SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934
For the fiscal year ended February 1, 1998
Commission File Number 1-10619
PAMIDA HOLDINGS CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 47-0696125
------------------------------- ----------------------------
(State or other jurisdiction of (IRS Employer Identification
incorporation or organization) Number)
8800 "F" Street, Omaha, Nebraska 68127
--------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (402) 339-2400
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each Name of Each Exchange
Class on Which Registered
------------ --------------------------
Common Stock American Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of March 24, 1998, was $24,938,602 based upon the closing
price for such stock on the American Stock Exchange on such date.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date:
Outstanding at
CLASS OF STOCK March 24, 1998
---------------------- ----------------
Common Stock 5,970,439 shares
Nonvoting Common Stock 3,050,473 shares
DOCUMENTS INCORPORATED BY REFERENCE: Portions of the registrant's proxy
statement dated March 25, 1998, for the annual meeting of the registrant's
stockholders to be held on May 21, 1998, are incorporated by reference into Part
III.
PART I
ITEM 1. BUSINESS.
FORWARD-LOOKING STATEMENTS
This 10-K contains certain forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995 (the "1995 Act"). Such
statements are made in good faith by the Company pursuant to the safe-harbor
provisions of the 1995 Act. In connection with these safe-harbor provisions,
this 10-K contains certain forward-looking statements which reflect management's
current views and estimates of future economic circumstances, industry
conditions, Company performance and financial results. The statements are based
on many assumptions and factors including sales results, expense levels,
competition and interest rates as well as other risks and uncertainties inherent
in the Company's business, capital structure and the retail industry in general.
Any changes in these factors could result in significantly different results.
The Company further cautions that the forward-looking information contained
herein is not exhaustive or exclusive. The Company does not undertake to update
any forward-looking statements which may be made from time to time by or on
behalf of the Company.
GENERAL.
Pamida Holdings Corporation conducts its general merchandise retail
business through its wholly-owned subsidiary, Pamida, Inc., a Delaware
corporation. Unless the context indicates otherwise, the terms "Pamida" and
"Company" refer collectively to Pamida Holdings Corporation, its direct and
indirect subsidiaries and their predecessors, and "Holdings" refers only to
Pamida Holdings Corporation.
Holdings is a Delaware corporation incorporated in 1986 to acquire all of
the capital stock of Pamida, Inc., which, directly since 1981 and through a
predecessor prior to 1981, had been engaged in the general merchandise retail
business since 1963. The capital stock of Pamida, Inc. is the only significant
asset of Holdings, and Holdings has no material operations of its own.
On January 19, 1996, the Company announced its intention to close 40 stores
located in unprofitable or highly competitive markets. Store closing sales began
on January 29, 1996, and the Company completed all of such store closings during
the second quarter of the fiscal year ended February 2, 1997. References in this
Form 10-K to the "40 Closed Stores" mean such 40 stores.
STORES.
At February 1, 1998, Pamida operated 148 general merchandise retail stores
located in 148 small towns (having an average population of approximately 5,500)
in 15 Midwestern, North Central and Rocky Mountain states. Pamida's strategic
objective is to be the dominant general merchandise retailer in the communities
it serves. The Company believes that it holds the leading market position in
over 77% of the communities in which its stores are located.
Pamida stores generally are located in small towns, normally county seats,
where there often is little or no competition from another major general
merchandise retailer and which the Company considers to be either too small to
support more than one major general merchandise retailer (thereby creating a
potential barrier to entry by a major competitor) or too small to attract
competitors whose stores generally are designed to serve larger populations. At
February 1, 1998, 115 of the Company's 148 stores faced no direct local
competition from other major general merchandise retailers.
The Company's stores average approximately 30,000 square feet of sales area
and range in size from approximately 6,000 to 51,000 square feet of sales area.
At February 1, 1998, Pamida's stores had an aggregate sales area of
approximately 4,408,000 square feet.
The following table indicates the states in which Pamida's stores were
located as of February 1, 1998:
State No. of
----- Stores Percent
------ -------
Minnesota............................................ 29 19.6%
Iowa................................................. 25 16.9
Nebraska............................................. 15 10.1
Wisconsin............................................ 14 9.5
Michigan............................................ 12 8.1
Ohio................................................ 10 6.8
Wyoming.............................................. 9 6.1
North Dakota......................................... 7 4.7
South Dakota......................................... 7 4.7
Montana.............................................. 7 4.7
Indiana.............................................. 4 2.7
Kansas............................................... 3 2.0
Illinois............................................. 3 2.0
Kentucky ............................................ 2 1.4
Missouri ............................................ 1 0.7
--- -----
148 100.0%
=== =====
The following tables show the number of the Company's store openings,
relocations and closings and the aggregate year-end store sales area by fiscal
year since fiscal 1994:
Fiscal Year Ended
--------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
Beginning of year 148 144 184 173 178
Stores opened in new markets 1 6 7 17 8
Stores relocated in
existing markets 2 2 3 -- --
Stores closed (includes
relocated stores) (3) (4) (10) (6) (13)
---- ---- ---- ---- ----
End of year 148 148 184 184 173
==== ==== ==== ====
Less 40 Closed Stores (40)
----
144
====
Fiscal Year Ended
--------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
Square feet of store sales
area at year-end (in millions) 4.41 4.35 5.22 5.09 4.68
Less 40 Closed Stores (1.09)
----
4.13
====
Pamida regularly evaluates all of its stores and from time to time closes
stores which no longer meet its standards for sales, profitability, selling area
or other applicable criteria.
STORE EXPANSION PROGRAM.
Pamida's store expansion program is subject to the Company's ability to
negotiate satisfactory leases, to the ability of prospective landlords to obtain
financing for new store buildings and to various zoning, site acquisition,
environmental, traffic, construction and other contingencies. Eight new stores,
two of which are replacement stores, are expected to commence operations this
year.
Pamida has identified numerous communities which are potential sites for
the Company's prototype stores and in which Pamida believes it can achieve a
leading market position, although there is no assurance that Pamida will open
stores in such communities or on any particular time schedule.
The Company began operations in a new 200,000 square foot distribution
center in Lebanon, Indiana, during the second quarter of fiscal 1998. Pamida
believes that its existing distribution facilities (including the new expandable
Lebanon, Indiana facility), senior and middle management staff as well as
corporate infrastructure should allow the Company to accommodate its anticipated
growth.
The Company typically invests approximately $1,450,000 to $1,700,000 in a
new prototype store. Such expenditures consist primarily of approximately
$1,000,000 to $1,200,000 for the initial store inventory, a portion of which is
financed by vendor trade credit, and approximately $450,000 to $500,000 for
store fixtures and equipment. In most cases, building and land costs of
approximately $1,450,000 to $1,750,000 per store are financed by unaffiliated
developers who lease the real estate to Pamida. To expedite the construction
process, Pamida occasionally may construct stores on sites which it acquires,
with the expectation that it subsequently will enter into sale-leaseback
transactions with respect to such stores with unaffiliated investors.
SALES AND MERCHANDISING.
Pamida's merchandising policy is to provide customers with reliable and
convenient family shopping and to feature nationally advertised brand-name
products as well as some private-label merchandise at attractive prices. Pamida
operates its stores on a self-service, primarily cash-and-carry basis and runs
weekly advertised promotions throughout the year. All of Pamida's stores accept
bank credit cards, which accounted for 14.8% of total store sales during the
fiscal year ended February 1, 1998.
Pamida's typical customers are price-conscious families across the income
spectrum. To effectively serve such customers, the Company's stores are open
seven days a week for an average of at least 75 hours per week.
Pamida's two basic merchandise divisions are softlines and hardlines. The
softlines division includes mens', womens', childrens' and infants' clothing,
footwear, accessories and jewelry. The hardlines division includes categories
such as health and beauty aids, automotive accessories, housewares, cleaning
supplies, hardware, paint, sporting goods, toys, stationery, small appliances
and electronic items, videos, compact discs and tapes, lawn and garden supplies,
linens and other domestics, cameras and accessories, pet supplies, consumables
and candy items.
The Company currently owns and operates pharmacies in 44 of its larger
stores, and eight of Pamida's other stores contain prescription pharmacies
leased to and operated by independent pharmacists. The pharmacies have proved to
be effective in building customer loyalty and attracting customers who are
likely to purchase other items in addition to prescription drugs. Pamida
intends, subject to regulatory and personnel considerations and where space
permits, to include a pharmacy in each of its new prototype stores and to add
pharmacies to existing stores.
During the fiscal year ended February 1, 1998, the hardlines division
accounted for approximately 72% of Pamida's total sales, while the apparel
division and the pharmacies accounted for 22% and 6%, respectively, of Pamida's
total sales.
Among the methods that the Company employs to build customer loyalty and
satisfaction are weekly advertised specials, competitive pricing, clean and
orderly stores, friendly well-trained personnel, a liberal return policy and a
wide variety of special customer services (such as wheelchairs for the elderly
and handicapped, restroom facilities and water fountains, seating benches,
speedy check-out lanes and expedited check cashing and raincheck and layaway
processing) offered under various customer-oriented themes such as "Hometown
Values", "We Care" and "We're Listening". Pamida places special emphasis on
maintaining a strong in-stock position in all merchandise categories,
particularly with respect to advertised items.
Pamida's business, like that of most other general merchandise retailers,
is seasonal. First quarter sales (February through April) are lower than sales
during the other three fiscal quarters, while fourth quarter sales (November
through January) in recent years have increased to approximately 29% of the full
year's sales and normally involve a greater proportion of higher margin
merchandise.
ADVERTISING AND PROMOTION.
The Company's extensive advertising primarily utilizes colorful weekly
circulars developed by a centralized advertising department at Pamida's
headquarters. Such circulars advertise brand-name and other merchandise at
significant price reductions and are inserted into local newspapers or mailed
directly to customers. Pamida also uses local shoppers publications and coupon
books. During fiscal 1998, Pamida spent approximately $10,468,000 (net of
promotional allowances provided by vendors) on advertising, which represented
approximately 1.6% of fiscal 1998 sales.
PURCHASING AND DISTRIBUTION.
Pamida maintains a centralized purchasing and store planning staff at its
executive offices. The merchandising department includes two general merchandise
managers, five hardlines divisional merchandise managers and three apparel
divisional merchandise managers. Each of the divisional merchandise managers
supervises from five to seven buyers. Members of the Company's experienced
buying staff regularly attend major trade shows, visit both domestic and
overseas markets and meet with vendor representatives at the Company's
headquarters.
The merchandise in the Company's stores is purchased from over 3,000
primary manufacturers and suppliers and numerous other vendors. Centralized
purchasing enables Pamida to more effectively control the cost of merchandise
and to take advantage of promotional programs and volume discounts offered by
certain vendors. The Company continuously seeks to optimize merchandise costs,
including promotional allowances offered by its suppliers. Pamida also has
centralized the management of returned merchandise, which enables the Company to
most effectively secure vendor credits and refunds with respect to such
merchandise.
The Company's point-of-sale data capture equipment located in its stores
provides current information to Pamida's buyers to assist them in managing
inventories, effecting prompt reorders of popular items, eliminating
slow-selling merchandise and reducing markdowns.
Seaway Importing Company, a wholly-owned subsidiary of Pamida, Inc.,
imports a wide variety of merchandise, including sporting goods, pet supplies,
toys, electronic items, apparel, hair care items, painting supplies, automotive
items and hardware, for sale in Pamida's stores.
During fiscal 1998, approximately 79% of Pamida's merchandise was
distributed to the stores through Pamida's own distribution centers, while the
remaining merchandise was supplied directly to the stores by manufacturers or
distributors.
COMPETITION.
The general merchandise retail business is highly competitive. The
Company's stores generally compete with other general merchandise retailers,
supermarkets, drug and specialty stores, mail order and catalog merchants and,
in some communities, department stores.. Competitors consist both of independent
stores and of regional and national chains, some of which have substantially
greater resources than the Company. The type and degree of competition and the
number of competitors which Pamida's stores face vary significantly by market.
Pamida believes that the principal areas of competition in the general
merchandise retail industry are store location, price, merchandise selection,
quality and customer service, although numerous other factors also affect the
competitive position of any particular store. Among the methods that the Company
employs to build customer loyalty and satisfaction are weekly advertised
specials, reliable in-stocks, competitive pricing, clean and orderly stores,
friendly well-trained personnel, a liberal return policy and a wide variety of
special customer services offered under themes such as "Hometown Values", "We
Care" and "We're Listening".
Pamida stores generally are located in small towns, normally county seats,
where there is no direct local competition from another major general
merchandise retailer and which may be either too small to support more than one
major general merchandise retailer (thereby creating a potential barrier to
entry by a major competitor) or too small to attract competitors whose stores
generally are designed to serve larger populations. The Company believes that,
in terms of sales, it is the leading general merchandise retailer in over 77% of
the communities in which its stores are located.
At February 1, 1998, 115 of Pamida's 148 stores were located in communities
in which there was no direct local competition from other major general
merchandise retailers. As of that date, Kmart, Alco, Wal-Mart, Target and ShopKo
had stores in 16, 11, 10, 2 and 1 communities, respectively, where Pamida stores
are located; however, because some of these communities have more than one of
such competitors, only 33 Pamida stores face direct local competition from such
retail chains. In recent years the Company's business strategy has been to focus
its store expansion program on communities with less likelihood of the entry of
a new major competitor, but there can be no assurance that in the future major
competitors will not open additional stores in the Company's markets.
Merchandise prices generally are established on a zone basis at Pamida's
executive offices, although store managers are given discretion to adjust prices
of key items to meet local competition and to match a competitor's advertised
prices. Zone pricing allows the Company to establish prices at different levels
in different trade territories, based primarily on competitive conditions within
such territories, rather than having a uniform pricing structure throughout the
entire chain. Pamida conducts a continuous program of competitor price
comparisons that enables the Company to make merchandise price adjustments, when
necessary, to assure that the Company maintains a competitive position.
EMPLOYEES.
As of February 1, 1998, Pamida had approximately 5,600 employees, of whom
approximately 2,700 were full-time and 2,900 were part-time. The number of
employees varies on a seasonal basis. Pamida's employees are not represented by
a labor union, and the Company believes that its relations with its employees
are good.
At February 1, 1998, the average length of service of the Company's
management staff was as follows:
Average
Years
Number of Service
------ ----------
Top Management 2 16.2
Senior Vice Presidents and Vice Presidents 18 7.1
District Managers 12 20.5
Pharmacy District Supervisors 4 5.3
Store Managers 148 11.4
Pharmacy Managers 44 3.4
Pamida's human resources department is responsible for company-wide salary
and wage administration, as well as all benefits. The human resources department
works closely with store operations in the development and administration of
Pamida's store-level employee training programs. In addition, Pamida has an
ongoing program for the development of management personnel to fill positions in
all facets of the Company's operations and makes a concerted effort to identify
and train potential successors for all of its key middle and senior managers.
ITEM 2. PROPERTIES.
At February 1, 1998, the Company owned 19 of its 148 store buildings, while
its remaining 129 stores operated in leased premises. A substantial majority of
the Company's leases have renewal options, with approximately 53% of the leases
having unexpired current terms of five years or more. The following table
provides information relating to the remaining lease terms for the Company's
leased stores at February 1, 1998:
Leases the Fiscal Number of Leased Stores
Year Ending During(1) 2/01/98
--------------------- -----------------------
1999 13
2000 24
2001 5
2002 8
2003 6
Thereafter 73
---
Total 129
===
(1) Includes renewal options.
Pamida's management believes that the physical condition of the Company's
stores generally is very good. All of the Company's stores are continuously
updated to conform to Pamida's operating and merchandising standards.
The Company's general offices and one of its three distribution centers are
located in a 215,000 square foot building in Omaha, Nebraska, owned by the
Company. This facility contains approximately 135,000 square feet of warehouse
space and approximately 80,000 square feet of office space.
Pamida's primary distribution center is a 336,000 square foot
"flow-through" facility situated on a 22-acre tract of land in Omaha
approximately one mile from the distribution center described above. This
facility, which is owned by Pamida, serves primarily as a redistribution center
for bulk shipments and promotional merchandise on which cost savings can be
realized through quantity purchasing. Pamida also owns an additional 10-acre
tract of land adjacent to such distribution center which would permit that
facility to be further expanded by almost 60%.
In July 1997, the Company began operations in a new 200,000 square foot
distribution center in Lebanon, Indiana. The facility, which is leased through
April 2007, redistributes bulk shipments and promotional merchandise to stores
in the Company's eastern sales districts. Future expansion of the facility is
being considered. This distribution facility replaced a 100,000 square foot
warehouse facility previously operated by the Company in the Milwaukee,
Wisconsin area.
Pamida also has a warehouse facility in Omaha which contains approximately
41,000 square feet of space and is located immediately adjacent to the Company's
general offices. This warehouse, which is owned by Pamida, is used for the
processing of merchandise to be returned to vendors and by the advertising
department in connection with its printing operations.
In addition to its retail stores, distribution centers and warehouse
facility, Pamida's tangible assets include inventories, warehouse and store
fixtures and equipment, merchandise handling equipment, office and data
processing equipment, motor vehicles and an airplane.
ITEM 3. LEGAL PROCEEDINGS.
Pamida is a party to a number of lawsuits incidental to its business, the
outcome of which, both individually and in the aggregate, is not expected to
have a material adverse effect on the Company's operations or financial
condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(a) A special meeting of stockholders (the "Special Meeting") of
Holdings was held on November 14, 1997.
(b) The meeting did not involve the election of directors.
(c)(1) Votes were cast at the Special Meeting with respect to approval
of the Note Amendment Agreement No.3 between Holdings and 399
Venture Partners, Inc. and the transactions contemplated
thereby as follows:
For: 3,792,221
Against: 12,832
Abstain: 3,700
There were broker nonvotes as to 858,928 shares on this matter.
This matter received sufficient votes to pass.
(2) Votes were cast at the Special Meeting with respect to approval
of an amendment to the Restated Certificate of Incorporation of
Holdings to change and reclassify all of the outstanding shares
of Preferred Stock of Holdings into shares of Common Stock of
Holdings as follows:
For: 4,447,649
Against: 217,032
Abstain: 2,500
There were broker nonvotes as to 500 shares on this matter.
This matter received sufficient votes to pass.
(3) Votes were cast at the Annual Meeting with respect to approval
of an amendment to the Restated Certificate of Incorporation of
Holdings to increase the number of authorized shares of Common
Stock of Holdings and correspondingly adjust the total number
of shares of stock which Holdings is authorized to issue as
follows:
For: 4,444,149
Against: 222,832
Abstain: 200
There were broker nonvotes as to 500 shares on this matter.
This matter received sufficient votes to pass.
(4) Votes were cast at the Special Meeting with respect to approval
of an amendment to the Restated Certificate of Incorporation of
Holdings to increase the number of authorized shares of
Nonvoting Common Stock of Holdings and correspondingly adjust
the total number of shares of stock which Holdings is
authorized to issue as follows:
For: 4,431,349
Against: 234,832
Abstain: 1,200
There were broker nonvotes as to 300 shares on this matter.
This matter received sufficient votes to pass.
(5) Votes were cast at the Special Meeting with respect to approval
of an amendment to the Restated Certificate of Incorporation of
Holdings to amend the conversion terms of the Nonvoting Common
Stock of Holdings and delete certain obsolete provisions as
follows:
For: 3,792,021
Against: 15,332
Abstain: 1,200
There were broker nonvotes as to 859,128 shares on this matter.
This matter received sufficient votes to pass.
(6) Votes were cast at the Special Meeting with respect to
approval of amendments to the Restated Certificate of
Incorporation of Holdings to reduce the number of authorized
shares of Junior Cumulative Preferred Stock of Holdings,
correspondingly decrease the total number of shares of stock
which Holdings is authorized to issue, and delete certain
obsolete provisions as follows:
For: 3,797,320
Against: 11,233
Abstain: 0
There were broker nonvotes as to 859,128 shares on this matter.
This matter received sufficient votes to pass.
(7) Votes were cast at the Special Meeting with respect to approval
of the issuance of shares of Common Stock of Holdings to 399
Venture Partners, Inc. or its assignee upon the future
conversion of shares of Nonvoting Common Stock of Holdings
issued to 399 Venture Partners, Inc. as follows:
For: 3,778,861
Against: 17,772
Abstain: 1,200
There were broker nonvotes as to 869,848 shares on this matter.
This matter received sufficient votes to pass.
(d) Not Applicable.
* * *
EXECUTIVE OFFICERS OF THE REGISTRANT.
The present executive officers of Holdings are Steven S. Fishman (Chairman
of the Board, President and Chief Executive Officer), Frank A. Washburn
(Executive Vice President, Chief Operating Officer and Secretary), and George R.
Mihalko (Senior Vice President, Chief Financial Officer, Treasurer and Assistant
Secretary). Information concerning such executive officers appears in the
following paragraphs:
Mr. Fishman, age 47, has served as President and Chief Executive Officer of
Holdings and Pamida, Inc. since April 1993 and as Chairman of the Board of
Holdings and Pamida, Inc. since August 1993. From 1988 to March 1993, Mr.
Fishman was employed by Caldor, Inc. as Senior Vice President and General
Merchandise Manager-Homelines. Mr. Fishman has been a director of Holdings since
1993 and also is a director of Pamida, Inc.
Mr. Washburn, age 49, has served as Chief Operating Officer of Holdings and
Pamida, Inc. since March 1997, Executive Vice President of Holdings since
September 1995 and Executive Vice President of Pamida, Inc. since February 1995.
Mr. Washburn previously served as Senior Vice President - Human Resources of
Pamida, Inc. from 1993 to 1995 and as Vice President - Human Resources of
Pamida, Inc. from 1987 to 1993. Mr. Washburn also serves as Secretary of
Holdings and Pamida, Inc. Mr. Washburn joined Pamida's predecessor in 1965. Mr.
Washburn has been a director of Holdings since 1995 and also is a director of
Pamida, Inc.
Mr. Mihalko, age 43, has served as Senior Vice President, Chief Financial
Officer, Treasurer and Assistant Secretary of Holdings and Pamida, Inc. since
September 1995. From February 1993 to September 1995, Mr. Mihalko was employed
by Pier 1 Imports, Inc. as Vice President and Treasurer. From July 1990 to
February 1993, Mr. Mihalko was employed by Burlington Northern Railroad as
Assistant Treasurer.
The executive officers of Holdings may be removed from their respective
positions as such officers at any time by the Board of Directors of Holdings,
subject to any rights which they may have under employment agreements with the
Company.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Common Stock of Holdings is listed and traded on the American Stock
Exchange.
