SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR
[X] 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 3, 1998
-----------
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
incorporation or organization) Identification
Number)
8800 "F" STREET, OMAHA, NEBRASKA 68127
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(402) 339-2400
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
CLASS OF COMMON STOCK OUTSTANDING AT JUNE 8, 1998
--------------------- ---------------------------
Common Stock 9,020,912 Shares
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
<S> <C> <C>
ASSETS: May 3, February 1,
Current assets: 1998 1998
---------- ----------
Cash $ 11,738 $ 6,816
Accounts receivable, less allowance for
doubtful accounts of $50 8,457 8,384
Merchandise inventories 168,480 152,927
Prepaid expenses 3,817 2,838
---------- ----------
Total current assets 192,492 170,965
Property, buildings and equipment, less accumulated
depreciation and amortization of $64,492 and $63,738 40,342 40,812
Leased property under capital leases, less accumulated
amortization of $16,023 and $15,387 24,545 25,181
Deferred financing costs 2,607 2,755
Other assets 21,050 20,368
---------- ----------
$ 281,036 $ 260,081
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 66,884 $ 47,687
Loan and security agreement 55,923 45,194
Accrued compensation 4,169 5,768
Accrued interest 2,255 6,668
Store closing reserve 973 1,564
Other accrued expenses 14,393 12,227
Income taxes - deferred and current payable 9,920 12,546
Current maturities of long-term debt 47 47
Current obligations under capital leases 1,827 1,843
---------- ----------
Total current liabilities 156,391 133,544
Long-term debt, less current maturities 140,277 140,289
Obligations under capital leases, less current obligations 31,697 32,156
Other long-term liabilities 7,247 6,367
Commitments and contingencies Common stockholders' equity:
Common stock, $.01 par value; 25,000,000 shares
authorized; 5,970,439 shares issued and outstanding 60 60
Nonvoting common stock, $.01 par value; 4,000,000 shares
authorized; 3,050,473 shares issued and outstanding 30 30
Additional paid-in capital 30,586 30,586
Accumulated deficit (85,252) (82,951)
---------- ----------
Total common stockholders' deficit (54,576) (52,275)
---------- ----------
$ 281,036 $ 260,081
========== ==========
See notes to consolidated financial statements.
</TABLE>
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Per Share Amounts)
(Unaudited)
Three Months Ended
---------------------
May 3, May 4,
1998 1997
-------- --------
Sales $144,532 $144,564
Cost of goods sold 110,172 111,296
-------- --------
Gross profit 34,360 33,268
-------- --------
Expenses:
Selling, general and administrative 31,728 30,974
Interest 6,361 7,753
-------- --------
38,089 38,727
-------- --------
Loss before income tax benefit (3,729) (5,459)
Income tax benefit 1,428 -
-------- --------
Net loss (2,301) (5,459)
Less provision for preferred dividends
and discount amortization - 105
-------- --------
Net loss available for common stock $ (2,301) $ (5,564)
======== ========
Basic and diluted loss per common share $ (.26) $ (1.11)
======== ========
See notes to consolidated financial statements.
<TABLE>
<CAPTION>
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
<S> <C> <C>
Three Months Ended
---------------------
May 3, May 4,
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES: -------- --------
Net loss $ (2,301) $ (5,459)
Adjustments to reconcile net loss to net -------- --------
cash from operations:
Depreciation and amortization of fixed assets
and intangibles 3,023 2,905
Provision for LIFO inventory valuation 250 150
Noncash interest expense - 1,167
Accretion of original issue debt discount - 41
(Gain) loss on disposal of assets (999) 11
Decrease in store closing reserve (670) (1,099)
Increase in merchandise inventories (15,803) (1,954)
Increase in other operating assets (3,399) (3,486)
Increase in accounts payable 19,197 5,868
Decrease in interest payable (4,413) (4,542)
Decrease in income taxes payable (2,626) (23)
Increase in other operating liabilities 1,526 358
-------- --------
Total adjustments (3,914) (604)
-------- --------
Net cash from operating activities (6,215) (6,063)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from disposal of assets 2,071 1,810
Proceeds from sale-leaseback of store facility 1,592 -
Changes in constructed stores to be refinanced
through lease financing (278) 140
Principal payments received on notes receivable 5 4
Capital expenditures (2,495) (2,222)
-------- --------
Net cash from investing activities 895 (268)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under loan and security agreement, net 10,729 9,042
Principal payments on capital lease obligations (475) (445)
Payments for deferred finance costs - (225)
Principal payments on other long-term debt (12) (11)
-------- --------
Net cash from financing activities 10,242 8,361
-------- --------
Net increase in cash 4,922 2,030
Cash at beginning of year 6,816 6,973
-------- --------
Cash at end of period $ 11,738 $ 9,003
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
(1) Cash paid (received) during the period for:
Interest $ 10,774 $ 11,087
Income taxes:
Payments to taxing authorities 1,315 32
Refunds received from taxing authorities (117) (9)
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITY:
(1) Amortization of discount on junior cumulative
preferred stock recorded as a direct charge to -
retained earnings 13
(2) Provision for dividends payable - 92
(3) In-kind payment of accrued interest on promissory notes:
Promissory notes - 1,140
Accrued interest - (1,140)
See notes to consolidated financial statements.
