-----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, Co2kXwJVPGMHuHpK+vIsG218O4+YgcOP5vCnB1dgDZY3Uh2/l6+W9AUZipN0ZYD5 Dwp97L9Ibvs9Dc2LXPnGfQ== 0000046601-95-000031.txt : 19951017 0000046601-95-000031.hdr.sgml : 19951017 ACCESSION NUMBER: 0000046601-95-000031 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950831 FILED AS OF DATE: 19951016 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: 95580821 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 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, 1995 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 October 1, 1995. 48,561,996 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, 1995 and August 31, 1994 (Unaudited) 3 Consolidated Balance Sheets as of August 31, 1995, and February 28, 1995 (Unaudited) 4 Consolidated Statements of Cash Flows for Six Months Ended August 31, 1995 and August 31, 1994 (Unaudited) 5 Notes to Consolidated Financial Statements (Unaudited) 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 PART II. OTHER INFORMATION Item 1. Legal Proceedings 10 Item 4. Submission of Matters to a Vote of Security Holders 10 Item 6. Exhibits and Reports on Form 8-K a. Exhibits - see Index to Exhibits 11 b. There were no reports on Form 8-K filed during the quarter ended August 31, 1995. 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, 1995 1994 1995 1994 Revenues: Sales $270,356 $223,359 $536,324 $446,540 Other income 54,505 45,760 107,508 91,426 Total revenues 324,861 269,119 643,832 537,966 Costs and Expenses: Costs of sales 179,853 145,244 349,458 286,515 Selling, general and administrative 103,018 82,195 201,143 163,434 Interest 10,453 7,890 19,970 14,991 Provision for doubtful accounts 13,859 10,208 26,373 20,288 Total costs and expenses 307,183 245,537 596,944 485,228 Earnings before provision for income taxes 17,678 23,582 46,888 52,738 Provision for income taxes 6,362 8,765 17,107 19,611 Net earnings $ 11,316 $ 14,817 $ 29,781 $ 33,127 Net earnings per share of common stock: Primary and fully diluted $0.23 $0.30 $0.60 $0.66 Cash dividends per share of common stock $0.07 $0.06 $0.14 $0.12 See notes to consolidated financial statements. HEILIG-MEYERS COMPANY CONSOLIDATED BALANCE SHEETS (Amounts in thousands except par value data) (Unaudited) August 31, February 28, 1995 1995 ASSETS Current assets: Cash $ 11,870 $ 10,360 Accounts receivable, net 492,489 538,208 Other receivables 16,587 13,231 Inventories 275,459 253,529 Other 47,918 37,354 Total current assets 844,323 852,682 Property and equipment, net 216,401 203,201 Excess costs over net assets acquired, net 164,500 153,054 $1,225,224 $1,208,937 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable $ 150,000 $ 139,800 Long-term debt due within one year 17,912 28,125 Accounts payable 81,476 87,523 Accrued expenses 51,797 43,138 Total current liabilities 301,185 298,586 Long-term debt 359,084 370,432 Deferred income taxes 51,105 49,529 Stockholders' equity: Preferred stock, $10 par value --- --- Common stock, $2 par value 97,118 97,096 Capital in excess of par value 120,584 120,129 Retained earnings 296,148 273,165 Total stockholders' equity 513,850 490,390 $1,225,224 $1,208,937 See notes to consolidated financial statements. HEILIG-MEYERS COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands) (Unaudited) Six Months Ended August 31, 1995 1994 Cash flows from operating activities: Net earnings $ 29,781 $ 33,127 Adjustments to reconcile net earnings to net cash used by operating activities: Depreciation and amortization 14,298 11,992 Provision for doubtful accounts 26,373 20,288 Other, net --- (81) Change in operating assets and liabilities net of the effects of acquisitions: Accounts receivable (81,373) (86,230) Sale of accounts receivable 100,000 50,000 Other receivables (4,079) (425) Inventories (7,814) (42,194) Prepaid expenses (12,390) (11,988) Accounts payable (6,047) 11,189 Accrued expenses 5,808 (5,885) Net cash provided/(used) by operating activities 64,557 (20,207) Cash flows from investing activities: Acquisitions, net of cash acquired (9,644) (26,523) Additions to property and equipment (32,666) (26,553) Disposals of property and equipment 1,220 234 Miscellaneous investments (3,913) (1,846) Net cash used by investing activities (45,003) (54,688) Cash flows from financing activities: Net increase (decrease) in notes payable 10,200 (10,500) Proceeds from long-term debt 0 105,000 Payments of long-term debt (21,561) (15,227) Issuance of common stock 116 1,151 Dividends paid (6,799) (5,813) Net cash (used)/provided by financing activities (18,044) 74,611 Net (decrease)/increase in cash 1,510 (284) Cash at beginning of period 10,360 6,295 Cash at end of period $ 11,870 $ 6,011 See notes to consolidated financial statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A. The accompanying consolidated financial statements of Heilig-Meyers Company have not been audited by independent accountants, except for the balance sheet at February 28, 1995. 