-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JwUIwxdYnNSIHYAI5099/dHYalMNN3buIeF0sTlQ+TqW/yioXdtwwyImfzOsebeg tE2IXkqORyhRbN/sh3Q8hg== 0000046601-97-000012.txt : 19970715 0000046601-97-000012.hdr.sgml : 19970715 ACCESSION NUMBER: 0000046601-97-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970531 FILED AS OF DATE: 19970714 SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HEILIG MEYERS CO CENTRAL INDEX KEY: 0000046601 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-FURNITURE STORES [5712] IRS NUMBER: 540558861 STATE OF INCORPORATION: VA FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08484 FILM NUMBER: 97640150 BUSINESS ADDRESS: STREET 1: 2235 STAPLES MILL RD CITY: RICHMOND STATE: VA ZIP: 23230 BUSINESS PHONE: 8043599171 MAIL ADDRESS: STREET 1: 2235 STAPLES MILL RD CITY: RICHMOND STATE: VA ZIP: 23230 10-Q 1 FORM 10-Q 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 May 31, 1997 or -------------------------------------- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE - --- SECURITIES EXCHANGE ACT OF 1934 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) (804) 359-9171 . - ------------------------------------------------------------------- (Registrant's telephone number, including area code) . - ------------------------------------------------------------------- (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 July 1, 1997. 56,999,511 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 Months Ended May 31, 1997 and May 31, 1996 (Unaudited) 3 Consolidated Balance Sheets as of May 31, 1997 (Unaudited), and February 28, 1997 (Audited) 4 Consolidated Statements of Cash Flows for Three Months Ended May 31, 1997 and May 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 8 PART II. OTHER INFORMATION Item 1. Legal Proceedings 12 Item 6. Exhibits and Reports on Form 8-K 13 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 May 31, ------------------ 1997 1996 -------- -------- Revenues: Sales $489,040 $300,691 Other income 77,285 57,223 -------- -------- Total revenues 566,325 357,914 -------- -------- Costs and Expenses: Costs of sales 319,982 193,714 Selling, general and administrative 185,987 115,458 Interest 15,428 10,591 Provision for doubtful accounts 22,928 18,943 -------- -------- Total costs and expenses 544,325 338,706 -------- -------- Earnings before provision for income taxes 22,000 19,208 Provision for income taxes 8,239 6,837 -------- -------- Net earnings $ 13,761 $ 12,371 ======== ======== Net earnings per share of common stock: Primary and fully diluted $0.25 $0.25 ======== ======== Cash dividends per share of common stock $0.07 $0.07 ======== ======== See notes to consolidated financial statements. 3 HEILIG-MEYERS COMPANY CONSOLIDATED BALANCE SHEETS (Amounts in thousands except par value data) May 31, February 28, 1997 1997 ---- ---- (Unaudited) (Audited) ASSETS Current assets: Cash $ 21,848 $ 14,959 Accounts receivable, net 623,963 596,959 Inventories 443,259 433,277 Other current assets 80,918 88,862 ---------- ---------- Total current assets 1,169,988 1,134,057 Property and equipment, net 394,429 366,749 Other assets 47,375 42,262 Excess costs over net assets acquired, net 294,517 294,090 ---------- ---------- $1,906,309 $1,837,158 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable $ 207,700 $ 156,000 Long-term debt due within one year 91,895 100,413 Accounts payable 163,448 160,857 Accrued expenses 175,846 166,650 ---------- ---------- Total current liabilities 638,889 583,920 ---------- ---------- Long-term debt 560,912 561,489 Deferred income taxes 54,121 49,128 Stockholders' equity: Preferred stock, $10 par value --- --- Common stock, $2 par value (250,000 shares authorized; shares issued 54,414 and 48,596, respectively) 108,830 108,828 Capital in excess of par value 195,374 195,352 Unrealized gain on investments 10,797 10,797 Retained earnings 337,386 327,644 ---------- ---------- Total stockholders' equity 652,387 642,621 ---------- ---------- $1,906,309 $1,837,158 ========== ========== See notes to consolidated financial statements. 