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.
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(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
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(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
PAMIDA , INC.
FORM 10-K -- FEBRUARY 1, 1998
EXHIBIT INDEX
Exhibit # Description
- --------------------============================================================
Restated Certificate of Incorporation of Pamida
3.1 Holdings Corporation, as amended.
- --------------------============================================================
(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 March 6, 1997, among Pamida
Holdings Corporation, Pamida, Inc., and Frank A.
Washburn.
- --------------------============================================================
(9) 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.
SEVERANCE PAY, CONFIDENTIALITY,
AND NON-SOLICITATION AGREEMENT
This Agreement (the "Agreement") is made this 17th day of November, 1997,
by and between PAMIDA, INC., a Delaware corporation ("Employer") and STEPHEN
ROBINSON ("Employee").
WITNESSETH:
WHEREAS, Employee desires to continue his employment with Employer, and
Employer desires to continue the employment of Employee; and
WHEREAS, Employer and Employee wish to set out in this Agreement the terms
and conditions of Employee's confidentiality and non-solicitation obligations
and Employee's right to severance pay in the event that Employee leaves the
Employer's employ under certain conditions;
NOW, THEREFORE, in consideration of the premises and of the covenants set
forth herein, the parties hereto, intending to be legally bound, agree as
follows:
1. EMPLOYMENT STATUS. On and after the date this Agreement is executed (the
"Effective Date"), Employee will continue to be an employee of Employer subject
to Employer's standard personnel policies, procedures, guidelines, and practices
as they may be amended from time to time. In the event of a conflict between the
provisions of such policies, procedures, guidelines and practices and the
provisions of this Agreement, the provisions of this Agreement shall control.
Employee shall diligently and faithfully perform the duties as may be from time
to time assigned to him by Employer.
2. AT-WILL STATUS. Employee is and shall remain an employee at-will. Either
Employee or Employer may end the employment relationship at any time, for any
reason, with or without cause.
3. SEVERANCE AMOUNT. If Employer terminates the employment of Employee
without Cause, including any constructive discharge arising from (i) a material
reduction in duties, (ii) a reduction in rank or base salary, or (iii) a
requirement by Employer that Employee relocate or transfer his principal
residence from the immediate vicinity of Omaha, Nebraska, at any time during his
employment by Employer, then Employee shall, upon such termination of
employment, be entitled to receive severance pay from Employer in an amount
equal to twice the Employee's annual base salary at the effective time of such
termination of employment. Employer shall pay such severance pay to Employee in
bi-weekly payments over the twenty-four (24) month period following the
effective time of such termination of employment in accordance with Employer's
normal payroll practice, less usual and customary deductions and other amounts
required to be withheld. Notwithstanding the foregoing provisions of this
Section 3, the amount of severance pay which Employee is entitled to receive
pursuant to this Section 3 shall be reduced by the total amount of any wages
earned by Employee during the twenty-four (24) month period immediately
following the effective date of the termination of his employment with Employer;
in no event, however, shall Employee be required to repay to Employer any
portion of any severance payments to which Employee was entitled pursuant to
this Section 3 for any period prior to the period during which Employee earned
such wages. For purposes of this Section 3, "wages" shall mean and include both
wages for purposes of federal income tax withholding as defined in Section 3401
of the Internal Revenue Code of 1986 (the "Code") and net earnings from self
employment as defined in Section 1402 of the Code.
4. CAUSE. For purposes of this Agreement, "Cause" shall mean only (i)
Employee's confession or conviction of theft, fraud, embezzlement, or any other
crime involving dishonesty with respect to Employer or any parent, subsidiary,
or affiliate of Employer, (ii) Employee's excessive absenteeism (other than by
reason of physical injury, disease, or mental illness) without reasonable cause,
(iii) material violation by Employee of the provisions of Section 8, (iv)
habitual and material negligence by Employee in the performance of his duties
and responsibilities as an executive of Employer and failure to cure such
negligence within thirty (30) days after his receipt of a written notice from
Employer setting forth in reasonable detail the particulars of such negligence,
or (v) material failure by Employee to comply with a lawful directive of
Employer and failure to cure such non-compliance within thirty (30) days after
his receipt of a written notice from Employer setting forth in reasonable detail
the particulars of such non-compliance.
