SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR
[X] 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 3, 1997
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Commission File Number 1-10619
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PAMIDA HOLDINGS CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 47-0696125
- -------------------------------- -----------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
8800 "F" Street, Omaha, Nebraska 68127
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(402) 339-2400
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
Class of Common Stock Outstanding at September 5, 1997
- --------------------- --------------------------------
Common Stock 5,004,942 Shares
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
ASSETS: August 3, February 2,
Current assets: 1997 1997
---------- -----------
<S> <C> <C>
Cash ...................................................... $ 8,485 $ 6,973
Accounts receivable, less allowance for
doubtful accounts of $50 ................................ 7,679 6,919
Merchandise inventories ................................... 147,240 157,490
Prepaid expenses .......................................... 3,624 2,993
Property held for sale .................................... -- 1,748
---------- -----------
Total current assets ................................... 167,028 176,123
Property, buildings and equipment, less accumulated
depreciation and amortization of $64,805 and $61,364 ...... 43,494 42,403
Leased property under capital leases, less accumulated
amortization of $15,900 and $14,604 ....................... 26,417 27,713
Deferred financing costs .................................... 3,098 3,176
Other assets ................................................ 20,244 19,773
---------- -----------
$ 260,281 $ 269,188
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable .......................................... $ 53,315 $ 54,245
Loan and security agreement ............................... 47,210 57,115
Accrued compensation ...................................... 4,320 3,860
Accrued interest .......................................... 7,217 7,668
Store closing reserve ..................................... 2,158 4,521
Other accrued expenses .................................... 13,499 10,112
Income taxes - deferred and current payable ............... 11,867 8,101
Current maturities of long-term debt ...................... 47 47
Current obligations under capital leases .................. 1,749 1,781
---------- -----------
Total current liabilities .............................. 141,382 147,450
Long-term debt, less current maturities ..................... 170,386 168,000
Obligations under capital leases, less current obligations .. 33,140 33,999
Other long-term liabilities ................................. 5,355 4,825
Commitments and contingencies ............................... -- --
Preferred stock subject to mandatory redemption
and reserve for dividends payable ......................... 2,487 2,217
Common stockholders' equity:
Common stock, $.01 par value; 10,000,000 shares authorized;
5,004,942 shares issued and outstanding, ................ 50 50
Additional paid-in capital ................................ 968 968
Accumulated deficit ....................................... (93,487) (88,321)
---------- -----------
Total common stockholders' equity ....................... (92,469) (87,303)
---------- -----------
$ 260,281 $ 269,188
========== ===========
</TABLE>
See notes to consolidated financial statements.
<TABLE>
<CAPTION>
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Per Share Amounts)
(Unaudited)
Three Months Ended Six Months Ended
--------------------- ---------------------
August 3, July 28, August 3, July 28,
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Sales ...................... $ 163,217 $ 155,817 $ 307,781 $ 287,603
Cost of goods sold ......... 121,715 118,721 233,011 218,932
--------- --------- --------- ---------
Gross profit ............... 41,502 37,096 74,770 68,671
Expenses:
Selling, general and
administrative ......... 33,275 31,262 64,249 60,473
Interest ................. 7,664 7,128 15,417 14,234
--------- --------- --------- ---------
40,939 38,390 79,666 74,707
--------- --------- --------- ---------
Income (loss) before income
tax provision ............ 563 (1,294) (4,896) (6,036)
Income tax provision ....... -- -- -- --
--------- --------- --------- ---------
Net income (loss) .......... 563 (1,294) (4,896) (6,036)
Less provision for preferred
dividends and discount
amortization ............. 165 97 270 190
--------- --------- --------- ---------
Net income (loss) available
for common stock ......... $ 398 $ (1,391) $ (5,166) $ (6,226)
========= ========= ========= =========
Income (loss) per common share $ .08 $ (.27) $ (1.03) $ (1.24)
========= ========= ========= =========
</TABLE>
See notes to consolidated financial statements.
