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 May 3, 1998
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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
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(Address of principal executive offices) (Zip Code)
(402) 339-2400
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(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 JUNE 8, 1998
--------------------- ---------------------------
Common Stock 1,000 Shares
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAMIDA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
<S> <C> <C>
ASSETS: May 3, February 1,
Current assets: 1998 1998
---------- ----------
Cash $ 11,738 $ 6,816
Accounts receivable, less allowance for
doubtful accounts of $50 8,983 8,901
Merchandise inventories 168,480 152,927
Prepaid expenses 3,817 2,838
---------- ----------
Total current assets 193,018 171,482
Property, buildings and equipment, less accumulated
depreciation and amortization of $64,492 and $63,738 40,342 40,812
Leased property under capital leases, less accumulated
amortization of $16,023 and $15,387 24,545 25,181
Deferred financing costs 2,607 2,755
Other assets 21,295 20,613
---------- ----------
$ 281,807 $ 260,843
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY:
Current liabilities:
Accounts payable $ 66,884 $ 47,687
Loan and security agreement 55,923 45,194
Accrued compensation 4,169 5,768
Accrued interest 2,255 6,668
Store closing reserve 973 1,564
Other accrued expenses 14,243 12,067
Income taxes - deferred and current payable 12,819 15,445
Current maturities of long-term debt 47 47
Current obligations under capital leases 1,827 1,843
---------- ----------
Total current liabilities 159,140 136,283
Long-term debt, less current maturities 140,277 140,289
Obligations under capital leases,
less current obligations 31,697 32,156
Other long-term liabilities 3,891 3,012
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 (70,198) (67,897)
---------- ----------
Total common stockholder's deficit (53,198) (50,897)
---------- ----------
$ 281,807 $ 260,843
========== ==========
See notes to consolidated financial statements
</TABLE>
PAMIDA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands)
(Unaudited)
Three Months Ended
--------------------
May 3, May 4,
1998 1997
-------- --------
Sales $144,532 $144,564
Cost of goods sold 110,172 111,296
-------- --------
Gross profit 34,360 33,268
-------- --------
Expenses:
Selling, general and administrative 31,728 30,969
Interest 6,361 6,545
-------- --------
38,089 37,514
-------- --------
Loss before income
tax benefit (3,729) (4,246)
Income tax benefit 1,428 -
-------- --------
Net loss $ (2,301) $ (4,246)
======== ========
See notes to consolidated financial statements.
PAMIDA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
Three Months Ended
---------------------
May 3, May 4,
1998 1997
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (2,301) $ (4,246)
-------- --------
Adjustments to reconcile net loss to net cash
from operating activities:
Depreciation and amortization of fixed assets
and intangibles 3,023 2,903
Provision for LIFO inventory valuation 250 150
(Gain) loss on disposal of assets (999) 11
Decrease in store closing reserve (670) (1,099)
(Increase) decrease in merchandise inventories (15,803) (1,954)
Increase in other operating assets (3,408) (3,489)
Increase in accounts payable 19,197 5,868
Decrease in other operating liabilities (5,504) (4,207)
-------- --------
Total adjustments (3,914) (1,817)
-------- --------
Net cash from operating activities (6,215) (6,063)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from disposal of assets 2,071 1,810
Proceeds from sale-leaseback of store facility 1,592 -
Changes in constructed stores to be refinanced
through lease financing (278) 140
Principal payments received on notes receivable 5 4
Capital expenditures (2,495) (2,222)
-------- --------
Net cash from investing activities 895 (268)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under loan and security agreement, net 10,729 9,042
Principal payments on capital lease obligations (475) (445)
Payments for deferred finance costs - (225)
Principal payments on long-term debt (12) (11)
-------- --------
Net cash from financing activities 10,242 8,361
-------- --------
Net increase in cash 4,922 2,030
Cash at beginning of year 6,816 6,973
-------- --------
Cash at end of period $ 11,738 $ 9,003
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
(1) Cash paid (received) during the period for:
Interest $ 10,774 $ 11,087
Income taxes:
Payments to taxing authorities 1,315 32
Refunds received from taxing authorities (117) (9)
See notes to consolidated financial statements.
PAMIDA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MAY 3, 1998 AND MAY 4, 1997
(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 1, 1998.
