<PAGE>
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended JANUARY 29, 1994
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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AMES DEPARTMENT STORES, INC.
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(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
-----------------
Securities Registered Pursuant to Section 12(b) of the Act: None
Securities Registered Pursuant to Section 12(g) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
- - - - - - - ------------------- -----------------------------------------
Common Stock, $.01 par value NASDAQ
Priority Common Stock, $.01 par value None
Series B Warrants None
Series C Warrants NASDAQ
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
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<PAGE>
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K 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.[ ]
APPLICABLE ONLY TO REGISTRANTS 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 Section 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
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As of April 15, 1994, the aggregate market value of voting stock
held by non-affiliates of the Registrant was $113,215,404 based on
the last reported sale price of the Registrant's Common Stock on the
NASDAQ National Market System.
17,085,738 shares of Common Stock and 3,041,531 shares of
Priority Common Stock were outstanding on April 15, 1994.
DOCUMENTS INCORPORATED BY REFERENCE: Portions of the
Registrant's definitive proxy statement to be filed pursuant to
Regulation 14A within 120 days after the end of the Registrant's
fiscal year are incorporated by reference in Part III.
Page 1 of 98 pages Exhibit Index
(including Exhibits) on page 78
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<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
(a) GENERAL.
Ames Department Stores, Inc. and its subsidiaries
(collectively, "Ames" or the "Company") are retail merchandisers.
As of April, 1994, Ames operates 306 self-service discount
department stores under the Ames name in 14 states in the
Northeast, Middle Atlantic and Mid-West regions and the District
of Columbia. The Company's stores are located in rural
communities, some of which are not served by other large retail
stores, high-traffic suburban sites, small cities and several
major metropolitan areas. The stores largely serve middle and
lower-middle income customers.
Ames is a Delaware corporation organized in 1962 as a
successor to a business originally founded in 1958. Ames was
reorganized on December 30, 1992 (see below) under Chapter 11 of
the United States Bankruptcy Code ("Chapter 11"). Its principal
executive offices are located at 2418 Main Street, Rocky Hill,
Connecticut 06067, and its telephone number is (203) 257-2000.
REORGANIZATION
Ames and its subsidiaries filed petitions under Chapter 11
in the United States Bankruptcy Court for the Southern District
of New York (the "Bankruptcy Court") on April 25, 1990 (the
"Filing Date"). From that time until December 30, 1992, Ames
operated its business as a debtor-in-possession subject to the
jurisdiction and supervision of the Bankruptcy Court. On
December 30, 1992, Ames emerged from bankruptcy (the
"Consummation Date").
Pursuant to the guidance 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" ("SOP 90-7"), the Company adopted fresh-start
reporting and reflected the distributions under the plan of
reorganization in its balance sheet as of December 26, 1992 (the
effective date of consummation of the plan of reorganization for
accounting purposes). Under fresh-start reporting, the
reorganization value of the Company was allocated to its net
assets on the basis of the purchase method of accounting.
As a result of the consummation of the plan of
reorganization and adoption of fresh-start reporting, the Company
was required to report its financial results for the 53 weeks
ended January 30, 1993 ("Fiscal 1993") in two separate audited
periods in the Consolidated Financial Statements included in this
Form 10-K. One period contains the forty-eight weeks ended
December 26, 1992, including the effects of the adoption of
fresh-start reporting and consummation of the plan of
reorganization, and the other Fiscal 1993 period contains the
five weeks ended January 30, 1993 for the reorganized Ames.
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In addition, as part of its restructuring announced prior to
its emergence from Chapter 11, the Company closed 60 discount
stores and three freestanding Crafts & More stores in March, 1993 with
going-out-of-business sales that commenced in January, 1993. The
Company also closed one distribution center/warehouse during the
fiscal year ended January 29, 1994 ("Fiscal 1994"). In addition
to these closings, as part of its restructuring during the
Chapter 11 case, the Company closed 311 other discount stores and
nine distribution centers/warehouses.
FISCAL 1994
The Company's liquidity position stabilized during Fiscal
1994 following its emergence from Chapter 11 and related
restructuring. Management believes that the Company's operating
performance and the availability of its financing facilities will
provide sufficient liquidity in the near term to allow the
Company to meet its financial obligations.
Ames completed the installation of scanning equipment in all
of its stores during Fiscal 1994 and continued the roll-out of
certain specialty departments within the stores. The Company
also remodeled 24 stores on a small scale and expanded certain
jewelry departments. In addition, during Fiscal 1994 management
initiated, among other things, a home office "Store Work Day
Program" whereby each home office associate at the director,
buyer and officer level, including the executive officer level,
works one day a month in a store to stay up-to-date with store
operations and concerns.
The Company continually reviews the profitability of its
stores in the ordinary course of business and closes or sells
stores whose performance is thought to be inadequate. The
Company will consider relocating certain stores and opening new
stores, particularly in selected markets that would reinforce
marketing programs, enhance name recognition, and/or achieve
market penetration. One store was destroyed by fire in Fiscal
1994 and is expected to be rebuilt by the landlord and reopened
by the Company in the fiscal year ending January 28, 1995
("Fiscal 1995"). There were no new store openings in Fiscal
1994. In addition, Ames announced in December, 1993 and
February, 1994 that two stores would close in the first quarter
of Fiscal 1995.
(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS.
Ames operates self-service retail discount department stores
selling a broad range of merchandise. There are no other
reportable industry segments.
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(c) NARRATIVE DESCRIPTION OF BUSINESS.
(i) SERVICES, MARKETS AND DISTRIBUTION.
Ames sells primarily brand name general merchandise,
including the following items: family apparel and
accessories, shoes, housewares, home furnishings,
crafts, hardware and automotive accessories, sporting
goods, toys, small appliances and consumer electronics,
pre-recorded tapes, jewelry, health and beauty
products, household products, camera and photographic
supplies, pet products, party and paper products, and
school and office supplies. Although Ames attempts to
be competitive on everyday pricing, the Company
primarily employs a high/low promotional pricing
strategy with an emphasis on quality weekly circular
advertising. Management will also continue to stress
depth and breadth of products in selected merchandise
categories, clean, neat and well-maintained facilities,
appealing merchandise presentation, customer service
and strict operating controls.
Merchandise is purchased by Ames through its Rocky
Hill, Connecticut headquarters for all stores and is
shipped by vendors either directly to individual stores
or to Ames' distribution centers/warehouses in
Massachusetts and Pennsylvania which then make
deliveries to stores. The Company's warehouse and
distribution systems permit one-day service to all
locations.
For the last three fiscal years, women's apparel has
been the only class of product that exceeded 10% of
total sales, accounting for an average of approximately
13.3% of total sales. An average of approximately
19.5% of sales for the last three fiscal years were
credit card sales and the remainder were by cash or
check.
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The table below sets forth the number of retail stores in
operation in each state in which Ames operated stores at the end of
each of the last three fiscal years.
<TABLE>
STORES IN OPERATION AT FISCAL YEAR END
--------------------------------------------------------
1994 1993 1992
-------------- --------------- -------------------
DISCOUNT DISCOUNT DISCOUNT CRAFTS &
STORES(a) STORES STORES MORE
--------- -------- -------- --------
<CAPTION>
<S> <C> <C> <C> <C>
Connecticut 15 15 15 -
Delaware 4 4 7 -
District of Columbia 1 1 1 -
Maine 28 28 29 1
Maryland 25 25 36 1
Massachusetts 32 32 36 -
Michigan - - 9 -
New Hampshire 19 19 20 -
New Jersey 5 5 8 -
New York 81 81 87 -
North Carolina - - - 2
Ohio 11 11 14 1
Pennsylvania 54 55 59 2
Rhode Island 7 7 7 -
South Carolina - - - 2
Vermont 13 13 13 -
Virginia 6 6 20 4
West Virginia 7 7 10 -
--- --- --- ---
Total 308 309 371 13
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</TABLE>
(a) Includes one Pennsylvania store in the process of closing at
year-end and one New Hampshire store that will close in April,
1994.
(ii) NEW PRODUCTS.
As mentioned in Item 1(a), the Company continued the
roll-out of certain specialty departments during
Fiscal 1994. These specialty departments included,
among other things, expanded party and paper products
and expanded pet products. The Company also performed
small-scale remodels at 24 of its older stores, in
addition to 20 stores already fully remodeled prior to
Fiscal 1994, with a format containing several distinct
and specialized departments, such as Crafts & More
departments, within the stores. Ames intends to
continue the expansion of successful specialty
departments and strategies to other stores, as well as
its offering of casual apparel and decorative home
products.
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(iii) RAW MATERIALS.
The Company does not rely on any one or a few suppliers for
a material portion of its purchases, and there is no current
or anticipated problem with respect to the availability of
merchandise.
(iv) PATENTS, TRADEMARKS AND LICENSES.
The mark "Ames" is registered with the United States Patent
and Trademark Office. The Company considers this mark and
the associated name recognition to be valuable to its
business. The Company has a significant number of other
trademarks, trade names, and service marks, some of which,
such as "Crafts & More," "Pawsitively Pets," and "Party Plaza," are
used in connection with the Company's roll-out of certain
specialty departments within the stores. Although the
Company considers these additional marks and its patents and
licenses to be valuable in the aggregate, none of them
individually has a material impact on the Company's
business.
(v) SEASONALITY OF BUSINESS.
During the second half of the Company's fiscal year, its
business is more active as a result of the back-to-school
and Christmas shopping seasons. Sales are highest in the
last fiscal quarter.
(vi) WORKING CAPITAL.
As of January 29, 1994, the Company's current ratio (current
assets divided by current liabilities) was 1.7 to 1. See
Item 7(b) - Management's Discussion and Analysis - Liquidity
and Capital Resources for discussion of liquidity and plans
to meet future liquidity needs.
The demand for working capital is heaviest in April and May,
and from August through November, when sufficient
merchandise must be purchased for the spring, back-to-school
and Christmas seasons.
(vii) CUSTOMERS.
No material part of the Company's business is dependent upon
a single customer or a few customers. During Fiscal 1994,
Ames had no single customer or affiliated group of customers
to whom sales were made in an amount which accounted for 10%
or more of the Company's total sales for such period.
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As is customary in the discount store industry, the
Company's retail operations allow merchandise to be returned
by customers if accompanied by proof of purchase. In
addition, the Company has a program that allows for the
matching of its sales prices to the advertised sales prices
of its local competitors upon presentation of proper proof
of the competitor's advertised price on the same item.
Merchandise may be purchased under the Ames' layaway plan.
(viii) BACKLOG.
Backlog is not a significant factor in the Company's
business.
(ix) GOVERNMENT CONTRACTS.
Ames has no material contracts with any government agency.
(x) COMPETITION.
Ames operates in a highly competitive environment. Ames
competes with other stores, including large national and
regional chains, in the purchase and sale of merchandise, as
well as for store locations. Ames anticipates a further
increase in competition from other discount store chains and
is continuing the modification of its store operations,
advertising, merchandise mix, and merchandise presentation
(see also "New Products" - Item 1(c)(ii)).
Many of the Company's stores are located in smaller
communities and are, in some cases, the largest non-food
retail store in their market area. They compete, however,
with many smaller stores offering a similar range of
products. The Company's stores located in suburban sites
and urban areas are in direct competition with other
discount stores, including other large national and regional
chains.
The policy of Ames is to compete with non-discount retail
competitors primarily on the basis of price and selection of
merchandise, and with all retail competitors on the basis of
convenience of location, depth and breadth of products in
selected merchandise categories, and customer service.
(xi) RESEARCH AND DEVELOPMENT.
Research and development activities are not a material
aspect of the Company's business.
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(xii) ENVIRONMENTAL MATTERS.
To date, compliance with federal, state and local laws and
regulations enacted to regulate the discharge of materials
into the environment has not had, and is not expected to
have, a material effect upon the Company's business.
(xiii) EMPLOYEES.
At March 31, 1994, Ames employed approximately 22,000
people.
(d) FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES.
The information called for by this item is not relevant to
the Company's business.
ITEM 2. PROPERTIES.
As of January 29, 1994, the Company's discount department stores
occupied a total of approximately 18,856,000 square feet. The
average store size is approximately 61,200 square feet. On average,
approximately 82% is selling area.
The construction of one discount store located in Monroeville, PA
was financed with an industrial development bond. Ames has an option
to purchase this location at nominal cost at the expiration of the
lease term. During Fiscal 1994, the Company exercised similar
options with respect to its stores located in Ellwood City and Grove
City, PA that had been financed under industrial development bonds.
The land and buildings for eight discount store locations are owned
by Ames (two of which were being held for sale at January 29, 1994).
The six owned locations with operating stores are Woodsville, NH,
Bethel Park, PA, No. Huntingdon, PA, Lewiston, ME and, once the
transfers are complete, the Ellwood City and Grove City, PA stores.
The Company's Cape May, NJ location was sold during Fiscal 1994 and
is being leased back under an operating lease. The Bethel Park, PA
and Huntingdon, PA locations are subject to mortgages. The remainder
of the Company's stores are leased, with the leases expiring at
various times between 1994 and 2015. The leases generally have
renewal options permitting extensions for at least five years. In
addition, the leases typically provide for fixed annual rentals,
payment of certain taxes, insurance and other charges, and additional
rentals based on a percentage of sales in excess of certain fixed
amounts. Except for certain point-of-sale equipment that is leased,
vendor-owned greeting card equipment and leased department equipment,
Ames owns the fixtures and equipment in its stores, some of which are
subject to various financing arrangements.
Leases on certain closed stores were rejected pursuant to
Bankruptcy Court orders. Closed store leases that were not rejected
were terminated or assigned to third parties. This process was
completed during Fiscal 1994.
<PAGE>
<PAGE>
The Company's warehouse and distribution facilities in Leesport,
PA, Clinton, MA, Mansfield, MA and McKeesport, PA are owned and
occupy an aggregate of approximately 2,543,500 square feet. The
construction of the facility in Clinton, MA was financed with
industrial development bonds and the Mansfield, MA facility is
subject to a mortgage. The McKeesport, PA facility was closed during
Fiscal 1994 and is being offered for sale or lease.
Ames leases approximately 386,000 square feet of space in
Rochester, NY under a lease expiring on December 31, 1997, with three
ten-year renewal options. These premises have been subleased to an
unaffiliated tenant for the remainder of the lease term. In Fiscal
1995, Ames is expected to assign its interest in a lease and sublease
to a 260,000 square foot warehouse in Indianapolis, IN. Ames' lease
for approximately 48,400 square feet of space in East Providence, RI
was rejected in the Chapter 11 case, effective March 31, 1993.
Ames owns and occupies its 217,000 square foot corporate office
in Rocky Hill, CT. On February 2, 1989, Ames purchased a 135,000
square foot office building in West Hartford, CT for use as a
satellite headquarters. This facility is currently being offered for
sale. The Company has a lease for 135,000 square feet of combined
storage, office and printing space in East Hartford, CT.
ITEM 3. LITIGATION.
Ames is involved in various litigation as detailed in Note 12 to
the Consolidated Financial Statements included in this Form 10-K.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted during the fourth quarter of
Fiscal 1994 to a vote of security holders, through the solicitation
of proxies or otherwise.
<PAGE>
<PAGE>
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
MATTERS CONCERNING SECURITY HOLDERS.
The Company's common stock and priority common stock was issued
on the Consummation Date, pursuant to the terms of the plan of
reorganization, to creditors and trustees for classes of general
unsecured creditors and the common stock is listed on the NASDAQ
National Market System ("NASDAQ"; symbol: AMES). As of April 15,
1994, Ames had 4,887 shareholders of record of the common stock and
14 shareholders of record of the priority common stock. These
securities were issued without registration under the Securities Act
of 1933, as amended or under any state or local law, in reliance on
the exemptions set forth in Section 1145 of the Bankruptcy Code.
Certain restrictions apply to the purchase and trading of the common
stock and priority common stock, and are set forth in Note 8 to the
Consolidated Financial Statements. High and low prices of the
Company's common stock for Fiscal 1994 and from the Consummation Date
through January 30, 1993, as reported on NASDAQ, are shown in the
table below:
<TABLE>
FISCAL 1994 FISCAL 1993 (a)
LOW HIGH LOW HIGH
------------------ ----------------
<CAPTION>
<S> <C> <C> <C> <C>
1st Quarter $2 5/8 $4 5/8 $ - $ -
2nd Quarter 2 1/8 3 7/16 - -
3rd Quarter 1 1/2 2 3/4 - -
4th Quarter 1 9/16 3 - 1/2 4 7/8
<FN>
(a) From December 30, 1992 (the first day of trading in the new stock).
</TABLE>
Ames' old common stock, which was canceled effective December 30,
1992 under the plan of reorganization, was listed on the New York
Stock Exchange (Symbol: ADD) and the Pacific Stock Exchange (Symbol:
ADD) through September 3, 1992. Thereafter the old common stock
traded on "pink sheets" provided by the National Quotation Bureau.
Ames had 10,504 holders of record of the old common stock on December
28, 1992. High and low prices of Ames' old common stock for Fiscal
1992 and Fiscal 1993 (through December 29, 1992), as reported on the
New York Stock Exchange through September 3, 1992 or as reported on
the National Quotation Bureau thereafter, are shown in the table
below:
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<TABLE>
FISCAL 1993 FISCAL 1992
LOW HIGH LOW HIGH
--------------- -----------------
<CAPTION>
<S> <C> <C> <C> <C>
1st Quarter $ 1/4 $ 5/8 $ 3/4 $3 -
2nd Quarter 1/2 1 - 1 5/8 2 1/2
3rd Quarter 1/16 5/8 1 - 2 1/4
4th Quarter (through 1/16 1/5 1/4 2 1/4
December 29, 1992)
</TABLE>
There were no quarterly dividends paid by Ames to the holders of
its new or old common stock during these periods. Ames also did not
issue or declare additional shares of preferred stock in lieu of cash
dividends on its old preferred stock, which was also canceled
effective December 30, 1992 under the plan of reorganization, during
the prior two fiscal years. The previous Board of Directors
suspended the quarterly cash dividend on the Company's old common
stock effective with the first quarter of Fiscal 1991. Dividends
could not be paid during the Chapter 11 case and cannot be declared
under the terms of the Company's original post-emergence credit
agreement.
ITEM 6. SELECTED FINANCIAL DATA.
The following selected financial data of Ames should be read in
conjunction with the Consolidated Financial Statements and related
Notes appearing elsewhere in this Form 10-K.
<PAGE>
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<TABLE>
(IN THOUSANDS EXCEPT PER SHARE DATA)
------------------------------------------------------------------------------------------
FISCAL YEAR FIVE WEEKS FORTY-EIGHT
ENDED ENDED WEEKS ENDED FISCAL YEAR ENDED
------------- ------------- ---------------- -----------------------------------------
JAN. 29, 1994 JAN. 30, 1993 DEC. 26, 1992(b) 1992 (d) 1991 (f) 1990 (h)
------------- ------------- ---------------- ------------ ------------ -----------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net sales $2,123,527 $142,349 | $2,284,026 $2,819,435 $3,109,080 $4,793,126
Net income (loss) $10,823(a) $(23,892) | $718,888(c) $(282,382)(e) $(793,459)(g) $(228,062)(i)
Net income (loss) |
per common sh. $.51(a) $(1.19) | - (c) $(7.87)(e) $(21.47)(g) $(6.41)(i)
Cash dividends per
common share - - - - - $.10
Dividends on
pref. shares - - - - - $12,543
Total assets $567,131 $638,046 $725,026 | $1,389,645 $1,617,448 $2,270,943
Long-term debt & |
capital leases $ 93,309 $176,239 $176,484 | $64,445 $84,002 $156,040
Liab.'s subject |
to settlement - - - | $1,776,634 $1,726,621 -
<FN>
Note: In accordance with fresh-start reporting, the purchase method of
accounting was used to record the fair value of assets and assumed
liabilities as of December 26, 1992. Accordingly, the selected
financial data above for January, 1994, January, 1993 and December,
1992 is not comparable in certain material respects to such data for
prior periods. Furthermore, the Company's results of operations for
the periods prior to its reorganization are not necessarily indicative
of results of operations that may be achieved in the future.
(a) Includes an extraordinary gain of $.9 million, or $.04 per share, for the early
extinguishment of certain debt.
(b) Excludes the results of 60 stores after the date of their announced closings
(October 30, 1992), closed as part of the Company's final restructuring prior to
its emergence from Chapter 11. Also excludes the results after May, 1992 of two
stores closed in the ordinary course of business.
(c) Includes the extraordinary gain of approximately $1.25 billion on debt
discharged pursuant to the plan of reorganization; the charge for revaluation of
assets and liabilities under fresh-start reporting of $391.2 million;
restructuring charges of $88.5 million for estimated costs of rejected leases,
the closing costs associated with the 60 closed stores, the costs for
discontinuance of private-label children's apparel, and for additional home
office and field employee severance costs; and bankruptcy expenses of $25.5
million. Net earnings per share was not presented for the forty-eight week
period ended December 26, 1992 because such presentation would not be
meaningful. The old common stock was canceled under the plan of reorganization
and the new common stock was not issued until December 30, 1992.
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(d) Excludes the results of 84 stores after the date of their announced closings
(January 26, 1991 for 7 stores and September 28, 1991 for 77 stores), closed as
part of the Company's restructuring.
(e) Includes bankruptcy expenses of $28.0 million and restructuring charges of
$147.2 million for estimated costs of rejected leases, closing 77 stores and
other facilities, and associated restructuring.
(f) Excludes the results of 227 stores after the date of their announced closings
(April 28, 1990 for 221 stores and October 27, 1990 for 6 stores), closed as
part of the Company's restructuring.
(g) Includes bankruptcy expenses of $22.5 million and adjustments necessary to
provide for a reserve for estimated costs associated with rejected leases and
closing stores and other facilities under the Company's restructuring ($373.5
million); estimated settlements of accounts payable amounts resulting from the
bankruptcy claims filing process ($40.0 million); inventory markdown reserves
required for planned special promotions ($124.5 million); and the write-off of
certain capitalized costs ($28.0 million).
(h) Includes the results of the G.C. Murphy Co. Variety Division until date of sale
(September, 1989).
(i) Includes a restructuring charge of $137.3 million in anticipation of closing
stores and restructuring store operations and distribution systems and an
extraordinary loss of $8.4 million, or $.22 per share, to write-off deferred
financing fees associated with the prepayment of debt.
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
(a) RESULTS OF OPERATIONS
<TABLE>
FISCAL YEAR ENDED
-----------------------------------------------------------
JANUARY 29, 1994 JANUARY 30, 1993* JANUARY 25, 1992
----------------- ----------------- -----------------
DISCOUNT DISCOUNT CRAFTS DISCOUNT CRAFTS
STORES STORES & MORE STORES & MORE
<CAPTION>
<S> <C> <C> <C> <C> <C>
Stores, beginning of period 309 371 13 455 15
New stores - - - - -
Closed stores (1)(a) (62)(b) (13)(b) (84)(c) (2)(c)
--- --- --- --- ---
Stores, end of period 308 309 0 371 13
=== === === === ===
* Includes the forty-eight weeks ended December 26, 1992
(pre-consummation) and five weeks ended January 30, 1993
(post-consummation).
(a) Represents the Mt. Pocono, PA store that was destroyed by fire and that is
expected to be rebuilt by the landlord and reopened by the Company in Fiscal
1995. Does not include two stores closed in the first quarter of Fiscal 1995.
(b) Includes 60 discount stores and 3 Crafts & More stores in the process of closing at
January 30, 1993.
(c) Includes 77 discount stores and one Crafts & More store in the process of closing at
January 25, 1992.
</TABLE>
The historical results of operations exclude the results of
the 60 stores (closed in Fiscal 1993 as part of the Company's
continued restructuring) after the date of their announced
closings (October 30, 1992) and the results of 84 stores closed
in Fiscal 1992 (also as part of the Company's restructuring)
after the date of their announced closings (January 26, 1991 for
7 stores and September 28, 1991 for 77 stores). In addition, the
historical results after May, 1992 exclude two stores closed
during Fiscal 1993 in the ordinary course of business.
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The following discussion and analysis is based on the
results of operations of the Company for Fiscal 1994, the
five-week period ended January 30, 1993 and the forty-eight week
period ended December 26, 1992 (combined - Fiscal 1993), and the
fifty-two weeks ended January 25, 1992 (Fiscal 1992). The
Company's results of operations for Fiscal 1994 and for the
five-week period ended January 30, 1993 are not comparable in
certain material respects to its results of operations for prior
periods due to the Company's adoption of fresh-start reporting as
of December 26, 1992 (Note 2 to the Consolidated Financial
Statements). For purposes of the following discussion,
comparison of the Company's results of operations for Fiscal 1994
and for the five-week period ended January 30, 1993 to prior
periods are made only when, in management's opinion, such
comparisons are meaningful. The financial information set forth
below should be read in conjunction with the Consolidated
Financial Statements of Ames Department Stores, Inc. and its
Subsidiaries included elsewhere in this filing.
The Company's business is seasonal in nature, with a large
portion (31% in Fiscal 1994) of its net sales occurring in the
fourth quarter (which includes the Christmas selling season).
Total sales, including sales from leased departments, for the
periods below and the respective total sales percentage
increases/decreases and comparable store sales percentage
increases/decreases over the prior year for stores that have been
open and operated by Ames for at least the prior full Fiscal year
were:
<TABLE>
(000'S OMITTED) PERCENTAGE INCREASES (DECREASES)
--------------- -----------------------------------
FISCAL YEAR ENDED TOTAL SALES TOTAL SALES COMPARABLE STORES
------------------ --------------- ------------- -------------------
<CAPTION>
<S> <C> <C> <C>
January 29, 1994 $2,228,135 (12.4)% (a) (2.3)%
January 30, 1993
(five weeks) $148,003 4.9% (b) 4.9%
December 26, 1992
(forty-eight weeks) $2,395,570 (14.9)% (c) (0.3)%
January 25, 1992 $2,956,762 (9.7)% 9.0%
The rate of inflation did not have a significant effect on sales during these
periods.
<FN>
(a) Represents the total sales decrease from the combined fifty-three weeks ended
January 30, 1993.
(b) Represents the total sales increase from the four weeks ended January 25, 1992.
(c) Represents the total sales decrease from the forty-eight weeks ended December
28, 1991.
</TABLE>
<PAGE>
<PAGE>
RESULTS OF OPERATIONS FOR FISCAL 1994 COMPARED TO COMBINED FISCAL
1993
Despite a continued difficult economic environment in the
Northeast and a decline in comparable store sales, the Company
has reported improvements in its gross margin rate, operating
earnings and net earnings, reflecting, in part, its emphasis on
higher-margin sales and inventory and expense controls. Although
no assurance can be given that the Company will be able to
improve upon, continue or maintain these performance levels,
management intends to build upon its Fiscal 1994 performance by
continuing the above steps and the roll-out of certain specialty
departments, and by converting Ames into a more focused chain
serving the middle and lower end of the retailing spectrum with,
among other things, an expanded selection of casual apparel and
home decor products, and fewer low-margin commodity items. These
steps, along with several changes in merchandise presentation and
in store operations (e.g. increased local store merchandise
selection and an increase in the number of store regions to
reduce the number of stores supervised by each regional
director), are being taken only after appropriate market
research.
Total sales declined 12.4% from Fiscal 1993 due to the
closing of 62 stores during Fiscal 1993, one less week in Fiscal
1994, and a decrease of 2.3% in comparable store sales on a
308-store basis. The major causes for the decline in comparable
store sales were the Company's de-emphasis of several
lower-margin hardline categories, reduced broadcast advertising,
severe winter weather during the first and fourth quarters of
Fiscal 1994, a weak apparel market, and increased discount store
competition, partially offset by sales increases from remodeled
stores, expansions of certain specialty departments, and
additional circular advertising.
Sales of the Company's leased departments were $104.6
million or 4.7% of total sales for Fiscal 1994 compared to $117.2
million or 4.6% of total sales for combined Fiscal 1993. The
decline of $12.6 million in leased department sales was due to
the closing of the 62 stores, one less week, and a decrease of
1.2% in leased department comparable store sales.
To facilitate a comparison of the Company's operating
results with results achieved in the prior full fiscal year,
including the predecessor's results , the following discussion
and analysis incorporates certain pro forma data of the Company,
which is summarized in the note titled "Pro Forma Summary
Information (Unaudited)" in the Notes to the Consolidated
Financial Statements. The pro forma data was prepared under the
assumption that the closing of the 60 stores and the
reorganization and related financing occurred at the beginning of
combined Fiscal 1993.
