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) April 20, 2000
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Heilig-Meyers Company
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(Exact name of registrant as specified in its charter)
Virginia 1-8484 54-0558861
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) file number) 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
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N/A
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(Former name or former address, if changed since last report)
<PAGE>
Item 2. Acquisition or Disposition of Assets
On April 20, 2000, Heilig-Meyers Company, a Virginia corporation (the
"Company") sold substantially all the assets of its Puerto Rican division which
operated 33 stores under the trade name Berrios, to Empresas Berrios, Inc., a
Puerto Rico corporation, and Empresa Manufacturera, Inc., a Puerto Rico
corporation. The total value of the transaction was in excess of $120 million,
before transaction costs, of which $18 million was in the form of a 11%
subordinated note due 2009 and $7.5 million was related to excess working
capital distributed to the Company. The subordinated note provides that a
portion of the interest (3% out of the 11%) is deferred and payable on the
maturity or prepayment, subject to a 50% reduction in such amount if the
subordinated note is prepaid in full by April 19, 2007.
A copy of the Company's press release issued April 25, 2000, announcing
the transaction is attached as Exhibit 99.1 hereto and is incorporated herein by
reference (the "April 25, 2000 Press Release").
Item 5. Other Events
The April 25, 2000 Press Release also announced the extension of the
Company's revolving credit facility and a change in the Company's revenue
recognition policy.
<PAGE>
Item 7. Financial Statements and Exhibits
(b) Pro Forma Financial Information
Pro Forma Condensed Consolidated Statements of Earnings For
the Year Ended February 29, 2000
Pro Forma Condensed Consolidated Balance Sheet As of February
29, 2000
Notes to Pro Forma Condensed Consolidated Financial Statements
(c) Exhibits
The following exhibits are filed as a part of this report:
2.1 Agreement of Sale dated as of April 19, 2000 by and
among Heilig-Meyers Company, a Virginia corporation,
HMPR, Inc., a Puerto Rico corporation,
MacManufacturing, Inc., a Delaware corporation, and
Empresas Berrios, Inc., a Puerto Rico corporation,
and Empresa Manufacturera, Inc., a Puerto Rico
corporation. Pursuant to Item 601(b)(2), the
Company agrees to furnish supplementally a copy of
any omitted schedule or exhibit to this agreement
to the Commission upon request.
99.1 Press Release dated April 25, 2000.
<PAGE>
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: May 15, 2000 By: /s/ Roy B. Goodman
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Roy B. Goodman
Executive Vice President,
Chief Financial Officer
<PAGE>
Exhibit Index
Exhibit
No. Description
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2.1 Agreement of Sale dated as of April 19, 2000 by and
among Heilig-Meyers Company, a Virginia corporation,
HMPR, Inc., a Puerto Rico corporation,
MacManufacturing, Inc., a Delaware corporation, and
Empresas Berrios, Inc., a Puerto Rico corporation,
and Empresa Manufacturera, Inc., a Puerto Rico
corporation. Pursuant to Item 601(b)(2), the
Company agrees to furnish supplementally a copy of
any omitted schedule or exhibit to this agreement
to the Commission upon request.
99.1 Press Release dated April 25, 2000.
<PAGE>
Pro Forma Financial Data
The following unaudited pro forma condensed consolidated statements of
earnings for the year ended February 29, 2000 to give effect to dispositions of
businesses by Heilig-Meyers. The pro forma information is based on the
historical financial statements of Heilig-Meyers giving effect to the
dispositions under the assumptions and adjustments described in the accompanying
notes to the unaudited pro forma condensed consolidated financial statements.
The following unaudited pro forma condensed consolidated balance sheet gives
effect to dispositions of businesses by Heilig-Meyers which were completed after
the balance sheet date, as if such dispositions had been completed as of
February 29, 2000.
On June 15, 1999, the Company entered into a definitive agreement to
sell its interest in its Rhodes division. The transaction was closed on July 13,
1999, with an effective date of July 1, 1999. Under the terms of the sale
agreement the Company received $60.0 million in cash, a $40 million 10%
pay-in-kind subordinated note receivable due 2004 (9.5% interest rate per annum
for periods where interest is paid in cash) and an option to acquire a 10%
equity interest in Rhodes Holdings, the acquiring entity. The Company also has
the option to acquire an additional 10% equity interest if certain financial
goals are achieved by Rhodes Holdings. The Company agreed to provide or
guarantee a $20.0 million standby credit facility to Rhodes after the closing,
which may only be drawn on in certain circumstances after utilization of
availability under Rhodes' primary credit facility. In addition, under terms of
the agreement, Rhodes assumed approximately $10 million in capital lease
obligations. As a result of this sale, the Company recorded a pre-tax charge to
earnings of $99.5 million ($64.5 million net of tax benefit) during the fiscal
year ended February 29, 2000. Historical results for fiscal 2000 include
operations of the Rhodes division through June 30, 1999.
