UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
X Annual report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 [Fee Required]
For the fiscal year ended February 28, 1994 or
Transition report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 [No Fee Required]
For the transition period from to
Commission file number 1-8484
HEILIG-MEYERS COMPANY
(Exact name of registrant as specified in its charter)
Virginia 54-0558861
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2235 Staples Mill Road, Richmond, Virginia 23230
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (804) 359-9171
Securities registered pursuant to Section 12(b) of the Act:
Title of each Class Name of each exchange on which registered
Common Stock, $2.00 New York Stock Exchange
Par Value Pacific Stock Exchange
Rights to purchase Preferred New York Stock Exchange
Stock, Series A, $10.00 Pacific Stock Exchange
Par Value
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 of 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
the filing requirements for at least the past 90 days. Yes X No .
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Sec. 229.405 of this chapter) 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. [ ]
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of May 13, 1994 was approximately $1,335,451,190.
This figure was calculated by multiplying (i) the closing sales price
of the registrant's common stock on the New York Stock Exchange on May 13,
1994 by (ii) the number of shares of the registrant's common stock not held
by the officers or directors of the registrant or any persons known to the
registrant to own more than five percent of the outstanding common stock of
the registrant. 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 stock of the registrant is in fact an
affiliate of the registrant.
As of May 13, 1994, there were outstanding 48,434,823 shares of the
registrant's common stock, $2.00 par value.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Proxy Statement for its Annual Meeting of
Shareholders scheduled for June 15, 1994, are incorporated by reference into
Part III.
PART I
Item 1. Business.
(a) General Development of Business - Heilig-Meyers Company (the
"registrant"), which together with its predecessors and subsidiaries is
sometimes hereinafter referred to as the "Company," is engaged primarily in
the retail sale of home furnishings. The Company's predecessors are numerous
Virginia and North Carolina corporations, the first of which was incorporated
in 1940, and all of which were merged into Heilig-Meyers Company, a North
Carolina corporation, in March 1970, which in turn was merged into the
registrant, a Virginia corporation, in June 1972. In February 1990, the
Company acquired the assets of 34 stores from Reliable Stores Inc. Sixteen
of these stores were consolidated with existing stores. In August 1991,
certain assets of 21 stores were acquired from WCK, Inc., trading as Danley
Furniture. In January 1992, the Company acquired the assets of 13 stores
from Gibson McDonald Furniture Company. In October 1992, the Company
acquired the assets of 14 stores from Wolf Furniture Enterprises, Inc. In
June 1993, the Company acquired the assets of 11 stores from L. Fish, Inc.
Most recently, in January 1994, the Company acquired certain assets relating
to 92 stores of McMahan's Furniture Company. For these acquisitions, as well
as smaller acquisitions, the stores are transitioned to full use of the
Company's systems and operating methodologies over a period of time. For
most acquisitions, this transition period is short and insignificant to total
company operations. However, due to the size and geographics of the
McMahan's acquisition, this transition period will be 12 to 18 months.
Except as otherwise noted, the remainder of this report addresses the
Company's operation of fully assimilated stores which represented
approximately 85% of stores in operation at February 28, 1994. For a
discussion of the Company's business and its development during the fiscal
year ended February 28, 1994, see "Narrative Description of Business."
(b) Financial Information About Industry Segments - The Company
considers that it is engaged primarily in one line of business, the sale of
home furnishings, and has one reportable industry segment. Accordingly, data
with respect to industry segments has not been separately reported herein.
(c) Narrative Description of Business
(i) General - The Company is one of the nation's largest publicly held
specialty retailers of furniture with 589 stores in 23 states (as of May 13,
1994), primarily located in small towns and rural markets in the Southeast,
Midwest and Southwest. The Company's operating strategy includes: (1)
offering a broad selection of affordably priced home furnishings
including furniture, consumer electronics, appliances, bedding and floor
coverings; (2) locating stores primarily in small towns and rural markets
which are at least 25 miles from a metropolitan area; (3) offering in-house
credit programs to provide flexible financing to its customers; (4) utilizing
a central distribution system to ensure prompt merchandise delivery;
and (5) emphasizing customer service, including repair service for consumer
electronics and other mechanical items, and free delivery. The Company
believes this strategy of offering selection, credit, delivery and service
typically allows it to have the largest market share among home furnishings
retailers in most of its small-town markets.
(ii) Merchandising - The Company's merchandising strategy is to
offer a broad selection of affordably priced home furnishings, including
furniture and accessories, consumer electronics, appliances, bedding, and
other items such as jewelry, small appliances and seasonal goods. During the
fiscal year ended February 28, 1994, approximately 59% of the Company's sales
were derived from furniture and accessories; 12% from consumer electronics;
8% from appliances; 10% from bedding; with the remaining 11% being divided
among other items such as jewelry, small appliances and seasonal goods.
These percentages have not varied significantly over the past three fiscal
years.
The Company carries a wide variety of items within each merchandise
category to appeal to individual tastes and preferences. A store will
typically display up to approximately 3,400 SKU's, depending on its floor
space. The Company believes this broad selection of products has enabled it
to expand its customer base and increase repeat sales to existing customers.
By carrying seasonal merchandise (heaters, air conditioners, lawn mowers,
outdoor furniture, etc.), the Company has been able to moderate seasonal
fluctuations in sales common in its industry.
While its basic merchandise mix remains fairly constant, the Company
continually refines its merchandise selections. Most recently, the Company
improved its carpeting, major appliance and upholstered merchandise programs.
The carpet selection has been broadened and the major appliance offerings now
emphasize brand names at value-oriented prices. Displays for both product
lines have been upgraded to a more contemporary format. A special order
program for customized upholstered merchandise provides customers increased
selection and prompt delivery. The Company has also upgraded other areas,
including the conversion to brand name electronics and the redesign of its
jewelry selection presentation.
Expansion into new geographic areas has resulted in greater variations
in customer tastes and preferences in the Company's markets. In response,
the Company has developed style categories by which it has classified stores
based on sales history. The Company offers more merchandise in the
applicable style categories in each store in order to appeal to the regional
tastes and preferences of the store's customer base.
The Company has also consolidated and strengthened its vendor
relationships. In addition to providing purchasing advantages, these
relationships provide warehousing and distribution arrangements which improve
inventory management.
In fiscal 1994, the Company installed a new sales analysis and inventory
control system. This new system provides management ready access to all
levels of sales and inventory data, enabling better management of promotional
events, closer evaluation of results by product and operating region and
providing an opportunity for improving inventory availability and increased
turnover.
(iii) Advertising and Promotion - The Company currently distributes
over 160 million direct mail circulars annually. These include monthly
circulars sent by direct mail to over ten million households on its mailing
list and special private sale circulars mailed to over one and a half million
of these households each month, as well as during special promotional
periods. During fiscal 1994, the Company began utilizing market segmentation
techniques to identify prospective customers by matching their demographics
to those of existing customers. Management believes ongoing market research
and improved mailing techniques have enhanced the Company's ability to place
circulars in the hands of potential customers most likely to make a purchase.
The Company believes that availability, as well as affordability of credit
are key determinants in the purchase decision, and therefore, promotes credit
availability by disclosing monthly payment terms in its circulars. The
Company also regularly conducts approximately 40 company-wide promotional
events each year, and, in addition, individual stores periodically conduct
local additional promotional events. Historically, expenses for advertising
and promotion have been between 6% and 8% of sales.
The Company designs, prepares and mails centrally from its corporate
headquarters its direct mail circulars, which account for approximately 54%
of the Company's advertising expenses. In addition, television commercials
are produced centrally and aired in selected markets. Newspaper and radio
advertising is placed largely at the store level with design assistance from
the corporate office.
In fiscal 1993, the Company entered into a sponsorship program with a
NASCAR racing team. Management believes this program has enhanced the
Company's name recognition among the millions of NASCAR fans in its market
area. Related promotions and the sale of racing apparel and other
merchandise have increased store traffic.
(iv) Store Operations
General. The Company believes that locating stores in small towns and
rural markets is an important element of its competitive strategy.
Currently, 80% of all stores are located in towns with populations under
50,000 and more than 25 miles from a metropolitan market. As the majority of
other furniture chains locate their stores in larger cities, competition in
these small towns largely comes from locally-owned store operations which
generally lack the financial strength to compete effectively with the
Company. Consequently, the Company believes that its stores generally have
the largest market share among furniture retailers in their areas. This
market leadership, combined with the relatively stable business environment
and the collective economic diversity of these small towns, has contributed
to sales and earnings growth, even in slow economic times.
The Company's stores generally range in size from 10,000 to 35,000
square feet, with the average being approximately 20,000 square feet. A
store's attached or nearby warehouse usually measures from 3,000 to 5,000
square feet. A typical store is designed to give the customer an urban
shopping experience in a rural location. During the last two years, the
Company revitalized its prototype store construction program. The first of
the new prototype stores opened in fiscal 1993; the Company added four of
these stores in fiscal 1994 and plans at least eight more for fiscal 1995.
The prototype stores feature the latest technology in display techniques and
construction efficiencies. Certain features of these prototype stores are
incorporated into other locations through the Company's ongoing remodeling
program. During the fiscal year ended February 28, 1994, the Company
remodeled 35 stores and approximately 65 additional remodelings are planned
for fiscal 1995.
In fiscal 1992, the Company installed an automated accounts receivable
system in all stores. This system was upgraded in fiscal 1993 to improve
customer service through quicker processing of credit transactions and to
provide store managers additional control over their receivables portfolio by
increasing information available on current account status and collection
performance. The Company also enhanced its corporate accounting and
budgeting systems during fiscal 1993 to increase the availability and
effectiveness of management information and to provide a foundation for
planned future growth.
Store operations are led by the Executive Vice President of Operations
and nine Regional Vice Presidents of Operations. Six of the Regional Vice
Presidents serve as the link between the corporate office and 31 Division
Supervisors, each of whom is generally responsible for 12 to 24 stores. Each
store manager is eligible to receive an incentive bonus based on monthly and
annual store performance. In addition, the former McMahan's stores are
currently being managed by three Regional Vice Presidents using the
management structure and bonus system that was in place at the time of
acquisition.
The Company has an extensive in-house education program to train new
employees in its operations and to keep current employees informed of the
Company's policies. This training program also emphasizes sales
productivity, credit extension and collection, and store administration. The
training program utilizes the publication of detailed store manuals,
internally produced videotape training films and Company-conducted classes
for employees. The Company also has an in-store manager training program
which provides potential managers hands on experience in all aspects of store
operations. Management believes that the Company's ongoing education program
will provide a sufficient number of experienced personnel for its new stores.
Distribution. The Company maintains six distribution centers which have
cantilever racking and computer-controlled random-access inventory storage.
The distribution centers are equipped with radio frequency bar coding systems
designed to improve merchandise availability and the accuracy of inventory
records. The Company opened its sixth distribution center in Moberly,
Missouri in October 1993 and will open a seventh distribution center in
Fontana, California during the summer of 1994 to handle the recent expansion
in the Southwest.
The Company uses several innovative design and management techniques to
increase the operational efficiency of its distribution network. A modern
high-ceiling design and improved equipment technology allow the Thomasville
and the Moberly facilities to exceed the capacity of the Company's other
distribution centers by approximately 15% without increasing square footage.
The Fontana facility will be leased and have a similar layout to that of
Moberly and Thomasville. Increased use of direct shipping and backhauling
from vendors have also enhanced distribution efficiency. Backhauling from
vendors is the transportation of purchased inventory to the distribution
center while returning from normal store deliveries. The Company now
backhauls approximately 25% of its purchased inventory. Also, all custom cut
carpet is now shipped directly from the vendor to each store, eliminating the
need to maintain carpet inventory at the distribution centers. Management
plans to expand three of the six existing distribution centers to handle
increased sales levels. With this expansion and the addition of the Fontana
facility, the distribution network will have the capacity to service over 700
stores.
Typically, each store is within 250 miles of one of the distribution
centers. The Company believes the use of the distribution centers enables it
to make available a broader selection of merchandise, to reduce inventory
requirements at individual stores, to benefit from volume purchasing to
provide prompt delivery to customers, and to minimize freight costs. The
Company operates a fleet of trucks which delivers merchandise to each store
at least twice a week.
Credit Operations. The Company believes that offering flexible,
in-house credit is an important part of its business strategy which provides
a significant competitive advantage. Because credit is administered at the
store level, terms can generally be tailored to meet the customer's ability
to pay. Each store has a credit manager who, under the store manager's
supervision, is responsible for extending and collecting that store's
accounts in accordance with corporate guidelines. Because Company
representatives work with customers on a local level, they can often extend
credit, without significantly increasing the risk of nonpayment, to customers
who do not qualify for credit under bank card programs or from competitors
who typically use strict, impersonal credit extension models. The Company
believes its credit program fosters customer loyalty and repeat business.
Historically, approximately 81% of the Company's sales have been made on
credit, principally through installment sales. Although the Company
extends credit for terms up to 24 months, the term of the average installment
obligation (excluding the two months of installment sales relating to the
former McMahan's stores) for the fiscal year ended February 28, 1994, was
approximately 16.7 months. The 1992 implementation of a store-level
automated accounts receivable system has allowed the Company to increase the
volume of credit sales without a corresponding increase in personnel. The
Company accepts major credit cards in all of its stores and, in addition,
offers a revolving credit program featuring its private label credit card.
The Company promotes this program by direct mailings to revolving credit
customers of acquired stores and potential new customers in targeted areas.
