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 July 27, 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
------ ------
20,447,269 shares of Common Stock were outstanding on August 9, 1996.
Exhibit Index on page 14
Page 1 of 16 (including exhibits)<PAGE>
AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTER ENDED JULY 27, 1996
I N D E X
Page
Part I: Financial Information
Consolidated Condensed Statements of Operations 3
for the Thirteen and Twenty-six Weeks Ended
July 27, 1996 and July 29, 1995
Consolidated Condensed Balance Sheets at 4
July 27, 1996, January 27, 1996, and
July 29, 1995
Consolidated Condensed Statements of Cash Flows 5
for the Twenty-six Weeks Ended July 27, 1996
and July 29, 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 Twenty-six
Weeks Ended Weeks Ended
----------------------- -------------------------
July 27, July 29, July 27, July 29,
1996 1995 1996 1995
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
TOTAL SALES $525,217 $526,625 $980,894 $983,693
Less: Leased department sales 26,110 26,437 43,120 45,193
----------- ----------- ------------ ------------
NET SALES 499,107 500,188 937,774 938,500
COSTS, EXPENSES AND (INCOME):
Cost of merchandise sold 359,382 364,188 680,647 687,155
Selling, general and administrative expenses 134,609 137,217 262,411 270,258
Leased department and other operating income (7,221) (7,708) (12,995) (13,962)
Depreciation and amortization expense 2,649 2,143 5,269 4,084
Amortization of the excess of revalued net assets
over equity under fresh-start reporting (1,539) (1,539) (3,077) (3,077)
Interest and debt expense, net 5,206 6,415 9,445 11,536
Gain on disposition of properties (395) (5,099) (395) (6,090)
----------- ----------- ------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES 6,416 4,571 (3,531) (11,404)
Income tax benefit (provision) (1,902) (1,383) 1,047 3,451
----------- ----------- ------------ ------------
NET INCOME (LOSS) $4,514 $3,188 ($2,484) ($7,953)
=========== =========== ============ ============
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES OUTSTANDING 21,680 21,531 20,465 20,127
=========== =========== ============ ============
NET INCOME (LOSS) PER SHARE $0.21 $0.15 ($0.12) ($0.40)
=========== =========== ============ ============
<FN>
(The accompanying notes are an integral part of these consolidated condensed financial statements.)
</TABLE>
<PAGE>
<PAGE>
<TABLE>
AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In Thousands)
(Unaudited)
<CAPTION>
July 27, January 27, July 29,
1996 1996 1995
ASSETS ------------------------------------
<S> <C> <C> <C>
Current Assets:
Cash and short-term investments 18,226 14,185 19,783
Receivables 25,544 14,478 23,388
Merchandise inventories 458,940 402,177 498,260
Prepaid expenses and other current assets 16,051 12,793 13,249
------------------------------------
Total current assets 518,761 443,633 554,680
------------------------------------
Fixed Assets 85,915 78,487 59,607
Less - Accumulated depreciation and amortization (25,233) (20,259) (11,828)
------------------------------------
Net fixed assets 60,682 58,228 47,779
------------------------------------
Other assets and deferred charges 5,665 3,965 4,834
------------------------------------
$585,108 $505,826 $607,293
====================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable:
Trade $137,595 $112,682 $126,210
Other 39,846 43,636 34,202
------------------------------------
Total accounts payable 177,441 156,318 160,412
Note payable - revolver 100,720 4,284 114,051
Current portion of long-term debt and capital lease obligations 16,241 17,347 19,485
Self-insurance reserves 36,081 39,003 43,850
Accrued expenses and other current liabilities 49,969 54,943 54,994
Restructuring reserves 19,827 30,623 1,227
------------------------------------
Total current liabilities 400,279 302,518 394,019
Long-term debt 13,267 23,159 25,919
Capital lease obligations 27,525 29,372 34,799
Other long-term liabilities 5,968 6,322 8,074
Unfavorable lease liability 17,847 18,672 21,961
Excess of revalued net assets over equity under fresh-start reporting 39,404 42,480 45,557
Stockholders' Equity:
Common stock 204 205 201
Additional paid-in capital 80,759 80,759 80,759
Retained earnings (accumulated deficit) (145) 2,339 (3,996)
------------------------------------
Total stockholders' equity 80,818 83,303 76,964
------------------------------------
$585,108 $505,826 $607,293
====================================
<FN>
(The accompanying notes are an integral part of these consolidated condensed financial statements.)
