SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934
For the fiscal year ended January 31, 1999
Commission File Number 1-10619
PAMIDA HOLDINGS CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 47-0696125
------------------------------- ----------------------------
(State or other jurisdiction of (IRS Employer Identification
incorporation or organization) Number)
8800 "F" Street, Omaha, Nebraska 68127
--------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (402) 339-2400
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each Name of Each Exchange
Class on Which Registered
------------- -----------------------
Common Stock American Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of March 22, 1999 was $18,396,051 based upon the closing price
for such stock on the American Stock Exchange on such date.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date:
Outstanding at
Class of Stock March 22, 1999
---------------------- ----------------
Common Stock 6,026,495 shares
Nonvoting Common Stock 3,050,473 shares
DOCUMENTS INCORPORATED BY REFERENCE: Portions of the registrant's proxy
statement dated April 5, 1999, for the annual meeting of the registrant's
stockholders to be held on May 20, 1999, are incorporated by reference into Part
III.
PART I
ITEM 1. BUSINESS.
FORWARD-LOOKING STATEMENTS
This Form 10-K contains certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995 (the "1995
Act"). Such statements are made in good faith by the Company pursuant to the
safe-harbor provisions of the 1995 Act. In connection with these safe-harbor
provisions, this Form 10-K 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. Plans for new stores are subject to
numerous contingencies discussed below in this Form 10-K. The Company further
cautions that the forward-looking information contained in this Form 10-K is not
exhaustive or exclusive. The Company does not undertake to update any
forward-looking statements which may be made from time to time by or on behalf
of the Company.
GENERAL.
Pamida Holdings Corporation conducts a general merchandise retail business
through its wholly-owned subsidiary, Pamida, Inc., a Delaware corporation.
Unless the context indicates otherwise, the terms "Pamida" and "Company" refer
collectively to Pamida Holdings Corporation, its direct and indirect
subsidiaries and their predecessors, and "Holdings" refers only to Pamida
Holdings Corporation.
Holdings is a Delaware corporation incorporated in 1986 to acquire all of
the capital stock of Pamida, Inc., which, directly since 1981 and through a
predecessor prior to 1981, had been engaged in the general merchandise retail
business since 1963. The capital stock of Pamida, Inc. is the only significant
asset of Holdings, and Holdings has no material operations of its own.
On January 19, 1996, the Company announced its intention to close 40 stores
located in unprofitable or highly competitive markets. Store closing sales began
on January 29, 1996, and the Company completed all of such store closings during
the second quarter of the fiscal year ended February 2, 1997. References in this
Form 10-K to the "40 Closed Stores" mean such 40 stores.
Except for the discussion in the final section of this Item 1, the
information contained in this Item 1 relates only to the Company's general
merchandise retail stores.
STORES.
At January 31, 1999, the Company operated 146 general merchandise retail
stores located in 146 small towns (having an average population of approximately
5,500) in 15 Midwestern, North Central and Rocky Mountain states. Pamida's
strategic objective is to be the dominant general merchandise retailer in the
communities it serves. The Company believes that it holds the leading market
position in over 80% of the communities in which its stores are located.
Pamida stores generally are located in small towns where there often is
less competition from another major general merchandise retailer and which the
Company considers to be either too small to support more than one major general
merchandise retailer (thereby creating a potential barrier to entry by a major
competitor) or too small to attract competitors whose stores generally are
designed to serve larger populations. At January 31, 1999, 117 of the Company's
146 stores faced no direct local competition from other general merchandise
retailers.
The Company's stores average approximately 30,000 square feet of sales area
and range in size from approximately 6,000 to 51,000 square feet of sales area.
At January 31, 1999, the Company's stores had an aggregate sales area of
approximately 4,413,000 square feet.
The following table indicates the states in which the Company's general
merchandise stores were located as of January 31, 1999:
State No. of
- ----- Stores Percent
------ -------
Minnesota................................................... 28 19.2%
Iowa........................................................ 26 17.8
Wisconsin................................................... 15 10.3
Nebraska.................................................... 14 9.6
Michigan.................................................... 12 8.2
Ohio........................................................ 10 6.8
Wyoming..................................................... 9 6.1
North Dakota................................................ 7 4.8
South Dakota................................................ 6 4.1
Montana..................................................... 6 4.1
Indiana..................................................... 4 2.7
Kansas...................................................... 3 2.1
Illinois.................................................... 3 2.1
Kentucky ................................................... 2 1.4
Missouri ................................................... 1 0.7
----- -----
146 100.0%
===== =====
The following tables show the number of the Company's general merchandise
store openings, relocations and closings and the aggregate year-end store sales
area by fiscal year since fiscal 1995:
Fiscal Year Ended
----------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Beginning of year 148 148 144 184 173
Stores opened in new markets 4 1 6 7 17
Stores relocated in existing markets 2 2 2 3 -
Stores closed (includes relocated stores) (8) (3) (4) (10) (6)
--- --- --- --- ---
End of year 146 148 148 184 184
Less 40 Closed Stores (40)
---
144
===
Fiscal Year Ended
----------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Square feet of store sales area at
year-end (in millions) 4.41 4.41 4.35 5.22 5.09
Less 40 Closed Stores (1.09)
----
4.13
====
The Company regularly evaluates all of its stores and from time to time
closes stores which no longer meet its standards for sales, profitability,
selling area or other applicable criteria.
STORE EXPANSION PROGRAM.
The Company's store expansion program is subject to the Company's ability
to access financing or negotiate satisfactory leases, as well as to the ability
of prospective landlords to obtain financing for new store buildings, and to
various zoning, site acquisition, environmental, traffic, construction and other
contingencies. Up to fifteen new stores, none of which are replacement stores,
are expected to commence operations during the fiscal year ending January 30,
2000.
The Company has identified numerous communities which are potential sites
for the Company's prototype stores and in which Pamida believes it can achieve a
leading market position, although there is no assurance that Pamida will open
stores in such communities or on any particular time schedule.
The Company began operations in a new 200,000 square foot distribution
center in Lebanon, Indiana, during the second quarter of fiscal 1998. Pamida
believes that its existing distribution facilities (including the expandable
Lebanon, Indiana, facility), senior and middle management staff and corporate
infrastructure should allow the Company to accommodate its currently anticipated
growth.
The Company typically invests approximately $1,550,000 to $1,750,000 in a
new prototype store. Such expenditures consist primarily of approximately
$1,000,000 to $1,200,000 for the initial store inventory, a portion of which is
financed by vendor trade credit, and approximately $450,000 to $500,000 for
store fixtures and equipment. In most cases, building and land costs of
approximately $1,550,000 to $1,750,000 per store are financed by unaffiliated
developers who lease the real estate to Pamida. To expedite the construction
process and because of construction financing constraints, Pamida frequently
constructs stores on sites which it acquires, with the expectation that it
subsequently will enter into sale-leaseback transactions involving such stores
with unaffiliated investors. At January 1, 1999, the Company has built, or is
building, twelve stores which the Company expects to sell and lease back within
the next twelve to eighteen months.
SALES AND MERCHANDISING.
Pamida's merchandising policy is to provide customers with reliable and
convenient family shopping and to feature nationally advertised brand-name
products as well as select private-label merchandise at attractive prices.
Pamida operates its stores on a self-service, primarily cash-and-carry basis and
runs weekly advertised promotions throughout the year. All of Pamida's stores
accept bank credit cards, which accounted for 15.4% of total store sales during
the fiscal year ended January 31, 1999.
Pamida's typical customers are price-conscious families across the income
spectrum. To effectively serve such customers, the Company's stores are open
seven days a week for an average of at least 75 hours per week.
Pamida's three primary merchandise divisions are softlines, hardlines and
pharmacies. The softlines division includes mens', womens', childrens' and
infants' clothing, footwear, accessories and jewelry. The hardlines division
includes categories such as health and beauty aids, automotive accessories,
housewares, paper and cleaning supplies, hardware, paint, sporting goods, toys,
stationery, small appliances and electronic items, videos, compact discs and
tapes, lawn and garden supplies, linens and other domestics, cameras and
accessories, pet supplies, consumables and candy items.
The Company currently owns and operates pharmacies in 54 of its larger
stores, and five of Pamida's other stores contain prescription pharmacies leased
to and operated by independent pharmacists. The pharmacies have proved to be
effective in building customer loyalty and attracting customers who are likely
to purchase other items in addition to prescription drugs. Pamida intends,
subject to regulatory and personnel considerations and where space permits, to
include a pharmacy in each of its new prototype stores and to add pharmacies to
existing stores.
During the fiscal year ended January 31, 1999, the hardlines division
accounted for approximately 72% of Pamida's total sales, while the apparel
division and the pharmacies accounted for approximately 21% and 7%,
respectively, of Pamida's total sales.
Among the methods that the Company employs to build customer loyalty and
satisfaction are weekly advertised specials, competitive pricing, clean and
orderly stores, friendly well-trained personnel, a liberal return policy and a
wide variety of special customer services (such as wheelchairs for the elderly
and handicapped, restroom facilities and water fountains, seating benches,
speedy check-out lanes and expedited check cashing and raincheck and layaway
processing) offered under various customer-oriented themes such as "Hometown
Values", "We Care" and "We're Listening". Pamida places special emphasis on
maintaining a strong in-stock position in all merchandise categories,
particularly with respect to advertised items.
Pamida's business, like that of most other general merchandise retailers,
is seasonal. First quarter sales (February through April) are lower than sales
during the other three fiscal quarters, while fourth quarter sales (November
through January) amount to approximately 29% of the full year's sales and
normally involve a greater proportion of higher margin merchandise.
ADVERTISING AND PROMOTION.
The Company's extensive advertising primarily utilizes colorful weekly
circulars developed by a centralized advertising department at Pamida's
headquarters. Such circulars advertise brand-name and other merchandise at
significant price reductions and are inserted into local newspapers or mailed
directly to customers. Pamida also uses local shoppers publications and coupon
books. During fiscal 1999, Pamida spent approximately $11,936,000 (net of
promotional allowances provided by vendors) on advertising, which represented
approximately 1.8% of fiscal 1999 sales.
PURCHASING AND DISTRIBUTION.