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 May 3,
1998 and February 1, 1998 by $7,430 and $7,180, 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. NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB adopted SFAS No. 130, "Reporting Comprehensive
Income", which establishes standards for reporting and display of
comprehensive income and its components in a full set of general purpose
financial statements. The adoption of this standard in the first quarter of
fiscal 1999 had no impact on the Company's financial statements. In June
1997, the FASB adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information". SFAS 131, effective for fiscal 1999,
redefines how operating segments are determined and requires disclosure of
certain financial and descriptive information about a company's operating
segments. The Company currently complies with most provisions of this
statement, and any incremental disclosure required is expected to be
minimal.
4. RECLASSIFICATIONS
Certain reclassifications have been made to the prior year's financial
statements to conform to the current year's presentation.
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
months ended May 3, 1998 and May 4, 1997:
Three Months Ended
------------------
May 3, May 4,
1998 1997
----- -----
Sales 100.0% 100.0%
Cost of goods sold 76.2 77.0
----- -----
Gross profit 23.8 23.0
Selling, general and administrative expenses 22.0 21.4
----- -----
Operating income 1.8 1.6
Interest expense 4.4 4.5
----- -----
Loss before income tax benefit (2.6) (2.9)
Income tax benefit 1.0 ( -)
----- -----
Net loss (1.6) (2.9)
===== =====
SALES for the first quarter of fiscal 1999 decreased by $32 or 0.0% from sales
for the first quarter of fiscal 1998. Comparable store sales for the first
quarter increased by 1.3% compared to last year. Last year's sales were elevated
by greater markdown and clearance activity which was not necessary this year.
Sales trends during the final month of the quarter were substantially stronger
than in the first two months of the quarter. The Company operated 149 stores at
the end of the first quarter of both fiscal 1999 and 1998. Since May 4, 1997,
the Company has opened one store in a new market, relocated three stores and
closed one store.
The Company experienced sales increases in numerous merchandise categories. The
largest increases were in the pharmacy prescriptions, lawn and garden, pets,
toys, and bed and bath areas. The shoe and team sports areas also showed
substantial percent increases over the first quarter of last year. The Company
experienced sales declines in several areas, with groceries, automotive, paper
and cleaning and electronics and audio/video sales areas having the largest
decreases.
GROSS PROFIT increased $1,092 or 3.3% for the first quarter of fiscal 1999
compared to the first quarter of last year as a result of improved margins
realized on sales. As a percentage of sales, gross profit increased to 23.8% for
the first quarter of fiscal 1999 compared to 23.0% for the first quarter last
year. This was caused primarily by a reduced level of clearance and markdown
activity this year as compared with the first quarter of last year.
SELLING, GENERAL AND ADMINISTRATIVE (SG&A) expense, in line with the Company's
plan, increased $759 or 2.5% for the first quarter of fiscal 1999, compared to
the first quarter of fiscal 1998. As a percentage of sales, SG&A expense
increased to 22.0% for the first quarter of fiscal 1999 compared to 21.4% last
year. Approximately 43.1% of the net increase in SG&A expense was attributable
to higher corporate general and administrative expenses, primarily involving
increases in payroll and incentive compensation expenses. Store payroll costs
increased slightly over last year to accommodate normal compensation increases
and minimum wage increases. Store fixed expenses also increased slightly due to
the effect of increased costs at new store locations.
INTEREST expense decreased $184 or 2.8% for the first quarter of fiscal 1999
compared to the same period of fiscal 1998. The decrease was attributable
primarily to lower average revolver borrowings due to improved cash flow.
INCOME TAX PROVISION - The Company had deferred tax assets, initially recorded
at the end of fiscal 1996, related to certain tax credit carryforwards which
resulted from prior year store closing charges. The Company had also recorded a
valuation allowance related to these assets. The Company's valuation allowance
was utilized during fiscal 1998 to partially offset income taxes from normal
operating activities of the Company. No provision for income taxes was recorded
during fiscal 1997 as this expense was offset by the reversal of a portion of
the valuation allowance. The Company expects that operations in future periods
will be taxed at a normal tax rate.
LIQUIDITY AND CAPITAL RESOURCES
The Company's business is seasonal with first quarter sales (February through
April) lower than sales during the other three quarters; fourth quarter sales
(November through January) have represented approximately 29% of the full year's
sales in recent years and normally involve a greater proportion of higher margin
sales.
