-----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, Giy2Q2uvCStQdSxjztewyFOnXQhmz8Gr3kVTqeFCfODslOiD9iRD3XUyOJA/Mg5l 540AcFbU5gyInPCCYYSmYA== 0000046601-96-000010.txt : 19960715 0000046601-96-000010.hdr.sgml : 19960715 ACCESSION NUMBER: 0000046601-96-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960531 FILED AS OF DATE: 19960712 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: 96594181 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 May 31, 1996 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, 1996. 48,604,804 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, 1996 and May 31, 1995 (Unaudited) 3 Consolidated Balance Sheets as of May 31, 1996, and February 29, 1996 (Unaudited) 4 Consolidated Statements of Cash Flows for Three Months Ended May 31, 1996 and May 31, 1995 (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 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 May 31, 1996. 11 HEILIG-MEYERS COMPANY CONSOLIDATED STATEMENTS OF EARNINGS (Amounts in thousands except per share data) (Unaudited) Three Months Ended May 31, 1996 1995 Revenues: Sales $300,691 $265,968 Other income 57,223 53,003 Total revenues 357,914 318,971 Costs and Expenses: Costs of sales 193,714 169,604 Selling, general and administrative 115,458 98,125 Interest 10,591 9,517 Provision for doubtful accounts 18,943 12,514 Total costs and expenses 338,706 289,760 Earnings before provision for income taxes 19,208 29,211 Provision for income taxes 6,837 10,745 Net earnings $ 12,371 $ 18,466 Net earnings per share of common stock: Primary and fully diluted $0.25 $0.37 Cash dividends per share of common stock $0.07 $0.07 See notes to consolidated financial statements. HEILIG-MEYERS COMPANY CONSOLIDATED BALANCE SHEETS (Amounts in thousands except par value data) (Unaudited) May 31, February 29, 1996 1996 ASSETS Current assets: Cash $ 10,640 $ 16,017 Accounts receivable, net 541,526 518,969 Other receivables 15,777 13,638 Inventories 321,125 293,191 Other 56,604 53,501 Total current assets 945,672 895,316 Property and equipment, net 224,395 216,059 Excess costs over net assets acquired, net 182,424 177,585 $1,352,491 $1,288,960 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable $ 221,300 $ 190,000 Long-term debt due within one year 17,814 17,812 Accounts payable 114,289 87,739 Accrued expenses 76,554 71,916 Total current liabilities 429,957 367,467 Long-term debt 344,991 352,631 Deferred income taxes 49,267 49,879 Stockholders' equity: Preferred stock, $10 par value --- --- Common stock, $2 par value 97,190 97,143 Capital in excess of par value 121,046 120,769 Retained earnings 310,040 301,071 Total stockholders' equity 528,276 518,983 $1,352,491 $1,288,960 See notes to consolidated financial statements. HEILIG-MEYERS COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands) (Unaudited) Three Months Ended May 31, 1996 1995 Cash flows from operating activities: Net earnings $ 12,371 $ 18,466 Adjustments to reconcile net earnings to net cash used by operating activities: Depreciation and amortization 7,999 7,440 Provision for doubtful accounts 18,943 12,514 Other, net (176) (51) Change in operating assets and liabilities net of the effects of acquisitions: Accounts receivable (42,555) (37,679) Other receivables (2,139) (5,425) Inventories (24,885) (6,179) Prepaid expenses (3,797) (5,227) Accounts payable 26,550 (729) Accrued expenses 3,462 8,021 Net cash used by operating activities (4,227) (8,849) Cash flows from investing activities: Acquisitions, net of cash acquired (2,088) (706) Additions to property and equipment (15,251) (17,144) Disposals of property and equipment 353 834 Miscellaneous investments (4,670) (1,829) Net cash used by investing activities (21,656) (18,845) Cash flows from financing activities: Net increase in notes payable 31,300 42,200 Payments of long-term debt (7,638) (7,661) Issuance of common stock 246 25 Dividends paid (3,402) (3,400) Net cash provided by financing activities 20,506 31,164 Net (decrease) increase in cash (5,377) 3,470 Cash at beginning of period 16,017 10,360 Cash at end of period $ 10,640 $ 13,830 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 29, 1996. 