Pamida maintains a centralized purchasing, merchandise allocation and store
planning staff at its central offices. The merchandising department includes two
general merchandise managers, three hardlines divisional merchandise managers
and two apparel divisional merchandise managers. Each of the divisional
merchandise managers supervises from five to seven buyers. Members of the
Company's experienced buying staff regularly attend major trade shows, visit
both domestic and overseas markets and meet with vendor representatives at the
Company's headquarters.
The merchandise in the Company's stores is purchased from approximately
2,400 primary manufacturers, suppliers and other vendors. Centralized purchasing
enables Pamida to more effectively control the cost of merchandise and to take
advantage of promotional programs and volume discounts offered by certain
vendors. The Company continuously seeks to optimize merchandise costs, including
promotional allowances offered by its suppliers. Pamida also has centralized the
management of returned merchandise, which enables the Company to most
effectively secure vendor credits and refunds with respect to such merchandise.
The Company's point-of-sale data capture equipment located in its stores
provides current information to Pamida's buyers to assist them in managing
inventories, effecting prompt reorders of popular items, eliminating
slow-selling merchandise and reducing markdowns.
Seaway Importing Company, a wholly-owned subsidiary of Pamida, Inc.,
imports a wide variety of merchandise, including sporting goods, pet supplies,
toys, electronic items, apparel, hair care items, painting supplies, automotive
items and hardware, for sale in Pamida's stores.
During fiscal 1999, approximately 77% of Pamida's merchandise was
distributed to the stores through Pamida's own distribution centers, while the
remaining merchandise was supplied directly to the stores by manufacturers or
distributors.
COMPETITION.
The general merchandise retail business is highly competitive. The
Company's stores generally compete with other general merchandise retailers,
supermarkets, drug and specialty stores, mail order and catalog merchants and,
in some communities, department stores. Competitors consist both of independent
stores and of regional and national chains, some of which have substantially
greater financial resources than the Company. The type and degree of competition
and the number of competitors which Pamida's stores face vary significantly by
market.
Pamida believes that the principal areas of competition in the general
merchandise retail industry are store location, merchandise selection and
quality, customer service and price, although numerous other factors also affect
the competitive position of any particular store. Among the methods that the
Company employs to build customer loyalty and satisfaction are weekly advertised
specials, reliable in-stocks, competitive pricing, clean and orderly stores,
friendly well-trained personnel, a liberal return policy and a wide variety of
special customer services offered under themes such as "Hometown Values", "We
Care" and "We're Listening".
Pamida stores generally are located in small towns where there is no direct
local competition from another major general merchandise retailer and which may
be either too small to support more than one major general merchandise retailer
(thereby creating a potential barrier to entry by a major competitor) or too
small to attract competitors whose stores generally are designed to serve larger
populations. The Company believes that, in terms of sales, it is the leading
general merchandise retailer in approximately 80% of the communities in which
its stores are located.
At January 31, 1999, 117 of Pamida's 146 general merchandise stores were
located in communities in which there was no direct local competition from other
major general merchandise retailers. As of that date, Kmart, Alco, Wal-Mart,
Target and ShopKo had stores in 13, 13, 7, 3 and 1 communities, respectively,
where Pamida stores are located; however, because some of these communities have
more than one of such competitors, only 29 Pamida stores face direct local
competition from such retail chains. In recent years the Company's business
strategy has been to focus its store expansion program on communities with less
likelihood of the entry of a new major competitor, but there can be no assurance
that in the future major competitors will not open additional stores in the
Company's markets.
Merchandise prices generally are established on a zone basis at Pamida's
central office, although store managers are given discretion to adjust prices of
key items to meet local competition and to match a competitor's advertised
prices. Zone pricing allows the Company to establish prices at different levels
in different trade territories, based primarily on competitive conditions within
such territories, rather than having a uniform pricing structure throughout the
entire chain. Pamida conducts a continuous program of competitor price
comparisons that enables the Company to make merchandise price adjustments, when
necessary, to assure that the Company maintains a competitive position.
EMPLOYEES.
As of January 31, 1999, Pamida had approximately 6,000 employees, of whom
approximately 2,900 were full-time and 3,100 were part-time. The number of
employees varies on a seasonal basis. Pamida's employees are not represented by
a labor union, and the Company believes that its relations with its employees
are good.
At January 31, 1999, the average length of service of the Company's
management staff was as follows:
Average
Years
Number of Service
------ ----------
Chief Executive and Operating Officers 2 17.2
Senior Vice Presidents and Vice Presidents 19 7.2
District Managers 12 20.9
Pharmacy District Supervisors 4 6.2
Store Managers 148 11.8
Pharmacy Managers 54 3.2
Pamida's human resources department is responsible for company-wide salary
and wage administration, as well as all employee benefits. The human resources
department works closely with store operations in the development and
administration of Pamida's store-level employee training programs. In addition,
Pamida has an ongoing program for the development of management personnel to
fill positions in all facets of the Company's operations and makes a concerted
effort to identify and train potential successors for all of its key middle and
senior managers.
HEARTLAND HOME FURNISHINGS.
During the third quarter of fiscal 1999, the Company converted a former
general merchandise store, which had substantial direct competition from a
national discount chain store, to a "Heartland Home Furnishings" (Heartland)
store, which sells furniture, rugs, lamps, accessories and other home
furnishings items. This new concept is currently being tested as a potential
alternative use for certain of the Company's general merchandise store
properties which are not performing to management's standards. The Company plans
to open four additional Heartland stores in the first quarter of fiscal 2000 and
will consider a very limited number of additional Heartland stores during the
year. The Company will continue to assess the results of this test concept on a
going forward basis, and there can be no assurance that the Company will either
continue or expand this retail store concept.
ITEM 2. PROPERTIES.
At January 31, 1999, the Company owned 14 of its 147 store buildings, while
its remaining 133 stores (including the Heartland Home Furnishings store)
operated in leased premises. A substantial majority of the Company's leases have
renewal options, with approximately 65% of the leases having unexpired current
terms of five years or more. The following table provides information relating
to the remaining lease terms for the Company's leased stores at January 31,
1999:
Lease Expiring Number of Leased Stores
During the Fiscal Year Ending (1) 1/31/99
--------------------------------- -----------------------
2000......................... 16
2001......................... 14
2002......................... 8
2003......................... 6
2004......................... 4
Thereafter..................... 85
---
Total ......................... 133
===
(1) Includes renewal options.
Pamida's management believes that the physical condition of the Company's
stores generally is very good. All of the Company's stores are continuously
updated to conform to Pamida's operating and merchandising standards.
The Company's general offices and one of its three distribution centers are
located in a 215,000 square foot building in Omaha, Nebraska, owned by the
Company. This facility contains approximately 135,000 square feet of
distribution center space and approximately 80,000 square feet of office space.
Pamida's primary distribution center is a 336,000 square foot
"flow-through" facility situated on a 22-acre tract of land in Omaha
approximately one mile from the distribution center described above. This
facility, which is owned by Pamida, serves primarily as a redistribution center
for bulk shipments and promotional merchandise on which cost savings can be
realized through quantity purchasing. Pamida also owns an additional 10-acre
tract of land adjacent to such distribution center which would permit that
facility to be further expanded by almost 60%.
In July 1997, the Company began operations in a new 200,000 square foot
distribution center in Lebanon, Indiana. The facility, which is leased through
April 2007, redistributes bulk shipments and promotional merchandise to stores
in the Company's eastern sales districts. Future expansion of the facility is
being considered.
Pamida also has a facility in Omaha which contains approximately 41,000
square feet of space and is located immediately adjacent to the Company's
corporate office. This facility, which is owned by Pamida, is used for
processing of merchandise to be returned to vendors and by the advertising
department in connection with its printing operations.
In addition to its retail stores, distribution centers and corporate
facilities, Pamida's tangible assets include inventories, warehouse and store
fixtures and equipment, merchandise handling equipment, office and data
processing equipment, motor vehicles and an airplane.
ITEM 3. LEGAL PROCEEDINGS.
Pamida is a party to a number of lawsuits incidental to its business, the
outcome of which, both individually and in the aggregate, is not expected to
have a material adverse effect on the Company's operations or financial
condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
* * *
EXECUTIVE OFFICERS OF THE REGISTRANT.
The present executive officers of Holdings are Steven S. Fishman (Chairman
of the Board, President and Chief Executive Officer), Frank A. Washburn
(Executive Vice President, Chief Operating Officer and Secretary), and George R.
Mihalko (Senior Vice President, Chief Financial Officer, Treasurer and Assistant
Secretary). Information concerning such executive officers appears in the
following paragraphs:
Mr. Fishman, age 48, has served as President and Chief Executive Officer of
Holdings and Pamida, Inc. since April 1993 and as Chairman of the Board of
Holdings and Pamida, Inc. since August 1993. From 1988 to March 1993, Mr.
Fishman was employed by Caldor, Inc. as Senior Vice President and General
Merchandise Manager-Homelines. Mr. Fishman has been a director of Holdings since
1993 and also is a director of Pamida, Inc.
Mr. Washburn, age 50, has served as Chief Operating Officer of Holdings and
Pamida, Inc. since March 1997, Executive Vice President of Holdings since
September 1995 and Executive Vice President of Pamida, Inc. since February 1995.
Mr. Washburn previously served as Senior Vice President - Human Resources of
Pamida, Inc. from 1993 to 1995 and as Vice President - Human Resources of
Pamida, Inc. from 1987 to 1993. Mr. Washburn also serves as Secretary of
Holdings and Pamida, Inc. Mr. Washburn joined Pamida's predecessor in 1965. Mr.
Washburn has been a director of Holdings since 1995 and also is a director of
Pamida, Inc.
Mr. Mihalko, age 44, has served as Senior Vice President, Chief Financial
Officer, Treasurer and Assistant Secretary of Holdings and Pamida, Inc. since
September 1995. From February 1993 to September 1995, Mr. Mihalko was employed
by Pier 1 Imports, Inc. as Vice President and Treasurer. From July 1990 to
February 1993, Mr. Mihalko was employed by Burlington Northern Railroad as
Assistant Treasurer.
The executive officers of Holdings may be removed from their respective
positions as such officers at any time by the Board of Directors of Holdings,
subject to any rights which they may have under employment agreements with the
Company.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Common Stock of Holdings is listed and traded on the American Stock
Exchange.
