SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended October 26, 1996
-----------------------------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
-------------------- ------------------
AMES DEPARTMENT STORES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 04-2269444
- -------------------------------- ---------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
2418 Main Street, Rocky Hill, Connecticut 06067
- ----------------------------------------- --------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (860) 257-2000
------------------
None
- -------------------------------------------------------------------------------
Former name, former address and former fiscal year if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
----- -----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING
THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has
filed all documents and reports required to be filed by Sections 12, 13 or
15(d) of the Securities Exchange Act of 1934 subsequent to the distribution
of securities under a plan confirmed by a court.
YES X NO
----- -----
20,472,469 shares of Common Stock were outstanding on November 8, 1996.
Exhibit Index on page 13
Page 1 of 15 (including exhibits)<PAGE>
AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTER ENDED OCTOBER 26, 1996
I N D E X
----------
Page
----
Part I: Financial Information
Consolidated Condensed Statements of Operations 3
for the Thirteen and Thirty-nine Weeks Ended
October 26, 1996 and October 28, 1995
Consolidated Condensed Balance Sheets at 4
October 26, 1996, January 27, 1996, and
October 28, 1995
Consolidated Condensed Statements of Cash Flows 5
for the Thirty-nine Weeks Ended October 26, 1996
and October 28, 1995
Notes to Consolidated Condensed Financial Statements 6
Management's Discussion and Analysis of Financial 9
Condition and Results of Operations
Part II: Other Information
Submission of Matters to a Vote of Security Holders 13
and Exhibits and Reports on Form 8-K
<PAGE>
<PAGE>
<TABLE>
PART I
FINANCIAL INFORMATION
AMES DEPARTMENT STORES, INC. AND SUSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Amounts)
(Unaudited)
<CAPTION>
For the Thirteen For the Thirty-nine
Weeks Ended Weeks Ended
----------------------- -------------------------
Oct. 26, Oct. 28, Oct. 26, Oct. 28,
1996 1995 1996 1995
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
TOTAL SALES $540,607 $524,421 $1,521,501 $1,508,114
Less: Leased department sales 23,731 22,871 66,851 68,064
----------- ----------- ------------ ------------
NET SALES 516,876 501,550 1,454,650 1,440,050
COSTS, EXPENSES AND (INCOME):
Cost of merchandise sold 375,652 367,413 1,056,299 1,054,568
Selling, general and administrative expenses 141,163 140,504 403,574 410,762
Leased department and other operating income (7,466) (7,182) (20,461) (21,144)
Depreciation and amortization expense 2,646 2,343 7,915 6,427
Amortization of the excess of revalued net assets
over equity under fresh-start reporting (1,538) (1,538) (4,615) (4,615)
Interest and debt expense, net 5,821 7,014 15,266 18,550
Gain on disposition of properties - - (395) (6,090)
----------- ----------- ------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES 598 (7,004) (2,933) (18,408)
Income tax benefit (provision) (177) 2,120 870 5,571
----------- ----------- ------------ ------------
NET INCOME (LOSS) $421 ($4,884) ($2,063) ($12,837)
=========== =========== ============ ============
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES OUTSTANDING 21,974 20,127 20,465 20,127
=========== =========== ============ ============
NET INCOME (LOSS) PER SHARE $0.02 ($0.24) ($0.10) ($0.64)
=========== =========== ============ ============
<FN>
(The accompanying notes are an integral part of these consolidated condensed financial statements.)
