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 November 1, 1998
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Commission File Number 1-10619
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PAMIDA HOLDINGS CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 47-0696125
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
8800 "F" Street, Omaha, Nebraska 68127
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(402) 339-2400
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Class of Stock Outstanding at
December 14, 1998
- ---------------------- -----------------
Common Stock 6,025,595 shares
Nonvoting Common Stock 3,050,473 shares
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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<CAPTION>
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
<S> <C> <C>
ASSETS: November 1, February 1,
Current assets: 1998 1998
------ ----
Cash $ 9,570 $ 6,816
Accounts receivable, less allowance for
doubtful accounts of $50 14,275 8,384
Merchandise inventories 202,362 152,927
Prepaid expenses 4,112 2,838
-------- --------
Total current assets 230,319 170,965
Property, buildings and equipment, less accumulated
depreciation and amortization of $67,418 and $63,738 38,984 40,812
Leased property under capital leases, less accumulated
amortization of $17,359 and $15,387 28,911 25,181
Deferred financing costs 2,470 2,755
Other assets 22,490 20,368
-------- --------
$ 323,174 $ 260,081
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 90,619 $ 47,687
Loan and security agreement 60,962 45,194
Accrued compensation 6,368 5,768
Accrued interest 2,538 6,668
Other accrued expenses 16,703 13,791
Income taxes - deferred and current payable 11,040 12,546
Current maturities of long-term debt 47 47
Current obligations under capital leases 1,854 1,843
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Total current liabilities 190,131 133,544
Long-term debt, less current maturities 140,254 140,289
Obligations under capital leases, less current obligations 36,402 32,156
Other long-term liabilities 8,755 6,367
Commitments and contingencies - -
Common stockholders' equity:
Common stock, $.01 par value; 25,000,000 shares
authorized; 6,025,595 and 5,970,439 shares issued
and outstanding 60 60
Nonvoting common stock, $.01 par value; 4,000,000 shares
authorized; 3,050,473 shares issued and outstanding 30 30
Additional paid-in capital 30,776 30,586
Accumulated deficit (83,234) (82,951)
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Total common stockholders' deficit (52,368) (52,275)
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$ 323,174 $ 260,081
========== ==========
See notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Per Share Amounts)
(Unaudited)
<S> <C> <C> <C> <C>
Three Months Ended Nine Months Ended
----------------------- -----------------------
November 1, November 2, November 1, November 2,
1998 1997 1998 1997
---------- ---------- ---------- ----------
Sales $ 157,585 $ 158,749 $ 472,286 $ 466,530
Cost of goods sold 120,279 120,895 357,312 353,906
---------- ---------- ---------- ----------
Gross profit 37,306 37,854 114,974 112,624
---------- ---------- ---------- ----------
Expenses:
Selling, general and
administrative 30,154 29,882 96,541 94,131
Interest 6,284 7,632 18,891 23,049
---------- ---------- ---------- ----------
36,438 37,514 115,432 117,180
---------- ---------- ---------- ----------
Income (loss) before income tax
provision (benefit) 868 340 (458) (4,556)
Income tax provision (benefit) 333 - (175) -
---------- ---------- ---------- ----------
Net income (loss) 535 340 (283) (4,556)
Less provision for preferred
dividends and discount amortization - 137 - 407
---------- ---------- ---------- ----------
Net income (loss) available for
common stock $ 535 $ 203 $ (283) $ (4,963)
========== ========== ========== ==========
Basic and diluted income (loss)
per common share $ .06 $ .04 $ (.03) $ (.98)
========== ========== ========== ==========
Weighted average shares outstanding:
Basic 9,067,133 5,098,894 9,036,525 5,047,192
========== ========== ========== ==========
Diluted 9,107,952 5,098,894 9,036,525 5,047,192
========== ========== ========== ==========
See notes to consolidated financial statements.
</TABLE>
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
Nine Months Ended
------------------------
November 1, November 2,
1998 1997
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (283) $ (4,556)
---------- ----------
Adjustments to reconcile net loss to net
cash from operations:
Depreciation and amortization of fixed assets
and intangibles 9,743 8,888
Provision for LIFO inventory valuation 750 716
Noncash interest expense - 3,763
Gain on disposal of assets (1,017) (139)
Decrease in store closing reserve (1,245) (2,654)
Increase in merchandise inventories (50,185) (30,469)
Increase in other operating assets (13,952) (8,038)
Increase in accounts payable 42,932 30,987
Increase in other operating liabilities 1,509 7,506
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Total adjustments (11,465) 10,506
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Net cash from operating activities (11,748) 6,004
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CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from disposal of assets 2,084 1,969
Proceeds from sale-leaseback of store facilities 8,389 -
Changes in constructed stores to be refinanced
through lease financing (3,397) 1,794
Principal payments received on notes receivable 47 13
Capital expenditures (6,931) (6,131)
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Net cash from investing activities 192 (2,355)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under loan and security agreement, net 15,768 (4)
Principal payments on capital lease obligations (1,444) (1,336)
Payments for deferred finance costs (169) (225)
Principal payments on other long-term debt (35) (35)
Proceeds from exercise of stock options 190 -
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Net cash from financing activities 14,310 (1,600)
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Net increase in cash 2,754 2,049
Cash at beginning of year 6,816 6,973
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Cash at end of period $ 9,570 $ 9,022
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
(1) Cash paid (received) during the period for:
Interest $ 23,021 $ 23,460
Income taxes:
Payments to taxing authorities 1,468 42
Refunds received from taxing authorities (137) (3,798)
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITY:
(1) Capital lease obligations incurred when
the Company entered into lease agreements
for new store facilities. 5,701 -
(2) Amortization of discount on junior cumulative
preferred stock recorded as a direct charge
to retained earnings - 38
(3) Provision for dividends payable - 369
(4) In-kind payment of accrued interest
on promissory notes:
Promissory notes - 3,561
Accrued interest - (3,561)
See notes to consolidated financial statements.
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED NOVEMBER 1, 1998 AND NOVEMBER 2, 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 November
1, 1998 and February 1, 1998 by $7,930 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 is 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. 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.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in Thousands)
The following is management's discussion and analysis of certain significant
factors which have affected the Company's results of operations and financial
condition for the periods included in the accompanying consolidated financial
statements.
RESULTS OF OPERATIONS
The following table sets forth an analysis of various components of the
Consolidated Statements of Operations as a percentage of sales for the three and
nine months ended November 1, 1998 and November 2, 1997:
Three Months Ended Nine Months Ended
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Nov. 1, Nov. 2, Nov. 1, Nov. 2,
1998 1997 1998 1997
------ ------ ------- ------
Sales 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 76.3% 76.2% 75.7% 75.9%
------ ------ ------- ------
Gross profit 23.7% 23.8% 24.3% 24.1%
Selling, general and
administrative expense 19.2% 18.8% 20.4% 20.2%
------ ------ ------- ------
Operating income 4.5% 5.0% 3.9% 3.9%
Interest expense 4.0% 4.8% 4.0% 4.9%
------ ------ ------- ------
Income (loss) before income
tax provision (benefit) 0.5% 0.2% (0.1)% (1.0)%
Income tax provision (benefit) 0.2% - - -
------ ------ ------- ------
Net income (loss) 0.3% 0.2% (0.1)% (1.0)%
====== ====== ======= ======
SALES - During the third quarter of fiscal 1999, sales in comparable stores
decreased $449, or 0.3%, and comparable store sales for the first nine months
increased $9,571, or 2.1%, compared to the same periods last year. Total sales
for the third quarter and first nine months of fiscal 1999 decreased $1,164 or
0.7%, and increased $5,756 or 1.2%, respectively, as compared to the same
periods last year.
