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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): APRIL 6, 1994
---------------
(APRIL 6, 1994)
AMES DEPARTMENT STORES, INC.
(Exact Name of Registrant As Specified In Its Charter)
DELAWARE
(State Or Other Jurisdiction Of Incorporation)
1-5380 04-2269444
(Commission File Number) (IRS Employer Identification No.)
2418 MAIN STREET; ROCKY HILL, CONNECTICUT 06067-0801
(Address Of Principal Executive Offices) (Zip Code)
(203) 257-2000
(Registrant's Telephone Number, Including Area Code)
NOT APPLICABLE
(Former Name Or Former Address, If Changed Since Last Report)
Exhibit Index on Page 6
Page 1 of 11 (Including Exhibits)
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ITEM 5: OTHER EVENTS
On April 5, 1994 Ames Department Stores, Inc. ("Ames" or the
"Company") publicly released its audited results of operations and
balance sheet for the fiscal year ended January 29, 1994 ("fiscal
1994"). Beginning on April 6, 1994, Ames will distribute, to certain
of its banks, potential lenders, principal trade vendors and factors,
summaries of its financial results for the four (unaudited) and
fifty-two weeks ended January 29, 1994 and for the four weeks ended
February 26, 1994 (unaudited). These monthly and year-to-date
results (collectively, the "monthly results") are attached hereto as
Exhibits 20-A and 20-B and are incorporated by reference herein. The
balance sheets as of January 29, 1994 and February 26, 1994 are
subject to possible debt reclassifications depending upon the status
of the Company's negotiations for new long-term financing prior to
the filing of its Form 10-K for fiscal 1994.
Compared with the projections contained in the Form 8-K dated April
5, 1993 (referred to herein as the "FY 94 Plan"), sales for the four
weeks ended January 29, 1994 were $18.1 million below FY 94 Plan and
EBITDA was $.5 million better than FY 94 Plan. EBITDA is defined as
earnings (loss) before interest, income taxes, LIFO expense or
credit, restructuring charges, bankruptcy expenses, depreciation and
amortization, and any non-cash extraordinary or unusual items. In
January, the major component of the sales shortfall was in softline
categories. January's sales were significantly impacted by severe
winter weather. The unfavorable impact from the lower-than-planned
sales on January's EBITDA was more than offset by a higher-than-
planned gross margin rate and lower-than-planned expenses. The gross
margin rate was above FY 94 Plan in January due primarily to lower-
than-planned clearance markdowns. In addition, in January,
advertising and store operating expenses were below FY 94 Plan.
Sales for the fifty-two weeks ended January 29, 1994 were $157.5
million below FY 94 Plan; however, EBITDA was $.5 million above FY 94
Plan. The fiscal 1994 sales shortfall against FY 94 Plan was
primarily due to the Company's de-emphasis of lower-margin hardline
categories, a weak apparel market and harsh winter weather during the
first and fourth quarters of the year. The unfavorable impact from
the sales shortfall on fiscal 1994's EBITDA was offset by lower-than-
planned expenses and a higher-than-planned gross margin rate
resulting primarily from the Company's emphasis on higher-margin
products in its merchandise mix and in its advertising and more
stringent inventory (and other operating) controls, which resulted
in, among other things, improved shrink results and lower clearance
markdowns compared to FY 94 Plan.
As a consequence of the adoption of fresh-start reporting (see below)
and Financial Accounting Standards No. 109 "Accounting for Income
Taxes," the Company recorded a non-cash income tax provision of $3.3
million for fiscal 1994 with an associated increase of $3.3 million
in additional paid-in capital. Ames currently expects to report the
tax benefits realized for tax purposes for cummulative temporary
differences, as well as for the net operating loss carryovers, as an
Page 2 of 11
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addition to paid-in capital rather than as a reduction in the tax
provision in future statements of operations. As a result, the
Company now currently anticipates that, assuming profitability, there
will be a tax provision for the fiscal year ending January 28, 1995
("fiscal 1995") at an effective rate similar to fiscal 1994.