</TABLE>
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MAY 3, 1998 AND MAY 4, 1997
(Unaudited)
(Dollars in Thousands)
1. MANAGEMENT REPRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information. In the opinion of management, all
adjustments necessary for a fair presentation of the results of operations
for the interim periods have been included. All such adjustments are of a
normal recurring nature. Because of the seasonal nature of the business,
results for interim periods are not necessarily indicative of a full year's
operations. The accounting policies followed by Pamida Holdings Corporation
(the "Company") and additional footnotes are reflected in the consolidated
financial statements contained in the Form 10-K Annual Report of the
Company for the fiscal year ended February 1, 1998.
2. INVENTORIES
Substantially all inventories are stated at the lower of cost (last-in,
first-out) or market. Total inventories would have been higher at May 3,
1998 and February 1, 1998 by $7,430 and $7,180 respectively, had the FIFO
(first-in, first-out) method been used to determine the cost of all
inventories. Quarterly LIFO inventory determinations reflect assumptions
regarding fiscal year-end inventory levels and the estimated impact of
annual inflation. Actual inventory levels and annual inflation could vary
from estimates made on a quarterly basis.
3. EARNINGS PER COMMON 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 are based on the weighted average outstanding
common shares during the 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.
4. NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB adopted SFAS No. 130, "Reporting Comprehensive
Income", which establishes standards for reporting and display of
comprehensive income and its components in a full set of general purpose
financial statements. The adoption of this standard in the first quarter of
fiscal 1999 had no impact on the Company's financial statements. In June
1997, the FASB adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information". SFAS 131, effective for fiscal 1999,
redefines how operating segments are determined and requires disclosure of
certain financial and descriptive information about a company's operating
segments. The Company currently complies with most provisions of this
statement, and any incremental disclosure required is expected to be
minimal.
5. RECLASSIFICATIONS
Certain reclassifications have been made to the prior year's financial
statements to conform to the current year's presentation.
The following is management's discussion and analysis of certain significant
factors which have affected the Company's results of operations and financial
condition for the periods included in the accompanying consolidated financial
statements.
RESULTS OF OPERATIONS
The following table sets forth an analysis of various components of the
Consolidated Statements of Operations as a percentage of sales for the three
months ended May 3, 1998 and May 4, 1997:
Three Months Ended
------------------
May 3, May 4,
1998 1997
----- -----
Sales 100.0% 100.0%
Cost of goods sold 76.2 77.0
----- -----
Gross profit 23.8 23.0
Selling, general and administrative expenses 22.0 21.4
----- -----
Operating income 1.8 1.6
Interest expense 4.4 5.4
----- -----
Loss before income tax benefit (2.6) (3.8)
Income tax benefit 1.0 ( -)
----- -----
Net loss (1.6) (3.8)
===== =====
SALES for the first quarter of fiscal 1999 decreased by $32 or 0.0% from sales
for the first quarter of fiscal 1998. Comparable store sales for the first
quarter increased by 1.3% compared to last year. Last year's sales were elevated
by greater markdown and clearance activity which was not necessary this year.
Sales trends during the final month of the quarter were substantially stronger
than in the first two months of the quarter. The Company operated 149 stores at
the end of the first quarter of both fiscal 1999 and 1998. Since May 4, 1997,
the Company has opened one store in a new market, relocated three stores and
closed one store.
