<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended APRIL 30, 1994
------------------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
--------------- --------------
AMES DEPARTMENT STORES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 04-2269444
- - ------------------------------- ----------------------
State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2418 MAIN STREET, ROCKY HILL, CONNECTICUT 06067
- - ----------------------------------------- --------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (203) 257-2000
--------------
NONE
- - -------------------------------------------------------------------
Former name, former address and former fiscal year if changed since
last report
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 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 such filing requirements for
the past 90 days.
YES X NO
----- -----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the
registrant has filed all documents and reports required to be filed
by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934
subsequent to the distribution of securities under a plan confirmed
by a court.
YES X NO
----- -----
17,727,787 shares of Common Stock and 2,399,482 shares of
Priority Common Stock were outstanding on June 1, 1994.
Exhibit Index on page 15
Page 1 of 17 (including exhibit)
<PAGE>
<PAGE>
<TABLE>
AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTER ENDED APRIL 30, 1994
I N D E X
----------
<CAPTION>
<S> <C> <C> <C>
Page
Part I: Financial Information
Consolidated Condensed Statements of Operations 3
for the Quarters Ended April 30, 1994 and
May 1, 1993
Consolidated Condensed Balance Sheets at 4
April 30, 1994, January 29, 1994 and
May 1, 1993
Consolidated Condensed Statements of Cash Flows 5
for the Quarters Ended April 30, 1994 and
May 1, 1993
Notes to Consolidated Condensed Financial Statements 6
Management's Discussion and Analysis of Financial 11
Condition and Results of Operations
Part II: Other Information
Submission of Matters to a Vote of Security Holders 15
and Exhibits and Reports on Form 8-K
</TABLE>
<PAGE>
<PAGE>
<TABLE>
PART I
FINANCIAL INFORMATION
AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Amounts)
(Unaudited)
<CAPTION>
For the
First Quarter Ended
April 30, May 1,
1994 1993
----------- -----------
<S> <C> <C>
TOTAL SALES $456,153 $454,992
Less: Leased department sales 20,398 20,231
----------- -----------
NET SALES 435,755 434,761
Cost of goods sold and transportation expenses 321,657 316,616
----------- -----------
GROSS PROFIT 114,098 118,145
Leased department income 3,672 3,642
Other operating income 2,550 2,393
----------- -----------
120,320 124,180
Store operating, administrative and general
expenses, including leased department expenses 136,911 137,001
Depreciation and amortization expense 939 118
Amortization of the excess of revalued net assets
over equity under fresh-start reporting (1,538) (1,539)
----------- -----------
LOSS FROM OPERATIONS (15,992) (11,400)
Interest and debt expense (6,398) (7,168)
Interest income 441 576
Gain on insurance settlement 687 -
Gain on sale of a store lease 1115 -
----------- -----------
LOSS BEFORE INCOME TAXES AND EXTRAORDINARY ITEM (20,147) (17,992)
Income tax benefit 6,523 -
----------- -----------
LOSS BEFORE EXTRAORDINARY ITEM (13,624) (17,992)
Extraordinary item - loss on early extinguishment
of debt (net of tax benefit of $727) (1,517) -
----------- -----------
NET LOSS ($15,141) ($17,992)
=========== ===========
<PAGE>
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 20,127 20,000
=========== ===========
LOSS PER SHARE BEFORE EXTRAORDINARY LOSS ($0.68) ($0.90)
EXTRAORDINARY LOSS (0.07) -
----------- -----------
NET LOSS PER SHARE ($0.75) ($0.90)
=========== ===========
<FN>
(The accompanying notes are an integral part of these condensed financial
statements.)
