REGISTRATION NO. 33-57990
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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POST-EFFECTIVE AMENDMENT NO. 6
On
FORM S-2
To
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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PAMIDA, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 5331 47-0626426
(State or other (Primary Standard (I.R.S. Employer Identification No.)
jurisdiction of Industrial
incorporation or Classification
organization) Code Number)
PAMIDA HOLDINGS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 5331 47-0696125
(State or other (Primary Standard (I.R.S. Employer Identification No.)
jurisdiction of Industrial
incorporation or Classification
organization) Code Number)
8800 "F" STREET
OMAHA, NEBRASKA 68127
TELEPHONE: (402) 339-2400
(Address, including zip code, and telephone number,
including area code, of registrants' principal executive offices)
GEORGE R. MIHALKO
SENIOR VICE PRESIDENT
PAMIDA, INC.
8800 "F" STREET
OMAHA, NEBRASKA 68127 (402) 339-2400
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
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COPIES TO:
Howard J. Kaslow, Esq.
Abrahams, Kaslow & Cassman
8712 West Dodge Road, Suite 300
Omaha, Nebraska 68114
(402) 392-1250
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Approximate date of commencement of proposed sale to the public: From time
to time after this registration statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [X]
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible copy thereof, pursuant to Item 11(a)(1) of
this Form, check the following box: [ ]
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The Registrants hereby amend this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrants
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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$140,000,000
PAMIDA, INC.
11 3/4% Senior Subordinated Notes Due 2003
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THE 11 3/4% SENIOR SUBORDINATED NOTES DUE 2003 (THE "NOTES") OFFERED HEREBY
WERE ISSUED BY PAMIDA, INC., A DELAWARE CORPORATION ("PAMIDA" OR THE "COMPANY"),
IN MARCH 1993 PURSUANT TO A REGISTERED PUBLIC OFFERING (THE "ORIGINAL OFFERING")
OF $140,000,000 AGGREGATE PRINCIPAL AMOUNT OF THE NOTES. INTEREST ON THE NOTES
IS PAYABLE SEMI-ANNUALLY ON MARCH 15 AND SEPTEMBER 15 OF EACH YEAR, COMMENCING
SEPTEMBER 15, 1993, AT THE RATE OF 11 3/4% PER ANNUM. THE NOTES ARE REDEEMABLE,
IN WHOLE OR IN PART, AT THE OPTION OF THE COMPANY, ON OR AFTER MARCH 15, 1998,
AT THE REDEMPTION PRICES SET FORTH HEREIN PLUS ACCRUED INTEREST.
IN THE EVENT OF A CHANGE OF CONTROL (AS DEFINED), THE COMPANY IS OBLIGATED
TO MAKE AN OFFER TO PURCHASE ALL OUTSTANDING NOTES AT A REDEMPTION PRICE OF 101%
OF THE PRINCIPAL AMOUNT THEREOF PLUS ACCRUED INTEREST. SEE "DESCRIPTION OF
NOTES--CHANGE OF CONTROL." IN ADDITION, THE COMPANY IS OBLIGATED IN CERTAIN
INSTANCES TO MAKE OFFERS TO PURCHASE NOTES AT A REDEMPTION PRICE OF 100% OF THE
PRINCIPAL AMOUNT THEREOF PLUS ACCRUED INTEREST WITH THE NET CASH PROCEEDS OF
CERTAIN SALES OR OTHER DISPOSITIONS OF ASSETS.
THE NOTES ARE GENERAL UNSECURED OBLIGATIONS OF THE COMPANY, ARE
SUBORDINATED IN RIGHT OF PAYMENT TO ALL SENIOR INDEBTEDNESS OF THE COMPANY
(WHICH IS LIMITED TO INDEBTEDNESS UNDER THE COMPANY'S CREDIT AGREEMENT, AS
DEFINED) AND RANK pari passu WITH OR SENIOR IN RIGHT OF PAYMENT TO ALL OTHER
EXISTING AND FUTURE INDEBTEDNESS OF THE COMPANY. THE COMPANY HAS NOT ISSUED, AND
HAS NO PRESENT PLANS OR ARRANGEMENTS TO ISSUE, ANY INDEBTEDNESS WITH RESPECT TO
WHICH THE NOTES ARE OR WOULD BE SENIOR IN RIGHT OF PAYMENT. AS OF FEBRUARY 1,
1998, APPROXIMATELY $45.2 MILLION OF SENIOR INDEBTEDNESS (EXCLUDING LETTERS OF
CREDIT) WAS OUTSTANDING.
THE NOTES ARE UNCONDITIONALLY GUARANTEED (THE "GUARANTEE") ON A SENIOR
SUBORDINATED BASIS BY THE COMPANY'S PARENT, PAMIDA HOLDINGS CORPORATION
("HOLDINGS"). THE GUARANTEE IS SUBORDINATED TO THE GUARANTEE BY HOLDINGS OF THE
COMPANY'S OBLIGATIONS UNDER THE CREDIT AGREEMENT BUT SENIOR TO THE SUBORDINATED
INDEBTEDNESS OF HOLDINGS. THE GUARANTEE IS SECURED BY A PLEDGE OF ALL OF THE
COMMON STOCK OF THE COMPANY, WHICH IS THE ONLY SIGNIFICANT ASSET OF HOLDINGS.
SUCH STOCK IS ALSO PLEDGED TO SECURE THE GUARANTEE BY HOLDINGS OF THE COMPANY'S
OBLIGATIONS UNDER THE CREDIT AGREEMENT. THE PLEDGE SECURING THE GUARANTEE BY
HOLDINGS OF THE COMPANY'S OBLIGATIONS UNDER THE CREDIT AGREEMENT RANKS PRIOR TO
THE PLEDGE SECURING THE GUARANTEE. HOLDINGS HAS NO MATERIAL OPERATIONS OF ITS
OWN AND CURRENTLY HAS NO SOURCE OF CASH OTHER THAN DIVIDENDS AND CERTAIN OTHER
PAYMENTS FROM THE COMPANY; ACCORDINGLY, IF HOLDINGS WERE CALLED UPON TO HONOR
THE GUARANTEE, IT IS UNLIKELY THAT IT WOULD HAVE FUNDS AVAILABLE FOR SUCH
PURPOSE.
SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN RISKS ASSOCIATED WITH AN
INVESTMENT IN THE NOTES.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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This prospectus is to be used by Citicorp Securities, Inc. ("CSI") in
connection with offers and sales of the Notes in market-making transactions at
negotiated prices related to prevailing market prices at the time of sale. CSI
or its affiliates may act as principal or agent in such transactions.
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CITICORP SECURITIES, INC.
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The date of this Prospectus is _______, 1998
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR CITICORP SECURITIES, INC. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF ANY OFFER TO BUY ANY
SECURITY OTHER THAN THE SENIOR SUBORDINATED NOTES OFFERED BY THIS PROSPECTUS,
NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY
THE SENIOR SUBORDINATED NOTES BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER
OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
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TABLE OF CONTENTS
Page
----
Available Information.................................................... 1
Incorporation of Certain Documents by Reference.......................... 2
Risk Factors............................................................. 3
The Company and Holdings................................................. 7
Ratio of Earnings to Fixed Charges....................................... 9
Use of Proceeds.......................................................... 9
Description of Notes..................................................... 9
Description of Certain Indebtedness...................................... 37
Plan of Distribution..................................................... 38
Legal Matters............................................................ 38
Experts.................................................................. 39
Prospectus Appendix...................................................... 40
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AVAILABLE INFORMATION
Holdings and Pamida are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith file reports and other information with the Securities and
Exchange Commission (the "Commission"). Reports (and, in the case of Holdings,
proxy and information statements) and other information filed by Holdings or
Pamida with the Commission may be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Regional Offices of the Commission located at 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661, and 7 World Trade Center,
Suite 1300, New York, New York 10048. Copies of such material may be obtained
from the Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Commission also maintains a
World Wide Web site on the Internet that contains reports, proxy and information
statements (in the case of Holdings), and other information regarding Holdings
and Pamida; the address of such Web site is http://www.sec.gov. Reports, proxy
statements and other information relating to Holdings also can be inspected at
the offices of the American Stock Exchange, 86 Trinity Place, New York, New York
10006, on which exchange the Common Stock of Holdings is listed.
The Company and Holdings have filed with the Commission a registration
statement (the "Registration Statement") under the Securities Act of 1933, as
amended, with respect to the Notes offered hereby and the Guarantee. This
Prospectus, which constitutes a part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement and the
exhibits and schedules thereto. For further information, reference is hereby
made to the Registration Statement, which may be obtained from the Public
Reference Section of the Commission at the address set forth above. Statements
contained in this Prospectus regarding the contents of any contract or other
document are not necessarily complete, and in each instance reference is made to
the copy of such contract or document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference.
The Indenture relating to the Notes requires the Company to file periodic
reports and other information pursuant to the informational requirements of the
Exchange Act referred to above, regardless of the number of persons holding
Notes.
The Company will furnish holders of the Notes with annual financial
statements that have been examined and reported upon, with an opinion expressed
by, an independent public accounting firm and quarterly reports containing
unaudited financial information for the first three quarters of each fiscal
year. The Company also will furnish such other reports as it may determine to be
appropriate or as may be required by law. Both the Company
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and Holdings maintain their principal executive offices at 8800 "F" Street,
Omaha, Nebraska 68127 (telephone (402) 339-2400).
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by the Company and by
Holdings pursuant to the Exchange Act are incorporated herein by reference:
1. The Annual Report of the Company on Form 10-K for the fiscal year ended
February 1, 1998.
2. The Annual Report of Holdings on Form 10-K for the fiscal year ended
February 1, 1998.
Each of the above-referenced documents is included in the appendix (the
"Prospectus Appendix") which forms a part of this prospectus and is being
delivered to each recipient of this prospectus.
All other reports filed by the Company or Holdings pursuant to the Exchange
Act since the filing of their respective Form 10-K Annual Report for the fiscal
year ended February 1, 1998, also are incorporated herein by this reference. The
Company and Holdings will provide without charge to each person, including any
beneficial owner of the Notes, to whom this Prospectus is delivered, upon
written or oral request of such person, a copy of such reports; such request
should be directed to the Company or Holdings at their address or telephone
number appearing in the preceding section of this Prospectus.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
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IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES AT LEVELS
ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING,
IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
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RISK FACTORS
Prospective purchasers of the Notes should carefully consider the risk
factors set forth below, as well as all other information contained in this
Prospectus, in evaluating an investment in the Notes.
HIGH LEVERAGE; LIQUIDITY
Pamida is highly leveraged. At February 1, 1998, Pamida had consolidated
indebtedness of approximately $219.5 million as compared to a common
stockholder's deficit of approximately ($50.9) million.
Pamida will require substantial cash flow to meet its interest and
principal repayment obligations under the Notes, the Credit Agreement (as
defined) and its other debt obligations. See "Description of Notes" and
"Description of Certain Indebtedness." For the fiscal year ended February 1,
1998, Pamida had a ratio of earnings to fixed charges of 1.23:1, and Holdings
had a ratio of earnings to fixed charges of 1.07:1. See "Ratio of Earnings to
Fixed Charges."
In the past, Pamida has relied upon funds from operations and borrowings
under its bank credit facilities to fund its business activities and meet its
debt service obligations. The ability of Pamida to make principal and interest
payments on the Notes and its other debt obligations will be dependent largely
upon the results of Pamida's future business operations. Pamida's business
operations are subject to and affected by economic conditions and other factors,
many of which are beyond its control. The highly leveraged position of Pamida
and the restrictive covenants contained in the Indenture and in the instruments
governing its other debt obligations could limit Pamida's ability to withstand
competitive pressures or adverse economic conditions.
RANKING
The Notes are general unsecured obligations of the Company and subordinated
in right of payment to all Senior Indebtedness of the Company (which is limited
to indebtedness under the Credit Agreement, as defined). As of February 1, 1998,
approximately $45.2 million of Senior Indebtedness (excluding letters of credit)
was outstanding.
The Company's indebtedness under the Credit Agreement is secured by all of
the Company's current assets (including inventory) and by liens on certain real
estate interests and other property of the Company, and the Company may grant
security interests in or liens on its other assets and property to further
secure its obligations under the Credit Agreement.
The Guarantee of the Notes by Holdings is subordinated in right of payment
to the guarantee by Holdings of the obligations
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of the Company under the Credit Agreement. See "Description of Notes --
Guarantee and Pledge Agreement." The Guarantee of the Notes is secured by a
pledge of all of the common stock of the Company; however, the guarantee by
Holdings of the obligations of the Company under the Credit Agreement is secured
by a first and prior security interest in the common stock of the Company which
ranks ahead of any security interest in such stock securing the Guarantee of the
Notes.
In the event of bankruptcy, liquidation or reorganization of the Company or
Holdings, as the case may be, the assets of the Company or Holdings, as the case
may be, will be available to pay obligations on the Notes and the Guarantee,
respectively, only after all Senior Indebtedness of the Company or Holdings, as
the case may be, has been paid in full; and there may not be sufficient assets
remaining to pay amounts due on any or all of the Notes or Guarantee then
outstanding.
OPERATING AND FINANCIAL RESTRICTIONS
The Credit Agreement contains provisions imposing substantial operating and
financial restrictions on the Company. Certain provisions of the Credit
Agreement require the maintenance of specified amounts of Consolidated Tangible
Net Worth and Consolidated Working Capital and the achievement of specified
minimum amounts of Consolidated Adjusted Cash Flow, as such terms are defined in
the Credit Agreement. The Credit Agreement currently requires the Company to
have Consolidated Tangible Net Worth of $70,000,000 through May 3, 1998,
$75,000,000 from May 4, 1998, through May 2, 1999, and $80,000,000 thereafter.
The definition of Consolidated Tangible Net Worth in the Credit Agreement
includes, as an addition to the specified net book value of the assets of the
Company and its subsidiaries, indebtedness of the Company and its subsidiaries
(including but not limited to the Notes) which is subordinated in right of
payment to the payment in full of all obligations under the Credit Agreement on
terms and conditions acceptable to the agent for the lenders under the Credit
Agreement. The Credit Agreement currently requires the Company to have
Consolidated Working Capital of $22,500,000 through May 3, 1998, $27,500,000
from May 4, 1998, through May 2, 1999, and $32,500,000 thereafter. The Credit
Agreement currently requires the Company to have Consolidated Adjusted Cash Flow
of not less than negative $10,500,000 for each fiscal quarter ending on or about
April 30, negative $9,500,000 for each two fiscal quarters, cumulatively, ending
on or about July 31, negative $6,500,000 for each three fiscal quarters,
cumulatively, ending on or about October 31, and $3,500,000 for each four fiscal
quarters, cumulatively, ending on or about January 31. The Credit Agreement
gives the agent for the lenders the right to establish the general criteria for
inventory advance rates and to determine, in its discretion, the amounts to be
loaned to the Company from time to time. In addition, the Credit Agreement
requires the Company to maintain a cash collateral account into which the
proceeds of sales of the Company's inventory will be deposited daily and applied
to
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service the Credit Agreement on a daily basis. Other restrictions in the
Credit Agreement and those provided under the Indenture 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 in subsidiaries. The Credit Agreement limits
the Company to not more than $12,000,000 of capital expenditures (other than
capitalized lease payments) in any fiscal year, with a carryover to future
fiscal years of any portion of such maximum amount which is not expended in a
particular fiscal year. The ability of the Company to satisfy the foregoing
requirements and comply with the foregoing restrictions will depend upon
prevailing economic conditions and other factors, including factors beyond the
control of the Company, such as interest rates. A failure by the Company to
comply with any of these or other requirements or restrictions could lead to a
default under the terms of the Credit Agreement or the Indenture and give the
lenders under the Credit Agreement or the holders of the Notes the right to
declare all of the funds borrowed pursuant thereto to be immediately due and
payable together with accrued and unpaid interest. The insecurity (without
further definition) of the lenders or their agent with respect to the
obligations of the Company under the Credit Agreement or with respect to the
collateral for such obligations also may constitute an event of default under
the Credit Agreement and result in an acceleration of the Company's obligations
under the Credit Agreement. Any such default on the Company's indebtedness would
be likely to have a material adverse effect on the Company and on the market
value and marketability of securities issued by the Company, including the
Notes. At February 1, 1998, the Company was in compliance with all applicable
covenants then contained in the Credit Agreement and the Indenture. See
"Description of Certain Indebtedness -- Credit Agreement."
LIMITED ASSETS AND LIQUIDITY OF HOLDINGS
Holdings has guaranteed the payment of amounts due under the Notes.
Holdings has no material operations of its own, and its only significant asset
is the common stock of the Company which has been pledged on a first priority
basis to secure the obligations of the Company under the Credit Agreement.
Holdings currently has no source of cash other than dividends and certain other
payments from the Company. Accordingly, if Holdings were called upon to honor
the Guarantee, it is unlikely that it would have funds available for such
purpose.
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COMPETITION
Pamida operates in a highly competitive environment, competing with
supermarkets, drug and specialty stores, mail-order and catalog merchants and,
in some communities, department stores and other general merchandise retailers.
Competitors consist both of independent stores and of regional and national
chains, some of which have substantially greater resources than Pamida. The type
and degree of competition and the number of competitors which Pamida's stores
face vary significantly by market. Of Pamida's 148 stores operating at February
1, 1998, 33 stores encountered direct local competition from other major general
merchandise retailers such as Wal-Mart, Kmart, Alco, ShopKo and Target. When
such competitors enter a community where Pamida operates, there typically is an
immediate adverse impact on the sales and profitability of the Pamida store in
that community, and such adverse impact may continue indefinitely. In such
cases, sales decline as some customers of the Company's store shift some or all
of their purchases to the competitor's store; and profitability declines because
of the reduced sales volume in the Company's store, lower gross margins
resulting from the need for competitive price adjustments, and the Company's
inability to reduce its store operating expenses in direct proportion to the
decline in store sales. Because of the adverse impact of new competition in a
community in which a Pamida store is located, in recent years the Company's
business strategy has been to focus its store expansion program on communities
with less likelihood of the entry of a new major competitor. However, there can
be no assurance that in the future major competitors will not open additional
stores in the Company's markets. See "The Company and Holdings."
EXPANSION PROGRAM
Pamida currently plans to continue its program of new store openings during
the next several years. Because Pamida intends to continue leasing most of its
stores, any delays or other difficulties in the negotiation of satisfactory
store leases or the inability on the part of prospective landlords to obtain
financing for new store buildings may delay or interfere with such new store
openings. In addition, there is no assurance that the sites which Pamida
identifies for new store locations actually will be available to the Company;
and various zoning, site acquisition, environmental, traffic, construction and
other contingencies also may delay or prevent the opening of a new store in a
particular location. There can be no assurance that any new stores which Pamida
may open will be profitable. Certain of the restrictive covenants in the Credit
Agreement or in the Indenture relating to the Notes, such as those which
restrict the ability of the Company to incur indebtedness, encumber its property
or makecapital expenditures or which impose certain restrictions on or otherwise
limit the Company's ability to engage in sale-leaseback transactions, may
prevent the Company from pursuing its store expansion program at the rate that
the Company desires.
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RELATIONSHIP WITH SUPPLIERS
Like most retailers, the Company depends upon the regular extension of
credit from its suppliers to finance the acquisition of a portion of its
inventory. The Company believes that the credit lines presently provided by its
suppliers, together with its working capital credit facilities, will be adequate
to finance its inventory purchases for the foreseeable future; but, because of
the Company's financial position and because of conditions in the retail
industry generally, there can be no assurance that this will continue to be the
case.
ABSENCE OF PUBLIC MARKET
There currently is no established trading market for the Notes. Pamida has
been advised by CSI that CSI presently intends to make a market in the Notes.
However, CSI is not obligated to do so, and any market-making activities with
respect to the Notes may be discontinued at any time without notice. There can
be no assurance that an active market for the Notes will exist at any particular
time. If the Notes are traded, they may be traded at a discount from their face
amount or the price paid for such Notes, depending upon prevailing interest
rates, the market for similar securities and other factors. Pamida does not
intend to list the Notes for trading on any securities exchange or on any
automated dealer quotation system. No assurance can be given that a holder of
Notes will be able to sell the Notes in the future or that such sale will be at
a price equal to or higher than the price paid for such Notes. The level of
activity in any market for the Notes will depend upon the number of holders of
Notes, the continuing interest of securities dealers in making a market in the
Notes and other factors. The absence of an active market for the Notes would
adversely affect the liquidity of the Notes.
THE COMPANY AND HOLDINGS
On January 19, 1996, the Company announced its intention to close 40 stores
located in unprofitable or highly competitive markets. Store closing sales began
on January 29, 1996, and the Company completed all of such store closings during
the second quarter of the fiscal year ended February 2, 1997.
At February 1, 1998, Pamida operated 148 general merchandise retail stores
located in 148 small towns (having an average population of approximately
5,500)in 15 Midwestern, North Central and Rocky Mountain states. Pamida's
strategic objective is to be the dominant general merchandise retailer in the
communities it serves. Excluding the Closed Stores, the Company believes that it
holds the leading market position in over 77% of the communities in which its
stores are located.
Pamida stores generally are located in small towns, normally county seats,
where there often is little or no competition from
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another major general merchandise retailer and which the Company considers to be
either too small to support more than one major general merchandise retailer
(thereby creating a potential barrier to entry by a major competitor) or too
small to attract competitors whose stores generally are designed to serve larger
populations. At February 1, 1998, 115 of the Company's 148 stores faced no
direct local competition from other major general merchandise retailers.
The Company's stores average approximately 30,000 square feet of sales area
and range in size from approximately 6,000 to 51,000 square feet of sales area.
At February 1, 1998, Pamida's stores had an aggregate sales area of
approximately 4,408,000 square feet.
The Company was incorporated in Delaware in 1980. In January 1981 the
Company, which then was owned by an employee stock ownership plan (the "ESOP"),
acquired substantially all of the assets and assumed substantially all of the
liabilities of a Nebraska corporation which previously had carried on the
general merchandise retail business of Pamida described above. The Company's
predecessor had been engaged in such business since 1963, and its stock was
publicly owned and listed on the New York Stock Exchange at the time of the 1981
sale to the Company.
In July 1986 Holdings acquired the stock of the Company from the ESOP, and
the Company became a wholly owned subsidiary of Holdings. The only significant
asset of Holdings is the common stock of the Company, and Holdings conducts no
operations separate from those of the Company. An initial public offering of
shares of Common Stock of Holdings occurred in September 1990, and the Common
Stock of Holdings has been listed on the American Stock Exchange and publicly
traded since then.
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RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratios of earnings to fixed charges for
the Company and Holdings:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FISCAL YEARS ENDED
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January 30, January 29, January 28, February 2, February 1,
1994 1995 1996 1997 1998
----------- ----------- ------------ ----------- -----------
PAMIDA, INC.:
Ratio of earnings 1.05:1 1.34:1 -- 1.12:1 1.23:1
to fixed charges
Excess of fixed -- -- $ 98,939,000 -- --
charges over
earnings
PAMIDA HOLDINGS
CORPORATION AND
SUBSIDIARY:
Ratio of earnings -- 1.18:1 -- -- 1.07:1
to fixed charges
Excess of fixed $ 2,114,000 -- $103,393,000 $ 1,350,000 --
charges over
earnings
</TABLE>
USE OF PROCEEDS
This prospectus is being used by Citicorp Securities, Inc. in connection
with offers and sales of the Notes in market-making transactions in the
secondary trading market. Sales of Notes being offered by this market-making
prospectus will not result in any proceeds to the Company or to Holdings.
DESCRIPTION OF NOTES
The Notes were issued under an indenture dated as of March 15, 1993 (the
"Indenture") among the Company, Holdings as guarantor and State Street Bank and
Trust Company as trustee (the "Trustee"). A copy of the form of the Indenture
has been filed as an exhibit to the Registration Statement of which this
Prospectus is a part. The following summary of certain provisions of the
Indenture does not purport to be a complete statement of such provisions and is
subject to, and is qualified in its entirety by reference to, the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"), and to all of the
provisions of the Indenture, including the definitions of certain terms therein
and those terms made a part of the Indenture by reference to the Trust Indenture
Act, as in effect on the date of the Indenture. While this summary does not
discuss all of the provisions of the Indenture, the Company believes that the
summary does contain information with respect to those provisions of the
Indenture which a prospective purchaser of Notes might
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reasonably consider to be material to an investment decision with respect to the
Notes. The definitions of certain capitalized terms used in the following
summary are set forth below under "Certain Definitions."
GENERAL
The Notes were issued only in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. The Notes may be
presented for transfer at the office of an affiliate of the Trustee in the City
of New York maintained for such purposes at 61 Broadway, New York, New York.
Interest may be paid by wire transfer or check mailed to the person entitled
thereto as shown on the register for the Notes. No service charge will be made
for any registration of transfer or exchange of the Notes, except for any tax or
other governmental charge that may be imposed in connection therewith.
MATURITY, INTEREST AND PRINCIPAL
The Notes are general unsecured obligations of the Company, limited to
$140,000,000 aggregate principal amount, and will mature on March 15, 2003.
Interest on the Notes accrues at the rate of 11 3/4% per annum and is payable
semi-annually on each March 15 and September 15, commencing September 15, 1993,
to the holders of record of Notes at the close of business on March 1 and
September 1 immediately preceding such interest payment date. Interest on the
Notes accrues from the most recent date to which interest has been paid or, if
no interest has been paid, from the original date of issuance (the "Issue
Date"). Interest is computed on the basis of a 360-day year comprised of twelve
30-day months. Interest on overdue principal and (to the extent permitted by
law) on overdue installments of interest accrues at the rate of 11 3/4%
per annum.
REDEMPTION
OPTIONAL REDEMPTION. The Notes are redeemable, in whole or in part, at the
option of the Company, at any time on or after March 15, 1998 at the redemption
prices (expressed as percentages of principal amount) set forth below plus
accrued and unpaid interest to the date of redemption, if redeemed during the
12-month period beginning on March 15 of the years indicated below:
Year Percentage
---- ----------
1998 . . . . . . . . . . . . . . . . . . . 105.875%
1999 . . . . . . . . . . . . . . . . . . . 103.917%
2000 . . . . . . . . . . . . . . . . . . . 101.958%
2001 and thereafter. . . . . . . . . . . . 100.000%
SELECTION AND NOTICE. In the event that less than all of the Notes are to
be redeemed at any time, selection of Notes for
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redemption will be made by the Trustee in compliance with the requirements of
the principal national securities exchange, if any, on which the Notes are
listed or, if the Notes are not listed on a national securities exchange, on a
pro rata basis, by lot or by such method as the Trustee shall deem fair and
appropriate, provided, however, that no Note of $1,000 or less shall be redeemed
in part. Notice of redemption shall be mailed by first-class mail at least 30
days but not more than 60 days before the date of redemption to each holder of
Notes to be redeemed at its registered address. If any Note is to be redeemed in
part only, the notice of redemption that relates to such Note shall state the
portion of the principal amount thereof to be redeemed. A new Note in a
principal amount equal to the unredeemed portion thereof will be issued in the
name of the holder thereof upon cancellation of the original Note. On and after
the date of redemption, interest will cease to accrue on Notes or portions
thereof called for redemption.
CHANGE OF CONTROL
In the event of a Change of Control (the date of such occurrence, the "Change of
Control Date"), the Company shall notify the holders of Notes in writing of such
occurrence and shall make an offer to purchase (the "Change of Control Offer")
on a business day (the "Change of Control Payment Date") not later than 60 days
following the Change of Control Date, all Notes then outstanding at a purchase
price equal to 101% of the principal amount thereof plus accrued and unpaid
interest, if any, to the Change of Control Payment Date.
Notice of a Change of Control Offer shall be mailed by the Company to the
holders of Notes not less than 30 days nor more than 45 days before the Change
of Control Payment Date. The Change of Control Offer is required to remain open
for at least 20 business days and until the close of business on the business
day next preceding the Change of Control Payment Date.
The Company must comply with any tender offer rules under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), which may then be
applicable, including but not limited to Rule 14e-1, in connection with any
Change of Control Offer required to be made by the Company as a result of a
Change of Control.
GUARANTEE AND PLEDGE AGREEMENT
The Notes are unconditionally guaranteed on a senior subordinated basis by
Holdings. The obligations of Holdings under its Guarantee of the Notes is
subordinated in right of payment to all existing and future Senior Indebtedness
of Holdings (which is limited to the obligations of Holdings in respect of the
Credit Agreement). See "Subordination" below.
The obligations of Holdings under its Guarantee of the Notes is secured by
a pledge of all the Common Stock of the Company.
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Such stock is also pledged to secure the obligations of Holdings under its
guarantee of the Credit Agreement. The security interest securing the guarantee
by Holdings of the Credit Agreement ranks prior to that securing Holdings'
Guarantee of the Notes.
The Indenture provides that Holdings may permit other Indebtedness to be
secured by a Lien on the shares of Common Stock of the Company so long as such
Lien ranks pari passu with or is subordinate in right of payment to the Lien
securing the obligations of Holdings pursuant to its Guarantee of the Notes.
Amendments to the Pledge Agreement necessary to permit the incurrence of such
additional Indebtedness secured by the pledged stock and to add additional
secured parties thereto may be made without the consent of the Trustee, provided
that the Indebtedness owing to such secured party and the Liens securing such
Indebtedness are permitted under the Indenture.
Upon repayment of all Indebtedness under the Credit Agreement and any other
Indebtedness then secured by the collateral under the Pledge Agreement, the
Pledge Agreement may be terminated and the collateral thereunder released upon
demand by Holdings. No such release of collateral under the Pledge Agreement
will constitute a default under the Indenture. Subsequent to any such
termination of the Pledge Agreement and release of collateral thereunder,
Holdings shall not create, incur or suffer to exist any lien of any kind upon
the Common Stock of the Company unless the Notes are equally and ratably secured
by such lien.
SUBORDINATION
The indebtedness of the Company evidenced by the Notes is subordinated in
right of payment to all Senior Indebtedness of the Company. Only obligations of
the Company under the Credit Agreement can constitute Senior Indebtedness with
respect to the Notes. As of February 1, 1998, approximately $45.2 million of
Senior Indebtedness (excluding letters of credit) was outstanding. The maximum
principal amount of Senior Indebtedness is limited to the amount of Indebtedness
permitted to be incurred under the Credit Agreement pursuant to clause (b) of
"Limitation on Additional Indebtedness" discussed under "Certain Covenants"
below.
The Indenture provides that no payment or distribution of cash, property or
securities of the Company (or of Holdings pursuant to the Guarantee) will be
made on account of principal of, premium, if any, or interest on the Notes, or
to defease or acquire any of the Notes, or on account of the redemption
provisions of the Notes (a) upon the maturity of any Senior Indebtedness by
lapse of time, acceleration or otherwise, unless and until all Senior
Indebtedness shall first be paid in full in cash or cash equivalents, or
provisions for such payments have been duly made in a manner satisfactory to the
holders of such Senior Indebtedness or (b) upon the default in the payment
of any
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principal of, premium, if any, or interest on or other amounts payable on or in
connection with any obligations in respect of any Senior Indebtedness when such
amounts become due and payable, whether at maturity or at a date fixed for
prepayment or by declaration or otherwise, unless and until such default has
been cured or waived or has ceased to exist.
Upon the happening of an event of default (or if an event of default would
result upon any payment with respect to the Notes) with respect to any Senior
Indebtedness pursuant to which the maturity thereof may be accelerated (if the
event of default relates to a default other than a default in the payment of
principal of, premium, if any, or interest on or other amounts due in connection
with such Senior Indebtedness) and upon receipt by the Trustee and the Company
of written notice from the Senior Representative of such Senior Indebtedness,
then, unless and until such event of default has been cured or waived or has
ceased to exist or the benefit of this sentence has been waived, no payment or
distribution will be made by or on behalf of the Company on account of or with
respect to the Notes; provided, that nothing in the above-described provision
will prevent the making of any payment for a period of more than 179 days after
the date written notice of the event of default is received by the Trustee or
the Company (the "Payment Blockage Period"). Not more than one Payment Blockage
Period may be commenced with respect to the Notes during any period of 365
consecutive days. In no event will a Payment Blockage Period extend beyond 179
days from the date of the receipt of the notice initiating such Payment Blockage
Period, and there must be a 180-consecutive-day period in any
365-consecutive-day period during which no Payment Blockage Period is in effect.
No default or event of default that existed or was continuing on the date of
commencement of any Payment Blockage Period with respect to the Senior
Indebtedness initiating such Payment Blockage Period may be, or be made, the
basis for the commencement of a subsequent Payment Blockage Period by the Senior
Representative for or the holders of such Senior Indebtedness, whether or not
within a period of 365 consecutive days, unless such default or event of default
has been cured or waived for a period of not less than 90 consecutive days.
Upon any payment or distribution of assets or securities of the Company (or
of Holdings pursuant to the Guarantee) of any kind or character, whether in
cash, property or securities, upon any dissolution or winding-up or total or
partial liquidation or reorganization of the Company or Holdings, as the case
may be, whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings, all amounts due or to become due with respect
to all obligations in respect of Senior Indebtedness shall first be paid in full
in cash or Cash Equivalents before the Holders of the Notes or the Trustee on
behalf of such Holders shall be entitled to receive any payment by the Company
(or by Holdings pursuant to the Guarantee) of the principal of, premium, if any,
or interest on the Notes, or any payment to acquire any of the Notes for cash,
property or
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securities, or any distribution with respect to the Notes of any cash, property
or securities. Before any payment may be made by or on behalf of the Company (or
by Holdings pursuant to the Guarantee) of the principal of, premium, if any, or
interest on the Notes upon any such dissolution or winding-up or liquidation or
reorganization, any payment or distribution of assets or securities of the
Company (or of Holdings pursuant to the Guarantee) of any kind or character,
whether in cash, property or securities, to which the Holders of the Notes or
the Trustee on their behalf would be entitled, but for the subordination
provisions of the Indenture, shall be made by the Company (or by Holdings
pursuant to the Guarantee) or by any receiver, trustee in bankruptcy,
liquidating trustee, agent or other Person making such payment or distribution
directly to the holders of the Senior Indebtedness (pro rata to such holders on
the basis of the respective amounts of Senior Indebtedness held by such holders)
or their representatives or to the trustee or trustees under any indenture
pursuant to which any of such Senior Indebtedness may have been issued, as their
respective interests may appear, to the extent necessary to pay all such Senior
Indebtedness in full in cash or Cash Equivalents after giving effect to any
concurrent payment, distribution or provision therefor to or for the holders of
such Senior Indebtedness. Nothing in the Indenture or in the Notes, however,
affects the unconditional absolute obligations of the Company (or of Holdings
pursuant to the Guarantee) to pay the principal of and interest on the Notes as
and when they become due and payable in accordance with their terms.
The failure to make any payment or distribution for or on account of the
Notes by reason of the provisions of the Indenture described under this
"Subordination" section will not be construed as preventing the occurrence of an
Event of Default described in clause (i) or (ii) of the first paragraph under
"Events of Default" below.
By reason of the subordination provisions described above, in certain
events funds which would otherwise be payable to holders of the Notes will be
paid to the holders of Senior Indebtedness to the extent necessary to pay the
Senior Indebtedness in full, and the Company and Holdings may be unable to fully
meet their obligations with respect to the Notes and the Guarantee,
respectively.
CERTAIN COVENANTS
Set forth below are certain covenants which are contained in the Indenture.
While the covenants which are discussed below do not include all of the
covenants contained in the Indenture, the Company believes that the covenants
which are discussed include those covenants which a prospective purchaser of
Notes might reasonably consider to be material to an investment decision with
respect to the Notes.
LIMITATION ON ADDITIONAL INDEBTEDNESS. The Indenture provides that the
Company shall not, and shall not permit any of
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its Subsidiaries to, create, incur, assume or issue, directly or indirectly, or
guarantee or in any manner become, directly or indirectly, liable for or with
respect to the payment of any Indebtedness (including Acquired Indebtedness)
except for:
(a) Indebtedness under the Notes and the Indenture;
(b) Indebtedness (including letters of credit) outstanding from time
to time pursuant to the Credit Agreement in an amount not to
exceed the aggregate of 90% of the net book value of the accounts
receivable and 60% of the net book value of the inventory
(on a FIFO basis) of the Company and its Subsidiaries, in each
case calculated on a consolidated basis in accordance with GAAP;
(c) Indebtedness not otherwise referred to in this covenant
outstanding on the Issue Date (including standby letters of
credit existing on the Issue Date);
(d) Indebtedness if, immediately after giving pro forma effect to the
incurrence thereof, the Fixed Charge Coverage Ratio of the
Company would be greater than or equal to 2.25:1 on or prior to
March 15, 1995 and 2.50:1 thereafter;
(e) Indebtedness in respect of Interest Rate Protection Obligations
incurred in the ordinary course of business;
(f) Indebtedness or Disqualified Stock of a Wholly-Owned Subsidiary
issued to and held by the Company or a Wholly-Owned Subsidiary or
Indebtedness of the Company to a Wholly-Owned Subsidiary in
respect of intercompany advances or transactions;
(g) Indebtedness in connection with or arising out of Capitalized
Lease Obligations or Purchase Money Indebtedness incurred after
the Issue Date with respect to the acquisition or construction of
assets by the Company after the Issue Date in the ordinary course
of the Company's business;
(h) contingent liabilities for (i) guarantees resulting from
endorsement of negotiable instruments for collection in the
ordinary course of business and (ii) guarantees by the Company of
obligations or liabilities of its Subsidiaries permitted under
the Indenture;
(i) other Indebtedness that does not exceed $10,000,000 in the
aggregate at any one time outstanding; and
(j) any deferrals, renewals, extensions, replacements, refinancings
or refundings of, amendments, modifications or supplements to,
Indebtedness incurred under clauses (c) and (d) above, whether
involving the same or any other lender or creditor or group of
lenders or creditors; provided, that any such deferrals,
renewals, extensions, replacements, refinancings, refundings,
amendments, modifications or supplements (i) shall not provide
for any mandatory redemption, amortization or sinking
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fund requirement in an amount greater than or at a time prior to
the amounts and times specified in the Indebtedness being
deferred, renewed, extended, replaced, refinanced, refunded,
amended, modified or supplemented, (ii) shall not exceed the
principal amount (plus accrued interest and prepayment premium,
if any) of the Indebtedness being deferred, renewed, extended,
replaced, refinanced, refunded, amended, modified or
supplemented; and (iii) shall be subordinated to the Notes at
least to the extent and in the manner, if at all, that the
Indebtedness being deferred, renewed, extended, replaced,
refinanced, refunded, amended, modified or supplemented is
subordinated to the Notes.
LIMITATION ON INVESTMENTS, LOANS AND ADVANCES. The Indenture provides that
the Company shall not make and shall not permit any of its Subsidiaries to make
any capital contributions, advances or loans to (including any guarantees of
loans to), or investments in or purchases of Capital Stock in, any Person
(collectively, "Investments"), except: (i) Investments by the Company in any
Wholly-Owned Subsidiary and Investments or loans in or to the Company or a
Wholly-Owned Subsidiary by any Subsidiary (provided, that such Investments in
any Wholly-Owned Subsidiary shall not exceed, individually or in the aggregate,
10% of the total assets of the Company and its Subsidiaries determined on a
consolidated basis at the time such Investment is made); (ii) Investments
represented by accounts receivable created or acquired in the ordinary course of
business; (iii) advances to employees in the ordinary course of business not to
exceed an aggregate of $250,000 outstanding at any one time; (iv) Investments
under or pursuant to Interest Rate Protection Obligations; (v) Investments in
promissory notes in an aggregate principal amount not to exceed $2,000,000 at
any one time outstanding representing portions of the purchase prices of
property sold or transferred by the Company or its Subsidiaries in connection
with sale and lease-back transactions permitted by the Indenture or other asset
sales permitted by the Indenture; (vi) Cash Equivalents; (vii) other Investments
not to exceed $2,000,000 outstanding at any one time; and (viii) Investments
permitted to be made under the "Limitation on Restricted Payments" covenant
described below.
LIMITATION ON RESTRICTED PAYMENTS. The Indenture provides that the Company
shall not make, and shall not permit any of its Subsidiaries to, directly or
indirectly, make, any Restricted Payment, unless:
(a) no Default or Event of Default shall have occurred and be
continuing at the time of or after giving effect to such
Restricted Payment;
(b) at the time of and after giving effect to such Restricted
Payment, the Company could incur at least $1 of Indebtedness
pursuant to clause (d) of the "Limitation on Additional
Indebtedness" covenant; and
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(c) immediately after giving effect to such Restricted Payments,
the aggregate of all Restricted Payments declared or made
after January 31, 1993 through and including the date of
such Restricted Payment (the "Base Period") does not exceed the
sum of (i) 50% of the Company's Consolidated Net Income (or in
the event such Consolidated Net Income shall be a deficit, minus
100% of such deficit) during the Base Period, and (ii) 100% of
the aggregate Net Proceeds and the Fair Market Value of
marketable securities and property received by the Company from
the issue or sale, after January 31, 1993, of Capital Stock(other
than Disqualified Stock) of the Company or of any Indebtedness or
other securities of the Company convertible into or exercisable
or exchangeable for Capital Stock (other than Disqualified Stock)
of the Company which has been so converted, exercised or
exchanged, as the case may be. For purposes of determining under
this clause (c) the amount expended for Restricted Payments, cash
distributed shall be valued at the face amount thereof and
property other than cash shall be valued at its Fair Market
Value.