The high and low sales prices for the Common Stock of Holdings on the
American Stock Exchange for fiscal 1998 and fiscal 1997 are as follows:
Fiscal 1998: High Low
------------ ---- ---
4th Quarter 6 1/8 4 1/4
3rd Quarter 6 7/16 4 1/8
2nd Quarter 4 1/8 2 3/4
1st Quarter 3 1/2 2
Fiscal 1997: High Low
------------ ---- ---
4th Quarter 2 5/16 1 1/2
3rd Quarter 2 3/8 1 5/8
2nd Quarter 3 1/4 2 1/8
1st Quarter 3 1/4 2 1/8
As of March 23, 1998 there were 281 record holders of the Common Stock of
Holdings.
There is no market for the Nonvoting Common Stock of Holdings, all of which
presently is owned by 399 Venture Partners, Inc., an indirect wholly-owned
subsidiary of Citicorp.
Holdings has never declared or paid any cash dividends on its Common Stock
or Nonvoting Common Stock and does not intend to pay any such dividends in the
foreseeable future. The obligations of Pamida, Inc. under certain of its
financing arrangements are guaranteed by Holdings. Such financing arrangements
presently prohibit the payment of dividends by Holdings on its Common Stock or
Nonvoting Common Stock and also significantly restrict the ability of Pamida,
Inc. to pay dividends or make other distributions to Holdings.
ITEM 6. SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY
SELECTED CONSOLIDATED FINANCIAL DATA
(AMOUNTS IN THOUSANDS - EXCEPT PER SHARE, NUMBER OF SHARES AND OTHER DATA)
Fiscal Year Ended
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
February 1, February 2, January 28, January 29, January 30,
1998 1997 (1) 1996 1995 1994
----------- ----------- ----------- ----------- -----------
INCOME STATEMENT DATA:
Sales .............................................. $ 657,017 $ 633,189 $ 736,315 $ 711,019 $ 656,910
Gross profit ....................................... 161,935 154,090 177,688 177,367 158,906
Selling, general and
administrative expenses .......................... 129,031 125,105 151,096 143,585 133,921
----------- ----------- ----------- ----------- -----------
Operating income ................................... 32,904 28,985 26,592 33,782 24,985
Interest expense ................................... 29,618 29,781 29,526 27,367 26,588
Long-lived asset write-off ......................... - - 78,551 - -
Store closing costs ................................ - - 21,397 - -
Income (loss) before provision for income
taxes and extraordinary item ..................... 3,286 (796) (102,882) 6,415 (1,603)
Income tax (benefit) provision ..................... - - (7,863) 3,500 427
----------- ----------- ----------- ----------- -----------
Income (loss) before extraordinary item ............ 3,286 (796) (95,019) 2,915 (2,030)
Extraordinary item ................................. 1,735 - 371 - (4,943)
----------- ----------- ----------- ----------- -----------
Net income (loss) .................................. 5,021 (796) (94,648) 2,915 (6,973)
Effect of preferred stock reclassification ......... 756 - - - -
Less preferred dividends
and discount amortization ........................ (407) (391) (362) (361) (359)
----------- ----------- ----------- ----------- -----------
Net income (loss) available
for common shares ................................ $ 5,370 $ (1,187) $ (95,010) $ 2,554 $ (7,332)
=========== =========== =========== =========== ===========
Weighted average number of basic shares
outstanding ...................................... 5,843,441 5,004,942 5,002,853 4,999,984 4,999,984
Weighted average number of diluted shares
outstanding ...................................... 5,875,463 5,004,942 5,002,853 5,039,684 4,999,984
Basic net income (loss) per share:
Income (loss) before extraordinary item.. $ .62 $ (.24) $ (19.07) $ .51 $ (.48)
Extraordinary item ...................... .30 - .08 - (.99)
----------- ----------- ----------- ----------- -----------
Basic income (loss)....................... $ .92 $ (.24) $ (18.99) $ .51 $ (1.47)
=========== =========== =========== =========== ===========
Diluted net income (loss) per share:
Income (loss) before extraordinary item.... $ .62 $ (.24) $ (19.07) $ .51 $ (.48)
Extraordinary item......................... .29 - .08 - (.99)
----------- ----------- ----------- ----------- -----------
Diluted income (loss)...................... $ .91 $ (.24) $ (18.99) $ .51 $ (1.47)
=========== =========== =========== =========== ===========
BALANCE SHEET DATA:
Working capital.............................. $ 37,421 $ 28,673 $ 34,082 $ 46,725 $ 41,323
Total assets................................. 260,081 269,188 258,525 354,367 314,621
Long-term debt............................... 140,289 168,000 163,746 162,505 160,315
Obligations under capital leases............. 32,156 33,999 36,559 43,050 35,618
Redeemable preferred stock.................... - 1,875 1,826 1,779 1,734
Common shareholders' (deficit) equity......... (52,275) (87,303) (86,116) 8,876 6,322
OTHER DATA:
Team members.................................. 5,600 5,700 7,200 7,200 6,100
Number of stores.............................. 148 148 184 184 173
Retail square feet (in millions).............. 4.41 4.35 5.22 5.09 4.68
(1) Represents a 53-week year.
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS
(DOLLAR AMOUNTS IN THOUSANDS)
YEAR ENDED FEBRUARY 1, 1998 COMPARED TO YEAR ENDED FEBRUARY 2, 1997
SALES - Total sales during the 52-week fiscal 1998 period increased by
$23,828, or 3.8%, from the 53-week fiscal 1997 period. On a 52 to 52-week basis,
total net sales increased by 5.2%. During fiscal 1998, sales in comparable
stores increased by $24,135, or 4.0%.
During fiscal 1998, the Company opened three new stores, of which one is
located in a new market and two were relocations; the Company also closed one
store (which will be replaced during fiscal 1999 by a new store in the same
market), resulting in a net increase in selling area during the fiscal year of
approximately 61,000 square feet to a total of approximately 4,408,000 square
feet.
The Company experienced sales increases in most merchandise categories
during fiscal 1998. The most significant increases occurred in pharmacy
prescriptions, housewares, toys, athletic shoes and team sports apparel. Other
categories experiencing gains were stationery, sporting goods, appliances, paper
and cleaning supplies and pets. The Company experienced sales decreases in
several categories. The largest dollar decreases were in the automotive, mens'
fashion apparel, jewelry and watches and juniors' apparel categories.
GROSS PROFIT - Gross profit for the 52-week fiscal 1998 period increased by
$7,845, or 5.1%, compared to the 53-week fiscal 1997 period. As a percentage of
sales, gross profit improved to 24.6% from 24.3%. The Company's merchandise
gross margin as a percentage of sales decreased to 27.6% in fiscal 1998 from
27.8% in fiscal 1997. The decrease in merchandise gross margin percent of sales
was offset by substantial expense reductions in the warehouse and distribution
areas made possible by operating efficiencies gained largely from a new
warehouse management system implemented during fiscal 1997. During the prior
fiscal year, the Company incurred higher than normal labor cost in the warehouse
and distribution areas due to implementation issues related to the warehouse
management system. Total warehouse and distribution costs amounted to 2.8% of
sales compared to 3.3% last year.
SELLING, GENERAL AND ADMINISTRATIVE (SG&A) expense increased $3,926, or
3.1%, to $129,031 in fiscal 1998 from $125,105 in fiscal 1997. As a percentage
of sales, SG&A expense decreased to 19.6% from 19.8% last year. Most of the
total net increase in SG&A expense for the year was attributable to higher
corporate general and administrative expenses, primarily involving planned
increases in payroll and incentive compensation expenses. Store occupancy costs
increased by $1,030, but remained at 3.9% as a percentage of net sales for both
fiscal 1998 and 1997. Store payroll costs and controllable costs decreased by
$391 and $163, respectively, during fiscal 1998 as compared to last year. As a
percentage of net sales, store payroll costs and controllable costs decreased
from 8.0% to 7.7% and 3.0% to 2.9% for the fiscal periods ended 1998 and 1997,
respectively.
INTEREST expense decreased by $163, or 0.5%, for fiscal 1998 compared to
fiscal 1997. As described in Note B to the financial statements, the decrease in
interest expense for fiscal 1998 was attributable to the payment of certain
promissory notes of the Company with common stock in November 1997, thereby
relieving the Company of the quarterly compounding interest obligation which had
previously been paid-in-kind. That decrease was offset in part by an increase in
interest expense of approximately $900 related to higher outstanding balances on
the revolving line of credit resulting from higher investments in basic
inventory during the year as well as the funding of certain of the Company's
information systems initiatives.
INCOME TAX PROVISION - The Company's loss carryforwards from store closing
charges recorded in fiscal 1996 were utilized during fiscal 1998 to completely
offset income taxes from normal operating activities of the Company and to
reduce income taxes related to the Note repayment and preferred stock
reclassification transactions which are described in Note B to the financial
statements. The Company expects that operations in future periods will be taxed
at a normal tax rate. No income tax benefit on losses for fiscal 1997 was
recorded as the Company could not establish, as of fiscal year end 1997, with a
reasonable degree of certainty, the potential utilization of loss carryforwards.
YEAR ENDED FEBRUARY 2, 1997 COMPARED TO YEAR ENDED JANUARY 28, 1996
SALES - As discussed in Note Q to the financial statements, the Company
closed forty stores at the end of fiscal 1996 in unprofitable or highly
competitive markets which did not fit the Company's niche market strategy.
Consequently, the Company experienced a planned decrease in total sales for
fiscal 1997 of $103,126 or 14.0% compared to fiscal 1996 due primarily to the
reduced number of stores. During fiscal 1997 the Company opened eight new
prototype stores, of which six are located in new markets and two were
relocations; the Company also closed two stores, resulting in a net increase in
selling area during the fiscal year of approximately 216,000 square feet (not
including changes relating to the forty stores closed as of fiscal year end
1996) to a total of 4,348,000 square feet. As of February 2, 1997, the Company's
store base included 35 of the Company's most recent store prototype, which
represented 28.7% of the Company's total selling square feet.
Comparable store sales during the 53-week fiscal 1997 period decreased by
$8,893 or 1.5% from the 52-week fiscal 1996 period. Comparable store sales on a
53-week to 53-week basis decreased by 2.6%. Sales were affected primarily by
slowed warehouse distributions to stores as a result of the implementation of a
new warehouse inventory management system initiated in the first quarter of
fiscal 1997. The slowed distributions caused a deterioration of merchandise
in-stock positions in most of the Company's stores, resulting in lost sales.
While implementation of the warehouse system was largely completed by August
1996, and in-stock positions at the stores improved thereafter, sales remained
below management expectations due to reduced customer traffic continuing in the
third and fourth quarters. Comparable sales also were affected during much of
the year by low-margin clearance sales in fiscal 1996 which were not necessary
at the same level in fiscal 1997. However, beginning late in the holiday
shopping season and continuing through fiscal year end, sales improved as the
Company demonstrated to customers its improved in-stock position in all product
categories.
The Company experienced substantial comparable store sales increases in
fiscal 1997 in several merchandise categories, the most dramatic of which were
in the pharmacy prescription, junior apparel, grocery and ready-to-wear areas.
Comparable store sales gains also were generated in the hosiery, team sports,
camera, stationery, health aids and bath categories. The Company experienced
comparable store sales decreases in several categories. The largest dollar
decreases on a comparable store basis were in the electronics, automotive,
misses bottoms, men's shoes, electrical and appliance areas. Management believes
that subtle adjustments made to the Company's softlines strategy at the end of
fiscal 1996 to meet customer demand for a deeper selection of basic apparel had
a positive impact on sales and margins in softlines during fiscal 1997.
GROSS PROFIT - Gross profit dollars were affected by the reduced number of
stores in operation during fiscal 1997 as compared to fiscal 1996. The Company's
merchandise gross profit as a percentage of sales improved to 27.8% in fiscal
1997 from 26.8% in fiscal 1996. However, this improvement was diluted by
additional costs related to the implementation of the new warehouse inventory
management system discussed above. Warehouse costs increased to $13,457 from
$11,066 the previous year and increased as a percent of sales to 2.1% from 1.5%
the previous year. Delivery costs decreased to $7,637 in fiscal 1997 from $8,845
the previous year and amounted to 1.2% of sales in both years. Accordingly,
gross profit decreased by $23,598, or 13.3%, to $154,090 in fiscal 1997 from
$177,688 in fiscal 1996 but, as a percentage of sales, increased to 24.3% in
fiscal 1997 from 24.1% in fiscal 1996.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE Decreased $25,991, or 17.2%, to
$125,105 in fiscal 1997 from $151,096 in fiscal 1996. As a percentage of sales,
selling, general and administrative expense decreased to 19.8% from 20.5% last
year. This reduction was largely attributable to reductions in store level
expenses. Store payroll, controllable and occupancy expenses accounted for 64.2%
of the total decrease in selling, general and administrative expense and
decreased by 14.5%, 17.5% and 13.9%, respectively. Selling, general and
administrative expense also was positively impacted by a 28.9% reduction in
advertising costs which accounted for 18.2% of the gross decrease in selling,
general and administrative expense. All of these areas of expense were impacted
by the elimination of costs related to the forty stores which were closed as of
the end of fiscal 1996. Selling, general and administrative expense also was
impacted by an 11.0% decrease in corporate general and administrative costs
which accounted for 11.3% of the gross decreases in selling, general and
administrative expense. The major components of this decrease were decreases in
the net costs of insurance, professional fees, management bonuses and related
fringe benefits.
Selling, general and administrative expense also was positively impacted by
the elimination of amortization of goodwill and favorable leasehold interests
resulting from the write-off of these items in the fourth quarter of fiscal
1996. The decreases in selling, general and administrative expense were offset
by a $1,246 reduction in other income which was attributable largely to one-time
gains realized in fiscal 1996, primarily from the sale of idle transportation
company assets.
INTEREST expense increased marginally by $255 or 0.9% for fiscal 1997
compared to fiscal 1996. The increase in interest expense for fiscal 1997 was
attributable primarily to higher usage of the revolving line of credit and to
the outstanding promissory notes of the Company which require quarterly
compounding interest payments to be paid-in-kind. These increases were largely
offset by decreased interest related to lower average outstanding capitalized
lease obligations in fiscal 1997 compared to fiscal 1996.
INCOME TAX PROVISION - No income tax benefit on losses for fiscal 1997 were
recorded since the Company could not establish with a reasonable degree of
certainty the potential utilization of certain tax loss carry forwards from
prior year store closing charges. The effective tax rate in fiscal 1996 was 7.6%
and was impacted by the non-deductible amortization and write-off of goodwill
and the reserves recorded to offset the deferred tax assets.
LIQUIDITY AND CAPITAL RESOURCES
The Company's business is seasonal with first quarter sales (February
through April) being lower than sales during the other three quarters, while
fourth quarter sales (November through January) have represented approximately
29% of the full year's retail sales in recent years and normally involve a
greater proportion of higher margin sales.
The Company has satisfied its seasonal liquidity requirements primarily
through a combination of funds provided from operations and from a revolving
credit facility. Funds provided by operating activities totaled $17,640 in
fiscal 1998, and funds used by operating activities totaled $11,577 in fiscal
1997. Funds provided from operations totaled $4,967 in fiscal 1996. The positive
change in cash flow from operating activities from fiscal 1997 to fiscal 1998
was primarily the result of improved operating results, a net decrease in
inventory and increases in operating and tax liabilities. The change in cash
flow from operating activities from fiscal 1996 to fiscal 1997 was primarily the
result of planned net increases in inventory and other operating assets and
decreases in accounts payable and other operating liabilities. These decreases
in cash flow were offset in part by changes in deferred income taxes.
Effective March 17, 1997, the term of Pamida, Inc.'s (Pamida) committed
Loan and Security Agreement (the Agreement) was extended to March 2000 and the
maximum borrowing limit of the facility was increased to $95,000 from $70,000,
which had been the limit throughout fiscal 1997. Prior to March 17, 1997,
borrowings under the Agreement bore interest at a rate which was .75% per annum
greater than the applicable prime rate. Effective March 17, 1997, borrowings
under the Agreement bear interest at a rate which is tied to prime rate or the
London Interbank Offered Rate (LIBOR), generally at Pamida's discretion. The
amounts Pamida is permitted to borrow are determined by a formula based upon the
amount of Pamida's eligible inventory from time to time. Such borrowings are
secured by security interests in all of the current assets (including inventory)
of Pamida and by liens on certain real estate interests and other property of
Pamida. The Company and two subsidiaries of Pamida have guaranteed the payment
and performance of Pamida's obligations under the Loan and Security Agreement
and have pledged some or all of their respective assets, including the stock of
Pamida owned by the Company, to secure such guarantees.
The Agreement contains provisions imposing operating and financial
restrictions on the Company. Certain provisions of the Agreement require the
maintenance of specified amounts of tangible net worth (as defined) and working
capital and the achievement of specified minimum amounts of cash flow (as
defined). Other restrictions in the Agreement and those provided under the
Indenture relating to the Senior Subordinated Notes will affect, among other
things, the ability of Pamida to incur additional indebtedness, pay dividends,
repay indebtedness prior to its stated maturity, create liens, enter into
leases, sell assets or engage in mergers or acquisitions, make capital
expenditures and make investments. These covenants currently have not had an
impact on the Company's ability to fully utilize the revolving credit facility.
However, certain of the covenants, such as those which restrict the ability of
the Company to incur indebtedness or encumber its property or which impose
restrictions on or otherwise limit the Company's ability to engage in
sale-lease-back transactions, may at some future time prevent the Company from
pursuing its store expansion program at the rate that the Company desires.
Obligations under the Agreement were $45,194 at February 1, 1998 and
$57,115 at February 2, 1997. As noted above, this facility expires in March
2000, and the Company intends to refinance any outstanding balance by such date.
Borrowings under the Agreement are senior to the Senior Subordinated Notes of
the Company. The Company had long-term debt and obligations under capital leases
of $172,445 at February 1, 1998 and $201,999 at February 2, 1997. The Company's
ability to satisfy scheduled principal and interest payments under such
obligations in the ordinary course of business is dependent primarily upon the
sufficiency of the Company's operating cash flow. At February 1, 1998, the
Company was in compliance with all covenants contained in its various financing
agreements.
On December 18, 1992, the promissory notes of the Company were amended
effective as of December 1, 1992 to provide that, until the obligations of
Pamida and the Company under certain of Pamida's credit agreements had been
repaid, the quarterly interest payments on the promissory notes of the Company
were to be paid-in-kind. As discussed in Note B to the financial statements, the
Company repaid all of the promissory notes with common stock of the Company on
November 18, 1997.
As described in Note B to the financial statements, the Company
reclassified all preferred stock into common stock effective November 18, 1997.
Accordingly, the Company has no remaining obligations related to the preferred
stock as of the end of fiscal 1998. Pamida paid the Company $315 in fiscal 1996
under a tax-sharing agreement to enable the Company to pay quarterly dividends
to its preferred stockholders. During fiscal 1996, the Company received $967
from Pamida under a tax-sharing agreement as a reimbursement for certain tax
benefits derived by Pamida. Such remittance, along with $18 from the exercise of
certain stock options, was used by the Company to redeem Subordinated Promissory
Notes as described in Note N to the financial statements, to repay intercompany
balances totaling $29, and to pay quarterly dividends on preferred stock. Since
the Company conducts no operations of its own, prior to the November 18, 1997
reclassification of the preferred stock, the only cash requirement of the
Company related to preferred stock dividends in the aggregate annual amount of
approximately $316; and Pamida was expressly permitted under its existing credit
facilities to pay dividends to the Company to fund such preferred stock
dividends. However, the General Corporation Law of the State of Delaware, under
which the Company and Pamida are incorporated, allows a corporation to declare
or pay a dividend only from its surplus or from the current or the prior year's
earnings. Due to the retained deficit resulting primarily from the store
closings and the write-off of goodwill and other long-lived assets recognized in
the fourth quarter of fiscal 1996, the Company and Pamida did not declare or pay
any cash dividends in fiscal 1997.
The Company made capital expenditures of $6,654 in fiscal 1998 compared to
$4,947 during fiscal 1997. The Company also made expenditures of $3,848 and
$3,680 in fiscal 1998 and 1997, respectively, related to information systems
software. The Company plans to open eight new stores in fiscal 1999 and will
consider additional opportunities for new store locations as they arise. Capital
expenditures and information systems software costs are expected to total
approximately $13,000 in fiscal 1999. The Company expects to fund these
expenditures from cash flow from its operations. The costs of buildings and land
for new store locations are expected to be financed by operating or capital
leases with unaffiliated landlords. The Company's expansion program also will
require inventory of approximately $1,000 to $1,200 for each new market store,
which the Company expects to finance through trade credit, borrowings under the
Agreement and cash flow from operations.
The 1997 changes to the Agreement, along with expected improvements in the
Company's cash flow from operations, should provide adequate resources to meet
the Company's near term liquidity requirements. On a long-term basis, the
Company's expansion will require continued investments in store locations,
distribution and infrastructure enhancements and working capital. The Company
expects to continue to finance some of these investments through leases from
unaffiliated landlords, trade credit, borrowings under the Agreement and cash
flow from operations but ultimately will need to explore additional sources of
funds which may include additional capital structure changes. Currently, it is
not possible for the Company to predict with any certainty either the timing or
the availability of such additional financing.
YEAR 2000 COMPLIANCE
The Company has developed a comprehensive plan to mitigate the Company's
exposure to potential problems with its systems' ability to properly process
data beyond the calendar year 1999, which is commonly referred to as Year 2000
compliance. The Company has completed implementation of several new systems and
is at various stages of implementation of others which replace legacy systems.
The Company plans to complete installation of current releases or upgrades for
all of these systems no later than July, 1999 to help ensure that these systems
will be Year 2000 compliant. All of these systems have substantially improved
functionality over the Company's legacy systems which they replace and will,
therefore, be capitalized. Failure to implement such releases or upgrades, or
the failure of the vendors of the aforementioned software to have eliminated the
potential Year 2000 issues within the software, could materially and adversely
affect the Company's operations and financial results. The cost of directly
addressing Year 2000 compliance for legacy systems which are not planned to be
replaced by new systems is being charged to expense as incurred and is not
expected to be material.
INFLATION
The Company uses the LIFO method of inventory valuation in its financial
statements; as a result, the cost of merchandise sold approximates current
costs. The Company's rental expense is generally fixed and, except for small
amounts of percentage rents and rentals adjusted by cost-of-living increases
tied to the Consumer Price Index or interest rates, has not been affected by
inflation.