</TABLE>
<PAGE>
<PAGE>
<TABLE>
AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In Thousands)
(Unaudited)
<CAPTION>
April 30, January 29, May 1,
1994 1994 1993
ASSETS ------------------------------------
<S> <C> <C> <C>
Current Assets:
Unrestricted cash and short-term investments $24,362 $16,465 $37,866
Restricted cash and short-term investments 56,578 55,980 68,873
------------------------------------
Total cash and short-term investments 80,940 72,445 106,739
Receivables 25,458 18,703 23,316
Merchandise inventories 506,841 442,198 515,395
Prepaid expenses and other current assets 12,120 10,130 9,247
Net assets held for disposition - - 1,840
------------------------------------
Total current assets 625,359 543,476 656,537
Fixed assets 25,766 23,686 6,890
Less - Accumulated depreciation and amortization (3,081) (2,098) (130)
------------------------------------
Net fixed assets 22,685 21,588 6,760
Other assets and deferred charges 1,155 2,067 -
------------------------------------
$649,199 $567,131 $663,297
====================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable:
Trade $110,276 $74,091 $71,316
Other 44,692 36,045 42,040
------------------------------------
Total accounts payable 154,968 110,136 113,356
Note payable - revolver 88,498 15,360 98,946
Current portion of long-term debt and capital lease obligations 52,488 18,609 19,972
Long-term debt classified as current (Note 5) 34,844 67,702 -
Self-insurance reserve 49,585 48,433 54,961
Accrued expenses and other current liabilities 52,965 55,276 66,702
Restructuring reserve 4,986 6,992 18,948
------------------------------------
Total current liabilities 438,334 322,508 372,885
Excess of revalued net assets over equity under fresh-start reporting 53,248 54,786 57,688
Long-term debt and capital lease obligations 84,101 93,309 167,445
Unfavorable lease liability 24,548 25,072 26,664
Other long-term liabilities 10,949 11,046 10,499
Commitments and contingencies
<PAGE>
Stockholders' Equity:
Priority common stock 26 38 51
Common stock 175 163 149
Additional paid-in capital 66,028 73,278 69,800
Accumulated deficit (28,210) (13,069) (41,884)
------------------------------------
Total stockholders' equity 38,019 60,410 28,116
------------------------------------
$649,199 $567,131 $663,297
====================================
<FN>
(The accompanying notes are an integral part of these condensed balance sheets.)
</TABLE>
<PAGE>
<PAGE>
<PAGE>
<TABLE>
AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<CAPTION>
For the
First Quarter Ended
April 30, May 1,
1994 1993
----------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss ($15,141) ($17,992)
Adjustments to reconcile net loss to net cash
used for operating activities:
Extraordinary loss on early extinguishment of debt 1,517 -
Income tax benefit (6,523) -
Gain on insurance settlement (687) -
Gain on sale of a store lease (1,115) -
Depreciation and amortization of fixed assets 985 126
Amortization of deferred financing costs 573 13
Amort. of the excess of revalued net assets over equity (1,538) (1,539)
Amort. of debt discounts and unfavorable leases, net 261 866
(Increase) decrease in accounts receivable (7,266) 871
(Increase) in merchandise inventories (64,643) (50,839)
Increase in accounts payable 44,832 8,157
(Decrease) in accrued expenses and other current liabs. (1,388) (19,755)
(Increase) in other working capital and other, net (2,004) (1,490)
----------- ------------
Cash used for operations before restructuring items (52,137) (81,582)
Changes due to restructuring activities:
Payments of restructuring costs (1,784) (18,428)
----------- ------------
Net cash used for operating activities (53,921) (100,010)
----------- ------------
Cash flows from investing activities:
Proceeds from the sale of assets held for disposition 20 35,811
Proceeds from insurance sett. and sale of a store lease 2,348 -
Purchases of fixed assets (2,208) (3,402)
(Increase) decrease in restricted cash (598) 14,794
----------- ------------
Net cash provided by (used in) investing activities (438) 47,203
----------- ------------
Cash flows from financing activities:
Payments of debt and capital lease obligations (10,094) (17,168)
Short-term borrowings under the revolver 78,294 78,840
Payments on the revolver (5,156) (2,854)
Increase in deferred financing costs (788) -
----------- ------------
Net cash provided by financing activities 62,256 58,818
----------- ------------
Increase in unrestricted cash and short-term investments 7,897 6,011
Unrestricted cash and short-term invest., beg. of period 16,465 31,855
----------- ------------
Unrestricted cash and short-term invest., end of period $24,362 $37,866
=========== ============
<PAGE>
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest and debt fees $3,269 $4,722
Income taxes 6 18
<FN>
(The accompanying notes are an integral part of these condensed financial
statements.)