-3-
</TABLE>
<PAGE>
<PAGE>
<TABLE>
AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In Thousands)
(Unaudited)
<CAPTION>
October 26, January 27, October 28,
1996 1996 1995
ASSETS ------------------------------------
<S> <C> <C> <C>
Current Assets:
Cash and short-term investments 20,577 14,185 19,998
Receivables 45,055 14,478 39,293
Merchandise inventories 558,727 402,177 600,230
Prepaid expenses and other current assets 15,620 12,793 19,017
------------------------------------
Total current assets 639,979 443,633 678,538
------------------------------------
Fixed Assets 91,597 78,487 69,316
Less - Accumulated depreciation and amortization (27,919) (20,259) (14,239)
------------------------------------
Net fixed assets 63,678 58,228 55,077
------------------------------------
Other assets and deferred charges 4,792 3,965 4,176
------------------------------------
$708,449 $505,826 $737,791
====================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable:
Trade $218,439 $112,682 $203,134
Other 40,919 43,636 38,119
------------------------------------
Total accounts payable 259,358 156,318 241,253
Note payable - revolver 141,507 4,284 175,747
Current portion of long-term debt and capital lease obligations 16,260 17,347 19,049
Self-insurance reserves 35,395 39,003 43,808
Accrued expenses and other current liabilities 55,509 54,943 51,868
Restructuring reserves 18,515 30,623 1,144
------------------------------------
Total current liabilities 526,544 302,518 532,869
Long-term debt 12,599 23,159 25,445
Capital lease obligations 26,966 29,372 33,967
Other long-term liabilities 5,793 6,322 7,922
Unfavorable lease liability 17,442 18,672 21,491
Excess of revalued net assets over equity under fresh-start reporting 37,865 42,480 44,018
Stockholders' Equity:
Common stock 205 205 201
Additional paid-in capital 80,759 80,759 80,759
Retained earnings (accumulated deficit) 276 2,339 (8,881)
------------------------------------
Total stockholders' equity 81,240 83,303 72,079
------------------------------------
$708,449 $505,826 $737,791
====================================
<FN>
(The accompanying notes are an integral part of these consolidated condensed financial statements.)
-4-
</TABLE>
<PAGE>
<PAGE>
<TABLE>
AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<CAPTION>
For the Thirty-nine
Weeks Ended
---------------------
Oct. 26, Oct. 28,
1996 1995
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) ($2,063) ($12,837)
Adjustments to reconcile net loss to net cash
used for operating activities:
Income tax benefit (870) (5,571)
Gain on disposition of properties (395) (6,090)
Depreciation and amortization of fixed assets 8,096 6,655
Amort. of the excess of revalued net assets over equity (4,615) (4,615)
Increase in accounts receivable (30,577) (22,486)
Increase in merchandise inventories (156,550) (170,078)
Increase in accounts payable 103,040 76,722
Decrease in accrued expenses and other current liabs. (3,950) (11,496)
Decrease (increase) in other working capital & other, net 1,640 (2,091)
---------- ----------
Cash used for operations before restructuring items (86,244) (151,887)
Payments of restructuring costs (11,714) (1,316)
---------- ----------
Net cash used for operating activities (97,958) (153,203)
---------- ----------
Cash flows from investing activities:
Proceeds from sales of properties and leases 690 5,493
Purchases of fixed assets (15,288) (20,103)
Purchase of leases (3,165) -
Decrease in restricted cash - 2,047
---------- ----------
Net cash used for investing activities (17,763) (12,563)
---------- ----------
Cash flows from financing activities:
Payments of debt and capital lease obligations (15,110) (18,385)
Short-term borrowings under the revolver, net 137,223 175,747
---------- ----------
Net cash provided by financing activities 122,113 157,362
---------- ----------
Increase (decr.) in unrest. cash and short-term invest. 6,392 (8,404)
Unrestricted cash and short-term invest., beg. of period 14,185 28,402
---------- ----------
Unrestricted cash and short-term invest., end of period $20,577 $19,998
========== ==========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest and debt fees not capitalized $10,973 $12,775
Income taxes 2 1
<FN>
(The accompanying notes are an integral part of these consolidated condensed
financial statements.)
- 5 -
</TABLE>
<PAGE>
AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation:
---------------------
In the opinion of management, the accompanying unaudited
consolidated condensed financial statements of Ames Department
Stores, Inc. (a Delaware Corporation) and subsidiaries
(collectively "Ames" or the "Company") contain all adjustments
(consisting of normal recurring adjustments) necessary for a fair
presentation of such financial statements for the interim periods.
Due to the seasonality of the Company's operations, the results of
its operations for the interim period ended October 26, 1996 may
not be indicative of total results for the full year. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to
the rules and regulations promulgated by the Securities and
Exchange Commission. Certain prior year amounts have been
reclassified to conform to the presentation used for the current
year. The consolidated condensed balance sheet at January 27, 1996
was taken from audited financial statements previously filed with
the Commission in the Company's latest Form 10-K. The accompanying
unaudited consolidated condensed financial statements should be
read in conjunction with the financial statements and notes thereto
included in the Company's latest Form 10-K.