FORWARD-LOOKING STATEMENTS
This management's discussion and analysis contains certain forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 (the "1995 Act"). Such statements are made in good faith by the Company
pursuant to the safe-harbor provisions of the 1995 Act. In connection with these
safe-harbor provisions, this management's discussion and analysis contains
certain forward-looking statements which reflect management's current views and
estimates of future economic circumstances, industry conditions, company
performance, Year 2000 compliance and financial results. The statements are
based on many assumptions and factors including sales results, expense levels,
competition and interest rates as well as other risks and uncertainties inherent
in the Company's business, capital structure and the retail industry in general.
Any changes in these factors could result in significantly different results.
The Company further cautions that the forward-looking information contained
herein is not exhaustive or exclusive. The Company does not undertake to update
any forward-looking statements which may be made from time to time by or on
behalf of the Company.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY
INDEPENDENT AUDITORS' REPORT
INDEPENDENT AUDITORS' REPORT
Board of Directors
Pamida Holdings Corporation
Omaha, Nebraska
We have audited the accompanying consolidated balance sheets of Pamida
Holdings Corporation and subsidiary as of February 1, 1998 and February 2, 1997,
and the related consolidated statements of operations, common stockholders'
equity and cash flows for each of the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. The consolidated statements of operations, common stockholders'
equity and cash flows of Pamida Holdings Corporation and subsidiary for the year
ended January 28, 1996, were audited by other auditors, whose report, dated
March 26, 1996, expressed an unqualified opinion on those statements and
included an explanatory paragraph that described the adoption of Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such 1998 and 1997 financial statements present fairly, in
all material respects, the financial position of Pamida Holdings Corporation and
subsidiary as of February 1, 1998 and February 2, 1997, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Omaha, Nebraska
March 5, 1998
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors
Pamida Holdings Corporation
Omaha, Nebraska
We have audited the accompanying consolidated statements of operations, common
stockholders' equity and cash flows of Pamida Holdings Corporation and
Subsidiary for the year ended January 28, 1996. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the results of operations and cash flows of
Pamida Holdings Corporation and Subsidiary for the year ended January 28, 1996,
in conformity with generally accepted accounting principles.
As discussed in Note P to the consolidated financial statements, the Company
adopted Statement of Financial Accounting Standards No 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets To Be Disposed of."
/s/ Coopers & Lybrand L.L.P.
Chicago, Illinois
March 26, 1996
<TABLE>
<CAPTION>
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLAR AMOUNTS IN THOUSANDS - EXCEPT PER SHARE DATA)
Fiscal Year Ended
-------------------------------------
<S> <C> <C> <C>
February 1, February 2, January 28,
1998 1997 1996
(52 Weeks) (53 Weeks) (52 Weeks)
--------- --------- ---------
Sales .......................................................... $ 657,017 $ 633,189 $ 736,315
Cost of goods sold ............................................. 495,082 479,099 558,627
--------- --------- ---------
Gross profit ................................................... 161,935 154,090 177,688
--------- --------- ---------
Expenses:
Selling, general and administrative ........................ 129,031 125,105 151,096
Interest ................................................... 29,618 29,781 29,526
Long-lived asset write-off ................................. - - 78,551
Store closing costs ........................................ - - 21,397
--------- --------- ---------
158,649 154,886 280,570
--------- --------- ---------
Income (loss) before provision for income
taxes and extraordinary item ............................... 3,286 (796) (102,882)
Income tax benefit ............................................. - - (7,863)
--------- --------- ---------
Income (loss) before extraordinary item ........................ 3,286 (796) (95,019)
Extraordinary item ............................................. 1,735 - 371
--------- --------- ---------
Net income (loss) .............................................. 5,021 (796) (94,648)
Effect of preferred stock reclassification ..................... 756 - -
Less provision for preferred dividends and discount amortization (407) (391) (362)
--------- --------- ---------
Net income (loss) available for common shares .................. $ 5,370 $ (1,187) $ (95,010)
========= ========= =========
Basic income (loss) per share:
Income (loss) before extraordinary item..................... $ .62 $ (.24) $ 19.07)
Extraordinary item.......................................... .30 - .08
--------- --------- ---------
Basic income (loss)......................................... $ .92 $ (.24) $ (18.99)
========= ========= =========
Diluted income (loss) per share:
Income (loss) before extraordinary item..................... $ .62 $ (.24) $ (19.07)
Extraordinary item.......................................... .29 - .08
--------- --------- ----------
Diluted income (loss)....................................... $ .91 $ (.24) $ (18.99)
========= ========= =========
See notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(DOLLAR AMOUNTS IN THOUSANDS - EXCEPT PER SHARE DATA)
<S> <C> <C>
February 1, February 2,
ASSETS 1998 1997
----------- -----------
Current assets:
Cash................................................................................ $ 6,816 $ 6,973
Accounts receivable, less allowance for doubtful accounts of $50 in both years...... 8,384 6,919
Merchandise inventories............................................................. 152,927 157,490
Prepaid expenses.................................................................... 2,838 2,993
Property held for sale.............................................................. - 1,748
----------- -----------
Total current assets............................................................. 170,965 176,123
Property, buildings and equipment, net.................................................. 40,812 42,403
Leased property under capital leases, less accumulated
amortization of $15,387 and $14,604, respectively................................... 25,181 27,713
Deferred financing costs................................................................ 2,755 3,176
Other assets............................................................................ 20,368 19,773
----------- -----------
$ 260,081 $ 269,188
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................................... $ 47,687 $ 54,245
Loan and security agreement......................................................... 45,194 57,115
Accrued compensation................................................................ 5,768 3,860
Accrued interest.................................................................... 6,668 7,668
Store closing reserve............................................................... 1,564 4,521
Other accrued expenses.............................................................. 12,227 10,112
Income taxes - deferred and current payable......................................... 12,546 8,101
Current maturities of long-term debt................................................ 47 47
Current obligations under capital leases............................................ 1,843 1,781
----------- -----------
Total current liabilities........................................................ 133,544 147,450
Long-term debt, less current maturities................................................. 140,289 168,000
Obligations under capital leases, less current obligations.............................. 32,156 33,999
Reserve for dividends................................................................... - 342
Other long-term liabilities............................................................. 6,367 4,825
Commitments and contingencies (Note O).................................................. - -
Preferred stock subject to mandatory redemption:
16-1/4% senior cumulative preferred stock, $1 par value;
514 shares authorized; 0 and 514 shares issued and outstanding................... - 514
14-1/4% junior cumulative preferred stock, $1 par value;
1,627 and 6,986 shares authorized; 0 and 1,627 shares issued and outstanding;
redemption amount of $0 and $1,627, less unamortized discount.................... - 1,361
Common stockholders' equity:
Common stock, $.01 par value; 25,000,000 and 10,000,000 shares authorized; 5,970,439
and 5,004,942 shares issued and outstanding...................................... 60 50
Nonvoting common stock, $.01 par value; 4,000,000 and 2,000,000 shares authorized;
3,050,473 and 0 shares issued and outstanding.................................... 30 -
Additional paid-in capital.......................................................... 30,586 968
Accumulated deficit................................................................. (82,951) (88,321)
----------- -----------
Total common stockholders' deficit............................................... (52,275) (87,303)
----------- -----------
$ 260,081 $ 269,188
=========== ===========
See notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
Retained
Nonvoting Additional Earnings
Common Common Paid-in (Accumulated
Stock Stock Capital Deficit)
--------- --------- --------- ---------
Balance at January 29, 1995............................. $ 50 $ - $ 950 $ 7,876
Net loss.............................................. - - - (94,648)
Amortization of discount on 14-1/4%
junior cumulative preferred........................ - - - (47)
Cash dividends to preferred stockholders.............. - - - (315)
Stock sold under incentive stock option plan.......... - - 18 -
--------- --------- --------- ---------
Balance at January 28, 1996............................. 50 - 968 (87,134)
Net loss.............................................. - - - (796)
Amortization of discount on 14-1/4%
junior cumulative preferred........................ - - - (49)
Accrued dividends for preferred stockholders - - (342)
--------- --------- --------- ---------
Balance at February 2, 1997............................. 50 - 968 (88,321)
Net income............................................ - - _ 5,021
Amortization of discount on 14-1/4%
junior cumulative preferred..................... - - - (38)
Accrued dividends for preferred stockholders.......... - - - (369)
Reclassification of preferred stock into common stock. 3 - 1,811 756
Payment of notes with common stock.................... 7 30 20,236 -
Gain on payment of notes held by Venture (net of tax). - - 7,571 -
--------- --------- --------- ---------
Balance at February 1, 1998............................. $ 60 $ 30 $ 30,586 $ (82,951)
========= ========= ========= =========
See notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLAR AMOUNTS IN THOUSANDS)
Fiscal Year Ended
-------------------------------------------
<S> <C> <C> <C>
February 1, February 2, January 28,
1998 1997 1996
(52 Weeks) (53 Weeks) (52 Weeks)
----------- ----------- -----------
Cash flows from operating activities:
Net income (loss) $ 5,021 $ (796) $ (94,648)
----------- ----------- -----------
Adjustments to reconcile net income (loss) to net cash from
operating activities:
Depreciation and amortization............................... 12,593 11,658 15,345
Provision (credit) for LIFO inventory valuation............. 606 874 (585)
Provision (credit) for deferred income taxes................ (3,297) 3,305 (6,647)
Noncash interest expense.................................... 3,974 4,473 3,910
Gain on disposal of assets.................................. (150) (56) (982)
Deferred retirement benefits................................ (142) (125) 13
Extraordinary item.......................................... (1,735) - (371)
Long-lived assets write-off................................. - - 78,551
Store closing costs......................................... (3,457) (3,726) 21,397
Decrease (increase) in merchandise inventories.............. 3,957 (7,527) 4,532
Increase in other operating assets.......................... (4,730) (5,622) (3,847)
Decrease in accounts payable................................ (6,558) (8,842) (6,749)
Increase (decrease) in income taxes payable................. 3,537 (3,250) (4,607)
Increase (decrease) in other operating liabilities.......... 8,021 (1,943) (345)
----------- ----------- -----------
Total adjustments............................................. 12,619 (10,781) 99,615
----------- ----------- -----------
Net cash from operating activities............................ 17,640 (11,577) 4,967
----------- ----------- -----------
Cash flows from investing activities:
Capital expenditures............................................ (6,654) (4,947) (9,265)
Proceeds from disposal of assets................................ 1,701 917 1,163
Principal payments received on notes receivable................. 18 16 15
Assets acquired for sale........................................ - (391) -
Changes in constructed stores to be refinanced through lease
financing.................................................... 1,790 (5,845) (4,412)
----------- ----------- -----------
Net cash from investing activities............................ (3,145) (10,250) (12,499)
----------- ----------- -----------
Cash flows from financing activities:
Borrowings (payments) under loan and security agreement, net.... (11,921) 25,527 10,986
Principal payments on other long-term debt...................... (75) (1,335) (193)
Dividends paid on preferred stock............................... - - (315)
Principal payments on promissory notes.......................... - - (641)
Payments for deferred finance costs............................. (225) (54) (13)
Principal payments on capital lease obligations................. (1,781) (2,636) (2,071)
Fees related to payment of debt and reclasification
of preferred stock............................................ (650) - -
Proceeds from sale of stock..................................... - - 18
----------- ----------- -----------
Net cash from financing activities............................ (14,652) 21,502 7,771
----------- ----------- -----------
Net (decrease) increase in cash................................. (157) (325) 239
Cash at beginning of year....................................... 6,973 7,298 7,059
----------- ----------- -----------
Cash at end of year............................................. $ 6,816 $ 6,973 $ 7,298
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid (received) during the year for:
Interest...................................................... $ 25,834 $ 24,804 $ 25,691
Income taxes:
Payments to taxing authorities.............................. 112 386 3,622
Refunds received from taxing authorities.................... (3,952) (442) (231)
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Capital lease obligations incurred when the Company entered
into lease agreements for new store facilities and equipment. $ - $ 11 $ 620
Capital lease obligations terminated............................ - - 154
Amortization of discount on junior cumulative preferred stock
recorded as a direct charge to retained earnings............. 38 49 47
Payment of interest in kind by increasing the
principal amount of the notes................................ 3,561 4,141 3,702
Provision for dividends payable................................. 369 342 -
Common stock issued in payment of notes
and reclassification of preferred stock...................... 8,690 - -
Nonvoting common stock issued in payment of notes............... 27,454 - -
Notes paid with, and preferred stock reclassified into,
common stock................................................. (36,144) - -
See notes to consolidated financial statements.
</TABLE>
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLDIATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS - EXCEPT PER SHARE DATA)
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Pamida Holdings Corporation (the "Company") was formed for the sole purpose
of acquiring Pamida, Inc. ("Pamida") through a merger in a leveraged buy-out
transaction which was consummated on July 29, 1986.
CONSOLIDATION - The consolidated financial statements include the results
of operations, account balances and cash flows of the Company and its
wholly-owned subsidiary, Pamida, and of Seaway Importing Company ("Seaway") and
Pamida Transportation Company, wholly-owned subsidiaries of Pamida. All material
intercompany accounts and transactions have been eliminated in consolidation.
FISCAL YEAR - All references in these financial statements to fiscal years
are to the calendar year in which the fiscal year ends.
LINE OF BUSINESS - Through Pamida, the Company is engaged in the operation
of general merchandise retail stores in a fifteen-state Midwestern, North
Central and Rocky Mountain area. Seaway imports primarily seasonal merchandise
for sale to Pamida. Pamida Transportation Company operated as a contract carrier
for Pamida until July 1995, at which time independent contractors were engaged
to provide all transportation needs of the Company. Because of the similarity in
nature of the Company's businesses, the Company considers itself to be a single
business segment.
REVENUE RECOGNITION - Pamida operates its stores on a self-service,
primarily cash-and-carry basis. Because of the insignificance of sales returns,
revenue is recognized at the point-of-sale without allowance for returns.
CASH FLOW REPORTING - For purposes of the statement of cash flows, the
Company considers all temporary cash investments purchased with a maturity of
three months or less to be cash equivalents. There were no temporary investments
at February 1, 1998 and February 2, 1997.
MERCHANDISE INVENTORIES - Substantially all of the Company's inventory is
stated at the lower of cost (last-in, first-out) or market.
PROPERTY, BUILDINGS AND EQUIPMENT - Property, buildings and equipment are
stated at cost and depreciated on the straight-line method over the estimated
useful lives. Buildings and building improvements are generally depreciated over
8-40 years, while store, warehouse and office equipment, vehicles and aircraft
equipment are generally depreciated over 3-10 years. Leasehold improvements are
depreciated over the life of the lease or the estimated life of the asset,
whichever is shorter.
LEASED PROPERTY UNDER CAPITAL LEASES - Noncancellable financing leases are
capitalized at the estimated fair value of the leasehold interest and are
amortized on the straight-line method over the terms of the leases.
LONG-LIVED ASSETS - When facts and circumstances indicate potential
impairment, the Company evaluates the recoverability of asset carrying values,
including associated goodwill, using estimates of future cash flows over
remaining asset lives. When impairment is indicated, any impairment loss is
measured by the excess of carrying values over fair values.
DEFERRED FINANCING COSTS AND ORIGINAL ISSUE DEBT DISCOUNT - Deferred
financing costs are being amortized using the straight-line method over the
terms of the issues which approximates the effective interest method. Original
issue debt discount is being amortized using the effective interest method over
the terms of the issues.
ADVERTISING COSTS - Advertising costs are expensed as incurred and totaled
$10,468, $11,653 and $16,381 for fiscal years 1998, 1997 and 1996, respectively.
PRE-OPENING EXPENSES - Costs related to opening new stores are expensed as
incurred.
STOCK-BASED COMPENSATION - The Company accounts for its stock-based
compensation under the provisions of Accounting Principles Board Opinion 25,
Accounting for Stock Issued to Employees (APB 25).
EARNINGS PER SHARE - In February 1997, the Financial Accounting Standards
Board ("FASB") adopted Statement of Financial Accounting Standards ("SFAS") No.
128, "Earnings per Share." SFAS 128 requires dual presentation of basic and
diluted earnings per share for all periods for which an income statement is
presented. Basic income per common share is based on the weighted average
outstanding common shares during the respective period. Diluted income per share
is based on the weighted average outstanding common shares and the effect of all
dilutive potential common shares, including stock options. All prior period
income per share data has been restated in accordance with SFAS 128.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
NEW ACCOUNTING PRONOUNCEMENTS - In June 1997, the FASB adopted SFAS No.
130, "Reporting Comprehensive Income", and No. 131, "Disclosures about Segments
of an Enterprise and Related Information". SFAS 130 establishes standards for
reporting and display of comprehensive income and its components in a full set
of general purpose financial statements. This statement is effective for the
Company's fiscal 1999 financial statements. SFAS 131, also effective in fiscal
1999, redefines how operating segments are determined and requires disclosure of
certain financial and descriptive information about a company's operating
segments. The Company currently complies with most provisions of the statements
and any incremental disclosure required is expected to be minimal.
RECLASSIFICATIONS - Certain reclassifications have been made to prior
years' financial statements to conform to the current year presentation.
B. EXCHANGE OF DEBT AND PREFERRED STOCK FOR COMMON STOCK AND RELATED
EXTRAORDINARY ITEM
On November 14, 1997, the stockholders of the Company approved various
proposals necessary to effect the payment of all of the Company's outstanding
Senior Promissory Notes, Subordinated Promissory Notes and Junior Subordinated
Promissory Notes (collectively, the "Notes") with common stock and to change and
reclassify all of the Company's outstanding preferred stock into common stock.
In connection with these transactions, which became effective on November
18, 1997, the Company issued 965,497 shares of Common Stock and 3,050,473 shares
of Nonvoting Common Stock. The Nonvoting Common Stock was issued only to 399
Venture Partners, Inc. ("Venture"), an affiliate of Citicorp, and is convertible
into Common Stock on a share-for-share basis upon certain conditions. Common
Stock was issued to all other holders of Notes and to all holders of Preferred
Stock.
The aggregate redemption value of the Preferred Stock at the effective date
of the transactions was $2,968, comprised of $1,000 per share stated liquidation
value plus accrued dividends. The aggregate principal amount and accrued
interest on the Notes at the effective date of the transactions was $33,175.
Based upon a value of $9 per share for purposes of the transactions, (i) 329,815
shares of Common Stock were issued to the holders of Preferred Stock resulting
in a net gain to the Company of $756, credited directly to retained earnings,
(ii) 635,682 shares of Common Stock were issued to Note holders other than
Venture resulting in a net gain to the Company of $1,735, reflected as an
extraordinary item in the consolidated statement of operations, and (iii)
3,050,473 shares of Nonvoting Common Stock were issued to Venture resulting in a
net gain to the Company of $7,571, credited directly to paid-in capital. These
net gains represent the excess of the value of the Common Stock for purposes of
the transactions over the value of the stock as determined by the closing market
price of the Common Stock as of the transaction date, net of applicable
transaction costs, unamortized discounts, and income taxes.
C. NET INCOME PER COMMON SHARE
The following table provides a reconciliation between basic and diluted
income per share (income and shares in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
--------------------------- --------------------------- ---------------------------
<S> <C> <C> <C>
Per-Share Per-Share Per-Share
Income Shares Amount Income Shares Amount Income Shares Amount
--------------------------- --------------------------- ---------------------------
Income (loss) before
extraordinary item $3,286 $ (796) $(95,019)
Less provision for
preferred dividends and
discount amortization (407) (391) (362)
Effect of preferred stock
reclassification 756 - -
------ ------ --------
Basic income (loss) per share
before extraordinary item 3,635 5,843 $ .62 (1,187) 5,005 $ (. 24) (95,381) 5,003 $ (19.07)
Effect of dilutive stock options - 32 - - - -
--------------------------- --------------------------- ---------------------------
Diluted income (loss) per share
before extraordinary item $3,635 5,875 $ .62 $(1,187) 5,005 $ (.24) $(95,381) 5,003 $ (19.07)
=========================== =========================== ============================
</TABLE>
D. MERCHANDISE INVENTORIES
Total inventories would have been higher at February 1, 1998 and February
2, 1997 by $7,180 and $6,574, respectively, had the FIFO (first-in, first-out)
method been used to determine the cost of all inventories. On a FIFO basis, net
income (loss) before extraordinary item would have been $3,892, $78 and
$(95,604), respectively, for fiscal years 1998, 1997, and 1996. During fiscal
years 1998, 1997, and 1996, certain inventory quantities were reduced resulting
in a liquidation of certain LIFO layers carried at costs which were lower than
the cost of current purchases, the effect of which increased net income by $263,
$116, and $125, respectively.
E. PROPERTY, BUILDINGS AND EQUIPMENT
Property, buildings and equipment consists of:
Feb. 1, Feb. 2,
1998 1997
--------- ---------
Land and land improvements..................... $ 4,030 $ 4,013
Buildings and building improvements............ 22,183 22,076
Store, warehouse and office equipment.......... 59,842 59,668
Vehicles and aircraft equipment................ 1,551 1,513
Leasehold improvements......................... 16,944 16,497
--------- ---------
104,550 103,767
Less accumulated depreciation and amortization. 63,738 61,364
--------- ---------
$ 40,812 $ 42,403
========= =========
F. OTHER ASSETS
Other assets consist of:
Feb. 1, Feb. 2,
1998 1997
--------- ---------
Constructed stores to be refinanced through
lease financing.............................. $ 7,969 $ 10,257
Unamortized software costs, net................ 10,435 7,541
Other.......................................... 1,964 1,975
--------- ---------
$ 20,368 $ 19,773
========= =========
The Company contracted for the construction of two and five store locations
during the periods ended January 28, 1996 and February 2, 1997, respectively.
The construction costs capitalized are recorded as other long-term assets during
the period of construction and for the period following completion of
construction to the date of sale of such stores through a lease financing
arrangement. The construction costs for five stores remain in Other Assets at
February 1, 1998. The cost of construction has been financed through the
Company's working capital and cash flow from operations. The Company expects to
obtain lease financing under favorable terms for each of the constructed stores
in the near future.
G. FINANCING AGREEMENTS
Effective March 17, 1997, the term of Pamida's committed Loan and Security
Agreement (the Agreement) was extended to March 2000, and the maximum borrowing
limit of the facility was increased to $95,000 from $70,000, which had been the
limit throughout fiscal 1997. Prior to March 17, 1997, borrowings under the
Agreement bore interest at a rate which was 0.75% per annum greater than the
applicable prime rate. Effective March 17, 1997, borrowings under the Agreement
bear interest at a rate which is tied to the applicable prime rate or the London
Interbank Offered Rate (LIBOR), generally at Pamida's discretion. The amounts
Pamida is permitted to borrow under the Agreement are determined by a formula
based upon the amount of Pamida's eligible inventory from time to time.
