UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
- --- SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 1997 or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
- --- SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
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Commission file number #1-8484 .
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Heilig-Meyers Company .
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(Exact name of registrant as specified in its charter)
Virginia 54-0558861
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
12560 West Creek Parkway, Richmond, Virginia 23238 .
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(Address of principal executive offices) (Zip Code)
(804) 784-7300 .
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(Registrant's telephone number, including area code)
2235 Staples Mill Road, Richmond, Virginia 23230 .
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(Former name, former address and former fiscal year, if changed
since last report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of October 1, 1997.
57,049,096 shares of Common Stock, $2.00 par value.
HEILIG-MEYERS COMPANY
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Earnings for
Three and Six Months Ended August 31, 1997
and August 31, 1996 (Unaudited) 3
Consolidated Balance Sheets as of August 31, 1997
(Unaudited), and February 28, 1997 (Audited) 4
Consolidated Statements of Cash Flows for
Six Months Ended August 31, 1997 and
August 31, 1996 (Unaudited) 5
Notes to Consolidated Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 17
2
PART I
ITEM 1. FINANCIAL STATEMENTS
HEILIG-MEYERS COMPANY
CONSOLIDATED STATEMENTS OF EARNINGS
(Amounts in thousands except per share data)
(Unaudited)
Three Months Ended Six Months Ended
August 31, August 31,
---------- ----------
1997 1996 1997 1996
---- ---- ---- ----
Revenues:
Sales $515,162 $286,989 $1,004,202 $587,680
Other income 75,050 56,534 152,335 113,757
-------- -------- ---------- --------
Total revenues 590,212 343,523 1,156,537 701,437
-------- -------- ---------- --------
Costs and Expenses:
Costs of sales 343,961 191,205 663,943 384,920
Selling, general and
administrative 193,815 111,179 379,802 226,637
Interest 16,101 10,974 31,529 21,565
Provision for doubtful
accounts 21,933 18,080 44,861 37,023
-------- -------- ---------- --------
Total costs
and expenses 575,810 331,438 1,120,135 670,145
-------- -------- ---------- --------
Earnings before provision for
income taxes 14,402 12,085 36,402 31,292
Provision for income taxes 5,123 4,338 13,362 11,175
-------- -------- ---------- --------
Net earnings $ 9,279 $ 7,747 $ 23,040 $ 20,117
======== ======== ========== ========
Net earnings per share of common stock:
Primary and fully diluted $ 0.16 $ 0.16 $ 0.41 $ 0.41
======== ======== ========== ========
Cash dividends per share of
common stock $ 0.07 $ 0.07 $ 0.14 $ 0.14
======== ======== ========== ========
See notes to consolidated financial statements.
3
HEILIG-MEYERS COMPANY
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands except par value data)
August 31, February 28,
1997 1997
---- ----
(Unaudited) (Audited)
ASSETS
Current assets:
Cash $ 16,400 $ 14,959
Accounts receivable, net 644,996 596,959
Inventories 464,604 433,277
Other current assets 103,254 88,862
---------- ----------
Total current assets 1,229,254 1,134,057
Property and equipment, net 420,448 366,749
Other assets 53,940 42,262
Excess costs over net assets acquired, net 354,511 294,090
---------- ----------
$2,058,153 $1,837,158
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 193,805 $ 156,000
Long-term debt due within
one year 2,204 100,413
Accounts payable 197,102 160,857
Accrued expenses 180,501 166,650
---------- ----------
Total current liabilities 573,612 583,920
---------- ----------
Long-term debt 735,607 561,489
Deferred income taxes 48,756 49,128
Stockholders' equity:
Preferred stock, $10 par value --- ---
Common stock, $2 par value (250,000
shares authorized; shares issued
56,785 and 54,414, respectively) 113,569 108,828
Capital in excess of par value 234,678 195,352
Unrealized gain on investments 9,367 10,797
Retained earnings 342,564 327,644
---------- ----------
Total stockholders' equity 700,178 642,621
---------- ----------
$2,058,153 $1,837,158
========== ==========
See notes to consolidated financial statements.