The high and low sales prices for the Common Stock of Holdings on the
American Stock Exchange for fiscal 1999 and fiscal 1998 are as follows:
Fiscal 1999: High Low
------------ ------ -----
4th Quarter ..........4 9/16 3
3rd Quarter ..........7 3 1/4
2nd Quarter ..........7 3/4 5 7/8
1st Quarter ..........6 1/4 4 5/8
Fiscal 1998: High Low
------------ ------ -----
4th Quarter ..........6 1/8 4 1/4
3rd Quarter ..........6 7/16 4 1/8
2nd Quarter ..........4 1/8 2 3/4
1st Quarter ..........3 1/2 2
As of March 22, 1999 there were 256 record holders of the Common Stock of
Holdings.
There is no market for the Nonvoting Common Stock of Holdings, all of which
presently is owned by 399 Venture Partners, Inc., an indirect wholly-owned
subsidiary of Citigroup Inc.
Holdings has never declared or paid any cash dividends on its Common Stock
or Nonvoting Common Stock and does not intend to pay any such dividends in the
foreseeable future. The obligations of Pamida, Inc. under certain of its
financing arrangements are guaranteed by Holdings. Such financing arrangements
presently prohibit the payment of dividends by Holdings on its Common Stock or
Nonvoting Common Stock and also significantly restrict the ability of Pamida,
Inc. to pay dividends or make other distributions to Holdings.
ITEM 6. SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY
SELECTED CONSOLIDATED FINANCIAL DATA
(AMOUNTS IN THOUSANDS - EXCEPT PER SHARE, NUMBER OF SHARES AND OTHER DATA)
<S> <C> <C> <C> <C> <C>
FISCAL YEAR ENDED
--------------------------------------------------------------
January 31, February 1, February 2, January 28, January 29,
1999 1998 1997 (1) 1996 1995
INCOME STATEMENT DATA:
Sales...................................... $ 672,394 $ 657,017 $ 633,189 $ 736,315 $ 711,019
Gross profit............................... 167,568 161,935 154,090 177,688 177,367
Selling, general and
administrative expenses.................. 134,288 128,436 124,429 150,102 142,689
Interest expense........................... 25,847 30,213 30,457 30,520 28,263
Long-lived asset write-off - - - 78,551 -
Store closing costs........................ - - - 21,397 -
---------- ---------- ---------- ---------- ----------
Income (loss) before provision for income
taxes and extraordinary item............. 7,433 3,286 (796) (102,882) 6,415
Income tax provision (benefit)............ 2,887 - - (7,863) 3,500
---------- ---------- ---------- ---------- ----------
Income (loss) before extraordinary item.... 4,546 3,286 (796) (95,019) 2,915
Extraordinary item......................... - 1,735 - 371 -
---------- ---------- ---------- ---------- ----------
Net income (loss) ......................... 4,546 5,021 (796) (94,648) 2,915
Effect of preferred stock reclassification. - 756 - - -
Less preferred dividends
and discount amortization................ - (407) (391) (362) (361)
---------- ---------- ---------- ---------- ----------
Net income (loss) available
for common shares........................ $ 4,546 $ 5,370 $ (1,187) $ (95,010) $ 2,554
========== ========== ========== ========== ==========
Weighted average number of basic shares
outstanding.............................. 9,046,410 5,843,441 5,004,942 5,002,853 4,999,984
Weighted average number of diluted shares
outstanding.............................. 9,094,194 5,875,463 5,004,942 5,002,853 5,039,684
Basic net income (loss) per share:
Income (loss) before extraordinary item.... $ .50 $ .62 $ (.24) $ (19.07) $ .51
Extraordinary item......................... - .30 - .08 -
---------- ---------- ---------- ---------- ----------
Basic income (loss)........................ $ .50 $ .92 $ (.24) $ (18.99) $ .51
========== ========== ========== ========== ==========
Diluted net income (loss) per share:
Income (loss) before extraordinary item.... $ .50 $ .62 $ (.24) $ (19.07) $ .51
Extraordinary item......................... - .29 - .08 -
---------- ---------- ---------- ---------- ----------
Diluted income (loss)...................... $ .50 $ .91 $ (.24) $ (18.99) $ .51
========== ========== ========== ========== ==========
BALANCE SHEET DATA:
Working capital............................ $ 43,329 $ 37,421 $ 28,673 $ 34,082 $ 46,725
Total assets............................... 298,215 260,081 269,188 258,525 354,367
Long-term debt (less current portion)...... 140,242 140,289 168,000 163,746 162,505
Obligations under capital leases (less
current portion)......................... 35,925 32,156 33,999 36,559 43,050
Redeemable preferred stock................. - - 1,875 1,826 1,779
Stockholders' (deficit) equity............. (47,539) (52,275) (87,303) (86,116) 8,876
OTHER DATA:
Team members............................... 6,000 5,600 5,700 7,200 7,200
Number of stores........................... 147 148 148 184 184
Retail square feet (in millions)........... 4.45 4.41 4.35 5.22 5.09
(1) Represents a 53-week year.
</TABLE>
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS
(DOLLAR AMOUNTS IN THOUSANDS)
YEAR ENDED JANUARY 31, 1999 COMPARED TO YEAR ENDED FEBRUARY 1, 1998
SALES - Total sales during fiscal 1999 increased by $15,377, or 2.3%, from
1998. During fiscal 1999, sales in comparable stores increased by $18,826, or
3.0%. During fiscal 1999, the Company opened six new stores, of which four are
located in new markets and two were relocations; the Company also closed seven
stores during fiscal 1999, resulting in a net increase in selling area during
the fiscal year of approximately 43,000 square feet. At January 31, 1999, the
Company had a total of approximately 4,451,000 square feet of sales area.
Sales during the second half of the year 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
fall and early winter season further tempered sales, especially in the winter
clothing and other seasonal sales categories. The Company's in-stock position in
basic merchandise suffered during the third quarter and the early part of the
fourth quarter due to implementation issues related to a comprehensive new
merchandising and inventory replenishment system installed late in the second
quarter. Sales increased dramatically during the period from Christmas to the
end of the fiscal year due to improved in-stock positions and normal seasonal
weather conditions.
The Company experienced sales increases in many merchandise categories
during fiscal 1999. The most significant increases occurred in pharmacy and
prescriptions, which increased 27.4% or $10,685, and in the yarns and crafts,
lawn and garden, bath and floor care, pet supplies and furniture categories
which increased by lesser amounts. Other categories experiencing gains were
athletic shoes, boys' toys, bedding, grocery, beauty aids, audio and video,
junior apparel, appliances, team sports and electronics. The Company experienced
sales decreases in several categories. The largest dollar decreases were in the
automotive, hosiery, paint and electric, paper and cleaning, misses apparel and
infants and toddlers categories.
During the third quarter, the Company converted a former general
merchandise store, which had substantial direct competition from a national
discount chain store, to a "Heartland Home Furnishings" (Heartland) store, which
sells furniture, rugs, lamps, accessories and other home furnishings items. This
new concept is currently being tested as a potential alternative use for certain
of the Company's general merchandise store properties which are not performing
to management's standards. The Company plans to open four additional Heartland
stores in the first quarter of fiscal 2000 and will consider a very limited
number of additional Heartland stores during the year. The Company will continue
to assess the results of this test concept on a going forward basis, and there
can be no assurance that the Company will either continue or expand this retail
store concept.
GROSS PROFIT - Gross profit for fiscal 1999 increased by $5,633, or 3.5%,
compared to fiscal 1998. As a percent of sales, gross profit improved to 24.9%
from 24.6%. The Company's merchandise gross margin as a percent of sales
increased to 27.9% in fiscal 1999 from 27.6% in fiscal 1998. Total warehouse and
distribution costs amounted to 2.9% of sales compared to 2.8% last year.
Markdowns were substantially lower for the year due to lower inventory in most
softlines categories, especially in fashions and other categories which have
higher potential for markdowns. The Company also implemented more competitive
pricing on many softlines goods which also contributed to a reduced need for
markdowns due to greater sell-through. Most sales categories experienced
increases in gross margin dollars for the year. Categories with the largest
increases in gross margin dollars were pharmacy and prescriptions, groceries,
yarns and crafts, housewares, junior apparel, beauty aids, pet supplies and
furniture. The largest dollar decreases in gross margin were in the automotive,
hosiery, misses apparel, cameras and candy categories.
SELLING, GENERAL AND ADMINISTRATIVE (SG&A) expense increased $5,852, or
4.6%, to $134,288 in fiscal 1999 from $128,436 in fiscal 1998. As a percentage
of sales, SG&A expense increased to 20.0% from 19.5% last year. Over half of the
total net increase in SG&A expense for the year was attributable to higher store
payroll due primarily to normal wage increases and the effects of federally
mandated minimum wage increases. Corporate general and administrative costs
increased by $1,859, or 6.6%, due primarily to increased depreciation and
amortization costs related to financial and merchandising systems implemented
within the last year. General and administrative payroll also increased with the
largest increase being incurred in the information systems area to support the
implementation and maintenance of the various new systems which have been, and
are being, implemented. Store controllable expenses increased $1,558, or 8.2%.
The largest increases in these expenses related to supplies, janitorial costs
and charge card fees. Advertising expenses increased $1,468, or 14.0%, due to a
significant increase in the number and cost of special advertising events and
increased costs of advertising circulars. Store fixed costs increased $813, or
3.2%, primarily due to the effect of higher costs of new store locations. These
increases in costs were offset by other income which increased by approximately
$2,685 and included: 1) the favorable settlement of a lawsuit related to
pharmacy operations which netted $1,333 in income, 2) a gain on the sale of the
Polson, Montana store property of $999, 3) the partial reversal of a reserve
established in fiscal 1996 related to the 40 store closings at that time
totaling $535 to reflect the impact of the planned conversion of two of the
leased properties to Heartland stores in fiscal 2000 and 4) the partial reversal
of a reserve established in fiscal 1998 for a long-term incentive plan, the
value of which is determined by the trading price of the stock, totaling $575 to
reflect the liability indicated by the actual price of the common stock at year
end.
INTEREST expense decreased by $4,366, or 14.5%, for fiscal 1999 compared to
fiscal 1998. As described in Note L to the financial statements, the decrease in
interest expense for fiscal 1999 was primarily attributable to the payment of
certain promissory notes of the Company with common stock in November 1997,
thereby relieving the Company of the quarterly compounding interest obligation
which had previously been paid in kind. In fiscal 1998 total interest expense
related to these promissory notes totaled $3,974. In addition, interest expense
related to the revolving line of credit decreased by $859 in fiscal 1999
compared to fiscal 1998 due to lower average borrowings, especially during the
early part of fiscal 1999, and reduced interest rates. These decreases in
expense were offset somewhat by higher interest expense related to capital
leases.