Borrowings of Pamida under the Agreement are secured by security interests
in substantially all of the current assets (including inventory) of Pamida and
by liens on certain real estate interests and other property of Pamida. The
Company and two subsidiaries of Pamida have guaranteed payment and performance
of Pamida's obligations under the Agreement and have pledged some or all of
their respective assets, including the stock of Pamida owned by the Company, to
secure such guarantees.
The Agreement contains provisions imposing operating and financial
restrictions on the Company. Certain provisions of the Agreement require the
maintenance of specified amounts of tangible net worth (as defined) and working
capital (as defined) and the achievement of specified minimum amounts of cash
flow (as defined). Other restrictions in the Agreement and those provided under
the Indenture relating to the Senior Subordinated Notes will affect, among other
things, the ability of Pamida to incur additional indebtedness, pay dividends,
repay indebtedness prior to its stated maturity, create liens, enter into
leases, sell assets or engage in mergers or acquisitions, make capital
expenditures and make investments.
The maximum amount of borrowings under the Agreement during fiscal 1998 and
1997 was $66,461 and $69,256, respectively. The weighted average amounts of
borrowings under the Agreement for fiscal 1998 and 1997 were $52,869 and
$43,002, respectively; and the weighted average interest rates were 9.8% and
10.0%, respectively.
Long-term debt consists of:
Feb. 1, Feb. 2,
1998 1997
-------- --------
Senior Subordinated Notes, 11.75%, due March 2003 .. $140,000 $140,000
Industrial development bond, 5.5%, due in monthly
installments through 2005......................... 336 411
Senior promissory notes, 15.5%, interest paid
in kind quarterly................................. - 4,926
Subordinated promissory notes, 16%, interest paid
in kind quarterly................................. - 13,454
Junior subordinated promissory notes, 16.25%, net of
unamortized discount of $0 and $878, interest paid
in kind quarterly................................. - 9,256
-------- --------
140,336 168,047
Less current maturities............................. 47 47
-------- --------
$140,289 $168,000
======== ========
As of February 1, 1998, the fair value of long-term debt was $144,489
compared to its recorded value of $140,289. The fair value of long-term debt was
estimated based on quoted market values for the notes. The aggregate maturities
of long-term debt totals $47 in each of the next five fiscal years.
The Senior Subordinated Notes are unsecured and are subordinate borrowings
under the Agreement. Presently, under the most restrictive debt covenants, the
Company is not permitted to pay dividends on its common stock.
The senior, subordinated and junior subordinated promissory notes of the
Company were amended to provide that, until the obligations of the Company and
Pamida under certain loan agreements had been paid in full, the quarterly
interest payments on the notes were to be paid-in-kind by increasing the
principal amount of each note on the applicable quarterly payment date by the
amount of accrued interest then being paid-in-kind. Interest on the notes
paid-in-kind accrued at a rate which, in each case, was two percentage points
higher than the applicable cash interest rate. See Note B describing the
transaction effecting the payment of these notes with shares of common stock of
the Company which was effective November 18, 1997.
H. INCOME TAXES
Components of the income tax provision (benefit) from continuing operations
are as follows:
Year Ended
----------------------------
Feb. 1, Feb. 2, Jan. 28,
1998 1997 1996
------- ------- -------
Current:
Federal..................................... $ 491 $(3,155) $ (993)
State....................................... 311 (150) (223)
------- ------- -------
802 (3,305) (1,216)
------- ------- -------
Deferred:
Federal..................................... (1,616) 3,189 (5,865)
State....................................... (330) 116 (782)
Utilization of tax benefit carryforward....... 2,718 - -
Change in beginning of year
valuation allowance......................... (1,574) - -
------- ------- -------
(802) 3,305 (6,647)
------- ------- -------
Total benefit from continuing operations...... $ - $ - $(7,863)
======= ======= =======
The differences between the U.S. Federal statutory tax rate and the
Company's effective tax rate are as follows:
Year Ended
----------------------------
Feb. 1, Feb. 2, Jan. 28,
1998 1997 1996
------- ------- -------
Statutory rate................................ 34.0% (34.0)% (34.0)%
State income tax effect....................... 4.6 (2.8)% (1.3)%
Amortization of the excess of cost over
net assets acquired......................... - - 23.9
Valuation allowance........................... (40.9) 25.1 3.6
Accretion of discount on junior
subordinated debt........................... 1.3 6.8 0.1
Other......................................... 1.0 4.9 0.1
------- ------- -------
- - (7.6)%
======= ======= =======
In fiscal 1998, income tax expense allocated to the extraordinary item was
$379 and income tax expense charged directly to stockholders' equity was $1,821.
These amounts are net of a change in the beginning of year valuation allowance
of $2,495.
Significant temporary differences between reported and taxable income that
give rise to deferred tax assets and liabilities were as follows:
Feb. 1, Feb. 2,
1998 1997
------- -------
Net current deferred tax liabilities:
Inventories................................. $13,910 $15,302
Prepaid insurance........................... 172 210
Other....................................... 423 412
Post employment health costs................ (135) (189)
Accrued expenses............................ (2,192) (941)
Store closing costs......................... (1,246) (2,570)
------- -------
Net current deferred tax liabilities...... 10,932 12,224
------- -------
Net long-term deferred tax liabilities:
Property, buildings and equipment........... 2,096 2,862
Other....................................... 1,836 1,436
Valuation allowance......................... - 4,069
Capital leases.............................. (3,377) (3,089)
Tax benefit carryforward.................... (800) (3,518)
------- -------
Net long-term deferred tax (asset) liabilities (245) 1,760
------- -------
Net total deferred tax liabilities............ $10,687 $13,984
======= =======
Net long-term deferred tax (asset) liabilities are classified with other
assets or other long-term liabilities in the consolidated balance sheets of the
Company. As of February 1, 1998 the Company had alternative minimum tax credit
carryforwards totaling $800, which do not expire.
I. LEASES
The majority of store facilities are leased under noncancelable leases.
Substantially all of the leases are net leases which require the payment of
property taxes, insurance and maintenance costs in addition to rental payments.
Certain leases provide for additional rentals based on a percentage of sales and
have renewal options for one or more periods totaling from one to twenty years.
At February 1, 1998 the future minimum lease payments under capital and
operating leases with rental terms of more than one year amounted to:
Fiscal Year Ending Capital Operating
Leases Leases
-------- --------
1999....................................... $ 5,659 $ 10,996
2000....................................... 5,442 8,867
2001....................................... 5,352 7,554
2002....................................... 5,267 6,788
2003....................................... 5,255 6,076
Later years................................ 36,129 61,356
-------- --------
Total minimum obligations.................. 63,104 $101,637
-------- ========
Less amount representing interest.......... 29,105
--------
Present value of net minimum lease payments 33,999
Less current portion....................... 1,843
--------
Long-term obligations...................... $ 32,156
========
The minimum rentals under operating leases have not been reduced by minimum
sublease rentals of $157 due in the future under noncancelable subleases.
Total rental expense related to all operating leases (including those with
terms less than one year) is as follows:
Year Ended
---------------------------
Feb. 1, Feb. 2, Jan. 28,
1998 1997 1996
------- ------- -------
Minimum rentals............................ $11,669 $10,938 $11,715
Contingent rentals......................... 272 258 399
Less sublease rental income................ (705) (735) (852)
------- ------- -------
$11,236 $10,461 $11,262
======= ======= =======
J. SAVINGS AND OTHER POSTEMPLOYMENT BENEFITS PLANS
Pamida has adopted a 401(k) plan that covers all employees who are 21 years
of age with one or more years of service. Participants can contribute from 1% to
15% of their pre-tax compensation. Pamida has currently elected to match 50% of
the participant's contribution up to 5% of compensation. Pamida's savings plan
contribution expenses for fiscal years 1998, 1997 and 1996, were $765, 770, and
$749, respectively.
Prior to December 1993, the Company had agreed to continue to provide
health insurance coverage and pay a portion of the health insurance premiums
until age 65 for individuals who retire if the individual was eligible to
participate in the plan, had attained age 55, had completed ten or more
consecutive years of service and elected to continue on the Company plan. The
plan is unfunded, and the Company had the right to modify or terminate these
benefits. In December 1993, the Company amended the Plan to no longer offer
postretirement health benefits for employees retiring after February 1, 1994.
The components of periodic expense for postretirement benefits in fiscal
1998, 1997 and 1996 were as follows:
Feb. 1, Feb. 2, Jan. 28,
1998 1997 1996
------ ------ ------
Annual postretirement benefit expense:
Interest cost............................... $ 11 $ 16 $ 32
Amortization of unrecognized net obligations (73) (44) (6)
------ ------ ------
Annual postretirement benefit (income) expense $ (62) $ (28) $ 26
====== ====== ======
The accumulated postretirement benefit obligation consists of:
Feb. 1, Feb. 2,
1998 1997
------ ------
Accumulated postretirement
benefit obligation.......................... $ 163 $ 194
Unrecognized gain............................. 189 299
------ ------
Accrued expense............................... $ 352 $ 493
====== ======
A 5% increase in the cost of covered health care benefits was assumed for
both fiscal 1998 and 1997. The rate of 5% is assumed to remain level after
fiscal 1998. Assuming a 1% increase in the health care trend rate, the annual
postretirement benefit expense would remain the same for both fiscal 1998 and
1997, and the unfunded accumulated postretirement benefit obligation would
increase by $2 and $4 for fiscal 1998 and 1997, respectively. The weighted
average discount rate used in determining the accumulated postretirement benefit
obligation was 7.0% for both fiscal 1998 and 1997.
K. PREFERRED STOCK SUBJECT TO MANDATORY REDEMPTION
See Note B describing the change and reclassification of all preferred
stock into common stock of the Company, effective November 18, 1997. Prior to
the reclassification, the Company was obligated to redeem all outstanding shares
of senior cumulative and junior cumulative preferred stock on December 31, 2001,
at a price not to exceed the liquidation value which was $1,000 per share plus
any accrued dividends. Subject to certain loan restrictions, the Company could,
at any time, have redeemed all or any portion of the preferred stock outstanding
at a price of $1,000 per share plus any accrued dividends.
Each share of senior cumulative and junior cumulative preferred stock
entitled its holder to receive a quarterly dividend of 16.25% and 14.25% per
annum, respectively, of the liquidation value from the date of issuance until
redeemed. Both series of preferred stock were nonvoting, and any unpaid
dividends were added to the liquidation value until paid.
The General Corporation Law of the State of Delaware, under which the
Company and Pamida are incorporated, allows a corporation to declare or pay a
dividend only from its surplus or from the current or the prior year's earnings.
Due to the accumulated deficit resulting primarily from the store closings and
the write-off of goodwill and other long-lived assets recognized in the fourth
quarter of fiscal 1996, the Company and Pamida did not declare or pay any cash
dividends in fiscal 1998 or 1997 and could pay cash dividends in ensuing years
only to the extent that the Company and Pamida satisfied the applicable
statutory standards which included the Company's having a net worth equal to at
least the aggregate par value of the preferred stock which amounted to $2. A
provision for preferred stock dividends has been recorded in the fiscal 1998 and
1997 financial statements. The cumulative dividend rate on the preferred stock
increased by 0.5% per quarter (with a maximum aggregate increase of 5%) on each
quarterly dividend payment date on which the preferred stock dividends were not
paid currently on a cumulative basis. As a result of the reclassification of the
preferred stock into common stock, the Company's obligation for further
preferred stock dividend payments or accrual has been eliminated.
The difference between the fair value of the junior cumulative preferred
stock at issuance and the mandatory redemption value was recorded through
periodic accretions, using the effective interest method with a related charge
to retained earnings.
L. STOCK OPTIONS
On November 24, 1992, the Board of Directors of the Company adopted the
Pamida Holdings Corporation 1992 Stock Option Plan (the "Plan"), which was
approved by the Company's stockholders in May 1993. The Plan, administered by a
Committee of the Board of Directors, provides for the granting of options to key
employees of the Company and its subsidiaries to purchase up to an aggregate of
350,000 shares of Common Stock of the Company. Options granted under the Plan
may be either incentive stock options, within the meaning of Section 422 of the
Internal Revenue Code, or non-qualified options. Options granted under the Plan
will be exercisable during the period fixed by the Committee for each option;
however, in general, no option will be exercisable earlier than one year after
the date of its grant, and no incentive stock option will be exercisable more
than ten years after the date of its grant. The option exercise price must be at
least 100% of the fair market value of the Common Stock on the date of the
option grant. No compensation expense related to stock options was recorded
during fiscal 1998, 1997 or 1996.
On March 5, 1998, the Board of Directors of the Company adopted the Pamida
Holdings Corporation 1998 Stock Incentive Plan (the "1998 Plan") which will
require approval by the stockholders to become effective. The 1998 Plan
authorizes 500,000 shares of Common Stock for option grants or other awards to
eligible officers and other key employees of the Corporation. No grants or other
awards have been made under the 1998 Plan.
The Company accounts for its stock-based compensation under the provisions
of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees (APB Opinion No. 25), which utilizes the intrinsic value method.
A summary of the Company's stock-based compensation activity related to
stock options for the last three fiscal years is as follows:
<TABLE>
<CAPTION>
Feb. 1, 1998 Feb. 2, 1997 Jan. 28, 1996
------------------ ------------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Number Price Number Price Number Price
------- -------- ------- -------- ------- --------
Outstanding - beginning of year 302,816 $ 4.39 296,546 $ 5.05 227,545 $ 4.33
Granted 40,700 3.06 86,800 2.37 122,205 6.80
Expired/terminated 21,083 4.93 80,530 4.66 48,246 6.22
Exercised - - - - 4,958 3.63
------- -------- ------- -------- ------- --------
Outstanding - end of year 322,433 $ 4.19 302,816 $ 4.39 296,546 $ 5.05
======= ======== ======= ======== ======= ========
</TABLE>
There were 161,093, 123,616 and 85,474 options exercisable at February 1,
1998, February 2, 1997 and January 28, 1996, respectively.
The following table summarizes information about stock options outstanding
as of February 1, 1998:
Options Outstanding Options Exercisable
- ------------------------------------------------------- ----------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Range of Number Contractual Exercise Number Exercise
Exercise Prices Outstanding Life Price Exercisable Price
- --------------- ----------- ------------ -------- ----------- --------
$ 1.94 - $2.78 77,300 8.5 Years $ 2.36 15,460 $ 2.36
3.06 39,200 9.1 Years 3.06 - 0.00
3.63 - 5.75 167,933 6.2 Years 4.61 130,433 4.37
7.19 38,000 7.1 Years 7.19 15,200 7.19
- --------------- ----------- ------------ -------- ----------- --------
$ 1.94 - $7.19 322,433 7.2 Years $ 4.19 161,093 $ 4.45
=============== =========== ============ ======== =========== =======-
If compensation cost for the Company's Plan had been determined based on
the fair value at the grant dates for awards under the Plan consistent with the
method of SFAS No. 123, Accounting for Stock-Based Compensation, the Company's
net income and net income per share would have been reduced to the pro forma
amounts indicated below:
Feb. 1, Feb. 2, Jan. 28,
1998 1997 1996
------ ------- --------
Net income (loss) As reported $5,370 $(1,187) $(95,010)
Pro forma 5,326 (1,235) (95,046)
Basic income (loss) per share As reported .92 (.24) (18.99)
Pro forma .91 (.25) (19.00)
Diluted income (loss) per share As reported .91 (.24) (18.99)
Pro forma .91 (.25) (19.00)
The weighted average fair value of options granted during the year was
$1.43, $0.70 and $2.86 per option for fiscal 1998, 1997 and 1996, respectively.
The fair value of options granted under the Plan was estimated at the date of
grant using a binomial options pricing model with the following assumptions:
Feb. 1, Feb. 2, Jan. 28,
1998 1997 1996
------ ------ -------
Risk-free interest rate 6.5% 6.0% 7.0%
Dividend yield 0.0% 0.0% 0.0%
Expected volatility 8.4% 8.1% 8.1 %
Expected life (years) 6.0 years 6.6 years 6.7 years
M. CAPITAL STOCK
As described in Note B, the Company issued an additional 965,497 shares of
Common Stock and 3,050,473 shares of Nonvoting Common Stock during fiscal 1998.
Accordingly, the Company had 5,970,439 shares of Common Stock and 3,050,473
shares of Nonvoting Common Stock outstanding at February 1, 1998. The Nonvoting
Common Stock is held entirely by 399 Venture Partners, Inc. which is also the
Company's largest holder of Common Stock. The Nonvoting Common Stock is
convertible into Common Stock on a share-for-share basis upon certain
conditions. The Company had 5,004,942 shares of Common Stock and no shares of
Nonvoting Common Stock outstanding at February 2, 1997.
N. EXTRAORDINARY ITEMS
As described in Note B, on November 18, 1997 the Company issued 635,682
shares of common stock to certain holders of Notes which resulted in an
extraordinary gain. On July 31, 1995, the Company made an offer to purchase for
cash 39.5% of the aggregate outstanding principal amount of 14% Subordinated
Promissory Notes (Notes) of Pamida Holdings Corporation. The offered purchase
price was 50% of the principal amount to be purchased. In the third quarter of
fiscal 1996, the Company redeemed Notes tendered in the aggregate principal
amount of $1,281 and made cash payments of $641, resulting in an after-tax gain
of $371.
O. COMMITMENTS AND CONTINGENCIES
Pamida has employment agreements with three key executive officers which
expire in 2000 and 2001. In addition to a base salary, the agreements provide
for a bonus to be paid if certain Company performance goals are achieved. Also,
in March 1997, the Board of Directors approved a long-term incentive
compensation program in order to enhance retention of certain key members of
management. Payout under such program is tied to continued employment and future
Company common stock price appreciation.
During fiscal 1996, the Company received $967 from Pamida as a
reimbursement for certain tax benefits derived by Pamida. Such remittance, along
with $18 from the exercise of certain stock options, was used by the Company to
redeem Subordinated Promissory Notes as described in Note N, to repay to Pamida
intercompany balances totaling $29, and to pay quarterly dividends on preferred
stock totaling $315.
On February 1, 1998, the Company had standby letters of credit outstanding
totaling $2,379 related to the Company's self-insured retention of worker's
compensation liabilities and future rental payments on a warehouse. Additional
letters of credit outstanding totaling $5,017 were committed for purchases of
merchandise inventory.
P. IMPAIRMENT OF LONG-LIVED ASSETS RECORDED IN FISCAL 1996
During fiscal 1996, weak trends in the retail industry combined with
increasing competition lowered the operating results of the Company. Therefore,
during the fourth quarter of fiscal 1996, management reviewed its expectations
for near- and long-term performance of the Company and revised its income
projections to reflect developing and projected trends, primarily in
comparable-store-sales growth, gross margins, operating expenses and interest
expenses. Consequently, the recoverability of the Company's long-lived assets
was also reassessed.
In the fourth quarter of fiscal 1996, the Company adopted Statement of
Financial Accounting Standards No. 121 Accounting For the Impairment of
Long-Lived Assets and Long-Lived Assets to Be Disposed Of (SFAS 121). This
financial accounting standard requires the Company to perform an analysis of the
recoverability of the net book value of long-lived assets. The Company analyzed
cash flows on an individual store basis to assess recoverability of store level
long-lived assets including allocated goodwill.
As a result of this analysis, impairment was indicated at certain stores,
and a noncash pre-tax charge was recorded as illustrated in the table below. The
impairment losses were based on fair value which was determined through
discounted cash flows for the particular stores utilizing a rate commensurate
with the associated risks. The effect of this accounting change was to increase
the net loss for the year by $24,693, or $4.94 per basic and diluted share.
The Company also analyzed the value of its remaining goodwill and favorable
leasehold interests not impaired under the store-level SFAS 121 analysis using
its historical method under Accounting Principles Board Opinion No. 17 (APB 17)
and determined that such remaining amounts also were impaired. For this analysis
the value of the goodwill and favorable leasehold interests was determined by
projecting aggregate net income and adjusting it by adding back amortization of
intangible assets. With respect to the projections of net income used to
evaluate intangible assets impairment, management made several assumptions in
projecting their best estimate of the results of future operations of the
Company. The most significant assumptions were an estimated remaining useful
life of goodwill of fifteen years, modest annual comparable store sales growth,
gross margin rates consistent with those experienced over the past fiscal year
in the stores not being closed, an annual expense escalation consistent with
recent inflation trends and the ability to refinance debt maturities as they
come due.
These assumptions resulted in aggregate undiscounted adjusted net income
for the fifteen-year forecast period of approximately $5,186, which reflects
aggregate pre-tax interest expense of approximately $398,000 payable in cash and
$86,000 payable "in kind" (PIK). The $5,186 of aggregate adjusted net income for
the fifteen-year forecast period also reflected projected adjusted net losses
for fiscal 1997 of $4,522, which included cash interest expense of $26,242 and
PIK interest of $4,453, and for fiscal 1998 of $2,863, which included cash
interest expense of $26,581 and PIK interest of $5,121. For fiscal 1999, the
Company projected adjusted net income of approximately $967, which included cash
interest expense of approximately $26,581 and PIK interest of $5,889. Due to the
uncertainty of projections beyond 1999, this level of adjusted net income was
assumed to continue for each of the remaining fiscal years in the projection
period. As a result of this evaluation in fiscal 1996, management concluded that
the remaining goodwill and favorable leasehold interests were fully impaired.
Pre-Tax Components of Long-Lived Asset Write-Off As Reflected in the
Statement of Operations for the year ended January 28, 1996:
SFAS APB
121 17 Total
------- ------- -------
Goodwill.......................... $20,607 $49,406 $70,013
Favorable leasehold interests..... 4,245 1,917 6,162
Property, buildings and equipment. 2,376 - 2,376
------- ------- -------
Total............................. $27,228 $51,323 $78,551
======= ======= =======
The goodwill was originally recorded in July 1986 when Pamida Holdings
Corporation acquired Pamida, Inc. through a leveraged buy-out and represented
the excess of the purchase price over the fair value of the net assets acquired.
Goodwill had been amortized on a straight-line basis over a forty-year period
but, due to the trends cited above, its estimated remaining useful life was
adjusted to fifteen years during the fourth quarter of fiscal 1996.
Q. STORE CLOSINGS IN FISCAL 1996
As discussed in Note P above, the Company's operating performance during
fiscal 1996 was below plan. Management's analysis of individual stores'
operations and cash flows resulted in the identification of forty unprofitable
or competitive market stores which did not fit the Company's niche market
strategy. Consequently, a charge was recorded at January 28, 1996 as indicated
below to cover the costs necessary to close these stores. The Company received
positive net cash flow from closing the stores due to cash generated from the
disposition of related inventories. The amounts the Company will ultimately
realize from the disposal of assets or pay on the resolution of liabilities may
differ from the estimated amounts utilized in arriving at the income statement
effect.