Credit extension and collection of revolving accounts are handled centrally
from the Company's credit center at its corporate office.
The entire amount of a credit sale is reflected in revenues upon
approval of credit and establishment of a definite delivery date, except that
finance charges are included in revenues on a monthly basis as earned.
During fiscal 1994, finance income amounted to $115,532,000 or approximately
13.4% of total revenues. The Company is unable to estimate accurately the
contribution of its financing operation to net income because the Company
does not specifically allocate various costs and expenses of operations
between retail sales and credit operations.
The Company offers, but does not require, property, life and disability
(in certain states) insurance with its credit sales.
Customer Service. The Company believes that customer service is an
important element for success in the retail furniture business and therefore
provides a broad range of services to its customers. These include free home
delivery and set-up in the home, as well as liberal policies with respect to
exchanges and returns. In addition, the Company sells service agreements
and provides repair service on virtually all consumer electronics and
mechanical items sold in its stores. The Company operates service centers
in Fayetteville, North Carolina and Moberly, Missouri. The Fayetteville
Service Center occupies approximately 40,000 square feet and has the capacity
to process 1,800 repair jobs a week. The Moberly Service Center was opened
in October 1993. It occupies 40,000 square feet adjacent to the Moberly,
Missouri Distribution Center and has the capacity to process 2,000 repair
jobs a week. The service centers provide service for all consumer
electronic items, most mechanical items (except major appliances which are
serviced locally) and watches and are also authorized to perform repair work
under certain manufacturers' warranties. Service center trucks visit stores
weekly, allowing one week turnaround on most repair orders. The Company
believes this level of service is not otherwise available in the small towns
in which it operates.
(v) Corporate Expansion - The Company has grown from 277 stores at
February 28, 1989 to 570 stores at February 28, 1994. Over this time period,
the Company has expanded from its traditional Southeast operating region into
the Midwest and most recently to the West and Southwest. The Company entered
the West and Southwest market with the purchase of certain assets relating to
92 stores of McMahan's Furniture Company in January 1994. The Company
currently operates stores in Alabama, Arizona, Arkansas, California,
Colorado, Florida, Georgia, Illinois, Indiana, Iowa, Kentucky, Mississippi,
Missouri, Nevada, North Carolina, New Mexico, Ohio, Pennsylvania, South
Carolina, Tennessee, Texas, Virginia and West Virginia. Store growth comes
primarily from three sources: acquisition of chains or independent stores,
refurbishing of existing retail space and new construction. During the
fiscal year ended February 28, 1994, the Company added 152 stores and closed
seven stores for a net increase of 145 stores. Of these, 65 are in
California, 18 are in Illinois, 12 are in Arizona, 7 are in New Mexico, 6 are
in Missouri, 6 are in Ohio, 4 are in Georgia, 4 are in Iowa, 4 are in Texas,
3 are in Florida, 3 are in Indiana, 3 are in Kentucky, 3 are in Mississippi,
3 are in North Carolina, 3 are in Nevada, 2 are in Tennessee, 2 are in
Virginia, 1 is in Alabama, 1 is in Colorado, 1 is in South Carolina and 1 is
in West Virginia. During fiscal 1994, 2 stores in Alabama, 1 in California,
1 in Florida, 1 in Mississippi, 1 in North Carolina and 1 in South Carolina
were closed. Of the 152 new stores, 114 were existing furniture stores
acquired by the Company in ten separate transactions, 34 were operations
begun by the Company in vacant buildings previously owned by others and 4
were prototype stores built according to the Company's specifications.
The Company constantly evaluates opportunities for further expansion of
its business. The Company plans to add approximately 50 to 60 stores during
fiscal 1995 by seeking acquisitions of existing businesses, obtaining and
renovating existing retail space or constructing new prototype stores in
selected small towns. These new stores are expected to be located in areas
contiguous to the Company's existing store locations. In selecting new
locations, the Company intends to follow its established strategy of
generally locating stores within 250 miles of a company distribution center
and in towns with populations of 5,000 to 50,000 and over 25 miles from the
closest metropolitan market. The Company believes that it has substantial
growth potential in its present and contiguous market areas.
(vi) Suppliers - During the fiscal year ended February 28, 1994, the
Company's ten largest suppliers accounted for approximately 35% of
merchandise purchased. The Company has no long-term contracts for the
purchase of merchandise. In the past, the Company has not experienced
difficulty in obtaining satisfactory sources of supply and believes that
adequate alternative sources of supply exist for the types of merchandise
sold in its stores. Neither the Company nor its officers or directors have
an interest, direct or indirect, in any of its suppliers of merchandise
other than minor investments in publicly held companies.
(vii) Service Marks, Trademarks and Franchise Operations - The
Company owns the service marks "MacSaver, design of a Scotsman," and
"MacSaver," which are used generally in the Company's business. During
fiscal 1992, the Company updated these service marks, which were introduced
over 30 years ago. The Company also owns the registered trademarks "Mighty
Mow" and "Health Bond" which are used on lawn mowers and mattresses,
respectively, manufactured for sale in the Company's stores.
During the fiscal year ended February 28, 1994, the Company maintained
one franchise agreement for the use of its service mark in connection with
retail furniture operations. This agreement relates to stores in Norfolk,
Virginia Beach, and Keller, Virginia. Florence T. Meyers, wife of Hyman
Meyers, a director of the Company, owned a one-third interest in these
franchise operations until her death in September 1993. The estate of Mrs.
Meyers, of which Hyman Meyers is executor, has disposed of most of the
interest in these franchise operations. Reference is made to information
under the heading "Certain Transactions," in the Company's definitive Proxy
Statement for the Annual Meeting of Shareholders scheduled for June 15,
1994, incorporated into Item 13 hereof.
The Company's franchise agreement generally permits the use of its
service marks and promotes the use of its system of retail home furnishings
operations. Currently, the Company does not permit the franchise to operate
under the name Heilig-Meyers Company. The Company supplies its franchise
with a merchandising and advertising program and the franchise operation pays
a franchise fee based upon sales, as well as making payments for any
merchandise, service or material purchased from the Company.
Franchise operations have not constituted a significant element of the
Company's operations in the past, and management presently has no plans to
further develop the franchise program.
(viii) Seasonality - Quarterly fluctuations in the Company's sales are
insignificant.
(ix) Competition - The retail home furnishings business is extremely
competitive and the Company as a whole competes with large chains and
independent department stores, discount stores, furniture stores, specialty
stores and others, some of which have financial resources greater than those
of the Company, and some of which derive revenues from the sale of products
other than home furnishings. However, since the Company's stores are
primarily located in small towns and rural markets, the Company frequently
has the largest market share among furniture retailers in such markets.
(x) Employees - As of February 28, 1994, the Company employed
approximately 10,540 persons full- or part-time, of whom 9,830 worked in the
Company's stores, distribution centers and service centers, with the balance
in the Company's corporate headquarters and two California offices. The
Company is not a party to any union contract and considers its relations
with its employees to be excellent.
(d) Financial Information About Foreign and Domestic Operations and
Export Sales - The Company has no foreign operations and makes no export
sales.
Item 2. Properties.
As of February 28, 1994, 353 of the Company's stores are on a single
level with approximately 80% of floor space devoted to sales and 20% used as
a warehouse primarily for merchandise being prepared for delivery and for
items customers carry with them. These stores are typically located away
from the center of town. The remaining 217 stores generally are in older
two- or three-level buildings in downtown areas. Generally there is no
warehouse space in these older buildings and the stores' warehouses are
located in nearby buildings.
The Company's executive offices are located at 2235 Staples Mill Road,
Richmond, Virginia. As of February 28, 1994, the Company owned 80 of its
stores, three of its distribution centers and the Fayetteville, North
Carolina Service Center. The Company leases the remaining stores, the
remaining distribution centers and its executive offices in Richmond,
Virginia. Rentals generally are fixed without reference to sales volume
although some leases provide for increased rent due to increases in taxes,
insurance premiums or both. Some renewal options are tied to changes in the
Consumer Price Index. Total rental payments for properties for the fiscal
year ended February 28, 1994, were approximately $24,908,000. In February
1991, the Company sold and leased back a portion of its store fixtures and
equipment under an operating lease. All vehicles placed in service after
March 14, 1990, a majority of the distribution centers' material handling
equipment placed in service after February 27, 1991, and a majority of the
Company's data processing equipment are also leased. The Company believes
that its facilities are adequate at present levels of operations.
Item 3. Legal Proceedings.
The Company is party to various legal actions and administrative
proceedings and subject to various claims arising in the ordinary course of
business. The Company believes that the disposition of these matters will
not have a material adverse effect on the financial position of the Company.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Executive Officers of the Registrant
The following table sets forth certain information with respect to the
executive officers of the Company as of May 13 , 1994:
Positions with the Company
or Principal Occupation for
Years with the Past Five Years and
Name Age the Company Other Information
William C. DeRusha 44 25 Chairman of the Board since
April 1986. Chief Executive
Officer since April 1984.
Director since January 1983.
Troy A. Peery, Jr. 48 22 President since April 1986.
Chief Operating Officer since
December 1987. Director since
April 1984.
James F. Cerza, Jr. 46 6 Executive Vice President,
Operations since August 1989.
Regional Vice President,
Operations from November 1988
to August 1989.
Joseph R. Jenkins 48 6 Executive Vice President and
Chief Financial Officer since
January 1988.
James R. Riddle 52 9 Executive Vice President,
Marketing since January 1988.
William J. Dieter 54 21 Senior Vice President,
Accounting since April 1986.
Chief Accounting Officer
since 1975. Controller from
1975 to April 1990.
J. Lee Hawks 44 5 Senior Vice President,
Merchandising since April
1990. Senior Vice President,
Operations, Best Products Co.
Inc. from May 1985 to August
1989.
William E. Helms 45 15 Senior Vice President,
Corporate Expansion since
May 1987.
R. Gene Laughter 61 33 Senior Vice President,
Special Research since July
1991. Senior Vice President,
Advertising and Sales
Promotion from January 1983
to July 1991.
H.C. Poythress 51 2 Senior Vice President,
Advertising since March
1993. Vice President,
Advertising from July 1991 to
March 1993. Vice President,
Advertising, Lowes, Inc.
prior to July 1991.
Ronald M. Ragland 52 30 Senior Vice President,
Human Resources and
Training, since March 1993.
Vice President, Human
Resources and Training
from April 1985 to March 1993.
John H. Sniffin 52 25 Senior Vice President,
Government Liaison, since
August 1992. Senior Vice
President, Merchandising
Administration from March
1989 to August 1992.
PART II
Item 5. Market for Registrant's Common Stock and Related Stockholder
Matters.
THE COMPANY'S STOCK
The Company's common stock is traded on the New York and Pacific Stock
Exchanges. The table below sets forth the high and low prices as reported on
the New York Stock Exchange Composite Tape, and dividend information for each
of the last eight fiscal quarters. Prices and dividends have been adjusted
for three-for-two stock splits distributed in November 1992 and July 1993.
Fiscal Year High Low Dividends
1994
4th Quarter $ 39 $ 31 7/8 $ .05
3rd Quarter 36 29 1/8 .05
2nd Quarter 31 1/2 23 1/8 .05
1st Quarter 25 19 3/8 .05
1993
4th Quarter $ 22 3/8 $ 17 1/8 $ .04
3rd Quarter 19 13 5/8 .04
2nd Quarter 15 1/8 10 5/8 .04
1st Quarter 15 1/2 10 5/8 .04
There were approximately 1,500 shareholders of record as of February 28,
1994.
The Company has paid cash dividends in every year since fiscal 1976. The
Board of Directors intends to continue its present policy of paying regular
quarterly dividends when justified by the financial condition of the Company.
The amount of future dividends, if any, will depend upon general business
conditions, earnings, capital requirements and such other factors as the
Board may deem relevant. The Company's payment of dividends is restricted,
under certain covenants in loan agreements, to $59,149,000 plus 50% of net
earnings adjusted for dividend payouts subsequent to February 28, 1994.
Item 6. Selected Financial Data.