</TABLE>
<PAGE>
<PAGE>
AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION:
---------------------
In the opinion of management, the accompanying unaudited
consolidated condensed financial statements of Ames Department
Stores, Inc. (a Delaware Corporation) and subsidiaries
(collectively "Ames" or the "Company") contain all adjustments
(consisting of normal recurring adjustments) necessary for a fair
presentation of such financial statements for the interim
periods. Due to the seasonality of the Company's operations, the
results of its operations for the interim period ended April 30,
1994 may not be indicative of total results for the full year.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted
pursuant to the rules and regulations promulgated by the
Securities and Exchange Commission. Certain prior year amounts
have been reclassified to conform to the presentation used for
the current year. The consolidated condensed balance sheet at
January 29, 1994 was taken from audited financial statements
previously filed with the Commission in the Company's latest Form
10-K. The accompanying unaudited consolidated condensed
financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's
latest Form 10-K.
2. EARNINGS PER COMMON SHARE:
-------------------------
Earnings per share was determined using the weighted average
number of shares of common stock outstanding. There were no
exercises of warrants during the quarter ended April 30, 1994.
Common stock equivalents and fully diluted earnings per share
were excluded as their inclusion would have reduced the reported
loss per share.
3. CASH AND SHORT-TERM INVESTMENTS:
-------------------------------
As of April 30, 1994, January 29, 1994, and May, 1, 1993,
approximately $55.6, $55.0 and $62.5 million, respectively, was
placed for collateral pledge and consignment with Republic
National Bank of New York as a condition precedent to the
issuance of letters of credit under the Letter of Credit Facility
(Note 5). This cash collateral is included in "Restricted cash
and short-term investments." The amounts of cash collateral will
change as the balances outstanding under the Letter of Credit
Facility change, since the cash collateral must equal 105% of the
Company's outstanding letters of credit, including expected
<PAGE>
<PAGE>
future increases to stand-by letters of credit to cover expected
workers' compensation claims. Ames earns interest on invested
cash collateral. The New Facility (Note 5), which is expected to
become effective in June, 1994, does not require cash
collateralization of letters of credit, except in limited
instances as described in the New Facility.
In addition, as of April 30, 1994, January 29, 1994, and May 1,
1993, Ames restricted approximately $1.0, $1.0 and $6.4
million of cash and short-term investments, respectively, for
expected payments of certain remaining administrative and
priority claims under the Company's plan of reorganization. This
amount is also included in "Restricted cash and short-term
investments." Management believes that the remaining segregated
funds are adequate to cover all related payments. Ames earns
interest on invested segregated funds.
4. INVENTORIES:
-----------
Ames values substantially all of its inventories at the
lower of cost or market. Cost is determined by the retail
last-in, first-out (LIFO) cost method for all merchandise
inventories. If the first-in, first-out (FIFO) cost method had
been used, inventories would have increased by $.2 and $.8
million at April 30, 1994 and May 1, 1993, respectively. No LIFO
reserve was necessary at January 29, 1994.
5. DEBT:
----
On April 28, 1994, the Company entered into an agreement
with BankAmerica Business Credit, Inc., as agent, and a syndicate
consisting of seven other banks and financial institutions, for a
secured revolving credit facility of up to $300 million (the "New
Facility"). The New Facility has a sublimit of $100 million for
letters of credit. Management believes that the New Facility
contains terms, covenants and interest rates that are generally
more favorable than those in the current Credit Agreement (see
below) and Letter of Credit Facility (see below). The New
Facility expires on the third anniversary from the initial
Advance (as defined in the New Facility). The New Facility is
secured by substantially all of the assets of the Company and
requires the Company to meet certain quarterly financial
covenants.
