SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR
[X] 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 3, 1997
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Commission File Number 33-57990
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PAMIDA, INC
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(Exact name of registrant as specified in its charter)
Delaware 47-0626426
- ------------------------------- ----------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
8800 "F" Street, Omaha, Nebraska 68127
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(402) 339-2400
----------------------------------------------------
(Registrant's telephone number, including area code)
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 [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
Class of Common Stock Outstanding at September 11, 1997
- --------------------- ---------------------------------
Common Stock 1,000 Shares
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PAMIDA INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
ASSETS: August 3, February 2,
1997 1997
--------- -----------
<S> <C> <C>
Current assets:
Cash ................................................... $ 8,485 $ 6,973
Accounts receivable, less allowance for
doubtful accounts of $50 ............................. 7,705 6,935
Merchandise inventories ................................ 147,240 157,490
Prepaid expenses ....................................... 3,619 2,993
Property held for sale ................................. -- 1,748
--------- -----------
Total current assets ................................. 167,049 176,139
Property, buildings and equipment, less accumulated
depreciation and amortization of $64,805 and $61,364 ... 43,494 42,403
Leased property under capital leases, less accumulated
amortization of $15,900 and $14,604 .................... 26,417 27,713
Deferred financing costs ................................. 3,051 3,124
Other assets ............................................. 20,244 19,773
--------- -----------
$ 260,255 $ 269,152
========= ===========
LIABILITIES AND STOCKHOLDER'S EQUITY:
Current liabilities:
Accounts payable ....................................... $ 53,315 $ 54,245
Loan and security agreement ............................ 47,210 57,115
Accrued compensation ................................... 4,320 3,860
Accrued interest ....................................... 6,358 6,857
Store closing reserve .................................. 2,158 4,521
Other accrued expenses ................................. 13,499 10,112
Income taxes - deferred and current payable ............ 12,723 8,956
Current maturities of long-term debt ................... 47 47
Current obligations under capital leases ............... 1,749 1,781
--------- -----------
Total current liabilities ........................... 141,379 147,494
Long-term debt, less current maturities .................. 140,341 140,364
Obligations under capital leases, less current obligations 33,140 33,999
Other long-term liabilities .............................. 5,355 4,825
Commitments and contingencies ............................ -- --
Common stockholder's equity:
Common stock, $.01 par value; 10,000 shares authorized;
1,000 shares issued and outstanding, ................. -- --
Additional paid-in capital ............................. 17,000 17,000
Accumulated deficit .................................... (76,960) (74,530)
--------- -----------
Total common stockholder's equity .................... (59,960) (57,530)
--------- -----------
$ 260,255 $ 269,152
========= ===========
</TABLE>
See notes to consolidated financial statements.
<TABLE>
<CAPTION>
PAMIDA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands)
(Unaudited)
Three Months Ended Six Months Ended
August 3, July 28, August 3, July 28,
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Sales ..................... $ 163,217 $ 155,817 $ 307,781 $ 287,603
Cost of goods sold ........ 121,715 118,721 233,011 218,932
--------- --------- --------- ---------
Gross profit .............. 41,502 37,096 74,770 68,671
--------- --------- --------- ---------
Expenses:
Selling, general and
administrative ........ 33,271 31,251 64,240 60,457
Interest ................ 6,415 6,060 12,960 12,140
--------- --------- --------- ---------
39,686 37,311 77,200 72,597
Income (loss) before income
tax provision (credit) .. 1,816 (215) (2,430) (3,926)
Income tax provision ...... -- -- -- --
--------- --------- --------- ---------
Net income (loss) ......... $ 1,816 $ (215) $ (2,430) $ (3,926)
========= ========= ========= =========
</TABLE>
See notes to consolidated financial statements.