2. Earnings Per Common Share:
-------------------------
Earnings per share was determined using the weighted average
number of common shares outstanding. There were no exercises of
warrants during the quarter ended October 26, 1996. Common stock
equivalents and fully diluted earnings per share were excluded for
the periods with net losses as their inclusion would have reduced
the reported loss per share. Fully diluted earnings per share was
equal to primary earnings per share for the quarter ended October
26, 1996.
3. Inventories:
-----------
Inventories are valued at the lower of cost or market. Cost is
determined by the retail last-in, first-out (LIFO) cost method for
all inventories. No LIFO reserve was necessary at October 26,
1996, January 27, 1996 and October 28, 1995.
<PAGE>
4. Debt:
----
On April 28, 1994, the Company entered into an agreement with
BankAmerica Business Credit, Inc., as agent, two financial
institutions as co-agents (together with the agent, the "Agents"),
and a syndicate consisting of five other banks and financial
institutions, for a secured revolving credit facility of up to $300
million, with a sublimit of $100 million for letters of credit (the
"Credit Agreement"). The Credit Agreement is in effect until June
22, 1997, is secured by substantially all of the assets of the
Company and requires the Company to meet certain quarterly
financial covenants which were amended in January, 1996. In
addition, the Company must have no outstanding borrowings (other
than borrowings, not to exceed $20 million, related to certain
expenditures) under the Credit Agreement for a consecutive 30-day
period between November 15th and February 15th of the following
year. The Company is in compliance with the financial covenants
through the quarter ended October 26, 1996.
The Company is currently engaged in negotiations regarding the
extension or replacement of the Credit Agreement.
As of October 26, 1996, borrowings of $141.5 million were
outstanding under the Credit Agreement. In addition, $26.9 and
$2.4 million of standby and trade letters of credit, respectively,
were outstanding under the Credit Agreement. The weighted average
interest rate on the borrowings was 8.7% and 9.2% for the thirteen
and thirty-nine weeks ended October 26, 1996, respectively. The
peak borrowing level through October 26, 1996 was $157.6 million.
The amount of borrowing under the Credit Agreement generally
shall not exceed the sum of (i) an amount equal to 55% of inventory
not covered by any outstanding letter of credit plus (ii) an amount
equal to 50% of inventory covered by any outstanding letter of
credit less (iii) a reserve for reinstated debt ($1.5 million as of
October 26, 1996). In addition, the Credit Agreement provides for
potential establishment of other reserves contingent upon the
Company's financial performance. In addition, each Agent reserves
the right to adjust the total available to be borrowed by
establishing reserves, making determinations of eligible inventory,
revising standards of eligibility or decreasing from time to time
the percentages set forth above. Reference can be made to the
latest Form 10-K for further descriptions of the Credit Agreement
and the obligations summarized below, and for descriptions of the
Company's other obligations not discussed herein.
Deferred Cash Distributions
The Company's plan of reorganization, which was consummated on
December 30, 1992, provided that $46.5 million of cash
distributions in respect to several classes of claims would be paid
subsequent to the consummation date. On January 31, 1993, January
31, 1994, January 31, 1995, and January 31, 1996, $15.0, $8.0, $8.0
and $8.0 million, respectively, of these deferred cash
distributions were paid as scheduled. The remaining unsecured
amount of $7.5 million is due, with interest that began on February
1, 1994 at 5% per annum, on January 31, 1997.
<PAGE>
5. Stock Options:
-------------
The Company has two stock option plans, the 1994 Management
Stock Plan and the 1994 Non-Employee Directors Stock Option Plan.
The Company accounts for these plans under APB Opinion No. 25,
under which no compensation cost has been recognized. The impact
on the Company's net income and earnings per share of compensation
cost determined consistent with FASB Statement No. 123 would have
been immaterial for the periods presented.
