<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
DECEMBER 17, 1997 (SEPTEMBER 26, 1997)
Date of Report (Date of earliest event reported)
HECHINGER COMPANY
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 0-7214 52-1001530
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
</TABLE>
<TABLE>
<S> <C>
1801 MCCORMICK DRIVE, LARGO, MARYLAND 20774
(Address of principal executive offices) (Zip Code)
</TABLE>
(301) 341-1000
(Registrant's telephone number, including area code)
1 of 26
<PAGE> 2
ITEM 5. OTHER EVENTS
Filed herewith are the pro forma financial statements referenced in Item 5 of
the Registrant's Current Report on Form 8-K filed with the Securities and
Exchange Commission on October 14, 1997 (the "October 14, 1997 Form 8-K").
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Businesses Acquired
Filed herewith are the financial statements required by Item 7(a) of
the October 14, 1997 Form 8-K.
(b) Pro Forma Financial Information
Filed herewith is the pro forma financial information required by
Item 7(b) of the October 14, 1997 Form 8-K.
2
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HECHINGER COMPANY
INDEX TO FORM 8-K/A
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION PAGE
- ----------- ----
<S> <C> <C>
Item 7(a) Financial Statements of Business Acquired
Audited Financial Statements for Builders Square, Inc.
Fiscal Year Ended January 26, 1997
Financial Statements 4 - 6
Notes to Financial Statements 7 - 13
Report of Independent Accountants 14
Unaudited Financial Statements for Builders Square, Inc.
Fiscal Twenty-six Week Period Ended July 27, 1997
Financial Statements 15 - 17
Note to Financial Statements 18
Item 7(b) Pro Forma Financial Information
Unaudited Pro Forma Financial Statements for Hechinger Company
Pro Forma Financial Statements 19 - 22
Notes to Pro Forma Financial Statements 23 - 25
Signatures 26
</TABLE>
3
<PAGE> 4
ITEM 7 (a). FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
BUILDERS SQUARE, INC.
BALANCE SHEETS
(DOLLARS IN MILLIONS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JANUARY 26, JANUARY 28,
1997 1996
---------------------- -----------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and equivalents $ 18.9 $ 12.2
Merchandise inventories 609.7 612.8
Accounts receivable and other current assets 18.5 53.7
Deferred income taxes 9.8 26.1
Property held for resale 140.1 144.0
--------------- ----------------
Total current assets 797.0 848.8
Property and equipment, net 7.5 -
Other assets and deferred charges 5.5 -
Deferred income taxes 83.3 121.0
--------------- ----------------
$ 893.3 $ 969.8
=============== ================
LIABILITIES AND PARENT COMPANY INVESTMENT
Current Liabilities:
Current portion of long-term obligations $ 3.4 $ 3.7
Accounts payable-trade 223.7 200.5
Accrued payrolls and other liabilities 29.5 66.1
--------------- ----------------
Total current liabilities 256.6 270.3
Capital lease obligations 96.2 107.5
Long-term debt 12.5 12.7
Deferred income taxes - 20.5
Other long-term liabilities 34.0 38.5
--------------- ----------------
Total liabilities 399.3 449.5
Parent company investment 494.0 520.3
--------------- ----------------
$ 893.3 $ 969.8
=============== ================
</TABLE>
See accompanying notes to financial statements
4
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BUILDERS SQUARE, INC.
STATEMENTS OF OPERATIONS
(DOLLARS IN MILLIONS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
--------------------------------------------------------------------------
JANUARY 26, JANUARY 28, JANUARY 22,
1997 1996 1995
------------------- ------------------- ---------------------
<S> <C> <C> <C>
Sales $ 2,550.3 $ 2,675.8 $ 2,951.6
------------------- ------------------- ------------------
Cost of merchandise sold
(including buying and occupancy costs) 2,026.2 2,118.1 2,300.7
Selling, general and administrative expenses 518.7 574.5 623.6
Interest expense:
Capital lease obligations and other 13.0 12.3 14.4
Parent company (Kmart) cost of capital allocation 86.5 74.1 57.2
Asset impairment charge - 369.9 -
------------------- ------------------- ------------------
2,644.4 3,148.9 2,995.9
------------------- ------------------- ------------------
Loss from operations before income taxes (94.1) (473.1) (44.3)
Income tax benefit (32.2) (156.0) (16.8)
------------------- ------------------- ------------------
Net loss $ (61.9) $ (317.1) $ (27.5)
=================== =================== ==================
</TABLE>
See accompanying notes to financial statements
5
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BUILDERS SQUARE, INC.
STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------------------------
JANUARY 26, JANUARY 28, JANUARY 22,
1997 1996 1995
---------------- ------------------ ------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (61.9) $ (317.1) $ (27.5)
Adjustments to reconcile net income to operating cash flows:
Asset impairment charge - 369.9 -
Depreciation and amortization 0.5 45.7 41.4
Deferred income taxes 33.4 (76.4) 20.5
(Increase) decrease in inventories 3.1 (4.0) 0.4
(Increase) decrease in accounts receivable
and other current assets 35.2 24.1 (12.1)
(Increase) decrease in property held for resale 3.9 (48.5) (45.1)
Increase (decrease) in accounts payable 23.2 (34.8) 0.2
Increase (decrease) in accrued expenses (36.6) (43.2) 29.8
Increase (decrease) in other long-term liabilities (4.5) (45.2) (91.6)
Other, net (5.4) (6.4) (10.9)
------------- -------------- -------------
Net cash used for operations (9.1) (135.9) (94.9)
------------- -------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures-owned property (8.0) (37.9) (110.3)
Proceeds from sale of assets - 1.1 1.2
------------- -------------- -------------
Net cash used for investing activities (8.0) (36.8) (109.1)
------------- -------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Reduction in long-term debt (0.2) (1.0) (1.9)
Net borrowings from parent company (Kmart) 35.6 184.2 174.8
Reduction in capital lease obligations (11.6) (4.7) 23.4
------------- -------------- -------------
Net cash provided by financing activities 23.8 178.5 196.3
------------- -------------- -------------
Net increase (decrease) in cash and equivalents 6.7 5.8 (7.7)
Cash and equivalents at beginning of year 12.2 6.4 14.1
------------- -------------- -------------
Cash and equivalents at end of year $ 18.9 $ 12.2 $ 6.4
============= ============== =============
Supplemental disclosure of cash flow information:
Interest paid $ 10.5 $ 9.2 $ 7.5
Income taxes paid $ - $ 3.6 $ -
</TABLE>
See accompanying notes to financial statements
6
<PAGE> 7
BUILDERS SQUARE, INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS)
- --------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION
Nature of Operations: Builders Square, Inc. (the "Company") is a specialty
retailer of home improvement and home decor products and services in the United
States and the commonwealth of Puerto Rico. Its strategy is to operate
large-format stores emphasizing customer services and providing do-it-yourself,
buy-it-yourself and commercial customers an extensive selection of quality
products and services to repair, remodel, redecorate and maintain the home and
garden. The Company has 168 stores located in 20 states and Puerto Rico with
concentrations in many of the nation's primary markets including Chicago,
Detroit, Houston, Miami, and Cleveland.
The Company was founded in 1983 and became a wholly-owned subsidiary of Kmart
Corporation ("Kmart") in 1984. The home improvement segment consists mainly of
structural materials such as lumber and hardware products. The home decor
segment includes mostly aesthetic finished products such as wall coverings,
window coverings and lawn and garden products.
Basis of Presentation: In February 1997, Kmart began negotiations with Waban
Inc. and Leonard Green & Partners, L. P. ("Leonard Green") to combine Waban's
HomeBase business and the Company to form a new home improvement company.
As a result of Kmart's decision to sell or merge the Company, an anticipated
after tax loss of $385 was recorded by Kmart in the fourth quarter of fiscal
1996. Accordingly, the Company is carried as a discontinued operation by
Kmart. As Kmart's decision to divest its interest in the Company does not
necessarily have a direct impact on the Company's business operations, these
financial statements have been prepared on the basis that the Company will
continue as a going concern.
Fiscal Year: The Company's fiscal year ends on the Sunday prior to the last
Wednesday in January. Fiscal year 1996 consisted of 52 weeks and ended on
January 26, 1997. Fiscal year 1995 consisted of 53 weeks and ended on January
28, 1996. Fiscal year 1994 consisted of 52 weeks and ended on January 22,
1995.
Earnings Per Common and Common Equivalent Share: Historical earnings per share
have been intentionally omitted from the Company's financial statements as the
Company was a wholly-owned subsidiary of Kmart during all periods presented.
Cash and Equivalents: For the purpose of reporting cash flows, the Company
considers cash on hand in stores, deposits in banks, certificates of deposit
and short-term marketable securities with original maturities of 90 days or
less to be cash and cash equivalents.
Inventories: Merchandise inventories are stated at lower of cost or market
with cost determined on the last-in first-out (LIFO) basis using the retail
inventory method and internal price indices to measure inflation. Inventory
values at year end 1996, 1995, and 1994 were $69.0, $57.9 and $50.3 lower,
respectively, than would have been reported had cost been determined on a
first-in, first-out (FIFO) basis.
Property and Equipment: Property and equipment are recorded at cost, less
impairment losses resulting from implementation of FAS 121 (see Note 5),
including a provision for capitalized interest. Capitalized amounts include
expenditures which materially extend the useful lives of existing facilities
and equipment. Expenditures for repairs and maintenance which do not
materially extend the useful lives of the related assets are charged to expense
as incurred.
Expenditures for owned properties, primarily self-developed locations, which
the Company intends to sell and lease back within one year are included in
current assets as property held for resale.
7
<PAGE> 8
BUILDERS SQUARE, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
(DOLLARS IN MILLIONS)
- --------------------------------------------------------------------------------
Depreciation and Amortization: Depreciation and amortization, which include
amortization of property held under capital leases over the respective lease
term, is computed based on the estimated useful lives of the respective assets
using the straight-line method for financial statement purposes. The ranges of
useful lives are twenty-five to fifty years for buildings, five to twenty-five
years for leasehold improvements and three to seven years for furniture,
fixtures and equipment.
Financial Instruments: The Company records all financial instruments,
including cash and equivalents, accounts receivable, property held for resale,
accounts payable, accrued liabilities, obligations under capital leases and
long-term debt at cost, which approximates fair value.
Pre-Opening and Closing Costs: Costs associated with the opening of a new
store are expensed during the first full month of operations. When the
decision to close a retail unit is made, any future net lease obligation and
nonrecoverable investment in fixed assets directly related to discontinuance of
operations are expensed.
Advertising Costs: Advertising costs, net of co-op recoveries from vendors,
are expensed the first time the advertising occurs. Included in selling,
general and administrative expenses for 1996, 1995 and 1994 are $51.3, $56.8
and $62.8 of advertising expenses, respectively.