On May 28, 1999, the Company entered into a definitive agreement to
sell 93% of its interest in its Mattress Discounters division, and on August 6,
1999, the Company completed the transaction. The Company received approximately
$204 million in cash, subject to certain working capital adjustments,
pay-in-kind junior subordinated notes valued at $11.4 million and retained a 7%
equity interest in Mattress Discounters. The Company incurred costs related to
the transaction of approximately $7.7 million and assumed liabilities of
approximately $2.9 million. This transaction resulted in a pre-tax gain of
$138.5 million ($63.2 million net of tax) during fiscal 2000. Historical results
for fiscal 2000 include operations of Mattress Discounters through August 6,
1999.
On January 31, 2000, the Company sold substantially all of the assets
of Guardian Products, Inc. The Company received $6.0 million in cash and a $5.1
million note receivable. This transaction resulted in a pre-tax loss of $.2
million, however, the sale resulted in a $3.8 million loss after income taxes as
a result of the Company's low tax basis in its investment. Historical results
for fiscal 2000 include operations of Guardian through January 31, 2000.
During the second quarter ended August 31, 1999, the Company announced
its intent to exit the Chicago, Illinois, Milwaukee, Wisconsin and Puerto Rican
markets, which are not considered to be part of the Company's core operations.
Pursuant to this plan, the Company sold the assets related to 18 stores in the
Chicago and Milwaukee markets (referred to throughout as The RoomStore -
Chicago) in September 1999. This transaction resulted in a pretax loss of $46.6
million ($28.0 million net of tax benefit) during fiscal 2000. Historical
results for fiscal 2000 include operations of The RoomStore - Chicago through
September 30, 1999.
On April 20, 2000, the sale of the Berrios division was completed. The
total value of the transaction was in excess of $120.0 million, before
transaction costs, of which $18.0 million was in the form of an 11% subordinated
note due 2009 and approximately $12.0 million was related to excess working
capital distributed to the Company.
The net cash proceeds generated by these transactions were or will be
used to reduce long term debt and notes payable.
The unaudited pro forma condensed consolidated financial statements
have been prepared by the management of Heilig-Meyers based upon historical and
other financial information. The pro forma statements do not purport to be
indicative of the results of operations or financial position which would have
occurred had the dispositions been made at the beginning of the periods or as of
the date indicated or of the financial position or results of operations which
may be obtained in the future.
<PAGE>
<TABLE>
Heilig-Meyers Company
Pro Forma Condensed Consolidated Statements of Earnings
For the Year Ended February 29, 2000
(Amounts in Thousands, except per share data)
<CAPTION>
Pro Forma Adjustments
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Mattress Other
Heilig-Meyers Rhodes Discounters Berrios Divested Pro Forma
Historical Operations Operations Operations Operations Other Combined
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<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Sales $2,038,143 $ (150,830) $ (106,631) $(126,543) $(17,900) $1,636,239
Other income 259,509 (9,218) (102) (20,498) (5,754) 223,937
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Total Revenues 2,297,652 (160,048) (106,733) (147,041) (23,654) - 1,860,176
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Costs and expenses:
Costs of sales 1,346,503 (106,463) (66,372) (71,905) (11,847) 1,089,916
Selling, general & administrative 762,176 (55,975) (28,711) (51,040) (13,534) 612,916
Interest, net 62,997 - - - - (17,954)(D) 45,043
Provision for doubtful accounts 99,283 - - (6,242) (2,334) 90,707
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Total costs and expenses 2,270,959 (162,438) (95,083) (129,187) (27,715) (17,954) 1,838,582
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Gain (loss) on sale and write-down of (63,052) 52,938 (C) (10,114)
assets held for sale
Earnings (loss) before income taxes (36,359) 2,390 (11,650) (17,854) 4,061 70,892 11,480
Provision (benefit) for income taxes 22,284 872 (4,245) (2,452) 2,039 (10,064) 8,434
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Net earnings (loss) $ (58,643) $ 1,518 $ (7,405) $ (15,402) $ 2,022 $ 80,956 $ 3,046
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Net earnings (loss) per share:
Basic $ (0.97) $ 0.03 $ (0.12) $ (0.26) $ 0.03 $ 1.34 $ 0.05
Diluted $ (0.97) $ 0.03 $ (0.12) $ (0.26) $ 0.03 $ 1.34 $ 0.05
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Weighted average shares:
Basic 60,289 60,289 60,289 60,289 60,289 60,289 60,289
Diluted 60,289 60,289 60,289 60,289 60,289 60,299 (E) 60,299
</TABLE>
See Notes to Pro Forma Condensed Consolidated Financial Statements.