6. Income Taxes:
------------
The Company's estimated annual effective income tax rate for
each year was applied to the loss incurred before income taxes for
the thirty-nine weeks ended October 26, 1996 and October 28, 1995
to compute non-cash income tax benefits of $0.9 and $5.6 million,
respectively. The same method was used to compute the income tax
provision of $0.2 million for the third quarter of 1996 and the
non-cash income tax benefit of $2.1 million for the third quarter
of 1995. The Company currently expects that, as a result of the
seasonality of the Company's business, this year's income tax
benefit will be offset by non-cash income tax expense in the
remaining interim periods. The income tax benefits are included in
other current assets in the accompanying balance sheet as of
October 26, 1996 and October 28, 1995.
7. Litigation:
----------
Reference can be made to the latest Form 10-K (Note 12 to the
Consolidated Financial Statements) for various litigation involving
the Company, for which there were no material changes since the
filing date of the Form 10-K, except as follows.
As reported in the Form 10-K, Class Action Complaints were
filed against the Company on March 21, 1995 and December 15, 1995.
Both actions concern certain wage and hour laws claims pertaining
to Assistant Managers. On June 25, 1996, a Complaint was filed
(the "Third Complaint") against the Company in the United States
District Court for the District of Massachusetts entitled David
Root, Individually and on Behalf of All other Similarly Situated v.
Ames Department Stores, Inc. The Third Complaint alleges that Ames
violated the Fair Labor Standards Act by failing to pay overtime to
Replenishment Assistant Managers and seeks to recover overtime for
Replenishment Assistant Managers employed anywhere in the United
States at any time since June 25, 1993. The Company has denied any
liability on the basis that Root and other similarly situated
Replenishment Assistant Managers were exempt employees not entitled
to overtime pay. The Company has further denied that plaintiff is
a proper representative of the purported class. No discovery has
commenced.
As reported in the Form 10-K, the Company had commenced an
adversary proceeding in the Bankruptcy Court seeking, among other
things, to enjoin Argonaut Insurance Company ("Argonaut") from
drawing down on a $5 million letter of credit issued to the benefit
of Argonaut at the request of Ames in May, 1990. On October 31,
1996, Argonaut and the Company entered into an agreement
resolving all disputes. On November 19, 1996, the agreement was approved
by the Bankruptcy Court. If no appeal is filed, it will become final 10
days after it is filed with the Court. The agreeement calls for
payment to Argonaut in February, 1997 of $1 million, which amount
is included in the self-insurance reserves in the Company's balance
sheet.
<PAGE>
<PAGE>
<TABLE>
AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
FISCAL QUARTER ENDED OCTOBER 26, 1996
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
<CAPTION>
Results of Operations
- ----------------------
The following table sets forth the number of stores in operation as of the dates indicated:
Number of Stores in Operation
---------------------------------------------
October 26, January 27, October 28,
1996 1996 1995
--------- ----------- -----------
303 307 307
The following discussion and analysis is based on the historical results of operations for the
thirteen and thirty-nine weeks ended October 26, 1996 and October 28, 1995. Seventeen (17)
stores were closed during fiscal 1996; thirteen (13) stores were opened during the same period.
One store was closed during the first three quarters of fiscal 1995.
The following table sets forth the historical operating results expressed as a percentage of net
sales for the periods indicated:
Thirteen Thirty-nine
Weeks Ended Weeks Ended
------------------ -------------------
Oct. 26, Oct. 28, Oct. 26, Oct. 28,
1996 1995 1996 1995
------- ------- ------- ---------
<S> <C> <C> <C> <C>
Net sales 100.0 % 100.0 % 100.0 % 100.0 %
Cost of merchandise sold 72.7 73.3 72.6 73.2
------- ------- ------- --------
Gross margin 27.3 26.7 27.4 26.8
Expenses and (income):
Selling, general and administrative expenses 27.3 28.0 27.7 28.5
Leased department and other operating income (1.4) (1.4) (1.4) (1.5)
Depreciation and amortization expense 0.5 0.5 0.5 0.4
Amortization of the excess of revalued net
assets over equity (0.3) (0.3) (0.3) (0.3)
Interest and debt expense, net 1.1 1.4 1.0 1.3
Gain on disposition of properties - - - (0.4)
------- ------- ------- --------
Income (loss) before income taxes 0.1 (1.4) (0.2) (1.3)
Income tax benefit (provision) - 0.4 0.1 0.4
------- ------- ------- --------
Net income (loss) 0.1 % (1.0)% (0.1)% (0.9)%
======= ======= ======= ========
- 9 -
</TABLE>
<PAGE>
Total sales (which include leased department sales) for the
third quarter increased $16.2 million or 3.1% over the prior-year's
third quarter. Net sales for the same period increased $15.3
million or 3.1% over the prior year. These increases were due to
an increase of 1.2% in comparable store sales on a 286-store base
and the opening of 13 new stores since the end of last year's
third quarter, partially offset by the closing of 17
underperforming stores in the first quarter of 1996.