INCOME TAX PROVISION - In fiscal 1999, income taxes were recorded at a
38.8% effective tax rate. 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 promissory note repayment and
preferred stock reclassification transactions which were consummated on November
18, 1997. The Company expects that operations in the future will continue to be
taxable at a normal tax rate.
YEAR ENDED FEBRUARY 1, 1998 COMPARED TO YEAR ENDED FEBRUARY 2, 1997
SALES - Total sales during the 52-week fiscal 1998 period increased by
$23,828, or 3.8%, from the 53-week fiscal 1997 period. On a 52 to 52-week basis,
total net sales increased by 5.2%. During fiscal 1998, sales in comparable
stores increased by $24,135, or 4.0%.
During fiscal 1998, the Company opened three new stores, of which one is
located in a new market and two were relocations; the Company also closed one
store (which was replaced during fiscal 1999 by a new store in the same market),
resulting in a net increase in selling area during the fiscal year of
approximately 61,000 square feet and a year-end total of approximately 4,408,000
square feet.
The Company experienced sales increases in most merchandise categories
during fiscal 1998. The most significant increases occurred in pharmacy
prescriptions, housewares, toys, athletic shoes and team sports apparel. Other
categories experiencing gains were stationery, sporting goods, appliances, paper
and cleaning supplies and pet supplies. The Company experienced sales decreases
in several categories. The largest dollar decreases were in the automotive,
mens' fashion apparel, jewelry and watches and juniors' apparel categories.
GROSS PROFIT - Gross profit for the 52-week fiscal 1998 period increased by
$7,845, or 5.1%, compared to the 53-week fiscal 1997 period. As a percentage of
sales, gross profit improved to 24.6% from 24.3%. The Company's merchandise
gross margin as a percentage of sales decreased to 27.6% in fiscal 1998 from
27.8% in fiscal 1997. The decrease in merchandise gross margin percent of sales
was offset by substantial expense reductions in the distribution and
transportation areas made possible by operating efficiencies gained largely from
a new distribution center management system implemented during fiscal 1997.
During the prior fiscal year, the Company incurred higher than normal labor cost
in its distribution centers due to implementation issues related to the
distribution center management system. Total distribution and transportation
costs amounted to 2.8% of sales compared to 3.3% last year.
SELLING, GENERAL AND ADMINISTRATIVE (SG&A) expense increased $4,007, or
3.2%, to $128,436 in fiscal 1998 from $124,429 in fiscal 1997. As a percentage
of sales, SG&A expense decreased to 19.5% from 19.7% last year. Most of the
total net increase in SG&A expense for the year was attributable to higher
corporate general and administrative expenses, primarily involving planned
increases in payroll and incentive compensation expenses. Store occupancy costs
increased by $989, but remained at 3.9% as a percentage of net sales for both
fiscal 1998 and 1997. Store payroll costs and controllable costs decreased by
$392 and $121, respectively, during fiscal 1998 as compared to last year. As a
percentage of net sales, store payroll costs and controllable costs decreased
from 8.0% to 7.7% and 3.0% to 2.9% for the fiscal periods ended 1998 and 1997,
respectively.
INTEREST expense decreased by $244, or 0.8%, for fiscal 1998 compared to
fiscal 1997. As described in Note L to the financial statements, the decrease in
interest expense for fiscal 1998 was attributable to the payment of certain
promissory notes of the Company with common stock in November 1997, thereby
relieving the Company of the quarterly compounding interest obligation which had
previously been paid in kind. That decrease was offset in part by an increase in
interest expense of approximately $900 related to higher outstanding balances on
the revolving line of credit resulting from higher investments in basic
inventory during the year as well as the funding of certain of the Company's
information systems initiatives.
INCOME TAX PROVISION - The Company's loss carryforwards from store closing
charges recorded in fiscal 1996 were utilized during fiscal 1998 to completely
offset income taxes from normal operating activities of the Company and to
reduce income taxes related to the promissory note repayment and preferred stock
reclassification transactions which are described in Note L to the financial
statements. No income tax benefit on losses for fiscal 1997 was recorded as the
Company could not establish, as of fiscal year end 1997, with a reasonable
degree of certainty, the potential utilization of loss carryforwards.
LIQUIDITY AND CAPITAL RESOURCES
The Company's business is seasonal with first quarter sales (February
through April) being lower than sales during the other three quarters, while
fourth quarter sales (November through January) have represented approximately
29% of the full year's retail sales in recent years and normally involve a
greater proportion of higher margin sales.
The Company has satisfied its seasonal liquidity requirements primarily
through a combination of funds provided from operations and from a revolving
credit facility. Funds used in operating activities totaled $5,734 in fiscal
1999, and funds provided by operating activities totaled $21,488 in fiscal 1998.
Funds used in operations totaled $7,897 in fiscal 1997. The change in cash flow
from operating activities from fiscal 1998 to fiscal 1999 was primarily the
result of increases in inventory and other operating assets, offset somewhat by
increases in accounts payable, primarily related to the Company's higher
inventory levels. The positive change in cash flow from operating activities
from fiscal 1997 to fiscal 1998 was primarily the result of improved operating
results, a net decrease in inventory and increases in operating and tax
liabilities.
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 increased the maximum borrowing limit to $125,000 from $95,000 and
reduced interest rate spreads 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 is using 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. 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 $66,497 at January 31, 1999 and
$45,194 at February 1, 1998. Included in this amount is $9,590 of borrowings
under the $25,000 supplemental facility. Total unused borrowing availability
under the Agreement as of January 31, 1999 totaled $49,568 compared to $31,288
at the end of the prior fiscal 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 $176,167 at January 31, 1999 and $172,445 at February 1, 1998. 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 January
31, 1999, 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 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 then existing credit facilities to
pay dividends to the Company to fund such preferred stock dividends. Because of
the accumulated deficit which resulted primarily from the store closings and the
write-off of goodwill and other long-lived assets recognized in the fourth
quarter of fiscal 1996, applicable corporate law did not permit the Company or
Pamida to declare or pay any cash dividends in fiscal 1999, 1998 and 1997.
The Company made capital expenditures of $8,328 in fiscal 1999 compared to
$6,654 during fiscal 1998. The Company also made expenditures of $6,435 and
$3,848 in fiscal 1999 and 1998, respectively, related to information systems
software. In addition, the Company incurred construction costs related to new
stores opened during fiscal 1999 totaling $8,720. Capital expenditures and
information systems software costs are expected to total approximately $20,000
in fiscal 2000. 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 fiscal 1999, the Company sold and leased back six store properties with net
cash proceeds totaling $8,475. 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. Proceeds from the sales were used to reduce outstanding indebtedness
under the Company's revolving line of credit.
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 READINESS DISCLOSURE
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, distribution center 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
expected 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 85% complete. The remaining 15% of these projects is planned to be
completed by the end of August 1999. The logistics, distribution center
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 being replaced currently and is
planned for completion 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 with 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 therefore is beginning to develop contingency plans to mitigate the
potential adverse effects of these risks, and intends to have such plans
completed before December 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
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 to $1,000. 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 communications 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 and hardware to have eliminated the
potential Year 2000 issues within the software and hardware could materially and
adversely affect the Company's ability to execute various aspects of its
operations, its ability to generate sales and ultimately its operations'
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.
ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
The following Discussion of the Company's exposure to various market risks
contains "forward-looking statements" that involve risks and uncertainties.
These projected results have been prepared utilizing certain assumptions
considered reasonable in the circumstances and in light of information currently
available to the Company. Actual results could differ materially from those
projected in the forward-looking statements.
INTEREST RATE RISK
At January 31, 1999, the Company had fixed-rate long-term debt totaling
$140,289 and having a fair value of $134,992. These instruments are fixed-rate
and therefore do not expose the Company to the possibility of earnings loss or
gain due to changes in market interest rates. However, the fair value of these
instruments would fluctuate by approximately $12,263 if interest rates were to
increase or decrease by 10% from their levels at January 31, 1999. In general,
such a change in fair value would impact earnings and cash flows only if the
Company were to reacquire all or a portion of these instruments prior to their
maturity.
At January 31, 1999, the Company had floating rate obligations of $66,497
which expose the Company to the possibility of increased or decreased interest
expense in the event of changes in short-term interest rates. If the floating
rates were to change by 10% from the January 31, 1999 levels, the Company's
consolidated interest expense for floating-rate obligations would increase or
decrease by approximately $49 during each month in which such change continued
based upon January 31, 1999 principal balances.
The Company's practice is not to hold or issue financial instruments for
trading purposes.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY
INDEPENDENT AUDITORS' REPORT
Board of Directors
Pamida Holdings Corporation
Omaha, Nebraska
We have audited the accompanying consolidated balance sheets of Pamida
Holdings Corporation and subsidiary as of January 31, 1999 and February 1, 1998,
and the related consolidated statements of operations, stockholders' equity and
cash flows for each of the three years in the period ended January 31, 1999.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Pamida Holdings Corporation and
subsidiary as of January 31, 1999 and February 1, 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
January 31, 1999 in conformity with generally accepted accounting principles.