<TABLE>
<CAPTION>
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
Six Months Ended
--------------------
August 3, July 28,
1997 1996
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss .......................................................... $ (4,896) $ (6,036)
-------- --------
Adjustments to reconcile net loss to net cash from operations:
Depreciation and amortization ................................. 5,890 5,468
Provision for LIFO inventory valuation ........................ 433 300
Non-cash interest expense ..................................... 2,375 2,015
Gain on disposal of assets .................................... (77) (28)
Other ......................................................... 82 79
Decrease in store closing reserve ............................. (2,028) (3,365)
Decrease in merchandise inventories ........................... 9,817 13,501
Increase in other operating assets ............................ (4,266) (3,252)
Increase (decrease) in accounts payable ....................... (930) 2,119
Increase (decrease) in other operating liabilities ............ 7,309 (864)
-------- --------
Total adjustments .......................................... 18,605 15,973
-------- --------
Net cash from operating activities ....................... 13,709 9,937
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ............................................. (4,833) (3,148)
Construction notes receivable .................................... 1,765 (3,022)
Proceeds from disposal of fixed assets ........................... 1,906 672
Assets acquired for sale, net .................................... -- (391)
Other ............................................................ 9 8
-------- --------
Net cash from investing activities ........................ (1,153) (5,881)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under loan and security agreement, net ................ (9,905) 667
Principal payments on capital lease obligations .................. (891) (884)
Principal payments on long-term debt ............................. (23) (104)
Payments for deferred finance costs .............................. (225) --
-------- --------
Net cash from financing activities ....................... (11,044) (321)
-------- --------
Net increase in cash ................................................ 1,512 3,735
Cash at beginning of year ........................................... 6,973 7,298
-------- --------
Cash at end of period ............................................... $ 8,485 $ 11,033
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
(1) Cash paid (received) during the period for:
Interest ..................................................... $ 13,459 $ 12,158
Income taxes:
Payments to taxing authorities ............................. 32 257
Refunds received from taxing authorities ................... (3,798) (169)
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITY:
(1) Amortization of discount on junior cumulative preferred
stock recorded as a direct charge to retained earnings ....... 25 24
(2) Provision for dividends payable ................................ 245 166
(3) In-kind payment of accrued interest on promissory notes:
Promissory notes ............................................. 2,327 1,989
Accrued interest ............................................. (2,327) (1,989)
</TABLE>
See notes to consolidated financial statements.
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED AUGUST 3, 1997 AND JULY 28, 1996
(Unaudited)
(Dollars in Thousands)
1. MANAGEMENT REPRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information. In the opinion of management, all
adjustments necessary for a fair presentation of the results of operations
for the interim periods have been included. All such adjustments are of a
normal recurring nature. Because of the seasonal nature of the business,
results for interim periods are not necessarily indicative of a full year's
operations. The accounting policies followed by Pamida Holdings Corporation
(the Company) and additional footnotes are reflected in the consolidated
financial statements contained in the Form 10-K Annual Report of the
Company for the fiscal year ended February 2, 1997.
2. INVENTORIES
Substantially all inventories are stated at the lower of cost (last-in,
first-out) or market. Total inventories would have been higher at August 3,
1997 and February 2, 1997 by $7,007 and $6,574 respectively, had the FIFO
(first-in, first-out) method been used to determine the cost of all
inventories. Quarterly LIFO inventory determinations reflect assumptions
regarding fiscal year-end inventory levels and the estimated impact of
annual inflation. Actual inventory levels and annual inflation could vary
from estimates made on a quarterly basis.
3. INCOME (LOSS) PER COMMON SHARE
Income (loss) per common share was calculated using the weighted average
common shares and dilutive common share equivalents outstanding during the
period using the treasury stock method.
4. RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings Per Share" which specifies the computation, presentation and
disclosure requirements for earnings per share. The objective of the
statement is to simplify the computation of earnings per share. The impact
on the Company's earnings per share is not materially different than
earnings per share determined in accordance with current guidance. SFAS No.
128 is applicable for fiscal years ending after December 15, 1997.
5. RECLASSIFICATIONS
Certain reclassifications have been made to the prior year's financial
statements to conform to the current year's presentation.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in Thousands)
The following is management's discussion and analysis of certain significant
factors which have affected the Company's results of operations and financial
condition for the periods included in the accompanying consolidated financial
statements.