Total sales for the thirty-nine weeks ended October 26, 1996
increased $13.4 million or 0.9% over the same prior year period.
Net sales for the same period increased $14.6 million or 1.0% over
the prior year. These increases were due to the opening of the new
stores cited above, partially offset by a 0.5% decrease in
comparable store sales and the closing of the stores cited above.
Net sales for all periods for last year have been restated to
reflect the effect of recording "55 Gold" senior citizen discounts
as markdowns, which conforms with the current year treatment.
Gross margin for the third quarter increased $7.1 million, or
0.6% as a percentage of net sales. Gross margin for the
thirty-nine weeks increased $12.9 million, or .6% as a percentage
of net sales. The third quarter and year-to-date gross margin rate
was positively impacted by a higher markup on sales and lower
markdowns.
Selling, general and administrative expenses increased $0.7
million in the third quarter compared to the same prior year
period, but decreased 0.7% as a percentage of net sales for the
same period. Selling, general and administrative expenses for the
thirty-nine week period declined $7.2 million, or 0.8% as a
percentage of net sales. In the quarter, increases in home office
and field support expenses were partially offset by decreases in
advertising and store expenses. All major expense categories,
except home office expenses, were lower for the thirty-nine weeks.
Depreciation and amortization expense increased by $0.3 and
$1.5 million in the quarter and year-to-date, respectively,
compared to the same prior-year period. The adoption of fresh-start
reporting as of December 26, 1992 resulted in the write-off of all
of the Company's non-current assets at that date, and therefore
depreciation and amortization expense reflects capital additions
after that date.
The amortization of the "excess of revalued net assets over
equity under fresh-start reporting" remained the same in the
current periods presented as compared to the prior year. The
Company is amortizing this amount over a ten-year period.
Interest and debt expense, net of interest income, declined by
$1.2 and $3.3 million, or 0.3% of net sales, in the quarter and
year-to-date, respectively. These decreases were due primarily to
lower outstanding long-term debt balances as well as a reduction in
interest expense related to the Credit Agreement (as defined
below). The Company's average outstanding debt under the Credit
Agreement decreased in both periods presented: from $145.4 to
$131.0 million during the quarter and from $106.3 to $93.8 million
during the year-to-date period. Interest rates on the borrowings
under the Credit Agreement were also lower in both periods
presented.
<PAGE>
The Company recognized $0.4 and $6.1 million of net property
gains during the thirty-nine weeks ended October 26, 1996 and
October 28, 1995, respectively. During last year's second
quarter, the Company in separate transactions sold two distribution
centers - one of which was an operating property through June,
1995; the other of which had been closed since March, 1993 - and
recognized gains totaling $5.1 million. In last year's first
quarter, the Company completed the assignment of a lease for a
warehouse which was not part of Ames' operations and recognized a
gain of $1.0 million.
The Company's estimated annual effective income tax rate for
each year was applied to the loss before income taxes for the
thirty-nine weeks ended October 26, 1996 and October 28, 1995 to
compute non-cash income tax benefits of $0.9 and $5.6 million,
respectively. The same method was used to compute the income tax
provision of $0.2 million for the third quarter of 1996 and the
non-cash income tax benefit of $2.1 million for the third quarter
of 1995. The Company currently expects that, as a result of the
seasonality of the Company's business, this year's income tax
benefit will be offset by non-cash income tax expense in the
remaining interim periods.