<PAGE>
<PAGE>
In management's judgement, the pro forma data enhances the
ability to understand the results of operations of the Company
for the 52 weeks ended January 29, 1994 compared with those for
the combined 53 weeks ended January 30, 1993. The pro forma data
is for illustrative purposes only and should not be construed to
be indicative of the Company's results of operations that
actually would have resulted if the transactions were consummated
on the date assumed and do not project the Company's results of
operations or trends for any future date or period.
The following table sets forth the historical operating
results for the 52 weeks ended January 29, 1994 and the unaudited
pro forma operating results for the 53 weeks ended January 30,
1993 in millions and as a percentage of net sales:
<TABLE>
UNAUDITED
PRO FORMA
FISCAL YEAR ENDED FISCAL YEAR ENDED
JANUARY 29, 1994 JANUARY 30, 1993
% OF SALES % OF SALES
----------------------- -----------------------
<CAPTION>
<S> <C> <C> <C> <C>
Net sales $2,123.5 100.0% $2,208.6 100.0%
Cost of goods sold and
transportation expenses 1,542.2 72.6 1,643.8 74.5
--------- ----- -------- ------
Gross Profit 581.3 27.4 564.8 25.5
Leased dept. and other
operating income 34.4 1.6 34.9 1.6
--------- ------ --------- ------
615.7 29.0 599.7 27.1
Store operating, admin., and
general expenses, including
leased dept. expenses 581.5 27.4 594.7 26.9
Depreciation and amortization 2.1 0.1 1.2 0.1
Amortization of excess of revalued
net assets over equity (6.2) (0.3) (6.0) (0.3)
--------- ------ --------- ------
Profit from Operations 38.3 1.8 9.8 0.4
Interest and debt expense (28.9) (1.4) (26.5) (1.2)
Interest income 2.5 0.1 3.5 0.2
Gain on sale of properties 1.3 0.1 - -
--------- ------ --------- ------
Income (Loss) before Income
Taxes and Extraordinary Item 13.2 0.6 (13.2) (0.6)
Income tax provision (3.3) (0.1) - -
--------- ------ --------- ------
Income (Loss) before
Extraordinary Item 9.9 0.5 (13.2) (0.6)
Extraordinary Gain .9 0.0 - -
--------- ------ --------- ------
Net Income (Loss) $10.8 0.5% $(13.2) (0.6)%
========= ====== ========= =======
</TABLE>
<PAGE>
<PAGE>
Consolidated gross profit increased $16.5 million or 1.9% as
a percentage of net sales in Fiscal 1994 compared to pro forma
Fiscal 1993. The Company is emphasizing higher-margin products
in its merchandise mix and in its advertising. For example, in
Fiscal 1994, Ames continued with the installation within the
stores of certain specialty departments, such as Crafts & More, Party
Plaza and Pawsitively Pets departments, and the remodeling and
expansions of jewelry departments. Broadcast advertising, which
resulted in higher sales but lower margins in Fiscal 1993, was
reduced and more narrowly focused by limiting the percents-off
primarily to specific merchandise departments. In addition,
although advertising markdowns were significantly higher this
year, clearance markdowns and inventory shrink were significantly
lower due primarily to tighter inventory (and other operating)
controls. Inventory shrink expense was reduced by approximately
.6% of net sales. Pro forma gross profit for Fiscal 1993
included a LIFO credit of $5.8 million as compared to no LIFO
charge or credit in Fiscal 1994. Management is continuing to
review all merchandising and operational strategies in an attempt
to improve merchandise presentation and build on the Fiscal 1994
gross margin improvement, and to ensure an in-stock position in
all core merchandise assortments. These steps to further improve
gross margin are expected to be partially offset by a continued
increase in discount store competition.
Consolidated store operating, general and administrative
expenses, including leased department expenses, decreased $13.2
million but increased as a percentage of net sales by .5% in
Fiscal 1994 compared to pro forma Fiscal 1993. The dollar
decrease was primarily due to reductions in home office expenses
and one less week in Fiscal 1994, while the increase as a
percentage of net sales was primarily due to the lower sales base
upon which the percentage is calculated. Advertising expense was
slightly higher in Fiscal 1994 compared to pro forma Fiscal 1993
due to additional circular advertising, partially offset by less
broadcast advertising. Store payroll expense was slightly higher
but other store expenses were slightly lower in Fiscal 1994
compared to pro forma Fiscal 1993. Management began its program
to improve customer service by, among other things, increasing
its investment in store payroll. Other store expenses include
the Company's self-insurance expense which was significantly
reduced in Fiscal 1994 due to an improved trend in claims
experience. Field support expenses were constant between the two
fiscal years.
Consolidated depreciation and amortization expense increased
$.9 million but remained the same as a percentage of sales in
Fiscal 1994 compared to pro forma Fiscal 1993. The adoption of
fresh-start reporting at December 26, 1992 resulted in the
write-off of all of the Company's noncurrent assets at that date,
and therefore depreciation and amortization expense for Fiscal
1994 was for capital additions subsequent to December 26, 1992.
The amortization of the excess of revalued net assets over equity
under fresh-start reporting resulted in a $6.2 million credit to
the Fiscal 1994 results. The Company is using a ten-year life
for the period of amortization.
<PAGE>
<PAGE>
Consolidated interest and debt expense increased $2.4
million or .2% of net sales in Fiscal 1994 compared to pro forma
Fiscal 1993. Approximately $1.3 million of fees related to the
Credit Agreement (Note 6) and the Letter of Credit Facility (Note
6) were charged to interest and debt expense in Fiscal 1994. The
Company had a daily weighted average of $89.3 million in
outstanding debt during Fiscal 1994 under the revolving credit
portion of the Credit Agreement. These borrowings were utilized
for seasonal inventory purchases and for the required cash
collateralization of outstanding letters of credit.
Consolidated interest income declined $1.0 million or .1% of
net sales in Fiscal 1994 compared to pro forma Fiscal 1993. The
decline was primarily due to lower cash collateral resulting from
average outstanding letters of credit that were below the pro
forma estimates for Fiscal 1993.
Consolidated leased department and other operating income
declined $.5 million in Fiscal 1994 compared to pro forma Fiscal
1993, but remained the same as a percentage of sales. The
decline was primarily attributable to the decrease in leased
department sales.
During Fiscal 1994, the Company sold a shopping plaza and
its corporate jet, both of which were operating properties and
not held for disposition, for a combined total of approximately
$3.4 million in proceeds and recognized a gain of approximately
$1.3 million. The Company is leasing back its store within the
shopping plaza under an operating lease and is utilizing charter
or commercial aircraft for air travel purposes.
As a consequence of the adoption of fresh-start reporting
and SFAS No. 109 (Note 9), the Company recorded an income tax
provision of $3.3 million for Fiscal 1994 with an associated
increase of $3.3 million in additional paid-in capital. In the
near future, Ames will report the tax benefits realized for tax
purposes for cumulative temporary differences, as well as for the
net operating loss carryovers, as an addition to paid-in capital
rather than as a reduction in the tax provision in future
statements of operations. The tax provision has no impact on the
Company's reported taxes payable or cash flows.
The Company recorded an extraordinary gain of $.9 million,
before and after income taxes, from the early settlement of
certain tax notes during Fiscal 1994.
Compared with the projections for Fiscal 1994 contained in a
Form 8-K filed on April 5, 1993 (referred to herein as the
"Plan"), sales for Fiscal 1994 were $157.5 million below Plan and
EBITDA (earnings before interest, taxes, LIFO expense or credit,
non-cash extraordinary or unusual items, and depreciation and
amortization) was $.5 million above Plan. The sales shortfall
against Plan was primarily due to the Company's de-emphasis of
lower-margin hardline categories, a weak apparel market, and
harsh winter weather. The better-than-expected EBITDA result was
attributable to improvement in the gross margin rate, the gain on
the sale of properties, and lower-than-planned expenses.
<PAGE>
<PAGE>
Note 15 to the Consolidated Financial Statements discusses
the anticipated impact on the Company's operations from the
partial roof collapse at the Leesport, PA distribution center.
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 and results of
operations.
RESULTS OF OPERATIONS FOR THE FIVE WEEKS ENDED JANUARY 30, 1993
COMPARED TO THE FOUR WEEKS ENDED JANUARY 25, 1992
The major causes for the 4.9% increase in total sales for
the five weeks ended January 30, 1993, as compared to the four
weeks ended January 25, 1992, were the extra week and the
increase in comparable store sales, partially offset by the
impact of having 62 fewer stores included in the January, 1993
sales. The increase in comparable store sales was primarily due
to two additional circulars in January, 1993 as compared to the
prior January, and the expansion of Crafts & More and jewelry
departments, partially offset by less broadcast advertising and
increased discount store competition. Comparable store sales for
the 309 on-going stores was calculated by including the first
week of fiscal February, 1992 in the prior January sales.
<PAGE>
<PAGE>
The following table sets forth the historical operating
results for the five weeks ended January 30, 1993 and the four
weeks ended January 25, 1992 as a percentage of net sales:
<TABLE>
PERCENTAGE OF NET SALES
----------------------------
Five Weeks Four Weeks
Ended Ended
January 30, January 25,
1993 1992
------------ ------------
<CAPTION>
<S> <C> <C>
Net Sales 100.0% | 100.0%
Cost of goods sold, transportation |
and buying expenses 83.9 | 68.0
-------- | --------
Gross Profit 16.1 | 32.0
Leased dept. and other income 1.4 | 2.4
-------- | --------
17.5 | 34.4
Store operating, administrative and |
general expenses, including leased |
department expenses 33.6 | 42.9
Depreciation and amortization - | 4.6
Amortization of excess of revalued |
net assets over equity (.4) | -
Bankruptcy expenses - | 3.7
-------- | --------
Loss from operations (15.7) | (16.8)
Interest and debt expense (1.3) | (2.3)
Interest income .2 | 1.2
-------- | --------
Net Loss (16.8)% | (17.9)%
======== | ========
</TABLE>
<PAGE>
<PAGE>
Sales of the Company's leased departments were $5.7 million
or 3.8% of total sales for the five weeks ended January 30, 1993
as compared to $5.3 million or 3.7% of total sales for the four
weeks ended January 25, 1992. The increase was primarily due to
the extra week ($1.0 million), partially offset by the 62 fewer
stores ($.7 million).
Consolidated gross profit declined $20.6 million or 15.9% as
a percentage of net sales for January, 1993 as compared to the
prior January. However, the prior January included a year-end
LIFO credit of $12.9 million, or 9.5% of net sales, as compared
to no LIFO charge or credit in January, 1993. In addition, the
prior January had a year-end adjustment related to favorable
inventory results for the month, versus a normal inventory shrink
expense of approximately $2.0 million or 1.4% of net sales in
January, 1993. Furthermore, clearance markdowns were greater in
January, 1993 because of the extra week and the three additional
heavy clearance sales days immediately after Christmas that fell
into January, 1993.
Consolidated store operating, general and administrative
expenses, including leased department expenses, decreased $10.5
million or 9.3% as a percentage of net sales for January, 1993 as
compared to the prior January. These decreases were primarily
due to the store closings, the higher sales in January, 1993
which increased the sales base upon which the percentage was
calculated, management's cost reduction programs in all selling,
general and administrative areas, and reduced broadcast
advertising, partially offset by the additional expenses for the
extra week and additional circulars in January, 1993.
Consolidated depreciation and amortization decreased by $6.3
million or 4.6% of net sales in January, 1993 compared to the
prior year period. As mentioned above, the adoption of
fresh-start reporting as of December 26, 1992 resulted in the
write-off of all the Company's noncurrent assets at that date,
and therefore the January 1993 depreciation and amortization was
for January capital additions only.
The amortization of the excess of revalued net assets over
equity under fresh-start reporting resulted in a $.5 million
credit to the operating results for January, 1993. The Company
is using a ten-year life for the period of amortization.
Consolidated interest and debt expense decreased $1.1
million or approximately 1.0% as a percentage of net sales in
January, 1993 as compared to the prior January due to the prior
January interest accrual on certain pre-petition debt and lower
variable interest rates, partially offset by interest expense on
the new and reinstated debt in January, 1993. The Company had an
average of $14.8 million in outstanding debt during January, 1993
under the revolving credit portion of the New Credit Agreement.
<PAGE>
<PAGE>
Consolidated interest income declined $1.3 million or 1.0%
as a percentage of net sales from the prior January due to lower
interest rates and the payout of the previously restricted cash
and investments on the Consummation Date, partially off- set by
the interest income earned in January, 1993 on the cash
collateral maintained to secure letters of credit and on
segregated funds maintained in connection with certain
prepetition priority and administrative claims.
Consolidated leased department and other operating income
(combined) declined $1.2 million or .9% of net sales due
primarily to the closed stores, a larger sales base upon which
the percentage was calculated, and year-end adjustments to the
layaway reserve which resulted in a $.6 million negative variance
from the prior January.
Because of the emergence from Chapter 11 on December 30,
1992, the Company no longer incurs bankruptcy expenses, which
totalled $5.0 million in January, 1992.
RESULTS OF OPERATIONS FOR THE FORTY-EIGHT WEEKS ENDED DECEMBER
26, 1992 COMPARED TO THE FORTY-EIGHT WEEKS ENDED DECEMBER 28,
1991
As part of its final restructuring prior to its emergence
from Chapter 11, the Company announced on October 30, 1992 the
planned closings of 60 discount stores. These store closings
were the primary cause for the 14.9% decrease in total sales for
the 48 weeks ended December 26, 1992, as compared to the 48 weeks
ended December 28, 1991. The results of operations of all closed
stores from the date of announcement were provided for in the
restructuring charge. Accordingly, the results of the 60 stores
were included in the statement of operations only through
October, 1992. Total sales at these stores through the nine
months ended October, 1992 were $227.9 million and for the fiscal
year ended January 25, 1992 were $362.5 million. The prior
year's operating results included $250.0 million in total sales
for the 77 closed stores through the eight months ended
September, 1991.
On a 309-store basis (the number of stores remaining after
the announcement of the 60 store closings), comparable store
sales for the forty-eight week period were virtually flat at a
.3% decline. The major negative factors affecting comparable
store sales were the unusually cold weather in the spring and
summer, the merchandise revision process in the first half of
Fiscal 1993, increased discount store competition, and a
reduction in circular advertising during the first two quarters
which caused an estimated $50 million reduction in sales. These
negative factors were mostly offset by the Company's continued
installation of Crafts & More departments within the stores, the
remodeling and expansion of jewelry departments, and additional
broadcast advertising in the last half of the year.
<PAGE>
<PAGE>
Management decided to discontinue the selling of
private-label children's apparel because of a significant decline
in sales in the children's department. This decline was due to
poor customer response to the private-label program. The Company
recorded a reserve at December 26, 1992 for the related
markdowns.
Management tested a program of reduced advertising during
the first two quarters of Fiscal 1993 believing that selective
reductions could be made while still producing desired sales.
However, results indicated that sales plans could not be met with
the reduced advertising and for the second half of Fiscal 1993
management resumed its traditional level of circular advertising,
enhanced by additional promotional event advertising.
The following table sets forth the historical operating
results for the forty-eight weeks ended December 26, 1992 and
December 28, 1991 expressed as a percentage of net sales:
<TABLE>
PERCENTAGE OF NET SALES
FORTY-EIGHT WEEKS ENDED
-------------------------------
DECEMBER 26, DECEMBER 28,
1992 1991
------------ ------------
<CAPTION>
<S> <C> <C>
Net Sales 100.0% 100.0%
Cost of goods sold, transportation
and buying expenses 74.0 74.0
-------- --------
Gross Profit 26.0 26.0
Leased dept. and other income 1.5 1.6
-------- --------
27.5 27.6
Store operating, administrative and
general expenses, including leased
department expenses 26.8 27.3
Depreciation and amortization 1.9 2.0
Bankruptcy expenses 1.1 .8
Restructuring charges 3.9 5.5
-------- --------
Loss from operations (6.2) (8.0)
Interest and debt expense (.4) (2.3)
Interest income .5 .7
-------- --------
Loss before fresh-start revaluation (6.1) (9.6)
Revaluation charge (17.1) -
-------- --------
Loss before extraordinary item (23.2) (9.6)
Extraordinary gain 54.7 -
-------- --------
Net income (loss) 31.5% (9.6)%
======== ========
</TABLE>
<PAGE>
<PAGE>
Sales of the Company's leased departments were $111.5
million or 4.7% of total sales for the forty-eight weeks ended
December 26, 1992 as compared to $132.1 million or 4.7% of total
sales for the forty-eight weeks ended December 28, 1991. The
decrease in leased department sales volume was primarily due to
the 77 and 62 store closings in the forty-eight weeks ended
December 28, 1991 and December 26, 1992, respectively.
Consolidated gross profit declined $104.6 million but
remained the same as a percentage of net sales for the
forty-eight week period as compared to the same prior-year
period. The decline in gross profit dollars was primarily due to
the 77 and 62 store closings. Gross profit for the current
period was positively affected by a LIFO credit of $5.8 million,
or .3% of net sales, versus a LIFO charge of $7.3 million, or .3%
of net sales, in the prior period and negatively impacted by a
.1% increase, as a percent of net sales, in inventory shrink,
which was due in part to unfavorable results for the first
full-year's physical inventory at the Leesport, PA distribution
center. Gross profit percentage was under downward pressure in
the last months of the year due to extensive promotions,
resulting in a larger percentage of sales coming from sale items.
This trend adversely impacted gross profit at the end of the
third quarter and continued into November and early December.
This negative factor was partially offset by the continued
expansion of Crafts & More and jewelry, both higher margin categories.
In addition, the Company continued to consolidate its
distribution centers, resulting in improved service and economies
of scale.
Consolidated store operating, general and administrative
expenses, including leased department expenses, decreased $121.4
million or .5% as a percentage of net sales for the 48 weeks
ended December 26, 1992 as compared to the same prior year
period. These decreases were due to the 77 and 62 store closings
and management's cost reduction programs in all selling, general
and administrative areas, partially offset by increased broadcast
advertising and coupon promotions, expenses incurred for store
remodeling (primarily internal labor costs), and the effect of
calculating the percentage of net sales on a reduced sales base.
Consolidated depreciation and amortization decreased $11.0
million but remained approximately the same as a percentage of
net sales for the 48-week period. The decrease was due to the 77
and 62 store closings.
Consolidated interest and debt expense decreased $51.0
million or 1.9% as a percentage of net sales for the 48-week
period. This decrease was due to the discontinuance of certain
interest accruals as a result of the Chapter 11 proceedings, a
lower number of capital lease obligations due to the store
closings, and lower variable interest rates, partially offset by
the effect of larger borrowings under the Debtor-in-Possession
<PAGE>
<PAGE>
(DIP) Facility. The maximum amount borrowed under the DIP
Facility was $70 million during the 48-week period compared to
$30.0 million in Fiscal 1992. These borrowings were utilized for
Christmas season inventory build-up and were repaid in early
December.
Consolidated interest income declined $7.3 million or .2% as
a percentage of net sales due to lower interest rates and smaller
cash balances available for investment.
Consolidated leased department and other operating income
(combined) decreased $8.8 million and .1% as a percentage of net
sales for the 48-week period. These decreases were primarily due
to the 77 and 62 store closings.
Additional costs related to the Chapter 11 case and the
restructuring were reflected as bankruptcy expenses (primarily
professional fees) and restructuring charges. Bankruptcy
expenses increased $2.5 million or .3% as a percentage of net
sales for the 48-week period in connection with the filing and
confirmation of the plan of reorganization. The restructuring
charge for the 48 weeks ended December 26, 1992 related primarily
to the closing of the 60 stores and the discontinuance of
private-label children's apparel. The restructuring charge
incurred during the 48 weeks ended December 28, 1991 resulted
primarily from the closing of 77 stores and two distribution
centers, the loss associated with the sale of M&B (the Company's former
wholesale sporting goods subsidiary), and the closing and sale of
eleven freestanding Crafts & More stores.
There was no tax provision for either of the 48-week
periods. The extraordinary gain on debt discharge as a result of
the consummation of the plan of reorganization for the 48-weeks
ended December 26, 1992 was not a taxable item. The Company is
in a net operating loss carryforward position and does not
receive any current income tax benefit from losses incurred.
As a result of the emergence from Chapter 11 and adoption of
fresh-start reporting, the Company recorded a non-taxable
extraordinary gain on debt discharge of approximately $1.25
billion (Note 20) and a fresh-start revaluation charge of
approximately $391 million (Note 2) for the 48 weeks ended
December 26, 1992. As a result of adopting fresh-start reporting
as of December 26, 1992, future operating results are not
comparable in certain material respects to periods through
December 26, 1992.
<PAGE>
<PAGE>
(b) 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 other banks and financial institutions, for a
secured revolving credit facility up to $300 million (the "New
Facility") that contains terms, covenants and interest rates that
management believes are generally more favorable than those in
the original post-emergence Credit Agreement. 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 New
Facility has a sublimit of $100 million for letters of credit,
with an additional sublimit of $45 million for standby letters of
credit. The New Facility has no requirement for cash
collateralization of letters of credit, except in limited
instances as described in the New Facility. The funds under the
New Facility may only be used for working capital and for the
payment of certain debt described below. The interest rate per
annum on the New Facility is equal to the Reference Rate (as
defined in the New Facility) plus 2% of the first $270 million of
Advances (subject to downward adjustments) or 5% of the last $30
million of Advances. Alternatively, the first $270 million of
Advances under the New Facility may be made at the interest rate
per annum equal to the Eurodollar Rate ( as defined in the New
Facility) plus 3.75% (subject to downward adjustments). A copy
of the New Facility is expected to be filed on a Form 8-K in
early May, 1994.
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 and the outstanding borrowings and term note under the
Credit Agreement. Funding under the New Facility is not expected
to occur until on or about June 30, 1994. As a result of the
refinancing, Ames is expecting to report a non-cash extraordinary
charge of approximately $2.5 million relating to the write-off of
deferred financing costs and debt discounts in Fiscal 1995.
The Company's principal sources of liquidity are certain
credit facilities that are available to it, cash from operations,
and cash on hand. Upon consummation of the plan of
reorganization, Ames obtained $210 million of post-emergence
financing (the "Credit Agreement"), including approximately $176
million in the form of revolving credit financing (the
"Revolver"). In addition, Ames obtained a $90 million letter of
credit facility which has since been increased to $120 million
(the "Letter of Credit Facility"). The Company's historical
borrowing patterns changed as a result of the Letter of Credit
Facility. That facility requires cash collateralization at 105%
of outstanding letters of credit, which in turn required an
average incremental increase of approximately $60 million in
outstanding borrowings under the Revolver in Fiscal 1994. The
Company's peak borrowing level under the Revolver, including
funds borrowed for the cash collateralization of letters of
credit, was $161.9 million in October, 1993. Ames repaid all
such borrowings in December, 1993 before borrowing $15.4 million
in January, 1994.
<PAGE>
<PAGE>
Ames is in compliance with its debt covenants through the
latest completed fiscal period (March, 1994).
Ames experienced a decline of $15.4 million in unrestricted
cash during Fiscal 1994. This decline was due, in part, to the
payment of approximately $15.0 million of deferred distributions
under the plan of reorganization, payments of $13.7 million of
other debt and capital lease obligations, payments of $32.4
million of restructuring costs, purchases of $20.2 million of
fixed assets, and the paydown of $7.6 million in the outstanding
balance under the Revolver, partially offset by a combined $40.5
million of cash proceeds on sales of net assets held for
disposition and other properties, $27.7 million of restricted
cash withdrawals, and $7.3 million in net cash provided by
operations prior to the payment of restructuring costs. Please
see below for further discussions of activities affecting cash
and liquidity for Fiscal 1994.
Ames experienced a total cash decrease of $25.6 million for
the forty-eight weeks ended December 26, 1992, prior to the
consummation cash distributions. The Company's unrestricted cash
position declined $21.2 million for the five weeks ended January
30, 1993. The 48-week decline was primarily due to the operating
loss incurred, partially offset by the proceeds from the sale of
assets held for disposition (primarily from the 77 store
closings). The 48-week cash decline caused Ames to increase its
peak borrowings by $40 million under the DIP Facility as compared
to the prior year. The January cash decrease was primarily a
result of the reduction of accounts payable and the operating
loss incurred, partially offset by the initial proceeds from the
sale of inventories at the 60 closing stores and short-term
borrowings under the Revolver. Please see below for further
discussions of activities affecting cash and liquidity for Fiscal
1993.
Cash flow and liquidity stabilized during Fiscal 1992,
primarily resulting from a decrease of inventory levels and the
sale of assets held for disposition, offset by the operating loss
incurred and the reduction of accounts payable. Trade payables
at the end of Fiscal 1992 were one-half of the prior year-end
amount. Despite the net loss reflected in the statement of
operations, net cash provided by operations totaled approximately
$4.6 million for Fiscal 1992. This enabled Ames to fund its
merchandise inventory purchases in the third and fourth quarters
with less than the average borrowings required in previous years.
Other than payments approved by the Bankruptcy Court made
to secured creditors as adequate protection payments, or costs
to cure defaults on leases and contracts assumed in the Chapter
11 case, principal and interest payments on indebtedness incurred
prior to the Filing Date were not made during the Chapter 11
proceedings. Virtually all pre-petition indebtedness of Ames was
subject to settlement under the reorganization case as a result
of the filing of the petitions under Chapter 11.
<PAGE>
<PAGE>
Chemical Bank, as agent for a group of banks, initially
provided the Company with a $250 million Debtor-in-Possession
Revolving Credit Agreement (the "DIP Facility") during Chapter
11. The DIP Facility provided Ames, at variable interest rates,
with a line of credit and letter of credit facility that could be
used to purchase inventory and for other corporate purposes. The
DIP Facility was lowered to $200 million in August, 1992 and
expired, in accordance with its terms, on the Consummation Date.
As of January 29, 1994 and January 30, 1993, approximately
$55.0 and $57.4 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. This cash collateral is included
in "Restricted cash and short-term investments." Approximately
$66.3 million had been placed as such collateral at the
Consummation Date. The amounts of cash collateral change as the
balances outstanding under the Letter of Credit Facility change,
since the cash collateral must equal 105% of the Company's
outstanding obligations, including $5.5 and $6.5 million at
January 29, 1994 and January 30, 1993, respectively, for future
increases to standby letters of credit to cover expected workers'
compensation claims. Ames earns interest on invested cash
collateral.
In addition, as of January 29, 1994 and January 30, 1993,
Ames restricted approximately $1.0 and $26.3 million of cash,
respectively, for expected payments of certain remaining
administrative and priority claims under the Amended Plan. This
amount is also included in "Restricted cash and short-term
investments." The associated liability is included in "Accrued
expenses." Approximately $37.7 million had been placed on
deposit for such claims at the Consummation Date. Management
believes that the remaining segregated funds are adequate to
cover all related payments. Ames earns interest on invested
segregated funds.
The following two paragraphs detail the components of
restricted cash prior to the Company's emergence from Chapter 11
and the related cash flows from the sale of assets held for
disposition from the Filing Date through December 26, 1992.
Ames received and segregated through December 26, 1992,
pursuant to Bankruptcy Court orders or agreements with creditors,
$244.9 million of proceeds from the sales of inventory, lease
contracts, furniture and equipment pursuant to the closing of 221
stores and other asset sales and $27.1 million of interest on
such proceeds. Pursuant to a Bankruptcy Court order and
agreements with creditors, Ames was authorized to draw up to
$51.0 million of such segregated proceeds and interest to pay for
actual expenses incurred in connection with the closing of the
221 stores and related restructuring costs. Furthermore, Ames
applied for and received Bankruptcy Court approval to use certain
additional segregated proceeds. Through December 26, 1992, Ames
<PAGE>
<PAGE>
had drawn $62.3 million of these funds ($41.4 million
representing the reimbursement for actual expenses incurred in
connection with the closing of the 221 stores). In addition,
other funds totalling $21.8 million were segregated for payment
of sales and payroll taxes and utilities incurred after the
Filing Date, as well as for the payment of certain mortgages.
Prior to distribution on the Consummation Date, Ames had on hand
$231.5 million of cash short-term investments related to the 221
stores and related escrow funds whose use was restricted and
subject primarily to Bankruptcy Court approval.
