company, Inc., Fort Worth,
Texas.

ROBERT M. WILSON was elected President and Chief Administrative Officer in
October 1998. He has been General Counsel, Secretary, and a director since 1993.
He has also served as Chief Financial Officer of Roberds since 1988, and was an
Executive Vice President from 1988 through October 1998. He was Treasurer from
1993 through May 1995, and Assistant Treasurer from May 1995 through May 1997.

BILLY D. BENTON was elected Executive Vice President-Operations in May 1997.
From October 1996 through May 1997, he consulted with several business and
explored a number of business opportunities. Prior thereto, he was employed in a
variety of positions with Levitz Furniture Corporation, Boca Raton, Florida.
From January through October 1996, Mr. Benton was National Director of Retail
Marketing for Levitz. From August 1995 through January 1996, he was Eastern
Division President. From 1992 through August 1995, he was Vice President-General
Manager, Southeast Region. Levitz filed for protection under Chapter 11 of the
bankruptcy laws in September 1997.

                                   16 of 116
<PAGE>   17

R. BRIAN GOOD was elected Senior Vice President-Stores in November 1998. From
April 1998 through November 1998, he was Senior Divisional Vice President,
Good's division of Breuner's Home Furnishings Corp., Lancaster, Pennsylvania.
From June 1996 through April 1998, he was Senior Regional Vice President of the
Good's division. From January through June 1996, he was Senior Vice President of
Sales and Marketing, Good's Furniture, Inc. From 1990 through January 1996, he
was Vice President of Sales of Good's.

MICHAEL A. BRUNS joined Roberds in April 1994 as Manager of Financial Reporting
and Analysis, and was elected Vice President, Controller, and Chief Accounting
Officer in August 1994. From 1984 through April 1994, he was associated with
Deloitte & Touche (now Deloitte & Touche LLP) in various capacities, most
recently as Audit Senior Manager in the Dayton, Ohio office.

WAYNE B. HAWKINS was elected Treasurer in May 1995, and Assistant Secretary in
May 1997. Prior thereto, he was Assistant Treasurer since February 1994. Prior
thereto, he was Vice President, PNC Bank, Ohio, NA, since 1992.

JONATHAN W. HOUSE was elected Vice President-Warehousing, Distribution and
Logistics in May 1998. Prior thereto, he served as a consultant to the Company
since March 1998. From November 1996 through March 1998, he was a Senior
Consulting Project Manager in logistics, NCR Corporation, Dayton, Ohio. Prior
thereto, he served in the United States Army primarily in logistics functions
and commands, retiring as a Colonel in November 1996. From June 1994 through
November 1996, he was Commander and Deputy Commander, Defense Electronics Supply
Center, Dayton, Ohio. From 1993 through June 1994, he was Commander, U.S. Army
Transportation School, Fort Eustis, Virginia.

WAYNE P. MCCOLLUM was elected Chief Information Officer in November 1998. From
November 1997 through November 1998, he was Vice President of Information
Technology, Farm Stores, Inc., Miami, Florida. From April 1997 through November
1997, he explored business opportunities. From August 1995 through April 1997,
he was Chief Information Officer and later Chief Operating Officer, Rampage
Clothing Company, Los Angeles, California. From 1993 through August 1995, he was
Senior Consultant, Electronic Data Systems, Dallas, Texas, specializing in
retail clients.

CHARLES H. PALKO was elected Vice President-Appliances and Electronics in
January 1998. He was Vice President-Appliances from March 1996 through January
1998. From 1993 through March 1996, Mr. Palko was Vice President-Merchandising,
Fretter, Inc., Brighton, Michigan. Fretter, Inc. filed for protection under the
United States Bankruptcy laws in October 1996.

M. SCOTT TAYLOR was elected Vice President-Human Resources in November 1998.
From October 1996 through November 1998, he was Vice President-Stores, Farm
Stores, Inc., Miami, Florida. From April 1995 through October 1996, he was
Director-Executive Placement, Sunglass Hut International, Coral Gables, Florida.
From 1991 through April 1995, he was Human Resource Manager, T.J. Maxx, Dedham,
Massachusetts.

MICHAEL VAN AUTREVE has been Vice President-Bedding since 1988.


The Company's future performance will depend to a significant extent upon the
efforts and abilities of certain members of senior management. The loss of the
services of any member of senior management could have a material adverse effect
on the Company.

At January 31, 1999, the Initial Shareholders, and their spouses, owned
approximately 49.5 percent of the Company's outstanding shares. As a result,
they may be in a position to control the election of the entire Board of
Directors of the Company and control the outcome of all actions requiring
shareholder approval, thereby insuring their ability to control the future
direction and management of the Company.

The Company's Amended Articles of Incorporation and Regulations contain certain
provisions that may discourage acquisition bids for the Company and could limit
the price that certain investors might be willing to pay for the Company's
common shares. Among others, these provisions include the classification of the
Board of Directors, certain restrictions 


                                   17 of 116
<PAGE>   18

on shareholders' ability to remove directors, certain "fair price" provisions
adopted by the Company under Ohio law, and the Company's adoption of certain
restrictions on shareholders' ability to bring matters before meetings of
shareholders. In addition, the Company has the ability to issue preferred
shares, which could serve to discourage acquisition bids for the Company's
common shares.

The common shares held by the Initial Shareholders are not registered for sale
under the Securities Act of 1933; however, such shares can be sold under SEC
Rule 144 and other provisions of the securities laws. In addition, shares that
may be acquired by directors and executive officers of the Company through
certain benefit plans are registered for resale by such directors and executive
officers. Sales of substantial numbers of shares by the Company, the Initial
Shareholders, or other officers or directors, or the perception that such sales
could occur, could adversely affect the market price of the Company's stock.


                                   18 of 116
<PAGE>   19

                                     PART II


ITEM 5.           MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER 
                  MATTERS

Trading in the common shares of Roberds, Inc. commenced in 1993, following its
initial public offering. The shares trade on the Nasdaq National Market tier of
The Nasdaq Stock Market, under the symbol "RBDS." The following table sets forth
the high, low, and closing prices for trading in the Company's common shares, as
reported on The Nasdaq Stock Market, for each quarter in fiscal 1998 and 1997.
<TABLE>
<CAPTION>


                      First     Second        Third        Fourth  
                     Quarter    Quarter      Quarter       Quarter
                     -------    -------      -------       -------
                                                     
1998                                                 
----                                                 
<S>                  <C>        <C>          <C>            <C>  
High                  $4.50      $3.50        $4.25          $3.00
                                                     
Low                    2.13       2.38         1.50           1.50
                                                     
Close                  3.00       2.63         2.50           2.06
                                                     
                                                     
1997                                                 
----                                                 
<S>                   <C>        <C>          <C>            <C>  
High                  $9.00      $7.25        $5.50          $5.13
                                                     
Low                    7.00       3.00         3.19           2.50
                                                     
Close                  7.06       5.25         3.50           3.00
</TABLE>
                                                     
                                              
Such quotations include inter-dealer prices, without retail mark-up, mark-down,
or commission, and may not necessarily reflect actual transactions. At the close
of trading on January 31, 1999, the Company had approximately 226 shareholders
of record. Based upon the quantity of shareholder materials provided to
brokerage houses and individual shareholders requesting such materials, the
Company estimates that the total number of record and beneficial shareholders at
January 31, 1999 was approximately 2,000.

In October 1998, The Nasdaq Stock Market ("Nasdaq") informed the Company that it
failed to meet one of the requirements for continued listing on the Nasdaq
National Market tier, specifically the requirement that at least $5 million of
stock be held by individuals other than officers, directors, and those who own
more than ten percent of the Company's outstanding shares. The Company has
appealed the Nasdaq's determination, and will request additional time to meet
the requirement. The Company expects the appeal to be heard in March 1999. It is
not possible to predict the outcome of the appeal. If Nasdaq rules that the
Company's shares do not qualify for listing on the National Market tier, the
Company will explore other alternatives so that it can remain listed. However,
it is possible that the Company's shares may become de-listed from the Nasdaq
National Market tier, and that they would trade on The Nasdaq Small Cap Market,
or that they would become de-listed altogether and that they would trade on the
OTC Bulletin Board or on what is generally known as the "pink sheets." Such an
outcome could adversely affect the price of the Company's shares and investors'
ability to readily trade shares.

Through the initial public offering of its common shares in 1993, the Company
paid dividends from time to time. In 1994, the Company paid $193,000 to Initial
Shareholders, pursuant to the Tax Indemnification Agreement entered into by the
Company and the Initial Shareholders at the time of the initial public offering.
Such reimbursement is reflected in the Company's financial statements as a
distribution of retained earnings. In 1998, the Company settled an examination
of its 1993 and 1994 federal income tax returns, and accrued an additional
$225,000 payable to the Initial Shareholders as 


                                   19 of 116
<PAGE>   20

the result of that settlement. See the Notes to the Consolidated Financial
Statements included elsewhere in this Report. Other than the reimbursements
described above, the Company has declared no dividends since the initial public
offering of its common shares, and no dividends are being contemplated by the
Board of Directors. The Company's revolving bank line of credit contains a
covenant prohibiting the payment of dividends. Therefore, no retained earnings
were available for dividends at December 31, 1998.



                                   20 of 116
<PAGE>   21

ITEM 6.           SELECTED FINANCIAL DATA

(All amounts in thousands, except per share data, percentages, and inventory
turnover)
The operations statement data and the balance sheet data presented below have
been derived from the Company's consolidated financial statements and should be
read in conjunction with Management's Discussion and Analysis of Financial
Condition and Results of Operations and the Consolidated Financial Statements
and Notes thereto, and the independent auditor's report thereon, included
elsewhere herein. Certain reclassifications have been made in the prior years'
selected financial data to conform to the classifications used in 1998. These
reclassifications had no effect on the net (loss) earnings or shareholders'
equity as previously reported.


OPERATIONS  STATEMENT DATA:
---------------------------
<TABLE>
<CAPTION>


                             YEAR ENDED DECEMBER 31


                              1998             1997              1996              1995             1994

<S>                        <C>              <C>               <C>              <C>               <C>     
Net revenues                $318,710         $341,703          $342,102         $301,324          $259,159

Cost of sales                218,497          230,754           238,645          209,320           180,947
                             -------          -------           -------          -------           -------
Gross profit                 100,213          110,949           103,457           92,004            78,212
Selling, delivery, and
 administrative expenses     110,358          111,642           102,043           81,187            71,089
Interest expense, net          7,224            7,545             5,681            3,500             1,636
Litigation                                                        3,314
Finance participation
  income                      (3,032)          (3,217)           (2,451)          (2,489)           (2,908)
Other income, net             (3,536)          (3,495)           (3,690)          (3,440)           (2,123)
                             -------         ---------           ------           ------           -------
(Loss) earnings before
  income taxes (benefit)     (10,801)          (1,526)           (1,440)          13,246            10,518
Income taxes (benefit)         5,322(3)          (425)             (530)           5,225             3,925
                             -------          --------        ----------         -------           -------
Net (loss) earnings         $(16,123)         $(1,101)        $    (910)          $8,021            $6,593
                            ========          ========        ==========          ======            ======

Basic and diluted
  earnings (loss) per share   $(2.66)          $(0.18)           $(0.15)           $1.36             $1.12
                               =====           =======           =======          ======             =====
Weighted average 
 shares outstanding:
  Basic                        6,065            5,979             5,934            5,898             5,871
                               =====            =====             =====            =====             =====
  Diluted                      6,065            5,979             5,934            5,919             5,872
                               =====            =====             =====            =====             =====
</TABLE>


------------------------------
3        See Note I to Consolidated Financial Statements.