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 1995 Annual Report on Form 10-K. The results for the second quarter of fiscal year 1996 are not necessarily indicative of future financial results. B. On June 21, 1995, the Board of Directors declared a cash dividend of $0.07 per share which was paid on August 26, 1995, to stockholders of record on July 19, 1995. C. During the second quarter of fiscal year 1996, the Company sold accounts receivable through an asset securitization totaling $100.0 million. D. Accounts receivable are shown net of the allowance for doubtful accounts and unearned finance income. The allowance for doubtful accounts was $43,550,000 and $46,678,000 and unearned finance income was $52,653,000 and $54,554,000 at August 31, 1995, and February 28, 1995, respectively. E. The Company made income tax payments of $12,812,000 and $21,314,000 during the three months ended August 31, 1995, and August 31, 1994, respectively. F. The Company made interest payments of $9,380,000 and $12,685,000 during the three months ended August 31, 1995, and August 31, 1994, respectively. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION 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, 1995. RESULTS OF OPERATIONS Total revenues for the quarter rose 20.7% to $324.9 million from $269.1 million in the prior year. Net earnings decreased 23.6% to $11.3 million (or $0.23 per share) from $14.8 million (or $0.30 per share) in the prior year. Sales for the second quarter increased 21.0% to $270.4 million from $223.4 million in the second quarter of the prior year. For the six month period ended August 31, 1995, sales increased 20.1% to $536.2 million from $446.5 million in the prior year. Comparable store sales were 3.1% and 2.8% compared to 6.1% and 7.4% for the three and six months ended August 31, 1995 and 1994, respectively. The Company's southwestern stores, consisting mainly of the stores acquired from McMahan's Furniture Company in January 1994, provided 11.0% of total sales for the second quarter of fiscal 1996, or $30.3 million, representing a 25.0% increase over the prior year quarter. The Company's recently acquired Puerto Rican stores provided 6% of total sales during the second quarter, or $16.7 million. Sales increases were below Management's expectations due to an overall sluggish retail environment. Overall sales increases for the three and six months ended August 31, 1995 were due to increased volume with an immaterial impact from price changes. As a percentage of sales, other income decreased during the second quarter to 20.2% from 20.5% in the prior year quarter. For the six months ended August 31, 1995, other income decreased, as a percentage of sales, to 20.0% from 20.5% in the prior year. The decrease in both periods is primarily the result of higher interest costs associated with a larger pool of securitized receivables and lower than expected sales in the first and second quarters. Interest costs related to securitized receivables, which are based on the dollar value of receivables sold to third parties, are netted against finance income. Proceeds from securitized receivables are generally used by the Company to lower debt levels. Costs of sales increased during the quarter to 66.5% of sales from 65.0% in the prior year quarter. In an effort to stimulate sales, the Company increased promotional pricing during the quarter. This accounted for approximately 1.0 percentage point of the increase in cost of sales, with the remaining increase resulting from loss of sales leverage on fixed type expenses such as occupancy costs. For the six month period ended August 31, 1995, costs of sales were 65.1% compared to 64.2% in the prior year. This increase is mainly due to loss of sales leverage on occupancy and delivery costs for the six months ended August 31, 1995. Selling, general and administrative expense increased as a percentage of sales to 38.1% from 36.8% in the prior year quarter. For the six month period ended August 31, 1995, selling, general and administrative expense was 37.5% compared to 36.6% in the prior year. The increase in both periods is primarily the result of additional promotional activity initiated during the first and second quarters in an effort to stimulate sales. In addition, the increase was also due to a loss of sales leverage on certain fixed type expenses such as salaries and related costs. Interest expense increased to 3.9% of sales in the second quarter of fiscal 1996 from 3.5% of sales in the second quarter of the prior year. For the six month period ended August 31, 1995, interest expense increased to 3.7% from 3.4% in the prior year. The increase in both periods is primarily the result of higher long-term debt levels. For the quarter, weighted average long-term debt increased to $386.2 million from $286.8 million in the prior year. Weighted average long-term interest rates remained the same at 7.9% compared to the prior year quarter. Weighted average short-term debt increased to $208.0 million from $183.0 million in the prior year. Weighted average short-term interest rates increased to 6.3% from 4.7% in the prior year. The Company continues to focus 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 changes in short-term interest rates. The provision for