Income Taxes: The Company participates in a tax sharing agreement with Kmart
(see Note 2). Under this agreement, the Company's accounting for income taxes
is substantially in accordance with Statement of Financial Accounting Standards
No. 109 ("FAS 109"). Under FAS 109, deferred tax assets and liabilities are
recognized based upon the future tax benefits and consequences of temporary
differences between the financial statement and income tax basis of assets and
liabilities.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
NOTE 2 - RELATIONSHIP WITH PARENT COMPANY
The Company's parent company, Kmart, manages most treasury functions on a
centralized, consolidated basis. Such activities include the investment of
surplus cash, the issuance, repayment and repurchase of short-term and
long-term debt and the issuance of common stock. Debt incurred by Kmart and
its subsidiaries, other than certain capital leases and mortgages related
specifically to the Company, have been reflected in the financial statements of
Kmart and net cash used by the Company is considered an inter-company note
payable which effectively increases Kmart's investment in the Company.
Interest on the note accrues at the prime rate and, if not paid by the Company,
also increases Kmart's investment in the Company.
Certain corporate and general and administrative costs (including certain
legal, tax, transportation and import, employee benefit and self-insurance
costs) have been charged to the Company based on utilization and negotiated
rates which management believes approximate the rates that the Company would
incur on a stand-alone basis.
Subsidiaries of Kmart, including the Company, are included in the consolidated
income tax returns filed by Kmart. Accordingly, the provision for income taxes
and the related payments or refunds of taxes are determined on a consolidated
basis. The Company's financial statement provision and related tax refunds
receivable have been reflected in accordance with Kmart's tax allocation
policy. Generally, such policy
8
<PAGE> 9
BUILDERS SQUARE, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
(DOLLARS IN MILLIONS)
- --------------------------------------------------------------------------------
provides that the consolidated tax provision be allocated based on the
financial income, taxable income, credits, preferences and other amounts
directly related to the Company.
For financial statement income tax provision and tax settlement purposes, tax
benefits resulting from net operating losses which cannot be utilized by
the Company on a separate return basis but which can be utilized on a
consolidated basis in any given year, are allocated to the Company. However,
if such tax benefits cannot be utilized on a consolidated basis in that year or
in a carry back year, such consolidated tax effect is adjusted in a subsequent
year to the extent necessary to allocate tax benefits back to the Company. Tax
benefits to be realized in Kmart's consolidated tax return relating to
operating losses of the Company have been deducted from the inter-company note
payable and effectively reduce Kmart's investment in the Company. The tax
provision recorded in the Company's financial statements approximates that
which would have been recorded on a separate company basis.
NOTE 3 - SALE OF ACCOUNTS RECEIVABLE
On April 12, 1996, the Company entered into an agreement with General Electric
Capital Corporation ("GECC") providing for the sale of substantially all trade
accounts receivable of the Company existing as of the date of the agreement to
GECC without recourse. In conjunction with the agreement, the Company
transferred all right, title and interest in approximately $29 of accounts
receivable to GECC at book value resulting in neither a gain nor a loss to the
Company.
NOTE 4 - STORE RESTRUCTURING AND OTHER CHARGES
During the fourth quarter of 1993, Kmart's Board of Directors approved a
restructuring plan ("the Plan") which provided for the closure of 79 existing
Builders Square stores and conversion of the remaining stores to a new Builders
Square II format. In connection with the Plan, the Company recorded $214 of
restructuring reserves in 1993. At year end 1996, all store closures under the
Plan have taken place with $23 remaining in the reserve which primarily
represents future lease payments and lease exit costs associated with the
discontinued locations. This restructuring reserve is included in other
long-term liabilities on the balance sheet, net of amounts expected to be paid
within one year. Management believes that the remaining reserve at January 26,
1997 is sufficient to cover all future costs associated with the Plan.
NOTE 5 - ASSET IMPAIRMENT CHARGE
The Company adopted Financial Accounting Standard No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
("FAS 121") in the fourth quarter of 1995. This statement requires companies
to record impairments of long-lived assets, certain identifiable intangibles,
and associated goodwill on an exception basis, when there is evidence that
events or changes in circumstances have made recovery of an asset's carrying
value unlikely. In conducting its review, management considered, among other
things, its current and expected operating cash flows together with a judgment
as to the fair value Kmart could receive upon sale of its investment in the
Company. Based on this review, the Company recorded a $369.9 pretax charge
($248.9 after tax) in 1995 which represented the undepreciated or unamortized
book value of all fixed assets and goodwill at January 28, 1996.
9
<PAGE> 10
BUILDERS SQUARE, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
(DOLLARS IN MILLIONS)
- --------------------------------------------------------------------------------
NOTE 6 - INCOME TAXES
The benefit for income taxes consists of:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Current:
Federal $ (65.6) $ (77.8) $ (36.1)
State and local - (1.8) (1.2)
Deferred:
Store restructuring and other charges 12.1 28.4 21.9
Excess tax over book depreciation 13.0 3.7 5.0
LIFO inventory 2.9 2.9 (2.2)
FAS 121 adjustment - (121.0) -
Other 5.4 9.6 (4.2)
-------- --------- --------
Total income taxes $ (32.2) $ (156.0) $ (16.8)
======== ========= ========
</TABLE>
A reconciliation of the federal statutory rate to the Company's effective tax
rate follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Benefit at federal statutory rate (35.0%) (35.0%) (35.0%)
State & local taxes, net of federal tax benefit 0.8% 2.8% (2.9%)
Other 0.0% (0.8%) 0.0%
-------- --------- --------
Effective tax rate (34.2%) (33.0%) (37.9%)
======== ========= ========
</TABLE>
Deferred tax assets and liabilities resulted from the following:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Deferred tax assets:
Accruals and other liabilities $ 11.4 $ 6.7
Capital leases 2.7 4.1
Store restructuring obligations 9.2 23.4
FAS 121 adjustment 123.0 121.0
Other 0.5 9.1
--------- -------
Total deferred tax assets 146.8 164.3
--------- -------
Deferred tax liabilities:
Inventory 16.7 12.3
Property and equipment 34.9 23.1
Other 2.1 2.3
--------- -------
Total deferred tax liabilities 53.7 37.7
--------- -------
Net deferred tax assets $ 93.1 $ 126.6
========= =======
</TABLE>
A valuation allowance has not been provided for deferred tax assets as
management believes it is more likely than not that the income tax benefits
generated by the Company will be fully utilized in Kmart's consolidated income
tax returns.