In addition, Ames received and segregated through December
26, 1992, pursuant to Bankruptcy Court orders, $42.2 million of
proceeds from the sales of inventory and other assets pursuant to
the closing of 77 stores and $8.5 million from the sale of
Mathews & Boucher, Inc. ("M&B"), and $1.0 and $.3 million of interest on
such proceeds, respectively. Through December 26, 1992, Ames had
drawn $17.6 and $.4 million from the 77 store funds and M&B funds,
respectively, to pay for expenses incurred in connection with the
closings and sale. Prior to the distribution on the Consummation
Date, Ames had on hand $25.7 million and $8.3 million of cash and
short-term investments related to the 77 stores and M&B, respectively,
whose use was restricted and subject primarily to Bankruptcy
Court approval.
For purposes of the following discussions, due to the
adoption of fresh-start reporting at December 26, 1992,
comparisons of the Company's balance sheets as of January 29,
1994, January 30, 1993 and December 26, 1992 to the corresponding
prior periods are made only when, in management's opinion, such
comparisons are meaningful. The changes in operating assets and
liabilities and other, net, in the consolidated statements of
cash flows exclude reclassifications related to the restructuring
and the Chapter 11 proceedings.
Merchandise inventories, valued on a LIFO basis, declined
$22.4 million to $442.2 million at January 29, 1994 from $464.6
million at January 30, 1993 primarily as a result of planned
reductions and more stringent inventory controls. Inventories
had declined $13.4 million during the five weeks ended January
30, 1993, primarily as a result of January clearance sales.
Inventories had increased $38.0 million to $478.0 million at
December 26, 1992 from $440.0 million at January 25, 1992 due
primarily to the lower than planned Christmas season sales, the
timing of inventory shipments and clearance sales, and the
elimination of the LIFO reserve of $34.3 million at December 26,
1992, partially offset by the effect of the closing of the 60
stores, which contained approximately $67.9 million of inventory
at January 25, 1992. Inventory shipments were unusually low
immediately prior to January 25, 1992 and post-Christmas
clearance sales took place after December 26, 1992. The LIFO
reserve as of December 26, 1992 was eliminated in connection with
the adoption of fresh-start reporting. Ames remained on the LIFO
method after emergence from Chapter 11, but there was no LIFO
charge or credit in Fiscal 1994 and January, 1993 because
inventory levels declined, the Company's merchandise mix
continued to change, and inflation was insignificant during those
periods.
<PAGE>
<PAGE>
Accounts payable increased $4.8 million during Fiscal 1994,
due primarily to the timing of inventory shipments prior to
January 29, 1994, and declined $57.1 million during the five
weeks ended January 30, 1993, primarily as a result of the timing
of inventory shipments at December 26, 1992 and the curtailment
of purchases at the 60 closing stores. Trade accounts payable at
January 30, 1993 were almost twice the level at January 25, 1992
due to the unusually low level of inventory shipments prior to
last year-end. Accounts payable had increased $57.9 million
during the forty-eight weeks ended December 26, 1992 primarily
due to the inventory build-up and the timing of inventory
shipments discussed above, partially offset by the curtailment of
purchases at the 60 closing stores. During Fiscal 1994, 1993 and
1992, the Company paid its trade payables in an average of 35, 35
and 31 days, respectively. Payments were and are being made
within the terms negotiated with vendors.
During Fiscal 1994 and January 1993, accrued expenses and
the restructuring reserve both declined as a result of payments
out of the segregated account and payments associated with the 60
closing stores. A major portion of the self-insurance reserve as
of January 29, 1994 may not be paid within a year. Accrued
expenses had increased at December 26, 1992 from January 25, 1992
primarily due to the segregated account liability, which
contained a larger accumulation of professional fees and assumed
lease liabilities.
Merchandise inventories, valued primarily on a LIFO basis,
were $440.0 million at the end of Fiscal 1992 compared with
$552.5 million at the end of Fiscal 1991. The Fiscal 1992
decline was primarily a result of the closing of 77 stores, which
contained approximately $88.8 million of inventory at January 26,
1991, and the disposal of seasonal merchandise on a more timely
basis through special promotions, partially offset by a $15.6
million decrease in the LIFO reserve.
At the end of Fiscal 1992, accounts payable were $109.2
million compared with $145.3 million at the end of Fiscal 1991.
Trade payables at January 25, 1992 were one-half of the prior
year-end level due to the unusually low level of inventory
shipments prior to January 25, 1992. Inventory purchases
declined in Fiscal 1992 as a result of the store closings and
efforts to reduce inventory levels. Payments were made within
the terms negotiated with vendors. Accrued expenses increased in
Fiscal 1992 primarily due to higher reserves for bankruptcy
professional fees and insurance.
The Company and its pre-petition lenders agreed to a
restructuring of the Company's obligations as part of the plan of
reorganization. These obligations now consist primarily of
secured notes that certain banks elected to receive and deferred
cash distributions. The major component of the current portion
of these long-term debts at January 29, 1994 related primarily to
the cash distribution of $8.0 million made on January 31, 1994
pursuant to the plan of reorganization.
<PAGE>
<PAGE>
The note payable of approximately $15.4 and $23.0 million at
January 29, 1994 and January 30, 1993, respectively, was the
amount outstanding under the Revolver. The unfavorable lease
liability was recorded as part of fresh-start reporting and other
long-term liabilities consist primarily of the long-term portion
of unemployment tax reserves. The unemployment tax reserves were
recorded at October 24, 1992 for the higher estimated
unemployment taxes to be paid as a result of the large number of
store closings and associated reductions in work force during the
Company's restructuring.
No dividends, common or preferred, were paid while Ames was
under the protection of Chapter 11, or since its emergence from
Chapter 11. The Company is restricted from declaring dividends
under the Credit Agreement.
Capital expenditures for Fiscal 1994 were $20.2 million and
consisted of: installation of scanning equipment ($4.7 million);
small-scale remodeling of 24 of the Company's older stores ($3.7
million); expansion of certain jewelry departments ($3.0
million); and various other projects ($8.8 million), including
expansions of certain specialty departments to other stores. The
decrease from the Fiscal 1993 expenditures of $29.0 million was
due primarily to the prior year costs related to the complete
remodeling of 18 stores. The higher Fiscal 1992 capital
expenditures of $32.1 million were related to the completion of
the Leesport, Pennsylvania distribution center.
Capital spending, subject to possible limitations under the
New Facility, is expected to be approximately $32.3 million for
Fiscal 1995 (including $7.3 million of carryovers for projects
authorized in Fiscal 1994), primarily for small-scale remodels at
50 stores ($2.7 million); complete remodels (with new
merchandising strategies) at 4 test stores ($2.5 million); other
remodeling activity ($5.6 million), including continued expansion
of certain specialty departments and new apparel fixtures;
projects to improve scanning and management information systems
($7.5 million); and various other projects ($14.0 million). Ames
expects to finance equipment purchases and the remodeling of
existing stores through internally-generated funds. Ames adjusts
its plans for making such expenditures depending on the amount of
internally-generated funds available. Land, buildings and
improvements are principally financed through either long-term
capital or operating leases.
Management believes the Company's ability to meet its
financial obligations and make planned capital expenditures will
depend on the Company's future operating performance, which will
be subject to financial, economic and other factors affecting the
industry and operations of the Company, including factors beyond
its control. Management believes that the Company's operating
performance and the availability of its financing facilities will
provide sufficient liquidity to allow the Company to meet its
financial obligations in the near term.
<PAGE>
<PAGE>
Ames currently anticipates the following investment and
financing activities for Fiscal 1995: capital expenditures as
described above, funding under the New Facility and related debt
payments described above, planned borrowings and payments under
the Revolver and the New Facility, planned payment of debt and
capital lease obligations, and the sale of properties and lease
interests from time to time. In anticipation of a further
increase in discount store competition, Ames is revising store
layouts and merchandise as part of its new strategies previously
discussed. These new strategies are expected to influence the
nature of capital expenditures over the next few years. As
discussed further in Note 15 to the Consolidated Financial
Statement, there was a partial roof collapse at the Leesport
distribution center. Incremental borrowings of approximately $10
million were required to replace certain inventories at the
Leesport, PA facility during the first quarter of Fiscal 1995.
Management believes the actions set forth above and the
availability of its financing facilities, together with the
Company's available cash and expected cash flows from Fiscal 1995
operations and beyond, will enable Ames to fund its expected
needs for working capital, capital expenditures and debt service
requirements. Achievement of expected cash flows from operations
is dependent upon the Company's attainment of sales, gross
profit, and expense levels that are reasonably consistent with
its financial projections.
The Company expects from time to time to consider possible
capital market transactions, debt refinancing, and other
additional transactions to further reduce the Company's overall
debt service requirements and further enhance the Company's
financial flexibility.
The significant net operating loss carryforwards remaining
after Fiscal 1994, subject to limitations pursuant to Internal
Revenue Code Sec. 382, should offset income on which taxes would
otherwise be payable in future years.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See Index to Consolidated Financial Statements.
ITEM 9. DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
None.
<PAGE>
<PAGE>
PART III
ITEM 10. OFFICERS AND DIRECTORS OF THE REGISTRANT.
Information as to the directors of the registrant required by
Item 10 is incorporated herein by reference from the information set
forth under the caption "ELECTION OF DIRECTORS" of the Company's
definitive proxy statement to be filed pursuant to Regulation 14A
within 120 days after the close of its fiscal year.
The following table indicates the names of all executive officers
of Ames and the offices held by each. There are no arrangements or
understandings between any officer below and any other person
pursuant to which he was selected as an officer.
Peter Thorner ............. President, Chief Operating Officer
William N. Anderson ....... Senior Vice President,
General Manager, Hardlines
Eugene E. Bankers ......... Senior Vice President, Marketing
Richard L. Carter ......... Senior Vice President,
Human Resources
John W. Hermsen ........... Senior Vice President,
Store Operations
Paul G. Leonard ........... Senior Vice President,
General Manager, Softlines
David H. Lissy ............ Senior Vice President,
General Counsel and Corporate
Secretary
Cornelius F. Moses, III ... Senior Vice President, Treasury
William C. Najdecki ....... Senior Vice President,
Chief Accounting Officer
Donald E. Norman .......... Senior Vice President, Logistics
Ronald T. Raymond ......... Senior Vice President,
Asset Protection
PETER THORNER, age 50, was named to the additional post of
President in February, 1993 after being appointed Chief Operating
Officer in December, 1992. He joined Ames in May, 1990 as Executive
Vice President and Chief Financial Officer. He was named to the Ames
Board of Directors in March, 1991, and to the reorganized Ames Board
of Directors in December, 1992. Prior to joining Ames, he was
Managing Director, Senior Vice President and Chief Financial Officer
of Wheelabrator Technologies, Inc. from 1987 to March, 1990.
<PAGE>
<PAGE>
WILLIAM N. ANDERSON, age 47, was appointed Senior Vice President,
General Manager, Hardlines, in December, 1992. He joined Ames in
July, 1992 as Senior Vice President, General Manager, Home. Prior to
joining Ames, he was Chief Executive Officer of Reality Technologies
from March, 1991 to October, 1992; and co-founder, President and
Chief Operating Officer of Domain, Inc. from 1986 to 1990.
EUGENE E. BANKERS, age 54, joined Ames as Senior Vice President,
Marketing, in December, 1993. Prior to joining Ames, he was employed
at Shopko Stores, Inc. as Vice President, Communications and Investor
Relations from 1991 to 1993, and Vice President of Advertising, Sales
Promotions, Special Events and Public Relations, from 1982 to 1991.
RICHARD L. CARTER, age 45, joined Ames as Senior Vice President,
Human Resources in February, 1993. Prior to joining Ames, he was
Senior Vice President, Human Resources at G. Fox & Co., Inc. from 1989 to
1993; and Senior Vice President, Human Resources at Hahne's
Department Stores, Inc. from 1987 to 1989.
JOHN W. HERMSEN, age 47, joined Ames as Senior Vice President,
Store Operations, in June, 1993. Prior to joining Ames, he was
employed at Shopko Stores, Inc. as Vice President for Store
Operations, Loss Prevention and Health Services from 1986 to 1993.
He was also a member of Shopko's real estate committee during that
time.
PAUL G. LEONARD, age 38, became Senior Vice President, General
Manager, Softlines, in April, 1993. He joined Ames in April, 1991 as
Vice President, General Manager, Jewelry and became Vice President,
General Manager, Softlines in December, 1992. Prior to joining Ames,
he was Vice President, Merchandising with Golden Touch Imports from
February, 1990 to March, 1991; and Vice President, Divisional
Merchandise Manager with Caldor Corp. from October, 1987 to February,
1990.
DAVID H. LISSY, age 50, became Senior Vice President, General
Counsel and Corporate Secretary in December, 1992. He began work on
the Ames Chapter 11 cases in June 1990, and in July 1990 was named as
Vice President, Legal Services. He was appointed Vice President,
General Counsel and Corporate Secretary in October, 1991. He has
been owner of Samuel Lehrer & Co., Inc., a wholesaler of fine quality
fabrics, since 1988. Prior to joining Ames, he was President and
Chief Operating Officer of PRD Property Development, Inc. from 1988
to 1989; and was Vice President and Executive Assistant to the
Chairman of McCrory Stores from 1986 to 1988.
CORNELIUS F. MOSES, III, age 35, became Senior Vice President,
Treasury in December, 1992. He joined Ames in June, 1990 as Vice
President, Special Projects. He became Vice President, Associate
Treasurer in September, 1990 and Vice President and Treasurer in
September, 1991. Prior to joining Ames, he served as
Director-Project Development, Manager-Project Finance, and Financial
Analyst for Wheelabrator Technologies, Inc. from 1985 to June, 1990.
<PAGE>
<PAGE>
WILLIAM C. NAJDECKI, age 43, became Senior Vice President, Chief
Accounting Officer in December, 1992. He joined Ames in April, 1991
as Vice President, Bankruptcy Administration, and became Vice
President, Controller in July, 1991. Prior to joining Ames, he was
Hardlines Controller for Montgomery Ward from 1989 to 1991; and
Regional Administrative Officer for Highland Superstores, Inc. from
1986 to 1991.
DONALD E. NORMAN, age 57, became Senior Vice President, Logistics
in December, 1992. He was previously Senior Vice President,
Management Information Systems from September, 1990 to December,
1992. Prior to joining Ames, he served as Principal of Donald Norman
Associates from April, 1990 to September, 1990; and President, and
Vice President, at Peter R. Johnson & Associates from December, 1986 to
April, 1990.
RONALD T. RAYMOND, age 50, became Senior Vice President, Asset
Protection in April, 1993. Since joining Ames in 1987, he has served
in a number of Loss Prevention positions, from Corporate Director to
Assistant Vice President to Vice President, and became Vice
President, Internal Audit and Loss Prevention in December, 1992.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by Item 11 is incorporated herein by
reference from the information set forth under the sections titled
"Executive Compensation", "Board Meetings and Committees",
"Compensation of Directors", "Employment Contracts, Termination,
Severance and Change-of-Control Arrangements", "Additional
Information with respect to Board of Directors Interlocks and Insider
Participation in Compensation Decisions", "The Board of Directors
Report on Executive Compensation", and "Performance Graph" of the
Company's definitive proxy statement to be filed pursuant to
Regulation 14A within 120 days after the close of its fiscal year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The information required by Item 12 is incorporated herein by
reference from the information set forth under the sections titled
"Security Ownership of Management" and "Security Ownership of Certain
Beneficial Owners" of the Company's definitive proxy statement to be
filed pursuant to Regulation 14A within 120 days after the close of
its fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by Item 13 is incorporated herein by
reference from the information set forth under the section titled
"Transactions with Management" of the Company's definitive proxy
statement to be filed pursuant to Regulation 14A within 120 days
after the close of its fiscal year.
<PAGE>
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) DOCUMENTS FILED AS PART OF THIS FORM 10-K
1. FINANCIAL STATEMENTS
The Financial Statements listed in the accompanying
Index to Consolidated Financial Statements are filed as
part of this Form 10-K.
2. FINANCIAL STATEMENT SCHEDULES
The Financial Statement Schedules listed in the
accompanying Index to Consolidated Financial Statements
are filed as part of this Form 10-K.
3. EXHIBITS
The Exhibits filed as part of this Form 10-K are listed
on the Exhibit Index immediately preceding such
Exhibits, incorporated herein by reference.
(b) REPORTS ON FORM 8-K
Reports on Form 8-K were filed with the Securities and
Exchange Commission during the fourth quarter as
follows:
<TABLE>
DATE OF REPORT DATE OF FILING ITEM # DESCRIPTION
-------------- -------------- ------ --------------------------------------
<CAPTION>
<S> <C> <C> <C>
Dec. 1, 1993 Dec. 1, 1993 5 Disclosure of Fiscal October 1993
results.
Dec. 13, 1993 Dec. 13, 1993 5 Disclosure of Fiscal November 1993
results.
Jan. 17, 1994 Jan. 18, 1994 5 Disclosure of Fiscal December 1993
results.
</TABLE>
<PAGE>
<PAGE>
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.
AMES DEPARTMENT STORES, INC.
(Registrant)
Dated: April 29, 1994 /S/ PETER THORNER
-----------------------------------------
Peter Thorner, President, Chief
Operating Officer and Director
Dated: April 29, 1994 /S/ WILLIAM C. NAJDECKI
-----------------------------------------
William C. Najdecki, Senior Vice
President, Chief Accounting 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.
Dated: April 29, 1994 /S/ PAUL M. BUXBAUM
---------------------------------------
Paul M. Buxbaum, Director and Chairman
Dated: April 29, 1994 /S/ FRANCIS X. BASILE
-----------------------------------------
Francis X. Basile, Director
Dated: April 29, 1994 /S/ ALAN COHEN
-----------------------------------------
Alan Cohen, Director
Dated: April 29, 1994 /S/ SIDNEY S. PEARLMAN
-----------------------------------------
Sidney S. Pearlman, Director
<PAGE>
<PAGE>
AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
------------------------------------
FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
(FORM 10-K)
EXHIBITS
FOR THE FISCAL YEAR ENDED JANUARY 29, 1994,
THE FIVE WEEKS ENDED JANUARY 30, 1993,
THE FORTY-EIGHT WEEKS ENDED DECEMBER 26, 1992,
AND FOR THE FISCAL YEAR ENDED JANUARY 25, 1992
(WITH REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS)
------------------------------------
<PAGE>
<PAGE>
AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
----------------------------------------------
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL
STATEMENT SCHEDULES FOR THE FISCAL YEAR ENDED JANUARY 29, 1994,
THE FIVE WEEKS ENDED JANUARY 30, 1993, THE FORTY-EIGHT WEEKS ENDED
DECEMBER 26, 1992, AND FOR THE FISCAL YEAR ENDED JANUARY 25, 1992
FINANCIAL STATEMENTS:
Report of Independent Public Accountants.
Consolidated Statements of Operations for the fiscal year ended
January 29, 1994, the five weeks ended January 30, 1993, the
forty-eight weeks ended December 26, 1992, and for the fiscal
year ended January 25, 1992.
Consolidated Balance Sheets as of January 29, 1994 and January
30, 1993.
Consolidated Statements of Changes in Stockholders' Equity
(Deficit) for the fiscal year ended January 29, 1994, the five
weeks ended January 30, 1993, the forty-eight weeks ended
December 26, 1992, and for the fiscal year ended January 25,
1992.
Consolidated Statements of Cash Flows for the fiscal year ended
January 29, 1994, the five weeks ended January 30, 1993, the
forty-eight weeks ended December 26, 1992, and for the fiscal
year ended January 25, 1992.
Notes to Consolidated Financial Statements.
SCHEDULES:
II. Amounts Receivable from Related Parties and Underwriters,
Promoters, and Employees other than Related Parties for the
fiscal year ended January 29, 1994, the five weeks ended
January 30, 1993, the forty-eight weeks ended December 26,
1992, and for the fiscal year ended January 25, 1992.
V. Fixed Assets for the fiscal year ended January 29, 1994, the
five weeks ended January 30, 1993, the forty-eight weeks
ended December 26, 1992, and for the fiscal year ended
January 25, 1992.
VI. Accumulated Depreciation, Depletion and Amortization of Fixed
Assets for the fiscal year ended January 29, 1994, the five
weeks ended January 30, 1993, the forty-eight weeks ended
December 26, 1992, and for the fiscal year ended January 25,
1992.
<PAGE>
<PAGE>
VIII. Valuation and Qualifying Accounts for the fiscal year ended
January 29, 1994, the five weeks ended January 30, 1993, the
forty-eight weeks ended December 26, 1992, and for the fiscal
year ended January 25, 1992.
IX. Short Term Borrowings for the fiscal year ended January 29,
1994, the five weeks ended January 30, 1993, the forty-eight
weeks ended December 26, 1992, and for the fiscal year ended
January 25, 1992.
X. Supplementary Income Statement Information for the fiscal
year ended January 29, 1994, the five weeks ended January 30,
1993, the forty-eight weeks ended December 26, 1992, and for
the fiscal year ended January 25, 1992.
SCHEDULES OMITTED:
All other schedules are omitted as they are not applicable or
the information is shown in the consolidated financial statements
or notes thereto.
<PAGE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE STOCKHOLDERS AND BOARD OF DIRECTORS OF
AMES DEPARTMENT STORES, INC.:
We have audited the accompanying consolidated balance sheets of Ames
Department Stores, Inc. (a Delaware corporation) and subsidiaries as
of January 29, 1994 and January 30, 1993, and the related
consolidated statements of operations, changes in stockholders'
equity (deficit) and cash flows for the fifty-two weeks ended January
29, 1994, the five weeks ended January 30, 1993, the forty-eight
weeks ended December 26, 1992 and the fifty-two weeks ended January
25, 1992. These consolidated financial statements and the schedules
referred to below are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated
financial statements and schedules 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, the financial statements referred to above present
fairly, in all material respects, the financial position of Ames
Department Stores, Inc. and subsidiaries as of January 29, 1994 and
January 30, 1993, and the results of their operations and their cash
flows for the fifty-two weeks ended January 29, 1994, the five weeks
ended January 30, 1993, the forty-eight weeks ended December 26, 1992
and the fifty-two weeks January 25, 1992 in conformity with generally
accepted accounting principles.
On December 30, 1992, the Company emerged from bankruptcy. As
discussed in Note 2 to the financial statements, effective December
26, 1992, the Company accounted for the reorganization, adopted
"fresh-start reporting" and changed its methods of accounting for
post-retirement benefits other than pensions and income taxes. As a
result of the reorganization and adoption of fresh-start reporting,
the consolidated statements of operation and cash flows for the
fifty-two weeks ended January 29, 1994 and the five weeks ended
January 30, 1993 are not comparable to the consolidated statements of
operations and cash flows for the forty-eight weeks ended December
26, 1992 and the fifty-two weeks ended January 25, 1992 since they
present the consolidated results of operations and cash flows of the
reorganized entity.
<PAGE>
<PAGE>
Our audits were made for the purpose of forming an opinion on the
basic financial statements taken as a whole. The schedules listed in
the index to the consolidated financial statements are presented for
purposes of filing with the Securities and Exchange Commission's
rules and are not a part of the basic financial statements. These
schedules have been subjected to the auditing procedures applied in
the audit of the basic financial statements and, in our opinion,
fairly state in all material respects the financial data required to
be set forth therein in relation to the basic financial statements
taken as a whole.
ARTHUR ANDERSEN & CO.
New York, New York
April 1, 1994 (except with respect to
the matter discussed in Note 6, as to
which the date is April 28, 1994)
<PAGE>
<PAGE>
<TABLE>
AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Amounts)
<CAPTION>
Fiscal Year Five Weeks Forty-eight Fiscal Year
Ended Ended Weeks Ended Ended
January 29, January 30, December 26, January 25,
1994 1993 1992 1992
Registrant Registrant Predecessor Predecessor
------------ ---------- ------------ ------------
<S> <C> <C> <C> <C>
TOTAL SALES $2,228,135 $148,003 | $2,395,570 $2,956,762
Less: Leased department sales 104,608 5,654 | 111,544 137,327
------------ ---------- |------------ ------------
NET SALES 2,123,527 142,349 | 2,284,026 2,819,435
Cost of goods sold and transportation expenses 1,542,205 119,465 | 1,690,653 2,079,622
------------ ---------- |------------ ------------
GROSS PROFIT 581,322 22,884 | 593,373 739,813
Leased department income 18,829 1,018 | 20,078 24,719
Other operating income 15,528 1,063 | 15,459 23,386
------------ ---------- |------------ ------------
615,679 24,965 | 628,910 787,918
Store operating, administrative and general expenses, |
including leased department expenses 581,462 47,790 | 611,442 792,517
Depreciation and amortization expense 2,105 2 | 43,919 58,602
Amortization of the excess of revalued net assets |
over equity under fresh-start reporting (6,215) (530) | - -
Bankruptcy expenses - - | 25,500 28,000
Restructuring charges - - | 88,500 147,200
------------ ---------- |------------ ------------
|
PROFIT (LOSS) FROM OPERATIONS 38,327 (22,297) | (140,451) (238,401)
|
Interest and debt expense (28,883) (1,916) | (9,917) (64,019)
Interest income 2,449 321 | 11,196 20,038
Gain on sale of properties 1,340 - | - -
------------ ---------- |------------ ------------
|
INCOME (LOSS) BEFORE FRESH-START REVALUATION, |
INCOME TAXES, AND EXTRAORDINARY ITEMS 13,233 (23,892) | (139,172) (282,382)
|
Revaluation of assets and liabilities pursuant to adoption |
of fresh-start reporting - - | (391,204) -
------------ ---------- |------------ ------------
|
INCOME (LOSS) BEFORE INCOME TAXES AND EXTRAORDINARY ITEMS 13,233 (23,892) | (530,376) (282,382)
|
Income tax provision (3,338) - | - -
------------ ---------- |------------ ------------
<PAGE>
|
INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS 9,895 (23,892) | (530,376) (282,382)
|
Extraordinary item - gain on debt discharge - - | 1,249,264 -
Extraordinary item - gain on early extinguishment of debt 928 - | - -
------------ ---------- |------------ ------------
|
|
NET INCOME (LOSS) $10,823 ($23,892) | $718,888 ($282,382)
============ ========== |============ ============
|
|
WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON EQUIVALENT |
SHARES USED IN THE CALCULATION OF PRIMARY EARNINGS PER SHARE 21,183 20,000 | * 37,582
|
INCOME (LOSS) PER SHARE BEFORE EXTRAORDINARY GAIN $0.47 ($1.19) | * ($7.87)
|
EXTRAORDINARY GAIN 0.04 - | * -
------------ ---------- | ------------
|
NET INCOME (LOSS) PER SHARE $0.51 ($1.19) | * ($7.87)
============ ========== | ============
<FN>
* Earnings per share was not presented for the forty-eight weeks ended December 26, 1992
because such presentation would not be meaningful. The predecessor's stock was cancelled under
the plan of reorganization and the registrant's stock was not issued until the Consummation Date.
(The accompanying notes are an integral part of these consolidated financial statements.)
</TABLE>
<PAGE>
<PAGE>
<TABLE>
AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Amounts)
<CAPTION>
January 29, January 30,
ASSETS 1994 1993
---------- ----------
<S> <C> <C>
Current Assets:
Unrestricted cash and short-term investments $16,465 $31,855
Restricted cash and short-term investments 55,980 83,667
---------- ----------
Total cash and short-term investments 72,445 115,522
---------- ----------
Receivables:
Trade 6,562 10,151
Other 12,141 14,036
Total receivables 18,703 24,187
Merchandise inventories 442,198 464,556
Prepaid expenses and other current assets 10,130 9,074
Net assets held for disposition - 21,218
---------- ----------
Total current assets 543,476 634,557
Fixed Assets:
Land and buildings 541 131
Fixtures and equipment 16,642 2,887
Leasehold improvements 6,503 475
--------- ----------
23,686 3,493
Less - Accumulated depreciation and amortization (2,098) (4)
---------- ----------
Net fixed assets 21,588 3,489
---------- ----------
Other assets and deferred charges 2,067 -
---------- ----------
$567,131 $638,046
========== ==========
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable:
Trade $74,091 $63,280
Other 36,045 42,058
---------- ----------
Total accounts payable 110,136 105,338
---------- ----------
Note payable - revolver 15,360 22,960
Current portion of long-term debt 14,821 20,469
Long-term debt classified as current (Note 6) 67,702 -
Current portion of capital lease obligations 3,788 6,442
Self-insurance reserve 48,433 55,884
Accrued compensation 22,044 22,684
Accrued expenses 33,232 62,711
Restructuring reserve 6,992 22,497
---------- ----------
Total current liabilities 322,508 318,985
Excess of revalued net assets over equity under fresh-start reporting 54,786 59,227
Long-term debt 51,423 131,082
Capital lease obligations 41,886 45,157
Unfavorable lease liability 25,072 27,195
Other long-term liabilities 11,046 10,292
Commitments and contingencies (Notes 7, 11, & 12)
Stockholders' Equity:
Priority common stock (12,000,000 shares authorized and issued; 3,860,058 and 11,037,789
shares outstanding at January 29, 1994 and January 30, 1993, respectively; par value $.01;
aggregate liquidation preference value $33,775,507 at January 29, 1994) 38 110
Common stock (40,000,000 shares authorized; 16,267,211 and 8,962,211 shares issued at
January 29, 1994 and January 30, 1993, respectively; par value $.01) 163 90
Additional paid-in capital 73,278 69,800
Accumulated deficit (13,069) (23,892)
---------- ----------
Total Stockholders' Equity 60,410 46,108
---------- ----------
$567,131 $638,046
========== ==========
<FN>
(The accompanying notes are an integral part of these consolidated balance sheets.)