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 1996 Annual Report on Form 10-K. The results for the first quarter of fiscal year 1997 are not necessarily indicative of future financial results. B. On April 3, 1996, the Board of Directors declared a cash dividend of $0.07 per share which was paid on May 18, 1996, to stockholders of record on April 24, 1996. C. Accounts receivable are shown net of the allowance for doubtful accounts and unearned finance income. The allowance for doubtful accounts was $70,134,000 and $64,714,000 and unearned finance income was $62,409,000 and $60,114,000 at May 31, 1996, and February 29, 1996, respectively. D. The Company made income tax payments of $0 and $505,000 during the three months ended May 31, 1996, and May 31, 1995, respectively. E. The Company made interest payments of $9,577,000 and $9,779,000 during the three months ended May 31, 1996, and May 31, 1995, 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 29, 1996. RESULTS OF OPERATIONS Total revenues for the quarter rose 12.2% to $357.9 million from $319.0 million in the prior year. Net earnings decreased 33.0% to $12.4 million (or $0.25 per share) from $18.5 million (or $0.37 per share) in the prior year. Sales for the first quarter of fiscal 1997 increased 13.1% to $300.7 million from $266.0 million in the first quarter of the prior year. The overall increase in sales was attributable to an increase of 76 stores from May 31, 1995 to May 31, 1996, and a comparable store sales increase of 2.2% for the three months ended May 31, 1996. The Company's Eastern stores provided 81% of total sales for the first quarter of fiscal 1997, or $242.9 million, representing an 9.1% increase in sales over the same period of the prior year. The Company's West stores added $33.9 million, or 11% of total sales, representing a 27.5% increase over the same period of the prior year. The Company's 30 Puerto Rican stores contributed $24.0 million, or 8% of total sales. Overall sales increases for the three months ended May 31, 1996 were due to increased volume with an immaterial impact from price changes. As a percentage of sales, other income decreased during the first quarter to 19.0% from 19.9% in the prior year quarter. This decrease is primarily the result of lower finance income as a percentage of sales. Finance income has increased at a lower rate than sales due to a larger pool of securitized accounts receivable compared to the prior year. 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. Proceeds from securitized accounts receivable are generally used by the Company to lower debt levels. Costs of sales increased during the quarter to 64.4% of sales from 63.8% in the prior year quarter. Loss of leverage on certain fixed-type expenses such as occupancy due to lower comparable store sales and normal year over year increases to certain fixed-type costs were the primary reason for this increase. Slightly lower raw margins, due in part to stronger sales of lower margin merchandise compared to the prior year, also contributed to this increase. Selling, general and administrative expense increased as a percentage of sales to 38.4% from 36.9% in the prior year quarter. This increase was due primarily to additional costs incurred as a result of increased emphasis on monitoring and collecting installment accounts receivable, costs associated with additional investments in infrastructure to support Puerto Rican operations, including nine stores acquired in October 1995, and a loss of leverage on fixed- type expenses due to lower comparable store sales compared to the prior year period. The impact of these increases was partially offset by reduced advertising expense, as a percentage of sales, compared to the prior year period. Interest expense decreased to 3.5% of sales in the first quarter of fiscal 1997 from 3.6% of sales in the first quarter of the prior year. The decrease is mainly due to lower long-term debt levels. For the quarter, weighted average long-term debt decreased to $364.4 million from $392.6 million in the prior year. Weighted average long-term interest rates decreased to 7.8% from 7.9% in the prior year period. Weighted average short-term debt increased to $180.6 million from $151.8 million in the prior year. Weighted average short-term interest rates decreased to 5.7% from 6.4% in the prior year. The Company expects 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 for the first quarter, as a percentage of sales, to 6.3% from 4.7% in the prior year quarter. The increase was the result of the lagging effects of a rise in the portfolio loss rate and related write-offs experienced in the third and fourth quarters of fiscal year 1996. The credit extension and collection process is constantly monitored by management to minimize the portfolio loss rate. The income tax rate in effect for the first quarter of fiscal 1997 was 35.6% compared to 36.8% for the first quarter of fiscal 1996. This decrease in the income tax rate is primarily the result of higher fixed dollar income tax credits in the current year (as a percentage of pretax income) and the lower effective tax rate on the Company's Puerto Rican earnings compared to the Company as a whole. LIQUIDITY AND CAPITAL RESOURCES The Company decreased its cash position $5.4 million to $10.6 million at May 31, 