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, 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 July 1, 1995.
48,551,896 shares of Common Stock, $2.00 par value.
<PAGE 1>
HEILIG-MEYERS COMPANY
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Earnings for
Three Months Ended May 31, 1995
and May 31, 1994 (Unaudited) 3
Consolidated Balance Sheets as of
May 31, 1995 (Unaudited), and February 28, 1995 4
Consolidated Statements of Cash Flows for
Three Months Ended May 31, 1995 and
May 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 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 May 31, 1995.
<PAGE 2>
HEILIG-MEYERS COMPANY
CONSOLIDATED STATEMENTS OF EARNINGS
(Amounts in thousands except per share data)
(Unaudited)
Three Months Ended
May 31,
1995 1994
Revenues:
Sales $265,968 $223,181
Other income 53,003 45,666
Total revenues 318,971 268,847
Costs and Expenses:
Costs of sales 169,604 141,271
Selling, general and
administrative 98,125 81,239
Interest 9,517 7,101
Provision for doubtful
accounts 12,514 10,080
Total costs and expenses 289,760 239,691
Earnings before provision for
income taxes 29,211 29,156
Provision for income taxes 10,745 10,846
Net earnings $ 18,466 $ 18,310
Net earnings per share of common
stock:
Primary and fully diluted $0.37 $0.37
Cash dividends per share of
common stock $0.07 $0.06
See notes to consolidated financial statements.
<PAGE 3>
HEILIG-MEYERS COMPANY
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands except par value data)
(Unaudited)
May 31, February 28,
1995 1995
ASSETS
Current assets:
Cash $ 13,830 $ 10,360
Accounts receivable, net 562,847 538,208
Other receivables 17,933 13,231
Inventories 270,347 253,529
Other 41,639 37,354
Total current assets 906,596 852,682
Property and equipment, net 204,648 203,201
Excess costs over net assets acquired, net 158,682 153,054
$1,269,926 $1,208,937
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 182,000 $ 139,800
Long-term debt due within
one year 28,092 28,125
Accounts payable 86,794 87,523
Accrued expenses 54,056 43,138
Total current liabilities 350,942 298,586
Long-term debt 362,804 370,432
Deferred income taxes 50,374 49,529
Stockholders' equity:
Preferred stock, $10 par value --- ---
Common stock, $2 par value 97,102 97,096
Capital in excess of par value 120,473 120,129
Retained earnings 288,231 273,165
Total stockholders' equity 505,806 490,390
$1,269,926 $1,208,937
See notes to consolidated financial statements.
<PAGE 4>
HEILIG-MEYERS COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
Three Months Ended
May 31,
1995 1994
Cash flows from operating activities:
Net earnings $ 18,466 $ 18,310
Adjustments to reconcile net
earnings to net cash used by
operating activities:
Depreciation and amortization 7,440 6,148
Provision for doubtful accounts 12,514 10,080
Other, net (51) (75)
Change in operating assets and
liabilities net of the effects
of acquisitions:
Accounts receivable (37,679) (46,140)
Sale of accounts receivable 0 50,000
Other receivables (5,425) (1,618)
Inventories (6,179) (7,436)
Prepaid expenses (5,227) (5,972)
Accounts payable (729) 758
Accrued expenses 8,021 18,046
Net cash (used)/provided
by operating activities (8,849) 42,101
Cash flows from investing activities:
Acquisitions, net of cash acquired (706) (5,543)
Additions to property and equipment (17,144) (6,781)
Disposals of property and equipment 834 123
Miscellaneous investments (1,829) (917)
Net cash used by investing
activities (18,845) (13,118)
Cash flows from financing activities:
Issuance of common stock 25 646
Net increase (decrease) in notes payable 42,200 (96,200)
Proceeds from long-term debt 0 80,000
Payments of long-term debt (7,661) (10,430)
Dividends paid (3,400) (2,906)
Net cash provided/(used)
by financing activities 31,164 (28,890)
Net increase in cash 3,470 93
Cash at beginning of period 10,360 6,295
Cash at end of period $ 13,830 $ 6,388
See notes to consolidated financial statements.