The Company experienced sales increases in numerous merchandise categories. The
largest increases were in the pharmacy prescriptions, lawn and garden, pets,
toys, and bed and bath areas. The shoe and team sports areas also showed
substantial percentage increases over the first quarter of last year. The
Company experienced sales declines in several areas, with groceries, automotive,
paper and cleaning and electronics and audio/video sales areas having the
largest decreases.
GROSS PROFIT increased $1,092 or 3.3% for the first quarter of fiscal 1999
compared to the first quarter of last year as a result of improved margins
realized on sales. As a percentage of sales, gross profit increased to 23.8% for
the first quarter of fiscal 1999 compared to 23.0% for the first quarter last
year. This was caused primarily by a reduced level of clearance and markdown
activity this year as compared with the first quarter of last year.
SELLING, GENERAL AND ADMINISTRATIVE (SG&A) expense, in line with the Company's
plan, increased $754 or 2.4% for the first quarter of fiscal 1999, compared to
the first quarter of fiscal 1998. As a percentage of sales, SG&A expense
increased to 22.0% for the first quarter of fiscal 1999 compared to 21.4% last
year. Approximately 43.1% of the net increase in SG&A expense was attributable
to higher corporate general and administrative expenses, primarily involving
increases in payroll and incentive compensation expenses. Store payroll costs
increased slightly over last year to accommodate normal compensation increases
and minimum wage increases. Store fixed expenses also increased slightly due to
the effect of increased costs at new store locations.
INTEREST expense decreased $1,392 or 18.0% for the first quarter of fiscal 1999
compared to the same period of fiscal 1998. The decrease was attributable
primarily 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. In
addition, average revolver borrowings were less than last year due to improved
cash flow.
INCOME TAX BENEFIT - 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 payment and preferred stock reclassification
transactions which were consummated on November 18, 1997. No income tax benefit
was recorded on the first quarter fiscal 1998 loss as the Company could not
establish, as of the quarter ended May 4, 1997, with a reasonable degree of
certainty, the potential utilization of loss carryforwards. An income tax
benefit was recorded related to the quarter ended May 3, 1998. The Company
expects that operations in the future will be taxable at a normal tax rate.
LIQUIDITY AND CAPITAL RESOURCES
The Company's business is seasonal with first quarter sales (February through
April) lower than sales during the other three quarters; fourth quarter sales
(November through January) have represented approximately 29% of the full year's
sales in recent years and normally involve a greater proportion of higher margin
sales.
The Company has satisfied its seasonal liquidity requirements primarily through
a combination of funds provided from operations and from a revolving credit
facility. Funds used by operating activities totaled $6,215 for the first
quarter of fiscal 1999 and $6,063 for the first quarter of fiscal 1998. The
change in cash flow from operating activities from fiscal 1998 to fiscal 1999
was primarily the result of increased accounts payable and a reduced net loss
offset by an increase in merchandise inventories to better support the Company's
in-stock position.
Pamida, Inc.'s (Pamida) committed Loan and Security Agreement (the Agreement)
provides funds to March 2000 and has a maximum borrowing limit of $95,000.
Borrowings under the Agreement bear interest at a rate which is tied to the
prime rate or the London Interbank Offered Rate (LIBOR), generally at 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
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-leaseback transactions, may at some future
time prevent the Company from pursuing its store expansion program at the rate
that the Company desires.
Obligations under the Agreement were $55,923 at May 3, 1998 and $66,157 at May
4, 1997. As noted above, this facility expires in March 2000, and the Company
intends to refinance any outstanding balance by such date. Borrowings under the
Agreement are senior to the Senior Subordinated Notes of the Company. The
Company had long-term debt and obligations under capital leases of $171,974 at
May 3, 1998 and $202,740 at May 4, 1997. The Company's ability to satisfy
scheduled principal and interest payments under such obligations in the ordinary
course of business is dependent primarily upon the sufficiency of the Company's
operating cash flow. At May 3, 1998, the Company was in compliance with all
covenants contained in its various financing agreements.
On December 18, 1992, the promissory notes of 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. The Company paid all of the promissory notes with common stock of
the Company on November 18, 1997.
The Company reclassified all of its preferred stock into common stock effective
November 18, 1997. Accordingly, the Company had no remaining obligations related
to the preferred stock as of the end of fiscal 1998. 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
1998.
