SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) July 13, 1999
Heilig-Meyers Company
(Exact name of registrant as specified in its charter)
Virginia 01-8484 54-0558861
(State or other jurisdiction (Commission (IRS Employer
of incorporation) file number) Identification No.)
12560 West Creek Parkway, Richmond, Virginia 23238
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (804)784-7300
N/A
(Former name or former address, if changed since last report)
Item 2. Acquisition or Disposition of Assets
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Heilig-Meyers Company, a Virginia corporation (the "Company"), entered into
a Stock Purchase Agreement dated June 15, 1999, as amended by the First
Amendment thereto dated July 13, 1999, attached hereto as Exhibit 2.1 (as
amended, the "Stock Agreement"), with Rhodes Holdings, Inc., a Delaware
corporation ("Rhodes Holdings"), and Rhodes Holdings II, Inc., a Delaware
corporation ("Rhodes Holdings II") and a wholly-owned subsidiary of Rhodes
Holdings, pursuant to which the Company agreed to sell its interest in Rhodes,
Inc., a Georgia corporation ("Rhodes"). Rhodes Holdings is controlled by an
investment group which includes certain institutional investors and managers
of Rhodes.
The transaction was closed on July 13, 1999, with an effective date of
July 1, 1999. Under the terms of the Stock Agreement, the Company received
$60.0 million in cash, a $40.0 million 10% pay-in-kind subordinated note due
2004 (9.5% interest rate per annum for periods where interest is paid in cash)
and an option to acquire a 10% equity interest in Rhodes Holdings. The Company
also has the option to acquire an additional 10% equity interest if certain
financial goals are achieved by Rhodes Holdings. Pursuant to the Stock
Agreement, the Company retained rights to an insurance claim settlement and a
federal net operating loss carry forward which in aggregate will result in
approximately a $15.0 million cash benefit to the Company. The Company has
agreed to provide or guarantee a $20.0 million standby credit facility to Rhodes
Holdings II or Rhodes after the closing, which may only be drawn on in certain
circumstances after utilization of availability under Rhodes' primary credit
facility. In addition, under the terms of the Stock Agreement, Rhodes will
assume approximately $10 million in capital lease obligations. In addition, the
Company previously guaranteed certain leases and other obligations of Rhodes,
which may not be released in connection with this transaction. Rhodes has
agreed to indemnify the Company in the event that payments are made under these
guarantees.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995: 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 may or will 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 Company's obligation to make
payments under guarantees of Rhodes leases or other obligations or the standby
credit facility as a result of lower than expected Rhodes operating results
or defaults by Rhodes.
Item 7. Financial Statements and Exhibits
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(b) Pro Forma Financial Information
Pro Forma Condensed Consolidated Statements of Earnings for the Year
Ended February 28, 1999
Pro Forma Condensed Consolidated Statements of Earnings for the Three
Months Ended May 31, 1999
Pro Forma Condensed Consolidated Balance Sheet as of May 31, 1999
Notes to Pro Forma Condensed Consolidated Financial Statements
(c) Exhibits
The following exhibit is filed as a part of this report:
2.1 Stock Purchase Agreement dated June 15, 1999, as amended by the
First Amendment thereto dated July 13, 1999, by and among
Heilig-Meyers Company, a Virginia corporation, Rhodes Holdings,
Inc., a Delaware corporation, and Rhodes Holdings II, Inc., a
Delaware corporation. Pursuant to Item 601(b)(2), the Company
agrees to furnish supplementally a copy of any omitted schedule
or exhibit to this agreement to the Commission upon request.
SIGNATURE
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Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HEILIG-MEYERS COMPANY
Date: July 28, 1999 By: /s/ Roy B. Goodman
-----------------------------
Roy B. Goodman
Executive Vice President,
Chief Financial Officer
Exhibit Index
Exhibit
No. Description
- ------- -----------
2.1 Stock Purchase Agreement dated June 15, 1999, as amended by the
First Amendment thereto dated July 13, 1999, by and among
Heilig-Meyers Company, a Virginia corporation, Rhodes Holdings,
Inc., a Delaware corporation, and Rhodes Holdings II, Inc., a
Delaware corporation. Pursuant to Item 601(b)(2), the Company
agrees to furnish supplementally a copy of any omitted schedule
or exhibit to this agreement to the Commission upon request.
Pro Forma Financial Information
The following unaudited pro forma condensed consolidated statements of
earnings for the year ended February 28, 1999 and the three months ended May 31,
1999 give effect to dispositions of businesses by Heilig-Meyers Company
(Heilig-Meyers) that have occurred or are probable. The pro forma information is
based on the historical financial statements of Heilig-Meyers giving effect to
the disposition under the assumptions and adjustments described in the
accompanying notes to the unaudited pro forma condensed consolidated financial
statements. The following unaudited pro forma condensed consolidated balance
sheet gives effect to dispositions of businesses by Heilig-Meyers which were
completed after the balance sheet date or are probable, as if such dispositions
had been completed as of May 31, 1999.
