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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    Form 10-K

(Mark One)
  X  Annual report pursuant to Section 13 or 15 (d) of the Securities Exchange
     Act of 1934 [Fee Required]

For the fiscal year ended February 28, 1997 or

     Transition  report  pursuant  to  Section  13 or 15 (d)  of the  Securities
     Exchange Act of 1934 [No Fee Required]

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)

Registrant's telephone number, including area code:  (804) 359-9171
Securities registered pursuant to Section 12(b) of the Act:

         Title of each Class         Name of each exchange on which registered
         Common Stock, $2.00               New York Stock Exchange
         Par Value                         Pacific Stock Exchange

         Rights to purchase Preferred      New York Stock Exchange
         Stock, Series A, $10.00           Pacific Stock Exchange
         Par Value

Securities registered pursuant to Section 12(g) of the Act:

                                              None
(Title of Class)

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 of 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 the
filing requirements for at least the past 90 days.
  Yes   X   No      .

         Indicate by check mark if disclosure of delinquent  filers  pursuant to
Item 405 of  Regulation  S-K (Sec.  229.405 of this  chapter)  is not  contained
herein,  and will not be contained,  to the best of registrant's  knowledge,  in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. [ X ]

         The aggregate  market value of the voting stock held by  non-affiliates
of the registrant as of May 1, 1997 was approximately $624,713,837.

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         This figure was calculated by  multiplying  (i) the closing sales price
of the  registrant's  common stock on the New York Stock Exchange on May 1, 1997
by (ii) the number of shares of the  registrant's  common  stock not held by the
officers or directors of the  registrant or any persons known to the  registrant
to own more than five percent of the outstanding common stock of the registrant.
Such calculation does not constitute an admission or determination that any such
officer,  director or holder of more than five percent of the outstanding common
stock of the registrant is in fact an affiliate of the registrant.

         As of May 1, 1997,  there  were  outstanding  54,414,463  shares of the
registrant's common stock, $2.00 par value.

DOCUMENTS INCORPORATED BY REFERENCE

Portions  of  the  registrant's  Proxy  Statement  for  its  Annual  Meeting  of
Shareholders  scheduled for June 18, 1997,  are  incorporated  by reference into
Part III.


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                                      INDEX

PART 1
ITEM 1.  BUSINESS                                                     Page
          A.  Introduction                                               4
          B.  Industry Segments                                          4
          C.  Nature of Business
                   General                                               4
                   Competition                                           5
          D.  Store Operations
                   General                                               5
                   Merchandising                                         6
                   Advertising and Promotion                             7
                   Credit Operations                                     7
                   Distribution                                          8
                   Customer Service                                      9
          E.  Corporate Expansion                                        9
          F.  Other Factors Affecting the Business of Heilig-Meyers
                   Suppliers                                            11
                   Service Marks, Trademarks and Franchise Operations   11
                   Seasonality                                          11
                   Employees                                            11
                   Foreign Operations and Export Sales                  11

ITEM 2.  PROPERTIES                                                     11

ITEM 3.  LEGAL PROCEEDINGS                                              13

ITEM 4.  SUBMISSION of MATTERS to a VOTE of SECURITY HOLDINGS           13

PART II
ITEM 5.  MARKET for REGISTRANT'S COMMON EQUITY and
                  RELATED STOCKHOLDER MATTERS                           16

ITEM 6.  SELECTED FINANCIAL DATA                                        17
ITEM 7.  MANAGEMENT'S DISCUSSION and ANALYSIS of
                   FINANCIAL CONDITION and RESULTS of OPERATIONS        19

ITEM 8.  FINANCIAL STATEMENTS and SUPPLEMENTARY DATA                    24

ITEM 9.  CHANGES in and DISAGREEMENTS with ACCOUNTANTS
                   on ACCOUNTING and FINANCIAL DISCLOSURE               43

PART III
ITEM 10.  DIRECTORS and EXECUTIVE OFFICERS of the REGISTRANT            44

ITEM 11.  EXECUTIVE COMPENSATION                                        44

ITEM 12.  SECURITY OWNERSHIP of CERTAIN BENEFICIAL OWNERS
                   and MANAGEMENT                                       44

ITEM 13.  CERTAIN RELATIONSHIPS and RELATED TRANSACTIONS                44

PART IV
ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULE, and
                   REPORTS on FORM 8-K                                  44

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                                     PART 1

                                ITEM 1. BUSINESS

                                 A. Introduction

          Heilig-Meyers  Company (the  "registrant"),  which  together  with its
predecessors  and  subsidiaries,   sometimes  hereinafter  referred  to  as  the
"Company,"  is engaged  primarily  in the retail sale of home  furnishings.  The
Company's  predecessors are numerous  Virginia and North Carolina  corporations,
the first of which was  incorporated  in 1940, and all of which were merged into
Heilig-Meyers  Company,  a North Carolina  corporation,  in March 1970, which in
turn was merged into the registrant, a Virginia corporation, in June 1972.

          The Company has grown in recent  years,  in part,  through a series of
acquisitions.  Among  the  largest  recent  acquisitions  are the  January  1994
acquisition  of certain  assets  relating  to 92 stores of  McMahan's  Furniture
Company,  the  February  1995  acquisition  of certain  assets  relating  to the
operations of 17 stores owned by Berrios Enterprises of Caguas, Puerto Rico, the
October  1996  acquisition  of certain  assets  relating  to the 20 stores of J.
McMahan's  in Santa  Monica,  California  and the unrelated  acquisition  of
certain assets  relating to the 23 stores of Self-Service  Furniture  Company of
Spokane,   Washington  and  the  December  1996   acquisition  of  the  Atlanta,
Georgia-based Rhodes, Inc., a publicly traded home furnishings retailer with 105
stores in 15 states.  Most recently,  during February 1997, the Company acquired
certain assets  relating to the 10 stores of The  RoomStore,  Inc. of Ft. Worth,
Texas.  The Rhodes and  RoomStore  chains will  continue to operate  under their
respective  names and  formats.  The Company  also  acquired the assets of a 19-
store furniture chain based in North Carolina on February 28, 1997. These stores
began  operations March 1, 1997 and are,  therefore,  excluded from the February
28, 1997 store count.

          As of February 28, 1997,  Heilig-Meyers  Company operates stores under
four names and formats. The "Heilig-Meyers"  name is associated with the
Company's  historical  format with the  majority of the stores  operating in
smaller  markets with a broad line of merchandise.  All of the Company's  Puerto
Rican stores operate under the "Berrios"  name. The Berrios format is similar to
the stores operated under the "Heilig-Meyers" name. The "Rhodes" name is
used for the 105 stores  acquired  on  December  31,  1996.  The  Rhodes  format
retailing strategy is selling quality furniture to a broad base of middle income
customers.  "The RoomStore"  name and format is utilized  for 10 stores
acquired  in February  1997 that  display and sell  furniture  in complete  room
packages.  The rooms are arranged by professional  designers and sell at a value
if purchased as a group.

                              B. Industry Segments

          The  Company  considers  that it is engaged  primarily  in one line of
business, the sale of home furnishings, and has one reportable industry segment.
Accordingly,  data with  respect to industry  segments  has not been  separately
reported herein.

                              C. Nature of Business

General
          The  Company  is the  nation's  largest  specialty  retailer  of  home
furnishings  with 944 stores (as of February 28, 1997), 912 of which are located
in 32 states with the  remainder in Puerto Rico.  The Company's  Heilig-  Meyers
stores are primarily  located in small towns and rural markets in the southeast,
southcentral,  midwest, west, northwest and southwest Continental United States.
The 105  Rhodes  stores  are  primarily  located  in the  midsized  markets  and
metropolitan areas of 15 southern, midwestern and western states.


          The Company's operating strategies include: (1) offering a broad

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selection of  competitively  priced home  furnishings,  including  furniture and
accessories,  and bedding, and in the Heilig-Meyers and Berrios stores, consumer
electronics,  appliances,  and other items such as jewelry, small appliances and
seasonal goods; (2) locating  Heilig-Meyers  stores primarily in small towns and
rural  markets  which  are at least 25 miles  from a  metropolitan  market;  (3)
offering credit  programs to provide  flexible  financing to its customers;  (4)
utilizing  centralized  inventory and distribution systems in strategic regional
locations to support store inventory and merchandise  delivery  operations;  (5)
emphasizing customer service, including free delivery on most major purchases in
the Heilig-Meyers  stores and repair service for consumer  electronics and other
mechanical  items.  As a result of the  acquisition of Rhodes and The RoomStore,
the  Company  now has the  ability to expand by  matching  operating  formats to
markets  with  appropriate  demographic  and  competitive  factors.  The Company
expects to expand these formats as appropriate markets are identified.

          The Company  believes  this  strategy of offering  selection,  credit,
delivery  and  service  generally  allows its  Heilig-Meyers  stores to have the
largest  market share among home  furnishings  retailers in most of their small-
town markets.

Competition
          The retail  home  furnishings  industry  is a highly  competitive  and
fragmented  market.  The  Company,  as a  whole,  competes  with  large  chains,
independent  stores,  discount stores,  furniture  stores,  specialty stores and
others,  some of  which  have  financial  resources  greater  than  those of the
Company,  and some of which derive revenues from the sale of products other than
home furnishings. The Company believes that the addition of the "Rhodes" and
"The  RoomStore"  names  and  formats  will  enhance  the  Company's
competitive  position.  The Company is now more  capable of  matching  the store
format with the local market environment.  The Company believes the "Rhodes"
and "The  RoomStore"  formats are better suited for larger  markets than
the Heilig-Meyers store format, which it believes better serves small towns.

          Due to volume purchasing, the Company believes it is generally able to
offer  merchandise at equal or lower prices than its  competitors,  particularly
local  independent  and regional  specialty  furniture  retailers.  In addition,
Management  believes that it offers a broader selection of merchandise than many
of its competitors.  The Company believes that locating its Heilig-Meyers stores
in small towns and rural markets  provides an important  competitive  advantage.
Currently,  approximately 80% of all  Heilig-Meyers  stores are located in towns
with  populations  under 50,000 that are more than 25 miles from a  metropolitan
market.  Competition in these small towns largely comes from locally-owned store
operations,  which generally lack the financial strength to compete  effectively
with the Company.  Consequently,  the Company  believes  that its  Heilig-Meyers
stores have the largest  market  share among home  furnishings  retailers in the
majority of their areas.

          Based  on  its  experience,   the  Company  believes  its  competitive
environment  is  comparable  in all  geographic  regions  in which it  operates.
Therefore,  the  Company  does  not  believe  that a  regional  analysis  of its
competitive market is meaningful at this time.

                               D. Store Operations

General
          The Company's Heilig-Meyers stores generally range in size from 10,000
to 35,000 square feet, with the average being approximately  20,000 square feet.
A store's  attached or nearby  warehouse  usually  measures  from 3,000 to 5,000
square feet. A typical store is designed to give the customer an urban  shopping
experience  in a rural  location.  During the last five  years,  the Company has
revised its Heilig-Meyers  prototype store construction  program.  The Company's
most recent  version of its prototype  stores opened in fiscal 1997. The Company
added 3 of these stores in fiscal 1994, 7 in fiscal 1995, 8 in fiscal 1996, 8 in
fiscal 1997 and plans to add up to 15 more for fiscal

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1998. The prototype stores are 27,000 square feet and feature the latest display
techniques and  construction  efficiencies.  Certain features of these prototype
stores are  incorporated  into other  locations  through the  Company's  ongoing
remodeling program. The Company's existing store remodeling program, under which
stores are remodeled on a rotational basis,  provides the Company's older stores
with a fresh look and  up-to-date  displays on a periodic  basis.  During fiscal
1997, the Company  remodeled 75 existing stores and approximately 105 additional
remodelings  are planned for fiscal  1998.  The  existing  Rhodes and  RoomStore
formats average approximately 34,000 and 25,000 square feet, respectively.

          Each  store unit is managed  by an  on-site  manager  responsible  for
day-to-day store  operations  including,  if offered in that store,  installment
credit  extension and collection.  Stores are grouped into divisions and regions
for executive management purposes.

          The Company has an extensive  in-house  education program to train new
employees  in its  operations  and to keep  current  employees  informed  of the
Company's policies. This training program emphasizes sales productivity,  credit
extension  and  collection,  and  store  administration.  The  training  program
utilizes the publication of detailed store manuals, internally produced training
videotapes and Company-conducted  classes for employees. The Company also has an
in-store  manager training program which provides  potential  managers  hands-on
experience in all aspects of store  operations.  The Company's ongoing education
program is designed to provide a sufficient  number of qualified  personnel  for
its stores.

          In recent years,  Heilig-Meyers  has enhanced its operating systems to
increase the  availability and  effectiveness  of management  information and to
provide a foundation for planned future growth. In fiscal 1995, the Company made
improvements  to  inventory  management  by use  of  just-in-time  ordering  and
backhauling.  Also during  fiscal 1995,  the Company  completed a conversion  to
updated hardware,  providing a foundation for numerous system  enhancements.  In
fiscal 1996, the Company  completed the installation of a new satellite  system.
This system provides  immediate  communication  between the Company's  corporate
headquarters,  Heilig-Meyers  stores and distribution  centers. As a result, the
Company  believes   customer  service  has  been  improved  by  providing  store
management  more timely access to information  related to product  availability.
This  system  also  provided  the means for the  Company  to  implement  its new
inventory  reservation  system and enhanced  target  marketing  programs  during
fiscal 1997.  The Rhodes and The  RoomStore  formats have  operating  systems in
place that provide similar operating capabilities.

Merchandising
          The Company's Heilig-Meyers merchandising strategy is to offer a broad
selection of  competitively  priced home  furnishings,  including  furniture and
accessories,  consumer electronics,  appliances, bedding and other items such as
jewelry and seasonal goods.  During the fiscal year ended February 28, 1997, the
percentage   of   Heilig-Meyers   stores'   sales  derived  from  the  following
merchandising categories was as follows:

Furniture and accessories                                60%
Consumer electronics                                     10
Bedding                                                  12
Appliances                                                8
Other (e.g. jewelry and seasonal goods                   10

          These  percentages  have not varied  significantly  over the past five
fiscal years.  The RoomStore and Rhodes stores  primarily sell  mid-price  point
furniture and bedding. Historically, 89% of Rhodes' sales consisted of furniture
and accessories with bedding comprising the remaining 11%.

          The Company  carries a wide variety of items  within each  merchandise
category to appeal to individual  tastes and  preferences.  The Company believes
this broad selection of products has enabled it to expand its customer base

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and  increase  repeat  sales  to  existing   customers.   By  carrying  seasonal
merchandise (heaters, air conditioners, lawn mowers, outdoor furniture, etc.) in
its  Heilig-Meyers  stores,  the Company has been able to moderate  the seasonal
fluctuations in its sales which are common to the industry.

          While the basic merchandise mix remained fairly constant during fiscal
1997, the Company  continued to refine its merchandise  selections to capitalize
on variations in customer preferences. During fiscal 1997, the Company continued
to  strengthen  its vendor  relationships.  In addition to providing  purchasing
advantages,   these   relationships   provide   warehousing   and   distribution
arrangements which improve inventory management.


Advertising and Promotion
          Direct  mail  circulars  are a key  part  of the  Company's  marketing
program.  The  Company  centrally  designs  its  direct  mail  circulars,  which
accounted for approximately 45% of the Company's  advertising expenses in fiscal
1997.  In fiscal  1997,  the Company  distributed  over 140 million  direct mail
circulars.  This  included  monthly  circulars  sent by direct mail to over nine
million  households  on the  Company's  mailing  list and special  private  sale
circulars mailed to approximately two million of these households each month, as
well as during special promotional periods.

          In addition to the  Company's  utilization  of direct mail  circulars,
television and radio  commercials are produced  centrally and aired in virtually
all of the Company's  markets.  Newspaper  advertising  is placed largely at the
store level. The Company also utilizes Spanish language  television and radio in
selected  markets  with  significant  Hispanic  populations.  The  Company  also
regularly conducts  approximately 40 Company-wide  promotional events each year.
In addition to these events,  individual stores periodically conduct promotional
events  locally.  Besides the  conventional  marketing  techniques  noted above,
Heilig-Meyers  has sought  alternative  methods to increase the  Company's  name
recognition  and customer  appeal.  In fiscal 1997,  the Company  continued  its
sponsorship of the Heilig-Meyers  NASCAR Racing Team as a means of enhancing the
Company's name recognition  among the millions of NASCAR fans in its current and
potential market areas.