</TABLE>
<PAGE>
<PAGE>
<TABLE>
AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<CAPTION>
For the Twenty-six
Weeks Ended
---------------------
July 27, July 29,
1996 1995
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) ($2,484) ($7,953)
Adjustments to reconcile net loss to net cash
used for operating activities:
Income tax benefit (1,047) (3,451)
Gain on disposition of properties (395) (6,090)
Depreciation and amortization of fixed assets 5,410 4,233
Amort. of the excess of revalued net assets over equity (3,076) (3,077)
Increase in accounts receivable (11,066) (6,581)
Increase in merchandise inventories (56,763) (68,108)
Increase (decrease) in accounts payable 21,123 (4,119)
Decrease in accrued expenses and other current liabs. (8,644) (8,328)
Decrease in other working capital and other, net 687 1,085
---------- ----------
Cash used for operations before restructuring items (56,255) (102,389)
Payments of restructuring costs (10,402) (1,134)
---------- ----------
Net cash used for operating activities (66,657) (103,523)
---------- ----------
Cash flows from investing activities:
Proceeds from sales of properties and leases 490 5,393
Purchases of fixed assets (9,978) (10,312)
Purchase of leases (2,965) -
Decrease in restricted cash - 2,047
---------- ----------
Net cash used for investing activities (12,453) (2,872)
---------- ----------
Cash flows from financing activities:
Payments of debt and capital lease obligations (13,285) (16,275)
Short-term borrowings under the revolver, net 96,436 114,051
---------- ----------
Net cash provided by financing activities 83,151 97,776
---------- ----------
Increase (decr.) in unrest. cash and short-term invest. 4,041 (8,619)
Unrestricted cash and short-term invest., beg. of period 14,185 28,402
---------- ----------
Unrestricted cash and short-term invest., end of period $18,226 $19,783
========== ==========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest and debt fees not capitalized $6,792 $8,413
Income taxes 2 1
<FN>
(The accompanying notes are an integral part of these consolidated condensed
financial statements.)
</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 July 27, 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 July 27, 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 quarters ended July 27,
1996 and July 29, 1995.
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 July 27, 1996,
January 27, 1996 and July 29, 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 July 27, 1996.
As of July 27, 1996, borrowings of $100.7 million were
outstanding under the Credit Agreement. In addition, $26.9 and
$6.4 million of standby and trade letters of credit, respectively,
were outstanding under the Credit Agreement. The weighted average
interest rate on the borrowings was 9.2% and 9.3% for the thirteen
and twenty-six weeks ended July 27, 1996, respectively. The peak
borrowing level through July 27, 1996 was $109.8 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 ($3.2 million as of
July 27, 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 twenty-six weeks ended July 27, 1996 and July 29, 1995 to
compute non-cash income tax benefits of $1.0 and $3.5 million,
respectively. The same method was used to compute income tax
provisions of $1.9 and $1.4 million for the second quarters of 1996
and 1995, respectively. 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 July 27, 1996 and July 29, 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 13, 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 and the case is set for scheduling conference on
September 19, 1996.
<PAGE>
<PAGE>
<TABLE>
AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
FISCAL QUARTER ENDED JULY 27, 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
---------------------------------------------
July 27, January 27, July 29,
1996 1996 1995
--------- ----------- -----------
300 307 305
The following discussion and analysis is based on the historical results of operations for the thirteen
and twenty-six weeks ended July 27, 1996 and July 29, 1995. Seventeen (17) stores were closed during fiscal
1996; ten (10) stores were opened during the same period. One store was closed during the first half of
fiscal 1995. On August 1, 1996, the Company opened a new store and re-opened a store previously closed by
flooding. In addition, the Company has announced that it will open two (2) new stores in September, 1996.
The following table sets forth the historical operating results expressed as a percentage of net sales for
the periods indicated:
Thirteen Twenty-six
Weeks Ended Weeks Ended
------------------ -------------------
Jul. 27, Jul. 29, Jul. 27, Jul. 29,
1996 1995 1996 1995
------- ------- ------- ---------
<S> <C> <C> <C> <C>
Net sales 100.0 % 100.0 % 100.0 % 100.0 %
Cost of merchandise sold 72.0 72.8 72.6 73.2
------- ------- ------- --------
Gross margin 28.0 27.2 27.4 26.8
Expenses and (income):
Selling, general and administrative expenses 27.0 27.4 28.0 28.8
Leased department and other operating income (1.4) (1.5) (1.4) (1.5)
Depreciation and amortization expense 0.5 0.4 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 1.0 1.3 1.0 1.2
Gain on disposition of properties (0.1) (1.0) - (0.6)
------- ------- ------- --------
Income (loss) before income taxes 1.3 0.9 (0.4) (1.2)
Income tax benefit (provision) (0.4) (0.3) 0.1 0.4
------- ------- ------- --------
Net income (loss) 0.9 % 0.6 % (0.3)% (0.8)%
======= ======= ======= ========
</TABLE>
<PAGE>
Total sales (which include leased department sales) for the
thirteen weeks ended July 27, 1996 decreased $1.4 million or 0.3%
from the prior-year's second quarter. Net sales for the same
period decreased $1.1 million or 0.2% from the prior year. These
decreases were due to an decrease of 1.2% in comparable store
sales on a 286-store base and the closing of 17 underperforming
stores in the first quarter of 1996, partially offset by the
opening of 12 new stores since the end of last year's second
quarter. The decrease in comparable store sales was primarily due
to additional new competition and a continued weak apparel sales
market.