5. BENEFITS. If Section 3 of this Agreement becomes applicable, then, in
addition to the payments of severance pay to which Employee is entitled under
Section 3, Employee also shall be entitled to continued participation in the
following benefit plans or programs of Employer which may be in effect from time
to time, to the extent that such continued participation by Employee is
permitted under the terms and conditions of such plans or programs (unless such
continued participation is restricted or prohibited by applicable governmental
regulations governing such plans or programs), until the first to occur of the
elapse of the period during which Employee is entitled to receive severance pay
pursuant to Section 3 or (separately with respect to the termination of each
benefit) the provision of a substantially equivalent benefit to Employee by
another employer of the Employee:
(1) Group medical/hospital insurance, (2) Group dental insurance, (3) Group
life insurance, (4) Employee life insurance, (5) Group long-term disability
insurance, (6) Exec-U-Care medical expense reimbursement insurance, (7)
Professional financial, tax, and estate planning services, (8) Continuation
of automobile benefits, (9) Annual physical examination;
however, if continued participation by Employee in any of the foregoing benefit
plans or programs of Employer is not permitted under the terms and conditions of
any of such plans or programs, then in lieu of continued participation in such
plan or program Employer shall pay to Employee in cash an amount equal to the
cost that Employer would have incurred with respect to Employee if Employee were
permitted to continue as a participant in such plan or program during the
applicable period; and Employer agrees not to unilaterally take any action which
would prevent Employee from continuing to participate in any of such plans or
programs unless such action similarly affects all other participants in such
plans or programs.
6. NON-SOLICITATION. For a period of one (1) year after the termination of
his employment with Employer, for any reason whatsoever, whether voluntarily or
involuntary, Employee will not, directly or indirectly, employ, solicit for
employment, or advise or recommend to any other person that such person employ
or solicit for employment any person employed by Employer in the three months
prior to the termination of Employee's employment with Employer.
7. NOTICE OF OTHER EMPLOYMENT AND OF BENEFITS. The Employee promptly shall
notify Employer in writing of (i) his acceptance of other employment or
commencement of self employment during the 24-month period referred to in
Section 3 if Section 3 is applicable, (ii) the effective date of such other
employment or self-employment, and (iii) the amount of wages (as defined in
Section 3) earned by Employee during any such period if Section 3 is applicable.
The Employee also promptly shall notify Employer of his receipt from another
employer of any benefits of the types referred to in Section 5 if Section 5 is
applicable. Such information shall be updated by Employee whenever necessary to
keep Employer informed on a current basis.
8. CONFIDENTIALITY. In order to permit Employee to function in his job with
the Employer, Employer may, from time to time, entrust Employee with highly
sensitive, confidential, and proprietary information belonging to Employer,
including but not limited to information regarding Employer's business, future
plans, trade secrets, know-how, products and suppliers, which Employer desires
to protect. In order to protect the Confidential Information of the Employer,
Employee shall treat all Confidential Information as confidential and will not
disclose Confidential Information except as directed by management of Employer
and will use Confidential Information only for the advancement of the interests
of Employer. Employee agrees that upon termination of his employment with
Employee, for any reason whatever, voluntary or involuntary, with or without
cause, he will immediately return to Employer all equipment, property, funds,
lists, forms, plans, documents or other written or computer material, software
or firmware, or copies of the same, belonging to Employer, including all
materials containing Confidential Information within his possession, and
Employee will not retain or use any Confidential Information. The provisions of
this Section 8 shall survive the termination of employment of Employee and
Employee shall, for a period of one (1) year following his termination of
employment with the Employer, inform any new employer, including any person for
whom Employee provides services as an independent contractor, of the provisions
of Sections 6 and 8 of this Agreement.
"Confidential Information" means information, not generally known, that is
proprietary to Employer, including without limitation:
1) financial and accounting data, sales records, profit and loss and
other performance reports, pricing manuals, personnel information,
training manuals, selling and pricing procedures, financing methods,
data processing and communication information, technical data, trade
secrets and know-how regarding Employer's business and its products
and services;
2) vendor and supplier information wherever located including, without
limitation, vendor and supplier lists, identities of foreign
manufacturers of goods, sources of supply, contact persons,
relationship information, costs of goods, production capabilities,
quantity requirements, availability, payment terms, and other
requirements of the vendor or supplier;
3) Employer's buying practices, sources of supply for goods, information
and materials used for production and assembly, the quality, prices
and usage of components, information and materials, manner of vendor
payment, profit margins, expense ratios, pricing, lead time and other
information concerning its buying activities;
4) Employer's sales information including, quantities of products sold,
pricing, terms, timing of sales, and current and anticipated
requirements of customers generally for products or services of
Employer;
5) product design, advertising layout and marketing, including, without
limitation, research, development, testing and customer surveys and
preferences regarding Employer's current and new products, and
specifications of any new products or services under development by or
for Employer; and
6) business projections, strategic planning, marketing planning, activity
and practices, marketing systems and procedures, pricing policies and
practices, and inventory procedures and systems.