          During  fiscal  1997,   the  Company   continued  to  utilize   market
segmentation techniques (begun in fiscal 1994) to identify prospective customers
by  matching  their  demographics  to those of  existing  customers.  Management
believes  ongoing market research and improved  mailing  techniques  enhance the
Company's  ability to place circulars in the hands of those potential  customers
most likely to make a purchase.  The Company  believes that the  availability as
well as the terms of credit are key determinants in the purchasing decision, and
therefore,  promotes credit  availability by disclosing monthly payment terms in
its circulars.

Credit Operations
          The Company  believes  that  offering  flexible  credit  options is an
important  part  of  its  business   strategy,   which  provides  a  significant
competitive advantage.  Because Heilig-Meyers installment credit is administered
at the store  level,  terms can  generally  be tailored  to meet the  customer's
ability to pay. Each  Heilig-Meyers  store has a credit  manager who,  under the
store  manager's  supervision,  is responsible for extending and collecting that
store's  accounts in  accordance  with  corporate  guidelines.  Because  Company
representatives  work with  customers  on a local  level,  they can often extend
credit,  without significantly  increasing the risk of nonpayment,  to customers
whose other credit sources may be limited.

          The Company  believes its credit program fosters  customer loyalty and
repeat business. Historically,  approximately 80% of sales in the Heilig- Meyers
stores have been made through the Company's installment credit program. Although
the Company extends credit for original terms up to 24 months,  the average term
of the  installment  obligation for the fiscal year ended February 28, 1997, was
approximately 17 months. The Company accepts major credit cards

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in all of its  stores  and,  in  addition,  offers a  revolving  credit  program
featuring  its private label credit card.  The Company  promotes this program by
direct mailings to revolving  credit  customers of acquired stores and potential
new customers in targeted  areas.  Credit  extension and collection of revolving
accounts are handled  centrally  from the  Company's  Credit  Center  located in
Richmond, Virginia.

          The Company offers a revolving credit program in the recently acquired
Rhodes  stores  through a private label credit  facility  pursuant to an ongoing
merchant  agreement  with  Beneficial  National  Bank USA.  The Company does not
service or provide recourse on these accounts.  All credit applications,  sales,
and many payments on account are processed  electronically  through  Rhodes'
point-of-sale  system.  Approximately  70% of Rhodes  sales are made through the
revolving credit program.

          Revenue is  recognized on  installment  and credit sales upon approval
and  establishment  of a delivery date,  which does not differ  materially  from
recognition  at time of shipment.  The effect of sales returns prior to shipment
date have been immaterial. Finance charges are included in revenues on a monthly
basis as earned. During fiscal 1997, finance income amounted to $209,491,000, or
approximately 13.1% of total revenues.  Because credit operations are integrated
with  sales  and  store  administration,  management  does not  believe  that an
accurate  allocation  of various  costs and expenses of  operations  can be made
between retail sales and credit operations.  Therefore, the Company is unable to
estimate accurately the contribution of its financing operations to net income.

          The Company offers, but does not require, one or more of the following
credit  insurance  products  at the  time  of a  credit  sale:  property,  life,
disability and unemployment insurance.  The Company's employees enroll customers
under a master policy issued by an unrelated third-party insurer with respect to
these credit insurance products.

Distribution
          The  Company  currently  operates  eight  Heilig-Meyers   distribution
centers in the Continental U.S. and one center in Puerto Rico. These centers are
located  in  Orangeburg,   South   Carolina;   Rocky  Mount,   North   Carolina;
Russellville,  Alabama; Mount Sterling, Kentucky; Thomasville, Georgia; Moberly,
Missouri; Fontana, California; Athens, Texas; and Cidra, Puerto Rico. The Athens
distribution  center  was  completed  near the end of  fiscal  1997,  with  full
operations  commencing in March 1997.  During fiscal 1996, the Company  expanded
the Moberly distribution center with a 150,000 square foot addition.  Currently,
the  Company's  Heilig-Meyers  distribution  network has the capacity to service
over 900 stores in the  continental  U.S.  The  Company  plans to  relocate  the
Fontana,  CA distribution  center in July 1997 to a larger,  400,000 square foot
facility with highly mechanized operations including conveyor systems located in
Hesperia,  CA. The new  distribution  center  will also  contain  the  relocated
Fontana Service Center as well as an outlet store. The Company also operates the
eleven  Rhodes  distribution  centers,  which  collectively  have  more than 1.1
million square feet and include home delivery operations in certain markets. The
Company also operates The RoomStore's  200,000 square foot distribution  center.
Management is in the process of evaluating the distribution function in light of
recent  acquisitions  in  order  to  maximize   warehousing  and  transportation
efficiencies.

          The  Company  utilizes  several  sophisticated  design and  management
techniques to increase the operational  efficiency of its distribution  network.
These include cantilever racking and computer-controlled random-access inventory
storage.  Use of direct shipping and backhauling  from vendors has also enhanced
distribution  efficiency.  Backhauling  involves routing its trucks so that they
can transport  purchased  inventory from suppliers to the  distribution  centers
while   returning  from  normal  store   deliveries.   The  Company   backhauled
approximately  26% of its purchased  inventory in the Continental U.S. in fiscal
1997.

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          Typically,  each of the  Company's  Heilig-Meyers  stores  is  located
within 250 miles of one of the eight distribution centers, and each Rhodes store
is within  100  miles of one of the  eleven  Rhodes  distribution  centers.  The
Company  operates a fleet of trucks which delivers  merchandise to each store at
least twice a week.  The Company  believes the use of the  distribution  centers
enables it to make  available  a broader  selection  of  merchandise,  to reduce
inventory  requirements at individual stores, to benefit from volume purchasing,
to provide prompt delivery to customers and to minimize freight costs.

Customer Service
          The Company believes that customer service is an important element for
success in the retail furniture business and therefore provides a broad range of
services to its  customers.  These include home  delivery and setup,  as well as
liberal policies with respect to exchanges and returns. In addition, the Company
offers service agreements on certain merchandise sold in its stores. The Company
sells  substantially all of its service policies to third parties and recognizes
service  policy  income  on  these at the time of  sale.  Revenue  from  service
policies and extended  warranty  contracts  retained by the Company are deferred
and recognized over the life of the contract period.

          In addition,  the Company  provides  repair  services on virtually all
consumer  electronics  and  mechanical  items sold in its  stores.  The  Company
operates service centers in Fayetteville,  North Carolina, Moberly, Missouri and
Fontana,  California.  The  Fayetteville  Service Center occupies  approximately
40,000 square feet and has the capacity to process 2,000 repair jobs a week. The
Moberly  Service  Center  occupies  35,000  square feet adjacent to the Moberly,
Missouri Distribution Center and has the capacity to process 2,000 repair jobs a
week.  The  Fontana  service  center  occupies  15,000  square  feet and has the
capacity to process 750 repair jobs a week.  The Fontana  service center will be
relocated  with the  distribution  center to a 35,000  square  foot  facility in
Hesperia,  CA. The service centers  provide service for all consumer  electronic
items,  most  mechanical  items  (except  major  appliances  which are  serviced
locally) and watches.  The service centers are also authorized to perform repair
work under certain manufacturers' warranties. Service center trucks visit stores
weekly, allowing one-week turnaround on most repair orders.


                             E. Corporate Expansion

          The  Company has grown from 374 stores at February  29,  1992,  to 944
stores at February  28, 1997.  Over this time  period,  the Company has expanded
from  its  traditional  southeast  operating  region  into  the  midwest,  west,
southwest,  northwest  and  southcentral  Continental  United  States as well as
Puerto Rico. In addition,  the Company has acquired new  operating  formats as a
result of the Rhodes and The RoomStore acquisitions.

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(page 10)
          The following  table discloses the  Company's  stores by state and
format as of February 28, 1997:

                            Heilig-
State                       Meyers               Rhodes


Alabama                         37                    9
Arizona                         15
Arkansas                         3
California                      89
Colorado                         4                    8
Florida                         39                   18
Georgia                         53                   18
Idaho                            4
Iowa                            20
Illinois                        41                    2
Indiana                         20                    1
Kansas                                                1
Kentucky                        28                    2
Louisiana                       12
Maryland                         1
Mississippi                     30                    1
Missouri                        29                    6
Montana                          2
North Carolina                  88                   11
Nevada                           5
New Mexico                       7
Ohio                            34                    8
Oklahoma                         7
Oregon                           6
Pennsylvania                    16
South Carolina                  44                    6
Tennessee                       54                    6
Texas                           20                    8
Virginia                        45
Washington                      14
West Virginia                   27
Wisconsin                        3

                               797                  105

The Company also operates 10 The  RoomStores  in Texas and 32 Berrios  stores in
Puerto Rico.

Growth in the number of stores comes  primarily from three sources:  acquisition
of chains or independent  stores,  refurbishing of existing retail space and new
construction. During the fiscal year ended February 28, 1997, the Company opened
or acquired 238 stores and closed 10 stores for a net  increase,  of 228 stores.
Of the 238 new  stores,  175 were  existing  furniture  stores  acquired  by the
Company in separate  transactions,  55 were  operations  begun by the Company in
vacant  existing  buildings and 8 were prototype  stores built  according to the
Company's specifications.

          The Company constantly  evaluates  opportunities for further expansion
of its business.  The Company plans to add  approximately 60 to 80 Heilig-Meyers
stores in the  Continental  U.S.  during fiscal 1998 by seeking  acquisitions of
existing   businesses,   obtaining  and  renovating  existing  retail  space  or
constructing  new  prototype  stores in selected  small towns.  Most fiscal 1998
expansion is expected to be focused in Texas,  Louisiana and Oklahoma due to the
proximity of the new Athens, Texas distribution center. In addition, the Company
plans to add two new stores in Puerto Rico during  fiscal 1998. In selecting new
Heilig-Meyers  locations, the Company intends to follow its established strategy
of generally locating stores within 250 miles of a

(page 11)
distribution  center and in towns with  populations  of 5,000 to 50,000 that are
over 25 miles from the closest metropolitan market. The Company believes that it
has  substantial  growth  potential in its present and contiguous  market areas.
Growth  opportunities of the recently acquired stores operating under the Rhodes
and The RoomStore formats are being evaluated. The Company plans to expand these
formats as the appropriate markets are identified.


             F.  Other Factors Affecting the Business of the Company

Suppliers
          During the fiscal year ended  February 28,  1997,  the  Company's  ten
largest suppliers accounted for approximately 35% of merchandise purchased.  The
Company has no long-term contracts for the purchase of merchandise. In the past,
the Company has not experienced  difficulty in obtaining satisfactory sources of
supply and believes  that adequate  alternative  sources of supply exist for the
types of merchandise sold in its stores. Neither the Company nor its officers or
directors  have an  interest,  direct or  indirect,  in any of its  suppliers of
merchandise other than minor investments in publicly held companies.

Service Marks, Trademarks and Franchise Operations
          The  marks  "Heilig-Meyers",   "MacSaver",   "MacSaver,  design  of  a
Scotsman",  other marks acquired through various  acquisitions and the Company's
distinctive  logo are federally  registered  service  marks of the Company.  The
Company has  registrations  for  numerous  other  trademarks  and service  marks
routinely used in the Company's  business.  These  registrations  can be kept in
force in perpetuity  through continued use of the marks and timely  applications
for renewal.

          The mark  "Berrios"  is a  federally  registered  service  mark of the
Company.  The Company has also applied for certain other  trademarks and service
marks for use in connection with its stores in Puerto Rico.

          The marks  "Rhodes" and "The  RoomStore" are federally
registered service marks of the Company which were acquired in fiscal year 1997.

Seasonality
          Quarterly fluctuations in the Company's sales are insignificant.

Employees
          As of February 28, 1997,  the Company  employed  approximately  18,200
persons  full-  or  part-time  in  the  Continental   United  States,   of  whom
approximately  17,200 worked in the Company's stores,  distribution  centers and
service  centers,  with the balance in the Company's  corporate  offices.  As of
February 28, 1997,  the Company  employed  approximately  1,000 persons full- or
part-time in Puerto  Rico,  of whom  approximately  800 worked in the stores and
distribution  center,  with the balance in the corporate office.  The Company is
not a party to any union contract and considers its relations with its employees
to be good.

Foreign Operations and Export Sales
          The Company has no foreign operations and makes no export sales.


                                      ITEM 2.  PROPERTIES

          As of February 28, 1997,  668 of the Company's  stores are on a single
level, with  approximately 80% of floor space devoted to sales and 20% used as a
warehouse  primarily for  merchandise  being prepared for delivery and for items
customers carry with them. The  Heilig-Meyers  stores are typically located away
from the center of town. The remaining 276 stores generally are in older two- or
three-level  buildings in downtown areas. Usually there is no warehouse space in
these  older  buildings,  and the  stores'  warehouses  are  located  in  nearby
buildings.

(page 12)
          As of February 28, 1997, the Company owned 71 of its Heilig-Meyers and
12 of its  Rhodes  stores,  three of its  Heilig-Meyers  and five of its  Rhodes
distribution  centers and the Fayetteville,  North Carolina Service Center.  The
Company leases the remaining stores,  the remaining  distribution  centers,  its
corporate headquarters located at 2235 Staples Mill Road, Richmond, Virginia and
other office  space.  Rentals  generally  are fixed  without  reference to sales
volume,  although  some leases  provide for  increased  rent due to increases in
taxes,  insurance  premiums or both. Some renewal options are tied to changes in
the Consumer  Price Index.  Total rental  payments for properties for the fiscal
year ended February 28, 1997, were approximately  $59,096,000.  Most vehicles, a
majority  of  the  distribution  centers'  material  handling  equipment,  and a
majority of the Company's data processing equipment are also leased. The Company
believes that its facilities are adequate at present levels of operations.

(page 13)
                                  ITEM 3. LEGAL PROCEEDINGS

      The Company  previously  reported  involvement in certain cases  regarding
non-filing  fees  charged by the Company on certain  credit  transactions.  Non-
filing fees are used to obtain insurance in lieu of filing a financing statement
to perfect a security  interest in  connection  with a credit  transaction.  The
plaintiffs  in the  cases  are  alleging  that  the  Company's  charging  of the
non-filing  fees  violates  certain  state and federal  statutes and are seeking
statutory  damages and  unspecified  punitive  damages.  Kirby et al v.  Heilig-
Meyers  Furniture  Company  and  Heilig-Meyers  Company  was filed in the United
States  District  Court for the Southern  District of  Mississippi  (Hattiesburg
District) on April 10, 1995. The plaintiffs in this case requested certification
of a class in all states except  Alabama and Georgia and  subsequently  moved to
substitute a Mississippi  class in its place. On February 3, 1997, this case and
Richardson v. Heilig-Meyers Company and Heilig-Meyers Furniture Company filed on
July 11,  1996 in the United  States  District  Court for the North  District of
Florida   (Tallahassee   Division)  (the  "Florida   District  Court")  (seeking
certification of a class of Florida residents and alleging  violation of federal
statutes) were  transferred by the panel on multi district  litigation (the "MDL
Panel") to the United States  District Court for the Middle District of Alabama.
The Company  has moved to return  these cases to the courts in which these cases
were  originally  filed.  There are also three  cases  pending in United  States
District Courts which seek to certify classes of residents in Georgia,  Illinois
and Virginia, respectively:  Eubanks v. Heilig- Meyers Company and Heilig-Meyers
Furniture  Company  (Southern  District  of  Georgia)  filed on March 5, 1997 in
Georgia State Court and  subsequently  removed to United States  District  Court
(alleges  violation  of Georgia  statutes);  Faulkner v.  Heilig-Meyers  Company
(Northern District of Illinois) filed on February 18, 1997 (alleges violation of
federal  and  Illinois   statutes);   and  Via  v.  Heilig-Meyers   Company  and
Heilig-Meyers  Furniture  Company (Western  District of Virginia) filed on April
23,  1997  (alleges  violation  of federal  statutes).  The  Company  intends to
vigorously  defend all of these cases. The Company has reached a settlement in a
case pending in the Florida District Court,  Pace v.  Heilig-Meyers  Company and
Heilig-Meyers  Furniture  Company,  which  sought  certification  of a class  of
Florida residents and alleged  violations of Florida  statutes.  The settlement,
which was approved by the Florida District Court in May 1997, is not expected to
have a  material  impact  on the  Company's  financial  statements.  In Jones v.
Heilig-Meyers Company and Heilig-Meyers Furniture Company (filed on February 23,
1996 in the Memphis, Tennessee Circuit Court seeking certification of a class of
Tennessee  residents and alleging violations of Tennessee  statutes),  the Court
granted the Company's  motion to deny class  certification on April 29, 1997 and
subsequently  granted the Company's motion to deny class  certification on April
29, 1997 and subsequently granted the Company's motion to dismiss the case.