4
HEILIG-MEYERS COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
Six Months Ended
August 31,
--------------------
1997 1996
---- ----
Cash flows from operating activities:
Net earnings $ 23,040 $ 20,117
Adjustments to reconcile net
earnings to net cash used by
operating activities:
Depreciation and amortization 26,804 15,603
Provision for doubtful accounts 44,861 37,023
Other, net 79 (117)
Change in operating assets and
liabilities net of the effects
of acquisitions:
Accounts receivable (90,687) (76,948)
Other receivables (10,801) (2,404)
Inventories (24,217) (9,199)
Prepaid expenses (5,489) (2,426)
Accounts payable 13,826 (5,717)
Accrued expenses 2,205 12,918
-------- --------
Net cash used by
operating activities (20,379) (11,150)
-------- --------
Cash flows from investing activities:
Acquisitions, net of cash acquired (8,386) (8,506)
Additions to property and equipment (68,123) (37,676)
Disposals of property and equipment 3,208 508
Miscellaneous investments (10,953) (7,164)
-------- ------
Net cash used by investing
activities (84,254) (52,838)
-------- -------
Cash flows from financing activities:
Net increase (decrease) in notes payable 37,805 (115,000)
Proceeds from long-term debt 174,767 199,612
Payments of long-term debt (99,545) (16,437)
Issuance of common stock 1,167 681
Dividends paid (8,120) (6,805)
-------- --------
Net cash provided
by financing activities 106,074 62,051
-------- --------
Net increase (decrease) in cash 1,441 (1,937)
Cash at beginning of period 14,959 16,017
-------- --------
Cash at end of period $ 16,400 $ 14,080
======== ========
See notes to consolidated financial statements.
5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. The accompanying consolidated financial statements of Heilig- Meyers
Company (the Company) have not been audited by independent accountants,
except for the balance sheet at February 28, 1997. These financial
statements have been prepared in accordance with regulations of the
Securities and Exchange Commission in regard to quarterly (interim)
reporting. In the opinion of management, the financial information
presented reflects all adjustments, comprised only of normal recurring
accruals, which are necessary for a fair presentation of the results for
the interim periods. Significant accounting policies and accounting
principles have been consistently applied in both the interim and annual
consolidated financial statements. Certain notes and the related
information have been condensed or omitted from the interim financial
statements presented in this Quarterly Report on Form 10-Q. Therefore,
these financial statements should be read in conjunction with the Company's
1997 Annual Report on Form 10-K. The results for the second quarter of
fiscal year 1998 are not necessarily indicative of future financial
results.
B. On June 18, 1997, the Board of Directors declared a cash dividend of $0.07
per share which was paid on August 23, 1997, to stockholders of record on
July 16, 1997.
C. Accounts receivable are shown net of the allowance for doubtful accounts
and unearned finance income. The allowance for doubtful accounts was
$37,985,000 and $41,120,000 and unearned finance income was $46,502,000 and
$44,356,000 at August 31, 1997, and February 28, 1997, respectively.
D. The Company made income tax payments of $4,832,500 and $1,231,000 during
the three months ended August 31, 1997, and August 31, 1996, respectively.
E. The Company made interest payments of $22,885,000 and $10,974,000 during
the three months ended August 31, 1997, and August 31, 1996, respectively.
F. On July 1, 1997, the Company acquired all of the outstanding capital stock
of Mattress Discounters Corporation and a related corporation ("Mattress
Discounters"). The Company issued 2,269,839 shares of common stock and
placed 264,550 shares of common stock in escrow to be released to the
former shareholders of Mattress Discounters if the acquired stores meet
certain earnings targets in the twelve months following the acquisition.
G. MacSaver Financial Services, Inc. is the Company's wholly-owned subsidiary
whose principal business activity is to obtain financing for the operations
of Heilig-Meyers and its other subsidiaries, and, in connection therewith,
MacSaver generally acquires and holds the aggregate principal amount of
installment credit accounts generated by the Company's operating
subsidiaries. The payment of principal and interest associated with this
debt is guaranteed by the Parent Company. The Company has not presented
separate financial statements and other disclosures concerning MacSaver
because management has determined that such information is not material to
the holders of the MacSaver debt securities guaranteed by the Company.
