-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DJetNRGkXbYgBqemqeYwImQYSYfprWyY5/MF5vpKrcsCM8f4gt/PJRAFntMVI4cQ zmqsLJWeTpUWHZSnrdGM/Q== 0000916641-00-000577.txt : 20000508 0000916641-00-000577.hdr.sgml : 20000508 ACCESSION NUMBER: 0000916641-00-000577 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000420 ITEM INFORMATION: ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20000505 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HEILIG MEYERS CO CENTRAL INDEX KEY: 0000046601 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-FURNITURE STORES [5712] IRS NUMBER: 540558861 STATE OF INCORPORATION: VA FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-08484 FILM NUMBER: 620863 BUSINESS ADDRESS: STREET 1: 12560 W CREEK PKWY CITY: RICHMOND STATE: VA ZIP: 23238 BUSINESS PHONE: 8047847300 MAIL ADDRESS: STREET 1: 2235 STAPLES MILL RD CITY: RICHMOND STATE: VA ZIP: 23230 8-K 1 FORM 8-K 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 ------------------------------ Heilig-Meyers Company ------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Virginia 1-8484 54-0558861 - ---------------------------- ------------ ------------------- (State or other jurisdiction (Commission (IRS Employer of incorporation) file number) Identification No.) 12560 West Creek Parkway, Richmond, Virginia 23238 - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (804) 784-7300 -------------------------- N/A ------------------------------------------------------------------------- (Former name or former address, if changed since last report) 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. 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. 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 ------------------ Roy B. Goodman Executive Vice President, Chief Financial Officer Exhibit Index Exhibit No. Description - ------- ----------- 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. 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. Heilig-Meyers Company Pro Forma Condensed Consolidated Statements of Earnings For the Year Ended February 29, 2000 (Amounts in Thousands, except per share data)
Pro Forma Adjustments -------------------------------------------------------------- Mattress Other Heilig-Meyers Rhodes Discounters Berrios Divested Pro Forma Historical Operations Operations Operations Operations Other Combined - ------------------------------------------------------------------------------------------------------------------------------------ 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 - ------------------------------------------------------------------------------------------------------------------------------------ Total Revenues 2,297,652 (160,048) (106,733) (147,041) (23,654) - 1,860,176 - ------------------------------------------------------------------------------------------------------------------------------------ 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 - ------------------------------------------------------------------------------------------------------------------------------------ Total costs and expenses 2,270,959 (162,438) (95,083) (129,187) (27,715) (17,954) 1,838,582 - ------------------------------------------------------------------------------------------------------------------------------------ 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 - ------------------------------------------------------------------------------------------------------------------------------------ Net earnings (loss) $ (58,643) $ 1,518 $ (7,405) $ (15,402) $ 2,022 $ 80,956 $ 3,046 ==================================================================================================================================== 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 ==================================================================================================================================== 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
See Notes to Pro Forma Condensed Consolidated Financial Statements. Heilig-Meyers Company Pro Forma Condensed Consolidated Balance Sheet As of February 29, 2000 (Amounts in Thousands)
Berrios Other Heilig-Meyers Pro Forma Pro Forma Pro Forma Historical Adjustments Adjustments Combined - ------------------------------------------------------------------------------------------------------------------------------------ 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) - ------------------------------------------------------------------------------------------------------------------------------------ Total current assets 903,477 (99,587) - 803,890 - ------------------------------------------------------------------------------------------------------------------------------------ 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 - ------------------------------------------------------------------------------------------------------------------------------------ $ 1,457,685 $ (81,587) $ - $ 1,376,098 ==================================================================================================================================== 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 - ------------------------------------------------------------------------------------------------------------------------------------ Total current liabilities 340,668 (63,249) (11,401) 266,018 - ------------------------------------------------------------------------------------------------------------------------------------ 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 - ------------------------------------------------------------------------------------------------------------------------------------ Total stockholders' equity 534,748 - 11,401 546,149 - ------------------------------------------------------------------------------------------------------------------------------------ $ 1,457,685 $ (81,587) $ - $ 1,376,098 ====================================================================================================================================
See Notes to Pro Forma Condensed Consolidated Financial Statements. 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) ------------------- Net cash proceeds 88,634 Note receivable 18,000 ------------------- Total proceeds 106,634 =================== 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 ------------------- 88,634 =================== (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.
Mattress Other Rhodes Discounters Berrios Divestitures Total ----------------------------------------------------------------------- -------------- 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 ----------------------------------------------------------------------- -------------- Net gain (loss) $ (64,499) $ 63,182 $ (36,418) $ (31,820) $ (69,555) ======================================================================= ============== EPS $ (1.07) $ 1.05 $ (0.60) $ (0.53) $ (1.15) ======================================================================= ==============
(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 ------------------- Net proceeds applied to notes payable $ 72,257 Weighted average annual interest rate 7.32% ------------------- $ 5,289 ------------------- Net proceeds applied to long-term debt $ 124,621 Weighted average annual interest rate 8.21% ------------------- $ 10,231 ------------------- ------------------- Interest income on seller's notes receivable $ 2,433 ------------------- ------------------- Annual pro forma reduction in interest expense $ 17,954 =================== (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. EX-99.1 2 PRESS RELEASE 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. -----END PRIVACY-ENHANCED MESSAGE-----