      In  addition,   the  Company  is  party  to  various   legal  actions  and
administrative proceedings and subject to various claims arising in the ordinary
course of business,  including claims relating to its charges in connection with
credit sales.  Based on the best information  presently  available,  the Company
believes that the disposition of these matters will not have a material  adverse
impact on the financial statements of the Company.


            ITEM 4.  SUBMISSION of MATTERS to a VOTE of SECURITY HOLDERS


      None.

(page 14)
                             Executive Officers of the Registrant

        The following table sets forth certain  information  with respect to the
executive officers of the Company as of May 1, 1997:


                                             Positions with the Company
                                             or Principal Occupation for
                               Years with    the Past Five Years and
     Name             Age      the Company       Other Information
     ----             ---      -----------       -----------------

William C. DeRusha      47           28    Chairman  of the Board since
                                           April 1986.  Chief Executive
                                           Officer  since  April  1984.
                                           Director since January 1983.

Troy A. Peery, Jr.      51           25    President since  April 1986.
                                           Chief Operating Officer since
                                           December 1987. Director since
                                           April 1984.

James F. Cerza, Jr.     49            9    Executive  Vice  President,
                                           since April 1995. Executive
                                           Vice President, Operations
                                           from August 1989 to April 1995.

Joseph R. Jenkins       51            9    Executive Vice President and
                                           Chief Financial Officer since
                                           January 1988.

Irwin L. Lowenstein     61            -    Executive Vice President, Rhodes
                                           since April 1997. Executive Vice
                                           President, Rhodes, Inc. since
                                           January 1997. Chairman of the
                                           Board, Rhodes, Inc. from 1994 to
                                           December 1996. Chief Executive
                                           Officer, Rhodes, Inc. from 1989 to
                                           December 1996. President and Chief
                                           Operating Officer, Rhodes, Inc.
                                           from 1973 to 1994.

Frederick E. Meiser     53            -    Executive Vice President,
                                           Merchandising since December 1996.
                                           Executive Vice President,
                                           Montgomery Ward from March
                                           1996 to December 1996 (retail
                                           merchandising of electronics,
                                           appliances, furniture and jewelry).
                                           Chairman of the Board and Chief
                                           Executive Officer, Lechmere from
                                           November 1995 to December 1996
                                           (retail merchandising of
                                           home oriented products). Executive
                                           Vice President, Merchandising,
                                           Builders Square from 1994 to
                                           November 1995 (retail
                                           merchandising of home improvement
                                           and repair products). Senior Vice
                                           President, Marketing, Builders
                                           Square from 1992 to 1994.

(page 15)
James R. Riddle         55           12    Executive Vice President,
                                           since April 1995. Executive
                                           Vice President, Marketing
                                           from January 1988 to April
                                           1995.


George A. Thornton III  56            -    Executive Vice President, Rhodes
                                           since April 1997. Director from
                                           April 1980 to February 1997.
                                           Independent consultant to
                                           furniture manufacturers and
                                           Chairman, Tim Buck II, LTD (real
                                           estate development) for more than
                                           five years prior to April 1997.


William J. Dieter       57           24    Senior Vice President, Accounting
                                           since April 1986. Chief Accounting
                                           Officer since 1975.

(page 16)
                                     PART II

Item 5.   MARKET for REGISTRANT'S COMMON EQUITY and RELATED STOCKHOLDER
MATTERS



          The Company's common stock is traded on the New York and Pacific Stock
Exchanges  under the  symbol  HMY.  The table  below sets forth the high and low
prices as reported on the New York Stock Exchange  Composite  Tape, and dividend
information for each of the last eight fiscal quarters.

         Fiscal Year          High           Low        Dividends

    1997
         4th Quarter        $  16 1/8    $  12 3/4      $  .07
         3rd Quarter           17 1/4       12 5/8         .07
         2nd Quarter           24 1/8       16             .07
         1st Quarter           23 3/8       13 7/8         .07

          1996
         4th Quarter        $  20 7/8    $  13 1/2      $  .07
         3rd Quarter           24 1/8       17 1/2         .07
         2nd Quarter           27 1/4       21 1/2         .07
         1st Quarter           24 1/8       19 5/8         .07

          There were  approximately  3,100 shareholders of record as of February
28, 1997.

          The Company has paid cash  dividends  in every year since fiscal 1976.
The Board of Directors  intends to continue its present policy of paying regular
quarterly  dividends when  justified by the financial  condition of the Company.
The amount of future  dividends,  if any,  will  depend  upon  general  business
conditions,  earnings,  capital requirements and such other factors as the Board
may deem  relevant.  The  Company's  payment of dividends is  restricted,  under
certain  covenants in loan agreements,  to $150,293,000 plus 75% of net earnings
adjusted for dividend payouts subsequent to February 28, 1997.

          Recent Sales of Unregistered Securities.  During the past fiscal year,
the Company  issued  shares of its common  stock in the  transactions  described
below.  The sales of the  securities  were  exempt from  registration  under the
Securities  Act of 1933 ("the  Act") for  transactions  not  involving  a public
offering,  based on the fact that the private placements were made to accredited
investors and a limited number of nonaccredited  investors  permitted under Rule
506 of Regulation D under the Act.

          On February  18,  1997,  the Company  acquired  substantially  all the
assets  of  The  RoomStore,   Inc.  which  operated  10  stores  in  Texas.  The
shareholders  of The RoomStore,  Inc.  received  720,000 shares of the Company's
common stock as part of the transaction.

          On February  28,  1997,  the Company  acquired  substantially  all the
assets  of Star  Furniture  Company,  Incorporated  which  operated  a  19-store
furniture  chain based in North  Carolina.  The  shareholders  of Star Furniture
Company,  Incorporated  received 500,000 shares of the Company's common stock as
part of the transaction.

(page 17)
Item 6.  SELECTED FINANCIAL DATA

  FISCAL YEAR              1997      1996      1995      1994      1993
                      (Dollar amounts in thousands except per share data)

  Earnings Statement Data:
  Sales              $1,342,208 $1,138,506 $ 956,004 $ 723,633  $549,660
  Annual growth in sales   17.9%      19.1%     32.1%     31.7%     25.9%
  Other income       $  250,911  $ 220,843 $ 196,135 $ 140,156  $107,883
  Total revenues      1,593,119  1,359,349 1,152,139   863,789   657,543
  Annual growth in revenue 17.2%      18.0%     33.4%     31.4%     26.5%
  Costs of sales      $ 876,142  $ 752,317 $ 617,839 $ 460,284  $351,361
  Gross profit margin      34.7%      33.9%     35.4%     36.4%     36.1%
  Selling, general and
    administrative
    expense           $ 526,369  $ 436,361 $ 350,093 $  260,161 $200,071
  Interest expense       47,800     40,767    32,889     23,834   23,084
  Provision for doubtful
    accounts             80,908     65,379    45,419     32,356   24,185
  Provision for income
   taxes                 21,715     23,021    39,086     32,158   20,833
  Effective income tax
   rate                    35.1%      35.7%     36.9%      36.9%    35.4%
  Earnings margin           3.0%       3.7%      7.0%       7.6%     6.9%
  Cumulative effect of
    accounting change       ---        ---       ---        ---      ---
  Net earnings        $  40,185  $  41,504 $  66,813 $   54,996 $ 38,009
  Earnings per share:
    Primary                 .80        .84      1.34       1.12      .84
    Fully diluted           .80        .84      1.34       1.12      .83
  Net earnings per share:
    Primary                 .80        .84      1.34       1.12      .84
    Fully diluted           .80        .84      1.34       1.12      .83
  Cash dividends per share  .28        .28       .24        .20      .16

  Balance Sheet Data:
  Total assets       $1,837,158 $1,288,960$1,208,937 $1,049,633 $766,485
  Average assets per store1,946      1,800     1,869      1,841    1,803
  Accounts receivable,
   net                  596,959    518,969   538,208    535,437  397,974
  Inventories           433,277    293,191   253,529    184,216  131,889
  Property and equipment,
    net                 366,749    216,059   203,201    168,142  126,611
  Additions to property
    and equipment        84,137     40,366    49,101     36,252   27,426
  Short-term debt       256,413    207,812   167,925    210,318  163,171
  Long-term debt        561,489    352,631   370,432    248,635  176,353
  Average debt per store    866        783       832        805      799
  Stockholders' equity  642,621    518,983   490,390    433,229  305,555
  Stockholders' equity
    per share             11.81      10.69     10.10       8.95     6.87

  Other Financial Data:
  Working capital    $  550,137 $  527,849$  554,096 $  453,175 $322,796
  Current ratio             1.9        2.4       2.9        2.4      2.3
  Debt to equity ratio     1.27       1.08      1.10       1.06     1.11
  Debt to debt and equity  56.0%      51.9%     52.3%      51.4%    52.6%
  Rate of return on
    average assets (1)      4.6%       5.4%      7.8%       7.7%     7.5%
  Rate of return on
    average equity          6.9%       8.2%     14.5%      14.9%    13.3%
  Number of stores          944        716       647        570      425
  Number of employees    19,131     14,383    13,063     10,536    7,850
  Average sales
    per employee     $       84 $       83$       81 $       79 $     76

(page 18)
  SELECTED FINANCIAL DATA, cont.


  FISCAL YEAR             1997      1996      1995      1994     1993
                      (Dollar amounts in thousands except per share data)

  Weighted average common shares outstanding:
      (in thousands)
    Primary               50,146    49,604     49,954   49,103    45,356
    Fully diluted         50,157    49,645     49,954   49,281    45,644

  Price range on common stock per share:
         High           $ 24 1/8   $27 1/4    $36      $39       $22 3/8
         Low              12 5/8    13 1/2     23 1/4   19 3/8    10 5/8
         Close            14 1/8    14         23 5/8   33        19 7/8


  Per share amounts  reflect a  three-for-two  stock split  distributed  in July
  1993.

  (1) Calculated using earnings before interest, net of tax.

(page 19)
          Item 7.  MANAGEMENT'S DISCUSSION and ANALYSIS of FINANCIAL
CONDITION and RESULTS of OPERATIONS

RESULTS OF OPERATIONS

          Highlights  of  operations  expressed as a percentage  of sales are as
follows:

                                                 Fiscal Year
                                                1997     1996      1995

Other income                                    18.7%    19.4%     20.5%
Costs of sales                                  65.3     66.1      64.6
Selling, general and
          administrative expense                39.2     38.3      36.6
Interest expense                                 3.6      3.6       3.4
Provision for doubtful
          accounts                               6.0      5.7       4.8
Earnings before provision for
          income taxes                           4.6      5.7      11.1
Provision for income taxes                       1.6      2.0       4.1
Net earnings                                     3.0      3.7       7.0

Revenues
          Sales for fiscal 1997  compared to the two previous  periods are shown
below:

                                                Fiscal Year
                                     1997            1996        1995

Sales (in thousands)           $1,342,208      $1,138,506    $956,004
Percentage increase over
          prior period               17.9%           19.1%       32.1%
Portion of increase from existing
          (comparable) stores        (0.6)            0.3         6.1
Portion of increase from new stores  18.5            18.8        26.0

          The   growth   in  total   sales   of   Heilig-Meyers   Company   (the
"Company") for fiscal years 1997 and 1996 is primarily attributed to the
growth in operating  units.  An increased  number of operating  units as well as
increased  volume in  comparable  stores  caused the fiscal 1995  increase.  The
impact of price  changes on sales  growth over the last three  fiscal  years has
been  insignificant.  Expansion of the Heilig-Meyers  retail units during fiscal
1997 was primarily in the  southcentral,  southwestern and  northwestern  United
States.  The  Heilig-Meyers  units  contributed  86%, 92% and 99.6% of sales for
fiscal years 1997, 1996 and 1995,  respectively.  The Company's Puerto Rican
operations, which conduct business under the name "Berrios," contributed
8% of total sales for fiscals 1997 and 1996 and .4% for fiscal 1995. On December
31, 1996, Rhodes, Inc., a Georgia Corporation,  became a wholly-owned subsidiary
of the Company, and the acquisition was accounted for under the purchase method.
The Company  operates  these  stores  under the Rhodes name and format.  The 105
Rhodes  stores are  primarily  located  in  metropolitan  areas of 15  southern,
midwestern  and western  states.  Sales by the Rhodes  stores for the  two-month
period  ended  February  28,  1997   represented   approximately   5.8%  of  the
Company's  total sales for fiscal 1997. In late February  1997,  the Company
acquired  certain assets relating to 10 stores  operating in central Texas under
the name  "The  RoomStore."  The RoomStore  operates  under a "rooms
concept,"  displaying and selling  furniture in complete room packages.  The
Company  plans to maintain  The  RoomStore  name and  continue to operate  these
stores under this format.  Due to the timing of the  acquisition,  The RoomStore
contribution  to the  Company's  fiscal  1997  consolidated  sales  was  not
significant.  On February 28, 1997, the Company  acquired a 19-store chain based
in North  Carolina.  These stores will begin  operations in March 1997,  and are
excluded from the table below. A summary of retail locations in

(page 20)
operation at the end of the last three fiscal years follows:



                                        Fiscal Year
                             1997               1996               1995

Heilig-Meyers                 797                688                630
Rhodes                        105                  -                  -
The RoomStore                  10                  -                  -
Berrios                        32                 28                 17
TOTAL                         944                716                647

          The Company  plans to continue its strategy of locating  Heilig-Meyers
stores  primarily in small towns and rural  markets and expects to open 60 to 80
new stores in fiscal 1998.  Growth  opportunities  of the stores operating under
the Rhodes and The RoomStore names are being  evaluated.  The Company expects to
expand these formats as appropriate markets are identified.
          Management  attributes the recent trends in sales  primarily to a weak
overall  home  furnishings  retail  environment.  The  consumer  demand for home
furnishings  continued  to be sluggish  during  fiscal  1997,  which  management
believes  has been  impacted by an overall  rise in  consumer  debt  levels.  In
addition,  the Company's  operating strategy during fiscal 1997 was designed
to increase the quality of sales, as measured by increasing  margin  percentages
over the prior year, and to reduce the growth rate in the provision for doubtful
accounts as a percentage of sales.
          Other income decreased to 18.7% of sales for fiscal 1997 from 19.4% of
sales for fiscal  1996.  This  decrease  was due  primarily to the impact of the
addition of the Rhodes stores  acquired on December 31, 1996.  The Rhodes stores
generate  minimal  finance related  revenues  because they do not offer in-house
credit to their  customers.  The Rhodes stores offer a private label credit card
program  that is  serviced  by a third  party.  Other  income  for  fiscal  1996
decreased to 19.4% of sales from 20.5% of sales in fiscal 1995. This decrease is
primarily  attributed to a larger pool of securitized accounts receivable during
fiscal 1996 as compared to fiscal 1995.  Interest  costs related to  securitized
receivables,  which are based on the dollar value of accounts receivable sold to
third parties, are netted against finance income.
          The Company  plans to continue to offer the third party  private label
credit card  program by its Rhodes  stores in fiscal  1998,  and to continue its
program  of  periodically  securitizing  a portion of the  installment  accounts
receivable portfolio of its other stores.  Proceeds from securitized receivables
are generally used to lower debt levels.