10
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BUILDERS SQUARE, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
(DOLLARS IN MILLIONS)
- --------------------------------------------------------------------------------
NOTE 7 - COMMITMENTS AND CONTINGENCIES
There are various claims, lawsuits and pending actions against the Company
incident to its operations. It is the opinion of management that the ultimate
resolution of these matters will not have a material adverse effect on the
Company's liquidity, financial position or results of operations.
NOTE 8 - LONG-TERM DEBT
Long-term debt at year end 1996 and 1995 of $12.5 and $12.7, respectively, is
presented net of $0.2 current portion each year and consists of a mortgage
secured by the Company's headquarters building in San Antonio, Texas. Terms of
the note require semi-annual payments of $0.7 including interest accrued
monthly at an annual rate of 8.59%, through October 1, 2004, at which time the
remaining unpaid principal balance of $10.9 is due. Based on current market
conditions, management believes that the outstanding principal balance of the
note approximates fair value.
NOTE 9 - LEASES
The Company conducts operations primarily in leased facilities. Store leases
are generally for terms of 25 years with varying renewal options which allow
the Company to extend the life of the lease up to 50 years. Substantially all
store leases are guaranteed by Kmart. Certain leases provide for additional
rental payments based on a percent of sales in excess of a specified base and
for the payment by the lessee of executory costs including taxes, maintenance,
and insurance.
Future minimum lease payments at January 26, 1997 are as follows:
<TABLE>
<CAPTION>
Capital Operating
------- ---------
<S> <C> <C>
1997 $ 15 $ 116
1998 15 115
1999 14 113
2000 14 113
2001 14 111
Later Years 198 1,467
-------- ---------
Total minimum lease payments 270 2,035
Less - minimum sublease rental income - (50)
-------- ---------
Net minimum lease payments 270 $ 1,985
=========
Less:
Estimated executory costs (49)
Amount representing interest (122)
--------
99
Portion due within one year (3)
--------
Long-term lease obligations $ 96
========
</TABLE>
11
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BUILDERS SQUARE, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
(DOLLARS IN MILLIONS)
- --------------------------------------------------------------------------------
A summary of operating lease rental expense and short-term rentals follows:
<TABLE>
<CAPTION>
1996 1995 1994
----- ---- ----
<S> <C> <C> <C>
Minimum rentals $ 126 $ 124 $ 113
Percentage rentals 1 1 1
----- ----- -----
Total $ 127 $ 125 $ 114
===== ===== =====
</TABLE>
NOTE 10 - PENSION PLANS
The Company participated in Kmart's non-contributory pension plans. Prior to
1996, Kmart had defined benefit pension plans covering eligible associates who
met certain requirements of age, length of service and hours worked per year.
Effective January 28, 1996, the pension plans were frozen and associates no
longer earn additional benefits under the plans.
The following tables summarize the funded status, components of pension cost
and actuarial assumptions for the Company's share of Kmart's employee pension
plans.
FUNDED STATUS OF PLAN
<TABLE>
<CAPTION>
1996 1995
----- -----
<S> <C> <C>
1. Vested benefit obligation $ (26.7) $ (26.9)
2. Accumulated benefit obligation $ (30.3) $ (31.4)
3. Projected benefit obligation $ (30.3) $ (31.4)
4. Market value of assets 33.4 30.0
-------------------------------------
5. (Unfunded)/Funded status: (3) + (4) 3.1 (1.4)
6. Unrecognized net transition Asset (1.4) (1.5)
7. Unrecognized prior service cost - -
8. Unrecognized net loss and other (2.6) 1.4
9. Adjustment to reflect minimum liability - -
-------------------------------------
10. Accrued cost $ (0.9) $ (1.5)
=====================================
</TABLE>
NET PERIODIC COST
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C> <C>
1. Service cost $ - $ 2.1 $ 3.0
2. Interest cost 2.3 2.2 2.2
3. Actual return on assets (4.8) (6.1) 0.4
4. Net amortization and deferral 1.8 3.7 (2.5)
--------------------------------------------------
5. Net periodic cost/(income) $ (0.7) $ 1.9 $ 3.1
==================================================
</TABLE>
ACTUARIAL ASSUMPTIONS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Discount rates 7.75% 7.25% 8.25%
Expected return 9.50% 9.50% 9.50%
Salary increases - 4.50% 4.50%
</TABLE>
Kmart also has a non-qualified pension plan for directors and officers. The
Company's share of the unfunded balance of this plan was $1.1 and $1.1 at the
end of 1996 and 1995, respectively.
12
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BUILDERS SQUARE, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
(DOLLARS IN MILLIONS)
- --------------------------------------------------------------------------------
NOTE 10 - OTHER POSTRETIREMENT AND POSTEMPLOYMENT BENEFIT PLANS
The Company adopted Financial Accounting Standard No. 106 "Employers'
Accounting for Postretirement Benefits Other Than Pensions" ("FAS 106")
beginning in 1993. FAS 106 requires the Company to accrue for future
postretirement medical benefits, whereas in prior years, these claims were
expensed when paid. The accrued liability for other postretirement benefits at
year end 1996 and 1995 was $2.2 and $2.3, respectively.