Compared with the projections for the third quarter of 1996
contained in the Form 8-K filed on June 11, 1996 (referred to
herein as the "Plan"), sales and EBITDA were $10.8 and $4.6 million
higher than Plan, respectively. EBITDA is defined as earnings
(loss) before net interest expense, income taxes, LIFO expense,
extraordinary or non-recurring items (including certain pre-opening
expenses), depreciation, amortization and other non-cash charges
and gain or loss on the sale of properties after January 28, 1996.
Year-to-date sales were $8.2 million less than Plan and year-to-
date EBITDA was $8.9 million better than Plan. The year-to-date
EBITDA results reflected lower-than-planned expenses and
higher-than-planned gross margin rate, partially offset by the
lower-than-planned sales.
Liquidity and Capital Resources
-------------------------------
On April 28, 1994, the Company entered into an agreement with
BankAmerica Business Credit, Inc., as agent, two financial
institutions as co-agents (together with the agent, the "Agents"),
and a syndicate consisting of five other banks and financial
institutions, for a secured revolving credit facility of up to $300
million, with a sublimit of $100 million for letters of credit (the
"Credit Agreement"). The Company was in compliance with the
financial covenants of the Credit Agreement through the quarter
ended October 26, 1996.
The Credit Agreement is in effect until June 22, 1997. The
Company is currently engaged in negotiations regarding the
extension or replacement of the Credit Agreement.
Reference can be made to Note 4 of this Quarterly Report and
the latest Form 10-K for further descriptions of the Credit
Agreement and the Company's other obligations.
Merchandise inventories, valued on a LIFO basis, decreased
$41.5 million from October 28, 1995 to October 26, 1996 due to a
planned reduction in apparel inventories and the effect of closing
17 stores during this year's first quarter, partially offset by the
addition of thirteen (13) new stores since last year's third
quarter. The increase in inventories of $156.6 million from
January 27, 1996 to October 26, 1996 was the result of a normal
seasonal build-up of inventories.<PAGE>
Trade accounts payable increased $15.3 million from October 28,
1995 to October 26, 1996 due primarily to the timing of merchandise
receipts and improved trade payment terms. The increase in trade
accounts payable of $105.8 million from January 27, 1996 to October
26, 1996 was the result of the seasonal build-up of merchandise
inventories referenced earlier.
Long-term debt decreased $12.8 million and $10.6 million from
October 28, 1995 and January 27, 1996, respectively, to October 26,
1996 due primarily to the payment of the deferred cash distribution
referenced in Note 4 of this Quarterly Report.
Capital expenditures for the thirty-nine weeks ended October
26, 1996 totaled $15.3 million and for the balance of the year are
estimated to be approximately $6.5 million. The Company adjusts
its plans for making such expenditures depending on the amount of
internally generated funds.
The net operating loss carryovers remaining after fiscal year
1996, subject to any limitations pursuant to Internal Revenue Code
Sec. 382, should offset income on which taxes would otherwise be
payable in future years.
The Company believes that available cash and expected cash
flows from the current fiscal year's operations and beyond, and the
availability of its financing facilities, will enable the Company
to fund its expected needs for working capital, capital
expenditures and debt service requirements. Achievement of
expected cash flows from operations and compliance with the EBITDA
(as defined above) covenant in the Credit Agreement is dependent
upon the Company's attainment of sales, gross profit, and expense
levels that are reasonably consistent with its financial
projections.
<PAGE>
Part II
OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
Reference can be made to Note 12 to the Consolidated
Financial Statements included in the Company's most recent
Form 10-K for various litigation involving the Company, for
which there were no material changes since the filing date of
the Form 10-K, except as set forth in
Note 7 of this Quarterly Report.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
There were no matters submitted to a vote of security
holders during the third quarter ended October 26, 1996,
through the solicitation of proxies or otherwise.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Index to Exhibits
-----------------
Exhibit No. Exhibit Page No.
----------- ------- --------
11 Schedule of computation of primary 15
and fully diluted earnings per share
(b) Reports on Form 8-K:
-------------------
The following reports on Form 8-K were filed
with the Securities and Exchange Commission
during the third quarter:
Date of Report Date of Filing Item # Description
-------------- -------------- ------ -----------
August 14, 1996 August 14, 1996 5 Disclosure
of fiscal
July 1996
results.