On July 13, 1999, with an effective date of July 1, 1999, Heilig-Meyers
completed the sale of its wholly-owned subsidiary, Rhodes, Inc. Heilig-Meyers
received $60.0 million in cash, a $40 million 10% pay-in-kind subordinated note
due 2004 (9.5% interest rate per annum for periods where interest is payed in
cash) note and an option to acquire a 10% equity interest in Rhodes Holdings,
the acquiring entity. Heilig-Meyers also received an option to acquire an
additional 10% equity interest in Rhodes Holdings if certain financial goals are
achieved by Rhodes Holdings. Heilig-Meyers has agreed to provide or guarantee a
$20.0 million standby credit facility after the closing, which may only be drawn
on in certain circumstances after utilization of availability under the Rhodes'
primary credit facility. During its first fiscal quarter ended May 31, 1999,
Heilig-Meyers recorded a $113.7 million write-down, before benefit for income
taxes, of its investment in Rhodes, Inc.
On May 28, 1999, Heilig-Meyers entered into a definitive agreement to sell
93% of its interest in its Mattress Discounters division. This transaction,
which is subject to certain closing conditions, is expected to close in
Heilig-Meyers' second fiscal quarter ending August 31, 1999. Proceeds are
expected to consist of cash proceeds, net of transaction costs, of approximately
$204.1 million, a $6.0 million note receivable, less the assumption of
approximately $4.0 million of liabilities by Heilig-Meyers. Heilig-Meyers
expects this transaction to result in a gain, net of income taxes, of
approximately $62.8 million.
The net cash proceeds generated by these transactions will be used to
reduce a portion of long term debt due within one year and notes payable.
The unaudited pro forma condensed consolidated financial statements have
been prepared by the management of Heilig-Meyers based upon historical and other
financial information. The pro forma statements do not purport to be indicative
of the results of operations or financial position which would have occurred had
the dispositions been made at the beginning of the periods or as of the date
indicated or of the financial position or results of operations which may be
obtained in the future.
Heilig-Meyers Company
Pro Forma Condensed Consolidated Statements of Earnings
For the Year Ended February 28, 1999
(Amounts in Thousands, except per share data)
Pro Forma Adjustments
------------------------------------
Mattress
Heilig-Meyers Rhodes Discounters Pro Forma
Historical Operations Operations Other Combined
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Revenues:
Sales $ 2,431,152 $(457,501) $(238,271) $ 1,735,380
Other income 295,206 (22,119) (377) 272,710
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Total Revenues 2,726,358 (479,620) (238,648) - 2,008,090
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Costs and expenses:
Costs of sales 1,637,901 (331,975) (149,101) 1,156,825
Selling, general & administrative 907,913 (176,924) (66,576) 664,413
Interest 75,676 - - (18,443)(D) 57,233
Provision for doubtful accounts 107,916 - - 107,916
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Total costs and expenses 2,729,406 (508,899) (215,677) (18,443) 1,986,387
- -----------------------------------------------------------------------------------------------------------------
Earnings (loss) before income taxes (3,048) 29,279 (22,971) 18,443 21,703
Provision (benefit) for income taxes (1,081) 10,687 (8,384) 6,732 7,954
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Net earnings (loss) $(1,967) $18,592 $(14,587) $11,711 $ 13,749
=================================================================================================================
Net earnings (loss) per share:
Basic $ (0.03) $ 0.31 $(0.25) $ 0.20 $ 0.23
Diluted $ (0.03) $ 0.31 $(0.25) $ 0.19 $ 0.23
=================================================================================================================
Weighted average shares:
Basic 59,331 59,331 59,331 59,331 59,331
Diluted 59,331 59,331 59,331 60,103 (F) 60,103 (F)
See notes to pro forma condensed consolidated financial statements.
Heilig-Meyers Company
Pro Forma Condensed Consolidated Statements of Earnings
For the Three Months Ended May 31, 1999
(Amounts in Thousands, except per share data)
Pro Forma Adjustments
----------------------------------
Mattress
Heilig-Meyers Rhodes Discounters Pro Forma
Historical Operations Operations Other Combined
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Revenues:
Sales $ 618,492 $(114,846) $ (60,988) $ 442,658
Other income 70,711 (7,257) (89) 63,365
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Total Revenues 689,203 (122,103) (61,077) - 506,023
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Costs and expenses:
Costs of sales 400,229 (79,358) (37,548) 283,323
Selling, general & administrative 231,320 (43,577) (16,818) 170,925
Interest 19,733 - - (4,985)(D) 14,748
Provision for doubtful accounts 23,872 - - 23,872
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Total costs and expenses 675,154 (122,935) (54,366) (4,985) 492,868
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Write-down of assets held for sale (113,690) 113,690 (E) -
Earnings (loss) before income taxes (99,641) 832 (6,711) 118,675 13,155
Provision (benefit) for income taxes (29,101) 304 (2,450) 35,957 4,710
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Net earnings (loss) $ (70,540) $ 528 $ (4,261) $ 82,718 $ 8,445
=================================================================================================================
Net earnings (loss) per share:
Basic $ (1.18) $ 0.01 $ (0.07) $ 1.38 $ 0.14
Diluted $ (1.18) $ 0.01 $ (0.07) $ 1.36 $ 0.14
=================================================================================================================
Weighted average shares:
Basic 59,861 59,861 59,861 59,861 59,861
Diluted 59,861 59,861 59,861 60,630 (F) 60,630 (F)
See notes to pro forma condensed consolidated financial statements.