4 HEILIG-MEYERS COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands) (Unaudited) Three Months Ended May 31, ------------------- 1997 1996 ---- ---- Cash flows from operating activities: Net earnings $ 13,761 $ 12,371 Adjustments to reconcile net earnings to net cash used by operating activities: Depreciation and amortization 12,572 7,999 Provision for doubtful accounts 22,928 18,943 Other, net 116 (176) Change in operating assets and liabilities net of the effects of acquisitions: Accounts receivable (51,300) (42,555) Other receivables 7,009 (2,139) Inventories (8,372) (24,885) Prepaid expenses 917 (3,797) Accounts payable 2,591 26,550 Accrued expenses 13,587 3,462 --------- -------- Net cash provided (used) by operating activities 13,809 (4,227) --------- ------- Cash flows from investing activities: Acquisitions, net of cash acquired (2,961) (2,088) Additions to property and equipment (38,864) (15,251) Disposals of property and equipment 2,174 353 Miscellaneous investments (5,879) (4,670) --------- ------- Net cash used by investing activities (45,530) (21,656) --------- -------- Cash flows from financing activities: Net increase in notes payable 51,700 31,300 Payments of long-term debt (9,095) (7,638) Issuance of common stock 24 246 Dividends paid (4,019) (3,402) --------- --------- Net cash provided by financing activities 38,610 20,506 --------- -------- Net increase (decrease) in cash 6,889 (5,377) Cash at beginning of period 14,959 16,017 --------- -------- Cash at end of period $ 21,848 $ 10,640 ========= ======== 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 first quarter of fiscal year 1998 are not necessarily indicative of future financial results. B. On April 2, 1997, the Board of Directors declared a cash dividend of $0.07 per share which was paid on May 17, 1997, to stockholders of record on April 23, 1997. C. Accounts receivable are shown net of the allowance for doubtful accounts and unearned finance income. The allowance for doubtful accounts was $47,149,000 and $41,120,000 and unearned finance income was $46,596,000 and $44,356,000 at May 31, 1997, and February 28, 1997, respectively. D. The Company made income tax payments of $4,584,872 and $- during the three months ended May 31, 1997, and May 31, 1996, respectively. E. The Company made interest payments of $9,342,000 and $10,577,000 during the three months ended May 31, 1997, and May 31, 1996, respectively. F. MacSaver Financial Services, 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 Statement of Earnings (Amounts in thousands) (Unaudited) Three Months Ended May 31, ------------------ 1997 1996 -------- -------- Net revenues $ 59,243 $ 22,836 Operating expenses 54,050 12,905 -------- -------- Earnings before taxes 5,193 9,931 -------- -------- Net earnings 3,375 6,455 ======== ======== MacSaver Financial Services Summarized Balance Sheet (Amounts in thousands) May 31, February 28, 1997 1997 ----------- ---------- (Unaudited) (Audited) Current assets $ 35,210 $ 36,401 Accounts receivable, net 499,409 454,774 Due to affiliates 510,681 504,763 ---------- ---------- Total Assets $1,045,300 $ 995,938 ========== ========== Current liabilities 123,206 128,921 Long-term debt 545,000 545,000 Notes payable 207,700 156,000 Stockholder's equity 169,394 166,017 ---------- ---------- Total Liabilities and Equity $1,045,300 $ 995,938 ========== ========== G. In February 1997, the Financial Accounting Standards Board issued Statement on 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 will, 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) Three Months Ended May 31, 1997 1996 ---------------- Average shares outstanding (basic earnings per share) 54,414 48,584 Stock option equivalents 833 1,096 Average shares and equivalents 55,247 49,680 (diluted earnings per share) Basic EPS $0.25 $0.25 Diluted EPS $0.25 $0.25 7 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. RESULTS OF OPERATIONS Total revenues for the quarter rose 58.2% to $566.3 million from $357.9 million in the prior year. Of the increase between periods, $141.5 million relates to the recent acquisitions of Rhodes and The RoomStore. Excluding Rhodes and The RoomStore, total revenues for the quarter increased 18.7% from the prior year. Net earnings increased 11.2% to $13.8 million (or $0.25 per share) from $12.4 million (or $0.25 per share) in the prior year. Sales for the first quarter of fiscal 1998 increased 62.6% to $489.0 million from $300.7 million in the first quarter of the prior year. The overall increase in sales was primarily attributable to an increase in operating units from May 