<PAGE>
<PAGE>
</TABLE>
<TABLE>
AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
(In Thousands)
<CAPTION>
Priority Pref. St Treasury Additional Retained Total
Common Stock Common Stock Preferred Stock Div. Pay Stock Paid-In Earnings Equity
Shares Amount Shares Amount Shares Amount Amount Shares Amount Capital (Deficit) (Deficit)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, Jan. 26, 1991 37,987 $18,994 425 $144,242 $6,424 (405) ($3,857) $223,348 ($826,160) ($437,009)
Net Loss (282,382) (282,382)
-----------------------------------------------------------------------------------------------------------
Balance, Jan. 25, 1992 37,987 $18,994 425 $144,242 $6,424 (405) ($3,857) $223,348 ($1,108,542) ($719,391)
Conversion of Subordinated
Debentures into Common
Stock 23 12 491 503
Cancellation of Former
Equity Interests under
Plan of Reorganization (38,010) (19,006) (425) (144,242) (6,424) 405 3,857 (223,839) 389,654 0
Net Income 718,888 718,888
Issuance of New Equity
Interests in Connection
with Emerg. from Ch. 11 8,000 80 12,000 120 69,800 70,000
-----------------------------------------------------------------------------------------------------------
Balance, Dec. 26, 1992 8,000 $80 12,000 $120 0 $0 $0 0 $0 $69,800 $0 $70,000
(Fresh-start Report. Date)
Conversion of Priority
Common Stock into
Common Stock 962 10 (962) (10) 0
Net Loss (23,892) (23,892)
-----------------------------------------------------------------------------------------------------------
Balance, Jan. 30, 1993 8,962 $90 11,038 $110 $69,800 ($23,892) $46,108
Conversion of Priority
Common Stock into
Common Stock 7,178 72 (7,178) (72) 0
Exercise of Series C
Warrants 127 1 140 141
Utilization of Tax
Attributes 3,338 3,338
Net Income 10,823 10,823
-----------------------------------------------------------------------------------------------------------
Balance, Jan. 29, 1994 16,267 $163 3,860 $38 $73,278 ($13,069) $60,410
===========================================================================================================
<FN>
(The accompanying notes are an integral part of these consolidated financial statements.)
</TABLE>
<PAGE>
<PAGE>
<TABLE>
AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
<CAPTION>
Fiscal Forty-eight Fiscal
Year Five Weeks Weeks Year
Ended Ended Ended Ended
January 29, January 30, December 26, January 25,
1994 1993 1992 1992
Registrant Registrant | Predecessor Predecessor
----------- ----------- | ----------- -----------
<S> <C> <C> | <C> <C>
Cash flows from operating activities: |
Net income (loss) $10,823 ($23,892) | $718,888 ($282,382)
Adjustments to reconcile net income (loss) to net cash provided |
by (used for) operating activities: |
Extraordinary gain on early extinguishment of debt (928) - | - -
Income tax provision 3,338 - | - -
Depreciation and amortization of fixed assets and leaseholds 2,167 4 | 47,582 63,208
Amortization of the excess of revalued net assets over equity (6,215) (530) | - -
Amortization of the unfavorable lease liability (2,123) (177) | - -
Amortization of debt discounts 5,526 483 | - -
Gain on sale of properties (1,340) - | - (237)
Other, net (417) 2 | 232 87
----------- ----------- | ----------- -----------
Cash provided by (used for) operations before changes in operating |
assets and liabilities, reorganization items, and restructuring items 10,831 (24,110) | 766,702 (219,324)
Cash provided by (used for) operating assets and liabilities, |
excluding changes due to reorganization and restructuring activities: |
(Increase) decrease in receivables 5,484 8,137 | (3,260) 274
(Increase) decrease in merchandise inventories 22,358 12,787 | (67,253) 59,198
(Increase) decrease in prepaids and other current assets (1,056) 1,118 | (3,129) 1,921
Increase (decrease) in accounts payable 4,798 (57,119) | 55,832 (35,879)
Increase (decrease) in accrued expenses and other current liabilities (35,069) (19,574) | 15,007 21,745
<PAGE>
Changes due to reorganization and restructuring activities: |
Fresh-start revaluation charge - - | 391,204 -
Extraordinary gain on debt discharge - - | (1,249,264) -
Restructuring charges - - | 88,500 147,200
Payment of restructuring costs (32,448) (6,123) | (26,799) (20,891)
Increase in pre-petition interest - - | 635 50,364
----------- ----------- | ----------- -----------
Net cash provided by (used for) operating activities (25,102) (84,884) | (31,825) 4,608
Cash flows from investing activities: |
Proceeds from sale of properties 3,439 - | - 525
Proceeds from sale of assets held for disposition 37,012 24,977 | 53,524 47,700
Purchase of fixed assets (20,215) (3,493) | (25,466) (32,101)
Decrease (increase) in restricted cash 27,687 20,310 | 133,268 (23,351)
----------- ----------- | ----------- -----------
Net cash provided by (used for) investing activities 47,923 41,794 | 161,326 (7,227)
----------- ----------- | ----------- -----------
Cash flows from financing activities: |
Borrowings under the revolver 138,915 32,776 | - -
Payments on the revolver (146,515) (9,816) | - -
Borrowings under the DIP facility - - | 70,000 30,000
Payments on the DIP facility - - | (70,000) (30,000)
Payment on debt and capital lease obligations (28,685) (1,028) | (2,853) (5,219)
Increase in deferred financing costs (2,067) - | - -
Proceeds from exercise of Series C Warrants 141 - | - -
Payments of liabilities subject to settlement before consummation - - | (18,946) (17,952)
Consummation cash distributions - - | (282,644) -
----------- ----------- | ----------- -----------
Net cash provided by (used for) financing activities (38,211) 21,932 | (304,443) (23,171)
----------- ----------- | ----------- -----------
Decrease in unrestricted cash and short-term investments (15,390) (21,158) | (174,942) (25,790)
Unrestricted cash and short-term investments, beginning of period 31,855 53,013 | 227,955 253,745
----------- ----------- | ----------- -----------
Unrestricted cash and short-term investments, end of period $16,465 $31,855 | $53,013 $227,955
=========== =========== | =========== ===========
<FN>
(The accompanying notes are an integral part of these consolidated financial statements).
</TABLE>
<PAGE>
<PAGE>
AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION:
---------------------
Ames Department Stores, Inc. (a Delaware corporation) and
its subsidiaries (collectively "Ames" or the "Company") filed
petitions under Chapter 11 of the U.S. Bankruptcy Code ("Chapter
11") on April 25, 1990. From that time until December 30, 1992,
Ames operated its business as a debtor-in-possession subject to
the jurisdiction of the United States Bankruptcy Court for the
Southern District of New York (the "Bankruptcy Court"). On
December 30, 1992, Ames emerged from bankruptcy (Note 2).
Management believes the Company's ability to meet its
financial obligations and make planned capital expenditures will
depend on the Company's future operating performance, which will
be subject to financial, economic and other factors affecting the
business and operations of the Company, including factors beyond
its control.
2. REORGANIZATION CASE AND FRESH-START REPORTING:
---------------------------------------------
REORGANIZATION CASE
As discussed in Note 1, Ames and its subsidiaries filed
petitions for reorganization under Chapter 11 on April 25, 1990
(the "Filing Date"). The Company's disclosure statement relating
to its Third Amended and Restated Joint Plan of Reorganization
dated October 23, 1992 (the "Amended Plan") was approved by the
Bankruptcy Court on October 29, 1992. The Amended Plan was
confirmed by the Bankruptcy Court on December 18, 1992 and
consummated on December 30, 1992 (the "Consummation Date").
The Amended Plan provided for, among other things, the
payment of $303.5 million of cash (including $46.5 million in
deferred cash distributions), $68.9 million in secured notes, the
reinstatement of certain obligations, and the distribution of all
of the new common stock of the reorganized Ames to creditors to
settle approximately $1.6 billion of total estimated claims
against the Company that existed as of the Filing Date. Upon
consummation of the Amended Plan, Ames obtained $210 million of
post-emergence financing (Note 6). Also under the Amended Plan,
all trade vendors' and factors' preferences were waived and there
was a mutual release of claims with the members of the
pre-petition bank group, TJX Companies, Inc., and certain other
creditors. In addition, effective on the Consummation Date, the
corporate structure of Ames was revised from 52 subsidiaries to
five subsidiaries and a partnership.
<PAGE>
<PAGE>
FRESH-START REPORTING
As discussed above, the Company's Amended Plan was
consummated on December 30, 1992 and Ames emerged from Chapter
11. Pursuant to the guidance 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" ("SOP 90-7"), the Company adopted fresh-start
reporting and reflected the consummation distributions in the
consolidated balance sheet as of December 26, 1992 (the fiscal
month-end for December). The consummation distributions included
the payment of certain fees related to the Credit Agreement (Note
6). Under fresh-start reporting, reorganization value of the
Company was allocated to the emerging Company's net assets on the
basis of the purchase method of accounting.
The resulting charge of $391.2 million from all fresh-start
adjustments, including the write-off of all revalued noncurrent
assets but excluding the write-off of the old stock, was
presented as "Revaluation of assets and liabilities pursuant to
adoption of fresh-start reporting" in the consolidated statement
of operations for the forty-eight weeks ended December 26, 1992.
The fresh-start reporting reorganization value was based, in
part, on a four-year analysis of the Company's projected
operations (fiscal years 1994-1997) prepared by management and
applying a discounted cash flow methodology. This value was
determined by adding the projected cash flow for the first three
years to a "capitalization" of the fourth year's projected cash
flow. The fourth year's projected cash flow was capitalized by
establishing a terminal value for the Company as of the end of
such period equal to 4.25 times the Company's projected earnings
before interest, taxes, LIFO expense, and depreciation and
amortization for the fourth year. The aggregate cash flow value
was then discounted to its present value, using a 23% discount
rate, to assist in establishing a reorganization value. The
discount rate and exit multiple utilized by the Company
reflected, in part, a "high-risk investment" and the lack of
profitability in the recent years prior to the Consummation Date.
The use of a four-year projection period placed a greater
emphasis on the accuracy of the terminal value.
The four-year cash flow projections were based on estimates
and assumptions about circumstances and events that had not yet
taken place. Such estimates and assumptions are inherently
subject to significant economic and competitive uncertainties and
contingencies beyond the control of the Company, including, but
not limited to, those with respect to the future course of the
Company's business activity.
<PAGE>
<PAGE>
The Company's reorganization value represented the value of
the "reconstituted entity." This value was viewed as the fair
value of the Company before considering liabilities and
approximated the amount a willing buyer would have paid for the
assets of the Company immediately after the restructuring. The
Company's "enterprise value", as defined in the Amended Plan and
later re-estimated by management (see below), represented the
present value of discounted cash flows (including cash from
dispositions) plus cash in excess of normal operating
requirements of the reorganized Company immediately before the
distributions called for by the Amended Plan.
In early 1993, using a business plan that reflected
revisions in light of operating results that had fallen below
levels anticipated in the Amended Plan, management estimated the
Company's total enterprise value before the distributions called
for by the Amended Plan. The Company employed the same valuation
method that was utilized in the Amended Plan to determine its
enterprise and equity values. A valuation utilizing the present
value of discounted cash flows methodology assumes the servicing
of a level of working capital and operating debt. Accordingly,
management added the working capital and operating debt to the
post-distribution enterprise value to arrive at a reorganization
value of $665 million. This value was viewed as the amount a
willing buyer would have paid for the assets of the Company
immediately after the restructuring. By deducting from the
reorganization value the working capital and operating debt and
the new debt incurred as part of the Amended Plan, management
arrived at an equity value of $70 million.
The Company's reorganization value of $665 million was less
than the fair value of its current assets at the Consummation
Date, which was approximately $725 million. Management believes
that the creditors accepted the Amended Plan and the
corresponding reorganization value despite the inherent future
business risks of the Company, in part because the Company's
reorganization value exceeded its liquidation value, there was a
waiver of all preferences, certain creditors wanted to
immediately receive their distributions and avoid prolonging the
Chapter 11 case, and certain creditors believed that it was in
the Company's best interest to emerge from bankruptcy at that
time. In accordance with the purchase method of accounting, the
excess of book value over fair value was allocated to reduce
proportionately the values assigned to non-current assets in
determining their fair values. Because this allocation reduced
the non-current assets to zero value, the remainder was
classified as a deferred credit ("Excess of revalued net assets
over equity under fresh-start reporting" or "negative goodwill")
and is being amortized systematically to income over the period
estimated to be benefited (ten years).
<PAGE>
<PAGE>
In connection with the adoption of fresh-start reporting,
the Company adopted Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes" ("SFAS No. 109"), which
had no impact on Ames. Prior to the adoption of fresh-start
reporting, the Company accounted for income taxes under Statement
of Financial Accounting Standards No. 96 ("SFAS No. 96"). Under
both SFAS No. 109 and SFAS No. 96, deferred income taxes are
provided for at the statutory rates on the difference between
financial statement basis and tax basis of assets and liabilities
and, under SFAS No. 109, are classified in the balance sheet as
current or non-current based upon the expected future period in
which such deferred income taxes are anticipated to reverse.
Also in connection with the adoption of fresh-start
reporting, the Company adopted Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Post-retirement
Benefits other than Pensions" ("SFAS No. 106"), which requires
that the cost of these benefits be recognized in the financial
statements over an employee's term of service with the Company.
Ames established a reserve of approximately $2.7 million at
December 26, 1992 for the estimated premium costs associated with
providing life insurance to certain previously retired employees
and for other post-retirement benefits. The related charge of
$2.7 million was included in the "Revaluation of assets and
liabilities pursuant to the adoption of fresh-start reporting" in
the consolidated statement of operations.
Since the purchase method of accounting was used to record
the fair values of assets and assumed liabilities of the
reorganized company at December 26, 1992, the consolidated
statements of operations and the consolidated statements of cash
flows for the fiscal year ended January 29, 1994 and for the five
weeks ended January 30, 1993 are not comparable in certain
material respects to such predecessor statements for any prior
periods. The consolidated financial statements for periods after
December 26, 1992 are those of the reorganized entity (the
registrant).
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(a) FISCAL YEAR:
The Company's fiscal year ends on the last Saturday in
January. The fiscal years ended January 29, 1994 (Fiscal
1994) and January 25, 1992 (Fiscal 1992) included 52 weeks.
The fiscal year ended January 30, 1993 (Fiscal 1993)
included 53 weeks and was comprised of the forty-eight weeks
ended December 26, 1992 (pre-emergence) and the five weeks
ended January 30, 1993 (post-emergence).
(b) PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts
of Ames and its subsidiaries, all of which are wholly-owned.
All material intercompany accounts and transactions have
been eliminated.
<PAGE>
<PAGE>
(c) CASH AND SHORT-TERM INVESTMENTS:
Ames considers all highly liquid investments with a maturity
of three months or less when purchased to be cash and
short-term investments.
(d) INVENTORY VALUATION:
Inventories are stated at the lower of cost, using the
retail last-in, first-out (LIFO) method, or market.
(e) FIXED ASSETS:
Land and buildings, fixtures and equipment, and leasehold
improvements are recorded at cost. All fixed assets were
written-off at December 26, 1992 under fresh-start reporting
(Note 2). Major replacements and betterments are
capitalized. Internal remodeling labor costs and
maintenance and repairs are charged to earnings as incurred.
Cost of assets sold or retired and the related amounts of
accumulated depreciation are eliminated from the accounts in
the year of disposal, with the resulting gain or loss
included in earnings.
(f) DEPRECIATION AND AMORTIZATION:
Depreciation and amortization of fixtures and equipment are
provided on the straight-line method principally over a 5 to
10 year period. Leasehold improvements are amortized over
10 years, or over the life of the lease if shorter.
Depreciation of buildings is provided on a straight-line
method principally over a 25 year period.
The unfavorable lease liability (recorded under fresh-start
reporting) is being amortized on a straight-line basis over
the applicable lease terms.
The excess of revalued net assets over equity under
fresh-start reporting is being amortized over a 10 year
period (Note 2).
(g) DEFERRED CHARGES:
Debt transaction costs and related issue expenses, except
those that were related to the initial issuance of the new
and reinstated debt (which were written-off as part of
fresh-start reporting), are deferred and amortized over the
term of the associated debt.
<PAGE>
<PAGE>
(h) LEASEHOLDS:
All leaseholds and accumulated amortization at December 26,
1992 were written-off under fresh-start reporting.
Leaseholds represented the present value of the economic
benefit of leases at stores acquired and were amortized on a
straight-line basis over their average remaining lease
lives. For the forty-eight weeks ended December 26, 1992
and for Fiscal 1992, $9.7 and $17.3 million, respectively,
of net leaseholds were written-off or sold as part of the
Company's restructuring. Amortization of leaseholds was
approximately $3.5 and $4.5 million in the forty-eight weeks
ended December 26, 1992 and in Fiscal 1992, respectively.
(i) INCOME TAXES:
Ames and its subsidiaries file a consolidated federal income
tax return. Ames adopted SFAS No. 109 under fresh-start
reporting (Notes 2 and 9). Under this method, any deferred
income taxes recorded are provided for at currently enacted
statutory rates on the differences in the basis of assets
and liabilities for tax and financial reporting purposes.
If recorded, deferred income taxes are classified in the
balance sheet as current or non-current based upon the
expected future period in which such deferred income taxes
are anticipated to reverse.
(j) SELF-INSURANCE RESERVES:
The Company is self-insured for workers' compensation,
general liability, property and casualty, and accident and
health insurance claims, subject to certain limitations and
deductibles. The Company has insurance coverage for losses
that may occur above certain levels. The Company determines
its liability for claims incurred but not reported based on
its historical claims experience. As of January 29, 1994,
Ames had established a self-insurance reserve of
approximately $48.4 million, a major portion of which may
not be paid within a year. As of January 30, 1993, Ames had
established a self-insurance reserve of approximately $55.9
million.
(k) LEASED DEPARTMENT SALES AND INCOME:
Ames has an agreement with an independent contractor that
allows the independent contractor to operate shoe
departments within the Ames stores and Ames receives a
percentage of the sales under the agreement.
(l) EARNINGS PER COMMON SHARE:
Net income per share for Fiscal 1994 was determined by using
the weighted average number of common and common equivalent
shares outstanding during the fiscal year. Common stock
equivalents represented the assumed exercise of the
outstanding Series C Warrants.
<PAGE>
<PAGE>
Net loss per common share for the five weeks ended January
30, 1993 was determined using the weighted average number of
common shares outstanding. Common stock equivalents and
fully diluted loss per share were excluded for the five
weeks ended January 30, 1993 as their inclusion would have
had an anti-dilutive impact on the loss per share.
Net earnings per share for the forty-eight weeks ended
December 26, 1992 was not presented because such
presentation would not be meaningful, as the old stock was
cancelled under the Amended Plan and the new stock was not
issued until the Consummation Date. Net loss per common
share for Fiscal 1992 was determined using the weighted
average number of the old common shares outstanding after
accrual for preferred stock dividends. Common stock
equivalents and fully diluted loss per share were excluded
for Fiscal 1992 because their inclusion would have had an
anti-dilutive impact on the loss per share.
(m) RECLASSIFICATION OF PRE-FISCAL 1994 FINANCIAL STATEMENTS:
Certain reclassifications have been made to pre-Fiscal 1994
account balances to conform to the current year
presentation.
4. CASH AND SHORT-TERM INVESTMENTS:
As of January 29, 1994 and January 30, 1993, approximately
$55.0 and $57.4 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 6). This cash collateral is
included in "Restricted cash and short-term investments." The
amount of cash collateral changes as the balance outstanding
under the Letter of Credit Facility changes, since the cash
collateral must equal 105% of the Company's outstanding
obligations, including $5.5 and $6.5 million at January 29, 1994
and January 30, 1993, respectively, for future increases to
standby letters of credit to cover expected workers' compensation
claims. Ames earns interest on invested cash collateral.
In addition, as of January 29, 1994 and January 30, 1993,
Ames restricted approximately $1.0 and $26.3 million of cash,
respectively, for expected payments of certain remaining
administrative and priority claims under the Amended Plan. This
amount is also included in "Restricted cash and short-term
investments." The associated liability is included in "Accrued
expenses." Management believes that the remaining segregated
funds are adequate to cover all related payments. Ames earns
interest on invested segregated funds.
<PAGE>
<PAGE>
5. 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. No LIFO reserve was necessary as of January 29,
1994 and January 30, 1993.
The Company eliminated the adjusted LIFO reserve of $34.3
million existing at December 26, 1992 under fresh-start
reporting. The resulting benefit reduced the fresh-start
revaluation charge in the statement of operations for the
forty-eight weeks ended December 26, 1992. Ames recorded $5.8 of
the $8.3 million LIFO adjustment at December 26, 1992 (prior to
the fresh-start adjustment) as a reduction in cost of goods sold
and the remaining $2.5 million as an adjustment to the
restructuring charge. The LIFO adjustment resulted primarily
from a change in the Company's merchandise mix. The Company
recorded $8.3 of the $15.6 million adjustment in Fiscal 1992 as a
reduction in cost of goods sold and $7.3 million as an adjustment
to the restructuring charge.
6. DEBT:
On April 28, 1994, the Company entered into an agreement
with BankAmerica Business Credit, Inc., as agent, and a syndicate
consisting of other banks and financial institutions, for a
secured revolving credit facility up to $300 million (the "New
Facility") that contains terms, covenants and interest rates that
management believes are generally more favorable than those in
the original post-emergence Credit Agreement. 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 New
Facility has a sublimit of $100 million for letters of credit,
with an additional sublimit of $45 million for standby letters of
credit. The New Facility has no requirement for cash
collateralization of letters of credit, except in limited
instances as described in the New Facility. The funds under the
New Facility may only be used for working capital and for the
payment of certain debt described below. The interest rate per
annum on the New Facility is equal to the Reference Rate (as
defined in the New Facility) plus 2% of the first $270 million of
Advances (subject to downward adjustments) or 5% of the last $30
million of Advances. Alternatively, the first $270 million of
Advances under the New Facility may be made at the interest rate
per annum equal to the Eurodollar Rate ( as defined in the New
Facility) plus 3.75% (subject to downward adjustments).
<PAGE>
<PAGE>
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
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.
The quarterly financial covenants under the New Facility are
limited to: capital expenditure limits; minimum earnings, without
giving effect to any extraordinary gains/losses or accounting
changes, before interest expense, income tax provision,
depreciation and amortization, LIFO expense, stock appreciation
right accruals, restructuring charges, and other non-cash
charges, plus or minus the amount of cash received or expended
relating to stock appreciation right accruals or restructuring
charges ("EBITDA"); and minimum EBITDA to cash interest expense.
In addition, Ames must have no outstanding cash loans under the
New Facility for 30 consecutive days during the period from
November 15th through February 15th of each contract year.
Fees required under the New Facility include: (1) quarterly
commitment fees of .5% per annum on the unused portion of the
facility during each quarter, (2) an initial facility fee of $5.4
million payable on the Closing Date (as defined in the New
Facility) and an additional facility fee of $3.0 million ($1.0
million payable at closing and the remainder due in quarterly
installments of $250,000 each beginning in the second year), (3)
prepayment fees of 3.0%, 2.0%, and 1.0% of the amount of the
Tranche A portion (as defined in the New Financing) reduced or
terminated prior to the first, second, and third (six months or
more prior to the maturity date) anniversary of the New Facility,
respectively, and (4) various other fees as defined in the New
Facility.
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. In connection with the New Facility,
liens presently securing the Company's trade debt will be
released. Funding under the New Facility is not expected to
occur until on or about June 30, 1994. As a result of the
refinancing, Ames is expected to report a non-cash extraordinary
charge of approximately $2.5 million relating to the write-off of
deferred financing costs and debt discounts in Fiscal 1995.
<PAGE>
<PAGE>
The Company's outstanding debt as of January 29, 1994 and
January 30, 1993 is listed and described below. Pursuant to the
Amended Plan, the Company and its lenders agreed to a
restructuring of the Company's obligations at December 26, 1992.
The difference between the pre-consummation debt obligations and
the present values of the new and reinstated debt obligations was
included in the calculation of the "Extraordinary gain on debt
discharge".
New and reinstated debt obligations that carried face
interest rates significantly lower than market rates (for
financing of a similar nature) as of the Consummation Date were
discounted to their present values using estimated market rates.
The discount amounts are being amortized to interest expense over
the terms of the related obligations using the effective interest
method. The determination of appropriate interest rates was
based upon an evaluation of Ames' credit standing, the nature of
the collateral, if any, and other terms pertaining to the debt,
and the prevailing rates for similar instruments of issues with
similar credit ratings. The market interest rates used to
determine the present values are shown in the table below.
Upon consummation of the Amended Plan, 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 a post-emergence 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 $210 million post-emergence financing ($32.9 million)
represents the two-year portion of the 8% Senior Secured Notes
(the "Series D Notes") issued under an indenture with Fleet Bank
as indenture trustee.
Upon consummation of the Amended Plan, 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.
During Fiscal 1994, Ames recognized an extraordinary gain of
approximately $.9 million on the early extinguishment of certain
tax obligations.
<PAGE>
<PAGE>
As of January 29, 1994, payments on long-term debt,
including the debt payments related to the New Facility
(discussed above) and the amount due under the Revolver, for the
next five years and thereafter were as follows:
<TABLE>
(000's OMITTED)
FISCAL YEAR ENDING JANUARY AMOUNT
-------------------------- ---------------
<CAPTION>
<S> <C> <C>
1995 $ 97,883
1996 15,674
1997 14,444
1998 13,120
1999 2,404
Thereafter 12,759
</TABLE>
<PAGE>
<PAGE>
Outstanding debt at January 29, 1994 and January 30,
1993 is listed below. Further explanations of certain of the
obligations follow the table.
<TABLE>
(000's OMITTED)
1/29/94 1/30/93
--------- ---------
<CAPTION>
<S> <C> <C>
SECURED DEBT -
Revolving Credit Facility (Note Payable): $15,360 $22,960
Senior Debt:
Series A Secured Term notes due 6/95 to 12/96,
variable interest rate. 25,306 25,306
8% Senior Secured Notes (Series D)
due 6/95 to 12/96. Discount rate 9%. 38,178 38,178
8% Series B Secured Term Notes due 12/96,
non-interest bearing through 12/95.
Discount rate 10%. 4,218 4,218
8% Secured Term Notes due 12/94. Discount Rate 9%. 1,207 1,207
Guaranteed First Mortgage Notes, interest rate
of 9.5%, due through 3/99. Discount Rate 11%. 12,500 12,500
Real Estate Mortgages, interest rates
ranging from 6% to 9%, due through 1/02.
Discount rates 10% to 12%. 12,043 12,400
Loan and Security Agreement, non-interest
bearing, due 5/95. Discount rate 10%. 4,588 7,887
Equipment Notes, interest rates at 9% to 10%, due
12/94 through 12/97. Discount rate 11% to 12%. 3,197 3,989
8.5% Industrial Development Bonds, due in
installments through 12/09. Discount rate 11%. 2,755 2,828
-------- --------
Total Face Value of Secured Debt $119,352 $131,473
-------- --------
UNSECURED DEBT -
Senior Debt:
Allowed Priority Tax Obligations,
5% interest rate. Discount rate 9%. $5,234 $9,028
Subordinated Debt:
Deferred Cash Distributions due 1/31/94 through
1/31/97, 5% interest rate beginning 2/94.