Costs and Expenses
          In fiscal 1997, costs of sales decreased, as a percentage of sales, to
65.3%  from  66.1% in fiscal  year  1996.  The  reduction  in costs of sales was
primarily related to improved raw selling margins in the Heilig-Meyers stores. A
reduction in the use of aggressive,  price-cutting promotions and improvement in
day-to-day  pricing  policies were the primary  contributors  to the raw selling
margin results.  Additionally, as compared to fiscal 1996, the merchandise sales
mix for fiscal 1997 included a higher percentage of furniture and bedding, which
carry higher raw selling margins.  Costs of sales increased to 66.1% of sales in
fiscal 1996 from 64.6% in fiscal 1995.  This increase was due to  utilization of
promotional pricing in response to the sluggish sales environment experienced in
fiscal 1996 and increases in costs  associated with occupancy,  depreciation and
lease charges related to store and distribution operations.
          Selling,  general and  administrative  expenses  increased to 39.2% of
sales in fiscal  1997 from 38.3% in fiscal  1996 and 36.6% in fiscal  1995.  The
increase in fiscal  1997 is  primarily  the result of loss of sales  leverage on
fixed type expenses such as base salaries,  data processing and depreciation and
amortization,  given the modest  decline in  comparable  store sales  during the
year. Advertising costs in fiscal 1997 were slightly down as a

(page 21)
percentage of sales compared to fiscal 1996;  however,  expenditures  during the
year remained above the fiscal 1995  percentage.  In fiscal 1996 the increase in
selling,  general  and  administrative  expenses  as compared to fiscal 1995 was
primarily due to an increase in advertising  expense  associated with additional
promotional activities in response to the sluggish retail sales environment.
          Interest  expense was 3.6% of sales in fiscal  years 1997 and 1996 and
3.4% of sales in fiscal  1995.  The impact of an increase  in  weighted  average
long-term  debt of $93.5 million was offset by lower weighted  average  interest
rates, which decreased to 7.7% from 7.9% on long-term debt and to 5.8% from 6.3%
on short-term debt in fiscal years 1997 and 1996, respectively.  The increase as
a percentage of sales from fiscal 1995 to fiscal 1996 was due to a $96.7 million
increase in weighted  average  long-term  debt levels with no change in weighted
average  long-term  interest rates.  Although  weighted average  short-term debt
levels  declined  during fiscal 1996 by  approximately  $31.4 million,  weighted
average  short-term  interest rates  increased to 6.3% from 5.1% in fiscal 1995.
The  increase  in  long-term  debt  levels  in both  fiscal  1997  and  1996 was
consistent  with the  Company's  plan to  structure  its debt  portfolio  to
contain a higher  percentage  of long-term  fixed rate debt in order to minimize
the exposure to future short-term interest rate fluctuations.
          The provision  for doubtful  accounts was 6.0% of sales in fiscal 1997
compared to 5.7% and 4.8% of sales in fiscal years 1996 and 1995,  respectively.
The increase in the provision for doubtful  accounts as a percentage of sales is
a result of a rise in the portfolio loss rate and related write-offs experienced
during the last  three  fiscal  years.  The growth  rate of the  provision  as a
percentage  of  sales  decreased  in  fiscal  1997  as a  result  of  the  sales
contribution  of the Rhodes  stores and a more  disciplined  approach  to credit
extension and account  collection in Heilig-  Meyers stores during the year. The
Company plans to continue this approach in order to minimize the portfolio  loss
rate,  and continue to offer third party credit  without  recourse in the Rhodes
stores during fiscal 1998.
          Total  portfolio  write-offs for fiscal 1997, 1996 and 1995 were $77.4
million, $66.1 million and $51.7 million,  respectively.  Of these amounts, $6.9
million,  $8.9  million  and  $7.6  million  were  for  purchased   receivables,
respectively.  Management  believes that the allowance for doubtful  accounts at
February 28, 1997, is adequate.

Provision for Income Taxes and Net Earnings
          The effective tax rate for fiscal 1997 was 35.1% compared to 35.7% and
36.9% for fiscal  1996 and  fiscal  1995,  respectively.  This  decrease  in the
effective  tax rate was  primarily  the result of higher fixed dollar income tax
credits in the current year and lower levels of pretax earnings.
          Net  earnings for fiscal 1997  decreased  to $40.2  million from $41.5
million for fiscal 1996.  As a percentage of sales,  profit margin  decreased to
3.0% for  fiscal  1997  from 3.7% for  fiscal  1996.  The  decrease  was  mostly
attributable  to an increase as a  percentage  of sales in selling,  general and
administrative  expense  due to the  decline in  comparable  store  sales and an
increase in the  provision  for doubtful  accounts.  As a  percentage  of sales,
profit margin  decreased to 3.7% for fiscal 1996 from 7.0% for fiscal 1995.  The
decrease was mostly attributable to a decline in the gross margin percentage, an
increase in selling,  general and administrative  expense and an increase in the
provision for doubtful accounts.

LIQUIDITY AND CAPITAL RESOURCES

          The Company  decreased its cash position $1.0 million to $15.0 million
at February 28, 1997,  from $16.0  million at February 29, 1996.  As the Company
continued  to expand its store base,  cash flows used for  investing  activities
exceeded cash provided by operating  activities for fiscal years 1997,  1996 and
1995.  The  Company's  operating  activities  typically  use cash  primarily
because  the  significant  majority  of  customer  sales have been  through  the
Company's  in-house credit  program.  These uses of cash have been partially
offset by proceeds from the sale of accounts receivable and

(page 22)
financing activities.
          Operating  activities  used  cash  of $3.0  million  for  fiscal  1997
compared to cash provided of $92.5 million in fiscal 1996 and $114.2  million in
fiscal 1995. The Company's  investment in accounts receivable grew by $144.1
million in fiscal 1997 because of the continued extension of credit to customers
and a reduced amount of accounts sold during the year as compared to the amounts
sold in fiscal 1996.  The increase in inventory  levels has  primarily  been the
result of the  opening of 113 new  Heilig-Meyers  and  Berrios  stores in fiscal
1997, 69 in fiscal 1996 and 77 in fiscal 1995. Continued extension of credit and
related  increases  in customer  accounts  receivable,  as well as  increases in
inventory  related  to  new  stores,  are  expected  to be  negative  cash  flow
activities in future periods.  However, as noted above, the Company periodically
sells  accounts  receivable  to  provide a source of  positive  cash  flows from
operating activities.
          Investing activities produced negative cash flows of $146.5 million in
fiscal 1997,  $95.6 million in fiscal 1996,  and $179.9  million in fiscal 1995.
Cash used for acquisitions was relatively  consistent in fiscal 1997 compared to
fiscal 1996, at $58.8  million and $51.7  million,  respectively.  Cash used for
acquisitions in fiscal 1995 was $132.2 million  primarily due to the acquisition
of 17 stores  in  Puerto  Rico for $99.0  million.  Cash used for  additions  to
property and  equipment  resulted  from the opening of new store  locations  and
related support facilities as well as the remodeling and improvement of existing
and  acquired  locations.   The  increase  in  the  cash  required  for  capital
expenditures in fiscal 1997 is the result of a larger number of prototype stores
and support facilities  completed or under construction as of February 28, 1997,
compared to February 29, 1996.  This  includes  the  Company's  distribution
center located in Athens,  Texas which opened in late fiscal 1997. This facility
will support current and future stores located in Texas, Louisiana and Oklahoma.
During  fiscal  1998,  the  Company  plans  to open  approximately  60 to 80 new
Heilig-Meyers  stores as well as continue its existing store remodeling program.
Capital  expenditures will continue to be financed by cash flows from operations
and external sources of funds.
          Financing  activities  provided  a  positive  net cash  flow of $148.4
million in fiscal  1997 as  compared  to $8.8  million in fiscal  1996 and $69.8
million in fiscal 1995. In July 1996, the Company and a wholly-owned  subsidiary
filed a joint  Registration  Statement  on Form  S-3  with  the  Securities  and
Exchange  Commission relating to up to $400.0 million aggregate principal amount
of securities.  Long-term  notes payable with an aggregate  principal  amount of
$300.0  million  were issued to the public  during  fiscal 1997  leaving  $100.0
million  available to be issued in the future.  All  previously  issued debt had
been in private  placements  rather than public  markets.  Proceeds were used to
reduce long-term debt which matured in fiscal 1997 and short-term notes payable.
The Company has access to a variety of external capital sources to finance asset
growth and plans to continue to finance  accounts  receivable,  inventories  and
future  expansion  from operating  cash flows  supplemented  by other sources of
capital.  As of February 28, 1997,  the Company had a $400.0  million  revolving
credit  facility in place which  expires in July 2000.  This  facility  includes
fourteen banks and had $145.0 million  outstanding  and $255.0 million unused as
of February 28, 1997. The Company also had additional lines of credit with banks
totaling  $54.0  million of which $43.0  million  was unused as of February  28,
1997.
          Total debt as a  percentage  of debt and equity was 56.0% at  February
29,  1997,  compared to 51.9% and 52.3% at  February  29,  (28),  1996 and 1995,
respectively.  The current  ratio was 1.9 at February 28, 1997,  compared to 2.4
and 2.9 for February 29, (28), 1996 and 1995, respectively.  The decrease in the
current  ratio at February 28, 1997 is primarily  attributed to an $82.6 million
increase in long-term debt due within one year.

FORWARD-LOOKING STATEMENTS

          Certain  statements  included in this  Annual  Report are not based on
historical facts, but are  forward-looking  statements.  These statements can be
identified by the use of forward-looking terminology such as "believes,"

(page 23)
"expects,"    "may,"   "will,"    "should,"   or
"anticipates"  or the negative  thereof or other  variations  thereon or
comparable   terminology,   or  by   discussions   of   strategy.   See,   e.g.,
"Management's Discussion and Analysis of Financial Condition and Results
of  Operations."  These  statements  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 risks and uncertainties  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,
the  Company's  ability to realize  cost  savings and other  synergies  from
recent  acquisitions  as well as the  Company's  access  to,  and  cost  of,
capital.  Other factors such as changes in tax laws,  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.

(page 24)
Item 8.  FINANCIAL STATEMENTS and SUPPLEMENTARY DATA




                       CONSOLIDATED STATEMENTS OF EARNINGS
                  (Amounts in thousands except per share data)


FISCAL YEAR                               1997         1996         1995
                                     ----------   ----------    ---------
   Revenues:
     Sales                           $1,342,208   $1,138,506    $ 956,004
     Other income                       250,911      220,843      196,135
                                     ----------   ----------    ---------
        Total revenues                1,593,119    1,359,349    1,152,139

Costs and expenses:

     Costs of sales                     876,142      752,317      617,839
     Selling,general and administrative 526,369      436,361      350,093
     Interest                            47,800       40,767       32,889
     Provision for doubtful accounts     80,908       65,379       45,419
                                     ----------   ----------    ---------
        Total costs and expenses      1,531,219    1,294,824    1,046,240
                                     ----------   ----------    ---------

Earnings before provision for income
     taxes                               61,900       64,525      105,899
Provision for income taxes               21,715       23,021       39,086
                                     ----------   ----------    ---------
Net earnings                          $  40,185    $  41,504    $  66,813
                                     ==========   ==========    =========
Net earnings per share:
     Primary and fully diluted        $     .80    $     .84    $    1.34
                                     ==========   ==========    =========

Weighted average common shares outstanding:
     Primary                             50,146       49,604       49,954

     Fully diluted                       50,157       49,645       49,954
                                     ==========   ==========    =========
Cash dividends per share of common
     stock                            $     .28    $     .28    $     .24
                                     ==========   ==========    =========

                       See notes to consolidated financial statements.

(PAGE)




(page 25)
                              CONSOLIDATED BALANCE SHEETS
                       (Amounts in thousands except par value data)


FEBRUARY 28, (29)                            1997                   1996

Assets
Current assets:
     Cash                              $    14,959            $    16,017
     Accounts receivable, net              596,959                518,969
     Inventories                           433,277                293,191
     Other current assets                   88,862                 67,139
                                       -----------            -----------
          Total current assets           1,134,057                895,316

Property and equipment, net                366,749                216,059
Other assets                                42,262                 29,455
Excess costs over net
     assets acquired, net                  294,090                148,130
                                       -----------            -----------
                                       $ 1,837,158            $ 1,288,960
                                       ===========            ===========

Liabilities And Stockholders' Equity

Current liabilities:
     Notes payable                     $   156,000            $   190,000
     Long-term debt due within one year    100,413                 17,812
     Accounts payable                      160,857                 87,739
     Accrued expenses                      166,650                 71,916
                                       -----------            -----------
          Total current liabilities        583,920                367,467

Long-term debt                             561,489                352,631
Deferred income taxes                       49,128                 49,879

Stockholders' equity:
     Preferred stock, $10 par value             --                     --

     Common stock, $2 par value            108,828                 97,143
     Capital in excess of par value        195,352                120,769
     Unrealized gain on investments         10,797                     --
     Retained earnings                     327,644                301,071
                                       -----------            -----------
         Total stockholders' equity        642,621                518,983
                                       -----------            -----------
                                       $ 1,837,158            $ 1,288,960
                                       ===========            ===========






                     See notes to consolidated financial statements.

(page 26)
                        CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                       (Amounts in thousands)


               Number of
               Common              Capital in                         Total
               Shares      Common  Excess of  Unrealized Retained Stockholders'
               Outstanding Stock   Par Value  Gain       Earnings     Equity
               -----------------   ---------  ----       --------     ------
Balances at
 March 1, 1994    48,423    $96,846   $118,400       $--   $217,983   $433,229
 Cash dividends       --         --         --        --    (11,631)   (11,631)
 Exercise of stock
  options, net       125        250      1,729        --         --      1,979
 Net earnings         --         --         --        --     66,813     66,813
                  -------------------------------------------------------------
Balances at
 February 28,1995 48,548     97,096    120,129        --    273,165    490,390
 Cash dividends       --         --         --        --    (13,598)   (13,598)
 Exercise of stock
  options, net        23         47        640        --         --        687
 Net earnings         --         --         --        --     41,504     41,504
                  -------------------------------------------------------------
Balances at
 February 29,1996 48,571     97,143    120,769        --    301,071    518,983
 Cash dividends       --         --         --        --    (13,612)   (13,612)
 Common stock
  issued for
  acquisitions     5,791     11,582     73,842        --         --     85,424
 Exercise of stock
  options, net        52        103        741        --         --        844
 Unrealized gain
  on investments      --         --         --    10,797         --     10,797
 Net earnings         --         --         --        --     40,185     40,185
                  -------------------------------------------------------------
Balances at
 February 28,1997 54,414   $108,828   $195,352   $10,797   $327,644   $642,621
                  =============================================================





                 See notes to consolidated financial statements.

(page 27)
                          CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (Amounts in thousands)


FISCAL YEAR                                 1997       1996        1995
                                       ---------  ---------   ---------
Cash flows from operating activities:
 Net earnings                          $  40,185  $  41,504   $  66,813

  Adjustments to reconcile net earnings
   to net cash provided (used) by
   operating activities:
    Depreciation and amortization         33,874     29,460      23,878
    Provision for doubtful accounts       80,908     65,379      45,419
    Other, net                               588       (470)       (406)
    Change in operating assets and
     liabilities, net of the effects
     of acquisitions:
       Accounts receivable              (204,560)  (167,860)   (171,137)
       Sale of accounts receivable        60,500    150,000     178,778
       Inventories                       (35,154)   (24,015)    (44,206)
       Other current assets              (10,306)   (23,447)     (5,830)
       Accounts payable                   18,017        216      18,098
       Accrued expenses                   12,948     21,734       2,767
                                       ---------  ---------   ---------
        Net cash provided (used)
         by operating activities          (3,000)    92,501     114,174
                                       ---------  ---------   ---------
Cash flows from investing activities:
  Acquisitions, net of cash acquired     (58,842)   (51,658)   (132,158)
  Additions to property and equipment    (84,137)   (40,366)    (49,101)
  Disposals of property and equipment      3,423      6,348       4,583
  Miscellaneous investments               (6,907)    (9,942)     (3,184)
                                       ---------  ---------   ---------
         Net cash used by
          investing activities          (146,463)   (95,618)   (179,860)
                                       ---------  ---------   ---------
Cash flows from financing activities:
  Issuance of stock                          683        286       1,979
  Proceeds from long-term debt           299,444         --     230,000
  Increase (decrease) in notes
   payable, net                          (34,000)    50,200    (112,800)
  Payments of long-term debt            (104,110)   (28,114)    (37,797)
  Dividends paid                         (13,612)   (13,598)    (11,631)
                                       ---------  ---------   ---------
         Net cash provided by
          financing activities           148,405      8,774      69,751
                                       ---------  ---------   ---------
Net increase (decrease) in cash           (1,058)     5,657       4,065
Cash at beginning of year                 16,017     10,360       6,295
                                       ---------  ---------   ---------
Cash at end of year                    $  14,959  $  16,017    $ 10,360
                                       =========  =========    ========



                 See notes to consolidated financial statements.