31, 1996 to May 31, 1997, and a comparable store sales increase of 3.4% for the three months ended May 31, 1997. The Company's Heilig-Meyers stores provided 67% of total sales for the first quarter of fiscal 1998, or $325.7 million, representing a 17.7% 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 $28.5 million, or 6% of total sales. Sales also include the results from the recently acquired Rhodes and The RoomStore units. During the quarter the conversion of 8 Rhodes units to The RoomStore format was begun and is expected to be completed during the third quarter. The 99 Rhodes stores contributed $111.5 million, or 23% of total sales. The 18 RoomStore units contributed $19.1 million, or 4% of total sales. 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 has been impacted by an overall rise in consumer debt levels. 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 first quarter to 15.8% from 19.0% in the prior year quarter. This decrease is primarily the result of the effect of the Rhodes' and The RoomStore's operations, as these stores' credit programs are maintained by a third party and, accordingly, do not produce finance income for the Company. To a lesser extent, a higher level of securitized accounts receivable as compared to the prior year also affected the results. Excluding the results of Rhodes and The RoomStore, other income for the first quarter represented 18.5% of sales. 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 65.4% of sales from 64.4% in the prior year quarter. This increase was primarily the result of 8 higher distribution costs and lower raw selling margins as a percentage of sales. A new distribution center in Athens, Texas began servicing stores in March 1997 and was at approximately 40% capacity at the end of the first quarter of fiscal 1998. The facility serviced approximately 50 stores during the quarter while it is designed to service approximately 130 stores. Raw selling margins, particularly in the Heilig-Meyers stores, were impacted by a shift in sales mix to lower margin goods. Selling, general and administrative expense decreased as a percentage of sales to 38.0% from 38.4% in the prior year quarter. The decrease between years was the result of leverage gained on the sales at the Rhodes and The RoomStore units. The Rhodes and The RoomStore units have generally lower levels of administrative costs as a percentage of sales than the Heilig-Meyers units as these stores' revolving credit extension and collections are maintained by third-party credit providers. However, the decrease caused by the Rhodes and The RoomStore leverage was somewhat offset by the Heilig-Meyers stores' continued commitment of additional resources to collection efforts which resulted in higher salaries as a percentage of sales than the prior year quarter. Advertising increased slightly as a percentage of sales due to increased circular distribution. Interest expense decreased to 3.2% of sales in the first quarter of fiscal 1997 from 3.5% of sales in the first quarter of the prior year. The decrease is mainly due to leverage on the sales of Rhodes and The RoomStore, which were purchased with common stock. For the quarter, weighted average long-term debt increased to $641.5 million from $364.4 million in the prior year first quarter. The Company 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 7.8% between periods. Weighted average short-term debt decreased to $175.0 million from $180.6 million in the prior year. Weighted average short-term interest rates increased to 6.0% from 5.7% in the prior year. 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 first quarter, as a percentage of sales, to 4.7% from 6.3% in the prior year quarter. The decrease was the result of the operations of Rhodes and The RoomStore as these units do not offer in-house credit. Excluding the effect of Rhodes and The RoomStore, the provision was 6.4% of sales for the first quarter. The effective income tax rate for the first quarter of fiscal 1998 was 37.5% compared to 35.6% for the first quarter of fiscal 1997. This increase is due to higher effective tax rates of recently acquired operating subsidiaries resulting from the carryover tax attributes of acquired assets and liabilities. Management believes that the consolidated effective rate for the remainder of the year will