                                   21 of 116
<PAGE>   22

<TABLE>
<CAPTION>
BALANCE SHEET DATA (AT PERIOD END):

                                   DECEMBER 31
                               1998             1997             1996             1995              1994

<S>                        <C>              <C>               <C>              <C>               <C>    
Working capital               $8,514          $18,182           $34,952          $23,060           $15,764
Merchandise inventories      $43,937          $51,173           $62,998          $41,377           $37,247
Property and equipment,
  net                        $92,085          $99,364          $104,953          $81,310           $55,791
Total assets                $148,208         $172,691          $192,208         $142,049          $105,556
Long-term debt,
  including capital leases,
  less current maturities    $70,065          $73,309           $90,365          $54,448           $29,168
Deferred warranty revenue     $5,211           $8,727           $11,627           $9,546            $6,925
Total shareholders'
  equity                     $29,672          $45,769           $46,570          $47,199           $38,965


SELECTED OPERATING DATA:
Stores open at end
 of period                        24               24                25               23                19
Total selling square
  footage at end
  of period (1)                1,805            1,782             1,784            1,394             1,133
Percentage (decrease)
  increase in comparable
  store net sales (2)           (4.6)           (11.0)             (8.1)            (0.9)             10.0
Inventory turnover (3)           4.6              4.0               4.6              5.3               5.3
</TABLE>


1)   Total selling square footage includes selling and office space within each
     store, but excludes warehouse space.

2)   Comparable store sales are computed monthly for each period presented by 
     comparing the sales in a month (for those stores that were open for the 
     entire month in the current year and the entire comparable month in the 
     prior year) with the sales for the comparable month in the prior year. 

3)   Inventory turnover is calculated by dividing cost of sales
     for the period by the average of the beginning and ending inventory 
     balances for the period.


                                   22 of 116
<PAGE>   23


ITEM 7.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 
                  AND RESULTS OF OPERATIONS
(All dollar amounts in thousands, except per share data)


RESULTS OF OPERATIONS
---------------------

The following table sets forth the results of operations as a percentage of
sales for the last three years:
<TABLE>
<CAPTION>

                                                    YEAR ENDED DECEMBER 31
                                                  1998        1997       1996

<S>                                            <C>          <C>       <C>   
Net sales and service revenues                   100.0%       100.0%    100.0%
Cost of sales and services                        68.6         67.5      69.8
                                                 -----        -----     -----
Gross profit                                      31.4         32.5      30.2
Selling, delivery and
  administrative expenses                         34.6         32.7      29.8
Interest expense, net                              2.2          2.2       1.6
Litigation                                                                1.0
Finance participation income                      (1.0)        (1.0)     (0.7)
Other income, net                                 (1.0)        (1.0)     (1.1)
                                                 -----        -----     -----
(Loss)  before income
  taxes (benefit)                                 (3.4)        (0.4)     (0.4)
Income taxes (benefit)                             1.7         (0.1)     (0.1)
                                                 -----        -----     -----
Net (loss)                                        (5.1)%       (0.3)%    (0.3)%
                                                 =====        =====     =====
</TABLE>

Sales by the Company's three market areas as a percentage of total sales for
each of the last three years were as follows:
<TABLE>
<CAPTION>

                                          YEAR ENDED DECEMBER 31

                                        1998       1997      1996

<S>                                  <C>          <C>         <C>
Ohio                                  49%          50%         46%

Georgia                               31           30          32

Florida                               20           20          22
                                    -------     --------    --------
                                     100%         100%        100%
                                    =======     ========    ========
</TABLE>

                                   23 of 116
<PAGE>   24

Sales by major product category as a percentage of total sales for each of the
last three years were as follows:
<TABLE>
<CAPTION>

                                             YEAR ENDED DECEMBER 31
                                           1998       1997       1996

<S>                                       <C>        <C>        <C>
Furniture.................................  38%        37%        38%

Bedding...................................  13         13         12

Major appliances..........................  24         25         25

Consumer electronics......................  18         19         21

Extended warranty contracts and other...     7          6          4
                                        -------        --        ---

                                           100%       100%       100%
                                           ===        ===        ===
</TABLE>


1998 COMPARED TO 1997. Sales in 1998 were $318,710, compared to $341,703 in
1997, a 6.7% decrease. Comparable store sales in 1998 decreased by 4.6 %. The
decline in total sales includes the effect of closing the Decatur, Georgia store
in December 1997 ($7,728) and, to a lesser extent, the withdrawal from the
personal computer business in the Ohio market area ($4,303).

For 1998, the percentage increases (decreases) in sales in the Company's three
market areas were as follows:
<TABLE>
<CAPTION>

                                TOTAL                   COMPARABLE
                               STORES                     STORES

<S>                            <C>                          <C> 
Ohio                             (8)%                         (8)%

Georgia                          (4)                           3

Florida                          (8)                          (8)
</TABLE>

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, contributed to the decrease in comparable
store sales. See "Business Competition."

In 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 are recognized
over the remaining lives of the contracts, and the expenses related to service
costs are recognized as incurred. Total sales were positively affected by this
new agreement by approximately 0.5% in 1998.

Gross profit for 1998 was $100,213, or 31.4% of sales, compared to $110,949, or
32.5% of sales, for 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. Also, contributing to the gross margin percentage
decline was an increase in the LIFO inventory reserve of $1,211 versus a
decrease in the reserve of $239 in 1997. 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 0.2% in 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.


                                   24 of 116
<PAGE>   25

Gross margin percentages for 1998 by category were approximately 34% for
furniture, 45% for bedding, 21% for major appliances, and 17% for consumer
electronics. The gross margin percentages for 1998 decreased for furniture as
compared to 1997, while margins for bedding, consumer electronics, and major
appliances held relatively steady. Contributing to the decline in gross margin
percentage for furniture was the above mentioned liquidation of certain aged and
de-emphasized merchandise and the increase in the LIFO reserve. This liquidation
is now complete. Product prices and margins in consumer electronics and
appliances continued to be under pressure during 1998, as a result of
competitive conditions in these categories.

Selling, delivery, and administrative expenses decreased to $110,358, or 34.6%
of sales in 1998, compared to $111,642, or 32.7% of sales, in 1997. The increase
in expenses as a percentage of sales for 1998, as compared to 1997, was
primarily due to increases in selling and warehouse expenses to support the
clearance of aged and discontinued merchandise and, to a lesser extent,
increases in provisions for certain employee benefits and the effect of fixed
costs in light of the Company's decline in comparable store sales. Selling,
delivery and administrative expenses for 1998 reflect: (a) reduced net
advertising and promotional credit expenses; (b) a one-time refund of premiums
of $1,053 and a 75% rate reduction for the first half of 1998 to all
participants in the State of Ohio workers' compensation fund; (c) a reduction in
worker's compensation expense as a result of a change to insured programs in
Georgia and Florida; (d) a decrease in professional fees for outside consulting
services; and (e) a reduction in property insurance expenses due to a change in
insurance carriers.

Interest expense, net of interest income, decreased to $7,224 for 1998, as
compared to $7,545 in 1997. The decrease in interest expense in 1998 resulted
primarily from a reduction in merchandise inventories, which resulted in a
decrease in the related indebtedness incurred to carry such inventories.

Finance participation income, which consists of income from the Company's
private-label credit card program, decreased to $3,032, or 1.0% of sales, in
1998, compared to $3,217, or 1.0% of sales, in 1997. Finance participation
decreased in 1998 as compared to 1997 as a result of ongoing changes in the use
of income-generating finance programs compared to longer-term, same-as-cash
programs that generate financing expense. Such shifts may occur again in the
future, thereby affecting the Company's finance participation income.

Other income, net, which consists primarily of cash discounts and rental income
from tenants, was $3,536, or 1.0% of sales, in 1998, compared to $3,495, or 1.0%
of sales, for 1997. The increase in other income for 1998 is a result of the
Company taking advantage of various cash discounts offered by its vendors.

Loss before income taxes (benefit) increased to $(10,801) in 1998, from $(1,526)
in 1997. Income tax expense for 1998 was $5,322, or approximately 49% of the
loss before taxes, as compared to income tax benefit of $425, or 28% of loss
before taxes, in 1997. The disproportionate provision for income taxes in 1998
reflects an increase in the valuation reserve provided for deferred tax assets
resulting in the elimination of all deferred tax assets at December 31, 1998.
The reserve was deemed necessary as a result of the uncertainty of the
recoverability of such future tax benefits.

1997 COMPARED TO 1996. Sales in 1997 decreased to $341,703 from $342,102 in
1996, a 0.1% decrease. Comparable store sales in 1997 decreased by 11.0%. The
decline in total sales for 1997, compared to 1996, is partially the result of
the comparison of sales for the Cincinnati megastore in 1997 to the very
successful grand opening of that store in the third quarter of 1996. 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.
Additionally, during 1997, the Company focused on improving its gross margin
percentage versus the very price-promotional approach utilized during 1996.

                                   25 of 116
<PAGE>   26

For 1997, the percentage increases (decreases) in sales in the Company's three
market areas were as follows:
<TABLE>
<CAPTION>

                             TOTAL                   COMPARABLE
                            STORES                     STORES

<S>                         <C>                       <C>
Ohio                           8%                       (11)%

Georgia                       (5)                       (12)

Florida                      (10)                       (10)
</TABLE>

Comparable store sales for the Ohio market decreased due to the comparison
against the very successful grand opening period for the Cincinnati megastore in
the third and fourth quarters of 1996.

Sales of furniture product as a percentage of total sales declined in 1997. This
decline is the result of a decrease in total sales in the Cincinnati megastore,
as compared to its very successful grand opening in the third quarter of 1996,
when the Cincinnati megastore generated a disproportionately high percentage of
the Company's furniture sales. Sales of consumer electronics products have
declined 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, 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.

As previously mentioned, in March 1997, the Company entered into an agreement to
sell third-party extended warranty contracts. Total sales were positively
affected by this new agreement by approximately 1.8% in 1997. As a result of the
change in the extended warranty arrangement, extended warranty contract revenue
increased as a percentage of total sales in 1997.

Gross profit for 1997 was $110,949, or 32.5% of sales, compared to $103,457, or
30.2% of sales, for 1996. Sales of third-party extended warranty contracts
favorably affected gross margins as a percentage of sales by approximately 0.7%
in 1997.

Gross margin percentages for 1997 by category were approximately 38% for
furniture, 45% for bedding, 22% for major appliances, and 17% for consumer
electronics. The gross margin percentages for 1997 increased for furniture,
bedding, and consumer electronics as compared to 1996, while margins for major
appliances held relatively steady. The increase in the furniture gross margin
percentage reflects less aggressive pricing in this category in all market
areas, but particularly in the Cincinnati megastore where the furniture category
was heavily discounted during the grand opening of that market in 1996. The
gross margin percentage increase for consumer electronics reflects a reduction
in the use of the price-promotional approach during 1997 as compared to 1996.

Selling, delivery, and administrative expenses increased to $111,642, or 32.7%
of sales, in 1997 compared to $102,043, or 29.8% of sales, in 1996. The increase
as a percentage of sales in 1997 is primarily attributed to: (a) increased sales
commissions as a result of a higher percentage of revenue associated with
warranty contracts and increased product gross margins; (b) increased
advertising expenses; (c) the effect of fixed occupancy costs in light of the
Company's declining comparable store sales; (d) increased professional fees, as
the result of the engagement of a national management consulting firm and (e)
increased workers' compensation costs. These increases were offset in part by a
decrease in costs that were incurred in 1996 in conjunction with the grand
opening of the Cincinnati megastore and the consolidation of warehouse
operations in Dayton.

Interest expense, net of interest income, increased to $7,545 for 1997, as
compared to $5,681 in 1996. Interest expense increased in 1997 primarily as the
result of additional indebtedness incurred to finance the Cincinnati megastore
and the Buckhead showroom, and increased merchandise inventory levels during the
first half of 1997. Net interest expense was partially offset by the
capitalization of $38 during 1997, compared to $685 in 1996.

                                   26 of 116
<PAGE>   27

Finance participation income, which consists of income from the Company's
private-label credit card program, increased to $3,217, or 1.0% of sales, in
1997, compared to $2,451, or 0.7% of sales, in 1996. Finance participation
increased in 1997 as compared to 1996 because finance participation was
unfavorably impacted in 1996 by the initial influx of non-interest-bearing
accounts into the private-label credit card program as part of the Cincinnati
market entry. Additionally, finance participation increased in 1997 as a result
of the Company's emphasis on its core and shorter-period finance programs during
the first half of 1997, as compared to 1996 when it relied heavily on
twelve-months programs.