The provisions of this covenant do not prohibit (i) the payment of any
dividend within 60 days after the date of declaration thereof, if at such date
of declaration such payment would comply with the provisions of the Indenture;
(ii) the retirement of any shares of Capital Stock or subordinated Indebtedness
of the Company in exchange for, by conversion into, or out of the Net Proceeds
of the substantially concurrent sale (other than to a Subsidiary of the Company)
of other shares of Capital Stock of the Company (other than Disqualified Stock);
(iii) the redemption or retirement of subordinated Indebtedness of the Company
in exchange for, by conversion into, or out of the Net Proceeds of the
substantially concurrent incurrence of subordinated Indebtedness of the Company
(other than any such subordinated Indebtedness owing to a Subsidiary of the
Company) that is contractually subordinated in right of payment to the Notes and
that is permitted to be incurred in accordance with the covenant described under
"Limitation on Additional Indebtedness" above; (iv) Restricted Payments to
Holdings after the third anniversary of the Issue Date in an amount necessary to
meet the cash requirements of Holdings to pay scheduled interest and principal
payments on the Promissory Notes at the time such interest and principal becomes
due and payable; provided that the Fixed Charge Coverage Ratio of the Company
and Holdings on a consolidated basis is greater than 2.0:1 at the time of and
after giving pro forma effect to such Restricted Payment (as if such Restricted
Payment were interest paid by the Company); (v) Restricted Payments to Holdings
in an amount not to exceed $316,000 per year to meet the cash requirements of
Holdings to pay scheduled dividend payments on the Holdings Preferred Stock at
the time such dividend payments become due and payable; (vi) advances or
dividends by the Company to Holdings to enable Holdings to pay administrative
and operating expenses in an amount not to exceed $100,000 in any one fiscal
year; and (vii) payments by the Company and its Subsidiaries in respect of their
obligations pursuant to any tax-sharing agreement among the
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Company, any Subsidiary of the Company and Holdings; provided that such payments
by the Company and its Subsidiaries do not exceed the amounts which would be
payable by the Company and its Subsidiaries assuming the Company and its
Subsidiaries paid the taxes subject to such tax-sharing agreement on a
stand-alone basis. Notwithstanding the foregoing, if an Event of Default shall
have occurred and be continuing, a Restricted Payment pursuant to clauses (iv),
(v) and (vi) above shall not be permitted. The Promissory Notes have been paid
in full with shares of Common Stock of Holdings, and the Holdings Preferred
Stock has been changed and reclassified into Common Stock of Holdings, in each
case effective November 18, 1997.
In determining the amount of Restricted Payments permissible under
subparagraph (c) above, the amounts expended pursuant to clauses (i), (ii),
(iv), (v) and (vi) above shall be included as Restricted Payments.
LIMITATION ON LIENS. The Indenture provides that the Company shall not, and
shall not permit, cause or suffer any of its Subsidiaries to, create, incur,
assume or suffer to exist any Lien of any kind upon any of its property or
assets now owned or hereafter acquired by it, except for:
(a) Liens existing as of the Issue Date;
(b) Permitted Liens;
(c) Liens on the assets or property of a Subsidiary of the Company
existing at the time such Subsidiary became a Subsidiary of the
Company and not incurred as a result of (or in connection with or
in anticipation of) such Subsidiary's becoming a Subsidiary of
the Company; provided that such Liens do not extend to or cover
any property or assets of the Company or any of its Subsidiaries
(other than the property or assets of the Subsidiary so
acquired);
(d) Liens securing obligations of the Company and its Subsidiaries in
respect of the Credit Agreement;
(e) any Lien securing Capitalized Lease Obligations and Purchase
Money Indebtedness, provided that such Capitalized Lease
Obligations and Purchase Money Indebtedness are incurred in
compliance with the "Limitations on Additional Indebtedness"
covenant and provided that such Liens do not extend to or cover
any property or assets of the Company or any of its Subsidiaries
other than the property or assets subject to such Capitalized
Lease Obligations and Purchase Money Indebtedness;
(f) leases and subleases of real property which do not interfere with
the ordinary conduct of the business of the Company or any of its
Subsidiaries and which are made on customary and usual terms
applicable to similar properties;
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(g) Liens securing Indebtedness which is incurred to refinance or
replace Indebtedness which has been secured by a Lien permitted
under the Indenture and is permitted to be refinanced or replaced
under the Indenture; provided that such Liens do not extend to or
cover any property or assets of the Company or any of its
Subsidiaries not securing the Indebtedness so refinanced or
replaced, except to the extent permitted under (d) above;
(h) Liens securing reimbursement obligations under letters of credit
but only in or upon the goods, the purchase of which was financed
by such letters of credit; and
(i) other Liens securing obligations which may be discharged by the
payment in the aggregate at any one time of not more than
$15,000,000.
LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING
SUBSIDIARIES. The Indenture provides that the Company shall not, and shall not
permit any Subsidiary of the Company to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective, or enter into any
agreement with any Person that would cause or create any consensual encumbrance
or restriction of any kind on the ability of any Subsidiary of the Company to
(a) pay dividends, in cash or otherwise, or make any other distributions on its
Capital Stock or any other interest or participation in, or measured by, its
profits owned by the Company or a Subsidiary of the Company, (b) make any loans
or advances to, or pay any Indebtedness owed to, the Company or any Subsidiary
of the Company or (c) transfer any of its properties or assets to the Company or
to any Subsidiary of the Company, except, in each case, for such encumbrances or
restrictions existing under or contemplated by or by reason of (i) the Notes or
the Indenture, (ii) any restrictions existing under or contemplated by
agreements in effect on the Issue Date, including, without limitation,
restrictions under the Credit Agreement, (iii) any restrictions, with respect to
a Subsidiary of the Company that is not a Subsidiary of the Company on the Issue
Date, in existence at the time such Person becomes a Subsidiary of the Company
(but not created in contemplation of such Person becoming a Subsidiary) and (iv)
any restrictions existing under any agreement that refinances or replaces an
agreement containing a restriction permitted by clause (i), (ii) or (iii) above,
provided that the terms and conditions of any such restrictions are not
materially less favorable in the aggregate to the holders of the Notes than
those under or pursuant to the agreement being replaced or the agreement
evidencing the Indebtedness being refinanced or replaced.
LIMITATION ON SALE-LEASEBACK TRANSACTIONS. The Indenture provides that the
Company shall not, and shall not permit any of its Subsidiaries to, enter into
any Sale-Leaseback Transaction unless either (i) after giving effect to such
Sale-Leaseback Transaction, the aggregate sale prices with respect to the
property subject to all Sale-Leaseback Transactions consummated
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by the Company and its Subsidiaries after the Issue Date will not exceed
$10,000,000 or (ii) the Indebtedness in the form of Capitalized Lease
Obligations resulting from such Sale-Leaseback Transaction is then permitted to
be incurred pursuant to clause (i) of the covenant described under "Limitations
on Additional Indebtedness" above. Notwithstanding the foregoing, the Company
and its Subsidiaries may enter into Sale-Leaseback Transactions if (i) after
giving pro forma effect to any such Sale-Leaseback Transaction, the Company
shall be in compliance with paragraph (d) of the covenant described under
"Limitation on Additional Indebtedness" above, (ii) the sale price in such
Sale-Leaseback Transaction is at least equal to the Fair Market Value of such
property, and (iii) the Company or such Subsidiary shall apply the Net Cash
Proceeds of the sale as provided under "Disposition of Proceeds of Asset Sales"
below, to the extent required by such provision.
DISPOSITION OF PROCEEDS OF ASSET SALES. The Indenture provides that the
Company shall not, and shall not permit any of its Subsidiaries to, make any
Asset Sale unless (a) such Asset Sale is for Fair Market Value, (b) the net
proceeds therefrom consist of at least 85% cash or Cash Equivalents and (c) the
Company shall commit to apply or to cause its Subsidiaries to apply the Net Cash
Proceeds of such Asset Sale within 270 days of receipt thereof, and shall apply
such Net Cash Proceeds within 360 days of receipt thereof, as follows:
(i) first, to satisfy all mandatory repayment obligations under the
Credit Agreement;
(ii) second, out of any Net Cash Proceeds remaining after application
of Net Cash Proceeds pursuant to the preceding paragraph (i) (the
"Available Amount"), the Company shall make an offer to purchase
(the "Asset Sale Offer") from all Holders of Notes, up to a
maximum principal amount (expressed as a multiple of $1,000) of
Notes equal to the Available Amount, at a purchase price equal to
100% of the principal amount thereof plus accrued and unpaid
interest thereon, if any, to the date of purchase; provided, that
the Company will not be required to apply pursuant to this
paragraph (ii) Net Cash Proceeds received from any Asset Sale
if, and only to the extent that, such Net Cash Proceeds are
committed in writing to be applied to acquire or construct
property or assets in lines of business related to the Company's
and its Subsidiaries' businesses within 270 days after the
consummation of such Asset Sale and are so applied within 360
days after the consummation of such Asset Sale, and, provided
further, that the Company may defer the Asset Sale Offer until
there is an aggregate unutilized Available Amount equal to or in
excess of $5,000,000 resulting from one or more Asset Sales
consummated in any consecutive four fiscal quarters (at which
time the entire unutilized Available Amount from the immediately
preceding four fiscal quarters, and not just the amount in excess
of $5,000,000, shall be applied as required pursuant to this
paragraph). The Asset Sale Offer shall remain open for a period
of 20 business days or such longer period as may be required
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by law. To the extent the Asset Sale Offer is not fully
subscribed to by the holders of the Notes, the Company may
retain any unutilized portion of the Net Cash Proceeds.
Whenever Net Cash Proceeds in excess of $5,000,000 resulting from one or
more Asset Sales consummated in any consecutive four fiscal quarters are
received by the Company and not applied to acquire or construct property or
assets in lines of business related to the Company's and its Subsidiaries'
businesses, as provided in the preceding paragraph, and such Net Cash Proceeds
may, through the passage of time or otherwise, be required to be applied to the
purchase of Notes pursuant to this covenant, the Company shall invest such Net
Cash Proceeds in Cash Equivalents. The Company or its relevant Subsidiary, as
applicable, shall be entitled to any interest or dividends accrued, earned or
paid on such Cash Equivalents.
OWNERSHIP OF STOCK OF WHOLLY-OWNED SUBSIDIARIES. The Indenture provides
that the Company shall at all times maintain, or cause each Material Subsidiary
to maintain, ownership of 100% of each class of voting securities and all other
equity securities of each Material Subsidiary existing on the Issue Date, except
for any Material Subsidiary that shall be disposed of in its entirety or
consolidated or merged with or into the Company or another Subsidiary, in each
case in accordance with the provisions described below under "Consolidation,
Merger, Conveyance, Transfer or Lease" and above under "Disposition of Proceeds
of Asset Sales."
LIMITATION ON TRANSACTIONS WITH AFFILIATES. The Indenture provides that the
Company shall not, and the Company shall not permit, cause, or suffer any
Subsidiary of the Company to, conduct any business or enter into any transaction
or series of transactions with or for the benefit of any Affiliate of the
Company or any of its Subsidiaries or any holder of 5% or more of any class of
Capital Stock of the Company (each an "Affiliate Transaction"), except in good
faith and on terms that are, in the aggregate, no less favorable to the Company
or such Subsidiary, as the case may be, than those that could have been obtained
in a comparable transaction on an arm's-length basis from a Person not an
Affiliate of the Company or such Subsidiary. All Affiliate Transactions (and
each series of related Affiliate Transactions which are similar or part of a
common plan) involving aggregate payments or other market value in excess of
$500,000 shall be approved by the Board of Directors of the Company, such
approval to be evidenced by a Board Resolution stating that such Board of
Directors has, in good faith, determined that such transaction complies with the
foregoing provisions. Notwithstanding the foregoing, the restrictions set forth
in this covenant shall not apply to customary directors' fees, consulting fees,
indemnification and similar arrangements and employee salaries and bonuses and
to transactions between the Company and any of its Wholly-Owned Subsidiaries or
among Wholly-Owned Subsidiaries of the Company.
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CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
The Company shall not consolidate with or merge with or into or sell,
assign, convey, lease or transfer all or substantially all of its properties and
assets as an entirety to any Person or group of affiliated Persons in a single
transaction or through a series of transactions, unless after giving effect
thereto: (a) the Company shall be the continuing Person, or the resulting,
surviving or transferee Person (the "surviving entity") shall be a corporation
organized and existing under the laws of the United States or any State thereof
or the District of Columbia; (b) the surviving entity shall expressly assume, by
a supplemental indenture executed and delivered to the Trustee in form and
substance reasonably satisfactory to the Trustee, all of the obligations of the
Company under the Notes and the Indenture; (c) immediately before and
immediately after giving effect to such transaction or series of transactions
(including, without limitation, any Indebtedness incurred or anticipated to be
incurred in connection with or in respect of such transaction or series of
transactions), no Default or Event of Default shall have occurred and be
continuing; (d) the Company or the surviving entity shall, immediately before
and immediately after giving effect to such transaction or series of
transactions, have a Consolidated Net Worth (including, without limitation, any
Indebtedness incurred or anticipated to be incurred in connection with or in
respect of such transaction or series of transactions) equal to or greater than
the Consolidated Net Worth of the Company immediately prior to such transaction
or series of transactions; (e) immediately after giving effect to such
transaction or series of transactions, the Company or the surviving entity could
incur $1 of Indebtedness pursuant to clause (d) of the "Limitation on Additional
Indebtedness" covenant above; (f) Holdings by supplemental indenture shall have
confirmed that its Guarantee and its obligations under the Pledge Agreement
shall apply to such surviving entity's obligations under the Indenture and the
Notes; (g) all of the Capital Stock of the Company or such surviving entity
shall be pledged to the same extent as provided in the Indenture and Pledge
Agreement; (h) the Company or the surviving entity shall have delivered to the
Trustee an Officer's Certificate stating that such consolidation, merger,
conveyance, transfer or lease and, if a supplemental indenture is required in
connection with such transaction or series of transactions, such supplemental
indenture complies with this covenant and that all conditions precedent in the
Indenture relating to such transaction or series of transactions have been
satisfied; and (i) neither the Company nor any Subsidiary would thereupon become
obligated with respect to any Indebtedness, nor any of its property become
subject to any Lien, unless the Company or such Subsidiary could incur such
Indebtedness or create such Lien under the Indenture. If the Company is
permitted by the Indenture to consummate a transaction described in this
paragraph, the Indenture does not provide any protection from a decline in
credit quality as a result of such transaction.
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EVENTS OF DEFAULT
The following are Events of Default under the Indenture:
(i) default in the payment of any interest on the Notes when it
becomes due and payable or of the principal of or premium, if
any, on the Notes pursuant to an offer to purchase required under
the Indenture, and the continuance of any such default for a
period of 30 days; or
(ii) default in the payment of the principal of or premium, if any, on
the Notes when due and payable (other than by reason of a default
in payment upon an offer to purchase); or
(iii) the Guarantee ceases to be in full force and effect; or
(iv) default in the performance, or breach, of any covenant in the
Indenture, the Guarantee (other than defaults specified in clause
(i) or (ii) above) or the Pledge Agreement, and the continuance
of such default or breach for a period of 30 days after written
notice thereof has been given to the Company by the Trustee or to
the Company and the Trustee by the holders of at least 25% in
aggregate principal amount of the outstanding Notes; or
(v) failure by the Company, any of its Material Subsidiaries or
Holdings to perform any term, covenant, condition or provision of
one or more classes or issues of other Indebtedness in an
aggregate principal amount of $5,000,000 or more, which failure
results in an acceleration of the maturity thereof; or
(vi) one or more judgments, orders or decrees for the payment of money
in excess of $5,000,000, either individually or in an aggregate
amount, not adequately covered by insurance shall be entered
against the Company, any of its Material Subsidiaries or Holdings
or any of their respective properties and shall not be
discharged, and there shall have been a period of 60 days during
which a stay of enforcement of such judgment or order, by reason
of a pending appeal or otherwise, shall not be in effect;
(vii)certain events of bankruptcy or insolvency with respect to the
Guarantor, the Company or any Material Subsidiary shall have
occurred; or
(viii) the Pledge Agreement shall cease to be in full force and effect
(other than pursuant to the terms thereof) or shall cease to give
the Trustee in any material respect the Liens, rights, powers and
privileges purported to be created thereby (including, without
limitation, the security interest in and Lien on all of the
Collateral (as defined in the Pledge Agreement), to the extent
provided for in the
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Indenture or in the Pledge Agreement) in favor of the Trustee
for the benefit of the Holders subject to no other Liens (except
as permitted by the Pledge Agreement).
If an Event of Default (other than an Event of Default specified in clause
(vii) above with respect to the Company) occurs and is continuing, then the
holders of at least 25% in principal amount of the outstanding Notes may, by
written notice to the Company and the Trustee, and the Trustee upon the request
of the holders of not less than 25% in principal amount of the outstanding Notes
shall declare the principal of, premium, if any, and accrued interest on all the
Notes to be due and payable immediately. Upon any such declaration such
principal, premium, if any, and accrued interest shall become due and payable
immediately. If an Event of Default specified in (vii) occurs with respect to
the Company and is continuing, then the principal of, premium, if any, and
accrued interest on all the Notes shall ipso facto become and be immediately due
and payable without any declaration or other act on the part of the Trustee or
any holder.
After a declaration of acceleration, the holders of a majority in aggregate
principal amount of the outstanding Notes may, by written notice to the Trustee,
rescind such declaration of acceleration if all existing Events of Default have
been cured or waived, other than non-payment of principal of and accrued
interest on the Notes that has become due solely as a result of such
acceleration and if the rescission of acceleration would not conflict with any
judgment or decree. The holders of a majority in principal amount of the
outstanding Notes also have the right to waive past defaults under the Indenture
except a default in the payment of the principal of, premium, if any, or
interest on any Note or in respect of a covenant or a provision which cannot be
modified or amended without the consent of all holders.
No holder of any of the Notes has any right to institute any proceeding
with respect to the Indenture or any remedy thereunder unless the holders of at
least 25% in principal amount of the outstanding Notes have made written
request, and offered reasonable indemnity, to the Trustee to institute such
proceeding as Trustee, the Trustee does not commence and diligently pursue the
remedy addressed in such request within 20 days after receipt of such notice and
offer and the Trustee has not within such 20-day period received directions
inconsistent with such written request from holders of a majority in principal
amount of the outstanding Notes. Such limitations do not apply, however, to a
suit instituted by a holder of a Note for the enforcement of the payment of the
principal of, premium, if any, or accrued interest on such Note on or after the
due date expressed in such Note.
During the existence of an Event of Default known to a Trust Officer of the
Trustee, the Trustee is required to exercise such rights and powers vested in it
under the Indenture and use the same degree of care and skill in its exercise
thereof as a prudent Person would exercise under the circumstances in the
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conduct of such Person's own affairs. Subject to the provisions of the Indenture
relating to the duties of the Trustee, in case an Event of Default shall occur
and be continuing, the Trustee is not under any obligation to exercise any of
its rights or powers under the Indenture at the request or direction of any of
the holders unless such holders shall have offered the Trustee reasonable
indemnity. Subject to certain provisions concerning the rights of the Trustee,
the holders of a majority in principal amount of the outstanding Notes have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or exercising any trust or power conferred on
the Trustee.
DEFEASANCE
The Company may at any time terminate all of its obligations with respect
to the Notes ("legal defeasance"), except for certain obligations, including
those regarding any trust established for a defeasance and obligations to
register the transfer or exchange of the Notes, to replace mutilated, destroyed,
lost or stolen Notes and to maintain agencies in respect of the Notes. The
Company may at any time terminate its obligations under certain covenants set
forth in the Indenture, some of which are described under "Certain Covenants"
above, and any omission to comply with such obligations shall not constitute a
Default or an Event of Default with respect to the Notes issued under the
Indenture ("covenant defeasance"). In order to exercise either legal defeasance
or covenant defeasance, the Company must irrevocably deposit in trust with the
Trustee, for the benefit of the holders of the Notes, money or U.S. government
obligations, or a combination thereof, in such amounts as will be sufficient to
pay the principal of, premium, if any, and interest on the Notes to redemption
or maturity and comply with certain other conditions, including the delivery of
an opinion as to certain tax matters; provided that the subordination provisions
of the Indenture permit payments with respect to the Notes and that such deposit
will not result in a default under the Credit Agreement or other Indebtedness of
the Company.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to certain surviving rights or registration of transfer or exchange
of Notes) as to all outstanding Notes when either (a) all such Notes theretofore
authenticated and delivered (except lost, stolen or destroyed Notes which have
been replaced or paid) have been delivered to the Trustee for cancellation and
the Company has paid all sums payable by it under the Indenture or (b)(i) all
such Notes not theretofore delivered to the Trustee for cancellation have become
due and payable pursuant to the redemption provisions of the Indenture and the
Company has irrevocably deposited or caused to be deposited with the Trustee as
trust funds in trust for the purpose an amount of money sufficient to pay and
discharge the entire indebtedness on the Notes not theretofore delivered to the
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Trustee for cancellation for principal, premium, if any, and accrued interest to
the date of maturity or redemption and (ii) the Company has delivered
irrevocable instructions to the Trustee to apply the deposited money toward the
payment of the Notes at maturity or on the redemption date, as the case may be;
provided that the subordination provisions of the Indenture permit payments with
respect to the Notes and that such deposit will not result in a default under
the Credit Agreement. In addition, the Company must deliver an Officers'
Certificate and an Opinion of Counsel stating that all conditions precedent to
satisfaction and discharge have been complied with.
AMENDMENTS AND WAIVERS
From time to time the Company, when authorized by a Board Resolution, and
the Trustee may, without the consent of the holders of the Notes, amend, waive
or supplement the Indenture or the Notes for certain specified purposes,
including, among other things, curing ambiguities, defects or inconsistencies,
maintaining the qualification of the Indenture under the Trust Indenture Act or
making any change that does not adversely affect the rights of any holder. Other
amendments and modifications of the Indenture or the Notes may be made by the
Company and the Trustee with the consent of the holders of not less than a
majority of the aggregate principal amount of the outstanding Notes; provided,
however, that no such modification or amendment may, without the consent of the
holder of each outstanding Note affected thereby, (i) reduce the principal
amount outstanding, extend the fixed maturity or alter the redemption provisions
of the Notes, (ii) change the currency in which any Notes or any premium or
accrued interest thereon is payable, (iii) reduce the percentage in principal
amount outstanding of Notes necessary for consent to an amendment, supplement or
waiver or consent to take any action under the Indenture, the Notes or the
Pledge Agreement, (iv) impair the right to institute suit for the enforcement of
any payment on or with respect to the Notes, (v) waive a default in payment with
respect to the Notes, (vi) reduce the rate or extend the time for payment of
interest on the Notes, (vii) upon the occurrence of a Change of Control or an
Asset Sale, alter the Company's obligation to purchase Notes in accordance with
the Indenture or waive any default in the performance thereof, (viii) release
Holdings from its obligations under the Guarantee, the Indenture or the Pledge
Agreement, or (ix) affect the ranking of the Notes; provided, however, that any
amendment which adversely affects the holders of Senior Indebtedness must have
the consent of the Senior Representative.
CERTAIN DEFINITIONS
Set forth below is a summary of certain defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other capitalized terms used herein for which no
definition is provided.
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"Acquired Indebtedness" means Indebtedness of a Person existing at the time
such Person becomes a Subsidiary of the Company or assumed in connection with an
Asset Acquisition of such Person, including, without limitation, Indebtedness
incurred in connection with, or in anticipation of, such Person's becoming a
Subsidiary of the Company or such acquisition.
"Affiliate" of any specified Person means any other Person which, directly
or indirectly, controls, is controlled by or is under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise, and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Asset Acquisition" means (i) any capital contribution (by means of
transfers of cash or other property to others or payments for property or
services for the account or use of others or otherwise) or purchase or
acquisition of Capital Stock by the Company or any of its Subsidiaries to or in
any other Person, in either case as a result of which such Person shall become a
Subsidiary of the Company or any of its Subsidiaries or shall be merged with or
into the Company or any of its Subsidiaries or (ii) any acquisition by the
Company or any of its Subsidiaries of the assets of any Person which constitute
substantially all of an operating unit or business of such Person.
"Asset Sale" means any direct or indirect sale, conveyance, transfer, lease
(including by means of sale-leaseback) or other disposition to any Person other
than the Company or a Subsidiary of the Company, in one transaction or a series
of related transactions, of (i) any Capital Stock of any Subsidiary of the
Company or (ii) any other property or asset of the Company or any Subsidiary of
the Company, in each case other than inventory in the ordinary course of
business and obsolete equipment and other than isolated transactions which do
not exceed $500,000 individually. For the purposes of this definition, the term
"Asset Sale" shall not include (i) sales of Cash Equivalents which are
reinvested in Cash Equivalents within 30 days of such sale, (ii) sales of
receivables not a part of a sale of the business from which they arose or any
disposition of properties and assets of the Company or any Subsidiary that is
governed under and complies with the "Consolidation, Merger, Conveyance,
Transfer or Lease" covenant described above or (iii) exchanges of properties and
assets of the Company or any Subsidiary for similar properties and assets of any
Person other than the Company or a Subsidiary of the Company.
"Board Resolution" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board
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of Directors of such Person and to be in full force and effect on the date of
such certification and delivered to the Trustee.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, rights in or other equivalents (however designated
and whether voting or non-voting) of such Person's capital stock, whether
outstanding on the Issue Date or issued after the Issue Date, and any and all
rights, warrants or options exchangeable for or convertible into such capital
stock.
"Capitalized Lease Obligation" means any obligation to pay rent or other
amounts under a lease of (or other agreement conveying the right to use) any
property (whether real, personal or mixed) that is required to be classified and
accounted for as a capital lease obligation under GAAP; and, for the purposes of
the Indenture, the amount of such obligation at any date shall be the
capitalized amount thereof at such date, determined in accordance with GAAP.
"Cash Equivalents" means, at any time, (i) any evidence of Indebtedness
with a maturity of 180 days or less issued or directly and fully guaranteed or
insured by the United States of America or any agency or instrumentality thereof
(provided, that the full faith and credit of the United States of America is
pledged in support thereof); (ii) certificates of deposit or acceptances with a
maturity of 180 days or less of any financial institution that is a member of
the Federal Reserve System having combined capital and surplus and undivided
profits, according to its most recent published annual report of condition, of
not less than $250,000,000; (iii) commercial paper with a maturity of 180 days
or less issued by a corporation (except an Affiliate of the Company) organized
under the laws of any state of the United States or the District of Columbia and
rated at least A-1 by Standard & Poor's Corporation or at least P-1 by Moody's
Investors Service, Inc.; and (iv) repurchase agreements and reverse repurchase
agreements relating to marketable direct obligations issued or unconditionally
guaranteed by the United States of America or issued by any agency thereof and
backed by the full faith and credit of the United States of America, in each
case maturing within one year from the date of acquisition; provided, however,
that the terms of such agreements comply with the guidelines set forth in the
Federal Financial Agreements of Depository Institutions with Securities Dealers
and Others, as adopted by the Comptroller of the Currency.
"Change of Control" means (i) the direct or indirect sale, lease, exchange
or other transfer of all or substantially all of the assets of Holdings to any
Person or entity or group of Persons or entities acting in concert as a
partnership or other group (a "Group of Persons") other than an Affiliate of
Holdings, (ii) the merger or consolidation of Holdings with or into another
corporation with the effect that the then existing shareholders of Holdings hold
less than 50% of the combined voting power of the then outstanding securities of
the surviving corporation in
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such merger or the corporation resulting from such consolidation ordinarily (and
apart from rights arising under special circumstances) having the right to vote
in the election of directors, (iii) the replacement of a majority of the Board
of Directors of Holdings, over a two-year period, from the directors who
constituted the Board of Directors at the beginning of such period, and such
replacement shall not have been approved by a vote of at least a majority of the
Board of Directors then still in office who either were members of the Board of
Directors at the beginning of such period or whose election as a member of the
Board of Directors was previously so approved, (iv) a Person or Group of Persons
shall, as a result of a tender or exchange offer, open market purchases,
privately negotiated purchases or otherwise, have become the beneficial owner
(within the meaning of Rule 13d-3 under the Exchange Act) of securities of
Holdings representing 30% or more of the combined voting power of the then
outstanding securities of Holdings ordinarily (and apart from rights arising
under special circumstances) having the right to vote in the election of
directors or (v) Holdings fails to own a majority of the combined voting power
of the outstanding voting stock of the Company. Notwithstanding the foregoing, a
Change of Control shall not be deemed to have occurred if one or more of the
above events occur or circumstances exist and, after giving effect thereto, the
Notes are rated BBB- or better by Standard & Poor's Corporation or Baa3 or
better by Moody's Investors Service, Inc.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period increased (to the
extent deducted in determining Consolidated Net Income) by the sum of the
following items of such Person and its Subsidiaries for such period, determined
on a consolidated basis in accordance with GAAP: (i) all United States Federal,
state and foreign income taxes paid or accrued (other than income taxes
attributable to extraordinary, unusual or non-recurring gains or losses); (ii)
all interest expense paid or accrued in accordance with GAAP (net of any
interest income and including amortization of original issue discount and the
interest portion of deferred payment obligations); (iii) depreciation; (iv)
amortization, including, without limitation, amortization of capitalized debt
issuance costs; (v) increases (or minus any decreases) in the LIFO reserve; and
(vi) any other non-cash charges to the extent deducted from Consolidated Net
Income (including non-cash expenses recognized in accordance with Financial
Accounting Standards Bulletin Number 106).
"Consolidated Net Income" means, with respect to any Person, for any
period, the aggregate of the Net Income of such Person and its Subsidiaries for
such period, on a consolidated basis, determined in accordance with GAAP;
provided, however, that (a) the Net Income of any Person (the "Other Person") in
which the Person in question or any of its Subsidiaries has a joint interest
with a third party (which interest does not allow the net income of such Other
Person to be consolidated into the net
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income of the Person in question in accordance with GAAP) shall be included only
to the extent of the amount of dividends or distributions paid to the Person in
question or the Subsidiary, (b) the Net Income of any Subsidiary of the Person
in question that is subject to any contractual restriction or limitation on the
payment of dividends or the making of other distributions shall be excluded to
the extent of such restriction or limitation, (c)(i) the Net Income (or loss) of
any Person acquired in a pooling of interests transaction for any period prior
to the date of such acquisition and (ii) any net gain (but not loss) resulting
from an Asset Sale by the Person in question or any of its Subsidiaries other
than in the ordinary course of business shall be excluded and (d) extraordinary
gains and losses shall be excluded.
"Consolidated Net Worth" means, with respect to any Person at any date of
determination, the consolidated stockholders' equity represented by the shares
of such Person's Capital Stock (other than Disqualified Stock) outstanding at
such date, as determined on a consolidated basis in accordance with GAAP.
"Credit Agreement" means the Loan and Security Agreement dated as of March
30, 1993, by and among Congress Financial Corporation (Southwest) and BA
Business Credit Inc. as Lenders, Congress Financial Corporation (Southwest) as
agent for the Lenders, and the Company and Seaway Importing Company as the
Borrowers providing for working capital and other financing, as the same may at
any time be amended, amended and restated, supplemented or otherwise modified,
including any deferral, refinancing, renewal, refunding, replacement or
extension thereof and whether by the same or any other lender or group of
lenders.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Disqualified Stock" means, with respect to any Person, any Capital Stock
which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is exchangeable for Indebtedness, or is redeemable
at the option of the holder thereof, in whole or in part, in each case on or
prior to the maturity date of the Notes.
"Fair Market Value" or "fair value" means, with respect to any asset or
property, the price which could be negotiated in an arm's-length free market
transaction, for cash, between a willing seller and a willing buyer, neither of
whom is under undue pressure or compulsion to complete the transaction. Fair
Market Value shall be determined by the Board of Directors of the Company acting
in good faith and shall be evidenced by a Board Resolution delivered to the
Trustee.
"Fixed Charge Coverage Ratio" means, with respect to any Person, the ratio
of (i) Consolidated Cash Flow of such Person
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for the four full fiscal quarters for which financial statements are available
that immediately precede the date of the transaction or other circumstances
giving rise to the need to calculate the Fixed Charge Coverage Ratio (the
"Transaction Date") to (ii) all cash and non-cash interest expense (including
capitalized interest) of such Person and its Subsidiaries determined in
accordance with GAAP (net of any interest income of such Person and its
Subsidiaries and exclusive of deferred financing fees of such Person and its
Subsidiaries) and the aggregate amount of cash dividends or other distributions
declared or paid on Capital Stock (other than Common Stock) of such Person and
its Subsidiaries, in each case for such four full fiscal quarter period. For
purposes of this definition, if the Transaction Date occurs prior to the date on
which the Company's consolidated financial statements for the four full fiscal
quarters subsequent to the Issue Date are first available, then "Consolidated
Cash Flow" and the items referred to in the preceding clause (ii) shall be
calculated, in the case of the Company, after giving effect on a pro forma basis
as if the Notes outstanding on the Transaction Date were issued on the first day
of such four-full-fiscal-quarter period. In addition to and without limitation
of the foregoing two sentences, for purposes of this definition, "Consolidated
Cash Flow" and the items referred to in the preceding clause (ii) shall be
calculated after giving effect on a pro forma basis for the period of such
calculation to (i) the incurrence of any Indebtedness of such Person or any of
its Subsidiaries at any time during the period (the "Reference Period") (A)
commencing on the first day of the four-full-fiscal-quarter period for which
financial statements are available that precedes the Transaction Date and (B)
ending on and including the Transaction Date, including, without limitation, the
incurrence of the Indebtedness giving rise to the need to make such calculation,
as if such incurrence occurred on the first day of the Reference Period;
provided, that if such Person or any of its Subsidiaries directly or indirectly
guarantees Indebtedness of a third Person, the above clause shall give effect to
the incurrence of such guaranteed Indebtedness as if such Person or Subsidiary
had directly incurred such guaranteed Indebtedness and (ii) any Asset Sales or
Asset Acquisitions (including, without limitation, any Asset Acquisition giving
rise to the need to make such calculation as a result of the Company or any of
its Subsidiaries (including any Person who becomes a Subsidiary as a result of
the Asset Acquisition) incurring Acquired Indebtedness) occurring during the
Reference Period and any retirement of Indebtedness in connection with such
Asset Sales, as if such Asset Sale or Asset Acquisition and/ or retirement
occurred on the first day of the Reference Period. Furthermore, in calculating
the denominator (but not the numerator) of this "Fixed Charge Coverage Ratio,"
(1) subject to clause (3) below, interest on Indebtedness determined on a
fluctuating basis as of the Transaction Date and which will continue to be so
determined thereafter shall be deemed to accrue at a fixed rate per annum equal
to the rate of interest on such Indebtedness in effect on the Transaction Date;
(2) if interest on any Indebtedness actually incurred on the
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Transaction Date may optionally be determined at an interest rate based upon a
factor of a prime or similar rate, a eurocurrency interbank offered rate, or
other rates, then the interest rate based upon a factor of a prime or similar
rate shall be deemed to have been in effect; and (3) notwithstanding clause (1)
above, interest on Indebtedness determined on a fluctuating basis, to the extent
such interest is covered by agreements relating to Interest Rate Protection
Obligations, shall be deemed to accrue at the rate per annum resulting after
giving effect to the operation of such agreements.
"GAAP" means generally accepted accounting principles in effect on the
Issue Date as set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as may be approved by a significant
segment of the accounting profession of the United States.
"Guarantee" means the guarantee of the Notes by Holdings.
"Holdings Preferred Stock" means the 16 1/4% Senior Cumulative Preferred
Stock, $1.00 par value, and 14 1/4% Junior Cumulative Preferred Stock, $1.00 par
value, of Holdings.
"Indebtedness" means, with respect to any Person, without duplication, (i)
any liability, contingent or otherwise, of such Person (A) for borrowed money
(whether or not the recourse of the lender is to the whole of the assets of such
Person or only to a portion thereof), (B) evidenced by a note, debenture or
similar instrument, letter of credit or draft accepted (including a purchase
money obligation) representing extensions of credit whether or not representing
obligations for borrowed money or (C) for the payment of money relating to a
Capitalized Lease Obligation or other obligation relating to the deferred
purchase price of property or services (other than property or services
purchased on ordinary trade terms therefor) which purchase price is payable over
a period in excess of six months or is evidenced by a note, invoice or similar
written instrument with a maturity in excess of six months; (ii) any liability
of others of the kind described in the preceding clause (i) which the Person has
guaranteed or which is otherwise its legal liability; (iii) any obligation
secured by a lien to which the property or assets of such Person are subject,
whether or not the obligations secured thereby shall have been assumed by or
shall otherwise be such Person's legal liability; and (iv) any and all
deferrals, renewals, extensions, replacements, refinancings and refundings of,
or amendments, modifications or supplements to, any liability of the kind
described in any of the preceding clauses (i), (ii) or (iii).
"Interest Rate Protection Obligations" means the obligations of any Person
pursuant to any arrangement with any other Person whereby, directly or
indirectly, such Person is entitled to
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<PAGE>
receive from time to time periodic payments calculated by applying either a
floating or a fixed rate of interest on a stated notional amount in exchange for
periodic payments made by such Person calculated by applying a fixed or a
floating rate of interest on the same notional amount and shall include, without
limitation, interest rate swaps, caps, floors, collars and similar agreements.
"Junior Subordinated Promissory Notes" means the 14.25% Junior Subordinated
Promissory Notes Due 2001 of Holdings.
"Lien" means any mortgage, lien (statutory or other), pledge, security
interest, encumbrance, hypothecation, assignment for security or other security
agreement of any kind or nature whatsoever. For purposes of the Indenture, a
Person shall be deemed to own subject to a Lien any property which it has
acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to such Person.
"Material Subsidiary" means a Subsidiary of the Company which would
constitute a "significant subsidiary" of the Company within the meaning of
Regulation S-X of the Securities and Exchange Commission. For purposes of the
Indenture, Pamida Transportation Company and Seaway Importing Company shall be
deemed to be Material Subsidiaries of the Company.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds
thereof in the form of cash or Cash Equivalents, including payments in respect
of deferred payment obligations when received in the form of cash or Cash
Equivalents (except to the extent that such obligations with respect to
Indebtedness are financed or sold with recourse to the Company or any of its
Subsidiaries) net of (i) brokerage commissions and other reasonable fees and
expenses (including fees and expenses of counsel and investment bankers) related
to such Asset Sale; (ii) provisions for all taxes payable as a result of such
Asset Sale; (iii) payments made to retire Indebtedness secured by the assets
subject to such Asset Sale (including retirements of Indebtedness under the
Credit Agreement) to the extent required pursuant to the terms of such
Indebtedness; and (iv) appropriate amounts to be provided by the Company or any
of its Subsidiaries, as the case may be, as a reserve, in accordance with GAAP,
against any liabilities associated with such Asset Sale and retained by the
Company or any of its Subsidiaries, as the case may be, after such Asset Sale,
including, without limitation, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and liabilities under
any indemnification obligations associated with such Asset Sale.
"Net Income" means, with respect to any Person for any period, the net
income (loss) of such Person determined in accordance with GAAP.
33
<PAGE>
"Net Proceeds" means (a) in the case of any sale of Capital Stock (other
than Disqualified Stock) by the Company, the aggregate net proceeds received by
the Company, after payment of expenses, commissions and the like incurred in
connection therewith, whether such proceeds are in cash or in property (valued
at the Fair Market Value thereof, as determined in good faith by the Board of
Directors of the Company, at the time of receipt), (b) in the case of any
exchange, exercise, conversion or surrender of outstanding securities of any
kind of the Company for or into shares of Capital Stock of the Company which is
not Disqualified Stock, the net book value of such outstanding securities on the
date of such exchange, exercise, conversion or surrender (plus any additional
amount required to be paid by the holder to the Company upon such exchange,
exercise, conversion or surrender, less any and all payments made to the
holders, e.g., on account of fractional shares, and less all expenses incurred
by the Company in connection therewith) and (c) in the case of the issuance of
any Indebtedness by the Company, the aggregate net cash proceeds received by the
Company, after payment of expenses, commissions and the like incurred therewith.
"Permitted Liens" means, with respect to any Person, any lien arising by
reason of (a) any attachment, judgment, decree or order of any court, so long as
such lien is being contested in good faith and is either adequately bonded or
execution thereon has been stayed pending appeal or review and any appropriate
legal proceedings which may have been duly initiated for the review of such
attachment, judgment, decree or order shall not have been finally terminated or
the period within which such proceedings may be initiated shall not have
expired; (b) taxes, assessments or governmental charges not yet delinquent or
which are being contested in good faith; (c) security for payment of workers'
compensation or other insurance; (d) security for the performance of tenders,
bids, leases and contracts (other than contracts for the payment of money); (e)
deposits to secure public or statutory obligations or in lieu of surety or
appeal bonds or to secure permitted contracts for the purchase or sale of any
currency entered into in the ordinary course of business; (f) operation of law
in favor of carriers, warehousemen, landlords, mechanics, materialmen, laborers,
employees or suppliers, incurred in the ordinary course of business for sums
which are not yet delinquent or are being contested in good faith by
negotiations or by appropriate proceedings which suspend the collection thereof;
(g) any interest or title of a lessor under any lease; (h) security for surety
or appeal bonds; and (i) easements, rights-of-way, zoning and similar covenants
and restrictions and other similar encumbrances or title defects which, in the
aggregate, are not substantial in amount and which do not in any case materially
interfere with the ordinary conduct of the business of the Company or any of its
Subsidiaries.
"Person" means any individual, corporation, partnership, joint venture,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
34
<PAGE>
"Pledge Agreement" means the Holdings Pledge Agreement providing, among
other things, that the obligations of Holdings in respect of the Guarantee shall
be secured under the Pledge Agreement.
"Promissory Notes" means the Senior Subordinated Promissory Notes,
Subordinated Promissory Notes and Junior Subordinated Promissory Notes.