more closely align with the prior year. LIQUIDITY AND CAPITAL RESOURCES The Company increased its cash position $6.9 million to $21.8 million at May 31, 1997, from $14.9 million at February 28, 1997, compared to a decrease of $5.4 million in the comparable period a year ago. 9 Net cash inflow from operating activities was $13.8 million, compared to a net cash outflow of $4.2 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 quarters of fiscals 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 quarter, inventory levels increased at a slower rate than the prior year quarter primarily due to the sale of inventory from the recent acquisitions as well as the sales increase in the quarter. There was a corresponding smaller increase in the Company's payable accounts as a result of the lower 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 $45.5 million during the first quarter of fiscal 1998 compared to negative cash flows of $21.7 million in the prior year first quarter. The increase in negative cash flows from 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 26 new store locations and related support facilities as well as the remodeling and improvement of existing and acquired locations. The Company plans to open approximately 80 new Heilig-Meyers stores during 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 $38.6 million during the first quarter of fiscal 1998 compared to a $20.5 million positive cash flow in the prior year first quarter. The positive cash flow from financing activities in both the current and prior year quarters was due to an increase in notes payable. As of May 31, 1997, long-term notes payable with an aggregate principal amount of $300.0 million have been issued to the public and are outstanding under this facility. 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. No securities have been issued under this registration statement as of July 1, 1997. 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 May 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 $195.0 million outstanding and $205.0 million unused as of May 31, 1997. The Company also had additional lines of credit with banks totaling $60.0 million of which $47.3 million was unused as of May 31, 1997. Total debt as a percentage of debt and equity was 56.9% at May 31, 1997, compared to 56.0% at February 28, 1997. The current ratio was 1.8 at May 31, 1997, compared to 1.9 at February 28, 1997. The decrease in the current ratios and increase in total debt as a percentage of debt and equity from February 28, 1997 to May 31, 1997 is primarily attributed to a $51.7 million increase in notes payable. 10 Acquisition On July 1, 1997, the Company acquired Mattress Discounters, a privately held bedding retailer and manufacturer based in Upper Marlboro, Maryland. The acquisition is being 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. Mattress Discounters is the nation's largest retail bedding specialist with revenues of approximately $175 million for its fiscal year ended December 28, 1996. As of July 1, 1997, Mattress Discounters had 169 stores in ten states and Washington, D.C. 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. 11 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 as set forth in the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1997. In addition, on June 23, 1997, Wahl v. Heilig-Meyers Company and Heilig-Meyers Furniture Company was filed in Memphis, Tennessee Chancery Court. The plaintiff in this case seeks certification of a class of certain individuals who made purchases in the Company's Tennessee stores, alleges violation of Tennessee statutes, and seeks statutory damages and unspecified punitive damages. 12 Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. See INDEX TO EXHIBITS (b) There was one Current Report on Form 8-K filed during the quarterly period ended May 31, 1997. On April 10, 1997, Registrant filed a Form 8-K in which it reported the public offering on February 20, 1997 by MacSaver Financial Services, Inc. of $100 million aggregate principal amount of 7.40% Notes due February 15, 2002, guaranteed as to payment of principal and interest by Registrant. INDEX TO EXHIBITS Page ---- 10. Contracts a. Amended and Restated Guaranty by the Registrant, dated as of May 9, 1997, of certain obligations under the Amended and Restated Merchant Agreement by and among Beneficial National Bank USA, HMY RoomStore, Inc. and Rhodes, Inc., dated as of May 9, 1997. 