NOTE 11 - RETIREMENT SAVINGS PLAN
Employees of the Company who meet certain requirements as to age and service
are eligible to participate in Kmart's Employee Savings Plan. The Company's
expense related to the Employee Savings Plan for 1996, 1995 and 1994 was $1.8,
$1.8 and $2.0, respectively. Effective January 1, 1995, a profit sharing
program was introduced as part of the Retirement Savings Plan. The Company
makes contributions based on profits, with minimum yearly contributions
required of $2.
NOTE 12 - PARENT COMPANY INVESTMENT
A reconciliation of Kmart's net investment in the Company is as follows:
<TABLE>
<CAPTION>
Intercompany Capital Operating Net
Account Stock Deficit Investment
------------ ------- --------- ----------
<S> <C> <C> <C> <C>
January 23, 1994 $ 654.6 $ 92.8 $ (241.5) $ 505.9
Net transactions with Kmart 174.8 - - 174.8
Net loss - - (27.5) (27.5)
------------ -------- ---------- ---------
January 22, 1995 829.4 92.8 (269.0) 653.2
Net transactions with Kmart 184.2 - - 184.2
Net loss - - (317.1) (317.1)
------------ -------- ---------- ---------
January 28, 1996 1,013.6 92.8 (586.1) 520.3
Net transactions with Kmart 35.6 - - 35.6
Net loss - - (61.9) (61.9)
------------ -------- ---------- ---------
January 26, 1997 $ 1,049.2 $ 92.8 $ (648.0) $ 494.0
============ ======== ========== =========
</TABLE>
NOTE 13 - SUBSEQUENT EVENTS (UNAUDITED)
Negotiations with Waban Inc. and Leonard Green to combine Waban's HomeBase
business and the Company to form a new home improvement company were terminated
without entering into a transaction.
In June 1997, the Company sold its six Puerto Rican stores to Masso, Inc., a
Puerto Rican operator of home improvement centers. The Company recorded a loss
on the sale of these stores of $7.7, after taxes.
In July 1997, Kmart reached an agreement to sell the Company's domestic
operations to Green Equity Investors II, L.P.. The transaction was completed on
September 25, 1997.
13
<PAGE> 14
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Directors of Builders Square, Inc.
(A wholly owned subsidiary of Kmart Corporation)
In our opinion, the accompanying balance sheets and the related statements of
operations and cash flows present fairly, in all material respects, the
financial position of Builders Square, Inc. (the Company) at January 26, 1997
and January 28, 1996 and the results of its operations and its cash flows for
each of the three years in the period ended January 26, 1997, in conformity
with generally accepted accounting principles. These financial statements are
the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
San Antonio, Texas
March 4, 1997
14
<PAGE> 15
BUILDERS SQUARE, INC.
UNAUDITED BALANCE SHEET
AS OF JULY 27, 1997
(DOLLARS IN MILLIONS)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Current Assets:
Cash and equivalents $ 23.3
Merchandise Inventories 602.6
Accounts receivable and other current assets 60.5
Deferred income taxes 8.5
Property held for resale 112.6
---------
Total current assets 807.5
Property and equipment, net 7.6
Other assets and deferred charges 6.6
Deferred income taxes 72.2
---------
$ 893.9
=========
LIABILITIES AND PARENT COMPANY INVESTMENT
Current Liabilities:
Current portion of long-term obligations $ 3.1
Accounts payable-trade 264.8
Accrued payrolls and other liabilities 29.4
---------
Total current liabilities 297.3
Capital lease obligations 92.9
Long-term debt 12.4
Deferred income taxes -
Other long-term liabilities 28.0
---------
Total liabilities 430.6
Parent company investment 463.3
---------
$ 893.9
=========
</TABLE>
See accompanying note to unaudited financial statements
15
<PAGE> 16
BUILDERS SQUARE, INC.
UNAUDITED STATEMENTS OF OPERATIONS
(DOLLARS IN MILLIONS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TWENTY-SIX WEEKS ENDED
--------------------------------------------------
JULY 27, 1997 JULY 28, 1996
---------------------- ----------------------
<S> <C> <C>
Sales $ 1,272.9 $ 1,351.2
---------------------- ----------------------
Cost of merchandise sold
(including buying and occupancy costs) 1,006.7 1,067.4
Selling, general and administrative expenses 246.9 264.6
Interest expense:
Capital lease obligations and other 5.4 6.3
Parent company (Kmart) cost of capital allocation 33.6 43.6
---------------------- ----------------------
1,292.6 1,381.9
---------------------- ----------------------
Loss from operations before income taxes (19.7) (30.7)
Income tax benefit (6.7) (10.2)
---------------------- ----------------------
Net loss $ (13.0) $ (20.5)
---------------------- ----------------------
</TABLE>
See accompanying note to unaudited financial statements
16
<PAGE> 17
BUILDERS SQUARE, INC.
UNAUDITED STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TWENTY-SIX WEEKS ENDED
------------------------------------------------
JULY 27, 1997 JULY 28, 1996
------------------- ----------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (13.0) $ (20.5)
Adjustments to reconcile net income to operating cash flows:
Depreciation and amortization 0.8 0.1
Deferred income taxes 12.4 17.5
(Increase) decrease in inventories 7.1 (25.0)
(Increase) decrease in accounts receivable
and other current assets (42.0) 32.1
(Increase) decrease in property held for resale 27.5 (0.3)
Increase (decrease) in accounts payable 41.1 89.7
Increase (decrease) in accrued expenses (0.1) (20.8)
Increase (decrease) in other long-term liabilities (6.0) (4.3)
Other, net (1.2) (5.4)
------------------- ----------------------
Net cash provided by operations 26.6 63.1
------------------- ----------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures-owned property (0.9) (3.5)
------------------- ----------------------
Net cash used for investing activities (0.9) (3.5)
------------------- ----------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Reduction in long-term debt (0.1) (0.3)
Net borrowings from parent company (Kmart) (17.6) (39.5)
Reduction in capital lease obligations (3.6) (10.1)
------------------- ----------------------
Net cash used for financing activities (21.3) (49.9)
------------------- ----------------------
Net increase in cash and equivalents 4.4 9.7
Cash and equivalents at beginning of year 18.9 12.2
------------------- ----------------------
Cash and equivalents at end of year $ 23.3 $ 21.9
=================== ======================
</TABLE>
See accompanying note to unaudited financial statements
17
<PAGE> 18
BUILDERS SQUARE, INC.