/s/Deloitte & Touche LLP
Deloitte & Touche LLP
Omaha, Nebraska
March 9, 1999
<TABLE>
<CAPTION>
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLAR AMOUNTS IN THOUSANDS) - EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Fiscal Year Ended
------------------------------------
January 31, February 1, February 2,
1999 1998 1997
(52 weeks) (52 Weeks) (53 Weeks)
---------- ---------- ----------
Sales........................................................... $ 672,394 $ 657,017 $ 633,189
Cost of goods sold.............................................. 504,826 495,082 479,099
---------- ---------- ----------
Gross profit.................................................... 167,568 161,935 154,090
---------- ---------- ----------
Expenses:
Selling, general and administrative........................... 134,288 128,436 124,429
Interest...................................................... 25,847 30,213 30,457
---------- ---------- ----------
160,135 158,649 154,886
---------- ---------- ----------
Income (loss) before provision for income
taxes and extraordinary item.................................. 7,433 3,286 (796)
Income tax provision........................................... 2,887 - -
---------- ---------- ----------
Income (loss) before extraordinary item......................... 4,546 3,286 (796)
Extraordinary item.............................................. - 1,735 -
---------- ---------- ----------
Net income (loss) .............................................. 4,546 5,021 (796)
Effect of preferred stock reclassification...................... - 756 -
Less provision for preferred dividends and discount amortization - (407) (391)
---------- ---------- ----------
Net income (loss) available for common shares................... $ 4,546 $ 5,370 $ (1,187)
========== ========== ==========
Basic income (loss) per share:
Income (loss) before extraordinary item....................... $ .50 $ .62 $ (.24)
Extraordinary item............................................ - .30 -
---------- ---------- ----------
Basic income (loss)........................................... $ .50 $ .92 $ (.24)
========== ========== ==========
Diluted income (loss) per share:
Income (loss) before extraordinary item....................... $ .50 $ .62 $ (.24)
Extraordinary item............................................ - .29 -
---------- ---------- ----------
Diluted income (loss)......................................... $ .50 $ .91 $ (.24)
========== ========== ==========
See notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(DOLLAR AMOUNTS IN THOUSANDS - EXCEPT PER SHARE DATA)
<S> <C> <C>
ASSETS January 31, February 1,
1999 1998
Current assets: ---------- ----------
Cash.......................................................................... $ 7,588 $ 6,816
Accounts receivable, less allowance for doubtful accounts of $50 in both years 10,125 8,384
Merchandise inventories....................................................... 180,063 152,927
Prepaid expenses.............................................................. 3,698 2,838
---------- ----------
Total current assets....................................................... 201,474 170,965
Property, buildings and equipment, net.......................................... 38,411 40,812
Leased property under capital leases, less accumulated
amortization of $18,024 and $15,387, respectively............................ 28,254 25,181
Deferred financing costs........................................................ 2,301 2,755
Other assets.................................................................... 27,775 20,368
---------- ----------
$ 298,215 $ 260,081
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.............................................................. $ 53,772 $ 47,687
Loan and security agreement................................................... 66,497 45,194
Accrued compensation.......................................................... 5,405 5,768
Accrued interest.............................................................. 6,614 6,668
Other accrued expenses........................................................ 12,196 13,791
Income taxes - deferred and current payable................................... 11,740 12,546
Current maturities of long-term debt.......................................... 47 47
Current obligations under capital leases...................................... 1,874 1,843
---------- ----------
Total current liabilities.................................................. 158,145 133,544
Long-term debt, less current maturities......................................... 140,242 140,289
Obligations under capital leases, less current obligations...................... 35,925 32,156
Other long-term liabilities..................................................... 11,442 6,367
Commitments and contingencies (Note O).......................................... - -
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........................................................... (78,405) (82,951)
---------- ----------
Total stockholders' deficit................................................ (47,539) (52,275)
---------- ----------
$ 298,215 $ 260,081
========== ==========
See notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
Nonvoting Additional
Common Common Paid-in (Accumulated
Stock Stock Capital Deficit)
------ --------- ---------- ------------
Balance at January 28, 1996............................ $ 50 $ - $ 968 $ (87,134)
Net loss............................................. - - - (796)
Amortization of discount on 14-1/4%
junior cumulative preferred........................ - - - (49)
Accrued dividends for preferred stockholders......... - - - (342)
------ --------- ---------- ------------
Balance at February 2, 1997............................ 50 - 968 (88,321)
Net income........................................... - - - 5,021
Amortization of discount on 14-1/4%
junior cumulative preferred........................ - - - (38)
Accrued dividends for preferred stockholders......... - - - (369)
Reclassification of preferred stock into common stock 3 - 1,811 756
Payment of notes with common stock................... 7 30 20,236 -
Gain on payment of notes held by Venture (net of tax) - - 7,571 -
------ --------- ---------- ------------
Balance at February 1, 1998............................ 60 30 30,586 (82,951)
Net income........................................... - - - 4,546
Exercise of stock options............................ - - 190 -
------ --------- ---------- ------------
Balance at January 31, 1999............................ $ 60 $ 30 $ 30,776 $ (78,405)
====== ========= ========== ============
See notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Fiscal Year Ended
------------------------------------
January 31, February 1, February 2,
1999 1998 1997
(52 Weeks) (52 Weeks) (53 Weeks)
---------- ---------- ----------
Cash flows from operating activities:
Net income (loss)............................................. $ 4,546 $ 5,021 $ (796)
Adjustments to reconcile net income (loss) to net cash ---------- ---------- ----------
from operating activities:
Depreciation and amortization............................. 13,456 12,668 11,773
Provision for LIFO inventory valuation.................... 385 606 874
Provision (benefit) for deferred income taxes............. (2,738) (3,297) 3,305
Noncash interest expense.................................. - 3,974 4,473
Gain on disposal of assets................................ (1,032) (150) (56)
Deferred retirement benefits.............................. (129) (142) (125)
Extraordinary item........................................ - (1,735) -
Decrease in store closing reserves........................ (1,967) (3,457) (3,726)
Changes in operating assets and liabilities:
(Increase) decrease in merchandise inventories......... (27,521) 3,957 (7,527)
Increase in other operating assets...................... ( 3,910) (957) (2,057)
Increase (decrease) in accounts payable................. 6,085 (6,558) (8,842)
(Decrease) increase in income taxes payable............. (294) 3,537 (3,250)
Increase (decrease) in other operating liabilities...... 7,385 8,021 (1,943)
---------- ---------- ----------
Total adjustments......................................... (10,280) 16,467 (7,101)
---------- ---------- ----------
Net cash from operating activities........................ (5,734) 21,488 (7,897)
---------- ---------- ----------
Cash flows from investing activities:
Capital expenditures.......................................... (8,328) (6,654) (4,947)
Capitalized software costs.................................... (6,435) (3,848) (3,680)
Proceeds from disposal of assets.............................. 2,095 1,701 917
Proceeds from sale-leaseback of store facilities.............. 8,475 - -
Principal payments received on notes receivable............... 52 18 16
Assets acquired for sale...................................... - - (391)
Changes in constructed stores to be refinanced through lease
financing................................................... (8,720) 1,790 (5,845)
---------- ---------- ----------
Net cash from investing activities........................ (12,861) (6,993) (13,930)
---------- ---------- ----------
Cash flows from financing activities:
Borrowings (payments) under loan and security agreement, net.. 21,303 (11,921) 25,527
Principal payments on other long-term debt.................... (47) (75) (1,335)
Payments for deferred finance costs........................... (169) (225) (54)
Principal payments on capital lease obligations............... (1,910) (1,781) (2,636)
Fees related to payment of debt and reclassification of
preferred stock............................................. - (650) -
Proceeds from the exercise of stock options.................. 190 - -
---------- ---------- ----------
Net cash from financing activities........................ 19,367 (14,652) 21,502
---------- ---------- ----------
Net increase (decrease) in cash............................... 772 (157) (325)
Cash at beginning of year..................................... 6,816 6,973 7,298
---------- ---------- ----------
Cash at end of year............................................. $ 7,588 $ 6,816 $ 6,973
========== ========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid (received) during the year for:
Interest.................................................... $ 25,278 $ 25,834 $ 24,804
Income taxes:
Payments to taxing authorities............................ 1,608 112 386
Refunds received from taxing authorities.................. (141) (3,952) (442)
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Capital lease obligations incurred when the Company entered
into lease agreements for new store facilities and equipment $ 5,710 $ - $ 11
Amortization of discount on junior cumulative preferred stock
recorded as a direct charge to accumulated deficit.......... - 38 49
Payment of interest in kind by increasing the
principal amount of the notes............................... - 3,561 4,141
Provision for dividends payable............................... - 369 342
Common stock issued in payment of notes
and reclassification of preferred stock..................... - 8,690 -
Nonvoting common stock issued in payment
of notes.................................................... - 27,454 -
Notes paid with, and preferred stock reclassified into,
common stock................................................ - (36,144) -
See notes to consolidated financial statements.
</TABLE>
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS - EXCEPT PER SHARE DATA)
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Pamida Holdings Corporation (the "Company") was formed for the sole purpose
of acquiring Pamida, Inc. ("Pamida") through a merger in a leveraged buy-out
transaction which was consummated on July 29, 1986.
CONSOLIDATION - The consolidated financial statements include the results
of operations, account balances and cash flows of the Company and its
wholly-owned subsidiary, Pamida, and of Seaway Importing Company ("Seaway") and
Pamida Transportation Company, wholly-owned subsidiaries of Pamida. All material
intercompany accounts and transactions have been eliminated in consolidation.
FISCAL YEAR - All references in these financial statements to fiscal years
are to the calendar year in which the fiscal year ends.
LINE OF BUSINESS - Through Pamida, the Company is engaged in the operation
of general merchandise retail stores in a fifteen-state Midwestern, North
Central and Rocky Mountain area. Seaway imports primarily seasonal merchandise
for sale to Pamida. Pamida Transportation Company operated as a contract carrier
for Pamida until July 1995, at which time independent contractors were engaged
to provide all transportation needs of the Company. Because of the similarity in
nature of the Company's businesses, the Company operates as a single business
segment.
REVENUE RECOGNITION - Pamida operates its stores on a self-service,
primarily cash-and-carry basis. Because of the insignificance of sales returns,
revenue is recognized at the point-of-sale without allowance for returns.
CASH FLOW REPORTING - For purposes of the statement of cash flows, the
Company considers all temporary cash investments purchased with a maturity of
three months or less to be cash equivalents. There were no temporary investments
at January 31, 1999 and February 1, 1998.
MERCHANDISE INVENTORIES - Substantially all of the Company's inventory is
stated at the lower of cost (last-in, first-out) or market.
PROPERTY, BUILDINGS AND EQUIPMENT - Property, buildings and equipment are
stated at cost and depreciated on the straight-line method over the estimated
useful lives. Buildings and building improvements are generally depreciated over
8-40 years, while store, distribution center and office equipment, vehicles and
aircraft equipment are generally depreciated over 3-10 years. Leasehold
improvements are depreciated over the life of the lease or the estimated life of
the asset, whichever is shorter.
LEASED PROPERTY UNDER CAPITAL LEASES - Noncancellable financing leases are
capitalized at the estimated fair value of the leasehold interest and are
amortized on the straight-line method over the terms of the leases.