RESULTS OF OPERATIONS
The following table sets forth an analysis of various components of the
Consolidated Statements of Operations as a percentage of sales for the three and
six months ended August 3, 1997 and July 28, 1996:
August 3, July 28, August 3, July 28,
1997 1996 1997 1996
--------- -------- --------- --------
Sales 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 74.6% 76.2% 75.7% 76.1%
--------- -------- --------- --------
Gross profit 25.4% 23.8% 24.3% 23.9%
Selling, general and
administrative expenses 20.4% 20.0% 20.9% 21.0%
--------- -------- --------- --------
Operating income 5.0% 3.8% 3.4% 2.9%
Interest expense 4.7% 4.6% 5.0% 5.0%
--------- -------- --------- --------
Income (loss) before income
tax provision 0.3% -0.8% -1.6% -2.1%
Income tax provision -- -- -- --
--------- -------- --------- --------
Net income (loss) 0.3% -0.8% -1.6% -2.1%
========= ======== ========= ========
SALES - During the second quarter and first six months of fiscal 1998, sales in
comparable stores increased $5,300 or 3.5% and $13,907 or 5.0%, respectively, as
compared to the second quarter and first six months last year. Total sales for
the second quarter and the first six months of fiscal 1998 increased by $7,400
or 4.8% and $20,179 or 7.0%, respectively, as compared to the same periods last
year.
The Company operated 149 stores at the end of the first quarter of fiscal 1998
as compared with 144 stores at the end of the first quarter last year and
operated 149 stores at the end of the second quarter of fiscal 1998 as compared
with 146 stores at the end of the second quarter last year. Since July 28, 1996
the Company has opened four stores in new markets, reopened a store which had
been closed due to storm damage, relocated one store and closed two stores. The
increase in total sales was primarily attributable to comparable store sales
increases and the effects of the net increase in the number of stores in
operation during the respective periods this year as compared with last year.
The Company experienced sales increases in most merchandise categories during
the second quarter of fiscal 1998. The largest dollar increases were in the
pharmacy prescriptions, sporting goods, housewares, men's denim apparel, women's
shoes, toys, stationary, appliances and misses tops categories. The Company
experienced sales declines in only a few categories, with men's fashions
experiencing the largest decrease.
GROSS PROFIT increased $4,406 or 11.9% and $6,099 or 8.9% for the second quarter
and first six months, respectively, of fiscal 1998 compared to the same periods
last year. As a percentage of sales, gross profit increased to 25.4% from 23.8%
and to 24.3% from 23.9% for the second quarter and first six months,
respectively, of fiscal 1998 compared to the same periods last year. The Company
improved its in-stock positions in most merchandise categories during the second
quarter of fiscal 1998 as compared with the second quarter of fiscal 1997. Sales
improved in most merchandise categories this year, with a marked increase in
sales of higher margin basic goods which experienced substantial out-of-stocks
during the second quarter last year. Also, the Company realized substantial
decreases in warehousing and distribution costs during the first half of fiscal
1998 compared to last year.
SELLING, GENERAL AND ADMINISTRATIVE (SG&A) expense increased $2,013 or 6.4% for
the second quarter of fiscal 1998 compared to the second quarter of fiscal 1997
and increased $3,776 or 6.2% for the first six months of fiscal 1997 compared to
the same period last year. As a percentage of sales, SG&A expense was 20.4% and
20.0%, respectively, for the second quarter of fiscal 1998 and 1997. As a
percentage of sales, SG&A expense was 20.9% and 21.0%, respectively, for the
first half of fiscal 1998 and 1997.
Most of the total net increase in SG&A expense for the second quarter of fiscal
1998 as compared to the second quarter last year was attributable to planned
higher corporate general and administrative expenses, primarily involving
increases in payroll and incentive compensation. As planned, store occupancy
costs also increased over last year to accommodate the higher sales activity.
These increases were offset partially by a $224 increase in other income,
primarily due to a gain on the sale of a parcel of land and business
interruption insurance settlements related to two stores.