However, as required by the 1934 Act, the summarized financial information
concerning MacSaver Financial Services is as follows:
6
MacSaver Financial Services
Summarized Statements of Earnings
(Amounts in thousands)
(Unaudited) (Unaudited)
Three Months Ended Six Months Ended
August 31, August 31,
---------- ----------
1997 1996 1997 1996
---- ---- ---- ----
Net revenues $63,722 $38,105 $122,965 $74,721
Operating expenses 54,283 25,405 108,333 49,815
------- ------- -------- -------
Earnings before taxes 9,439 12,700 14,632 24,906
------- ------- -------- -------
Net earnings 6,136 8,255 9,511 16,189
======= ======= ======== =======
MacSaver Financial Services
Summarized Balance Sheets
(Amounts in thousands)
August 31, February 28,
1997 1997
--------- -----------
(Unaudited) (Audited)
Current assets $ 34,032 $ 36,401
Accounts receivable, net 550,149 454,774
Due to affiliates 530,067 504,763
---------- ----------
Total Assets $1,114,248 $ 995,938
========== ==========
Current liabilities $ 24,917 $ 128,921
Long-term debt 720,000 545,000
Notes payable 193,800 156,000
Stockholder's equity 175,531 166,017
---------- ----------
Total Liabilities and Equity $1,114,248 $ 995,938
========== ==========
H. In February 1997, the Financial Accounting Standards Board (FASB)issued
Statement of Financial Accounting Standards (SFAS) No. 128 on "Earnings
per Share". The Statement changes the computation, presentation and
disclosure requirements for earnings per share in financial statements
for periods ending after December 15, 1997. Basic earnings per share
will not include stock options as common stock equivalents and may,
therefore, be higher than previously reported primary earnings per
share. Diluted earnings per share will equal previously reported
primary earnings per share under the Company's current capital
structure. Pro forma disclosure of basic EPS and diluted EPS for the
current reporting period and comparable period in the prior year is as
follows (in thousands except per share data):
(Unaudited) (Unaudited)
Three Months Ended Six Months Ended
August 31, August 31,
1997 1996 1997 1996
------------------ ----------------
Average shares outstanding
(basic earnings per share) 56,003 48,616 55,208 48,571
Stock option equivalents 914 1,059 874 718
Average shares and equivalents 56,917 49,675 56,082 49,289
(diluted earnings per share)
Basic EPS $0.17 $0.16 $0.42 $0.41
Diluted EPS $0.16 $0.16 $0.41 $0.41
7
I. In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information," which will be effective for
the Company's fiscal year ended February 28, 1999. SFAS No. 131
redefines how operating segments are determined and requires disclosure
of certain financial and descriptive information about a company's
operating segments. Management has not yet completed its analysis of
which operating segments it will report on.
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
consolidated financial statements and notes to the consolidated financial
statements included in Item 1 of this document, and with the Company's audited
consolidated financial statements and notes thereto for the fiscal year ended
February 28, 1997.
On July 1, 1997, the Company acquired Mattress Discounters, a privately
held bedding retailer and manufacturer based in Upper Marlboro, Maryland. The
acquisition was accounted for as a purchase and was accomplished through the
issuance of 2,269,839 shares of common stock. In addition, 264,550 shares of
common stock were placed in escrow to be paid to the former shareholders of
Mattress Discounters if the acquired stores meet certain earnings targets in the
twelve months subsequent to the acquisition.
RESULTS OF OPERATIONS
Total revenues for the quarter rose 71.8% to $590.2 million from $343.5
million in the prior year. Approximately $179.2 million of this increase can be
attributed to the recently acquired Rhodes, The RoomStore and Mattress
Discounters operations. Excluding Rhodes, The RoomStore and Mattress
Discounters, total revenues for the quarter increased 19.7% from the prior year.
Net earnings increased 19.8% to $9.3 million (or $0.16 per share) from $7.7
million (or $0.16 per share) in the prior year. The earnings per share remained
flat between current and prior year quarters as a result of the shares issued in
the acquisition of Rhodes, The RoomStore and Mattress Discounters. Net earnings
for the six months ended August 31, 1997 increased 14.5% to $23.0 million (or
$0.41 per share) from $20.1 million (or $0.41 per share) in the prior year
period.