15 11. Computation of Per Share Earnings 18 27. Financial Data Schedule 19 13 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: July 11, 1997 /s/Roy B. Goodman ------------- ----------------- Roy B. Goodman Senior Vice President and Principal Financial Officer Date: July 11, 1997 /s/William J. Dieter ------------- -------------------- William J. Dieter Senior Vice President, Accounting and Principal Accounting Officer 14 EX-10 2 AMENDED AND RESTATED GUARANTY Exhibit 10.a. AMENDED AND RESTATED GUARANTY This Amended and Restated Guaranty ("Amended and Restated Guaranty") is executed as of the 9th day of May, 1997 by Heilig-Meyers Company, a Virginia corporation (the "Guarantor"), in favor of Beneficial National Bank USA, a national banking association ("BNB USA"). PRELIMINARY STATEMENTS WHEREAS, Rhodes, Inc., a Georgia corporation ("Rhodes"), and BNB USA are parties to a Merchant Agreement dated as of May 15, 1992, which was amended from time to time (the "Original Merchant Agreement"); WHEREAS, Rhodes is a wholly-owned subsidiary of the Guarantor; WHEREAS, the Guarantor guaranteed the payment obligations of Rhodes under Section 9(D) of the Original Merchant Agreement (the "Original Guarantee"); WHEREAS, the Original Merchant Agreement was amended and restated as of May 9, 1997 (the "Amended and Restated Merchant Agreement") by Rhodes, the Guarantor, BNB USA and HMY RoomStore, Inc., a Virginia corporation ("RoomStore"); WHEREAS, RoomStore is a wholly-owned subsidiary of the Guarantor; WHEREAS, the Guarantor has agreed to guarantee the payment obligations of Rhodes and RoomStore under Section 9(D) of the Amended and Restated Merchant Agreement; WHEREAS, the Guarantor and BNB USA desire to amend and restate the Original Guarantee; NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the Guarantor, the Guarantor agrees as follows: Definitions. Unless otherwise defined in this Amended and Restated Guaranty, all defined terms used in this Amended and Restated Guaranty shall have the meanings ascribed to such terms in the Amended and Restated Merchant Agreement. Guaranty of Obligations. The Guarantor unconditionally guarantees the full and prompt payment when due of all of the payment obligations of Rhodes and RoomStore under Section 9(D)(3) of the Amended and Restated Merchant Agreement (pursuant to which Rhodes and RoomStore are obligated to repurchase certain Recourse Accounts), under Section 9(D)(4) of the Amended and Restated Merchant Agreement (pursuant to which Rhodes and RoomStore are obligated to pay certain expenses associated with the collection of the Recourse Accounts) and under Section 9(D)(7) of the Amended and Restated Merchant Agreement (pursuant to which Rhodes and RoomStore are obligated to establish and maintain a reserve or secure and maintain a letter of credit in favor of BNB USA) (collectively, the "Obligations"). Payment of Costs and Expenses. The Guarantor shall pay all reasonable costs and expenses, including, without limitation, all court costs and attorney's fees and expenses, paid or incurred by BNB USA in connection with the enforcement of the obligations of the Guarantor under this Amended and Restated Guaranty. 15 Validity of Obligations; Irrevocability. The Guarantor agrees that its obligations under this Amended and Restated Guaranty shall be absolute and unconditional, irrespective of (i) the validity, enforceability, discharge, disaffirmance, settlement or compromise (by any person, including a trustee in bankruptcy) of the Obligations, (ii) the absence of any attempt to collect the Obligations from Rhodes or RoomStore, (iii) the waiver or consent by BNB USA with respect to any provision of any instrument evidencing the Obligations, (iv) any change of the time, manner or place of payment or performance, or any other term of any of the Obligations, (v) any law, regulation or order of any jurisdiction affecting any term of any of the Obligations or rights of BNB USA with respect thereto or (vi) any other circumstances which might otherwise constitute a legal or equitable discharge or defense of a guarantor. The Guarantor agrees that BNB USA shall be under no obligation to marshall any assets in favor of or against or in payment