The amount of borrowing under the New Facility shall not
exceed the sum of (i) an amount equal to 55% of Eligible
Inventory (as defined in the New Facility) not covered by any
outstanding Merchandise Letter of Credit (as defined in the New
Facility) plus (ii) an amount equal to 50% of Eligible Inventory
covered by any outstanding Merchandise Letter of Credit less the
net Reinstated Debt Reserve (as defined in the New Facility), and
the potential establishment of other reserves contingent upon the
<PAGE>
<PAGE>
Company's financial performance. In addition, each Agent
reserves the right in good faith, based upon such collateral
consideration as such Agent may in its sole discretion deem
necessary or appropriate to adjust the Borrowing Base (as defined
in the New Facility) by establishing reserves, making
determinations of Eligible Inventory, revising standards of
eligibility or decreasing from time to time the percentages set
forth above. Reference can be made to the Company's latest Form
10-K for further descriptions of the New Facility and the
obligations summarized below, and for descriptions of the
Company's other obligations not discussed herein.
The Company will use the funds that will no longer be
restricted for the collateralization of letters of credit (Note
3), and funds from the New Facility, to prepay the Series A, B
and D Notes, the $1.2 million term note, and the outstanding
borrowings under the Credit Agreement. Funding under the New
Facility is expected to occur on or about June 22, 1994. As a
result of the refinancing and associated commitment to prepay the
above debt, Ames recorded a non-cash extraordinary charge of
approximately $1.5 million, net of tax benefit of approximately
$.7 million, in the quarter ended April 30, 1994, primarily for
the write-off of deferred financing costs and debt discounts
related to the debt to be prepaid. In addition, as of April 30,
1994 and January 29, 1994, approximately $34.8 and $67.7 million,
respectively, represents the portion of long-term debt that will
be prepaid and that has been classified as "Long-term debt
classified as current." The change in this amount from January
29, 1994 represents the term note portion ($32.9 million) of the
8% Senior Secured Notes (the "Series D Notes") that became
current as of February, 1994.
Upon consummation of the plan of reorganization on December
30, 1992, Ames obtained $210 million of post-emergence financing.
Of this amount, $175.9 million is in the form of a revolving
credit facility (the "Revolver") and $1.2 million is in the form
of a two-year term note. Citibank is the agent in the
post-Chapter 11 credit agreement (the "Credit Agreement"-see
below) which combines the $175.9 million Revolver and the $1.2
million term note. The balance of the post-emergence financing
($32.9 million) represents the two-year portion of the Series D
Notes issued under an indenture with Fleet Bank as indenture
trustee.
Upon consummation of the plan of reorganization, the Company
also entered into a one-year $90 million letter of credit
facility with Republic National Bank of New York (the "Letter of
Credit Facility"-see below). In September, 1993, the Letter of
Credit Facility was increased to $120 million and extended to
November 28, 1994.
<PAGE>
<PAGE>
CREDIT AGREEMENT
The Credit Agreement is between Ames and Citibank, as agent,
and a syndicate consisting of other banks and financial
institutions. For the first quarter ended April 30, 1994, the
weighted average interest rate on the Revolver was approximately
8.8%. Approximately $88.5, $15.4 and $98.9 million was
outstanding under the Revolver at April 30, 1994, January 29,
1994 and May 1, 1993, respectively. The maximum amount borrowed
under the Revolver in the first quarter ended April 30, 1994 was
approximately $93.7 million.
The Credit Agreement contains certain financial and
operating covenants including current ratio; the maintenance of
certain inventory levels; maximum capital expenditures; minimum
interest and fixed charge coverages; and minimum earnings before
interest, taxes, depreciation and amortization, LIFO expense or
credit, and any non-cash extraordinary or unusual items
("EBITDA"). The EBITDA covenant was calculated cumulatively from
December 1992 forward, until December 1993 when it converted to a
"rolling 12-month" calculation. Ames is in compliance with all
debt covenants through the latest completed fiscal period (May
1994).
LETTER OF CREDIT FACILITY
The $120 million Letter of Credit Facility with Republic
National Bank of New York has sublimits of $60 million for trade
letters of credit and $60 million for standby letters of credit.
As of April 30, 1994, January 29, 1994 and May 1, 1993
approximately $11.9, $11.3 and $17.6 million and $41.0, $35.6 and
$39.3 million was outstanding in trade and stand-by letters of
credit, respectively. All letters of credit outstanding under
the Letter of Credit Facility must be cash collateralized at 105%
from the date of issuance.