Other income, net, which consists primarily of cash discounts and rental income
from tenants, was $3,495, or 1.0% of sales, in 1997, compared to $3,690, or 1.1%
of sales, for 1996. Cash discounts decreased in total and as a percentage of
sales in 1997 as the Company reduced its appliance and consumer electronics
inventories to better match the consumer demand for these products.

Loss before income tax benefit increased to $(1,526) in 1997, from $(1,440) in
1996. Income tax benefit for 1997 was $425, or approximately 28% of the loss
before taxes, as compared $530, or 37% of loss before taxes, in 1996. The
disproportionate provision for income taxes in 1997 reflects minimum taxes
imposed by certain jurisdictions, and a valuation reserve for certain state
operating loss carryforwards because the Company determined that recoverability
of such carryforwards was uncertain.

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

Cash declined to $932 at December 31, 1998, compared to $2,494 at December 31,
1997. The Company generated $2,375 of cash from operating activities during
1998. Cash of $6,025 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 inventory levels to consumer demand and to increase
inventory turns. Funds generated from the reduction of merchandise inventories
were utilized in part by reductions of $2,741 in accounts payable and $3,516 in
the balance of deferred warranty revenue. The Company's accounts payable balance
has declined as the result of reduced levels of purchasing and as the Company
took advantage of various cash discounts offered by its vendors. As a result of
the Company's ability to generate cash flow from operating activities during
1998, the Company was able to reduce its total debt by $3,031.

During 1998, the Company's capital expenditures totaled $1,499. These
expenditures primarily represented normal replacement and upgrade projects. As
of December 31, 1998, the Company had outstanding commitments to acquire
delivery vehicles and warehouse equipment totaling approximately $3,400. These
commitments are expected to be financed through operating leases. Subsequent to
December 31, 1998, the Company entered into an agreement to acquire
approximately $1,700 of computer hardware and software that is expected to be
financed under capital lease arrangements. The Company has no other significant
expansion or capital expenditure plans for 1999 other than normal replacement,
repair, and upgrade projects, and existing store refurbishment.

During the past two years the Company has generated $23,229 million in cash from
operating activities, of which $18,089 was generated through reductions of
inventory. The cash flow generated from operations in 1997 and 1998 was utilized
to reduce to Company's total debt by $20,747. While the Company will continue to
identify opportunities to reduce inventories, it does not believe that inventory
reductions will provide significant additional cash flow in 1999. As a result,
the Company's 1999 capital expenditure plans and debt maturities will need to be
funded by a combination of operating cash flow, the revolving line of credit, or
other alternative financing sources.

In March 1999, the Company refinanced its revolving line of credit with another
bank. The refinanced line expires in February 2004. 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 inventory, which varies seasonally. At December 31, 1998,
$27,181 would have been available under the line, of which $17,500 was
outstanding. The line of credit bears interest at either the bank's base rate
(7.75% at December 31, 1998) or LIBOR plus 2.25% (7.88% at December 31, 1998).

The line of credit includes certain restrictive covenants including, among
others, limitations on capital expenditures and the aggregate amount of funded
debt. The line prohibits the payment of dividends. The line also requires the
maintenance of a minimum fixed-charge-coverage ratio, which becomes increasingly
restrictive over time. In order to comply with 

                                   27 of 116
<PAGE>   28

this covenant, the Company must improve operations significantly during 1999
over the actual results experienced during 1998. Such improvements in operations
are expected based upon the Company's 1999 business plan. If such improvements
are not achieved, the Company will have to renegotiate the covenants in order to
remain in compliance. 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.

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. The Company believes
that its 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 will be approximately
$1,700,000, which it expects to finance through a capital lease arrangement, for
which it has a commitment. The majority of the expenditures will be for hardware
upgrades to accommodate new software. No significant expenditures have occurred
to date. The Company expects to make all of the expenditures by the third
quarter of 1999.

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.
Only a small portion of these expenditures has occurred to date. The Company
expects to make all such expenditures by late 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 nine 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 monitoring its suppliers'
compliance activities.

The expenditures for the hardware upgrades to the primary management information
system are expected to be financed through leasing arrangements. The remaining
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.

OUTLOOK
-------

The Company engaged a national management consulting firm 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.

                                   28 of 116
<PAGE>   29

During 1999, the Company will continue to focus on improving business operations
and customer service. Areas of focus include imposing new selling-floor
disciplines, improving warehouse operations and delivery performance, improving
the management of inventory, 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 1998. The Company believes these initiatives
will yield improvement in the Company's operations during 1999 and beyond.

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. It is not clear how
recent economic problems outside the United States will affect the economy and
consumer confidence. Although the Company has seen a modest reduction in
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, gross margins,
promotional finance expenses, and operating results. If the economy slows, the
competition can be expected to be even more aggressive.

There are a number of changes occurring in the competitive situation in the
Company's market areas. A national retailer of furniture has completed its
withdrawal from all of the Company's markets. A regional furniture retailer has
entered the Dayton market during the first quarter of 1999, and a regional
electronics retailer will enter the Cincinnati market area in the first quarter
of 1999 to succeed a local competitor that closed in 1998. These expansions will
likely continue to put pressure on sales and gross margins.

INFLATION
---------

The Company does not believe that inflation had any significant impact on its
operations in 1998, 1997, or 1996.

SEASONALITY
-----------

The Company typically experiences an increase in its 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. As a
result, operating results for the full year are highly dependent upon the
success of the Company's operations in the fourth quarter.


                                   29 of 116
<PAGE>   30

The following tables show the Company's quarterly sales, gross profit, net
(loss) earnings, and (loss) earnings per common share for the last two years.

<TABLE>
<CAPTION>

                                                    1998
                              --------------------------------------------------
                                   FIRST      SECOND       THIRD       FOURTH
                                 QUARTER     QUARTER     QUARTER      QUARTER
<S>                           <C>         <C>         <C>          <C>
Net sales and
  service revenues              $ 78,512    $ 73,894    $ 78,696    $ 87,608

Gross profit                      24,681      23,096      25,460      26,976

Net loss                          (1,972)     (1,218)     (1,150)    (11,783)(1)

 Basic and diluted loss
   per share                        (.33)       (.20)       (.19)      (1.93)(1)


(1) Net loss for the fourth quarter of 1998 includes an increase in the
valuation allowance for deferred tax assets of $9,327, or $1.53 per share.

<CAPTION>

                                                       1997
                                  ----------------------------------------------
                                     FIRST       SECOND        THIRD      FOURTH
                                   QUARTER      QUARTER      QUARTER     QUARTER
<S>                              <C>            <C>        <C>         <C>
Net sales and
  service revenues                $ 83,152     $ 80,235     $ 83,928    $ 94,388

Gross profit                        26,641       26,606       27,744      29,958

Net (loss) earnings                   (145)      (1,313)          59         298

Basic and diluted (loss)
  earnings per share                  (.02)        (.22)         .01         .05
</TABLE>

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. 


                                   30 of 116
<PAGE>   31

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.

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.


                                   31 of 116
<PAGE>   32

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.

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 7A.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


Not applicable.


ITEM 8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


The Company's Consolidated Financial Statements for the three years ended
December 31, 1998, the Notes thereto, and the Independent Auditors' Report
thereon are as follows:


                                   32 of 116
<PAGE>   33



INDEPENDENT AUDITORS' REPORT
----------------------------

Board of Directors
Roberds, Inc.
Dayton, Ohio

We have audited the accompanying consolidated balance sheets of Roberds, Inc.
and subsidiary as of December 31, 1998 and 1997 and the related consolidated
statements of operations, shareholders' equity and cash flows for each of the
three years in the period ended December 31, 1998. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Roberds, Inc. and subsidiary at
December 31, 1998 and 1997, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1998, in
conformity with generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note B to the
consolidated financial statements, the Company incurred operating losses during
the past several years. This matter raises substantial doubt about the Company's
ability to continue as a going concern. Management's plans in regard to this
matter are also described in Note B. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.



/s/ Deloitte & Touche LLP
-------------------------
DELOITTE & TOUCHE LLP
Dayton, Ohio
February 16, 1999
(March 10, 1999 as to Note D)




                                   33 of 116
<PAGE>   34



ROBERDS, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>

                                                                  YEAR ENDED DECEMBER 31
                                                             1998         1997         1996


<S>                                                       <C>          <C>          <C>     
NET SALES AND SERVICE REVENUES (NOTE G)                     $318,710     $341,703     $342,102

COST OF SALES AND SERVICES                                   218,497      230,754      238,645
                                                          -----------  -----------  ----------
     Gross profit                                            100,213      110,949      103,457

SELLING, DELIVERY AND ADMINISTRATIVE EXPENSES                110,358      111,642      102,043
INTEREST EXPENSE, NET                                          7,224        7,545        5,681
LITIGATION (NOTE L)                                                                      3,314
FINANCE PARTICIPATION INCOME (NOTE H)                        (3,032)      (3,217)      (2,451)
OTHER INCOME, NET                                            (3,536)      (3,495)      (3,690)
                                                          -----------  -----------  ----------

LOSS BEFORE INCOME TAXES (BENEFIT)                          (10,801)      (1,526)      (1,440)

INCOME TAXES (BENEFIT) (NOTE I)                                5,322        (425)        (530)
                                                          -----------  -----------  ----------

NET LOSS                                                   ($16,123)     ($1,101)       ($910)
                                                          ===========  ===========  ==========

BASIC AND DILUTED NET LOSS PER COMMON SHARE                  ($2.66)      ($0.18)      ($0.15)
                                                          ===========  ===========  ==========

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING -
  BASIC AND DILUTED                                            6,065        5,979        5,934
                                                          ===========  ===========  ==========

</TABLE>

See notes to consolidated financial statements.




                                   34 of 116
<PAGE>   35

ROBERDS, INC. AND SUBSIDIARY
----------------------------

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
--------------
<TABLE>
<CAPTION>


                                                               DECEMBER 31
ASSETS (NOTE D)                                              1998           1997
---------------                                                               

<S>                                                        <C>          <C>
CURRENT ASSETS:
  Cash and cash equivalents                                  $932         $2,494
  Receivables:
    Customers (less allowance of $212
      in 1998 and $75 in 1997)                                921          1,311
    Vendors and other (Note C)                              2,390          2,693
  Merchandise inventories (Note A)                         43,937         51,173
  Refundable income taxes                                   2,360          2,025
  Prepaid expenses and other                                1,983          1,792
  Deferred tax assets (Note I)                                             3,375
                                                       ----------     ----------
          Total current assets                             52,523         64,863

PROPERTY AND EQUIPMENT - AT COST (NOTES A AND E):
  Land                                                     15,539         15,539
  Buildings and improvements                               65,432         65,206
  Leasehold improvements                                   33,590         33,020
  Furniture, fixtures and office equipment                  6,145          5,961
  Computer equipment                                        5,788          5,792
  Warehouse equipment and vehicles                          3,176          3,227
  Construction in progress                                    111
                                                       ----------     ----------
                                                          129,781        128,745
  Less accumulated depreciation and amortization           37,696         29,381
                                                       ----------     ----------
                                                           92,085         99,364
 
DEFERRED TAX ASSETS (NOTE I)                                               4,381

CERTIFICATES OF DEPOSIT - RESTRICTED (NOTE A)               2,331          2,541

OTHER ASSETS                                                1,269          1,542
                                                       ----------     ----------
                                                         $148,208       $172,691
                                                       ==========     ==========
</TABLE>



See notes to consolidated financial statements.