(page 28)
Notes To Consolidated Financial Statements

(1)      Summary of Significant Accounting Policies

Nature of Operations

         Heilig-Meyers  is a retailer of home  furnishings  which  operated  944
stores as of February  28, 1997 of which 912 are located in 32 states and 32 are
located in Puerto Rico. The Company's  stores are primarily located in small
towns  and  rural  markets  in  the  southeast,  south-central,  midwest,  west,
northwest and southwest  continental United States. During the fourth quarter of
this fiscal year,  the Company  acquired  Rhodes,  Inc. of Atlanta,  Georgia and
certain assets of The RoomStore of Dallas,  Texas.  The Rhodes and The RoomStore
stores continue to operate under their respective names and formats.
         The  Company's   operating   strategy  includes  offering  a  broad
selection  of  home  furnishings  including  furniture,   consumer  electronics,
appliances, bedding and floor coverings. The Company offers in-house installment
and third party private  label credit card programs to provide  financing to its
customers.

Principles of Consolidation

         The consolidated  financial  statements include the accounts of Heilig-
Meyers Company and its subsidiaries  (the  "Company"),  all of which are
wholly owned.  All material  intercompany  balances and  transactions  have been
eliminated.

Fiscal Year

         Fiscal years are designated in the consolidated financial statements by
the calendar year in which the fiscal year ends. Accordingly, results for fiscal
years 1997, 1996 and 1995 represent the years ended February 28, 1997,  February
29, 1996 and February 28, 1995, respectively. Certain amounts in the fiscal 1996
consolidated  financial  statements  have been  reclassified  to  conform to the
fiscal 1997 presentation.

Segment Information

         The  Company  considers  that it is  engaged  primarily  in one line of
business,  the sale of home  furnishings.  Accordingly,  data  with  respect  to
industry segments have not been separately reported herein.

Use of Estimates in the Preparation of Financial Statements

         The  preparation of financial  statements in conformity  with generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect  the  reported  amount of assets and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.

Accounts Receivable

         In  accordance  with  customary  trade  practice,  payments on accounts
receivable  due after one year are included in current  assets.  Provisions  for
doubtful  accounts  are  made  to  maintain  an  adequate   allowance  to  cover
anticipated losses. The Company reviews customer accounts on an individual basis
in reaching  decisions  regarding methods of collection or write-off of doubtful
accounts.  Generally,  accounts on which payments have not been received for six
months are charged to the allowance for doubtful accounts.  The Company has sold
a portion  of its  accounts  receivable.  These  sales are  accounted  for under
Statement of Financial Accounting Standards (SFAS) No.

(page 29)
125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities."

Inventories

         Merchandise  inventories  are  stated at the lower of cost or market as
determined by the average cost method. Inventory costs include certain warehouse
and handling costs.

Property and Equipment

         Additions to property and  equipment,  other than capital  leases,  are
recorded at cost and, when  applicable,  include  interest  incurred  during the
construction period.  Capital leases are recorded at the lesser of fair value or
the discounted present value of the minimum lease payments.
         Depreciation is computed by the  straight-line  method.  Capital leases
and leasehold  improvements are amortized by the  straight-line  method over the
shorter of the estimated  useful life of the asset or the term of the lease. The
estimated  useful  lives  are 7 to 45 years  for  buildings,  3 to 10 years  for
fixtures, equipment and vehicles, and 10 to 15 years for leasehold improvements.

Excess Costs Over Net Assets Acquired

         Excess costs over net assets  acquired are being amortized over periods
not exceeding 40 years using the  straight-line  method.  The Company  evaluates
excess costs over net assets acquired for recoverability on the basis of whether
goodwill is fully  recoverable from projected,  undiscounted net cash flows from
operations of the related business unit. Impairment,  should any occur, would be
recognized  by a charge to  operating  results and a reduction  in the  carrying
value of excess costs over net assets acquired.

Stockholders' Equity

         The Company is authorized to issue  250,000,000  shares of $2 par value
common stock.  At February 28, (29),  1997 and 1996,  there were  54,414,000 and
48,571,000 shares outstanding,  respectively. The Company is authorized to issue
3,000,000 shares of $10 par value preferred stock. To date, none of these shares
have been issued.

New Accounting Standards

         Effective   March  1,  1996,   the  Company   adopted   SFAS  No.  121,
"Accounting  for the  Impairment  of  Long-Lived  Assets and for  Long-Lived
Assets to be  Disposed  Of."  The  adoption  of SFAS No.  121 did not have a
material impact on the financial  statements.  The Company also adopted SFAS No.
123, "Accounting for Stock-Based  Compensation." As provided for by SFAS
No. 123,  the Company  has  decided to continue to apply  Accounting  Principles
Board  (APB) No. 25  "Accounting  for Stock  Issued to  Employees,"  for
recognition and measurement purposes within the financial statements. During the
fiscal year, the Financial  Accounting Standards Board issued SFAS No. 125. This
statement was effective for applicable transactions after January 1, 1997.

Revenues and Costs of Sales

         Other income  consists  primarily of finance and other income earned on
accounts  receivable.  Finance  charges  were  $209,491,000,  $182,426,000,  and
$163,114,000  during  fiscal  1997,  1996 and  1995,  respectively.  Revenue  is
recognized on installment and credit sales upon approval and  establishment of a
delivery  date,  which does not  materially  differ from  recognition at time of
shipment. Finance charges are included in revenues on a monthly basis as earned.
The effect of sales returns prior to shipment date have

(page 30)
been immaterial.  The Company sells substantially all of its service policies to
third parties and recognizes service policy income on these at the time of sale.
Revenue from service policies and extended  warranty  contracts  retained by the
Company are deferred and recognized over the life of the contract period.  Costs
of sales includes occupancy and delivery expenses.


Earnings and Dividends Per Share

         Primary  and fully  diluted  earnings  per  share of  common  stock are
calculated  by dividing net earnings by the  weighted  average  number of common
shares and common stock equivalents (stock options) outstanding during the year.

Interest Rate Swap Agreements

         The Company has entered  into  several  interest  rate swap  agreements
("swap  agreements")  as a means of managing  its exposure to changes in
interest   rates.   These   agreements  in  effect  convert  a  portion  of  the
Company's  floating  rate debt and floating  rate asset  securitizations  to
fixed rates by exchanging  floating rate payments for fixed rate  payments.  The
differential  to be paid or  received  on these  agreements  is  accrued  and is
recognized as an adjustment to interest  expense.  The related amount of payable
to or  receivable  from  counterparties  is recorded as an adjustment to accrued
interest expense.


(2)      Expansion

         During  fiscal years 1997 and 1996,  the Company made the  acquisitions
described  below.  All  acquisitions  have been  accounted  for by the  purchase
method,  and accordingly,  operations  subsequent to the respective  acquisition
dates have been included in the  accompanying  financial  statements.  Pro forma
results of operations for certain  acquisitions  have not been presented because
the effects were not  significant.  Other  acquisitions  completed during fiscal
years 1997 and 1996 are not  discussed  below  because  they are not  considered
material to the financial statements.
         During October 1996, the Company  acquired certain assets related to 20
stores of J.  McMahan's in Santa Monica,  California.  The purchase price of
these assets was approximately  $20,021,000,  net of $26,989,000 of assets which
were subsequently  sold. The unamortized  excess of purchase price over the fair
market value of the net assets  acquired from J. McMahan as of February 28, 1997
was $16,333,000.
         During October 1996, the Company  purchased  certain assets relating to
23 stores of Self Service Furniture Company of Spokane, Washington. The purchase
price of these assets was approximately  $19,163,000.  The unamortized excess of
purchase  price over the fair market value of the net assets  acquired from Self
Service as of February 28, 1997 was $5,195,000.
         During  December 1996, the Company  acquired  Rhodes,  Inc., a publicly
traded  home  furnishings  retailer  with 105 stores in 15 states.  The  Company
issued  approximately  4,588,000  shares of its common stock in the  transaction
valued  at   $69,390,000,   assumed  debt  and  other  accrued   liabilities  of
$192,542,000  and  incurred  approximately  $1,400,000  in costs  related to the
acquisition. The Company assigned $107,782,000 of acquisition costs to excess of
purchase  price over the fair  market  value of the net assets  acquired.  As of
February 28, 1997, the purchase price  allocation was considered  preliminary as
certain  studies  related to the fair value of assets  acquired and  liabilities
assumed  have not been  completed.  However,  management  does  not  expect  the
resulting adjustments to be material.
         The unaudited  consolidated  results of operations on a pro forma basis
as though  Rhodes had been acquired as of the beginning of fiscal years 1997 and
1996 are as follows:

(page 31)
                                                     1997               1996
                                                     ----               ----
(Amounts in thousands except per share data)

Total revenues                                 $2,027,753         $1,795,015
Net earnings                                       33,829             48,674
Net earnings per share:
         Primary and fully diluted                   0.63               0.90

         The pro forma  information is presented for  comparative  purposes only
and is not  necessarily  indicative  of the  operating  results  that would have
occurred had the Rhodes  acquisition been consummated as of the above dates, nor
is it necessarily indicative of future operating results.
         During February 1997, the Company  acquired  certain assets relating to
10 stores of The RoomStore,  Inc. of Dallas,  Texas.  The Company issued 720,000
shares of its common stock in the transaction valued at $9,630,000,  and assumed
debt and other accrued  liabilities of  $5,984,000.  The  unamortized  excess of
purchase  price  over the fair  market  value of the net assets  acquired  as of
February 28, 1997 was $7,905,000.
         During fiscal 1996,  the Company  acquired  certain assets related to 9
stores of BWAC International located in Puerto Rico. The purchase price of these
assets was approximately  $39,196,000.  The unamortized excess of purchase price
over the fair market value of the net assets  acquired  from BWAC as of February
28, 1997 was $8,631,000.
         The Company  amortizes  the excess of  purchase  price over fair market
value of net assets acquired on a straight-line basis over periods not exceeding
40 years.  The  unamortized  excess of purchase price over the fair value of the
net assets acquired for all acquisitions was $294,090,000 and $148,130,000,  net
of accumulated amortization of $20,213,000 and $15,593,000, at February 28, 1997
and February 29, 1996, respectively.


(3)      Accounts Receivable

         As of February 28, 1997, accounts  receivable  consisted of amounts due
from customers of  $421,999,000,  a related  allowance for doubtful  accounts of
$41,120,000,  and the Company's $216,080,000 interest in a Master Trust (the
"Trust"),  which is more fully described below. As of February 29, 1996,
accounts receivable consisted of amounts due from customers of $573,683,000, and
an allowance for doubtful  accounts,  applicable to those accounts owned as well
as those sold with recourse, of $54,714,000.  Balances receivable from customers
are shown net of unearned  finance  income of  $44,356,000  and  $60,114,000  at
February 28, 1997,  and February  29, 1996,  respectively.  Accounts  receivable
having  balances  due after  one year  were  $139,233,000  and  $131,501,000  at
February 28, 1997 and February 29, 1996, respectively.
         Credit  operations  are generally  maintained at each store to evaluate
the credit  worthiness of its customers  and to manage the  collection  process.
Furthermore,  the Company  generally  requires down payments on credit sales and
offers credit insurance to its customers,  both of which lessen credit risk. The
Company  operates  its 944 stores  throughout  32 states  and  Puerto  Rico and,
therefore,  is not dependent on any given  industry or business for its customer
base and has no significant concentration of credit risk.
         As noted above,  the Company  participates  in an asset  securitization
agreement in which it sells interests in certain installment accounts receivable
from its customers to third parties.  The Company was required to apply SFAS No.
125 to all securitization  transactions  entered into after January 1, 1997. The
adoption of SFAS No. 125 had no impact on earnings.
         During fiscal 1997, the Company terminated its existing  securitization
programs and replaced them with a new securitization arrangement.  Under the new
arrangement,  all previously  securitized accounts and an additional $60,500,000
in aggregate  principal amount were  transferred  without recourse to the Trust.
The Trust issued certificates  representing undivided interests in the assets of
the Trust.  Senior Class  certificates  having an aggregate  principal amount of
$592,000,000 were sold

(page 32)
to  investors.  Subordinate  Class  certificates  and  the  remaining  undivided
interest in the Trust, which are subordinated to the Senior Class  certificates,
were retained by the Company.
         Cash flows  generated  from the  receivables  in the Trust are,  to the
extent allocable to holders of the Senior Class certificates and the Subordinate
Class  certificates,  applied to pay  interest on Senior  Class and  Subordinate
Class certificates,  cover credit losses, and pay servicing fees to the Company,
which will continue to service the  receivables  in the Trust.  The  receivables
were transferred  without recourse.  Excess cash flows revert to the Company and
have been  recorded as an  interest-only  strip.  No  servicing  asset  resulted
because  contractual  rates are at  estimated  market  rates and are  considered
adequate compensation for servicing.
         The interest rate in effect for the  certificates  issued under the new
securitization  agreement,  which is a variable  rate tied to  commercial  paper
indices,  was 5.7% at  February  28,  1997.  The term on the new  securitization
agreement  is 29  months.  The rates in effect for the  previous  securitization
agreements  were  variable,  either being tied to LIBOR or commercial  paper and
ranged  from 5.7% to 6.8% in fiscal  1996.  As a means of  managing  unfavorable
movements  in these  rates,  the  Company has entered  into  interest  rate swap
agreements  which fix rates on notional  amounts of $235,000,000 at February 28,
1997 and February  29, 1996.  The swap rates in effect at the end of fiscal 1997
and 1996  ranged  from 5.3% to 7.4%.  The terms on the  previous  securitization
agreements in effect during fiscal 1996 ranged from 29 to 54 months.
         The former  agreements in existence  during fiscal 1996 and  throughout
much of fiscal 1997  provided  third parties with limited  recourse  against the
Company. On a $140,000,000 pool of receivables,  recourse was limited each month
to 20%  of the  third  parties'  interest  in  the  pool  as of the  related
settlement  date.  Recourse on a $63,600,000  pool of receivables was limited to
approximately  15%  of  the  balance.  The  recourse  provisions  relating  to a
$392,000,000 pool were limited to 6% of the third  parties'  interest in the
pool as of the related settlement date.  Payments under all recourse  provisions
never  exceeded  established   reserves.   Earnings  from  securitizations  were
$4,250,000 and $8,771,000 in fiscal 1997 and 1996, respectively.
         The Company  offers certain of its customers  revolving  credit through
private label credit  facilities with  commercial  banks.  Heilig-Meyers  offers
revolving  credit to certain  customers  through an agreement with  NationsBank,
N.A. The Company  services these accounts and provides  recourse up to specified
limits. A second  revolving  credit program is offered by the recently  acquired
Rhodes stores  through a private label credit  facility  pursuant to an on-going
merchant  agreement  with  Beneficial  National  Bank USA.  The Company does not
service or provide recourse on these accounts.
         The  Company's  interest in the Trust and  interest-only  strip are
carried at fair value and consist of the following:

                                   Unrealized         Unrealized         Fair
                          Cost          Gains             Losses        Value
                          ----          -----             ------        -----
(Amounts in thousands)

Investment in
 receivables          $200,229        $15,851            $    -      $216,080
Interest-only strip     25,337          2,010                 -        27,347
         Total        $225,566        $17,861            $    -      $243,427



(4)      Property and Equipment

         Property and equipment consists of the following:

(page 33)
                                                         1997           1996
                                                         ----           ----
                                                      (Amounts in thousands)

Land and buildings                                   $133,049       $ 80,839
Fixtures, equipment and vehicles                      111,916         87,846
Leasehold improvements                                215,683        142,108
Construction in progress                               36,484         12,854
                                                      497,132        323,647
Less accumulated depreciation                         130,383        107,588
                                                     $366,749       $216,059