However, the tax provision has no impact on the Company's EBITDA,
taxes payable, or cash flows. As a result of its significant carry-
forward tax benefits, Ames does not anticipate having to pay income
taxes for an extended period.
As of January 29, 1994, inventories were $4.7 million above FY 94
Plan due primarily to a planned LIFO reserve of $3.0 million that was
not needed. Trade payables were $14.3 million below FY 94 Plan due
primarily to the timing of trade payments. Outstanding
borrowings under the Company's revolving line of credit
as of January 29, 1994 were $15.4 million above FY 94 Plan due, in
part, to earlier-than-planned funding of standby letters of credit
and the timing of trade payments. The Company's cash balance at
January 29, 1994 was $19.3 million below FY 94 Plan due, in part, to
lower-than-planned total outstanding letters of credit (that must be
cash collateralized) and the timing of trade payments.
The Company met its consecutive 30-day "clean-up" requirement in
January and is in compliance with all debt covenants through fiscal
February.
As previously reported, on January 28, 1994, there was a partial roof
collapse at the Company's distribution center in Leesport, PA. The
collapse involved approximately 10,000 square feet of the total 1.2
million square feet in the facility. Subsequent to that date, there
were three additional partial collapses totalling approximately
30,000 square feet. The Leesport facility was closed for several
weeks. However, since March 24, 1994, the Company has been able to
access the inventory at Leesport. Repair work has begun and the
facility is currently expected to be partially operational by June
1994 and fully operational by October 1994. The Company obtained
temporary warehouse space within a short distance from Leesport and
has also been operating additional shifts at its other distribution
centers in Mansfield and Clinton, MA. The Company believes that
these steps will continue to provide an adequate supply of
merchandise to its stores in the immediately foreseeable future. In
addition, the Company expects to be reimbursed for its property
damages and for a substantial portion of any incremental expenses it
may incur in connection with this incident. At the present time, the
Company believes that the net financial effect from the Leesport
situation will not have a material impact on the Company's financial
position or results of operations.
Compared with the projections contained in the Form 8-K dated
February 17, 1994 (referred to herein as the "FY 95 Plan"), sales for
the four weeks ended February 26, 1994 were $3.6 million below FY 95
Plan; however, EBITDA was $1.8 million better than FY 95 Plan. In
February, the sales shortfall was entirely in hardlines. February
sales were affected by the persistently harsh winter weather and the
Page 3 of 11
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Leesport closing. The unfavorable impact from the lower-than-planned
sales on February's EBITDA was more than offset by lower-than-planned
expenses and the gain on sale of a store lease. Store operating,
field and home office expenses were all below FY 95 Plan in February.
As of February 26, 1994, inventories were $24.0 million below FY 95
Plan, principally in softline categories, due, in part, to a
temporary delay in the volume of shipments received as a result of
the Leesport closing. Trade payables were $33.3 million above FY 95
Plan due primarily to the timing of payments. Outstanding borrowing
under the Company's revolving line of credit were $61.5 million below
FY 95 Plan as of February 26, 1994 due, in part, to the above
factors. The Company's unrestricted cash balance at February 26,
1994 was $3.8 million below FY 95 Plan due, in part, to the fact that
the beginning balance was less than projected in the FY 95 Plan.
Ames is distributing the monthly results to its banks, potential
lenders, principal trade vendors and factors to facilitate their
credit analysis following the Company's emergence from bankruptcy.
The summary results SHOULD NOT BE RELIED UPON FOR ANY OTHER PURPOSE
and should be read in conjunction with the Company's Form 10-K for
the fiscal year ended January 30, 1993 ("fiscal 1993"), the Company's
most recent Form 10-Q for the third fiscal quarter ended October 30,
1993, the Company's Form 10-K to be filed for the fiscal year ended
January 29, 1994, the Company's Form 8-K dated April 5, 1993, and the
Company's Form 8-K dated February 17, 1994. The monthly results are
being reported publicly solely because they are being distributed to
a large number of the Company's vendors for purposes of their credit
analyses.