Discount rate 12%. 31,500 46,514
TJX Expense Note, 10% interest rate,
due 1/98 (Note 11) 198 -
-------- --------
Total Face Value of Unsecured Debt $36,932 $55,542
-------- --------
Total Face Value of Debt 156,284 187,015
Less: Current Portion 14,821 20,469
Long-term Debt Classified
as Current 67,702 -
Debt Discounts 6,978 12,504
Note Payable - Revolver 15,360 22,960
-------- --------
Amount Due After One Year $51,423 $131,082
======== ========
</TABLE>
<PAGE>
<PAGE>
THE CREDIT AGREEMENT
The Credit Agreement is between Ames and Citibank, as agent,
and a syndicate consisting of other banks and financial
institutions and is scheduled to expire on December 28, 1994 (see
New Facility described above). The Credit Agreement provides the
$175.9 million Revolver and a $1.2 million term loan. The amount
outstanding under the Revolver at the time of the funding of the
New Financing, along with the term loan, will be prepaid out of
the funds from the New Facility.
The funds under the Credit Agreement must be used for
working capital, except that up to $10 million may be used for
any purpose. The interest rate per annum on the Revolver is
equal to the Base Rate (as defined in the Credit Agreement) plus
2 1/2%. For the fiscal year ended January 29, 1994 and for the
five weeks ended January 30, 1993, the weighted average interest
rate on the Revolver was 8.6%. Approximately $15.4 and $23.0
million was outstanding under the Revolver at January 29, 1994
and January 30, 1993, respectively. The maximum amount borrowed
under the Revolver was approximately $161.9 and $32.8 million
during Fiscal 1994 and during the five weeks ended January 30,
1993, respectively. The face interest rate on the term loan is
8% per annum.
Fees required under the Credit Agreement include: (1) a
commitment fee of .5% per annum of the unused portion of the
Revolver, (2) an initial facility fee of $4.0 million (paid on
the Consummation Date and written-off in conjunction with the
recording of the Amended Plan) and a subsequent facility fee of
$.9 million paid in December, 1993, (3) a usage fee of $.8
million paid when the sum of advances under the Revolver plus a
portion of the Series D Notes exceeded $100 million, and (4) an
agent's fee of $1.0 million paid in December, 1993 (the initial
agent's fee of $1.0 million was paid on the Consummation Date and
written-off in conjunction with the recording of the Amended
Plan).
The Credit Agreement is secured by substantially all of the
assets of Ames, with a first priority lien subordinated only to
existing liens on specific assets, and "pari passu" with the
first priority lien securing: (1) Series A Notes (see below), (2)
Series B Notes (see below), (3) Series D Notes, and (4) 50% of
inventory trade payables. Each of the Company's subsidiaries has
guaranteed the obligations under the Credit Agreement.
The Credit Agreement, as amended, 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, income tax provision, depreciation and
amortization, LIFO expense or credit, and any non-cash
extraordinary or unusual items ("EBITDA"). In addition, Ames
must have no outstanding borrowings (other than borrowings used
<PAGE>
<PAGE>
to cash collateralize letters of credit) under the Credit
Agreement for a consecutive 30-day period beginning between
November 15 of each fiscal year and the last day of such fiscal
year. Ames is in compliance with these covenants through the
latest completed fiscal period (March, 1994). The EBITDA covenant
was calculated cumulatively from December, 1992 and forward,
until December, 1993 when it converted to a "rolling 12-month"
calculation.
SERIES A NOTES
Certain banks from the pre-petition Citibank syndicate
elected to receive Series A Notes as part of their distribution
under the Amended Plan. The total amount issued was $25.3
million, due in installments at June 30, 1995, December 31, 1995,
and December 31, 1996. There is a mandatory prepayment
requirement for these banks' pro rata portion of any "annual
excess cash flow" (as defined in the Amended Plan-see Note 11).
The annual face interest rate on these notes is equal to the Base
Rate (as defined in the Credit Agreement) plus 3 1/2%. The
Series A Notes are secured in the same manner as the Credit
Agreement and contain the same financial covenants (extended to
Fiscal years 1996 and 1997) as in the Credit Agreement. The
Series A Notes will be prepaid at the time of the funding under
the New Facility and, accordingly, have been classified as a
component of "Long-term Debt Classified as Current" as of January
29, 1994.
SERIES B NOTES
Certain banks from the pre-petition Citibank syndicate
elected to receive
Series B Notes as part of their distribution under the Amended
Plan. The total amount issued was $4.2 million, due December 31,
1996. There is a mandatory prepayment requirement for these
banks' pro rata portion of any "annual excess cash flow" (Note
11). These notes are non-interest bearing until December 31,
1995 when they begin to bear face interest at 8.0% per annum.
The Series B Notes are secured in the same manner as the Credit
Agreement and contain the same financial covenants as the Series
A Notes. The Series B Notes will be prepaid at the time of the
funding under the New Facility and, accordingly, have been
classified as a component of "Long-term Debt Classified as
Current" as of January 29, 1994.
SERIES D NOTES
Certain banks from the pre-petition Citibank syndicate
elected to receive
Series D Notes as part of their distribution under the Amended
Plan and, for the two-year term note portion of the Series D
Notes ($32.9 million), made a net cash contribution to the
Company rather than providing the Company with revolving credit
financing. The total amount issued was $38.2 million, $32.9
million of which is due on the earlier of June 30, 1995 or 45
days after the termination of the Credit Agreement. The
remainder is due in installments at December 31, 1995 and
<PAGE>
<PAGE>
December 31, 1996. There is a mandatory prepayment requirement
for these banks' pro rata portion of any "annual excess cash
flow" (Note 11). The Indenture to provide for the issuance of
the Series D Notes is dated December 28, 1992 and has been filed
with the Securities and Exchange Commission. The Series D Notes
yield a face interest rate of 8.0% per annum and are secured in
the same manner as the obligations under the Credit Agreement.
There are no financial covenants under the Indenture. The Series
D Notes will be prepaid at the time of the funding under the New
Facility and, accordingly, have been classified as a component of
"Long-term Debt Classified as Current" as of January 29, 1994.
THE LETTER OF CREDIT FACILITY
The $120 million Letter of Credit Facility with Republic
National Bank of New York ("Republic") has sublimits of $60
million for trade letters of credit and $60 million for standby
letters of credit. The Letter of Credit Facility is scheduled to
expire on November 28, 1994 (see New Facility described above)
and permits the issuance of letters of credit with an expiration
date not later than December 28, 1994.
As of January 29, 1994, approximately $11.3 and $35.6
million was outstanding in trade and standby letters of credit,
respectively. As of January 30, 1993, approximately $12.7 and
$44.4 million was outstanding in trade and standby letters of
credit, respectively, including trade letters of credit still
outstanding under the DIP Facility (see below) and $9.0 million
of back-up stand-by letters of credit for such letters of credit.
All letters of credit outstanding under the Letter of Credit
Facility must be cash collateralized at 105% from the date of
issuance (Note 4).
ALLOWED PRIORITY TAX OBLIGATIONS
Allowed priority tax obligations consist of claims entitled
to priority under the Bankruptcy Code, including claims based on
retail sales made by Ames, the proceeds of which are deemed to be
held in trust by Ames for the benefit of various state taxing
authorities. Unless otherwise agreed to in writing with Ames,
the holder of an allowed priority tax claim receives deferred
cash payments in a principal amount equal to the amount of such
claim over a period not exceeding six years from the date of
assessment of the tax on which the claim is based. The deferred
cash payments may be made in annual installments equal to 10% of
the allowed priority tax claim together with simple interest at
the rate of 5% per annum. The remaining unpaid principal and
accrued interest thereon will be paid on the first business day
following the date that is the sixth anniversary of the date of
assessment of the tax on which the claim is based. During Fiscal
1994, the Company paid approximately $1.9 million to certain
state taxing authorities in early settlement of approximately
$2.8 million of tax obligations (Note 20).
<PAGE>
<PAGE>
DEFERRED CASH DISTRIBUTIONS
The Amended Plan 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 each year at January 31, 1995 and January
31, 1996, and $7.5 million due at January 31, 1997.
BEFORE REORGANIZATION
Generally, interest on pre-petition claims ceases accruing
upon the filing of a petition under the Bankruptcy Code. If,
however, the claims are collateralized by an interest in property
whose value (minus the cost of preserving such property) exceeds
the amount of the debt, post-petition interest may be payable.
As part of the Amended Plan, the Company reached agreements with
secured creditors as to the extent of the collateral value
supporting their original loan obligations and the resulting
interest due, if any, has been accrued. The Bankruptcy Court
ordered Ames to make adequate protection payments to a number of
secured creditors during the bankruptcy period. In the absence
of such an order, no principal or interest payments were made
until the Amended Plan (defining the repayment terms) was
consummated. Nevertheless, Ames recorded interest expense on
potential collateralized secured claims totalling $50.4 million
for the fiscal year ended January 25, 1992. Ames ceased accruing
interest on the pre-petition credit agreement at the beginning of
Fiscal 1993 because management believed that, in accordance with
SOP 90-7, the collateral securing the debt did not exceed the
principal due. Ames had accrued such interest for conservative
purposes only.
Contractual interest expense not recorded on certain debt
totaled approximately $76.2 and $45.5 million for the
forty-eight weeks ended December 26, 1992 and for Fiscal 1992,
respectively.
To finance seasonal working capital requirements during the
Chapter 11 period, Ames and Chemical Bank, as agent, were parties
to a Debtor-in-Possession Revolving Credit Agreement (the "DIP
Facility"), under which Ames was allowed to borrow up to $250
million ($200 million beginning in August, 1992) for general
corporate purposes, working capital, letters of credit, and
inventory purchases, subject to certain restrictions, as defined
in the DIP Facility.
The maximum amount borrowed under the DIP Facility,
exclusive of letters of credit, was $70.0 million during the
forty-eight weeks ended December 26, 1992 and $30.0 million
during Fiscal 1992. The average interest rate on the DIP
Facility was 7.6% in the forty-eight weeks ended December 26,
1992 and 8.9% in Fiscal 1992.
<PAGE>
<PAGE>
7. LEASE COMMITMENTS AND UNFAVORABLE LEASE LIABILITY:
Ames is committed under long-term leases for various retail
stores, warehouses and equipment expiring at various dates
through 2015 with varying renewal options and escalating lease
clauses. Some leases are classified as capital leases under
Statement of Financial Accounting Standards No. 13. Capital
lease obligations were revalued under fresh-start reporting.
Ames generally pays for real estate taxes, insurance, and
specified maintenance costs under real property leases. Certain
leases also provide for contingent rentals based on percentages
of sales in excess of specified amounts.
Future minimum lease payments for leases as of January 29,
1994 were as follows:
<TABLE>
(000's OMITTED)
LEASE PAYMENTS
--------------------------
FISCAL YEAR CAPITAL OPERATING
ENDED JANUARY LEASES LEASES
------------------- ---------- ---------
<CAPTION>
<S> <C> <C> <C>
1995 $8,596 $41,483
1996 8,130 37,831
1997 7,756 35,928
1998 6,837 32,167
1999 5,786 29,725
Thereafter 49,680 226,971
------- -------
Total minimum lease payments 86,785 $404,105
========
Less: amount representing
estimated executory costs 1,331
-------
Net minimum lease payments 85,454
Less: amount representing interest 39,780
-------
Present value of net minimum
lease payments 45,674
Less: currently payable 3,788
-------
Long-term capital
lease obligations $41,886
=======
</TABLE>
<PAGE>
<PAGE>
Total payments have not been reduced by minimum sublease
rentals to be received in the aggregate under noncancellable
subleases of capital leases and operating leases of approximately
$3.7 and $3.0 million, respectively, as of January 29, 1994.
Amortization of capital lease assets was approximately $4.0
and $6.5 million for the forty-eight weeks ended December 26,
1992 and for Fiscal 1992. The cost of capital lease assets of
$64.0 million and the related accumulated amortization of $26.4
million at December 26, 1992 were written-off under fresh-start
reporting and there were no additions since that time.
<TABLE>
Rent expense (income) was as follows:
(000's OMITTED)
------------------------------------------------------
FISCAL YEAR FIVE WEEKS FORTY-EIGHT FISCAL YEAR
ENDED ENDED WEEKS ENDED ENDED
JANUARY 29, JANUARY 30, DECEMBER 26, JANUARY 25,
1994 1993 1992 1992
----------- ----------- ------------ -----------
<CAPTION>
<S> <C> <C> <C> <C>
Minimum rent on operating leases $42,646 $3,716 | $47,527 $66,486
Contingent rental expense 6,414 453 | 6,459 7,699
Sublease rental income (3,206) (315) | (4,730) (6,021)
</TABLE>
The unfavorable lease liability was recorded as part of
fresh-start reporting and represents the estimated liability
related to lease commitments that exceed market rents for similar
locations. This liability is being amortized as a reduction of
rent expense over the remaining lease terms.
8. STOCKHOLDER'S EQUITY:
COMMON STOCK AND PRIORITY COMMON STOCK
As provided under the Amended Plan, the authorized capital
stock of the reorganized Ames consists of 40,000,000 shares of
common stock (16,267,211 and 8,962,211 shares issued as of
January 29, 1994 and January 30, 1993, respectively), par value
$.01 per share (the "Common Stock"), and 12,000,000 shares of
priority common stock (3,860,058 and 11,037,789 shares
outstanding as of January 29, 1994 and January 30, 1993,
respectively), par value $.01 per share (the "Priority Common
Stock"). These securities, as well as the warrants described
below, were issued without registration under the Securities Act
of 1933, as amended or under any state or local law, in reliance
on the exemptions set forth in Section 1145 of the Bankruptcy
Code. Holders of shares of Common Stock and Priority Common
<PAGE>
<PAGE>
Stock are entitled to vote as one class with one vote per share
on all matters to be voted upon by the stockholders and are
entitled to receive dividends equally when, as and if declared by
the Board of Directors. In the event of any liquidation,
dissolution or winding up of the Company, whether voluntary or
involuntary, the holders of the Priority Common Stock then
outstanding shall be entitled to be paid out of the assets of the
Company available for distribution to its stockholders only an
amount equal to $8.75 for each share outstanding (aggregate
liquidation preference value $33,775,507 as of January 29, 1994).
After the full preferential amount to which holders of the
Priority Common Stock are entitled have been paid or set apart,
the remaining assets of the Company available for distribution to
its stockholders would be paid to the holders of the Common Stock
equally, on a share for share basis.
The holder of any shares of Priority Common Stock may at
such holder's option, at any time and from time to time, convert
any or all such shares into an equal number of fully paid and
nonassessable shares of Common Stock. As of January 29, 1994,
8,139,942 shares of Priority Common Stock had been converted to
Common Stock. Any shares of Priority Common Stock that remain
outstanding on the second anniversary of the initial issuance of
the shares of Priority Common Stock, December 30, 1994, will be
converted automatically into an equal number of fully paid and
nonassessable shares of Common Stock. Such conversion will be
deemed to have occurred on such second anniversary without any
notice or other action on the part of the Company or the holder
of such Priority Common Stock.
The Common Stock and Priority Common Stock do not have any
preemptive rights or subscription or redemption privileges. The
Common Stock and Priority Common Stock do not have cumulative
voting rights, which means that the holder or holders of more
than half of the shares voting for the election of directors can
elect all the directors then being elected. All the shares of
Common Stock and Priority Common Stock issued under the Amended
Plan are fully paid and nonassessable. After the original
issuance of the Priority Common Stock, neither the beneficial nor
the record ownership of the Priority Common Stock may be traded
or transferred, and any attempt to trade or transfer the
ownership of the Priority Common Stock will be void. The
Priority Stock must first be converted to Common Stock in order
to be traded or otherwise transferred.
The Common Stock is subject to certain transfer restrictions
in order to preserve the ability of the Company to utilize net
operating loss carryovers, capital loss carryovers, and business
credit carryovers (the "Tax Benefits") to which the Company is
entitled pursuant to the Internal Revenue Code of 1986, as
amended (collectively, the "Code") and the regulations
promulgated thereunder (Note 9). The following restrictions
apply for the two-year period immediately following the effective
date, December 30, 1992, of the Amended and Restated Certificate
of Incorporation of the Company:
<PAGE>
<PAGE>
No person may acquire any shares of Common Stock of the
Company, or any option or warrant to purchase any such
stock, to the extent such acquisition would cause the
Ownership Interest Percentage (as determined under Treasury
regulations) of the acquiror or any other person to increase
above five (5) percent, whether or not said acquiror or
other person held stock of the Company, or options or
warrants to purchase such stock, in excess of such
percentage before such transfer. In addition, no person
whose Ownership Interest Percentage exceeds five (5) percent
may transfer any shares of Common Stock of the Company or
any options to purchase such stock.
Any transfer of shares of Common Stock of the Company,
or options or warrants to purchase any such shares, that
would otherwise be prohibited pursuant to the preceding
paragraph, will nonetheless be permitted if information
relating to a specific proposed transaction is presented to
the Board of Directors and the Board determines that such
transaction will not jeopardize the Tax Benefits, based upon
an opinion of legal counsel selected by the Board of
Directors to that effect. The transfer restrictions set
forth in the Amended and Restated Certificate of
Incorporation will not be effective if (a) the Board of
Directors authorizes the filing of a federal tax return
electing to opt out of Section 382(l)(5) of the Code or (b)
the Board of Directors determines that Section 382(l)(5)
does not apply. The provisions will not apply to a transfer
of Common Stock pursuant to a bona fide tender offer for at
least 50% of the aggregate amount of the Company's Common
Stock and Priority Common Stock, for the sole purpose of
allowing stockholders to tender their shares pursuant to the
offer. Nothing in this paragraph or the immediately
preceding paragraph shall be construed to limit or restrict
the Board of Directors in the exercise of its fiduciary
duties under applicable law.
All equity interests existing immediately prior to the
consummation of the Amended Plan were cancelled pursuant to the
Amended Plan and the accumulated deficit was eliminated under
fresh-start reporting.
WARRANTS
An aggregate of 200,000 Series B Warrants were issued under
the Amended Plan. Each such warrant entitles the holder to
purchase one share of the Common Stock at any time from six
months after the Consummation Date through the eighth anniversary
of the Consummation Date. The initial exercise price is $5.92
per share (200% of the average closing price of the Common Stock
for the 60 trading days after the Consummation Date). No Series
B Warrants were exercised during Fiscal 1994.
<PAGE>
<PAGE>
An aggregate of 2,120,000 Series C Warrants were issued
(1,992,715 outstanding as of January 29, 1994) under the Amended
Plan. Each such Warrant entitles the holder to purchase one
share of the Common Stock at any time from six months after the
Consummation Date through January 31, 1999. The initial exercise
price is $1.11 per share (37.5% of the average closing price of
the Common Stock for the 60 trading days after the Consummation
Date). There were 127,285 common shares issued upon exercise of
the Series C Warrants during Fiscal 1994.
The exercise prices of the above warrants are subject to
adjustment upon the occurrence of certain events, including,
among other things, the payment of a stock dividend with respect
to the Company's Common Stock, the subdivision, combination or
reclassification of Common Stock, the merger or consolidation of
the reorganized Company, and the issuance for consideration of
rights, options or warrants (other than rights to purchase Common
Stock issued to shareholders generally) to acquire Common Stock
of the Company. Rights, options or warrants distributed to
holders of Common Stock prior to the warrant expiration dates
will be distributed to holders of such warrants as if the
warrants had been exercised immediately prior to the record date
for such distribution. Upon the exercise of warrants, a holder
of such warrants is entitled to receive any distributions (other
than distributions described above, distributions in connection
with the total liquidation, dissolution, or winding-up of the
Company or dividends payable out of current earnings) made to
holders of Common Stock prior to expiration of such warrants as
if the holder had exercised such warrants prior to the record
date of such distribution. In this case, the holder, upon
conversion, would also receive interest at a rate of 10% per
annum on any cash payable, as well as any income earned on
distributed assets, property or securities from the distribution
date to the date of exercise. The exercise prices and number of
shares issuable upon exercise will also be adjusted in certain
circumstances if the Company issues certain securities at below
market prices.
A holder of any of the warrants described above as such will
not be entitled to any rights as a stockholder of the Company,
including without limitation the right to vote with respect to
the shares of Common Stock of the Company, until such holder has
properly exercised the warrants in accordance with the terms of
the respective warrant agreement.
9. INCOME TAXES:
There were no provisions for income taxes for the five weeks
ended January 30, 1993, the forty-eight weeks ended December 26,
1992, and for Fiscal 1992. For reasons discussed below, the
Company recorded an income tax provision of approximately $3.3
million for Fiscal 1994.
<PAGE>
<PAGE>
The Company adopted SFAS No. 109 in conjunction with the
adoption of fresh-start reporting (Note 2). Prior periods were
not restated to adopt SFAS No. 109. The accounting method
previously used to account for income taxes was the liability
method under SFAS No. 96. Under SFAS No. 109, deferred income
taxes are recognized by applying the enacted statutory tax rates
in future years to the changes in "cumulative temporary
differences" (the differences between financial statement
carrying values and the tax basis of assets and liabilities).
As a consequence of the adoption of fresh-start reporting
and SFAS No. 109, in the near future any tax benefits realized
for tax purposes after the Consummation Date for cumulative
temporary differences, as well as for the net operating loss
carryovers, will be reported as an addition to paid-in-capital
(see Consolidated Statement of Changes in Stockholders' Equity)
rather than as a reduction in the tax provision in the statements
of operations. Tax benefits or liabilities realized for book
purposes after the Consummation Date will be combined in the near
future with the pre-consummation deferred tax asset. Therefore,
Ames, although not likely to pay income taxes in the near future,
is expecting to record a tax provision on any book income.
However, the tax provision has no impact on the Company's
reported operating earnings, earnings before income taxes, taxes
payable, or cash flows.
Ames has the following deferred tax assets, primarily from
pre-consummation periods, as of the following dates (in
millions):
<TABLE>
AS OF AS OF
JANUARY 29, 1994 JANUARY 30, 1993
---------------- ----------------
<CAPTION>
<S> <C> <C>
Fixed assets $80 $100
Self insurance reserve 14 22
Store closing reserve 8 26
Leases 32 38
Vacation pay reserve
and other 8 8
Net operating loss
carryovers 167 118
------ ------
Total deferred tax asset 309 312
Valuation allowance (309) (312)
------ ------
Net deferred tax asset $0 $0
====== ======
</TABLE>
<PAGE>
<PAGE>
The Company has fully reserved for its deferred tax assets
because of the current uncertainty of the future recognition of
such deductions. In subsequent periods, Ames may reduce the
valuation allowance, provided that the possibility of utilization
of the deferred tax asset is more likely than not, as defined by
SFAS No. 109. Any such reduction in the valuation allowance in
the near future will result in a corresponding addition to
paid-in-capital.
In October 1993, the Company filed its federal income tax
return for Fiscal 1993. In its return, the Company treated
"pre-emergence net operating losses" (qualified losses incurred
prior to the Consummation Date) under Section 382(l)(5) of the
Internal Revenue Service ("IRS") Code (hereafter "L-5"). Under
"L-5," there is approximately $295 million in pre-emergence net
operating losses available as carryovers without any annual
limitation, which could result in future tax benefits of
approximately $118 million at currently enacted tax rates. If
the Company experiences an ownership change on or before December
30, 1994, the Company will lose its "L-5" net operating loss
carryovers. The Company would experience an ownership change if
one or more 5% or more shareholders increase their interests in
the aggregate by more than an additional 50% of the total of the
Company's combined Common and Priority Common Stock (Note 8). In
an attempt to prevent an ownership change from occurring, there
are significant restrictions for a two-year period on the trading
of Ames stock by either a 5% or more shareholder or a shareholder
who would become a 5% or more shareholder on or before December
30, 1994. For this purpose, the test is based upon all voting
stock. Using this criteria, Ames does not currently have a 5% or
more shareholder. Procedures have been established with Chemical
Bank, the transfer agent, to monitor the above trading.
Ames also has a "post-emergence net operating loss"
carryover (incurred after the Consummation Date) of approximately
$120 million. Both pre and post emergence net operating loss
carryovers will expire in 2007, 2008 and 2009. In addition, Ames
has targeted jobs tax credit carryovers of approximately $7
million and alternative minimum tax credit carryovers of
approximately $3 million, which will expire in 2007 and 2004,
respectively. Federal net operating loss carryovers for fiscal
years subsequent to Fiscal 1990 are subject to future
adjustments, if any, by the IRS.
Ames has substantial potential state net operating loss
carryovers. It is difficult, however, to quantify the utilizable
amounts of such state operating losses because of the uncertainty
related to the mix of future profits in specific states.
<PAGE>
<PAGE>
10. BENEFIT AND COMPENSATION PLANS:
RETIREMENT AND SAVINGS PLAN
Ames maintains a defined contribution retirement and savings
plan for certain of its eligible employees. The provisions of
the plan allow Ames to make matching contributions of 50% of the
employee's contribution (up to 5% of the employee's
compensation). Ames also funds all administrative costs incurred
by the plan. Ames' expense associated with this plan amounted to
approximately $2.6, $.2, $2.5, and $3.3 million, in Fiscal 1994,
in the five weeks ended January 30, 1993, in the forty-eight
weeks ended December 26, 1992, and in Fiscal 1992, respectively.
INCOME CONTINUATION PLAN
Certain officers of Ames participate in an Income
Continuation Plan ("ICP"), which guarantees up to one year's
salary in the event of termination other than for cause. As of
January 29, 1994, the Company has reserved for its known
obligations under the ICP.
STOCK APPRECIATION RIGHTS
In connection with the Amended Plan, stock appreciation
rights ("SARs") exercisable only for cash, equivalent to 1.2
million shares of the new Common Stock were granted to certain
members of management and key employees as compensation for their
efforts in restructuring Ames and enabling it to emerge from
Chapter 11. After certain exercises and forfeitures (related to
terminated officers), SARs equivalent to approximately 1.0
million shares (one-third of this amount vested on the
Consummation Date, one-third vested on December 30, 1993, and
one-third will vest on December 30, 1994) were outstanding at
January 29, 1994. Each SAR entitles the recipient, upon exercise
(which may not be sooner than three months or later than five
years after the Consummation Date), to receive in cash the excess
of the average closing price of a share of Common Stock during
the ten trading days prior to the exercise date, over the average
closing price of a share of Common Stock during the 60 trading
days after the Consummation Date. The average closing price for
the 60 trading days after the Consummation Date was $2.96 per
share and the average closing price for the last 10 trading days
of Fiscal 1994 was $2.36 per share. Therefore, no reserve was
necessary at January 29, 1994. During Fiscal 1994, 16,667 SARs
were exercised.
<PAGE>
<PAGE>
KEY EMPLOYEE CONTINUITY BENEFIT PLAN
Ames has a Key Employee Continuity Benefit Plan (the
"Continuity Plan") that covers all officers, Vice President and
above, and certain other employees of Ames. If the employment of
any participant in the Continuity Plan is terminated, other than
for death, disability, cause (as defined in the Continuity Plan)
or by the participant other than for good reason (as defined in
the Continuity Plan), within 18 months after a change of control
of Ames, the participant will receive a lump sum cash severance
payment. The severance payment is 2.99 times Base Compensation
for the President and Executive Vice Presidents, 2 times Base
Compensation for Senior Vice Presidents and selected Vice
Presidents and 1 times Base Compensation for other Vice
Presidents. Base Compensation is defined generally as the sum of
the participant's annual base compensation in effect immediately
prior to the participant's termination plus one-third of the
value of the cash and stock bonuses paid to the participant
during the 36 months ending on the date of termination. For
purposes of the Continuity Plan, a change of control includes but
is not limited to the acquisition by any person of beneficial
ownership of 20% or more of Ames outstanding voting securities or
the failure of the individuals who constituted the Board of
Directors at the beginning of any period of 12 consecutive months
to continue to constitute a majority of the Board during such
period.
On September 2, 1992, pursuant to applicable provisions of
the Continuity Plan, the Board of Directors of Ames adopted a
resolution providing that none of the events to occur in
connection with the consummation of the Amended Plan constituted
a change of control for purposes of the Continuity Plan.