                                   35 of 116
<PAGE>   36

ROBERDS, INC. AND SUBSIDIARY
----------------------------

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
-------------------------------------
<TABLE>
<CAPTION>
                                                                         DECEMBER 31
LIABILITIES AND SHAREHOLDERS' EQUITY                                 1998         1997
------------------------------------                                                  

<S>                                                              <C>            <C>
CURRENT LIABILITIES:
  Accounts payable                                                 $14,130       $16,871
  Accrued payroll and payroll taxes                                  5,702         3,650
  Accrued sales taxes                                                2,073         2,165
  Other accrued expenses                                             2,510         1,640
  Customer deposits                                                 11,573        11,686
  Litigation (Note L)                                                1,271         2,992
  Accrued self-insured workers' compensation                         1,225         1,430
  Deferred warranty revenue - current (Note A)                       2,580         3,516
  Current maturities of long-term debt (Note D)                      2,945         2,731
                                                                 ----------   ----------
          Total current liabilities                                 44,009        46,681


LONG-TERM LIABILITIES:
  Long-term debt including capital leases (Notes D and E)           70,065        73,309
  Deferred rent (Note E)                                             1,831         1,721
  Deferred warranty revenue (Note A)                                 2,631         5,211
                                                                 ----------   ----------
          Total long-term liabilities                               74,527        80,241


SHAREHOLDERS' EQUITY (NOTE F)
  Preferred stock - authorized 5,000 shares,
    None issued or outstanding
  Common stock - authorized 15,000 shares,
    no par value; issued and outstanding, 6,108 and
    6,006  respectively, stated at $.10 per share                      611           601
  Additional paid-in capital                                        32,332        32,091
  (Deficit) retained earnings                                      (3,271)        13,077
                                                                 ----------   ----------
         Total shareholders' equity                                 29,672        45,769
                                                                 ==========   ==========
                                                                  $148,208      $172,691
                                                                 ==========   ==========

</TABLE>


See notes to consolidated financial statements.

                                   36 of 116
<PAGE>   37



ROBERDS, INC. AND SUBSIDIARY
----------------------------

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS)
--------------
<TABLE>
<CAPTION>

                                                                                  ADDITIONAL       RETAINED
                                                            COMMON STOCK           PAID-IN         EARNINGS
                                                         SHARES       AMOUNT       CAPITAL         (DEFICIT)

<S>                                                     <C>           <C>          <C>            <C>
BALANCE - December 31, 1995                                5,909         $591         $31,520        $15,088

  Issuance of common shares (Note F)                          37            4             277
  Net loss                                                                                             (910)
                                                       ----------  -----------   -------------   -----------

BALANCE - December 31, 1996                                5,946          595          31,797         14,178

  Issuance of common shares (Note F)                          60            6             294
  Net loss
                                                                                                     (1,101)
                                                       ----------  -----------   -------------   -----------

BALANCE - December 31, 1997                                6,006          601          32,091         13,077

  Issuance of common shares (Note F)                         102           10             241
  Net loss                                                                                          (16,123)
  Distributions payable to initial shareholders
  pursuant to Tax Indemnification Agreement (Note                                                      (225)
  I)
                                                       ----------  -----------   -------------   -----------

BALANCE - December 31, 1998                                6,108         $611         $32,332       ($3,271)
                                                       ==========  ===========   =============   ===========

</TABLE>

See notes to consolidated financial statements.



                                   37 of 116
<PAGE>   38

ROBERDS, INC. AND SUBSIDIARY
----------------------------

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS)
--------------
<TABLE>
<CAPTION>

                                                                             YEARS ENDED DECEMBER 31
                                                                         1998         1997           1996
<S>                                                               <C>            <C>               <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss                                                          ($16,123)      ($1,101)         ($910)
  Adjustments to reconcile net loss to net
    cash provided by (used in) operating activities:
      Depreciation and amortization                                     8,795         9,025          7,516
      LIFO reserve                                                      1,211         (239)           (84)
      Loss on sales of property and equipment                              38            87             97
      Deferred income taxes                                             7,756         1,510        (3,526)
      Changes in assets and liabilities:
         Receivables                                                       693         2,388         (936)
         Merchandise inventories                                         6,025        12,064      (21,537)
         Refundable income taxes                                         (335)       (2,025)
         Prepaid expenses and other                                      (191)            65         (225)
         Accounts payable                                              (2,654)         (769)         4,394
         Customer deposits                                               (113)         2,899         2,433
         Accrued expenses                                                  679         (230)         5,519
         Deferred warranty revenue and rent                            (3,406)       (2,820)         2,741
                                                                    ----------    ----------     ---------
      Net cash provided by (used in) operating activities                2,375        20,854       (4,518)
CASH FLOWS FROM INVESTING ACTIVITIES:
  Capital expenditures                                                 (1,499)       (3,413)      (32,179)
  Proceeds from sales of property and equipment                             61            54           163
  Decreases (increase) in certificates of deposit - restricted             210         (248)           273
  Other assets                                                             189            94         (131)
                                                                    ----------    ----------     ---------
      Net cash used in investing activities                            (1,039)       (3,513)      (31,874)
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from long-term debt                                           2,500         8,080        39,700
  Payments on long-term debt                                           (5,531)      (25,796)       (3,139)
  Net proceeds from issuance of common shares                              164           220           281
  Debt issuance costs                                                     (31)         (145)          (66)
                                                                    ----------    ----------     ---------
      Net cash (used in) provided by financing activities              (2,898)      (17,641)        36,776
                                                                    ----------    ----------     ---------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                   (1,562)         (300)           384
CASH AND CASH EQUIVALENTS - Beginning of year                            2,494         2,794         2,410
                                                                    ----------    ----------     ---------
CASH AND CASH EQUIVALENTS - End of year                                   $932        $2,494        $2,794
                                                                    ==========    ==========    ==========
CASH PAID (REFUNDED) FOR: 
  Interest, net of capitalized amounts of $38 and $685
    in 1997 and 1996, respectively                                      $6,878        $7,621        $5,600
                                                                    ==========    ==========    ==========
  Income taxes                                                        ($2,271)          $826        $2,566
                                                                    ==========    ==========    ==========

NON-CASH TRANSACTIONS - Issuance of common shares to
   Roberds, Inc. Employee Profit Sharing and Savings Plan                 $87           $80
                                                                    ==========    ==========

See notes to consolidated financial statements
</TABLE>


                                   38 of 116
<PAGE>   39

ROBERDS, INC. AND SUBSIDIARY
----------------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1998, 1997
AND 1996 
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
-----------------------------------------------

A.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation
---------------------------

The accompanying consolidated financial statements include the accounts of
Roberds, Inc. and its wholly-owned subsidiary, Roberd Insurance Agency, Inc.
(the Company). All significant intercompany transactions and balances have been
eliminated.

Operations
----------

The Company operates retail stores in three market areas selling furniture,
bedding, appliances and electronics. At December 31, 1998, the Company operated
24 large-format stores, with seven in the Ohio market, including six in Dayton
and one megastore in Cincinnati, nine in the Atlanta, Georgia market, and eight
in the Tampa, Florida market.

Cash and Cash Equivalents
-------------------------

Cash equivalents include all highly liquid investments with a maturity of three
months or less when purchased. The State of Florida requires the Company to
maintain deposits to partially fund its extended warranty and product
maintenance contracts and its self insured liability for workers' compensation.
Such deposits are included in certificates of deposit - restricted.

Merchandise Inventories
-----------------------

Merchandise inventories are valued at the lower of cost or market. Cost is
determined by the last-in, first-out (LIFO) method, except for electronics which
are valued using the first-in, first-out (FIFO) method. Electronics represented
approximately 24% of merchandise inventories at both December 31, 1998 and 1997.
If the FIFO method had been used for all inventory, inventory values would have
been approximately $3,317 higher at December 31, 1998 and $2,106 higher at
December 31, 1997.

Pre-Opening Costs
-----------------

Costs incurred in the opening of new stores are expensed as incurred.

Property and Equipment
----------------------

Property, equipment and improvements, including capital leases, are depreciated
or amortized over their estimated useful lives or the lease term using the
straight-line method. The lives, by category, generally are as follows:
<TABLE>
<CAPTION>

<S>                                                          <C>
         Buildings and improvements                           10 to 40 years
         Leasehold improvements                               10 years
         Furniture, fixtures and office equipment             3 to 5 years
         Computer equipment                                   3 to 8 years
         Warehouse equipment and vehicles                     3 to 10 years

</TABLE>

                                   39 of 116
<PAGE>   40

Extended Warranty and Product Maintenance Contracts
---------------------------------------------------

Contracts with terms from nine months to ten years are sold to supplement or
extend manufacturers' warranties on appliances, electronics and furniture
products. In 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. Deferred warranty
revenue and selling costs related to contracts sold prior to the effective date
of the agreement are recognized over the remaining lives of the contracts, and
the expenses related to service costs are recognized as incurred.

Revenue Recognition
-------------------

Merchandise inventory sales are recognized when the goods are delivered to the
customer.

Advertising
-----------

Advertising production costs, primarily those associated with television
advertising, are expensed the first time the related advertising is utilized.

Early Payment Discounts
-----------------------

Discounts received from vendors for early payment have been classified as other
income in the consolidated statements of operations.

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 reported amounts of assets and liabilities, and disclosure of
contingent assets and liabilities, at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

Net Earnings (Loss) Per Common Share
------------------------------------

In 1997, the Company adopted Statement of Financial Accounting Standards (SFAS)
No. 128, "Earnings Per Share." Diluted earnings per share are computed are
computed by dividing net earnings by the weighted average number of common
shares outstanding during the year, adjusted for the dilutive effect, if any, of
the Company's stock-based incentive plans. For the years ended December 31,
1998, 1997, and 1996, stock options outstanding under the Company's stock-based
incentive plans were anti-dilutive.

Stock Options
-------------

The Company measures cost for stock options issued to employees using the method
of accounting prescribed by APB Opinion No. 25, "Accounting for Stock Issued to
Employees."

Reclassifications
-----------------

Certain reclassifications have been made in the 1997 and 1996 financial
statements to conform to the classifications used in 1998. These
reclassifications had no effect on the results of operations or shareholders'
equity as previously reported.

B.   BASIS OF PRESENTATION

The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. As shown in the financial
statements, the 

                                   40 of 116
<PAGE>   41

Company has incurred an operating loss during each of the last three years.
These factors among others may indicate that the Company will be unable to
continue as a going concern for a reasonable period of time.

The financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or the amounts and
classification of liabilities that might be necessary should the Company be
unable to continue as a going concern. The Company's continuation as a going
concern is dependent upon its ability to generate sufficient cash flow to meet
its obligations on a timely basis, to comply with the terms and covenants of its
new financing agreement (Note D), to obtain additional financing or refinancing
as may be required, and ultimately to attain successful operations. Management
of the Company believes improved controls over selling prices and an increased
focus on add-on services to customers combined with expense reductions will
result, ultimately, in operating profits. However, management cannot provide any
assurance that these events will occur or that the Company will return to
profitability.

C.  ACCOUNTS RECEIVABLE FROM VENDORS AND OTHER

Accounts receivable from vendors and other consist primarily of amounts due from
vendors for various rebate and cooperative advertising programs and for
merchandise inventory returns.

D.  LONG-TERM DEBT
<TABLE>
<CAPTION>
                                                                                DECEMBER 31
                                                                              1998         1997

<S>                                                                       <C>          <C>
Revolving line of credit refinanced in March 1999                           $17,500      $15,000
Mortgage note payable, due in monthly payments of $123,
   including interest at 7.875%, to February 2011                            11,558       12,104
Mortgage notes payable, due in monthly payments of $45,
   plus interest at 9.03%, to April 2002                                      7,137        7,676
Mortgage notes payable, due in monthly payments of $77,
   plus interest at 9.675%, to June 2010                                      6,416        6,709
Mortgage notes payable, due in monthly payments of $62,
  including interest at 8.00%, to December 2010                               5,759        6,037
Mortgage note payable, due in monthly payments of $49,
  including interest at 9.00%, to July 2010                                   4,259        4,459
Mortgage note payable, due in monthly payments of $35,
  including interest at 10.375%, to September 2000                            3,287        3,357
Mortgage note payable, due in monthly payments of $29,
  including interest at 7.64%, to January 2013                                3,009        3,123
Mortgage note payable, due in monthly payments of $33
  including interest at 9.59%, to February 2010                               2,713        2,843
Term loan agreement repaid under the revolving line of
  credit in February 1998                                                                  2,800
Capital lease obligations                                                    11,372       11,932
                                                                         -----------  ----------
                                                                             73,010       76,040
Less current maturities                                                       2,945        2,731
                                                                         -----------  ----------
                                                                            $70,065      $73,309
                                                                         ===========  ==========
</TABLE>

In March 1999, the Company refinanced its revolving line of credit with a bank.
The refinanced line expires in February 2004. 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 inventory, which varies seasonally. At December 31, 1998,
$27,181 would have been available under the line, of which $17,500 was
outstanding. The line of credit bears interest at either the bank's base rate
(7.75% at December 31, 1998) or LIBOR plus 2.25% (7.88% at December 31, 1998).