Heilig-Meyers Company
Pro Forma Condensed Consolidated Balance Sheet
As of May 31, 1999
(Amounts in Thousands)
Mattress
Rhodes Discounters Other
Heilig-Meyers Pro Forma Pro Forma Pro Forma Pro Forma
Historical Adjustments Adjustments Adjustments Combined
- ------------------------------------------------------------------------------------------------------------------------------
Assets
Current assets:
Cash $ 20,649 $ 20,649
Accounts receivable, net 252,205 252,205
Retained interest in securitized receiva1 92,184 192,184
Inventories 396,845 396,845
Other 98,773 98,773
Net assets held for sale 159,857 (88,877) (A) (70,980) (B) -
- -------------------------------------------------------------------------------------------------------------------------------
Total current assets 1,120,513 (88,877) (70,980) - 960,656
- -------------------------------------------------------------------------------------------------------------------------------
Property, plant & equipment, net 320,712 320,712
Other assets 104,995 40,038 (A) 6,000 (B) 156,002
4,969 (C)
Excess cost over net assets acquired, net 196,126 196,126
-
- -------------------------------------------------------------------------------------------------------------------------------
$1,742,346 $ (48,839) $ (60,011) $ - $1,633,496
===============================================================================================================================
Liabilities And Stockholders' Equity
Current liabilities:
Notes payable $ 201,358 $(164,062) (D) $ 37,296
Long-term debt due within one year 131,193 (54,900) (A)(D) (40,100) (D) 36,193
Accounts payable 147,368 147,368
Accrued expenses and other 154,875 6,061 (A) 4,000 (B) (3,165) (D) 239,121
77,350 (B)
-
- -------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 634,794 (48,839) (122,812) (3,165) 459,978
- -------------------------------------------------------------------------------------------------------------------------------
Long-term debt/capital leases 536,766 536,766
Deferred income taxes 40,129 40,129
Stockholders' equity:
Common stock, at par 119,722 119,722
Capital in excess of par value 242,380 242,380
Unrealized gain on investments 5,478 5,478
Retained earnings 163,077 62,801 (B) 3,165 (D) 229,043
- -------------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 530,657 - 62,801 3,165 596,623
- -------------------------------------------------------------------------------------------------------------------------------
$1,742,346 $ (48,839) $ (60,011) $ - $1,633,496
===============================================================================================================================
See notes to pro forma condensed consolidated financial statements.
Heilig-Meyers Company
Notes to Pro Forma Condensed Consolidated Financial Statements
(Amounts in Thousands)
(A) To reflect the allocation of proceeds generated by the disposition of
Rhodes, Inc.
Cash $ 60,000
Transaction costs (5,100)
----------
Net cash proceeds 54,900
Note receivable 40,000
Warrants to acquire a 10% equity interest in Rhodes Holdings, at fair value 38
Liabilities assumed by Heilig-Meyers (6,061)
----------
Total proceeds 88,877
Less: investment in Rhodes 88,877
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Gain (loss) on disposition $ -
==========
(B) To reflect the allocation of estimated proceeds to be generated by the
planned disposition of Mattress Discounters.
Cash $ 213,575
Transaction costs (9,413)
-----------
Net cash proceeds 204,162
Note receivable 6,000
Liabilities assumed by Heilig-Meyers (4,000)
-----------
Total proceeds 206,162
Less: investment in Mattress Discounters 66,011
-----------
Gain on disposition 140,151
Income tax expense 77,350
-----------
Net gain on disposition $ 62,801
===========
(C) Represents the 7% interest in Mattress Discounters retained by the Company.
This amount is carried at the Company's historical cost.
(D) To reflect the pro forma impact of reduction of debt outstanding from
application of net proceeds generated by the dispositions.
3 months ended 12 months ended
May 31, 1999 February 28, 1999
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Net proceeds applied to notes payable $ 164,062 $ 164,062
Weighted average annual interest rate 8.10% 7.64%
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$ 13,289 $ 12,534
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Net proceeds applied to long-term debt $ 95,000 $ 95,000
Weighted average annual interest rate 7.00% 6.22%
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$ 6,650 $ 5,909
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Annual pro forma reduction in interest expense $ 19,939 $ 18,443
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Quarterly pro forma reduction in interest expense $ 4,985
The first $95.0 million of net cash proceeds will be applied to
long-term debt due within one year and the remaining
$164.1 million will be applied to notes payable.
(E) To eliminate the write-down of investment in Rhodes to give effect to the
disposition of Rhodes as if it had been completed prior to the beginning
of the period.
(F) Diluted weighted average shares have been adjusted for pro forma purposes to
include common stock equivalents that were excluded for purposes of the
historical statements since the result would have been antidilutive to the
loss from operations.