LONG-LIVED ASSETS - When facts and circumstances indicate potential
impairment, the Company evaluates the recoverability of asset carrying values,
including associated goodwill, using estimates of future cash flows over
remaining asset lives. When impairment is indicated, any impairment loss is
measured by the excess of carrying values over fair values.
DEFERRED FINANCING COSTS AND ORIGINAL ISSUE DEBT DISCOUNT - Deferred
financing costs are being amortized using the straight-line method over the
terms of the issues which approximates the effective interest method. Original
issue debt discount is being amortized using the effective interest method over
the terms of the issues.
ADVERTISING COSTS - Advertising costs are expensed as incurred and netted
to $11,936, $10,468 and $11,653 for fiscal years 1999, 1998 and 1997,
respectively.
PRE-OPENING EXPENSES - Costs related to opening new stores are expensed as
incurred.
SOFTWARE COSTS - The Company capitalizes internally developed software
costs, which then are amortized on a straight-line basis over three to five
years.
STOCK-BASED COMPENSATION - The Company accounts for its stock-based
compensation under the provisions of Accounting Principles Board Opinion 25,
Accounting for Stock Issued to Employees (APB 25) which utilizes the intrinsic
value method.
EARNINGS PER SHARE - Basic income per common share is based on the weighted
average outstanding common shares during the respective period. Diluted income
per share is based on the weighted average outstanding common shares and the
effect of all dilutive potential common shares, including stock options.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS - The historical cost of financial
instruments (cash, accounts receivable, accounts payable and the Company's
committed line of credit) as presented in the financial statements approximates
their fair value in all instances, except for long-term debt, which is disclosed
in Note F.
RECLASSIFICATIONS - Certain reclassifications have been made to prior
years' financial statements to conform to the current year presentation.
B. NET INCOME PER SHARE
The following table provides a reconciliation between basic and diluted
income (loss) per share (income and shares in thousands):
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1999 1998 1997
------------------------- ------------------------- --------------------------
Per Share Per Share Per Share
Income Shares Amount Income Shares Amount Loss Shares Amount
------ ------ --------- ------ ------ --------- ------- ------ ---------
Income (loss) before
extraordinary item .... $4,546 $3,286 $ (796)
Less provision for
preferred dividends and
discount amortization . - (407) (391)
Effect of preferred stock
reclassification ...... - 756 -
------ ------ --------- ------ ------ --------- ------- ------ ---------
Basic income (loss)
before extraordinary
item .................. 4,546 9,046 $ .50 3,635 5,843 $ .62 (1,187) 5,005 $ (.24)
Effect of dilutive stock
options ............... - 48 - - 32 - - - -
------ ------ --------- ------ ------ --------- ------- ------ ---------
Diluted income (loss)
before extraordinary
item .................. $4,546 9,094 $ .50 $3,635 5,875 $ .62 $(1,187) 5,005 $ (. 24)
====== ====== ========= ====== ====== ========= ======= ====== =========
</TABLE>
C. MERCHANDISE INVENTORIES
Total inventories would have been higher at January 31, 1999 and February
1, 1998 by $7,565 and $7,180, respectively, had the FIFO (first-in, first-out)
method been used to determine the cost of all inventories. On a FIFO basis, net
income before extraordinary item would have been $4,931, $3,892 and $78
respectively, for fiscal years 1999, 1998, and 1997. During fiscal years 1999,
1998, and 1997, certain inventory quantities were reduced resulting in a
liquidation of certain LIFO layers carried at costs which were lower than the
cost of current purchases, the effect of which increased net income by $33,
$263, and $116, respectively.
D. PROPERTY, BUILDINGS AND EQUIPMENT
Property, buildings and equipment consists of:
Jan. 31, Feb. 1,
1999 1998
--------- ---------
Land and land improvements.................... $ 3,504 $ 4,030
Buildings and building improvements........... 18,807 22,183
Store, warehouse and office equipment......... 65,349 59,842
Vehicles and aircraft equipment............... 1,658 1,551
Leasehold improvements........................ 18,186 16,944
--------- ---------
107,504 104,550
Less accumulated depreciation and amortization 69,093 63,738
--------- ---------
$ 38,411 $ 40,812
========= =========
E. OTHER ASSETS
Other assets consist of:
Jan. 31, Feb. 1,
1999 1998
--------- ---------
Constructed stores to be refinanced through
lease financing $ 10,084 $ 7,969
Unamortized software costs, net............... 14,568 10,435
Other......................................... 3,123 1,964
--------- ---------
$ 27,775 $ 20,368
========= =========
The Company contracted for the construction of five and eleven stores
during the periods ended February 1, 1998 and January 31, 1999, respectively.
The construction costs capitalized are recorded as other long-term assets during
the period of construction and for the period following completion of
construction to the date of sale of such stores through lease financing
arrangements. The construction costs for twelve stores remain in Other Assets at
January 31, 1999. The cost of construction has been financed through the
Company's working capital, including the Company's committed line of credit, and
cash flow from operations. In the first half of fiscal 1999, the Company sold
and leased back six store properties with net cash proceeds totaling $8,475.
Proceeds from the sales were used to reduce outstanding indebtedness under the
Company's committed line of credit.
F. FINANCING AGREEMENTS
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 increased the maximum borrowing limit to $125,000 from $95,000 and
reduced interest rate spreads by 75 basis points. The amended $125,000 facility
includes a $25,000 supplemental facility primarily intended for real estate
development activities.
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. 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.
The maximum amount of borrowings under the Agreement during fiscal 1999 and
1998 was $66,469 and $66,461, respectively. The weighted average amounts of
borrowings under the Agreement for fiscal 1999 and 1998 were $48,414 and 52,869,
respectively; and the weighted average interest rates were 8.9% and 9.8%,
respectively.
Long-term debt consists of:
Jan. 31, Feb. 1,
1999 1998
-------- --------
Senior Subordinated Notes, 11.75%, due March 2003 $140,000 $140,000
Industrial development bond 5.5%, due in monthly
installments through 2005...................... 289 336
-------- --------
140,289 140,336
Less current maturities.......................... 47 47
-------- --------
$140,242 $140,289
======== ========
As of January 31, 1999 and February 1, 1998, the fair value of long-term
debt was $134,992 and $144,489, respectively. The fair value of long-term debt
was estimated based on quoted market values for the notes. The aggregate
maturities of long-term debt in each of the next five fiscal years are $47, $47,
$47, $47 and $140,047.
The Senior Subordinated Notes are unsecured and are subordinate borrowings
under the Agreement. Presently, under the most restrictive debt covenants, the
Company is not permitted to pay dividends on its common stock.
G. INCOME TAXES
Components of the income tax provision (benefit) from continuing operations
are as follows:
Year Ended
---------------------------
Jan. 31, Feb. 1, Feb. 2,
1999 1998 1997
Current: ------- ------- -------
Federal...................................... $ (12) $ 491 $(3,155)
State........................................ 161 311 (150)
------- ------- -------
149 802 (3,305)
------- ------- -------
Deferred:
Federal...................................... 2,409 (1,616) 3,189
State........................................ 329 (330) 116
Utilization of tax benefit carryforward........ - 2,718 -
Change in beginning of year valuation allowance - (1,574) -
------- ------- -------
2,738 (802) 3,305
------- ------- -------
Total provision from continuing operations..... $ 2,887 $ - $ -
======= ======= =======
The differences between the U.S. Federal statutory tax rate and the
Company's effective tax rate are as follows:
Year Ended
---------------------------
Jan. 31, Feb.1, Feb. 2,
1999 1998 1997
------- ------- -------
Statutory rate................................. 34.0% 34.0% (34.0)%
State income tax effect........................ 4.4 4.6 (2.8)
Valuation allowance............................ - (40.9) 25.1
Accretion of discount on junior
subordinated debt............................ - 1.3 6.8
Other.......................................... .4 1.0 4.9
------- ------- -------
38.8% - -
======= ======= =======
In fiscal 1998, income tax expense allocated to the extraordinary item was
$379 and income tax expense charged directly to stockholders' equity was $1,821.
These amounts are net of a change in the beginning of year valuation allowance
of $2,495.
Significant temporary differences between reported and taxable income that
give rise to deferred tax assets and liabilities were as follows:
Jan. 31, Feb. 1,
1999 1998
------- -------
Net current deferred tax liabilities:
Inventories................................. $14,155 $13,910
Prepaid insurance........................... 240 172
Other....................................... 790 423
Post employment health costs................ (85) (135)
Accrued expenses............................ (3,034) (2,192)
Store closing costs......................... (623) (1,246)
------- -------
Net current deferred tax liabilities.... 11,443 10,932
------- -------
Net long-term deferred tax liabilities:
Property, buildings and equipment........... 1,957 2,096
Other....................................... 3,680 1,836
Capital leases.............................. (3,655) (3,377)
Tax benefit carryforward.................... - (800)
------- -------
Net long-term deferred tax (asset) liabilities 1,982 (245)
------- -------
Net total deferred tax liabilities............. $13,425 $10,687
======= =======
Net long-term deferred tax (asset) liabilities are classified with other
assets or other long-term liabilities in the consolidated balance sheets of the
Company.
H. LEASES
The majority of store facilities are leased under noncancelable leases.
Substantially all of the store leases are net leases which require the payment
of property taxes, insurance and maintenance costs in addition to rental
payments. Certain leases provide for additional rentals based on a percentage of
sales and have renewal options for one or more periods totaling from one to
twenty years.
At January 31, 1999 the future minimum lease payments under all capital and
operating leases with rental terms of more than one year amounted to:
Fiscal Year Ending Capital Operating
Leases Leases
-------- --------
2000....................................... $ 6,100 $ 11,207
2001....................................... 6,010 9,635
2002....................................... 5,925 8,602
2003....................................... 5,913 7,566
2004....................................... 5,915 6,880
Later years................................ 43,994 64,292
-------- --------
Total minimum obligations.................. 73,857 $108,182
========
Less amount representing interest.......... 36,058
--------
Present value of net minimum lease payments 37,799
Less current portion....................... 1,874
--------
Long-term obligations...................... $ 35,925
========
The minimum rentals under operating leases have not been reduced by minimum
sublease rental income of $89 due in the future under noncancelable subleases
of stores.