(5)      Notes Payable and Long-Term Debt

         The Company is currently in the second year of a five-year $400,000,000
revolving credit facility dated July 19, 1995.  Comprised of fourteen banks, the
facility had $145,000,000 outstanding and $255,000,000 unused as of February 28,
1997.  The Company  also has  additional  lines of credit  with banks,  totaling
$54,000,000,  $43,000,000  of which  was  unused at  February  28,  1997,  and a
$6,000,000  letter of credit,  of which all was unused at February 28, 1997. The
Company's maximum short-term borrowings were $321,000,000 during fiscal 1997
and $249,700,000 during fiscal 1996. The average short-term debt outstanding for
fiscal 1997 was  $186,281,000  compared to  $190,236,000  for fiscal  1996.  The
approximate  weighted  average interest rates were 5.8%, 6.3% and 5.1% in fiscal
1997, 1996 and 1995, respectively.
         At February  28,  1997,  the Company had  $156,000,000  of  outstanding
short-term borrowings compared to $190,000,000 at February 29, 1996. The average
interest rate on this debt was approximately 5.8% at February 28, 1997, and 5.6%
and 6.4% at February 29, 1996 and February 28, 1995, respectively. There were no
compensating balance requirements.
         Long-term debt consists of the following:

                                                    1997         1996
                                                    (Amounts in thousands)

Shelf registration issues:
         7.88% unsecured notes due 2003         $200,000    $       -
         7.40% unsecured notes due 2002          100,000            -

Other issues:
         Notes payable to insurance companies and banks,  maturing through 2002,
         interest ranging from 6.25% to 9.98%,
         unsecured                               343,400      365,371

         Notes,  collateralizing  industrial development revenue bonds, maturing
         through 2004,  interest ranging from a floating rate of 60% of prime to
         an
         8.50% fixed rate                          1,316       1,727

         Term loans, maturing through 2007,
         interest ranging to 9.80%, primarily
         collateralized by deeds of trust            505         599

         Capital lease obligations, maturing
         through 2006, interest ranging from
         76% of prime to 12.90%                   16,681       2,746
                                                 661,902     370,443

         Less amounts due within one year        100,413      17,812
                                                 561,489    $352,631

         Principal payments are due for the four years after February 28, 1998

(page 34)
as follows: 1999,  $20,943,000;  2000,  $165,659,000;  2001, $641,000; and 2002,
$160,200,000.  The  aggregate  net  carrying  value of  property  and  equipment
collateralization at February 28, 1997, was $11,091,000. The Company has on file
a shelf  registration to issue up to $400,000,000 of common stock,  warrants and
debt  securities.  The  $200,000,000  unsecured  7.88%  notes  due  2003 and the
$100,000,000  unsecured  7.40%  notes  due 2002  were  issued  under  the  shelf
registration with the remaining $100,000,000 unissued at February 28, 1997.
         Notes  payable  to  insurance  companies  contain  certain  restrictive
covenants.  Under these  covenants,  the payment of cash dividends is limited to
$150,293,000 plus 75% of net earnings  adjusted for dividend payouts  subsequent
to February 28,  1997.  Other  covenants  relate to the  maintenance  of working
capital, net earnings coverage of fixed charges, limitations on total and funded
indebtedness  and maintenance of  stockholders'  equity.  As of February 28,
1997, the Company is in compliance with its restrictive covenants.
         Interest  payments of  $46,710,000,  $40,710,000 and $30,303,000 net of
capitalized  interest of $2,360,000,  $2,141,000 and $1,751,000 were made during
fiscal 1997, 1996 and 1995, respectively.


(6)      Income Taxes

         The provision for income taxes consists of the following:

                                        1997          1996          1995
                                            (Amounts in thousands)

Current:
         Federal                     $ 5,481       $11,034       $23,282
         State                         3,006         1,988         3,595
         Puerto Rico                   2,160          (522)            -
Deferred:
         Federal                       7,758         6,012        10,242
         State                         1,618         1,293         1,967
         Puerto Rico                   1,692         3,216             -
                                      11,068        10,521        12,209
                                     $21,715       $23,021       $39,086

         The  income  tax  effects of  temporary  differences  that gave rise to
significant  portions of the net deferred tax  liability as of February 28, 1997
and February 29, 1996, consist of the following:

                                                  1997                1996
                                                   (Amounts in thousands)
Deferred tax assets:
         Accrued liabilities                   $25,198              $5,028
         Allowance for doubtful accounts         8,775               5,943
         Subsidiary net operating
                   loss carryforward             5,622                   -
         Puerto Rico alternative minimum
                   tax credit carryforward       3,014                   -
         Deferred revenues                       1,487                 711
         Other                                     435                   -
                                                44,531              11,682

(page 35)
Deferred tax liabilities:
         Excess costs over net
                   assets acquired              58,172              42,148
         Asset securitizations                  19,152              11,142
         Inventory                               7,469               4,148
         Property and equipment                  7,029               4,290
         Puerto Rico accounts receivable         6,813               4,286
         Costs capitalized on
                   constructed assets            5,767               5,480
         Other                                   2,547               1,338
                                               106,949              72,832
                                               $62,418             $61,150

Balance sheet classification:
         Other current liabilities             $13,290             $11,271
         Deferred income tax liability          49,128              49,879
                                               $62,418             $61,150

         A  reconciliation  of the  statutory  federal  income  tax  rate to the
Company's effective rate is provided below:

                                          1997         1996          1995

Statutory federal income tax rate         35.0%        35.0%         35.0%
State income taxes, net of federal
         income tax benefit                3.7          3.8           3.3
Tax credits                               (5.3)        (3.1)         (1.9)
Other, net                                 1.7            -            .5
                                          35.1%        35.7%         36.9%

         Income tax payments of $18,446,824,  $24,737,603  and $28,966,000  were
made during fiscal 1997, 1996 and 1995, respectively.
         A  wholly-owned  subsidiary  has a separate  company net operating loss
carryforward  in the amount of  $16,065,100  at February  28,  1997,  which will
expire in fiscal year 2012.


(7)      Retirement Plans

         The Company has a qualified profit sharing and retirement savings plan,
which includes a cash deferred  arrangement under Section 401(k) of the Internal
Revenue  Code (the  "Code")  and covers all  eligible  employees  of the
Company who have completed twelve months of employment and have attained the age
of 21. Eligible employees may elect to contribute specified percentages of their
compensation to the plan. The Company  guarantees a  dollar-for-dollar  match on
the first two  percent of the  employee's  compensation  contributed  to the
plan. The Company will make an additional  matching  contribution  if and to the
extent that four  percent of the  Company's  estimated  consolidated  income
before taxes exceeds the two percent  dollar-for-dollar  match described  above.
The Company may, at the  discretion of its Board of Directors,  make  additional
Company matching  contributions subject to certain limitations.  The plan may be
terminated  at the  discretion  of the  Board  of  Directors.  If  the  plan  is
terminated the Company will not be required to make any further contributions to
the plan and participants  will become 100% vested in any Company  contributions
made to the plan. The plan expense  recognized in fiscal 1997, 1996 and 1995 was
$2,507,000, $2,553,000 and $4,505,000, respectively.
         In addition, a non-qualified supplemental profit sharing and retirement
savings plan was  established  as of March 1, 1991, for the purpose of providing
deferred  compensation  for certain  employees whose benefits and  contributions
under the  qualified  plan are limited by the Code.  The  deferred  compensation
expense  recognized  in fiscal 1997,  1996 and 1995 was  $283,000,  $254,000 and
$386,000, respectively.
         The Company has an  executive  income  continuation  plan which  covers
certain executive officers. The plan is intended to provide certain supplemental
preretirement death benefits and retirement  benefits to its key executives.  In
the event an executive dies prior to age 65 in the

(page 36)
employment of the Company,  the executive's  beneficiary will receive annual
benefits of 100% of salary for a period of one to two years and/or 25% to 50% of
salary for a period of eight years.  If the executive  retires at age 65, either
the executive or his beneficiary will receive an annual retirement benefit of 6%
to 25% of the  executive's  salary  increased 4% annually for a period of 15
years.  This  plan  has been  funded  through  the  purchase  of life  insurance
contracts  covering the  executives  and owned by the Company.  For fiscal years
1997, 1996 and 1995, there was no charge to earnings.
         As of February 28,  1997,  the Company  continued  to operate  separate
employee benefit plans covering certain groups of employees of Rhodes, which was
acquired on December 31, 1996. These plans include a qualified  non-contributory
defined  benefit plan covering  substantially  all employees who are at least 21
years old, a  non-qualified  unfunded  defined  benefit  plan  covering  certain
officers who earn  compensation in excess of the limits imposed by the Code, and
a qualified defined contribution savings plan.
         A comparison  of  accumulated  plan  benefits and plan net assets as of
February 28, 1997 for the defined benefit plan follows(Amounts in thousands):

Actuarial present value of accumulated plan benefits:               $13,495
         Vested                                                         387
         Non-vested                                                 $13,882


Net assets available for plan benefits                              $12,972

         The  projected   benefit   obligation  of  the  unfunded  plan  totaled
$1,062,000 at February 28, 1997.  The assumed rate of return used in determining
the  actuarial  present  value of  accumulated  plan  benefits  for both defined
benefit  plans was 7.75%.  The expense  related to the  operation of these plans
during fiscal 1997 was insignificant.
         In connection with the acquisition of Rhodes,  the Company  developed a
plan to  potentially  terminate  these  separate  benefit  plans.  The estimated
additional  liability  associated with such  termination was recorded as part of
the purchase price allocation to the acquired assets and liabilities of Rhodes.


(8)      Stock Options

         The Company has elected to follow  Accounting  Principles Board Opinion
No. 25,  "Accounting for Stock Issued to Employees" (APB 25) and related
Interpretation  in accounting  for its employee  stock  options.  In electing to
account for its stock  options under APB 25, the Company is required by SFAS No.
123,  "Accounting  for  Stock-Based  Compensation"  to provide pro forma
information regarding net income and earnings per share.
         The 1983,  1990 and 1994 Stock Option Plans  provide that key employees
of the Company  are  eligible to receive  common  stock  options (at an exercise
price  of no less  than  fair  market  value  at the date of  grant)  and  stock
appreciation rights. Under these plans, approximately 8,094,000 shares have been
authorized to be reserved for issuance. All options granted have ten year terms.
The options vest on a graduated basis and become fully exercisable at the end of
two years of continued employment.
         Pro forma  information  regarding  net income and earnings per share as
required by SFAS No. 123 has been determined as if the Company had accounted for
its employee  stock options under the fair value method of that  statement.  The
fair  value  for  these  options  was  estimated  at the date of  grant  using a
Black-Scholes  option  valuation  model  with  the  following   weighted-average
assumptions for fiscal 1997 and 1996, respectively: risk- free interest rates of
6.1% and 5.2%;  a dividend  yield of 1.6%;  volatility  factors of the  expected
market price of the  Company's  common stock of 41%; and a  weighted-average
expected  option  life of 3.48 years and 3.50  years for  fiscal  years 1997 and
1996, respectively.

(page 37)
         The  Black-Scholes  option  valuation  model was  developed  for use in
estimating the fair value of traded  options which have no vesting  restrictions
and are fully  transferable.  In addition,  option  valuation models require the
input of highly  subjective  assumptions  including  the  expected  stock  price
volatility.    Because   the   Company's   employee   stock   options   have
characteristics  significantly  different  from  those of  traded  options,  and
because changes in the subjective  input  assumptions can materially  affect the
fair value estimate,  in  management's  opinion,  the existing models do not
necessarily  provide a reliable single measure of the fair value of its employee
stock options.
         For purposes of pro forma disclosures, the estimated fair value of
the options is amortized to expense over the options vesting period.  The
Company's pro forma information follows:
                                               1997               1996
                                (Amounts in thousands except per share data)

Pro forma net income                        $37,072            $36,524
Pro forma earnings per share:
         Primary                               $.74               $.74
         Fully diluted                         $.74               $.74

                                                            Weighted
                                                                         Average
                                                            Exercise
                                             Options           Price

Outstanding at March 1, 1994               3,603,272          $16.98
Granted                                      600,500          $26.18
Exercised                                   (128,043)         $11.52
Outstanding at February 28, 1995           4,075,729          $18.46
Granted                                    1,045,200          $17.25
Exercised                                    (23,525)         $12.17
Forfeited                                   (665,500)         $32.50
Outstanding at February 29, 1996           4,431,904          $18.49
Granted                                      816,480          $14.55
Exercised                                    (51,500)         $13.25
Outstanding at February 28, 1997           5,196,884          $15.55

         A summary  of the  Company's  stock  option  activity  and  related
information for the years ended February 28, 1997, 1996 and 1995 follows:

Range of                  $5.52          $10.01           $17.01      $27.01
Exercise                  to             to               to          to
Prices                    $10.00         $17.00           $27.00      $35.06

Options outstanding
at February 28, 1997   1,639,804        816,480        2,728,600      12,000

Weighted average
remaining contract life,
outstanding options         4.16           9.94             6.96        6.95

Weighted average
exercise price,
outstanding options        $8.58         $14.55           $20.54      $35.06

Options exercisable
at February 28, 1997   1,639,804        568,142        2,542,900      12,000

Weighted average
exercise price,
exercisable options        $8.58         $14.19           $20.36      $35.06

         Options  exercisable  at year end and the respective  weighted  average
exercise prices were 4,762,846 at $15.50, 4,017,290 at $18.06 and 3,334,019

(page 38)
at $16.80 for fiscal 1997, 1996 and 1995, respectively.
         The weighted average fair value of options granted during the year
was $4.88 for fiscal 1997 and $5.42 for fiscal 1996.


(9)      Commitments and Contingencies

Leases

         The Company has  entered  into  noncancellable  lease  agreements  with
initial terms ranging from 1 to 25 years for certain stores,  warehouses and the
corporate  office.  Certain leases include  renewal options ranging from 1 to 10
years  and/or  purchase  provisions,  both  of  which  may be  exercised  at the
Company's option. Most of the leases are gross leases under which the lessor
pays the taxes,  insurance and maintenance  costs. The following  capital leases
are included in the accompanying consolidated balance sheets:

                                                   1997              1996
                                                   (Amounts in thousands)

Land and buildings                              $12,098            $6,426
Fixtures and equipment                              675               675
                                                 12,773             7,101
Less accumulated depreciation
         and amortization                         3,724             3,307
                                                $ 9,049            $3,794


         Capitalized  lease  amortization is included in  depreciation  expense.
Future minimum lease  payments under capital leases and operating  leases having
initial  or  remaining  noncancellable  lease  terms  in  excess  of one year at
February 28, 1997, are as follows:

Fiscal Years                  Capital Leases             Operating Leases
                                        (Amounts in thousands)

1998                                 $ 3,411                     $ 79,791
1999                                   3,389                       74,643
2000                                   3,566                       65,980
2001                                   3,546                       59,001
2002                                   2,957                       50,188
After 2002                             7,351                      255,872
Total minimum lease payments         $24,220                     $585,475
Less:
         Executory costs                  99
         Imputed interest              7,440
Present value of minimum
         lease payments              $16,681

         Total rental expense under  operating  leases for fiscal 1997, 1996 and
1995 was  $83,888,000,  $67,509,000 and  $50,855,000,  respectively.  Contingent
rentals and sublease rentals are negligible.
         Payments to affiliated entities under capital and operating leases were
$314,000 for fiscal 1997,  which included  payments to limited  partnerships  in
which the Company has equity  interests.  Lease payments to affiliated  entities
for fiscal 1996 and 1995 were $625,000 and $856,000, respectively.

Litigation

(page 39)
         The  Company  is party to  various  legal  actions  and  administrative
proceedings  and subject to various  claims  arising in the  ordinary  course of
business.  Based  on the  best  information  presently  available,  the  Company
believes that the  disposition of these matters will not have a material  effect
on the financial statements.


