UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
August 29, 1997 (August 28, 1997)
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Date of Report (Date of earliest event reported)
HECHINGER COMPANY
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(Exact name of registrant as specified in its charter)
Delaware 0-7214 52-1001530
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1801 McCormick Drive, Largo, Maryland 20774
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (301) 341-1000
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INFORMATION TO BE INCLUDED IN THE REPORT
Item 5. Other Events.
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On August 28, 1997, Hechinger Company (the "Registrant"), a Delaware
corporation, entered into the First Amendment, dated as of August 28, 1997, to
the Agreement and Plan of Merger, dated as of July 17, 1997 (as amended by such
amendment, the "Merger Agreement"), among the Registrant, Hechinger Acquisition,
Inc., a Delaware corporation, and BSQ Acquisition, Inc., a Delaware corporation
("BSQ Acquisition"). Pursuant to the Merger Agreement, each share of the
Registrant's Class A Common Stock and Class B Common Stock (collectively, the
"Common Stock") issued and outstanding immediately prior to the effective time
of the merger (the "Merger") will be converted into the right to receive $2.375
in cash, without interest. The closing of the transactions contemplated by the
Merger Agreement is subject to the satisfaction or waiver of several conditions
including, without limitation, approval of the Merger Agreement and the Merger
by the requisite vote of the holders of the Common Stock and the closing of the
transactions contemplated by the Purchase and Sale Agreement, dated as of July
17, 1997, among Kmart Corporation, Builders Square, Inc. and BSQ Acquisition.
Registrant's press release dated August 28, 1997 is filed herewith as
Exhibit 20 and is incorporated herein by reference.
Item 7. Financial Statements and Exhibits.
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(c) Exhibit.
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20. Press release of Registrant dated August 28,
1997 relating to the First Amendment to the
Merger Agreement and the transactions
contemplated thereby.
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SIGNATURE
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Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, the Registrant has duly caused this Current Report to be
signed on its behalf by the undersigned thereunto duly authorized.
HECHINGER COMPANY
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(Registrant)
By /s/ Mark R. Adams
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Mark R. Adams, Esq.
Senior Vice President, Treasurer
and Secretary
Date: August 29, 1997
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EXHIBIT INDEX
Sequentially
Exhibit No. Description Numbered Page
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20 Press release of Registrant dated 5
August 28, 1997 relating to the First
Amendment to the Merger Agreement and the
transactions contemplated thereby.
Page 4 of 7
FOR IMMEDIATE RELEASE
HECHINGER COMPANY ANNOUNCES SECOND QUARTER
RESULTS; REVISED PER SHARE PRICE OFFERED
BY LEONARD GREEN & PARTNERS, LP
LARGO, MARYLAND -- August 28, 1997 -- Hechinger Company (Nasdaq-NNM: HECHA and
HECHB) today announced a net loss for the second quarter ended August 2, 1997 of
$40.6 million or $.96 per share compared with net earnings of $12.2 million or
$.28 per share last year. The loss for this year's second quarter includes a
charge of $31.8 million related to the previously announced store closings in
Michigan. Earnings before interest, taxes, depreciation, and amortization
(EBITDA) for the quarter was $15.7 million compared with $36.4 million for the
second quarter last year. Sales for the second quarter were $591.6 million
compared with $665.9 million last year, a decrease of 11.2 percent. Comparable
store sales were down 10.3 percent for the quarter.
For the first half of the current fiscal year, including the store closing
charge, the Company reported a net loss of $54.1 million or $1.28 per share
compared with net earnings of $6.2 million or $.15 per share last year. Earnings
before interest, taxes, depreciation and amortization (EBITDA) was $27.2 million
compared with $54.6 million last year. Sales for the first half of fiscal 1997
were $1.1 billion compared with $1.2 billion last year, a decrease of 10.4
percent. Comparable store sales were down 9.9 percent for the first half of
fiscal 1997.