<PAGE 5>
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 first
quarter of fiscal year 1996 are not necessarily indicative of future
financial results.
B. On April 5, 1995, the Board of Directors declared a cash dividend of
$0.07 per share which was paid on May 21, 1995, to stockholders of
record on April 27, 1995.
C. Accounts receivable are shown net of the allowance for doubtful
accounts and unearned finance income. The allowance for doubtful
accounts was $51,625,000 and $46,678,000 and unearned finance income
was $56,126,000 and $54,554,000 at May 31, 1995, and February 28, 1995,
respectively.
D. The Company made income tax payments of $505,000 and $823,000 during
the three months ended May 31, 1995, and May 31, 1994, respectively.
E. The Company made interest payments of $9,779,000 and $5,586,000 during
the three months ended May 31, 1995, and May 31, 1994, respectively.
<PAGE 6>
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 18.6% to $319.0 million from $268.8
million in the prior year. Net earnings increased 0.9% to $18.5 million (or
$0.37 per share) from $18.3 million (or $0.37 per share) in the prior year.
Sales for the first quarter increased 19.2% to $266.0 million from $223.2
million in the first quarter of the prior year. The Company's eastern stores
provided 84% of total sales for the first quarter of fiscal 1996, or $222.7
million, representing a 12.8% increase over the prior year quarter. The
Company's southwestern stores provided 10% of total sales for the first
quarter of fiscal 1996, or $26.6 million, representing a 3.0% increase over
the prior year quarter. The Company's recently acquired Puerto Rican stores
provided 6% of total sales, or $16.8 million, which was in line with
Management's expectations. Comparable store sales for the Company's eastern
stores increased 3.1%, while comparable sales in the Company's southwestern
stores increased 1.0%. Overall, the Company's comparable store sales
increased 2.8%. The Company attributes these sales increases to increase
volume with an immaterial impact from price changes.
As a percentage of sales, other income decreased to 19.9% from 20.5% in
the prior year. The decrease is primarily the result of higher interest
costs associated with a larger pool of securitized receivables. These costs,
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 to 63.8% of sales from 63.3% in the prior
year. During the quarter, raw margins (sales less cost of merchandise sold)
improved as management continued its focus on strong vendor relationships
resulting in obtaining quality goods at the best prices. Despite this
improvement, costs of sales increased primarily due to higher delivery costs
associated with the Fontana, California Distribution Center, which opened in
July 1994, and slightly higher costs associated with home deliveries in the
major metropolitan markets. Occupancy expense also increased slightly over
the prior year as a result of scheduled annual rate increases to certain
southwestern store leases.
Selling, general and administrative expense increased as a percentage
of sales to 36.9% from 36.4% in the prior year quarter. The increase was
primarily due to higher advertising costs resulting from increased use of
companywide television, radio and newspaper advertising aimed at stimulating
sales. The increase in advertising costs was partially offset by lower
selling, general and administrative expenses at the Puerto Rican operations,
as these stores have lower selling, general and administrative expenses as a
percentage of sales compared to the Company as a whole.
Interest expense increased to 3.6% of sales in the first quarter of
fiscal 1996 from 3.2% of sales in the first quarter of the prior year. The
increase is primarily the result of higher long-term debt levels. Weighted
average long-term debt increased to $392.6 million from $228.2 million in
the prior year. Weighted average long-term interest rates decreased to 7.9%
from 8.2% in the prior year. Weighted average short-term debt decreased to
$151.8 million from $228.9 million in the prior year. Weighted average
short-term interest rates increased to 6.4% from 4.1% in the prior year.
<PAGE 7>
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 as a percentage of sales
to 4.7% from 4.5% in the prior year. The increase was the result of a rise in
the portfolio loss rate applied to the growing accounts receivable base. The
extension of credit is constantly monitored by management to minimize the
portfolio loss rate.