In accordance with the guidelines provided by the American Institute
of Certified Public Accountants in Statement of Position 90-7
"Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code," the Company adopted fresh-start reporting at
December 26, 1992, the effective date of the Chapter 11 plan of
reorganization for accounting purposes. Under fresh-start reporting,
the reorganization value of the Company upon its emergence from
Chapter 11 was allocated to its net assets on the basis of the
purchase method of accounting at December 26, 1992. Accordingly,
results for the fiscal year ended January 29, 1994, except for
January's monthly results, are not comparable in certain material
respects to such results for fiscal 1993. Management believes that
the presentation of EBITDA results in a more meaningful comparison
with fiscal 1993 due to the impact of fresh-start reporting on
depreciation, amortization and LIFO inventory.
During the pendency of its reorganization case, Ames disclosed
publicly its monthly results through filings with the Office of the
U.S. Bankruptcy Trustee. Although Ames expects to continue to make
its monthly results public for fiscal 1995, Ames does not believe it
is obligated to provide such information indefinitely, other than as
required by applicable regulations, and Ames may cease making such
Page 4 of 11
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disclosures and updates at any time. The monthly results were not
examined, reviewed or compiled by Ames' independent certified
accountants. Moreover, Ames does not believe that it is obligated to
update the monthly results to reflect subsequent events or
developments. The reported monthly results for February are subject
to future adjustments, if any, that could materially affect such
results. However, in the opinion of the Company, the monthly results
contain all adjustments (consisting of normal recurring adjustments
for February) necessary for a fair statement of the results for the
periods presented.
ITEM 7: FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
Exhibit: 20-A Financial Summary Results for the Four Weeks
(Unaudited) and Fifty-Two Weeks Ended January
29, 1994.
Exhibit: 20-B Unaudited Financial Summary Results for the Four
Weeks Ended February 26, 1994.
Page 5 of 11
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INDEX TO EXHIBITS
EXHIBIT NO. EXHIBIT PAGE NO.
20-A Financial Summary Results for the Four 8
Weeks (Unaudited) and Fifty-Two Weeks
Ended January 29, 1994.
20-B Unaudited Financial Summary Results for 10
the Four Weeks Ended February 26, 1994.
Page 6 of 11
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMES DEPARTMENT STORES, INC.
Registrant
Dated: April 5, 1994 By: /S/ PETER THORNER
Peter Thorner
President, Chief Operating
Officer and Director
Dated: April 5, 1994 By: /S/ WILLIAM C. NAJDECKI
William C. Najdecki
Senior Vice President,
Chief Accounting Officer
Page 7 of 11
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AMES DEPARTMENT STORES, INC. Exhibit 20-A
JANUARY RESULTS VS. PLAN Page 1 of 2
MANAGEMENT FORMAT
(Unaudited)
(In Millions)
<CAPTION>
January 1994 Total Fiscal Year 1994
Actual Plan* Last Yr** Actual Plan* Last Yr**
<S> <C> <C> <C> <C> <C> <C>
INCOME SUMMARY:
Net Sales $97.0 $115.1 $142.3 $2,123.5 $2,281.0 $2,206.2
FIFO Margin $ 20.2 22.6 22.0 571.8 590.1 552.2
Margin % 20.8% 19.6% 15.4% 26.9% 25.9% 25.0%
Total Expenses 36.9 40.3 44.3 533.5 554.1 585.1
Gain on Sale of Properties - - - 1.3 - -
--------------------------------------------------
EBIT (16.7) (17.7) (22.3) 39.6 36.0 (32.9)
Interest (Expense) Income, net (1.8) (1.7) (1.6) (26.4) (29.2) (0.3)