                                   41 of 116
<PAGE>   42


The line of credit includes certain restrictive covenants including, among
others, limitations on capital expenditures, and the aggregate amount of funded
debt. The line prohibits the payment of dividends. The line also requires the
maintenance of a minimum fixed-charge-coverage ratio, which becomes increasingly
restrictive over time. In order to comply with this covenant, the Company must
improve operations significantly during 1999 over the actual results experienced
during 1998.

Maturities of long-term debt, including capital leases, are:
<TABLE>
<CAPTION>

<S>                                                    <C>   
  1999                                                     $2,945
  2000                                                      6,302
  2001                                                      3,344
  2002                                                      8,602
  2003                                                      3,383
  Thereafter                                               48,434
                                                      -----------
                                                          $73,010
                                                      ===========
</TABLE>

Essentially all of the Company's assets are pledged as collateral for the
Company's indebtedness. The fair value of the Company's long-term debt based on
current rates offered to the Company for debt of similar maturities, excluding
capital leases, was $64,770 at December 31, 1998, and the related carrying value
was $61,638.

E.  LEASING ACTIVITIES

The Company leases the majority of its retail locations, including some from
entities controlled by one or more of the initial shareholders. Most leases
include renewal options. In addition, the Company leases the majority of its
vehicles from third parties under operating leases. These vehicle leases
generally include contingent rentals based upon mileage.

Minimum lease commitments for leases with remaining lease terms in excess of one
year are as follows:
<TABLE>
<CAPTION>

                                                                        Capital
                                                                        CAPITAL
                                                OPERATING LEASES        LEASES-
                                              RELATED                   RELATED
YEAR ENDING DECEMBER 31                       PARTIES        OTHER      PARTIES

<S>                                           <C>        <C>          <C>   
1999                                            $721       $6,605       $1,919
2000                                             721        5,998        1,919
2001                                             721        5,768        1,919
2002                                             721        5,161        1,919
2003                                             721        5,038        1,919
2004 and later                                 6,027       15,639       12,163
                                          -----------   ----------   ----------
Total                                         $9,632      $44,209      $21,758
                                          ===========   ==========
Less amount representing interest                                       10,386
                                                                     ----------
Capital lease obligations                                              $11,372
                                                                     ==========
</TABLE>

Rent expense for all operating leases was approximately $8,067, $8,391, and
$7,921, for the years ended December 31, 1998, 1997 and 1996, which included
approximately $721, $721, and $731, for the years ended December 31, 1998, 1997 

                                   42 of 116
<PAGE>   43
and 1996, to related parties. Rent expense also included $246, $262, and $246,
of contingent rentals based upon vehicle mileage for the years ended December
31, 1998, 1997 and 1996.

Included in buildings and improvements at December 31, 1998 and 1997 are capital
leases totaling $13,641. Accumulated amortization related to the capitalized
leases is $4,474 at December 31, 1998 and $3,594 at December 31, 1997.

Certain leases include scheduled rent increases that have been recognized on a
straight-line basis over the term of the leases. The accumulated difference
between rent expense and cash payments is included in liabilities as deferred
rent.

F.   SHAREHOLDERS' EQUITY

The Company's stock-based compensation plans are described below.

Employee Stock Purchase Plan.
-----------------------------

The Company's employee stock purchase plan is qualified under the Internal
Revenue Code and permits employees to purchase shares at a price equal to 85% of
the lower of: (i) the fair market value of the shares at the commencement of
each six-month option period or (ii) the fair market value of the shares at the
close of the option period. A maximum of 500,000 shares may be issued under the
plan. With certain exceptions, all employees of the Company may participate in
the plan and pay for their options through payroll deductions.

The Company issued 31,715 shares at $2.34 per share and 37,574 shares at $2.39
per share under the plan during 1998; 18,221 shares at $7.23 per share and
19,517 shares at $4.52 per share under the plan during 1997; and 37,110 shares
at $7.44 per share during 1996. In January 1999, the Company issued 51,706
shares at $1.56 per share under the plan.

1993 Outside Director Stock Option Plan.
----------------------------------------

The Company has a director's stock option plan, which has reserved up to 10,000
common shares to be offered to outside directors of the Company. Grants are made
at the market price of the stock at the date of grant. The Company has granted
options on 6,000 common shares, at $13.00 per share and on 2,000 common shares,
at $9.25 per share. All of the outstanding options were exercisable at December
31, 1998; however, none have been exercised. At December 31, 1998, 2,000 options
were available under this plan for future grants.

1993 Stock Incentive Plan.
--------------------------

The Company's stock incentive plan provides that options on up to 1,300,000
shares may be granted to employees of the Company. Grants are made at the market
price of the stock at the date of grant. One-fourth of the options become
exercisable on each anniversary of the grant. Any options which are not
exercisable by an employee at the termination of employment are canceled.


                                   43 of 116
<PAGE>   44

A summary of option transactions under the stock incentive plan is as follows:
<TABLE>
<CAPTION>

                                                               WEIGHTED AVERAGE
                                                  SHARES        EXERCISE PRICE
<S>                                              <C>              <C>   
Outstanding December 31, 1995                      249,500          $10.54

  Granted                                           35,000            9.64
  Exercised                                          (500)            8.88
  Canceled                                        (44,500)           10.29
                                                ----------
Outstanding December 31, 1996                      239,500           10.46

  Granted                                          151,000            5.10
  Canceled                                        (39,500)           10.49
                                               -----------
Outstanding December 31, 1997                      351,000            8.15

  Granted                                          830,778            2.28
  Canceled                                       (107,000)            5.43
                                               -----------
Outstanding December 31, 1998                    1,074,778            3.89
                                               ===========
</TABLE>

The following table shows various information about stock options outstanding at
December 31, 1998:
<TABLE>
<CAPTION>

                                         OPTIONS OUTSTANDING                        OPTIONS EXERCISABLE
                         ---------------------------------------------------   ---------------------------------
                                              WEIGHTED-
                                               AVERAGE
                             NUMBER           REMAINING         WEIGHTED-           NUMBER           WEIGHTED
                           OUTSTANDING AT    CONTRACTUAL         AVERAGE        EXERCISABLE AT        AVERAGE
        RANGE OF          DECEMBER 31,        LIFE (IN           EXERCISE        DECEMBER 31,        EXERCISE
    EXERCISE PRICES           1998             YEARS)             PRICE              1998              PRICE

<S>                     <C>                  <C>             <C>                   <C>                 <C>
      $1.84 - 2.87               774,000         9.8              $2.28                -                 -
      3.82 - 5.44                137,778         8.5               5.06                   34,000       $4.24
          8.50                    80,500         6.0               8.50                   80,500        8.50
      9.50 - 11.75                15,000         6.5              10.13                   10,000       10.25
         13.00                    67,500         4.9              13.00                   67,500       13.00
                         ----------------                                      ------------------
      3.82- 13.00              1,074,778         9.0               3.89                  192,000        9.42
                         ================                                      ==================
</TABLE>


At December 31, 1998, 225,222 shares were available for future grants under the
stock incentive plan.

The Company applies APB Opinion 25 "Accounting for Stock Issued to Employees"
and related Interpretations to measure the cost of stock options issued to
employees. Accordingly, no compensation cost has been recognized for it's stock
option plans or its employee stock purchase plan. Had compensation cost for the
Company's stock-based compensation plans been determined based on the fair value
at the grant dates for the awards under those plans consistent with the method
of FASB Statement 123 "Accounting for Stock Based Compensation", the effect on
the Company's net loss and loss per share would have been as follows:

                                   44 of 116
<PAGE>   45
<TABLE>
<CAPTION>

                                       YEAR ENDED DECEMBER 31
                                  1998          1997           1996
<S>                        <C>            <C>             <C>
Net loss                
   As reported               ($16,123)       ($1,101)         ($910)
   Pro forma                 ($16,241)        (1,199)          (985)
Net loss per share
   As reported                 ($2.66)        ($0.18)        ($0.15)
   Pro forma                   ($2.68)         (0.20)         (0.17)
</TABLE>

The majority of the additional expense included in the pro forma net loss in the
table above is the result of stock options issued under the stock incentive plan
in 1998 and the result of shares issued under the Employee Stock Purchase Plan
in 1997 and 1996.

G.    NET SALES AND SERVICE REVENUE

Net sales and service revenue includes the following products:

                                         YEAR ENDED DECEMBER 31
                                  1998             1997            1996
Furniture                      $122,383         $125,154        $129,979
Bedding                          42,342           43,015          40,361
Appliances                       75,155           85,814          85,099
Electronics                      57,693           65,859          71,620
Other                            21,137           21,861          15,043
                            ------------     ------------    ------------
                               $318,710         $341,703        $342,102
                            ============     ============    ============

H.  FINANCE PARTICIPATION

The Company earns a finance participation fee on credit sales placed through a
private-label revolving credit plan with a bank. Receivables from this plan are
held by the bank without recourse to the Company. Sales under the private label
plan represented approximately 41, 40, and 46 percent of consolidated net sales
for the years ended December 31, 1998, 1997, and 1996. Because a significant
portion of the Company's sales are financed by consumers, the lack of
availability of consumer credit programs, or a significant increase in the cost
of such programs, could have a material adverse effect on the Company.

                                   45 of 116
<PAGE>   46

I.  INCOME TAXES

Deferred taxes reflect the effects of temporary differences between carrying
amounts of assets and liabilities for financial reporting purposes and the
amounts used for income tax purposes. The principal current and non-current
deferred income tax assets are as follows:
<TABLE>
<CAPTION>

                                                            DECEMBER 31
                                                          1998           1997
<S>                                               <C>             <C>
Deferred tax assets:
  Deferred warranty revenue                              $2,032        $3,403
  Merchandise inventories                                   787         1,177
  Capital lease obligations                                 860           735
  Depreciation                                              924           162
  Workers' compensation accrual                             973         1,725
  Vacation accrual                                          527           295
  Deferred rent                                             568
  Other                                                     528           259
  Net operating loss carryforwards                        2,608           155
  Valuation allowance                                   (9,807)         (155)
                                                     ===========  ===========
Net deferred tax asset                               $     -           $7,756
                                                     ===========  ===========

Included in the balance sheet:
  Current                                                              $3,375
  Long-term                                                             4,381
                                                                  ===========
                                                                       $7,756
                                                                  ===========
</TABLE>

Income taxes (benefit) consist of the following:
<TABLE>
<CAPTION>

                                   
                                               YEAR ENDED DECEMBER 31
                                          1998         1997         1996
<S>                                   <C>           <C>           <C>
Currently payable (refundable):
  Federal                                ($2,279)     ($1,985)       $2,461
  State and local                           (155)           50          535
                                       -----------   ----------   ---------
                                          (2,434)      (1,935)        2,996

Deferred federal and state                  7,756        1,510      (3,526)
                                       -----------   ----------   ---------
                                           $5,322       ($425)       ($530)
                                       ===========   ==========   =========
</TABLE>

A reconciliation between the statutory federal income tax rate and the effective
tax rate follows:
<TABLE>
<CAPTION>

                                                                       YEAR ENDED DECEMBER 31
                                                                   1998         1997         1996
<S>                                                               <C>          <C>          <C>  
Statutory federal income tax rate                                  (34)%        (34)%        (34)%
State and local income taxes, net of federal benefit                (5)          (4)          (3)
Tax settlement                                                      (2)
Change in valuation allowance                                       90           10
                                                                -----------  -----------  -----------
                                                                    49%         (28)%        (37)%
                                                                ===========  ===========  ===========
</TABLE>

                                   46 of 116
<PAGE>   47

The disproportionate provision for income taxes in 1998 reflects an increase in
the valuation reserve provided for deferred tax benefits. The reserve was deemed
necessary as a result of the uncertainty of the recoverability of such tax
benefits. The income tax benefit in 1997 reflects minimum taxes imposed by
certain jurisdictions and a valuation reserve for certain state operating loss
carryforwards. At December 31, 1998, the Company's federal net operating loss
carryforward was approximately $5,659, which expires in 2018.