<PAGE>
<TABLE>
Heilig-Meyers Company
Pro Forma Condensed Consolidated Balance Sheet
As of February 29, 2000
(Amounts in Thousands)
<CAPTION>
Berrios Other
Heilig-Meyers Pro Forma Pro Forma Pro Forma
Historical Adjustments Adjustments Combined
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<S> <C> <C> <C> <C>
Assets
Current assets:
Cash $ 15,073 $ 1,750 (B) $ 16,823
Accounts receivable, net 143,132 143,132
Retained interest in securitized receivables 165,873 165,873
Inventories 336,690 336,690
Other 116,792 9,164 (A) 125,956
1,800 (B) 1,800
Net assets held for sale 125,917 (106,634) (A) 13,616
(5,667) (B)
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Total current assets 903,477 (99,587) - 803,890
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Property, plant & equipment, net 290,252 290,252
Other assets 121,031 18,000 (A) 139,031
Excess cost over net assets acquired, net 142,925 142,925
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$ 1,457,685 $ (81,587) $ - $ 1,376,098
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Liabilities And Stockholders' Equity
Current liabilities:
Notes payable $ 72,257 $ (61,132) (A) $ 11,125
Long-term debt due within one year 706 706
Accounts payable 125,464 125,464
Accrued expenses and other 142,241 (2,117) (B) (11,401) (D) 128,723
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Total current liabilities 340,668 (63,249) (11,401) 266,018
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Long-term debt 535,982 (18,338) (A) 517,644
Deferred income taxes 46,287 46,287
Stockholders' equity:
Common stock, at par 121,354 121,354
Capital in excess of par value 240,871 240,871
Unrealized gain on investments 4,169 4,169
Retained earnings 168,354 11,401 (D) 179,755
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Total stockholders' equity 534,748 - 11,401 546,149
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$ 1,457,685 $ (81,587) $ - $ 1,376,098
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</TABLE>
See Notes to Pro Forma Condensed Consolidated Financial Statements.
<PAGE>
Heilig-Meyers Company
Notes to Pro Forma Condensed Consolidated Financial Statements
(Amounts in Thousands)
(A) To reflect the allocation of estimated proceeds generated by the disposition
of the Berrios division.
Cash $ 91,134
Transaction costs (2,500)
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Net cash proceeds 88,634
Note receivable 18,000
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Total proceeds 106,634
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The Company expects to apply the net cash proceeds of $88,634 as
follows:
Deposits to cash collateral accounts $ 9,164
Reduction in notes payable 61,132
Reduction in long-term debt 18,338
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88,634
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(B) The Company's investment in the Berrios division is included in net
assets held for sale of the February 29, 2000 consolidated balance sheet
at the estimated net realizable value of $112.3 million. Due to activity
subsequent to February 29, 2000, the carrying amount of the Company's
investment in Berrios approximated total proceeds as of April 20, 2000.
This activity reduced assets held for sale by $5,667, increased cash by
$1,750, increased other current assets by $1,800 and decreased accrued
liabilities by $2,117.
(C) To eliminate the gain (loss) on sale and write-down of assets held for
sale to give effect to the dispositions of the Rhodes, Mattress
Discounters, and Berrios divisions, and other divestitures as if they
had been completed prior to the beginning of the period. Other
divestitures include the disposition The RoomStore - Chicago division
and the sale of Guardian Products, Inc.
<TABLE>
<CAPTION>
Mattress Other
Rhodes Discounters Berrios Divestitures Total
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<S> <C> <C> <C> <C> <C>
Gain (loss) on sale and write-down of
assets held for sale $ (99,535) $ 138,533 $ (45,117) $ (46,819) $ (52,938)
Provision (benefit) for income taxes (35,036) 75,351 (8,699) (14,999) 16,617
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Net gain (loss) $ (64,499) $ 63,182 $ (36,418) $ (31,820) $ (69,555)
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EPS $ (1.07) $ 1.05 $ (0.60) $ (0.53) $ (1.15)
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</TABLE>
(D) To reflect the pro forma impact of reduction of debt outstanding from
application of net proceeds generated by the dispositions. The proceeds
applied are presented on an annual weighted average basis as determined
by the closing dates of the dispositions. The interest income on
seller's notes receivable is presented as if the notes were outstanding
for the full fiscal year.