Sales for the second quarter of fiscal 1998 increased 79.5% to $515.2
million from $287.0 million in the second quarter of the prior year. For the six
month period ended August 31, 1997, sales increased 70.9% to $1,004.2 million
from $587.7 million. Approximately $172.2 million and $302.8 million of this
increase resulted from the recently acquired Rhodes, The RoomStore and Mattress
Discounters operations for the second quarter and the six months ended August
31, 1997, respectively. Excluding Rhodes, The RoomStore and Mattress
Discounters, total sales for the three and six months ended August 31, 1997
increased 19.5% and 19.3%, respectively, from the prior year. The remaining
increase in sales for both periods was primarily attributable to an increase in
Heilig-Meyers operating units from August 31, 1996 to August 31, 1997, and a
comparable store sales increase of 3.0% and 3.3% for the three and six months
ended August 31, 1997, respectively.
Through recent acquisitions, the Company now has five retail formats
targeting a wide range of markets. The Company's Heilig-Meyers stores provided
61.4% of total sales for the second quarter of fiscal 1998, or $316.5 million,
representing an 19.8% increase in sales over the same period of the prior year.
The Heilig-Meyers stores provided 64.3% of total sales for the six months ended
August 31, 1997, or $646.4 million, representing an 19.5% increase in sales over
the same period of the prior year. The Company's 32 Puerto Rican stores, which
operate under the "Berrios" name, contributed $26.5 million and $55.0 million,
or 5.1% and 5.5% of total sales, for the three and six months ended August 31,
1997, respectively. Sales also include the results from the recently acquired
Rhodes, The RoomStore and Mattress Discounters units. The 99 Rhodes stores
contributed $111.1 million and $222.7 million, or 21.6% and 22.2% of total
sales, for the three and six months ended August 31, 1997, respectively. The 18
RoomStore units contributed $25.0 million and $44.1 million, or 4.9% and 4.4% of
9
total sales, for the three and six months ended August 31, 1997, respectively.
The 171 Mattress Discounters stores contributed $36.1 million, or 7.0% and 3.6%
of sales, for the three and six months ended August 31, 1997, respectively.
Price changes had an immaterial impact on the overall sales increase for the
quarter. Management believes the consumer demand for home furnishings remained
relatively unchanged from the prior year quarter and that demand is impacted by
the high level of consumer debt. As a result, the Company is anticipating modest
same store sales increases in the upcoming quarters.
As a percentage of sales, other income decreased during the second quarter
to 14.6% from 19.7% in the prior year quarter. For the six months ended August
31, 1997, other income decreased as a percentage of sales to 15.2% from 19.4% in
the prior year. This decrease is primarily the result of the effect of the
Rhodes, The RoomStore and Mattress Discounters operations, as these stores'
credit programs are maintained by a third party and, unlike the Heilig-Meyers
in-house program, do not produce finance income for the Company. Excluding the
results of Rhodes, The RoomStore and Mattress Discounters, other income for the
three and six months ended August 31, 1997 represented 19.8% and 19.2% of sales,
respectively.
The Company offers third party private label credit card programs to
customers of the Rhodes and The RoomStore locations and plans to continue its
program of periodically securitizing a portion of the installment accounts
receivable portfolio of its other stores. Proceeds from securitized accounts
receivable are generally used by the Company to lower debt levels. Interest
costs related to securitized receivables, which are based on the dollar value of
accounts receivable sold to third parties, are netted against finance income.
Costs and Expenses
Costs of sales increased during the quarter to 66.8% of sales from
66.6% in the prior year quarter. This increase was primarily the result of the
liquidation of merchandise associated with recent acquisitions. For the six
month period ending August 31, 1997, costs of sales were 66.1% of sales as
compared to 65.5% in the prior year. This increase resulted from higher
distribution costs and lower raw selling margins as a percentage of sales. Raw
selling margins, particularly in the Heilig-Meyers stores, were impacted by a
shift in the sales mix to lower margin goods during the first quarter.