The tax rate in effect for fiscal 1996 is 36.8%, compared to 37.2% for
the first quarter of fiscal 1995. The decrease is a result of the dilutive
effect of the effective tax rate for the Company's Puerto Rican operations.
LIQUIDITY AND CAPITAL RESOURCES
The Company increased its cash position $3,470,000 to $13,830,000 at May
31, 1995, from $10,360,000 at February 28, 1995, compared to an increase of
$93,000 in the comparable period a year ago.
Net cash outflow from operating activities was $8.8 million, compared to
a net cash inflow of $42.1 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. An increase in
accounts receivable and a rise in inventory levels led to the net cash
outflow during the first quarter of fiscal 1996. Accounts receivable
increased during the first quarter of fiscal 1996 due to a 19.2% increase
in sales. Inventory levels rose due to the addition of new stores as well
as the full utilization of the Company's distribution network, which
included additions to the Fontana Distribution Center and expansion of three
other distribution centers, all of which were completed in the second half of
fiscal 1995. In contrast, the positive cash flow from operations during the
first quarter of fiscal year 1995 was due to the amendment of two asset
securitization agreements involving the sale of an additional $50.0 million
of accounts receivable. Excluding the $50.0 million asset securitization,
the prior year quarter would have yielded a net cash outflow from operating
activities of $7.9 million, which compares to the $8.8 million net cash outflow
of the current year quarter. Continued extension of credit and related
increases in customer accounts receivable, combined with an increase in
inventory levels associated with the addition of new stores and full
utilization of the Company's distribution network, 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, which inturn,
improve net cash flows from operating activities.
<PAGE 8>
Investing activities produced negative cash flows of $18.8 million
during the first quarter of fiscal 1995 as compared to $13.1 million in the
prior year. Additions to property and equipment increased compared to the
same period in the prior year due to the expansion of the Company's
distribution network. In addition, the Company began construction of four
new prototype stores during the quarter in addition to the five prototype
stores that were initiated at the end of fiscal 1995. Continuing its
store remodeling program, the Company remodeled 40 existing stores during
the quarter ended May 31, 1995. 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 positive cash flows of $31.2 million
during the first quarter of fiscal 1996 as compared to a $28.9 million
negative cash flow in the prior year. This increase in cash flow is mainly
due to the increase in notes payable. During the same period in the prior
year, the Company received $80.0 million from a long-term borrowing, the
proceeds of which were used to reduce notes payable. The Company has lines
of credit through eleven banks totaling $300.0 million, of which $118.0
million was unused at May 31, 1995.
<PAGE 9>
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 10, 1995 /s/Joseph R. Jenkins
Joseph R. Jenkins
Executive Vice President
Principal Financial Officer
Date: July , 1995
William J. Dieter
Senior Vice President,
Accounting and Principal
Accounting Officer
<PAGE 10>
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, 1995.
INDEX TO EXHIBITS
Page
Exhibit 11. Computation of Per Share Earnings 12
Exhibit 27. Financial Data Schedule 13
<PAGE 11>
EXHIBIT 11
HEILIG-MEYERS COMPANY
COMPUTATION OF PER SHARE EARNINGS
(Amounts in thousands except per share data)
Three Months Ended
May 31, May 31,
1995 1994
Primary Earnings Per Share:
Average number of
shares outstanding 48,549 48,431
Net effect of stock
options 1,080 1,590
Average number of
shares as adjusted 49,629 50,021
Net earnings $18,466 $18,310
Per share amount $ .37 $ .37
Fully Diluted Earnings Per Share:
Average number of
shares outstanding 48,549 48,431
Net effect of stock
options 1,244 1,590
Average number of
shares as adjusted 49,793 50,021
Net earnings $18,466 $18,310
Per share amount $ .37 $ .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, 1995 were not included in the earings per share
calculation.
<PAGE 12>
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