DEFERRED CASH DISTRIBUTIONS
The plan of reorganization provided that approximately $46.5
million of cash distributions in respect to several classes of
claims would be paid subsequent to the consummation date.
Approximately $15.0 and $8.0 million of these deferred cash
distributions were paid as scheduled on January 31, 1993 and
January 31, 1994, respectively, and the remaining unsecured
amounts are due as follows, with interest beginning February 1,
1994 at 5% per annum: $8.0 million due at January 31, 1995 and
January 31, 1996; and $7.5 million due at January 31, 1997.
<PAGE>
<PAGE>
6. INCOME TAXES:
------------
The Company's estimated annual effective income tax rate was
applied to the loss incurred before income taxes and
extraordinary item for the first quarter ended April 30, 1994 to
compute an income tax benefit, and related decrease to paid-in
capital, of approximately $6.5 million for the period. The same
rate was applied to the extraordinary loss to compute an income
tax benefit, and associated decrease to paid-in capital, of
approximately $.7 million for the extraordinary item. The
Company currently expects that these benefits will be offset by
income tax expense, and associated increase to paid-in capital,
in later interim periods. Reference should be made to the
Company's latest Form 10-K for discussion of other income tax
issues affecting Ames.
7. LITIGATION:
----------
Reference can be made to the Company's latest Form 10-K
(Note 12 to the Consolidated Financial Statements) for various
litigation involving Ames, for which there were no material
changes since the filing date of the Form 10-K. The closing on
the Wertheim Settlement Agreement took place on June 9, 1994 and
at the closing the Company received $12 million of the total
settlement amount. The Class AG-6A Trust received $7 million of
the total settlement amount.
8. RESTRUCTURING:
-------------
As part of its restructuring prior to emergence from Chapter
11 Reorganization, the Company announced on October 30, 1992 that
it would close 60 discount stores and the three remaining
freestanding Crafts & More stores in early fiscal year 1994. All of
these stores were closed as planned in March, 1993. Certain
distribution centers/warehouses also were closed and office
facilities were further consolidated.
Restructuring costs represent losses from store operations
from the date of announcement until closing, employee payroll and
severance costs, losses on liquidation of inventories, and other
related restructuring costs. Net assets held for disposition are
recorded net of anticipated costs associated with the sale of
such assets. Such assets, other than merchandise inventories,
are sold as market conditions permit.
Prior to the start of fiscal year 1994, the Company entered
into an agreement (the "60-Store Agency Agreement") with an agent
to assist the Company with the merchandise inventory "Going-out-
of-Business" (GOB) sales at the 60 discount stores and three
<PAGE>
<PAGE>
Crafts & More stores. The GOB sales commenced following the physical
inventories that were taken in January 1993. The GOB sales were
completed in March 1993 and the Company realized approximately
$46 million in cash for the merchandise inventory after payment
of all direct GOB expenses as defined in the 60-Store Agency
Agreement. This represented approximately 52% of the beginning
GOB retail inventory value at the closed stores. Other cash
expenses (accrued prior to fiscal year 1994) were incurred from
these store closings and GOB sales.
<PAGE>
<PAGE>
<TABLE>
AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
FISCAL QUARTER ENDED APRIL 30, 1994
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
<CAPTION>
Results of Operations
The following table sets forth the number of stores in operation as of the dates indicated:
Number of Stores in Operation
April 30, January 29, May 1,
1994 1994 1993
--------- ----------- -----------
306 308 309
The following discussion and analysis is based on the historical results of operations for the first
quarters ended April 30, 1994 and May 1, 1993. Two stores were closed during the first quarter
ended April 30, 1994. The Company's Mt. Pocono, PA store, which was destroyed by fire subsequent to
last year's first quarter, is being rebuilt by the landlord and is scheduled to be reopened by the
Company later this year. One additional store is in the process of closing at this time.