September 6, 1996 September 6, 1996 5 Disclosure
of fiscal
August 1996
results.
October 11, 1996 October 11, 1996 5 Disclosure of
fiscal September
1996 results.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
AMES DEPARTMENT STORES, INC.
(Registrant)
Dated: November 22, 1996 /s/ Joseph R. Ettore
--------------------------------------
Joseph R. Ettore, President, Director,
and Chief Executive Officer
Dated: November 22, 1996 /s/ John F. Burtelow
--------------------------------------
John F. Burtelow, Executive Vice
President and Chief Financial Officer
Dated: November 22, 1996 /s/ Gregory D. Lambert
--------------------------------------
Gregory D. Lambert
Senior Vice President - Finance
<PAGE>
<PAGE>
<TABLE>
Exhibit 11
AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
SCHEDULE OF COMPUTATION OF PRIMARY AND FULLY DILUTED EARNINGS
PER SHARE
(Amounts in thousands except per share amounts)
<CAPTION>
For the Thirteen For the Thirty-nine
Weeks Ended Weeks Ended
-------------------- --------------------
Oct. 26, Oct. 28, Oct. 26, Oct. 28,
1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net income (loss) $421 ($4,884) ($2,063) ($12,837)
========= ========= ========= =========
For Primary Earnings Per Share
- ------------------------------
Weighted average number of common shares
outstanding during the period 20,460 20,127 20,465 20,127
Add: Common stock equivalent shares represented by
- Series B Warrants (a) (b) (b) (b)
- Series C Warrants 1,340 (b) (b) (b)
- Options under 1994 Management Stock
Option Plan 168 (b) (b) (b)
- Options under 1994 Non-Employee Directors
Stock Option Plan 6 (b) (b) (b)
--------- --------- --------- ---------
Weighted average number of common and common
equivalent shares used in the calculation
of primary earnings per share 21,974 20,127 20,465 20,127
========= ========= ========= =========
Primary net income (loss) per share $0.02 ($0.24) ($0.10) ($0.64)
========= ========= ========= =========
For Fully Diluted Earnings Per Share
- ---------------------------------------
Weighted average number of common shares
outstanding during the period 20,460 20,127 20,465 20,127
Add: Common stock equivalent shares represented by
- Series B Warrants (a) (b) (b) (b)
- Series C Warrants 1,480 (b) (b) (b)
- Options under 1994 Management Stock
Option Plan 314 (b) (b) (b)
- Options under 1994 Non-Employee Directors
Stock Option Plan 17 (b) (b) (b)
--------- --------- --------- ---------
Weighted average number of common and common
equivalent shares used in the calculation
of fully diluted earnings per share 22,271 20,127 20,465 20,127
========= ========= ========= =========
Fully diluted net income (loss) per share $0.02 ($0.24) ($0.10) ($0.64)
========= ========= ========= =========
<FN>
(a) These options/warrants were not considered common stock equivalents because the
exercise price exceeded the market price of the common stock for all or substantially
all of the period.
(b) Common stock equivalents have not been included because the effect would be
anti-dilutive.
- 15 -
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-25-1997
<PERIOD-END> OCT-26-1996
<CASH> 20577
<SECURITIES> 0
<RECEIVABLES> 45055
<ALLOWANCES> 0
<INVENTORY> 558727
<CURRENT-ASSETS> 639979
<PP&E> 91597
<DEPRECIATION> 27919
<TOTAL-ASSETS> 708449
<CURRENT-LIABILITIES> 526544
<BONDS> 39565
0
0
<COMMON> 205
<OTHER-SE> 81035
<TOTAL-LIABILITY-AND-EQUITY> 708449
<SALES> 1454650
<TOTAL-REVENUES> 1475111
<CGS> 1056299
<TOTAL-COSTS> 1056299
<OTHER-EXPENSES> 406874
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15318
<INCOME-PRETAX> (2933)
<INCOME-TAX> (870)
<INCOME-CONTINUING> (2063)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2063)
<EPS-PRIMARY> (.10)
<EPS-DILUTED> (.10)
</TABLE>