NOTE TO UNAUDITED FINANCIAL STATEMENTS
AS OF AND FOR THE TWENTY-SIX WEEK PERIOD ENDED JULY 27, 1997
(DOLLARS IN MILLIONS)
- --------------------------------------------------------------------------------
NOTE 1 - BASIS OF PRESENTATION
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amount reported in the financial statements and accompanying
notes. Actual results could differ from these estimates. The financial
statements presented herein should be read in conjunction with the annual
financial statements of Builders Square, Inc. (the "Company") included herein.
The operating results for the twenty-six week periods ended July 27, 1997 and
July 28, 1996 are not necessarily indicative of the results to be expected for
the Company's fiscal year.
18
<PAGE> 19
ITEM 7(b). PRO FORMA FINANCIAL INFORMATION
HECHINGER COMPANY
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
The following unaudited pro forma consolidated financial information gives
effect to the Registrant's September 26, 1997 purchase of certain assets and
business of BSQ Transferee Corp. ("BSQ Newco"), a Delaware corporation (the
"Purchase").
On September 25, 1997, BSQ Acquisition, Inc. ("BSQ Acqco"), a Delaware
corporation and wholly owned subsidiary of Centers Holdings, Inc., a Delaware
corporation ("Centers Holdings") purchased BSQ Newco, (which represented
substantially all of the assets and liabilities of Builders Square, Inc.). BSQ
Newco was a wholly-owned subsidiary of Builders Square, Inc., which is in turn
a wholly-owned subsidiary of Kmart Corporation, a Michigan corporation
("Kmart") (the "Initial Purchase"). On September 25, 1997, BSQ Acqco also
acquired the Registrant, as was described in the Form 8-K's filed on October
14, 1997 and October 8, 1997.
In the Purchase, Hechinger Investment Company of Delaware, Inc. ("Hechinger
Investment Company"), a Delaware corporation and indirect wholly owned
subsidiary of Hechinger Company (the "Registrant" or the "Company"), purchased
from BSQ Newco certain of the assets and business of BSQ Newco for $217.3 and
assumption of operating liabilities of approximately $375.6, subject to certain
adjustments related to changes in working capital and final determination of
fair values of the assets and liabilities. The Registrant is awaiting certain
additional information which may affect the estimation of the fair value of
the acquired assets and liabilities, and which may result in differences in the
final purchase price.
The unaudited pro forma consolidated balance sheet has been prepared as if the
Purchase was consummated as of August 2, 1997. The unaudited pro forma
consolidated statements of operations for the year ended February 1, 1997 and
for the 26 week period ended August 2, 1997, give effect to the Purchase as if
it were completed as of February 4, 1996.
Actual statements of operations of the Registrant will reflect the operating
results from the purchase date with no retroactive adjustments. The unaudited
pro forma consolidated financial information is provided for illustrative
purposes only and is not necessarily indicative of the consolidated financial
position or consolidated results of operation that would have been reported had
the Purchase occurred on the dates indicated, nor does it represent a forecast
of the consolidated financial position or results of operations for any future
period. The unaudited pro forma consolidated financial information should be
read in conjunction with the historical financial statements and accompanying
notes of the Registrant and Builders Square, Inc.
19
<PAGE> 20
HECHINGER COMPANY
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AUGUST 2, 1997
(DOLLARS IN MILLIONS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BSQ NEWCO
NET ASSETS HISTORICAL PRO FORMA
ACQUIRED HECHINGER HECHINGER
(NOTE 1) COMPANY ADJUSTMENTS COMPANY
------------ ------------ ------------ --------------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1.8 $ 41.1 $ 113.0 (a) $ 125.3
(30.6) (b)
Merchandise inventories 561.7 429.2 - 990.9
Other current assets 19.0 45.5 - 64.5
------------ ------------- ------------ -------------
TOTAL CURRENT ASSETS 582.5 515.8 82.4 1,180.7
ASSETS HELD FOR RESALE - - 17.2 (c) 17.2
PROPERTY, FURNITURE AND EQUIPMENT, NET - 423.9 (37.0) (c) 386.9
COSTS IN EXCESS OF NET ASSETS ACQUIRED, NET - 51.2 - 51.2
LEASEHOLD ACQUISITION COSTS, NET - 45.8 - 45.8
OTHER ASSETS 10.4 22.5 18.3 (d) 48.3
(2.9) (e)
------------ ------------- ------------ -------------
TOTAL ASSETS $ 592.9 $ 1,059.2 $ 78.0 $ 1,730.1
============= ============= ============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Revolving credit facility $ - $ 87.2 $ 243.0 (f) $ 330.2
Intercompany payable (receivable) - - (25.7) (f) 47.6
25.7 (a)
47.6 (a)
Accounts payable and accrued expenses 301.1 224.1 - 525.2
Current portion of long-term debt
and capital lease obligations 2.0 3.3 - 5.3
Store closing reserve - 3.9 - 3.9
------------- ------------- ------------ -------------
TOTAL CURRENT LIABILITIES 303.1 318.5 290.6 912.2
LONG-TERM DEBT - 380.3 - 380.3
CAPITAL LEASE OBLIGATIONS 64.3 12.8 - 77.1
DEFERRED RENT - 27.4 - 27.4
OTHER LONG-TERM LIABILITIES 8.2 - - 8.2
------------- ------------- ------------ -------------
TOTAL LIABILITIES 375.6 739.0 290.6 1,405.2
(a), (b),
(c), (d),
TOTAL STOCKHOLDERS' EQUITY 217.3 320.2 (212.6) (e), (f) 324.9
------------- ------------- ------------ -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 592.9 $ 1,059.2 $ 78.0 $ 1,730.1
============= ============= ============ =============
</TABLE>
See accompanying notes to unaudited pro forma consolidated financial
statements.