Pre-Tax Components of fiscal 1996 Store Closing Costs:
Income
Statement
Effect
--------
Real estate exit costs and write-off of property,
buildings, and equipment........................ $ 11,455
Inventory liquidation............................ 9,080
Professional charges............................. 314
Severance and other costs and fees............... 548
--------
Total............................................ $ 21,397
========
The store closing reserve balance as of January 28, 1996 included amounts
related to real estate, inventory, severance, professional fees and other costs
of closing the forty stores. The liquidation of the closing stores inventory was
completed in the second quarter of fiscal 1997. All known ancillary costs of the
store closings have been paid except those related to the remaining real estate.
During fiscal years 1997 and 1998, the Company negotiated settlements on
twenty-five closed store properties which had been leased, three which had been
subleased, and sold eight closed store properties which had been owned. As of
February 1, 1998, the Company remains liable for lease obligations on seven
closed store properties. The Company anticipates that final disposition of the
remaining obligations will be completed in fiscal 1999 and 2000. There were no
adjustments made during fiscal 1998 and 1997 to the store closing reserve other
than cash inflows and outflows related to the store closings.
The store closing reserve is presented in the balance sheets as follows:
Feb. 1, Feb. 2,
1998 1997
-------- --------
Store closing reserve (short-term)............... $ 1,564 $ 4,521
Amount included in other
long-term liabilities.......................... 1,690 2,190
-------- --------
Total............................................ $ 3,254 $ 6,711
======== ========
R. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of the quarterly results of operations for the
years ended February 1, 1998 and February 2, 1997:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
May 4, August 3, November 2, February 1,
Fiscal 1998 1997 1997 1997 1998 Year
- -------------------------------- ----------- ----------- ----------- ----------- -----------
Sales .......................... $ 144,564 $ 163,217 $ 158,749 $ 190,487 $ 657,017
Gross profit.................... 33,268 41,502 37,854 49,311 161,935
(Loss) income before
extraordinary item............ (5,459) 563 340 7,842 3,286
Extraordinary item.............. - - - 1,735 1,735
Net (loss) income (5,459) 563 340 9,577 5,021
Effect of preferred stock
reclassification.............. - - - 756 756
Less provision for preferred
dividends and discount
amortization.................. (105) (165) (137) - (407)
----------- ----------- ----------- ----------- -----------
Net (loss) income available
for common shares $ (5,564) $ 398 $ 203 $ 10,333 $ 5,370
=========== =========== =========== =========== ===========
Basic (loss) income per share:
(Loss) income before
extraordinary item.......... $ (1.11) $ .08 $ .04 $ 1.03 $ .62
Extraordinary item............ - - - .21 .30
----------- ----------- ----------- ----------- -----------
Basic (loss) income........... $ (1.11) $ .08 $ .04 $ 1.24 $ .92
=========== =========== =========== =========== ===========
Diluted (loss) income per share:
(Loss) income before
extraordinary item.......... $ (1.11) $ .08 $ .04 $ 1.02 $ .62
Extraordinary item............ - - - .21 .29
----------- ----------- ----------- ----------- -----------
Diluted (loss) income......... $ (1.11) $ .08 $ .04 $ 1.23 $ .91
=========== =========== =========== =========== ===========
April 28, July 28, October 27, February 2,
Fiscal 1997 1996 1996 1996 1997 Year
- -------------------------------- ----------- ----------- ----------- ----------- -----------
Sales........................... $ 131,786 $ 155,817 $ 151,980 $ 193,606 $ 633,189
Gross profit.................... 31,575 37,096 36,446 48,973 154,090
Net (loss) income............... (4,742) (1,294) 189 5,051 (796)
Less provision for preferred
dividends and discount
amortization.................. (93) (97) (99) (102) (391)
----------- ----------- ----------- ----------- -----------
Net (loss) income available for
common shares................. $ (4,835) $ (1,391) $ 90 $ 4,949 $ (1,187)
=========== =========== =========== =========== ===========
Basic and diluted (loss)
income per share.............. $ (.97) $ (.28) $ .02 $ .99 $ (.24)
=========== =========== =========== =========== ===========
</TABLE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Pamida Holdings Corporation
Omaha, Nebraska
We have audited the consolidated balance sheets of Pamida Holdings
Corporation and subsidiary as of February 1, 1998 and February 2, 1997, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the years then ended and have issued our report thereon dated
March 5, 1998; such financial statements and report are included in this Annual
Report on Form 10-K. Our audits also included the financial statement schedule
of Pamida Holdings Corporation and subsidiary as of February 1, 1998 and
February 2, 1997, and for each of the years then ended listed in Item 14(a)2.
This financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits. In
our opinion, such financial statement schedule, when considered in relation to
the basic financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Omaha, Nebraska
March 5, 1998
REPORT OF INDEPENDENT ACCOUNTANTS
Our report on the consolidated financial statements of Pamida Holdings
Corporation and Subsidiary for fiscal 1996 is included in this Form 1O-K. In
connection with our audit of such financial statements, we have also audited the
related financial statement Schedule I Condensed Financial Information of
Registrant for such year included in this Form l0-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to he
included therein.
/s/ Coopers & Lybrand L.L.P.
Chicago, Illinois
March 26, 1996
PAMIDA HOLDINGS CORPORATION
(Parent Company Only)
(Dollar amounts in thousands)
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
BALANCE SHEETS - FEBRUARY 1, 1998 AND FEBRUARY 2, 1997
- --------------------------------------------------------------------------------
ASSETS 1998 1997
-------- --------
Current assets:
Refundable income taxes due from subsidiary $ 2,335 $ 855
Investment in subsidiary (50,898) (57,531)
Deferred financing costs - 52
-------- --------
$(48,563) $(56,624)
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accrued interest $ - $ 811
Other accrued expense 160 -
Payable to Pamida, Inc. 516 15
-------- --------
Total current liabilities 676 826
Long-term debt - 27,636
Dividends payable - 342
Other long-term liabilities 3,036 -
Preferred stock subject to mandatory redemption:
16-1/4% senior cumulative preferred stock, $1
par value; 514 shares authorized, 0 and 514
issued and outstanding - 514
14-1/4% junior cumulative preferred stock, $1 par value;
1,627 and 6,986 shares authorized; 0 and 1,627 shares
issued and outstanding; redemption amount of $0 and
$1,627 less unamortized discount - 1,361
Common stockholders' equity:
Common stock, $.01 par value; 25,000,000 and
10,000,000 shares authorized; 5,970,439 and 5,004,942
shares issued and 0 shares issued and outstanding 60 50
Nonvoting common stock, $.01 par value; 4,000,000
and 2,000,000 shares authorized; 3,050,473 and
0 shares issued and outstanding 30 -
Additional paid-in capital 29,895 968
Accumulated deficit (82,260) (88,321)
-------- --------
Total common stockholders' deficit (52,275) (87,303)
-------- --------
$(48,563) $(56,624)
======== ========
See notes to Parent Company Only financial statements.
<TABLE>
<CAPTION>
PAMIDA HOLDINGS CORPORATION
(Parent Company Only)
(Dollar amounts in thousands)
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF COMMON STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Retained
Nonvoting Additional Earnings
Common Common Paid-in (Accumulated
Stock Stock Capital Deficit)
------- ------ --------- ------------
Balance at January 29, 1995............................. $ 50 $ - $ 950 $ 7,876
Net loss.............................................. - - - (94,648)
Amortization of discount on 14-1/4%
junior cumulative preferred......................... - - - (47)
Cash dividends to preferred stockholders.............. - - - (315)
Stock sold under incentive stock option plan.......... - - 18 -
------- ------ --------- ------------
Balance at January 28, 1996............................. 50 - 968 (87,134)
Net loss.............................................. - - - (796)
Amortization of discount on 14-1/4%
junior cumulative preferred......................... - - - (49)
Accrued dividends for preferred stockholders - - - (342)
------- ------ --------- ------------
Balance at February 2, 1997............................. 50 - 968 (88,321)
Net income............................................ - - - 5,712
Amortization of discount on 14-1/4%
junior cumulative preferred......................... - - - (38)
Accrued dividends for preferred stockholders.......... - - - (369)
Reclassification of preferred stock into common stock. 3 - 1,811 756
Payment of notes with common stock.................... 7 30 20,236 -
Gain on payment of notes held by Venture (net of tax). - - 6,880 -
------- ------ --------- ------------
Balance at February 1, 1998............................. $ 60 $ 30 $ 29,895 $ (82,260)
======= ====== ========= ============
See notes to Parent Company Only financial statements.
</TABLE>
PAMIDA HOLDINGS CORPORATION
(Parent Company Only)
(Dollar amount in thousands except for per share data)
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT STATEMENTS OF
OPERATIONS AND RETAINED (DEFICIT) EARNINGS YEARS ENDED FEBRUARY 1, 1998,
FEBRUARY 2, 1997 AND JANUARY 28, 1996
- --------------------------------------------------------------------------------
1998 1997 1996
-------- -------- --------
Equity in income (loss) of subsidiary $ 6,633 $ 3,696 $(92,527)
Expenses:
General and administrative 17 19 33
Interest 3,974 4,473 3,910
-------- -------- --------
3,991 4,492 3,943
-------- -------- --------
Income (loss) before provision for income
taxes and extraordinary item 2,642 (796) (96,470)
Income tax benefit (1,480) - (1,451)
-------- -------- --------
Income (loss) before extraordinary item 4,122 (796) (95,019)
Extraordinary item 1,590 - 371
-------- -------- --------
Net income (loss) 5,712 (796) (94,648)
Effect of preferred stock reclassification 756 - -
Amortization of discount on 14-1/4%
junior cumulative preferred (38) (49) (47)
Cash dividends paid to preferred
stockholders - - (315)
Accrued dividends for
preferred stockholders (369) (342) -
-------- -------- --------
Net income (loss) available for common shares $ 6,061 $ (1,187) $(95,010)
======== ======== ========
Basic income (loss) per share:
Income (loss) before extraordinary item $ .77 $ (.24) $ (19.07)
Extraordinary item .27 - .08
-------- -------- --------
Basic income (loss) $ 1.04 $ (.24) $ (18.99)
======== ======== ========
Diluted income (loss) per share
Income (loss) before extraordinary item $ .76 $ (.24) $ (19.07)
Extraordinary item .27 - .08
-------- -------- --------
Diluted income (loss) $ 1.03 $ (.24) $ (18.99)
======== ======== ========
See notes to Parent Company Only financial statements.
<TABLE>
<CAPTION>
PAMIDA HOLDINGS CORPORATION
(Parent Company Only)
(Dollar amounts in thousands)
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF CASH FLOWS
YEARS ENDED FEBRUARY 1, 1998, FEBRUARY 2, 1997 AND JANUARY 28, 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1998 1997 1996
Cash flows from operating activities: -------- -------- --------
Net income (loss) ................................. $ 5,712 $ (796) $(94,648)
-------- -------- --------
Adjustments to reconcile net income (loss) to
net cash from operating activities:
Equity in (income) loss of subsidiary .......... (6,633) (3,696) 92,527
Noncash interest expense ....................... 3,850 4,313 3,756
Accretion of original issue debt discount ...... 124 160 154
Amortization of intangible assets .............. 8 11 10
Extraordinary item related to retirement of debt (1,590) - (371)
(Increase) decrease in refundable income tax ... (1,480) - (483)
Increase (decrease) in operating liabilities ... 659 8 (7)
-------- -------- --------
Total adjustments ........................... (5,062) 796 95,586
-------- -------- --------
Net cash from operating activities .......... 650 - 938
-------- -------- --------
Cash flows from investing activities:
Dividends received from subsidiary ................ - - -
Cash flows from financing activities:
Fees related to payment of debt and
reclassification of preferred stock .............. (650) - -
Proceeds from sale of stock ....................... - - 18
Principal payments on promissory notes ............ - - -
Payments to redeem subordinated notes ............. - - (641)
Dividends paid to preferred stockholders .......... - - (315)
-------- -------- --------
Net cash from financing activities .......... (650) - (938)
-------- -------- --------
Net change in cash .................................. - - -
Cash at beginning of year ........................... - - -
-------- -------- --------
Cash at end of year ................................. $ - $ - $ -
======== ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the year for interest $ - $ - $ -
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING
ACTIVITY:
Amortization of discount on junior
cumulative preferred stock recorded
as a direct charge to retained earnings $ 38 $ 49 $ 47
Payment of interest in kind by increasing
the principal amount of the notes 3,561 4,141 3,702
See notes to Parent Company Only financial statements.
</TABLE>
PAMIDA HOLDINGS CORPORATION
(Parent Company Only)
(Dollar Amounts In Thousands)
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
NOTES TO FINANCIAL STATEMENTS
A. The Condensed Financial Statements include the Registrant only and reflect
the equity method of accounting for its benefically wned subsidiary,
Pamida, Inc.
B. The registrant files a consolidated U.S. federal tax return with Pamida,
Inc. The Company has a tax sharing agreement with Pamida, Inc. that
provides that taxes will be allocated among the companies based upon the
tax expense or benefit that was derived on a consolidated basis from each
entity's operations. Income tax effects included in these financial
statements are calculated on a stand-alone basis for Pamida Holdings
Corporation. Related to the Company's payment of debt with common stock and
reclassification of preferred stock into common stock which was effective
November 18, 1997, income tax expense allocated to the extraordinary item
totaled $524 and income tax expense charged to stockholders' equity was
$2,512. These amounts are net of a change in the beginning of year
valuation allowance of $1,659.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
The information required by this item has been previously reported in the
Form 8-K Current Report of the registrant dated October 16, 1996.
PART III
The information required by this Part III is incorporated by reference from
the registrant's definitive proxy statement for the 1998 annual meeting of the
registrant's stockholders to be held on May 21, 1998, which involves the
election of directors. Such definitive proxy statement will be filed with the
Securities and Exchange Commission not later than 120 days after the end of the
fiscal year covered by this Form 10-K. However, information concerning the
registrant's executive officers will be omitted from such proxy statement and is
furnished in a separate item captioned "Executive Officers of the Registrant"
included in Part I of this Form 10-K.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) The following documents are filed as a part of this report in Item 8 of
Part II:
1. Financial Statements.
Pamida Holdings Corporation and Subsidiary
- Independent Auditors' Report
- Consolidated Statements of Operations for the Years Ended February
1, 1998, January 2, 1997 and January 28, 1996
- Consolidated Balance Sheets at February 1, 1998 and February 2,
1997
- Consolidated Statements of Common Stockholders' Equity for the Years
Ended February 1, 1998, February 2, 1997 and January 28, 1996
- Consolidated Statements of Cash Flows for the Years Ended February
1, 1998, February 2, 1997 and January 28, 1996
- Notes to Consolidated Financial Statements for the Years Ended
February 1, 1998, February 2, 1997 and January 28, 1996
2. Financial Statement Schedules.
- Independent Auditors' Report on Schedule I
- Schedule I - Condensed Financial Information of Registrant
All other schedules of the registrant for which provision is made in the
applicable accounting regulations of the Securities and Exchange Commission are
not required under the related instructions, are inapplicable or have been
disclosed in the Notes to Consolidated Financial Statements and, therefore, have
been omitted.
3. Exhibits.
3.1 - Restated Certificate of Incorporation of Pamida Holdings
Corporation (March 12, 1998).
(2) 3.2 - Revised By-Laws of Pamida Holdings Corporation.
(2) 4.1 - Form of certificate representing shares of the Common Stock of
Pamida Holdings Corporation.
(6) 4.2 - Indenture dated as of March 15, 1993, among Pamida, Inc. as
Issuer, Pamida Holdings Corporation as Guarantor, and State
Street Bank and Trust Company as Trustee relating to 11 3/4%
Senior Subordinated Notes due 2003 of Pamida, Inc.
(6) 4.3 - Specimen form of 11 3/4% Senior Subordinated Note due 2003 of
Pamida, Inc.
(3) 10.1 - Stock and Note Purchase Agreement dated as of July 29, 1986,
among Pamida Holdings Corporation, Citicorp Venture Capital, Ltd.,
Citicorp Capital Investors, Ltd., and the individual purchasers
who are parties thereto.
(1) 10.2 - Amendment to Stock and Note Purchase Agreement, dated July 31, 1990
(amends Exhibit 10.1).
(1) 10.3 - Second Amendment to Stock and Note Purchase Agreement, dated
August 10, 1990 (amends Exhibit 10.1).
(1) 10.4 - Third Amendment to Stock and Note Purchase Agreement, dated
September 13, 1990 (amends Exhibit 10.1).
(1) 10.5 - Exchange Agreement dated August 10, 1990, among Pamida Holdings
Corporation, Citicorp Venture Capital, Ltd. and Court Square
Capital Limited.
(1) 10.6 - Agreement dated September 13, 1990, among Pamida Holdings
Corporation, Citicorp Venture Capital, Ltd. and Court Square
Capital Limited.
(2) 10.7 - Agreement dated September 20, 1990, among Pamida Holdings
Corporation, Citicorp Venture Capital, Ltd. and Court Square
Capital Limited.
(4) 10.8 - Exchange Agreement dated as of December 1, 1990 between Pamida
Holdings Corporation, Citicorp Venture Capital, Ltd. and Court
Square Capital Limited.
(4) 10.9 - Form of 14.25% Junior Subordinated Promissory Note of Pamida
Holdings Corporation.
(4) 10.10- Form of Indemnification Agreement between Pamida Holdings
Corporation and its officers and directors.
(5) 10.11- Note Amendment Agreement dated as of December 18, 1992, between
Pamida Holdings Corporation and Court Square Capital Limited.
(5) 10.12- Note Amendment Agreement No. 2 dated as of March 1, 1993, between
Pamida Holdings Corporation and Citicorp Investments Inc.
(13) 10.13- Note Amendment Agreement No. 3 dated July 22, 1997, between
Pamida Holdings Corporation and 399 Venture Partners, Inc.
(5) 10.14- Tax-Sharing Agreement dated as of February 2, 1992, among Pamida
Holdings Corporation, Pamida, Inc., Seaway Importing Company,
and Pamida Transportation Company.
(6) 10.15- Loan and Security Agreement dated March 30, 1993, by and among
Congress Financial Corporation (Southwest) and BA Business Credit,
Inc. as Lenders, Congress Financial Corporation (Southwest) as
Agent for the Lenders, and Pamida, Inc. and Seaway Importing
Company as Borrowers.
(9) 10.16- Amendment No. 1 to Loan and Security Agreement, dated January 23,
1995, among Pamida, Inc. and Seaway Importing Company as
Borrowers, Congress Financial Corporation (Southwest) as a
Lender and Agent, and BA Business Credit Inc. as a Lender (amends
Exhibit 10.15).
(10) 10.17- Amendment No. 2 to Loan and Security Agreement, dated January 28,
1996, among Pamida, Inc. and Seaway Importing Company as
Borrowers, Congress Financial Corporation (Southwest) as a
Lender and Agent, and BankAmerica Business Credit as a Lender
(amends Exhibit 10.15).
(11) 10.18- Amendment No. 3 to Loan and Security Agreement among Pamida,
Inc. and Seaway Importing Company, as Borrowers, Congress
Financial Corporation (Southwest) and BankAmerica Business Credit,
Inc., as Lenders, and Congress Financial Corporation (Southwest),
as Agent, dated September 16, 1996 (amends Exhibit 10.15).
(12) 10.19- Amendment No. 4 to Loan and Security Agreement among Pamida,
Inc. and Seaway Importing Company, as Borrowers, Congress
Financial Corporation (Southwest) and BankAmerica Business Credit,
Inc., as Lenders, and Congress Financial Corporation (Southwest),
as Agent, dated January 31, 1997 (amends Exhibit 10.15).
(12) 10.20- Amendment No. 5 to Loan and Security Agreement among Pamida,
Inc. and Seaway Importing Company, as Borrowers, Congress
Financial Corporation (Southwest) and BankAmerica Business Credit,
Inc., as Lenders, and Congress Financial Corporation (Southwest),
as Agent, dated March 17, 1997 (amends Exhibit 10.15).
(14) 10.21- Amendment No. 6 to Loan and Security Agreement among Pamida,
Inc. and Seaway Importing Company, as Borrowers, Congress Financial
Corporation (Southwest) and BankAmerica Business Credit, Inc., as
Lenders, and Congress Financial Corporation (Southwest), as Agent,
dated May 8, 1997 (amends Exhibit 10.15).
(7) 10.22- Pamida Holdings Corporation 1992 Stock Option Plan.
(9) 10.23- Employment Agreement dated September 22, 1995, among Pamida
Holdings Corporation, Pamida, Inc. and Steven S. Fishman.
(11) 10.24- Amendment No. 1 to Employment Agreement among Pamida Holdings
Corporation, Pamida, Inc., and Steven S. Fishman dated August 29,
1996 (amends Exhibit 10.23).
(12) 10.25- Amendment No. 2 to Employment Agreement among Pamida Holdings
Corporation, Pamida, Inc., and Steven S. Fishman dated March 6,
1997 (amends Exhibit 10.23).
10.26- Amendment No. 3 to Employment Agreement among Pamida Holdings
Corporation, Pamida, Inc., and Steven S. Fishman dated May 22,
1997 (amends Exhibit 10.23).
10.27- Amendment No. 4 to Employment Agreement among Pamida Holdings
Corporation, Pamida Inc., and Steven S. Fishman dated March 5, 1998
(amends Exhibit 10.23).
(8) 10.28- Pamida, Inc. 1995 Deferred Compensation Plan.
(12) 10.29- Employment Agreement dated as of March 6, 1997, among Pamida
Holdings Corporation, Pamida, Inc., and Frank A. Washburn.
10.30- Amendment No. 1 to employment Agreement among Pamida Holdings
Corporation, Pamida, Inc., and Frank A. Washburn dated March 5,
1998 (amends Exhibit 10.29).
(12) 10.31- Employment Agreement dated as of March 6, 1997, among Pamida
Holdings Corporation, Pamida, Inc., and George R. Mihalko.
10.32- Amendment No. 1 to Employment Agreement among Pamida Holdings
Corporation, Pamida, Inc., and George R. Mihalko dated March 5,
1998 (amends Exhibit 10.31).
(12) 10.33- Long-Term Incentive Award Agreement dated as of March 6, 1997,
between Pamida, Inc., and Steven S. Fishman.
(12) 10.34- Long-Term Incentive Award Agreement dated as of March 6, 1997,
between Pamida, Inc., and Frank A. Washburn.
(12) 10.35- Long-Term Incentive Award Agreement dated as of March 6, 1997,
between Pamida, Inc., and George R. Mihalko.
(1) 22.1 - Subsidiaries of Pamida Holdings Corporation.
23.1 - Consent of Deloitte & Touche LLP.