Most of the total net increase in SG&A expense for the first half of fiscal 1998
as compared to the first half of last year was attributable to planned higher
corporate general and administrative expenses, primarily involving increases in
payroll, incentive compensation expenses and professional fees. As planned,
store controllable, occupancy and payroll costs also increased over last year to
accommodate the higher sales activity. These increases were offset partially by
a $135 increase in other income.
INTEREST expense increased $536 or 7.5% for the second quarter of fiscal 1998
compared to the same period of fiscal 1997 and increased $1,183 or 8.3% for the
first half of fiscal 1998 compared to the same period of fiscal 1997. The
increases were due primarily to increased revolver borrowings to support higher
investments in basic inventory and the Company's seasonal operating pattern.
There also was an increase in interest expense attributable to the promissory
notes which require quarterly interest to be paid in kind.
INCOME TAX BENEFIT - No income tax benefit on losses will be recorded until the
Company can establish with a reasonable degree of certainty the potential
utilization of certain tax loss carryforwards from prior year store closing
charges.
PROPOSED TRANSACTIONS - On July 22, 1997, the Company announced that it had
entered into an agreement with 399 Venture Partners, Inc., a Citicorp
subsidiary, providing for the payment of all of the presently outstanding Senior
Promissory Notes, Subordinated Promissory Notes and Junior Subordinated
Promissory Notes (the Notes) of the Company with shares of newly issued common
stock and nonvoting common stock of the Company. 399 Venture Partners, Inc. owns
approximately 82.75% of such Notes.
Shares of the Company's stock will be issued in payment of the Notes at the rate
of one share for each $9.00 of principal and accrued interest as of the
effective date. 399 Venture Partners, Inc. will receive shares of nonvoting
common stock, which may be converted into the same number of shares of common
stock under certain conditions; and the remaining note holders will receive
shares of common stock. The proposed transactions and the authorization of
sufficient shares to accomplish such transactions are subject to stockholder
approval. The Company presently anticipates that, if the requisite stockholder
approvals are obtained, the proposed transactions described above will be
completed during the Company's third fiscal quarter ending November 2, 1997.
The proposed transactions described above also are subject to the simultaneous
change and reclassification of all of the outstanding shares of preferred stock
of the Company into shares of common stock at the rate of one share of common
stock for each $9.00 of preferred stock liquidation value plus accrued dividends
as of the effective date. Such change and reclassification of preferred stock
has been approved by the holders of a majority of the shares of preferred stock
but is subject to approval by the holders of a majority of the presently
outstanding shares of common stock of the Company.
The Company currently has outstanding 5,004,942 shares of common stock. Assuming
approval by the stockholders of the Company and a November 2, 1997 effective
date for the proposed transactions, a total of approximately 3,989,848
additional shares of common stock and nonvoting common stock would be issued in
payment of the Notes and in connection with the change and reclassification of
the preferred stock.
If the proposed transactions are effected, the Company would be relieved of the
obligation to repay the Notes in 2003 and to redeem the preferred stock
(including the payment of accrued dividends) in December 2001. The transactions
would also relieve the Company of substantial amounts of compounding non-cash
interest expense on the Notes and from earnings per share dilution caused both
by the preferred stock dividends and by discount amortization. Assuming a
November 2, 1997 effective date for the proposed transactions, approximately
$1,526,000 of interest expense, preferred stock dividends and discount
amortization would be eliminated for the remainder of the current fiscal year.
Scheduled interest and discount amortization on the Notes is $5,981,000,
$6,958,000 and $8,119,000 for the fiscal years ending in 1999, 2000 and 2001,
respectively. The scheduled provision for dividends and discount amortization on
the preferred stock is $705,000, $845,000 and $1,016,000 for the fiscal years
ending in 1999, 2000 and 2001, respectively.