Total sales for the twenty-six weeks ended July 27, 1996
decreased $2.8 million or 0.3% from the same prior year period.
Net sales for the same period decreased $0.7 million or 0.1% from
the prior year. These decreases were due to the same factors as
those cited above for the second quarter. 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 second quarter increased $3.7 million, or
0.8% as a percentage of net sales. Gross margin for the twenty-six
weeks increased $5.8 million, or .6% as a percentage of net sales.
The second 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 declined $2.6 and
$7.8 million, or 0.4% and 0.8% as a percentage of net sales, in the
thirteen and twenty-six weeks ended July 27, 1996, respectively,
compared to the same prior-year periods. Reductions in store
expenses were partially offset by increases in advertising and home
office expenses in the second quarter; all major expense
categories were lower for the twenty-six weeks.
Depreciation and amortization expense increased by $0.5 and
$1.2 million, or 0.1% of net sales, in the thirteen and twenty-six
weeks ended July 27, 1996, respectively, compared to the same
prior-year periods. 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 $2.1 million, or 0.3% and 0.2% of net sales, in the
thirteen and twenty-six weeks ended July 27, 1996, 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 later). The Company's average
outstanding borrowings under the Credit Agreement decreased in both
periods presented: from $115.9 to $101.1 million during the
thirteen week period and from $86.7 to $75.2 million during the
twenty-six week 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 twenty-six weeks ended July 27, 1996 and July 29,
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
twenty-six weeks ended July 27, 1996 and July 29, 1995 to compute
non-cash income tax benefits of $1.0 and $3.5 million, respectively.
The same method was used to compute income tax provisions of $1.9
and $1.4 million for the second quarters of 1996 and 1995, respectively.
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 second quarter of 1996
contained in the Form 8-K filed on June 11, 1996 (referred to
herein as the "Plan"), net sales were $11.8 million lower than Plan
and EBITDA was $1.9 million higher than Plan. EBITDA is defined as
per the Credit Agreement 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
$19.0 million less than Plan and EBITDA was $4.3 million better
than Plan. The year-to-date EBITDA results reflected lower-than-
planned expenses and a 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 July 27, 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
$39.3 million from July 29, 1995 to July 27, 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 twelve (12) new stores since last year's second
quarter. The increase in inventories of $56.8 million from January
27, 1996 to July 27, 1996 was the result of a normal seasonal
build-up of inventories.
<PAGE>
Trade accounts payable increased $11.4 million from July 29,
1995 to July 27, 1996 due primarily to the timing of merchandise
receipts and improved trade payment terms. The increase in trade
accounts payable of $24.9 million from January 27, 1996 to July 27,
1996 was the result of the seasonal build-up of merchandise
inventories referenced above.
Capital expenditures for the twenty-six weeks ended July 27,
1996 totaled $10.0 million and for the balance of the year are
estimated to be approximately $12.0 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
1995, 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
---------------------------------------------------
The Annual Meeting of Stockholders was held Wednesday,
May 22, 1996, to consider and act upon the following matters:
(a) the election of seven (7) directors for a term of one year
or until their successor(s) have been elected and qualified;
(b) the approval of an Amended and Restated Certificate of
Incorporation of the Company to authorize a class of preferred
stock commonly known as "blank check" preferred stock and to
make certain other changes; (c) the ratification and approval
of the appointment of Arthur Andersen LLP as the Company's
independent certified public accountants and auditors for the
fiscal year ending January 25, 1997; (d) voting on a
stockholder proposal to limit the terms of office of its non-
employee directors; and (e) the transaction of such other
business as may properly come before the meeting or any
adjournments thereof.