In connection with the initial public offering of stock in 1993, the initial
shareholders of the Company entered into a Tax Indemnification Agreement that
requires the Company to reimburse them for certain additional taxes that they
may have to pay for any adjustments in taxable income in years prior to the
offering. In addition, the agreement requires the initial shareholders to
reimburse the Company for certain decreases in taxes that are refunded to them
for adjustments in taxable income. The Company also agreed to conduct, at its
expense, the defense of, or the negotiations in settlement with respect to, any
challenge to the S Corporation status in prior years.

During 1998 the Company settled an examination of its 1993 and 1994 federal
income tax returns. This resulted in an additional tax benefit to the Company of
$221 ($.03 per share). The Company was required under the Tax Indemnification
Agreement to reimburse the initial shareholders $225 for additional taxes they
were required to pay as part of the settlement. The additional tax benefit was
recorded as a reduction of income taxes for the year ended December 31, 1998 and
the payments were recorded as distributions payable to the initial shareholders.
As a result of the settlement of the 1993 examination, all obligations required
under the Tax Indemnification Agreement have been fulfilled by the Company.

J.  EMPLOYEE BENEFIT PLANS

The Company has a profit sharing plan for all eligible employees. Contributions
to the plan are made under guidelines established in the Roberds, Inc. Executive
Compensation Plan. Profit sharing plan expense was $82, $80, and $97 for the
year ended December 31, 1998, 1997, and 1996.

The Company has a self-insured group health and welfare benefit plan. This plan
operates through an independent trust and offers major medical, dental and
disability insurance coverage to all eligible employees. The Company provides
life insurance for all employees and their dependents at no cost to the
employees. The Company's expense under the health and welfare benefit plan was
approximately $779 in the year ended December 31, 1998,
$484 in 1997, and $281 in 1996.

                                   47 of 116
<PAGE>   48

K. BUSINESS SEGMENTS

As of December 31, 1998, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 131 "Disclosures about Segments of an Enterprise and
Related Information." The statement requires disclosure of segment information
based upon the way management organizes segments within the Company for making
operating decisions and assessing performance. The Company has identified the
three geographic market areas in which it operates as segments. A summary of the
Company's operations by segment for the years ended December 31, 1998, 1997 and
1996 are as follows:
<TABLE>
<CAPTION>

                                                                                 
                              Earnings                Depreciation      Interest 
                            (Loss)Before                  and            Expense, 
            Net Sales       Income Taxes              Amortization         net       Litigation
1998                                                                       
----
<S>        <C>               <C>                     <C>            <C>   
Ohio         $156,310              2,502                   $4,614         $3,532
Georgia        98,568            (5,144)                    2,628          2,521
Florida        63,832            (8,159)                    1,553          1,171
           -----------     --------------            -------------    -----------    -----------
             $318,710          ($10,801)                   $8,795         $7,224
           ===========     ==============            =============    ===========    ===========
1997
Ohio         $169,557             $5,161                   $4,644         $3,670
Georgia       103,063            (4,212)                    2,969          2,665
Florida        69,083            (2,475)                    1,412          1,210
           -----------     --------------            -------------    -----------    -----------
             $341,703           ($1,526)                   $9,025         $7,545
           ===========     ==============            =============    ===========    ===========
1996
Ohio         $156,472               $463                   $3,466         $2,634          $2,972
Georgia       108,942              (312)                    2,548          1,935             200
Florida        76,688            (1,591)                    1,502          1,112             142
           -----------     --------------            -------------    -----------    -----------
             $342,102           ($1,440)                   $7,516         $5,681          $3,314
           ===========     ==============            =============    ===========    ===========
</TABLE>

Included in the operating results of the Company's segments are certain
corporate and non-segment expenses that have been allocated to the segments. The
Company does not report identifiable assets by operating segment. As a result,
such disclosures have been omitted from the segment data.

L.  LITIGATION AND OTHER PROCEEDINGS

In February 1994, the Company announced its earnings for the fourth quarter and
year ended 1993. Following that announcement, the Company's stock price declined
substantially. Four lawsuits were filed against the Company, certain of its
directors, certain of its officers, and its co-managing underwriters, in U.S.
District Court for the Southern District of Ohio, case numbers C-3-94-86, 99,
100, and 127. The suits were consolidated into a single suit, In re Roberds
Securities Litigation. In December 1996, the Company reached an agreement to
settle the class-action securities litigation and such agreement was approved by
the court in 1997. A total of $1,600 was paid into an escrow account to satisfy
the plaintiffs' legal expenses and claims for damages to the class. In 1997,
Roberds paid $343 into escrow as its share of the settlement, and the insurance
carrier for its officers and directors paid $1,258. No portion of the funds paid
into escrow can revert to the Company.

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

                                   48 of 116
<PAGE>   49
also for a similar adjustment for the years subsequent to 1993. The Company
accrued $2,600 in the fourth quarter of 1996 for the estimated amount of an
assessment for the 1992-1996 time period.

The amount of the Company's payment to settle the shareholders' suit, and the
related legal expenses, and the $2,600 accrual for the workers' compensation
issue are contained in Litigation in the consolidated statements of operations
in 1996.

In May 1998, the 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. In December
1998, the Bureau completed an examination of the Company's workers compensation
returns for the period from July 1996 through June 1998. The amounts assessed by
the audit approximated the amounts previously accrued by the Company for the
periods covered by the examination. The Company has accrued the estimated amount
of taxes that would be caused by a reclassification of employees for the period
from January 1994 through June 1996.

The Company is involved in various legal proceedings, incidental to normal
operations. At this time, it is not possible to determine the ultimate
liability, if any, in these matters. In the opinion of management, after
consultation with legal counsel, such proceedings will not have a material
effect on the financial position or results of operations.

M.    COMMITMENTS

At December 31, 1998, the Company had outstanding commitments to acquire
delivery vehicles and warehouse equipment totaling approximately $3.4 million.
These commitments are expected to be financed through operating leases.
Subsequent to December 31, 1998, the Company entered into an agreement to
acquire approximately $1.7 million of computer hardware and software that is
expected to be financed under capital lease arrangements.



                                   49 of 116
<PAGE>   50

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 
         FINANCIAL DISCLOSURE


None.


                                   50 of 116
<PAGE>   51

                                    PART III



Certain information required by Part III of this Report is omitted because the
Company will file a definitive proxy statement, pursuant to Regulation 14A, for
its 1999 annual meeting of shareholders ("1999 Proxy Statement"), not later than
120 days after the end of the fiscal year covered by this Report, and certain
information included in the 1999 Proxy Statement is incorporated herein by
reference.


ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT


Information concerning the Company's directors is contained in the "Election of
Directors" section of the Company's 1999 Proxy Statement and is incorporated
herein by reference.


ITEM 11. EXECUTIVE COMPENSATION


The information required by this Item is incorporated herein by reference to the
"Executive Compensation" section of the Company's 1999 Proxy Statement.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT


The information required by this Item is incorporated herein by reference to the
"Security Ownership of Certain Beneficial Owners and Management" section of the
Company's 1999 Proxy Statement.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


The information required by this Item is incorporated herein by reference to the
"Certain Relationships and Related Transactions" section of the Company's 1999
Proxy Statement.



                                   51 of 116
<PAGE>   52

                                     PART IV



ITEM 14.     EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K


         (a)(1)   FINANCIAL STATEMENTS
         -----------------------------

         The following financial statements are filed as part of this Report and
         are attached hereto:

                  Independent Auditors' Report.

                  Consolidated Balance Sheets at December 31, 1998 and 1997.

                  Consolidated Statements of Operations for the years ended
                  December 31, 1998, 1997, and 1996.

                  Consolidated Statements of Shareholders' Equity for the years
                  ended December 31, 1998, 1997, and 1996.

                  Consolidated Statements of Cash Flows for the years ended
                  December 31, 1998, 1997, and 1996.

                  Notes to Consolidated Financial Statements for the years ended
                  December 31, 1998, 1997 and 1996.


                                   52 of 116
<PAGE>   53


         (a)(2)   FINANCIAL STATEMENT SCHEDULES
         --------------------------------------
The following financial statement schedule of the Company, for the three years
ended December 31, 1998, is filed as part of this Report and should be read in
conjunction with the consolidated financial statements of Roberds, Inc. for the
periods then ended:

         Independent Auditors' Report

         Schedule II, Valuation and qualifying accounts

Schedules not listed above are omitted because they are not applicable, are not
required, or the information required to be set forth therein is included in the
Consolidated Financial Statements or the notes thereto.




INDEPENDENT AUDITORS' REPORT
----------------------------

Board of Directors
Roberds, Inc.
Dayton, Ohio

We have audited the consolidated financial statements of Roberds, Inc. and
subsidiary ("Company") as of December 31, 1998 and 1997 and for each of the
three years in the period ended December 31, 1998, and have issued our report
thereon dated February 16, 1999 (March 10, 1999 as to Note D) which expresses
an unqualified opinion and includes an explanatory paragraph describing matters
that raise substantial doubt about the Company's ability to continue as a going
concern. Such financial statements and report are included elsewhere in this    
Annual Report on Form 10-K. Our audits also included the financial statement
schedule of Roberds, Inc. and subsidiary, listed in Item 14(a)(2) of this
Annual Report on Form 10-K. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audits. In our opinion, such financial statement schedule,
when considered in relation to the basic consolidated financial statements
taken as a whole, presents fairly in all material respects, the information set
forth therein.



/s/ Deloitte & Touche LLP
-------------------------
DELOITTE & TOUCHE LLP
Dayton, Ohio
February 16, 1999



                                   53 of 116
<PAGE>   54


ROBERDS, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)

                COLUMN A                        COLUMN B        COLUMN C         COLUMN D         COLUMN E
------------------------------------------    -------------   -------------    -------------    -------------
                                               BALANCE AT      CHARGED TO                        BALANCE AT
                                               BEGINNING       COSTS AND                           END OF
DESCRIPTION                                    OF PERIOD        EXPENSES        DEDUCTIONS         PERIOD
------------------------------------------    -------------   -------------    -------------    -------------

<S>                                                  <C>           <C>               <C>              <C>
YEAR ENDED DECEMBER 31, 1998:
   Allowance for doubtful accounts                     $75            $669             $532             $212

YEAR ENDED DECEMBER 31, 1997:
   Allowance for doubtful accounts                     $80            $620             $625              $75

YEAR ENDED DECEMBER 31, 1996:
   Allowance for doubtful accounts                     $50            $619             $589              $80

</TABLE>

                                   54 of 116
<PAGE>   55


         (a)(3)     EXHIBITS
         -------------------

2.5           Certificate of merger of Roberds Service Company into Roberds,
              Inc., effective August 31, 1994, filed as Exhibit 2.5 to
              Registrant's Annual Report on Form 10-K for the fiscal year ended
              December 31, 1994 and incorporated herein by reference.

3.1           Amended Articles of Incorporation of Registrant, filed January 10,
              1994, as Exhibit 4.1 to Registrant's Form S-8, Registration File
              No. 33-73900, and incorporated herein by reference.

3.2           Amended Code of Regulations of Registrant, filed January 10, 1994,
              as Exhibit 4.2 to Registrant's Form S-8, Registration File No.
              33-73900, and incorporated herein by reference.

4.1           Amended Articles of Incorporation of Registrant (filed as Exhibit
              3.1).

4.2           Amended Code of Regulations of Registrant (filed as Exhibit 3.2).

4.3.1         Amended specimen certificate for Registrant's Common Shares,
              reflecting the change in stock transfer agent to National City
              Bank, Cleveland, Ohio, effective November 1, 1995, filed as
              Exhibit 4.3.1 to Registrant's Annual Report on Form 10-K for
              the fiscal year ended December 31, 1995, and incorporated
              herein by reference.

4.4           Excluded from the exhibits are certain agreements relating to long
              term debt which, individually, do not exceed 10% of the total
              assets of Registrant. Registrant hereby undertakes to furnish a
              copy of such agreements upon request by the Commission.