The following table sets forth the historical operating results expressed as a percentage of net
sales for the periods indicated:
First
Quarter Ended
April 30, May 1,
1994 1993
------- --------
<S> <C> <C>
Net sales 100.0 % 100.0%
Cost of goods sold and transportation expenses 73.8 72.8
------- -------
Gross Profit 26.2 27.2
Leased department and other operating income 1.4 1.4
------- -------
27.6 28.6
Store operating, administrative and general
expenses, including leased dept. expenses 31.4 31.5
Depreciation and amortization expense 0.2 -
Amortization of the excess of revalued net
assets over equity (0.3) (0.3)
------- -------
Loss from Operations (3.7) (2.6)
<PAGE>
Interest and debt expense (1.5) (1.6)
Interest income 0.1 0.1
Gain on insurance settlement 0.2 -
Gain on sale of a store lease 0.3 -
------- -------
Loss before Income Taxes and Extraordinary Item (4.6) (4.1)
Income tax benefit 1.5 -
------- -------
Loss before Extraordinary Item (3.1) (4.1)
Extraordinary loss, net of tax benefit (0.4) -
------- -------
Net Loss (3.5)% (4.1)%
======= =======
</TABLE>
<PAGE>
<PAGE>
<PAGE>
Total sales (which include leased department sales) for the
quarter ended April 30, 1994 increased $1.2 million or 0.3% from
the prior year's first quarter. Net sales for the same period
increased $1.0 million or 0.2% from the prior year. These
increases were due to an increase of 0.7% in comparable store
sales on a 306-store base and an increase of 1.5% in comparable
leased department (shoe) sales, partially offset by the sales
loss from three fewer stores during this year's first quarter.
The major causes for the increase in comparable store sales were
increases from remodeled stores, expansions of certain specialty
departments, and additional circular advertising, partially
offset by the Company's continued de-emphasis of several
lower-margin hardline categories, certain merchandise shortages
due to the temporary closing of the Company's Leesport, PA
distribution center, and increased discount store competition.
Gross profit decreased $4.0 million, or 1.0% as a percentage
of net sales, compared to the prior year's first quarter. The
decrease in gross profit dollars was primarily due to the lower
gross profit rate that was principally the result of higher
advertising markdowns in apparel and a decrease of $1.5 million
in purchase discounts. These factors were partially offset by an
improved markup on the mix of sales and lower inventory shrink
expense. The Company will continue to emphasize higher-margin
products in its advertising and will be expanding the
installation of successful specialty departments, such as Party
Plaza and Pawsitively Pets, within the stores.
Leased department and other operating income for the quarter
ended April 30, 1994 remained approximately the same compared to
the prior year period.
Store operating, administrative and general expenses,
including leased department expenses, also remained approximately
the same for the first quarter compared to the prior year period.
Declines in home office and field support expenses were mostly
offset by increases in store payroll and advertising expenses.
Home Office expenses were lower than the prior year's first
quarter despite an expense of approximately $2.0 million in this
year's period for stock appreciation rights (SARs). The SARs
expense, which included an accrual of $1.5 million for the value
of unexercised SARs as of April 30, 1994, resulted from the
market price of the Company's common stock as reported on NASDAQ
rising above the exercise price of the SARs.
Depreciation and amortization increased $.9 million, or 0.2%
as a percentage of net sales, in the first quarter compared to
the prior year period. The adoption of fresh-start reporting as
of December 26, 1992 resulted in the write-off of all of the
Company's non-current assets at that date, and therefore
depreciation and amortization expense (as presented in both
periods) is for post-Chapter 11 capital additions only.
<PAGE>
<PAGE>
The amortization of the excess of revalued net assets over
equity under fresh-start reporting resulted in credits of $1.5
million to both year's first quarter operating results. The
Company is using a ten-year life for the period of amortization.
Interest and debt expense declined $.8 million, or 0.1% of
net sales, for the first quarter compared to the prior year
period. The Company had an average of $57.4 million in
outstanding debt during this year's first quarter under the
Revolver (Note 5) and paid approximately $.1 million in
commitment fees under the Credit Agreement. This compares to
average borrowings of $59.0 million under the Revolver during the
prior year's first quarter and approximately $1.0 million in
usage and commitment fees paid under the Credit Agreement. As a
result of the partial roof collapse at the Company's Leesport, PA
distribution center and the temporary closing of the facility,
the Company incurred incremental borrowings of approximately $10
million in this year's first quarter to replace certain
inventories.