Sales during the third quarter were adversely affected by economic weaknesses in
the agricultural communities in which many of the Company's stores are located.
Also, unseasonably warm weather during much of the quarter tempered sales,
especially in the winter clothing and other seasonal sales categories. Lastly,
the Company's in-stock position in basic merchandise suffered due to
implementation issues related to a comprehensive merchandising and inventory
replenishment system installation late in the second quarter.
The Company experienced sales decreases in many merchandise categories during
the third quarter. The largest dollar decreases were in the paint and electric,
automotive, hosiery, men's fashions, misses tops, infants and toddlers, casual
and winter shoes and seasonal categories. Substantial sales increases were
experienced in several categories, most notably pharmacy prescriptions (due in
part to new pharmacies opened during fiscal 1999), audio and video, yarns and
crafts, furniture, athletic shoes, and the bath and floor areas.
The Company operated 149 stores at the end of the third quarter of both fiscal
1999 and 1998. Since November 2, 1997 the Company has opened three stores in new
markets, expanded one existing store, relocated one store and closed three
stores. In addition, during the third quarter, the Company took its first steps
to test a new furniture store concept. The Company converted one general
merchandise store, which had substantial direct competition from a national
discount chain store, to a "Heartland Home Furnishings" store, which sells
furniture, rugs, lamps, accessories and other home furnishings items. This new
concept is currently being tested as an alternative use for store properties
which are not performing to management's expectations. The Company will continue
to assess the results of this concept on a going forward basis, and a very
limited number of these locations is expected to open in the near term.
GROSS PROFIT decreased $548, or 1.4%, and increased $2,350, or 2.1%, for the
third quarter and first nine months, respectively, of fiscal 1999 compared to
the same periods last year. As a percent of sales, gross profit was 23.7% and
24.3% for the third quarter and first nine months, respectively, of fiscal 1999
versus 23.8% and 24.1% for the respective periods last year. Despite lower than
planned sales performance in the quarter, gross margin percent of sales remained
relatively consistent with the same period last year. Markdowns were lower in
the third quarter this year due to the reduced overall inventory investment in
most softlines categories, especially in fashions and other categories which
have higher potential for markdowns. Categories experiencing increases in gross
profit dollars correlate with categories experiencing sales improvements
described above.
SELLING, GENERAL AND ADMINISTRATIVE (SG&A) expense increased $272, or 0.9%, for
the third quarter of fiscal 1999 compared to the third quarter of fiscal 1998
and increased $2,410, or 2.6%, for the first nine months of fiscal 1999 compared
to the same period last year. As a percentage of sales, SG&A expense was 19.2%
and 18.8% for the third quarters of fiscal 1999 and 1998, respectively, and was
20.4% and 20.2%, respectively, for the first nine months of fiscal 1999 and
1998.
The major component changes in SG&A expense for the quarter were as follows.
Store fixed costs increased $658, or 10.6%, primarily due to increased store
rents. Store payroll increased $609, or 4.7%, due primarily to normal wage
increases and the effects of federally mandated minimum wage increases.
Advertising expenses increased $573, or 25.3%, as planned, due to a significant
increase in the number and cost of advertising circulars produced and utilized
during the quarter. Corporate general and administrative costs increased by
$519, or 10.6%, due primarily to increased depreciation and amortization costs
related to financial and merchandising systems implemented within the last year.
These increases in costs were offset by other income which increased by
approximately $2,089 and included (i) the favorable settlement of a lawsuit
related to pharmacy operations which netted $1,316 in income and (ii) the
reversal of a charge recorded in the first quarter for closed store rent on a
single store location totaling $742. The latter location will reopen during the
first quarter of fiscal 2000 as a Heartland Home Furnishings store. In addition,
expenses for bonus accruals were $300 less than last year.
For the first nine months of the current year, corporate general and
administrative costs increased $1,693, or 8.4%, due primarily to increased
corporate payroll and related benefits. The largest increase in payroll expenses
was incurred in the information systems area to support the implementation and
maintenance of the various new systems which have been, and are being,
implemented. In addition, store payroll increased, as planned, due to normal
wage increases and minimum wage increases by $1,476, or 4.0%. Store fixed costs
increased $1,048, or 5.6%, primarily due to the effect of higher costs of new
store locations. These increases were offset somewhat by other income which
increased approximately $2,190, primarily as a result of the items discussed
above related to the third quarter.
INTEREST expense decreased $1,348, or 17.7%, for the third quarter of fiscal
1999 compared to the same period last year and decreased $4,158, or 18.0%, for
the first nine months of fiscal 1999 compared to the same period last year. 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 year-to-date were
approximately $8,567 less than last year, due to the cumulative effect of
improved cash flow, thereby reducing the related interest expense.
INCOME TAX PROVISION - The Company's loss carryforwards from store closing
charges recorded in fiscal 1996 were utilized in the fourth quarter of 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 were consummated on November 18, 1997.
No income tax effects were recorded for the third quarter and first nine months
operations in fiscal 1998 as the Company could not establish, as of the quarter
ended November 2, 1997, with a reasonable degree of certainty, the potential
utilization of loss carryforwards. In contrast, an income tax provision was
recorded related to both the third quarter and nine months ended November 1,
1998. The Company expects that operations in the future will continue to 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 in operating activities totaled $11,748 for the first nine
months of fiscal 1999, and funds provided by operating activities totaled $6,004
during the same period last year. The decrease in cash flow from operating
activities from fiscal 1998 to fiscal 1999 was primarily the result of planned
increases in inventory and changes in other operating liabilities and assets.
These items were offset somewhat by increased accounts payable and improvements
in net income.
Pamida, Inc.'s (Pamida) committed Loan and Security Agreement (the Agreement)
was amended and restated on July 2, 1998 and extended to July 2001. The
amendment increases the maximum borrowing limit to $125,000 from $95,000 and
reduces interest rates by 75 basis points. The amended $125,000 facility
includes a $25,000 supplemental facility primarily intended for real estate
development activities, which the Company plans to use to accelerate its new
store opening program in fiscal 2000.
Borrowings under the Agreement bear interest at a rate which is tied to the
prime rate (as defined) or the London Interbank Offered Rate (LIBOR), generally
at Pamida's discretion. Included in the July 2, 1998 amendment to the Agreement
were provisions substantially increasing the maximum permitted borrowings
available to Pamida at any given time. 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. The Agreement requires 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, engage in
sale/leaseback transactions, or encumber its property, may at some future time,
unless waived or amended, prevent the Company from pursuing its store expansion
program at the rate that the Company desires.
Obligations under the Agreement were $60,962 at November 1, 1998 and $57,111 at
November 2, 1997. Total unused borrowing availability under the Agreement as of
November 1, 1998 totaled $57,936 as compared to $35,513 at the end of the same
period last year. As noted above, this facility expires in July 2001, and the
Company intends to refinance any outstanding balance by such date. Borrowings
under the Agreement are senior to the Senior Subordinated Notes of Pamida. The
Company had long-term debt and obligations under capital leases of $176,656 at
November 1, 1998 and $204,361 at November 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 and refinancings. At November 1, 1998, the Company
was in compliance with all covenants contained in its various financing
agreements.
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. 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 then 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 $6,931 in the first nine months of
fiscal 1999 compared to $5,465 during the same period last year. In addition,
the Company made expenditures of $5,465 and $2,857 in the first nine months of
fiscal 1999 and 1998, respectively, related to information systems software. The
Company opened one additional new store in the fourth quarter and will consider
additional opportunities for new store locations as they arise. Capital
expenditures and information systems software costs are expected to total
approximately $15,000 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, as well as borrowings under the Agreement.