FISCAL YEAR 1994 1993 1992 1991 1990
(Dollar amounts in thousands except per share data)
Earnings Statement Data:
Sales $723,633 $549,660 $436,664 $376,701 $330,698
Annual growth in sales 31.7% 25.9% 15.9% 13.9% 12.2%
Other income $140,156 $107,883 $ 83,229 $ 71,050 $ 62,710
Total revenues 863,789 657,543 519,893 447,751 393,408
Annual growth in revenue 31.4% 26.5% 16.1% 13.8% 11.9%
Costs of sales $460,284 $351,361 $276,971 $238,107 $208,791
Gross profit margin 36.4% 36.1% 36.6% 36.8% 36.9%
Selling, general and administrative
expense $260,161 $200,071 $160,393 $136,430 $115,575
Interest expense 23,834 23,084 21,389 26,037 27,447
Provision for doubtful
accounts 32,356 24,185 20,298 16,299 14,083
Provision for income tax 32,158 20,833 13,858 9,996 9,069
Effective income tax rate 36.9% 35.4% 33.9% 32.4% 33.0%
Earnings margin (1) 7.6% 6.9% 6.2% 5.5% 5.6%
Cumulative effect of
accounting changes --- --- --- ($2,552) $1,584
Net earnings $54,996 $38,009 $26,984 $18,330 $20,027
Earnings per share (1):
Primary 1.12 0.84 0.64 0.58 0.51
Fully diluted 1.12 0.83 0.63 0.57 0.51
Net earnings per share:
Primary 1.12 0.84 0.64 0.51 0.56
Fully diluted 1.12 0.83 0.63 0.51 0.56
Cash dividends per share 0.20 0.16 0.14 0.13 0.12
Balance Sheet Data:
Total assets $1,040,185 $766,485 $636,576 $520,461 $511,757
Average assets per store 1,825 1,803 1,702 1,616 1,683
Accounts receivable, net 535,437 397,974 315,949 234,638 218,932
Inventories 184,216 131,889 119,803 113,945 116,546
Property and equipment,
net 168,142 126,611 108,758 97,803 101,598
Additions to property
and equipment 36,252 27,426 24,010 12,510 18,383
Short-term debt 210,318 163,171 42,086 96,021 121,411
Long-term debt 248,635 176,353 226,112 164,369 148,490
Average debt per store 805 799 717 809 888
Stockholders' equity 433,229 305,555 263,928 185,175 171,158
Stockholders' equity
per share 8.95 6.87 6.07 5.19 4.80
Other Financial Data:
Working Capital $453,175 $322,796 $355,975 $233,720 $211,137
Current ratio 2.5 2.3 4.1 2.6 2.3
Debt to equity ratio 1.06 1.11 1.02 1.41 1.58
Debt to debt and equity 51.4% 52.6% 50.4% 58.4% 61.2%
Rate of return on
average assets (1) 7.8% 7.5% 7.1% 7.5% 7.3%
Rate of return on
average equity (1) 14.9% 13.3% 12.0% 11.7% 11.3%
Number of stores 570 425 374 322 304
Number of employees 10,536 7,850 6,700 5,910 5,320
Average sales per employee $ 79 $ 76 $ 69 $ 67 $ 65
SELECTED FINANCIAL DATA, cont.
FISCAL YEAR 1994 1993 1992 1991 1990
(Dollar amounts in thousands except per share data)
Weighted average common
shares outstanding:
(in thousands)
Primary 49,103 45,356 42,123 35,991 35,732
Fully diluted 49,281 45,644 42,417 36,242 35,907
Price range on common stock per share:
High $ 39 $22 3/8 $14 5/8 $ 8 7/8 $7 3/4
Low 19 3/8 10 5/8 7 3/4 4 3/4 4 3/4
Close 33 19 7/8 14 1/8 7 3/4 6 1/2
Per share amounts reflect three-for-two stock splits distributed in
January 1992, November 1992, and July 1993.
(1) Calculated before cumulative effect of accounting changes.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations
Highlights of operations expressed as a percentage of sales are as
follows:
Fiscal Year
1994 1993 1992
Other income 19.4% 19.6% 19.1%
Costs of sales 63.6 63.9 63.4
Selling, general and
administrative expense 36.0 36.4 36.7
Interest expense 3.3 4.2 4.9
Provision for doubtful
accounts 4.5 4.4 4.7
Earnings before provision for
income taxes 12.0 10.7 9.4
Provision for income taxes 4.4 3.8 3.2
Net earnings 7.6 6.9 6.2
Revenues
Sales for fiscal 1994 compared to the two previous periods are shown
below:
Fiscal Year
1994 1993 1992
Sales (in thousands) $ 723,633 $549,660 $436,664
Percentage increase over
prior period 31.7% 25.9% 15.9%
Portion of increase from
existing (comparable) stores 12.1 10.1 5.7
Portion of increase from
new stores 19.6 15.8 10.2
Sales increased by 31.7% in fiscal 1994 compared to 25.9% in the prior
year. During fiscal 1994, new stores contributed 19.6% of the total increase
as compared to 15.8% of the total increase in fiscal 1993, while existing
(comparable) stores contributed 12.1% of the increase as compared to 10.1% of
the increase in fiscal 1993. Management attributes the comparable store
increase primarily to continuing operational enhancements such as targeted
customer advertising and improved merchandising programs. The improving
economy in our stores' markets also contributed to the increase, particularly
during the holiday selling season.
During fiscal 1994, other income decreased as a percentage of sales from
the prior year. Finance income, the major component of other income,
decreased as a percentage of sales due to the accelerated sales growth rate
of fiscal 1994 and the associated delay in the recognition of the finance
income which is earned over the average contract life. During fiscal 1993,
other income increased primarily as a result of growth in the Company's
receivable base and a slight increase in the average initial term of
installment contracts.
Costs and Expenses
Costs of sales decreased to 63.6% of sales from 63.9% in the prior year.
Gross margins were slightly improved for the year due to improved merchandise
buying, warehousing refinements and less promotional pricing. As a
percentage of sales, both occupancy and delivery costs improved due to the
higher sales volume. In fiscal 1993, costs of sales increased as the Company
lowered selling prices on selected merchandise in order to stimulate sales
and increase its market share. The resulting increase in costs of sales was
partially offset by both occupancy and delivery costs which improved as a
percentage of sales due to the higher sales volume. In fiscal 1995, higher
costs of sales associated with the Company's west coast stores are expected
to cause total costs of sales to increase slightly. This increase is
expected to be partially offset by the benefits of improved inventory
management resulting from the implementation of a sales analysis and
inventory control system.
Selling, general and administrative expense decreased to 36.0% for
fiscal 1994 from 36.4% in fiscal 1993. Store salaries expense improved as a
percentage of sales due to the higher sales volume. Advertising expense
related to the Company's direct mail circular program decreased as a
percentage of sales due to reduced mailing volume from more efficient
customer targeting. These savings were partially invested in additional
institutional advertising methods such as television advertising and the
Company's NASCAR sponsorship. Overall, this resulted in advertising expense
decreasing slightly to 6.9% of sales for fiscal 1994 compared to 7.0% for
fiscal 1993. In addition, other selling and administrative expenses improved
as a percentage of sales due to the higher sales volume. In fiscal 1993,
selling, general and administrative expense decreased as a percentage of
sales due to lower advertising costs from the implementation of a targeted
circular program which resulted in mailing fewer pieces per store.
Interest expense decreased as a percentage of sales in fiscal 1994 to
3.3% from 4.2% in fiscal 1993 primarily due to improved interest rates.
Weighted average short-term rates decreased to 3.5% from 4.0% in fiscal 1993
and long-term rates decreased to 8.8% from 9.3%. In dollars, interest
expense increase $750,000 to $23.8 million from $23.0 million for fiscal 1993
due to higher average debt levels. Average short-term debt outstanding
increased $44.1 million while average long-term debt levels increased $15.4
million. These increases, however, were offset by reduced interest rates.
In May 1993, the Company completed a common stock offering of 2.3 million
shares. The proceeds of $74.5 million were used to reduce indebtedness. For
fiscal 1993, interest expense increased due to higher average long-term debt
levels outstanding; however, this was substantially offset by lower weighted
average short-term interest rates. Subsequent to February 28, 1994, the
company received commitments to borrow $80.0 million in long-term debt.
Accordingly, the Company reclassified $80.0 million of notes payable to banks
as long-term debt on the February 28, 1994, balance sheet. The proceeds will
be used to reduce notes payable to banks. This long-term debt placement, at
an interest rate of 6.9%, will lessen the effect of future short-term
interest rate fluctuations. The Company anticipates slightly higher interest
expense for fiscal 1995 as a percentage of sales due to an expected rise in
interest rates.
The provision for doubtful accounts increased slightly as a percentage
of sales to 4.5% for fiscal 1994 from 4.4% for fiscal 1993. A slight rise in
the portfolio loss rate applied to the growing accounts receivable base
caused the increase. This increase was partially offset by repossession
losses which were slightly improved over the prior year as a percentage of
sales. In fiscal 1993, the provision for doubtful accounts decreased as a
percentage of sales due primarily to a reduction in the Company's
repossession losses resulting from strong collection performance due to an
improved accounts receivable system and a stronger economy.
Total portfolio write-offs for fiscal 1994, 1993 and 1992 were $32.9
million, $25.5 million and $21.2 million, respectively. Of these amounts,
$3.2 million, $3.0 million and $2.4 million were for purchased receivables.
Management believes that the allowance for doubtful accounts of $28.5 million
at February 28, 1994 is adequate.
Provision for Income Taxes and Net Earnings
The effective tax rate for fiscal 1994 was 36.9% compared to 35.4% and
33.9% for fiscal 1993 and 1992, respectively. On August 10, 1993, the
Omnibus Reconciliation Act of 1993 (the "Budget Act") was signed into law.
The Budget Act includes an increase in the corporate tax rate to 35.0% from
34.0% retroactive to January 1, 1993. The Company was required to adjust its
deferred income tax balance to reflect the higher tax rate and recognize the
effects of the adjustment during the second quarter of fiscal 1994.
Net earnings for fiscal 1994 increased over fiscal 1993 in dollars and
percentage of sales. Net earnings for fiscal 1994 were $55.0 million or 7.6%
of sales compared to $38.0 million or 6.9% of sales for fiscal 1993. As a
percentage of sales, lower interest, selling, general and administrative
expense, and costs of sales contributed to the improvement in profit margin.
Fiscal 1993 earnings increased to 6.9% of sales from 6.2% in fiscal 1992 due
to higher revenues, lower interest expense and selling, general and
administrative expenses and a reduced provision for bad debts.
Liquidity and Capital Resources
The Company traditionally produces a deficit in cash flow from
operations because it extends credit to its customers. During fiscal 1994,
net cash used by the Company's operating activities was $74.8 million
compared to $23.1 in fiscal 1993. While cash flow from operations increased
due to the Company's strong net earnings, the growth in accounts receivable
and inventory levels caused an overall negative cashflow from operating
activities. The growth in accounts receivable is the result of the
continuing increase in credit sales. Inventory levels increased due to the
addition of the Moberly, Missouri distribution center and the opening of 145
stores during fiscal 1994. In fiscal 1993, the deficit in cash flow from
operations was largely due to higher inventory levels from the addition of 51
new stores and the Thomasville, Georgia distribution center, and the growth
in accounts receivable from the continuing increase in credit sales.
Investing activities produced negative cash flows of $114.9 million in
fiscal 1994 and $50.8 million in fiscal 1993. Capital spending has increased
over the prior year due to a more aggressive expansion program including the
purchase of certain assets of McMahan's Furniture Company as well as ongoing
remodeling of existing stores. On January 1, 1994, the Company acquired
certain assets relating to 92 stores of McMahan's Furniture Company of
Carlsbad, California. The purchase price, net of accounts receivable and
real estate, was $58,433,000. Improvements planned for the Company's west
coast operations are expected to cause capital spending for fiscal 1995 to
increase to approximately $63.0 million which is slightly higher both as
a percentage of sales and of assets when compared to the prior fiscal year.
Capital expenditures will continue to be financed by cash flows from
operations supplemented by external sources of funds.
Financing activities provided a positive net cash flow of $192.1 million
in fiscal 1994 compared to $74.9 million in fiscal 1993. A common stock
offering during the first quarter of fiscal 1994 provided net proceeds of
$74.5 million which were used to reduce indebtedness in the current year.
Subsequent to February 28, 1994, the Company received commitments to borrow
$80.0 million at an interest rate of 6.9% to reduce the Company's exposure to
interest rate fluctuations. As a result, the company reclassified $80.0
million of notes payable to long-term debt on the accompanying February 28,
1994, balance sheet. In fiscal 1993, the Company borrowed $85.0 million in
long-term debt to reduce short-term borrowings and lessen the effect of
interest rate fluctuations.
The Company has access to a broad diversity of external capital sources
to finance asset growth and plans to continue to finance accounts receivable,
inventories and future expansion with cash flow from operations supplemented
by other sources of capital. Agreements have been made with ten banks for
lines of credit totalling $324.0 million of which $151.4 million was unused
at February 28, 1994.
Total debt as a percentage of debt and equity was 51.4% at February 28,
1994, compared to 52.6% and 50.4% at February 28(29), 1993, and 1992,
respectively. The current ratio was 2.5 at February 28, 1994, compared to
2.3 and 4.1 for February 28(29), 1993, and 1992, respectively. The return on
average assets, which was calculated using earnings before interest expense
(net of tax), rose to 7.8% during fiscal 1994 compared to 7.5% in fiscal 1993
and 7.1% in fiscal 1992.
Accounting for Income Taxes
In February 1992, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes," which supersedes the previous standard, Accounting Principles
Board Opinion No. 11. The Company adopted the new standard in fiscal 1994 by
restating prior years. There was no material impact on net earnings in
either the year of change or any prior year. The provision for income taxes
reflects changes in the valuation of deferred income tax liabilities due to
changes in statutory tax rates.
Accounting for Postretirement Benefits
In December 1990, the FASB issued Statement of Accounting Standards No.
106 ("SFAS 106") which establishes standards for employers' accounting for
postretirement benefits other than pensions. The Company adopted the new
standard in fiscal 1994. There was no material impact on operating results
from the adoption of SFAS 106.
Item 8. Financial Statements and Supplementary Data.
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying consolidated balance sheets of Heilig-Meyers
Company and subsidiaries as of February 28, 1994 and 1993, and the related
consolidated statements of earnings, stockholders' equity, and cash flows for
each of the three years in the period ended February 28, 1994. Our audits
also included the financial statement schedules listed in the Index at Item
14(a) 2. These financial statements and financial statement schedules are
the responsibility of the Company's management. Our responsibility is to
express an opinion on the financial statements and financial statement
schedules 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 acocunting 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 Heilig-Meyers Company and
subsidiaries as of February 28, 1994 and 1993, and the results of their
operations and their cash flows for each of the three years in the period
ended February 28, 1994 in conformity with generally accepted accounting
principles. Also, in our opinion, such financial statement schedules, when
considered in relation to the basic consolidated financial statements taken
as a whole, present fairly in all material respects the information set forth
therein.