9. SUCCESSORS, ASSIGNS, AND AMENDMENTS. This Agreement shall be binding
upon and inure to the benefit of Employee, his heirs and personal
representatives, and Employer, its affiliates, successors, and assigns. The
rights and benefits of Employee under this Agreement are personal to him and no
right or benefit may be assigned or transferred by Employee to another.
10. EMPLOYEE BENEFIT PLANS. Nothing in this Agreement shall be construed to
restrict Employee's participation in Employer's benefit plans during his
employment.
11. INJUNCTIVE RELIEF. If Employee shall violate or threaten to violate any
of the terms set forth in Sections 6 or 8 of this Agreement, then Employer shall
be entitled to injunctive relief; such remedy shall be in addition to and not in
limitation of any rights or remedies to which Employer is or may be entitled to
at law or in equity.
12. PRIOR AGREEMENTS SUPERSEDED. This Agreement supersedes and replaces the
Severance Pay, Confidentiality, and Non-Solicitation Agreement dated June 20,
1997, between Employer and Employee and any other prior agreements between
Employer and Employee concerning severance pay, confidentiality, or
non-solicitation of employees. Such prior agreements shall be of no further
force or effect.
13. GOVERNING LAW. This Agreement shall be subject to and construed under
the laws of the State of Nebraska.
14. ATTORNEY REVIEW. Employee represents and agrees that he has been given
the opportunity by Employer to negotiate the terms of this Agreement and to
thoroughly discuss all aspects of this Agreement with his attorney. Employee has
carefully read and fully understands all of the provisions of this Agreement,
and he is voluntarily entering into this Agreement.
15. MERGER, CONSOLIDATION, SALE OF ASSETS. In the event of (a) a merger of
Employer with another corporation in a transaction in which Employer is not the
surviving corporation, (b) the consolidation of Employer into a new corporation
resulting from such consolidation, or (c) the sale or other disposition of all
or substantially all of the assets of Employer, Employer may assign this
Agreement and all of the rights and obligations of Employer under this Agreement
to the surviving, resulting, or acquiring entity (a "Permitted Assignee");
provided, that such surviving, resulting, or acquiring entity shall in writing
assume and agree to perform all of the obligations of Employer under this
Agreement; and provided further, that Employer shall remain liable for the
performance of its obligations under this Agreement in the event of a failure of
the Permitted Assignee to perform its obligations under this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first above written.
PAMIDA, INC.
By:/s/ Steven S. Fishman
Steven S. Fishman, Chairman of the
Board and Chief Executive Officer
/s/ Stephen Robinson
Stephen Robinson
SEVERANCE PAY, CONFIDENTIALITY, AND NON-SOLICITATION AGREEMENT
This Agreement ("Agreement") is made this 18 day of November, 1997, by and
between PAMIDA, INC. ("Employer"), a Delaware corporation, and DONALD G.
HENDRICKSEN ("Employee").
W I T N E S S E T H:
WHEREAS, Employee currently is employed by Employer as a senior executive;
and
WHEREAS, Employer and Employee wish to set forth in this Agreement the
terms and conditions of Employee's confidentiality and non-solicitation
obligations and Employee's right to severance pay in the event that Employee
leaves the Employer's employ under certain conditions;
NOW, THEREFORE, in consideration of the premises and of the covenants set
forth herein, the parties hereto, intending to be legally bound, agree as
follows:
1. EMPLOYMENT STATUS. On and after the date this Agreement is executed (the
"Effective Date"), Employee will continue his employment with Employer subject
to Employer's standard personnel policies, procedures, guidelines, and practices
as they may exist and be amended from time to time. In the event of a conflict
between the provisions of such policies, procedures, guidelines, and practices
and the provisions of this Agreement, the provisions of this Agreement shall
control. During the period of his employment by Employer, Employee shall
diligently and faithfully perform the duties from time to time assigned to him
by or on behalf of Employer.
2. AT-WILL STATUS. This Agreement is not, and shall not for any purpose be
deemed to constitute, an employment agreement between Employer and Employee.
Employee is and shall remain an employee at-will of Employer. Either Employee or
Employer may end the employment relationship between Employer and Employee at
any time, for any reason, with or without cause.