"Public Offering" means the first offer and sale to the public by Holdings
or the Company of shares of any class of the Capital Stock (other than
Disqualified Stock) of Holdings or the Company pursuant to a registration
statement declared effective by the Securities and Exchange Commission after the
Issue Date.
"Purchase Money Indebtedness" means Indebtedness of the Company or any
Subsidiary (i) issued to finance or refinance (including any extensions or
renewals) the purchase or construction of any assets of the Company or any
Subsidiary or (ii) secured by a Lien on any assets of the Company or any
Subsidiary where the lender's sole recourse is to the assets so encumbered, in
either case (a) to the extent the purchase or construction costs for such assets
are or should be included in "additions to property, plant and equipment" in
accordance with GAAP, (b) if the purchase or construction of such assets is not
part of the acquisition of a Person or business unit and (c) so long as the
aggregate principal amount of such Indebtedness does not exceed the lesser of
cost or Fair Market Value of the assets so purchased or constructed.
"Restricted Payment" means any of the following: (i) the declaration or
payment of any dividend or any other distribution on Capital Stock of the
Company or any Subsidiary of the Company or any payment made to the direct or
indirect holders (in their capacities as such) of Capital Stock of the Company
or any Subsidiary of the Company (other than (x) dividends or distributions
payable solely in Capital Stock (other than Disqualified Stock) or in options,
warrants or other rights to purchase Capital Stock (other than Disqualified
Stock) and (y) in the case of Subsidiaries of the Company, dividends or
distributions payable to the Company or to a Subsidiary of the Company), (ii)
the purchase, redemption or other acquisition or retirement for value of any
Capital Stock of the Company or any of its Subsidiaries, (iii) the making of any
principal payment on, or the purchase, defeasance, repurchase, redemption or
other acquisition or retirement for value, prior to any scheduled maturity,
scheduled repayment or scheduled sinking fund payment, of, any Indebtedness
which is subordinated in right of payment to the Notes (other than Indebtedness
acquired in anticipation of satisfying a sinking fund obligation, principal
installment or final maturity, in each case due within one year of the date of
acquisition) and (iv) the making of any Investment in any Person other than
pursuant to clauses (i) through (vii) of the "Limitation on Investments, Loans
and Advances" covenant described above.
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<PAGE>
"Sale-Leaseback Transaction" means any arrangement with any Person
providing for the leasing by the Company or any Subsidiary of the Company of any
real or tangible personal property, which property has been or is to be sold or
transferred by the Company or such Subsidiary to such Person in contemplation of
such leasing.
"Senior Indebtedness" means, at any date, all obligations of the Company
under the Credit Agreement, including obligations to pay principal, premium, if
any, and interest (including, in the case of the following sentence only,
interest accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to the Company whether or not such claim for
post-petition interest is allowed in such proceeding). Notwithstanding the
foregoing, the maximum principal amount of Senior Indebtedness permitted to be
incurred is the amount of Indebtedness permitted to be incurred under the Credit
Agreement pursuant to clause (b) of "Limitation on Additional Indebtedness"
above, and any Indebtedness under the Credit Agreement in excess of such amount
shall not be Senior Indebtedness. Senior Indebtedness shall not include
Indebtedness which is subordinated or junior in right of payment to any other
Indebtedness of the Company.
"Senior Representative" means any agent, trustee or other representative of
the holders of any Senior Indebtedness, and if there is no such agent, trustee
or other representative with respect to any such Senior Indebtedness, "Senior
Representative" shall mean, collectively, the holders of at least a majority in
dollar amount of such Senior Indebtedness.
"Senior Subordinated Promissory Notes" means the 13.5% Senior Subordinated
Promissory Notes Due 2001 of Holdings.
"Subordinated Promissory Notes" means the 14% Subordinated Promissory Notes
Due 2001 of Holdings.
"Subsidiary" means, with respect to any Person, (i) any corporation of
which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors shall at the time be owned,
directly or indirectly, by such Person, by a Subsidiary of such Person or by
such Person and a Subsidiary of such Person, or (ii) any other Person (other
than a corporation) of which at least a majority of voting interest is at the
time, directly or indirectly, owned by such Person, by a Subsidiary of such
Person or by such Person and a Subsidiary of such Person.
"Wholly-Owned Subsidiary" means any Subsidiary of the Company, 100% of the
Capital Stock of which (other than shares of Capital Stock representing any
director's qualifying shares or investments by foreign nationals mandated by
applicable law) is owned by the Company, by a Wholly-Owned Subsidiary of the
Company or by the Company and a Wholly-Owned Subsidiary of the Company.
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<PAGE>
DESCRIPTION OF CERTAIN INDEBTEDNESS
The following is a summary of certain terms of the Credit Agreement and of
certain promissory notes of Holdings. For more complete information regarding
the Credit Agreement and the promissory notes of Holdings, reference is made to
the Credit Agreement and the agreements and instruments governing such
promissory notes, copies of which have been filed as exhibits to the
Registration Statement and which are incorporated by reference herein. The
descriptions contained herein of such agreements and instruments do not purport
to be complete and are qualified in their entirety by the provisions thereof;
however, the Company believes that the matters discussed or referred to in such
descriptions are those matters which a prospective purchaser of Notes might
reasonably consider to be material to an investment decision with respect to the
Notes.
CREDIT AGREEMENT
On March 30, 1993, Pamida entered into a Loan and Security Agreement with
Congress Financial Corporation (Southwest) and BankAmerica Business Credit, Inc.
(then known as BA Business Credit Inc.) under which new revolving credit
facilities (including letter of credit facilities) in an aggregate amount of up
to $60,000,000 were established (the "Credit Agreement"). Such credit facilities
replaced certain previously existing bank credit facilities. On January 23,
1995, such amount was increased to $80,000,000 by an amendment of the Credit
Agreement; on January 28, 1996, at the Company's request, such amount was
decreased to $70,000,000 by an amendment of the Credit Agreement; and on March
17, 1997, such amount was increased to $95,000,000 by an amendment of the Credit
Agreement.
The Credit Agreement presently has a term extending to March 31, 2000, and
loans thereunder bear interest at a rate which is tied either to the applicable
prime rate or to the applicable London Interbank Offered Rate, generally at the
Company's discretion. The amounts which the Company is permitted to borrow under
the Credit Agreement are determined by a formula based upon the amount of the
Company's eligible inventory from time to time and are subject to the discretion
of the agent for the lenders.
Obligations of the Company under the Credit Agreement 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, and the Company may grant security interests in or liens on its other
assets and property to further secure its obligations under the Credit
Agreement. Holdings and two subsidiaries of the Company (Pamida Transportation
Company and Seaway Importing Company) have guaranteed payment and performance of
the Company's obligations under the Credit Agreement and have pledged some or
all of their
37
<PAGE>
respective assets (including the stock of the Company owned by Holdings) to
secure such guarantees.
See "Investment Considerations -- Operating and Financial Restrictions" and
"Description of Notes -- Guarantee and Pledge Agreement" for other important
information concerning the Credit Agreement.
HOLDINGS PROMISSORY NOTES
On November 18, 1997, all of the 13.5% Senior Promissory Notes, 14%
Subordinated Promissory Notes and 14.25% Junior Subordinated Promissory Notes of
Holdings were paid in full with newly issued shares of Common Stock and
Nonvoting Common Stock of Holdings.
PLAN OF DISTRIBUTION
This prospectus is to be used by Citicorp Securities, Inc. ("CSI") in
connection with offers and sales of the Notes in market-making transactions at
negotiated prices related to prevailing market prices at the time of sale. CSI
may act as principal or agent in such transactions. CSI has no obligation to
make a market in the Notes and may discontinue market-making activities at any
time without notice at its sole discretion. The Notes are not listed on any
stock exchange nor are they quoted on any automated quotation system.
CSI acted as underwriter of the Original Offering of the Notes and received
underwriter discounts and commissions totalling $4.2 million.
399 Venture Partners, Inc., an affiliate of CSI, owns Common Stock and
Nonvoting Common Stock of Holdings which represent approximately 43.9% of the
aggregate common equity of Holdings. The Common Stock owned by 399 Venture
Partners, Inc. represents approximately 15.2% of the outstanding voting stock
of Holdings. The Nonvoting Common Stock of Holdings owned by 399 Venture
Partners, Inc. represents 100% of the outstanding shares of that class and is
convertible into Common Stock upon certain conditions.
M. Saleem Muqaddam, a director of Holdings, is a Vice President of 399
Venture Partners, Inc., which is an affiliate of CSI.
LEGAL MATTERS
Certain legal matters regarding the Notes have been passed upon for Pamida
and Holdings by Abrahams, Kaslow & Cassman, Omaha, Nebraska.
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<PAGE>
EXPERTS
The financial statements and schedule of Pamida and Holdings as of February
1, 1998, and February 2, 1997, and for the years then ended included in the
following Prospectus Appendix have been audited by Deloitte & Touche LLP,
independent auditors, to the extent stated in its reports which are included in
the following Prospectus Appendix and have been so incorporated in reliance upon
the reports of such firm given upon the authority of such firm as experts in
accounting and auditing.
The financial statements and schedule of Pamida and Holdings for the year
ended January 28, 1996, included in the following Prospectus Appendix have been
audited by Coopers & Lybrand L.L.P., independent auditors, to the extent stated
in its reports which are included in the following Prospectus Appendix and have
been so incorporated in reliance upon the reports of such firm given upon the
authority of such firm as experts in accounting and auditing.
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<PAGE>
---------------
PROSPECTUS APPENDIX
TO PROSPECTUS DATED _______, 1998
---------------
$140,000,000
PAMIDA, INC.
11 3/4% SENIOR SUBORDINATED
NOTES DUE 2003
This Prospectus Appendix contains the following documents which are
required to be delivered with each copy of the Prospectus:
* Annual Report of Pamida, Inc. on Form 10-K for the fiscal year ended
February 1, 1998.
* Annual Report of Pamida Holdings Corporation on Form 10-K for the fiscal
year ended February 1, 1998.
40
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934
For the fiscal year ended February 1, 1998
Commission File Number 33-57990
PAMIDA, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 47-0626426
------------------------------- ----------------------------
(State or other jurisdiction of (IRS Employer Identification
incorporation ororganization) Number)
8800 "F" STREET, OMAHA, NEBRASKA 68127
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (402) 339-2400
Securities Registered Pursuant to Section 12(b) of the Act:
NONE
Securities Registered Pursuant to Section 12(g) of the Act:
NONE
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 registrant's
classes of common stock, as of the latest practicable date:
Outstanding at
Class of Stock March 24, 1998
-------------- --------------
Common Stock 1,000 shares
PART I
ITEM 1. BUSINESS.
FORWARD-LOOKING STATEMENTS
This 10-K 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 10-K contains certain forward-looking statements which reflect management's
current views and estimates of future economic circumstances, 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. 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.
GENERAL.
Pamida, Inc. (the "Company" or "Pamida") was incorporated in Delaware in
1980. In January 1981, the Company, which then was owned by an employee stock
ownership plan (the "ESOP"), acquired substantially all of the assets and
assumed substantially all of the liabilities of a Nebraska corporation which
previously had carried on the mass merchandise retail business of the Company
described below. The Company's predecessor had been engaged in such business
since 1963, and its stock was publicly owned and listed on the New York Stock
Exchange at the time of the 1981 sale to the Company.
In July 1986, Pamida Holdings Corporation ("Holdings") acquired the stock
of the Company from the ESOP, and the Company became a wholly-owned subsidiary
of Holdings. The only significant asset of Holdings is the common stock of the
Company, and Holdings conducts no operations separate from those of the Company.
An initial public offering of shares of Common Stock of Holdings occurred in
September 1990, and the Common Stock of Holdings has been listed on the American
Stock Exchange and publicly traded since then.
On January 19, 1996, the Company announced its intention to close 40 stores
located in unprofitable or highly competitive markets. Store closing sales began
on January 29, 1996, and the Company completed all of such store closings during
the second quarter of the fiscal year ended February 2, 1997. References in this
Form 10-K to the "40 Closed Stores" mean such 40 stores.
STORES.
At February 1, 1998, Pamida operated 148 general merchandise retail stores
located in 148 small towns (having an average population of approximately 5,500)
in 15 Midwestern, North Central and Rocky Mountain states. Pamida's strategic
objective is to be the dominant general merchandise retailer in the communities
it serves. The Company believes that it holds the leading market position in
over 77% of the communities in which its stores are located.
Pamida stores generally are located in small towns, normally county seats,
where there often is little or no competition from another major general
merchandise retailer and which the Company considers to be either too small to
support more than one major general merchandise retailer (thereby creating a
potential barrier to entry by a major competitor) or too small to attract
competitors whose stores generally are designed to serve larger populations. At
February 1, 1998, 115 of the Company's 148 stores faced no direct local
competition from other major general merchandise retailers.
The Company's stores average approximately 30,000 square feet of sales area
and range in size from approximately 6,000 to 51,000 square feet of sales area.
At February 1, 1998, Pamida's stores had an aggregate sales area of
approximately 4,408,000 square feet.
The following table indicates the states in which Pamida's stores were
located as of February 1, 1998:
STATE No. of
Stores Percent
------ -------
Minnesota............................................... 29 19.6%
Iowa.................................................... 25 16.9
Nebraska................................................ 15 10.1
Wisconsin............................................... 14 9.5
Michigan................................................ 12 8.1
Ohio.................................................... 10 6.8
Wyoming................................................. 9 6.1
North Dakota............................................ 7 4.7
South Dakota............................................ 7 4.7
Montana................................................. 7 4.7
Indiana................................................. 4 2.7
Kansas.................................................. 3 2.0
Illinois................................................ 3 2.0
Kentucky ............................................... 2 1.4
Missouri ............................................... 1 0.7
--- -------
148 100.0%
=== ======
The following tables show the number of the Company's store openings,
relocations and closings and the aggregate year-end store sales area by fiscal
year since fiscal 1994:
Fiscal Year Ended
--------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
Beginning of 148 144 184 173 178
Stores opened in new markets 1 6 7 17 8
Stores relocated in existing markets 2 2 3 -- --
Stores closed (includes relocated stores) (3) (4) (10) (6) (13)
--- --- --- --- ---
End of year 148 148 184 184 173
Less 40 Closed Stores === === (40) === ===
---
144
===
Fiscal Year Ended
--------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
Square feet of store sales area at
year-end (in millions) 4.41 4.35 5.22 5.09 4.68
Less 40 Closed Stores (1.09)
----
4.13
====
Pamida regularly evaluates all of its stores and from time to time closes
stores which no longer meet its standards for sales, profitability, selling area
or other applicable criteria.
STORE EXPANSION PROGRAM.
Pamida's store expansion program is subject to the Company's ability to
negotiate satisfactory leases, to the ability of prospective landlords to obtain
financing for new store buildings and to various zoning, site acquisition,
environmental, traffic, construction and other contingencies. Eight new stores,
two of which are replacement stores, are expected to commence operations this
year.
Pamida has identified numerous communities which are potential sites for
the Company's prototype stores and in which Pamida believes it can achieve a
leading market position, although there is no assurance that Pamida will open
stores in such communities or on any particular time schedule.
The Company began operations in a new 200,000 square foot distribution
center in Lebanon, Indiana, during the second quarter of fiscal 1998. Pamida
believes that its existing distribution facilities (including the new expandable
Lebanon, Indiana facility), senior and middle management staff as well as
corporate infrastructure should allow the Company to accommodate its anticipated
growth.
The Company typically invests approximately $1,450,000 to $1,700,000 in a
new prototype store. Such expenditures consist primarily of approximately
$1,000,000 to $1,200,000 for the initial store inventory, a portion of which is
financed by vendor trade credit, and approximately $450,000 to $500,000 for
store fixtures and equipment. In most cases, building and land costs of
approximately $1,450,000 to $1,750,000 per store are financed by unaffiliated
developers who lease the real estate to Pamida. To expedite the construction
process, Pamida occasionally may construct stores on sites which it acquires,
with the expectation that it subsequently will enter into sale-leaseback
transactions with respect to such stores with unaffiliated investors.
SALES AND MERCHANDISING.
Pamida's merchandising policy is to provide customers with reliable and
convenient family shopping and to feature nationally advertised brand-name
products as well as some private-label merchandise at attractive prices. Pamida
operates its stores on a self-service, primarily cash-and-carry basis and runs
weekly advertised promotions throughout the year. All of Pamida's stores accept
bank credit cards, which accounted for 14.8% of total store sales during the
fiscal year ended February 1, 1998.
Pamida's typical customers are price-conscious families across the income
spectrum. To effectively serve such customers, the Company's stores are open
seven days a week for an average of at least 75 hours per week.
Pamida's two basic merchandise divisions are softlines and hardlines. The
softlines division includes mens', womens', childrens' and infants' clothing,
footwear, accessories and jewelry. The hardlines division includes categories
such as health and beauty aids, automotive accessories, housewares, cleaning
supplies, hardware, paint, sporting goods, toys, stationery, small appliances
and electronic items, videos, compact discs and tapes, lawn and garden supplies,
linens and other domestics, cameras and accessories, pet supplies, consumables
and candy items.
The Company currently owns and operates pharmacies in 44 of its larger
stores, and eight of Pamida's other stores contain prescription pharmacies
leased to and operated by independent pharmacists. The pharmacies have proved to
be effective in building customer loyalty and attracting customers who are
likely to purchase other items in addition to prescription drugs. Pamida
intends, subject to regulatory and personnel considerations and where space
permits, to include a pharmacy in each of its new prototype stores and to add
pharmacies to existing stores.
During the fiscal year ended February 1, 1998, the hardlines division
accounted for approximately 72% of total sales, while the apparel division and
the pharmacies accounted for 22% and 6%, respectively, of total sales.
Among the methods that the Company employs to build customer loyalty and
satisfaction are weekly advertised specials, competitive pricing, clean and
orderly stores, friendly well-trained personnel, a liberal return policy and a
wide variety of special customer services (such as wheelchairs for the elderly
and handicapped, restroom facilities and water fountains, seating benches,
speedy check-out lanes and expedited check cashing and raincheck and layaway
processing) offered under various customer-oriented themes such as "Hometown
Values", "We Care" and "We're Listening". Pamida places special emphasis on
maintaining a strong in-stock position in all merchandise categories,
particularly with respect to advertised items.
Pamida's business, like that of most other general merchandise retailers,
is seasonal. First quarter sales (February through April) are lower than sales
during the other three fiscal quarters, while fourth quarter sales (November
through January) in recent years have increased to approximately 29% of the full
year's sales and normally involve a greater proportion of higher margin
merchandise.
ADVERTISING AND PROMOTION.
The Company's extensive advertising primarily utilizes colorful weekly
circulars developed by a centralized advertising department at Pamida's
headquarters. Such circulars advertise brand-name and other merchandise at
significant price reductions and are inserted into local newspapers or mailed
directly to customers. Pamida also uses local shoppers publications and coupon
books. During fiscal 1998, Pamida spent approximately $10,468,000 (net of
promotional allowances provided by vendors) on advertising, which represented
approximately 1.6% of fiscal 1998 sales.
PURCHASING AND DISTRIBUTION.
Pamida maintains a centralized purchasing and store planning staff at its
executive offices. The merchandising department includes two general merchandise
managers, five hardlines divisional merchandise managers and three apparel
divisional merchandise managers. Each of the divisional merchandise managers
supervises from five to seven buyers. Members of the Company's experienced
buying staff regularly attend major trade shows, visit both domestic and
overseas markets and meet with vendor representatives at the Company's
headquarters.
The merchandise in the Company's stores is purchased from over 3,000
primary manufacturers and suppliers and numerous other vendors. Centralized
purchasing enables Pamida to more effectively control the cost of merchandise
and to take advantage of promotional programs and volume discounts offered by
certain vendors. The Company continuously seeks to optimize merchandise costs,
including promotional allowances offered by its suppliers. Pamida also has
centralized the management of returned merchandise, which enables the Company to
most effectively secure vendor credits and refunds with respect to such
merchandise.
The Company's point-of-sale data capture equipment located in its stores
provides current information to Pamida's buyers to assist them in managing
inventories, effecting prompt reorders of popular items, eliminating
slow-selling merchandise and reducing markdowns.
Seaway Importing Company, a wholly-owned subsidiary of Pamida, imports a
wide variety of merchandise, including sporting goods, pet supplies, toys,
electronic items, apparel, hair care items, painting supplies, automotive items
and hardware, for sale in Pamida's stores.
During fiscal 1998, approximately 79% of Pamida's merchandise was
distributed to the stores through Pamida's own distribution centers, while the
remaining merchandise was supplied directly to the stores by manufacturers or
distributors.
COMPETITION.
The general merchandise retail business is highly competitive. The
Company's stores generally compete with other general merchandise retailers,
supermarkets, drug and specialty stores, mail order and catalog merchants and,
in some communities, department stores.. Competitors consist both of independent
stores and of regional and national chains, some of which have substantially
greater resources than the Company. The type and degree of competition and the
number of competitors which Pamida's stores face vary significantly by market.
Pamida believes that the principal areas of competition in the general
merchandise retail industry are store location, price, merchandise selection,
quality and customer service, although numerous other factors also affect the
competitive position of any particular store. Among the methods that the Company
employs to build customer loyalty and satisfaction are weekly advertised
specials, reliable in-stocks, competitive pricing, clean and orderly stores,
friendly well-trained personnel, a liberal return policy and a wide variety of
special customer services offered under themes such as "Hometown Values", "We
Care" and "We're Listening".
Pamida stores generally are located in small towns, normally county seats,
where there is no direct local competition from another major general
merchandise retailer and which may be either too small to support more than one
major general merchandise retailer (thereby creating a potential barrier to
entry by a major competitor) or too small to attract competitors whose stores
generally are designed to serve larger populations. The Company believes that,
in terms of sales, it is the leading general merchandise retailer in over 77% of
the communities in which its stores are located.
At February 1, 1998, 115 of Pamida's 148 stores were located in communities
in which there was no direct local competition from other major general
merchandise retailers. As of that date, Kmart, Alco, Wal-Mart, Target and ShopKo
had stores in 16, 11, 10, 2 and 1 communities, respectively, where Pamida stores
are located; however, because some of these communities have more than one of
such competitors, only 33 Pamida stores face direct local competition from such
retail chains. In recent years the Company's business strategy has been to focus
its store expansion program on communities with less likelihood of the entry of
a new major competitor, but there can be no assurance that in the future major
competitors will not open additional stores in the Company's markets.
Merchandise prices generally are established on a zone basis at Pamida's
executive offices, although store managers are given discretion to adjust prices
of key items to meet local competition and to match a competitor's advertised
prices. Zone pricing allows the Company to establish prices at different levels
in different trade territories, based primarily on competitive conditions within
such territories, rather than having a uniform pricing structure throughout the
entire chain. Pamida conducts a continuous program of competitor price
comparisons that enables the Company to make merchandise price adjustments, when
necessary, to assure that the Company maintains a competitive position.
EMPLOYEES.
As of February 1, 1998, Pamida had approximately 5,600 employees, of whom
approximately 2,700 were full-time and 2,900 were part-time. The number of
employees varies on a seasonal basis. Pamida's employees are not represented by
a labor union, and the Company believes that its relations with its employees
are good.
At February 1, 1998, the average length of service of the Company's
management staff was as follows:
Average
Years
Number of Service
------ ----------
Top Management 2 16.2
Senior Vice Presidents and Vice Presidents 18 7.1
District Managers 12 20.5
Pharmacy District Supervisors 4 5.3
Store Managers 148 11.4
Pharmacy Managers 44 3.4
Pamida's human resources department is responsible for company-wide salary
and wage administration, as well as all benefits. The human resources department
works closely with store operations in the development and administration of
Pamida's store-level employee training programs. In addition, Pamida has an
ongoing program for the development of management personnel to fill positions in
all facets of the Company's operations and makes a concerted effort to identify
and train potential successors for all of its key middle and senior managers.
ITEM 2. PROPERTIES.
At February 1, 1998, the Company owned 19 of its 148 store buildings, while
its remaining 129 stores operated in leased premises. A substantial majority of
the Company's leases have renewal options, with approximately 53% of the leases
having unexpired current terms of five years or more. The following table
provides information relating to the remaining lease terms for the Company's
leased stores at February 1, 1998:
Leases Expiring Number of Leased Stores
During the Fiscal Year Ending (1) 2/01/98
--------------------------------- -----------------------
1999 13
2000 24
2001 5
2002 8
2003 6
Thereafter 73
---
Total 129
===
(1) Includes renewal options.
Pamida's management believes that the physical condition of the Company's
stores generally is very good. All of the Company's stores are continuously
updated to conform to Pamida's operating and merchandising standards.
The Company's general offices and one of its three distribution centers are
located in a 215,000 square foot building in Omaha, Nebraska, owned by the
Company. This facility contains approximately 135,000 square feet of warehouse
space and approximately 80,000 square feet of office space.
Pamida's primary distribution center is a 336,000 square foot
"flow-through" facility situated on a 22-acre tract of land in Omaha
approximately one mile from the distribution center described above. This
facility, which is owned by Pamida, serves primarily as a redistribution center
for bulk shipments and promotional merchandise on which cost savings can be
realized through quantity purchasing. Pamida also owns an additional 10-acre
tract of land adjacent to such distribution center which would permit that
facility to be further expanded by almost 60%.
In July 1997, the Company began operations in a new 200,000 square foot
distribution center in Lebanon, Indiana. The facility, which is leased through
April 2007, redistributes bulk shipments and promotional merchandise to stores
in the Company's eastern sales districts. Future expansion of the facility is
being considered. This distribution facility replaced a 100,000 square foot
warehouse facility previously operated by the Company in the Milwaukee,
Wisconsin area.
Pamida also has a warehouse facility in Omaha which contains approximately
41,000 square feet of space and is located immediately adjacent to the Company's
general offices. This warehouse, which is owned by Pamida, is used for the
processing of merchandise to be returned to vendors and by the advertising
department in connection with its printing operations.
In addition to its retail stores, distribution centers and warehouse
facility, Pamida's tangible assets include inventories, warehouse and store
fixtures and equipment, merchandise handling equipment, office and data
processing equipment, motor vehicles and an airplane.
ITEM 3. LEGAL PROCEEDINGS.
Pamida is a party to a number of lawsuits incidental to its business, the
outcome of which, both individually and in the aggregate, is not expected to
have a material adverse effect on the Company's operations or financial
condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company is a wholly-owned subsidiary of Holdings. There is no market
for the Company's common equity. Because the Company pays dividends on its
common stock only to its parent corporation, no information is provided
concerning past dividend payments or anticipated future dividend payments.
ITEM 6. SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
PAMIDA, INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT OTHER DATA)
<S> <C> <C> <C> <C> <C>
Fiscal Year Ended
-------------------------------------------------------------------
February 1, February 2, January 28, January 29, January 30,
1998 1997 (1) 1996 1995 1994
----------- ----------- ----------- ----------- -----------
INCOME STATEMENT DATA:
Sales ............................... $ 657,017 $ 633,189 $ 736,315 $ 711,019 $ 656,910
Gross profit ........................ 161,935 154,090 177,688 177,367 158,906
Selling, general and
administrative expenses ........... 129,014 125,086 151,063 143,551 133,887
----------- ----------- ----------- ----------- -----------
Operating income .................... 32,921 29,004 26,625 33,816 25,019
Interest expense .................... 25,644 25,308 25,616 23,904 23,515
Long-lived asset write-off .......... - - 78,551 - -
Store closing costs ................. - - 21,397 - -
----------- ----------- ----------- ----------- -----------
Income (loss) before
provision for income taxes
and extraordinary item ............ 7,277 3,696 (98,939) 9,912 1,504
Income tax provision
(benefit) ......................... 644 - (6,412) 4,782 1,562
----------- ----------- ----------- ----------- -----------
Income (loss) before
extraordinary item ................ 6,633 3,696 (92,527) 5,130 (58)
Extraordinary item (2) .............. - - - - (4,943)
----------- ----------- ----------- ----------- -----------
Net income (loss) .................. $ 6,633 $ 3,696 $ (92,527) $ 5,130 $ (5,001)
=========== =========== =========== =========== ===========
BALANCE SHEET DATA:
Working capital ..................... $ 35,199 $ 28,645 $ 33,874 $ 46,684 $ 41,145
Total assets ........................ 260,843 269,152 258,470 354,309 314,816
Long-term debt (less current portion) 140,289 140,364 140,411 141,745 141,938
Obligations under capital
leases (less current portion) ..... 32,156 33,999 36,559 43,050 35,618
Common stockholder's
(deficit) equity .................. (50,897) (57,530) (61,226) 31,301 26,171
OTHER DATA:
Team members ........................ 5,600 5,700 7,200 7,200 6,100
Number of stores .................... 148 148 184 184 173
Retail square feet
(in millions) ..................... 4.41 4.35 5.22 5.09 4.68
</TABLE>
(1) Represents a 53-week year.
(2) In fiscal 1994, Pamida incurred an extraordinary charge of $4,943, net of
income tax benefit of $3,095, for the write-offs of unamortized deferred
financing costs and unamortized original issue discount and the payment of
redemption premiums relating to the early extinguishment of the Series A
and Series B Senior Subordinated Debentures and the Subordinated Debentures
of Pamida. This charge further included the write-off of unamortized
deferred financing costs relating to the early extinguishment of amounts
outstanding under Pamida's former bank credit agreement.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
PAMIDA, INC
MANAGEMENT'S DISCUSSION AND ANALYSIS
(DOLLAR AMOUNTS IN THOUSANDS)
YEAR ENDED FEBRUARY 1, 1998 COMPARED TO YEAR ENDED FEBRUARY 2, 1997
SALES - Total sales during the 52-week fiscal 1998 period increased by
$23,828, or 3.8%, from the 53-week fiscal 1997 period. On a 52 to 52-week basis,
total net sales increased by 5.2%. During fiscal 1998, sales in comparable
stores increased by $24,135, or 4.0%.
During fiscal 1998, the Company opened three new stores, of which one is
located in a new market and two were relocations; the Company also closed one
store (which will be replaced during fiscal 1999 by a new store in the same
market), resulting in a net increase in selling area during the fiscal year of
approximately 61,000 square feet to a total of approximately 4,408,000 square
feet.
The Company experienced sales increases in most merchandise categories
during fiscal 1998. The most significant increases occurred in pharmacy
prescriptions, housewares, toys, athletic shoes and team sports apparel. Other
categories experiencing notable gains were stationery, sporting goods,
appliances, paper and cleaning supplies and pets. The Company experienced sales
decreases in several categories. The largest dollar decreases were in the
automotive, mens' fashion apparel, jewelry and watches and juniors' apparel
categories.
GROSS PROFIT - Gross profit for the 52-week fiscal 1998 period increased by
$7,845, or 5.1%, compared to the 53-week fiscal 1997 period. As a percentage of
sales, gross profit improved to 24.6% from 24.3%. The Company's merchandise
gross margin as a percentage of sales decreased to 27.6% in fiscal 1998 from
27.8% in fiscal 1997. The decrease in merchandise gross margin percent of sales
was offset by substantial expense reductions in the warehouse and distribution
areas made possible by operating efficiencies gained largely from a new
warehouse management system implemented during fiscal 1997. During the prior
fiscal year, the Company incurred higher than normal labor cost in the warehouse
and distribution areas due to implementation issues related to the warehouse
management system. Total warehouse and distribution costs amounted to 2.8% of
sales compared to 3.3% last year.
SELLING, GENERAL AND ADMINISTRATIVE (SG&A) expense increased $3,928, or
3.1%, to $129,014 in fiscal 1998 from $125,086 in fiscal 1997. As a percentage
of sales, SG&A expense decreased to 19.6% from 19.8% last year. Most of the
total net increase in SG&A expense for the year was attributable to higher
corporate general and administrative expenses, primarily involving planned
increases in payroll and incentive compensation expenses. Store occupancy costs
increased by $1,030, but remained at 3.9% as a percentage of net sales for both
fiscal 1998 and 1997. Store payroll costs and controllable costs decreased by
$391 and $163, respectively, during fiscal 1998 as compared to last year. As a
percentage of net sales, store payroll costs and controllable costs decreased
from 8.0% to 7.7% and 3.0% to 2.9% for the fiscal periods ended 1998 and 1997,
respectively.
INTEREST expense increased by $336, or 1.3%, for fiscal 1998 compared to
fiscal 1997 because of higher outstanding balances on the revolving line of
credit resulting from higher investments in basic inventory during the year as
well as the funding of certain of the Company's information systems initiatives.
This increase was offset in part by decreased interest related to lower average
outstanding capitalized lease obligations in fiscal 1998 compared to fiscal
1997.
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. The Company expects that operations
in future periods will be taxed at a normal tax rate. 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.
YEAR ENDED FEBRUARY 2, 1997 COMPARED TO YEAR ENDED JANUARY 28, 1996
SALES - As discussed in Note L to the financial statements, the Company
closed forty stores at the end of fiscal 1996 in unprofitable or highly
competitive markets which did not fit the Company's niche market strategy.
Consequently, the Company experienced a planned decrease in total sales for
fiscal 1997 of $103,126 or 14.0% compared to fiscal 1996 due primarily to the
reduced number of stores. During fiscal 1997 the Company opened eight new
prototype stores, of which six are located in new markets and two were
relocations; the Company also closed two stores, resulting in a net increase in
selling area during the fiscal year of approximately 216,000 square feet (not
including changes relating to the forty stores closed as of fiscal year end
1996) to a total of 4,348,000 square feet. As of February 2, 1997, the Company's
store base included 35 of the Company's most recent store prototype, which
represented 28.7% of the Company's total selling square feet.
Comparable store sales during the 53-week fiscal 1997 period decreased by
$8,893 or 1.5% from the 52-week fiscal 1996 period. Comparable store sales on a
53-week to 53-week basis decreased by 2.6%. Sales were affected primarily by
slowed warehouse distributions to stores as a result of the implementation of a
new warehouse inventory management system initiated in the first quarter of
fiscal 1997. The slowed distributions caused a deterioration of merchandise
in-stock positions in most of the Company's stores, resulting in lost sales.
While implementation of the warehouse system was largely completed by August
1996, and in-stock positions at the stores improved thereafter, sales remained
below management expectations due to reduced customer traffic continuing in the
third and fourth quarters. Comparable sales also were affected during much of
the year by low-margin clearance sales in fiscal 1996 which were not necessary
at the same level in fiscal 1997. However, beginning late in the holiday
shopping season and continuing through fiscal year end, sales improved as the
Company demonstrated to customers its improved in-stock position in all product
categories.
The Company experienced substantial comparable store sales increases in
fiscal 1997 in several merchandise categories, the most dramatic of which were
in the pharmacy prescription, junior apparel, grocery and ready-to-wear areas.
Comparable store sales gains also were generated in the hosiery, team sports,
camera, stationery, health aids and bath categories. The Company experienced
comparable store sales decreases in several categories. The largest dollar
decreases on a comparable store basis were in the electronics, automotive,
misses bottoms, men's shoes, electrical and appliance areas. Management believes
that subtle adjustments made to the Company's softlines strategy at the end of
fiscal 1996 to meet customer demand for a deeper selection of basic apparel had
a positive impact on sales and margins in softlines during fiscal 1997.
GROSS PROFIT - Gross profit dollars were affected by the reduced number of
stores in operation during fiscal 1997 as compared to fiscal 1996. The Company's
merchandise gross profit as a percentage of sales improved to 27.8% in fiscal
1997 from 26.8% in fiscal 1996. However, this improvement was diluted by
additional costs related to the implementation of the new warehouse inventory
management system discussed above. Warehouse costs increased to $13,457 from
$11,066 last year and increased as a percent of sales to 2.1% from 1.5% last
year. Delivery costs decreased to $7,637 in fiscal 1997 from $8,845 last year
and amounted to 1.2% of sales in both years. Accordingly, gross profit decreased
by $23,598, or 13.3%, to $154,090 in fiscal 1997 from $177,688 in fiscal 1996
but, as a percentage of sales, increased to 24.3% in fiscal 1997 from 24.1% in
fiscal 1996.
SELLING, GENERAL AND ADMINISTRATIVE expense decreased $25,977, or 17.2%, to
$125,086 in fiscal 1997 from $151,063 in fiscal 1996. As a percentage of sales,
selling, general and administrative expense decreased to 19.8% from 20.5% last
year. This reduction was largely attributable to reductions in store level
expenses. Store payroll, controllable and occupancy expenses accounted for 64.2%
of the total decrease in selling, general and administrative expense and
decreased by 14.5%, 17.5% and 13.9%, respectively. Selling, general and
administrative expense also was positively impacted by a 28.9% reduction in
advertising costs which accounted for 18.2% of the gross decrease in selling,
general and administrative expense. All of these areas of expense were impacted
by the elimination of costs related to the forty stores which were closed as of
the end of fiscal 1996. Selling, general and administrative expense also was
impacted by an 11.0% decrease in corporate general and administrative costs
which accounted for 11.3% of the gross decreases in selling, general and
administrative expense. The major components of this decrease were decreases in
the net costs of insurance, professional fees, management bonuses and related
fringe benefits.
Selling, general and administrative expense also was positively impacted by
the elimination of amortization of goodwill and favorable leasehold interests
resulting from the write-off of these items in the fourth quarter of fiscal
1996. The decreases in selling, general and administrative expense were offset
by a $1,246 reduction in other income which was attributable largely to one-time
gains realized in fiscal 1996, primarily from the sale of idle transportation
company assets.
The Company is continuing to focus on controlling selling, general and
administrative expenses. Store operating expenses as a percent of sales are
anticipated to remain relatively constant in fiscal 1998. Certain expense
categories are anticipated to increase somewhat as a percent of sales due to
more normal clearance activity and expected increases in interest expense,
information systems costs, store payroll expenses (due to federally mandated
minimum wage increases) and incentive compensation. The Company expects to begin
to realize operating efficiencies from systems enhancements in the warehouse and
distribution areas in fiscal 1998 and in the merchandising areas beginning in
the second half of fiscal 1999. Further expense leveraging is expected in future
years through internal growth as well as the addition of new stores.
INTEREST expense increased marginally by $308 or 1.2% for fiscal 1997
compared to fiscal 1996. The increase in interest expense for fiscal 1997 was
attributable primarily to higher usage of the revolving line of credit. This
increase was largely offset by decreased interest related to lower average
outstanding capitalized lease obligations in fiscal 1997 compared to fiscal
1996.
INCOME TAX PROVISION - The Company has deferred tax assets related to
certain tax loss carryforwards which resulted from prior year store closing
charges. The Company has also recorded a valuation allowance related to these
assets. No provision for income taxes was recorded during fiscal 1997 as this
expense served to reduce the valuation allowance. The effective tax rate in
fiscal 1996 was 6.5% and was impacted by the non-deductible amortization and
write-off of goodwill and the reserves recorded to offset the deferred tax
assets.
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, while
fourth quarter sales (November through January) have represented approximately
29% of the full year's retail 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 provided by operating activities totaled $16,990 in
fiscal 1998, and funds used by operating activities totaled $11,577 in fiscal
1997. Funds provided from operations totaled $4,029 in fiscal 1996. The positive
change in cash flow from operating activities from fiscal 1997 to fiscal 1998
was primarily the result of improved operating results, a net decrease in
inventory and increases in operating and tax liabilities. The change in cash
flow from operating activities from fiscal 1996 to fiscal 1997 was primarily the
result of planned net increases in inventory and other operating assets and
decreases in accounts payable and other operating liabilities. These decreases
in cash flow were offset in part by changes in deferred income taxes.
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 from $70,000, which had
been the limit throughout fiscal 1997. Prior to March 17, 1997, borrowings under
the Agreement bore interest at a rate which was .75% per annum greater than the
applicable prime rate. Effective March 17, 1997, borrowings under the Agreement
bore interest at a rate which is tied to 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 Loan and Security 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-lease-back 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 $45,194 at February 1, 1998 and
$57,115 at February 2, 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 $172,445 at February 1, 1998 and $174,363 at February 2, 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 February 1, 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 repaid 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 has no remaining
obligations related to its preferred stock as of the end of fiscal 1998. The
Company paid Holdings $315 in fiscal 1996 under a tax-sharing agreement to
enable Holdings to pay quarterly dividends to its preferred stockholders. During
fiscal 1996, Holdings received $967 from the Company under a tax-sharing
agreement as a reimbursement for certain tax benefits derived by the Company.
Such remittance, along with $18 from the exercise of certain stock options, was
used by Holdings to redeem Subordinated Promissory Notes, to repay intercompany
balances of Holdings totaling $29, and to pay quarterly dividends on preferred
stock. 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 1997.
The Company made capital expenditures of $6,654 in fiscal 1998 compared to
$4,947 during fiscal 1997. The Company also made expenditures of $3,848 and
$3,680 in fiscal 1998 and 1997, respectively, related to information systems
software. The Company plans to open 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 1997 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,
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 but ultimately will need to explore 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.
YEAR 2000 COMPLIANCE
The Company has developed a comprehensive plan to mitigate the Company's
exposure to potential problems with its systems' ability to properly process
data beyond the calendar year 1999, which is commonly referred to as Year 2000
compliance. The Company has completed implementation of several new systems and
is at various stages of implementation of others which replace legacy systems.
The Company plans to complete installation of current releases or upgrades for
all of these systems no later than July, 1999 to help ensure that these systems
will be Year 2000 compliant. All of these systems have substantially improved
functionality over the Company's legacy systems which they replace and will,
therefore, be capitalized. Failure to implement such releases or upgrades, or
the failure of the vendors of the aforementioned software to have eliminated the
potential Year 2000 issues within the software, could materially and adversely
affect the Company's operations and financial results. The cost of directly
addressing Year 2000 compliance for legacy systems which are not planned to be
replaced by new systems is expensed as incurred and is not expected to be
material.
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, 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.