Total rental expense related to all operating leases (including those with
terms less than one year) is as follows:
Year Ended
---------------------------
Jan. 31, Feb. 1, Feb. 2,
1999 1998 1997
------- ------- -------
Minimum rentals........................... $13,086 $11,669 $10,938
Contingent rentals........................ 292 272 258
Less sublease rental income............... (532) (705) (735)
------- ------- -------
$12,846 $11,236 $10,461
======= ======= =======
I. OTHER INCOME
The following non-recurring other income items reduced selling, general and
administrative costs during the:
Year Ended
---------------------------
Jan. 31, Feb. 1, Feb. 2,
1999 1998 1997
------- ------- -------
Legal settlements......................... $ 1,333 $ - $ 207
Gain on sale of closed store properties... 999 - -
Gain on sale of idle assets............... - 103 -
Reduction of store closing reserve........ 535 - -
------- ------- -------
$ 2,867 $ 103 $ 207
======= ======= =======
J. EMPLOYEE SAVINGS AND OTHER POSTEMPLOYMENT BENEFIT PLANS
Pamida has adopted a 401(k) savings plan that covers all employees who are
21 years of age with one or more years of service. Participants can contribute
from 1% to 15% of their pre-tax compensation. Pamida has currently elected to
match 50% of the participant's contribution up to 5% of compensation. Pamida's
savings plan contribution expenses for fiscal years 1999, 1998, and 1997 were
$792, $765, and $770, respectively.
Prior to December 1993, the Company had agreed to continue to provide
health insurance coverage and pay a portion of the health insurance premiums
until age 65 for individuals who retire if the individual was eligible to
participate in the plan, had attained age 55, had completed ten or more
consecutive years of service and elected to continue on the Company plan. The
plan is unfunded, and the Company had the right to modify or terminate these
benefits. In December 1993, the Company amended the Plan to no longer offer
postretirement health benefits for employees retiring after February 1, 1994.
The accumulated postretirement benefit obligation as of January 31, 1999 and
February 1, 1998 and the components of periodic expense for postretirement
benefits in fiscal 1999, 1998 and 1997 were insignificant.
K. STOCK OPTIONS
On November 24, 1992, the Board of Directors of the Company adopted the
Pamida Holdings Corporation 1992 Stock Option Plan (the "1992 Plan"), which was
approved by the Company's stockholders in May 1993. On March 5, 1998, the Board
of Directors of the Company adopted the Pamida Holdings Corporation 1998 Stock
Incentive Plan (the "1998 Plan") which was approved by the Company's
stockholders in May 1998. The 1992 Plan and the 1998 Plan are administered by a
Committee of the Board of Directors and provide for the granting of options to
key employees of the Company and its subsidiaries to purchase up to an aggregate
of 350,000 and 500,000 shares of Common Stock of the Company under the 1992 Plan
and the 1998 Plan, respectively. The 1998 Plan also permits the granting of
other types of awards in the form of Common Stock of the Company; none have been
granted. Options granted under the 1992 Plan and the 1998 Plan may be either
incentive stock options, within the meaning of Section 422 of the Internal
Revenue Code, or non-qualified options.
Options granted under the 1992 Plan and the 1998 Plan will be exercisable
during the period fixed by the Committee for each option at the time of its
grant; however, in general, no option will be exercisable earlier than one year
after the date of its grant, and no incentive stock option will be exercisable
more than ten years after the date of its grant. The option exercise price must
be at least 100% of the fair market value of the Common Stock on the date of the
option grant. No compensation expense related to stock options was recorded
during fiscal 1999, 1998 or 1997.
A summary of the Company's stock-based compensation activity related to
stock options for the last three fiscal years is as follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
JAN. 31, 1999 FEB. 1, 1998 FEB. 2, 1997
------------------ ------------------ ------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Number Price Number Price Number Price
------- -------- ------- -------- ------- --------
Outstanding - beginning of year 322,433 $ 4.19 302,816 $ 4.39 296,546 $ 5.05
Granted 190,200 6.18 40,700 3.06 86,800 2.37
Expired/terminated 2,100 2.94 21,083 4.93 80,530 4.66
Exercised 55,156 3.45 - - - -
------- -------- ------- -------- ------- --------
Outstanding - end of year 455,377 $ 5.11 322,433 $ 4.19 302,816 $ 4.39
======= ======== ======= ======== ======= ========
</TABLE>
Options covering 154,337, 161,093 and 123,616 shares were exercisable at
January 31, 1999, February 1, 1998 and February 2, 1997, respectively.
The following table summarizes information about stock options outstanding
as of January 31, 1999:
Options Outstanding Options Exercisable
- ------------------------------------------------------ ----------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Range of Number Contractual Exercise Number Exercise
Exercise Prices Outstanding Life Price Exercisable Price
- --------------- ----------- ----------- -------- ----------- --------
$1.94 - $2.78 68,240 7.5 Years $ 2.34 22,760 $ 2.32
3.06 37,137 8.1 Years 3.06 6,97 3.06
3.63 - 5.75 144,400 5.6 Years 5.02 101,800 4.91
6.31 - 7.19 205,600 8.9 Years 6.47 22,800 7.19
- --------------- ----------- ----------- -------- ----------- --------
$1.94 - $7.19 455,377 7.8 Years $ 5.11 154,337 $ 4.78
=============== =========== =========== ======== =========== ========
If compensation cost for the Company's Plan had been determined based on
the fair value at the grant dates of awards under the Plan consistent with the
method of SFAS No. 123, "Accounting for Stock-Based Compensation", the Company's
net income (loss) and net income (loss) per share would have been reduced to the
pro forma amounts indicated below:
Jan. 31, Feb. 1, Feb. 2,
1999 1998 1997
------- ------- -------
Net income (loss) As reported $ 4,546 $ 5,370 $(1,187)
Pro forma 4,402 5,326 (1,235)
Basic net income (loss)
per share As reported .50 .92 (.24)
Pro forma .49 .91 (.25)
Diluted net income (loss)
per share As reported .50 .91 (.24)
Pro forma .48 .91 (.25)
The weighted average fair value of options granted during the year was
$2.07, $1.43 and $0.70 per option for fiscal 1999, 1998 and 1997, respectively.
The fair value of options granted under the Plan was estimated at the date of
grant using a binomial option pricing model with the following assumptions:
Jan. 31, Feb. 1, Feb. 2,
1999 1998 1997
------- ------- -------
Risk-free interest rate 5.2 % 6.5 % 6.0 %
Dividend yield - - -
Expected volatility 8.3 % 8.4 % 8.1 %
Expected life (years) 7.5 years 6.0 years 6.6 years
L. EXCHANGE OF DEBT AND PREFERRED STOCK FOR COMMON STOCK AND RELATED
EXTRAORDINARY ITEM
On November 14, 1997, the stockholders of the Company approved various
proposals necessary to effect the payment of all of the Company's outstanding
Senior Promissory Notes, Subordinated Promissory Notes and Junior Subordinated
Promissory Notes (collectively, the "Notes") with common stock and to change and
reclassify all of the Company's outstanding preferred stock into common stock.
In connection with these transactions, which became effective on November
18, 1997, the Company issued 965,497 shares of Common Stock and 3,050,473 shares
of Nonvoting Common Stock. The Nonvoting Common Stock was issued only to 399
Venture Partners, Inc. ("Venture"), an affiliate of Citigroup Inc., and is
convertible into Common Stock on a share-for-share basis upon certain
conditions. Common Stock was issued to all other holders of Notes and to all
holders of Preferred Stock.
The aggregate redemption value of the Preferred Stock at the effective date
of the transactions was $2,968, comprised of $1,000 per share stated liquidation
value plus accrued dividends. The aggregate principal amount and accrued
interest on the Notes at the effective date of the transactions was $33,175.
Based upon a value of $9 per share for purposes of the transactions, (i) 329,815
shares of Common Stock were issued to the holders of Preferred Stock resulting
in a net gain to the Company of $756, credited directly to accumulated deficit,
(ii) 635,682 shares of Common Stock were issued to Note holders other than
Venture resulting in a net gain to the Company of $1,735, reflected as an
extraordinary item in the consolidated statement of operations, and (iii)
3,050,473 shares of Nonvoting Common Stock were issued to Venture resulting in a
net gain to the Company of $7,571, credited directly to paid-in capital. These
net gains represent the excess of the value of the Common Stock for purposes of
the transactions over the value of the stock as determined by the closing market
price of the Common Stock as of the transaction date, net of applicable
transaction costs, unamortized discounts, and income taxes.
M. CAPITAL STOCK
As described in Note L, the Company issued an additional 965,497 shares of
Common Stock and 3,050,473 shares of Nonvoting Common Stock during fiscal 1998.
During fiscal 1999, 55,156 shares of Common Stock were issued upon the exercise
of stock options. The Company had 6,025,595 shares of Common Stock and 3,050,473
shares of Nonvoting Common Stock outstanding at January 31, 1999. The Nonvoting
Common Stock is held entirely by 399 Venture Partners, Inc. which is also the
Company's largest holder of Common Stock. The Nonvoting Common Stock is
convertible into Common Stock on a share-for-share basis upon certain
conditions. The Company had 5,970,439 shares of Common Stock and 3,050,473
shares of Nonvoting Common Stock outstanding at February 1, 1998.
N. PREFERRED STOCK SUBJECT TO MANDATORY REDEMPTION
Note L describes the change and reclassification of all preferred stock
into common stock of the Company, effective November 18, 1997. Prior to the
reclassification, the Company was obligated to redeem all outstanding shares of
senior cumulative and junior cumulative preferred stock on December 31, 2001, at
a price not to exceed the liquidation value which was $1,000 per share plus any
accrued dividends. Subject to certain loan restrictions, the Company could, at
any time, have redeemed all or any portion of the preferred stock outstanding at
a price of $1,000 per share plus any accrued dividends.
Each share of senior cumulative and junior cumulative preferred stock
entitled its holder to receive a quarterly dividend of 16.25% and 14.25% per
annum, respectively, of the liquidation value from the date of issuance until
redeemed. Both series of preferred stock were nonvoting, and any unpaid
dividends were added to the liquidation value until paid.
Because of the accumulated deficit which resulted primarily from the store
closings and the write-off of goodwill and other long-lived assets recognized in
the fourth quarter of fiscal 1996, applicable corporate law did not permit the
Company or Pamida to declare or pay any cash dividends on any stock in fiscal
1998 or 1997. A provision for preferred stock dividends was recorded in the
fiscal 1998 and 1997 financial statements. As a result of the reclassification
of the preferred stock into common stock, the Company's obligation for further
preferred stock dividend payments or accruals has been eliminated.