The Company made capital expenditures of $2,495 in the first quarter of fiscal
1999 compared to $2,222 during the first quarter of fiscal 1998. The Company
also made expenditures of $1,966 and $1,381 in the first quarters of fiscal 1999
and 1998, respectively, related to information systems software. The Company
plans to open up to eight new stores in fiscal 1999 and will consider additional
opportunities for new store locations as they arise. Capital expenditures and
information systems software costs are expected to total approximately $13,000
in fiscal 1999. The Company expects to fund these expenditures from cash flow
from its operations. The costs of buildings and land for new store locations are
expected to be financed by operating or capital leases with unaffiliated
landlords. The Company's expansion program also will require inventory of
approximately $1,000 to $1,200 for each new market store, which the Company
expects to finance through trade credit, borrowings under the Agreement and cash
flow from operations.
The Company's cash flow from operations, along with the Agreement, should
provide adequate resources to meet the Company's near term liquidity
requirements. On a long-term basis, the Company's expansion will require
continued investments in store locations, distribution and infrastructure
enhancements and working capital. The Company expects to continue to finance
some of these investments through leases from unaffiliated landlords, trade
credit, borrowings under the Agreement and cash flow from operations. The
Company is also exploring additional sources of funds which may include
additional capital structure changes. Currently, it is not possible for the
Company to predict with any certainty either the timing or the availability of
such additional financing.
INFLATION
The Company uses the LIFO method of inventory valuation in its financial
statements; as a result, the cost of merchandise sold approximates current
costs. The Company's rental expense is generally fixed and, except for small
amounts of percentage rents and rentals adjusted by cost-of-living increases
tied to the Consumer Price Index or interest rates, has not been affected by
inflation.
FORWARD-LOOKING STATEMENTS
This management's discussion and analysis contains certain forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 (the "1995 Act"). Such statements are made in good faith by the Company
pursuant to the safe-harbor provisions of the 1995 Act. In connection with these
safe-harbor provisions, this management's discussion and analysis contains
certain forward-looking statements which reflect management's current views and
estimates of future economic conditions, industry conditions, company
performance, Year 2000 compliance and financial results. The statements are
based on many assumptions and factors including sales results, expense levels,
competition and interest rates as well as other risks and uncertainties inherent
in the Company's business, capital structure and the retail industry in general.
Any changes in these factors could result in significantly different results for
the Company. Plans for new stores are subject to numerous contingencies
discussed in the Company's Form 10-K Annual Report. The Company further cautions
that the forward-looking information contained herein is not exhaustive or
exclusive. The Company does not undertake to update any forward-looking
statements which may be made from time to time by or on behalf of the Company.
PART II - OTHER INFORMATION
ITEMS 1-5:
None.
ITEM 6:
(a) Exhibits.
- 27.1 Financial Data Schedule (EDGAR version only)
(b) Reports on Form 8-K.
No reports on Form 8-K have been filed during the quarter for
which this report is filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PAMIDA HOLDINGS CORPORATION
(Registrant)
Date: June 8, 1998 By: /s/ Steven S. Fishman
-----------------------------
Steven S. Fishman, Chairman,
President and Chief Executive
Officer
Date: June 8, 1998 By: /s/ Todd D. Weyhrich
------------------------------
Todd D. Weyhrich,
Vice President, Controller and
Chief Accounting Officer
<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 and Subsidiary as of May 3, 1998
and the related Consolidated Statement of Operations for the 13 weeks then ended
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000864760
<NAME> Pamida Holdings Corporation
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-02-1998
<PERIOD-END> MAY-03-1998
<CASH> 11,738
<SECURITIES> 0
<RECEIVABLES> 8,507
<ALLOWANCES> 50
<INVENTORY> 168,480
<CURRENT-ASSETS> 281,036
<PP&E> 104,834
<DEPRECIATION> 64,492
<TOTAL-ASSETS> 281,036
<CURRENT-LIABILITIES> 156,391
<BONDS> 171,974
0
0
<COMMON> 90
<OTHER-SE> (54,666)
<TOTAL-LIABILITY-AND-EQUITY> 281,036
<SALES> 144,532
<TOTAL-REVENUES> 144,532
<CGS> 110,172
<TOTAL-COSTS> 141,900
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,361
<INCOME-PRETAX> (3,729)
<INCOME-TAX> (1,428)
<INCOME-CONTINUING> (2,301)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,301)
<EPS-PRIMARY> (.26)
<EPS-DILUTED> (.26)
</TABLE>