20
<PAGE> 21
HECHINGER COMPANY
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATION
26 WEEKS ENDED AUGUST 2, 1997
(DOLLARS IN MILLIONS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
BSQ NEWCO HECHINGER HECHINGER
(NOTE 1) COMPANY ADJUSTMENTS COMPANY
--------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
REVENUES
Net Sales $ 1,217.6 $ 1,099.6 $ - $ 2,317.2
Other 0.2 - 0.2
--------------- ---------------- ------------------ ---------------------
Total Revenues 1,217.6 1,099.8 - 2,317.4
COSTS AND EXPENSES
Cost of sales 960.9 883.1 - 1,844.0
Selling, general and
administrative expenses 237.6 217.6 - 455.2
--------------- ---------------- ------------------ ---------------------
OPERATING INCOME/(LOSS) BEFORE
INTEREST AND UNUSUAL CHARGES 19.1 (0.9) - 18.2
Interest expense 5.4 21.4 1.8 (g) 37.3
9.8 (h)
(1.1) (k)
Intercompany interest 33.6 - (31.9) (i) 1.7
Unusual Charges - 31.8 - 31.8
--------------- ---------------- ------------------- ---------------------
INCOME (LOSS) BEFORE INCOME TAXES (19.9) (54.1) 21.4 (52.6)
INCOME TAX EXPENSE (BENEFIT) (6.7) - 6.7 (j) -
--------------- ---------------- ------------------- ---------------------
NET LOSS $ (13.2) $ (54.1) $ 14.7 $ (52.6)
=============== ================ =================== =====================
</TABLE>
See accompanying notes to unaudited pro forma consolidated financial
statements.
21
<PAGE> 22
HECHINGER COMPANY
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FISCAL YEAR ENDED FEBRUARY 1, 1997
(DOLLARS IN MILLIONS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
BSQ NEWCO HECHINGER HECHINGER
(NOTE 1) COMPANY ADJUSTMENTS COMPANY
-------------- ------------ -------------- ------------
<S> <C> <C> <C> <C>
REVENUES
Net Sales $ 2,406.1 $ 2,199.0 $ - $ 4,605.1
Other (principally interest) 2.8 - 2.8
-------------- ------------ -------------- ------------
Total Revenues 2,406.1 2,201.8 - 4,607.9
COSTS AND EXPENSES
Cost of sales 1,908.7 1,743.9 - 3,652.6
Selling, general and
administrative expenses 492.8 442.8 - 935.6
-------------- ------------ -------------- ------------
OPERATING INCOME
BEFORE INTEREST 4.6 15.1 - 19.7
Interest expense 13.0 40.2 3.7 (g) 74.4
19.6 (h)
(2.1) (k)
Intercompany interest 86.5 - (83.3) (i) 3.2
-------------- ------------ -------------- ------------
LOSS BEFORE INCOME TAXES (94.9) (25.1) 62.1 (57.9)
INCOME TAX EXPENSE (BENEFIT) (32.2) - 32.2 (j) -
-------------- ------------ -------------- ------------
NET LOSS $ (62.7) $ (25.1) $ 29.9 $ (57.9)
============== ============ ============== ============
</TABLE>
See accompanying notes to unaudited pro forma consolidated financial
statements.
22
<PAGE> 23
HECHINGER COMPANY
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS)
- --------------------------------------------------------------------------------
NOTE 1 - BASIS OF PRESENTATION
On September 25, 1997, BSQ Acqco purchased BSQ Newco (the "Initial Purchase").
On September 25, 1997, BSQ Acqco also acquired all of the outstanding shares of
the Registrant. The Registrant's previously outstanding publicly-traded debt
remained outstanding following the acquisition.
On September 26, 1997, Hechinger Investment Company, an indirect wholly-owned
subsidiary of the Registrant ("Hechinger Investment Company"), purchased
certain of the assets and business of BSQ Newco (the "Purchase"). The
principal assets of BSQ Newco which were not acquired by Hechinger Investment
Company included assets held for resale and property and equipment (under the
Initial Purchase, the carrying value of these assets was reduced to zero as a
result of the allocation of excess value over the purchase price). In
addition, on September 26, 1997, Hechinger Investment Company entered into a
sublease with BSQ Newco which covers substantially all of BSQ Newco's operating
facilities, has a six-year term with two five-year option periods, and has
rental payments which are consistent with the leases between BSQ Newco and the
respective third parties. In addition, on the same date, Hechinger Investment
Company entered into a lease with BSQ Newco for the BSQ Newco facilities which
are owned by BSQ Newco. The term of the lease is six years with two five-year
option periods.
The unaudited pro forma consolidated balance sheet included herein reflects the
Registrant's balance sheet as of August 2, 1997, adjusted to include the
acquired assets and liabilities of BSQ Newco as of the date of the Purchase as
well as the amounts paid by Hechinger Investment Company to acquire such assets
and liabilities of BSQ Newco (see Note 3 (a) below).