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.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
PAMIDA, INC.
INDEPENDENT AUDITORS' REPORT
INDEPENDENT AUDITORS' REPORT
Board of Directors
Pamida Inc.
Omaha, Nebraska
We have audited the accompanying consolidated balance sheets of Pamida,
Inc. (a wholly-owned subsidiary of Pamida Holdings Corporation) and subsidiaries
as of February 1, 1998 and February 2, 1997, and the related consolidated
statements of operations, common stockholder's equity and cash flows for the
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits. The consolidated statements of
operations, common stockholder's equity and cash flows for the year ended
January 28, 1996, were audited by other auditors, whose report, dated March 26,
1996, expressed an unqualified opinion on those statements and included an
explanatory paragraph that described the adoption of Statement of Financial
Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such 1998 and 1997 financial statements present fairly, in
all material respects, the financial position of Pamida, Inc. and subsidiaries
as of February 1, 1998 and February 2, 1997, and the results of their operations
and their cash flows for the years then ended in conformity with generally
accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Omaha, Nebraska
March 5, 1998
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors
Pamida, Inc.
Omaha, Nebraska
We have audited the accompanying consolidated statements of operations, common
stockholder's equity and cash flows of Pamida, Inc. and Subsidiaries for the
year ended January 28, 1996. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides reasonable a basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the results of operations and cash flows of
Pamida, Inc. and Subsidiaries for the year ended January 28, 1996, in conformity
with generally accepted accounting principles.
As discussed in Note K to the consolidated financial statements, the Company
adopted Statement of Financial Accounting Standards No 121, "Accounting for the
Impairment of' Long-Lived Assets and for Long-Lived Assets To Be Disposed Of."
/s/ Coopers & Lybrand L.L.P.
Chicago, Illinois
March 26, 1996
<TABLE>
<CAPTION>
PAMIDA , INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollar amounts in thousands)
<S> <C> <C> <C>
Fiscal Year Ended
---------------------------------------
February 1, February 2, January 28,
1998 1997 1996
(52 Weeks) (53 Weeks) (52 Weeks)
----------- ----------- -----------
Sales............................................ $ 657,017 $ 633,189 $ 736,315
Cost of goods sold............................... 495,082 479,099 558,627
----------- ----------- -----------
Gross profit..................................... 161,935 154,090 177,688
Expenses:
Selling, general and administrative............ 129,014 125,086 151,063
Interest....................................... 25,644 25,308 25,616
Long-lived asset write-off..................... - - 78,551
Store closing costs............................ - - 21,397
----------- ----------- -----------
154,658 150,394 276,627
----------- ----------- -----------
Income (loss) before provision for income taxes.. 7,277 3,696 (98,939)
Income tax provision (benefit)................... 644 - (6,412)
----------- ----------- -----------
Net income (loss)............................... $ 6,633 $ 3,696 $ (92,527)
=========== =========== ===========
See notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
PAMIDA , INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands)
<S> <C> <C>
February 1, February 2,
ASSETS 1998 1997
Current assets: ----------- -----------
Cash...................................................... $ 6,816 $ 6,973
Accounts receivable, less allowance for doubtful
accounts of $50 in both years............................. 8,901 6,935
Merchandise inventories..................................... 152,927 157,490
Prepaid expenses............................................ 2,838 2,993
Property held for sale...................................... - 1,748
----------- -----------
Total current assets...................................... 171,482 176,139
Property, buildings and equipment, net........................ 40,812 42,403
Leased property under capital leases, less accumulated
amortization of $15,387 and $14,604, respectively........... 25,181 27,713
Deferred financing costs...................................... 2,755 3,124
Other assets.................................................. 20,613 19,773
----------- -----------
$ 260,843 $ 269,152
=========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable............................................ $ 47,687 $ 54,245
Loan and security agreement................................. 45,194 57,115
Accrued compensation........................................ 5,768 3,860
Accrued interest............................................ 6,668 6,857
Store closing reserve....................................... 1,564 4,521
Other accrued expenses...................................... 12,067 10,112
Income taxes - deferred and current payable................. 15,445 8,956
Current maturities of long-term debt........................ 47 47
Current obligations under capital leases.................... 1,843 1,781
----------- -----------
Total current liabilities................................. 136,283 147,494
Long-term debt, less current maturities....................... 140,289 140,364
Obligations under capital leases, less current obligations.... 32,156 33,999
Other long-term liabilities................................... 3,012 4,825
Commitments and contingencies (Note J)........................ - -
Common stockholder's equity:
Common stock, $.01 par value; 10,000 shares authorized;
1,000 shares issued and outstanding, respectively ....... - -
Additional paid-in capital.................................. 17,000 17,000
Accumulated deficit......................................... (67,897) (74,530)
----------- -----------
Total common stockholder's deficit........................ (50,897) (57,530)
----------- -----------
$ 260,843 $ 269,152
=========== ===========
See notes to consolidated financial statements.
</TABLE>
PAMIDA , INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDER'S EQUITY
(Dollar amounts in thousands)
Retained
Additional Earnings
Common Paid-in (Accumulated
Stock Capital Deficit)
----------- ----------- -----------
Balance at January 29, 1995....... $ - $ 17,000 $ 14,301
Net loss...................... - - (92,527)
----------- ----------- -----------
Balance at January 28, 1996....... - 17,000 (78,226)
Net income.................... - - 3,696
----------- ----------- -----------
Balance at February 2, 1997....... - 17,000 (74,530)
Net income.................... - - 6,633
----------- ----------- -----------
Balance at February 1, 1998....... $ - $ 17,000 $ (67,897)
=========== =========== ===========
See notes to consolidated financial statements.
<TABLE>
<CAPTION>
PAMIDA , INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar amounts in thousands)
<S> <C> <C> <C>
Fiscal Year Ended
---------------------------------------
February 1, February 2, January 28,
1998 1997 1996
(52 Weeks) (53 Weeks) (52 Weeks)
----------- ----------- -----------
Cash flows from operating activities:
Net income (loss) .................................. $ 6,633 $ 3,696 $ (92,527)
----------- ----------- -----------
Adjustments to reconcile net income (loss) to net cash
from operating activities:
Depreciation and amortization.................... 12,585 11,647 15,335
Provision (credit) for LIFO inventory valuation.. 606 874 (585)
(Credit) provision for deferred income taxes..... (3,297) 3,305 (6,647)
Gain on disposal of assets....................... (150) (56) (982)
Deferred retirement benefits..................... (142) (125) 13
Long-lived assets write-off ..................... - - 78,551
Store closing costs.............................. (3,457) (3,726) 21,397
Decrease (increase) in merchandise inventories... 3,957 (7,527) 4,532
Increase in other operating assets............... (5,231) (5,630) (3,840)
Decrease in accounts payable..................... (6,558) (8,842) (6,749)
Increase (decrease) in income taxes payable...... 7,781 (3,250) (4,124)
Increase (decrease in other operating liabilities 4,263 (1,943) (345)
----------- ----------- -----------
Total adjustments 10,357 (15,273) 96,556
----------- ----------- -----------
Net cash from operating activities................. 16,990 (11,577) 4,029
----------- ----------- -----------
Cash flows from investing activities:
Capital expenditures................................. (6,654) (4,947) (9,265)
Proceeds from disposal of assets..................... 1,701 917 1,163
Principal payments received on notes receivable...... 18 16 15
Assets acquired for sale............................. - (391) -
Changes in constructed stores to be refinanced
through lease financing............................ 1,790 (5,845) (4,412)
----------- ----------- -----------
Net cash from investing activities................. (3,145) (10,250) (12,499)
----------- ----------- -----------
Cash flows from financing activities:
Borrowings under loan and security agreement, net.... (11,921) 25,527 10,986
Principal payments on other long-term debt........... (75) (1,335) (193)
Payments for deferred finance costs.................. (225) (54) (13)
Principal payments on capital lease obligations...... (1,781) (2,636) (2,071)
----------- ----------- -----------
Net cash from financing activities................. (14,002) 21,502 8,709
----------- ----------- -----------
Net (decrease) increase in cash.................... (157) (325) 239
Cash at beginning of year.......................... 6,973 7,298 7,059
----------- ----------- -----------
Cash at end of year................................ $ 6,816 $ 6,973 $ 7,298
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid (received) during the year for:
Interest........................................... $ 25,834 $ 24,804 $ 25,584
Income taxes:
Payments to taxing authorities................... 112 386 3,622
Payments to Pamida Holdings Corporation for
benefit of loss from operations................ - - 967
Refunds received from taxing authorities........... (3,952) (442) (231)
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Capital lease obligations incurred when the
Company entered into lease agreements for
new store facilities and equipment................. $ - $ 11 $ 620
Capital lease obligations terminated................. - - 154
See notes to consolidated financial statements.
</TABLE>
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Pamida, Inc. (the "Company") became a wholly-owned subsidiary of Pamida
Holdings Corporation ("Holdings") through a merger in a leveraged buy-out
transaction which was consummated on July 29, 1986.
CONSOLIDATION - The consolidated financial statements include the results
of operations, account balances and cash flows of the Company and its
wholly-owned subsidiaries, Seaway Importing Company ("Seaway") and Pamida
Transportation Company. All material intercompany accounts and transactions have
been eliminated in consolidation.
FISCAL YEAR - All references in these financial statements to fiscal years
are to the calendar year in which the fiscal year ends.
LINE OF BUSINESS - The Company is engaged in the operation of general
merchandise retail stores in a fifteen-state Midwestern, North Central and Rocky
Mountain area. Seaway imports primarily seasonal merchandise for sale to Pamida.
Pamida Transportation Company operated as a contract carrier for Pamida until
July 1995, at which time independent contractors were engaged to provide all
transportation needs of the Company. Because of the similarity in nature of the
Company's businesses, the Company considers itself to be a single business
segment.
REVENUE RECOGNITION - Pamida operates its stores on a self-service,
primarily cash-and-carry basis. Because of the insignificance of sales returns,
revenue is recognized at the point-of-sale without allowance for returns.
CASH FLOW REPORTING - For purposes of the statement of cash flows, the
Company considers all temporary cash investments purchased with a maturity of
three months or less to be cash equivalents. There were no temporary investments
at February 1, 1998 and February 2, 1997.
MERCHANDISE INVENTORIES - Substantially all of the Company's inventory is
stated at the lower of cost (last-in, first-out) or market.
PROPERTY, BUILDINGS AND EQUIPMENT - Property, buildings and equipment are
stated at cost and depreciated on the straight-line method over the estimated
useful lives. Buildings and building improvements are generally depreciated over
8-40 years, while store, warehouse and office equipment, vehicles and aircraft
equipment are generally depreciated over 3-10 years. Leasehold improvements are
depreciated over the life of the lease or the estimated life of the asset,
whichever is shorter.
LEASED PROPERTY UNDER CAPITAL LEASES - Noncancellable financing leases are
capitalized at the estimated fair value of the leasehold interest and are
amortized on the straight-line method over the terms of the leases.
LONG-LIVED ASSETS - When facts and circumstances indicate potential
impairment, the Company evaluates the recoverability of asset carrying values,
including associated goodwill, using estimates of future cash flows over
remaining asset lives. When impairment is indicated, any impairment loss is
measured by the excess of carrying values over fair values.
DEFERRED FINANCING COSTS AND ORIGINAL ISSUE DEBT DISCOUNT - Deferred
financing costs are being amortized using the straight-line method over the
terms of the issues which approximates the effective interest method. Original
issue debt discount is being amortized using the effective interest method over
the terms of the issues.
ADVERTISING COSTS - Advertising costs are expensed as incurred and totaled
$10,468, $11,653 and $16,381 for fiscal years 1998, 1997 and 1996, respectively.
PRE-OPENING EXPENSES - Costs related to opening new stores are expensed as
incurred.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
NEW ACCOUNTING PRONOUNCEMENTS - In June 1997, the FASB adopted SFAS No.
130, "Reporting Comprehensive Income", and No. 131, "Disclosures about Segments
of an Enterprise and Related Information". SFAS 130 establishes standards for
reporting and display of comprehensive income and its components in a full set
of general purpose financial statements. This statement is effective for the
Company's fiscal 1999 financial statements. SFAS 131, also effective in 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 the statements
and any incremental disclosure required is expected to be minimal.
RECLASSIFICATIONS - Certain reclassifications have been made to prior
years' financial statements to conform to the current year presentation.
B. EXCHANGE OF DEBT AND PREFERRED STOCK FOR COMMON STOCK
On November 14, 1997, the stockholders of Holdings approved various
proposals necessary to effect the payment of all of Holdings' outstanding Senior
Promissory Notes, Subordinated Promissory Notes and Junior Subordinated
Promissory Notes (collectively, the "Notes") with common stock of Holdings and
to change and reclassify all of Holdings' outstanding preferred stock into
common stock.
C. MERCHANDISE INVENTORIES
Total inventories would have been higher at February 1, 1998 and February
2, 1997 by $7,180 and $6,574, respectively, had the FIFO (first-in, first-out)
method been used to determine the cost of all inventories. On a FIFO basis, net
income (loss) would have been $7,239, $4,570 and $(93,112), respectively, for
fiscal years 1998, 1997, and 1996. During fiscal years 1998, 1997, and 1996,
certain inventory quantities were reduced resulting in a liquidation of certain
LIFO layers carried at costs which were lower than the cost of current
purchases, the effect of which increased net income by $263, $116, and $125,
respectively.
D. PROPERTY, BUILDINGS AND EQUIPMENT
Property, buildings and equipment consists of:
Feb. 1, Feb. 2,
1998 1997
-------- --------
Land and land improvements.................... $ 4,030 $ 4,013
Buildings and building improvements........... 22,183 22,076
Store, warehouse and office equipment......... 59,842 59,668
Vehicles and aircraft equipment............... 1,551 1,513
Leasehold improvements........................ 16,944 16,497
-------- --------
104,550 103,767
Less accumulated depreciation and amortization 63,738 61,364
-------- --------
$ 40,812 $ 42,403
======== ========
E. OTHER ASSETS
Other assets consist of:
Feb. 1, Feb. 2,
1998 1997
-------- --------
Constructed stores to be refinanced
through lease financing..................... $ 7,969 $ 10,257
Unamortized software costs, net.............. 10,435 7,541
Other........................................ 2,209 1,975
-------- --------
$ 20,613 $ 19,773
======== ========
The Company contracted for the construction of two and five store locations
during the periods ended January 28, 1996 and February 2, 1997, respectively.
The construction costs capitalized are recorded as other long-term assets during
the period of construction and for the period following completion of
construction to the date of sale of such stores through a lease financing
arrangement. The construction costs for five stores remain in Other Assets at
February 1, 1998. The cost of construction has been financed through the
Company's working capital and cash flow from operations. The Company expects to
obtain lease financing under favorable terms for each of the constructed stores
in the near future.
F. FINANCING AGREEMENTS
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 from $70,000, which had
been the limit throughout fiscal 1997. Prior to March 17, 1997, borrowings under
the Agreement bore interest at a rate which was 0.75% per annum greater than the
applicable prime rate. Effective March 17, 1997, borrowings under the Agreement
bear interest at a rate which is tied to the applicable prime rate or the London
Interbank Offered Rate (LIBOR), generally at the Company's discretion. The
amounts the Company is permitted to borrow under the Agreement are determined by
a formula based upon the amount of the Company's eligible inventory from time to
time.
Borrowings of the Company under the Agreement are secured by security
interests in substantially all of the current assets (including inventory) of
the Company and by liens on certain real estate interests and other property of
the Company. Holdings and two subsidiaries of the Company have guaranteed
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 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.
The maximum amount of borrowings under the Agreement during fiscal 1998 and
1997 was $66,461 and $69,256, respectively. The weighted average amounts of
borrowings under the Agreement for fiscal 1998 and 1997 were $52,869 and
$43,002, respectively; and the weighted average interest rates were 9.8% and
10.0%, respectively.
Long-term debt consists of:
Feb. 1, Feb. 2,
1998 1997
-------- --------
Senior Subordinated Notes, 11.75%,
due March 2003.............................. $140,000 $140,000
Industrial development bond, 5.5%, due in
monthly installments through 2005........... 336 411
-------- --------
140,336 140,411
Less current maturities....................... 47 47
-------- --------
$140,289 $140,364
======== ========
As of February 1, 1998, the fair value of long-term debt was $144,489
compared to its recorded value of $140,289. The fair value of long-term debt was
estimated based on quoted market values for the notes. The aggregate maturities
of long-term debt totals $47 in each of the next five fiscal years.
The Senior Subordinated Notes are unsecured and are subordinate borrowings
under the Agreement. Presently, under the most restrictive debt covenants, the
Company is not permitted to pay dividends on its common stock.
G. INCOME TAXES
Components of the income tax provision (benefit) from continuing operations
are as follows:
Year Ended
----------------------------
Feb. 1, Feb.2, Jan. 28,
1998 1997 1996
Current: ------- ------- -------
Federal.................................... $ 3,132 $(3,436) $ (212)
State...................................... 809 131 (23)
------- ------- -------
3,941 (3,305) (235)
Deferred: ------- ------- -------
Federal.................................... (1,616) 3,189 (5,865)
State...................................... (330) 116 (782)
Utilization of tax
benefit carryforward....................... 1,059 - -
Change in beginning of year
valuation allowance ....................... (2,410) - -
------- ------- -------
(3,297) 3,305 (6,647)
------- ------- -------
Total benefit from continuing operations..... $ 644 $ - $(6,412)
======= ======= =======
The differences between the U.S. Federal statutory tax rate and the
Company's effective tax rate are as follows:
Year Ended
----------------------------
Feb. 1, Feb. 2, Jan. 28,
1998 1997 1996
------- ------- -------
Statutory rate............................... 34.0% 34.0% (34.0)%
State income tax effect...................... 4.3 4.4 (1.2)%
Amortization of the excess of cost over
net assets acquired........................ - - 24.8
Valuation allowance.......................... (29.9) (39.5) 3.8
Other........................................ .4 1.1 0.1
------- ------- -------
8.8% 0.0% (6.5)%
======= ======= =======
Significant temporary differences between reported and taxable income that
give rise to deferred tax assets and liabilities were as follows:
Feb. 1, Feb. 2,
1998 1997
Net current deferred tax liabilities: ------ -------
Inventories.............................. $13,910 $15,302
Prepaid insurance........................ 172 210
Other.................................... 423 412
Post employment health costs............. (135) (189)
Accrued expenses......................... (2,192) (941)
Store closing costs...................... (1,246) (2,570)
------- -------
Net current deferred tax liabilities 10,932 12,224
------- -------
Net long-term deferred tax liabilities:
Property, buildings and equipment........ 2,096 2,862
Other.................................... 1,836 1,436
Valuation allowance...................... - 2,410
Capital leases........................... (3,377) (3,089)
Tax benefit carryforward................. (800) (1,859)
------- -------
Net long-term deferred tax
(asset) liabilities ....................... (245) 1,760
------- -------
Net total deferred tax liabilities........... $10,687 $13,984
======= =======
Net long-term deferred tax (asset) liabilities are classified with other
assets or other long-term liabilities in the consolidated balance sheets of the
Company. As of February 1, 1998 the Company had alternative minimum tax credit
carryforwards totaling $800, which do not expire.
H. LEASES
The majority of store facilities are leased under noncancelable leases.
Substantially all of the leases are net leases which require the payment of
property taxes, insurance and maintenance costs in addition to rental payments.
Certain leases provide for additional rentals based on a percentage of sales and
have renewal options for one or more periods totaling from one to twenty years.
At February 1, 1998 the future minimum lease payments under capital and
operating leases with rental terms of more than one year amounted to:
Fiscal Year Ending Capital Operating
Leases Leases
-------- --------
1999....................................... $ 5,659 $ 10,996
2000....................................... 5,442 8,867
2001....................................... 5,352 7,554
2002....................................... 5,267 6,788
2003....................................... 5,255 6,076
Later years................................ 36,129 61,356
-------- --------
Total minimum obligations.................. 63,104 $101,637
Less amount representing interest.......... 29,105 ========
--------
Present value of net minimum lease payments 33,999
Less current portion....................... 1,843
--------
Long-term obligations...................... $ 32,156
========
The minimum rentals under operating leases have not been reduced by minimum
sublease rentals of $157 due in the future under noncancelable subleases.
Total rental expense related to all operating leases (including those with
terms less than one year) is as follows:
Year Ended
----------------------------
Feb. 1, Feb. 2, Jan. 28,
1998 1997 1996
------- ------- -------
Minimum rentals.............................. $11,669 $10,938 $11,715
Contingent rentals........................... 272 258 399
Less sublease rental income.................. (705) (735) (852)
------- ------- -------
$11,236 $10,461 $11,262
======= ======= =======
I. SAVINGS AND OTHER POSTEMPLOYMENT BENEFIT PLANS
Pamida has adopted a 401(k) savings plan that covers all employees who are
21 years of age with one or more years of service. Participants can contribute
from 1% to 15% of their pre-tax compensation. Pamida has currently elected to
match 50% of the participant's contribution up to 5% of compensation. Pamida's
savings plan contribution expenses for fiscal years 1998, 1997, and 1996 were
$765, $770, and $749, respectively.
Prior to December 1993, the Company had agreed to continue to provide
health insurance coverage and pay a portion of the health insurance premiums
until age 65 for individuals who retire if the individual was eligible to
participate in the plan, had attained age 55, had completed ten or more
consecutive years of service and elected to continue on the Company plan. The
plan is unfunded, and the Company had the right to modify or terminate these
benefits. In December 1993, the Company amended the Plan to no longer offer
postretirement health benefits for employees retiring after February 1, 1994.
The components of periodic expense for postretirement benefits in fiscal
1998, 1997 and 1996 were as follows:
Feb. 1, Feb. 2, Jan. 28,
1998 1997 1996
------- ------- -------
Annual postretirement benefit expense:
Interest cost............................... $ 11 $ 16 $ 32
Amortization of unrecognized net obligations (73) (44) (6)
------- ------- -------
Annual postretirement benefit (income) expense $ (62) $ (28) $ 26
======= ======= =======
The accumulated postretirement benefit obligation consists of:
Feb. 1, Feb. 2,
1998 1997
------- -------
Accumulated postretirementbenefit obligation $ 163 $ 194
Unrecognized gain........................... 189 299
------- -------
Accrued expense............................. $ 352 $ 493
======= =======
A 5% increase in the cost of covered health care benefits was assumed for
both fiscal 1998 and 1997. The rate of 5% is assumed to remain level after
fiscal 1998. Assuming a 1% increase in the health care trend rate, the annual
postretirement benefit expense would remain the same for both fiscal 1998 and
1997, and the unfunded accumulated postretirement benefit obligation would
increase by $2 and $4 for fiscal 1998 and 1997, respectively. The weighted
average discount rate used in determining the accumulated postretirement benefit
obligation was 7.0% for both fiscal 1998 and 1997.
J. COMMITMENTS AND CONTINGENCIES
The Company has employment agreements with three key executive officers
which expire in 2000 and 2001. In addition to a base salary, the agreements
provide for a bonus to be paid if certain Company performance goals are
achieved. Also, in March 1997, the Board of Directors of Holdings approved a
long-term incentive compensation program in order to enhance retention of
certain key members of management. Payout under such program is tied to
continued employment and future Holdings common stock price appreciation.
During fiscal 1996, the Company paid $967 to Holdings as a reimbursement
for certain tax benefits derived by the Company. Such remittance, along with $18
from the exercise of certain Holdings stock options, was used by Holdings to
redeem Subordinated Promissory Notes, to repay to the Company intercompany
balances totaling $29, and to pay quarterly dividends on preferred stock
totaling $315.
On February 1, 1998, the Company had standby letters of credit outstanding
totaling $2,379 related to the Company's self-insured retention of worker's
compensation liabilities and future rental payments on a warehouse. Additional
letters of credit outstanding totaling $5,017 were committed for purchases of
merchandise inventory.
K. IMPAIRMENT OF LONG-LIVED ASSETS RECORDED IN FISCAL 1996
During fiscal 1996, weak trends in the retail industry combined with
increasing competition lowered the operating results of the Company. Therefore,
during the fourth quarter of fiscal 1996, management reviewed its expectations
for near- and long-term performance of the Company and revised its earnings
projections to reflect developing and projected trends, primarily in
comparable-store-sales growth, gross margins, operating expenses and interest
expenses. Consequently, the recoverability of the Company's long-lived assets
was also reassessed.
In the fourth quarter of fiscal 1996, the Company adopted Statement of
Financial Accounting Standards No. 121 "Accounting For the Impairment of
Long-Lived Assets and Long-Lived Assets to Be Disposed Of" (SFAS 121). This
financial accounting standard requires the Company to perform an analysis of the
recoverability of the net book value of long-lived assets. The Company analyzed
cash flows on an individual store basis to assess recoverability of store level
long-lived assets including allocated goodwill.
As a result of this analysis, impairment was indicated at certain stores,
and a noncash pre-tax charge was recorded as illustrated in the table below. The
impairment losses were based on fair value which was determined through
discounted cash flows for the particular stores utilizing a rate commensurate
with the associated risks. The effect of this accounting change was to increase
the net loss for the year by $24,693.
The Company also analyzed the value of its remaining goodwill and favorable
leasehold interests not impaired under the store-level SFAS 121 analysis using
its historical method under Accounting Principles Board Opinion No. 17 (APB 17)
and determined that such remaining amounts also were impaired. For this analysis
the value of the goodwill and favorable leasehold interests was determined by
projecting aggregate net income and adjusting it by adding back amortization of
intangible assets. With respect to the projections of net income used to
evaluate intangible assets impairment, management made several assumptions in
projecting their best estimate of the results of future operations of the
Company. The most significant assumptions were an estimated remaining useful
life of goodwill of fifteen years, modest annual comparable store sales growth,
gross margin rates consistent with those experienced over the past fiscal year
in the stores not being closed, an annual expense escalation consistent with
recent inflation trends and the ability to refinance debt maturities as they
come due.
These assumptions resulted in aggregate undiscounted adjusted net income of
Holdings for the fifteen-year forecast period of approximately $5,186, which
reflects aggregate pre-tax interest expense of approximately $398,000 payable in
cash and, at the Holdings level, $86,000 payable "in kind" (PIK). The $5,186 of
aggregate adjusted net income for the fifteen-year forecast period also
reflected projected adjusted net losses for Holdings for fiscal 1997 of $4,522,
which included cash interest expense of $26,242 and PIK interest of $4,453, and
for fiscal 1998 of $2,863, which included cash interest expense of $26,581 and
PIK interest of $5,121. For fiscal 1999, Holdings projected adjusted net income
of approximately $967, which included cash interest expense of approximately
$26,581 and PIK interest of $5,889. Due to the uncertainty of projections beyond
1999, this level of adjusted net income was assumed to continue for each of the
remaining fiscal years in the projection period. As a result of this evaluation
in fiscal 1996, management concluded that the remaining goodwill and favorable
leasehold interests were fully impaired.
Pre-Tax Components of Long-Lived Asset Write-Off As Reflected in the
Statement of Operations for the year ended January 28, 1996:
SFAS APB
121 17 Total
------- ------- -------
Goodwill.................................... $20,607 $49,406 $70,013
Favorable leasehold interests............... 4,245 1,917 6,162
Property, buildings and equipment........... 2,376 - 2,376
------- ------- -------
Total....................................... $27,228 $51,323 $78,551
======= ======= =======
The goodwill was originally recorded in July 1986 when The Company was
acquired by Pamida Holdings Corporation through a leveraged buy-out and
represented the excess of the purchase price over the fair value of the net
assets acquired. Goodwill had been amortized on a straight-line basis over a
forty-year period but, due to the trends cited above, its estimated remaining
useful life was adjusted to fifteen years during the fourth quarter of fiscal
1996.
L. STORE CLOSINGS IN FISCAL 1996
As discussed in Note K above, the Company's operating performance during
fiscal 1996 was below plan. Management's analysis of individual stores'
operations and cash flows resulted in the identification of forty unprofitable
or competitive market stores which did not fit the Company's niche market
strategy. Consequently, a charge was recorded at January 28, 1996 as indicated
below to cover the costs necessary to close these stores. The Company received
positive net cash flow from closing the stores due to cash generated from the
disposition of related inventories. The amounts the Company will ultimately
realize from the disposal of assets or pay on the resolution of liabilities may
differ from the estimated amounts utilized in arriving at the income statement
effect.
Pre-Tax Components of fiscal 1996 Store Closing Costs
Income
Statement
Effect
---------
Real estate exit costs and write-off
of property, buildings, and equipment........ $ 11,455
Inventory liquidation.......................... 9,080
Professional charges........................... 314
Severance and other costs and fees............. 548
---------
Totals......................................... $ 21,397
=========
The store closing reserve balance as of January 28, 1996 included amounts
related to real estate, inventory, severance, professional fees and other costs
of closing the forty stores. The liquidation of the closing stores inventory was
completed in the second quarter of fiscal 1997. All known ancillary costs of the
store closings have been paid except those related to the remaining real estate.
During fiscal years 1997 and 1998, the Company negotiated settlements on
twenty-five closed store properties which had been leased, three which had been
subleased, and sold eight closed store properties which had been owned. As of
February 1, 1998, the Company remains liable for lease obligations on seven
closed store properties. The Company anticipates that final disposition of the
remaining obligations will be completed in fiscal 1999 and 2000. There were no
adjustments made during fiscal 1998 and 1997 to the store closing reserve other
than cash inflows and outflows related to the store closings.
The store closing reserve is presented in the balance sheets as follows:
Feb. 1, Feb. 2,
1998 1997
------- -------
Store closing reserve (short-term).... $ 1,564 $ 4,521
Amount included in other
long-term liabilities............... 1,690 2,190
------- -------
Total................................. $ 3,254 $ 6,711
======= =======
M. SUPPLEMENTAL FINANCIAL INFORMATION - CAPITALIZATION OF PAMIDA HOLDINGS
CORPORATION
The capitalization of Pamida Holdings Corporation is as follows:
Feb. 1, Feb. 2,
1998 1997
-------- --------
Long-term debt:
Senior promissory notes, 15.5%, interest
paid-in-kind quarterly, unsecured............ $ - $ 4,926
Subordinated promissory notes, 16%, interest
paid-in-kind quarterly, unsecured............ - 13,454
Junior subordinated promissory notes, 16.25%,
net of unamortized discount of $0 and $878,
interest paid-in-kind quarterly, unsecured... - 9,256
-------- --------
- 27,636
-------- --------
Preferred stock subject to mandatory redemption:
16-1/4% senior cumulative preferred stock,
$1 par value; 514 shares authorized; 0 and 514
shares issued and outstanding................ - 514
14-1/4% junior cumulative preferred stock, $1
par value; 1,627 and 6,986 shares authorized;
0 and 1,627 shares issued and outstanding;
redemption amount of $0 and $1,627, less
unamortized discount......................... - 1,361
-------- --------
- 1,875
-------- --------
Common stockholders' equity:
Common stock, $.01 par value; 25,000,000
and 10,000,000 shares authorized; 5,970,439
and 5,004,942 shares issued and outstanding.. 60 50
Nonvoting common stock, $.01 par value;
4,000,000 and 2,000,000 shares authorized;
3,050,473 and 0 shares issued and outstanding 30 -
Additional paid-in capital..................... 30,586 968
Accumulated deficit............................ (82,951) (88,321)
-------- --------
(52,275) (87,303)
-------- --------
Total capitalization....................... $(52,275) $(57,792)
======== ========
The promissory notes were amended effective December 1, 1992 to provide
that until the obligations of Holdings and the Company under certain credit
agreements have been paid in full the quarterly interest payments on the notes
will be paid in kind by increasing the principal amount of each note on the
applicable quarterly payment date by the amount of accrued interest then being
paid in kind. Interest on the notes paid in kind accrued at a rate which, in
each case, was two percentage points higher than the applicable cash interest
rate. The notes were paid in full on November 18, 1997, by the issuance of
shares of common stock of Holdings.
The preferred stock, including accrued dividends thereon, was changed and
reclassified into common stock on November 18, 1997.
N. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of the quarterly results of operations for the
years ended February 1, 1998 and February 2, 1997:
<TABLE>
<S> <C> <C> <C> <C> <C>
May 5, August 3, November 2, February 1,
Fiscal 1998 1997 1997 1997 1998 Year
----------------- ----------- ----------- ----------- ----------- -----------
Sales............. $ 144,564 $ 163,217 $ 158,749 $ 190,487 $ 657,017
Gross profit...... $ 33,268 $ 41,502 $ 37,854 $ 49,311 $ 161,935
Net (loss) income. $ (4,246) $ 1,816 $ 1,651 $ 7,412 $ 6,633
April 28, July 28, October 27, February 2,
Fiscal 1997 1996 1996 1996 1997 Year
------------------ ----------- ----------- ----------- ----------- -----------
Sales............. $ 131,786 $ 155,817 $ 151,980 $ 193,606 $ 633,189
Gross profit...... $ 31,575 $ 37,096 $ 36,446 $ 48,973 $ 154,090
Net (loss) income. $ (3,711) $ (215) $ 1,313 $ 6,309 $ 3,696
</TABLE>
Fourth quarter fiscal 1998 net income was favorably impacted by a LIFO
benefit of $110 while the fourth quarter fiscal 1997 net income was unfavorably
impacted by a LIFO provision of $424.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
The information required by this item has been previously reported in the
Form 8-K Current Report of the Company dated October 16, 1996.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The directors of the Company are Steven S. Fishman, Frank A. Washburn, and
George R. Mihalko. The term of office of the directors of the Company is for one
year and until their respective successors are elected. Messrs. Fishman and
Washburn have been directors of the Company since 1993. Mr. Mihalko has been a
director of the Company since 1996. Messrs. Fishman, Washburn, and Mihalko
receive no compensation other than their regular compensation as officers and
employees of the Company for serving as directors of the Company.
Set forth below are the names, ages and positions with the Company of the
directors and executive officers of the Company:
Name Age Position
- ------------------ --- --------------------------------
Steven S. Fishman 47 Chairman of the Board, President,
Chief Executive Officer
and Director
Frank A. Washburn 49 Executive Vice President , Chief
Operating Officer and Director
Stephen D. Robinson 43 Senior Vice President-General
Merchandise Manager (Softlines)
George R. Mihalko 43 Senior Vice President, Chief
Financial Officer and Treasurer
Donald Hendricksen 47 Senior Vice President-General
Merchandise Manager (Hardlines)
Paul L. Knutson 40 Senior Vice President -
Human Resources
Kurt Streitz 49 Senior Vice President -
Chief Information Officer
Robert C. Hafner 42 Senior Vice President -
Marketing and Business Development
Steven S. Fishman has served as President and Chief Executive Officer of
the Company since April 1993 and as Chairman of the Board of the Company since
August 1993. From 1988 to March 1993, Mr. Fishman was employed by Caldor, Inc.
as Senior Vice President and General Merchandise Manager-Homelines.
Frank A. Washburn has served as Chief Operating Officer of the Company
since March 1997, and Executive Vice President-Corporate Operations of the
Company since February 1995, having previously served as Senior Vice
President-Human Resources, Real Estate and Store Development of the Company
since 1993 and as Vice President-Human Resources of the Company from 1987 to
1993. Mr. Washburn joined the Company's predecessor in 1965.
Stephen D. Robinson has served as Senior Vice President-General Merchandise
Manager of the Company since he joined the Company in September 1993. From
February 1992 to September 1993, Mr. Robinson served as Vice President of Sales
and Marketing for Benchmark Home Products; from January 1991 to February 1992,
Mr. Robinson was employed by Caldor, Inc. as an Operating Vice President and
Divisional Merchandise Manager.
George R. Mihalko has served as Senior Vice President, Chief Financial
Officer and Treasurer of the Company since September 1995. From February 1993 to
September 1995, Mr. Mihalko was employed by Pier I Imports, Inc. as Vice
President and Treasurer. From July 1990 to February 1993, Mr. Mihalko was
employed by Burlington Northern Railroad as Assistant Treasurer.
Donald Hendricksen has served as Senior Vice President-Store Operations of
the Company since January 1996. From 1986 to January 1996, Mr. Hendricksen
served as a Vice President and Divisional Merchandise Manager of the Company.
Mr. Hendricksen joined the Company's predecessor in 1969.
Paul L. Knutson has served as Senior Vice President - Human Resources since
March 1997. From July 1994 to March 1997, Mr. Knutson served as Vice President -
Human Resources of the Company. Mr. Knutson was Manager of Benefits,
Compensation and Human Resources Information Services at Lands' End from
February 1992 to July 1994. Mr. Knutson served as Manager of Compensation and
Benefits at Pamida before February 1992. He originally joined the Company in
1983.
Kurt Streitz has served as Senior Vice President - Chief Information
Officer of the Company since March 1997. Mr. Streitz was Principal -
Organizational and Technology Transformation of Telluride Consulting Group from
1993 to 1995. He served as Vice President of Operational Development and
Information Services at Arvida/JMB Partners from 1991 to 1993.
Robert C. Hafner has served as Senior Vice President - Marketing and
Business Development of the Company since November 24, 1997. From 1992 to 1995
Mr. Hafner was employed as a retail consultant by Integrated Marketing
Solutions, and from 1995 to November 1997 he provided consulting services
through his own company, Hafner & Associates, Inc. See Item 13.
All executive officers of the Company may be removed from their positions
as such officers at any time by the board of directors of the Company. However,
Messrs. Fishman, Washburn and Mihalko have employment agreements with the
Company which provide for the continuation of their employment with the Company
(see Item 11).
ITEM 11. EXECUTIVE COMPENSATION.
ANNUAL EXECUTIVE COMPENSATION.
The following table shows the annual compensation paid by the Company for
services rendered during the fiscal years ended February 1, 1998, February 2,
1997 and January 28, 1996 to the Chief Executive Officer of the Company and to
the next four most highly compensated executive officers of the Company:
<TABLE>
<CAPTION>
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Summary Compensation Table
<S> <C> <C> <C> <C> <C> <C>
Long-Term
Compensation
Annual Compensation Awards
--------------------------------------------------- -------------
Name and Other Stock Options
Principal Fiscal Annual (Number of All Other
Position Year Salary Bonus Compensation(1) Shares) Compensation (2)
- -------------------- ------ -------- -------- -------------- ------------- ----------------
Steven S. Fishman, 1998 $500,050 $234,242 $ - 6,200 $40,099
Chairman of the 1997 $506,973 $ - $ - 25,800 $34,427
Board, President, 1996 $444,088 $ - $ - 2,778 $24,310
and Chief Executive
Officer
Frank A. Washburn, 1998 $270,185 $128,833 $ - 3,000 $21,037
Executive Vice 1997 $223,127 $ - $ - 13,000 $16,013
President and Chief 1996 $194,281 $ 25,000 $ - 14,667 $12,877
Operating Officer
Stephen D. Robinson, 1998 $248,512 $100,000 $ - 1,500 $19,586
Senior Vice 1997 $199,858 $ 20,000 $ - 6,500 $15,268
President-General 1996 $182,358 $ 15,000 $ - 14,667 $12,071
Merchandise Manager
George R. Mihalko, 1998 $207,396 $ 55,873 $ - 1,500 $18,665
Senior Vice 1997 $182,935 $ 15,000 $ - 6,500 $11,515
President and 1996 $ 58,385 $ 35,000 $ 29,836 (4) 10,000 $2,856
Chief Financial
Officer (3)
Donald Hendricksen, 1998 $171,877 $ 53,213 $ - 9,000 $ 9,069
Senior Vice 1997 $149,281 $ 25,000 $ - 6,500 $ 8,122
President- 1996 $118,358 $ - $ - 417 $ 8,122
General
Merchandise
Manager (5)
- --------------------
</TABLE>
(1) Except as otherwise indicated in this column, perquisites and other
benefits, securities, or property for any of the named persons did not
exceed the lesser of $50,000 or 10% of the total amount of annual salary
and bonus.
(2) All Other Compensation for fiscal 1998 consists of contributions by the
Company to its 401(k) plan and 1995 Deferred Compensation Plan ($4,000 and
$36,099 for Mr. Fishman, $4,000 and $17,037 for Mr. Washburn, $4,000 and
$15,586 for Mr. Robinson, $3,481 and $13,623 for Mr. Mihalko, and $4,296
and $4,773 for Mr. Hendricksen). The Company's Deferred Compensation Plan
provides for elective salary deferrals by participants (not less than 2%
and not more than 10% of base salary); the Company matches a participant's
deferral quarterly up to 5% of base salary and credits a participant's
deferral account quarterly with an interest equivalent at the rate of 7%
per annum.
(3) Mr. Mihalko became an executive officer of the Company in September 1995.
Prior to that time he was not employed by the Company.
(4) $16,849 of this amount was a sign-on bonus in connection with Mr. Mihalko's
initial employment by the Company, and $11,873 of this amount was
reimbursement of various moving and relocation expenses.
(5) Mr. Hendricksen became an executive officer of the Company in January 1996.
Information concerning his prior employment by the Company appears on a
previous page of this Form 10-K.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
Potential
Realizable Value at
Assumed Annual
Rates of Stock Price
Appreciation
Individual Grants (1) for Option Term (2)
- ------------------------------------------------------------------------ --------------------
<S> <C> <C> <C> <C> <C> <C>
% of Total
Options
Options Granted to
Granted Employees Exercise
(Number of in Fiscal Price Expiration
Name Shares) Year ($/Sh) Date 5% 10%
- ------------------- ---------- ----------- ------- ---------- ------- -------
Steven S. Fishman 6,200 (3) 15.2% $3.0625 3-6-07 $11,941 $30,261
Frank A. Washburn 3,000 (3) 7.4% $3.0625 3-6-07 $ 5,778 $14,642
Stephen D. Robinson 1,500 (3) 3.7% $3.0625 3-6-07 $ 2,889 $ 7,321
George R. Mihalko 1,500 (3) 3.7% $3.0625 3-6-07 $ 2,889 $ 7,321
Donald Hendricksen 9,000 (3) 22.1% $3.0625 3-6-07 $17,334 $43,926
- -------------------
</TABLE>
(1) The options granted during fiscal 1998 were granted under the Pamida
Holdings Corporation 1992 Stock Option Plan (the "Plan") by the Stock
Option Committee of the Board of Directors of Holdings. Such options relate
to shares of the Common Stock of Holdings, were granted at prices equal to
the average of the high and low prices of such Common Stock on the American
Stock Exchange on the date of the grants, and are intended to be incentive
stock options for federal income tax purposes to the extent permitted by
the Internal Revenue Code of 1986.