The Company has satisfied its seasonal liquidity requirements primarily through
a combination of funds provided from operations and from a revolving credit
facility. Funds used by operating activities totaled $6,215 for the first
quarter of fiscal 1999 and $6,063 for the first quarter of fiscal 1998. The
change in cash flow from operating activities from fiscal 1998 to fiscal 1999
was primarily the result of increased accounts payable and a reduced net loss
offset by the increase in merchandise inventories to better support the
Company's in-stock position.
The Company's committed Loan and Security Agreement (the Agreement) provides
funds to March 2000 and has a maximum borrowing limit of $95,000. Borrowings
under the Agreement bear interest at a rate which is tied to the prime rate or
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 from time to
time. 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 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 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 $55,923 at May 3, 1998 and $66,157 at May
4, 1997. 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 $171,974 at
May 3, 1998 and $173,923 at May 4, 1997. 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. At May 3, 1998, the Company was in compliance with all
covenants contained in its various financing agreements.
On December 18, 1992, the promissory notes of Holdings were amended effective as
of December 1, 1992 to provide that, until the obligations of the Company and
Holdings under certain of the Company's credit agreements had been repaid, the
quarterly interest payments on the promissory notes of Holdings were to be paid
in kind. Holdings paid all of the promissory notes with common stock of Holdings
on November 18, 1997.
Holdings reclassified all of its preferred stock into common stock of Holdings
effective November 18, 1997. Accordingly, Holdings had no remaining obligations
related to its preferred stock as of the end of fiscal 1998. Since Holdings
conducts no operations of its own, prior to the November 18, 1997
reclassification of the preferred stock, the only cash requirement of Holdings
related to preferred stock dividends in the aggregate annual amount of
approximately $316; and the Company was 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, 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 retained 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 1998.
The Company made capital expenditures of $2,495 in the first quarter of fiscal
1999 compared to $2,222 during the first quarter of fiscal 1998. The Company
also made expenditures of $1,966 and $1,381 in the first quarters of fiscal 1999
and 1998, respectively, related to information systems software. The Company
plans to open up to eight new stores in fiscal 1999 and will consider additional
opportunities for new store locations as they arise. Capital expenditures and
information systems software costs are expected to total approximately $13,000
in fiscal 1999. 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 Company's cash flow from operations, along with the Agreement, 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, distribution and infrastructure
enhancements and working capital. 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. The
Company is also exploring additional sources of funds which may include
additional 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 conditions, industry conditions, company
performance, Year 2000 compliance 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. Plans for new stores are subject to numerous contingencies
discussed in the Company's Form 10-K Annual Report. 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: June 8, 1998 By: /s/ Steven S. Fishman
-----------------------------
Steven S. Fishman, Chairman,
President and Chief Executive
Officer
Date: June 8, 1998 By: /s/ Todd D. Weyhrich
------------------------------
Todd D. Weyhrich
Vice President, Controller and
Chief Accounting Officer
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<ARTICLE> 5
<LEGEND>
Financial Data Schedule
Item 601(c) of Regulation S-K Commercial and
Industrial Companies Article 5 of Regulation S-X
(Dollars is thousands, except per share amounts)
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet of Pamida, Inc. and Subsidiaries as of May 3, 1998
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> Pamida, Inc.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-Mos
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-02-1998
<PERIOD-END> MAY-03-1998
<CASH> 11,738
<SECURITIES> 0
<RECEIVABLES> 9,033
<ALLOWANCES> 50
<INVENTORY> 168,480
<CURRENT-ASSETS> 193,018
<PP&E> 104,834
<DEPRECIATION> 64,492
<TOTAL-ASSETS> 281,807
<CURRENT-LIABILITIES> 159,140
<BONDS> 171,974
0
0
<COMMON> 0
<OTHER-SE> (53,198)
<TOTAL-LIABILITY-AND-EQUITY> 281,807
<SALES> 144,532
<TOTAL-REVENUES> 144,532
<CGS> 110,172
<TOTAL-COSTS> 141,900
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,361
<INCOME-PRETAX> (3,729)
<INCOME-TAX> (1,428)
<INCOME-CONTINUING> (2,301)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,301)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