/s/ Deloitte & Touche
Richmond, Virginia
March 21, 1994
CONSOLIDATED STATEMENTS OF EARNINGS
(Amounts in thousands except per share data)
FISCAL YEAR 1994 1993 1992
Revenues:
Sales $723,633 $549,660 $436,664
Other income 140,156 107,883 83,229
Total revenues 863,789 657,543 519,893
Costs and expenses:
Costs of sales 460,284 351,361 276,971
Selling, general and administrative 260,161 200,071 160,393
Interest 23,834 23,084 21,389
Provision for doubtful accounts 32,356 24,185 20,298
Total costs and expenses 776,635 598,701 479,051
========= ========= =========
Earnings before provision for income taxes 87,154 58,842 40,842
Provision for income taxes 32,158 20,833 13,858
Net earnings $ 54,996 $ 38,009 $ 26,984
======== ======== ========
Net earnings per share:
Primary $ 1.12 $ .84 $ .64
Fully diluted $ 1.12 $ .83 $ .63
======== ======== ========
Weighted average common shares outstanding:
Primary 49,103 45,356 42,123
Fully diluted 49,281 45,644 42,417
======== ======== ========
Cash dividends per share of common stock $ .20 $ .16 $ .14
======== ======== ========
See notes to consolidated financial statements.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands except par value data)
FEBRUARY 28, 1994 1993
Assets
Current assets:
Cash $ 6,295 $ 3,868
Accounts receivable, net 535,437 397,974
Other receivables 17,988 14,363
Inventories 184,216 131,889
Other 21,366 18,483
Total current assets 765,302 566,577
Property and equipment, net 168,142 126,611
Other assets 106,741 73,297
$1,040,185 $ 766,485
Liabilities And Stockholders' Equity
Current liabilities:
Notes payable $ 172,600 $113,400
Long-term debt due within one year 37,718 49,771
Accounts payable 69,045 50,666
Accrued expenses 32,764 29,944
Total current liabilities 312,127 243,781
Long-term debt 248,635 176,353
Deferred income taxes 46,194 40,796
Commitments -- --
Stockholders' equity:
Preferred stock, $10 par value -- --
Common stock, $2 par value 96,846 59,296
Capital in excess of par value 118,400 73,969
Retained earnings 217,983 172,290
Total stockholders' equity 433,229 305,555
$1,040,185 $ 766,485
========== ==========
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Amounts in thousands)
Number of
Common Capital in Total
Shares Common Excess of Retained Stockholders'
Outstanding Stock Par Value Earnings Equity
Balances at February 28, 1991
as previously reported 10,577 $ 21,153 $ 43,773 $120,232 $185,158
Adoption of new income tax
accounting standard -- -- -- 17 17
Balances as restated 10,577 21,153 43,773 120,249 185,175
Cash dividends -- -- -- (5,899) (5,899)
Exercise of stock option 249 499 4,039 -- 4,538
Issuance of stock 2,063 4,126 49,004 -- 53,130
Three-for-two stock split 6,437 12,874 (12,874) -- __
Net earnings -- -- -- 26,984 26,984
Balances at February 29,
1992 19,326 38,652 83,942 141,334 263,928
Cash dividends -- -- -- (7,053) (7,053)
Exercise of stock option 531 1,063 9,608 -- 10,671
Three-for-two stock split 9,791 19,581 (19,581) -- --
Net earnings -- -- -- 38,009 38,009
Balances at February 28,
1993 29,648 59,296 73,969 172,290 305,555
Cash dividends -- -- -- (9,303) (9,303)
Exercise of stock option 470 940 6,578 -- 7,518
Issuance of stock 2,300 4,600 69,863 -- 74,463
Three-for-two stock split 16,005 32,010 (32,010) -- --
Net earnings -- -- -- 54,996 54,996
Balances at February 28,
1994 48,423 $ 96,846 $118,400 $217,983 $433,229
====== ======== ======== ======== ========
See notes to consolidated statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
FISCAL YEAR 1994 1993 1992
Cash flows from operating activities:
Net earnings $ 54,996 $ 38,009 $ 26,984
Adjustments to reconcile net earnings to net cash
used by operating activities:
Depreciation and amortization 20,627 16,141 13,720
Provision for doubtful accounts 32,356 24,185 20,298
Other, net 28 (286) 93
Change in operating assets and liabilities, net
of the effects of acquisitions:
Accounts receivable (173,995) (102,135) (93,243)
Other receivables (4,708) 1,575 (4,306)
Inventories (25,460) (9,659) 3,706)
Prepaid expenses (4,474) (3,482) (194)
Accounts payable 18,379 10,088 13,322
Accrued expenses 7,477 2,428 14,575
Net cash used by
operating activities (74,774) (23,136) (5,045)
Cash flows from investing activities:
Acquisitions, net of cash acquired (75,473) (25,638) (39,123)
Additions to property and equipment (36,252) (27,426) (24,010)
Disposals of property and equipment 1,350 6,248 10,609
Miscellaneous investments (4,531) (3,937) (1,370)
Net cash used by
investing activities (114,906) (50,753) (53,894)
Cash flows from financing activities:
Issuance of stock 81,981 10,671 57,668
Proceeds from long-term debt 30,000 85,000 --
Increase(decrease) in
notes payable, net 139,200 (100) 31,600
Payments of long-term debt (49,771) (13,574) (23,792)
Dividends paid (9,303) (7,053) (5,899)
Net cash provided
by financing activities 192,107 74,944 59,577
Net increase in cash 2,427 1,055 638
Cash at beginning of year 3,868 2,813 2,175
Cash at end of year $ 6,295 $ 3,868 $ 2,813
======== ======= =======
See notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of Heilig-Meyers
Company (the "Company") and its subsidiaries, all of which are wholly owned.
All material intercompany balances and transactions have been eliminated.
Segment Information
The Company considers that it is engaged primarily in one line of business,
the sale of home furnishings. Accordingly, data with respect to industry
segments have not been separately reported herein.
Accounts Receivable
In accordance with customary trade practice, payments on accounts receivable
due after one year are included in current assets. Provisions for doubtful
accounts are made to maintain an adequate allowance to cover anticipated
losses. The Company reviews customer accounts on an individual basis in
reaching decisions regarding methods of collection or write-off of doubtful
accounts. Generally, accounts on which payments have not been received for
six months are charged to the allowance for doubtful accounts.
Inventories
Merchandise inventories are stated at the lower of cost or market as
determined by the average cost method. Inventory costs include certain
warehouse and delivery expenses.
Property and Equipment
Additions to property and equipment, other than capital leases, are recorded
at cost and, when applicable, include interest incurred during the
construction period. Capital leases are recorded at the lesser of fair value
or the discounted present value of the minimum lease payments.
Depreciation is computed by the straight-line method. Capital leases and
leasehold improvements are amortized by the straight-line method over the
shorter of the estimated useful life of the asset or the term of the lease.
The estimated useful lives are 7 to 45 years for buildings, 3 to 10 years for
fixtures, equipment and vehicles, and 10 to 15 years for leasehold
improvements.
Other Assets
Other assets is comprised primarily of the excess of cost (purchase price)
over the fair market value of the net assets acquired. These costs are being
amortized over 40 years using the straight-line method. Cash surrender value
of life insurance and miscellaneous investments are also included in the
category.
Stockholders' Equity
The Company is authorized to issue 75,000,000 shares of $2 par value common
stock. At February 28, 1994, and 1993, there were 48,423,000 and 29,648,000
shares outstanding, respectively. The Company is authorized to issue 3,000,000
shares of $10 par value preferred stock. To date, none of these shares have
been issued.
Accounting Changes
Effective March 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income Taxes."
Accordingly, the financial statements for all periods presented have been
restated. There was no material impact on net earnings in either the current
or any prior year resulting from the implementation of SFAS 109. The
provisions of this statement are discussed in the Income Taxes paragraph of
this note.
Effective March 1, 1993, the Company also adopted Statement of Financial
Accounting Standards No. 106 ("SFAS 106"), "Employers' Accounting for
Postretirement Benefits Other Than Pensions." The implementation of SFAS 106
had no effect on net earnings in the current year or any prior year.
Revenues and Costs of Sales
Other income consists primarily of finance and other income earned on
accounts receivable. Finance charges were $115,532,000, $91,111,000 and
$70,151,000 during fiscal 1994, 1993 and 1992, respectively. The Company
sells a significant portion of its service policy contracts to third parties
and recognizes the service policy income on these at the time of sale. On
those service policies that the Company retains, income is deferred, along
with the direct costs of acquiring the contracts, and earned on a
straight-line basis over the life of the contract. Costs of sales includes
occupancy and delivery expenses.
Income Taxes
Effective March 1, 1993, the Company adopted SFAS 109 which utilizes the
liability method in accounting for income taxes. Under this method, deferred
tax assets and liabilities are determined based on differences between
financial reporting and tax bases of assets and liabilities and are measured
using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse. Prior to the adoption of SFAS 109,
income tax expense was determined using the deferred method. Deferred tax
expense was based on items of income and expense that were reported in
different years in the financial statements and tax returns and were measured
at the tax rate in effect in the year the difference originated.
The Company has elected to restate the prior year financial statements. The
retroactive application of SFAS 109 did not have a material effect on net
earnings or earnings per share for any year during the three-year period
ended February 28, 1994. The cumulative effect on retained earnings as of
February 28, 1991, was also not material.
Earnings Per Share
Primary and fully diluted earnings per share of common stock are calculated
by dividing net earnings by the weighted average number of common shares and
common stock equivalents (stock options) outstanding during the year.
Interest Rate Swap Agreements
The Company has entered into several interest rate swap agreements ("swap
agreements") as a means of managing its interest rate exposure. The
differential to be paid or received on these agreements is accrued and is
recognized over the lives of the agreements.
Asset Securitizations
The Company, as a means of financing its growth, has sold a portion of its
accounts receivable. The Company continues to service these accounts and has
provided the buyer with recourse, up to established limits, upon the
determination of uncollectibility. A reserve was established at the time of
sale to provide for this contingent liability and is adjusted periodically.
This reserve is included in the allowance for doubtful accounts.
Fiscal Year
Fiscal years are designated in the consolidated financial statements by the
calendar year in which the fiscal year ends. Accordingly, results for fiscal
years 1994, 1993 and 1992 represent the years ended February 28, 1994, 1993,
and February 29, 1992, respectively.
(2) Expansion
On January 1, 1994, the Company acquired certain assets relating to 92 stores
of McMahan's Furniture Company ("McMahan's"), a privately-held California
corporation. Sixty-five of these stores are in California, twelve in
Arizona, seven in New Mexico, four in Texas, three in Nevada and one in
Colorado. The purchase price, net of accounts receivable and real estate,
was $58,432,000. Accounts receivable of $104,343,000 were securitized and
purchased by an unaffiliated party. The Company will act as servicer for
these accounts. The real estate associated with 70 stores was purchased by
an unaffiliated entity for $59,218,000, and Heilig-Meyers has entered into an
operating lease on these properties. The Company assumed the leases on the
remaining store properties. The unamortized excess of purchase price over
the fair market value of the net assets acquired from McMahan's as of
February 28, 1994, was $21,049,000. The unaudited consolidated results of
operations on a proforma basis as though McMahan's had been acquired as of
the beginning of fiscal years 1994 and 1993 are as follows:
1994 1993
(Amount in thousands except per share data)
Total Revenues $965,208 $770,198
Net Income 58,518 37,207
Net earnings per share:
Primary 1.19 0.82
Fully Diluted 1.19 0.82
The proforma information is presented for comparative purposes only and is
not necessarily indicative of the operating results that would have occurred
had the McMahan's acquisition been consummated as of the above dates, nor is
it necessarily indicative of future operating results.
During the fiscal year, the Company also acquired assets of 11 stores from L.
Fish, Inc. for $6,033,000. In fiscal 1993, the Company acquired the assets
of 14 stores from Wolf Furniture Enterprises, Inc. for $6,799,000 and the
assets of four stores from Reichart Furniture Corporation for $739,000. All
acquisitions have been accounted for by the purchase method, and accordingly,
operations subsequent to the respective acquisition dates have been included
in the accompanying financial statements.
The Company amortizes the excess of purchase price over fair market value on
a straight-line basis over a 40-year period. The unamortized excess of
purchase price over the fair market value of the net assets acquired for all
acquisitions was $93,654,000 and $64,509,000 at February 28, 1994, and 1993,
respectively.
(3) Accounts Receivable
Accounts receivable are shown net of the allowance for doubtful accounts and
unearned finance income. The allowance for doubtful accounts was $28,497,000
and $20,781,000 and unearned finance income was $49,420,000 and $37,648,000
at February 28, 1994, and 1993, respectively. Accounts receivable having
balances due after one year were $124,966,000 and $93,090,000 at February 28,
1994, and 1993, respectively.
Credit operations are maintained at each store to evaluate the credit
worthiness of its customers and to manage the collection process.
Furthermore, the Company generally requires down payments on credit sales and
offers credit insurance to its customers, both of which minimize credit risk.
The Company operates its 570 stores throughout 22 states and believes it is
not dependent on a given industry or business for its customer base and
therefore has no significant concentration of credit risk.
In the normal course of business, the Company is a party to financial
instruments with off-balance-sheet risk in order to meet its financing needs
and to reduce its exposure to interest rate fluctuations. These financial
instruments include asset securitizations and interest rate swaps.