(2) The calculations are made at the 5% and 10% rates prescribed by Securities
and Exchange Commission regulation and are not intended to forecast
possible future appreciation of the Common Stock of Holdings. The
calculations assume the indicated annual rates of appreciation of the
exercise price for ten years on a compounded basis for all of the shares
covered by the option, minus the aggregate exercise price.
(3) These options become exercisable in five equal annual installments
beginning March 6, 1998, subject to the terms of the Plan and the
applicable stock option agreement.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL-YEAR-END OPTION VALUES
<S> <C> <C> <C> <C>
Number of
Shares Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
2-1-98 (1) 2-1-98 (2)
Number of
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise Realized Unexercisable(2) Unexercisable
- ------------------- --------------- -------- --------------- -------------
Steven S. Fishman - - 109,882 $79,675
56,840 $51,098
Frank A. Washburn - - 10,533 $ 8,926
21,800 $30,263
Stephen D. Robinson - - 9,233 $ 8,625
15,100 $15,131
George R. Mihalko - - 5,300 $ 5,900
12,700 $19,256
Donald Hendricksen - - 2,758 $ 7,640
14,200 $27,788
- -------------------
</TABLE>
(1) All options relate to shares of the Common Stock of Holdings and were
granted under the Pamida Holdings Corporation 1992 Stock Option Plan.
(2) Based upon the $4.75 market value of the underlying Common Stock of
Holdings on January 30, 1998, the last day of the fiscal year on which
trading in the Common Stock of Holdings occurred, minus the option exercise
price for the shares covered by the option.
LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR (1)
Performance or Other Period
Name Number of Unites Until Maturation or Payment
- ------------------- ---------------- ---------------------------
Steven S. Fishman 125,000 3-6-97 to 3-5-00
Frank A. Washburn 68,750 3-6-97 to 3-5-00
Stephen D. Robinson 48,000 3-6-97 to 3-5-00
George R. Mihalko 42,000 3-6-97 to 3-5-00
Donald Hendricksen 33,000 3-6-97 to 3-5-00
(1) Under separate Long-Term Incentive Award Agreements between the Company and
each executive officer named in the table above, if such executive officer
is a regular full-time employee of the Company at the close of business on
March 5, 2000, and at such time has been continuously employed by the
Company on a regular full-time basis since March 6, 1997, then the Company
will pay such executive officer in cash on or before April 15, 2000, an
amount equal to the product of the number of units set forth after such
executive officer's name in the table above multiplied by the positive
difference, if any, resulting from the subtraction of (a) $3.0625 from (b)
the lesser of (i) the Average Price or (ii) $9.0625. "Average Price" means
the average of the closing prices of the Common Stock of Holdings on the
American Stock Exchange on the first 20 trading days subsequent to March 5,
2000, on which the Common Stock is traded on such Exchange. Each Long-Term
Incentive Award Agreement also provides for a payment at the discretion of
the Board of Directors if the executive officer's employment by the Company
terminates prior to March 5, 2000, by reason of his death or disability and
for certain payments based on the Common Stock price appreciation to the
date of the event in the case of a change of control of Holdings or the
Company or a termination of the executive officer's employment without
cause.
EMPLOYMENT AND OTHER AGREEMENTS.
Mr. Fishman was employed by the Company as its President and Chief
Executive Officer, effective April 19, 1993, pursuant to an employment agreement
having a three-year term ending on April 18, 1996. On September 22, 1995, the
Company and Holdings entered into a new employment agreement with Mr. Fishman
which superseded the 1993 agreement except as otherwise described in this
paragraph. The term of the 1995 agreement extends through April 18, 2001.
Through April 18, 1996, Mr. Fishman was entitled to receive a base salary at an
annual rate of $450,000 (the rate for such period provided for in the 1993
agreement); thereafter, Mr. Fishman is entitled to receive a base salary at an
annual rate of not less than $500,000 for the remaining term of the 1995
agreement. Under the 1995 agreement, Mr. Fishman was entitled to and did receive
a bonus for fiscal 1998 based upon the financial performance of Holdings and its
subsidiaries on a consolidated basis and the comparable store sales performance
of the Company's stores. The 1995 agreement requires the Board of Directors of
Holdings and Mr. Fishman to agree periodically upon incentive bonus programs for
Mr. Fishman for fiscal 1999 through 2001. Mr. Fishman's fiscal 1999 incentive
bonus program provides for a potential incentive bonus based upon the financial
performance of Holdings and its subsidiaries on a consolidated basis and the
comparable store sales performance of the Company's stores. Mr. Fishman also is
entitled to customary fringe benefits under the 1995 agreement. In the event of
Mr. Fishman's death, his base salary would continue for 90 days, and his estate
would be entitled to a pro rata portion of his incentive bonus (if any) for the
fiscal year in which his death occurs. If Mr. Fishman's employment terminates
for cause or by reason of his disability for a continuous period of six months,
then he would be entitled to his base salary to the termination date, a pro rata
portion of his incentive bonus (if any) for the fiscal year in which such
termination occurs, and (only in the case of his disability) the continuation of
certain fringe benefits until not later than his attainment of age 65. If Mr.
Fishman's employment is terminated by Holdings or Pamida without cause prior to
a Significant Corporate Event (as defined in the 1995 agreement), then he would
be entitled to the continuation of his base salary through April 18, 2001 (less
amounts which Mr. Fishman might receive from other employment), a pro rata
portion of his incentive bonus (if any) for the fiscal year in which such
termination occurs, the continuation of certain fringe benefits until the
earlier of April 18, 2001, or his receipt of such benefits from another
employer, and the equivalent of certain deferred compensation and 401(k) plan
benefits which Mr. Fishman would lose as a result of his termination without
cause. If the termination without cause occurs after a Significant Corporate
Event, then Mr. Fishman also would be entitled to receive an incentive bonus for
each of the next two 12-month periods (but not beyond April 18, 2001) in an
amount equal to the average amount of the incentive bonuses (if any) which he
received for the three fiscal years prior to the fiscal year during which such
termination occurs. Significant Corporate Events are Holdings' ceasing to own
all of the capital stock of the Company, the merger of the Company into a
corporation of which Holdings' does not own a majority of the voting shares, the
merger of Holdings into another corporation a majority of whose voting shares
are owned by persons other than the previous majority owners of the Holdings,
the acquisition by a person or group (other than 399 Venture Partners, Inc. or
its affiliates) of 30% or more of the voting shares of Holdings, and a
stockholder vote to dissolve the Company or dispose of all of its property and
assets. The 1995 agreement also provides that Mr. Fishman is entitled to at
least 12 months advance notice if Holdings and the Company do not intend to
continue his employment after April 18, 2001, with at least the same base salary
as then in effect and with a substantially similar incentive bonus program and
fringe benefits; in the absence of such notice prior to April 18, 2000, Mr.
Fishman would be entitled to certain compensation through the end of a 12-month
period beginning when such notice actually is given. In March 1998 Mr. Fishman's
annual base salary was increased to $525,000.
Mr. Washburn has an employment agreement with Holdings and the Company,
providing for his employment as Executive Vice President and Chief Operating
Officer, which became effective on March 6, 1997, and has a term of three years.
The agreement provides for a base salary at an annual rate of not less than
$275,000 and in other material respects is substantially identical to Mr.
Fishman's 1995 agreement described above. In March 1998 Mr. Washburn's annual
base salary was increased to $325,000.
Mr. Mihalko has an employment agreement with Holdings and the Company,
providing for his employment as Senior Vice President and Chief Financial
Officer, which became effective on March 6, 1997, and has a term of three years.
The agreement provides for a base salary at an annual rate of not less than
$210,000. In most other material respects, Mr. Mihalko's agreement is
substantially similar to Mr. Fishman's 1995 agreement described above; however,
Mr. Mihalko's agreement does not include provisions for certain bonus payments
or certain continued salary payments and benefits in the event of the
termination of Mr. Mihalko's employment for various reasons prior to the
expiration of the three-year term or without at least 12 months' advance notice.
In March 1998 Mr. Mihalko's annual base salary was increased to $230,000.
The Company has an agreement with Mr. Robinson which provides that if Mr.
Robinson's employment is terminated by the Company without cause (as defined in
the agreement), then he will be entitled to receive severance pay in an amount
equal to twice his then current annual base salary, payable over the 24-month
period following the termination and with any remaining payments reduced by any
wages earned by him during such 24-month period. Mr. Robinson's current annual
base salary is $275,000.
The Company has an agreement with Mr. Hendricksen which provides that if
Mr. Hendricksen's employment is terminated by the Company without cause (as
defined in the agreement), then he will be entitled to receive severance pay in
an amount equal to his then current annual base salary, payable over the
12-month period following the termination and with any remaining payments
reduced by any wages earned by him during such 12-month period. If Mr. Fishman
is not the Chief Executive Officer of the Company at the time of such
termination or ceases to be the Chief Executive Officer of the Company within
three months after the time of such termination, then the severance pay of Mr.
Hendricksen will be an amount equal to twice his then current annual base
salary, payable over the 24-month period following the termination and with any
remaining payments reduced by any wages earned by him during such 24-month
period. Mr. Hendricksen's current annual base salary is $200,000.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Holdings owns 100% of the outstanding capital stock of the Company. Its
address is the same as that of the Company.
The following table sets forth information as to each class of equity
securities of Holdings beneficially owned as of March 26, 1998, by each director
of the Company, by certain executive officers of the Company and by all
directors and executive officers of the Company as a group:
Number of
Shares of Common Percent
Stock Beneficially of
Beneficial Owner Owned (1) Class
------------------- ------------------ ---------
Steven S. Fishman 163,522 (2) 2.69%
Frank A. Washburn 28,233 (3) 0.47%
Stephen D. Robinson 12,933 (4) 0.22%
George R. Mihalko 14,375 (5) 0.24%
Donald Hendricksen 10,258 (6) 0.17%
All directors and executive officers 257,345 (7) 4.20%
as a group (8 persons)
-------------------
(1) Each person named in the table above has sole voting power and sole
investment power with respect to the shares set forth after his or her
name, except for the shares referred to in notes (2) and (4).
(2) Mr. Fishman disclaims beneficial ownership of 40,000 of these shares, which
are held by his wife as custodian for their children. Mr. Fishman has the
right to acquire beneficial ownership of 113,522 of these shares pursuant
to currently exercisable options.
(3) Mr. Washburn has the right to acquire beneficial ownership of 15,133 of
these shares pursuant to currently exercisable options.
(4) Mr. Robinson has the right to acquire beneficial ownership of 12,933 of
these shares pursuant to currently exercisable options.
(5) Mr. Mihalko has the right to acquire beneficial ownership of 6,200 of these
shares pursuant to currently exercisable options.
(6) Mr. Hendricksen has the right to acquire beneficial ownership of 5,158 of
these shares pursuant to currently exercisable options.
(7) 162,646 of these shares may be acquired pursuant to currently exercisable
options.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Robert C. Hafner became an executive officer of the Company on November 24,
1997. Prior to that time he had not been an employee of the Company but had
provided consulting services to the Company on behalf of his own consulting
company, Hafner & Associates, Inc., for which the Company paid an aggregate of
$137,098 to such corporation for services rendered during the fiscal year ended
February 1, 1998. Such services related primarily to marketing and sales
promotion.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) The following documents are filed as a part of this report in Item 8:
1. FINANCIAL STATEMENTS.
Pamida, Inc., and Subsidiaries
- Independent Auditors' Report
- Consolidated Statements of Operations for the Years Ended February 2,
1997, January 28, 1996 and January 29, 1995
- Consolidated Balance Sheets at February 2, 1997 and January 28, 1996
- Consolidated Statements of Common Stockholder's Equity for the Years
Ended February 2, 1997, January 28, 1996 and January 29, 1995
- Consolidated Statements of Cash Flows for the Years Ended February 2,
1997, January 28, 1996 and January 29, 1995
- Notes to Consolidated Financial Statements for the Years Ended February
2, 1997, January 28, 1996 and January 29, 1995
2. FINANCIAL STATEMENT SCHEDULES.
None
All schedules of the registrant for which provision is made in the
applicable accounting regulations of the Securities and Exchange Commission
are not required under the related instructions, are inapplicable or have
been disclosed in the Notes to Consolidated Financial Statements and,
therefore, have been omitted.
3. EXHIBITS.
(1) 3.1 - Restated Certificate of Incorporation of Pamida, Inc.
(1) 3.2 - Second Revised By-Laws of Pamida, Inc.
(2) 4.1 - Indenture dated as of March 15, 1993, among Pamida, Inc., as
Issuer, Pamida Holdings Corporation as Guarantor, and State
Street Bank and Trust Company as Trustee relating to 11 3/4%
Senior Subordinated Notes due 2003 of Pamida, Inc.
(2) 4.2 - Specimen form of 11 3/4% Senior Subordinated Note due 2003 of
Pamida, Inc.
(2) 10.1 - Tax-Sharing Agreement dated as of February 2, 1992, among
Pamida Holdings Corporation, Pamida, Inc., Seaway Importing
Company, and Pamida Transportation Company.
(3) 10.2 - Loan and Security Agreement dated March 30, 1993, by and among
Congress Financial Corporation (Southwest) and BA Business
Credit, Inc. as Lenders, Congress Financial Corporation
(Southwest) as Agent for the Lenders, and Pamida, Inc., and
Seaway Importing Company as Borrowers.
(6) 10.3 - Amendment No. 1 to Loan and Security Agreement, dated January
28, 1996, among Pamida, Inc. and Seaway Importing Company as
Borrowers, Congress Financial Corporation (Southwest) as
Lender and Agent and BankAmerica Business Credit as a Lender
(amends Exhibit 10.2).
(7) 10.4 - Amendment No. 2 to Loan and Security Agreement, dated January
28, 1996, among Pamida, Inc., and Seaway Importing
Company as Borrowers, Congress Financial Corporation
(Southwest) as Lender and Agent and BankAmerica Business
Credit as a Lender (amends Exhibit 10.2).
(8) 10.5 - Amendment No. 3 to Loan and Security Agreement among Pamida, Inc.
and Seaway Importing Company, as Borrowers, Congress Financial
Corporation (Southwest) and BankAmerica Business Credit, Inc.,
as Lenders, and Congress Financial Corporation (Southwest),
as Agent, dated September 16, 1996 (amends Exhibit 10.2).
(9) 10.6 - Amendment No. 4 to Loan and Security Agreement among Pamida,
Inc. and Seaway Importing Company, as Borrowers, Congress
Financial Corporation (Southwest) and BankAmerica Business
Credit, Inc., as Lenders, and Congress Financial Corporation
(Southwest), as Agent, dated January 31, 1997 (amends
Exhibit 10.2).
(9) 10.7 - Amendment No. 5 to Loan and Security Agreement among Pamida,
Inc. and Seaway Importing Company, as Borrowers, Congress Financial
Corporation (Southwest) and BankAmerica Business Credit, Inc., as
Lenders, and Congress Financial Corporation (Southwest), as Agent,
dated March 17, 1997 (amends Exhibit 10.2).
(11) 10.8 - Amendment No. 6 to Loan and Security Agreement among
Pamida, Inc. and Seaway Importing Company, as Borrowers,
Congress Financial Corporation (Southwest) and BankAmerica
Business Credit, Inc., as Lenders, and Congress Financial
Corporation (Southwest), as Agent, dated May 8, 1997 (amends
Exhibit 10.2)
(4) 10.9 - Pamida Holdings Corporation 1992 Stock Option Plan.
(6) 10.10 - Employment Agreement dated September 22, 1995, among Pamida
Holdings Corporation, Pamida, Inc., and Steven S. Fishman.
(8) 10.11 - Amendment No. 1 to Employment Agreement among Pamida Holdings
Corporation, Pamida, Inc., and Steven S. Fishman dated August 29,
1996 (amends Exhibit 10.10).
(9) 10.12 - Amendment No. 2 to Employment Agreement among Pamida Holdings
Corporation, Pamida, Inc., and Steven S. Fishman dated March 6,
1997 (amends Exhibit 10.10).
(10) 10.13 - Amendment No. 3. to Employment Agreement among Pamida Holdings
Corporation, Pamida, Inc., and Steven S. Fishman dated May 22, 1997
(amends Exhibit 10.10).
(10) 10.14 - Amendment No. 4 to Employment Agreement among Pamida Holdings
Corporation, Pamida, Inc., and Steven S. Fishman dated March 5,1998
(amends Exhibit 10.10).
10.15 - Severance Pay, Confidentiality, and Non-Solicitation Agreement
dated November 17, 1997, between Pamida, Inc., and Stephen
Robinson.
10.16 - Severance Pay, Confidentiality, and Non-Solicitation Agreement
between Pamida, Inc., and Donald Hendricksen dated
November 18, 1997.
(9) 10.17 - Employment Agreement dated as of March 6, 1997, among Pamida
Holdings Corporation, Pamida, Inc., and Frank A. Washburn.
(10) 10.18 - Amendment No. 1 to Employment Agreement among Pamida Holdings
Corporation, Pamida, Inc., and Frank A. Washburn dated March 5,
1998 (amends Exhibit 10.17).
(9) 10.19 - Employment Agreement dated as of March 6, 1997, among Pamida
Holdings Corporation, Pamida, Inc., and George R. Mihalko.
(10) 10.20 - Amendment No. 1 to Employment Agreement among Pamida Holdings
Corporation, Pamida, Inc., and George R. Mihalko dated March 5,
1998 (amends Exhibit 10.19).
(9) 10.21 - Long-Term Incentive Award Agreement dated as of March 6, 1997,
between Pamida, Inc., and Steven S. Fishman.
(9) 10.22 - Long-Term Incentive Award Agreement dated as of March 6, 1997,
between Pamida, Inc., and Frank A. Washburn.
(9) 10.23 - Long-Term Incentive Award Agreement dated as of March 6, 1997,
between Pamida, Inc., and George R. Mihalko.
(9) 10.24 - Long-Term Incentive Award Agreement dated as of March 6, 1997,
between Pamida, Inc., and Stephen Robinson.
(9) 10.25 - Long-Term Incentive Award Agreement dated as of March 6, 1997,
between Pamida, Inc., and Donald Hendricksen.
(5) 10.26 - Pamida, Inc. 1995 Deferred Compensation Plan.
(2) 22.1 - Subsidiaries of Pamida, Inc.
27.1 - Financial Data Schedule (EDGAR filing only).
- ----------------
(1) Previously filed as an exhibit to Registration Statement of Pamida, Inc. on
Form S-l (Registration No. 33-10980) and incorporated herein by this
reference.
(2) Previously filed as an exhibit to Registration Statement of Pamida, Inc.
and Pamida Holdings Corporation Form S-1 (Registration No. 33-57990) and
incorporated herein by this reference.
(3) Previously filed as an exhibit to Form 10-Q Quarterly Report of Pamida
Holdings Corporation (File No. 1- 10619) for the period ended May 2, 1993,
and incorporated herein by this reference.
(4) Previously filed as an exhibit to Form 10-Q Quarterly Report of Pamida
Holdings Corporation (File No. 1- 10619) for the period ended August 1,
1993, and incorporated herein by this reference.
(5) Previously filed as an exhibit to Form 10-K Annual Report of Pamida
Holdings Corporation for the fiscal year ended January 29, 1995, and
incorporated herein by this reference.
(6) Previously filed as an exhibit to Form 10-Q Quarterly Report of Pamida
Holdings Corporation for the period ended October 29, 1995, and
incorporated herein by this reference.
(7) Previously filed as an exhibit to Form 10-K Annual Report of Pamida
Holdings Corporation for the period ended January 28, 1996, and
incorporated herein by this reference.
(8) Previously filed as an exhibit to Form 10-Q Quarterly Report of Pamida
Holdings Corporation for the period ended October 27, 1996, and
incorporated herein by this reference.
(9) Previously filed as an exhibit to Form 10-K Annual Report of Pamida, Inc.
for the fiscal year ended February 2, 1997, and incorporated herein by this
reference.
(10) Previously filed as an exhibit to Form 10-K Annual Report of Pamida
Holdings Corporation for the fiscal year ended February 1, 1998, and
incorporated herein by this reference.
(11) Previously filed as an exhibit to Form 10-Q Quarterly Report of Pamida
Holdings Corporation for the period ended May 4, 1997, and incorporated
herein by this reference.
* * *
(b) No reports on Form 8-K were filed by the registrant during the last
quarter of the period covered by this report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: April 20, 1998 PAMIDA, INC.
By: /s/ Steven S. Fishman
Steven S. Fishman, Chairman of
the Board, President, Chief
Executive Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/ Steven S. Fishman April 20, 1998
- -----------------------
Steven S. Fishman Chairman of the Board,
President, Chief Executive
Officer and Director
/s/ George R. Mihalko April 20, 1998
- -----------------------
George R. Mihalko Senior Vice President,
Chief Financial Officer,
Treasurer and Director
/s/ Todd D. Weyhrich April 20, 1998
- -----------------------
Todd D. Weyhrich Vice President, Controller
and Principal Accounting
Officer
/s/ Frank A. Washburn April 20, 1998
- -----------------------
Frank A. Washburn Director
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934
For the fiscal year ended February 1, 1998
Commission File Number 1-10619
PAMIDA HOLDINGS CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 47-0696125
------------------------------- ----------------------------
(State or other jurisdiction of (IRS Employer Identification
incorporation or organization) Number)
8800 "F" Street, Omaha, Nebraska 68127
--------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (402) 339-2400
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each Name of Each Exchange
Class on Which Registered
------------ --------------------------
Common Stock American Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act:
NONE
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of March 24, 1998, was $24,938,602 based upon the closing
price for such stock on the American Stock Exchange on such date.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date:
Outstanding at
CLASS OF STOCK March 24, 1998
---------------------- ----------------
Common Stock 5,970,439 shares
Nonvoting Common Stock 3,050,473 shares
DOCUMENTS INCORPORATED BY REFERENCE: Portions of the registrant's proxy
statement dated March 25, 1998, for the annual meeting of the registrant's
stockholders to be held on May 21, 1998, are incorporated by reference into Part
III.
PART I
ITEM 1. BUSINESS.
FORWARD-LOOKING STATEMENTS
This 10-K 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 10-K 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.
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.
GENERAL.
Pamida Holdings Corporation conducts its general merchandise retail
business through its wholly-owned subsidiary, Pamida, Inc., a Delaware
corporation. Unless the context indicates otherwise, the terms "Pamida" and
"Company" refer collectively to Pamida Holdings Corporation, its direct and
indirect subsidiaries and their predecessors, and "Holdings" refers only to
Pamida Holdings Corporation.
Holdings is a Delaware corporation incorporated in 1986 to acquire all of
the capital stock of Pamida, Inc., which, directly since 1981 and through a
predecessor prior to 1981, had been engaged in the general merchandise retail
business since 1963. The capital stock of Pamida, Inc. is the only significant
asset of Holdings, and Holdings has no material operations of its own.
On January 19, 1996, the Company announced its intention to close 40 stores
located in unprofitable or highly competitive markets. Store closing sales began
on January 29, 1996, and the Company completed all of such store closings during
the second quarter of the fiscal year ended February 2, 1997. References in this
Form 10-K to the "40 Closed Stores" mean such 40 stores.
STORES.
At February 1, 1998, Pamida operated 148 general merchandise retail stores
located in 148 small towns (having an average population of approximately 5,500)
in 15 Midwestern, North Central and Rocky Mountain states. Pamida's strategic
objective is to be the dominant general merchandise retailer in the communities
it serves. The Company believes that it holds the leading market position in
over 77% of the communities in which its stores are located.
Pamida stores generally are located in small towns, normally county seats,
where there often is little or no competition from another major general
merchandise retailer and which the Company considers to be either too small to
support more than one major general merchandise retailer (thereby creating a
potential barrier to entry by a major competitor) or too small to attract
competitors whose stores generally are designed to serve larger populations. At
February 1, 1998, 115 of the Company's 148 stores faced no direct local
competition from other major general merchandise retailers.
The Company's stores average approximately 30,000 square feet of sales area
and range in size from approximately 6,000 to 51,000 square feet of sales area.
At February 1, 1998, Pamida's stores had an aggregate sales area of
approximately 4,408,000 square feet.
The following table indicates the states in which Pamida's stores were
located as of February 1, 1998:
State No. of
----- Stores Percent
------ -------
Minnesota............................................ 29 19.6%
Iowa................................................. 25 16.9
Nebraska............................................. 15 10.1
Wisconsin............................................ 14 9.5
Michigan............................................ 12 8.1
Ohio................................................ 10 6.8
Wyoming.............................................. 9 6.1
North Dakota......................................... 7 4.7
South Dakota......................................... 7 4.7
Montana.............................................. 7 4.7
Indiana.............................................. 4 2.7
Kansas............................................... 3 2.0
Illinois............................................. 3 2.0
Kentucky ............................................ 2 1.4
Missouri ............................................ 1 0.7
--- -----
148 100.0%
=== =====
The following tables show the number of the Company's store openings,
relocations and closings and the aggregate year-end store sales area by fiscal
year since fiscal 1994:
Fiscal Year Ended
--------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
Beginning of year 148 144 184 173 178
Stores opened in new markets 1 6 7 17 8
Stores relocated in
existing markets 2 2 3 -- --
Stores closed (includes
relocated stores) (3) (4) (10) (6) (13)
---- ---- ---- ---- ----
End of year 148 148 184 184 173
==== ==== ==== ====
Less 40 Closed Stores (40)
----
144
====
Fiscal Year Ended
--------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
Square feet of store sales
area at year-end (in millions) 4.41 4.35 5.22 5.09 4.68
Less 40 Closed Stores (1.09)
----
4.13
====
Pamida regularly evaluates all of its stores and from time to time closes
stores which no longer meet its standards for sales, profitability, selling area
or other applicable criteria.
STORE EXPANSION PROGRAM.
Pamida's store expansion program is subject to the Company's ability to
negotiate satisfactory leases, to the ability of prospective landlords to obtain
financing for new store buildings and to various zoning, site acquisition,
environmental, traffic, construction and other contingencies. Eight new stores,
two of which are replacement stores, are expected to commence operations this
year.
Pamida has identified numerous communities which are potential sites for
the Company's prototype stores and in which Pamida believes it can achieve a
leading market position, although there is no assurance that Pamida will open
stores in such communities or on any particular time schedule.
The Company began operations in a new 200,000 square foot distribution
center in Lebanon, Indiana, during the second quarter of fiscal 1998. Pamida
believes that its existing distribution facilities (including the new expandable
Lebanon, Indiana facility), senior and middle management staff as well as
corporate infrastructure should allow the Company to accommodate its anticipated
growth.
The Company typically invests approximately $1,450,000 to $1,700,000 in a
new prototype store. Such expenditures consist primarily of approximately
$1,000,000 to $1,200,000 for the initial store inventory, a portion of which is
financed by vendor trade credit, and approximately $450,000 to $500,000 for
store fixtures and equipment. In most cases, building and land costs of
approximately $1,450,000 to $1,750,000 per store are financed by unaffiliated
developers who lease the real estate to Pamida. To expedite the construction
process, Pamida occasionally may construct stores on sites which it acquires,
with the expectation that it subsequently will enter into sale-leaseback
transactions with respect to such stores with unaffiliated investors.
SALES AND MERCHANDISING.
Pamida's merchandising policy is to provide customers with reliable and
convenient family shopping and to feature nationally advertised brand-name
products as well as some private-label merchandise at attractive prices. Pamida
operates its stores on a self-service, primarily cash-and-carry basis and runs
weekly advertised promotions throughout the year. All of Pamida's stores accept
bank credit cards, which accounted for 14.8% of total store sales during the
fiscal year ended February 1, 1998.
Pamida's typical customers are price-conscious families across the income
spectrum. To effectively serve such customers, the Company's stores are open
seven days a week for an average of at least 75 hours per week.
Pamida's two basic merchandise divisions are softlines and hardlines. The
softlines division includes mens', womens', childrens' and infants' clothing,
footwear, accessories and jewelry. The hardlines division includes categories
such as health and beauty aids, automotive accessories, housewares, cleaning
supplies, hardware, paint, sporting goods, toys, stationery, small appliances
and electronic items, videos, compact discs and tapes, lawn and garden supplies,
linens and other domestics, cameras and accessories, pet supplies, consumables
and candy items.
The Company currently owns and operates pharmacies in 44 of its larger
stores, and eight of Pamida's other stores contain prescription pharmacies
leased to and operated by independent pharmacists. The pharmacies have proved to
be effective in building customer loyalty and attracting customers who are
likely to purchase other items in addition to prescription drugs. Pamida
intends, subject to regulatory and personnel considerations and where space
permits, to include a pharmacy in each of its new prototype stores and to add
pharmacies to existing stores.
During the fiscal year ended February 1, 1998, the hardlines division
accounted for approximately 72% of Pamida's total sales, while the apparel
division and the pharmacies accounted for 22% and 6%, respectively, of Pamida's
total sales.
Among the methods that the Company employs to build customer loyalty and
satisfaction are weekly advertised specials, competitive pricing, clean and
orderly stores, friendly well-trained personnel, a liberal return policy and a
wide variety of special customer services (such as wheelchairs for the elderly
and handicapped, restroom facilities and water fountains, seating benches,
speedy check-out lanes and expedited check cashing and raincheck and layaway
processing) offered under various customer-oriented themes such as "Hometown
Values", "We Care" and "We're Listening". Pamida places special emphasis on
maintaining a strong in-stock position in all merchandise categories,
particularly with respect to advertised items.
Pamida's business, like that of most other general merchandise retailers,
is seasonal. First quarter sales (February through April) are lower than sales
during the other three fiscal quarters, while fourth quarter sales (November
through January) in recent years have increased to approximately 29% of the full
year's sales and normally involve a greater proportion of higher margin
merchandise.
ADVERTISING AND PROMOTION.
The Company's extensive advertising primarily utilizes colorful weekly
circulars developed by a centralized advertising department at Pamida's
headquarters. Such circulars advertise brand-name and other merchandise at
significant price reductions and are inserted into local newspapers or mailed
directly to customers. Pamida also uses local shoppers publications and coupon
books. During fiscal 1998, Pamida spent approximately $10,468,000 (net of
promotional allowances provided by vendors) on advertising, which represented
approximately 1.6% of fiscal 1998 sales.
PURCHASING AND DISTRIBUTION.
Pamida maintains a centralized purchasing and store planning staff at its
executive offices. The merchandising department includes two general merchandise
managers, five hardlines divisional merchandise managers and three apparel
divisional merchandise managers. Each of the divisional merchandise managers
supervises from five to seven buyers. Members of the Company's experienced
buying staff regularly attend major trade shows, visit both domestic and
overseas markets and meet with vendor representatives at the Company's
headquarters.
The merchandise in the Company's stores is purchased from over 3,000
primary manufacturers and suppliers and numerous other vendors. Centralized
purchasing enables Pamida to more effectively control the cost of merchandise
and to take advantage of promotional programs and volume discounts offered by
certain vendors. The Company continuously seeks to optimize merchandise costs,
including promotional allowances offered by its suppliers. Pamida also has
centralized the management of returned merchandise, which enables the Company to
most effectively secure vendor credits and refunds with respect to such
merchandise.
The Company's point-of-sale data capture equipment located in its stores
provides current information to Pamida's buyers to assist them in managing
inventories, effecting prompt reorders of popular items, eliminating
slow-selling merchandise and reducing markdowns.
Seaway Importing Company, a wholly-owned subsidiary of Pamida, Inc.,
imports a wide variety of merchandise, including sporting goods, pet supplies,
toys, electronic items, apparel, hair care items, painting supplies, automotive
items and hardware, for sale in Pamida's stores.
During fiscal 1998, approximately 79% of Pamida's merchandise was
distributed to the stores through Pamida's own distribution centers, while the
remaining merchandise was supplied directly to the stores by manufacturers or
distributors.
COMPETITION.
The general merchandise retail business is highly competitive. The
Company's stores generally compete with other general merchandise retailers,
supermarkets, drug and specialty stores, mail order and catalog merchants and,
in some communities, department stores.. Competitors consist both of independent
stores and of regional and national chains, some of which have substantially
greater resources than the Company. The type and degree of competition and the
number of competitors which Pamida's stores face vary significantly by market.
Pamida believes that the principal areas of competition in the general
merchandise retail industry are store location, price, merchandise selection,
quality and customer service, although numerous other factors also affect the
competitive position of any particular store. Among the methods that the Company
employs to build customer loyalty and satisfaction are weekly advertised
specials, reliable in-stocks, competitive pricing, clean and orderly stores,
friendly well-trained personnel, a liberal return policy and a wide variety of
special customer services offered under themes such as "Hometown Values", "We
Care" and "We're Listening".
Pamida stores generally are located in small towns, normally county seats,
where there is no direct local competition from another major general
merchandise retailer and which may be either too small to support more than one
major general merchandise retailer (thereby creating a potential barrier to
entry by a major competitor) or too small to attract competitors whose stores
generally are designed to serve larger populations. The Company believes that,
in terms of sales, it is the leading general merchandise retailer in over 77% of
the communities in which its stores are located.
At February 1, 1998, 115 of Pamida's 148 stores were located in communities
in which there was no direct local competition from other major general
merchandise retailers. As of that date, Kmart, Alco, Wal-Mart, Target and ShopKo
had stores in 16, 11, 10, 2 and 1 communities, respectively, where Pamida stores
are located; however, because some of these communities have more than one of
such competitors, only 33 Pamida stores face direct local competition from such
retail chains. In recent years the Company's business strategy has been to focus
its store expansion program on communities with less likelihood of the entry of
a new major competitor, but there can be no assurance that in the future major
competitors will not open additional stores in the Company's markets.
Merchandise prices generally are established on a zone basis at Pamida's
executive offices, although store managers are given discretion to adjust prices
of key items to meet local competition and to match a competitor's advertised
prices. Zone pricing allows the Company to establish prices at different levels
in different trade territories, based primarily on competitive conditions within
such territories, rather than having a uniform pricing structure throughout the
entire chain. Pamida conducts a continuous program of competitor price
comparisons that enables the Company to make merchandise price adjustments, when
necessary, to assure that the Company maintains a competitive position.
EMPLOYEES.
As of February 1, 1998, Pamida had approximately 5,600 employees, of whom
approximately 2,700 were full-time and 2,900 were part-time. The number of
employees varies on a seasonal basis. Pamida's employees are not represented by
a labor union, and the Company believes that its relations with its employees
are good.
At February 1, 1998, the average length of service of the Company's
management staff was as follows:
Average
Years
Number of Service
------ ----------
Top Management 2 16.2
Senior Vice Presidents and Vice Presidents 18 7.1
District Managers 12 20.5
Pharmacy District Supervisors 4 5.3
Store Managers 148 11.4
Pharmacy Managers 44 3.4
Pamida's human resources department is responsible for company-wide salary
and wage administration, as well as all benefits. The human resources department
works closely with store operations in the development and administration of
Pamida's store-level employee training programs. In addition, Pamida has an
ongoing program for the development of management personnel to fill positions in
all facets of the Company's operations and makes a concerted effort to identify
and train potential successors for all of its key middle and senior managers.
ITEM 2. PROPERTIES.
At February 1, 1998, the Company owned 19 of its 148 store buildings, while
its remaining 129 stores operated in leased premises. A substantial majority of
the Company's leases have renewal options, with approximately 53% of the leases
having unexpired current terms of five years or more. The following table
provides information relating to the remaining lease terms for the Company's
leased stores at February 1, 1998:
Leases the Fiscal Number of Leased Stores
Year Ending During(1) 2/01/98
--------------------- -----------------------
1999 13
2000 24
2001 5
2002 8
2003 6
Thereafter 73
---
Total 129
===
(1) Includes renewal options.
Pamida's management believes that the physical condition of the Company's
stores generally is very good. All of the Company's stores are continuously
updated to conform to Pamida's operating and merchandising standards.
The Company's general offices and one of its three distribution centers are
located in a 215,000 square foot building in Omaha, Nebraska, owned by the
Company. This facility contains approximately 135,000 square feet of warehouse
space and approximately 80,000 square feet of office space.
Pamida's primary distribution center is a 336,000 square foot
"flow-through" facility situated on a 22-acre tract of land in Omaha
approximately one mile from the distribution center described above. This
facility, which is owned by Pamida, serves primarily as a redistribution center
for bulk shipments and promotional merchandise on which cost savings can be
realized through quantity purchasing. Pamida also owns an additional 10-acre
tract of land adjacent to such distribution center which would permit that
facility to be further expanded by almost 60%.
In July 1997, the Company began operations in a new 200,000 square foot
distribution center in Lebanon, Indiana. The facility, which is leased through
April 2007, redistributes bulk shipments and promotional merchandise to stores
in the Company's eastern sales districts. Future expansion of the facility is
being considered. This distribution facility replaced a 100,000 square foot
warehouse facility previously operated by the Company in the Milwaukee,
Wisconsin area.
Pamida also has a warehouse facility in Omaha which contains approximately
41,000 square feet of space and is located immediately adjacent to the Company's
general offices. This warehouse, which is owned by Pamida, is used for the
processing of merchandise to be returned to vendors and by the advertising
department in connection with its printing operations.
In addition to its retail stores, distribution centers and warehouse
facility, Pamida's tangible assets include inventories, warehouse and store
fixtures and equipment, merchandise handling equipment, office and data
processing equipment, motor vehicles and an airplane.
ITEM 3. LEGAL PROCEEDINGS.
Pamida is a party to a number of lawsuits incidental to its business, the
outcome of which, both individually and in the aggregate, is not expected to
have a material adverse effect on the Company's operations or financial
condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(a) A special meeting of stockholders (the "Special Meeting") of
Holdings was held on November 14, 1997.
(b) The meeting did not involve the election of directors.
(c)(1) Votes were cast at the Special Meeting with respect to approval
of the Note Amendment Agreement No.3 between Holdings and 399
Venture Partners, Inc. and the transactions contemplated
thereby as follows:
For: 3,792,221
Against: 12,832
Abstain: 3,700
There were broker nonvotes as to 858,928 shares on this matter.
This matter received sufficient votes to pass.
(2) Votes were cast at the Special Meeting with respect to approval
of an amendment to the Restated Certificate of Incorporation of
Holdings to change and reclassify all of the outstanding shares
of Preferred Stock of Holdings into shares of Common Stock of
Holdings as follows:
For: 4,447,649
Against: 217,032
Abstain: 2,500
There were broker nonvotes as to 500 shares on this matter.
This matter received sufficient votes to pass.
(3) Votes were cast at the Annual Meeting with respect to approval
of an amendment to the Restated Certificate of Incorporation of
Holdings to increase the number of authorized shares of Common
Stock of Holdings and correspondingly adjust the total number
of shares of stock which Holdings is authorized to issue as
follows:
For: 4,444,149
Against: 222,832
Abstain: 200
There were broker nonvotes as to 500 shares on this matter.
This matter received sufficient votes to pass.
(4) Votes were cast at the Special Meeting with respect to approval
of an amendment to the Restated Certificate of Incorporation of
Holdings to increase the number of authorized shares of
Nonvoting Common Stock of Holdings and correspondingly adjust
the total number of shares of stock which Holdings is
authorized to issue as follows:
For: 4,431,349
Against: 234,832
Abstain: 1,200
There were broker nonvotes as to 300 shares on this matter.
This matter received sufficient votes to pass.
(5) Votes were cast at the Special Meeting with respect to approval
of an amendment to the Restated Certificate of Incorporation of
Holdings to amend the conversion terms of the Nonvoting Common
Stock of Holdings and delete certain obsolete provisions as
follows:
For: 3,792,021
Against: 15,332
Abstain: 1,200
There were broker nonvotes as to 859,128 shares on this matter.
This matter received sufficient votes to pass.
(6) Votes were cast at the Special Meeting with respect to
approval of amendments to the Restated Certificate of
Incorporation of Holdings to reduce the number of authorized
shares of Junior Cumulative Preferred Stock of Holdings,
correspondingly decrease the total number of shares of stock
which Holdings is authorized to issue, and delete certain
obsolete provisions as follows:
For: 3,797,320
Against: 11,233
Abstain: 0
There were broker nonvotes as to 859,128 shares on this matter.
This matter received sufficient votes to pass.
(7) Votes were cast at the Special Meeting with respect to approval
of the issuance of shares of Common Stock of Holdings to 399
Venture Partners, Inc. or its assignee upon the future
conversion of shares of Nonvoting Common Stock of Holdings
issued to 399 Venture Partners, Inc. as follows:
For: 3,778,861
Against: 17,772
Abstain: 1,200
There were broker nonvotes as to 869,848 shares on this matter.
This matter received sufficient votes to pass.
(d) Not Applicable.
* * *
EXECUTIVE OFFICERS OF THE REGISTRANT.
The present executive officers of Holdings are Steven S. Fishman (Chairman
of the Board, President and Chief Executive Officer), Frank A. Washburn
(Executive Vice President, Chief Operating Officer and Secretary), and George R.