<TABLE>
<CAPTION>
PAMIDA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
SIX MONTHS ENDED
---------------------
August 3, July 28,
1997 1996
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ................................................ $ (2,430) $ (3,926)
-------- --------
Adjustments to reconcile net loss to net cash
from operating activities:
Depreciation and amortization of fixed assets
and intangibles ..................................... 5,885 5,462
Provision for LIFO inventory valuation ................ 433 300
Gain on disposal of assets ............................ (77) (28)
Decrease in merchandise inventories ................... 9,817 13,501
Increase in other operating assets .................... (4,271) (3,262)
Increase (decrease) in accounts payable ............... (930) 2,119
Increase (decrease) in other operating liabilities .... 7,310 (864)
Decrease in store closing reserve ..................... (2,028) (3,365)
-------- --------
Total adjustments .................................. 16,139 13,863
-------- --------
Net cash from operating activities .............. 13,709 9,937
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from disposal of assets ........................ 1,906 672
(Increase) decrease in construction notes receivable .... 1,765 (3,022)
Capital expenditures .................................... (4,833) (3,148)
Assets acquired for sale, net ........................... -- (391)
Other ................................................... 9 8
-------- --------
Net cash used in investing activities ............. (1,153) (5,881)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under loan and security agreement, net ....... (9,905) 667
Principal payments on capital lease obligations ......... (891) (884)
Payments for deferred finance costs ..................... (225) --
Principal payments on long-term debt .................... (23) (104)
-------- --------
Net cash by used in financing activities (11,044) (321)
-------- --------
Net increase in cash ....................................... 1,512 3,735
Cash at beginning of year .................................. 6,973 7,298
-------- --------
Cash at end of period ...................................... $ 8,485 $ 11,033
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
(1) Cash paid (received) during the period for:
Interest $ 13,459 $ 12,158
Income taxes:
Payments to taxing authorities 32 257
Refunds received from taxing authorities (3,798) (169)
</TABLE>
See notes to consolidated financial statements.
PAMIDA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED AUGUST 3, 1997 AND JULY 28, 1996
(Unaudited)
(Dollars in Thousands)
1. MANAGEMENT REPRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information. In the opinion of management, all
adjustments necessary for a fair presentation of the results of operations
for the interim periods have been included. All such adjustments are of a
normal recurring nature. Because of the seasonal nature of the business,
results for interim periods are not necessarily indicative of a full
year's operations. The accounting policies followed by Pamida Inc. (the
"Company") and additional footnotes are reflected in the consolidated
financial statements contained in the Form 10-K Annual Report of the
Company for the fiscal year ended February 2, 1997.
2. INVENTORIES
Substantially all inventories are stated at the lower of cost (last-in,
first-out) or market. Total inventories would have been higher at August
3, 1997 and February 2, 1997 by $7,007 and $6,574 respectively, had the
FIFO (first-in, first-out) method been used to determine the cost of all
inventories. Quarterly LIFO inventory determinations reflect assumptions
regarding fiscal year-end inventory levels and the estimated impact of
annual inflation. Actual inventory levels and annual inflation could vary
from estimates made on a quarterly basis.
3. RECLASSIFICATIONS
Certain reclassifications have been made to the prior year's financial
statements to conform to the current year's presentation.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in Thousands)
The following is management's discussion and analysis of certain significant
factors which have affected the Company's results of operations and financial
condition for the periods included in the accompanying consolidated financial
statements.
RESULTS OF OPERATIONS
The following table sets forth an analysis of various components of the
Consolidated Statements of Operations as a percentage of sales for the three and
six months ended August 3, 1997 and July 28, 1996:
Three Months Ended Six Months Ended
------------------- -------------------
August 3, July 28, August 3, July 28,
1997 1996 1997 1996
------ ------ ------ ------
Sales .......................... 100.0% 100.0% 100.0% 100.0%
Cost of goods sold ............. 74.6% 76.2% 75.7% 76.1%
------ ------ ------ ------
Gross profit ................... 25.4% 23.8% 24.3% 23.9%
Selling, general and
administrative expenses ...... 20.4% 20.0% 20.9% 21.0%
------ ------ ------ ------
Operating income ............... 5.0% 3.8% 3.4% 2.9%
Interest expense ............... 3.9% 3.9% 4.2% 4.2%
------ ------ ------ ------
Income (loss) before income
tax provision ................ 1.1% -0.1% -0.8% -1.3%
Income tax provision ........... -- -- -- --
------ ------ ------ ------
Net income (loss) .............. 1.1% -0.1% -0.8% -1.3%
====== ====== ====== ======
SALES - During the second quarter and first six months of fiscal 1998, sales in
comparable stores increased $5,300 or 3.5% and $13,907 or 5.0%, respectively, as
compared to the second quarter and first six months last year. Total sales for
the second quarter and the first six months of fiscal 1998 increased by $7,400
or 4.8% and $20,178 or 7.0%, respectively, as compared to the same periods last
year.