Selling, general and administrative expenses decreased as a percentage of
sales to 37.6% from 38.7% in the prior year quarter. For the six month period
ended August 31, 1997, selling, general and administrative expenses were 37.8%
compared to 38.6% in the prior year. The decrease between years was the result
of leverage gained on the sales at the Rhodes, The RoomStore and Mattress
Discounters units. Compared to the prior year quarter, the addition of these
units has resulted in a lower administrative cost structure generally due to the
use of third-party credit providers. However, the decrease caused by the Rhodes,
The RoomStore and Mattress Discounters leverage was somewhat offset by the
Heilig-Meyers stores' continued commitment of additional store-level resources
to collection efforts which resulted in higher salaries as a percentage of sales
than the prior year. Advertising increased slightly as a percentage of sales due
to increased circular distribution and television advertising.
Interest expense decreased to 3.1% of sales in the second quarter of
fiscal 1998 from 3.8% of sales in the second quarter of the prior year. The
decrease is mainly due to leverage on the sales of Rhodes, The RoomStore and
Mattress Discounters, which were purchased with common stock. For the quarter,
weighted average long-term debt increased to $608.1 million from $401.9 million
10
in the prior year second quarter. The Company issued $175 million in public debt
during the quarter. The Company also issued approximately $300 million in public
debt in the last half of fiscal 1997 as part of the financing strategy discussed
below. Weighted average long-term interest rates remained consistent at 7.9%
between periods. Weighted average short-term debt increased to $248.5 million
from $207.4 million in the prior year second quarter. Weighted average
short-term interest rates increased to 6.1% from 5.9% in the prior year. For the
six months ended August 31, 1997 interest expense decreased to 3.1% of sales
from 3.7% from the prior year period. The Company has focused on structuring its
debt portfolio to contain a higher percentage of long-term fixed rate debt. This
strategy is designed to minimize the Company's exposure to significant changes
in short-term interest rates.
The provision for doubtful accounts decreased for the second quarter, as a
percentage of sales, to 4.3% from 6.3% in the prior year quarter. For the six
months ended August 31, 1997, the provision decreased to 4.5% from 6.3% in the
prior year. The decrease in the current fiscal year was the result of the
operations of Rhodes, The RoomStore and Mattress Discounters as these units
primarily use third-party credit providers and, accordingly, do not record
significant provisions for doubtful accounts. Excluding the effect of Rhodes,
The RoomStore and Mattress Discounters, the provision was 6.4% of sales for the
second quarter and for the six months ended August 31, 1997.
The effective income tax rate for the second quarter of fiscal 1998 was
35.6% compared to 35.9% for the second quarter of fiscal 1997. For the six
months ended August 31, 1997, the income tax rate was 36.7% compared to 35.7% in
the prior year period. This increase for the six months is due to the higher
effective tax rates of the recently acquired operating subsidiaries resulting
from the carryover tax attributes of acquired assets and liabilities.
LIQUIDITY AND CAPITAL RESOURCES
The Company increased its cash position $1.4 million to $16.4 million at
August 31, 1997, from $15.0 million at February 28, 1997, compared to a decrease
of $1.9 million in the comparable period a year ago.
Net cash outflow from operating activities was $20.4 million, compared to
a net cash outflow of $11.2 million in the comparable period of the prior year.
As the Company continued to expand its store base, cash flows used for investing
activities exceeded cash provided by operating activities for the first six
months of fiscal years 1998 and 1997. The Company traditionally produces minimal
or negative cash flow from operating activities because it extends in-house
credit in its Heilig-Meyers and Berrios stores. During the six months ended
August 31, 1997, inventory levels increased at a higher rate than the prior year
period primarily due to the stocking of line-up inventory in the recently
acquired stores in order to support the merchandising plan for the upcoming fall
selling season. There was a corresponding increase in the Company's accounts
payable as a result of the higher levels of inventory purchases. Continued
extension of credit and related increases in customer accounts receivable will
likely produce minimal or negative cash flow from operations in the upcoming
fiscal 1998 quarters. However, the Company periodically sells accounts
receivable as a source of liquidity, providing additional positive cash flows
from operating activities.
Investing activities produced negative cash flows of $84.3 million during
the six months ended August 31, 1997 compared to negative cash flows of $52.8
million in the prior year period. The increase in negative cash flows from
11
investing activities is primarily due to an increase in additions to property
and equipment during the period. Cash used for additions to property and
equipment resulted from the opening of 33 new store locations (excluding
acquisitions) and related support facilities as well as the remodeling and
improvement of existing and acquired locations. The Company plans to open
approximately 40 to 50 additional new stores during the remainder of fiscal 1998
as well as continue its existing store remodeling program. Capital expenditures
will continue to be financed by cash flows from operations and external sources
of funds.