3. SEVERANCE PAYMENT. If Employer terminates the employment of Employee
without Cause, including but not limited to a constructive discharge arising
from a material reduction in duties or a material reduction in rank or base
salary, then Employee shall, upon such termination of employment, be entitled to
receive severance pay from Employer in an amount equal to Employee's annual base
salary at the effective time of such termination of employment; provided, that
the amount of such severance pay shall increase to twice Employee's annual base
salary at the effective time of such termination of employment in the event that
Steven S. Fishman is not the Chief Executive Officer of Employer at the
effective time of such termination of employment or ceases to be the Chief
Executive Officer of Employer within three (3) months after the effective time
of such termination of employment. Employer shall pay such severance pay to
Employee in bi-weekly payments over the applicable twelve (12) month or
twenty-four (24) month period following the effective time of such termination
of employment in accordance with Employer's normal payroll practices, less
applicable deductions and other amounts required by law to be withheld.
Notwithstanding the foregoing provisions of this Section 3, the amount of
severance pay which Employee is entitled to receive pursuant to this Section 3
shall be reduced by the total amount of any wages earned by Employee during the
applicable twelve (12) month or twenty-four (24) month period immediately
following the effective date of the termination of his employment by Employer;
in no event, however, shall Employee be required to repay to Employer any
portion of any severance payments to which Employee was entitled pursuant to
this Section 3 for any period prior to the period during which Employee earned
such wages. For purposes of this Section 3, "wages" shall mean and include both
wages for purposes of federal income tax withholding as defined in Section 3401
of the Internal Revenue Code of 1986 (the "Code") and net earnings from
self-employment as defined in Section 1402 of the Code. If Employer terminates
the employment of Employee for Cause, then Employee shall not be entitled to
receive any payments under this Section 3.
4. CAUSE. For purposes of this Agreement, "Cause" shall mean only (i)
Employee's confession or conviction of theft, fraud, embezzlement, or any other
crime involving dishonesty with respect to Employer or any parent, subsidiary,
or affiliate of Employer, (ii) Employee's excessive absenteeism (other than by
reason of physical injury, disease, or mental illness) without reasonable cause,
(iii) material violation by Employee of the provisions of Section 8, (iv)
habitual and material negligence by Employee in the performance of his duties
and responsibilities as an executive of Employer and failure to cure such
negligence within thirty (30) days after his receipt of a written notice from
Employer setting forth in reasonable detail the particulars of such negligence,
or (v) material failure by Employee to comply with a lawful directive of
Employer and failure to cure such non-compliance within thirty (30) days after
his receipt of a written notice from Employer setting forth in reasonable detail
the particulars of such non-compliance.
5. OTHER BENEFITS. In the event of the termination of Employee's employment
with Employer for any reason whatsoever, whether voluntarily or involuntary,
Employee will not be entitled to receive any further employee benefits at
Employer's expense; provided, that Employee shall be entitled to continue
certain health insurance benefits at his expense to the extent provided by the
Consolidated Omnibus Budget Reconciliation Act of 1986, as amended. The
severance benefits set forth in this Agreement are in lieu of any and all other
severance benefits that Employee might otherwise be entitled to receive as a
result of his employment with Employer.
6. NON-SOLICITATION. In further consideration of his employment by Employer
and the provisions of this Agreement, Employee agrees that for a period of one
(1) year after the termination of his employment with Employer for any reason
whatsoever, whether voluntarily or involuntary, Employee will not, directly or
indirectly, employ, solicit for employment, or advise or recommend to any other
person that such other person solicit for employment any person employed by
Employer during the three (3) months prior to the termination of Employee's
employment with Employer.
7. REPORT OF NEW EMPLOYMENT. During the twelve (12) month or twenty-four
(24) month period, as the case may be, in which Employee may be entitled to
receive severance pay pursuant to Section 3, Employee will advise Employer, in
writing, within five (5) days after the beginning of each calendar month, of his
employment status as of the beginning of such month, including (if applicable)
the name and address of any employer or other person or entity for which
Employee then is providing or expects to provide services as an employee or
independent contractor, and the compensation Employee is entitled to receive
from such employment. For purposes of this Section 7, employment shall include
self-employment and compensation shall include net earnings from
self-employment. Employer will rely on such report to adjust the severance
payments to which Employee may be entitled pursuant to Section 3 of this
Agreement.