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. In the first half of 1998, the Company sold and leased back six
store properties with net cash proceeds totaling $8,389. The leases are
classified as capital and operating leases for four and two store properties,
respectively. The annual lease payments for the six store properties for each of
the next five years total $933.
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, systems and working capital. The Company expects to continue to
finance these investments through cash flow from operations, leases from
unaffiliated landlords, trade credit and borrowings under the Agreement. 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.
YEAR 2000
The information in this Year 2000 section is a Year 2000 Readiness Disclosure
under the Year 2000 Information Readiness and Disclosure Act.
The Company has developed and begun execution of a plan to mitigate the
Company's exposure to risks emanating from computer software and hardware being
potentially unable to properly process data beyond the calendar year 1999, which
is commonly referred to as Year 2000 compliance. This plan includes addressing
three major elements of risk both within, and external to, the Company: 1)
information technology (IT) systems, 2) non-IT, or embedded technology, systems
and 3) relationships with its key business partners. The plan is further divided
into four phases related to each of the elements of risk: assessment,
remediation planning, solutions implementation, and validation (testing) of
compliance. The Company has substantially completed the assessment phase for all
three elements and currently is at varying points of completion of the other
phases as described more fully below.
Internal Considerations:
The Company's IT systems include proprietary and third-party software and
related hardware as well as data and telephone networks. Since 1994, the Company
has modernized its information technology by replacing five of its
mission-critical legacy systems (inventory, warehouse management, logistics,
store operations and financial systems) with purchased and leased software and
hardware. While the primary impetus for replacing the legacy systems was to
substantially improve each system's functionality, an additional benefit is that
the new systems are designed to be Year 2000 compliant. The two most recent
implementations, financial and inventory systems, are each approximately 80%
complete. The remaining 20% of these projects is planned to be completed by the
end of July 1999. The logistics, warehouse management and store operations
systems implementations are complete and, as needed, will be upgraded further.
The Company's other major system, human resources (including payroll
processing), is planned for replacement by the end of October 1999. Each of
these systems has been certified as being Year 2000 compliant by the respective
vendors.
In addition to the aforementioned systems, the Company has numerous other
systems applications and interfaces between systems which are maintained by the
Company. Approximately 25% of these systems and interfaces have been modified to
address the Year 2000 issue. Those remaining systems and interfaces which are
believed to have potentially material adverse effects on the Company's
operations or financial results in the event of failure are planned for
necessary modifications to be completed and tested by July 1999. The hardware
supporting these systems is planned to be replaced by Year 2000 compliant
hardware before July 1999.
The Company plans to extensively test its key operating systems and mission
critical systems, through simulation of Year 2000 transactions, in the first
half of 1999 and anticipates completion of the testing phase for all of the
Company's software by October 1999.
The Company has recently begun to address its non-IT systems, or embedded
technology risks. While assessment is not yet complete, the Company plans to
complete any necessary remediation by the end of July 1999. Validation is
planned for completion by the end of October 1999.
External Considerations:
The Company has identified its key business partners and will take prudent steps
to assess their Year 2000 readiness and mitigate the risk if they are not
prepared for the Year 2000. Accordingly, the Company is participating in the
International Mass Retail Association (IMRA) task force's efforts to obtain
assurances from vendors and service providers related to their Year 2000
compliance. If certain vendors are unable to deliver product on a timely basis,
due to their own Year 2000 issues, the Company anticipates there will be others
who will be able to deliver similar goods. The Company also recognizes the risks
to the Company if other key suppliers in utilities, communications,
transportation, banking and government areas are not ready for the Year 2000,
and is beginning to develop contingency plans to mitigate the potential adverse
effects of these risks, and intends to have such plans completed by mid-1999.
Costs Related to Year 2000:
The majority of the systems the Company has recently implemented, and those new
systems yet to be implemented, have substantially improved functionality over
the Company's legacy systems which they replace. Accordingly, most of the costs
associated with these systems have been, and will continue to be, capitalized.
Thus far in fiscal 1999, the Company has expensed less than $50,000 related
directly to Year 2000 readiness, and prior to fiscal 1999 the amounts expensed
were similarly immaterial. 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 expected to total approximately $500,000
to $1 million. All expenditures related to the Company's Year 2000 readiness
initiatives will be funded by cash flow from operations and the Agreement and
are included in the Company's operating plans.
Summary:
The Company anticipates that the most reasonably likely worst-case scenarios
include, but are not limited to, loss of communication with stores, loss of
electric power and other utility services, inability to process transactions or
engage in normal business activity, and delayed receipt of merchandise from
vendors. In planning for the most likely worst- case scenarios, the Company is
addressing all three major elements in its plan. The Company believes its IT
systems will be ready for the Year 2000, but the Company may experience some
incidences of non-compliance. The Company plans to allocate internal resources
and, if possible, retain dedicated consultants and vendor representatives to be
ready to take action if these events occur. Development of contingency plans for
non-IT systems is currently in process, and the Company is prepared to dedicate
the required resources to carry out those plans for key non-IT systems, such as
store and phone communications systems.
In addition to the risks previously described, the Company must also be
successful in retaining numerous key employees and external service providers
involved with systems implementation and validation. Failure by the Company to
complete implementation of all mission-critical systems, inability of the
Company to properly address significant system interface issues or 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.
Although the Company is taking the steps it deems reasonable to mitigate
external Year 2000 issues, many elements of these risks, and the ability to
definitively mitigate them, are outside the control the Company. Given the
importance of certain key vendors and service providers, the inability of these
business partners to provide their goods or services to the Company on a timely
basis could also have material adverse effects on the Company's operations and
financial results.
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 except for some
percentage rents and periodic rental adjustments.
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, customer buying
preferences and patterns, competitive conditions, company performance, Year 2000
compliance and Company 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 1-4.
None.
ITEM 5.
Effective June 29, 1998, the Securities and Exchange Commission adopted an
amendment to Rule 14a-4 under the Securities Exchange Act of 1934. As amended,
Rule 14a-4(c)(1) relates to the Company's use of discretionary proxy voting
authority with respect to a shareholder proposal presented at an annual meeting
which the shareholder did not seek to have included in the Company's proxy
statement for such annual meeting. If the proponent of the proposal fails to
notify the Company of the intended proposal at least 45 days prior to the month
and day on which the Company first mailed its proxy statement for the prior
year's annual meeting, then the holders or proxies solicited by the Board of
Directors of the Company will be allowed to use their discretionary voting
authority when the shareholder proposal is raised at the meeting, even though
there was no discussion of the matter in the proxy statement for such meeting.
With respect to the Company's 1999 annual meeting of shareholders, if the
Company does not receive notice of a shareholder proposal intended to be
presented at such annual meeting (which the shareholder has not previously
sought to include in the Company's proxy statement) by March 3, 1999, then the
holders of proxies solicited by the Board of Directors of the Company will be
allowed to use their discrestionary voting authority referred to above with
respect to such proposal.
ITEM 6.
(a) Exhibits.
10.1 Pamida Holdings Corporation 1998 Stock Incentive Plan.
27.1 Financial Data Schedule (EDGAR version only)
(b) Reports on Form 8-K.