The proposed reclassification of the Company's preferred stock into common
stock, if consummated, will be a tax-free reorganization for the Company and
will have no direct tax impact on the corporation. However, if the proposed
transaction involving the issuance of common stock of the Company in payment of
the Company's Notes is approved by the common stockholders of the Company and
consummated, then some of the Company's tax loss carryforwards may be utilized,
potentially requiring tax expense to be recorded related to operations. The
difference, if any, between the recorded value of the Notes and the fair market
value of the common stock issued in payment of the Notes as of the effective
date of such transaction would result in a taxable gain or loss on
extinguishment of indebtedness for the Company which will be taxed as ordinary
income or loss for federal income tax purposes. The amount of income taxes
attributable to the taxable income or loss which may result from the
consummation of such transaction would be reduced by the existing net operating
loss and tax credit carryforwards. No assurances can be given that such
transactions will be approved by the common stockholders of the Company or that
the transactions will be consummated. Similarly, no assurances can be given
regarding the potential impact of the tax consequences of the transactions if
they are consummated.
For financial statement purposes, any gain on extinguishment of the Notes held
by persons other than 399 Venture Partners would be reflected on the Company's
Statement of Operations as an extraordinary item (net of related taxes),
separate from the operating results of the Corporation. Any gain related to the
payment of Notes owned by 399 Venture Partners with nonvoting common stock would
be considered to be a capital transaction; accordingly, such gain, net of taxes,
would be recorded directly to additional paid-in capital on the Company's
financial statements. The gain on the preferred stock exchange for common stock
will be accounted for as a capital transaction.
LIQUIDITY AND CAPITAL RESOURCES
The Company's business is seasonal with first quarter sales (February through
April) being lower than sales during the other three quarters. Fourth quarter
sales (November through January) have represented approximately 30% of the full
year's sales in recent years and normally involve a greater proportion of higher
margin sales. Funds provided by operating activities were $13,709 in the first
half of fiscal 1998 compared to $9,937 in the first half of fiscal 1997. This
$3,772 improvement in net cash generated by operating activities during the
first half of fiscal 1998 resulted primarily from changes in other operating
liabilities and the store closing reserve as well as the decreased net loss for
the period, offset somewhat by changes in inventory, accounts payable and
operating assets.
Effective March 17, 1997, the term of Pamida, Inc.'s (Pamida) committed Loan and
Security Agreement (the Agreement) was extended to March 2000 and the maximum
borrowing limit of the facility was increased to $95,000. Prior to March 17,
1997, borrowings under the Agreement bore interest at a rate of 0.75% per annum
greater than the applicable prime rate. Effective March 17, 1997, borrowings
under the Agreement bear interest at a rate 0.50% per annum greater than the
applicable prime rate or a rate which is tied to the London Interbank Offered
Rate (LIBOR), generally at Pamida's discretion. The amounts Pamida is permitted
to borrow are determined by a formula based upon the amount of Pamida's eligible
inventory. Such borrowings are secured by security interests in all of the
current assets (including inventory) of Pamida and by liens on certain real
estate interests and other property of Pamida. The Company and two subsidiaries
of Pamida have guaranteed the payment and performance of Pamida's obligations
under the Agreement and have pledged some or all of their respective assets,
including the stock of Pamida owned by the Company, to secure such guarantees.
The Agreement contains provisions imposing operating and financial restrictions
on the Company. Certain provisions of the Agreement require the maintenance of
specified amounts of tangible net worth (as defined) and working capital (as
defined) and the achievement of specified minimum amounts of cash flow (as
defined). Other restrictions in the Agreement and those provided under the
Indenture relating to the Senior Subordinated Notes of Pamida will affect, among
other things, the ability of Pamida to incur additional indebtedness, pay
dividends, repay indebtedness prior to its stated maturity, create liens, enter
into leases, sell assets or engage in mergers or acquisitions, make capital
expenditures and make investments. These covenants currently have not had an
impact on the Company's ability to fully utilize the revolving credit facility.
However, certain of the covenants, such as those which restrict the ability of
the Company to incur indebtedness or encumber its property or which impose
restrictions on or otherwise limit the Company's ability to engage in
sale-leaseback transactions, may at some future time prevent the Company from
pursuing its store expansion program at the rate that the Company desires.