of any or all of the Obligations. The Guarantor further agrees that, to the extent that Rhodes or RoomStore makes a payment or payments to BNB USA, which payment or payments or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to Rhodes or RoomStore, or to the estate, trustee, or receiver of Rhodes or RoomStore or to any other party, including, without limitation, the Guarantor, under any bankruptcy, insolvency or similar state or federal law, common law or equitable cause, then to the extent of such payment or repayment, the Obligation or part thereof which has been paid, reduced or satisfied by such amount shall be reinstated and continued in full force and effect as of the date such initial payment, reduction or satisfaction occurred. The Guarantor waives all set-offs and counterclaims and all presentments, demands for performance, notices of dishonor and notices of acceptance of this Amended and Restated Guaranty. The Guarantor agrees that its obligations under this Amended and Restated Guaranty shall be irrevocable. Rights of Set-Off. The Guarantor hereby authorizes BNB USA at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (whether general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by BNB USA to or for the credit or the account of the Guarantor against any and all of the obligations of the Guarantor now or hereafter existing under this Amended and Restated Guaranty to BNB USA. The Guarantor acknowledges that the rights of BNB USA described in this Section 5 are in addition to other rights and remedies (including, without limitation, other rights of set-off) BNB USA may have. Successors and Assigns. This Amended and Restated Guaranty shall bind the Guarantor and its successors and assigns and shall inure to the benefit of and be enforceable by BNB USA and its respective successors and assigns. Severability. If any term or provision of this Amended and Restated Guaranty shall be determined to be illegal or unenforceable to any extent with respect to any person or circumstance, the enforceability of such term or provision shall not be affected with respect to any other person or circumstance, and such term or provision shall be enforceable to the fullest extent permitted by applicable law. Governing Law. This Amended and Restated Guaranty shall be governed by and construed in accordance with the laws of the State of Delaware. IN WITNESS WHEREOF, this Amended and Restated Guaranty has been duly executed by the Guarantor as of the date first written above. 16 HEILIG-MEYERS COMPANY By /s/ Paige H. Wilson ---------------------- Name: Paige H. Wilson Title: Vice President, Treasurer and Secretary Acknowledged and accepted as of this 27th day of June, 1997 BENEFICIAL NATIONAL BANK, USA By /s/ Signature Unreadable ------------------------ Name: Title: 17 EX-11 3 STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS Exhibit 11 HEILIG-MEYERS COMPANY COMPUTATION OF PER SHARE EARNINGS (Amounts in thousands except per share data) Three Months Ended ------------------ May 31, May 31, 1997 1996 ---- ---- Primary Earnings Per Share: Average number of shares outstanding 54,414 48,584 Net effect of stock options 833 1,096 Average number of shares as adjusted 55,247 49,680 Net earnings $13,761 $12,371 Per share amount $ .25 $ .25 Fully Diluted Earnings Per Share: Average number of shares outstanding 54,414 48,584 Net effect of stock options 881 1,138 Average number of shares as adjusted 55,295 49,722 Net earnings $13,761 $12,371 Per share amount $ .25 $ .25 Earnings Per Common Share: Earnings per common share is computed by dividing net earnings by the weighted average number of shares of common stock and common stock equivalents outstanding during the year. The Company has issued stock options, which are the Company's only common stock equivalent, at exercise prices ranging from $5.52 to $35.06. Stock options which were antidilutive for the period ended May 31, 1997 were not included in the earnings per share calculation. 18 EX-27 4 FDS 5/31/97
5 3-MOS FEB-28-1998 MAY-31-1997 21848000 0 671112000 47149000 443259000 1169988000 532678000 138249000 1906309000 638889000 560912000 0 0 108830000 543557000 1906309000 489040000 566325000 319982000 319982000 0 22928000 15428000 22000000 8239000 13761000 0 0 0 13761000 0.25 0.25
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