Chapter 11 Expenses - - - - - (25.5)
Restructuring Charges - - - - - (88.5)
Fresh-Start Revaluation Charge - - - - - (391.2)
Non-Cash Extraordinary Gain - - - 0.9 - 1,249.3
Income Tax Expense*** (3.3) - - (3.3) (0.3) -
--------------------------------------------------
Net Profit (Loss) ($21.8)($19.4) ($23.9) $10.8 $6.5 $710.9
==================================================
Depr. & Amort. and LIFO, net 0.7 0.2 0.7 5.5 2.4 (36.8)
--------------------------------------------------
EBITDA ($17.4)($17.9) ($23.0) $34.1 $33.6 $3.9
==================================================
BALANCE SHEET SUMMARY: Balance at
end of Period
Actual Plan
------------------
Cash and Cash Equivalents $72.4 $91.7
Merchandise Inventories, LIFO 442.2 437.5
Other Current Assets 28.8 32.5
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Total Current Assets 543.4 561.7
Net Fixed Assets 21.6 29.3
Other Assets 2.1 -
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Total Assets $567.1 $591.0
==================
Trade Accounts Payable $74.1 $88.4
Short-Term Debt (Revolver) 15.4 -
Other Current Liabilities 165.3 201.0
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Total Current Liabilities 254.8 289.4
Long-Term Debt 119.1 123.0
Other Long-Term Liabs. & Excess Reval. Net Assets 132.8 125.7
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Total Liabilities & Excess Reval. Net Assets 506.7 538.1
Paid-In-Capital 73.5 70.3
Retained Earnings (Deficit) (13.1) (17.4)
------------------
Total Liabilities & Equity $567.1 $591.0
==================
<FN>
* As reported on Form 8-K dated April 5, 1993.
** Last year's (fiscal 1993) income summary is revised for 309 stores.
Also, gross margin excludes depreciation for comparability. Last
year's fiscal January and year included one additional week
compared to this fiscal January and fiscal 1994.
*** Income tax expense is not payable in cash but rather is recorded
as an addition to paid-in capital.
NOTE: EBIT is earnings (loss) before interest, Ch. 11 expenses, restruc. chgs.,
income taxes, and any non-cash extraordinary items. EBITDA is EBIT before
depreciation & amortization, LIFO expense or credit, and any non-cash
unusual charges and gains.
Page 8 of 11
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AMES DEPARTMENT STORES, INC. Exhibit 20-A
JANUARY RESULTS VS. PLAN Page 2 of 2
MANAGEMENT FORMAT
(Unaudited)
(In Millions)
<CAPTION>
Total Fiscal
January 1994 Year 1994
Actual Plan* Actual Plan*
<S> <C> <C> <C> <C>
CASH FLOW SUMMARY:
Beginning Cash & Cash Equivalents $111.0 $108.0 $115.5 $115.5
Cash Generated from (Used in) Operations:
Net Profit (Loss) (21.8) (19.4) 10.8 6.5
Other 2.3 0.5 0.4 3.7
------------------------------------
Cash from Operations (19.5) (18.9) 11.2 10.2
Changes in Working Capital:
FIFO Inventory (increase) decrease (16.7) (1.2) 22.4 24.1
Trade Payables increase (decrease) 3.5 14.0 10.8 25.1
All Other (17.6) (9.2) (39.0) (13.8)
------------------------------------
Net Changes in Working Capital (30.8) 3.6 (5.8) 35.4
Capital Spending (1.3) (0.8) (20.2) (28.6)
Other:
Short-Term Borrowings (Payments) 15.4 0.0 (7.6) (23.0)
Payment of Capital Leases (0.3) (0.3) (3.5) (3.4)
Payments on Long-Term Debt (0.2) (1.4) (25.1) (23.5)
Restructuring & Other (1.9) 1.5 7.9 9.1
------------------------------------
Total Other 13.0 (0.2) (28.3) (40.8)
------------------------------------
Cash Increase (Decrease) (38.6) (16.3) (43.1) (23.8)
------------------------------------
Ending Cash & Cash Equivalents $72.4 $91.7 $72.4 $91.7
====================================
<FN>
* As reported on Form 8-K dated April 5, 1993.