23.2 - Consent of Coopers & Lybrand L.L.P.
24.1 - Powers of Attorney
27.1 - Financial Data Schedule (EDGAR filing only)
27.2 - Restated Financial Data Schedule - fiscal years ended January 28,
1996 and February 2, 1997 and the three, six and nine months ended
April 28, 1996, July 28, 1996 and October 27, 1996, respectively.
(EDGAR filing only)
27.3 - Restated Financial Data Schedule - three, six and nine months ended
May 4, 1997, August 3, 1997 and November 2, 1997.
(EDGAR filing only)
- -------------------------
(1) Previously filed as an exhibit to Registration Statement of Pamida Holdings
Corporation on Form S-1 (Registration No. 33-35324) and incorporated herein
by this reference.
(2) Previously filed as an exhibit to Form 10-Q Quarterly Report of Pamida
Holdings Corporation for the period ended October 28, 1990, and
incorporated herein by this reference.
(3) Previously filed as an exhibit to Registration Statement of Pamida, Inc. on
Form S-l (Registration No. 33-10980) and incorporated herein by this
reference.
(4) Previously filed as an exhibit to Form 10-K Annual Report of Pamida
Holdings Corporation for the fiscal year ended February 3, 1991, and
incorporated herein by this reference.
(5) Previously filed as an exhibit to Registration Statement of Pamida, Inc.
and Pamida Holdings Corporation on Form S-1 (Registration No. 33-57990) and
incorporated herein by this reference.
(6) Previously filed as an exhibit to Form 10-Q Quarterly Report of Pamida
Holdings Corporation for the period ended May 2, 1993, and incorporated
herein by this reference.
(7) Previously filed as an exhibit to Form 10-Q Quarterly Report of Pamida
Holdings Corporation for the period ended August 1, 1993, and incorporated
herein by this reference.
(8) Previously filed as an exhibit to Form 10-K Annual Report of Pamida
Holdings Corporation for the fiscal year ended January 29, 1995, and
incorporated herein by this reference.
(9) Previously filed as an exhibit to Form 10-Q Quarterly Report of Pamida
Holdings Corporation for the period ended October 29, 1995, and
incorporated herein by this reference.
(10) Previously filed as an exhibit to Form 10-K Annual Report of Pamida
Holdings Corporation for the fiscal year ended January 28, 1996, and
incorporated herein by this reference.
(11) Previously filed as an exhibit to Form 10-Q Quarterly Report of Pamida
Holdings Corporation for the period ended October 27, 1996, and
incorporated herein by this reference.
(12) Previously filed as an exhibit to Form 10-K Annual Report of Pamida
Holdings Corporation for the fiscal year ended February 2, 1997, and
incorporated herein by this reference.
(13) Previously filed as an exhibit to Form 8-K Current Report of Pamida
Holdings Corporation (Date of Report: July 22, 1997) and incorporated
herein by this reference.
(14) Previously filed as an exhibit to Form 10-Q Quarterly Report of Pamida
Holdings Corporation for the period ended May 4, 1997, and incorporated
herein by this reference.
* * *
(b) A report on Form 8-K was filed during the last quarter of the period
covered by this report. Such report had a Date of Report of November
18, 1997, and related to Item 5, Other Events. No financial statements
were filed with such report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: April 20, 1998 PAMIDA HOLDINGS CORPORATION
By: /s/ Steven S. Fishman
Steven S. Fishman, Chairman
of the Board, President, and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/ Steven S. Fishman April 20, 1998
- ----------------------
Steven S. Fishman Chairman of the Board,
President, Chief Executive
Officer and Director
/s/ George R. Mihalko April 20, 1998
- ----------------------
George R. Mihalko Senior Vice President,
Chief Financial Officer
and Treasurer
/s/ Todd D. Weyhrich April 20, 1998
- ----------------------
Todd D. Weyhrich Vice President,
Controller and Principal
Accounting Officer
/s/ Frank A. Washburn April 20, 1998
- ----------------------
Frank A. Washburn Director
* April 20, 1998
- ----------------------
L. David Callaway, III Director
* April 20, 1998
- ----------------------
Stuyvesant P. Comfort Director
* April 20, 1998
- ----------------------
M. Saleem Muqaddam Director
* April 20, 1998
- ----------------------
Peter J. Sodini Director
* By:/s/ George R. Mihalko
George R. Mihalko,
Attorney-in-Fact
PAMIDA HOLDINGS CORPORATION
FORM 10-K -- FEBRUARY 2, 1997
EXHIBIT INDEX
Exhibit # Description
- ------------------==============================================================
Restated Certificate of Incorporation of Pamida
3.1 Holdings Corporation, as amended.
- ------------------==============================================================
(2) 3.2 Revised By-Laws of Pamida Holdings Corporation.
- ------------------==============================================================
(2) 4.1 Form of certificate representing shares of the Common
Stock of Pamida Holdings Corporation.
- ------------------==============================================================
(6) 4.2 Indenture dated as of March 15, 1993, among Pamida,
Inc. as Issuer, Pamida Holdings Corporation as
Guarantor, and State Street Bank and Trust Company as
Trustee relating to 11 3/4% Senior Subordinated Notes
due 2003 of Pamida, Inc.
- ------------------==============================================================
(6) 4.3 Specimen form of 11 3/4% Senior Subordinated Note due
2003 of Pamida, Inc.
- ------------------==============================================================
(3) 10.1 Stock and Note Purchase Agreement dated as of July 29,
1986, among Pamida Holdings Corporation, Citicorp
Venture Capital, Ltd., Citicorp Capital Investors,
Ltd., and the individual purchasers who are parties
thereto.
- ------------------==============================================================
(1) 10.2 Amendment to Stock and Note Purchase Agreement, dated
July 31, 1990 (amends Exhibit 10.1).
- ------------------==============================================================
(1) 10.3 Second Amendment to Stock and Note Purchase Agreement,
dated August 10, 1990 (amends Exhibit 10.1).
- ------------------==============================================================
(1) 10.4 Third Amendment to Stock and Note Purchase Agreement,
dated September 13, 1990 (amends Exhibit 10.1).
- ------------------==============================================================
(1) 10.5 Exchange Agreement dated August 10, 1990, among Pamida
Holdings Corporation, Citicorp Venture Capital, Ltd.
and Court Square Capital Limited.
- ------------------==============================================================
(1) 10.6 Agreement dated September 13, 1990, among Pamida
Holdings Corporation, Citicorp Venture Capital, Ltd.
and Court Square Capital Limited.
- ------------------==============================================================
(2) 10.7 Agreement dated September 20, 1990, among Pamida
Holdings Corporation, Citicorp Venture Capital, Ltd.
and Court Square Capital Limited.
- ------------------==============================================================
(4) 10.8 Exchange Agreement dated as of December 1, 1990
between Pamida Holdings Corporation, Citicorp Venture
Capital, Ltd. and Court Square Capital Limited.
- ------------------==============================================================
(4) 10.9 Form of 14.25% Junior Subordinated Promissory Note of
Pamida Holdings Corporation.
- ------------------==============================================================
(4) 10.10 Form of Indemnification Agreement between Pamida
Holdings Corporation and its officers and directors.
- ------------------==============================================================
(5) 10.11 Note Amendment Agreement dated as of December 18,
1992, between Pamida Holdings Corporation and Court
Square Capital Limited.
- ------------------==============================================================
(5) 10.12 Note Amendment Agreement No. 2 dated as of March 1,
1993, between Pamida Holdings Corporation and Citicorp
Investments Inc.
- ------------------==============================================================
(13) 10.13 Note Amendment Agreement No. 3 dated July 22, 1997,
between Pamida Holdings Corporation and 399 Venture
Partners, Inc.
- ------------------==============================================================
(5) 10.14 Tax-Sharing Agreement dated as of February 2, 1992,
among Pamida Holdings Corporation, Pamida, Inc.,
Seaway Importing company, and Pamida Transportation
Company.
- ------------------==============================================================
(6) 10.15 Loan and Security Agreement dated March 30, 1993, by
and among Congress Financial Corporation (Southwest)
and BA Business Credit, Inc. as Lenders, Congress
Financial Corporation (Southwest) as Agent for the
Lenders, and Pamida, Inc. and Seaway Importing Company
as Borrowers.
- ------------------==============================================================
(9) 10.16 Amendment No. 1 to Loan and Security Agreement, dated
January 23, 1995, among Pamida, Inc. and Seaway
Importing Company as Borrowers, Congress Financial
Corporation (Southwest) as a Lender and Agent, and BA
Business Credit Inc. as a Lender (amends Exhibit 10.15).
- ------------------==============================================================
(10) 10.17 Amendment No. 2 to Loan and Security Agreement, dated
January 28, 1996, among Pamida, Inc. and Seaway
Importing Company as Borrowers, Congress Financial
Corporation (Southwest) as a Lender and Agent, and
BankAmerica Business Credit as a Lender (amends
Exhibit 10.15).
- ------------------==============================================================
(11) 10.18 Amendment No. 3 to Loan and Security Agreement among
Pamida, Inc. and Seaway Importing Company, as
Borrowers, Congress Financial Corporation (Southwest)
and BankAmerica Business Credit, Inc., as Lenders, and
Congress Financial Corporation (Southwest), as Agent,
dated September 16, 1996 (amends Exhibit 10.15).
- ------------------==============================================================
(12) 10.19 Amendment No. 4 to Loan and Security Agreement among
Pamida, Inc. and Seaway Importing Company, as
Borrowers, Congress Financial Corporation (Southwest)
and BankAmerica Business Credit, Inc., as Lenders, and
Congress Financial Corporation (Southwest), as Agent,
dated January 31, 1997 (amends Exhibit 10.15).
- ------------------==============================================================
(12) 10.20 Amendment No. 5 to Loan and Security Agreement among
Pamida, Inc. and Seaway Importing Company, as
Borrowers, Congress Financial Corporation (Southwest)
and BankAmerica Business Credit, Inc., as Lenders, and
Congress Financial Corporation (Southwest), as Agent,
dated March 17, 1997 (amends Exhibit 10.15).
- ------------------==============================================================
(14) 10.21 Amendment No. 6 to Loan and Security Agreement among
Pamida, Inc. and Seaway Importing Company, as
Borrowers, Congress Financial Corporation (Southwest)
and BankAmerica Business Credit, Inc., as Lenders, and
Congress Financial Corporation (Southwest) as Agent,
dated May 8, 1997 (amends Exhibit 10.15).
- ------------------==============================================================
(7) 10.22 Pamida Holdings Corporation 1992 Stock Option Plan.
- ------------------==============================================================
(9) 10.23 Employment Agreement dated September 22, 1995, among
Pamida Holdings Corporation, Pamida, Inc. and
Steven S. Fishman.
- ------------------==============================================================
(11) 10.24 Amendment No. 1 to Employment Agreement among Pamida
Holdings Corporation, Pamida, Inc., and Steven S.
Fishman dated August 29, 1996 (amends Exhibit 10.23).
- ------------------==============================================================
(12) 10.25 Amendment No. 2 to Employment Agreement among Pamida
Holdings Corporation, Pamida, Inc., and Steven S.
Fishman dated March 6, 1997 (amends Exhibit 10.23).
- ------------------==============================================================
10.26 Amendment No. 3 to Employment Agreement among Pamida
Holdings Corporation, Pamida, Inc., and Steven S.
Fishman dated May 22, 1997 (amends Exhibit 10.23).
- ------------------==============================================================
10.27 Amendment No. 4 to Employment Agreement amount Pamida
Holdings Corporation, Pamida Inc., and Steven S.
Fishman dated March 5, 1998 (amends Exhibit 10.23).
- ------------------==============================================================
(8) 10.28 Pamida, Inc., 1995 Deferred Compensation Plan.
- ------------------==============================================================
(12) 10.29 Employment Agreement dated as of March 6, 1997, among
Pamida Holdings Corporation, Pamida, Inc., and Frank
A. Washburn.
- ------------------==============================================================
10.30 Amendment No. 1 to Employment Agreement among Pamida
Holdings Corporation, Pamida, Inc., and Frank A.
Washburn dated March 5, 1998 (amends Exhibit 10.29)
- ------------------==============================================================
(12) 10.31 Employment Agreement dated as of March 6, 1997, among
Pamida Holdings Corporation, Pamida, Inc., and George
R. Mihalko.
- ------------------==============================================================
10.32 Amendment No. 1 to Employment Agreement among Pamida
Holdings Corporation, Pamida, Inc., and George R.
Mihalko dated March 5, 1998 (amends Exhibit 10.31).
- ------------------==============================================================
(12) 10.33 Long-Term Incentive Award Agreement dated as of March
6, 1997, between Pamida, Inc. and, Steven S. Fishman.
- ------------------==============================================================
(12) 10.34 Long-Term Incentive Award Agreement dated as of March
6, 1997, between Pamida, Inc., and Frank A. Washburn.
- ------------------==============================================================
(12) 10.35 Long-Term Incentive Award Agreement dated as of March
6, 1997, between Pamida, Inc., and George R. Mihalko.
- ------------------==============================================================
(1) 22.1 Subsidiaries of Pamida Holdings Corporation.
- ------------------==============================================================
23.1 Consent of Deloitte & Touche LLP.
- ------------------==============================================================
23.2 Consent of Coopers & Lybrand L.L.P.
- ------------------==============================================================
24.1 Powers of Attorney
- ------------------==============================================================
27.1 Financial Data Schedule (EDGAR filing only)
- ------------------==============================================================
27.2 Restated Financial Data Schedule - fiscal years ended
January 28, 1996 and February 2, 1997 and the three, six and
nine months ended April 28, 1996, July 28, 1996 and
October 27, 1996, respectively. (EDGAR filing only)
- ------------------==============================================================
27.3 Restated Financial Data Schedule - three, six and nine months
ended May 4, 1997, August 3, 1997 and November 2, 1997.
(EDGAR filing only)
- ------------------==============================================================
- -------------------------
(1) Previously filed as an exhibit to Registration Statement of Pamida Holdings
Corporation on Form S-1 (Registration No. 33-35324) and incorporated herein
by this reference.
(2) Previously filed as an exhibit to Form 10-Q Quarterly Report of Pamida
Holdings Corporation for the period ended October 28, 1990, and
incorporated herein by this reference.
(3) Previously filed as an exhibit to Registration Statement of Pamida, Inc. on
Form S-l (Registration No. 33-10980) and incorporated herein by this
reference.
(4) Previously filed as an exhibit to Form 10-K Annual Report of Pamida
Holdings Corporation for the fiscal year ended February 3, 1991, and
incorporated herein by this reference.
(5) Previously filed as an exhibit to Registration Statement of Pamida, Inc.
and Pamida Holdings Corporation on Form S-1 (Registration No. 33-57990) and
incorporated herein by this reference.
(6) Previously filed as an exhibit to Form 10-Q Quarterly Report of Pamida
Holdings Corporation for the period ended May 2, 1993, and incorporated
herein by this reference.
(7) Previously filed as an exhibit to Form 10-Q Quarterly Report of Pamida
Holdings Corporation for the period ended August 1, 1993, and incorporated
herein by this reference.
(8) Previously filed as an exhibit to Form 10-K Annual Report of Pamida
Holdings Corporation for the fiscal year ended January 29, 1995, and
incorporated herein by this reference.
(9) Previously filed as an exhibit to Form 10-Q Quarterly Report of Pamida
Holdings Corporation for the period ended October 29, 1995, and
incorporated herein by this reference.
(10) Previously filed as an exhibit to Form 10-K Annual Report of Pamida
Holdings Corporation for the fiscal year ended January 28, 1996, and
incorporated herein by this reference.
(11) Previously filed as an exhibit to Form 10-Q Quarterly Report of Pamida
Holdings Corporation for the period ended October 27, 1996, and
incorporated herein by this reference.
(12) Previously filed as an exhibit to Form 10-K Annual Report of Pamida
Holdings Corporation for the fiscal year ended February 2, 1997, and
incorporated herein by this reference.
(13) Previously filed as an exhibit to Form 8-K Current Report of Pamida
Holdings Corporation (Date of Report: July 22, 1997) and incorporated
herein by this reference.
(14) Previously filed as an exhibit to Form 10-Q Quarterly Report of Pamida
Holdings Corporation for the period ended May 4, 1997, and incorporated
herein by this reference.
RESTATED CERTIFICATE OF INCORPORATION
OF
PAMIDA HOLDINGS CORPORATION
Pamida Holdings Corporation (the "Corporation"), a corporation organized
and existing under the General Corporation Law of the State of Delaware, hereby
certifies as follows:
1. The present name of the Corporation is Pamida Holdings Corporation. The
Corporation was originally incorporated under such name, and the original
Certificate of Incorporation of the Corporation was filed with the Secretary of
State of the State of Delaware on April 18, 1986.
2. Pursuant to Section 245 of the General Corporation Law of the State of
Delaware, this Restated Certificate of Incorporation only restates and
integrates and does not further amend the provisions of the Certificate of
Incorporation of the Corporation as heretofore amended or supplemented, and
there is no discrepancy between those provisions and the provisions of this
Restated Certificate of Incorporation.
3. The Certificate of Incorporation of the Corporation as heretofore
amended or supplemented hereby is restated so as to read in its entirety as
follows:
ARTICLE FIRST
The name of the corporation is Pamida Holdings Corporation.
ARTICLE SECOND
The address of the corporation's registered office in the State of Delaware
is 1209 Orange Street, in the City of Wilmington, County of New Castle. The name
of its registered agent at such address is The Corporation Trust Company.
ARTICLE THIRD
The nature of the business or purposes to be conducted or promoted is to
engage in any lawful act or activity for which corporations may be organized
under the Delaware General Corporation Law.
ARTICLE FOURTH
4.1 GENERAL
The total number of shares of stock which the corporation has authority to
issue is 29,002,141 consisting of:
(i) 514 shares of 16.25% Senior Cumulative Preferred Stock,
par value $1.00 per share (the "Senior Preferred");
(ii) 1,627 shares of 14.25% Junior Cumulative Preferred Stock, par value
$1.00 per share (the "Junior Preferred");
(iii)25,000,000 shares of Common Stock, par value $.01 per
share (the "Common Stock"); and
(iv) 4,000,000 shares of Nonvoting Common Stock, par value $.01 per share
(the "Nonvoting Common Stock").
4.2 RECLASSIFICATION OF PREFERRED STOCK
Upon the effectiveness of this Certificate of Amendment of the Restated
Certificate of Incorporation of the corporation (the "Effective Date"), each
outstanding share of Senior Preferred and each outstanding share of Junior
Preferred shall be changed and reclassified, without any other action being
required on the part of the respective holders thereof, into the number of
shares of Common Stock of the corporation calculated as follows: The number of
shares of Common Stock to be issued for the outstanding shares of Senior
Preferred and Junior Preferred held by each holder thereof shall be equal to the
Liquidation Value of such holder's shares of Senior Preferred and Junior
Preferred divided by nine (9) and rounded up to the next whole number. The
"Liquidation Value" of each share of Senior Preferred or Junior Preferred shall
mean the Liquidation Value as determined pursuant to the terms of Section 4.2 of
Article Fourth of the Restated Certificate of Incorporation of the corporation
as in effect immediately prior to the Effective Date plus any unpaid dividends
not included in the Liquidation Value accrued from the most recent Dividend
Reference Date (as such term is defined in the Restated Certificate of
Incorporation of the corporation as in effect immediately prior to the Effective
Date) to the close of business on the Effective Date.
At and after the Effective Date, holders of shares of Senior Preferred and
Junior Preferred, upon surrender of a certificate or certificates for such
shares to the corporation, shall be entitled to receive in replacement thereof a
certificate representing the number of shares of Common Stock of the corporation
into which the aggregate number of shares of Senior Preferred or Junior
Preferred represented by the certificate or certificates so surrendered shall
have been changed and reclassified pursuant to the preceding paragraph of this
Section 4.2. From and after the Effective Date, until surrendered and replaced
in accordance with this paragraph, each such certificate representing shares of
Senior Preferred or Junior Preferred shall be deemed for all corporate purposes
to represent the number of shares of Common Stock of the corporation into which
such shares of Senior Preferred or Junior Preferred shall have been changed and
reclassified pursuant to the preceding paragraph of this Section 4.2; provided,
however, that the rights of the holders of such certificates representing shares
of Senior Preferred or Junior Preferred (i) to vote and (ii) to receive
dividends and distributions, if any, payable to holders of Common Stock of the
corporation shall be governed by the following provisions of this paragraph.
After the Effective Date, no holder of shares of Senior Preferred or Junior
Preferred shall have the right to vote on any matter submitted to a vote of the
holders of Common Stock of the corporation until the corporation, in accordance
with the provisions of this paragraph, has issued to such holder a certificate
for the shares of Common Stock of the corporation into which such shares of
Senior Preferred or Junior Preferred shall have been changed and reclassified
pursuant to the preceding paragraph of this Section 4.2. Unless and until the
certificate or certificates representing shares of Senior Preferred or Junior
Preferred have been surrendered to the corporation as contemplated in this
paragraph, no dividends or other distributions payable to holders of Common
Stock of the corporation as of a record date at or after the Effective Date
shall be paid to any holder of such certificate or certificates. Subject to the
effect of unclaimed property, escheat, and other applicable laws, after the
surrender of any such certificate for shares of Senior Preferred or Junior
Preferred, there shall be paid to the record holder of the shares of Common
Stock of the corporation issued in replacement of such certificate, without
interest, (i) the amount of dividends or other distributions with a record date
at or after the Effective Date but prior to such surrender theretofore paid with
respect to such shares of Common Stock of the corporation and (ii) on the
appropriate payment date, the amount of dividends or other distributions with a
record date at or after the Effective Date but prior to such surrender and a
payment date subsequent to such surrender payable with respect to such shares of
Common Stock of the corporation. From and after the Effective Date, the stock
transfer books of the corporation with respect to the Senior Preferred and the
Junior Preferred shall be closed, and no transfer of any of such shares
thereafter shall be made. If, after the Effective Date, certificates for shares
of Senior Preferred or Junior Preferred are presented to the corporation for
transfer, then such certificates shall be cancelled and replaced by certificates
issued in the name of the transferee representing the appropriate number of
shares of Common Stock of the corporation as provided in this paragraph.
4.3 COMMON STOCK AND NONVOTING COMMON STOCK
Except as otherwise provided in this Section 4.3 or as otherwise required
by applicable law, all shares of Common Stock and Nonvoting Common Stock shall
be identical in all respects and shall entitle the holders thereof to the same
rights and privileges, subject to the same qualifications, limitations, and
restrictions.
Part 1. VOTING RIGHTS.
