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
Date of Report (Date of earliest event reported) N/A
Heilig-Meyers Company
(Exact name of registrant as specified in its charter)
Virginia
(State or other jurisdiction of incorporation)
1-8484 54-0558861
(Commission file number) (IRS Employer Identification No.)
12560 West Creek Parkway, Richmond, Virginia 23238
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (804) 784-7300
(Former name or former address, if changed since last report)
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Item 5. Other Events
On December 17, 1997, Heilig-Meyers Company (the "Company")
issued a press release reporting 3rd Quarter results and announcing an
aggressive plan to improve core store profitability, which is attached
hereto as Exhibit 99 and is incorporated herein by reference.
Item 7. Financial Statements and Exhibits
(c) Exhibits
The following exhibits are filed as a part of this report:
Exhibit 99 - Press Release dated December 17, 1997.
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SIGNATURE
Pursuant to the requirements of the Securities and
Exchange Act of 1934, the registrant has caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.
HEILIG-MEYERS COMPANY
Date: December 23, 1997 By: /s/ Roy B. Goodman
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Roy B. Goodman
Senior Vice President,
Principal Financial Officer
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Exhibit Index
Exhibit
No. Description
99 Press Release dated December 17, 1997.
EXHIBIT 99
FOR IMMEDIATE RELEASE: December 17, 1997
Heilig-Meyers Reports 3rd Quarter Results and Announces an Aggressive
Plan to Improve Core Store Profitability
Heilig-Meyers Company (NYSE:HMY), the Richmond-based home furnishings
retailer, today announced an aggressive plan to improve profitability in
its Heilig-Meyers division. The plan includes three main components: (1)
expense reductions; (2) restructuring of certain aspects of the
business; and (3) core store operating initiatives. The Company said
that it expects to incur a total of $134.0 million in pre-tax special
charges in its third and fourth quarters in connection with this plan.
A total of $85.8 million pre-tax or $0.97 per share of special
charges were recorded in the third quarter, which ended November
30, 1997, resulting in a net loss of $49.1 million or $0.85 per share
versus earnings of $9.5 million or $0.19 per share in the prior year
quarter. The Company reported that total revenues for the three-month
period increased approximately 64.1% to $678.5 million from $413.5
million in the prior year.
For the nine months ended November 30, 1997, total revenues increased
64.6% to $1.8 billion from $1.1 billion in the prior year. Including
$85.8 million in pre-tax special charges associated with the profit
improvement plan for the Heilig-Meyers division, the Company has
incurred a net loss of $26.1 million or $0.46 per share for the
nine-month period versus earnings of $29.6 million or $0.60 per share
in the prior year.
The Company stated that its profit improvement plan will result in
approximately $30.0 million of expense reductions. An estimated $20.0
million in costs are expected to be eliminated from corporate overhead
and non-store locations and the remaining $10.0 million in expense
reductions would be at the store level principally through personnel
attrition. The Company commented that in the current retail home
furnishings environment, which is characterized by an increase in
consumer credit problems and bankruptcies, the organization must
seek to be as efficient as possible and that investments which fail to
produce adequate returns must be eliminated.
Management noted that the $134.0 million in special charges associated
with the profit improvement plan would principally be a result of
store closings, severance arrangements, accelerated write-offs of
accounts in bankruptcy and the reorganization of its private label
revolving credit program. Approximately $51.0 million of the charges
are related to the closing of approximately 60 Heilig-Meyers stores.
Approximately $14.0 million of the $51.0 million will result from an
increase in the bad debt reserve to cover the sale of installment
accounts receivable for these stores, and approximately $14.5
million will result from the establishment of reserves to cover future
payments for lease commitments. The remaining $22.5 million in special
charges associated with store closings will result from reserves
for the disposal of fixed assets, severance arrangements and the
write-off of goodwill associated with the closed stores. The majority
of stores identified to be closed are in larger markets where it is
more difficult for the Heilig-Meyers small-town format to be
successful. William C. DeRusha, Chairman and Chief Executive Officer,
commented that the Company's recently acquired Rhodes and The
RoomStore units are better suited for larger markets, and that the size
and location of the stores targeted for closing were not adequate for
conversion.