No reports on Form 8-K were 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: December 16, 1998 By: /s/ STEVEN S. FISHMAN
----------------- ------------------------------
Steven S. Fishman, Chairman,
President and Chief Executive
Officer
Date: December 16, 1998 By: /s/ TODD D. WEYHRICH
----------------- ------------------------------
Todd D. Weyhrich,
Vice President, Controller and
Chief Accounting Officer
EXHIBIT 10.1
PAMIDA HOLDINGS CORPORATION
1998 STOCK INCENTIVE PLAN
1. PURPOSE. The purpose of the Pamida Holdings Corporation 1998 Stock
Incentive Plan (the "Plan") is to foster and promote the long-term financial
success of the Company and its Subsidiaries and thereby increase stockholder
value by providing incentives to those officers and other key employees who are
likely to be responsible for achieving such success.
2. CERTAIN DEFINITIONS.
"BOARD" means the Board of Directors of the Company.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor thereto. References to a particular section of the Code
shall include any regulations issued under such section.
"COMMITTEE" shall have the meaning provided in Section 3 of the Plan.
"COMMON STOCK" means the Common Stock, $.01 par value per share, of the
Company.
"COMPANY" means Pamida Holdings Corporation, a Delaware corporation.
"DISABILITY" means (i) with respect to the exercise of an Incentive Stock
Option after termination of employment, a disability within the meaning of
Section 22(e)(3) of the Code and (ii) for all other purposes, a mental or
physical condition which, in the opinion of the Committee, renders a grantee
unable or incompetent to carry out the job responsibilities which such grantee
held or the tasks to which such grantee was assigned at the time the disability
was incurred and which is expected to be permanent or for an indefinite duration
exceeding one year.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from
time to time.
"FAIR MARKET VALUE" means, as determined by the Committee, the last
reported sale price on the principal national securities exchange on which the
Common Stock is listed or admitted to trading on the trading day for which the
determination is being made, or, if no such reported sale takes place on such
day, the average of the closing bid and asked prices on such day on the
principal national securities exchange on which the Common Stock is listed or
admitted to trading, or, if the Common Stock is not admitted to trading on a
national securities exchange, the average of the closing bid and asked prices in
the over-the-counter market on the day for which the determination is being made
as reported through Nasdaq, or, if bid and asked prices for the Common Stock on
such day are not reported through Nasdaq, the average of the bid and asked
prices for such day as furnished by any New York Stock Exchange member firm
regularly making a market in the Common Stock selected for such purpose by the
Committee, or, if none of the foregoing is applicable, then the fair market
value of the Common Stock as determined in good faith by the Committee in its
sole discretion.
"INCENTIVE STOCK OPTION" means any stock option intended to qualify as an
"incentive stock option" within the meaning of Section 422 of the Code.
"NON-QUALIFIED STOCK OPTION" means any stock option that is not intended to
be an Incentive Stock Option, including any stock option that provides (as of
the time such option is granted) that it will not be treated as an Incentive
Stock Option.
"PARENT CORPORATION" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company if, at the time of the
granting of the option, each of the corporations other than the Company owns
stock possessing 50% or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain.
"PERFORMANCE UNIT AWARD" means an award granted pursuant to Section 8.
"PLAN YEAR" means the twelve-month period beginning on January 1 and ending
on December 31; provided, that the first Plan Year shall be a short Plan Year
beginning on March 5, 1998, and ending on December 31, 1998.
"RESTRICTED STOCK AWARD" means an award of Common Stock granted pursuant to
Section 9.
"RULE 16B-3" means Rule 16b-3 under the Exchange Act, as in effect from
time to time.
"STOCK APPRECIATION RIGHT" means an award granted pursuant to Section 7.
"STOCK BONUS AWARD" means an award of Common Stock granted pursuant to
Section 10.
"STOCK OPTION" means any option to purchase Common Stock granted pursuant
to Section
"SUBSIDIARY" means (i) as it relates to Incentive Stock Options, any
corporation (other than the Company) in an unbroken chain of corporations
beginning with the Company if, at the time of the granting of the option, each
of the corporations (other than the last corporation in the unbroken chain) owns
stock possessing 50% or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain and (ii) for all other
purposes, a corporation, domestic or foreign, of which not less than 50% of the
voting shares are held by the Company or by a Subsidiary, whether or not such
corporation now exists or hereafter is organized or acquired by the Company or
by a Subsidiary.
3. ADMINISTRATION. The Plan shall be administered by a committee of two or
more members of the Board (the "Committee") selected by the Board, each of whom
shall qualify as a "Non-Employee Director" within the meaning of Rule 16b-3 and
as an "outside director" within the meaning of Section 162(m) of the Code.
The Committee shall have authority to grant to eligible employees of the
Company or its Subsidiaries, pursuant to the terms of the Plan, (a) Stock
Options, (b) Stock Appreciation Rights, (c) Restricted Stock Awards, (d)
Performance Unit Awards, (e) Stock Bonus Awards, or (f) any combination of the
foregoing.
Subject to the applicable provisions of the Plan, the Committee shall have
authority to interpret the provisions of the Plan and to decide all questions of
fact arising in the application of such provisions; to select the officers and
other key employees to whom awards or options shall be granted under the Plan;
to determine whether and to what extent awards or options shall be granted under
the Plan; to determine the types of awards and options to be granted under the
Plan and the amount, size, terms and conditions of each such award or option; to
determine the time when awards or options shall be granted under the Plan; to
determine whether, to what extent and under what circumstances the payment of
Common Stock and other amounts payable with respect to an award granted under
the Plan shall be deferred either automatically or at the election of the
grantee; to determine the Fair Market Value of the Common Stock from time to
time; to authorize persons to execute on behalf of the Company any agreement
required to be entered into under the Plan; to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as the
Committee from time to time shall deem advisable; and to make all other
determinations necessary or advisable for the administration of the Plan.
Unless otherwise expressly provided in the Plan, all decisions and
determinations made by the Committee pursuant to the provisions of the Plan
shall be made in the sole discretion of the Committee and shall be final and
binding on all persons, including but not limited to the Company and its
Subsidiaries, the officers and other key employees to whom awards and options
are granted under the Plan, the heirs and legal representatives of such officers
and key employees, and the personal representatives and beneficiaries of the
estates of such officers and key employees.
The Committee may delegate to any officer or officers of the Company any of
the Committee's duties, powers, and authorities under the Plan upon such
conditions and with such limitations as the Committee may determine; provided,
that only the Committee may select for awards or options under the Plan, and
make grants of awards or options under the Plan to, officers and other key
employees of the Company or any Subsidiary who are subject to Section 16 of the
Exchange Act at the time of such selection or the making of such a grant.
4. COMMON STOCK SUBJECT TO THE PLAN. The Company shall reserve and keep
available for issuance under the Plan 500,000 shares of Common Stock, subject to
adjustment pursuant to Section 19. Such shares may consist in whole or in part
of authorized and unissued shares or treasury shares or any combination thereof.
The aggregate number of shares of Common Stock subject to or issuable in payment
of (i) Stock Options, (ii) Stock Appreciation Rights, (iii) Stock Bonus Awards,
(iv) Restricted Stock Awards or (v) Performance Unit Awards granted under the
Plan in any Plan Year to any individual may not exceed 150,000, subject to
adjustment pursuant to Section 19. Except as otherwise provided in the Plan, any
shares subject to an option or right which expires for any reason or terminates
unexercised as to such shares shall again be available for the grant of awards
or options under the Plan. If any shares of Common Stock have been pledged as
collateral for indebtedness incurred by an optionee in connection with the
exercise of a Stock Option and such shares are returned to the Company in
satisfaction of such indebtedness, then such shares shall again be available for
the grant of awards or options under the Plan.