Mihalko (Senior Vice President, Chief Financial Officer, Treasurer and Assistant
Secretary). Information concerning such executive officers appears in the
following paragraphs:
Mr. Fishman, age 47, has served as President and Chief Executive Officer of
Holdings and Pamida, Inc. since April 1993 and as Chairman of the Board of
Holdings and Pamida, Inc. since August 1993. From 1988 to March 1993, Mr.
Fishman was employed by Caldor, Inc. as Senior Vice President and General
Merchandise Manager-Homelines. Mr. Fishman has been a director of Holdings since
1993 and also is a director of Pamida, Inc.
Mr. Washburn, age 49, has served as Chief Operating Officer of Holdings and
Pamida, Inc. since March 1997, Executive Vice President of Holdings since
September 1995 and Executive Vice President of Pamida, Inc. since February 1995.
Mr. Washburn previously served as Senior Vice President - Human Resources of
Pamida, Inc. from 1993 to 1995 and as Vice President - Human Resources of
Pamida, Inc. from 1987 to 1993. Mr. Washburn also serves as Secretary of
Holdings and Pamida, Inc. Mr. Washburn joined Pamida's predecessor in 1965. Mr.
Washburn has been a director of Holdings since 1995 and also is a director of
Pamida, Inc.
Mr. Mihalko, age 43, has served as Senior Vice President, Chief Financial
Officer, Treasurer and Assistant Secretary of Holdings and Pamida, Inc. since
September 1995. From February 1993 to September 1995, Mr. Mihalko was employed
by Pier 1 Imports, Inc. as Vice President and Treasurer. From July 1990 to
February 1993, Mr. Mihalko was employed by Burlington Northern Railroad as
Assistant Treasurer.
The executive officers of Holdings may be removed from their respective
positions as such officers at any time by the Board of Directors of Holdings,
subject to any rights which they may have under employment agreements with the
Company.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Common Stock of Holdings is listed and traded on the American Stock
Exchange.
The high and low sales prices for the Common Stock of Holdings on the
American Stock Exchange for fiscal 1998 and fiscal 1997 are as follows:
Fiscal 1998: High Low
------------ ---- ---
4th Quarter 6 1/8 4 1/4
3rd Quarter 6 7/16 4 1/8
2nd Quarter 4 1/8 2 3/4
1st Quarter 3 1/2 2
Fiscal 1997: High Low
------------ ---- ---
4th Quarter 2 5/16 1 1/2
3rd Quarter 2 3/8 1 5/8
2nd Quarter 3 1/4 2 1/8
1st Quarter 3 1/4 2 1/8
As of March 23, 1998 there were 281 record holders of the Common Stock of
Holdings.
There is no market for the Nonvoting Common Stock of Holdings, all of which
presently is owned by 399 Venture Partners, Inc., an indirect wholly-owned
subsidiary of Citicorp.
Holdings has never declared or paid any cash dividends on its Common Stock
or Nonvoting Common Stock and does not intend to pay any such dividends in the
foreseeable future. The obligations of Pamida, Inc. under certain of its
financing arrangements are guaranteed by Holdings. Such financing arrangements
presently prohibit the payment of dividends by Holdings on its Common Stock or
Nonvoting Common Stock and also significantly restrict the ability of Pamida,
Inc. to pay dividends or make other distributions to Holdings.
ITEM 6. SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY
SELECTED CONSOLIDATED FINANCIAL DATA
(AMOUNTS IN THOUSANDS - EXCEPT PER SHARE, NUMBER OF SHARES AND OTHER DATA)
Fiscal Year Ended
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
February 1, February 2, January 28, January 29, January 30,
1998 1997 (1) 1996 1995 1994
----------- ----------- ----------- ----------- -----------
INCOME STATEMENT DATA:
Sales .............................................. $ 657,017 $ 633,189 $ 736,315 $ 711,019 $ 656,910
Gross profit ....................................... 161,935 154,090 177,688 177,367 158,906
Selling, general and
administrative expenses .......................... 129,031 125,105 151,096 143,585 133,921
----------- ----------- ----------- ----------- -----------
Operating income ................................... 32,904 28,985 26,592 33,782 24,985
Interest expense ................................... 29,618 29,781 29,526 27,367 26,588
Long-lived asset write-off ......................... - - 78,551 - -
Store closing costs ................................ - - 21,397 - -
Income (loss) before provision for income
taxes and extraordinary item ..................... 3,286 (796) (102,882) 6,415 (1,603)
Income tax (benefit) provision ..................... - - (7,863) 3,500 427
----------- ----------- ----------- ----------- -----------
Income (loss) before extraordinary item ............ 3,286 (796) (95,019) 2,915 (2,030)
Extraordinary item ................................. 1,735 - 371 - (4,943)
----------- ----------- ----------- ----------- -----------
Net income (loss) .................................. 5,021 (796) (94,648) 2,915 (6,973)
Effect of preferred stock reclassification ......... 756 - - - -
Less preferred dividends
and discount amortization ........................ (407) (391) (362) (361) (359)
----------- ----------- ----------- ----------- -----------
Net income (loss) available
for common shares ................................ $ 5,370 $ (1,187) $ (95,010) $ 2,554 $ (7,332)
=========== =========== =========== =========== ===========
Weighted average number of basic shares
outstanding ...................................... 5,843,441 5,004,942 5,002,853 4,999,984 4,999,984
Weighted average number of diluted shares
outstanding ...................................... 5,875,463 5,004,942 5,002,853 5,039,684 4,999,984
Basic net income (loss) per share:
Income (loss) before extraordinary item.. $ .62 $ (.24) $ (19.07) $ .51 $ (.48)
Extraordinary item ...................... .30 - .08 - (.99)
----------- ----------- ----------- ----------- -----------
Basic income (loss)....................... $ .92 $ (.24) $ (18.99) $ .51 $ (1.47)
=========== =========== =========== =========== ===========
Diluted net income (loss) per share:
Income (loss) before extraordinary item.... $ .62 $ (.24) $ (19.07) $ .51 $ (.48)
Extraordinary item......................... .29 - .08 - (.99)
----------- ----------- ----------- ----------- -----------
Diluted income (loss)...................... $ .91 $ (.24) $ (18.99) $ .51 $ (1.47)
=========== =========== =========== =========== ===========
BALANCE SHEET DATA:
Working capital.............................. $ 37,421 $ 28,673 $ 34,082 $ 46,725 $ 41,323
Total assets................................. 260,081 269,188 258,525 354,367 314,621
Long-term debt............................... 140,289 168,000 163,746 162,505 160,315
Obligations under capital leases............. 32,156 33,999 36,559 43,050 35,618
Redeemable preferred stock.................... - 1,875 1,826 1,779 1,734
Common shareholders' (deficit) equity......... (52,275) (87,303) (86,116) 8,876 6,322
OTHER DATA:
Team members.................................. 5,600 5,700 7,200 7,200 6,100
Number of stores.............................. 148 148 184 184 173
Retail square feet (in millions).............. 4.41 4.35 5.22 5.09 4.68
(1) Represents a 53-week year.
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS
(DOLLAR AMOUNTS IN THOUSANDS)
YEAR ENDED FEBRUARY 1, 1998 COMPARED TO YEAR ENDED FEBRUARY 2, 1997
SALES - Total sales during the 52-week fiscal 1998 period increased by
$23,828, or 3.8%, from the 53-week fiscal 1997 period. On a 52 to 52-week basis,
total net sales increased by 5.2%. During fiscal 1998, sales in comparable
stores increased by $24,135, or 4.0%.
During fiscal 1998, the Company opened three new stores, of which one is
located in a new market and two were relocations; the Company also closed one
store (which will be replaced during fiscal 1999 by a new store in the same
market), resulting in a net increase in selling area during the fiscal year of
approximately 61,000 square feet to a total of approximately 4,408,000 square
feet.
The Company experienced sales increases in most merchandise categories
during fiscal 1998. The most significant increases occurred in pharmacy
prescriptions, housewares, toys, athletic shoes and team sports apparel. Other
categories experiencing gains were stationery, sporting goods, appliances, paper
and cleaning supplies and pets. The Company experienced sales decreases in
several categories. The largest dollar decreases were in the automotive, mens'
fashion apparel, jewelry and watches and juniors' apparel categories.
GROSS PROFIT - Gross profit for the 52-week fiscal 1998 period increased by
$7,845, or 5.1%, compared to the 53-week fiscal 1997 period. As a percentage of
sales, gross profit improved to 24.6% from 24.3%. The Company's merchandise
gross margin as a percentage of sales decreased to 27.6% in fiscal 1998 from
27.8% in fiscal 1997. The decrease in merchandise gross margin percent of sales
was offset by substantial expense reductions in the warehouse and distribution
areas made possible by operating efficiencies gained largely from a new
warehouse management system implemented during fiscal 1997. During the prior
fiscal year, the Company incurred higher than normal labor cost in the warehouse
and distribution areas due to implementation issues related to the warehouse
management system. Total warehouse and distribution costs amounted to 2.8% of
sales compared to 3.3% last year.
SELLING, GENERAL AND ADMINISTRATIVE (SG&A) expense increased $3,926, or
3.1%, to $129,031 in fiscal 1998 from $125,105 in fiscal 1997. As a percentage
of sales, SG&A expense decreased to 19.6% from 19.8% last year. Most of the
total net increase in SG&A expense for the year was attributable to higher
corporate general and administrative expenses, primarily involving planned
increases in payroll and incentive compensation expenses. Store occupancy costs
increased by $1,030, but remained at 3.9% as a percentage of net sales for both
fiscal 1998 and 1997. Store payroll costs and controllable costs decreased by
$391 and $163, respectively, during fiscal 1998 as compared to last year. As a
percentage of net sales, store payroll costs and controllable costs decreased
from 8.0% to 7.7% and 3.0% to 2.9% for the fiscal periods ended 1998 and 1997,
respectively.
INTEREST expense decreased by $163, or 0.5%, for fiscal 1998 compared to
fiscal 1997. As described in Note B to the financial statements, the decrease in
interest expense for fiscal 1998 was attributable to the payment of certain
promissory notes of the Company with common stock in November 1997, thereby
relieving the Company of the quarterly compounding interest obligation which had
previously been paid-in-kind. That decrease was offset in part by an increase in
interest expense of approximately $900 related to higher outstanding balances on
the revolving line of credit resulting from higher investments in basic
inventory during the year as well as the funding of certain of the Company's
information systems initiatives.
INCOME TAX PROVISION - The Company's loss carryforwards from store closing
charges recorded in fiscal 1996 were utilized during fiscal 1998 to completely
offset income taxes from normal operating activities of the Company and to
reduce income taxes related to the Note repayment and preferred stock
reclassification transactions which are described in Note B to the financial
statements. The Company expects that operations in future periods will be taxed
at a normal tax rate. No income tax benefit on losses for fiscal 1997 was
recorded as the Company could not establish, as of fiscal year end 1997, with a
reasonable degree of certainty, the potential utilization of loss carryforwards.
YEAR ENDED FEBRUARY 2, 1997 COMPARED TO YEAR ENDED JANUARY 28, 1996
SALES - As discussed in Note Q to the financial statements, the Company
closed forty stores at the end of fiscal 1996 in unprofitable or highly
competitive markets which did not fit the Company's niche market strategy.
Consequently, the Company experienced a planned decrease in total sales for
fiscal 1997 of $103,126 or 14.0% compared to fiscal 1996 due primarily to the
reduced number of stores. During fiscal 1997 the Company opened eight new
prototype stores, of which six are located in new markets and two were
relocations; the Company also closed two stores, resulting in a net increase in
selling area during the fiscal year of approximately 216,000 square feet (not
including changes relating to the forty stores closed as of fiscal year end
1996) to a total of 4,348,000 square feet. As of February 2, 1997, the Company's
store base included 35 of the Company's most recent store prototype, which
represented 28.7% of the Company's total selling square feet.
Comparable store sales during the 53-week fiscal 1997 period decreased by
$8,893 or 1.5% from the 52-week fiscal 1996 period. Comparable store sales on a
53-week to 53-week basis decreased by 2.6%. Sales were affected primarily by
slowed warehouse distributions to stores as a result of the implementation of a
new warehouse inventory management system initiated in the first quarter of
fiscal 1997. The slowed distributions caused a deterioration of merchandise
in-stock positions in most of the Company's stores, resulting in lost sales.
While implementation of the warehouse system was largely completed by August
1996, and in-stock positions at the stores improved thereafter, sales remained
below management expectations due to reduced customer traffic continuing in the
third and fourth quarters. Comparable sales also were affected during much of
the year by low-margin clearance sales in fiscal 1996 which were not necessary
at the same level in fiscal 1997. However, beginning late in the holiday
shopping season and continuing through fiscal year end, sales improved as the
Company demonstrated to customers its improved in-stock position in all product
categories.
The Company experienced substantial comparable store sales increases in
fiscal 1997 in several merchandise categories, the most dramatic of which were
in the pharmacy prescription, junior apparel, grocery and ready-to-wear areas.
Comparable store sales gains also were generated in the hosiery, team sports,
camera, stationery, health aids and bath categories. The Company experienced
comparable store sales decreases in several categories. The largest dollar
decreases on a comparable store basis were in the electronics, automotive,
misses bottoms, men's shoes, electrical and appliance areas. Management believes
that subtle adjustments made to the Company's softlines strategy at the end of
fiscal 1996 to meet customer demand for a deeper selection of basic apparel had
a positive impact on sales and margins in softlines during fiscal 1997.
GROSS PROFIT - Gross profit dollars were affected by the reduced number of
stores in operation during fiscal 1997 as compared to fiscal 1996. The Company's
merchandise gross profit as a percentage of sales improved to 27.8% in fiscal
1997 from 26.8% in fiscal 1996. However, this improvement was diluted by
additional costs related to the implementation of the new warehouse inventory
management system discussed above. Warehouse costs increased to $13,457 from
$11,066 the previous year and increased as a percent of sales to 2.1% from 1.5%
the previous year. Delivery costs decreased to $7,637 in fiscal 1997 from $8,845
the previous year and amounted to 1.2% of sales in both years. Accordingly,
gross profit decreased by $23,598, or 13.3%, to $154,090 in fiscal 1997 from
$177,688 in fiscal 1996 but, as a percentage of sales, increased to 24.3% in
fiscal 1997 from 24.1% in fiscal 1996.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE Decreased $25,991, or 17.2%, to
$125,105 in fiscal 1997 from $151,096 in fiscal 1996. As a percentage of sales,
selling, general and administrative expense decreased to 19.8% from 20.5% last
year. This reduction was largely attributable to reductions in store level
expenses. Store payroll, controllable and occupancy expenses accounted for 64.2%
of the total decrease in selling, general and administrative expense and
decreased by 14.5%, 17.5% and 13.9%, respectively. Selling, general and
administrative expense also was positively impacted by a 28.9% reduction in
advertising costs which accounted for 18.2% of the gross decrease in selling,
general and administrative expense. All of these areas of expense were impacted
by the elimination of costs related to the forty stores which were closed as of
the end of fiscal 1996. Selling, general and administrative expense also was
impacted by an 11.0% decrease in corporate general and administrative costs
which accounted for 11.3% of the gross decreases in selling, general and
administrative expense. The major components of this decrease were decreases in
the net costs of insurance, professional fees, management bonuses and related
fringe benefits.
Selling, general and administrative expense also was positively impacted by
the elimination of amortization of goodwill and favorable leasehold interests
resulting from the write-off of these items in the fourth quarter of fiscal
1996. The decreases in selling, general and administrative expense were offset
by a $1,246 reduction in other income which was attributable largely to one-time
gains realized in fiscal 1996, primarily from the sale of idle transportation
company assets.
INTEREST expense increased marginally by $255 or 0.9% for fiscal 1997
compared to fiscal 1996. The increase in interest expense for fiscal 1997 was
attributable primarily to higher usage of the revolving line of credit and to
the outstanding promissory notes of the Company which require quarterly
compounding interest payments to be paid-in-kind. These increases were largely
offset by decreased interest related to lower average outstanding capitalized
lease obligations in fiscal 1997 compared to fiscal 1996.
INCOME TAX PROVISION - No income tax benefit on losses for fiscal 1997 were
recorded since the Company could not establish with a reasonable degree of
certainty the potential utilization of certain tax loss carry forwards from
prior year store closing charges. The effective tax rate in fiscal 1996 was 7.6%
and was impacted by the non-deductible amortization and write-off of goodwill
and the reserves recorded to offset the deferred tax assets.
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, while
fourth quarter sales (November through January) have represented approximately
29% of the full year's retail 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 provided by operating activities totaled $17,640 in
fiscal 1998, and funds used by operating activities totaled $11,577 in fiscal
1997. Funds provided from operations totaled $4,967 in fiscal 1996. The positive
change in cash flow from operating activities from fiscal 1997 to fiscal 1998
was primarily the result of improved operating results, a net decrease in
inventory and increases in operating and tax liabilities. The change in cash
flow from operating activities from fiscal 1996 to fiscal 1997 was primarily the
result of planned net increases in inventory and other operating assets and
decreases in accounts payable and other operating liabilities. These decreases
in cash flow were offset in part by changes in deferred income taxes.
Effective March 17, 1997, the term of Pamida, Inc.'s (Pamida) 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 from $70,000,
which had been the limit throughout fiscal 1997. Prior to March 17, 1997,
borrowings under the Agreement bore interest at a rate which was .75% per annum
greater than the applicable prime rate. Effective March 17, 1997, borrowings
under the Agreement bear interest at a rate which is tied to prime rate or the
London Interbank Offered Rate (LIBOR), generally at Pamida's discretion. The
amounts Pamida is permitted to borrow are determined by a formula based upon the
amount of Pamida's eligible inventory from time to time. Such borrowings are
secured by security interests in all of the current assets (including inventory)
of Pamida and by liens on certain real estate interests and other property of
Pamida. The Company and two subsidiaries of Pamida have guaranteed the payment
and performance of Pamida's obligations under the Loan and Security Agreement
and have pledged some or all of their respective assets, including the stock of
Pamida owned by the Company, 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 Pamida 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-lease-back 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 $45,194 at February 1, 1998 and
$57,115 at February 2, 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 $172,445 at February 1, 1998 and $201,999 at February 2, 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 February 1, 1998, the
Company was in compliance with all covenants contained in its various financing
agreements.
On December 18, 1992, the promissory notes of the Company were amended
effective as of December 1, 1992 to provide that, until the obligations of
Pamida and the Company under certain of Pamida's credit agreements had been
repaid, the quarterly interest payments on the promissory notes of the Company
were to be paid-in-kind. As discussed in Note B to the financial statements, the
Company repaid all of the promissory notes with common stock of the Company on
November 18, 1997.
As described in Note B to the financial statements, the Company
reclassified all preferred stock into common stock effective November 18, 1997.
Accordingly, the Company has no remaining obligations related to the preferred
stock as of the end of fiscal 1998. Pamida paid the Company $315 in fiscal 1996
under a tax-sharing agreement to enable the Company to pay quarterly dividends
to its preferred stockholders. During fiscal 1996, the Company received $967
from Pamida under a tax-sharing agreement as a reimbursement for certain tax
benefits derived by Pamida. Such remittance, along with $18 from the exercise of
certain stock options, was used by the Company to redeem Subordinated Promissory
Notes as described in Note N to the financial statements, to repay intercompany
balances totaling $29, and to pay quarterly dividends on preferred stock. Since
the Company conducts no operations of its own, prior to the November 18, 1997
reclassification of the preferred stock, the only cash requirement of the
Company related to preferred stock dividends in the aggregate annual amount of
approximately $316; and Pamida was expressly permitted under its existing credit
facilities to pay dividends to the Company to fund such preferred stock
dividends. However, the General Corporation Law of the State of Delaware, under
which the Company and Pamida 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 Pamida did not declare or pay
any cash dividends in fiscal 1997.
The Company made capital expenditures of $6,654 in fiscal 1998 compared to
$4,947 during fiscal 1997. The Company also made expenditures of $3,848 and
$3,680 in fiscal 1998 and 1997, respectively, related to information systems
software. The Company plans to open 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 1997 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,
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 but ultimately will need to explore 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.
YEAR 2000 COMPLIANCE
The Company has developed a comprehensive plan to mitigate the Company's
exposure to potential problems with its systems' ability to properly process
data beyond the calendar year 1999, which is commonly referred to as Year 2000
compliance. The Company has completed implementation of several new systems and
is at various stages of implementation of others which replace legacy systems.
The Company plans to complete installation of current releases or upgrades for
all of these systems no later than July, 1999 to help ensure that these systems
will be Year 2000 compliant. All of these systems have substantially improved
functionality over the Company's legacy systems which they replace and will,
therefore, be capitalized. Failure to implement such releases or upgrades, or
the failure of the vendors of the aforementioned software to have eliminated the
potential Year 2000 issues within the software, could materially and adversely
affect the Company's operations and financial results. The cost of directly
addressing Year 2000 compliance for legacy systems which are not planned to be
replaced by new systems is being charged to expense as incurred and is not
expected to be material.
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, 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.
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.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY
INDEPENDENT AUDITORS' REPORT
INDEPENDENT AUDITORS' REPORT
Board of Directors
Pamida Holdings Corporation
Omaha, Nebraska
We have audited the accompanying consolidated balance sheets of Pamida
Holdings Corporation and subsidiary as of February 1, 1998 and February 2, 1997,
and the related consolidated statements of operations, common stockholders'
equity and cash flows for each of the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. The consolidated statements of operations, common stockholders'
equity and cash flows of Pamida Holdings Corporation and subsidiary for the year
ended January 28, 1996, were audited by other auditors, whose report, dated
March 26, 1996, expressed an unqualified opinion on those statements and
included an explanatory paragraph that described the adoption of Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such 1998 and 1997 financial statements present fairly, in
all material respects, the financial position of Pamida Holdings Corporation and
subsidiary as of February 1, 1998 and February 2, 1997, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Omaha, Nebraska
March 5, 1998
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors
Pamida Holdings Corporation
Omaha, Nebraska
We have audited the accompanying consolidated statements of operations, common
stockholders' equity and cash flows of Pamida Holdings Corporation and
Subsidiary for the year ended January 28, 1996. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the results of operations and cash flows of
Pamida Holdings Corporation and Subsidiary for the year ended January 28, 1996,
in conformity with generally accepted accounting principles.
As discussed in Note P to the consolidated financial statements, the Company
adopted Statement of Financial Accounting Standards No 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets To Be Disposed of."
/s/ Coopers & Lybrand L.L.P.
Chicago, Illinois
March 26, 1996
<TABLE>
<CAPTION>
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLAR AMOUNTS IN THOUSANDS - EXCEPT PER SHARE DATA)
Fiscal Year Ended
-------------------------------------
<S> <C> <C> <C>
February 1, February 2, January 28,
1998 1997 1996
(52 Weeks) (53 Weeks) (52 Weeks)
--------- --------- ---------
Sales .......................................................... $ 657,017 $ 633,189 $ 736,315
Cost of goods sold ............................................. 495,082 479,099 558,627
--------- --------- ---------
Gross profit ................................................... 161,935 154,090 177,688
--------- --------- ---------
Expenses:
Selling, general and administrative ........................ 129,031 125,105 151,096
Interest ................................................... 29,618 29,781 29,526
Long-lived asset write-off ................................. - - 78,551
Store closing costs ........................................ - - 21,397
--------- --------- ---------
158,649 154,886 280,570
--------- --------- ---------
Income (loss) before provision for income
taxes and extraordinary item ............................... 3,286 (796) (102,882)
Income tax benefit ............................................. - - (7,863)
--------- --------- ---------
Income (loss) before extraordinary item ........................ 3,286 (796) (95,019)
Extraordinary item ............................................. 1,735 - 371
--------- --------- ---------
Net income (loss) .............................................. 5,021 (796) (94,648)
Effect of preferred stock reclassification ..................... 756 - -
Less provision for preferred dividends and discount amortization (407) (391) (362)
--------- --------- ---------
Net income (loss) available for common shares .................. $ 5,370 $ (1,187) $ (95,010)
========= ========= =========
Basic income (loss) per share:
Income (loss) before extraordinary item..................... $ .62 $ (.24) $ 19.07)
Extraordinary item.......................................... .30 - .08
--------- --------- ---------
Basic income (loss)......................................... $ .92 $ (.24) $ (18.99)
========= ========= =========
Diluted income (loss) per share:
Income (loss) before extraordinary item..................... $ .62 $ (.24) $ (19.07)
Extraordinary item.......................................... .29 - .08
--------- --------- ----------
Diluted income (loss)....................................... $ .91 $ (.24) $ (18.99)
========= ========= =========
See notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(DOLLAR AMOUNTS IN THOUSANDS - EXCEPT PER SHARE DATA)
<S> <C> <C>
February 1, February 2,
ASSETS 1998 1997
----------- -----------
Current assets:
Cash................................................................................ $ 6,816 $ 6,973
Accounts receivable, less allowance for doubtful accounts of $50 in both years...... 8,384 6,919
Merchandise inventories............................................................. 152,927 157,490
Prepaid expenses.................................................................... 2,838 2,993
Property held for sale.............................................................. - 1,748
----------- -----------
Total current assets............................................................. 170,965 176,123
Property, buildings and equipment, net.................................................. 40,812 42,403
Leased property under capital leases, less accumulated
amortization of $15,387 and $14,604, respectively................................... 25,181 27,713
Deferred financing costs................................................................ 2,755 3,176
Other assets............................................................................ 20,368 19,773
----------- -----------
$ 260,081 $ 269,188
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................................... $ 47,687 $ 54,245
Loan and security agreement......................................................... 45,194 57,115
Accrued compensation................................................................ 5,768 3,860
Accrued interest.................................................................... 6,668 7,668
Store closing reserve............................................................... 1,564 4,521
Other accrued expenses.............................................................. 12,227 10,112
Income taxes - deferred and current payable......................................... 12,546 8,101
Current maturities of long-term debt................................................ 47 47
Current obligations under capital leases............................................ 1,843 1,781
----------- -----------
Total current liabilities........................................................ 133,544 147,450
Long-term debt, less current maturities................................................. 140,289 168,000
Obligations under capital leases, less current obligations.............................. 32,156 33,999
Reserve for dividends................................................................... - 342
Other long-term liabilities............................................................. 6,367 4,825
Commitments and contingencies (Note O).................................................. - -
Preferred stock subject to mandatory redemption:
16-1/4% senior cumulative preferred stock, $1 par value;
514 shares authorized; 0 and 514 shares issued and outstanding................... - 514
14-1/4% junior cumulative preferred stock, $1 par value;
1,627 and 6,986 shares authorized; 0 and 1,627 shares issued and outstanding;
redemption amount of $0 and $1,627, less unamortized discount.................... - 1,361
Common stockholders' equity:
Common stock, $.01 par value; 25,000,000 and 10,000,000 shares authorized; 5,970,439
and 5,004,942 shares issued and outstanding...................................... 60 50
Nonvoting common stock, $.01 par value; 4,000,000 and 2,000,000 shares authorized;
3,050,473 and 0 shares issued and outstanding.................................... 30 -
Additional paid-in capital.......................................................... 30,586 968
Accumulated deficit................................................................. (82,951) (88,321)
----------- -----------
Total common stockholders' deficit............................................... (52,275) (87,303)
----------- -----------
$ 260,081 $ 269,188
=========== ===========
See notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
Retained
Nonvoting Additional Earnings
Common Common Paid-in (Accumulated
Stock Stock Capital Deficit)
--------- --------- --------- ---------
Balance at January 29, 1995............................. $ 50 $ - $ 950 $ 7,876
Net loss.............................................. - - - (94,648)
Amortization of discount on 14-1/4%
junior cumulative preferred........................ - - - (47)
Cash dividends to preferred stockholders.............. - - - (315)
Stock sold under incentive stock option plan.......... - - 18 -
--------- --------- --------- ---------
Balance at January 28, 1996............................. 50 - 968 (87,134)
Net loss.............................................. - - - (796)
Amortization of discount on 14-1/4%
junior cumulative preferred........................ - - - (49)
Accrued dividends for preferred stockholders - - (342)
--------- --------- --------- ---------
Balance at February 2, 1997............................. 50 - 968 (88,321)
Net income............................................ - - _ 5,021
Amortization of discount on 14-1/4%
junior cumulative preferred..................... - - - (38)
Accrued dividends for preferred stockholders.......... - - - (369)
Reclassification of preferred stock into common stock. 3 - 1,811 756
Payment of notes with common stock.................... 7 30 20,236 -
Gain on payment of notes held by Venture (net of tax). - - 7,571 -
--------- --------- --------- ---------
Balance at February 1, 1998............................. $ 60 $ 30 $ 30,586 $ (82,951)
========= ========= ========= =========
See notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLAR AMOUNTS IN THOUSANDS)
Fiscal Year Ended
-------------------------------------------
<S> <C> <C> <C>
February 1, February 2, January 28,
1998 1997 1996
(52 Weeks) (53 Weeks) (52 Weeks)
----------- ----------- -----------
Cash flows from operating activities:
Net income (loss) $ 5,021 $ (796) $ (94,648)
----------- ----------- -----------
Adjustments to reconcile net income (loss) to net cash from
operating activities:
Depreciation and amortization............................... 12,593 11,658 15,345
Provision (credit) for LIFO inventory valuation............. 606 874 (585)
Provision (credit) for deferred income taxes................ (3,297) 3,305 (6,647)
Noncash interest expense.................................... 3,974 4,473 3,910
Gain on disposal of assets.................................. (150) (56) (982)
Deferred retirement benefits................................ (142) (125) 13
Extraordinary item.......................................... (1,735) - (371)
Long-lived assets write-off................................. - - 78,551
Store closing costs......................................... (3,457) (3,726) 21,397
Decrease (increase) in merchandise inventories.............. 3,957 (7,527) 4,532
Increase in other operating assets.......................... (4,730) (5,622) (3,847)
Decrease in accounts payable................................ (6,558) (8,842) (6,749)
Increase (decrease) in income taxes payable................. 3,537 (3,250) (4,607)
Increase (decrease) in other operating liabilities.......... 8,021 (1,943) (345)
----------- ----------- -----------
Total adjustments............................................. 12,619 (10,781) 99,615
----------- ----------- -----------
Net cash from operating activities............................ 17,640 (11,577) 4,967
----------- ----------- -----------
Cash flows from investing activities:
Capital expenditures............................................ (6,654) (4,947) (9,265)
Proceeds from disposal of assets................................ 1,701 917 1,163
Principal payments received on notes receivable................. 18 16 15
Assets acquired for sale........................................ - (391) -
Changes in constructed stores to be refinanced through lease
financing.................................................... 1,790 (5,845) (4,412)
----------- ----------- -----------
Net cash from investing activities............................ (3,145) (10,250) (12,499)
----------- ----------- -----------
Cash flows from financing activities:
Borrowings (payments) under loan and security agreement, net.... (11,921) 25,527 10,986
Principal payments on other long-term debt...................... (75) (1,335) (193)
Dividends paid on preferred stock............................... - - (315)
Principal payments on promissory notes.......................... - - (641)
Payments for deferred finance costs............................. (225) (54) (13)
Principal payments on capital lease obligations................. (1,781) (2,636) (2,071)
Fees related to payment of debt and reclasification
of preferred stock............................................ (650) - -
Proceeds from sale of stock..................................... - - 18
----------- ----------- -----------
Net cash from financing activities............................ (14,652) 21,502 7,771
----------- ----------- -----------
Net (decrease) increase in cash................................. (157) (325) 239
Cash at beginning of year....................................... 6,973 7,298 7,059
----------- ----------- -----------
Cash at end of year............................................. $ 6,816 $ 6,973 $ 7,298
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid (received) during the year for:
Interest...................................................... $ 25,834 $ 24,804 $ 25,691
Income taxes:
Payments to taxing authorities.............................. 112 386 3,622
Refunds received from taxing authorities.................... (3,952) (442) (231)
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Capital lease obligations incurred when the Company entered
into lease agreements for new store facilities and equipment. $ - $ 11 $ 620
Capital lease obligations terminated............................ - - 154
Amortization of discount on junior cumulative preferred stock
recorded as a direct charge to retained earnings............. 38 49 47
Payment of interest in kind by increasing the
principal amount of the notes................................ 3,561 4,141 3,702
Provision for dividends payable................................. 369 342 -
Common stock issued in payment of notes
and reclassification of preferred stock...................... 8,690 - -
Nonvoting common stock issued in payment of notes............... 27,454 - -
Notes paid with, and preferred stock reclassified into,
common stock................................................. (36,144) - -
See notes to consolidated financial statements.
</TABLE>
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLDIATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS - EXCEPT PER SHARE DATA)
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Pamida Holdings Corporation (the "Company") was formed for the sole purpose
of acquiring Pamida, Inc. ("Pamida") through a merger in a leveraged buy-out
transaction which was consummated on July 29, 1986.
CONSOLIDATION - The consolidated financial statements include the results
of operations, account balances and cash flows of the Company and its
wholly-owned subsidiary, Pamida, and of Seaway Importing Company ("Seaway") and
Pamida Transportation Company, wholly-owned subsidiaries of Pamida. All material
intercompany accounts and transactions have been eliminated in consolidation.
FISCAL YEAR - All references in these financial statements to fiscal years
are to the calendar year in which the fiscal year ends.
LINE OF BUSINESS - Through Pamida, the Company is engaged in the operation
of general merchandise retail stores in a fifteen-state Midwestern, North
Central and Rocky Mountain area. Seaway imports primarily seasonal merchandise
for sale to Pamida. Pamida Transportation Company operated as a contract carrier
for Pamida until July 1995, at which time independent contractors were engaged
to provide all transportation needs of the Company. Because of the similarity in
nature of the Company's businesses, the Company considers itself to be a single
business segment.
REVENUE RECOGNITION - Pamida operates its stores on a self-service,
primarily cash-and-carry basis. Because of the insignificance of sales returns,
revenue is recognized at the point-of-sale without allowance for returns.
CASH FLOW REPORTING - For purposes of the statement of cash flows, the
Company considers all temporary cash investments purchased with a maturity of
three months or less to be cash equivalents. There were no temporary investments
at February 1, 1998 and February 2, 1997.
MERCHANDISE INVENTORIES - Substantially all of the Company's inventory is
stated at the lower of cost (last-in, first-out) or market.
PROPERTY, BUILDINGS AND EQUIPMENT - Property, buildings and equipment are
stated at cost and depreciated on the straight-line method over the estimated
useful lives. Buildings and building improvements are generally depreciated over
8-40 years, while store, warehouse and office equipment, vehicles and aircraft
equipment are generally depreciated over 3-10 years. Leasehold improvements are
depreciated over the life of the lease or the estimated life of the asset,
whichever is shorter.
LEASED PROPERTY UNDER CAPITAL LEASES - Noncancellable financing leases are
capitalized at the estimated fair value of the leasehold interest and are
amortized on the straight-line method over the terms of the leases.
LONG-LIVED ASSETS - When facts and circumstances indicate potential
impairment, the Company evaluates the recoverability of asset carrying values,
including associated goodwill, using estimates of future cash flows over
remaining asset lives. When impairment is indicated, any impairment loss is
measured by the excess of carrying values over fair values.
DEFERRED FINANCING COSTS AND ORIGINAL ISSUE DEBT DISCOUNT - Deferred
financing costs are being amortized using the straight-line method over the
terms of the issues which approximates the effective interest method. Original
issue debt discount is being amortized using the effective interest method over
the terms of the issues.
ADVERTISING COSTS - Advertising costs are expensed as incurred and totaled
$10,468, $11,653 and $16,381 for fiscal years 1998, 1997 and 1996, respectively.
PRE-OPENING EXPENSES - Costs related to opening new stores are expensed as
incurred.
STOCK-BASED COMPENSATION - The Company accounts for its stock-based
compensation under the provisions of Accounting Principles Board Opinion 25,
Accounting for Stock Issued to Employees (APB 25).
EARNINGS PER SHARE - In February 1997, the Financial Accounting Standards
Board ("FASB") adopted Statement of Financial Accounting Standards ("SFAS") No.
128, "Earnings per Share." SFAS 128 requires dual presentation of basic and
diluted earnings per share for all periods for which an income statement is
presented. Basic income per common share is based on the weighted average
outstanding common shares during the respective period. Diluted income per share
is based on the weighted average outstanding common shares and the effect of all
dilutive potential common shares, including stock options. All prior period
income per share data has been restated in accordance with SFAS 128.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
NEW ACCOUNTING PRONOUNCEMENTS - In June 1997, the FASB adopted SFAS No.
130, "Reporting Comprehensive Income", and No. 131, "Disclosures about Segments
of an Enterprise and Related Information". SFAS 130 establishes standards for
reporting and display of comprehensive income and its components in a full set
of general purpose financial statements. This statement is effective for the
Company's fiscal 1999 financial statements. SFAS 131, also effective in 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 the statements
and any incremental disclosure required is expected to be minimal.
RECLASSIFICATIONS - Certain reclassifications have been made to prior
years' financial statements to conform to the current year presentation.
B. EXCHANGE OF DEBT AND PREFERRED STOCK FOR COMMON STOCK AND RELATED
EXTRAORDINARY ITEM
On November 14, 1997, the stockholders of the Company approved various
proposals necessary to effect the payment of all of the Company's outstanding
Senior Promissory Notes, Subordinated Promissory Notes and Junior Subordinated
Promissory Notes (collectively, the "Notes") with common stock and to change and
reclassify all of the Company's outstanding preferred stock into common stock.
In connection with these transactions, which became effective on November
18, 1997, the Company issued 965,497 shares of Common Stock and 3,050,473 shares
of Nonvoting Common Stock. The Nonvoting Common Stock was issued only to 399
Venture Partners, Inc. ("Venture"), an affiliate of Citicorp, and is convertible
into Common Stock on a share-for-share basis upon certain conditions. Common
Stock was issued to all other holders of Notes and to all holders of Preferred
Stock.
The aggregate redemption value of the Preferred Stock at the effective date
of the transactions was $2,968, comprised of $1,000 per share stated liquidation
value plus accrued dividends. The aggregate principal amount and accrued
interest on the Notes at the effective date of the transactions was $33,175.
Based upon a value of $9 per share for purposes of the transactions, (i) 329,815
shares of Common Stock were issued to the holders of Preferred Stock resulting
in a net gain to the Company of $756, credited directly to retained earnings,
(ii) 635,682 shares of Common Stock were issued to Note holders other than
Venture resulting in a net gain to the Company of $1,735, reflected as an
extraordinary item in the consolidated statement of operations, and (iii)
3,050,473 shares of Nonvoting Common Stock were issued to Venture resulting in a
net gain to the Company of $7,571, credited directly to paid-in capital. These
net gains represent the excess of the value of the Common Stock for purposes of
the transactions over the value of the stock as determined by the closing market
price of the Common Stock as of the transaction date, net of applicable
transaction costs, unamortized discounts, and income taxes.
C. NET INCOME PER COMMON SHARE
The following table provides a reconciliation between basic and diluted
income per share (income and shares in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
--------------------------- --------------------------- ---------------------------
<S> <C> <C> <C>
Per-Share Per-Share Per-Share
Income Shares Amount Income Shares Amount Income Shares Amount
--------------------------- --------------------------- ---------------------------
Income (loss) before
extraordinary item $3,286 $ (796) $(95,019)
Less provision for
preferred dividends and
discount amortization (407) (391) (362)
Effect of preferred stock
reclassification 756 - -
------ ------ --------
Basic income (loss) per share
before extraordinary item 3,635 5,843 $ .62 (1,187) 5,005 $ (. 24) (95,381) 5,003 $ (19.07)
Effect of dilutive stock options - 32 - - - -
--------------------------- --------------------------- ---------------------------
Diluted income (loss) per share
before extraordinary item $3,635 5,875 $ .62 $(1,187) 5,005 $ (.24) $(95,381) 5,003 $ (19.07)
=========================== =========================== ============================
</TABLE>
D. MERCHANDISE INVENTORIES
Total inventories would have been higher at February 1, 1998 and February
2, 1997 by $7,180 and $6,574, respectively, had the FIFO (first-in, first-out)
method been used to determine the cost of all inventories. On a FIFO basis, net
income (loss) before extraordinary item would have been $3,892, $78 and
$(95,604), respectively, for fiscal years 1998, 1997, and 1996. During fiscal
years 1998, 1997, and 1996, certain inventory quantities were reduced resulting
in a liquidation of certain LIFO layers carried at costs which were lower than
the cost of current purchases, the effect of which increased net income by $263,
$116, and $125, respectively.
E. PROPERTY, BUILDINGS AND EQUIPMENT
Property, buildings and equipment consists of:
Feb. 1, Feb. 2,
1998 1997
--------- ---------
Land and land improvements..................... $ 4,030 $ 4,013
Buildings and building improvements............ 22,183 22,076
Store, warehouse and office equipment.......... 59,842 59,668
Vehicles and aircraft equipment................ 1,551 1,513
Leasehold improvements......................... 16,944 16,497
--------- ---------
104,550 103,767
Less accumulated depreciation and amortization. 63,738 61,364
--------- ---------
$ 40,812 $ 42,403
========= =========
F. OTHER ASSETS
Other assets consist of:
Feb. 1, Feb. 2,
1998 1997
--------- ---------
Constructed stores to be refinanced through
lease financing.............................. $ 7,969 $ 10,257
Unamortized software costs, net................ 10,435 7,541
Other.......................................... 1,964 1,975
--------- ---------
$ 20,368 $ 19,773
========= =========
The Company contracted for the construction of two and five store locations
during the periods ended January 28, 1996 and February 2, 1997, respectively.
The construction costs capitalized are recorded as other long-term assets during
the period of construction and for the period following completion of
construction to the date of sale of such stores through a lease financing
arrangement. The construction costs for five stores remain in Other Assets at
February 1, 1998. The cost of construction has been financed through the
Company's working capital and cash flow from operations. The Company expects to
obtain lease financing under favorable terms for each of the constructed stores
in the near future.