ANNUAL INCENTIVE COMPENSATION PLAN
The Company has an Annual Incentive Compensation Plan (the
"Annual Bonus Plan") that is subject to annual review by the
Board of Directors. The Annual Bonus Plan provides annual
incentive cash bonuses based on the achievement of the Company's
financial goals for the year (and customer service goals for
store and field management beginning in Fiscal 1994). Bonuses
totalling approximately $1.9, $0, $1.2, and $3.3 million were
paid under this plan during Fiscal 1994 for Fiscal 1993, during
the five weeks ended January 30, 1993, during the forty-eight
weeks ended December 26, 1992 for Fiscal 1992, and in Fiscal 1992
for Fiscal 1991, respectively. Bonuses of approximately $2.8
million are expected to be paid under this plan in Fiscal 1995
for Fiscal 1994.
PERFORMANCE STOCK UNIT PLAN
Ames has a Performance Stock Unit Plan (the "Performance
Stock Unit Plan") which provides for long-term incentive awards,
contingent upon the degree to which Ames achieves a range of
pre-established objectives of cumulative earnings per share of
Common Stock for a consecutive period of three fiscal years (the
"Performance Target"). No incentive awards have been made under
the Performance Stock Unit Plan subsequent to the Filing Date.
<PAGE>
<PAGE>
RETIREMENT PLAN
Ames has an unfunded Retirement Plan for Officers/Directors
(the "Retirement Plan"). Every person who is employed by Ames as
an officer or director when he or she retires, dies or becomes
disabled and who (i) served as both a full-time officer and a
director of Ames and has completed five years of service in both
of these capacities, or (ii) served as a director of Ames and has
completed 10 years, not necessarily consecutive, of service to
Ames, is eligible for benefits under the Retirement Plan.
Benefits are payable upon termination of employment due to
retirement, death or disability. The annual benefit is equal to
two-thirds of the participant's average annual base salary during
the five-year period immediately preceding such termination of
employment. The maximum annual benefit under the Retirement Plan
is $100,000 ($150,000 in the case of a participant who served as
President and Chief Operating Officer). The annual benefit is
reduced by an amount equal to such participant's annual Social
Security benefits. Each participant in the Retirement Plan is
entitled to benefits for a period of 10 years. Upon the earlier
death of the participant, the then present value of all unpaid
benefits will be paid to the participant's estate. The Company
has reserved for potential payments under the Retirement Plan.
No payments have been made under this plan subsequent to the
Filing Date.
THE G.C. MURPHY COMPANY LIFE INSURANCE PLAN
The G.C. Murphy Company Life insurance plan granted a flat
dollar amount (defined benefit) of group term life insurance at
no cost to certain retired employees. This plan excludes G.C.
Murphy Co. employees who retired from Ames after January 31,
1986. The amount of coverage varies by retiree, is payable only
upon death, and has no loan or cash value. There are currently
2,321 retirees covered by this plan. The Company has reserved
for the projected payments under this plan.
Ames recorded a $2.7 million charge (Note 2) in the
forty-eight weeks ended December 26, 1992 related to the above
retirement plans.
11. COMMITMENTS AND CONTINGENCIES:
As part of the Company's settlement with TJX Companies, Inc.
("TJX") under the Amended Plan, Ames must reimburse TJX for
various obligations, fees, and expenses that may be paid by TJX
relating to various properties that were under leases rejected by
Ames. The total reimbursement may not exceed $2.7 million and
will be in the form of an unsecured note payable due on January
31, 1998 (the "TJX Expense Note"). TJX will furnish Ames with
the amounts paid, if any, during each quarter and those amounts,
after appropriate review, will become the principal due under the
TJX Expense Note. The amount claimed as due by TJX and recorded
for the TJX Expense Note as of January 29, 1994 was approximately
$.2 million. Interest is being accrued on the principal amounts
due at 10% per annum and will be payable on January 31, 1998.
<PAGE>
<PAGE>
The Amended Plan states that portions of any "Excess cash
flow amount" must be distributed to holders of claims in certain
classes in the order set forth in the Amended Plan. "Excess cash
flow amount" is defined as, with respect to each future fiscal
year ending January 28, 1995, January 27, 1996 and January 25,
1997, 50% of the excess of (i) EBITDA (as defined in the Credit
Agreement) of reorganized Ames for such fiscal year over (ii)(a)
$82.4 million with respect to the fiscal year ending January 28,
1995, (b) $99.1 million with respect to the fiscal year ending
January 27, 1996, and (c) $114.7 million with respect to the
fiscal year ending January 25, 1997; provided, however, that
excess cash flow amounts shall not be paid with respect to any
fiscal year after the fiscal year ending January 25, 1997. There
are a number of events that must occur before these classes will
receive any payments from the excess cash flow amount. First,
Ames must realize cash flows that exceed the level of projected
cash flows in the Amended Plan. Second, if there is cash flow
exceeding those projections, it will be allocated to pay the
other distributions scheduled under the Amended Plan before any
of the classes entitled to receive excess cash flow payments will
receive any payments from the excess cash flow amount. Thus, if
Ames has excess cash flow, some of the deferred distributions
provided in the Amended Plan may be paid earlier than otherwise
scheduled. Third, the excess will be measured at the end of each
fiscal year through January 25, 1997. This means that if the
required earnings levels are not reached during those years, no
excess cash flow amount will ever be paid. There were no excess
cash flow amounts through January 29, 1994 and none are
anticipated in the Company's latest projections.
The Amended Plan further states that portions of any
Wertheim Claim Proceeds (Note 12) and Litigation Claims must be
distributed to certain classes of claims. As to Wertheim Claim
Proceeds, after distribution to allowed classes, Ames would
retain 50% of the first $20 million of such proceeds and 25% of
proceeds in excess of $20 million. The Company must utilize the
first $10 million of its Wertheim Claim Proceeds, if any, to pay
down the Revolver. Any net proceeds from Litigation Claims would
be distributed pursuant to the Amended Plan.
12. LITIGATION:
On April 25, 1990, Ames filed for protection under Chapter
11 of the United States Bankruptcy Code in the United States
Bankruptcy Court for the Southern District of New York, Case Nos.
90B11233 through 11285. By Order dated as of December 18, 1992
(and modified subsequently) (the "Confirmation Order"), the
Bankruptcy Court confirmed the Amended Plan. The Amended Plan
was consummated on December 30, 1992.
<PAGE>
<PAGE>
The Confirmation Order, INTER ALIA, dismissed with prejudice
all pending litigation, and released all claims that could have
been brought in litigation, between the Company and the Citibank
Group, TJX (to the extent provided in the Ames-TJX Release), and
the creditors of the Company, including but not limited to Claims
arising in (a) the Tax Refund Motion, (b) the Citibank Lift Stay
Motion, (c) the Ames Declaratory Judgment Action, (d) the
Substantive Consolidation Motion (as terms (a) through (d) are
defined on pages 24 and 25 of the October 23, 1992 Disclosure
Statement and Restated Joint Plan of Reorganization of Ames
Department Stores, Inc. and Other Members of Ames), and (e) an
action filed under seal in the Bankruptcy Court on April 24, 1992
by the members of Ames as Adversary Proceeding No. 92-9016A
(JAG).
A number of claims filed in connection with the Ames Chapter
11 cases remain unresolved. To the extent that such claims are
properly asserted or found to be unpaid administrative priority
claims, they would be the responsibility of the Company. In the
aggregate, these claims would be material, and certain individual
claims are for significant amounts. Based on its continuing
review of these claims, the Company believes that some have, in
fact, already been fully satisfied, others are pre-petition
unsecured claims which are not the responsibility of the Company,
and some will be without any validity. It is not possible at
this time for the Company to determine with any reasonable
certainty its ultimate responsibility for these unresolved
claims.
On February 1, 1994, a civil complaint was filed against the
Company in the Circuit Court for Prince George's County,
Maryland, entitled Robert S. Wilson and Lillian Wilson vs Ames
Department Stores, Inc. et. al. This complaint arose from an
incident on February 15, 1993 in an Ames store in which one of
the plaintiffs, Robert S. Wilson, was apprehended for allegedly
shoplifting merchandise and was injured in a struggle with Ames
store personnel. The complaint alleges that the plaintiff was
permanently disabled and, among other things, that Ames personnel
used excessive force. The plaintiffs most recent demand was for
$15 million. The case is still in a very preliminary stage and
no discovery has commenced. Based on the information known to
date, the Company believes it has meritorious defenses to the
claims asserted.
<PAGE>
<PAGE>
WERTHEIM PROCEEDING
On October 13, 1992, Ames commenced an adversary proceeding
against Wertheim Schroder & Co., Inc. ("Wertheim") and James A. Harmon
("Harmon") (Wertheim & Harmon, collectively the "Defendants"). In this
proceeding (the "Wertheim Proceeding"), Ames sought damages and
equitable relief for breach of fiduciary duty, professional
malpractice, fraudulent conveyance and transfer pursuant to the
Bankruptcy Code and New York law, and other improper conduct
relating to Ames' acquisition from Zayre Corporation ("Zayre") of
Zayre's discount stores division in October 1988 (the "Zayre
Acquisition"). Wertheim was investment advisor to both Ames and
Zayre in connection with the Zayre Acquisition; Harmon at the
time of the Zayre Acquisition served as Chairman of the Board of
Directors of Ames and as Chairman of Wertheim.
On November 20, 1992, the Defendants answered the complaint,
denied its material allegations and interposed ten counterclaims
against Ames, asserting (i) contribution claims under common law
and the 1933 Securities Act, and (ii) claims for indemnity under
Ames' articles of incorporation, Ames' engagement letter with
Wertheim, other agreements between Wertheim and Ames, Delaware
law and common law.
On March 31, 1994, Ames entered into a settlement agreement
with the Defendants (the "Settlement Agreement"), which was
subject to the approval of the Bankruptcy Court (see below). In
summary, the Settlement Agreement provides for a $19 million
settlement payment by the Defendants and dismissal of all claims
and counterclaims in the Wertheim Proceeding. The Settlement
Agreement also provides for the Bankruptcy Court to enter an
order (the "Bar Order") barring the assertion of further claims
arising out of the Zayre Acquisition against the Defendants by
Ames and holders of Allowed Claims (as defined in the Amended
Plan). The Settlement Agreement also requires Ames to indemnify
the Defendants in the event that the assertion of Zayre-related
claims by Ames against any third party results in that third
party bringing a claim over against either of the Defendants. A
hearing on the motion to approve the Settlement Agreement and
enter the Bar Order was held on April 26, 1994.
Subsequent to the hearing, the Bankruptcy Court entered an
order approving the Settlement Agreement. Pursuant to the
Settlement Agreement, the $19 million will be paid 5 business
days after the order approving the settlement becomes Final (as
that term is defined in the Settlement Agreement). If no appeals
are filed, it is currently anticipated that the payment will be
made in early June.
Pursuant to the Amended Plan, once the Settlement Agreement
is Final, the Class AG-6A Trust will receive 50 percent of the
net proceeds, after first deducting fees and expenses of Ames and
its professional advisors incurred in connection with the
Wertheim Proceeding.
<PAGE>
<PAGE>
The Class AG-6A Trustee and the Company are not in agreement
as to whether the Company is entitled to recoup certain fees and
expenses incurred prior to the consummation of the Amended Plan.
The Trustee has filed a Motion seeking an order that Ames is not
permitted to deduct such fees and expenses in calculating the net
proceeds to be divided between the Company and the Class AG-6A
Trust. If the parties are not able to resolve the dispute
themselves, and the Bankruptcy Court were to rule in favor of the
Class AG-6A Trust, Ames estimates its total recovery would be
diminished by about $450,000. The Company, therefore, currently
anticipates that it will receive between $11.5 and $12 million of
the total settlement amount and that the Trustee will receive
between $7 and $7.5 million.
OTHER MATTERS:
Both prior and subsequent to the Filing Date, various class
action suits were commenced on behalf of certain prior
stockholders and debenture holders of Ames Department Stores,
Inc. A settlement of these class actions, dated May 14, 1993,
was reached between the plaintiffs and defendants and was
approved by the United States District Court, Southern District
of New York, on July 14, 1993. Any claim against Ames arising
out of these suits were discharged as part of and in accordance
with the terms of the Amended Plan which was confirmed on
December 18, 1992. Accordingly, the settlement of these cases
has no financial impact on Ames beyond the terms of the Amended
Plan.
Ames has owned and/or leased current and former facilities
that are subject to several environmental laws relating to the
operation and maintenance of those facilities, particularly with
respect to the facilities' 200 or more underground storage tanks.
The vast majority of those tanks have been cleanly removed. Some
residual contamination exists at a limited number of facilities,
the extent of which has not been determined at this time.
Environmental liabilities associated with these facilities may be
shared with facility landlords, tenants, subtenants, or other
third parties. In some states, clean-ups may be eligible for
financing from state funds. Based on currently available
information, no liabilities material to the Company will result
from any underground storage tank residual contamination. The
Company believes that adequate liabilities have been recorded
related to any potential costs.
<PAGE>
<PAGE>
Under the Comprehensive Environmental Response, Compensation
and Liability Act of 1980 as amended by the Superfund Amendments
and Reauthorization Act of 1986 ("Superfund"), liability may be
imposed on waste generators, site owners and operators, and
others regardless of fault or the legality of the original waste
disposal activity. Ames may be liable for costs at several sites
under Superfund or similar state laws either for generating
wastes, including waste oils disposed of at those sites, or in
connection with the assumption by Ames of certain Zayre Discount
Division liabilities. Ames believes that it has been connected
to most of these sites based on relatively small amounts of
wastes and that many other parties are involved at these sites
and may share in the ultimate liability. Ames does not have
sufficient information to determine its relative responsibility
for, or contribution to (if any), all of these sites at this
time.
At the Peak Oil Superfund site in Florida, four Zayre stores
were among a number of parties which received unilateral orders
from the United States Environmental Protection Agency ("EPA") in
1990 requiring them to participate in an immediate removal action
at that site. Subsequently, that removal action was performed by
the EPA. The Company's understanding, based on negotiations with
the EPA and the Company's participation in two remedial
investigation/feasibility studies relating to this site, is that
the EPA will not attempt to enforce the orders against the
Company. However, if the EPA were to attempt to enforce the
order, it could claim that the Company was jointly and severally
liable with other parties for approximately $600,000 in removal
costs plus treble punitive damages for failure to comply with the
orders. In the event that the EPA does attempt to enforce the
orders, the Company believes that, based on the current state of
the law regarding the treatment of environmental claims in
bankruptcy, it would have meritorious legal defenses to any such
claim, and in addition, with respect to punitive damages, that it
would have meritorious defenses based on the language of the
Superfund statute. In addition, the Company would have a right
to obtain contribution from other parties affected by the order.
The Company believes that adequate liabilities have been recorded
for any potential costs.
The Company is a party to various claims and legal
proceedings covering a wide range of matters that arise in the
ordinary course of its business activities. The Company believes
that any liability, in the event of a final adverse
determination, will not have a material adverse effect,
individually or in the aggregate, on the consolidated financial
position or results of operations of the Company.
The Company does not believe that, taken as a whole, the
final determination of all legal matters discussed within this
Note, would have a material adverse affect on the consolidated
financial position or results of operations of the Company.
<PAGE>
<PAGE>
<TABLE>
13. SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest and income taxes were as follows:
(000's OMITTED)
-------------------------------------------------------
FISCAL YEAR FIVE WEEKS FORTY-EIGHT FISCAL YEAR
ENDED ENDED WEEKS ENDED ENDED
JANUARY 29, JANUARY 30, DECEMBER 26, JANUARY 25,
1994 1993 1992 1992
----------- ----------- ------------ -----------
<CAPTION>
<S> <C> <C> <C> <C>
Interest $23,204 $258 | $11,844 $12,478
Income taxes 19 - | 10 220
Ames entered into other non-cash investing and financing activities as follows:
(000's OMITTED)
-------------------------------------------------------
FISCAL YEAR FIVE WEEKS FORTY-EIGHT FISCAL YEAR
ENDED ENDED WEEKS ENDED ENDED
JANUARY 29, JANUARY 30, DECEMBER 26, JANUARY 25,
1994 1993 1992 1992
----------- ----------- ------------ -----------
<CAPTION>
<S> <C> <C> <C> <C>
New capital lease obligations $- $- | $204 $-
Conversion of subordinated |
debentures into Common Stock - - | 503 -
Conversion of Priority Common |
Stock into Common Stock 72 10 | - -
</TABLE>
<PAGE>
<PAGE>
14. FAIR VALUES OF FINANCIAL INSTRUMENTS:
The Financial Accounting Standard Board has issued Statement
of Financial Accounting Standards No. 107, "Disclosures About
Fair Value of Financial Instruments" ("SFAS No. 107"), which
requires disclosure of the fair value of financial instruments.
The following methods and assumptions were used by the Company in
estimating the fair value disclosures for its financial
instruments.
The Company's financial instruments as of January 29, 1994
and January 30, 1993 were cash and short-term investments,
long-term debt, and the Series C Warrants. For cash and
short-term investments, the carrying amounts reported in the
Consolidated Balance Sheets approximated fair values. The
carrying amount of the Company's long-term debt at January 30,
1993 approximated fair value because Ames had just stated its
liabilities at the present value of the amounts to be paid under
fresh-start reporting at December 26, 1992. For long-term debt
obligations at January 29, 1994, the fair values of those
instruments expected to be paid-off from the proceeds of the New
Facility (Note 6) were stated at their face amounts and the fair
values of the other instruments were estimated using a discounted
cash flow analysis (based upon the Company's incremental
borrowing rates for similar types of borrowing arrangements).
The estimates of the fair values of these other debt instruments
at January 29, 1994 approximated their carrying amounts. The
fair value of the Series C Warrants was based on the market
trading price at year-end less the exercise price, times the
number of such warrants that were outstanding.
The carrying amounts and fair values of the Company's
financial instruments at January 29, 1994 and January 30, 1993
were as follows:
<TABLE>
(000's OMITTED)
------------------------------------------
JANUARY 29, 1994 JANUARY 30, 1993
------------------- --------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
--------- ------- --------- --------
<CAPTION>
<S> <C> <C> <C> <C>
Cash and short-term investments $ 72,445 $ 72,445 $115,522 $115,522
Long-term debt
Secured debt 100,069 101,240 102,731 102,768
Unsecured debt 33,877 33,877 48,820 48,820
Series C Warrants - 1,026 - 4,007
</TABLE>
<PAGE>
<PAGE>
15. LEESPORT DISTRIBUTION CENTER:
On January 28, 1994, there was a partial roof collapse at
the Company's distribution center in Leesport, PA. 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 is in process 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.
As a result of the partial roof collapse, the Company
reclassified approximately $1.8 million of damaged and impaired
inventory as of January 29, 1994 to "Prepaid expenses and other
current assets" as it expects that it will be reimbursed for this
amount. In addition, the Company expects that it will 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.
16. RESTRUCTURING:
Restructuring charges represented profits or losses from
store operations from the date of announcement until closing,
estimated lease liabilities (including amounts that were subject
to settlement), employee payroll and severance costs, losses on
liquidation of inventories, losses on disposition of owned assets
and leasehold interests, and other related restructuring costs.
Non-cash decreases in merchandise inventories due to
restructuring activities totalled $57.8 and $53.3 million for the
forty-eight weeks ended December 26, 1992 and for Fiscal 1992,
respectively. The following items represent the major components
of the restructuring charges for the forty-eight weeks ended
December 26, 1992 and for fiscal year 1992:
<PAGE>
<PAGE>
<TABLE>
($ IN MILLIONS)
-------------------------------
FORTY-EIGHT
WEEKS ENDED FISCAl
ITEM DECEMBER 26, 1992 1992
---- ----------------- --------
<CAPTION>
<S> <C> <C>
Lease costs (a) $23.4 $44.3
Net fixed asset and leasehold
write-down 28.3 52.1
Write-down of inventories 9.3 10.1
Severance and other human
resource costs 18.2 22.4
Reserve for discontinuance of
private-label children's apparel 12.1 -
Various other (including post-
announcement operating results
for closing stores) (2.8) 18.3
------ ------
$88.5 $147.2
====== ======
<FN>
(a) The lease costs relate to the closing of stores/facilities and rejected leases
as part of the Chapter 11 case.
</TABLE>
Net assets held for disposition are recorded net of related
anticipated costs associated with the sale of such assets.
Assets other than merchandise inventories are sold as market
conditions permit.
As part of its restructuring prior to emergence from Chapter
11, the Company announced in October, 1992 that it would close 60
discount stores and the three remaining (freestanding) Crafts & More
stores in early Fiscal 1994. All of these stores were closed as
planned in March, 1993. In connection with the 60 store closings
and related restructuring (including the closing of a
distribution center/warehouse and office consolidation), the
Company recorded a restructuring charge of $72.5 million in
October, 1992. In December, 1992, the Company recorded an
additional restructuring charge of $16.0 million, primarily to
provide a reserve for expected markdowns associated with the
discontinuance of private-label children's apparel and for
additional home office and field employee severance costs
associated with the continued restructuring of the Company.
<PAGE>
<PAGE>
In December, 1992, 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 Crafts & More stores.
The GOB sales commenced following the physical inventories that
were taken in January. 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 were
incurred (accrued prior to Fiscal 1994) from these store closings
and GOB sales.
In October, 1991, the Company announced the closing of 77
discount stores and the sale of Mathews & Boucher, Inc. ("M&B"), its
wholesale sporting goods subsidiary, and recorded a charge of $147.2
million in restructuring costs related to these and other
restructuring items (including costs to close two distribution
centers/warehouses). Ames sold substantially all of the assets
of M&B to a third party (the "Purchaser") for approximately $8 million
in cash. The Purchaser also assumed certain of the post-petition
liabilities of M&B. The October, 1991 restructuring charge also
included the expected proceeds and costs associated with eleven
freestanding Crafts & More store dispositions. The Company received
Bankruptcy Court approval for these closings and sales during
Fiscal 1992.
17. PRO FORMA SUMMARY INFORMATION (UNAUDITED):
During the forty-eight weeks ended December 26, 1992, Ames
announced its plan to close 60 discount stores in early Fiscal
1994. The announcement was made on October 30, 1992 and the
stores were closed in March, 1993. Results of closing stores'
operations are applied against the restructuring reserve from the
date of announcement. Therefore the operating results of the 60
stores were included in the statements of operations only through
October, 1992. Also, during Fiscal 1992, the Company received
Bankruptcy Court approval to close 77 stores and to sell M&B as part of
its restructuring. The operating results of the 77 stores were
included in the statement of operations for Fiscal 1992 through
September, 1991.
The following unaudited pro forma summary information for
the forty-eight weeks ended December 26, 1992 and for Fiscal 1992
represents the estimated results of operations of the Company as
if the Amended Plan was effective at the beginning of Fiscal
1992, the 60 closed stores were excluded from operations for the
forty-eight weeks ended December 26, 1992 and for Fiscal 1992,
and the 77 closed stores and M&B were excluded from operations for
Fiscal 1992. The adjustments reflected in the information below
include: (1) the estimated effects of the Amended Plan; (2) the
reversal of the restructuring charges and operating results of
the 60 and 77 stores and M&B; (3) interest expense and
<PAGE>
<PAGE>
interest income adjustments related to inventory levels at the
closed stores and additional funds on hand; (4) income tax
expense for the forty-eight week period; and (5) adjustment to
the earnings per common share based on the new common shares
issued under the Amended Plan.
<TABLE>
PRO FORMA SUMMARY INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE AMOUNT)
(UNAUDITED)
FORTY-EIGHT WEEKS FISCAL YEAR
ENDED ENDED
DECEMBER 26, 1992 JANUARY 25, 1992
----------------- ----------------
<CAPTION>
<S> <C> <C>
Total Sales $2,167,658 $2,324,813
Net Income (Loss) 8,594 (11,805)
Net Income (Loss) Per Common Share .43 (.59)
</TABLE>
Although reductions were made in corporate office and field
expenses in connection with the store closings, no estimates of
such reductions were included in any of the pro forma
adjustments. Only expenses directly attributable to the closing
stores' operations were removed from the historical expense
totals. The pro forma data is for illustrative purposes only and
should not be construed to be indicative of the Company's results
of operations that actually would have resulted if the
transactions were consummated on the date assumed and do not
project the Company's results of operations or trends for any
future date or period.
<TABLE>
18. OTHER OPERATING INCOME:
<CAPTION>
(000's OMITTED)
------------------------------------------------------
FISCAL YEAR FIVE WEEKS FORTY-EIGHT FISCAL YEAR
ENDED ENDED WEEKS ENDED ENDED
JANUARY 29, JANUARY 30, DECEMBER 26, JANUARY 25,
1994 1993 1992 1992
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Concession and vending income $1,620 $ - | $2,064 $2,298
Layaway service fees 3,109 149 | 3,192 4,225
Various other 10,799 914 | 10,203 16,863
------- ------- | ------- -------
$15,528 $1,063 | $15,459 $23,386
======= ======= | ======= =======
</TABLE>
<PAGE>
<PAGE>
19. BANKRUPTCY EXPENSES:
Bankruptcy related expenses represented primarily
professional fees and incremental internal costs incurred as a
result of the Chapter 11 cases. Costs totalling $25.5 and $28.0
million were expensed during the forty-eight weeks ended December
26, 1992 and in Fiscal 1992, respectively, relating primarily to
accounting, legal and consulting services provided to Ames and
various official creditors' committees (which were required to be
paid by Ames while in Chapter 11).
20. EXTRAORDINARY ITEMS:
During the third quarter of Fiscal 1994, the Company paid
approximately $1.9 million to certain state taxing authorities in
early settlement of approximately $2.8 million of tax obligations
and recorded the difference of $.9 million as an extraordinary
gain in the accompanying consolidated statement of operations for
Fiscal 1994.
The Company stated its liabilities at December 26, 1992 at
the present value of the amounts to be paid pursuant to the
Amended Plan. The resulting non-taxable gain of approximately
$1.25 billion from the debt discharge was presented as an
extraordinary gain in the accompanying consolidated statement of
operations for the forty-eight weeks ended December 26, 1992.
21. QUARTERLY FINANCIAL DATA (UNAUDITED):
Summarized unaudited quarterly financial data (in thousands
except for per share amounts) for Fiscal 1994, for the five weeks
ended January 30, 1993 and for the forty-eight weeks ended
December 26, 1992 are shown below. Due to the adoption of
fresh-start reporting at December 26, 1992 (Note 2), the
financial data after that date are not comparable in certain
material respects to prior periods. The quarterly gross profit
amounts for the forty-eight weeks ended December 26, 1992 include
certain reclassifications to conform to the current year
presentation.
<PAGE>
<PAGE>
<TABLE>
NET INCOME (LOSS)
NET SALES GROSS PROFIT NET INCOME (LOSS) PER COMMON SHARE
----------- ------------ ----------------- -----------------
<CAPTION>
<S> <C> <C> <C> <C>
Fiscal 1994
First $434,761 $118,145 ($17,992) ($.90)
Second 496,850 136,182 (9,955) (.50)
Third 526,502 143,779 (1,653)(a) (.08)(a)
Fourth 665,414 183,216 40,423 (b) 1.91 (b)
------- ------- --------- -------
Total $2,123,527 $581,322 $10,823 $.51 (c)
========== ======== ========= =======
Five Weeks
Ended 1/30/93 $142,349 $22,884 ($23,892) ($1.19)
========== ======== ========= =======
Forty-eight weeks
Ended 12/26/92
First $482,096 $128,448 ($37,737) ($1.09)
Second 586,554 137,282 (36,170) (1.05)
Third 614,326 160,369 (91,396)(d) (2.52)(d)
Nov. & Dec. 601,050 167,274 884,191 (e) - (f)
---------- -------- --------- -------
Total $2,284,026 $593,373 $718,888 - (f)
========== ======== ======== =======
<FN>
(a) Included the extraordinary gain on early extinguishment of debt of $.9 million
(Note 20).
(b) Included a reduction in cost of sales of $1.8 million for an adjustment to the
LIFO reserve. A portion of this adjustment may be applicable to prior quarters,
however, such amounts were undeterminable.
(c) Per share figures do not total due to the weighted average number of common and
common equivalent shares outstanding in each quarter.
(d) Included a restructuring charge of $72.5 million (Note 16).