The unaudited pro forma consolidated statement of operations for the fiscal
year ended February 1, 1997 includes the historical results of Builders Square,
Inc. for the fiscal year ended January 26, 1997. The pro forma consolidated
statement of operations for the 26 weeks ended August 2, 1997 includes the
historical results of Builders Square, Inc. for the 26 weeks ended July 27,
1997. Certain stores operated by Builders Square, Inc., were not included in
the Initial Purchase. The revenues and costs related to these stores have been
eliminated in the unaudited pro forma results for the year ended February 1,
1997 and the 26 weeks ended August 2, 1997.
NOTE 2 - PURCHASE PRICE OF NET ASSETS ACQUIRED
The purchase price of the net assets acquired from BSQ Newco is subject to
adjustment related to changes in working capital and final determination of
fair values of the assets and liabilities. Based on the preliminary estimates
of these amounts (as reflected in the unaudited consolidated pro forma balance
sheet), the purchase price of the net assets is as follows :
<TABLE>
<S> <C>
Cash consideration paid on closing $243.0
Amount due from BSQ Newco (25.7)
------
$217.3
======
</TABLE>
The purchase price of the net assets is expected to be allocated as follows:
<TABLE>
<S> <C>
Inventory $ 561.7
Other current assets 31.2
Liabilities assumed (375.6)
-------
$ 217.3
=======
</TABLE>
23
<PAGE> 24
HECHINGER COMPANY
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(DOLLARS IN MILLIONS)
- --------------------------------------------------------------------------------
NOTE 3 - PRO FORMA ADJUSTMENTS - THE PURCHASE
The following pro forma adjustments have been made to the unaudited pro forma
consolidated financial information:
(a) Represents cash transferred from BSQ Acqco to Registrant. $39.7 of
this amount represents contributed capital, $25.7 represents payment
of the intercompany receivable described in note (f) and the remaining
$47.6 represents an advance to the Registrant.
(b) Represents costs paid by the Registrant as a result of its purchase by
BSQ Acqco. These amounts relate primarily to severance payments to
former executives of the Registrant and other acquisition-related
costs incurred by the Registrant.
(c) Pursuant to its acquisition, the Registrant decided to close certain
facilities. This adjustment represents the transfer of the carrying
value of these assets to assets held for sale and the reduction to
fair value of those assets.
(d) Represents costs associated with acquiring the Credit Agreement, as
defined and described in the Form 8-K filed on October 14, 1997, which
were paid on behalf of the Registrant by BSQ Newco.
(e) Represents the write-off of debt issuance costs related to a line of
credit which was required to be repaid as a result of the acquisition
of the Registrant.
(f) Represents the preliminary purchase price for the assets and
liabilities acquired in the Purchase. The Company initially borrowed
$243 under the Credit Agreement (as defined and as described in the
Form 8-K filed by the Company on October 14, 1997). This preliminary
purchase price is subject to adjustment based on the final
determination of fair values of the assets and liabilities acquired
(the "Adjusted Purchase Price"). The initial amount paid exceeded the
preliminary estimate of the Adjusted Purchase Price by $25.7.
Therefore, this amount has been recorded as an intercompany receivable
from Newco. As is noted above, the purchase price is subject to
adjustment due to changes in working capital and final determination
of fair values of the assets and liabilities acquired.
(g) Reflects the amortization of the debt issuance costs described in note
(d) above, which will be amortized over the debt term of 5 years.
(h) Reflects the increase in interest expense as a result of the initial
borrowings under the Credit Agreement. The proceeds of the initial
advances of $243.0 were the source of the cash used to pay for the
assets purchased from BSQ Newco. The advances reflected as
outstanding in the attached unaudited pro forma consolidated statement
of operations is the expected Adjusted Purchase Price of $217.3.
Interest expense is calculated using the initial interest rate on the
Credit Agreement borrowing of 9% (the interest rate fluctuates based
on prime, the base CD rate plus 1%, the Federal Funds rate plus .5%, or
LIBOR plus 2.0%, in accordance with the Credit Agreement).
24
<PAGE> 25
HECHINGER COMPANY
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(DOLLARS IN MILLIONS)
- --------------------------------------------------------------------------------
(i) To reduce interest expense related to BSQ Newco's intercompany
borrowing from Kmart, which was not acquired from Kmart in the Initial
Purchase, to an amount based on the increase in the intercompany
borrowing from Kmart by BSQ Newco during the period, and based on the
interest rate on the Credit Agreement as described in note (h) above.
(j) Reflects the elimination of the tax benefit recorded in BSQ Newco's
historical financial statements which would not be recognized in the
pro forma Hechinger Company.
(k) Reflects the elimination of the amortization related to the debt
issuance costs described in note (e) above.
The accompanying unaudited pro forma consolidated statements of operations do
not reflect any reductions in general and administrative and other operating
expenses, primarily relating to duplicate personnel and facilities, which are
not expected to recur. The registrant intends to take advantage of operational
synergies and eliminate these duplicate areas; however, no assurances can be
given that the businesses will be successfully integrated or that operational
synergies will be achieved to the extent expected by management, if at all, or
that the expected cost savings will be achieved.
In addition to the transaction costs reflected herein, the Registrant expects
to report an additional loss for the period from August 3, 1997 through
September 27, 1997, primarily as a result of losses from operations during that
period and an accrual for estimated carrying costs of stores previously closed
by the Company. As a result, the Company expects that total stockholders'
equity prior to the closing of this transaction and as of September 27, 1997
will be reduced substantially from the amount shown in the accompanying pro
forma consolidated balance sheet as of August 2, 1997.
25
<PAGE> 26
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.
Date: December 17, 1997 HECHINGER COMPANY
----------------
Registrant
/S/ HAROLD R. HALL
------------------
Harold R. Hall
Executive Vice President and Chief
Financial Officer
(Principal Financial Officer)
26