The Company has entered into three asset securitization agreements with
commercial banks in which it has sold accounts receivable with limited
recourse. Two of these agreements were for the sale of installment
receivables ($50,000,000 and $40,000,000) and have 21-month and nine-month
lives, respectively. The rates on these agreements, which are fixed via swap
agreements, are 7.1% and 6.4%, respectively. The third agreement, which was
for the sale of revolving receivables ($42,854,000), has an estimated life of
approximately 18 months and carries a fixed rate of 5.9%, also resulting from
a swap agreement. Should the 30-day LIBOR rate rise above contractual
levels, the rates on these swap agreements will convert to rates that will
float below LIBOR. In an additional transaction, the installment accounts
receivable of McMahan's Furniture Company ($104,343,000) were securitized and
purchased by an unaffiliated party. This transaction has a life of twelve
months. The Company will act as a servicer for these accounts, and has
provided the buyer with limited recourse. The Company believes its credit
risk on securitized receivables is far below the contract amount of
$237,197,000 and is no greater than the risk on its own receivables.
(4) Property and Equipment
Property and equipment consists of the following:
1994 1993
(Amounts in thousands)
Land and buildings $69,848 $64,748
Fixtures, equipment and vehicles 74,883 59,689
Leasehold improvements 90,151 61,387
Construction in progress 12,404 7,023
247,286 192,847
Less accumulated depreciation 79,144 66,236
$168,142 $126,611
(5) Notes Payable and Long-Term Debt
The Company maintains principal relationships with ten banks which have
approved $324,000,000 for short-term borrowings, of which $151,400,000 was
unused at February 28, 1994. These approvals are renewable annually. The
Company's maximum short-term borrowings were $270,800,000 during fiscal 1994
and $148,400,000 during fiscal 1993. The average daily short-term debt
outstanding for fiscal 1994 was $150,377,000 compared to $106,266,000 for
fiscal 1993. The approximate weighted average interest rates were 3.5%, 4.0%
and 6.1% in fiscal 1994, 1993 and 1992, respectively.
At February 28, 1994, the Company had $172,600,000 of outstanding short-term
borrowings compared to $113,400,000 at February 28, 1993. The average
interest rate on this debt was approximately 3.6% at February 28, 1994, and
3.5% and 4.7% at February 28, 1993, and February 29, 1992, respectively.
There were no compensating balance requirements.
Subsequent to February 28, 1994, the Company received commitments to borrow
$80,000,000 at an interest rate of 6.9% from two insurance companies. The
proceeds will be used to reduce notes payable to banks. As a result, the
Company reclassified $80,000,000 of notes payable to banks as long-term debt
on the accompanying February 28, 1994, balance sheet.
Long-term debt consists of the following:
1994 1993
(Amounts in thousands)
Notes payable to insurance
companies and banks, maturing through
1998, interest ranging from 4.3% to 12.8%,
unsecured $278,996 $217,745
Notes, collateralizing industrial development
revenue bonds, maturing through 2004,
interest ranging from floating rate of
60% of prime to 8.5% fixed rate 3,013 3,485
Capital lease obligations, maturing through 2006,
interest ranging from 76% of prime to 12.9% 3,590 4,065
Term loans, maturing through 2007, interest
ranging to 9.8%, primarily collateralized
by deeds of trust 754 829
286,353 226,124
Less amounts due within one year 37,718 49,771
$248,635 $176,353
======== ========
Principal payments are due for the four years after February 28, 1995, as
follows: 1996, $28,192,000; 1997, $17,895,000; 1998, $99,327,000; and 1999,
$20,943,000. The aggregate net carrying value of property and equipment
collateralized at February 28, 1994, was $9,451,000.
Notes payable to insurance companies contain certain restrictive covenants.
Under these covenants, the payment of cash dividends is limited to
$59,149,000 plus 50% of net earnings adjusted for dividend payouts subsequent
to February 28, 1994. Other covenants relate to the maintenance of working
capital, net earnings coverage of fixed charges, limitations on total and
funded indebtedness and maintenance of stockholders' equity.
Interest payments of $24,486,000, $22,418,000 and $21,879,000, net of
capitalized interest of $1,057,000, $453,000 and $447,000, were made during
fiscal 1994, 1993 and 1992, respectively.
(6) Income Taxes
The Company adopted the provisions of SFAS 109 in March 1993, and has
elected to apply these provision retroactively to each of the years in the
three-year period ended February 28, 1994. The retroactive application of
SFAS 109 did not have a material impact on net earnings or net earnings per
share for any year during the three-year period ended February 28, 1994.
The cumulative effect of retroactive application of SFAS 109 did not have a
material impact on retained earnings at February 28, 1991.
The provision for income taxes consists of:
1994 1993 1992
(Amounts in thousands)
Current:
Federal $24,633 $15,355 $10,888
State 3,245 1,572 849
27,878 16,927 11,737
Deferred:
Federal 3,712 3,261 1,638
State 568 645 483
4,280 3,906 2,121
$32,158 $20,833 $13,858
=======================
Temporary differences between the financial statement carrying amounts and
tax bases of assets and liabilities that give rise to deferred income taxes
at February 28, 1994, 1993 and February 29, 1992, relate to the following:
1994 1993 1992
(Amounts in thousands)
Deferred gross profit $ -- $ -- $(4,816)
Provision for doubtful accounts (464) (713) 47
Inventory capitalization (352) 210 253
Income from service contracts 763 (653) 244
Effect of income tax rate changes
on deferred taxes (195) -- --
Other (300) 109 728
Net current deferred income
tax asset (548) (1,047) (3,544)
1994 1993 1992
(Amounts in thousands)
Internal costs capitalized, net 3,820 5,648 6,633
Depreciation (391) (840) (822)
Effect of income tax rate changes
on deferred taxes 949 -- --
Other 450 145 (147)
Net noncurrent deferred income tax
liability 4,828 4,953 5,665
Net deferred income taxes $4,280 $3,906 $2,121
====== ====== ======
A reconciliation of the statuatory federal income tax rate
to the Company's effective rate is provided below:
1994 1993 1992
Statutory federal income tax rate 35.0% 34.0% 34.0%
State income taxes, net of federal
income tax benefit 2.8 2.5 2.1
Tax credits (2.0) (1.2) (0.9)
Effect of income tax rate changes
on deferred taxes 0.9 -- --
Other, net 0.2 0.1 (1.3)
36.9% 35.4% 33.9%
===== ===== =====
Income tax payments of $18,686,000, $11,462,000 and $10,240,000 were made
during fiscal 1994, 1993 and 1992, respectively.
(7) Retirement Plans
The Company has a qualified profit sharing and retirement savings plan, which
includes a cash deferred arrangement under Section 401(k) of the Internal
Revenue Code (the "Code") and covers substantially all the Company's
employees. Eligible employees may elect to contribute specified percentages
of their compensation to the plan. The Company guarantees a
dollar-for-dollar match on the first two percent of the employee's
compensation contributed to the plan. The Company will make an additional
matching contribution if and to the extent that four percent of the Company's
consolidated income before taxes exceeds the two percent dollar-for-dollar
match described above. The Company may, at the discretion of its Board of
Directors, make additional Company matching contributions subject to certain
limitations. The plan may be terminated at the discretion of the Board of
Directors. If the plan is terminated, the Company will not be required to
make any further contributions to the plan and participants will become 100%
vested in any Company contributions made to the plan. The plan expense
recognized in fiscal 1994, 1993 and 1992 was $3,631,000, $2,475,000 and
$1,718,000, respectively.
In addition, a non-qualified supplemental profit sharing and retirement
savings plan was established as of March 1, 1991, for the purpose of
providing deferred compensation for certain employees whose benefits under
the qualified plan are limited by the Code. The deferred compensation
expense recognized in fiscal 1994 was $160,000.
The Company has an executive income continuation plan which covers certain
executive officers. The plan is intended to provide certain supplemental
preretirement death benefits and retirement benefits to its key executives.
In the event an executive dies prior to age 65 in the employment of the
Company, the executive's beneficiary will receive annual benefits of 100% of
salary for a period of one to two years and/or 50% of salary for a period of
eight years. If the executive retires at age 65, either the executive or
his beneficiary will receive an annual retirement benefit of 20% to 25% of
the executive's salary increased 4% anually for a period of 15 years. This
plan has been funded throught the purchase of life insurance contracts
covering the executives and owned by the Compnay. For fiscal 1994, 1993 and
1992, there was no charge to expense.
(8) Stock Options and Grants
Under the Company's Long-Term Incentive Award Plan, 506,250 shares of the
Company's common stock have been reserved for issuance. The plan provides
for a combination of restricted stock and cash awards to key management
employees. A provision of $320,000 was made for these stock grants during
fiscal 1992. There was no provision required in fiscal 1994 and 1993.
The 1983 and 1990 Stock Option Plans provide that all employees of the
Company with management responsibilities are eligible to receive common stock
options (at no less than fair market value at the date of grant) and stock
appreciation rights. Under the plan, 6,093,750 shares have been authorized
to be reserved for issuance. The following table summarizes stock option
activity for fiscal 1994 and 1993. Shares and prices have been adjusted to
reflect the three-for-two stock split in November 1992 and July 1993.
Shares
Under Option Exercise Price
Outstanding at March 1, 1992 3,273,573 $ 5.52 to $ 9.03
Granted 733,500 $20.29
Exercised (988,291) $ 5.52 to $ 9.03
Cancelled (10,401) $ 5.54 to $ 9.03
Outstanding at February 28, 1993 3,008,381 $ 5.52 to $20.29
Granted 1,099,500 $20.83 to $35.06
Exercised (504,609) $ 5.52 to $20.29
Outstanding at February 28, 1994 3,603,272 $ 5.52 to $35.06
=========
Options are exercisable at such times as specified by the Board of Directors,
and if not exercised, expire ten years from the date of grant. At February
28, 1994, options for 2,584,546shares of common stock were exercisable.
Approximately 107,000 shares of the options granted in fiscal 1994 have been
issued subject to shareholder approval of the 1994 Stock Option Plan.
(9) Commitments and Contingencies
Leases
The Company has entered into noncancellable lease agreements with initial
terms ranging from 1 to 25 years for certain stores, warehouses and the
corporate office. Certain leases include renewal options ranging from 1 to
10 years and/or purchase provisions, both of which may be exercised at the
Company's option. Most of the leases are gross leases under which the lessor
pays the taxes, insurance and maintenance costs. The following capital
leases are included in the accompanying consolidated balance sheets:
1994 1993
(Amounts in thousands)
Land and buildings $6,426 $6,426
Fixtures and equipment 675 675
7,101 7,101
Less accumulated depreciation
and amortization 2,856 2,595
$4,245 $4,506
=====================
Capitalized lease amortization is included in depreciation expense.
Future minimum lease payments under capital leases and operating leases
having initial or remaining noncancellable lease terms in excess of one year
at February 28, 1994, are as follows:
Capital Operating
Fiscal Years Leases Leases
(Amounts in thousands)
1995 $ 713 $ 26,202
1996 678 24,431
1997 657 22,395
1998 620 18,390
1999 597 14,925
After 1999 1,942 46,310
Total minimum lease payments 5,207 $152,653
Less: ========
Executory costs 145
Imputed interest 1,471
Present value of minimum
lease payments $3,591
======
Total rental expense under operating leases for fiscal 1994, 1993 and 1992
was $30,379,000, $23,794,000 and $19,541,000, respectively. Contingent
rentals and sublease rentals are negligible.
Payments to affiliated entities under capital and operating leases were
$852,000 for fiscal 1994, which included payments to limited partnerships in
which the Company has equity interests. Lease payments to affiliated
entities for fiscal 1993 and 1992 were $1,675,000 and $1,633,000,
respectively.
Litigation
The Company is party to various legal actions and administrative proceedings
and subject to various claims arising in the ordinary course of business.
The Company believes that the disposition of these matters will not have a
material adverse effect on the financial position of the Company.
(10) Fair Value of Financial Instruments
The disclosure of estimated fair value of financial instruments is made in
accordance with Statement of Financial Accounting Standards No. 107,
"Disclosures about Fair Value of Financial Instruments." The estimated fair
values have been determined by the Company using available market
information. The estimates are not necessarily indicative of the amounts the
Company could realize in a current market exchange. The use of different
market assumptions and/or estimation methodologies may have a material effect
on the estimated fair value amounts.
The estimated fair values of the Company's financial instruments at Feburary
28, 1994, are as follows:
Carrying Fair
Amount Value
Assets (Amounts in thousands)
Cash and cash equivalents $ 6,295 $ 6,295
Accounts receivable 535,437 535,437
Liabilities
Accounts payable 69,045 69,045
Notes payable 172,600 172,600
Long-term debt 286,353 299,778
Off-balance-sheet financial instruments
Interest rate swaps agreements -- 4,623
The following methods and assumptions were used to estimate the fair value of
each class of financial instrument for which it is practicable to estimate
that value:
Cash and Accounts Receivables
The carrying amount approximates fair value because of the short maturity of
these assets.
Accounts Payable and Notes Payable
The carrying value approximates fair value because of the short maturity of
these liabilities.
Long-Term Debt
The fair value of the Company's long-term debt is based on the discounted
cash flow of that debt, using current rates and remaining maturities.
Interest Rate Swap Agreements
The fair value of the Company's interest rate swap agreements is the
estimated amount that the Company would pay to terminate the agreements at
February 28, 1994, based on estimates obtained from the counterparties.