<PAGE>
(e) Included the extraordinary gain on debt discharge of $1.25 billion (Note 20),
the revaluation charge under fresh-start reporting of $391.2 million (Note 2), a
restructuring charge of $16.0 million (Note 16), and $9.0 million in bankruptcy
expenses. Also included in the combined November and December net earnings was
a reduction in cost of sales of $9.5 million to record the effect of the
adjustment to the LIFO reserve prior to the implementation of fresh-start
reporting. A portion of this adjustment may be applicable to prior quarters;
however, such amounts were undeterminable
(f) Earnings per share for the combined November and December period and for the
forty-eight week period were not presented because such presentation would not
be meaningful. The old common stock was canceled under the Amended Plan and the
new stock was not issued until the Consummation Date.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
SCHEDULE II
AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTERS
AND EMPLOYEES OTHER THAN RELATED PARTIES
BALANCE AT
BEGINNING OF AMOUNTS BALANCE AT END OF PERIOD
------------------------
NAME OF DEBTOR PERIOD DELETIONS COLLECTED CURRENT NONCURRENT
- - - - - - - -------------- ------------ --------- --------- ----------- ----------
<CAPTION>
<S> <C> <C> <C> <C> <C>
FISCAL YEAR ENDED
JANUARY 29, 1994
None
FIVE WEEKS ENDED
JANUARY 30, 1993
None
FORTY-EIGHT WEEKS ENDED
DECEMBER 26, 1992
None
FISCAL YEAR ENDED
JANUARY 25, 1992
Peter B. Hollis $166,600 (a) ($166,600)(a) - - -
<FN>
(a) Interest bearing promissory note, payable annually in arrears, collateralized by
pledged common stock:
PLEDGED
NAME OF DEBTOR TITLE NOTE DUE INTEREST RATE COMMON SHARES
-------------- -------------- ---------- ------------- -------------
P. B. Hollis Former Director 01/05/92 6.93% 20,000
This amount was written-off in Fiscal 1992 pursuant to a settlement agreement
approved by the Bankruptcy Court.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
SCHEDULE V
AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
FIXED ASSETS
(000's OMITTED)
RETIREMENTS,
BALANCE AT WRITE-OFFS,
BEGINNING OF ADDITIONS SALES AND BALANCE AT END
CLASSIFICATION PERIOD AT COST RECLASSIFICATIONS OF PERIOD
- - - - - - - -------------------- ------------ --------- ----------------- --------------
<CAPTION>
<S> <C> <C> <C> <C>
FISCAL YEAR ENDED
JANUARY 29, 1994
Land and building $ 131 $ 423 $ 13 $ 541
Fixtures and equipment 2,887 13,768 13 16,642
Leasehold improvements 475 6,024 (4) 6,503
-------- -------- -------- --------
$ 3,493 $ 20,215 $ 22 $ 23,686
======== ======== ======== ========
FIVE WEEKS ENDED
JANUARY 30, 1993
Land and building $ - $ 131 $ - $ 131
Fixtures and equipment - 2,887 - 2,887
Leasehold improvements - 475 - 475
-------- -------- -------- --------
$ - $ 3,493 $ - $ 3,493
======== ======== ======== ========
FORTY-EIGHT WEEKS ENDED
DECEMBER 26, 1992
Land and building $ 94,729 $ 1,716 $ 96,445 $ -
Property under
capital leases 89,163 204 89,367 -
Fixtures and equipment 274,847 16,633 291,480 -
Leasehold improvements 76,681 7,117 83,798 -
-------- -------- -------- --------
$535,420 $ 25,670 $561,090 (a) $ -
======== ======== ======== ========
FISCAL YEAR ENDED
JANUARY 25, 1992
Land and building $107,799 $ 2,200 $ 15,270 $ 94,729
Property under
capital leases 125,315 - 36,152 89,163
Fixtures and equipment 306,941 26,152 58,246 (c) 274,847
Leasehold improvements 87,190 3,749 14,258 76,681
-------- -------- -------- --------
$627,245 $ 32,101 $123,926 (b) $535,420
======== ======== ======== ========
<PAGE>
<FN>
(a) Includes the write-offs of all remaining balances at December 26, 1992 under
fresh-start reporting (Note 2). Also includes the write-offs of assets and
transfers to assets held for disposition related to the 60 stores and one
distribution center/warehouse closed as part of the Company's final
restructuring prior to emergence from Chapter 11 (Note 16), as follows:
Land and building $ 99
Property under capital leases 23,855
Fixtures and equipment 32,870
Leasehold improvements 10,347
--------
$ 67,171
========
(b) Includes sale of M&B and write-offs of assets and transfers to assets held for
disposition related to the 77 stores and two distribution centers/warehouses
closed as part of the Company's restructuring (Note 16), as follows:
Land and building $ 14,502
Property under capital leases 36,929
Fixtures and equipment 39,246
Leasehold improvements 14,475
--------
$105,152
========
(c) Includes a reclassification of $5.4 million from assets held for disposition
due to the Bankruptcy Court approval of the conveyor system at the Leesport,
PA distribution center.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
SCHEDULE VI
AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF
FIXED ASSETS
(000's OMITTED)
BALANCE AT CHARGED TO RETIREMENTS,
BEGINNING OF COSTS AND SALES AND BALANCE AT END
CLASSIFICATION PERIOD EXPENSES RECLASSIFICATIONS OF PERIOD
- - - - - - - -------------------- ------------ ---------- ----------------- --------------
<CAPTION>
<S> <C> <C> <C> <C>
FISCAL YEAR ENDED
JANUARY 29, 1994
Land and building $ - $ 19 $ - $ 19
Fixtures and equipment 2 1,870 73 1,799
Leasehold improvements 2 278 - 280
-------- ------- -------- --------
$ 4 $ 2,167 $ 73 $ 2,098
======== ======= ======== ========
FIVE WEEKS ENDED
JANUARY 30, 1993
Land and building $ - $ - $ - $ -
Fixtures and equipment - 2 - 2
Leasehold improvements - 2 - 2
-------- -------- -------- --------
$ - $ 4 $ - $ 4
======== ======== ======== ========
FORTY-EIGHT WEEKS ENDED
DECEMBER 26, 1992
Land and building $ 9,226 $ 2,875 $ 12,101 $ -
Property under
capital leases 30,413 3,967 34,380 -
Fixtures and equipment 134,582 30,432 165,014 -
Leasehold improvements 34,343 6,699 41,042 -
-------- -------- -------- --------
$208,564 $ 43,973 $252,537 (a) $ -
======== ======== ======== ========
FISCAL YEAR ENDED
JANUARY 25, 1992
Land and building $ 8,876 $ 3,302 $ 2,952 $ 9,226
Property under
capital leases 43,293 6,455 19,335 30,413
Fixtures and equipment 119,626 40,473 25,517 134,582
Leasehold improvements 30,879 8,232 4,768 34,343
-------- ------- ------- --------
$202,674 $58,462 $52,572 (b) $208,564
======== ======= ======= ========
<PAGE>
<FN>
(a) Includes the write-offs of all remaining balances at December 26, 1992 under
fresh-start reporting (Note 2). Also includes the write-offs of accumulated
depreciation and transfers to assets held for disposition related to the 60
stores and one distribution center/warehouse closed as part of the Company's
final restructuring prior to emergence from Chapter 11 (Note 16), as follows:
Land and building $ 0
Property under capital leases 6,457
Fixtures and equipment 18,730
Leasehold improvements 4,885
-------
$30,072
=======
(b) Includes sale of M&B and write-offs of accumulated depreciation and transfers to
assets held for disposition related to the 77 stores and two distribution
centers/warehouses closed as part of the restructuring (Note 16), as follows:
Land and building $ 2,815
Property under capital leases 19,722
Fixtures and equipment 15,096
Leasehold improvements 4,701
-------
$42,334
=======
</TABLE>
<PAGE>
<PAGE>
<TABLE>
SCHEDULE VIII
AMES DEPARTMENT STORES,INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(000's OMITTED)
BALANCE AT CHARGED TO BALANCE AT
BEGINNING OF COST AND END OF
DESCRIPTION PERIOD EXPENSE RECLASSIFICATIONS DEDUCTIONS PERIOD
- - - - - - - ----------- ------------ ---------- ----------------- ---------- ----------
<CAPTION>
<S> <C> <C> <C> <C> <C>
FISCAL YEAR ENDED
JANUARY 29, 1994
Restructuring Reserve $ 22,497 - $16,943(a) ($32,448)(b) $6,992
FIVE WEEKS ENDED
JANUARY 30, 1993
Restructuring Reserve $ 29,396 - ($776)(c) ($6,123) $22,497
FORTY-EIGHT WEEKS ENDED
DECEMBER 26, 1992
Restructuring Reserve $ 33,812 $88,500 ($66,117)(c) ($26,799) $29,396
Reserve included in
Liabilities Subject to
Settlement Under the
Reorganization Case $ 40,000 - - ($40,000)(d) -
FISCAL YEAR ENDED
JANUARY 25, 1992
Restructuring Reserve - $147,200 ($92,497)(c) ($20,891) $33,812
Reserve included in
Liabilities Subject to
Settlement Under the
Reorganization Case $ 40,000 - - - $40,000
<FN>
(a) Represents reclassifications of costs associated with "Net assets held for
disposition" and other reclassifications.
(b) Represents payments of restructuring costs, including costs related to "Net assets
held for disposition."
(c) Represents reclassifications to reflect portions of the restructuring charge
that reduces "Net assets held for disposition" to net realizable value and
other reclassifications.
(d) Eliminated in connection with the consummation of the Company's plan of
reorganization.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
SCHEDULE IX
AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
SHORT TERM BORROWINGS
(000's OMITTED)
BALANCE WEIGHTED AVE. MAXIMUM AMOUNT AVERAGE AMOUNT WEIGHTED AVE.
AT END INTEREST RATE OUTSTANDING OUTSTANDING INTEREST RATE
CLASSIFICATION OF PERIOD END OF PERIOD DURING PERIOD DURING PERIOD DURING PERIOD
- - - - - - - ----------------- --------- ------------- -------------- -------------- -------------
<CAPTION>
<S> <C> <C> <C> <C> <C>
FISCAL YEAR ENDED
JANUARY 26, 1994
Bank Borrowings $ 15,360 (a) 8.500% $161,875 (a) $ 89,303 (c) 8.6% (c)
FIVE WEEKS ENDED
JANUARY 30, 1993
Bank Borrowings $ 22,960 (a) 8.500% $ 32,776 (a) $ 14,835 (c) 8.6% (c)
FORTY-EIGHT WEEKS ENDED
DECEMBER 26, 1992
Bank Borrowings $ - (b) - $322,292 (b) $320,852 (c) - (d)
DIP Borrowing - - 70,000 10,818 (c) 7.6% (c)
FISCAL YEAR ENDED
JANUARY 25, 1992
Bank Borrowings $320,312 (b) 9.875% $320,312 (b) $320,312 (c) 11.8% (c)
DIP Borrowing - - 30,000 2,610 (c) 8.9% (c)
<FN>
(a) Represents borrowings under the revolving credit facility of the Credit
Agreement.
(b) Borrowings under the pre-petition Revolving Credit Facility of the Credit
Agreement dated as of October 28, 1988 were classified as part of "Liabilities
subject to settlement under the reorganization case" as of January 25, 1992 in
Ames' Consolidated Balance Sheet. These pre-petition borrowings were settled
as part of the Company's plan of reorganization.
(c) Computed based on daily weighted averages.
(d) No interest was accrued on these pre-petition borrowings during this period
(Note 6).
</TABLE>
<PAGE>
<PAGE>
<TABLE>
SCHEDULE X
AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
SUPPLEMENTARY INCOME STATEMENT INFORMATION
STORE OPERATING, ADMINISTRATIVE AND GENERAL EXPENSES
(000's OMITTED)
CHARGES TO COSTS AND EXPENSES
FOR THE PERIOD ENDED
---------------------------------------------------------
JANUARY 29, JANUARY 30, DECEMBER 26, JANUARY 25,
ITEM 1994 (1) 1993 (2) 1992 (3) 1992 (1)
----------------------- ----------- ----------- ------------ -----------
<CAPTION>
<S> <C> <C> <C> <C>
Maintenance and repairs (a) (a) (a) (a)
Amortization of (a) (a) (a) (a)
intangible assets
Taxes, other than payroll (a) (a) (a) (a)
and income taxes
Royalties None None None None
Advertising $ 86,753 $ 5,391 $ 91,679 $105,667
<FN>
(1) Represents fifty-two weeks.
(2) Represents five weeks.
(3) Represents forty-eight weeks.
(a) Less than 1% of total sales as reported in the Consolidated Statements of
Operations.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
E X H I B I T I N D E X
CROSS-REFERENCE
EXHIBIT OR PAGE NUMBER
NUMBER EXHIBIT IN FORM 10-K
- - - - - - - ------- ------- ---------------
<CAPTION>
<S> <C> <C>
2(a) Third Amended and Restated Plan of Reorganization
of the Ames Department Stores, Inc. and other
members of the Ames Group, Citibank, N.A. as
Agent, the Parent Creditor's Committee, the
Subsidiaries Creditor's Committee, the Bond-
holders' Committee and the Employees' Committee
dated October 23, 1992 (incorporated herein by
reference to Exhibit 2 of the Company's Report
on Form 8-K dated December 29, 1992 and filed
December 31, 1992).
2(b) Statement of Ames Group with respect to conditions
to Consummation of Third Amended and Restated
Joint Plan of Reorganization of Ames Department
Stores, Inc. other members of Ames Group,
Citibank, N.A., Parent Creditors' Committee,
Subsidiaries Creditors' Committee, Bondholders'
Committee and Employees' Committee dated
December 28, 1992 (incorporated herein by
reference to Exhibit 2B of the Company's Report
on Form 8-K dated December 29, 1992 and filed
December 31, 1992).
2(c) Ames Department Stores, Inc. Information
Supplementing Disclosure Statement dated
December 29, 1992 (incorporated herein by
reference to Exhibit 2C of the Company's
Report on Form 8-K dated December 29, 1992
and filed December 31, 1992).
3(a) Amended and Restated Certificate of Incorporation
of Ames Department Stores, Inc.
(incorporated herein by reference to
Form 8 dated and filed December 29, 1992).
3(b) Form of By-laws of Ames Department Stores, Inc. 83
as amended October 4, 1993.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
E X H I B I T I N D E X
CROSS-REFERENCE
EXHIBIT OR PAGE NUMBER
NUMBER EXHIBIT IN FORM 10-K
- - - - - - - ------- ------- ---------------
<CAPTION>
<S> <C> <C>
4(a) Series B Warrant Certificate for Purchase of New
Common Stock of Ames Department Stores, Inc.
(incorporated herein by reference to Form 8-A
dated and filed December 11, 1992).
4(b) Series C Warrant Certificate for Purchase of New
Common Stock of Ames Department Stores, Inc.
(incorporated herein by reference to Form 8-A
dated and filed December 11, 1992).
4(c) Credit Agreement Among Ames Department Stores, Inc.
and Banks named herein as Banks and Citibank,
N.A. as Agent dated as of December 18, 1992
(incorporated herein by reference to Exhibit
28A-1 of the Company's Report on Form 8-K dated
January 7, 1993 and filed January 8, 1993).
4(d) Amendment No. 1, dated April 13, 1993, to the Credit
Agreement (Exhibit 4(c) above) Among Ames Depart-
ment Stores, Inc. and Banks named herein as Banks
and Citibank, N.A. as Agent (incorporated herein
by reference to Exhibit 4 of the Company's Report
on Form 8-K dated May 6, 1993 and filed May 7, 1993).
4(e) Inventory Security Agreement from Ames Department
Stores, Inc. and the Banks named herein as
Banks and Citibank, N.A. as Agent (incorporated
herein by reference to Exhibit 28A-2 of the
Company's Report on Form 8-K dated January 7,
1993 and filed January 8, 1993).
4(f) Shared Collateral Security Agreement from Ames
Department Stores, Inc. and the Subsidiaries
of Ames as Grantors to Citibank, N.A. as
Collateral Trustee (incorporated herein by
reference to Exhibit 28A-3 of the Company's
Report on Form 8-K dated January 7, 1993
and filed January 8, 1993).
4(g) Guaranty from the Subsidiaries of Ames Department
Stores, Inc. as Grantors in favor of the
Lenders Party to the Credit Agreement
referred to herein and Citibank, N.A. as Agent
(incorporated herein by reference to Exhibit
28A-4 of the Company's Report on Form 8-K
dated January 7, 1993 and filed January 8, 1993).
</TABLE>
<PAGE>
<PAGE>
<TABLE>
E X H I B I T I N D E X
CROSS-REFERENCE
EXHIBIT OR PAGE NUMBER
NUMBER EXHIBIT IN FORM 10-K
- - - - - - - ------- ------- ---------------
<CAPTION>
<S> <C> <C>
4(h) Collateral Trust Agreement among Ames Department
Stores, Inc. the other Collateral Grantors
and Citibank, N,A. the Collateral Trustee
(incorporated herein by reference to Exhibit
28A-5 of the Company's Report on Form 8-K
dated January 7, 1993 and filed January 8,
1993).
4(i) Indenture Dated as of December 29, 1992 by and
among Ames Department Stores, Inc. (8% Senior
Secured Notes (Series D) due December 31, 1996,
incorporated herein by reference to Exhibit
28B of the Company's Report on Form 8-K
dated January 7, 1993 and filed January 8,
1993).
4(j) Letter of Credit and Reimbursement Agreement dated
as of December 18, 1992 between Ames
Department Stores, Inc. and Republic National
Bank of New York (incorporated herein by
reference to Exhibit 28C of the Company's
Report on Form 8-K dated January 7, 1993 and
filed January 8, 1993).
4(k) Amendment, dated August 26, 1993, to the Letter of
Credit and Reimbursement Agreement (Exhibit 4(j)
above) between Ames Department Stores, Inc. and
Republic National Bank of New York (incorporated
herein by reference to Exhibit 4 of the Company's
Report on Form 8-K dated September 30, 1993 and
filed September 30, 1993).
</TABLE>
<PAGE>
<PAGE>
<TABLE>
E X H I B I T I N D E X
CROSS-REFERENCE
EXHIBIT OR PAGE NUMBER
NUMBER EXHIBIT IN FORM 10-K
- - - - - - - ------- ------- ---------------
<CAPTION>
<S> <C> <C>
10(a) Performance Stock Unit Plan (incorporated
herein by reference to the Company's 1990
Annual Report on Form 10-K dated May 11, 1990
filed May 14, 1990).
10(b) Amendment No. 1 and No. 2 to Performance Stock
Unit Plan (incorporated herein by reference
to Exhibit 10(e) of the Company's 1985 Annual
Report on Form 10-K dated January 26, 1985
and filed April 24, 1985).
10(c) Deferred Compensation Plan for Directors
(incorporated herein by reference to the
Company's 1990 Annual Report on Form 10-K
dated May 11, 1990 filed May 14, 1990).
10(d) Restatement of the Retirement Plan for
Officers/Directors, effective January 1, 1985
(incorporated herein by reference to Exhibit
10(h) of the Company's 1985 Annual Report on
Form 10-K dated January 26, 1985 and filed
April 24, 1985).
10(e) Incentive Stock Option Plan (incorporated
herein by reference to the Company's
Registration Statement on Form S-8, File No.
2-80931).
10(f) Amendment, dated November 7, 1984, to the
Incentive Stock Option Plan (incorporated
herein by reference to Exhibit 10(j) of the
Company's 1985 Annual Report on Form 10-K
dated January 26, 1985 and filed April 24,
1985).
10(g) Agreement, dated December 9, 1983, between
United Air Lines, Inc. and the Company
(incorporated herein by reference to Exhibit
10(i) of the Company's 1984 Annual Report on
Form 10-K dated January 28, 1984 and filed
April 23, 1984).
</TABLE>
<PAGE>
<PAGE>
<TABLE>
E X H I B I T I N D E X
CROSS-REFERENCE
EXHIBIT OR PAGE NUMBER
NUMBER EXHIBIT IN FORM 10-K
- - - - - - - ------- ------- ---------------
<CAPTION>
<S> <C> <C>
10(h) Retirement and Savings Plan as restated
December 27, 1984, and Amendment No. 1
(incorporated herein by reference to Exhibit
10(n) of the Company's 1985 Annual Report on
Form 10-K dated January 26, 1985 and filed
April 24, 1985).
10(i) Ames Stock Ownership Plan, dated December 27,
1984 and proposed Amendment No. 1
(incorporated herein by reference to Exhibit
10(o) of the Company's 1985 Annual Report on
Form 10-K dated January 26, 1985 and filed
April 24, 1985).
10(j) 1989 Incentive Stock Option Plan (incorporated
herein by reference to the Company's
Registration Statement on Form S-8, File No.
33-29639).
10(k) Employment and Non-Competition Agreement with
Stephen L. Pistner (incorporated herein by
reference to the Company's 1990 Annual Report on
Form 10-K dated May 11, 1990, filed May 14, 1990).
10(l) Settlement Agreement, dated March 31, 1994, between Ames
Department Stores, Inc. and Subsidiaries and Wertheim
Schroder & Co. Incorporated and James A. Harmon
(incorporated herein by reference to Exhibit 10 of
the Company's Report on Form 8-K dated and filed
April 8, 1994).
11 Schedule of computation of primary and fully-diluted 96,97
net earnings per share.
22 Subsidiaries of the Registrant. 98
</TABLE>
<PAGE>
<PAGE>
EXHIBIT 3(b)
AMENDED AND RESTATED
BY-LAWS
OF
AMES DEPARTMENT STORES, INC.
(hereinafter called the "Corporation")
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of the
Corporation shall be in the City of Wilmington, County of New Castle,
State of Delaware.
SECTION 2. OTHER OFFICES. The Corporation may also have offices
at such other places both within and without the State of Delaware as
the Board of Directors of the Corporation (the "Board of Directors")
may from time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. PLACE OF MEETINGS. Meetings of the stockholders for
the election of directors or for any other purpose shall be held at
such time and place, either within or without the State of Delaware
as shall be designated from time to time by the Board of Directors
and stated in the notice of the meeting or in a duly executed waiver
of notice thereof.
SECTION 2. ANNUAL MEETINGS. The annual meeting of stockholders
shall be held on such date and at such time as shall be designated
from time to time by the Board of Directors. At the Annual Meeting
the stockholders shall elect by a plurality vote the Board of
Directors, and transact such other business as may properly be
brought before the meeting. Written notice of the Annual Meeting
stating the place, date and hour of the meeting shall be given to
each stockholder entitled to vote at such meeting not less than ten
nor more than sixty days before the date of the meeting.
<PAGE>
<PAGE>
SECTION 3. SPECIAL MEETINGS. Unless otherwise prescribed by law
or by the Certificate of Incorporation, special meetings of
stockholders, for any purpose or purposes, may be called at any time
by either (i) the Chairman, if there be one, (ii) the President,
(iii) any Vice President, if there be one, (iv) the Secretary or (v)
any Assistant Secretary, if there be one, and shall be called by any
such officer at the request in writing of a majority of the Board of
Directors or at the request in writing of stockholders owning a
majority of the capital stock of the Corporation issued and
outstanding and entitled to vote. Such request shall state the
purpose or purposes of the proposed meeting. Written notice of a
special meeting stating the place, date and hour of the meeting and
the purpose or purposes for which the meeting is called shall be
given not less than ten nor more than sixty days before the date of
the meeting to each stockholder entitled to vote at such meeting.
SECTION 4. QUORUM. Except as otherwise provided by law or by
the Certificate of Incorporation, the holders of a majority of the
capital stock issued and outstanding and entitled to vote thereat,
present in person or represented by proxy, shall constitute a quorum
at all meetings of the stockholders for the transaction of business.
If, however, such quorum shall not be present or represented at any
meeting of the stockholders, the stockholders entitled to vote
thereat, present in person or represented by proxy, shall have the
power to adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be
present or represented, any business may be transacted which might
have been transacted at the meeting as originally noticed. If the
adjournment is for more than thirty days, or if after the adjournment
a new record date is fixed for the adjourned meeting, a notice of the
adjourned meeting shall be given to each stockholder entitled to vote
at the meeting.
SECTION 5. VOTING. Unless otherwise required by law, the
Certificate of Incorporation or these By-Laws, any question brought
before any meeting of stockholders shall be decided by the vote of
the holders of a majority of the stock represented and entitled to
vote thereat. Each stockholder represented at a meeting of
stockholders shall be entitled to cast one vote for each share of the
capital stock entitled to vote thereat held by such stockholder. Such
votes may be cast in person or by proxy but no proxy shall be voted
on or after three years from its date, unless such proxy provides for
a longer period. The Board of Directors, in its discretion, or the
officer of the Corporation presiding at a meeting of stockholders, in
his discretion, may require that any votes cast at such meeting shall
be cast by written ballot.
<PAGE>
<PAGE>
SECTION 6. CONSENT OF STOCKHOLDERS IN LIEU OF MEETING.
Unless otherwise provided in the Certificate of Incorporation,
any action required or permitted to be taken at any annual or
special meeting of stockholders of the Corporation, may be taken
without a meeting, without prior notice and without a vote, if a
consent in writing setting forth the action so taken, shall be
signed by the holders of outstanding stock have not less than the
minimum number of votes that would be necessary to authorize or
take such action at a meeting at which all shares entitled to
vote thereon were present and voted. Prompt notice of the taking
of the corporate action without a meeting by less than unanimous
written consent shall be given to those stockholders who have not
consented in writing.
SECTION 7. LIST OF STOCKHOLDERS ENTITLED TO VOTE. The
officer of the Corporation who has charge of the stock ledger of
the Corporation shall prepare and make, at least ten days before
every meeting of stockholders, a complete list of the
stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder
and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days prior
to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list shall also be produced
and kept at the time and place of the meeting during the whole
time thereof, and may be inspected by any stockholder of the
Corporation who is present.
SECTION 8. STOCK LEDGER. The stock ledger of the
Corporation shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list
required by Section 7 of this Article II or the books of the
Corporation, or to vote in person or by proxy at any meeting of
stockholders.
<PAGE>
ARTICLE III
DIRECTORS
SECTION 1. NUMBER AND ELECTION OF DIRECTORS. The Board of
Directors shall consist of five members except as provided in
Section 2 of this Article, directors shall be elected by a
plurality of the votes cast at annual meetings of stockholders,
and each director so elected shall hold office until his
successor is elected and qualified or until his earlier death or
resignation. Any director may resign at any time upon written
notice to the Corporation. Directors need not be stockholders.
SECTION 2. VACANCIES. Vacancies occurring on the Board of
Directors for any reason may be filled by a majority of the
directors then in office, though less than a quorum, or by a sole
remaining director, and the directors so chosen shall hold office
until the next annual election and until their successors are
duly elected and qualified, or until their earlier resignation or
removal.
SECTION 3. DUTIES AND POWERS. The business of the
Corporation shall be managed by or under the direction of the
Board of Directors that may exercise all such powers of the
Corporation and do all such lawful acts and things as are not by
statute or by the Certificate of Incorporation or by these
By-Laws directed or required to be exercised or done by the
stockholders.
SECTION 4. MEETINGS. The Board of Directors of the
Corporation may hold meetings, both regular and special, either
within or without the State of Delaware. Regular meetings of the
Board of Directors may be held without notice at such time and at
such place as may from time to time be determined by the Board of
Directors. Special Meetings of the Board of Directors may be
called by the Chairman, if there be one, the President, or any
directors. Notice thereof stating the place, date and hour of the
meeting shall be given to each director either by mail not less
than forty-eight (48) hours before the date of the meeting, by
telephone or telegram on twenty-four (24) hours' notice, or on
such shorter notice as the person or persons calling such meeting
may deem necessary or appropriate in the circumstances. Notice of
a meeting of the Board of Directors need not be given to any
director who submits a signed waiver of notice whether before or
after the meeting, or who attends the meeting without protesting,
prior thereto or at its commencement, the lack of notice to him.
A notice, or waiver of notice, need not specify the business to
be transacted at or purpose of any meeting of the Board of
Directors.
<PAGE>
<PAGE>
SECTION 5. QUORUM. Except as may be otherwise specifically
provided by law, the Certificate of Incorporation or these
By-Laws, at all meetings of the Board of Directors, a majority of
the entire Board of Directors shall constitute a quorum for the
transaction of business and the act of a majority of the
directors present at any meeting at which there is a quorum shall
be the act of the Board of Directors. If a quorum shall not be
present at any meeting of the Board of Directors, the directors
present thereat may adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a
quorum shall be present.