Interest income declined $.1 million for the first quarter
compared to the prior year period. This decline was due to a
lower average restricted cash balance.
The Company's estimated annual effective income tax rate was
applied to the loss incurred before income taxes and
extraordinary item for this year's first quarter to compute an
income tax benefit (and associated reduction to paid-in capital)
of approximately $6.5 million. This benefit was recorded because
the Company currently expects that there will be offsetting
income tax expense (and associated increase to paid-in capital)
in later interim periods.
In February, 1994, the Company sold its interest in a store
lease, which was an operating property until closed in February,
for approximately $1.2 million in cash proceeds and recognized a
gain of approximately $1.1 million. In addition, in March, 1994,
the Company received approximately $1.2 million in cash proceeds
for the settlement of the inventory portion of its property
insurance claim for the Mt. Pocono store (see above) and
recognized a gain of approximately $.7 million. This gain
represents the amount of the insurance proceeds that exceeded the
inventory carrying cost (which was included in accounts
receivable).
As a result of the refinancing (Note 5) and associated
commitment to prepay certain debt, the Company recorded a
non-cash extraordinary charge of approximately $1.5 million, net
of tax benefit of approximately $.7 million, in this year's first
quarter. The charge was primarily for the write-off of deferred
financing costs and debt discounts related to the debt to be
prepaid.
<PAGE>
<PAGE>
Compared with the projections for the first quarter of
fiscal year 1995 contained in the Form 8-K filed on May 27, 1994
(referred to herein as the "Plan"), sales for the first quarter
were $.4 million below Plan; however, EBITDA (earnings before
interest, income taxes, LIFO expense, SARs accruals,
extraordinary or non-recurring items, depreciation and
amortization, and other non-cash charges) was $1.4 million better
than Plan. The favorable EBITDA variance for the first quarter
was due to lower-than-planned expenses, partially offset by
lower-than-planned gross margin.
LIQUIDITY AND CAPITAL RESOURCES
--------------------------------
On April 28, 1994, the Company entered into an agreement
with BankAmerica Business Credit, Inc., as agent, and a syndicate
consisting of seven other banks and financial institutions, for a
secured revolving credit facility of up to $300 million (the "New
Facility"). The New Facility has a sublimit of $100 million for
letters of credit. Management believes that the New Facility
contains terms, covenants and interest rates that are generally
more favorable than those in the current Credit Agreement (Note
5) and Letter of Credit Facility (Note 5). The New Facility
expires on the third anniversary from the initial Advance (as
defined in the New Facility). Reference can be made to the
Company's latest Form 10-K for further descriptions of the New
Facility and the Company's other obligations. The Company will
use the funds that will no longer be restricted for the
collateralization of letters of credit, and funds from the New
Facility, to prepay the Series A, B and D Notes, the $1.2 million
term note, and the outstanding borrowings under the Credit
Agreement. Funding under the New Facility is expected to occur
on or about June 22, 1994.
Ames' unrestricted cash and short-term investments increased
$7.9 million during the first quarter ended April 30, 1994. This
increase was primarily due to the increase in the net borrowings
under the Revolver and an increase in trade payables, partially
offset by the seasonal build-up of inventories, payments of debt,
and an increase in accounts receivable.
Notes 3 and 8 of the Notes to the Consolidated Condensed
Financial Statements discuss restructuring activities, components
of restricted cash and short-term investments, and cash flows
from the sale of assets held for disposition.
Merchandise inventories, valued on a LIFO basis, declined
$8.6 million from May 1, 1993 to April 30, 1994 due primarily to
the closing of three stores ($4.0 million) and improved inventory
controls. The increase in inventories of $64.6 million from
January 29, 1994 to April 30, 1994 was principally the result of
a normal seasonal build-up of inventories.
Accounts payable increased $41.6 million from May 1, 1993 to
April 30, 1994 due primarily to improved trade payment terms.
The increase in accounts payable of $44.8 million from January
29, 1994 to April 30, 1994 was principally the result of the
seasonal build-up of inventories and improved trade payment
terms.