5. ELIGIBILITY TO RECEIVE AWARDS AND OPTIONS. Awards and options may be
granted under the Plan to those officers and other key employees of the Company
or any Subsidiary who are responsible for or contribute to, or are likely to be
responsible for or contribute to, the management, growth and success of the
Company or any Subsidiary. The granting of an award or option under the Plan to
an officer or other key employee of the Company or any Subsidiary shall
conclusively evidence the Committee's determination that such grantee meets one
or more of the criteria referred to in the preceding sentence. Directors of the
Company or of any Subsidiary who are not employees of the Company or any
Subsidiary shall not be eligible to participate in the Plan.
6. STOCK OPTIONS. A Stock Option may be an Incentive Stock Option or a
Non-Qualified Stock Option. To the extent that any Stock Option does not qualify
as an Incentive Stock Option, it shall constitute a separate Non-Qualified Stock
Option. Stock Options may be granted alone or in addition to other awards made
under the Plan. Stock Options shall be evidenced by agreements in such form as
the Committee shall approve from time to time. The agreements shall contain in
substance the following terms and conditions and may contain such additional
terms and conditions, not inconsistent with the terms of the Plan, as the
Committee shall deem appropriate:
(a) TYPE OF OPTION. Each option agreement shall identify the Stock
Option represented thereby as an Incentive Stock Option or a Non-Qualified
Stock Option, as the case may be.
(b) OPTION PRICE. The option exercise price per share shall not be
less than the Fair Market Value of the Common Stock on the date the Stock
Option is granted and in no event shall be less than the par value of the
Common Stock.
(c) TERM. Each option agreement shall state the period or periods of
time within which the Stock Option may be exercised, in whole or in part,
which shall be such period or periods of time as the Committee may
determine at the time of the Stock Option grant; provided, that no Stock
Option granted under the Plan shall be exercisable more than ten years
after the date of its grant; and provided further, that each Stock Option
granted under the Plan shall become exercisable one year after the date of
its grant, unless the option agreement specifically provides otherwise. The
Committee shall have authority to accelerate previously established
exercise rights, subject to the requirements set forth in the Plan, under
such circumstances and upon such terms and conditions as the Committee
shall deem appropriate.
(d) PAYMENT FOR SHARES. The Committee may permit all or part of the
payment of the option exercise price to be made (i) in cash, by check or by
wire transfer or (ii) in shares of Common Stock (A) which already are owned
by the optionee and which are surrendered to the Company in good form for
transfer or (B) which are retained by the Company from the shares of the
Common Stock which would otherwise be issued to the optionee upon the
optionee's exercise of the Stock Option. Such shares shall be valued at
their Fair Market Value on the date of exercise of the Stock Option. In
lieu of payment in fractions of shares, payment of any fractional share
amount shall be made in cash or check payable to the Company. The Committee
also may provide that the exercise price may be paid by delivering a
properly executed exercise notice in a form approved by the Committee
together with irrevocable instructions to a broker to promptly deliver to
the Company the amount of the applicable sale or loan proceeds required to
pay the exercise price. No shares of Common Stock shall be issued to any
optionee upon the exercise of a Stock Option until the Company receives
full payment therefor as described above.
(e) RIGHTS UPON TERMINATION OF EMPLOYMENT. In the event that an
optionee ceases to be employed by the Company and all of its Subsidiaries
for any reason other than such optionee's death or Disability, any rights
of the optionee under any Stock Option then in effect immediately shall
terminate; provided, that the optionee (or the optionee's legal
representative) shall have the right to exercise the Stock Option during
its term within a period of one (1) month after such termination of
employment to the extent that the Stock Option was exercisable at the time
of such termination or within such other period and subject to such other
terms and conditions as may be specified by the Committee. Notwithstanding
the foregoing provisions of this Section 6(e), the optionee (and the
optionee's legal representative) shall not have any rights under any Stock
Option, and the Company shall not be obligated to sell or deliver shares of
Common Stock (or have any other obligation or liability) under any Stock
Option, if the Committee shall determine that the employment of the
optionee with the Company or any Subsidiary has been terminated for cause.
In the event of such determination, the optionee (and the optionee's legal
representative) shall have no right under any Stock Option to purchase any
shares of Common Stock regardless of whether the optionee (or the
optionee's legal representative) shall have delivered a notice of exercise
prior to the Committee's making of such determination. Any Stock Option may
be terminated entirely by the Committee at the time of or at any time
subsequent to a determination by the Committee under this Section 6(e)
which has the effect of eliminating the Company's obligation to sell or
deliver shares of Common Stock under such Stock Option.
In the event that an optionee ceases to be employed by the Company and
all of its Subsidiaries by reason of such optionee's Disability, prior to
the expiration of a Stock Option and without such optionee's having fully
exercised such Stock Option, such optionee or such optionee's legal
representative shall have the right to exercise such Stock Option during
its term within a period of six (6) months after such termination of
employment to the extent that such Stock Option was exercisable at the time
of such termination or within such other period and subject to such other
terms and conditions as may be specified by the Committee.
In the event that an optionee ceases to be employed by the Company and
all of its Subsidiaries by reason of such optionee's death, prior to the
expiration of a Stock Option and without such optionee's having fully
exercised such Stock Option, the personal representative of such optionee's
estate or the person who acquired the right to exercise such Stock Option
by bequest or inheritance from such optionee shall have the right to
exercise such Stock Option during its term within a period of twelve (12)
months after the date of such optionee's death to the extent that such
Stock Option was exercisable at the time of such death or within such other
period and subject to such other terms and conditions as may be specified
by the Committee.
To the extent that the aggregate Fair Market Value (determined as of the time
the option is granted) of the Common Stock with respect to which Incentive Stock
Options granted under the Plan (and all other plans of the Company and its
Subsidiaries) become exercisable for the first time by any individual in any
calendar year exceeds $100,000, such Stock Options shall be treated as
Non-Qualified Stock Options. No Incentive Stock Option shall be granted to any
employee if, at the time the option is granted, the employee (in his or her own
right or by reason of the attribution rules applicable under Section 424(d) of
the Code) owns more than 10% of the total combined voting power of all classes
of stock of the Company or any Parent Corporation or Subsidiary unless at the
time such option is granted the option price is at least 110% of the Fair Market
Value of the stock subject to such Stock Option and such Stock Option by its
terms is not exercisable after the expiration of five years from the date of its
grant.
7. STOCK APPRECIATION RIGHTS. Stock Appreciation Rights shall enable the
grantees thereof to benefit from increases in the Fair Market Value of shares of
Common Stock and shall be evidenced by agreements in such form as the Committee
shall approve from time to time. The agreements shall contain in substance the
following terms and conditions and may contain such additional terms and
conditions, not inconsistent with the terms of the Plan, as the Committee shall
deem appropriate:
(a) AWARD. A Stock Appreciation Right shall entitle the grantee,
subject to such terms and conditions as the Committee may prescribe, to
receive upon the exercise thereof an award equal to all or a portion of the
excess of (i) the Fair Market Value of a specified number of shares of
Common Stock at the time of the exercise of such right over (ii) a
specified price which shall not be less than the Fair Market Value of the
Common Stock at the time the right is granted or, if connected with a
previously granted Stock Option, not less than the Fair Market Value of the
Common Stock at the time such Stock Option was granted. Subject to the
limitations set forth in Section 4, such award may be paid by the Company
in cash, shares of Common Stock (valued at their then Fair Market Value) or
any combination thereof, as the Committee may determine. Stock Appreciation
Rights may be, but are not required to be, granted in connection with a
previously or contemporaneously granted Stock Option. In the event of the
exercise of a Stock Appreciation Right, the number of shares reserved for
issuance under the Plan shall be reduced by the number of shares covered by
the Stock Appreciation Right as to which such exercise occurs.