(10)     Derivative Financial Instruments

         The  Company  uses  derivative  financial  instruments  in the  form of
interest  rate  swap  agreements  primarily  to manage  the risk of  unfavorable
movements in interest rates.  These convert floating rate notes payable to banks
and  floating  rates on asset  securitization  agreements  to fixed  rates.  The
notional amounts of these swap agreements at February 28, (29) were as follows:

                                                   1997                1996
                                                    (Amounts in thousands)

On notes payable and other                     $211,700            $231,100
On securitized receivables                     $235,000            $235,000

         Interest  rates that the Company paid per the swap  agreements  related
primarily to notes payable were fixed at an average rate of 6.7% at February 28,
1997. At February 29, 1996, rates were fixed at an average of 6.5%. The variable
rates received per these agreements were tied to LIBOR or commercial paper rates
and averaged  5.7% and 5.3% at February 28, (29),  1997 and 1996,  respectively.
The terms for these agreements range from 3 to 5 years.
         Interest  rates that the  Company  paid on swap  agreements  related to
securitized  receivables  were fixed at an average  rate of 6.5% at February 28,
1997. At February 29, 1996, rates were fixed at an average of 6.5%. The variable
rates received per these agreements were tied to LIBOR or commercial paper rates
and averaged  5.5% and 5.3% at February 28, (29),  1997 and 1996,  respectively.
The terms for these  agreements  range from 2 to 5 years.  Resulting  changes in
interest are recorded as increases or decreases to interest expense. The accrued
interest liability is correspondingly increased or decreased.
         The Company believes its risk of  credit-related  losses resulting from
nonperformance by a counterparty is remote. The amount of any such loss would be
limited to a small percentage of the notional amount of each swap. As a means of
reducing  this  risk,  the  Company  as a matter  of  policy  only  enters  into
transactions with counterparties rated "A" or higher.
         The Company  does not mark its swaps to market and  therefore  does not
record a gain or loss with interest  rate  changes.  Gains on disposals of swaps
are recognized over the remaining life of the swap.  Losses on disposals,  which
there have been none to date, would be recognized immediately.
         All swaps are held for purposes other than trading.


(11)     Fair Value of Financial Instruments

         The estimated fair values of financial instruments have been determined
by  using  available  market  information.  The  estimates  are not  necessarily
indicative  of the  amounts  the  Company  could  realize  in a  current  market
exchange.   The  use  of  different   market   assumptions   and/or   estimation
methodologies may have a material effect on the estimated fair value amounts.
         The estimated  fair values of the Company's  financial  instruments  at
February 28, 1997 and at February 29, 1996 are as follows:

(page 40)

                                       1997                      1996
                              Carrying      Fair        Carrying       Fair
                                Amount     Value          Amount      Value
Assets:
         Cash                  $14,959   $14,959         $16,017    $16,017
         Accounts receivable   596,959   596,959         518,969    518,969

Liabilities:
         Accounts payable      160,857   160,857          87,739     87,739
         Notes payable         156,000   156,000         190,000    190,000
         Long-term debt        645,221   661,940         370,443    390,745

Off-balance-sheet financial instruments:
         Interest rate swap agreements:
                   Assets            -       632               -      1,226
                   Liabilities       -     6,247               -     12,412

         The following  methods and  assumptions  were used to estimate the fair
value for each class of financial instruments shown above:

Cash and Accounts Receivable

         The carrying amount  approximates  fair value because of the short-term
maturity of these assets.

Accounts Payable and Notes Payable

         The carrying  value  approximates  fair value because of the short-term
maturity of these liabilities.

Long-Term Debt

         The fair  value  of the  Company's  long-term  debt is based on the
discounted cash flow of that debt, using current rates and remaining maturities.

Interest Rate Swap Agreements

         The fair value of the  Company's  interest rate swap  agreements is
the estimated  amount that the Company would receive or pay upon  termination of
the  agreements,  based on estimates  obtained  from the  counterparties.  These
agreements are not held for trading purposes,  but rather to hedge interest rate
risk.


(12)     Quarterly Financial Data (Unaudited)

         The following is a summary of quarterly  financial data for fiscal 1997
and 1996:

                                               Three months ended
                        May 31     August 31     November 30  February 28,(29)
                            (Amounts in thousands except per share data)

1997
Revenues              $357,914      $343,523        $413,474         $478,207
Gross profit (1)       106,977        95,784         123,614          139,692
Earnings before
 taxes                  19,208        12,085          14,701           15,907
Net earnings            12,371         7,747           9,492           10,576
Earnings per share of common stock:
 Primary and fully
  diluted                 0.25          0.16            0.19             0.20
Cash dividends per share
 of common stock          0.07          0.07            0.07             0.07

(page 41)
1996
Revenues              $318,971      $324,861        $375,479         $340,040
Gross profit (1)        96,364        90,503         108,439           90,885
Earnings before
 taxes                  29,211        17,678          12,849            4,789
Net earnings            18,466        11,316           8,757            2,961
Earnings per share of common stock:
 Primary and fully
  diluted                 0.37          0.23            0.18             0.06
Cash dividends per share
 of common stock          0.07          0.07            0.07             0.07

(1) Gross profit is sales less costs of sales.


(13)     MacSaver Financial Services

         MacSaver Financial Services ("MacSaver"),  is the Company's
wholly-owned subsidiary whose principal business activity is to obtain financing
for  the  operations  of  Heilig-Meyers  and  its  other  subsidiaries,  and  in
connection  therewith,  MacSaver  generally  acquires  and holds  the  aggregate
principal amount of installment  credit accounts  generated by the Company's
operating  subsidiaries,  and  issues  and  carries  substantially  all  of  the
Company's  notes payable and long-term  debt.  Substantially  all of the net
revenues  generated by MacSaver are  pursuant to operating  agreements  with the
Company and certain of its wholly-owned subsidiaries.  In July 1996, the Company
and  MacSaver  filed  a  joint  Registration  Statement  on Form  S-3  with  the
Securities  and Exchange  Commission  relating to up to  $400,000,000  aggregate
principal  amount of securities.  MacSaver has issued  $300,000,000 in aggregate
principal  amount of its notes;  $200,000,000 at 7.88% due 2003 and $100,000,000
at 7.40% due 2002. These notes are  unconditionally  guaranteed as to payment of
principal and interest by the Company.  The Company has not  presented  separate
financial   statements  and  other  disclosures   concerning   MacSaver  because
management  has determined  that such  information is not material to holders of
the debt  securities.  However,  as  required  by the 1934 Act,  the  summarized
financial information concerning MacSaver is as follows:

MacSaver Financial Services Summarized Statements of Earnings

                                   Twelve months ended February 28,(29),
                                   1997            1996            1995
                                      (Amounts in thousands)

Net revenues                   $158,306        $116,243         $91,001
Operating expenses              102,706          71,649          46,367
Earnings before taxes            55,600          44,594          44,634
Net earnings                   $ 36,140        $ 28,986         $29,012

MacSaver Financial Services Summarized Balance Sheets
                                               February 28, February 29,
                                               1997                   1996
                                               (Amounts in thousands)

Current assets                                 $ 36,401           $ 43,869
Accounts receivable, net                        454,774            423,105
Due from affiliates                             504,763            224,292
         TOTAL ASSETS                          $995,938           $691,266

Current liabilities                            $128,921           $ 33,785
Notes payable                                   156,000            190,000
Long-term debt                                  545,000            348,401
Stockholder's equity                            166,017            119,080
         TOTAL LIABILITIES AND
         STOCKHOLDER'S EQUITY                  $995,938           $691,266

(page 42)
Independent Auditors' Report

To the Stockholders and Board of Directors
Heilig-Meyers Company
Richmond, Virginia

We have audited the  accompanying  consolidated  balance sheets of Heilig-Meyers
Company and  subsidiaries as of February 28, 1997 and February 29, 1996, and the
related consolidated statements of earnings,  stockholders' equity, and cash
flows for each of the three years in the period ended  February  28,  1997.  Our
audits also included the  financial  statement  schedule  listed in the Index at
item 14(a)2. These financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express
an opinion on the financial statements and financial statement schedule based on
our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  such consolidated  financial  statements present fairly, in all
material  respects,   the  financial  position  of  Heilig-Meyers   Company  and
subsidiaries  as of February 28, 1997 and February 29, 1996,  and the results of
their  operations and their cash flows for each of the three years in the period
ended  February  28,  1997 in  conformity  with  generally  accepted  accounting
principles.  Also,  in our opinion,  such  financial  statement  schedule,  when
considered in relation to the basic consolidated financial statements taken as a
whole,  presents  fairly in all  material  respects  the  information  set forth
therein.


/s/ Deloitte & Touche LLP

Richmond, Virginia
March 25, 1997


(page 43)

  Item 9.  CHANGES in and DISAGREEMENTS with ACCOUNTANTS on ACCOUNTING

           and FINANCIAL DISCLOSURE


   None.

(page 44)
                              PART III

    In accordance  with general  instruction  G(3) of Form 10-K, the information
called for by Items 10, 11, 12 and 13 of Part III is  incorporated  by reference
from the  registrant's  definitive  Proxy  Statement  for its Annual  Meeting of
Shareholders  scheduled for June 18, 1997, except for information concerning the
executive  officers of the registrant which is included in Part I of this report
under the caption "Executive Officers of the Registrant."

                                PART IV

Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K

      (a)  1.   Financial Statements

         The  following   consolidated  financial  statements  of  Heilig-Meyers
         Company  and  Subsidiaries  included  in the  registrant's  1997 Annual
         Report to Shareholders are included in item 8 herein:

             Independent Auditors' Report

             Consolidated Balance Sheets -
               February 28, 1997 and February 29, 1996

             Consolidated Statements of Earnings -
               Year Ended February 28, 1997,
               Year Ended February 29, 1996, and
               Year Ended February 28, 1995

             Consolidated Statements of Stockholders' Equity -
               Year Ended February 28, 1997,
               Year Ended February 29, 1996, and
               Year Ended February 28, 1995

             Consolidated Statements of Cash Flows -
               Year Ended February 28, 1997,
               Year Ended February 29, 1996, and
               Year Ended February 28, 1995

             Notes to Consolidated Financial Statements

(page 45)
      (a)  2. Financial Statement Schedules:   The  financial statement
              schedule required by this item is listed below.

              Independent  Auditors'  Report on  Schedule  II included in Item 8
              herein.

              Schedule II - Valuation and Qualifying Accounts

              Schedules  other than those listed above have been omitted because
              they  are  not  applicable  or are not  required  or  because  the
              required  information  is included in the financial  statements or
              notes thereto.

      (a)  3. Exhibits  required to be filed by Item 601  of Regulation
              S-K.

              See INDEX TO EXHIBITS

      (b)  1. Reports on Form 8-K Filed During Last Quarter of Year Ended
              February 28, 1997.

     There were two Current Reports on Form 8-K filed during the last quarter of
     the fiscal year ended  February 28, 1997.  On January 10, 1997,  Registrant
     filed a Form 8-K in which it reported that Registrant had acquired  Rhodes,
     Inc.  ("Rhodes") and including certain financial statements related
     thereto.  On February 24, 1997,  Registrant  filed  Amendment  No. 1 to its
     January  10,  1997  Form  8-K,  in  which  it  reported  certain  financial
     statements related to Rhodes.

(page 46)
                             SIGNATURES

    Pursuant  to the  requirements  of  Section  13 or 15(d)  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


       Date:  May 27, 1997                by  /s/William C. DeRusha
                                          William C. DeRusha
                                          Chairman of the Board
                                          and Chief Executive Officer

    Pursuant to the  requirements  of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
registrant and in the capacities and on the dates indicated.


       Date:  May 27, 1997                /s/William C. DeRusha
                                          William C. DeRusha
                                          Chairman of the Board
                                          Principal Executive Officer
                                          Director


       Date:  May 27, 1997                /s/Joseph R. Jenkins
                                          Joseph R. Jenkins
                                          Executive Vice President
                                          Principal Financial Officer


       Date:  May 27, 1997                /s/William J. Dieter
                                          William J. Dieter
                                          Senior Vice President,
                                          Accounting and Principal
                                          Accounting Officer


       Date:  May 27, 1997                /s/Alexander Alexander
                                          Alexander Alexander, Director


       Date:  May 27, 1997                /s/Robert L. Burrus, Jr.
                                          Robert L. Burrus, Jr., Director



(page 47)
       Date:  May 27, 1997             /s/Beverley E. Dalton
                                       Beverley E. Dalton, Director


       Date:  May __, 1997             ___________________
                                       Charles A. Davis, Director


       Date:  May 27, 1997             /s/Benjamin F. Edwards, III
                                       Benjamin F. Edwards, III, Director


       Date:  May __, 1997             __________________
                                       Alan G. Fleischer, Director


       Date:  May 27, 1997             /s/Nathaniel Krumbein
                                       Nathaniel Krumbein, Director


       Date:  May 27, 1997             /s/Hyman Meyers
                                       Hyman Meyers, Director


       Date:  May 27, 1997             /s/S. Sidney Meyers
                                       S. Sidney Meyers, Director


       Date:  May 27, 1997             /s/Troy A. Peery, Jr.
                                       Troy A. Peery, Jr., Director


       Date:  May 27, 1997             /s/Lawrence N. Smith
                                       Lawrence N. Smith, Director


       Date:  May 27, 1997             /s/Eugene P. Trani
                                       Eugene P. Trani, Director

(page 48)
                     HEILIG-MEYERS COMPANY AND SUBSIDIARIES

                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
                             (Amounts in thousands)



Column A     Column B      Column C                 Column D          Column E

                                         Write-off
            Balance at Charged  Charged   and       Purchased  Sold     Balance
            Beginning  To Costs To Other Repossession Accounts Accounts at Close
Description of Period &Expenses Accounts Losses Receivable Receivable of Period

Allowance for
 Doubtful Accounts:

Year Ended
 February 28,
 1997        $54,714   $80,908 $1,330(A) $70,438  $6,912(C)  $33,940  $41,120

                              $15,458(B)
Year Ended
 February 29,
 1996        $46,678   $65,379 $1,134(A) $57,231  $8,917(C)      $--  $54,714

                               $7,671(B)

Year Ended
 February 28,
 1995        $28,497   $45,419 $  806(A) $45,735  $7,595(C)      $--  $46,678
                              $25,286(B)


(A)  Represents  recoveries  on accounts  previously  written off. (B) Allowance
applicable  to  purchased  accounts  receivable.  (C)  Deductions  from  reserve
applicable to purchased accounts receivable, as
    follows:


                                            1997         1996          1995


Write-offs of Uncollectible Accounts        $6,912       $8,917        $7,595


(page 49)
                                Index to Exhibits

3.        Articles of Incorporation and Bylaws.

          a.       Registrant's Restated Articles of Incorporation filed as
                   Exhibit 3(a) to Registrant's Annual Report on Form 10-K for
                   the fiscal year ended February 28, 1990 (No. 1-8484) are
                   incorporated herein by this reference.

          b.       Articles of Amendment to Registrant's Restated Articles of
                   Incorporation filed as Exhibit 4 to Registrant's Form 8
                   (Amendment No. 5 to Form 8-A filed April 26, 1983) filed
                   August 6, 1992 (No. 1-8484) are incorporated herein by this
                   reference.

          c.       Articles of Amendment to Registrant's Restated Articles of
                   Incorporation filed as Exhibit 3(c) to Registrant's Annual
                   Report on Form 10-K for the fiscal year ended February 28,
                   1993 (No. 1-8484) are incorporated herein by this reference.

          d.       Articles of Amendment to Registrant's Restated Articles of
                   Incorporation, filed as Exhibit 3(d) to Registrant's Annual
                   Report on Form 10-K for the fiscal year ended February 28,
                   1995 (No. 1-8484), are incorporated herein by this reference.

          e.       Registrant's Amended Bylaws.

4.        Instruments defining the rights of security holders, including
          indentures.

          a.       Indenture  dated as of  August  1,  1996,  among  Registrant,
                   MacSaver Financial Services,  Inc.  ("MacSaver")  and
                   First Union National Bank of Virginia, as Trustee, filed with
                   the  Commission as Exhibit 4(a) to  Registrant's  Current
                   Report on Form 8-K dated September 11, 1996 (No. 1-8484),  is
                   incorporated herein by this reference.

          b.       Officer's  Certificate dated August 9, 1996,  relating to the
                   public  offering  by  MacSaver  of  $200  million   aggregate
                   principal amount of 7/8% Notes due August 1, 2003, guaranteed
                   as to payment of principal and interest by Registrant,  filed
                   with  the  Commission  as  Exhibit  4(b) to  Registrant's
                   Current   Report  on  Form  8-K  dated   September  11,  1996
                   (No.1-8484), is incorporated herein by this reference.

          c.       In addition to the foregoing, the long-term debt as shown on
                   the consolidated balance sheet of the Registrant at February
                   28, 1995 includes various obligations each of which is
                   evidenced by an instrument authorizing an amount that is less
                   than 10% of the total assets of the Registrant and its
                   subsidiaries on a consolidated basis.  The documents
                   evidencing these obligations are accordingly omitted pursuant
                   to Regulation S-K, Item 601(b)(4)(iii) and will be furnished
                   to the Commission upon request.