G. FINANCING AGREEMENTS
Effective March 17, 1997, the term of Pamida'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 from $70,000, which had been the
limit throughout fiscal 1997. Prior to March 17, 1997, borrowings under the
Agreement bore interest at a rate which was 0.75% per annum greater than the
applicable prime rate. Effective March 17, 1997, borrowings under the Agreement
bear interest at a rate which is tied to the applicable prime rate or the London
Interbank Offered Rate (LIBOR), generally at Pamida's discretion. The amounts
Pamida is permitted to borrow under the Agreement are determined by a formula
based upon the amount of Pamida's eligible inventory from time to time.
Borrowings of Pamida under the Agreement are secured by security interests
in substantially all of the current assets (including inventory) of Pamida and
by liens on certain real estate interests and other property of Pamida. The
Company and two subsidiaries of Pamida have guaranteed payment and performance
of Pamida's obligations under the Agreement and have pledged some or all of
their respective assets, including the stock of Pamida owned by the Company, 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 will affect, among other
things, the ability of Pamida 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.
The maximum amount of borrowings under the Agreement during fiscal 1998 and
1997 was $66,461 and $69,256, respectively. The weighted average amounts of
borrowings under the Agreement for fiscal 1998 and 1997 were $52,869 and
$43,002, respectively; and the weighted average interest rates were 9.8% and
10.0%, respectively.
Long-term debt consists of:
Feb. 1, Feb. 2,
1998 1997
-------- --------
Senior Subordinated Notes, 11.75%, due March 2003 .. $140,000 $140,000
Industrial development bond, 5.5%, due in monthly
installments through 2005......................... 336 411
Senior promissory notes, 15.5%, interest paid
in kind quarterly................................. - 4,926
Subordinated promissory notes, 16%, interest paid
in kind quarterly................................. - 13,454
Junior subordinated promissory notes, 16.25%, net of
unamortized discount of $0 and $878, interest paid
in kind quarterly................................. - 9,256
-------- --------
140,336 168,047
Less current maturities............................. 47 47
-------- --------
$140,289 $168,000
======== ========
As of February 1, 1998, the fair value of long-term debt was $144,489
compared to its recorded value of $140,289. The fair value of long-term debt was
estimated based on quoted market values for the notes. The aggregate maturities
of long-term debt totals $47 in each of the next five fiscal years.
The Senior Subordinated Notes are unsecured and are subordinate borrowings
under the Agreement. Presently, under the most restrictive debt covenants, the
Company is not permitted to pay dividends on its common stock.
The senior, subordinated and junior subordinated promissory notes of the
Company were amended to provide that, until the obligations of the Company and
Pamida under certain loan agreements had been paid in full, the quarterly
interest payments on the notes were to be paid-in-kind by increasing the
principal amount of each note on the applicable quarterly payment date by the
amount of accrued interest then being paid-in-kind. Interest on the notes
paid-in-kind accrued at a rate which, in each case, was two percentage points
higher than the applicable cash interest rate. See Note B describing the
transaction effecting the payment of these notes with shares of common stock of
the Company which was effective November 18, 1997.
H. INCOME TAXES
Components of the income tax provision (benefit) from continuing operations
are as follows:
Year Ended
----------------------------
Feb. 1, Feb. 2, Jan. 28,
1998 1997 1996
------- ------- -------
Current:
Federal..................................... $ 491 $(3,155) $ (993)
State....................................... 311 (150) (223)
------- ------- -------
802 (3,305) (1,216)
------- ------- -------
Deferred:
Federal..................................... (1,616) 3,189 (5,865)
State....................................... (330) 116 (782)
Utilization of tax benefit carryforward....... 2,718 - -
Change in beginning of year
valuation allowance......................... (1,574) - -
------- ------- -------
(802) 3,305 (6,647)
------- ------- -------
Total benefit from continuing operations...... $ - $ - $(7,863)
======= ======= =======
The differences between the U.S. Federal statutory tax rate and the
Company's effective tax rate are as follows:
Year Ended
----------------------------
Feb. 1, Feb. 2, Jan. 28,
1998 1997 1996
------- ------- -------
Statutory rate................................ 34.0% (34.0)% (34.0)%
State income tax effect....................... 4.6 (2.8)% (1.3)%
Amortization of the excess of cost over
net assets acquired......................... - - 23.9
Valuation allowance........................... (40.9) 25.1 3.6
Accretion of discount on junior
subordinated debt........................... 1.3 6.8 0.1
Other......................................... 1.0 4.9 0.1
------- ------- -------
- - (7.6)%
======= ======= =======
In fiscal 1998, income tax expense allocated to the extraordinary item was
$379 and income tax expense charged directly to stockholders' equity was $1,821.
These amounts are net of a change in the beginning of year valuation allowance
of $2,495.
Significant temporary differences between reported and taxable income that
give rise to deferred tax assets and liabilities were as follows:
Feb. 1, Feb. 2,
1998 1997
------- -------
Net current deferred tax liabilities:
Inventories................................. $13,910 $15,302
Prepaid insurance........................... 172 210
Other....................................... 423 412
Post employment health costs................ (135) (189)
Accrued expenses............................ (2,192) (941)
Store closing costs......................... (1,246) (2,570)
------- -------
Net current deferred tax liabilities...... 10,932 12,224
------- -------
Net long-term deferred tax liabilities:
Property, buildings and equipment........... 2,096 2,862
Other....................................... 1,836 1,436
Valuation allowance......................... - 4,069
Capital leases.............................. (3,377) (3,089)
Tax benefit carryforward.................... (800) (3,518)
------- -------
Net long-term deferred tax (asset) liabilities (245) 1,760
------- -------
Net total deferred tax liabilities............ $10,687 $13,984
======= =======
Net long-term deferred tax (asset) liabilities are classified with other
assets or other long-term liabilities in the consolidated balance sheets of the
Company. As of February 1, 1998 the Company had alternative minimum tax credit
carryforwards totaling $800, which do not expire.
I. LEASES
The majority of store facilities are leased under noncancelable leases.
Substantially all of the leases are net leases which require the payment of
property taxes, insurance and maintenance costs in addition to rental payments.
Certain leases provide for additional rentals based on a percentage of sales and
have renewal options for one or more periods totaling from one to twenty years.
At February 1, 1998 the future minimum lease payments under capital and
operating leases with rental terms of more than one year amounted to:
Fiscal Year Ending Capital Operating
Leases Leases
-------- --------
1999....................................... $ 5,659 $ 10,996
2000....................................... 5,442 8,867
2001....................................... 5,352 7,554
2002....................................... 5,267 6,788
2003....................................... 5,255 6,076
Later years................................ 36,129 61,356
-------- --------
Total minimum obligations.................. 63,104 $101,637
-------- ========
Less amount representing interest.......... 29,105
--------
Present value of net minimum lease payments 33,999
Less current portion....................... 1,843
--------
Long-term obligations...................... $ 32,156
========
The minimum rentals under operating leases have not been reduced by minimum
sublease rentals of $157 due in the future under noncancelable subleases.
Total rental expense related to all operating leases (including those with
terms less than one year) is as follows:
Year Ended
---------------------------
Feb. 1, Feb. 2, Jan. 28,
1998 1997 1996
------- ------- -------
Minimum rentals............................ $11,669 $10,938 $11,715
Contingent rentals......................... 272 258 399
Less sublease rental income................ (705) (735) (852)
------- ------- -------
$11,236 $10,461 $11,262
======= ======= =======
J. SAVINGS AND OTHER POSTEMPLOYMENT BENEFITS PLANS
Pamida has adopted a 401(k) plan that covers all employees who are 21 years
of age with one or more years of service. Participants can contribute from 1% to
15% of their pre-tax compensation. Pamida has currently elected to match 50% of
the participant's contribution up to 5% of compensation. Pamida's savings plan
contribution expenses for fiscal years 1998, 1997 and 1996, were $765, 770, and
$749, respectively.
Prior to December 1993, the Company had agreed to continue to provide
health insurance coverage and pay a portion of the health insurance premiums
until age 65 for individuals who retire if the individual was eligible to
participate in the plan, had attained age 55, had completed ten or more
consecutive years of service and elected to continue on the Company plan. The
plan is unfunded, and the Company had the right to modify or terminate these
benefits. In December 1993, the Company amended the Plan to no longer offer
postretirement health benefits for employees retiring after February 1, 1994.
The components of periodic expense for postretirement benefits in fiscal
1998, 1997 and 1996 were as follows:
Feb. 1, Feb. 2, Jan. 28,
1998 1997 1996
------ ------ ------
Annual postretirement benefit expense:
Interest cost............................... $ 11 $ 16 $ 32
Amortization of unrecognized net obligations (73) (44) (6)
------ ------ ------
Annual postretirement benefit (income) expense $ (62) $ (28) $ 26
====== ====== ======
The accumulated postretirement benefit obligation consists of:
Feb. 1, Feb. 2,
1998 1997
------ ------
Accumulated postretirement
benefit obligation.......................... $ 163 $ 194
Unrecognized gain............................. 189 299
------ ------
Accrued expense............................... $ 352 $ 493
====== ======
A 5% increase in the cost of covered health care benefits was assumed for
both fiscal 1998 and 1997. The rate of 5% is assumed to remain level after
fiscal 1998. Assuming a 1% increase in the health care trend rate, the annual
postretirement benefit expense would remain the same for both fiscal 1998 and
1997, and the unfunded accumulated postretirement benefit obligation would
increase by $2 and $4 for fiscal 1998 and 1997, respectively. The weighted
average discount rate used in determining the accumulated postretirement benefit
obligation was 7.0% for both fiscal 1998 and 1997.
K. PREFERRED STOCK SUBJECT TO MANDATORY REDEMPTION
See Note B describing the change and reclassification of all preferred
stock into common stock of the Company, effective November 18, 1997. Prior to
the reclassification, the Company was obligated to redeem all outstanding shares
of senior cumulative and junior cumulative preferred stock on December 31, 2001,
at a price not to exceed the liquidation value which was $1,000 per share plus
any accrued dividends. Subject to certain loan restrictions, the Company could,
at any time, have redeemed all or any portion of the preferred stock outstanding
at a price of $1,000 per share plus any accrued dividends.
Each share of senior cumulative and junior cumulative preferred stock
entitled its holder to receive a quarterly dividend of 16.25% and 14.25% per
annum, respectively, of the liquidation value from the date of issuance until
redeemed. Both series of preferred stock were nonvoting, and any unpaid
dividends were added to the liquidation value until paid.
The General Corporation Law of the State of Delaware, under which the
Company and Pamida 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 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 Pamida did not declare or pay any cash
dividends in fiscal 1998 or 1997 and could pay cash dividends in ensuing years
only to the extent that the Company and Pamida satisfied the applicable
statutory standards which included the Company's having a net worth equal to at
least the aggregate par value of the preferred stock which amounted to $2. A
provision for preferred stock dividends has been recorded in the fiscal 1998 and
1997 financial statements. The cumulative dividend rate on the preferred stock
increased by 0.5% per quarter (with a maximum aggregate increase of 5%) on each
quarterly dividend payment date on which the preferred stock dividends were not
paid currently on a cumulative basis. As a result of the reclassification of the
preferred stock into common stock, the Company's obligation for further
preferred stock dividend payments or accrual has been eliminated.
The difference between the fair value of the junior cumulative preferred
stock at issuance and the mandatory redemption value was recorded through
periodic accretions, using the effective interest method with a related charge
to retained earnings.
L. STOCK OPTIONS
On November 24, 1992, the Board of Directors of the Company adopted the
Pamida Holdings Corporation 1992 Stock Option Plan (the "Plan"), which was
approved by the Company's stockholders in May 1993. The Plan, administered by a
Committee of the Board of Directors, provides for the granting of options to key
employees of the Company and its subsidiaries to purchase up to an aggregate of
350,000 shares of Common Stock of the Company. Options granted under the Plan
may be either incentive stock options, within the meaning of Section 422 of the
Internal Revenue Code, or non-qualified options. Options granted under the Plan
will be exercisable during the period fixed by the Committee for each option;
however, in general, no option will be exercisable earlier than one year after
the date of its grant, and no incentive stock option will be exercisable more
than ten years after the date of its grant. The option exercise price must be at
least 100% of the fair market value of the Common Stock on the date of the
option grant. No compensation expense related to stock options was recorded
during fiscal 1998, 1997 or 1996.
On March 5, 1998, the Board of Directors of the Company adopted the Pamida
Holdings Corporation 1998 Stock Incentive Plan (the "1998 Plan") which will
require approval by the stockholders to become effective. The 1998 Plan
authorizes 500,000 shares of Common Stock for option grants or other awards to
eligible officers and other key employees of the Corporation. No grants or other
awards have been made under the 1998 Plan.
The Company accounts for its stock-based compensation under the provisions
of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees (APB Opinion No. 25), which utilizes the intrinsic value method.
A summary of the Company's stock-based compensation activity related to
stock options for the last three fiscal years is as follows:
<TABLE>
<CAPTION>
Feb. 1, 1998 Feb. 2, 1997 Jan. 28, 1996
------------------ ------------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Number Price Number Price Number Price
------- -------- ------- -------- ------- --------
Outstanding - beginning of year 302,816 $ 4.39 296,546 $ 5.05 227,545 $ 4.33
Granted 40,700 3.06 86,800 2.37 122,205 6.80
Expired/terminated 21,083 4.93 80,530 4.66 48,246 6.22
Exercised - - - - 4,958 3.63
------- -------- ------- -------- ------- --------
Outstanding - end of year 322,433 $ 4.19 302,816 $ 4.39 296,546 $ 5.05
======= ======== ======= ======== ======= ========
</TABLE>
There were 161,093, 123,616 and 85,474 options exercisable at February 1,
1998, February 2, 1997 and January 28, 1996, respectively.
The following table summarizes information about stock options outstanding
as of February 1, 1998:
Options Outstanding Options Exercisable
- ------------------------------------------------------- ----------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Range of Number Contractual Exercise Number Exercise
Exercise Prices Outstanding Life Price Exercisable Price
- --------------- ----------- ------------ -------- ----------- --------
$ 1.94 - $2.78 77,300 8.5 Years $ 2.36 15,460 $ 2.36
3.06 39,200 9.1 Years 3.06 - 0.00
3.63 - 5.75 167,933 6.2 Years 4.61 130,433 4.37
7.19 38,000 7.1 Years 7.19 15,200 7.19
- --------------- ----------- ------------ -------- ----------- --------
$ 1.94 - $7.19 322,433 7.2 Years $ 4.19 161,093 $ 4.45
=============== =========== ============ ======== =========== =======-
If compensation cost for the Company's Plan had been determined based on
the fair value at the grant dates for awards under the Plan consistent with the
method of SFAS No. 123, Accounting for Stock-Based Compensation, the Company's
net income and net income per share would have been reduced to the pro forma
amounts indicated below:
Feb. 1, Feb. 2, Jan. 28,
1998 1997 1996
------ ------- --------
Net income (loss) As reported $5,370 $(1,187) $(95,010)
Pro forma 5,326 (1,235) (95,046)
Basic income (loss) per share As reported .92 (.24) (18.99)
Pro forma .91 (.25) (19.00)
Diluted income (loss) per share As reported .91 (.24) (18.99)
Pro forma .91 (.25) (19.00)
The weighted average fair value of options granted during the year was
$1.43, $0.70 and $2.86 per option for fiscal 1998, 1997 and 1996, respectively.
The fair value of options granted under the Plan was estimated at the date of
grant using a binomial options pricing model with the following assumptions:
Feb. 1, Feb. 2, Jan. 28,
1998 1997 1996
------ ------ -------
Risk-free interest rate 6.5% 6.0% 7.0%
Dividend yield 0.0% 0.0% 0.0%
Expected volatility 8.4% 8.1% 8.1 %
Expected life (years) 6.0 years 6.6 years 6.7 years
M. CAPITAL STOCK
As described in Note B, the Company issued an additional 965,497 shares of
Common Stock and 3,050,473 shares of Nonvoting Common Stock during fiscal 1998.
Accordingly, the Company had 5,970,439 shares of Common Stock and 3,050,473
shares of Nonvoting Common Stock outstanding at February 1, 1998. The Nonvoting
Common Stock is held entirely by 399 Venture Partners, Inc. which is also the
Company's largest holder of Common Stock. The Nonvoting Common Stock is
convertible into Common Stock on a share-for-share basis upon certain
conditions. The Company had 5,004,942 shares of Common Stock and no shares of
Nonvoting Common Stock outstanding at February 2, 1997.
N. EXTRAORDINARY ITEMS
As described in Note B, on November 18, 1997 the Company issued 635,682
shares of common stock to certain holders of Notes which resulted in an
extraordinary gain. On July 31, 1995, the Company made an offer to purchase for
cash 39.5% of the aggregate outstanding principal amount of 14% Subordinated
Promissory Notes (Notes) of Pamida Holdings Corporation. The offered purchase
price was 50% of the principal amount to be purchased. In the third quarter of
fiscal 1996, the Company redeemed Notes tendered in the aggregate principal
amount of $1,281 and made cash payments of $641, resulting in an after-tax gain
of $371.
O. COMMITMENTS AND CONTINGENCIES
Pamida has employment agreements with three key executive officers which
expire in 2000 and 2001. In addition to a base salary, the agreements provide
for a bonus to be paid if certain Company performance goals are achieved. Also,
in March 1997, the Board of Directors approved a long-term incentive
compensation program in order to enhance retention of certain key members of
management. Payout under such program is tied to continued employment and future
Company common stock price appreciation.
During fiscal 1996, the Company received $967 from Pamida as a
reimbursement for certain tax benefits derived by Pamida. Such remittance, along
with $18 from the exercise of certain stock options, was used by the Company to
redeem Subordinated Promissory Notes as described in Note N, to repay to Pamida
intercompany balances totaling $29, and to pay quarterly dividends on preferred
stock totaling $315.
On February 1, 1998, the Company had standby letters of credit outstanding
totaling $2,379 related to the Company's self-insured retention of worker's
compensation liabilities and future rental payments on a warehouse. Additional
letters of credit outstanding totaling $5,017 were committed for purchases of
merchandise inventory.
P. IMPAIRMENT OF LONG-LIVED ASSETS RECORDED IN FISCAL 1996
During fiscal 1996, weak trends in the retail industry combined with
increasing competition lowered the operating results of the Company. Therefore,
during the fourth quarter of fiscal 1996, management reviewed its expectations
for near- and long-term performance of the Company and revised its income
projections to reflect developing and projected trends, primarily in
comparable-store-sales growth, gross margins, operating expenses and interest
expenses. Consequently, the recoverability of the Company's long-lived assets
was also reassessed.
In the fourth quarter of fiscal 1996, the Company adopted Statement of
Financial Accounting Standards No. 121 Accounting For the Impairment of
Long-Lived Assets and Long-Lived Assets to Be Disposed Of (SFAS 121). This
financial accounting standard requires the Company to perform an analysis of the
recoverability of the net book value of long-lived assets. The Company analyzed
cash flows on an individual store basis to assess recoverability of store level
long-lived assets including allocated goodwill.
As a result of this analysis, impairment was indicated at certain stores,
and a noncash pre-tax charge was recorded as illustrated in the table below. The
impairment losses were based on fair value which was determined through
discounted cash flows for the particular stores utilizing a rate commensurate
with the associated risks. The effect of this accounting change was to increase
the net loss for the year by $24,693, or $4.94 per basic and diluted share.
The Company also analyzed the value of its remaining goodwill and favorable
leasehold interests not impaired under the store-level SFAS 121 analysis using
its historical method under Accounting Principles Board Opinion No. 17 (APB 17)
and determined that such remaining amounts also were impaired. For this analysis
the value of the goodwill and favorable leasehold interests was determined by
projecting aggregate net income and adjusting it by adding back amortization of
intangible assets. With respect to the projections of net income used to
evaluate intangible assets impairment, management made several assumptions in
projecting their best estimate of the results of future operations of the
Company. The most significant assumptions were an estimated remaining useful
life of goodwill of fifteen years, modest annual comparable store sales growth,
gross margin rates consistent with those experienced over the past fiscal year
in the stores not being closed, an annual expense escalation consistent with
recent inflation trends and the ability to refinance debt maturities as they
come due.
These assumptions resulted in aggregate undiscounted adjusted net income
for the fifteen-year forecast period of approximately $5,186, which reflects
aggregate pre-tax interest expense of approximately $398,000 payable in cash and
$86,000 payable "in kind" (PIK). The $5,186 of aggregate adjusted net income for
the fifteen-year forecast period also reflected projected adjusted net losses
for fiscal 1997 of $4,522, which included cash interest expense of $26,242 and
PIK interest of $4,453, and for fiscal 1998 of $2,863, which included cash
interest expense of $26,581 and PIK interest of $5,121. For fiscal 1999, the
Company projected adjusted net income of approximately $967, which included cash
interest expense of approximately $26,581 and PIK interest of $5,889. Due to the
uncertainty of projections beyond 1999, this level of adjusted net income was
assumed to continue for each of the remaining fiscal years in the projection
period. As a result of this evaluation in fiscal 1996, management concluded that
the remaining goodwill and favorable leasehold interests were fully impaired.
Pre-Tax Components of Long-Lived Asset Write-Off As Reflected in the
Statement of Operations for the year ended January 28, 1996:
SFAS APB
121 17 Total
------- ------- -------
Goodwill.......................... $20,607 $49,406 $70,013
Favorable leasehold interests..... 4,245 1,917 6,162
Property, buildings and equipment. 2,376 - 2,376
------- ------- -------
Total............................. $27,228 $51,323 $78,551
======= ======= =======
The goodwill was originally recorded in July 1986 when Pamida Holdings
Corporation acquired Pamida, Inc. through a leveraged buy-out and represented
the excess of the purchase price over the fair value of the net assets acquired.
Goodwill had been amortized on a straight-line basis over a forty-year period
but, due to the trends cited above, its estimated remaining useful life was
adjusted to fifteen years during the fourth quarter of fiscal 1996.
Q. STORE CLOSINGS IN FISCAL 1996
As discussed in Note P above, the Company's operating performance during
fiscal 1996 was below plan. Management's analysis of individual stores'
operations and cash flows resulted in the identification of forty unprofitable
or competitive market stores which did not fit the Company's niche market
strategy. Consequently, a charge was recorded at January 28, 1996 as indicated
below to cover the costs necessary to close these stores. The Company received
positive net cash flow from closing the stores due to cash generated from the
disposition of related inventories. The amounts the Company will ultimately
realize from the disposal of assets or pay on the resolution of liabilities may
differ from the estimated amounts utilized in arriving at the income statement
effect.
Pre-Tax Components of fiscal 1996 Store Closing Costs:
Income
Statement
Effect
--------
Real estate exit costs and write-off of property,
buildings, and equipment........................ $ 11,455
Inventory liquidation............................ 9,080
Professional charges............................. 314
Severance and other costs and fees............... 548
--------
Total............................................ $ 21,397
========
The store closing reserve balance as of January 28, 1996 included amounts
related to real estate, inventory, severance, professional fees and other costs
of closing the forty stores. The liquidation of the closing stores inventory was
completed in the second quarter of fiscal 1997. All known ancillary costs of the
store closings have been paid except those related to the remaining real estate.
During fiscal years 1997 and 1998, the Company negotiated settlements on
twenty-five closed store properties which had been leased, three which had been
subleased, and sold eight closed store properties which had been owned. As of
February 1, 1998, the Company remains liable for lease obligations on seven
closed store properties. The Company anticipates that final disposition of the
remaining obligations will be completed in fiscal 1999 and 2000. There were no
adjustments made during fiscal 1998 and 1997 to the store closing reserve other
than cash inflows and outflows related to the store closings.
The store closing reserve is presented in the balance sheets as follows:
Feb. 1, Feb. 2,
1998 1997
-------- --------
Store closing reserve (short-term)............... $ 1,564 $ 4,521
Amount included in other
long-term liabilities.......................... 1,690 2,190
-------- --------
Total............................................ $ 3,254 $ 6,711
======== ========
R. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of the quarterly results of operations for the
years ended February 1, 1998 and February 2, 1997:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
May 4, August 3, November 2, February 1,
Fiscal 1998 1997 1997 1997 1998 Year
- -------------------------------- ----------- ----------- ----------- ----------- -----------
Sales .......................... $ 144,564 $ 163,217 $ 158,749 $ 190,487 $ 657,017
Gross profit.................... 33,268 41,502 37,854 49,311 161,935
(Loss) income before
extraordinary item............ (5,459) 563 340 7,842 3,286
Extraordinary item.............. - - - 1,735 1,735
Net (loss) income (5,459) 563 340 9,577 5,021
Effect of preferred stock
reclassification.............. - - - 756 756
Less provision for preferred
dividends and discount
amortization.................. (105) (165) (137) - (407)
----------- ----------- ----------- ----------- -----------
Net (loss) income available
for common shares $ (5,564) $ 398 $ 203 $ 10,333 $ 5,370
=========== =========== =========== =========== ===========
Basic (loss) income per share:
(Loss) income before
extraordinary item.......... $ (1.11) $ .08 $ .04 $ 1.03 $ .62
Extraordinary item............ - - - .21 .30
----------- ----------- ----------- ----------- -----------
Basic (loss) income........... $ (1.11) $ .08 $ .04 $ 1.24 $ .92
=========== =========== =========== =========== ===========
Diluted (loss) income per share:
(Loss) income before
extraordinary item.......... $ (1.11) $ .08 $ .04 $ 1.02 $ .62
Extraordinary item............ - - - .21 .29
----------- ----------- ----------- ----------- -----------
Diluted (loss) income......... $ (1.11) $ .08 $ .04 $ 1.23 $ .91
=========== =========== =========== =========== ===========
April 28, July 28, October 27, February 2,
Fiscal 1997 1996 1996 1996 1997 Year
- -------------------------------- ----------- ----------- ----------- ----------- -----------
Sales........................... $ 131,786 $ 155,817 $ 151,980 $ 193,606 $ 633,189
Gross profit.................... 31,575 37,096 36,446 48,973 154,090
Net (loss) income............... (4,742) (1,294) 189 5,051 (796)
Less provision for preferred
dividends and discount
amortization.................. (93) (97) (99) (102) (391)
----------- ----------- ----------- ----------- -----------
Net (loss) income available for
common shares................. $ (4,835) $ (1,391) $ 90 $ 4,949 $ (1,187)
=========== =========== =========== =========== ===========
Basic and diluted (loss)
income per share.............. $ (.97) $ (.28) $ .02 $ .99 $ (.24)
=========== =========== =========== =========== ===========
</TABLE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Pamida Holdings Corporation
Omaha, Nebraska
We have audited the consolidated balance sheets of Pamida Holdings
Corporation and subsidiary as of February 1, 1998 and February 2, 1997, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the years then ended and have issued our report thereon dated
March 5, 1998; such financial statements and report are included in this Annual
Report on Form 10-K. Our audits also included the financial statement schedule
of Pamida Holdings Corporation and subsidiary as of February 1, 1998 and
February 2, 1997, and for each of the years then ended listed in Item 14(a)2.
This financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits. In
our opinion, such financial statement schedule, when considered in relation to
the basic financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Omaha, Nebraska
March 5, 1998
REPORT OF INDEPENDENT ACCOUNTANTS
Our report on the consolidated financial statements of Pamida Holdings
Corporation and Subsidiary for fiscal 1996 is included in this Form 1O-K. In
connection with our audit of such financial statements, we have also audited the
related financial statement Schedule I Condensed Financial Information of
Registrant for such year included in this Form l0-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to he
included therein.
/s/ Coopers & Lybrand L.L.P.
Chicago, Illinois
March 26, 1996
PAMIDA HOLDINGS CORPORATION
(Parent Company Only)
(Dollar amounts in thousands)
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
BALANCE SHEETS - FEBRUARY 1, 1998 AND FEBRUARY 2, 1997
- --------------------------------------------------------------------------------
ASSETS 1998 1997
-------- --------
Current assets:
Refundable income taxes due from subsidiary $ 2,335 $ 855
Investment in subsidiary (50,898) (57,531)
Deferred financing costs - 52
-------- --------
$(48,563) $(56,624)
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accrued interest $ - $ 811
Other accrued expense 160 -
Payable to Pamida, Inc. 516 15
-------- --------
Total current liabilities 676 826
Long-term debt - 27,636
Dividends payable - 342
Other long-term liabilities 3,036 -
Preferred stock subject to mandatory redemption:
16-1/4% senior cumulative preferred stock, $1
par value; 514 shares authorized, 0 and 514
issued and outstanding - 514
14-1/4% junior cumulative preferred stock, $1 par value;
1,627 and 6,986 shares authorized; 0 and 1,627 shares
issued and outstanding; redemption amount of $0 and
$1,627 less unamortized discount - 1,361
Common stockholders' equity:
Common stock, $.01 par value; 25,000,000 and
10,000,000 shares authorized; 5,970,439 and 5,004,942
shares issued and 0 shares issued and outstanding 60 50
Nonvoting common stock, $.01 par value; 4,000,000
and 2,000,000 shares authorized; 3,050,473 and
0 shares issued and outstanding 30 -
Additional paid-in capital 29,895 968
Accumulated deficit (82,260) (88,321)
-------- --------
Total common stockholders' deficit (52,275) (87,303)
-------- --------
$(48,563) $(56,624)
======== ========
See notes to Parent Company Only financial statements.
<TABLE>
<CAPTION>
PAMIDA HOLDINGS CORPORATION
(Parent Company Only)
(Dollar amounts in thousands)
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF COMMON STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Retained
Nonvoting Additional Earnings
Common Common Paid-in (Accumulated
Stock Stock Capital Deficit)
------- ------ --------- ------------
Balance at January 29, 1995............................. $ 50 $ - $ 950 $ 7,876
Net loss.............................................. - - - (94,648)
Amortization of discount on 14-1/4%
junior cumulative preferred......................... - - - (47)
Cash dividends to preferred stockholders.............. - - - (315)
Stock sold under incentive stock option plan.......... - - 18 -
------- ------ --------- ------------
Balance at January 28, 1996............................. 50 - 968 (87,134)
Net loss.............................................. - - - (796)
Amortization of discount on 14-1/4%
junior cumulative preferred......................... - - - (49)
Accrued dividends for preferred stockholders - - - (342)
------- ------ --------- ------------
Balance at February 2, 1997............................. 50 - 968 (88,321)
Net income............................................ - - - 5,712
Amortization of discount on 14-1/4%
junior cumulative preferred......................... - - - (38)
Accrued dividends for preferred stockholders.......... - - - (369)
Reclassification of preferred stock into common stock. 3 - 1,811 756
Payment of notes with common stock.................... 7 30 20,236 -
Gain on payment of notes held by Venture (net of tax). - - 6,880 -
------- ------ --------- ------------
Balance at February 1, 1998............................. $ 60 $ 30 $ 29,895 $ (82,260)
======= ====== ========= ============
See notes to Parent Company Only financial statements.
</TABLE>
PAMIDA HOLDINGS CORPORATION
(Parent Company Only)
(Dollar amount in thousands except for per share data)
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT STATEMENTS OF
OPERATIONS AND RETAINED (DEFICIT) EARNINGS YEARS ENDED FEBRUARY 1, 1998,
FEBRUARY 2, 1997 AND JANUARY 28, 1996
- --------------------------------------------------------------------------------
1998 1997 1996
-------- -------- --------
Equity in income (loss) of subsidiary $ 6,633 $ 3,696 $(92,527)
Expenses:
General and administrative 17 19 33
Interest 3,974 4,473 3,910
-------- -------- --------
3,991 4,492 3,943
-------- -------- --------
Income (loss) before provision for income
taxes and extraordinary item 2,642 (796) (96,470)
Income tax benefit (1,480) - (1,451)
-------- -------- --------
Income (loss) before extraordinary item 4,122 (796) (95,019)
Extraordinary item 1,590 - 371
-------- -------- --------
Net income (loss) 5,712 (796) (94,648)
Effect of preferred stock reclassification 756 - -
Amortization of discount on 14-1/4%
junior cumulative preferred (38) (49) (47)
Cash dividends paid to preferred
stockholders - - (315)
Accrued dividends for
preferred stockholders (369) (342) -
-------- -------- --------
Net income (loss) available for common shares $ 6,061 $ (1,187) $(95,010)
======== ======== ========
Basic income (loss) per share:
Income (loss) before extraordinary item $ .77 $ (.24) $ (19.07)
Extraordinary item .27 - .08
-------- -------- --------
Basic income (loss) $ 1.04 $ (.24) $ (18.99)
======== ======== ========
Diluted income (loss) per share
Income (loss) before extraordinary item $ .76 $ (.24) $ (19.07)
Extraordinary item .27 - .08
-------- -------- --------
Diluted income (loss) $ 1.03 $ (.24) $ (18.99)
======== ======== ========
See notes to Parent Company Only financial statements.
<TABLE>
<CAPTION>
PAMIDA HOLDINGS CORPORATION
(Parent Company Only)
(Dollar amounts in thousands)
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF CASH FLOWS
YEARS ENDED FEBRUARY 1, 1998, FEBRUARY 2, 1997 AND JANUARY 28, 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1998 1997 1996
Cash flows from operating activities: -------- -------- --------
Net income (loss) ................................. $ 5,712 $ (796) $(94,648)
-------- -------- --------
Adjustments to reconcile net income (loss) to
net cash from operating activities:
Equity in (income) loss of subsidiary .......... (6,633) (3,696) 92,527
Noncash interest expense ....................... 3,850 4,313 3,756
Accretion of original issue debt discount ...... 124 160 154
Amortization of intangible assets .............. 8 11 10
Extraordinary item related to retirement of debt (1,590) - (371)
(Increase) decrease in refundable income tax ... (1,480) - (483)
Increase (decrease) in operating liabilities ... 659 8 (7)
-------- -------- --------
Total adjustments ........................... (5,062) 796 95,586
-------- -------- --------
Net cash from operating activities .......... 650 - 938
-------- -------- --------
Cash flows from investing activities:
Dividends received from subsidiary ................ - - -
Cash flows from financing activities:
Fees related to payment of debt and
reclassification of preferred stock .............. (650) - -
Proceeds from sale of stock ....................... - - 18
Principal payments on promissory notes ............ - - -
Payments to redeem subordinated notes ............. - - (641)
Dividends paid to preferred stockholders .......... - - (315)
-------- -------- --------
Net cash from financing activities .......... (650) - (938)
-------- -------- --------
Net change in cash .................................. - - -
Cash at beginning of year ........................... - - -
-------- -------- --------
Cash at end of year ................................. $ - $ - $ -
======== ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the year for interest $ - $ - $ -
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING
ACTIVITY:
Amortization of discount on junior
cumulative preferred stock recorded
as a direct charge to retained earnings $ 38 $ 49 $ 47
Payment of interest in kind by increasing
the principal amount of the notes 3,561 4,141 3,702
See notes to Parent Company Only financial statements.
</TABLE>
PAMIDA HOLDINGS CORPORATION
(Parent Company Only)
(Dollar Amounts In Thousands)
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
NOTES TO FINANCIAL STATEMENTS
A. The Condensed Financial Statements include the Registrant only and reflect
the equity method of accounting for its benefically wned subsidiary,
Pamida, Inc.
B. The registrant files a consolidated U.S. federal tax return with Pamida,
Inc. The Company has a tax sharing agreement with Pamida, Inc. that
provides that taxes will be allocated among the companies based upon the
tax expense or benefit that was derived on a consolidated basis from each
entity's operations. Income tax effects included in these financial
statements are calculated on a stand-alone basis for Pamida Holdings
Corporation. Related to the Company's payment of debt with common stock and
reclassification of preferred stock into common stock which was effective
November 18, 1997, income tax expense allocated to the extraordinary item
totaled $524 and income tax expense charged to stockholders' equity was
$2,512. These amounts are net of a change in the beginning of year
valuation allowance of $1,659.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
The information required by this item has been previously reported in the
Form 8-K Current Report of the registrant dated October 16, 1996.
PART III
The information required by this Part III is incorporated by reference from
the registrant's definitive proxy statement for the 1998 annual meeting of the
registrant's stockholders to be held on May 21, 1998, which involves the
election of directors. Such definitive proxy statement will be filed with the
Securities and Exchange Commission not later than 120 days after the end of the
fiscal year covered by this Form 10-K. However, information concerning the
registrant's executive officers will be omitted from such proxy statement and is
furnished in a separate item captioned "Executive Officers of the Registrant"
included in Part I of this Form 10-K.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) The following documents are filed as a part of this report in Item 8 of
Part II:
1. Financial Statements.
Pamida Holdings Corporation and Subsidiary
- Independent Auditors' Report
- Consolidated Statements of Operations for the Years Ended February
1, 1998, January 2, 1997 and January 28, 1996
- Consolidated Balance Sheets at February 1, 1998 and February 2,
1997
- Consolidated Statements of Common Stockholders' Equity for the Years
Ended February 1, 1998, February 2, 1997 and January 28, 1996
- Consolidated Statements of Cash Flows for the Years Ended February
1, 1998, February 2, 1997 and January 28, 1996
- Notes to Consolidated Financial Statements for the Years Ended
February 1, 1998, February 2, 1997 and January 28, 1996
2. Financial Statement Schedules.
- Independent Auditors' Report on Schedule I
- Schedule I - Condensed Financial Information of Registrant
All other schedules of the registrant for which provision is made in the
applicable accounting regulations of the Securities and Exchange Commission are
not required under the related instructions, are inapplicable or have been
disclosed in the Notes to Consolidated Financial Statements and, therefore, have
been omitted.
3. Exhibits.
3.1 - Restated Certificate of Incorporation of Pamida Holdings
Corporation (March 12, 1998).
(2) 3.2 - Revised By-Laws of Pamida Holdings Corporation.
(2) 4.1 - Form of certificate representing shares of the Common Stock of
Pamida Holdings Corporation.
(6) 4.2 - Indenture dated as of March 15, 1993, among Pamida, Inc. as
Issuer, Pamida Holdings Corporation as Guarantor, and State
Street Bank and Trust Company as Trustee relating to 11 3/4%
Senior Subordinated Notes due 2003 of Pamida, Inc.
(6) 4.3 - Specimen form of 11 3/4% Senior Subordinated Note due 2003 of
Pamida, Inc.
(3) 10.1 - Stock and Note Purchase Agreement dated as of July 29, 1986,
among Pamida Holdings Corporation, Citicorp Venture Capital, Ltd.,
Citicorp Capital Investors, Ltd., and the individual purchasers
who are parties thereto.
(1) 10.2 - Amendment to Stock and Note Purchase Agreement, dated July 31, 1990
(amends Exhibit 10.1).
(1) 10.3 - Second Amendment to Stock and Note Purchase Agreement, dated
August 10, 1990 (amends Exhibit 10.1).
(1) 10.4 - Third Amendment to Stock and Note Purchase Agreement, dated
September 13, 1990 (amends Exhibit 10.1).
(1) 10.5 - Exchange Agreement dated August 10, 1990, among Pamida Holdings
Corporation, Citicorp Venture Capital, Ltd. and Court Square
Capital Limited.
(1) 10.6 - Agreement dated September 13, 1990, among Pamida Holdings
Corporation, Citicorp Venture Capital, Ltd. and Court Square
Capital Limited.
(2) 10.7 - Agreement dated September 20, 1990, among Pamida Holdings
Corporation, Citicorp Venture Capital, Ltd. and Court Square
Capital Limited.
(4) 10.8 - Exchange Agreement dated as of December 1, 1990 between Pamida
Holdings Corporation, Citicorp Venture Capital, Ltd. and Court
Square Capital Limited.
(4) 10.9 - Form of 14.25% Junior Subordinated Promissory Note of Pamida
Holdings Corporation.
(4) 10.10- Form of Indemnification Agreement between Pamida Holdings
Corporation and its officers and directors.
(5) 10.11- Note Amendment Agreement dated as of December 18, 1992, between
Pamida Holdings Corporation and Court Square Capital Limited.
(5) 10.12- Note Amendment Agreement No. 2 dated as of March 1, 1993, between
Pamida Holdings Corporation and Citicorp Investments Inc.
(13) 10.13- Note Amendment Agreement No. 3 dated July 22, 1997, between
Pamida Holdings Corporation and 399 Venture Partners, Inc.
(5) 10.14- Tax-Sharing Agreement dated as of February 2, 1992, among Pamida
Holdings Corporation, Pamida, Inc., Seaway Importing Company,
and Pamida Transportation Company.
(6) 10.15- Loan and Security Agreement dated March 30, 1993, by and among
Congress Financial Corporation (Southwest) and BA Business Credit,
Inc. as Lenders, Congress Financial Corporation (Southwest) as
Agent for the Lenders, and Pamida, Inc. and Seaway Importing
Company as Borrowers.
(9) 10.16- Amendment No. 1 to Loan and Security Agreement, dated January 23,
1995, among Pamida, Inc. and Seaway Importing Company as
Borrowers, Congress Financial Corporation (Southwest) as a
Lender and Agent, and BA Business Credit Inc. as a Lender (amends
Exhibit 10.15).
(10) 10.17- Amendment No. 2 to Loan and Security Agreement, dated January 28,
1996, among Pamida, Inc. and Seaway Importing Company as
Borrowers, Congress Financial Corporation (Southwest) as a
Lender and Agent, and BankAmerica Business Credit as a Lender
(amends Exhibit 10.15).
(11) 10.18- Amendment No. 3 to Loan and Security Agreement among Pamida,
Inc. and Seaway Importing Company, as Borrowers, Congress
Financial Corporation (Southwest) and BankAmerica Business Credit,
Inc., as Lenders, and Congress Financial Corporation (Southwest),
as Agent, dated September 16, 1996 (amends Exhibit 10.15).