8. CONFIDENTIALITY. To permit Employee to effectively function in his job
with Employer, Employer may, from time to time, entrust Employee with highly
sensitive, confidential, and proprietary information belonging to Employer,
including but not limited to information regarding Employer's business,
finances, future plans, trade secrets, know-how, products, and suppliers, which
Employer desires to protect. In order to protect the Confidential Information of
Employer, Employee shall treat all Confidential Information as confidential,
will not disclose Confidential Information to anyone except as directed by
management of Employer, and will use Confidential Information only for the
advancement of the interests of Employer. Employee agrees that upon termination
of his employment with Employer, for any reason whatsoever, voluntary or
involuntary, he will immediately return to Employer all equipment, property,
funds, lists, forms, plans, documents or other written or electronic material,
software or firmware, or copies of any of such items, within his possession
which belong to Employer, including but not limited to all materials containing
Confidential Information; and Employee will not retain or use any Confidential
Information for any purpose after the termination of his employment with
Employer.
"Confidential Information" means information, not generally known or
available to the public, that is proprietary to Employer, including without
limitation:
1) financial and accounting data, securities information, sales records,
profit and loss and other performance reports, personnel information,
benefit plans and programs, training manuals, financing methods, data
processing and communications information, technical data, trade
secrets, and know-how regarding Employer's business and its products
and services;
2) vendor and supplier information wherever located including, without
limitation, vendor and supplier lists, identities of foreign and
domestic manufacturers of goods, contact persons, relationship
information, costs of goods, production capabilities, quantity
requirements, availability, payment terms, and other requirements of
the vendor or supplier;
3) Employer's buying practices, sources of supply for goods, information
and materials used for production and assembly, the quality, prices
and usage of components, information and materials, manner of vendor
payment, profit margins, expense ratios, pricing, lead time and other
information concerning Employer's buying activities;
4) Employer's sales information, including but not limited to quantities
of products sold, pricing policies and practices, terms, timing of
sales, and current and anticipated requirements of customers generally
for products or services of Employer;
5) product design, advertising layout and marketing, including but not
limited to research, development, testing and customer surveys and
preferences regarding Employer's current and new products, and
specifications of any new products or services under development by or
for Employer; and
6) business projections, strategic planning, marketing planning, activity
and practices, marketing systems and procedures, inventory procedures
and systems, and other merchandise logistics.
9. SURVIVAL AND NOTICE. The provisions of Sections 6 and 8 shall survive
the termination of Employee's employment with Employer, regardless of the
circumstances of such termination and regardless of whether such termination is
voluntary or involuntary. Employee shall, for a period of one (1) year following
his termination of employment with Employer, inform any new employer, including
any person for whom Employee provides services as an independent contractor, of
the provisions of Sections 6 and 8 of this Agreement; but the termination of
such requirement after one (1) year shall not limit the continuing obligations
of Employee under Section 8 of this Agreement.
10. BINDING EFFECT; NO ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of Employee, Employer, and their respective heirs, personal
representatives, successors, and assigns. The rights and benefits of Employee
under this Agreement are personal to him, and no such right or benefit may be
assigned or transferred by Employee to anyone else.
11. INJUNCTIVE RELIEF. If Employee shall violate or threaten to violate any
of the provisions of Section 6 or 8 of this Agreement, then Employer shall be
entitled to injunctive relief; such remedy shall be in addition to and not in
limitation of any rights or remedies to which Employer is or may be entitled at
law or in equity, including the forfeiture of any remaining entitlement to
severance payments pursuant to Section 3 of this Agreement.
12. PRIOR AGREEMENTS. This Agreement supersedes any prior agreement that
Employee has with Employer concerning confidentiality, non-solicitation of
employees, or severance pay, including but not limited to the Severance Pay,
Confidentiality, and Non-Solicitation Agreement between the Employer and the
Employee dated April 7, 1997.
13. GOVERNING LAW. This Agreement shall be subject to and construed under
the laws of the State of Nebraska.
14. ATTORNEY REVIEW. Employee confirms that he has been given the
opportunity by Employer to negotiate the terms of this Agreement and to
thoroughly discuss all aspects of this Agreement with his attorney. Employee has
carefully read and fully understands all of the provisions of this Agreement and
is voluntarily entering into this Agreement.
IN WITNESS WHEREOF, the parties have executed this agreement on the day and
year first above written.
PAMIDA, INC.
By:/s/ Steven S. Fishman
Steven S. Fishman, Chairman of the
Board and Chief Executive Officer
/s/ Donald G. Hendricksen
Donald G. Hendricksen, Employee
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