Financing activities produced positive cash flows of $106.1 million during
the six months ended August 31, 1997 compared to a $62.1 million positive cash
flow in the prior year period. The positive cash flow from financing activities
in both the current and prior year quarters was due to an increase in long-term
debt. On June 24, 1997, the Company and a wholly-owned subsidiary filed a joint
Registration Statement on Form S-3 with the Securities and Exchange Commission
relating to up to $400.0 million aggregate principal amount of securities. As of
August 31, 1997, long-term notes payable with an aggregate principal amount of
$175.0 million have been issued to the public and are outstanding under this
facility. The Company has access to a variety of external capital sources to
finance asset growth and plans to continue to finance accounts receivable,
inventories and future expansion from operating cash flows supplemented by other
sources of capital. As of August 31, 1997, the Company had a $400.0 million
revolving credit facility in place which expires in July 2000. This facility
includes fourteen banks and had $170.0 million outstanding and $230.0 million
unused as of August 31, 1997. The Company also had additional lines of credit
with banks totaling $60.0 million of which $23.8 million was unused as of August
31, 1997.
Total debt as a percentage of debt and equity was 57.1% at August 31,
1997, compared to 56.0% at February 28, 1997. The current ratio was 2.1 at
August 31, 1997, compared to 1.9 at February 28, 1997. The increase in the
current ratio from February 28, 1997 to August 31, 1997 is primarily attributed
to the maturity of $100.0 million in long-term debt in the current quarter. The
increase in total debt as a percentage of debt and equity from February 28, 1997
to August 31, 1997 is primarily attributed to the issuance of $175 million of
long-term notes payable during the quarter, which was somewhat offset by the
payment on the maturity of long-term notes discussed above.
FORWARD-LOOKING STATEMENTS
Certain statements included above are not based on historical facts,
but are forward-looking statements. These statements can be identified by the
use of forward-looking terminology such as "believes," "expects," "may," "will,"
"should," or "anticipates" or the negative thereof or other variations thereon
or comparable terminology, or by discussions of strategy. These statements
reflect the Company's reasonable judgments with respect to future events and are
subject to risks and uncertainties that could cause actual results to differ
materially from those in the forward-looking statements. Such risks and
uncertainties include, but are not limited to, the customer's willingness, need
and financial ability to purchase home furnishings and related items, the
Company's ability to extend credit to its customers, the costs and effectiveness
of promotional activities, the Company's ability to realize cost savings and
other synergies from recent acquisitions as well as the Company's access to, and
cost of, capital. Other factors such as changes in tax laws, recessionary or
expansive trends in the Company's markets, inflation rates and regulations and
laws which affect the Company's ability to do business in its markets may also
impact the outcome of forward-looking statements.
12
PART II
Item 1. Legal Proceedings
The Company previously reported involvement in certain cases regarding
non-filing fees charged by the Company on certain credit transactions in the
Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1997
(the "Company's 1997 Form 10-K") and the Company's Quarterly Report on Form 10-Q
for the quarter ended May 31, 1997. These cases included Kirby et al v.
Heilig-Meyers Furniture Company and Heilig-Meyers Company and Richardson v.
Heilig-Meyers Company and Heilig-Meyers Furniture Company which, as previously
reported in the Company's 1997 Form 10-K, were transferred by the Panel on
Multi-District Litigation (the "MDL Panel") to the United States District Court
for the Middle District of Alabama. The Company's motion to return these cases
to the courts in which these cases were originally filed was denied; however,
the court dismissed the Richardson case without prejudice in September 1997. In
addition, the plaintiffs in the Kirby case, who originally requested
certification of a class in all states except Alabama and Georgia and
subsequently moved to substitute a Mississippi class, have now requested
certification of a class for all states except Alabama and Florida. Among the
other cases regarding non-filing fees reported in the Company's 1997 Form 10-K
were Faulkner v. Heilig-Meyers Company (Northern District of Illinois) and Via
v. Heilig-Meyers Company and Heilig-Meyers Furniture Company (Western District
of Virginia). The MDL Panel has pending a motion to transfer the Faulkner case
to the United States District Court for the Middle District of Alabama. The
plaintiffs in the Via case have filed a motion to withdraw the case without
prejudice.