10.       Contracts

          a.       Three leases dated as of December 27, 1976 between Hyman
                   Meyers, Agent, and the Registrant, filed as Exhibit 10(a)(2)

(page 50)
                   and  Exhibit  10(a)(4)  - Exhibit  10(a)(5)  to  Registrant's
                   Annual Report on Form 10-K for the fiscal year ended February
                   28,  1989  (No.  1-8484),  are  incorporated  herein  by this
                   reference.

          b.       The following Agreements filed as Exhibits 10(b) through
                   10(f) to Registrant's Annual Report on Form 10-K for the
                   fiscal year ended February 28, 1991 (No. 1-8484) are
                   incorporated herein by this reference:

                   (1)       Lease dated as of January 1, 1980 between Hyman
                             Myers, Agent, and the Registrant.

                   (2)       Lease dated  November 1, 1970 between Hyman Meyers,
                             Agent,  and the Registrant as successor in interest
                             to Heilig-Meyers Company of Greenville, Inc.

                   (3)       Lease dated April 15, 1971 between Meyers-Thornton
                             Investment Co. and the Registrant as successor in
                             interest to Meyers-Thornton Corporation.

                   (4)       Lease dated June 28, 1971  between  Meyers-Thornton
                             Investment  Company and the Registrant as successor
                             in interest to Meyers-Thornton Corporation.

                   (5)       Lease dated December 1, 1972 between Meyers-
                             Thornton Investment Company and the Registrant.

          c.       The  following  Agreements  (originally  filed as exhibits to
                   Registrant's  Annual  Report on Form 10-K for the fiscal year
                   ended March 31, 1982) were  refiled as Exhibits  10(c)(1)-(3)
                   to  Registrant's  Annual  Report on Form 10-K for the  fiscal
                   year  ended   February   28,   1993  (No.   1-8484)  and  are
                   incorporated herein by reference:

                   (1)       Executive Employment and Deferred Compensation
                             Agreement made January 12, 1982 between Hyman
                             Meyers and the Registrant. *

                   (2)       Executive Employment and Deferred Compensation
                             Agreement made January 12, 1982 between S. Sidney
                             Meyers and the Registrant. *

                   (3)       Executive Employment and Deferred Compensation
                             Agreement made January 12, 1982 between Nathaniel
                             Krumbein and the Registrant. *

          d.       Employees'  Profit  Sharing   Retirement  Plan,  amended  and
                   restated,  effective  as of March 1,  1989  filed as  Exhibit
                   10(d) to  Registrant's  Annual  Report  on Form  10-K for the
                   fiscal  year  ended   February  28,  1993  (No.   1-8484)  is
                   incorporated herein by this reference.*

          e.       First  Amendment,  dated as of June 15, 1992,  to the Heilig-
                   Meyers Employees' Profit Sharing Retirement Plan, amended and
                   restated,  effective  as of March 1,  1989,  filed as Exhibit
                   10(e) to the Registrant's  Annual Report on Form 10-K for the
                   fiscal  year  ended   February  28,  1993  (No.   1-8484)  is
                   incorporated herein by this reference.*

          f.       Second Amendment, dated as of February 1, 1994, to the
                   Heilig-Meyers Employees' Profit Sharing Retirement Plan,
                   amended and restated, effective as of March 1, 1989. *

(page 51)
          g.       Third Amendment, dated as of May 1, 1995, to the Heilig-
                   Meyers Employees' Profit Sharing Retirement Plan, amended and
                   restated, effective as of March 1, 1989. *

          h.       Addendum to Lease and Contract dated February 26, 1973
                   amending Lease Contract dated April 15, 1971 between Meyers-
                   Thornton Investment Co. and the Company as successor in
                   interest to Meyers-Thornton Corporation (see Exhibit
                   10(c)(2)), filed as Exhibit 10(k) to Registrant's
                   Registration Statement on Form S-2 (No. 2-81775) is
                   incorporated herein by this reference.

          i.       The following Agreements filed as Exhibits 19(a) through
                   19(c) to Registrant's Quarterly Report on Form 10-Q for the
                   quarter ended June 30, 1984 (No. 1-8484) are incorporated
                   herein by this reference:

                   (1)       Agreement made as of May 4, 1984 to amend Executive
                             Employment and Deferred Compensation Agreement
                             between Hyman Meyers and Registrant.*

                   (2)       Agreement made as of May 4, 1984 to amend Executive
                             Employment and Deferred Compensation Agreement
                             between S. Sidney Meyers and Registrant.*


                   (3)       Agreement made as of May 4, 1984 to amend Executive
                             Employment and Deferred Compensation Agreement
                             between Nathaniel Krumbein and Registrant.*

          j.       Agreement  made as of September  15, 1989 to amend  Executive
                   Employment and Deferred Compensation  Agreement between Hyman
                   Meyers  and   Registrant   filed  as  Exhibit  10(i)  to  the
                   Registrant's  Annual  Report on Form 10-K for the fiscal year
                   ended February 28, 1990 (No.  1-8484) is incorporated  herein
                   by this reference.*

          k.       Agreement  made as of September  15, 1989 to amend  Executive
                   Employment  and Deferred  Compensation  Agreement  between S.
                   Sidney  Meyers and  Registrant  filed as Exhibit 10(j) to the
                   Registrant's  Annual  Report on Form 10-K for the fiscal year
                   ended February 28, 1990 (No.  1-8484) is incorporated  herein
                   by this reference.*

          l.       Agreement  made as of September  15, 1989 to amend  Executive
                   Employment  and  Deferred   Compensation   Agreement  between
                   Nathaniel  Krumbein and Registrant  filed as Exhibit 10(k) to
                   the  Registrant's  Annual  Report on Form 10-K for the fiscal
                   year ended  February  28,  1990 (No.  1-8484)is  incorporated
                   herein by this reference.*

          m.       Deferred Compensation Agreement between Robert L. Burrus, Jr.
                   and the Registrant filed as Exhibit 10(o) to the Registrant's
                   Annual Report on Form 10-K for the fiscal year ended February
                   28, 1987 (No. 1-8484) is incorporated herein by this
                   reference.*

          n.       Amendment dated September 15, 1989 to the Deferred
                   Compensation Agreement between Robert L. Burrus, Jr. and the
                   Registrant filed as Exhibit 10(m) to Registrant's Annual
                   Report on Form 10-K for the fiscal year ended February 28,
                   1990 (No. 1-8484) is incorporated herein by this reference.*

          o.       Deferred Compensation Agreement between Lawrence N. Smith and

(page 52)
                   the Registrant filed as Exhibit 10(p) to the Registrant's
                   Annual Report on Form 10-K for the fiscal year ended February
                   28, 1987 (No. 1-8484) is incorporated herein by this
                   reference.*

          p.       Amendment dated September 15, 1989 to Deferred Compensation
                   Agreement between Lawrence N. Smith and the Registrant filed
                   as Exhibit 10(o) to Registrant's Annual Report on Form 10-K
                   for the fiscal year ended February 28, 1990 (No. 1-8484) is
                   incorporated herein by this reference.*

          q.       Deferred Compensation Agreement between George A. Thornton,
                   III and the Registrant filed as Exhibit 10(q) to the
                   Registrant's Annual Report on Form 10-K for the fiscal year
                   ended February 28, 1987 (No. 1-8484) is incorporated herein
                   by this reference.*

          r.       Amendment dated September 15, 1989 to Deferred Compensation
                   Agreement between George A. Thornton, III and the Registrant
                   filed as Exhibit 10(q) to Registrant's Annual Report on Form
                   10-K for the fiscal year ended February 28, 1990 (No. 1-8484)
                   is incorporated herein by this reference.*

          s.       Employees Supplemental Profit-Sharing and Retirement Savings
                   Plan, adopted effective as of March 1, 1991, amended and
                   restated effective as of March 1, 1994. *

          t.       Registrant's 1983 Stock Option Plan, as amended, filed as
                   Exhibit C to Registrant's Proxy Statement dated May 9, 1988
                   (No. 1-8484) for its Annual Meeting of Stockholders held on
                   June 22, 1988 is incorporated herein by this reference.*

          u.       Amendments to registrant's 1983 Stock Option Plan, as
                   amended, filed as Exhibit 10(t) to Registrant's Annual Report
                   on Form 10-K for the fiscal year ended February 28, 1990 (No.
                   1-8484) is incorporated herein by this reference.*

          v.       Registrant's 1990 Stock Option Plan, as amended, filed as
                   Exhibit 10(t) to Registrant's Annual Report on Form 10-K for
                   the fiscal year ended February 28, 1993 (No. 1-8484) is
                   incorporated herein by this reference.*

          w.       Registrant's 1994 Stock Option Plan, as amended, filed as
                   Exhibit A to Registrant's Proxy Statement dated May 3, 1994
                   (No. 1-8484) for its Annual Meeting of Stockholders held on
                   June 15, 1994 is incorporated herein by this reference.*

          x.       Registrant's Executive Severance Plan effective as of
                   September 15, 1989 filed as Exhibit 10(v) to Registrant's
                   Annual Report on Form 10-K for the fiscal year ended February
                   28, 1990 (No. 1-8484) is incorporated herein by this
                   reference.*

          y.       Form of Executive Supplemental Retirement Agreement between
                   the Registrant and each of William C. DeRusha and Troy A.
                   Peery, Jr. dated January 1, 1996. *

          z.       Form of Executive Supplemental Retirement Agreement between
                   the Registrant and each of James F. Cerza, Jr., Joseph R.
                   Jenkins and James R. Riddle dated January 1, 1996. *

          aa.      Form of Executive Supplemental Retirement Agreement between
                   the Registrant and William J. Dieter dated January 1, 1996. *

(page 53)
          bb.      Employment Agreement made as of November 1, 1996
                   between William C. DeRusha and the Registrant. *

          cc.      Employment Agreement made as of November 1, 1996
                   between Troy A. Peery, Jr. and the Registrant. *

          dd.      The following Agreements filed as Exhibits 10 (ii) through 10
                   (kk) to the  Registrant's  Annual  Report  on Form  10-K  for
                   fiscal  year  ended  February  28,  1991  (No.   1-8484)  are
                   incorporated herein by this reference:

                   (1)       Employment Agreement dated April 10, 1991 between
                             Joseph R. Jenkins and the Registrant.*

                   (2)       Employment Agreement dated April 10, 1991 between
                             James C. Cerza, Jr. and the Registrant.*

                   (3)       Employment Agreement dated April 10, 1991 between
                             James R. Riddle and the Registrant.*

          ee.      Carve Out Life Insurance Plan filed as Exhibit 10(ff) to the
                   Registrant's Annual Report on Form 10-K for the fiscal year
                   ended February 28, 1993 (No. 1-8484) is incorporated herein
                   by this reference.*

          ff.      Amendment, dated as of August 18, 1993, to the Heilig-
                   Meyers Company Severance Plan filed as exhibit 10(hh) to the
                   Registrant's Annual Report on Form 10-K for the fiscal year
                   ended February 28, 1994 (No. 1-8484) is incorporated herein
                   by this reference.*

          gg.      1988 Deferred Compensation Agreement for Outside Directors
                   between George A. Thornton, III and the Registrant filed as
                   exhibit 10(ii) to the Registrant's Annual Report on Form 10-K
                   for the fiscal year ended February 28, 1994 (No. 1-8484) is
                   incorporated herein by this reference.*

          hh.      Amendment,  dated as of April 18,  1994,  to the 1986 Heilig-
                   Meyers Company  Deferred  Compensation  Agreement for Outside
                   Director  between George A. Thornton,  III and the Registrant
                   filed as exhibit 10(jj) to the Registrant's  Annual Report on
                   Form 10-K for the fiscal year ended February 28, 1994 (No. 1-
                   8484) is incorporated herein by this reference.*

          ii.      Amendment,  dated as of April 18,  1994,  to the 1990  Heilig
                   Meyers Company  Deferred  Compensation  Agreement for Outside
                   Director  between George A. Thornton,  III and the Registrant
                   filed as exhibit 10(kk) to the Registrant's  Annual Report on
                   Form 10-K for the fiscal year ended February 28, 1994 (No. 1-
                   8484) is incorporated herein by this reference.*

          jj.      Letter Agreement, dated August 26, 1993, amending employment
                   agreement between Joseph R. Jenkins and the Registrant filed
                   as exhibit 10(ll) to the Registrant's Annual Report on Form
                   10-K for the fiscal year ended February 28, 1994 (No. 1-8484)
                   is incorporated herein by this reference.*

          kk.      Letter Agreement, dated August 26, 1993, amending employment
                   agreement between James R. Riddle and the Registrant filed as
                   exhibit 10(mm) to the Registrant's Annual Report on Form 10-K
                   for the fiscal year ended February 28, 1994 (No. 1-8484) is
                   incorporated herein by this reference.*

          ll.      Letter Agreement, dated August 26, 1993, amending employment

(page 54)
                   agreement between James F. Cerza and the Registrant filed as
                   exhibit 10(nn) to the Registrant's Annual Report on Form 10-K
                   for the fiscal year ended February 28, 1994 (No. 1-8484) is
                   incorporated herein by this reference.*

          mm.      $400,000,000 Credit Agreement dated July 18, 1995 among
                   MacSaver Financial Services, Inc., as Borrower; the
                   Registrant, as Guarantor; and Wachovia Bank of Georgia, N.A.,
                   as Administrative Agent, as amended by the First Amendment
                   and Restatement of Credit Agreement dated May 14, 1996 filed
                   as exhibit 10 (pp) to the Registrant's Annual Report on Form
                   10-K for the fiscal year ended February 29, 1996 (No. 1-8484)
                   is incorporated herein by this reference.

          nn.      Rhodes, Inc. Employees' Savings Plan, filed with the
                   Commission as Exhibit 10.6 to Rhodes, Inc.'s Annual
                   Report on Form 10-K for the year ended February 28, 1986 (No.
                   0-08966) is incorporated herein by this reference.*

      oo.          Policy issued by Life Insurance Company of North America,
                   dated March 1, 1989 covering the Rhodes, Inc. Employee
                   Disability Plan, filed with the Commission as Exhibit 10.38
                   to Rhodes, Inc.'s Annual Report on Form 10-K for the year
                   ended February 28, 1991 (No. 0-08966) is incorporated herein
                   by this reference.*

      pp.          Form of Compensation (change in control) Agreement between
                   Irwin L. Lowenstein and Rhodes, Inc., filed with the
                   Commission as Exhibit 10.7 to Rhodes, Inc.'s Annual
                   Report on Form 10-K for the year ended February 28, 1995 (No.
                   1-09308) is incorporated herein by this reference.*

      qq.          Amended and Restated Merchant Agreement by and between
                   Beneficial National Bank USA, HMY RoomStore, Inc. and Rhodes,
                   Inc., dated as of May 9, 1997.

      rr.          Compensation Agreement entered into between Rhodes, Inc. and
                   Joel T. Lanham, filed with the Commission as Exhibit 10.10 to
                   Rhodes, Inc.'s. Annual Report on Form 10-K for the year
                   ended February 29, 1996 (No. 1-09308) is incorporated herein
                   by this reference.*

      ss.          Compensation Agreement entered into between Rhodes, Inc. and
                   Joel H. Dugan, filed with the Commission as Exhibit 10.11 to
                   Rhodes, Inc.'s Annual Report on Form 10-K for the year
                   ended February 29, 1996 (No. 1-09308) is incorporated herein
                   by this reference.*

(page 55)
11.                Computation of per share earnings for the fiscal years ended
                   February 28, (29), 1997, 1996 and 1995.


21.                Subsidiaries of Registrant.


23.                Consents of experts and counsel.

                   a.      Consent of Deloitte & Touche LLP to incorporation by
                           reference of Accountants' Reports into Registrant's
                           Registration Statements on Form S-8.

27.                Financial Data Schedule


*                  Management contract or compensatory plan or arrangement of
                   the Company required to be filed as an exhibit.


(page 56)