Each nominee for director was elected as follows:
For Withheld
---------- ---------
Francis X. Basile 15,271,265 1,234,375
Paul Buxbaum 15,273,634 1,232,006
Alan Cohen 15,259,406 1,246,234
Joseph R. Ettore 15,245,140 1,260,500
Richard M. Felner 15,264,034 1,241,606
Sidney S. Pearlman 15,270,032 1,235,608
Laurie M. Shahon 15,264,480 1,241,160
The Amended and Restated Certificate of Incorporation was
approved by a vote of 10,917,987 shares in favor with
1,097,474 shares against, 439,223 shares abstaining and
4,157,413 broker non-votes. The appointment of Arthur
Andersen LLP was approved by a vote of 15,628,964 shares in
favor with 805,891 shares against and 70,785 shares
abstaining. The stockholder proposal to limit the terms of
office of the non-employee directors did not receive a second
at the Annual Meeting and was, therefore, not put to a vote.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Index to Exhibits
-----------------
Exhibit No. Exhibit Page No.
----------- ------- --------
11 Schedule of computation of primary 16
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 second quarter:
Date of Report Date of Filing Item # Description
-------------- -------------- ------ -----------
May 16, 1996 May 16, 1996 5 Disclosure of
fiscal April 1996
results.
June 7, 1996 June 7, 1996 5 Disclosure of
fiscal May 1996
results.
June 11, 1996 June 11, 1996 5 Disclosure of
the revised
fiscal 1996
summary financial
plan.
July 12, 1996 July 12, 1996 5 Disclosure of
fiscal June 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: August 22, 1996 /s/ Joseph R. Ettore
--------------------------------------
Joseph R. Ettore, President, Director,
and Chief Executive Officer
Dated: August 22, 1996 /s/ John F. Burtelow
--------------------------------------
John F. Burtelow, Executive Vice
President and Chief Financial Officer
<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 Twenty-six
Weeks Ended Weeks Ended
-------------------- --------------------
July 27, July 29, July 27, July 29,
1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net income (loss) $4,514 $3,188 ($2,484) ($7,953)
========= ========= ========= =========
For Primary Earnings Per Share
- ------------------------------
Weighted average number of common shares
outstanding during the period 20,460 20,422 20,465 20,127
Add: Common stock equivalent shares represented by
- Series B Warrants (a) (a) (b) (b)
- Series C Warrants 1,161 1,108 (b) (b)
- Options under 1994 Management Stock
Option Plan 59 1 (b) (b)
- Options under 1994 Non-Employee Directors
Stock Option Plan (a) (a) (b) (b)
--------- --------- --------- ---------
Weighted average number of common and common
equivalent shares used in the calculation
of primary earnings per share 21,680 21,531 20,465 20,127
========= ========= ========= =========
Primary net income (loss) per share $0.21 $0.15 ($0.12) ($0.40)
========= ========= ========= =========
For Fully Diluted Earnings Per Share
- ---------------------------------------
Weighted average number of common shares
outstanding during the period 20,460 20,422 20,465 20,127
Add: Common stock equivalent shares represented by
- Series B Warrants (a) (a) (b) (b)
- Series C Warrants 1,161 1,170 (b) (b)
- Options under 1994 Management Stock
Option Plan 59 5 (b) (b)
- Options under 1994 Non-Employee Directors
Stock Option Plan (a) (a) (b) (b)
--------- --------- --------- ---------
Weighted average number of common and common
equivalent shares used in the calculation
of fully diluted earnings per share 21,680 21,597 20,465 20,127
========= ========= ========= =========
Fully diluted net income (loss) per share $0.21 $0.15 ($0.12) ($0.40)
========= ========= ========= =========
<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.
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-25-1997
<PERIOD-END> JUL-27-1996
<CASH> 18226
<SECURITIES> 0
<RECEIVABLES> 25544
<ALLOWANCES> 0
<INVENTORY> 458940
<CURRENT-ASSETS> 518761
<PP&E> 85915
<DEPRECIATION> 25233
<TOTAL-ASSETS> 585108
<CURRENT-LIABILITIES> 400279
<BONDS> 40792
0
0
<COMMON> 204
<OTHER-SE> 80614
<TOTAL-LIABILITY-AND-EQUITY> 585108
<SALES> 937774
<TOTAL-REVENUES> 950769
<CGS> 680647
<TOTAL-COSTS> 680647
<OTHER-EXPENSES> 264603
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9467
<INCOME-PRETAX> (3531)
<INCOME-TAX> (1047)
<INCOME-CONTINUING> (2484)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2484)
<EPS-PRIMARY> (.12)
<EPS-DILUTED> (.12)
</TABLE>