Page 9 of 11
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AMES DEPARTMENT STORES, INC. Exhibit 20-B
FEBRUARY RESULTS VS. PLAN Page 1 of 2
MANAGEMENT FORMAT
(Unaudited)
(In Millions)
<CAPTION>
Feb. and Year-to-Date FY9
Actual Plan* Last Yr**
<S> <C> <C> <C>
INCOME SUMMARY:
Net Sales $121.5 $125.1 $124.0
FIFO Margin $ 29.6 30.9 31.6
Margin % 24.3% 24.7% 25.5%
Total Expenses 39.4 41.2 39.4
Gain on Sale of Lease 1.1 - -
---------------------------
EBIT (8.7) (10.3) (7.8)
Interest (Expense) Income, net (1.8) (1.9) (1.5)
Income Tax Expense - - -
---------------------------
Net Profit (Loss) ($10.5) ($12.2) ($9.3)
===========================
Depr. & Amort. and LIFO, net - 0.2 0.3
---------------------------
EBITDA ($8.7) ($10.5) ($8.1)
===========================
BALANCE SHEET SUMMARY: Balance at
end of Period
Actual Plan
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Unrestricted Cash and Cash Equivalents $24.7 $28.5
Restricted Cash and Cash Equivalents 53.4 61.0
Merchandise Inventories, LIFO 467.6 491.6
Other Current Assets 28.4 32.7
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Total Current Assets 574.1 613.8
Net Fixed Assets 21.4 27.3
Other Assets 1.9 -
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Total Assets $597.4 $641.1
==================
Trade Accounts Payable $105.0 $71.7
Short-Term Debt (Revolver) 33.5 95.0
Other Current Liabilities 198.8 187.4
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Total Current Liabilities 337.3 354.1
Long-Term Debt 78.2 110.9
Fresh-Start Excess Net Assets (Negative Goodwill) 54.3 54.3
Unfavorable Lease Liability 24.9 24.9
Other Long-Term Liabilities 52.8 51.3
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Total Liabilities & Negative Goodwill 547.5 595.5
Paid-In-Capital 73.5 70.1
Retained Earnings (Deficit) (23.6) (24.5)
------------------
Total Liabilities & Equity $597.4 $641.1
==================
<FN>
* As reported on Form 8-K dated February 17, 1994.
** Last year's (fiscal 1994) income summary is revised for 307 stores.
NOTE: EBIT is earnings (loss) before interest, income taxes,
and any non-cash extraordinary items. EBITDA is EBIT before
depreciation & amortization, LIFO expense or credit, and any non-cash
unusual charges and gains.
Page 10 of 11
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AMES DEPARTMENT STORES, INC. Exhibit 20-B
FEBRUARY RESULTS VS. PLAN Page 2 of 2
MANAGEMENT FORMAT
(Unaudited)
(In Millions)
<CAPTION> February
and Year-to-
Date FY '95
Actual Plan*
<S> <C> <C>
CASH FLOW SUMMARY:
Beginning Unrestricted Cash & Cash Equivalents $16.5 $26.9
Cash Generated from (Used in) Operations:
Net Loss (10.5) (12.2)
Other (0.8) 0.2
------------------
Cash from Operations (11.3) (12.0)
Changes in Working Capital:
FIFO Inventory (increase) decrease (25.5) (51.1)
Trade Payables increase (decrease) 30.9 (3.2)
All Other 1.9 5.8
------------------
Net Changes in Working Capital 7.3 (48.5)
Capital Spending (0.1) (1.7)
(Increase) Decrease in Restricted Cash & Cash Equivalents 2.5 (2.8)
Other:
Short-Term Borrowings (Payments) under the Revolver 18.1 75.0
Payments of Capital Leases (0.3) (0.3)
Payments on Long-Term Debt (8.4) (8.4)
Restructuring & Other 0.4 0.3
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Total Other 9.8 66.6
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Unrestricted Cash Increase (Decrease) 8.2 1.6
------------------
Ending Unrestricted Cash & Cash Equivalents $24.7 $28.5
==================
<FN>
* As reported on Form 8-K dated February 17, 1994.
Page 11 of 11
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