10.1#         Roberds, Inc. 1993 Stock Incentive Plan, filed October 1, 1993 as
              Exhibit 10.1 to Registrant's Form S-1, Registration File No.
              33-69876, and incorporated herein by reference.

10.1.1#       Amendment to Roberds, Inc. 1993 Stock Incentive Plan, filed as
              Exhibit 99.1 to Registrant's Form S-8, File No. 33-97262, filed
              September 25, 1995, and incorporated herein by reference.

10.1.2#       Amendment to Roberds, Inc. 1993 Stock Incentive Plan, referred
              to in Exhibit 10.1, effective as of November 1, 1996, and
              filed as Exhibit 10.1.2 to Registrant's Annual Report on Form
              10-K for the fiscal year ended December 31, 1996, and
              incorporated herein by reference.

10.2#         Roberds, Inc. Employee Stock Purchase Plan, filed October 1, 1993
              as Exhibit 10.2 to Registrant's Form S-1, Registration File No.
              33-69876, and incorporated herein by reference.

10.2.1#       Amendment to Roberds, Inc. Employee Stock Purchase Plan,
              referred to in Exhibit 10.2, effective as of November 1, 1996,
              and filed as Exhibit 10.2.1 to Registrant's Annual Report on
              Form 10-K for the fiscal year ended December 31, 1996, and
              incorporated herein by reference.

10.2.2#       Amendment to Roberds, Inc. Employee Stock Purchase Plan,
              referred to in Exhibit 10.2, effective as of May 13, 1997, and
              filed as Exhibit 99.1 to Registrant's Form S-8, Registration
              File No. 333-37829, and incorporated herein by reference.

10.3#         Roberds, Inc. 1993 Outside Director Stock Option Plan, filed
              October 1, 1993 as Exhibit 10.3 to Registrant's Form S-1,
              Registration File No. 33-69876, and incorporated herein by
              reference.


                                   55 of 116
<PAGE>   56
10.3.1#       Amendment to Roberds, Inc. 1993 Outside Director Stock Option
              Plan, referred to in Exhibit 10.3, effective as of November 1,
              1996, and filed as Exhibit 10.3.1 to Registrant's Annual
              Report on Form 10-K for the fiscal year ended December 31,
              1996, and incorporated herein by reference.

10.3.2#       Roberds, Inc. Profit Sharing and Employee Retirement Savings Plan,
              as amended, filed as Exhibit 99 to Registrant's Form S-8,
              Registration File No. 33-81086, and incorporated herein by
              reference.

10.3.2.1#     Roberds, Inc. Profit Sharing and Employee Retirement Savings
              Plan, as adopted March 26, 1997, and filed as Exhibit 99 to
              Registrant's Form S-8, Registration File No. 333-43977, and
              incorporated herein by reference.

10.3.3#       Roberds, Inc. Amended and Restated Deferred Compensation Plan
              for Outside Directors, effective 1996, filed as Exhibit 10.3.2
              to Registrant's Annual Report on Form 10-K for the fiscal year
              ended December 31, 1995, and incorporated herein by reference.

10.3.3.1#     Amendment to Roberds, Inc. Amended and Restated Deferred
              Compensation Plan for Outside Directors, referred to in
              Exhibit 10.3.3, effective as of February 27, 1996, and filed
              as Exhibit 10.3.3.1 to Registrant's Annual Report on Form 10-K
              for the fiscal year ended December 31, 1996, and incorporated
              herein by reference.

10.3.3.2#     Amendment to Roberds, Inc. Amended and Restated Deferred
              Compensation Plan for Outside Directors, referred to in
              Exhibit 10.3.3, effective as of November 1, 1996, and filed as
              Exhibit 99.1 to Registrant's Form S-8, Registration File No.
              333-19903, and filed as Exhibit 10.3.3.2 to Registrant's
              Annual Report on Form 10-K for the fiscal year ended December
              31, 1996, and incorporated herein by reference.

10.4.1        Lease Agreement dated April 1, 1990 among Registrant, Kenneth
              W. Fletcher and Donald C. Wright, relating to Registrant's
              facility located at 1000 East Central Avenue, West Carrollton,
              Ohio, and amendments thereto, filed October 1, 1993 as Exhibit
              10.4.1 to Registrant's Form S-1, Registration File No.
              33-69876, and incorporated herein by reference.

10.4.1.1      Assignment and Assumption Agreement in connection with the
              transfer of ownership of Registrant's facility located at 1000
              East Central Avenue, West Carrollton, Ohio from Kenneth W.
              Fletcher and Donald C. Wright, an Ohio general partnership, to
              Kenneth W. Fletcher, individually, and assigning Registrant's
              related lease of the property to Mr. Fletcher, all effective
              January 1, 1995, and filed as Exhibit 10.4.1.1 to Registrant's
              Annual Report on Form 10-K for the fiscal year ended December
              31, 1994 and incorporated herein by reference.

10.4.1.2      Assignment and Assumption Agreement in connection with the
              transfer of ownership of Registrant's facility located at 1000
              East Central Avenue, West Carrollton, Ohio from Kenneth W.
              Fletcher, individually, to DAF Investments LTD., an Ohio limited
              liability company controlled by Mr. Fletcher, and assigning
              Registrant's related lease of the property to DAF Investments
              LTD., all effective January 1, 1995, and filed as Exhibit 10.4.1.2
              to Registrant's Annual Report on Form 10-K for the fiscal year
              ended December 31, 1994 and incorporated herein by reference.

10.4.1.3      Assignment and Assumption of Lease in connection with the transfer
              of ownership of Registrant's facility located at 1000 East Central
              Avenue, West Carrollton, Ohio from DAF Investments LTD., an Ohio
              limited liability company controlled by Mr. Kenneth W. Fletcher,
              to DAF West Carrollton Plaza, LTD., an Ohio limited liability
              company controlled by Mr. Fletcher, and assigning Registrant's
              related lease of the property to DAF West Carrollton Plaza, LTD.,
              effective January 14, 1997, and filed as Exhibit 10.4.1.3 to
              Registrant's Annual Report on Form 10-K for the fiscal year ended
              December 31, 1996, and incorporated herein by reference.

                                   56 of 116
<PAGE>   57

10.4.2        Lease Agreement dated April 1, 1990 among Registrant, Kenneth
              W. Fletcher and Donald C. Wright, relating to Registrant's
              facility located at 1100 East Central Avenue, West Carrollton,
              Ohio, and amendments thereto, filed October 1, 1993 as Exhibit
              10.4.2 to Registrant's Form S-1, Registration File No.
              33-69876, and incorporated herein by reference.

10.4.2.1      Assignment and Assumption Agreement in connection with the
              transfer of ownership of Registrant's facility located at 1100
              East Central Avenue, West Carrollton, Ohio from Kenneth W.
              Fletcher and Donald C. Wright, an Ohio general partnership, to
              Kenneth W. Fletcher, individually, and assigning Registrant's
              related lease of the property to Mr. Fletcher, all effective
              January 1, 1995, and filed as Exhibit 10.4.2.1 to Registrant's
              Annual Report on Form 10-K for the fiscal year ended December
              31, 1994 and incorporated herein by reference.

10.4.2.2      Assignment and Assumption Agreement in connection with the
              transfer of ownership of Registrant's facility located at 1100
              East Central Avenue, West Carrollton, Ohio from Kenneth W.
              Fletcher, individually, to DAF Investments LTD., an Ohio limited
              liability company controlled by Mr. Fletcher, and assigning
              Registrant's related lease of the property to DAF Investments
              LTD., all effective January 1, 1995, and filed as Exhibit 10.4.2.2
              to Registrant's Annual Report on Form 10-K for the fiscal year
              ended December 31, 1994 and incorporated herein by reference.

10.4.2.3      Assignment and Assumption of Lease in connection with the transfer
              of ownership of Registrant's facility located at 1100 East Central
              Avenue, West Carrollton, Ohio from DAF Investments LTD., an Ohio
              limited liability company controlled by Mr. Kenneth W. Fletcher,
              to DAF West Carrollton Plaza, LTD., an Ohio limited liability
              company controlled by Mr. Fletcher, and assigning Registrant's
              related lease of the property to DAF West Carrollton Plaza, LTD.,
              effective January 14, 1997, and filed as Exhibit 10.4.2.3 to
              Registrant's Annual Report on Form 10-K for the fiscal year ended
              December 31, 1996, and incorporated herein by reference.

10.4.3        Lease Agreement dated June 1, 1988 among Registrant, Kenneth
              W. Fletcher and Donald C. Wright, relating to Registrant's
              Piqua, Ohio facility, and amendments thereto, filed October 1,
              1993 as Exhibit 10.4.3 to Registrant's Form S-1, Registration
              File No. 33-69876, and incorporated herein by reference.

10.4.3.1      Assignment and Assumption Agreement in connection with the
              transfer of ownership of Registrant's Piqua, Ohio facility
              from Kenneth W. Fletcher and Donald C. Wright, an Ohio general
              partnership, to Donald C. Wright, individually, and assigning
              Registrant's related lease of the property to Mr. Wright, all
              effective January 1, 1995 and filed as Exhibit 10.4.3.1 to
              Registrant's Annual Report on Form 10-K for the fiscal year
              ended December 31, 1994 and incorporated herein by reference.

10.4.4        Lease Agreement dated April 1, 1988 among Registrant, Kenneth
              W. Fletcher and Donald C. Wright, relating to Registrant's
              Richmond, Indiana facility, and amendments thereto, filed
              October 1, 1993 as Exhibit 10.4.4 to Registrant's Form S-1,
              Registration File No. 33-69876, incorporated herein by
              reference.

10.4.4.1      Assignment and Assumption Agreement in connection with the
              transfer of ownership of Registrant's Richmond, Indiana
              facility from Kenneth W. Fletcher and Donald C. Wright, an
              Ohio general partnership, to Donald C. Wright, individually,
              and assigning Registrant's related lease of the property to
              Mr. Wright, all effective January 1, 1995, and filed as
              Exhibit 10.4.4.1 to Registrant's Annual Report on Form 10-K
              for the fiscal year ended December 31, 1994 and incorporated
              herein by reference.

10.4.5        Lease Agreement dated March 1, 1992 among Registrant, Kenneth
              W. Fletcher and Donald C. Wright, relating to Registrant's
              Springfield, Ohio facility, and amendments thereto, filed
              October 1, 1993 as Exhibit 10.4.5 to Registrant's Form S-1,
              Registration File No. 33-69876, and incorporated herein by
              reference.

                                   57 of 116
<PAGE>   58

10.4.5.1      Assignment and Assumption of Leases transferring ownership of
              Registrant's Springfield, Ohio facility from Kenneth W.
              Fletcher and Donald C. Wright, an Ohio general partnership, to
              Springfield Properties, Inc., an Ohio corporation owned by
              Messrs. Fletcher and Wright, and assigning Registrant's
              related lease of the property to Springfield Properties, Inc.,
              all effective November 16, 1994, and filed as Exhibit 10.4.5.1
              to Registrant's Annual Report on Form 10-K for the fiscal year
              ended December 31, 1994, and incorporated herein by reference.


10.4.6        Lease Agreement dated March 1, 1987 between Registrant and
              Howard Investments, a partnership owned by the Initial
              Shareholders, relating to Registrant's Norcross, Georgia
              facility, filed October 1, 1993 as Exhibit 10.4.6 to
              Registrant's Form S-1, Registration File No. 33-69876, and
              incorporated herein by reference.

10.4.6.1      Amendments to Lease Agreement between Registrant and Howard
              Investments, referred to in Exhibit 10.4.6, effective December
              20, 1995, pursuant to a sale of the property by Howard
              Investments to 800 Broadway and Ponce de Leon Stores, which
              are unrelated to the Company and the Initial Shareholders,
              filed as Exhibit 10.4.6.1 to Registrant's Annual Report on
              Form 10-K for the fiscal year ended December 31, 1995, and
              incorporated herein by reference.

10.4.7        Lease Agreement dated March 1, 1987 between Registrant and
              Howard Investments, a partnership owned by the Initial
              Shareholders, relating to Registrant's Marietta, Georgia
              facility, filed October 1, 1993 as Exhibit 10.4.7 to
              Registrant's Form S-1, Registration File No. 33-69876, and
              incorporated herein by reference.