SECTION 6. ACTIONS OF BOARD BY WRITTEN CONSENT. Unless
otherwise provided by the Certificate of Incorporation or these
By-Laws, any action required or permitted to be taken at any
meeting of the Board of Directors or of any committee thereof may
be taken without a meeting, prior notice, or a vote, if all the
members of the Board of Directors or committee, as the case may
be, consent thereto in writing, and the writing or writings are
filed with the minutes of proceedings of the Board of Directors
or committee.
SECTION 7. MEETINGS BY MEANS OF CONFERENCE TELEPHONE.
Unless otherwise provided by the Certificate of Incorporation or
these By-Laws, members of the Board of Directors of the
Corporation, or any committee designated by the Board of
Directors, may participate in a meeting of the Board of Directors
or such committee by means of a conference telephone or similar
communications equipment by means of which all persons
participating in the meeting can hear each other, and
participation in a meeting pursuant to this Section 7 shall
constitute presence in person at such meeting.
SECTION 8. COMMITTEES. The Board of Directors may, by
resolution passed by a majority of the entire Board of Directors,
designate one or more committees, each committee to consist of
one or more of the directors of the Corporation. The Board of
Directors may designate one or more directors as alternate
members of any committee, who may replace any absent or
disqualified member at any meeting of any such committee. In the
absence or disqualification of a member of a committee, and in
the absence of a designation by the Board of Directors of an
alternate member to replace the absent or disqualified member,
the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any absent or
disqualified member. Any committee, to the extent allowed by law
and provided in the resolution establishing such committee, shall
have and may exercise all the powers and authority of the Board
of Directors in the management of the business and affairs of the
Corporation. Each committee shall keep regular minutes and report
to the Board of Directors when so requested by the Board of
Directors.
<PAGE>
<PAGE>
SECTION 9. COMPENSATION. The directors may be paid their
expenses, if any, of attendance at each meeting of the Board of
Directors and for the performance of their duties as directors
and may be paid a fixed sum, determined by the Board of
Directors, for attendance at each meeting of the Board of
Directors or a stated salary as director. No such payment shall
preclude any director from serving the Corporation in any other
capacity and receiving compensation therefor. Members of special
or standing committees may be allowed like compensation for
attending committee meetings.
SECTION 10. INTERESTED DIRECTORS. No contract or
transaction between the Corporation and one or more of its
directors or officers, or between the Corporation and any other
corporation, partnership, association, or other organization in
which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable
solely for this reason, or solely because the director or officer
is present at or participates in the meeting of the Board of
Directors or committee thereof that authorizes the contract or
transaction, or solely because his or their votes are counted for
such purpose if (i) the material facts as to his or their
relationship or interest and as to the contract or transaction
are disclosed or are known to the Board of Directors or the
committee, and the Board of Directors or committee in good faith
authorizes the contract or transaction by the affirmative votes
of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or (ii) the
material facts as to his or their relationship or interest and as
to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the
stockholders; or (iii) the contract or transaction is fair as to
the Corporation as of the time it is authorized, approved or
ratified, by the Board of Directors, a committee thereof or the
stockholders. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the Board of
Directors or of a committee which authorizes the contract or
transaction.
<PAGE>
<PAGE>
ARTICLE IV
OFFICERS
SECTION 1. GENERAL. The officers of the Corporation shall
be chosen by the Board of Directors and shall be a President, a
Secretary and a Treasurer. The Board of Directors, in its
discretion, may also choose a Chairman of the Board of Directors
(who must be a director) and one or more Vice Presidents,
Assistant Secretaries, Assistant Treasurers and other officers.
Any number of offices may be held by the same person, unless
otherwise prohibited by law, the Certificate of Incorporation or
these By-Laws. The officers of the Corporation need not be
stockholders of the Corporation nor, except in the case of the
Chairman of the Board of Directors, need such officers be
directors of the Corporation.
SECTION 2. ELECTION. The Board of Directors at its first
meeting held after each annual meeting of stockholders shall
elect the officers of the Corporation who shall hold their
offices for such terms and shall exercise such powers and perform
such duties as shall be determined from time to time by the Board
of Directors; and all officers of the Corporation shall hold
office until their successors are chosen and qualified, or until
their earlier resignation or removal. Any officer elected by the
Board of Directors may be removed at any time by the affirmative
vote of a majority of the Board of Directors. Any vacancy
occurring in any office of the Corporation shall be filled by the
Board of Directors. The salaries of all officers of the
Corporation shall be fixed by the Board of Directors.
SECTION 3. VOTING SECURITIES OWNED BY THE CORPORATION.
Powers of attorney, proxies, waivers of notice of meeting,
consents and other instruments relating to securities owned by
the Corporation may be executed in the name of and on behalf of
the Corporation by the President or any Vice President and any
such officer may, in the name of and on behalf of the
Corporation, take all such action as any such officer may deem
advisable to vote in person or by proxy at any meeting of
security holders of any corporation in which the Corporation may
own securities and at any such meeting shall possess and may
exercise any and all rights and power incident to the ownership
of such securities and which, as the owner thereof, the
Corporation might have exercised and possessed if present. The
Board of Directors may, by resolution, from time to time confer
like powers upon any other person or persons.
<PAGE>
<PAGE>
SECTION 4. CHAIRMAN OF THE BOARD OF DIRECTORS. The
Chairman of the Board of Directors, if there be one, shall
preside at all meetings of the stockholders and of the Board of
Directors. He shall be the Chief Executive Officer of the
Corporation, and except where by law the signature of the
President is required, the Chairman of the Board of Directors
shall possess the same power as the President to sign all
contracts, certificates and other instruments of the Corporation
which may be authorized by the Board of Directors. During the
absence or disability of the President, the Chairman of the Board
of Directors shall exercise all the powers and discharge all the
duties of the President. The Chairman of the Board of Directors
shall also perform such other duties and may exercise such other
powers as from time to time may be assigned to him by these
By-Laws or by the Board of Directors.
SECTION 5. PRESIDENT. The President shall, subject to the
control of the Board of Directors and, if there be one, the
Chairman of the Board of Directors, have general supervision of
the business of the Corporation and shall see that all orders and
resolutions of the Board of Directors are carried into effect. He
shall execute all bonds, mortgages, contracts and other
instruments of the Corporation requiring a seal, under the seal
of the Corporation, except where required or permitted by law to
be otherwise signed and executed and except that the other
officers of the Corporation may sign and execute documents when
so authorized by these By-Laws, the Board of Directors or the
President. In the absence or disability of the Chairman of the
Board of Directors, or if there be none, the President shall
preside at all meetings of the stockholders and the Board of
Directors. If there be no Chairman of the Board of Directors, the
President shall be the Chief Executive Officer of the
Corporation. The President shall also perform such other duties
and may exercise such other powers as from time to time may be
assigned to him by these By-Laws or by the Board of Directors.
SECTION 6. VICE PRESIDENTS. At the request of the
President or in his absence or in the event of his inability or
refusal to act (and if there be no Chairman of the Board of
Directors), the Vice President or the Vice Presidents if there is
more than one (in the order designated by the Board of Directors)
shall perform the duties of the President, and when so acting,
shall have all the powers of and be subject to all the
restrictions upon the President. Each Vice President shall
perform such other duties and have such other powers as the Board
of Directors from time to time may prescribe. If there be no
Chairman of the Board of Directors and no Vice President, the
Board of Directors shall designate the officer of the Corporation
who, in the absence of the President or in the event of the
inability or refusal of the President to act, shall perform the
duties of the President, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the
President.
<PAGE>
<PAGE>
SECTION 7. SECRETARY. The Secretary shall attend all
meetings of the Board of Directors and all meetings of
stockholders and record all the proceedings thereat in a book or
books to be kept for that purpose; the Secretary shall also
perform like duties for the standing committees when required.
The Secretary shall give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the Board of
Directors, and shall perform such other duties as may be
prescribed by the Board of Directors or President, under whose
supervision he shall be. If the Secretary shall be unable or
shall refuse to cause to be given notice of all meetings of the
stockholders and special meetings of the Board of Directors, and
if there be no Assistant Secretary, then either the Board of
Directors or the President may choose another officer to cause
such notice to be given. The Secretary shall have custody of the
seal of the Corporation and the Secretary or any Assistant
Secretary, if there be one, shall have authority to affix the
same to any instrument requiring it and when so affixed, it may
be attested by the signature of the Secretary or by the signature
of any such Assistant Secretary. The Board of Directors may give
general authority to any other officer to affix the seal of the
Corporation and to attest the affixing by his signature. The
Secretary shall see that all books, reports, statements,
certificates and other documents and records required by law to
be kept or filed are properly kept or filed, as the case may be.
SECTION 8. TREASURER. The Treasurer shall have the custody
of the corporate funds and securities and shall keep full and
accurate accounts of receipts and disbursements in books
belonging to the Corporation and shall deposit all moneys and
other valuable effects in the name and to the credit of the
Corporation in such depositories as may be designated by the
Board of Directors. The Treasurer shall disburse the funds of the
Corporation as may be ordered by the Board of Directors, taking
proper vouchers for such disbursements, and shall render to the
President and the Board of Directors, at its regular meetings, or
when the Board of Directors so requests, an account of all his
transactions as Treasurer and of the financial condition of the
Corporation. If required by the Board of Directors, the Treasurer
shall give the Corporation a bond in such sum and with such
surety or sureties as shall be satisfactory to the Board of
Directors for the faithful performance of the duties of his
office and for the restoration to the Corporation, in case of
his death, resignation, retirement or removal from office, of all
books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the
Corporation.
<PAGE>
<PAGE>
SECTION 9. ASSISTANT SECRETARIES. Except as may be otherwise
provided in these By-Laws, Assistant Secretaries, if there be any,
shall perform such duties and have such powers as from time to time
may be assigned to them by the Board of Directors, the President, any
Vice President, if there be one, or the Secretary, and in the absence
of the Secretary or in the event of his disability or refusal to act,
shall perform the duties of the Secretary, and when so acting, shall
have all the powers of and be subject to all the restrictions upon
the Secretary.
SECTION 10. ASSISTANT TREASURERS. Assistant Treasurers, if there
be any, shall perform such duties and have such powers as from time
to time may be assigned to them by the Board of Directors, the
President, any Vice President, if there be one, or the Treasurer, and
in the absence of the Treasurer or in the event of his disability or
refusal to act, shall perform the duties of the Treasurer, and when
so acting, shall have all the powers of and be subject to all the
restrictions upon the Treasurer. If required by the Board of
Directors, an Assistant Treasurer shall give the Corporation a bond
in such sum and with such surety or sureties as shall be satisfactory
to the Board of Directors for the faithful performance of the duties
of his office and for the restoration to the Corporation, in case of
his death, resignation, retirement or removal from office, of all
books, papers, vouchers, money and other property of whatever kind in
his possession or under his control belonging to the Corporation.
SECTION 11. OTHER OFFICERS. Such other officers as the Board of
Directors may choose shall perform such duties and have such powers
as from time to time may be assigned to them by the Board of
Directors. The Board of Directors may delegate to any other officer
of the Corporation the power to choose such other officers and to
prescribe their respective duties and powers.
<PAGE>
<PAGE>
ARTICLE V
STOCK
SECTION 1. FORM OF CERTIFICATES. Every holder of stock in the
Corporation shall be entitled to have a certificate signed, in the
name of the Corporation (i) by the Chairman of the Board of
Directors, the President or a Vice President and (ii) by the
Treasurer or an Assistant Treasurer, or the Secretary or an Assistant
Secretary of the Corporation, certifying the number of shares owned
by him in the Corporation.
SECTION 2. SIGNATURES. Where a certificate is countersigned by
(i) a transfer agent other than the Corporation or its employee, or
(ii) a registrar other than the Corporation or its employee, any
other signature on the certificate may be a facsimile. In case any
officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the
same effect as if he were such officer, transfer agent or registrar
at the date of issue.
SECTION 3. LOST CERTIFICATES. The Board of Directors may direct
a new certificate to be issued in place of any certificate
theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by
the person claiming the certificate of stock to be lost, stolen or
destroyed. When authorizing such issue of a new certificate, the
Board of Directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed certificate, or his legal representative, to
advertise the same in such manner as the Board of Directors shall
require and/or to give the Corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the
Corporation with respect to the certificate alleged to have been
lost, stolen or destroyed.
SECTION 4. TRANSFERS. Except as otherwise provided in the
Certificate of Incorporation, stock of the Corporation shall be
transferable in the manner prescribed by law and in these By-Laws.
Transfers of stock shall be made on the books of the Corporation only
by the person named in the certificate or by his attorney lawfully
constituted in writing and upon the surrender of the certificate
therefor, which shall be cancelled before a new certificate shall be
issued.
<PAGE>
<PAGE>
SECTION 5. RECORD DATE. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any
meeting of stockholders or any adjournment thereof, or entitled to
express consent to corporate action in writing without a meeting, or
entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock, or for the
purpose of any other lawful action, the Board of Directors may fix,
in advance, a record date, which shall not be more than sixty days
nor less than ten days before the date of such meeting, nor more than
sixty days prior to any other action. A determination of stockholders
of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for
the adjourned meeting.
SECTION 6. BENEFICIAL OWNERS. The Corporation shall be entitled
to recognize the exclusive right of a person registered on its books
as the owner of shares to receive dividends, and to vote as such
owner, and to hold liable for calls and assessments a person
registered on its books as the owner of shares, and shall not be
bound to recognize any equitable or other claim to or interest in
such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise
provided by law.
ARTICLE VI
NOTICES
SECTION 1. NOTICES. Whenever written notice is required by law,
the Certificate of Incorporation or these By-Laws, to be given to any
director, member of a committee or stockholder, such notice may be
given by mail, addressed to such director, member of a committee or
stockholder, at his address as it appears on the records of the
Corporation, with postage thereon prepaid, and such notice shall be
deemed to be given at the time when the same shall be deposited in
the United States mail. Written notice may also be given personally
or by telegram, telex or cable.
SECTION 2. WAIVERS OF NOTICE. Whenever any notice is required by
law, the Certificate of Incorporation or these By-Laws, to be given
to any director, member of a committee or stockholder, a waiver
thereof in writing, signed by the person or persons entitled to said
notice, whether before or after the time stated therein, shall be
deemed equivalent thereto. Attendance of a stockholder at a meeting
in person or by proxy shall constitute a waiver of notice of such
meeting, except when such stockholder attends such meeting for the
express purpose of objecting at the beginning of such meeting, to the
transaction of any business on the grounds that notice of such
meeting was inadequate or improperly given.
<PAGE>
<PAGE>
ARTICLE VII
GENERAL PROVISIONS
SECTION 1. DIVIDENDS. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of
Incorporation, if any, may be declared by the Board of Directors at
any regular or special meeting, and may be paid in cash, in property,
or in shares of the capital stock. Before payment of any dividend,
there may be set aside out of any funds of the Corporation available
for dividends such sum or sums as the Board of Directors from time to
time, in its absolute discretion, deems proper as a reserve or
reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for any
proper purpose, and the Board of Directors may modify or abolish any
such reserve.
SECTION 2. DISBURSEMENTS. All checks or demands for money and
notes of the Corporation shall be signed by such officer or officers
or such other person or persons as the Board of Directors may from
time to time designate.
SECTION 3. FISCAL YEAR. The fiscal year of the Corporation shall
be fixed by resolution of the Board of Directors and may be changed
from time to time in the same manner.
SECTION 4. CORPORATE SEAL. The corporate seal shall have
inscribed thereon the name of the Corporation, the year of its
organization and the words "Corporate Seal, Delaware." The seal may
be used by causing it or a facsimile thereof to be impressed or
affixed or reproduced or otherwise.
<PAGE>
<PAGE>
ARTICLE VIII
INDEMNIFICATION
SECTION 1. POWER TO INDEMNIFY IN ACTIONS, SUITS OR PROCEEDINGS
OTHER THAN THOSE BY OR IN THE RIGHT OF THE CORPORATION. Subject to
Section 3 of this Article VIII, the Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to
any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than
an action by or in the right of the Corporation) by reason of the
fact that he is or was a director or officer of the Corporation, or
is or was a director or officer of the Corporation serving at the
request of the Corporation as a director or officer, employee or
agent of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with
such action, suit or proceeding if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct
was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner
which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal
action or proceeding, had reasonable cause to believe that his
conduct was unlawful.
SECTION 2. POWER TO INDEMNIFY IN ACTIONS, SUITS OR PROCEEDINGS BY
OR IN THE RIGHT OF THE CORPORATION. Subject to Section 3 of this
Article VIII, the Corporation shall indemnify any person who was or
is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact
that he is or was a director or officer of the Corporation, or is or
was a director or officer of the Corporation serving at the request
of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise against expenses (including
attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if
he acted in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of the Corporation; except
that no indemnification shall be made in respect of any claim, issue
or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the
Court of Chancery of the State of Delaware or the court in which such
action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper.
<PAGE>
<PAGE>
SECTION 3. AUTHORIZATION OF INDEMNIFICATION. Any indemnification
under this Article VIII (unless ordered by a court) shall be made by
the Corporation only as authorized in the specific case upon a
determination that indemnification of the director or officer is
proper in the circumstances because he has met the applicable
standard of conduct set forth in Section 1 or Section 2 of this
Article VIII, as the case may be. Such determination shall be made
(i) by the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to such action, suit or
proceeding, or (ii) if such a quorum is not obtainable, or, even if
obtainable a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion, or (iii) by the
stockholders. To the extent that a director or officer of the
Corporation has been successful on the merits or otherwise in defense
of any action, suit or proceeding described above, or in defense of
any claim, issue or matter therein, he shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred
by him in connection therewith, without the necessity of
authorization in the specific case.
SECTION 4. GOOD FAITH DEFINED. For purposes of any determination
under Section 3 of this Article VIII, a person shall be deemed to
have acted in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of the Corporation, or, with
respect to any criminal action or proceeding, to have had no
reasonable cause to believe his conduct was unlawful, if his action
is based on the records or books of account of the Corporation or
another enterprise, or on information supplied to him by the officers
of the Corporation or another enterprise in the course of their
duties, or on the advice of legal counsel for the Corporation or
another enterprise or on information or records given or reports made
to the Corporation or another enterprise by an independent certified
public accountant or by an appraiser or other expert selected with
reasonable care by the Corporation or another enterprise. The term
"another enterprise" as used in this Section 4 shall mean any other
corporation or any partnership, joint venture, trust, employee
benefit plan or other enterprise of which such person is or was
serving at the request of the Corporation as a director, officer,
employee or agent. The provisions of this Section 4 shall not be
deemed to be exclusive or to limit in any way the circumstances in
which a person may be deemed to have met the applicable standard of
conduct set forth in Section 1 or 2 of this Article VIII, as the case
may be.
<PAGE>
<PAGE>
SECTION 5. INDEMNIFICATION BY A COURT. Notwithstanding any
contrary determination in the specific case under Section 3 of this
Article VIII, and notwithstanding the absence of any determination
thereunder, any director or officer may apply to any court of
competent jurisdiction in the State of Delaware for indemnification
to the extent otherwise permissible under Section 1 and 2 of this
Article VIII. The basis of such indemnification by a court shall be a
determination by such court that indemnification of the director or
officer is proper in the circumstances because he has met the
applicable standards of conduct set forth in Section 1 or 2 of this
Article VIII, as the case may be. Neither a contrary determination in
the specific case under Section 3 of this Article VIII nor the
absence of any determination thereunder shall be a defense to such
application or create a presumption that the director or officer
seeking indemnification has not met any applicable standard of
conduct. Notice of any application for indemnification pursuant to
this Section 5 shall be given to the Corporation promptly upon the
filing of such application. If successful, in whole or in part, the
director or officer seeking indemnification shall also be entitled to
be paid the expense of prosecuting such application.
SECTION 6. EXPENSES PAYABLE IN ADVANCE. Expenses (including
attorneys' fees) incurred by a director or officer in defending or
investigating a threatened or pending action, suit or proceeding
shall be paid by the Corporation in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of such director or officer to repay such amount if it
shall ultimately be determined that he is not entitled to be
indemnified by the Corporation as authorized in this Article VIII.
SECTION 7. NONEXCLUSIVITY OF INDEMNIFICATION AND ADVANCEMENT OF
EXPENSES. The indemnification and advancement of expenses provided
by or granted pursuant to this Article VIII shall not be deemed
exclusive of any other rights to which those seeking indemnification
or advancement of expenses may be entitled under any law, By-Law,
agreement, contract, vote of stockholders or disinterested directors
or pursuant to the direction (howsoever embodied) of any court of
competent jurisdiction or otherwise, both as to action in his
official capacity and as to action in another capacity while holding
such office, it being the policy of the Corporation that
indemnification of the persons specified in Sections 1 and 2 of this
Article VIII shall be made to the fullest extent permitted by law.
The provisions of this Article VIII shall not be deemed to preclude
the indemnification of any person who is not specified in Section 1
or 2 of this Article VIII but whom the Corporation has the power or
obligation to indemnify under the provisions of the General
Corporation Law of the State of Delaware, or otherwise.
SECTION 8. INSURANCE. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director or officer
of the Corporation, or is or was a director or officer of the
Corporation serving at the request of the Corporation as a director,
officer, employee or agent of an other corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise
against any liability asserted against him and incurred by him in any
such capacity, or arising out of his status as such, whether or not
the Corporation would have the power or the obligation to indemnify
him against such liability under the provisions of this Article VIII.
<PAGE>
<PAGE>
SECTION 9. CERTAIN DEFINITIONS. For purposes of this Article
VIII, references to "the Corporation" shall include, in addition to
the resulting corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or merger
which, if its separate existence had continued, would have had power
and authority to indemnify its directors or officers, so that any
person who is or was a director or officer of such constituent
corporation, or is or was a director or officer of such constituent
corporation serving at the request of such constituent corporation as
a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other
enterprise, shall stand in the same position under the provisions of
this Article VIII with respect to the resulting or surviving
corporation as he would have with respect to such constituent
corporation if its separate existence had continued. For purposes of
this Article VIII, references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan;
and references to "serving at the request of the Corporation" shall
include any service as a director, officer, employee or agent of the
Corporation which imposes duties on, or involves services by, such
director or officer with respect to an employee benefit plan, its
participants or beneficiaries; and a person who acted in good faith
and in a manner he reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "not opposed to the best interests
of the Corporation" as referred to in this Article VIII.
SECTION 10. SURVIVAL OF INDEMNIFICATION AND ADVANCEMENT OF
EXPENSES. The indemnification and advancement of expenses provided
by, or granted pursuant to, this Article VIII shall, unless otherwise
provided when authorized or ratified, continue as to a person who has
ceased to be a director or officer and shall inure to the benefit of
the heirs, executors and administrators of such a person.
SECTION 11. LIMITATION ON INDEMNIFICATION. Notwithstanding
anything contained in this Article VIII to the contrary, except for
proceedings to enforce rights to indemnification (which shall be
governed by Section 5 hereof), the Corporation shall not be obligated
to indemnify any director or officer in connection with a proceeding
(or part thereof) initiated by such person unless such proceeding (or
part thereof) was authorized or consented to by the Board of
Directors of the Corporation.
SECTION 12. INDEMNIFICATION OF EMPLOYEES AND AGENTS. The
Corporation may, to the extent authorized from time to time by the
Board of Directors, provide rights to indemnification and to the
advancement of expenses to employees and agents of the Corporation
similar to those conferred in this Article VIII to directors and
officers of the Corporation.
<PAGE>
ARTICLE IX
AMENDMENTS
SECTION 1. These By-Laws may be altered, amended or repealed, in
whole or in part, or new By-Laws may be adopted by the stockholders
or by the Board of Directors, provided, however, that notice of such
alteration, amendment, repeal or adoption of new By-Laws be contained
in the notice of such meeting of stockholders or Board of Directors
as the case may be. All such amendments must be approved by either
the holders of a majority of the outstanding capital stock entitled
to vote thereon or by a majority of the entire Board of Directors
then in office.
SECTION 2. Entire Board of Directors. As used in this Article IX
and in these By-Laws generally, the term "entire Board of Directors"
means the total number of directors which the Corporation would have
if there were no vacancies.
<PAGE>
<PAGE>
<TABLE>
Exhibit 11-A
AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
SCHEDULE OF COMPUTATION OF PRIMARY AND FULLY-DILUTED NET EARNINGS PER SHARE
(Amounts in thousands except per share amounts)
<CAPTION>
For the For the
Fiscal Year Five Weeks
Ended Ended
January 29, January 30,
1994 1993
------------ ------------
<S> <C> <C>
Income (loss) before extraordinary item $9,895 ($23,892)
Extraordinary gain 928 -
------------ ------------
Primary and fully-diluted net income (loss) $10,823 ($23,892)
============ ============
For Primary Earnings per Share:
Weighted average number of common shares
outstanding during the period 20,049 20,000
Add: Common stock equivalent shares represented
by the Series B Warrants (a) (b)
Common stock equivalent shares represented
by the Series C Warrants 1,134 (b)
------------ ------------
Weighted average number of common and common
equivalent shares used in the computation of primary
net earnings per share 21,183 20,000
============ ============
Primary earnings per share:
Primary income (loss) per share before extraordinary item $0.47 ($1.19)
Extraordinary gain 0.04 -
------------ ------------
Primary net income (loss) per share $0.51 ($1.19)
============ ============
For Fully-Diluted Earnings per Share:
Weighted average number of common shares
outstanding during the period 20,049 20,000
Add: Common stock equivalent shares represented
by the Series B Warrants (a) (b)
Common stock equivalent shares represented
by the Series C Warrants 1,165 (b)
------------ ------------
Weighted average number of common and common
equivalent shares used in the computation of fully-diluted
net earnings per share 21,214 20,000
============ ============
<PAGE>
Fully-diluted earnings per share:
Fully-diluted income (loss) per share before extraordinary item $0.47 ($1.19)
Extraordinary gain 0.04 -
------------ ------------
Fully-diluted net income (loss) per share $0.51 ($1.19)
============ ============
<FN>
(a) The Series B Warrants were not considered common stock equivalents because the exercise price
exceeded the market price of the common stock through-out the period.
(b) Common stock equivalents were not included because the effect would have been anti-dilutive.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
EXHIBIT 11-B
AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
SCHEDULE OF COMPUTATION OF PRIMARY NET EARNINGS PER SHARE
(AMOUNTS IN THOUSANDS
EXCEPT PER SHARE AMOUNTS)
-------------------------
<CAPTION>
<S> <C>
FOR THE FISCAL
YEAR ENDED
JANUARY 25,
1992
-----------
Net loss ($282,382)
Dividends on preferred stock (as if accrued) (13,567)
----------
Primary net loss ($295,949)
==========
Weighted average number of common shares outstanding
during the year 37,582
======
ADD: Common stock equivalent shares represented
by employee common stock options granted
on September 19, 1983, November 7, 1984,
November 20, 1985, November 26, 1986,
December 2, 1987 and December 23, 1988 (a)
Common stock equivalent shares represented
by the 6% Series A Cumulative Convertible
Senior Preferred Stock (a)
Contingently issuable shares under the
executive incentive plan and Directors
Deferred Compensation Plan (a)
------
Weighted average number of common shares used
in the computation of primary net loss per share 37,582
======
Primary net loss per common share ($7.87)
=======
</TABLE>
<PAGE>
<PAGE>
(a) Common stock equivalents were not included because the
effect would be to decrease the loss per common share
otherwise computed.
The 7 1/2% convertible Subordinated Debentures issued by the Company
on October 13, 1989 were not considered common stock equivalents and
were therefore excluded from the computation of primary net loss per
common share. Fully diluted earnings per share were not presented as
the effect would be anti-dilutive.
NOTE: Earnings per share was not presented for the forty-eight
weeks ended December 26, 1992 because such presentation
would not be meaningful. The old common and preferred stock
were cancelled under the plan of reorganization and the new
stock was not issued until the Consummation Date.
<PAGE>
<PAGE>
<TABLE>
EXHIBIT 22
AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
SUBSIDIARIES OF THE REGISTRANT
NAME STATE OF INCORPORATION
- - - - - - - -------------------------------------------- ----------------------
<CAPTION>
<S> <C>
Ames Transportation Systems, Inc. Delaware
AMD, Inc. Delaware
Ames Realty II, Inc. Delaware
Zayre New England Corp. * Delaware
Zayre Central Corp.* Delaware
* Holds a 50% interest in Ames Stores, a partnership.
</TABLE>