(b) TERM. Each agreement shall state the period or periods of time
within which the Stock Appreciation Right may be exercised, in whole or in
part, subject to such terms and conditions prescribed for such purpose by
the Committee; provided, that no Stock Appreciation Right shall be
exercisable more than ten years after the date of its grant; and provided
further, that each Stock Appreciation Right granted under the Plan shall
become exercisable one year after the date of its grant, unless the
agreement specifically provides otherwise. The Committee shall have
authority to accelerate previously established exercise rights, subject to
the requirements set forth in the Plan, under such circumstances and upon
such terms and conditions as the Committee shall deem appropriate.
(c) RIGHTS UPON TERMINATION OF EMPLOYMENT. In the event that a grantee
of a Stock Appreciation Right ceases to be employed by the Company and all
of its Subsidiaries for any reason other than such grantee's death or
Disability, any rights of the grantee under any Stock Appreciation Right
then in effect immediately shall terminate; provided, that the grantee (or
the grantee's legal representative) shall have the right to exercise the
Stock Appreciation Right during its term within a period of one (1) month
after such termination of employment to the extent that the Stock
Appreciation Right was exercisable at the time of such termination or
within such other period and subject to such other terms and conditions as
may be specified by the Committee. Notwithstanding the foregoing provisions
of this Section 7(c), the grantee (and the grantee's legal representative)
shall not have any rights under any Stock Appreciation Right, and the
Company shall not be obligated to pay or deliver any cash, Common Stock or
any combination thereof (or have any other obligation or liability) under
any Stock Appreciation Right, if the Committee shall determine that the
employment of the grantee with the Company or any Subsidiary has been
terminated for cause. In the event of such determination, the grantee (and
the grantee's legal representative) shall have no right under any Stock
Appreciation Right regardless of whether the grantee (or the grantee's
legal representative) shall have delivered a notice of exercise prior to
the Committee's making of such determination. Any Stock Appreciation Right
may be terminated entirely by the Committee at the time of or at any time
subsequent to a determination by the Committee under this Section 7(c)
which has the effect of eliminating the Company's obligations under such
Stock Appreciation Right.
In the event that a grantee of a Stock Appreciation Right ceases to be
employed by the Company and all of its Subsidiaries by reason of such
grantee's Disability, prior to the expiration of a Stock Appreciation Right
and without such grantee's having fully exercised such Stock Appreciation
Right, such grantee or such grantee's legal representative shall have the
right to exercise such Stock Appreciation Right during its term within a
period of six (6) months after such termination of employment to the extent
that such Stock Appreciation Right was exercisable at the time of such
termination or within such other period and subject to such other terms and
conditions as may be specified by the Committee.
In the event that a grantee ceases to be employed by the Company and
all of its Subsidiaries by reason of such grantee's death, prior to the
expiration of a Stock Appreciation Right and without such grantee's having
fully exercised such Stock Appreciation Right, the personal representative
of the grantee's estate or the person who acquired the right to exercise
such Stock Appreciation Right by bequest or inheritance from such grantee
shall have the right to exercise such Stock Appreciate Right during its
term within a period of twelve (12) months after the date of such grantee's
death to the extent that such Stock Appreciation Right was exercisable at
the time of such death or within such other period and subject to such
other terms and conditions as may be specified by the Committee.
8. PERFORMANCE UNIT AWARDS. Performance Unit Awards shall entitle the
grantees thereof to receive future payments based upon and subject to the
achievement of preestablished long-term performance targets and shall be
evidenced by agreements in such form as the Committee shall approve from time to
time. The agreements shall contain in substance the following terms and
conditions and may contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem
appropriate:
(a) PERFORMANCE PERIOD. The Committee shall establish with respect to
each Performance Unit Award a performance period of not fewer than two
years nor more than five years.
(b) UNIT VALUE. The Committee shall establish with respect to each
Performance Unit Award a value for each unit which shall not change
thereafter or which may vary thereafter on the basis of criteria specified
by the Committee.
(c) PERFORMANCE TARGETS. The Committee shall establish with respect to
each Performance Unit Award maximum and minimum performance targets to be
achieved during the applicable performance period. The achievement of the
maximum targets shall entitle a grantee to payment with respect to the full
value of a Performance Unit Award. The achievement of less than the maximum
targets, but in excess of the minimum targets, shall entitle a grantee to
payment with respect to a portion of a Performance Unit Award according to
the level of achievement of the applicable targets as specified by the
Committee. To the extent the Committee deems necessary or appropriate to
protect against the loss of deductibility pursuant to Section 162(m) of the
Code, such targets shall be established in conformity with the requirements
of Section 162(m) of the Code.
(d) PERFORMANCE MEASURES. Performance targets established by the
Committee shall relate to corporate, division, subsidiary, group or unit
performance in terms of objective financial criteria or performance goals
which satisfy the requirements of Section 162(m) of the Code or, with
respect to grantees not subject to Section 162(m) of the Code, such other
measures or standards of performance as the Committee may determine.
Multiple targets may be used and may have the same or different weighting,
and the targets may relate to absolute performance or relative performance
measured against other companies, businesses or indexes.
(e) ADJUSTMENTS. At any time prior to the payment of a Performance
Unit Award, the Committee may adjust previously established performance
targets or other terms and conditions of such Performance Unit Award,
including the Company's or another company's financial performance for Plan
purposes, in order to reduce or eliminate, but not to increase, the payment
with respect to a Performance Unit Award that otherwise would be due upon
the attainment of such previously established performance targets. Such
adjustments shall be made to reflect major unforeseen events such as
changes in laws, regulations or accounting practices, mergers, acquisitions
or divestitures or other extraordinary, unusual or nonrecurring items or
events.
(f) PAYMENT OF PERFORMANCE UNIT AWARDS. Upon the conclusion of each
performance period, the Committee shall determine the extent to which the
applicable performance targets have been attained and any other terms and
conditions have been satisfied for such period and shall provide such
certification thereof as may be necessary to satisfy the requirements of
Section 162(m) of the Code. The Committee shall determine what, if any,
payment is due on a Performance Unit Award and, subject to the limitations
set forth in Section 4, whether such payment shall be made in cash, shares
of Common Stock (valued at their then Fair Market Value) or a combination
thereof. Payment of a Performance Unit Award shall be made in a lump sum or
in installments, as determined by the Committee, commencing as promptly as
practicable after the end of the performance period unless such payment is
deferred upon such terms and conditions as may be specified by the
Committee.
(g) TERMINATION OF EMPLOYMENT. In the event that a grantee of a
Performance Unit Award ceases to be employed by the Company and all of its
Subsidiaries for any reason other than such grantee's death or Disability,
any rights of such grantee under any Performance Unit Award then in effect
whose performance period has not ended shall terminate immediately;
provided, that the Committee may authorize the partial payment of any such
Performance Unit Award if the Committee determines such action to be
equitable.
In the event that a grantee of a Performance Unit Award ceases to be
employed by the Company and all of its Subsidiaries by reason of such
grantee's death or Disability, any rights of such grantee under any
Performance Unit Award then in effect whose performance period has not
ended shall terminate immediately; provided, that the Committee may
authorize the payment to such grantee or such grantee's legal
representative of all or any portion of such Performance Unit Award to the
extent earned under the applicable performance targets, even though the
applicable performance period has not ended, upon such terms and conditions
as may be specified by the Committee.