The $134.0 million in special charges also includes a $50.0 million
increase in bad debt reserves resulting from a more conservative
approach to its estimates for write-offs relating to customer accounts
entering into bankruptcy and the Company's installment portfolio.
Approximately $38.0 million is related to accounts in bankruptcy and
approximately $12.0 million is related to accounts in the installment
portfolio. Troy A. Peery, Jr., President and Chief Operating Officer
commented, The Company is taking this action in response to a
challenging consumer credit environment and
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these aggressive steps will allow the Company to focus on new
business while maintaining the proper balance in sales and credit risk.
The remaining portion of the $134.0 million in special charges is
associated with approximately $15.0 million in costs relating to the
Company's plan to reorganize it's Heilig-Meyers private label
credit card program, and approximately $18.0 million in costs
relating to non-store employee severance arrangements and the
disposition of certain real estate. The overall cash impact related to
the special charges will be positive as cash received from the sale of
certain assets, and from income tax benefits is expected to
significantly exceed cash expenditures primarily related to severance
costs and potential lease settlements.
Management also outlined a number of core store operating initiatives to
improve performance in the Heilig-Meyers stores. It indicated that
current plans are to significantly slow the growth of the Heilig-Meyers
units over the next year to allow the maturation of this division and
further improve results. Management also noted that approximately 20
to 30 stores would be relocated in an effort to place those stores in
higher traffic locations. The Company has developed and is initiating a
merchandising and advertising strategy which will differentiate
between the larger and smaller Heilig-Meyers markets, thereby
reaching those customers in these respective areas through different
mediums and types of messages better suited for each type of market.
Management added that plans were under way to strengthen inventory
management in an effort to significantly reduce the frequency of
assortment changes in the merchandise line-up. Further plans are to
add consumer credit expertise to the senior management team and to
further develop risk profiling, bankruptcy scoring and risk based
pricing models for the installment program.
Management commented further that while it planned to slow growth
in the Heilig-Meyers division, it expected to pursue opportunities in
the Company's other formats. These opportunities would be in formats
which are less capital intensive and are currently operating at
higher levels of returns than the Heilig-Meyers division. The Company
also indicated that it will adopt a rigorous capital allocation process
under which all expansion and capital projects will be subjected to
stringent return on investment criterion. Mr. Peery said that,
Heilig-Meyers remains and will remain the Company's flagship operation
and that there are a tremendous number of towns to which Heilig-Meyers
could expand. However in the near-term, growth would be primarily in
the Company's other divisions.
In a closing statement, management commented that the profit
improvement plan and related initiatives are intended to help
Heilig-Meyers Company enter its upcoming fiscal year stronger and
more focused than anytime in the Company's history. Management added
that consolidated earnings for fiscal 1999 are expected to be
significantly improved and that the Company maintains its 15-20%
long-term growth target for earnings per share going forward.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995: The forward looking statements made above and
identified by such words as expects, likely, and plans, reflect the
Company's reasonable judgments with respect to future events and are
subject to risks and uncertainties that could cause actual results
to differ materially from those in the forward-looking statements.
Such factors include but are not limited to, the customer's
willingness, need and financial ability to purchase home furnishings and
related items, the Company's ability to extend credit to its
customers, the costs and effectiveness of promotional activities as
well as the Company's access to, and cost of, capital. Other factors
such as changes in tax laws, consumer credit and bankruptcy trends,
recessionary or expansive trends in the Company's markets, inflation
rates and regulations and laws which affect the Company's ability to
do business in its markets may also impact the outcome of
forward-looking statements.
Heilig-Meyers Company, a Virginia Corporation, currently operates 1,190
stores; 864 as Heilig-Meyers, 171 as Mattress Discounters, 100 as
Rhodes, 23 as The RoomStore and 32 in Puerto Rico as Berrios.