<PAGE>
<PAGE>
Capital expenditures for the first quarter ended April 30,
1994 totalled $2.2 million and for the balance of fiscal 1995 are
estimated to be approximately $29.8 million. The decline in
capital expenditures from the prior year's first quarter was
primarily due to the prior year's expenditures for the
installation of scanning equipment. The costs incurred for the
current year's first quarter were comprised of: projects to
improve scanning and management information systems ($1.1
million); the initial expenditures associated with small-scale
remodeling of 26 stores ($.5 million); other remodeling activity
($.1 million); and various other projects ($.5 million).
Expected capital expenditures for the remainder of the year
include: small-scale remodeling of 51 stores ($2.4 million),
including completion of the 26 stores started in the first
quarter; projects to improve scanning and management information
systems ($5.6 million); other remodeling activity ($11.9
million), including expansions of certain specialty departments
to additional stores and new apparel fixtures; complete remodels
(with new merchandising strategies) at two test stores ($1.2
million); and various other projects ($8.7 million).
Management believes that the Company's available cash and
expected cash flows from fiscal 1995 operations and beyond, and
the availability of financing facilities, will enable Ames to
fund its expected needs for working capital, debt service
requirements, and capital expenditures.
The significant net operating loss carryovers remaining
after fiscal 1994, subject to any limitations pursuant to
Internal Revenue Code Sec. 382, should offset income on which
taxes would otherwise be payable in future years.
<PAGE>
<PAGE>
<TABLE>
Part II
OTHER INFORMATION
<CAPTION>
<S> <C> <C> <C>
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
----------------------------------------------------
There were no matters submitted to a vote of security holders during the
first quarter of fiscal 1995, through the solicitation of proxies or
otherwise.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) INDEX TO EXHIBITS
-----------------
EXHIBIT NO. EXHIBIT PAGE NO.
----------- ------- --------
11 Schedule of computation of primary 17
earnings per share
(b) REPORTS ON FORM 8-K:
-------------------
The following reports on Form 8-K were filed
with the Securities and Exchange Commission
during the first quarter:
<CAPTION>
DATE OF REPORT DATE OF FILING ITEM # DESCRIPTION
-------------- -------------- ------ -----------
<S> <C> <C> <C>
February 17, 1994 February 17, 1994 5 Disclosure of the
fiscal 1995 summary
financial plan (since
revised on a Form 8-K
dated May 27, 1994).
April 6, 1994 April 6, 1994 5 Disclosure of fiscal
January and February
1994 results.
April 8, 1994 April 8, 1994 5 Filing of the
Settlement Agreement
between Ames and
Wertheim (see Note 7).
April 22, 1994 April 22, 1994 5 Disclosure of fiscal
March 1994 results.
</TABLE>
<PAGE>
<PAGE>
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: June 10, 1994 /S/ WILLIAM C. NAJDECKI
--------------------------------------
William C. Najdecki, Senior Vice
President and Chief Accounting Officer
<PAGE>
<PAGE>
<TABLE>
EXHIBIT 11
AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
SCHEDULE OF COMPUTATION OF PRIMARY NET LOSS PER COMMON SHARE
(Amounts in thousands except per share amounts)
<CAPTION>
For the First
Quarter Ended
April 30, May 1,
1994 1993
------------ ------------
<S> <C> <C>
Loss before extraordinary item ($13,624) ($17,992)
Extraordinary loss (1,517) -
------------ ------------
Primary net loss ($15,141) ($17,992)
============ ============
Weighted average number of common shares
outstanding during the period 20,127 20,000
Add: Common stock equivalent shares
represented by the Series B Warrants (a) (a)
Common stock equivalent shares
represented by the Series C Warrants (a) (a)
------------ ------------
Weighted average number of common and
common equivalent shares used in the
computation of primary earnings per share 20,127 20,000
============ ============
Primary earnings per share:
Primary loss per share before
extraordinary loss ($0.68) ($0.90)
Extraordinary loss (0.07) -
------------ ------------
Primary net loss per share ($0.75) ($0.90)
============ ============
<FN>
(a) Common Stock equivalents have not been included because the effect
would be anti-dilutive.
Note: Fully diluted earnings per share has not been presented as the effect
would be anti-dilutive.
</TABLE>