Obligations under the Agreement were $47,210 at August 3, 1997 and $32,255 at
July 28, 1996. As noted above, this facility expires in March 2000, and the
Company intends to refinance any outstanding balance by such date. Borrowings
under the Agreement are senior to the Senior Subordinated Notes of Pamida. The
Company had long-term debt and obligations under capital leases of $203,526 at
August 3, 1997 and $201,703 at July 28, 1996. The Company's ability to satisfy
scheduled principal and interest payments under such obligations in the ordinary
course of business is dependent primarily upon the sufficiency of the Company's
operating cash flow and continued access to financial markets. At August 3,
1997, the Company was in compliance with all covenants contained in its various
financing agreements.
On December 18, 1992, the promissory notes of the Company were amended effective
as of December 1, 1992 to provide that, until the obligations of Pamida and the
Company under certain of Pamida's credit agreements have been repaid, the
quarterly interest payments on the promissory notes of the Company will be paid
in kind. Since the Company conducts no operations of its own, the only cash
requirement of the Company relates to preferred stock dividends in the aggregate
annual amount for fiscal 1998 totaling approximately $503; and Pamida is
expressly permitted under its existing credit facilities to pay dividends to the
Company to fund such preferred stock dividends. However, the General Corporation
Law of the State of Delaware, under which the Company and Pamida are
incorporated, generally allows a corporation to declare or pay a dividend only
from its surplus or from the current or the prior year's earnings. Due to the
accumulated deficit resulting primarily from the store closings and the
write-off of goodwill and other long-lived assets recognized in the fourth
quarter of fiscal 1996, the Company and Pamida did not declare or pay any cash
dividends in fiscal 1997 or the first half of fiscal 1998 and may pay cash
dividends in future periods only to the extent that the Company and Pamida
satisfy the applicable statutory standards which include the Company's having a
net worth equal to at least the aggregate par value of the preferred stock which
amounts to $2. The cumulative dividend rate on the preferred stock increases by
0.5% per quarter (with a maximum aggregate increase of 5%) on each quarterly
dividend payment date on which the preferred stock dividends are not paid
currently on a cumulative basis. Any unpaid dividends are added to the
liquidation value until paid in cash. Such nonpayment of preferred stock
dividends does not accelerate the redemption rights of the preferred
stockholders.
The Company made capital expenditures of $4,833 in the first half of fiscal 1998
compared to $3,148 during the first half of fiscal 1997. The Company plans to
open a total of three new stores in fiscal 1998, two of which were opened in the
first half, and will consider additional opportunities for new store locations
as they arise. Total capital expenditures are expected to total approximately
$10,000 in fiscal 1998. The Company expects to fund these expenditures from cash
flow from its operations. The costs of buildings and land for new store
locations are expected to be financed by operating or capital leases with
unaffiliated landlords. The Company's expansion program also will require
inventory of approximately $1,000 to $1,200 for each new market store, which the
Company expects to finance through trade credit, borrowings under the Agreement
and cash flow from operations.
The recent changes to the Agreement, along with expected improvements in the
Company's cash flow from operations, should provide adequate resources to meet
the Company's near- term liquidity requirements. On a long-term basis, the
Company's expansion will require continued investments in store locations,
working capital and distribution and infrastructure enhancements. The Company
expects to continue to finance some of these investments through leases from
unaffiliated landlords, trade credit, borrowings under the Agreement and cash
flow from operations but ultimately will need to explore additional sources of
funds which may include capital structure changes. Currently, it is not possible
for the Company to predict with any certainty either the timing or the
availability of such additional financing.
INFLATION
The Company uses the LIFO method of inventory valuation in its financial
statements; as a result, the cost of merchandise sold approximates current
costs. The Company's rental expense is generally fixed and, except for small
amounts of percentage rents and rentals adjusted by cost-of-living increases
tied to the Consumer Price Index or interest rates, has not been affected by
inflation.