The Company operated 149 stores at the end of the first quarter of fiscal 1998
as compared with 144 stores at the end of the first quarter last year and
operated 149 stores at the end of the second quarter of fiscal 1998 as compared
with 146 stores at the end of the second quarter last year. Since July 28, 1996
the Company has opened four stores in new markets, reopened a store which had
been closed due to storm damage, relocated one store and closed two stores. The
increase in total sales was primarily attributable to comparable store sales
increases and the effects of the net increase in the number of stores in
operation during the respective periods this year as compared with last year.
The Company experienced sales increases in most merchandise categories during
the second quarter of fiscal 1998. The largest dollar increases were in the
pharmacy prescriptions, sporting goods, housewares, men's denim apparel, women's
shoes, toys, stationary, appliances and misses tops categories. The Company
experienced sales declines in only a few categories, with men's fashions
experiencing the largest decrease.
GROSS PROFIT increased $4,406 or 11.9% and $6,099 or 8.9% for the second quarter
and first six months, respectively, of fiscal 1998 compared to the same periods
last year. As a percentage of sales, gross profit increased to 25.4% from 23.8%
and to 24.3% from 23.9% for the second quarter and first six months,
respectively, of fiscal 1998 compared to the same periods last year. The Company
improved its in-stock positions in most merchandise categories during the second
quarter of fiscal 1998 as compared with the second quarter of fiscal 1997. Sales
improved in most merchandise categories this year, with a marked increase in
sales of higher margin basic goods which experienced substantial out-of-stocks
during the second quarter last year. Also, the Company realized substantial
decreases in warehousing and distribution costs during the first half of fiscal
1998 compared to last year.
SELLING, GENERAL AND ADMINISTRATIVE (SG&A) expense increased $2,020 or 6.5% for
the second quarter of fiscal 1998 compared to the second quarter of fiscal 1997
and increased $3,783 or 6.3% for the first six months of fiscal 1998 compared to
the same period last year. As a percentage of sales, SG&A expense was 20.4% and
20.0%, respectively, for the second quarter of fiscal 1998 and 1997. As a
percentage of sales, SG&A expense was 20.9% and 21.0%, respectively, for the
first half of fiscal 1998 and 1997.
Most of the total net increase in SG&A expense for the second quarter of fiscal
1998 as compared to the second quarter last year was attributable to planned
higher corporate general and administrative expenses, primarily involving
increases in payroll and incentive compensation. As planned, store occupancy
costs also increased over last year to accommodate the higher sales activity.
These increases were offset partially by a $224 increase in other income,
primarily due to a gain on the sale of a parcel of land and business
interruption insurance settlements related to two stores.
Most of the total net increase in SG&A expense for the first half of fiscal 1998
as compared to the first half of last year was attributable to planned higher
corporate general and administrative expenses, primarily involving increases in
payroll, incentive compensation expenses and professional fees. As planned,
store controllable, occupancy and payroll costs also increased over last year to
accommodate the higher sales activity. These increases were offset partially by
a $135 increase in other income.
INTEREST expense increased $355 or 5.9% for the second quarter of fiscal 1998
compared to the same period of fiscal 1997 and increased $820 or 6.8% for the
first half of fiscal 1998 compared to the same period of fiscal 1997. The
increases were due primarily to increased revolver borrowings to support higher
investments in basic inventory and the Company's seasonal operating pattern.
INCOME TAX BENEFIT - No income tax benefit on losses will be recorded until the
Company can establish with a reasonable degree of certainty the potential
utilization of certain tax loss carryforwards from prior year store closing
charges.
LIQUIDITY AND CAPITAL RESOURCES
The Company's business is seasonal with first quarter sales (February through
April) being lower than sales during the other three quarters. Fourth quarter
sales (November through January) have represented approximately 30% of the full
year's sales in recent years and normally involve a greater proportion of higher
margin sales. Funds provided by operating activities were $13,709 in the first
half of fiscal 1998 compared to $9,937 in the first half of fiscal 1997. This
$3,772 improvement in net cash generated by operating activities during the
first half of fiscal 1998 resulted primarily from changes in other operating
liabilities and the store closing reserve as well as the decreased net loss for
the period, offset somewhat by changes in inventory, accounts payable and
operating assets.