9. RESTRICTED STOCK AWARDS. Restricted Stock Awards shall consist of shares
of Common Stock restricted against transfer, subject to a substantial risk of
forfeiture and to other terms and conditions intended to further the purpose of
the Plan as the Committee may determine, and shall be evidenced by agreements in
such form as the Committee shall approve from time to time. The agreements shall
contain in substance the following terms and conditions and may contain such
additional terms and conditions, not inconsistent with the terms of the Plan, as
the Committee shall deem appropriate:
(a) RESTRICTION PERIOD. The Common Stock covered by Restricted Stock
Awards shall be subject to the applicable restrictions established by the
Committee over such period as the Committee shall determine. To the extent
the Committee deems necessary or appropriate to protect against the loss of
deductibility pursuant to Section 162(m) of the Code, Restricted Stock
Awards also may be subject to the attainment of one or more preestablished
performance objectives which relate to corporate, subsidiary, division,
group or unit performance in terms of objective financial criteria or
performance goals which satisfy the requirements of Section 162(m) of the
Code; provided, that any such preestablished financial criteria or
performance goals subsequently may be adjusted by the Committee to reduce
or eliminate, but not to increase, a Restricted Stock Award in order to
take into account unforeseen events or changes in circumstances.
(b) RESTRICTION UPON TRANSFER. Shares of Common Stock covered by
Restricted Stock Awards may not be sold, assigned, transferred, exchanged,
pledged, hypothecated or otherwise encumbered, except as provided in the
Plan or in any Restricted Stock Award agreement entered into between the
Company and a grantee, during the restriction period applicable to such
shares. Notwithstanding the foregoing provisions of this Section 9(b), and
except as otherwise provided in the Plan or the applicable Restricted Stock
Award agreement, a grantee of a Restricted Stock Award shall have all of
the other rights of a holder of Common Stock including but not limited to
the right to receive dividends and the right to vote such shares.
(c) PAYMENT. The Committee shall determine the amount, form and time
of payment, if any, that shall be required from the grantee of a Restricted
Stock Award in consideration of the issuance and delivery of the shares of
Common Stock covered by such Restricted Stock Award.
(d) CERTIFICATES. Each certificate issued in respect of shares of
Common Stock covered by a Restricted Stock Award shall be registered in the
name of the grantee and shall bear the following legend (in addition to any
other legends which may be appropriate):
"This certificate and the shares of stock represented hereby are
subject to the terms and conditions (including forfeiture
provisions and restrictions against transfer) contained in the
Pamida Holdings Corporation 1998 Stock Incentive Plan and a
Restricted Stock Award Agreement entered into between the
registered owner and Pamida Holdings Corporation. Release from
such terms and conditions may be obtained only in accordance with
the provisions of such Plan and Agreement, a copy of each of
which is on file in the office of the Secretary of Pamida
Holdings Corporation."
The Committee may require the grantee of a Restricted Stock Award to enter
into an escrow agreement providing that the certificates representing the
shares covered by such Restricted Stock Award will remain in the physical
custody of an escrow agent until all restrictions are removed or expire.
The Committee also may require that the certificates held in such escrow be
accompanied by a stock power, endorsed in blank by the grantee, relating to
the Common Stock covered by such certificates.
(e) LAPSE OF RESTRICTIONS. Except for preestablished performance
objectives established with respect to Restricted Stock Awards to grantees
subject to Section 162(m) of the Code, the Committee may provide for the
lapse of restrictions applicable to Common Stock subject to Restricted
Stock Awards in installments and may waive such restrictions in whole or in
part based upon such factors and such circumstances as the Committee shall
determine. Upon the lapse of such restrictions, certificates for shares of
Common Stock, free of the restrictive legend set forth in Section 9(c),
shall be issued to the grantee or the grantee's legal representative. The
Committee shall have authority to accelerate the expiration of the
applicable restriction period with respect to all or any portion of the
shares of Common Stock covered by a Restricted Stock Award except, with
respect to grantees subject to Section 162(m) of the Code, to the extent
such acceleration would result in the loss of the deductibility of such
Restricted Stock Award pursuant to Section 162(m) of the Code.
(f) TERMINATION OF EMPLOYMENT. In the event that a grantee of a
Restricted Stock Award ceases to be employed by the Company and all of its
Subsidiaries for any reason, any rights of such grantee with respect to
shares of Common Stock that remain subject to restrictions under such
Restricted Stock Award shall terminate immediately, and any shares of
Common Stock covered by a Restricted Stock Award with unlapsed restrictions
shall be subject to reacquisition by the Company upon the terms set forth
in the applicable agreement with such grantee. The Committee may provide
for complete or partial exceptions to such employment requirement if the
Committee determines such action to be equitable.
10. STOCK BONUS AWARDS. The Committee may grant a Stock Bonus Award to an
eligible grantee under the Plan based upon corporate, division, subsidiary,
group or unit performance in terms of preestablished objective financial
criteria or performance goals or, with respect to participants not subject to
Section 162(m) of the Code, such other measures or standards of performance
(including but not limited to performance already accomplished) as the Committee
may determine; provided, that any such preestablished financial criteria or
performance goals subsequently may be adjusted to reduce or eliminate, but not
to increase, a Stock Bonus Award in order to take into account unforeseen events
or changes in circumstances.
If appropriate in the sole discretion of the Committee, Stock Bonus Awards
shall be evidenced by agreements in such form as the Committee shall approve
from time to time. In addition to any applicable performance goals or standards
and subject to the terms of the Plan, shares of Common Stock which are the
subject of a Stock Bonus Award may be (i) subject to additional restrictions
(including but not limited to restrictions on transfer) or (ii) granted directly
to a grantee free of any restrictions, as the Committee shall deem appropriate.
11. GENERAL RESTRICTIONS. Each award or grant under the Plan shall be
subject to the requirement that if at any time the Committee shall determine
that (i) the listing, registration or qualification of the shares of Common
Stock subject or related thereto upon any securities exchange or under any state
or federal law, (ii) the consent or approval of any governmental regulatory
body, or (iii) an agreement by the grantee of an award or grant with respect to
the disposition of the shares of Common Stock subject or related thereto is
necessary or desirable as a condition of, or in connection with, such award or
grant or the issuance or purchase of shares of Common Stock thereunder, then
such award or grant may not be consummated and any rights thereunder may not be
exercised in whole or in part unless such listing, registration, qualification,
consent, approval or agreement shall have been effected or obtained upon
conditions acceptable to the Committee. Awards or grants under the Plan shall be
subject to such additional terms and conditions, not inconsistent with the Plan,
as the Committee in its sole discretion deems necessary or desirable, including
but not limited to such terms and conditions as are necessary to enable a
grantee to avoid any short-swing profit recapture liability under Section 16 of
the Exchange Act.
12. SINGLE OR MULTIPLE AGREEMENTS. Multiple forms of awards or grants or
combinations thereof may be evidenced either by a single agreement or by
multiple agreements, as determined by the Committee.
13. RIGHTS OF A STOCKHOLDER. Unless otherwise provided by the Plan, the
grantee of any award or grant under the Plan shall have no rights as a
stockholder of the Company with respect to the shares of Common Stock subject or
related to such award or grant unless and until certificates for such shares of
Common Stock are issued to such grantee.
14. NO RIGHT TO CONTINUE EMPLOYMENT. Nothing in the Plan or in any
agreement entered into pursuant to the Plan shall confer upon any grantee the
right to continue in the employment of the Company or any Subsidiary or affect
any right which the Company or any Subsidiary may have to terminate the
employment of any grantee with or without cause.