The loss for the second quarter and for the first half includes a store closing
charge of $31.8 million or $.75 per share for the closing of seven Michigan
stores. The charge consists of $27.9 million in non-cash asset write-downs and
$3.9 million in cash for severance and operating costs during the inventory
liquidation period. The Company has an agreement to sell up to seven of its Home
Quarters Warehouse stores to Costco Companies, Inc., subject to various
conditions including receipt of regulatory and other third-party approvals.
Proceeds from this transaction, including inventory liquidation, could amount to
approximately $60 million. In addition, operating results for the second quarter
were adversely impacted by higher than anticipated inventory shrinkage.
Due to operating results coming in below expectations, the Company announced
that it has agreed to accept from Leonard Green & Partners, LP a revised cash
price of $2.375 per share for all outstanding Hechinger Company Class A Common
Stock and Class B Common Stock. The Company had previously agreed to a cash
price of $3.00 per share. In addition, the Company's agreement with Leonard
Green & Partners, LP has been modified to eliminate the material adverse change
provision such that further changes in the Company's operating performance will
not adversely impact this transaction.
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The Company expects to complete the regulatory review process for this
transaction in the near future, and a proxy statement is expected to be mailed
to shareholders of record within approximately one week. A special meeting of
shareholders is planned for late September to vote on the transaction, and if
approved, the transaction is expected to close immediately thereafter.
Hechinger Company serves the home improvement industry with 117 stores in 21
states and the District of Columbia.
Forward-looking statements in this press release are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995. There
are various factors that could cause results to differ materially from those
anticipated by some statements made above. All forward-looking statements
involve risks and uncertainty. Factors that could cause actual results to differ
materially include the following: pending merger, sale of Home Quarters
Warehouse stores in Michigan, general economic conditions, housing turnover,
interest rates, weather, impact on sales and margins from both existing and new
competition, product mix, lumber prices, and the risks described from time to
time in the Company's SEC filings.
# # # # #
Contact: W. Clark McClelland
Executive Vice President, Chief Financial Officer
(301) 925-3005
(Financial Chart Follows)
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HECHINGER COMPANY
Consolidated Statements of Operations
(unaudited)
(in thousands except per share data)
<TABLE>
<CAPTION>
13 WEEKS ENDED 26 WEEKS ENDED
Aug. 2, 1997 Aug. 3, 1996 Aug. 2, 1997 Aug. 3, 1996
------------ ------------ ------------ ------------
REVENUES
<S> <C> <C> <C> <C>
Net sales $ 591,626 $ 665,902 $1,099,607 $1,227,219
Other
(principally interest) 239 845 239 1,361
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Total Revenues 591,865 666,747 1,099,846 1,228,580
COSTS AND EXPENSES
Cost of sales 477,771 526,338 883,101 971,811
Selling, general and
administrative expenses 111,975 118,394 217,578 230,989
Interest expense 10,886 9,800 21,478 19,555
Store closing charge 31,800 - 31,800 -
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Total Costs and Expenses 632,432 654,532 1,153,957 1,222,355
EARNINGS (LOSS) BEFORE
INCOME TAXES (40,567) 12,215 (54,111) 6,225
INCOME TAX EXPENSE - - - -
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NET EARNINGS (LOSS) $ (40,567) $ 12,215 $ (54,111) $ 6,225
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PRIMARY AND FULLY
DILUTED EARNINGS (LOSS)
($0.96) $0.28 ($1.28) $0.15
PER COMMON SHARE ----------- ----------- ----------- -----------
AVERAGE NUMBER OF COMMON
AND COMMON EQUIVALENT
42,187 46,723 42,187 42,264
SHARES OUTSTANDING ----------- ----------- ----------- -----------
</TABLE>
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<TABLE>
<CAPTION>
Supplemental Financial Information (in thousands)
<S> <C> <C> <C> <C>
Earnings before interest, taxes,
depreciation, amortization and
store closing charge $ 15,708 $ 36,408 $ 27,174 $ 54,646
Depreciation and amortization expense $ 13,589 $ 14,393 $ 28,007 $ 28,866
LIFO charge $ 615 $ 1,260 $ 923 $ 2,339
Pre-opening expense $ 0 $ 939 $ 0 $ 1,874
</TABLE>
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