Effective March 17, 1997, the term of the Company's committed Loan and Security
Agreement (the Agreement) was extended to March 2000 and the maximum borrowing
limit of the facility was increased to $95,000. Prior to March 17, 1997,
borrowings under the Agreement bore interest at a rate of 0.75% per annum
greater than the applicable prime rate. Effective March 17, 1997, borrowings
under the Agreement bear interest at a rate 0.50% per annum greater than the
applicable prime rate or a rate which is tied to the London Interbank Offered
Rate (LIBOR), generally at the Company's discretion. The amounts the Company is
permitted to borrow are determined by a formula based upon the amount of the
Company's eligible inventory. Such borrowings are secured by security interests
in all of the current assets (including inventory) of the Company and by liens
on certain real estate interests and other property of the Company. Pamida
Holdings Corporation (Holdings) and two subsidiaries of the Company have
guaranteed the payment and performance of the Company's obligations under the
Agreement and have pledged some or all of their respective assets, including the
stock of the Company owned by Holdings, to secure such guarantees.
The Agreement contains provisions imposing operating and financial restrictions
on the Company. Certain provisions of the Agreement require the maintenance of
specified amounts of tangible net worth (as defined) and working capital (as
defined) and the achievement of specified minimum amounts of cash flow (as
defined). Other restrictions in the Agreement and those provided under the
Indenture relating to the Senior Subordinated Notes of the Company will affect,
among other things, the ability of the Company to incur additional indebtedness,
pay dividends, repay indebtedness prior to its stated maturity, create liens,
enter into leases, sell assets or engage in mergers or acquisitions, make
capital expenditures and make investments. These covenants currently have not
had an impact on the Company's ability to fully utilize the revolving credit
facility. However, certain of the covenants, such as those which restrict the
ability of the Company to incur indebtedness or encumber its property or which
impose restrictions on or otherwise limit the Company's ability to engage in
sale-leaseback transactions, may at some future time prevent the Company from
pursuing its store expansion program at the rate that the Company desires.
Obligations under the Agreement were $47,210 at August 3, 1997 and $32,255 at
July 28, 1996. As noted above, this facility expires in March 2000, and the
Company intends to refinance any outstanding balance by such date. Borrowings
under the Agreement are senior to the Senior Subordinated Notes of the Company.
The Company had long-term debt and obligations under capital leases of $173,481
at August 3, 1997 and $176,300 at July 28, 1996. The Company's ability to
satisfy scheduled principal and interest payments under such obligations in the
ordinary course of business is dependent primarily upon the sufficiency of the
Company's operating cash flow and continued access to financial markets. At
August 3, 1997, the Company was in compliance with all covenants contained in
its various financing agreements.
Since Holdings conducts no operations of its own, the only cash requirement of
Holdings relates to preferred stock dividends in the aggregate annual amount for
fiscal 1998 totaling approximately $503; and the Company is expressly permitted
under its existing credit facilities to pay dividends to Holdings to fund such
preferred stock dividends. However, the General Corporation Law of the State of
Delaware, under which the Company and Holdings are incorporated, generally
allows a corporation to declare or pay a dividend only from its surplus or from
the current or the prior year's earnings. Due to the accumulated deficit
resulting primarily from the store closings and the write-off of goodwill and
other long-lived assets recognized in the fourth quarter of fiscal 1996, the
Company and Holdings did not declare or pay any cash dividends in fiscal 1997 or
the first half of fiscal 1998 and may pay cash dividends in future periods only
to the extent that the Company and Holdings satisfy the applicable statutory
standards which include Holding's having a net worth equal to at least the
aggregate par value of the preferred stock which amounts to $2. The cumulative
dividend rate on the preferred stock increases by 0.5% per quarter (with a
maximum aggregate increase of 5%) on each quarterly dividend payment date on
which the preferred stock dividends are not paid currently on a cumulative
basis. Any unpaid dividends are added to the liquidation value until paid in
cash. Such nonpayment of preferred stock dividends does not accelerate the
redemption rights of the preferred stockholders. Holdings has proposed to change
and reclassify all of its outstanding preferred stock into shares of its common
stock. Such transaction is subject, among other things, to approval by the
holders of a majority of the presently outstanding shares of common stock of
Holdings. Additional information concerning such proposed transaction and
related matters appears in the Form 10-Q Quarterly Report filed by Holdings for
the quarterly period ended August3, 1997.