doubtful accounts increased in the second quarter, as a percentage of sales, to 5.1% from 4.6% in the prior year. For the six months ended August 31, 1995, the provision increased to 4.9% from 4.5% in the prior year. The increase in both periods was the result of a rise in the portfolio loss rate and related write-offs associated with the growing accounts receivable base (prior to the effect of securizations). As a result of current trends, the Company anticipates an increase to the provision, as a percentage of sales, in the remaining fiscal 1996 quarters. The extension of credit is constantly monitored by management to minimize the portfolio loss rate. The income tax rate in effect for fiscal 1996 is 36.5% compared to 36.9% for fiscal 1995. This decrease in the income tax rate is the result of larger fixed dollar income tax credits in the current year and the lower effective tax rate of the Company's Puerto Rican operations. LIQUIDITY AND CAPITAL RESOURCES The Company increased its cash position $1.5 million to $11.9 million at August 31, 1995, from $10.4 million at February 28, 1995, compared to a decrease of $.3 million in the comparable period a year ago. Net cash inflow from operating activities was $64.6 million, compared to a net cash outflow of $20.2 million in the comparable period of the prior year. The Company traditionally produces a deficit in cash flow from operations because it extends credit to its customers. However, during the second quarter of fiscal 1996, the Company entered into an asset securitization agreement involving the sale of $100.0 million of accounts receivable. Likewise, the Company entered into an asset securitization agreement during the first quarter of the prior year involving the sale of $50.0 million in accounts receivable. During the first six months of fiscal 1996, accounts receivable, prior to the effect of securitizations, grew at a slower rate due to a lower year-to-date sales growth of 21.0% in fiscal 1996 versus a year-to-date sales growth of 36.3% in the prior year. During the first six months of fiscal 1996, net cash outflows for inventories decreased as compared to the prior year. This decrease is mainly due to the addition of the Fontana Distribution Center in the prior year as well as fewer stores being opened in the six months ended August 31, 1995 (41 versus 44 in the prior year). Also contributing to the decrease in growth of inventory levels are slightly higher inventory turns compared to the prior year and increased utilization of inventory management techniques such as Just-In-Time inventory. Continued extension of credit and related increases in customer accounts receivable, combined with expected increases to inventory levels in preparation for the upcoming holiday selling season, will likely produce negative cash flow from operations in the forthcoming fiscal 1996 quarters. However, the Company periodically sells accounts receivable with limited recourse which provides additional positive cash flows from operating activities. Investing activities produced negative cash flows of $45.0 million during the first six months of fiscal 1996 as compared to negative cash flows of $54.7 million in the prior year. During the first six months of fiscal 1996, the Company began construction of twelve new prototype stores (versus eight in the prior year period) and completed three prototype stores initiated at the end of fiscal 1995. Continuing its store remodeling program, the Company remodeled 54 existing stores (versus 28 in the prior year period) during the six months ended August 31, 1995. Cash outflows for acquisitions decreased to $9.6 million during the first six months of fiscal 1996 from $26.5 million in the prior year. This decrease is primarily due to the prior year purchase of nine stores from Nelson Brothers Furniture Corporation of Chicago, Illinois, which included $12.9 million of accounts receivable. The Company expects total capital spending for fiscal 1996 to be stable as a percentage of both sales and assets compared to the prior fiscal year. Capital expenditures will continue to be financed by cash flows from operations, supplemented by funds from external sources. Financing activities produced negative cash flows of $18.0 million during the first six months of fiscal 1996 as compared to a $74.6 million positive cash flow in the prior year. During the same period in the prior year, the Company received $105 million from a long-term borrowing, the proceeds of which were used to reduce notes payable. Excluding this $105 million from the long-term borrowing, the prior year period produced negative cash flows of $30.4 million compared to negative cash flows of $18.0 million during the current year period. This decrease in negative cash flows is mainly due to the increase in notes payable in the current year period. During the second quarter of fiscal 1996, the Company entered into a five year, $400.0 million revolving credit facility, of which $265.0 million was unused at August 31, 1995. This credit facility replaced previously existing lines of credit totaling $300.0 million. OUTLOOK The Company