(11) Quarterly Financial Data (Unaudited)
The following is a summary of quarterly financial data for fiscal 1994 and
1993:
Three Months Ended
May August November February
31 31 30 28
(Amounts in thousands
except per share data)
1994
Revenues $186,761 $204,693 $230,399 $241,936
Gross profit (1) 58,794 60,992 72,841 70,722
Earnings before taxes 20,902 19,221 24,825 22,206
Net earnings 13,461 11,417 15,863 14,255
Earnings per share of common stock:
Primary and
fully diluted (2) 0.29 0.23 0.32 0.28
Cash dividends per share
of common stock (2) 0.05 0.05 0.05 0.05
1993
Revenues $150,948 $152,475 $171,712 $182,408
Gross profit (1) 47,029 44,625 53,017 53,628
Earnings before taxes 16,173 12,268 15,475 14,926
Net earnings 10,469 8,028 9,919 9,593
Earnings per share of common stock:
Primary and
fully diluted (2) 0.23 0.18 0.22 0.21
Cash dividends per share
of common stock (2) 0.04 0.04 0.04 0.04
(1) Gross profit is sales less costs of sales.
(2) Per share amounts reflect three-for-two stock splits in
November 1992 and July 1993.
Item 9. Changes in and Disagreement with Accountants on Accounting and
Financial Disclosure.
None.
PART III
In accordance with general instruction G(3) of Form 10-K, the
information called for by Items 10, 11, 12 and 13 of Part III is incorporated
by reference from the registrant's definitive Proxy Statement for its Annual
Meeting of Shareholders scheduled for June 15, 1994, except for information
concerning the executive officers of the registrant which is included in Part
I of this report and under the caption "Executive Officers of the
Registrant."
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) 1. Financial Statements
The following consolidated financial statements of Heilig-Meyers
Company and Subsidiaries included in the registrant's 1994 Annual
Report to Shareholders are included in item 8 herein:
Independent Auditors' Report
Consolidated Balance Sheets -
February 28, 1994 and February 28, 1993
Consolidated Statements of Earnings -
Year Ended February 28, 1994,
Year Ended February 28, 1993, and
Year Ended February 29, 1992
Consolidated Statements of Stockholders' Equity -
Year Ended February 28, 1994,
Year Ended February 28, 1993, and
Year Ended February 29, 1992
Consolidated Statements of Cash Flows -
Year Ended February 28, 1994,
Year Ended February 28, 1993, and
Year Ended February 29, 1992
Notes to Consolidated Financial Statements
(a) 2. Financial Statement Schedules: The financial statement
schedules required by this item are listed below.
Schedule VIII - Valuation and Qualifying Accounts
Schedule X - Supplementary Income Statement Information
Schedules other than those listed above have been omitted
because they are not applicable or are not required or
because the required information is included in the
financial statements or notes thereto.
(b) Reports on Form 8-K Filed During Last Quarter of Year
Ended February 28, 1994.
On January 19, 1994, the registrant
filed form 8-K relating to the
acquisition of certain assets of
McMahan's Furniture Company.
(c) Exhibits required to be filed by Item 601 of Regulation
S-K.
See INDEX TO EXHIBITS
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
HEILIG-MEYERS COMPANY
Date: May 23, 1994 /s/William C. DeRusha
William C. DeRusha
Chairman of the Board
Principal Executive Officer
Date: May 23, 1994 /s/Joseph R. Jenkins
Joseph R. Jenkins
Executive Vice President
Principal Financial Officer
Date: May 23, 1994 /s/William J. Dieter
William J. Dieter
Senior Vice President,
Accounting and Principal
Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: May 23, 1994 /s/Alexander Alexander
Alexander Alexander, Director
Date: May 23, 1994 /s/Robert L. Burrus, Jr.
Robert L. Burrus, Jr., Director
Date: May 23, 1994 /s/Arthur D. Charpentier
Arthur D. Charpentier, Director
Date: May 23, 1994 /s/William C. DeRusha
William C. DeRusha, Director
Date: May 23, 1994 /s/Benjamin F. Edwards, III
Benjamin F. Edwards, III, Director
Date: May 23, 1994 /s/Alan G. Fleischer
Alan G. Fleischer, Director
Date: May 23, 1994 /s/Nathaniel Krumbein
Nathaniel Krumbein, Director
Date: May 23, 1994 /s/Hyman Meyers
Hyman Meyers, Director
Date: May 23, 1994 /s/S. Sidney Meyers
S. Sidney Meyers, Director
Date: May 23, 1994 /s/Troy A. Peery, Jr.
Troy A. Peery, Jr., Director
Date: May 23, 1994 /s/Lawrence N. Smith
Lawrence N. Smith, Director
Date: May 23, 1994 /s/George A. Thornton, III
George A. Thornton, III, Director
HEILIG-MEYERS COMPANY AND SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
(Amounts in thousands)
Column A Column B Column C Column D Column E
Write-off
Balance at Charged Charged and Purchased Balance
Beginning To Costs To Other Repossession Accounts at Close
of Period & Expenses Accounts Losses Receivable of Period
Description
Allowance for
Doubtful Accounts:
Year Ended
February 28,
1994 $20,781 $32,356 $ 430 (A) $29,713 $3,200 (C) $28,497
$7,843 (B)
Year Ended
February 28,
1993 $17,014 $24,185 $ 352 (A) $22,534 $2,968 (C) $20,781
$4,732 (B)
Year Ended
February 29,
1992 $12,269 $20,298 $ 274 (A) $18,749 $2,420 (C) $17,014
$5,342 (B)
(A) Represents recoveries on accounts previously written off.
(B) Allowance applicable to purchased accounts receivable.
(C) Deductions from reserve applicable to purchased accounts receivable, as
follows:
1994 1993 1992
Write-offs of Uncollectible Accounts $3,200 $2,968 $2,420
HEILIG-MEYERS COMPANY AND SUBSIDIARIES
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
COLUMN A COLUMN B
Charged to Costs and Expenses
Item Years Ended
February 28, February 28, February 29,
1994 1993 1992
Advertising $49,966,000 $38,657,000 $33,004,000
Index to Exhibits
3. Articles of Incorporation and Bylaws.
a. Registrant's Restated Articles of Incorporation filed as Exhibit 3(a)
to Registrant's Annual Report on Form 10-K for the fiscal year ended
February 28, 1990 are incorporated herein by this reference.
b. Articles of Amendment to Registrant's Restated Articles of
Incorporation filed as Exhibit 4 to Registrant's Form 8 (Amendment No.
5 to Form 8-A filed April 26, 1983) filed August 6, 1992 are
incorporated herein by this reference.
c. Articles of Amendment to Registrant's Restated Articles of
Incorporation filed as Exhibit 3(c) to Registrant's Annual Report on
Form 10-K for the fiscal year ended February 28, 1993 are incorporated
herein by this reference.
d. Registrant's Amended Bylaws filed as Exhibit 3(b) to registrant's
Annual Report on Form 10-K for the fiscal year ended February 29, 1988
are incorporated herein by this reference.
4. Instruments defining the rights of security holders, including indentures.
a. The long-term debt as shown on the consolidated balance sheet of the
registrant at February 28, 1993 includes various obligations each of
which is evidenced by an instrument authorizing an amount that is less
than 10% of the total assets of the registrant and its subsidiaries on
a consolidated basis. The documents evidencing these obligations are
accordingly omitted pursuant to Regulation S-K, Item 601(b)(4)(iii)
and will be furnished to the Commission upon request.
10. Contracts
a. Four leases dated as of December 27, 1976 between Hyman Meyers, Agent,
and the registrant, filed as Exhibit 10(a)(2) - Exhibit 10(a)(5) to
registrant's Annual Report on Form 10-K for the fiscal year ended
February 28, 1989, are incorporated herein by this reference.
b. The following Agreements filed as Exhibits 10(b) through 10(f) to
registrant's Annual Report on Form 10-K for the fiscal year ended
February 28, 1991 are incorporated herein by this reference:
(1) Lease dated as of January 1, 1980 between Hyman Myers, Agent, and
the registrant.
(2) Lease dated November 1, 1970 between Hyman Meyers, Agent, and the
registrant as successor in interest to Heilig-Meyers Company of
Greenville, Inc.
(3) Lease dated April 15, 1971 between Meyers-Thornton Investment Co.
and the registrant as successor in interest to Meyers-Thornton
Corporation.
(4) Lease dated June 28, 1971 between Meyers-Thornton Investment
Company and the registrant as successor in interest to Meyers-
Thornton Corporation.
(5) Lease dated December 1, 1972 between Meyers-Thornton Investment
Company and the registrant.
c. The following Agreements (originally filed as exhibits to registrant's
Annual Report on Form 10-K for the fiscal year ended March 31, 1982)
were refiled as Exhibits 10(c)(1)-(3) to Registrant's Annual Report on
Form 10-K for the fiscal year ended February 28, 1993 and are
incorported herein by reference:
(1) Executive Employment and Deferred Compensation Agreement made
January 12, 1982 between Hyman Meyers and the registrant.
(2) Executive Employment and Deferred Compensation Agreement made
January 12, 1982 between S. Sidney Meyers and the registrant.
(3) Executive Employment and Deferred Compensation Agreement made
January 12, 1982 between Nathaniel Krumbein and the registrant.
d. Employees' Profit Sharing Retirement Plan, amended and restated,
effective as of March 1, 1989 filed as Exhibit 10(d) to Registrant's
Annual Report on Form 10-K for the fiscal year ended February 28, 1993
is incorporated herein by this reference.*
e. First Amendment, dated as of June 15, 1992, to the Heilig-Meyers
Employees' Profit Sharing Retirement Plan, amended and restated,
effective as of March 1, 1989, filed as Exhibit 10(r).*
f. Addendum to Lease and Contract dated February 26, 1973 amending Lease
Contract dated April 15, 1971 between Meyers-Thornton Investment Co.
and the Company as successor in interest to Meyers-Thornton
Corporation (see Exhibit 10(c)(2)), filed as Exhibit 10(k) to
registrant's Registration Statement on Form S-2 (No. 2-81775) is
incorporated herein by this reference.
g. The following Agreements filed as Exhibits 19(a) through 19(c) to
registrant's Quarterly Report on Form 10-Q for the quarter ended June
30, 1984 are incorporated herein by this reference:
(1) Agreement made as of May 4, 1984 to amend Executive Employment
and Deferred Compensation Agreement between Hyman Meyers and
registrant.*
(2) Agreement made as of May 4, 1984 to amend Executive Employment
and Deferred Compensation Agreement between S. Sidney Meyers and
registrant.*
(3) Agreement made as of May 4, 1984 to amend Executive Employment
and Deferred Compensation Agreement between Nathaniel Krumbein
and registrant.*
h. Agreement made as of September 15, 1989 to amend Executive Employment
and Deferred Compensation Agreement between Hyman Meyers and
registrant filed as Exhibit 10(i) to the registrant's Annual Report
on Form 10-K for the fiscal year ended February 28, 1990 is
incorporated herein by this reference.*
i. Agreement made as of September 15, 1989 to amend Executive Employment
and Deferred Compensation Agreement between S. Sidney Meyers and
registrant filed as Exhibit 10(j) to the registrant's Annual Report on
Form 10-K for the fiscal year ended February 28, 1990 is incorporated
herein by this reference.*
j. Agreement made as of September 15, 1989 to amend Executive Employment
and Deferred Compensation Agreement between Nathaniel Krumbein and
registrant filed as Exhibit 10(k) to the registrant's Annual Report on
Form 10-K for the fiscal year ended February 28, 1990 is incorporated
herein by this reference.*
k. Deferred Compensation Agreement between Robert L. Burrus, Jr. and the
registrant filed as Exhibit 10(o) to the registrant's Annual Report on
Form 10-K for the fiscal year ended February 28, 1987 is incorporated
herein by this reference.*
l. Amendment dated September 15, 1989 to the Deferred Compensation
Agreement between Robert L. Burrus, Jr. and the registrant filed as
Exhibit 10(m) to registrant's Annual Report on Form 10-K for the
fiscal year ended February 28, 1990 is incorporated herein by this
reference.*
m. Deferred Compensation Agreement between Lawrence N. Smith and the
registrant filed as Exhibit 10(p) to the registrant's Annual Report on
Form 10-K for the fiscal year ended February 28, 1987 is incorporated
herein by this reference.*
n. Amendment dated September 15, 1989 to Deferred Compensation Agreement
between Lawrence N. Smith and the registrant filed as Exhibit 10(o) to
registrant's Annual Report on Form 10-K for the fiscal year ended
February 28, 1990 is incorporated herein by this reference.*
o. Deferred Compensation Agreement between George A. Thornton, III and
the registrant filed as Exhibit 10(q) to the registrant's Annual
Report on Form 10-K for the fiscal year ended February 28, 1987 is
incorporated herein by this reference.*
p. Amendment dated September 15, 1989 to Deferred Compensation Agreement
between George A. Thornton, III and the registrant filed as Exhibit
10(q) to registrant's Annual Report on Form 10-K for the fiscal year
ended February 28, 1990 is incorporated herein by this reference.*
q. Employees Supplemental Profit Sharing and Retirement Savings Plan
filed as Exhibit 10(q) to Registrant's Annual Report on Form 10-K for
the fiscal year ended February 28, 1993 is incorporated herein by this
reference.*
r. Registrant's 1983 Stock Option Plan, as amended, filed as Exhibit C to
registrant's Proxy Statement dated May 9, 1988 for its Annual Meeting
of Stockholders held on June 22, 1988 is incorporated herein by this
reference.*
s. Amendments to registrant's 1983 Stock Option Plan, as amended, filed
as Exhibit 10(t) to registrant's Annual Report on Form 10-K for the
fiscal year ended February 28, 1990 is incorporated herein by this
reference.*
t. Registrant's 1990 Stock Option Plan, as amended filed as Exhibit 10(t)
to Registrant's Annual Report on Form 10-K for the fiscal year ended
February 28, 1993 is incorporated herein by this reference.*
u. Registrant's 1983 Stock Option Plan, as amended, filed as Exhibit A to
registrant's Proxy Statement dated May 3, 1994 for its Annual Meeting
of Stockholders held on June 15, 1994 is incorporated herein by this
reference.*
v. Registrant's Executive Severance Plan effective as of September 15,
1989 filed as Exhibit 10(v) to registrant's Annual Report on Form 10-K
for the fiscal year ended February 28, 1990 is incorporated herein by
this reference.*
w. Form of Executive Supplemental Retirement Agreement between the
registrant and each of William C. DeRusha, Troy A. Peery, Jr.,
James F. Cerza, Jr., Joseph R. Jenkins, James R. Riddle, and five
other executive officers, filed as Exhibit 10(p) to the registrant's
Annual Report on Form 10-K for the fiscal year ended
February 28, 1989 is incorporated herein by this reference.*
x. Amendment dated September 15, 1989 to Executive Supplemental
Retirement Agreement between William C. DeRusha and the registrant
filed as Exhibit 10(x) to the registrant's Annual Report on Form 10-K
for the fiscal year ended February 28, 1990 is incorporated herein
by this reference.*
y. Amendment dated September 15, 1989 to Executive Supplemental
Retirement Agreement between Troy A. Peery, Jr. and the registrant
filed as Exhibit 10(y) to the registrant's Annual Report on Form 10-K
for the fiscal year ended February 28, 1990 is incorporated herein by
this reference.*
z. Form of Amendment to Form of Executive Supplemental Retirement
Agreement between the registrant and each of James F. Cerza, Jr.,
Joseph R. Jenkins and James R. Riddle and five other executive
officers filed as Exhibit 10(p) to the registrant's Annual Report on
Form 10-K for the fiscal year ended February 28, 1989 is incorporated
herein by this reference.*
aa. Form of Amendment to Form of Executive Supplemental Retirement
Agreement between the registrant and each of two executive officers
filed as Exhibit 10(aa) to the registrant's Annual Report on Form 10-K
for the fiscal year ended February 28, 1990 is incorporated herein by
this reference.*
bb. Employment Agreement dated October 20, 1988 between William C. DeRusha
and the registrant, filed as Exhibit 10(q) to the registrant's Annual
Report on Form 10-K for the fiscal year ended February 28, 1989 is
incorporated herein by this reference.*
cc. Agreement made as of September 11, 1989 to amend the Employment
Agreement dated October 20, 1988 between William C. DeRusha and the
registrant filed as Exhibit 10(cc) to the registrant's Annual Report
on Form 10-K for the fiscal year ended February 28, 1990 is
incorporated herein by this reference.*
dd. Employment Agreement dated October 20, 1988 between Troy A. Peery, Jr.