The Company made capital expenditures of $4,833 in the first half of fiscal 1998
compared to $3,148 during the first half of fiscal 1997. The Company plans to
open a total of three new stores in fiscal 1998, two of which were opened in the
first half, and will consider additional opportunities for new store locations
as they arise. Total capital expenditures are expected to total approximately
$10,000 in fiscal 1998. The Company expects to fund these expenditures from cash
flow from its operations. The costs of buildings and land for new store
locations are expected to be financed by operating or capital leases with
unaffiliated landlords. The Company's expansion program also will require
inventory of approximately $1,000 to $1,200 for each new market store, which the
Company expects to finance through trade credit, borrowings under the Agreement
and cash flow from operations.
The recent changes to the Agreement, along with expected improvements in the
Company's cash flow from operations, should provide adequate resources to meet
the Company's near-term liquidity requirements. On a long-term basis, the
Company's expansion will require continued investments in store locations,
working capital and distribution and infrastructure enhancements. The Company
expects to continue to finance some of these investments through leases from
unaffiliated landlords, trade credit, borrowings under the Agreement and cash
flow from operations but ultimately will need to explore additional sources of
funds which may include capital structure changes. Currently, it is not possible
for the Company to predict with any certainty either the timing or the
availability of such additional financing.
INFLATION
The Company uses the LIFO method of inventory valuation in its financial
statements; as a result, the cost of merchandise sold approximates current
costs. The Company's rental expense is generally fixed and, except for small
amounts of percentage rents and rentals adjusted by cost-of-living increases
tied to the Consumer Price Index or interest rates, has not been affected by
inflation.
FORWARD-LOOKING STATEMENTS
This management's discussion and analysis contains certain forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 (the "1995 Act"). Such statements are made in good faith by the Company
pursuant to the safe-harbor provisions of the 1995 Act. In connection with these
safe-harbor provisions, this management's discussion and analysis contains
certain forward-looking statements which reflect management's current views and
estimates of future economic circumstances, industry conditions, company
performance and financial results. The statements are based on many assumptions
and factors including sales results, expense levels, competition and interest
rates as well as other risks and uncertainties inherent in the Company's
business, capital structure and the retail industry in general. Any changes in
these factors could result in significantly different results for the Company.
The Company further cautions that the forward-looking information contained
herein is not exhaustive or exclusive. The Company does not undertake to update
any forward-looking statements which may be made from time to time by or on
behalf of the Company.
PART II - OTHER INFORMATION
ITEMS 1 -5:
None.
ITEM 6:
(a) Exhibits.
- 27.1 Financial Data Schedule (EDGAR version only)
(b) Reports on Form 8-K.
No reports on Form 8-K have been filed during the quarter for which
this report is filed.
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.
PAMIDA, INC.
------------
(Registrant)
Date: September 11, 1997 By: /S/ STEVEN S. FISHMAN
Steven S. Fishman, Chairman,
President and Chief Executive
Officer
Date: September 11, 1997 By: /S/ TODD D. WEYHRICH
Todd D. Weyhrich
Chief Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
Consolidated Balance Sheet of Pamida, Inc. and Subsidiaries as of August 3, 1997
and the related Consolidated Statement of Operations for the 13 weeks then ended
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000808304
<NAME> PAMDIA, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-END> AUG-01-1997
<CASH> 8,485
<SECURITIES> 0
<RECEIVABLES> 7,755
<ALLOWANCES> 50
<INVENTORY> 147,240
<CURRENT-ASSETS> 167,049
<PP&E> 108,299
<DEPRECIATION> 64,805
<TOTAL-ASSETS> 260,255
<CURRENT-LIABILITIES> 141,379
<BONDS> 173,481
0
0
<COMMON> 0
<OTHER-SE> (59,960)
<TOTAL-LIABILITY-AND-EQUITY> 260,255
<SALES> 163,217
<TOTAL-REVENUES> 163,217
<CGS> 121,715
<TOTAL-COSTS> 154,986
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,415
<INCOME-PRETAX> 1,816
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,816
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,816
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