1996, from $16.0 million at February 29, 1996, compared to an increase of $3.5 million in the comparable period a year ago. Net cash outflow from operating activities was $4.2 million, compared to a net cash outflow of $8.8 million in the comparable period of the prior year. The Company traditionally produces a deficit in cash flow from operating activities because it extends credit to its customers. An increase in accounts receivable due to a 13.1% increase in sales during the quarter led to the net cash outflow during the first quarter of fiscal 1997. During the quarter, inventory levels rose primarily due to the new stores added in addition to certain new merchandise items being added to store line-ups. This increase in inventory was offset by a corresponding increase to the Company's payable accounts. Continued extension of credit and related increases in customer accounts receivable will likely produce negative cash flow from operations in the upcoming fiscal 1997 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 $21.7 million during the first quarter of fiscal 1997 compared to negative cash flows of $18.8 million in the prior year first quarter. The increase in negative cash flows from investing activities is primarily due to increased funding of certain miscellaneous investments made during the first quarter of fiscal 1997. The Company expects total capital spending for fiscal 1997 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 positive cash flows of $20.5 million during the first quarter of fiscal 1997 compared to a $31.2 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. The Company has a $400.0 million revolving credit facility, of which $230.0 million was unused at May 31, 1996. The Company also has lines of credit with banks, totaling $60.0 million, of which $8.7 was unused at May 31, 1996. In addition, the Company has a commitment from a bank to borrow $60.0 million for five years, if necessary. OUTLOOK The retail furniture environment showed only minimal improvement during the first quarter of fiscal 1997 and thus the Company is anticipating marginal same store sales increases in the upcoming quarters. However, during the first quarter of fiscal 1997, the underlying trends in costs of sales and selling, general and administrative expense showed improvement (as a percentage of sales) as compared to the third and fourth quarters of the prior fiscal year. These improvements were the result of the Company's disciplined promotional strategy and related focus on merchandising margins and cost control. The Company anticipates these improving trends will continue and result in favorable year over year improvements to costs of sales and selling, general and administrative expense (as a percentage of sales) in the third and fourth quarters of this fiscal year. Certain statements included in the above discussion are not based on historical facts, but are forward-looking statements that are based upon a number of assumptions concerning future conditions that may ultimately prove to be inaccurate. Actual events and results may materially differ from anticipated results described in such statements. The Company's ability to achieve such results is subject to certain risks and uncertainties, including, but not limited to, adverse changes in the Company's customer spending habits, continued availability of capital and financing, competitive factors, and economic and other factors affecting the Company's business beyond the Company's control. 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 12, 1996 /s/Joseph R. Jenkins Joseph R. Jenkins Executive Vice President and Principal Financial Officer Date: July 12, 1996 /s/William J. Dieter William J. Dieter Senior Vice President, Accounting and Principal Accounting Officer 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 May 31, 1996. INDEX TO EXHIBITS Page Exhibit 11. Computation of Per Share Earnings 12 Exhibit 27. Financial Data Schedule 13 EXHIBIT 11 HEILIG-MEYERS COMPANY COMPUTATION OF PER SHARE EARNINGS (Amounts in thousands except per share data) Three Months Ended May 31, May 31, 1996 1995 Primary Earnings Per Share: Average number of shares outstanding 48,584 48,549 Net effect of stock options 1,096 1,080 Average number of shares as adjusted 49,680 49,629 Net earnings $12,371 $18,466 Per share amount $ .25 $ .37 Fully Diluted Earnings Per Share: Average number of shares outstanding 48,584 48,549 Net effect of stock options 1,138 1,244 Average number of shares as adjusted 49,722 49,793 Net earnings $12,371 $18,466 Per share amount $ .25 $ .37 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, 1996 were not included in the earnings per share calculation. EX-27 2
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