and the registrant, filed as Exhibit 10(r) to registrant's Annual
Report on Form 10-K for the fiscal year ended February 28, 1989 is
incorporated herein by this reference.*
ee. Agreement made as of September 11, 1989 to amend the Employment
Agreement dated October 20, 1988 between Troy A. Peery, Jr. and the
registrant filed as Exhibit 10(ee) to the registrant's Annual Report
on Form 10-K for the fiscal year ended February 28, 1990 is
incorporated herein by this reference.*
ff. The following Agreements filed as Exhibits 10 (ii) through 10 (kk) to
registrant's Annual Report on Form 10-K for fiscal year ended February
28, 1991 are incorporated herein by this reference:
(1) Employment Agreement dated April 10, 1991 between Joseph R.
Jenkins and the registrant.*
(2) Employment Agreement dated April 10, 1991 between James C. Cerza,
Jr. and the registrant.*
(3) Employment Agreement dated April 10, 1991 between James R. Riddle
and the registrant.*
gg. Carve Out Life Insurance Plan filed as Exhibit 10(ff) to Registrant's
Annual Report on Form 10-K for the fiscal year ended February 28, 1993
is incorporated herein by this reference.*
hh. Amendment, dated as of August 18, 1993, to the Heilig-Meyers Company
Severance Plan.*
ii. 1988 Deferred Compensation Agreement for Outside Directors between
George A. Thornton, III and the registrant.*
jj. Amendment, dated as of April 18, 1994, to the 1986 Heilig-Meyers
Company Deferred Compensation Agreement for Outside Director between
George A. Thornton, III and the registrant.*
kk. Amendment, dated as of April 18, 1994, to the 1990 Heilig-Meyers
Company Deferred Compensation Agreement for Outside Director between
George A. Thornton, III and the registrant.*
ll. Letter Agreement, dated August 26, 1993, amending employment agreement
between Joseph R. Jenkins and the registrant.*
mm. Letter Agreement, dated August 26, 1993, amending employment agreement
between James R. Riddle and the registrant.*
nn. Letter Agreement, dated August 26, 1993, amending employment agreement
between James F. Cerza and the registrant.*
11. Computation of per share earnings for the fiscal years ended February 28,
1993, February 29, 1992 and February 28, 1991.
13. Annual report to security holders, Form 10-Q or quarterly report to
security holders.
a. The registrant's Annual Report to Shareholders for the fiscal year
ended February 28, 1993.
22. Subsidiaries of registrant.
24. Consents of experts and counsel.
a. Consent of Deloitte & Touche to incorporation by reference of
Accountants' Reports into registrant's Registration Statements on Form
S-8.
Exhibit hh
AMENDMENT
TO THE
HEILIG-MEYERS COMPANY
SEVERANCE PLAN
AMENDMENT, dated as of August 18, 1993, to the Heilig-Meyers Company
Severance Plan (the "Plan"), by Heilig-Meyers Company (the "Company").
The Company maintains the Plan, originally effective as of
September 15, 1989 and has reserved the right to amend the Plan.
The Company now wishes to amend the Plan to make certain changes outlined
below.
NOW, THEREFORE, the Plan is amended as follows:
I. Effective as of August 18, 1993, Section 3(e) is amended in its
entirety to read as follows:
(e) Participant: All employees holding the title of Assistant Vice
President or above (other than the Chairman, the President, and the three
most senior executive vice-presidents, all of whom are entitled to
severance payments under their respective executive employment agreements),
all officers of the Company (whether elected or appointed), area
supervisors, store managers, distribution center managers, service center
managers, directors of management information systems, director of internal
audit, director of taxes, assistant controllers, assistant to the
treasurer, clearance center managers, fixture center managers, maintenance
center managers and all full-time employees (employees who regularly work
forty hours or more per week) who have completed ten years or more of
service (provided such service requirement is met on a date a benefit
becomes payable under Section 4); and provided, further, that no employee
who becomes entitled to a severance payment under an executive employment
agreement with the Company shall be considered a Participant under this
Plan.
II. Except where otherwise stated, this Amendment shall be effective as of
August 18, 1993.
III. In all respects not amended, the Plan is hereby ratified and
confirmed.
* * * * *
To record the adoption of the Amendment as set forth above, the Company has
caused this document to be signed on this 30th day of August, 1993.
HEILIG-MEYERS COMPANY
By /s/ William C. DeRusha
Exhibit ii
HEILIG-MEYERS COMPANY
1988 DEFERRED COMPENSATION AGREEMENT
FOR OUTSIDE DIRECTORS
AGREEMENT between George A. Thornton, III (the "Director") and
Heilig-Meyers Company (the "Company").
1. Purpose and Effective Date. The purpose of this Agreement is to provide
the Company's Director who is not simultaneously a Company employee an
opportunity to defer payment of all or part of his meeting fees. The
effective date of this Agreement is July 1, 1988. The Board has determined
that the benefits to be paid to the Director under this Agreement
constitute reasonable compensation for the services rendered and to be
rendered by the Director.
2. Definitions.
(a) Actuarial Equivalent. An amount or benefit determined on the
basis of the UP84 Unisex Mortality Table and an assumed interest rate of
12% to be equal in value to the aggregate amounts expected to be received
under a different form of payment or at a different time.
(b) Agreement. This Heilig-Meyers Company 1988 Deferred Compensation
Agreement for Outside Directors.
(c) Beneficiary. A person or persons or other entity designated by
the Director to receive the payment of the Director's benefits under this
Agreement. If there is no valid designation by the Director, or if the
designated Beneficiary is not living or, if a trust, is not in existence at
the time of the Director's death, the Director's Beneficiary is the
Director's estate.
(d) Board. The Board of Directors of the Company.
(e) Change of Control. "Change of Control" means:
(i) The acquisition, other than from the Company, by any
individual, entity or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20% or more of either the
then outstanding shares of common stock of the Company or the combined
voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors, but excluding
for this purpose, any such acquisition by the Company or any of its
subsidiaries, or any employee benefit plan (or related trust) of the
Company or its subsidiaries, or any corporation with respect to which,
following such acquisition, more than 50% of, respectively, the then
outstanding shares of common stock of such corporation and the
combined voting power of the then outstanding voting securities of
such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by
the individuals and entities who were the beneficial owners,
respectively, of the common stock and voting securities of the
Company immediately prior to such acquisition in substantially the
same proportion as their ownership, immediately prior to such
acquisition, of the then outstanding shares of common stock of the
Company or the combined voting power of the the then outstanding
voting securities of the Company entitled to vote generally
in the election of directors, as the case may be; or
(ii) Individuals who, as of the date hereof, constitute the
Board (as of the date hereof the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board, provided that
any individual becoming a director subsequent to the date hereof whose
election or nomination for election by the Company's shareholders was
approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for
this purpose, any such individual whose initial assumption of office
is in connection with an actual or threatened election contest
relating to the election of the Directors of the Company (as such
terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act); or
(iii) Approval by the stockholders of the Company of a
reorganization, merger or consolidation, in each case, with respect to
which the individuals and entities who were respective beneficial
owners of the common stock and voting securities of the Company
immediately prior to such reorganization, merger or consolidation do
not, following such reorganization, merger or consolidation,
beneficially own, directly or indirectly, more than 50% of,
respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such reorganization, merger
or consolidation, or a complete liquidation or dissolution of the
Company or of its sale or other disposition of all or substantially
all of the assets of the Company.
(f) Committee. The Compensation Committee of the Board.
(g) Deferral Period. A seven-year period beginning on July 1, 1988
and ending on June 30, 1995.
3. Administration.
(a) This Agreement is administered by the Committee. Subject to this
Agreement's provisions, the Committee may adopt rules and regulations
necessary to carry out the Agreement's purposes. Subject to subsection
3(b), the Committee's interpretation and construction of any Agreement
provision is final and conclusive.
(b) If for any reason a benefit due under this Agreement is not paid
when due, the individual entitled to such benefit may file a written claim
with the Committee. If the claim is denied or no response is received
within ninety (90) days (in which case the claim will be deemed to have
been denied), the individual may appeal the denial to the Board within
sixty (60) days of the denial. In pursuing an appeal, an individual may
request that a responsible officer review the denial, may review pertinent
documents, and may submit issues and comments in writing. A decision on
appeal will be made within sixty (60) days after the appeal is made,
unless special circumstances require the Board to extend the period for
another sixty (60) days.
4. Deferral Elections. The Director elects to defer payment until he attains
age 59 of $17,500 of the meeting fees that he otherwise would be entitled
to receive during the Deferral Period. The Company shall credit the
Director's meeting fees to a deferred compensation bookkeeping account as
of the date the Director would have received payment for the applicable
meeting.
5. Deferred Benefits.
(a) Distribution of Deferred Benefit Payments.
(i) The Director will receive an annual deferred benefit payable
in monthly installments for 15 years. The amount of each annual
deferred benefit payment will be $7,631. Distribution of the
Director's deferred benefit will begin on the first day of the month
coinciding with or immediately following the date the Director attains
age 59.
(ii) If the Director dies after he attains age 59 but before he
has received payments for a 15-year period, the balance of any
payments due to him shall be paid to the Director's Beneficiary.
Payments to the Director's Beneficiary shall be distributed on a
monthly basis unless the Committee selects another distribution method
(e.g., annual payments or a lump sum payment).
(iii) If the Director's relationship with the Company terminates
before the Director attains age 59 for any reason other than for "due
cause," he shall be entitled to receive a benefit under this Agreement
upon such early termination determined under subsection 5(a)(i) as if
his relationship with the Company terminated at age 59, but if such
termination occurs before July 1, 1995, the benefit under subsection
5(a)(i) shall be multiplied by a fraction, the numerator of which is
the amount of deferrals made by Director to the date of termination
and the denominator of which is $17,500. The benefit payable under
this subsection shall be the Actuarial Equivalent of the adjusted
benefit that would have been payable at age 59. In no event shall
the benefit payable under this subsection be less than the Director's
amount of deferrals, credited with interest at the rate of 12%,
compounded monthly, from the date of deferral to the date of his
termination.
For purposes of this Agreement, "due cause" shall mean:
(x) The commission of a crime of moral turpitude resulting
in damage to the Company; or
(y) The commission of a crime against the property or
person of another director or employee of the Company.