expects the sluggish retail environment experienced during the first half of fiscal 1995 to continue during the third quarter. For the month ended September 30, 1995, sales increased 14.9% over the same period last year. Comparable store sales for the month ended September 30, 1995 were -0.9%. In an effort to stimulate sales in the third and fourth quarters, Management expects the need to continue its strategy of increased promotional pricing which could have an effect on gross margin percentages. Management is confident that the Company's core strategy of focusing on its small-town market niche while providing a broad selection of merchandise, flexible in-house credit and emphasizing customer service provides a strong foundation for continued long-term success. PART II. OTHER INFORMATION Item 1. Legal Proceedings. As previously reported in its Annual Report on Form 10K, the Company is involved in cases regarding credit insurance premiums and non-filing fees charged by the Company on certain transactions. The plaintiffs are alleging that the Company's charging of these fees violate certain state and federal statutes and are seeking statutory damages and unspecified punitive damages. One of these cases, Leverett et al v. Heilig-Meyers Furniture Company was filed on September 22, 1994 in the Superior Court of Richmond County, Georgia and was subsequently removed to the United States District Court for the Southern District of Georgia. The Company moved to dismiss the case and for summary denial of the class certification motion. On September 18, 1995, the Court granted the Company's motion for denial of class certification and has granted summary dismissal on two of the three counts brought by the plaintiff. As a result, the Company anticipates the amount involved in the resolution of this matter will be negligible. The Company is also party to Inman, et al v. Heilig-Meyers Furniture Company, et al (filed on May 12, 1994 in the Circuit Court of Fayette County, Alabama), in which a class consisting of certain of its Alabama customers has been conditionally certified. The plaintiffs seek compensatory and punitive damages related to the Company's charges for certain credit insurance products. The Company and plaintiff had reached a preliminary settlement in an amount not significant to the Company. However, the plaintiffs have reneged on this agreement. The Company intends to vigorously defend this case. Item 4. Submission of Matters to a Vote of Security Holders. (a) The Annual Meeting of the Company's shareholders was held June 21, 1995. (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 - 41,074,480 AGAINST - 31,918 ABSTAIN - 57,116 (c)(ii) The shareholders of the Company also elected a board of twelve directors for one-year terms. The elections were approved by the following vote: Directors For Withheld William C DeRusha 40,921,629 241,885 Troy A. Peery, Jr. 40,926,561 236,953 Alexander Alexander 41,042,411 121,103 Robert L. Burrus, Jr. 40,483,906 679,608 Aurthur D. Charpentier 41,046,036 117,478 Benjamin F. Edwards, III 41,045,736 117,778 Alan G. Fleisher 41,031,356 132,158 Nathaniel Krumbein 40,908,073 255,441 Hyman Meyers 40,905,238 258,276 S. Sidney Meyers 40,907,836 255,678 Lawrence N. Smith 41,044,536 118,978 George A. Thornton, III 41,044,236 119,278 Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. See INDEX TO EXHIBITS (b) There were no reports on Form 8-K filed during the quarter ended August 31, 1995. 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 16, 1995 s/s/Joseph R. Jenkins Joseph R. Jenkins Executive Vice President Principal Financial Officer Date: October 16, 1995 s/s/William J. Dieter William J. Dieter Senior Vice President, Accounting and Principal Accounting Officer INDEX TO EXHIBITS Page Exhibit 11. Computation of Per Share Earnings 14 Exhibit 27. Financial Data Schedule 15 EXHIBIT 11 HEILIG-MEYERS COMPANY COMPUTATION OF PER SHARE EARNINGS (Amounts in thousands except per share data) Three Months Ended Six Months Ended August 31, August 31, August 31, August 31, 1995 1994 1995 1994 Primary Earnings Per Share: Average number of shares outstanding 48,554 48,441 48,554 48,436 Net effect of stock options 1,296 1,479 1,188 1,578 Average number of shares as adjusted 49,850 49,920 49,742 50,014 Net earnings $11,316 $14,817 $29,781 $33,127 Per share amount $ .23 $ .30 $ .60 $ .66 Fully Diluted Earnings Per Share: Average number of shares outstanding 48,554 48,441 48,554 48,436 Net effect of stock options 1,296 1,479 1,270 1,578 Average number of shares as adjusted 49,850 49,920 49,824 50,014 Net earnings $11,316 $14,817 $29,781 $33,127 Per share amount $ .23 $ .30 $ .60 $ .66 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 August 31, 1995 were not included in the earnings per share calculation. EX-27 2
5 6-MOS FEB-29-1996 AUG-31-1995 11870000 0 536039000 43550000 275459000 844323000 316209000 99808000 1225224000 301185000 359084000 97118000 0 0 416732000 1225224000 536324000 643832000 349458000 349458000 0 26373000 19970000 46888000 17107000 29781000 0 0 0 29781000 .60 .60
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