13
Item 2. Changes in Securities.
(c) On July 1, 1997, the Company acquired all the outstanding capital stock of
Mattress Discounters Corporation and a related corporation ("Mattress
Discounters") in merger transactions in which the shareholders of Mattress
Discounters received 2,269,839 shares of the Company's Common Stock and an
additional 264,550 shares of the Company's Common Stock were placed in escrow.
The sale of the foregoing shares were exempt from registration under the
Securities Act of 1933 (the "Act") as transactions not involving a public
offering, based on the fact that the shares were sold to accredited investors
under Rule 506 of Regulation D under the Act.
14
Item 4. Submission of Matters to a Vote of Security Holders.
(a) The Annual Meeting of the Company's shareholders was held June
18, 1997.
(c)(i) The shareholders approved the ratification of the selection of
Deloitte & Touche LLP as accountants and auditors for the
Company for the current fiscal year. The ratification was approved by
the following vote:
FOR - 47,505,229
AGAINST - 94,503
ABSTAIN - 64,697
(c)(ii) The shareholders of the Company elected a board of thirteen
directors for one-year terms. The elections were approved by
the following vote:
Directors: For Withheld
William C DeRusha 46,998,566 665,863
Troy A. Peery, Jr. 47,001,968 662,461
Alexander Alexander 47,032,362 632,067
Robert L. Burrus, Jr. 46,714,679 949,750
Beverley E. Dalton 47,048,158 616,271
Charles A. Davis 46,680,360 984,069
Benjamin F. Edwards III 46,883,564 780,865
Alan G. Fleischer 47,001,423 663,006
Nathaniel Krumbein 46,881,216 783,213
Hyman Meyers 46,874,524 789,905
S. Sidney Meyers 46,876,697 787,732
Lawrence N. Smith 47,048,918 615,511
Eugene P. Trani 47,029,876 634,553
15
Item 5. Other Information.
(i). On August 27, 1997 the Company announced that the Board of
Directors appointed former Virginia Governor Douglas Wilder as an
additional director.
16
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits. See INDEX TO EXHIBITS
(b) There were three Current Reports on Form 8-K filed during the
quarterly period ended August 31, 1997. On July 17, 1997,
Registrant filed a Form 8-K in which it reported the acquisition
of all outstanding capital stock of Mattress Discounters
Corporation and a related corporation ("Mattress Discounters").
On August 8, 1997, Registrant filed a Form 8-K in which it
reported Heilig-Meyers Company ("Heilig-Meyers") and MacSaver
Financial Services, Inc. ("MacSaver") entered into a Pricing
Agreement with Goldman, Sachs & Co., on behalf of itself and
NationsBanc Capital Markets, Inc. and Salomon Brothers Inc.,
which incorporated by reference a related Underwriting Agreement,
dated July 31, 1997, for the public offering by MacSaver of $175
million aggregate principal amount of 7.60% Notes due August 1,
2007, guaranteed as to payment of principal and interest by
Heilig-Meyers (the "7.60% Notes"). The 7.60% Notes were issued
pursuant to an Indenture dated as of August 1, 1996 among
Heilig-Meyers, MacSaver and First Union National Bank, formerly
known as First Union National Bank of Virginia, as Trustee, and
an Officers' Certificate dated as of August 5, 1997.
On August 13, 1997, Registrant filed a Form 8-K in which it
attached and incorporated by reference the August 6, 1997 press
release issued by the Registrant reporting July sales and other
information.
INDEX TO EXHIBITS
Page
3. Articles of Incorporation
a. Registrant's Amended Bylaws 19
11. Computation of Per Share Earnings 25
27. Financial Data Schedule 26
17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Heilig-Meyers Company
(Registrant)
Date: October 13, 1997 /s/Roy B. Goodman
---------------- -----------------
Roy B. Goodman
Senior Vice President and
Principal Financial Officer
Date: October 13, 1997 /s/William J. Dieter
---------------- --------------------
William J. Dieter
Senior Vice President,
Accounting and Principal
Accounting Officer
18