FORWARD-LOOKING STATEMENTS
This management's discussion and analysis contains certain forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 (the "1995 Act"). Such statements are made in good faith by the Company
pursuant to the safe-harbor provisions of the 1995 Act. In connection with these
safe-harbor provisions, this management's discussion and analysis contains
certain forward-looking statements which reflect management's current views and
estimates of future economic circumstances, industry conditions, company
performance and financial results. The statements are based on many assumptions
and factors including sales results, expense levels, competition and interest
rates as well as other risks and uncertainties inherent in the Company's
business, capital structure and the retail industry in general. Any changes in
these factors could result in significantly different results for the Company.
The Company further cautions that the forward-looking information contained
herein is not exhaustive or exclusive. The Company does not undertake to update
any forward-looking statements which may be made from time to time by or on
behalf of the Company.
PART II - OTHER INFORMATION
ITEMS 1-2:
None
ITEM 3:
The General Corporation Law of Delaware, under which the registrant is
incorporated, generally allows a corporation to declare or pay a dividend
only from its surplus or from the current or the prior year's earnings. Due
to the retained deficit resulting primarily from store closings and the
write-off of goodwill and other long-lived assets in the fourth quarter of
fiscal 1996, the registrant was not permitted to pay dividends in fiscal
1997 and may pay dividends in fiscal 1998 and ensuing years only to the
extent that the registrant satisfies the applicable statutory standards,
which include the registrant's having a net worth equal to at least the
aggregate par value of its outstanding preferred stock, which amounts to
$2. Accordingly, the registrant was restricted from declaring or paying the
quarterly dividends payable during fiscal 1997 and on February 28 and May
31, 1997, with respect to the outstanding 16.25% Senior Cumulative
Preferred Stock and 14.25% Junior Cumulative Preferred Stock of the
registrant and does not anticipate paying dividends on the registrant's
preferred stock in the foreseeable future. Pursuant to the Certificate of
Incorporation of the registrant, the dividend rate on the registrant's
preferred stock increases cumulatively by 0.5% per quarter (with a maximum
cumulative increase of 5%) on each quarterly dividend payment date on which
the preferred stock dividends are not paid currently on a cumulative basis.
As of the date of this report, the total preferred stock dividend arrearage
was $586,952 representing six quarterly dividend payments at the applicable
dividend rates. Any unpaid dividends are added to the liquidation value of
the preferred stock until paid in cash. Such nonpayment of preferred stock
dividends does not accelerate the redemption rights of the preferred
stockholders.
ITEM 4:
(a) The 1997 annual meeting (the "Annual Meeting") of stockholders of the
registrant was held on May 22, 1997.
(b) The following persons were elected as directors at the Annual Meeting:
L. David Callaway, III
Stuyvesant P. Comfort
M. Saleem Muqaddam
Steven S. Fishman
Peter J. Sodini
Frank A. Washburn.
No other director's term of office continued after the Annual Meeting.
(c) Votes were cast or withheld in the election of directors at the Annual
Meeting as follows:
Director For Withheld
---------------------- --------- --------
L. David Callaway, III 4,516,580 20,865
Stuyvesant P. Comfort 4,517,580 19,865
M. Saleem Muqaddam 4,517,480 19,965
Steven S. Fishman 4,517,580 19,865
Peter J. Sodini 4,517,580 19,865
Frank A. Washburn 4,517,480 19,965
ITEM 5:
None
ITEM 6:
(a) Exhibits.
- 27.0 Financial Data Schedule (EDGAR version only)
(b) Reports on Form 8-K
A report on Form 8-K was filed during the quarter for which this Form
10-Q is filed. Such report had a Date of Report of July 22, 1997, and
related to Item 5, Other Events. No financial statements were filed with
such report.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PAMIDA HOLDINGS CORPORATION
---------------------------
(Registrant)
Date: September 5, 1997 By: /s/ Steven S. Fishman
Steven S. Fishman, Chairman of the
Board, President and Chief
Executive Officer
Date: September 5, 1997 By: /s/ Todd D. Weyhrich
Todd D. Weyhrich,
Chief Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
Consolidated Balance Sheet of Pamida Holdings Corporation and Subsidiary as of
August 3, 1997 and the related Consolidated Statement of Operations for the 13
weeks then ended and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
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<NAME> Pamida Holdings Corp.
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2,487
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