15. WITHHOLDING. The Company's obligation to (i) deliver shares of Common
Stock or pay cash upon the exercise of any Stock Option or Stock Appreciation
Right, (ii) deliver shares of Common Stock or pay cash in payment of any
Performance Unit Award, (iii) deliver stock certificates upon the vesting of any
Restricted Stock Award, and (iv) deliver shares of Common Stock upon the grant
of any Stock Bonus Award shall be subject to applicable federal, state and local
tax withholding requirements. In the discretion of the Committee, amounts
required to be withheld for taxes may be paid by the grantee in cash or shares
of Common Stock (either through the surrender of previously held shares of
Common Stock or the withholding of shares of Common Stock otherwise issuable
upon the exercise or payment of such award or grant) having a Fair Market Value
equal to the required tax withholding amount and upon such other terms and
conditions as the Committee shall determine; provided, that any election by a
grantee subject to Section 16(b) of the Exchange Act to pay any tax withholding
in shares of Common Stock shall be subject to and must comply with Rule 16b-3(e)
under the Exchange Act.
16. INDEMNIFICATION. No member of the Board or the Committee, nor any
officer or employee of the Company or a Subsidiary acting on behalf of the Board
or the Committee, shall be personally liable for any action, determination or
interpretation taken or made in good faith with respect to the Plan; and all
members of the Board or the Committee and each and any officer or employee of
the Company or any Subsidiary acting on their behalf shall, to the extent
permitted by law, be fully indemnified and protected by the Company in respect
of any such action, determination or interpretation.
17. NON-ASSIGNABILITY. No award or grant under the Plan shall be assignable
or transferable by the recipient thereof except by will, by the laws of descent
and distribution or, in the case of awards or grants other than Incentive Stock
Options, pursuant to a qualified domestic relations order or by such other means
(if any) as the Committee may approve from time to time with respect to holders
whose transactions in the Common Stock are not subject to Section 16(b) of the
Exchange Act. No right or benefit under the Plan shall in any manner be subject
to the debts, contracts, liabilities or torts of the person entitled to such
right or benefit.
18. NONUNIFORM DETERMINATIONS. The Committee's determinations under the
Plan (including but not limited to determinations of the persons to receive
awards or grants, the form, amount and timing of such awards or grants, the
terms and provisions of such awards or grants and the agreements evidencing them
and the establishment of values and performance targets) need not be uniform and
may be made by the Committee selectively among the persons who receive, or are
eligible to receive, awards or grants under the Plan, whether or not such
persons are similarly situated.
19. ADJUSTMENTS. In the event of any change in the outstanding shares of
Common Stock, by reason of a stock dividend or distribution, stock split,
recapitalization, merger, reorganization, consolidation, split-up, spin-off,
combination of shares, exchange of shares or other change in corporate structure
affecting the Common Stock, the Committee shall make appropriate adjustments in
(a) the aggregate number of shares of Common Stock (i) reserved for issuance
under the Plan, (ii) for which grants or awards may be made to an individual
grantee and (iii) covered by outstanding awards and grants denominated in shares
or units of Common Stock, (b) the exercise or other applicable price related to
outstanding awards or grants and (c) the appropriate Fair Market Value and other
price determinations relevant to outstanding awards or grants and shall make
such other adjustments as may be equitable under the circumstances; provided,
that the number of shares subject to any award or grant always shall be a whole
number.
20. TERMS OF PAYMENT. Subject to any other applicable provisions of the
Plan and to any applicable laws, whenever payment by a grantee is required with
respect to shares of Common Stock which are the subject of an award or grant
under the Plan, the Committee shall determine the time, form and manner of such
payment, including but not limited to lump-sum payments and installment payments
upon such terms and conditions as the Committee may prescribe. Installment
payment obligations of a grantee may be evidenced by full-recourse,
limited-recourse or non-recourse promissory notes or other instruments, with or
without interest and with or without collateral or other security as the
Committee may determine.
21. TERMINATION AND AMENDMENT. The Board may terminate or amend the Plan or
any portion thereof at any time, including but not limited to amendments to the
Plan necessary to comply with the requirements of Section 16(b) of the Exchange
Act. The termination or any modification or amendment of the Plan shall not,
without the consent of a grantee, adversely affect such grantee's rights under
an award or grant previously made to such grantee under the Plan. The Committee
may amend the terms of any award or grant theretofore granted, prospectively or
retroactively; but, except as otherwise expressly permitted by the Plan and
subject to Section 19, no such amendment shall adversely affect the rights of
the grantee of such award or grant without such grantee's consent.
Notwithstanding the foregoing provisions of this Section 21, stockholder
approval of any action referred to in this Section 21 shall be required whenever
necessary to satisfy the applicable requirements of Rule 16b-3, Section 162(m)
of the Code or Section 422 of the Code.
22. SEVERABILITY. With respect to participants subject to Section 16 of the
Exchange Act, (i) the Plan is intended to comply with all applicable conditions
of Rule 16b-3 or any successor to such rule, (ii) all transactions involving
grantees who are subject to Section 16(b) of the Exchange Act are subject to
such conditions, regardless of whether the conditions are expressly set forth in
the Plan and (iii) any provision of the Plan that is contrary to a condition of
Rule 16b-3 shall not apply to grantees who are subject to Section 16(b) of the
Exchange Act. If any of the terms or provisions of the Plan, or awards or grants
made under the Plan, conflict with the requirements of Section 162(m) or Section
422 of the Code with respect to awards or grants subject to or governed by
Section 162(m) or Section 422 of the Code, as the case may be, then such terms
or provisions shall be deemed inoperative to the extent they so conflict with
the requirements of Section 162(m) or Section 422 of the Code, as the case may
be. With respect to an Incentive Stock Option, if the Plan does not contain any
provision required to be included in the Plan under Section 422 of the Code (as
amended from time to time) or any successor to such section, then such provision
shall be deemed to be incorporated in the Plan with the same force and effect as
if such provision had been expressly set out in the Plan.
23. EFFECT ON OTHER PLANS. Participation in the Plan shall not affect an
employee's eligibility to participate in any other benefit or incentive plan of
the Company or any Subsidiary. Any grants or awards made pursuant to the Plan
shall not be taken into account in determining the benefits provided or to be
provided under any other plan of the Company or any Subsidiary unless otherwise
specifically provided in such other plan.
24. TERM OF PLAN. Subject to approval of the Plan by the stockholders of
the Company not later than December 31, 1998, the Plan shall become effective on
March 5, 1998, and shall terminate for purposes of further grants on the first
to occur of (i) December 31, 2007, or (ii) the effective date of the termination
of the Plan by the Board pursuant to Section 21. No awards or options may be
granted under the Plan after the termination of the Plan, but such termination
shall not affect any awards or options outstanding at the time of such
termination or the authority of the Committee to continue to administer the Plan
apart from the making of further grants.
25. GOVERNING LAW. The Plan shall be governed by and construed in
accordance with the laws of Delaware.
<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 November 1,
1998 and the related Consolidated Statement of Operations for the 39 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> 9-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-02-1998
<PERIOD-END> NOV-01-1998
<CASH> 9,570
<SECURITIES> 0
<RECEIVABLES> 14,325
<ALLOWANCES> 50
<INVENTORY> 202,362
<CURRENT-ASSETS> 230,319
<PP&E> 106,402
<DEPRECIATION> 67,418
<TOTAL-ASSETS> 323,174
<CURRENT-LIABILITIES> 190,131
<BONDS> 176,656
0
0
<COMMON> 90
<OTHER-SE> (52,458)
<TOTAL-LIABILITY-AND-EQUITY> 323,174
<SALES> 472,286
<TOTAL-REVENUES> 472,286
<CGS> 357,312
<TOTAL-COSTS> 453,853
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,891
<INCOME-PRETAX> (458)
<INCOME-TAX> (175)
<INCOME-CONTINUING> (283)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (283)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