Except as otherwise provided in this Section 4.3 or in ARTICLE ELEVENTH or
as otherwise required by applicable law, the holders of Common Stock shall be
entitled to one vote per share on all matters to be voted on by the
corporation's stockholders, and the holders of Nonvoting Common Stock shall have
no right to vote on any matters to be voted on by the corporation's
stockholders; provided, that the holders of Nonvoting Common Stock shall have
the right to vote as a separate class on any merger or consolidation of the
corporation with or into another entity or entities, or any recapitalization or
reorganization, in which shares of Nonvoting Common Stock would receive or be
exchanged for consideration different on a per share basis from the
consideration received with respect to or in exchange for shares of Common Stock
or would otherwise be treated differently from shares of Common Stock, except
that shares of Nonvoting Common Stock may, without such a separate class vote,
receive or be exchanged for non-voting securities which are otherwise identical
on a per share basis in amount and form to the voting securities received with
respect to or in exchange for the Common Stock so long as (i) such non-voting
securities are convertible into voting securities on the same terms as Nonvoting
Common Stock is convertible into Common Stock under Part 4 of this Section 4.3
and (ii) all other consideration is equal on a per share basis.
Part 2. DIVIDENDS
As and when dividends are declared or paid thereon, whether in cash,
property, or securities of the corporation, the holders of Common Stock and the
holders of Nonvoting Common Stock shall be entitled to participate in such
dividends ratably on a per share basis; provided, that (i) if dividends are
declared which are payable in shares of Common Stock or Nonvoting Common Stock,
then dividends shall be declared which are payable at the same rate on both
classes of stock, the dividends payable in shares of Common Stock shall be
payable to holders of Common Stock, and the dividends payable in shares of
Nonvoting Common Stock shall be payable to holders of Nonvoting Common Stock and
(ii) if the dividends consist of other voting securities of the corporation, the
corporation shall make available to each holder of Nonvoting Common Stock, at
such holder's request, dividends consisting of non-voting securities of the
corporation which are otherwise identical to such voting securities and which
are convertible into or exchangeable for such voting securities on the same
terms as Nonvoting Common Stock is convertible into Common Stock under Part 4 of
this Section 4.3.
Part 3. LIQUIDATION.
Except as otherwise provided by applicable law or by the Restated
Certificate of Incorporation of the corporation or any amendments thereto, in
the event of any liquidation, dissolution, or winding up of the corporation,
whether voluntary or involuntary, the holders of Common Stock and the holders of
Nonvoting Common Stock shall be entitled to share, ratably according to the
number of shares of Common Stock and Nonvoting Common Stock held by them, in all
remaining assets of the corporation available for distribution to its
stockholders.
Part 4. CONVERSION.
4A.CONVERSION OF NONVOTING COMMON STOCK.
Each holder of shares of Nonvoting Common Stock shall be entitled to
convert into the same number of shares of Common Stock any or all of such
holder's shares of Nonvoting Common Stock if (i) such conversion would not have
the effect of causing such holder (or a group acting in concert as a partnership
or other group of which such holder is a member) to become the beneficial owner
(within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as
amended) of securities of the corporation representing 30% or more of the
combined voting power of the outstanding securities of the corporation
ordinarily (and apart from rights arising under special circumstances) having
the right to vote in the election of directors (hereinafter, a "30% Holder");
provided, however, that, notwithstanding the foregoing provisions of this clause
(i), if immediately prior to a transfer of shares of Nonvoting Common Stock to a
transferee holder, the transferor of such shares would have been a 30% Holder if
its holdings of Nonvoting Common Stock were deemed converted into shares of
Common Stock, then the transferee holder of such shares of Nonvoting Common
Stock shall not have the right to convert such shares of Nonvoting Common Stock
into shares of Common Stock until the sixty-first day after the date of the
transfer, or (ii) the 11 3/4% Senior Subordinated Notes due 2003 of Pamida,
Inc., a Delaware corporation (the "Senior Subordinated Notes") are not
outstanding and have not been replaced with a debt issue with comparable
provisions requiring redemption or otherwise imposing requirements or
restrictions on the corporation or the issuer of such replacement debt issue in
the event a person or group becomes a 30% Holder. For purposes of this Part 4, a
"person" shall include any natural person and any corporation, partnership,
joint venture, trust, unincorporated organization, or other entity or
organization.
4B. CONVERSION PROCEDURE.
(i) Each conversion of shares of Nonvoting Common Stock into shares of
Common Stock pursuant to Part 4A above shall be effected by the surrender of the
certificate or certificates representing the shares to be converted at the
principal office of the corporation at any time during normal business hours,
together with a written notice by the holder of such shares of Nonvoting Common
Stock stating that such holder desires to convert the shares, or a stated number
of the shares, of Nonvoting Common Stock represented by such certificate or
certificates into shares of Common Stock. Each conversion shall be deemed to
have been effected as of the close of business on the date on which such
certificate or certificates have been surrendered and such notice has been
received, and at such time the rights of the holder of the converted shares of
Nonvoting Common Stock as such holder shall cease and the person or persons in
whose name or names the certificate or certificates for shares of Common Stock
are to be issued upon such conversion shall be deemed to have become the holder
or holders of record of the shares of Common Stock represented thereby.
(ii) Promptly after the surrender of such certificates and the receipt of
such written notice, the corporation shall issue and deliver in accordance with
the surrendering holder's instructions (a) the certificate or certificates for
the shares of Common Stock issuable upon such conversion and (b) a certificate
representing any shares of Nonvoting Common Stock which were represented by the
certificate or certificates surrendered to the corporation in connection with
such conversion but which were not converted.
(iii) The issuance of certificates for shares of Common Stock upon
conversion of shares of Nonvoting Common Stock will be made without charge to
the holders of such shares for any issuance tax in respect thereof or other cost
incurred by the corporation in connection with such conversion and the related
issuance of shares of Common Stock.
(iv) The corporation at all times shall reserve and keep available out of
its authorized but unissued shares of Common Stock, solely for the purpose of
issuance upon the conversion of shares of Nonvoting Common Stock, such number of
shares of Common Stock as may be issuable upon the conversion of all outstanding
shares of Nonvoting Common Stock. All shares of Common Stock which are so
issuable shall, when issued, be duly and validly issued, fully paid and
nonassessable, and free from all taxes, liens, and charges. The corporation
shall take all such actions as may be necessary to assure that all such shares
of Common Stock may be so issued without violation of any applicable law or
governmental regulation or any requirements of any domestic securities exchange
upon which shares of Common Stock may be listed (except for official notice of
issuance which will be immediately transmitted by the corporation upon
issuance).
(v) The corporation shall not close its books against the transfer of
shares of Nonvoting Common Stock or shares of Common Stock issued or issuable
upon conversion of shares of Nonvoting Common Stock in any manner which would
interfere with the timely conversion of shares of Nonvoting Common Stock.
(vi) If the corporation in any manner subdivides or combines the
outstanding shares of Common Stock or Nonvoting Common Stock, then the
outstanding shares of the other of such classes of stock shall be
proportionately subdivided or combined in a similar manner.
Part 5. AMENDMENT AND WAIVER.
No amendment or waiver of any provision of this Section 4.3 shall be
effective without the prior approval of the holders of a majority of the then
outstanding shares of Nonvoting Common Stock voting as a separate class.
ARTICLE FIFTH
The corporation shall indemnify all officers and directors of the
corporation to the fullest extent permitted by the Delaware General Corporation
Law, as amended from time to time. To the fullest extent permitted by the
Delaware General Corporation Law as it now exists or may hereafter be amended,
no director of the corporation shall be liable to the corporation or its
stockholders for monetary damages arising from a breach of fiduciary duty owed
to the corporation.
ARTICLE SIXTH
The corporation is to have perpetual existence.
ARTICLE SEVENTH
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors of the corporation is expressly authorized to make, alter
or repeal the by-laws of the corporation.
ARTICLE EIGHTH
Meetings of stockholders may be held within or without the State of
Delaware, as the by-laws of the corporation may provide. The books of the
corporation may be kept outside the State of Delaware at such place or places as
may be designated from time to time by the Board of Directors or in the by-laws
of the corporation.
ARTICLE NINTH
The corporation reserves the right to amend, alter, change or repeal any
provision contained in this Restated Certificate of Incorporation in the manner
now or hereafter prescribed herein and by the laws of the State of Delaware, and
all rights conferred upon stockholders herein are granted subject to this
reservation.
ARTICLE TENTH
This Restated Certificate of Incorporation supersedes and takes the place
of the heretofore existing Certificate of Incorporation of this corporation and
any amendments and supplements thereto.
ARTICLE ELEVENTH
The provisions of this ARTICLE ELEVENTH shall become operative on the
effective date of the first registration statement filed by the corporation
under the Securities Act of 1933, as amended, relating to the public offering of
Common Stock of the corporation.
11.1 SECTION 203 NOT APPLICABLE
The corporation shall not be governed by the provisions of Section 203 of
the General Corporation Law of the State of Delaware.
11.2 SPECIAL MEETINGS OF STOCKHOLDERS; VOTING
Special meetings of stockholders of the corporation may be called by the
Board of Directors, such Person or Persons as may be authorized to call a
special meeting by the corporation's by-laws, or by the holders of 20% (twenty
percent) of the corporation's Voting Shares. The holders of a majority of the
Voting Shares shall constitute a quorum at all meetings of stockholders. When a
quorum is present or represented by proxy at any meeting, the vote of the
holders of a majority of the Voting Shares present in person or represented by
proxy and voting shall decide any question brought before the meeting, except as
otherwise provided by law or the provisions of ARTICLE FOURTH or this ARTICLE
ELEVENTH. All Voting Shares shall be entitled to one vote per share on any
matter submitted to a vote of stockholders, except as otherwise provided by the
provisions of this ARTICLE ELEVENTH. All proxies, ballots, votes, and
tabulations that identify the particular vote of holders of Voting Shares shall
be confidential and shall not be disclosed except (i) to independent election
inspectors appointed by the corporation, who shall not be directors, officers,
or employees of the corporation, (ii) as required by law, or (iii) when
expressly requested by the voting stockholder.
11.3 ACTION BY STOCKHOLDERS IN LIEU OF A MEETING
Any action required by Delaware law to be taken at any annual or special
meeting of stockholders of the corporation, or any action which may be taken at
any annual or special meeting of such stockholders, may be taken without a
meeting, without prior notice and without a vote, if a consent or consents in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voting and shall be delivered to the
corporation by delivery to its registered office in Delaware, the corporation's
principal place of business, or an officer or agent of the corporation having
custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested.
11.4 ELECTION OF BOARD OF DIRECTORS
(a) Annual Election. Directors of the corporation shall not be divided into
classes, and the term of each director shall expire at the annual meeting of
stockholders.
(b) Cumulative Voting. At all elections of directors of the corporation,
each holder of Voting Shares or of any class or classes or of a series or series
thereof shall be entitled to as many votes as shall equal the number of votes
which (except for this provision as to cumulative voting) he would be entitled
to cast for the election of directors with respect to his Voting Shares
multiplied by the number of directors to be elected by him, and he may cast all
of such votes for a single director or may distribute them among the number to
be voted for, or for any two or more of them, as he may see fit.
(c) Vacancies. Vacancies on the corporation's Board of Directors and newly
created directorships shall not be filled by the corporation's board of
directors for a period of 90 days commencing on the effective date of such
vacancy or new directorship, and, during such 90-day period, the holders of
Voting Shares may fill such vacancy or newly created directorship.
11.5 STOCK ISSUANCES
(a) Vote Required for Certain Sales of Securities. Except as set forth in
subsection (b) of this Section 11.5, in addition to any affirmative vote of
stockholders required by any provision of law, the Restated Certificate of
Incorporation or by-laws of the corporation, or any policy adopted by the Board
of Directors of the corporation, the corporation shall not, and shall not permit
any Subsidiary to, on or after the date the corporation's stockholders adopt
this Section 11.5, issue or sell any equity security of the corporation or any
Subsidiary to any Person who would be, after giving effect to such issuance or
sale, an Interested Person, without the affirmative vote of the holders of
Voting Shares which represent at least a majority of the aggregate voting power
of all outstanding Voting Shares, excluding Voting Shares beneficially owned by
such Person, voting together as a single class. Such affirmative vote shall be
required notwithstanding the fact that no vote may be required, or that a lesser
percentage may be specified, by law or any agreement with any national
securities exchange or otherwise.
(b) When a Vote is Not Required. The provisions of subsection (a) of this
Section 11.5 shall not be applicable with respect to any issuance of shares of
Nonvoting Common Stock and also shall not be applicable with respect to any
issuance of any shares of stock (i) pursuant to any stock split-up or division
effected by the corporation on a pro rata basis to all stockholders, (ii)
pursuant to any dividend on shares of the corporation's stock that is paid by
the corporation in shares of capital stock of the corporation or any Subsidiary
on a pro rata basis to all stockholders, (iii) pursuant to any dividend
reinvestment plan adopted by the corporation in which all stockholders are
eligible to participate, or (iv) upon the exercise of rights or options of a
type referred to in subsection (b) of Section 11.7.
11.6 RESTRICTION OF GREENMAIL
(a) Vote Required for Certain Acquisitions of Securities. Except as set
forth in subsection (b) of this Section 11.6, in addition to any affirmative
vote of stockholders required by any provision of law, the Restated Certificate
of Incorporation or by-laws of the corporation, or any policy adopted by the
Board of Directors of the corporation, the corporation shall not, and shall not
permit any Subsidiary to, knowingly effect any direct or indirect purchase or
other acquisition (including, without limitation, redemptions and exchanges) of
any equity security of a class of securities issued by the corporation which is
registered pursuant to Section 12 of the Exchange Act, at a price which is in
excess of the Market Price of such equity security on the date that the
understanding to effect such transaction is entered into by the corporation
(whether or not such transaction is concluded or a written agreement relating to
such transaction is executed on such date, such date to be conclusively
established by determination of the Board of Directors), from any Interested
Person, without the affirmative vote of the holders of Voting Shares which
represent at least a majority of the aggregate voting power of all outstanding
Voting Shares, excluding Voting Shares beneficially owned by such Interested
Person, voting together as a single class. Such affirmative vote shall be
required notwithstanding the fact that no vote may be required, or that a lesser
percentage may be specified, by law or any agreement with any Person.
(b) When a Vote is Not Required. The provisions of subsection (a) of this
Section 11.6 shall not be applicable with respect to:
(i) any purchase, acquisition, redemption, or exchange of Preferred
Stock, the purchase, acquisition, redemption, or exchange of which is
provided for in the provisions of the Restated Certificate of Incorporation
of the corporation establishing the designations, rights, and preferences
of such Preferred Stock;
(ii) any purchase or other acquisition of equity securities made as
part of a tender or exchange offer by the corporation to purchase
securities of the same class made on the same terms to all holders of such
securities and complying with the applicable requirements of the Exchange
Act and the rules and regulations thereunder (or any successor provisions
to such Act, rules, or regulations); or
(iii) any acquisition by the corporation of shares of its Common Stock
solely in exchange for the same number of shares of Nonvoting Common Stock.
11.7 RIGHTS AND OPTIONS
(a) Vote Required for Rights and Option. Except as set forth in subsection
(b) of this Section 11.7, the corporation shall not, and shall not permit any
Subsidiary to, create or issue any rights or options entitling the holders
thereof to purchase from the corporation or any such Subsidiary any shares of
its capital stock of any class or classes without the affirmative vote of the
holders of Voting Shares which represent at least a majority of the aggregate
voting power of all outstanding Voting Shares.
(b) When a Vote is Not Required. The provisions of subsection (a) of this
Section 11.7 shall not be applicable with respect to any rights or options
issued to employees of the corporation or any Subsidiary in connection with
normal compensation arrangements entered into by the corporation or any
Subsidiary in the ordinary course of business.
11.8 GOLDEN PARACHUTES
The corporation shall not enter into or extend any agreements or
arrangements pursuant to which compensation would be paid to any director,
officer, or employee of the corporation which is contingent upon a change of
control, merger, or acquisition of the corporation, without the affirmative vote
of the holders of Voting Shares which represent at least a majority of the
aggregate voting power of all outstanding Voting Shares, excluding Voting Shares
beneficially owned by any Person that is a party to such agreement or
arrangement, voting together as a single class.
11.9 CLASSES OF STOCK
The designations, powers, preferences, rights, qualifications, limitations,
and restrictions in respect of any class or classes of stock and any series of
any class of stock of the corporation shall be set forth in the Restated
Certificate of Incorporation of the corporation; and the Board of Directors of
the corporation shall not have the authority to fix by resolution or resolutions
any of such designations, powers, preferences, rights, qualifications,
limitations, and restrictions.
11.10 CERTAIN DEFINITIONS
For the purposes of this ARTICLE ELEVENTH:
(i) "Affiliate" and "associate" shall have the respective meanings ascribed
to such terms in Rule 12b-2 of the General Rules and Regulations under the
Exchange Act, as in effect on June 30, 1990.
(ii) "Beneficial Owner" and "beneficial ownership" shall have the meanings
ascribed to such terms in Rule 13d-3 and Rule 13d-5 of the General Rules and
Regulations under the Exchange Act, as in effect on June 30, 1990.
(iii) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(iv) "Interested Person" shall mean any person (other than the corporation
or any Subsidiary) that is the direct or indirect Beneficial Owner of more than
5% (five percent) of the aggregate voting power of the Voting Shares and any
affiliate or associate of any such Person. For the purpose of determining
whether a Person is an Interested Person, the outstanding Voting Shares shall
include unissued shares of voting stock of the corporation of which the
Interested Person is the Beneficial Owner but shall not include any other shares
of voting stock of the corporation which may be issuable pursuant to any
agreement, arrangement, or understanding, upon exercise of conversion rights,
warrants, or options, or otherwise to any Person who is not the Interested
Person.
(v) "Market Price" of shares of a class of an equity security of the
corporation on any day shall mean the highest sale price (regular way) of shares
of such class of such equity security on such day, or if that day is not a
trading day, then on the trading day immediately preceding such day, on the
largest principal national securities exchange on which such class of stock is
then listed or admitted to trading, or if such class of stock is not listed or
admitted to trading on any national securities exchange, then the highest
reported sale price for such shares in the over-the-counter market as reported
on the NASDAQ National Market System, or if such sale price shall not be
reported on such system, then the highest bid price so reported, or if such bid
price shall not be reported thereon, then as such bid price shall be reported by
the National Quotation Bureau Incorporated, or if the price is not determinable
as set forth above, then as determined in good faith by the Board of Directors
of the corporation.
(vi) "Person" shall mean any individual, partnership, firm, corporation,
association, trust, unincorporated organization, or other entity, as well as any
syndicate or group deemed to be a person pursuant to Section 13(d)(5) of the
Exchange Act, as in effect on June 30, 1990.
(vii) "Subsidiary" shall mean any company of which the corporation owns,
directly or indirectly, (A) a majority of the outstanding shares of equity
securities or (B) shares having a majority of the voting power represented by
all of the outstanding voting stock of such company entitled to vote generally
in the election of directors. For the purpose of determining whether a company
is a Subsidiary, the outstanding voting stock and shares of equity securities
thereof shall include unissued shares of which the corporation is the Beneficial
Owner but, except for the purpose of determining whether a company is a
Subsidiary for the purpose of subsection (iv) hereof, shall not include any
other shares which may be issuable pursuant to any agreement, arrangement, or
understanding, or upon the exercise of conversion rights, warrants, or options,
or otherwise to any Person who is not the corporation.
(viii) "Voting Shares" shall mean the outstanding shares of capital stock
of the corporation entitled to vote generally in the election of directors.
11.11 AMENDMENT
Notwithstanding any provisions to the contrary of ARTICLE NINTH of the
Restated Certificate of Incorporation of the corporation, the provisions of this
ARTICLE ELEVENTH shall not be amended without the affirmative vote of the
holders of Voting Shares which represent at least two-thirds of the aggregate
voting power of all outstanding Voting Shares.
4. The foregoing Restated Certificate of Incorporation of Pamida Holdings
Corporation has been duly adopted by the Board of Directors of the Corporation
in accordance with the provisions of Section 245 of the General Corporation Law
of the State of Delaware.
IN WITNESS WHEREOF, this Restated Certificate of Incorporation has been
duly executed by the Chairman of the Board and Chief Executive Officer of the
Corporation this 6th day of March, 1998.
PAMIDA HOLDINGS CORPORATION, a
Delaware corporation
By:/s/Steven S. Fishman
Steven S. Fishman, Chairman of the
Board and Chief Executive Officer
AMENDMENT NO. 3 TO EMPLOYMENT AGREEMENT
This Amendment No. 3 to Employment Agreement is made and entered into on
the 22nd day of May, 1997, among PAMIDA HOLDINGS CORPORATION ("Holdings"), a
Delaware corporation, PAMIDA, INC. ("Pamida"), a Delaware corporation, and
STEVEN S. FISHMAN (the "Executive"). Holdings and Pamida collectively are
referred to in this Amendment No. 3 as the "Companies".
* * *
WHEREAS, the Companies and the Executive are parties to an Employment
Agreement dated September 22, 1995 (the "Employment Agreement"); and
WHEREAS, the Companies and the Executive have amended the Employment
Agreement by Amendments No. 1 and No. 2 thereto; and
WHEREAS, the Companies and the Executive now desire to further amend the
Employment Agreement for the purpose of correcting an error in Amendment No. 2
to the Employment Agreement;
NOW, THEREFORE, the Companies and the Executive agree as follows:
1. Paragraph 1(a) of Amendment No. 2 to the Employment Agreement hereby is
amended so as to correctly read as follows:
"(a) If the consolidated earnings of Holdings and its subsidiaries (on a
first-in, first-out basis with respect to merchandise inventories)
before interest, taxes, depreciation, and amortization for Fiscal 1998
(the "EBITDA") are less than $42,000,000, then the Executive shall not
be entitled to any incentive bonus for Fiscal 1998."
2. As hereby amended, the Employment Agreement and Amendments No. 1 and No.
2 thereto shall remain in full force and effect.
IN WITNESS WHEREOF, the Companies and the Executive have executed this
Amendment No. 3 to Employment Agreement on the day and year first above written.
PAMIDA HOLDINGS CORPORATION,
a Delaware corporation
/s/ Steven S. Fishman
-----------------
By: /s/ Frank A. Washburn Steven S. Fishman
-----------------
Frank A. Washburn, Executive
Vice President
PAMIDA, INC., a Delaware
corporation
By: /s/ Frank A. Washburn
-----------------
Frank A. Washburn, Executive
Vice President
AMENDMENT NO. 4 TO EMPLOYMENT AGREEMENT
This Amendment No. 4 to Employment Agreement is made and entered into on
the 5th day of March, 1998, among PAMIDA HOLDINGS CORPORATION ("Holdings"), a
Delaware corporation, PAMIDA, INC. ("Pamida"), a Delaware corporation, and
STEVEN S. FISHMAN (the "Executive"). Holdings and Pamida collectively are
referred to in this Amendment No. 4 as the "Companies".