(12) 10.19- Amendment No. 4 to Loan and Security Agreement among Pamida,
Inc. and Seaway Importing Company, as Borrowers, Congress
Financial Corporation (Southwest) and BankAmerica Business Credit,
Inc., as Lenders, and Congress Financial Corporation (Southwest),
as Agent, dated January 31, 1997 (amends Exhibit 10.15).
(12) 10.20- Amendment No. 5 to Loan and Security Agreement among Pamida,
Inc. and Seaway Importing Company, as Borrowers, Congress
Financial Corporation (Southwest) and BankAmerica Business Credit,
Inc., as Lenders, and Congress Financial Corporation (Southwest),
as Agent, dated March 17, 1997 (amends Exhibit 10.15).
(14) 10.21- Amendment No. 6 to Loan and Security Agreement among Pamida,
Inc. and Seaway Importing Company, as Borrowers, Congress Financial
Corporation (Southwest) and BankAmerica Business Credit, Inc., as
Lenders, and Congress Financial Corporation (Southwest), as Agent,
dated May 8, 1997 (amends Exhibit 10.15).
(7) 10.22- Pamida Holdings Corporation 1992 Stock Option Plan.
(9) 10.23- Employment Agreement dated September 22, 1995, among Pamida
Holdings Corporation, Pamida, Inc. and Steven S. Fishman.
(11) 10.24- Amendment No. 1 to Employment Agreement among Pamida Holdings
Corporation, Pamida, Inc., and Steven S. Fishman dated August 29,
1996 (amends Exhibit 10.23).
(12) 10.25- Amendment No. 2 to Employment Agreement among Pamida Holdings
Corporation, Pamida, Inc., and Steven S. Fishman dated March 6,
1997 (amends Exhibit 10.23).
10.26- Amendment No. 3 to Employment Agreement among Pamida Holdings
Corporation, Pamida, Inc., and Steven S. Fishman dated May 22,
1997 (amends Exhibit 10.23).
10.27- Amendment No. 4 to Employment Agreement among Pamida Holdings
Corporation, Pamida Inc., and Steven S. Fishman dated March 5, 1998
(amends Exhibit 10.23).
(8) 10.28- Pamida, Inc. 1995 Deferred Compensation Plan.
(12) 10.29- Employment Agreement dated as of March 6, 1997, among Pamida
Holdings Corporation, Pamida, Inc., and Frank A. Washburn.
10.30- Amendment No. 1 to employment Agreement among Pamida Holdings
Corporation, Pamida, Inc., and Frank A. Washburn dated March 5,
1998 (amends Exhibit 10.29).
(12) 10.31- Employment Agreement dated as of March 6, 1997, among Pamida
Holdings Corporation, Pamida, Inc., and George R. Mihalko.
10.32- Amendment No. 1 to Employment Agreement among Pamida Holdings
Corporation, Pamida, Inc., and George R. Mihalko dated March 5,
1998 (amends Exhibit 10.31).
(12) 10.33- Long-Term Incentive Award Agreement dated as of March 6, 1997,
between Pamida, Inc., and Steven S. Fishman.
(12) 10.34- Long-Term Incentive Award Agreement dated as of March 6, 1997,
between Pamida, Inc., and Frank A. Washburn.
(12) 10.35- Long-Term Incentive Award Agreement dated as of March 6, 1997,
between Pamida, Inc., and George R. Mihalko.
(1) 22.1 - Subsidiaries of Pamida Holdings Corporation.
23.1 - Consent of Deloitte & Touche LLP.
23.2 - Consent of Coopers & Lybrand L.L.P.
24.1 - Powers of Attorney
27.1 - Financial Data Schedule (EDGAR filing only)
27.2 - Restated Financial Data Schedule - fiscal years ended January 28,
1996 and February 2, 1997 and the three, six and nine months ended
April 28, 1996, July 28, 1996 and October 27, 1996, respectively.
(EDGAR filing only)
27.3 - Restated Financial Data Schedule - three, six and nine months ended
May 4, 1997, August 3, 1997 and November 2, 1997.
(EDGAR filing only)
- -------------------------
(1) Previously filed as an exhibit to Registration Statement of Pamida Holdings
Corporation on Form S-1 (Registration No. 33-35324) and incorporated herein
by this reference.
(2) Previously filed as an exhibit to Form 10-Q Quarterly Report of Pamida
Holdings Corporation for the period ended October 28, 1990, and
incorporated herein by this reference.
(3) Previously filed as an exhibit to Registration Statement of Pamida, Inc. on
Form S-l (Registration No. 33-10980) and incorporated herein by this
reference.
(4) Previously filed as an exhibit to Form 10-K Annual Report of Pamida
Holdings Corporation for the fiscal year ended February 3, 1991, and
incorporated herein by this reference.
(5) Previously filed as an exhibit to Registration Statement of Pamida, Inc.
and Pamida Holdings Corporation on Form S-1 (Registration No. 33-57990) and
incorporated herein by this reference.
(6) Previously filed as an exhibit to Form 10-Q Quarterly Report of Pamida
Holdings Corporation for the period ended May 2, 1993, and incorporated
herein by this reference.
(7) Previously filed as an exhibit to Form 10-Q Quarterly Report of Pamida
Holdings Corporation for the period ended August 1, 1993, and incorporated
herein by this reference.
(8) Previously filed as an exhibit to Form 10-K Annual Report of Pamida
Holdings Corporation for the fiscal year ended January 29, 1995, and
incorporated herein by this reference.
(9) Previously filed as an exhibit to Form 10-Q Quarterly Report of Pamida
Holdings Corporation for the period ended October 29, 1995, and
incorporated herein by this reference.
(10) Previously filed as an exhibit to Form 10-K Annual Report of Pamida
Holdings Corporation for the fiscal year ended January 28, 1996, and
incorporated herein by this reference.
(11) Previously filed as an exhibit to Form 10-Q Quarterly Report of Pamida
Holdings Corporation for the period ended October 27, 1996, and
incorporated herein by this reference.
(12) Previously filed as an exhibit to Form 10-K Annual Report of Pamida
Holdings Corporation for the fiscal year ended February 2, 1997, and
incorporated herein by this reference.
(13) Previously filed as an exhibit to Form 8-K Current Report of Pamida
Holdings Corporation (Date of Report: July 22, 1997) and incorporated
herein by this reference.
(14) Previously filed as an exhibit to Form 10-Q Quarterly Report of Pamida
Holdings Corporation for the period ended May 4, 1997, and incorporated
herein by this reference.
* * *
(b) A report on Form 8-K was filed during the last quarter of the period
covered by this report. Such report had a Date of Report of November
18, 1997, and related to Item 5, Other Events. No financial statements
were filed with such report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: April 20, 1998 PAMIDA HOLDINGS CORPORATION
By: /s/ Steven S. Fishman
Steven S. Fishman, Chairman
of the Board, President, and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/ Steven S. Fishman April 20, 1998
- ----------------------
Steven S. Fishman Chairman of the Board,
President, Chief Executive
Officer and Director
/s/ George R. Mihalko April 20, 1998
- ----------------------
George R. Mihalko Senior Vice President,
Chief Financial Officer
and Treasurer
/s/ Todd D. Weyhrich April 20, 1998
- ----------------------
Todd D. Weyhrich Vice President,
Controller and Principal
Accounting Officer
/s/ Frank A. Washburn April 20, 1998
- ----------------------
Frank A. Washburn Director
* April 20, 1998
- ----------------------
L. David Callaway, III Director
* April 20, 1998
- ----------------------
Stuyvesant P. Comfort Director
* April 20, 1998
- ----------------------
M. Saleem Muqaddam Director
* April 20, 1998
- ----------------------
Peter J. Sodini Director
* By:/s/ George R. Mihalko
George R. Mihalko,
Attorney-in-Fact
PART II -- INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 16. EXHIBITS.
** 1.1 -- Form of Underwriting Agreement.
(1) 3.1 -- Restated Certificate of Incorporation of Pamida, Inc.
(1) 3.2 -- Second Revised By-Laws of Pamida, Inc.
(13)3.3 -- Restated Certificate of Incorporation of Pamida Holdings
Corporation (March 12, 1998).
(3) 3.4 -- Revised By-Laws of Pamida Holdings Corporation.
(9) 4.1 -- Indenture dated as of March 15, 1993, among Pamida, Inc.,
as Issuer, Pamida Holdings Corporation, as Guarantor, and
State Street Bank and Trust Company, as Trustee, relating to
11 3/4% Senior Subordinated Notes due 2003 of Pamida, Inc.
(1) 4.2 -- Indenture dated as of July 29, 1986, between Pamida
Acquisition Corporation and The First National Bank of
Boston, Trustee, relating to 12 1/8% Series A Senior
Subordinated Debentures due 1998 and 12 1/8% Series B Senior
Subordinated Debentures due 1998; and First Supplement to
Indenture dated as of July 29, 1986, between Pamida, Inc.
and The First National Bank of Boston, Trustee.
(4) 4.3 -- Second Supplement to Indenture dated April 3, 1989, between
Pamida, Inc. and The First National Bank of Boston, Trustee
(amends Exhibit 4.2).
** 4.4 -- Third Supplement to Indenture dated December 26, 1990,
between Pamida, Inc. and The First National Bank of Boston,
Trustee (amends Exhibit 4.2).
(1) 4.5 -- Indenture dated as of July 29, 1986, between Pamida
Acquisition Corporation and Colonial Bank, Trustee, relating
to 13 1/8% Subordinated Debentures due 2001; and First
Supplement to Indenture dated as of July 29, 1986, between
Pamida, Inc. and Colonial Bank, Trustee.
(4) 4.6 -- Second Supplement to Indenture dated April 3, 1989, between
Pamida, Inc. and Bank of Boston Connecticut, Trustee
(amends Exhibit 4.5).
** 4.7 -- Third Supplement to Indenture dated December 26, 1990,
between Pamida, Inc. and Bank of Boston Connecticut,
Trustee (amends Exhibit 4.5).
(5) 4.8 -- Amended and Restated Credit Agreement dated as of July 29,
1988, among Pamida, Inc., Pamida Holdings Corporation, the
Banks named therein, Bankers Trust Company, as Agent, and
Continental Illinois National Bank and Trust Company of
Chicago, as Co-Agent.
(4) 4.9 -- First Amendment to Amended and Restated Credit Agreement
dated January 18, 1989 (amends Exhibit 4.8).
(2) 4.10 -- Second Amendment to Amended and Restated Credit Agreement
dated June 1, 1990 (amends Exhibit 4.8).
(6) 4.11 -- Third Amendment and Limited Waiver to Amended and Restated
Credit Agreement dated as of December 1, 1990 (amends Exhibit
4.8).
(7) 4.12 -- Fourth Amendment to Amended and Restated Credit Agreement
dated as of July 30, 1991 (amends Exhibit 4.8).
(8) 4.13 -- Fifth Amendment to Amended and Restated Credit Agreement
dated as of September 3, 1991 (amends Exhibit 4.8).
** 4.14 -- Sixth Amendment to Amended and Restated Credit Agreement
dated as of December 16, 1992 (amends Exhibit 4.8).
** 4.15 -- Note Amendment Agreement dated as of December 18, 1992,
between Pamida Holdings Corporation and Court Square
Capital Limited.
(1) 4.16 -- Specimen form of Pamida, Inc. Series A Senior Subordinated
Debenture due 1998.
(1) 4.17 -- Specimen form of Pamida, Inc. Series B Senior Subordinated
Debenture due 1998.
(1) 4.18 -- Specimen form of Pamida, Inc. Subordinated Debenture due
2001.
(9) 4.19 -- Specimen form of 11 3/4% Senior Subordinated Note due 2003
of Pamida, Inc.
** 4.20 -- Note Amendment Agreement No. 2 dated as of March 1, 1993,
between Pamida Holdings Corporation and Citicorp
Investments Inc.
(14)4.21 -- Note Amendment Agreement No. 3 dated July 22, 1997, between
Pamida Holdings Corporation and 399 Venture Partners, Inc.
(9) 4.22 -- Loan and Security Agreement, dated as of March 30, 1993, by
and among Congress Financial Corporation (Southwest) and
BA Business Credit Inc. as Lenders, Congress Financial
Corporation (Southwest) as Agent for the Lenders, and
Pamida, Inc. and Seaway Importing Company as Borrowers.
** 4.23 -- Amendment No. 1 to Loan and Security Agreement dated
January 23, 1995, among Pamida, Inc. and Seaway Importing
Company as Borrowers, Congress Financial Corporation
(Southwest) as a Lender and Agent, and BA Business Credit
Inc. as a Lender (amends Exhibit 4.22).
(10)4.24 -- Amendment No. 2 to Loan and Security Agreement, dated
January 28, 1996, among Pamida, Inc. and Seaway Importing
Company as Borrowers, Congress Financial Corporation
(Southwest) as Lender and Agent and BankAmerica Business
Credit as a Lender (amends Exhibit 4.22).
(11)4.25 -- Amendment No. 3 to Loan and Security Agreement among
Pamida, Inc. and Seaway Importing Company, as Borrowers,
Congress Financial Corporation (Southwest) and BankAmerica
Business Credit, Inc., as Lenders, and Congress Financial
Corporation (Southwest), as Agent, dated September 16, 1996
(amends Exhibit 4.22).
(12)4.26 -- Amendment No. 4 to Loan and Security Agreement among
Pamida, Inc. and Seaway Importing Company, as Borrowers,
Congress Financial Corporation (Southwest) and BankAmerica
Business Credit, Inc., as Lenders, and Congress Financial
Corporation (Southwest), as Agent, dated January 31, 1997
(amends Exhibit 4.22).
(12)4.27 -- Amendment No. 5 to Loan and Security Agreement among
Pamida, Inc. and Seaway Importing Company, as Borrowers,
Congress Financial Corporation (Southwest) and BankAmerica
Business Credit, Inc., as Lenders, and Congress Financial
Corporation (Southwest), as Agent, dated March 17, 1997
(amends Exhibit 4.22).
(15)4.28 -- Amendment No. 6 to Loan and Security Agreement among Pamida,
Inc. and Seaway Importing Company, as Borrowers, Congress
Financial Corporation (Southwest) and BankAmerica Business
Credit, Inc., as Lenders, and Congress Financial Corporation
(Southwest), as Agent, dated May 8, 1997 (amends
Exhibit 4.22).
** 5.1 -- Opinion and consent of Abrahams, Kaslow & Cassman, counsel to
the registrants.
(6)10.1 -- Form of Indemnification Agreement between Pamida Holdings
Corporation and its officers and directors.
(1)10.2 -- Stock and Note Purchase Agreement dated as of July 29,
1986, among Pamida Holdings Corporation, Citicorp Venture
Capital, Ltd., Citicorp Capital Investors, Ltd. and the
individual purchasers who are parties thereto.
(2)10.3 -- Amendment to Stock and Note Purchase Agreement dated July
31, 1990 (amends Exhibit 10.6).
(2)10.4 -- Second Amendment to Stock and Note Purchase Agreement dated
August 10, 1990 (amends Exhibit 10.6).
(2)10.5 -- Third Amendment to Stock and Note Purchase Agreement dated
September 13, 1990 (amends Exhibit 10.6).
(2)10.6 -- Agreement dated September 13, 1990, among Pamida Holdings
Corporation, Citicorp Venture Capital, Ltd. and Court
Square Capital Limited.
(3)10.7 -- Agreement dated September 20, 1990, among Pamida Holdings
Corporation, Citicorp Venture Capital, Ltd. and Court
Square Capital Limited.
** 10.8 -- Tax Sharing Agreement dated as of February 3, 1992, among
Pamida Holdings Corporation, Pamida, Inc., Seaway Importing
Company and Pamida Transportation Company.
12.1 -- Computation of Ratio of Earnings to Fixed Charges
-- Pamida, Inc.
12.2 -- Computation of Ratio of Earnings to Fixed Charges
-- Pamida Holdings Corporation.
** 21.1 -- Subsidiaries of Pamida Holdings Corporation.
** 21.2 -- Subsidiaries of Pamida, Inc.
** 23.1 -- Consent of Abrahams, Kaslow & Cassman (included in Exhibit
5.1).
23.2 -- Consent of Deloitte & Touche LLP.
23.3 -- Consents of Coopers & Lybrand L.L.P.
24.1 -- Powers of Attorney.
** 26.1 -- Statement of Eligibility and Qualification of State Street
Bank and Trust Company on Form T-1 under the Trust Indenture
Act of 1939, as Trustee under the Indenture relating to the
Senior Subordinated Notes of Pamida, Inc.
- ---------------
(1) Previously filed as an exhibit to Registration Statement of Pamida, Inc. on
Form S-1 (Registration No. 33-10980) and incorporated herein by this
reference.
(2) Previously filed as an exhibit to Registration Statement of Pamida Holdings
Corporation on Form S-1 (Registration No. 33-35324) and incorporated herein
by this reference.
(3) Previously filed as an exhibit to Quarterly Report of Pamida Holdings
Corporation on Form 10-Q (File No. 1-10619) for the period ended October
28, 1990, and incorporated herein by this reference.
(4) Previously filed as an exhibit to Annual Report of Pamida, Inc. on Form 10-K
(File No. 33-10980) for the fiscal year ended January 29, 1989, and
incorporated herein by this reference.
(5) Previously filed as an exhibit to Registration Statement of Pamida, Inc. on
Form S-1 (Registration No. 33-22878) and incorporated herein by this
reference.
(6) Previously filed as an exhibit to Annual Report of Pamida Holdings
Corporation on Form 10-K (File No. 1-10619) for the fiscal year ended
February 3, 1991, and incorporated herein by this reference.
(7) Previously filed as an exhibit to Quarterly Report of Pamida Holdings
Corporation on Form 10-Q (File No. 1-10619) for the period ended August 4,
1991, and incorporated herein by this reference.
(8) Previously filed as an exhibit to Quarterly Report of Pamida Holdings
Corporation on Form 10-Q (File No. 1-10619) for the period ended November
3, 1991, and incorporated herein by this reference.
(9) Previously filed as an exhibit to Quarterly Report of Pamida Holdings
Corporation on Form 10-Q (File No. 1-10619) for the period ended May 2,
1993, and incorporated herein by this reference.
(10) Previously filed as an exhibit to Annual Report of Pamida, Inc. on Form
10-K (File No. 33-57990) for the fiscal year ended January 28, 1996, and
incorporated herein by this reference.
(11) Previously filed as an exhibit to Quarterly Report of Pamida, Inc. on Form
10-Q (File No. 33-57990) for the period ended October 27, 1996, and
incorporated herein by this reference.
(12) Previously filed as an exhibit to Annual Report of Pamida, Inc. on Form
10-K (File No. 33-57990) for the fiscal year ended February 2, 1997, and
incorporated herein by this reference.
(13) Previously filed as an exhibit to Annual Report of Pamida Holdings
Corporation on Form 10-K (File No. 1-10619) for the fiscal year ended
February 1, 1998, and incorporated herein by this reference.
(14) Previously filed as an exhibit to Current Report of Pamida Holdings
Corporation (Date of Report: July 22, 1997) on Form 8-K (File No. 1-10619)
and incorporated herein by this reference.
(15) Previously filed as an exhibit to Quarterly Report of Pamida Holdings
Corporation on Form 10-Q (File No. 1-10619) for the period ended May 4,
1997, and incorporated herein by this reference.
** Previously filed.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Securities Act"), may be permitted to directors,
officers and controlling persons of the Registrants pursuant to the provisions
referred to in Item 15 of this Registration Statement, or otherwise, the
Registrants have been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrants of expenses incurred or paid by a director, officer or controlling
person of the Registrants in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrants will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
The undersigned Registrants hereby undertake:
(1) That, for purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in the
form of prospectus filed by the Registrants pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act of 1933 shall be deemed to be part
of this Registration Statement as of the time it was declared effective.
(2) That, for the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(3) (a) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement to
include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement
or any material change to such information in this Registration
Statement.
(b) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the Registrant's annual report pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Act of 1934) that
is incorporated by reference in this Registration Statement shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Post-Effective Amendment No. 6 to Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Omaha, State of Nebraska, on the 28th day of April, 1998.
PAMIDA, INC.
By: /s/ Steven S. Fishman
Steven S. Fishman, Chairman of
the Board and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 6 has been signed by the following persons in the
capacities indicated on the 28th day of April, 1998.
/s/ Steven S. Fishman
Steven S. Fishman Chairman of the Board, President,
Chief Executive Officer and Director
/s/ George R. Mihalko
George R. Mihalko Senior Vice President, Chief
Financial Officer, Treasurer
and Director
/s/ Todd D. Weyhrich
Todd D. Weyhrich Principal Accounting Officer
/s/ Frank A. Washburn
Frank A. Washburn Director
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Post-Effective Amendment No. 6 to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Omaha, State of
Nebraska, on the 28th day of April, 1998.
PAMIDA HOLDINGS CORPORATION
By: /s/ Steven S. Fishman
Steven S. Fishman, Chairman of
the Board, President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 6 has been signed by the following persons in the
capacities indicated on the 28th day of April, 1998.
/s/ Steven S. Fishman
Steven S. Fishman Chairman of the Board, President,
Chief Executive Officer and Director
/s/ George R. Mihalko
George R. Mihalko Senior Vice President, Treasurer
and Chief Financial Officer
/s/ Todd D. Weyhrich
Todd D. Weyhrich Principal Accounting Officer
/s/ Frank A. Washburn
Frank A. Washburn Director
*
Peter J. Sodini Director
*
M. Saleem Muqaddam Director
*
Stuyvesant P. Comfort Director
*
L. David Callaway, III Director
*By: /s/ Steven S. Fishman
Steven S. Fishman,
Attorney-in-Fact
PAMIDA, INC. AND PAMIDA HOLDINGS CORPORATION
POST-EFFECTIVE AMENDMENT NO. 6
EXHIBIT INDEX
Exhibit
Number Description
- -------- --------------------------------------------------------------
** 1.1 -- Form of Underwriting Agreement.
(1) 3.1 -- Restated Certificate of Incorporation of Pamida, Inc.
(1) 3.2 -- Second Revised By-Laws of Pamida, Inc.
(13)3.3 -- Restated Certificate of Incorporation of Pamida Holdings
Corporation (March 12, 1998).
(3) 3.4 -- Revised By-Laws of Pamida Holdings Corporation.
(9) 4.1 -- Indenture dated as of March 15, 1993, among Pamida, Inc.,
as Issuer, Pamida Holdings Corporation, as Guarantor, and
State Street Bank and Trust Company, as Trustee, relating to
11 3/4% Senior Subordinated Notes due 2003 of Pamida, Inc.
(1) 4.2 -- Indenture dated as of July 29, 1986, between Pamida
Acquisition Corporation and The First National Bank of
Boston, Trustee, relating to 12 1/8% Series A Senior
Subordinated Debentures due 1998 and 12 1/8% Series B Senior
Subordinated Debentures due 1998; and First Supplement to
Indenture dated as of July 29, 1986, between Pamida, Inc.
and The First National Bank of Boston, Trustee.
(4) 4.3 -- Second Supplement to Indenture dated April 3, 1989, between
Pamida, Inc. and The First National Bank of Boston, Trustee
(amends Exhibit 4.2).
** 4.4 -- Third Supplement to Indenture dated December 26, 1990,
between Pamida, Inc. and The First National Bank of Boston,
Trustee (amends Exhibit 4.2).
(1) 4.5 -- Indenture dated as of July 29, 1986, between Pamida
Acquisition Corporation and Colonial Bank, Trustee, relating
to 13 1/8% Subordinated Debentures due 2001; and First
Supplement to Indenture dated as of July 29, 1986, between
Pamida, Inc. and Colonial Bank, Trustee.
(4) 4.6 -- Second Supplement to Indenture dated April 3, 1989, between
Pamida, Inc. and Bank of Boston Connecticut, Trustee
(amends Exhibit 4.5).
** 4.7 -- Third Supplement to Indenture dated December 26, 1990,
between Pamida, Inc. and Bank of Boston Connecticut,
Trustee (amends Exhibit 4.5).
(5) 4.8 -- Amended and Restated Credit Agreement dated as of July 29,
1988, among Pamida, Inc., Pamida Holdings Corporation, the
Banks named therein, Bankers Trust Company, as Agent, and
Continental Illinois National Bank and Trust Company of
Chicago, as Co-Agent.
(4) 4.9 -- First Amendment to Amended and Restated Credit Agreement
dated January 18, 1989 (amends Exhibit 4.8).
(2) 4.10 -- Second Amendment to Amended and Restated Credit Agreement
dated June 1, 1990 (amends Exhibit 4.8).
(6) 4.11 -- Third Amendment and Limited Waiver to Amended and Restated
Credit Agreement dated as of December 1, 1990 (amends Exhibit
4.8).
(7) 4.12 -- Fourth Amendment to Amended and Restated Credit Agreement
dated as of July 30, 1991 (amends Exhibit 4.8).
(8) 4.13 -- Fifth Amendment to Amended and Restated Credit Agreement
dated as of September 3, 1991 (amends Exhibit 4.8).
** 4.14 -- Sixth Amendment to Amended and Restated Credit Agreement
dated as of December 16, 1992 (amends Exhibit 4.8).
** 4.15 -- Note Amendment Agreement dated as of December 18, 1992,
between Pamida Holdings Corporation and Court Square
Capital Limited.
(1) 4.16 -- Specimen form of Pamida, Inc. Series A Senior Subordinated
Debenture due 1998.
(1) 4.17 -- Specimen form of Pamida, Inc. Series B Senior Subordinated
Debenture due 1998.
(1) 4.18 -- Specimen form of Pamida, Inc. Subordinated Debenture due
2001.
(9) 4.19 -- Specimen form of 11 3/4% Senior Subordinated Note due 2003
of Pamida, Inc.
** 4.20 -- Note Amendment Agreement No. 2 dated as of March 1, 1993,
between Pamida Holdings Corporation and Citicorp
Investments Inc.
(14)4.21 -- Note Amendment Agreement No. 3 dated July 22, 1997, between
Pamida Holdings Corporation and 399 Venture Partners, Inc.
(9) 4.22 -- Loan and Security Agreement, dated as of March 30, 1993, by
and among Congress Financial Corporation (Southwest) and
BA Business Credit Inc. as Lenders, Congress Financial
Corporation (Southwest) as Agent for the Lenders, and
Pamida, Inc. and Seaway Importing Company as Borrowers.
** 4.23 -- Amendment No. 1 to Loan and Security Agreement dated
January 23, 1995, among Pamida, Inc. and Seaway Importing
Company as Borrowers, Congress Financial Corporation
(Southwest) as a Lender and Agent, and BA Business Credit
Inc. as a Lender (amends Exhibit 4.22).
(10)4.24 -- Amendment No. 2 to Loan and Security Agreement, dated
January 28, 1996, among Pamida, Inc. and Seaway Importing
Company as Borrowers, Congress Financial Corporation
(Southwest) as Lender and Agent and BankAmerica Business
Credit as a Lender (amends Exhibit 4.22).
(11)4.25 -- Amendment No. 3 to Loan and Security Agreement among
Pamida, Inc. and Seaway Importing Company, as Borrowers,
Congress Financial Corporation (Southwest) and BankAmerica
Business Credit, Inc., as Lenders, and Congress Financial
Corporation (Southwest), as Agent, dated September 16, 1996
(amends Exhibit 4.22).
(12)4.26 -- Amendment No. 4 to Loan and Security Agreement among
Pamida, Inc. and Seaway Importing Company, as Borrowers,
Congress Financial Corporation (Southwest) and BankAmerica
Business Credit, Inc., as Lenders, and Congress Financial
Corporation (Southwest), as Agent, dated January 31, 1997
(amends Exhibit 4.22).
(12)4.27 -- Amendment No. 5 to Loan and Security Agreement among
Pamida, Inc. and Seaway Importing Company, as Borrowers,
Congress Financial Corporation (Southwest) and BankAmerica
Business Credit, Inc., as Lenders, and Congress Financial
Corporation (Southwest), as Agent, dated March 17, 1997
(amends Exhibit 4.22).
(15)4.28 -- Amendment No. 6 to Loan and Security Agreement among Pamida,
Inc. and Seaway Importing Company, as Borrowers, Congress
Financial Corporation (Southwest) and BankAmerica Business
Credit, Inc., as Lenders, and Congress Financial Corporation
(Southwest), as Agent, dated May 8, 1997 (amends
Exhibit 4.22).
** 5.1 -- Opinion and consent of Abrahams, Kaslow & Cassman, counsel to
the registrants.
(6)10.1 -- Form of Indemnification Agreement between Pamida Holdings
Corporation and its officers and directors.
(1)10.2 -- Stock and Note Purchase Agreement dated as of July 29,
1986, among Pamida Holdings Corporation, Citicorp Venture
Capital, Ltd., Citicorp Capital Investors, Ltd. and the
individual purchasers who are parties thereto.
(2)10.3 -- Amendment to Stock and Note Purchase Agreement dated July
31, 1990 (amends Exhibit 10.6).
(2)10.4 -- Second Amendment to Stock and Note Purchase Agreement dated
August 10, 1990 (amends Exhibit 10.6).
(2)10.5 -- Third Amendment to Stock and Note Purchase Agreement dated
September 13, 1990 (amends Exhibit 10.6).
(2)10.6 -- Agreement dated September 13, 1990, among Pamida Holdings
Corporation, Citicorp Venture Capital, Ltd. and Court
Square Capital Limited.
(3)10.7 -- Agreement dated September 20, 1990, among Pamida Holdings
Corporation, Citicorp Venture Capital, Ltd. and Court
Square Capital Limited.
** 10.8 -- Tax Sharing Agreement dated as of February 3, 1992, among
Pamida Holdings Corporation, Pamida, Inc., Seaway Importing
Company and Pamida Transportation Company.
12.1 -- Computation of Ratio of Earnings to Fixed Charges
-- Pamida, Inc.
12.2 -- Computation of Ratio of Earnings to Fixed Charges
-- Pamida Holdings Corporation.
** 21.1 -- Subsidiaries of Pamida Holdings Corporation.
** 21.2 -- Subsidiaries of Pamida, Inc.
** 23.1 -- Consent of Abrahams, Kaslow & Cassman (included in Exhibit
5.1).
23.2 -- Consent of Deloitte & Touche LLP.
23.3 -- Consents of Coopers & Lybrand L.L.P.
24.1 -- Powers of Attorney.
** 26.1 -- Statement of Eligibility and Qualification of State Street
Bank and Trust Company on Form T-1 under the Trust Indenture
Act of 1939, as Trustee under the Indenture relating to the
Senior Subordinated Notes of Pamida, Inc.
- ---------------
(1) Previously filed as an exhibit to Registration Statement of Pamida, Inc. on
Form S-1 (Registration No. 33-10980) and incorporated herein by this
reference.
(2) Previously filed as an exhibit to Registration Statement of Pamida Holdings
Corporation on Form S-1 (Registration No. 33-35324) and incorporated herein
by this reference.
(3) Previously filed as an exhibit to Quarterly Report of Pamida Holdings
Corporation on Form 10-Q (File No. 1-10619) for the period ended October
28, 1990, and incorporated herein by this reference.
(4) Previously filed as an exhibit to Annual Report of Pamida, Inc. on Form 10-K
(File No. 33-10980) for the fiscal year ended January 29, 1989, and
incorporated herein by this reference.
(5) Previously filed as an exhibit to Registration Statement of Pamida, Inc. on
Form S-1 (Registration No. 33-22878) and incorporated herein by this
reference.
(6) Previously filed as an exhibit to Annual Report of Pamida Holdings
Corporation on Form 10-K (File No. 1-10619) for the fiscal year ended
February 3, 1991, and incorporated herein by this reference.
(7) Previously filed as an exhibit to Quarterly Report of Pamida Holdings
Corporation on Form 10-Q (File No. 1-10619) for the period ended August 4,
1991, and incorporated herein by this reference.
(8) Previously filed as an exhibit to Quarterly Report of Pamida Holdings
Corporation on Form 10-Q (File No. 1-10619) for the period ended November
3, 1991, and incorporated herein by this reference.
(9) Previously filed as an exhibit to Quarterly Report of Pamida Holdings
Corporation on Form 10-Q (File No. 1-10619) for the period ended May 2,
1993, and incorporated herein by this reference.
(10) Previously filed as an exhibit to Annual Report of Pamida, Inc. on Form
10-K (File No. 33-57990) for the fiscal year ended January 28, 1996, and
incorporated herein by this reference.
(11) Previously filed as an exhibit to Quarterly Report of Pamida, Inc. on Form
10-Q (File No. 33-57990) for the period ended October 27, 1996, and
incorporated herein by this reference.
(12) Previously filed as an exhibit to Annual Report of Pamida, Inc. on Form
10-K (File No. 33-57990) for the fiscal year ended February 2, 1997, and
incorporated herein by this reference.
(13) Previously filed as an exhibit to Annual Report of Pamida Holdings
Corporation on Form 10-K (File No. 1-10619) for the fiscal year ended
February 1, 1998, and incorporated herein by this reference.
(14) Previously filed as an exhibit to Current Report of Pamida Holdings
Corporation (Date of Report: July 22, 1997) on Form 8-K (File No. 1-10619)
and incorporated herein by this reference.
(15) Previously filed as an exhibit to Quaterly Report of Pamida Holdings
Corporation on Form 10-Q (File No. 1-10619) for the period ended May 4,
1997, and incorporated herein by this reference.
** Previously filed.
<TABLE>
<CAPTION>
PAMIDA , INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollar amounts in thousands)
<S> <C> <C> <C> <C> <C>
Years Ended
-------------------------------------------------------------------
January 30, January 29, January 28, February 2, February 1,
1994 1995 1996 1997 1998
(52 Weeks) (52 Weeks) (52 Weeks) (53 Weeks) (52 Weeks)
----------- ----------- ----------- ----------- -----------
Income (loss) before
taxes and extraordinary item $ 1,504 $ 9,912 $ (98,939) $ 3,696 $ 7,277
Add:
Interest expense 23,515 23,904 25,616 25,308 25,644
Amortization of
finance cost 852 895 994 676 594
Portion of rentals
representative of
interest factor 4,042 4,572 5,631 5,231 5,618
----------- ----------- ----------- ----------- -----------
Income before taxes and
extra-ordinary items,
as adjusted $ 29,913 $ 39,283 $ (66,698) $ 34,911 $ 39,133
=========== =========== =========== =========== ===========
Fixed
Charges:
Interest expense $ 23,515 $ 23,904 $ 25,616 $ 25,308 $ 25,644
Amortization of
finance cost 852 895 994 676 594
Portion of rentals
representative of
interest factor 4,042 4,572 5,631 5,231 5,618
----------- ----------- ----------- ----------- -----------
Fixed charges
as adjusted $ 28,409 $ 29,371 $ 32,241 $ 31,215 $ 31,856
=========== =========== =========== =========== ===========
Ratio of earnings
to fixed charges 1.05:1 1.34:1 -- 1.12:1 1.23:1
=========== =========== =========== =========== ===========
Excess of fixed
charges over
earnings -- -- $ 98,939 -- --
=========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollar amounts in thousands)
Years Ended
-------------------------------------------------------------------
January 30, January 29, January 28, February 2, February 1,
1994 1995 1996 1997 1998
(52 Weeks) (52 Weeks) (52 Weeks) (53 Weeks) (52 Weeks)
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Income (loss) before
taxes and extraordinary item $ (1,603) $ 6,415 $ (102,882) $ (796) $ 3,286
Add:
Interest expense 26,588 27,367 29,526 29,781 29,618
Amortization of
finance cost 862 906 1,004 687 602
Portion of rentals
representative of
interest factor 4,042 4,572 5,631 5,231 5,618
----------- ----------- ----------- ----------- -----------
Income before taxes and
extra-ordinary items,
as adjusted $ 29,889 $ 39,260 $ (66,721) $ 34,903 $ 39,124
=========== =========== =========== =========== ===========
Fixed
Charges:
Interest expense $ 26,588 $ 27,367 $ 29,526 $ 29,781 $ 29,618
Amortization of
finance cost 862 906 1,004 687 602
Portion of rentals
representative of
interest factor 4,042 4,572 5,631 5,231 5,618
Preferred dividend
factor on pre-tax basis 511 508 511 554 598
----------- ----------- ----------- ----------- -----------
Fixed charges,
as adjusted $ 32,003 $ 33,353 $ 36,672 $ 36,253 $ 36,436
=========== =========== =========== =========== ===========
Ratio of earnings
to fixed charges -- 1.18:1 -- -- 1.07:1
=========== =========== =========== =========== ===========
Excess of fixed
charges over
earnings $ 2,114 -- $ 103,393 $ 1,350 --
=========== =========== =========== =========== ===========
</TABLE>
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Post-Effective Amendment No.6 to
Registration Statement No. 33-57990 of Pamida, Inc. and Pamida Holdings
Corporation of our reports dated March 5, 1998 appearing in the Annual Reports
on Form 10-K of Pamida, Inc. and Pamida Holdings Corporation for the year ended
February 1, 1998, and to the reference to Deloitte & Touche LLP under the
heading "Experts" in the Prospectus, which is part of this Registration
Statement.
/s/Deloitte & Touche LLP
Deloitte & Touche LLP
Omaha, Nebraska
April 10, 1998
Consent of Independent Accountants
We consent to the inclusion in this post effective amendment No. 6 on Form S-2
to the registration statement on Form S-1 (File No. 33-57990) of our report
dated March 26, 1996, on our audit of the consolidated financial statements of
Pamida, Inc. and Subsidiaries for the year ended January 28, 1996. We also
consent to the reference to our Firm under the caption "Experts."
/s/ Coopers & Lybrand L.L.P.
Chicago, Illinois
April 27, 1998
Consent of Independent Accountants
We consent to the inclusion in this post effective amendment No. 6 on Form S-2
to the registration statement on Form S-1 (File No. 33-57990) of our report
dated March 26, 1996, on our audit of the consolidated financial statements and
financial statement schedule of Pamida Holdings Corporation and Subsidiary for
the year ended January 28, 1996. We also consent to the reference to our Firm
under the caption "Experts."
/s/ Coopers & Lybrand L.L.P.
Chicago, Illinois
April 27, 1998
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I do hereby constitute and appoint
Steven S. Fishman, Frank A. Washburn, and George R. Mihalko, and each or any of
them individually, as my true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution to each of them, for me and in my name,
place, and stead, in any and all capacities (including, if applicable, my
capacity as a director of Pamida Holdings Corporation and my capacity as a
director of Pamida, Inc.), from time to time to sign one or more post-effective
amendments to Registration Statement No. 33-57990 under the Securities Act of
1933, as amended, relating to $140,000,000 principal amount of 11 3/4% Senior
Subordinated Notes due 2003 of Pamida, Inc. and the Guarantee of such Notes by
Pamida Holdings Corporation and to file such post-effective amendments, with all
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them individually, full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises as fully to all intents and purposes as I might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or either of them, or their or his substitutes or substitute, may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have executed this Power of Attorney this 19th day of
March, 1998.
/s/ L. David Callaway, III
L. David Callaway, III
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I do hereby constitute and appoint
Steven S. Fishman, Frank A. Washburn, and George R. Mihalko, and each or any of
them individually, as my true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution to each of them, for me and in my name,
place, and stead, in any and all capacities (including, if applicable, my
capacity as a director of Pamida Holdings Corporation and my capacity as a
director of Pamida, Inc.), from time to time to sign one or more post-effective
amendments to Registration Statement No. 33-57990 under the Securities Act of
1933, as amended, relating to $140,000,000 principal amount of 11 3/4% Senior
Subordinated Notes due 2003 of Pamida, Inc. and the Guarantee of such Notes by
Pamida Holdings Corporation and to file such post-effective amendments, with all
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them individually, full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises as fully to all intents and purposes as I might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or either of them, or their or his substitutes or substitute, may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have executed this Power of Attorney this 19th day of
March, 1998.
/s/ Stuyvesant P. Comfort
Stuyvesant P. Comfort
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I do hereby constitute and appoint
Steven S. Fishman, Frank A. Washburn, and George R. Mihalko, and each or any of
them individually, as my true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution to each of them, for me and in my name,
place, and stead, in any and all capacities (including, if applicable, my
capacity as a director of Pamida Holdings Corporation and my capacity as a
director of Pamida, Inc.), from time to time to sign one or more post-effective
amendments to Registration Statement No. 33-57990 under the Securities Act of
1933, as amended, relating to $140,000,000 principal amount of 11 3/4% Senior
Subordinated Notes due 2003 of Pamida, Inc. and the Guarantee of such Notes by
Pamida Holdings Corporation and to file such post-effective amendments, with all
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them individually, full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises as fully to all intents and purposes as I might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or either of them, or their or his substitutes or substitute, may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have executed this Power of Attorney this 30th day of
March, 1998.
/s/ Saleem Muqaddam
M. Saleem Muqaddam
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I do hereby constitute and appoint
Steven S. Fishman, Frank A. Washburn, and George R. Mihalko, and each or any of
them individually, as my true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution to each of them, for me and in my name,
place, and stead, in any and all capacities (including, if applicable, my
capacity as a director of Pamida Holdings Corporation and my capacity as a
director of Pamida, Inc.), from time to time to sign one or more post-effective
amendments to Registration Statement No. 33-57990 under the Securities Act of
1933, as amended, relating to $140,000,000 principal amount of 11 3/4% Senior
Subordinated Notes due 2003 of Pamida, Inc. and the Guarantee of such Notes by
Pamida Holdings Corporation and to file such post-effective amendments, with all
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them individually, full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises as fully to all intents and purposes as I might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or either of them, or their or his substitutes or substitute, may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have executed this Power of Attorney this 23rd day of
March, 1998.
/s/ Peter J. Sodini
Peter J. Sodini