12 months ended
February 29, 2000
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Net proceeds applied to notes payable $ 72,257
Weighted average annual interest rate 7.32%
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$ 5,289
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Net proceeds applied to long-term debt $ 124,621
Weighted average annual interest rate 8.21%
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$ 10,231
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Interest income on seller's notes receivable $ 2,433
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Annual pro forma reduction in interest expense $ 17,954
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(E) Diluted weighted average shares have been adjusted for pro forma
purposes to include common stock equivalents that were excluded for
purposes of the historical statements since the result would have been
antidilutive to the loss from operations.
Exhibit 99.1
FOR IMMEDIATE RELEASE April 25, 2000
Heilig-Meyers Completes the Sale of its Puerto Rican Division, Extends its
Revolving Credit Facility and Announces Change in Revenue Recognition Policy
Richmond, VA: Heilig-Meyers Company (NYSE: HMY) today announced that it
had completed the sale of its Puerto Rican division, which operates under the
trade name Berrios, to Empresas Berrios Inc. The total value of the transaction
was in excess of $120 million of which $18 million was in the form of a
subordinated note. William C. DeRusha, Chairman and Chief Executive Officer,
noted that management was pleased with the completion of this transaction and
that the proceeds would be used to pay down debt obligations. "This transaction
will allow the Company to lower debt leverage to its lowest level in over ten
years and refocus its energy on the core operations. This is one of the last
major milestones in our divestiture program and management is extremely pleased
with the progress made on improving the overall financial condition of the
Company."
Management noted that the Company had obtained commitments, subject to
final documentation, from its current bank group to extend its revolving credit
facility until April 2001, with certain additional provisions under which the
facility may be extended until July 2001. Upon application of proceeds from the
Berrios sale, the Company expects the facility to be reduced from $200 million
to $140 million. In addition, under terms of the extended facility and within
provisions of the public debt indentures, the Company would pledge certain
assets as partial security to the lenders involved in the extension.
The Company also announced today that as a result of the Securities
and Exchange Commission's December 1999, release of Staff Accounting Bulletin
101, (SAB 101) which summarizes certain of the SEC staff's views in applying
generally accepted accounting principles to revenue recognition in financial
statements for all publicly traded companies, the Company expects to change its
accounting method for revenue recognition. The Company will now record sales
upon delivery of merchandise to the customer. Historically merchandise sales
were recorded prior to delivery but subject to certain criteria such as a signed
and approved credit contract for financed sales, receipt of full payment on cash
sales, in-stock inventory as well as an established delivery date for a specific
sales transaction. These conditions were typically met at the time of sale.
This change in accounting method will have an effective date of March
1, 2000. The implementation of this change will be accounted for as a change in
accounting principle and applied cumulatively in the income statement, below
income from operations, in the Company's May 31, 2000, first quarter report.
Management estimates the effect of the change to be a one-time, non-cash
reduction to the Company's net earnings of approximately $0.25 to $0.30 per
share. Roy B. Goodman, Executive Vice President and Chief Financial Officer
noted that this adjustment will not in any way impact the Company's cash flows
from operations and that this change in accounting practice was consistent with
methods being implemented by many other retailers. Mr. Goodman stated, "This
adjustment represents customer purchases that had not been delivered by fiscal
year end, February 29, 2000. Accordingly, when delivery occurs during the first
quarter that ends May 31, 2000, the Company will record the sale under the new
accounting treatment. As a result of this accounting change the May 2000 quarter
and future quarters will only be impacted by seasonal trends in sales and
corresponding delivery cycles which may possibly result in a net revenue shift
from one quarter to the following quarter."
Heilig-Meyers is the Nation's largest retailer of furniture, bedding
and related items. As of March 31, 2000, the Company operated 906 stores: 814 as
Heilig-Meyers, 56 as The RoomStore, 3 as Homemakers and 33 in Puerto Rico as
Berrios.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995: The forward-looking statements made above and identified by the words
"subject to," "expects" and "would" 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, final
documentation and execution of agreements relating to the extension of the
Company's revolving credit facility.