* * *
WHEREAS, the Companies and the Executive are parties to an Employment
Agreement dated September 22, 1995 (the "Employment Agreement"); and
WHEREAS, the Companies and the Executive now desire to amend the Employment
Agreement as more particularly set forth below;
NOW, THEREFORE, the Companies and the Executive agree as follows:
1. Pursuant to Paragraph 6 of the Employment Agreement, the Companies and
the Executive agree that the Executive's incentive bonus program for the fiscal
year of Holdings ending January 31, 1999 ("Fiscal 1999") shall be the following:
(a) If (i) the consolidated earnings of Holdings and its subsidiaries (on
a first-in, first-out basis with respect to merchandise inventories)
before interest, taxes, depreciation, and amortization (the "EBITDA")
for Fiscal 1999 (the "FY99 EBITDA") are less than the EBITDA for
Fiscal 1998 or (ii) the percentage increase in the comparable store
sales of Pamida for Fiscal 1999 compared with the fiscal year ended
February 1, 1998, is less than 3%, then the Executive shall not be
entitled to any incentive bonus for Fiscal 1999.
(b) If the FY99 EBITDA equals or exceeds the EBITDA for Fiscal 1998, then
the Executive's incentive bonus for Fiscal 1999 shall be determined as
a percentage of the Executive's base salary from the matrix attached
to this Amendment No. 4 taking into account (i) the FY99 EBITDA and
(ii) the percentage increase in the comparable store sales of Pamida
for Fiscal 1999 compared with the fiscal year ended February 1, 1998.
Comparable store sales percentage increases shall be determined in
accordance with Pamida's historical practices.
(c) For purposes of such matrix, comparable store sales percentage
increases of more than 9% shall be treated as increases of 9%, and
FY99 EBITDA of more than $52,000,000 shall be treated as FY99 EBITDA
of $52,000,000.
(d) For purposes of applying such matrix, the Executive's base salary
shall be the Executive's base salary in effect on January 31, 1999.
(e) The maximum incentive bonus that the Executive shall have the
opportunity to earn for Fiscal 1999 is 100% of the Executive's
applicable base salary.
(f) FY99 EBITDA amounts between whole millions of dollars and comparable
store sales percentage increases between whole percentages shall be
interpolated on a straight-line basis for purposes of applying such
matrix.
(g) Solely by way of illustration of the application of such matrix, if
the FY99 EBITDA is $48,500,000 and the comparable store sales
percentage increase for Fiscal 1999 is 4.6%, then the Executive's
incentive bonus for Fiscal 1999 would be 51.4166% of the Executive's
applicable base salary.
The Executive's incentive bonus for Fiscal 1999 (if any) shall be paid to the
Executive as soon as practicable after Holdings has received the final audit
report with respect to Fiscal 1999 from its independent accountants.
2. The provisions of this Amendment No. 4 are intended to satisfy the
requirements of Paragraph 6 of the Employment Agreement for the fiscal year of
Holdings ending in 1999.
3. This Amendment No. 4 shall be effective as of February 2, 1998.
4. As hereby amended, the Employment Agreement shall remain in full force
and effect.
IN WITNESS WHEREOF, the Companies and the Executive have executed this
Amendment No. 4 to Employment Agreement on the day and year first above written.
PAMIDA HOLDINGS CORPORATION,
a Delaware corporation
By:/s/ Frank A. Washburn
---------------------
Frank A. Washburn, Executive
Vice President
PAMIDA, INC., a Delaware corporation
By:/s/ Frank A. Washburn
---------------------
Frank A. Washburn, Executive
Vice President
/s/ Steven S. Fishman
---------------------
Steven S. Fishman
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT
This Amendment No. 1 to Employment Agreement is made and entered into on
the 5th day of March, 1998, among PAMIDA HOLDINGS CORPORATION ("Holdings"), a
Delaware corporation, PAMIDA, INC. ("Pamida"), a Delaware corporation, and FRANK
A. WASHBURN (the "Executive"). Holdings and Pamida collectively are referred to
in this Amendment No. 1 as the "Companies".
* * *
WHEREAS, the Companies and the Executive are parties to an Employment
Agreement dated March 6, 1997 (the "Employment Agreement"); and
WHEREAS, the Companies and the Executive now desire to amend the Employment
Agreement as more particularly set forth below;
NOW, THEREFORE, the Companies and the Executive agree as follows:
1. Pursuant to Paragraph 6 of the Employment Agreement, the Companies and
the Executive agree that the Executive's incentive bonus program for the fiscal
year of Holdings ending January 31, 1999 ("Fiscal 1999") shall be the following:
(a) If (i) the consolidated earnings of Holdings and its subsidiaries (on
a first-in, first-out basis with respect to merchandise inventories)
before interest, taxes, depreciation, and amortization (the "EBITDA")
for Fiscal 1999 (the "FY99 EBITDA") are less than the EBITDA for
Fiscal 1998 or (ii) the percentage increase in the comparable store
sales of Pamida for Fiscal 1999 compared with the fiscal year ended
February 1, 1998, is less than 3%, then the Executive shall not be
entitled to any incentive bonus for Fiscal 1999.
(b) If the FY99 EBITDA equals or exceeds the EBITDA for Fiscal 1998, then
the Executive's incentive bonus for Fiscal 1999 shall be determined as
a percentage of the Executive's base salary from the matrix attached
to this Amendment No. 1 taking into account (i) the FY99 EBITDA and
(ii) the percentage increase in the comparable store sales of Pamida
for Fiscal 1999 compared with the fiscal year ended February 1, 1998.
Comparable store sales percentage increases shall be determined in
accordance with Pamida's historical practices.
(c) For purposes of such matrix, comparable store sales percentage
increases of more than 9% shall be treated as increases of 9%, and
FY99 EBITDA of more than $52,000,000 shall be treated as FY99 EBITDA
of $52,000,000.
(d) For purposes of applying such matrix, the Executive's base salary
shall be the Executive's base salary in effect on January 31, 1999.
(e) The maximum incentive bonus that the Executive shall have the
opportunity to earn for Fiscal 1999 is 100% of the Executive's
applicable base salary.
(f) FY99 EBITDA amounts between whole millions of dollars and comparable
store sales percentage increases between whole percentages shall be
interpolated on a straight-line basis for purposes of applying such
matrix.
(g) Solely by way of illustration of the application of such matrix, if
the FY99 EBITDA is $48,500,000 and the comparable store sales
percentage increase for Fiscal 1999 is 4.6%, then the Executive's
incentive bonus for Fiscal 1999 would be 51.4166% of the Executive's
applicable base salary.
The Executive's incentive bonus for Fiscal 1999 (if any) shall be paid to the
Executive as soon as practicable after Holdings has received the final audit
report with respect to Fiscal 1999 from its independent accountants.
2. The provisions of this Amendment No. 1 are intended to satisfy the
requirements of Paragraph 6 of the Employment Agreement for the fiscal year of
Holdings ending in 1999.
3. This Amendment No. 1 shall be effective as of February 2, 1998.
4. As hereby amended, the Employment Agreement shall remain in full force
and effect.
IN WITNESS WHEREOF, the Companies and the Executive have executed this
Amendment No. 1 to Employment Agreement on the day and year first above written.
PAMIDA HOLDINGS CORPORATION,
a Delaware corporation
By:/s/ Steven S. Fishman
Steven S. Fishman, Chairman of the
Board and Chief Executive Officer
PAMIDA, INC., a Delaware corporation
By:/s/ Steven S. Fishman
Steven S. Fishman, Chairman of the
Board and Chief Executive Officer
/s/ Frank A. Washburn
Frank A. Washburn
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT
This Amendment No. 1 to Employment Agreement is made and entered into on
the 5th day of March, 1998, among PAMIDA HOLDINGS CORPORATION ("Holdings"), a
Delaware corporation, PAMIDA, INC. ("Pamida"), a Delaware corporation, and
GEORGE R. MIHALKO (the "Executive"). Holdings and Pamida collectively are
referred to in this Amendment No. 1 as the "Companies".
* * *
WHEREAS, the Companies and the Executive are parties to an Employment
Agreement dated March 6, 1997 (the "Employment Agreement"); and
WHEREAS, the Companies and the Executive now desire to amend the Employment
Agreement as more particularly set forth below;
NOW, THEREFORE, the Companies and the Executive agree as follows:
1. Pursuant to Paragraph 6 of the Employment Agreement, the Companies and
the Executive agree that the Executive's incentive bonus program for the fiscal
year of Holdings ending January 31, 1999 ("Fiscal 1999") shall be the following:
(a) If (i) the consolidated earnings of Holdings and its subsidiaries (on
a first-in, first-out basis with respect to merchandise inventories)
before interest, taxes, depreciation, and amortization (the "EBITDA")
for Fiscal 1999 (the "FY99 EBITDA") are less than the EBITDA for
Fiscal 1998 or (ii) the percentage increase in the comparable store
sales of Pamida for Fiscal 1999 compared with the fiscal year ended
February 1, 1998, is less than 3%, then the Executive shall not be
entitled to any incentive bonus for Fiscal 1999.
(b) If the FY99 EBITDA equals or exceeds the EBITDA for Fiscal 1998, then
the Executive's incentive bonus for Fiscal 1999 shall be determined as
a percentage of the Executive's base salary from the matrix attached
to this Amendment No. 1 taking into account (i) the FY99 EBITDA and
(ii) the percentage increase in the comparable store sales of Pamida
for Fiscal 1999 compared with the fiscal year ended February 1, 1998.
Comparable store sales percentage increases shall be determined in
accordance with Pamida's historical practices.
(c) For purposes of such matrix, comparable store sales percentage
increases of more than 9% shall be treated as increases of 9%, and
FY99 EBITDA of more than $52,000,000 shall be treated as FY99 EBITDA
of $52,000,000.
(d) For purposes of applying such matrix, the Executive's base salary
shall be the Executive's base salary in effect on January 31, 1999.
(e) The maximum incentive bonus that the Executive shall have the
opportunity to earn for Fiscal 1999 is 72% of the Executive's
applicable base salary.
(f) FY99 EBITDA amounts between whole millions of dollars and comparable
store sales percentage increases between whole percentages shall be
interpolated on a straight-line basis for purposes of applying such
matrix.
(g) Solely by way of illustration of the application of such matrix, if
the FY99 EBITDA is $48,500,000 and the comparable store sales
percentage increase for Fiscal 1999 is 4.6%, then the Executive's
incentive bonus for Fiscal 1999 would be 34.2% of the Executive's
applicable base salary.
The Executive's incentive bonus for Fiscal 1999 (if any) shall be paid to the
Executive as soon as practicable after Holdings has received the final audit
report with respect to Fiscal 1999 from its independent accountants.
2. The provisions of this Amendment No. 1 are intended to satisfy the
requirements of Paragraph 6 of the Employment Agreement for the fiscal year of
Holdings ending in 1999.
3. This Amendment No. 1 shall be effective as of February 2, 1998.
4. As hereby amended, the Employment Agreement shall remain in full force
and effect.
IN WITNESS WHEREOF, the Companies and the Executive have executed this
Amendment No. 1 to Employment Agreement on the day and year first above written.
PAMIDA HOLDINGS CORPORATION,
a Delaware corporation
By:/s/ Steven S. Fishman
Steven S. Fishman, Chairman of the
Board and Chief Executive Officer
PAMIDA, INC., a Delaware corporation
By:/s/ Steven S. Fishman
Steven S. Fishman, Chairman of the
Board and Chief Executive Officer
/s/ George R. Mihalko
George R. Mihalko
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
33-83708 of Pamida Holdings Corporation on Form S-8 of our reports dated March
5, 1998 appearing in this Annual Report on Form 10-K of Pamida Holdings
Corporation for the year ended February 1, 1998.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Omaha, Nebraska
April 10, 1998
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the registration statement of
Pamida Holdings Corporation and Subsidiary on Form S-8 (File No. 33-83708) of
our report dated March 26, 1996, on our audit of the fiscal 1996 consolidated
financial statements and financial statement schedule of Pamida Holdings
Corporation and Subsidiary as of January 28, 1996 and for the year then ended,
which report is included in this Annual Report on Form 10-K.
/s/ COOPERS & LYBRAND L.L.P.
Chicago, Illinois
April 15, 1998
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I do hereby constitute and appoint
Steven S. Fishman, Frank A. Washburn, and George R. Mihalko, and each of them
individually, as my true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for me and in my name, place, and
stead in my capacity as a director of Pamida Holdings Corporation to sign the
Annual Report on Form 10-K of Pamida Holdings Corporation for the fiscal year
ended February 1, 1998, and to file such Annual Report, with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto such attorneys-in-fact and agents, and each
of them individually and their substitutes, full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises in connection with such Annual Report as fully to all intents
and purposes as I might or could do in person, hereby ratifying and confirming
all that such attorneys-in-fact and agents or any of them, or their or his
substitutes or substitute, lawfully may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have executed this Power of Attorney this 19th day of
March, 1998.
/s/ Stuyvesant P. Comfort
Stuyvesant P. Comfort
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I do hereby constitute and appoint
Steven S. Fishman, Frank A. Washburn, and George R. Mihalko, and each of them
individually, as my true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for me and in my name, place, and
stead in my capacity as a director of Pamida Holdings Corporation to sign the
Annual Report on Form 10-K of Pamida Holdings Corporation for the fiscal year
ended February 1, 1998, and to file such Annual Report, with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto such attorneys-in-fact and agents, and each
of them individually and their substitutes, full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises in connection with such Annual Report as fully to all intents
and purposes as I might or could do in person, hereby ratifying and confirming
all that such attorneys-in-fact and agents or any of them, or their or his
substitutes or substitute, lawfully may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have executed this Power of Attorney this 19th day of
March, 1998.
/s/ L. David Callaway, III
L. David Callaway, III
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I do hereby constitute and appoint
Steven S. Fishman, Frank A. Washburn, and George R. Mihalko, and each of them
individually, as my true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for me and in my name, place, and
stead in my capacity as a director of Pamida Holdings Corporation to sign the
Annual Report on Form 10-K of Pamida Holdings Corporation for the fiscal year
ended February 1, 1998, and to file such Annual Report, with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto such attorneys-in-fact and agents, and each
of them individually and their substitutes, full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises in connection with such Annual Report as fully to all intents
and purposes as I might or could do in person, hereby ratifying and confirming
all that such attorneys-in-fact and agents or any of them, or their or his
substitutes or substitute, lawfully may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have executed this Power of Attorney this 23rd day of
March, 1998.
/s/ Peter J. Sodini
Peter J. Sodini
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I do hereby constitute and appoint
Steven S. Fishman, Frank A. Washburn, and George R. Mihalko, and each of them
individually, as my true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for me and in my name, place, and
stead in my capacity as a director of Pamida Holdings Corporation to sign the
Annual Report on Form 10-K of Pamida Holdings Corporation for the fiscal year
ended February 1, 1998, and to file such Annual Report, with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto such attorneys-in-fact and agents, and each
of them individually and their substitutes, full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises in connection with such Annual Report as fully to all intents
and purposes as I might or could do in person, hereby ratifying and confirming
all that such attorneys-in-fact and agents or any of them, or their or his
substitutes or substitute, lawfully may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have executed this Power of Attorney this 30th day of
March, 1998.
/s/ M. Saleem Muqaddam
M. Saleem Muqaddam
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Financial Data Schedule
Item 601(c) of Regulation S-K Commercial and
Industrial Companies Article 5 of Regulation S-X
(Dollars is thousands, except per share amounts)
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet of Pamida Holdings Corporation and Subsidiary as of
February 1, 1998 and the related Consolidated Statement of Operations for the 52
weeks then ended and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0000864760
<NAME> Pamida Holdings Corporation
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> FEB-01-1998
<PERIOD-START> FEB-03-1997
<PERIOD-END> FEB-01-1998
<CASH> 6,816
<SECURITIES> 0
<RECEIVABLES> 8,434
<ALLOWANCES> 50
<INVENTORY> 152,927
<CURRENT-ASSETS> 170,965
<PP&E> 40,812
<DEPRECIATION> 0
<TOTAL-ASSETS> 260,081
<CURRENT-LIABILITIES> 133,544
<BONDS> 172,445
0
0
<COMMON> 90
<OTHER-SE> (52,365)
<TOTAL-LIABILITY-AND-EQUITY> 260,081
<SALES> 657,017
<TOTAL-REVENUES> 657,017
<CGS> 495,082
<TOTAL-COSTS> 624,113
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29,618
<INCOME-PRETAX> 3,286
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,286
<DISCONTINUED> 0
<EXTRAORDINARY> 1,735
<CHANGES> 0
<NET-INCOME> 5,370
<EPS-PRIMARY> .92
<EPS-DILUTED> .91
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Restated Financial Data Schedule
Item 601(c) of Regulation S-K Commercial and
Industrial Companies Article 5 of Regulation S-X
(Dollars is thousands, except per share amounts)
This restated schedule contains summary financial information extracted from the
Consolidated Balance Sheets of Pamida Holdings Corporation and Subsidiary as of
January 28, 1996, February 2, 1997, April 28, 1996, July 28, 1996 and October
27, 1996, and the related Consolidated StatementS of Operations for the 52, 53,
13, 26 and 39 weeks then ended and is qualified in its entirety by reference to
such financial statements. Certain reclassifications have been made to prior
years' financial information to conform to the fiscal year end 1998
presentation.
</LEGEND>
<CIK> 0000864760
<NAME> Pamida Holdings Corporation
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> JAN-28-1996 FEB-02-1997 FEB-02-1997 FEB-02-1997 FEB-02-1997
<PERIOD-START> JAN-30-1995 JAN-29-1996 JAN-29-1996 JAN-29-1996 JAN-29-1996
<PERIOD-END> JAN-28-1996 FEB-02-1997 APR-28-1996 JUL-28-1996 OCT-27-1996
<CASH> 7,298 6,973 8,239 11,033 9,890
<SECURITIES> 0 0 0 0 0
<RECEIVABLES> 9,099 6,969 12,977 15,236 18,545
<ALLOWANCES> 50 50 50 50 50
<INVENTORY> 150,837 157,490 141,702 137,036 183,633
<CURRENT-ASSETS> 172,355 176,123 170,073 167,243 217,308
<PP&E> 44,153 42,403 98,513 101,153 102,523
<DEPRECIATION> 0 0 55,599 57,378 59,189
<TOTAL-ASSETS> 258,525 269,188 252,186 252,152 301,186
<CURRENT-LIABILITIES> 138,273 147,450 135,782 137,997 185,754
<BONDS> 200,305 201,999 238,249 236,821 266,756
1,826 1,875 1,919 2,016 2,115
0 0 0 0 0
<COMMON> 50 50 50 50 50
<OTHER-SE> (86,166) (87,353) (91,001) (94,328) (92,302)
<TOTAL-LIABILITY-AND-EQUITY> 258,525 269,188 252,186 252,152 301,186
<SALES> 736,315 633,189 131,786 287,603 439,583
<TOTAL-REVENUES> 736,315 633,189 131,786 287,603 439,583
<CGS> 558,627 479,099 100,211 218,932 334,466
<TOTAL-COSTS> 709,723 604,204 129,422 279,076 423,761
<OTHER-EXPENSES> 99,948 0 0 0 0
<LOSS-PROVISION> 0 0 0 0 0
<INTEREST-EXPENSE> 29,526 29,781 7,106 14,234 21,669
<INCOME-PRETAX> (102,882) (796) (4,742) (6,036) (5,847)
<INCOME-TAX> (7,863) 0 0 0 0
<INCOME-CONTINUING> (95,019) (796) (4,742) (6,036) (5,847)
<DISCONTINUED> 0 0 0 0 0
<EXTRAORDINARY> 371 0 0 0 0
<CHANGES> 0 0 0 0 0
<NET-INCOME> (95,010) (1,187) (4,835) (6,226) (6,136)
<EPS-PRIMARY> (18.99) (0.24) (0.97) (1.24) (1.23)
<EPS-DILUTED> (18.99) (0.24) (0.97) (1.24) (1.23)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Restated Financial Data Schedule
Item 601(c) of Regulation S-K Commercial and
Industrial Companies Article 5 of Regulation S-X
(Dollars is thousands, except per share amounts)
This restated schedule contains summary financial information extracted from the
Consolidated Balance Sheets of Pamida Holdings Corporation and Subsidiary as of
May 4, 1997, August 3, 1997 and November 2, 1997 and the related Consolidated
Statements of Operations for the 13, 26 and 39 weeks then ended and is qualified
in its entirety by reference to such financial statements. Certain
reclassifications have been made to prior years' financial information to
conform to the fiscal year end 1998 presentation.
</LEGEND>
<CIK> 0000864760
<NAME> Pamida Holdings Corporation
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> FEB-01-1998 FEB-01-1998 FEB-01-1998
<PERIOD-START> FEB-03-1997 FEB-03-1997 FEB-03-1997
<PERIOD-END> MAY-04-1997 AUG-03-1997 NOV-02-1997
<CASH> 9,003 8,485 9,022
<SECURITIES> 0 0 0
<RECEIVABLES> 8,744 7,729 10,326
<ALLOWANCES> 50 50 50
<INVENTORY> 159,294 147,240 187,243
<CURRENT-ASSETS> 180,154 167,028 210,161
<PP&E> 105,719 108,299 109,561
<DEPRECIATION> 62,955 64,805 66,639
<TOTAL-ASSETS> 274,085 260,281 302,859
<CURRENT-LIABILITIES> 156,967 141,382 182,682
<BONDS> 202,740 203,526 204,361
2,322 2,487 2,624
0 0 0
<COMMON> 50 50 50
<OTHER-SE> (92,917) (92,519) (92,316)
<TOTAL-LIABILITY-AND-EQUITY> 274,085 260,281 302,859
<SALES> 144,564 307,781 466,530
<TOTAL-REVENUES> 144,564 307,781 466,530
<CGS> 111,296 233,011 353,906
<TOTAL-COSTS> 142,270 297,260 448,037
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 7,753 15,417 23,049
<INCOME-PRETAX> (5,459) (4,896) (4,556)
<INCOME-TAX> 0 0 0
<INCOME-CONTINUING> (5,459) (4,896) (4,556)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> (5,564) (5,166) (4,963)
<EPS-PRIMARY> (1.11) (1.03) (0.99)
<EPS-DILUTED> (1.11) (1.03) (0.99)
</TABLE>