The Board or Committee shall, in its discretion, determine whether
"due cause" exists.
(iv) If a Change of Control has occurred, and thereafter the
Director's relationship with the Company terminates before the
Director attains age 59 for any reason other than for "due cause,"
the Company shall enter into a trust agreement with a national bank
having trust powers, in the form attached as Exhibit A to this
Agreement, establishing a "Grantor Trust" pursuant to the terms of
Internal Revenue Code sections 671 through 679, and within 30 days of
the occurrence of such Change of Control the Company shall deposit
with the trustee of such trust an amount sufficient to provide the
annual payments determined under subsection 5(a)(iii) and ancillary
benefits ("Amount") to which the Director or his Beneficiary is or
may become entitled to receive under this Agreement. In determining
the Amount, the Company shall assume that the earnings on trust
assets over the period benefits are to be provided through the trust
under the Agreement will be the interest rate on 30 year Treasury
Bills at the time the computation is made.
(b) Death before Age 59. If the Director dies before he attains age
59, his Beneficiary shall be entitled to receive a single lump payment in
the amount of $113,794. If the Beneficiary dies before receiving the
single lump sum payment due, the single lump sum payment due shall be made
to the Beneficiary's estate.
(c) Disability. If the Director's relationship with the Company
terminates before he attains age 59 because of the Director's permanent
disability (as determined by the Committee in its sole discretion), all or
any part of the Director's deferred compensation account may be paid to the
Director or the Director's duly-appointed guardian or duly-designated
attorney-in-fact at the request of any of them. Distributions made in the
event of the Director's permanent disability will be made in the sole
discretion of disinterested members of the Committee and regardless of any
election made by the Director.
(a) The Director may designate a Beneficiary to receive any benefits
due under this Agreement upon the Director's death. The Beneficiary
designation must be made by executing a Beneficiary designation form
provided by the Committee.
(b) The Director may change an earlier Beneficiary designation by a
later execution of a Beneficiary designation form. A Beneficiary
designation is not binding on the Company until the Chief Financial Officer
of the Company receives the Beneficiary designation form.
7. Obligations of the Company. This Agreement is unfunded and the amounts
payable are to be satisfied solely out of the general assets of the Company
that remain subject to the claims of its creditors. A benefit is at all
times a mere contractual obligation of the Company. The Company will not
segregate any funds for benefits or issue any notes as security for the
payment of any benefits.
8. Restrictions on Transfer. Any benefits to which the Director or his
Beneficiary may become entitled under this Agreement are not subject in any
manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, or charge, and any attempt to do so is void. Benefits are not
subject to attachment or legal process for the debts, contracts,
liabilities, engagements, or torts of the Director or his Beneficiary.
This Agreement does not give the Director or his Beneficiary any interest,
lien, or claim against any specific asset of the Company. The Director
and his Beneficiary have only the rights of general creditors of the
Company.
9. Amendment of Termination.
(a) Subject to subsections 9(b) and (c), the Board may amend or
terminate this Agreement at any time.
(b) The Board may not amend or terminate this Agreement if that
action would reduce the benefit payable in the future or suspend or
interrupt the payment of benefits to the Director or a Beneficiary who is
receiving payments pursuant to Section 5.
(c) This Agreement may not be amended or terminated if a Change of
Control occurs.
10. Successors and Assigns. This Agreement shall be binding on the Company,
its successors, and assigns. Should there be a consolidation or merger of
the Company with or into another corporation, or a purchase of all or
substantially all of the assets of the Company by another entity, the
surviving or acquiring corporation will succeed to the rights and
obligations of the Company under this Agreement.
11. Enforcement by Director. If litigation shall be brought by the Company or
Director in good faith to enforce or interpret any provision of this
Agreement, or if the Director shall have to institute litigation brought in
good faith to enforce any of his rights under this Agreement, the Company
shall indemnify the Director for his reasonable attorney's fees and
disbursements incurred in any such litigation.
12. Computations. The computation of the amount of any payment or benefit
under this Agreement shall be made by the Company's then independent
actuaries.
13. Construction. This Agreement is construed in accordance with the laws of
the Commonwealth of Virginia, except to the extent that the laws of the
United States of America have superseded those laws. The headings in this
Agreement have been inserted for convenience of reference only and are to
be ignored in any construction of the provisions. If a provision of this
Agreement is not valid, that invalidity does not affect other provisions.
HEILIG-MEYERS COMPANY
DATE: May 10, 1994 BY: /s/ William C. DeRusha
GEORGE A. THORNTON, III
DATE: May 10, 1994 /s/ George A. Thornton, III
(Signature)
Exhibit jj
AMENDMENT TO THE 1986
HEILIG-MEYERS COMPANY
DEFERRED COMPENSATION AGREEMENT
FOR OUTSIDE DIRECTOR
This AMENDMENT, dated as of April 18, 1994, by and between Heilig-Meyers
Company (the "Company") and George A. Thornton, III (the "Director").
The Company maintains the Heilig-Meyers Company Deferred Compensation
Agreement for Outside Director (the "Agreement") originally effective as of July
1, 1986, and subsequently amended as of September 15, 1989. Pursuant to Section
9(a) of the Agreement, as amended, the Company reserves the power to amend the
Agreement at any time and now wishes to amend the Agreement.
NOW, THEREFORE, the Agreement, as amended by the September 15, 1989
Amendment, is amended as follows:
IV. Section 5(a)(iii) is amended by substituting the words "age 59" for
the words "age 70."
V. Section 5(b) is amended in its entirety to read as follows:
(b) Death Before Age 59. If the Director dies before he attains age
59, his Beneficiary shall be entitled to receive a single lump sum payment
in the amount of $493,629. If the Beneficiary dies before he receives the
single lump sum payment, the payment due shall be made to the Beneficiary's
estate.
VI. This amendment shall be effective as of July 1, 1986.
VII. In all respects not amended, the Agreement is hereby ratified and
confirmed.
* * * * *
To record the adoption of this amendment as set forth above, the Company
has caused this document to be signed on this 10th day of May, 1994.
HEILIG-MEYERS COMPANY
By /s/ William C. DeRusha
/s/ George A. Thornton, III
George A. Thornton, III
Exhibit kk
AMENDMENT TO THE 1990
HEILIG-MEYERS COMPANY
DEFERRED COMPENSATION AGREEMENT
FOR OUTSIDE DIRECTOR
This AMENDMENT, dated as of April 18, 1994, by and between Heilig-Meyers
Company (the "Company") and George A. Thornton, III (the "Director").
The Company maintains the Heilig-Meyers Company 1990 Deferred Compensation
Agreement for Outside Director (the "Agreement") effective as of July 1, 1990.
Pursuant to Section 9(a) of the Agreement, the Company reserves the power to
amend the Agreement at any time and now wishes to amend the Agreement.
NOW, THEREFORE, the Agreement is amended as follows:
VIII. Section 4 is amended by substituting the words "age 59" for the
words "age 70."
IX. Subsections (i), (ii) and (iii) of Section 5(a) are amended by
substituting the words "age 59" for the words "age 70" each time they appear in
such subsections.
X. Section 5(b) is amended by substituting the words "age 59" for the
words "age 70."
XI. Section 5(c) is amended by substituting the words "age 59" for the
Words "age 70."
XII. This amendment shall be effective as of July 1, 1990.
VI. In all respects not amended, the Agreement is hereby ratified and
confirmed.
* * * * *
To record the adoption of this amendment as set forth above, the Company
has caused this document to be signed on this 10th day of May, 1994.
HEILIG-MEYERS COMPANY
By /s/ William C. DeRusha
/s/ George A. Thornton, III
George A. Thornton, III
Exhibit ll
Employment Agreement
August 26, 1993
Mr. Joseph R. Jenkins
Executive Vice President and
Chief Financial Officer
Heilig-Meyers Company
2235 Staples Mill Road
Richmond, Virginia 23230
Dear Joe:
This letter will amend our letter of April 10, 1991 confirming our
understanding of the terms and conditions of your employment with Heilig-Meyers
Company and its subsidiaries (the "Company"). In recognition of your past and
future services with the Company and other good and valuable consideration, your
employment agreement is amended as follows:
I. Effective as of September 18, 1993, the third sentence of Section 3 of
your employment agreement shall read:
The Company also agrees to pay you an annual bonus ("Bonus") in
accordance with the Company's bonus program for Company officers (the
"Bonus Plan"); provided, however, that in the event of a Change of
Control (as hereafter defined), your annual Bonus shall not be less
than the average Bonus paid to you during the three fiscal years
immediately preceding the year for which the Bonus is currently
payable.
II. In all respects not amended, your employment agreement is hereby
ratified and confirmed.
If the foregoing is in accordance with your understanding, please sign and
return the extra copy of this agreement to the Company.
HEILIG-MEYERS COMPANY
By: /s/ William C. DeRusha
William C. DeRusha
/s/ Joseph R. Jenkins
Joseph R. Jenkins
Exhibit mm
Employment Agreement
August 26, 1993
Mr. James R. Riddle
2151 Chepstow Terrace
Midlothian, Virginia 23113
Dear James:
This letter will amend our letter of April 10, 1991 confirming our
understanding of the terms and conditions of your employment with Heilig-Meyers
Company and its subsidiaries (the "Company"). In recognition of your past and
future services with the Company and other good and valuable consideration, your
employment agreement is amended as follows:
I. Effective as of September 18, 1993, the third sentence of Section 3 of
your employment agreement shall read:
The Company also agrees to pay you an annual bonus ("Bonus") in
accordance with the Company's bonus program for Company officers (the
"Bonus Plan"); provided, however, that in the event of a Change of
Control (as hereafter defined), your annual Bonus shall not be less
than the average Bonus paid to you during the three fiscal years
immediately preceding the year for which the Bonus is currently
payable.
II. In all respects not amended, your employment agreement is hereby
ratified and confirmed.
If the foregoing is in accordance with your understanding, please sign and
return the extra copy of this agreement to the Company.
HEILIG-MEYERS COMPANY
By: /s/ William C. DeRusha
William C. DeRusha
/s/ James R. Riddle
James R. Riddle
Exhibit nn
Employment Agreement
August 26, 1993
Mr. James F. Cerza
357 Holly Lake Drive
Manakin Sabot, Virginia 23103
Dear James:
This letter will amend our letter of April 10, 1991 confirming our
understanding of the terms and conditions of your employment with Heilig-Meyers
Company and its subsidiaries (the "Company"). In recognition of your past and
future services with the Company and other good and valuable consideration, your
employment agreement is amended as follows:
I. Effective as of September 18, 1993, the third sentence of Section 3 of
your employment agreement shall read:
The Company also agrees to pay you an annual bonus ("Bonus") in
accordance with the Company's bonus program for Company officers (the
"Bonus Plan"); provided, however, that in the event of a Change of
Control (as hereafter defined), your annual Bonus shall not be less
than the average Bonus paid to you during the three fiscal years
immediately preceding the year for which the Bonus is currently
payable.
II. In all respects not amended, your employment agreement is hereby
ratified and confirmed.
If the foregoing is in accordance with your understanding, please sign and
return the extra copy of this agreement to the Company.
HEILIG-MEYERS COMPANY
By: /s/ William C. DeRusha
William C. DeRusha
/s/ James F. Cerza
James F. Cerza
Exhibit 11
HEILIG-MEYERS COMPANY AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
FISCAL YEAR ENDED
February 28, February 28, February 29,
1994 1993 1992
Primary Earnings Per Share:
Average number of
shares outstanding 47,292,368 43,999,398 41,454,333
Net effect of stock
options 1,810,937 1,356,205 667,975
Average number of
shares as adjusted 49,103,305 45,355,603 42,122,308
Net earnings $54,996,000 $38,009,000 $26,984,000
Per share amount $1.12 $.84 $.64
Fully Diluted Earnings
Per Share:
Average number of
shares outstanding 47,292,368 43,999,398 41,454,333
Net effect of stock
options 1,988,509 1,643,622 963,378
Average number of
shares as adjusted 49,280,878 45,643,020 42,417,711
Net earnings $54,996,000 $38,009,000 $26,984,000
Per share amount $1.12 $.83 $.63
Earnings Per Common Share
Earnings per common share is computed by dividing net income by the
weighted number of shares of common stock and common stock equivalents
outstanding during each period. The Company has issued stock options, which
are the Company's only common stock equivalent, at exercise prices ranging
currently from $5.52 to $35.06. All shares and prices reflect three-for-two
common stock splits distributed in January 1992, November 1992 and July 1993.
Exhibit 24A
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in (i) the Registration
Statements No. 2-96961 and No. 33-28095 on Form S-8 and related Prospectus of
Heilig-Meyers Company relating to Common Stock issued and issuable under 1983
Stock Option Plan of the Company, (ii) the Registration Statements
No. 33-35263, No. 33-50086 and No. 33-64616 on Form S-8 and related
Prospectus of Heilig-Meyers Company relating to Common Stock issued and
issuable under the 1990 Stock Option Plan of the Company and related
Prospectus of the Company and (iii) the Registration Statement No. 33-43791
on Form S-8 relating to the Heilig-Meyers Company Employee Stock Purchase
Plan and related Prospectus of the Company of our report dated March 21, 1994
on the consolidated financial statements and supporting schedules of
Heilig-Meyers Company and subsidiaries, as listed under Items 14(a) (1) and
(2), both appearing in the Annual Report on Form 10-K of Heilig-Meyers Company
for the year ended February 28, 1994.
/s/ Deloitte & Touche
Richmond, Virginia
May 23, 1994