10.4.8        Lease Agreement dated November 1, 1987 between Registrant and
              Howard Investments, a partnership owned by the Principal
              Shareholders, relating to Registrant's Forest Park, Georgia
              facility, and amendments thereto, filed October 1, 1993 as
              Exhibit 10.4.8 to Registrant's Form S-1, Registration File No.
              33-69876, and incorporated herein by reference.

10.4.9        Rent-Up Guarantee Agreement, filed October 1, 1993 as Exhibit
              10.4.9 to Registrant's Form S-1, Registration File No.
              33-69876, and incorporated herein by reference.

10.5          Tax Indemnification Agreement among Kenneth W. Fletcher, Donald C.
              Wright, Howard W. Smith, and Registrant, filed October 1, 1993 as
              Exhibit 10.5 to Registrant's Form S-1, Registration File No.
              33-69876, and incorporated herein by reference.

10.6.2        Inventory Financing and Security Agreement between Whirlpool
              Financial Corporation and Registrant, filed October 1, 1993 as
              Exhibit 10.6.2 to Registrant's Form S-1, Registration File No.
              33-69876, and incorporated herein by reference.

10.6.3        Business Loan Agreement between Bank One, Dayton, NA and
              Registrant, dated November 23, 1993, for up to $30 million.
              Filed as Exhibit 10.6.3 to Registrant's Form 10-K for the
              fiscal year ended December 31, 1993, and incorporated herein
              by reference.

10.6.3.1      Amendment to Business Loan Agreement between Bank One, Dayton,
              NA and Registrant, dated April 20, 1994, amending the
              agreement referred to in Exhibit 10.6.3, and filed as Exhibit
              10.6.3.1 to Registrant's Annual Report on Form 10-K for the
              fiscal year ended December 31, 1994, and incorporated herein
              by reference.

10.6.3.2      Amendment to Amended and Restated Business Loan Agreement
              between Bank One, Dayton, NA and Registrant, dated December 7,
              1994, amending the agreement referred to in Exhibit 10.6.3,
              and filed as Exhibit 10.6.3.2 to Registrant's Annual Report on
              Form 10-K for the fiscal year ended December 31, 1994, and
              incorporated herein by reference.


                                   58 of 116
<PAGE>   59
  

10.6.3.3      Amendment to Amended and Restated Business Loan Agreement
              between Bank One, Dayton, NA and Registrant, dated October 13,
              1995, amending the agreement referred to in Exhibit 10.6.3,
              filed as Exhibit 10.6.3.3 to Registrant's Annual Report on
              Form 10-K for the fiscal year ended December 31, 1995, and
              incorporated herein by reference.

10.6.3.4      Amendment to Amended and Restated Business Loan Agreement
              between Bank One, Dayton, NA and Registrant, dated as of June
              29, 1996, amending the agreement referred to in Exhibit
              10.6.3, filed as Exhibit 10.6.3.4 to Registrant's Annual
              Report on Form 10-K for the fiscal year ended December 31,
              1996, and incorporated herein by reference.

10.6.3.5      Second Amendment to Amended and Restated Business Loan
              Agreement between Bank One, Dayton, NA and Registrant, dated
              December 31, 1996, amending the agreement referred to in
              Exhibit 10.6.3.4, filed as Exhibit 10.6.3.5 to Registrant's
              Annual Report on Form 10-K for the fiscal year ended December
              31, 1996, and incorporated herein by reference.

10.6.3.6      Amendment to Second Amended and Restated Business Loan
              Agreement between Bank One, Dayton, NA and Registrant, dated
              February 27, 1997, amending the agreement referred to in
              Exhibit 10.6.3, filed as Exhibit 10.6.3.6 to Registrant's
              Annual Report on Form 10-K for the fiscal year ended December
              31, 1996, and incorporated herein by reference.

10.6.3.7.1    Second Amendment to Second Amended and Restated Business Loan
              Agreement between Bank One, NA, successor by merger of Bank
              One, Dayton, NA, and Registrant, dated as of June 30, 1997,
              amending the agreement referred to in Exhibit 10.6.3, filed as
              Exhibit 10 to Registrant's Quarterly Report on Form 10-Q for
              the quarter ended September 30, 1997, and incorporated herein
              by reference.

**10.6.3.7.2  Third Amendment to Second Amended and Restated Business Loan
              Agreement between Bank One, NA, successor by merger of Bank
              One, Dayton, NA, and Registrant, dated as of June 30, 1998,
              amending the agreement referred to in Exhibit 10.6.3, filed as
              Exhibit 10 to Registrant's Quarterly Report on Form 10-Q for
              the quarter ended September 30, 1998, and incorporated herein
              by reference.

*10.6.3.7.3   Fourth Amendment to Second Amended and Restated Business Loan
              Agreement between Bank One, NA, successor by merger of Bank
              One, Dayton, NA, and Registrant, dated as of December 31,
              1998, amending the agreement referred to in Exhibit 10.6.3,
              filed herewith.

10.6.4        Term loan agreement between Bank One, Dayton, NA and
              Registrant, dated November 8, 1994, for up to $7 million, and
              filed as Exhibit 10.6.4 to Registrant's Annual Report on Form
              10-K for the fiscal year ended December 31, 1994, and
              incorporated herein by reference.

10.7          Amended and Restated Private Label Revolving Plan Agreement
              between Registrant and Bank One, Dayton, N.A., filed October
              1, 1993 as Exhibit 10.7 to Registrant's Form S-1, Registration
              File No. 33-69876, and incorporated herein by reference.
              Portions of the Exhibit have been omitted pursuant to a
              request by Registrant for confidential treatment. During 1998,
              the period of confidentiality was extended through 2003.

**10.7.1      Amended and Restated Private Label Revolving Credit Plan
              Agreement between Registrant and Bank One, NA, dated as of
              June 17, 1998, filed as Exhibit 10.2 to Registrant's Quarterly
              Report on Form 10-Q for the fiscal period ended June 30, 1998,
              and incorporated herein by reference.

*10.8         Loan and Security Agreement between Registrant and BankBoston
              Retail Finance Inc., dated March 3, 1999, filed herewith.

                                   59 of 116
<PAGE>   60

10.9#         Letter Agreements Limiting Salary and Bonus of Messrs.
              Fletcher, Wright and Smith, filed November 12, 1993 as Exhibit
              10.9 to Registrant's Amendment No. 3 to Form S-1, Registration
              File No. 33-69876, and incorporated herein by reference.

10.10#        Registrant's Executive Compensation Plan, adopted in 1994,
              effective for the 1995 calendar year, filed as Exhibit 10.10
              to Registrant's Annual Report on Form 10-K for the fiscal year
              ended December 31, 1994 and incorporated herein by reference.

10.10.1#      Registrant's Amended and Restated Executive Compensation Plan,
              as amended for the 1996 calendar year, amending the Plan
              referred to in Exhibit 10.10 above, and filed as Exhibit
              10.10.1 to Registrant's Annual Report on Form 10-K for the
              fiscal year ended December 31, 1995, and incorporated herein
              by reference.

10.10.2#      Registrant's Seconded Amended and Restated Executive
              Compensation Plan, as amended for the 1997 calendar year,
              amending the Plan referred to in Exhibit 10.10.1 above, filed
              as Exhibit 10.10.2 to Registrant's Annual Report on Form 10-K
              for the fiscal year ended December 31, 1996, and incorporated
              herein by reference.

10.10.3#      Registrant's Third Amended and Restated Executive Compensation
              Plan, as amended for the 1998 calendar year, amending the Plan
              referred to in Exhibit 10.10.2 above, filed as Exhibit 10.10.3
              to Registrant's Annual Report on Form 10-K for the fiscal year
              ended December 31, 1997, and incorporated herein by
              reference..

10.11.1#      Employment Agreement, dated as of March 1, 1996, between
              Registrant and Charles H. Palko, Vice President-Appliances,
              filed as Exhibit 10.11.1 to Registrant's Annual Report on Form
              10-K for the fiscal year ended December 31, 1996, and
              incorporated herein by reference.

10.11.2#      Employment Agreement, dated as of July 10, 1996, between
              Registrant and Michael E. Ray, President-Tampa Market, filed
              as Exhibit 10.11.2 to Registrant's Annual Report on Form 10-K
              for the fiscal year ended December 31, 1996, and incorporated
              herein by reference.

10.11.3#      Employment Agreement, dated as of May 27, 1997, between
              Registrant and Billy D. Benton, Executive Vice
              President-Operations, filed as Exhibit 10.11.3 to Registrant's
              Annual Report on Form 10-K for the year ended December 31,
              1997, and incorporated herein by reference.

10.11.4#      Consulting Agreement, dated as of December 1, 1997, between
              Registrant and Kenneth W. Fletcher, Chairman of the Board,
              filed as Exhibit 10.11.4 to Registrant's Annual Report on Form
              10-K for the year ended December 31, 1997, and incorporated
              herein by reference.

**10.11.5#    Employment Agreement, dated July 6, 1998, between Registrant
              and Melvin H. Baskin, Chief Executive Officer, filed as
              Exhibit 10.1 to Registrant's Report on Form 10-Q for the
              quarterly period ended September 30, 1998, and incorporated
              herein by reference.

21            Subsidiary of Registrant, filed as Exhibit 21 to Registrant's
              Annual Report on Form 10-K for the fiscal year ended December 31,
              1994 and incorporated herein by reference.

*23           Independent Auditors' Consent.

*24           Powers of attorney.

*27           Financial Data Schedules

                                   60 of 116
<PAGE>   61

*        Exhibits electronically filed herewith.
**       Exhibits incorporated by reference for the first time.
#        Constitutes a "management contract or compensatory plan or arrangement,
         "pursuant to Item 14(a)(3),(c).

         (b)      REPORTS ON FORM 8-K
         ----------------------------

None.

         (c)      EXHIBITS
         -----------------

The response to this portion of Item 14 is submitted as a separate section of
this Report.


         (d)      FINANCIAL STATEMENT SCHEDULES
         --------------------------------------
The response to this portion of Item 14 is submitted as a separate section of
this Report.


                                   61 of 116
<PAGE>   62



                                   SIGNATURES



Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.

ROBERDS, INC., by



/s/ Melvin H. Baskin*

------------------------------------
Melvin H. Baskin, its
Chief Executive Officer


/s/ Robert M. Wilson

------------------------------------
Robert M. Wilson, its
President and
Chief Financial Officer



/s/ Michael A. Bruns

------------------------------------
Michael A. Bruns, its
Vice President and
Chief Accounting Officer


           /s/ Robert M. Wilson

*By:--------------------------------
Robert M. Wilson
Attorney in Fact



February 16, 1999



                                   62 of 116
<PAGE>   63


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of Registrant and in
the capacities indicated on February 16, 1999.



/s/ Carl E. Gunter*

------------------------------------
Carl E. Gunter
Director

/s/ Jerry L. Kirby*

------------------------------------
Jerry L. Kirby
Director

/s/ James F. Robeson*

------------------------------------
James F. Robeson
Director

/s/ Howard W. Smith*

------------------------------------
Howard W. Smith
Director

/s/ Gilbert P. Williamson*

------------------------------------
Gilbert P. Williamson
Director

/s/ Robert M. Wilson

------------------------------------
Robert M. Wilson
Director

/s/ Donald C. Wright*

------------------------------------
Donald C. Wright
Director


            /s/ Robert M. Wilson

*By:--------------------------------
Robert M. Wilson
Attorney in Fact



                                   63 of 116
<PAGE>   64
                                 EXHIBIT INDEX
                                 -------------



10.6.3.7.3        Fourth Amendment to Second Amended and Restated Business Loan
                  Agreement between Bank One, NA, successor by merger of Bank
                  One, Dayton, NA, and Registrant, dated as of December 31,
                  1998, amending the agreement referred to in Exhibit 10.6.3,
                  filed herewith.

10.8              Loan and Security Agreement between Registrant and BankBoston
                  Retail Finance Inc., dated March 3, 1999, filed herewith.

23                Independent Auditors' Consent.

24                Powers of attorney.

27                Financial Data Schedule