The difference between the fair value of the junior cumulative preferred
stock at issuance and the mandatory redemption value was recorded through
periodic accretions, using the effective interest method with a related charge
to retained earnings.
O. COMMITMENTS AND CONTINGENCIES
Pamida has employment agreements with three key executive officers which
expire in 2000 and 2001. In addition to a base salary, the agreements provide
for a bonus to be paid if certain Company performance goals are achieved. Also,
in March 1997, the Board of Directors approved a long-term incentive
compensation program in order to enhance retention of certain key members of
management. Payout under such program is tied to continued employment and future
Company common stock price appreciation.
On January 31, 1999, the Company had standby letters of credit outstanding
totaling $4,879 related to the Company's self-insured retention of workers'
compensation and general liabilities as well as future rental payments on a
distribution center. Additional letters of credit outstanding totaling $4,057
were committed for purchases of merchandise inventory.
P. STORE CLOSING RESERVES
During fiscal 1996, the Company recognized a $21,397 charge reflecting
management's best estimate of total costs to close forty unprofitable or
competitive market stores which did not fit the Company's niche market strategy.
Remaining expected future charges are recorded in the store closing reserve. The
amounts the Company will ultimately realize from the disposal of assets or pay
on the resolution of liabilities may differ from the estimated amounts
established in the 1996 store closing reserve.
The 1996 store closing reserve balance as of January 28, 1996 included
amounts related to real estate, inventory, severance, professional fees and
other costs of closing the forty stores. The liquidation of the closed stores'
inventory was completed in the second quarter of fiscal 1997. As of January 31,
1999, all known ancillary costs of the store closings have been paid except
those related to the remaining real estate. During fiscal 1997, 1998 and 1999
the Company negotiated settlements on twenty-seven closed store properties which
had been leased, three of which have been subleased, and sold eight closed store
properties which had been owned. As of January 31, 1999, the Company remains
liable for lease obligations on five closed store properties. The Company
anticipates that final disposition of the remaining obligations will be
accomplished in fiscal 2000 and 2001.
The 1996 store closing reserve activity and amounts included in the balance
sheets are as follows:
1996 Store Closing Reserves
----------------------------------------------
Amount included Amount included
in other accrued in other long-
expenses term liabilities Total
---------------- ----------------- -------
Balance at January 28, 1996 $ 7,818 $ 2,619 $10,437
Payments applied to reserve 3,297 429 3,726
---------------- ----------------- -------
Balance at February 2, 1997 4,521 2,190 6,711
Payments applied to reserve 2,957 500 3,457
---------------- ----------------- -------
Balance at February 1, 1998 1,564 1,690 3,254
Payments applied to reserve 477 955 1,432
Reduction in the required reserve - 535 535
---------------- ----------------- -------
Balance at January 31, 1999 $ 1,087 $ 200 $ 1,287
================ ================= =======
Q. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of the quarterly results of operations for the
years ended January 31, 1999 and February 1, 1998:
<TABLE>
<S> <C> <C> <C> <C> <C>
May 3, August 2, November 1, January 31,
FISCAL 1999 1998 1998 1998 1999 Year
- ----------- ----------- ----------- ----------- ----------- -----------
Sales....................... $ 144,532 $ 170,169 $ 157,585 $ 200,108 $ 672,394
Gross profit................ 34,360 43,308 37,306 52,594 167,568
Net (loss) income........... (2,301) 1,483 535 4,829 4,546
Basic and diluted (loss)
income per share ......... $ (.26) $ .16 $ .06 $ .53 $ .50
=========== =========== =========== =========== ===========
May 4, August 3, November 2, February 1,
FISCAL 1998 1997 1997 1997 1998 Year
- ----------- ----------- ----------- ----------- ----------- -----------
Sales....................... $ 144,564 $ 163,217 $ 158,749 $ 190,487 $ 657,017
Gross profit................ 33,268 41,502 37,854 49,311 161,935
(Loss) income before
extraordinary item........ (5,459) 563 340 7,842 3,286
Extraordinary item.......... - - - 1,735 1,735
Net (loss) income (5,459) 563 340 9,577 5,021
Effect of preferred stock
reclassification.......... - - - 756 756
Less provision for preferred
dividends and discount
amortization.............. (105) (165) (137) - (407)
----------- ----------- ----------- ----------- -----------
Net (loss) income available
for common shares......... $ (5,564) $ 398 $ 203 $ 10,333 $ 5,370
=========== =========== =========== =========== ===========
Basic (loss) income per share:
(Loss) income before
extraordinary item........ $ (1.11) $ .08 $ .04 $ 1.03 $ .62
Extraordinary item.......... - - - .21 .30
----------- ----------- ----------- ----------- -----------
Basic (loss) income......... $ (1.11) $ .08 $ .04 $ 1.24 $ .92
=========== =========== =========== =========== ===========
Diluted (loss) income per share:
(Loss) income before
extraordinary item........ $ (1.11) $ .08 $ .04 $ 1.02 $ .62
Extraordinary item.......... - - - .21 .29
----------- ----------- ----------- ----------- -----------
Diluted (loss) income....... $ (1.11) $ .08 $ .04 $ 1.23 $ .91
=========== =========== =========== =========== ===========
</TABLE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Pamida Holdings Corporation
Omaha, Nebraska
We have audited the consolidated financial statements of Pamida Holdings
Corporation and subsidiary as of January 31, 1999 and February 1, 1998, and for
each of the three years in the period ended January 31, 1999, and have issued
our report thereon dated March 9, 1999; such financial statements and report are
included in your 1999 Annual Report to Stockholders and are incorporated herein
by reference. Our audits also included the financial statement schedule of
Pamida Holdings Corporation, listed in Item 14. This financial statement
schedule is the responsibility of the Corporation's management. Our
responsibility is to express an opinion based on our audits. In our opinion,
such financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
/s/Deloitte & Touche LLP
Deloitte & Touche LLP
Omaha, Nebraska
March 9, 1999
PAMIDA HOLDINGS CORPORATION
(PARENT COMPANY ONLY)
(DOLLAR AMOUNT IN THOUSANDS EXCEPT FOR PER SHARE DATA)
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF OPERATIONS -
YEARS ENDED JANUARY 31, 1999, FEBRUARY 1, 1998 AND FEBRUARY 2, 1997
- --------------------------------------------------------------------------------
1999 1998 1997
-------- -------- --------
Equity in income of subsidiary $ 4,503 $ 6,633 $ 3,696
Expenses:
General and administrative (70) 17 19
Interest - 3,974 4,473
-------- -------- --------
(70) 3,991 4,492
-------- -------- --------
Income (loss) before provision for
income taxes and extraordinary item 4,573 2,642 (796)
Income tax provision (benefit) 27 (644) -
-------- -------- --------
Income (loss) before
extraordinary item 4,546 3,286 (796)
Extraordinary item 1,735 - -
-------- -------- --------
Net income (loss) 4,546 5,021 (796)
Effect of preferred stock
reclassification - 756 -
Amortization of discount on 14-1/4%
junior cumulative preferred - (38) (49)
Accrued dividends for
preferred stockholders - (369) (342)
-------- -------- --------
Net income (loss) available for
common shares $ 4,546 $ 5,370 $ (1,187)
======== ======== ========
Basic income (loss) per share:
Income (loss) before
extraordinary item $ .50 $ .62 ($ .24)
Extraordinary item - .30 -
-------- -------- --------
Basic income (loss) $ 50 $ 92 ($ .24)
======== ======== ========
Diluted income (loss) per share
Income (loss) before
extraordinary item $ .50 $ .62 ($ .24)
Extraordinary item - .29 -
-------- -------- --------
Diluted income (loss) $ .50 $ .91 ($ .24)
======== ======== ========
See notes to Parent Company Only financial statements.
PAMIDA HOLDINGS CORPORATION
(PARENT COMPANY ONLY)
(DOLLAR AMOUNTS IN THOUSANDS)
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
BALANCE SHEETS - JANUARY 31, 1999 AND FEBRUARY 1, 1998
- --------------------------------------------------------------------------------
ASSETS 1999 1998
-------- --------
Current assets:
Refundable income taxes due from subsidiary $ 2,308 $ 2,335
Investment in subsidiary (46,395) (50,898)
-------- --------
$(44,087) (48,563)
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Other accrued expense $ 13 $ 160
Payable to Pamida, Inc. 403 516
-------- --------
Total current liabilities 416 676
Other long-term liabilities 3,036 3,036
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 (78,405) (82,951)
-------- --------
Total stockholders' deficit (47,539) (52,275)
-------- --------
$(44,087) $(48,563)
========= ========
See notes to Parent Company Only financial statements.
<TABLE>
<CAPTION>
PAMIDA HOLDINGS CORPORATION
(PARENT COMPANY ONLY)
(DOLLAR AMOUNTS IN THOUSANDS)
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Nonvoting Additional
Common Common Paid-in (Accumulated
Stock Stock Capital Deficit)
------ --------- ---------- ------------
Balance at January 28, 1996................. $ 50 $ - $ 968 $ (87,134)
Net loss.................................... - - - (796)
Amortization of discount on 14-1/4%
junior cumulative preferred............... - - - (49)
Accrued dividends for preferred stockholders - - - (342)
------ --------- ---------- ------------
Balance at February 2, 1997................. 50 - 968 (88,321)
Net income - - - 5,021
Amortization of discount on 14-1/4%
junior cumulative preferred............... - - - (38)
Accrued dividends for preferred stockholders - - - (369)
Reclassification of preferred stock into
common stock.............................. 3 - 1,811 756
Payment of notes with common stock.......... 7 30 20,236 -
Gain on payment of notes held by Venture
(net of tax).............................. - - 7,571 -
------ --------- ---------- ------------
Balance at February 1, 1998................. 60 30 30,586 (82,951)
Net income.................................. _ _ _ 4,546
Stock sold under incentive stock
option plan.............................. - - 190 -
Balance at January 31, 1999................ $ 60 $ 30 $ 30,776 $ (78,405)
====== ========= ========== ============
See notes to Parent Company Only financial statements.
</TABLE>
PAMIDA HOLDINGS CORPORATION
(PARENT COMPANY ONLY)
(DOLLAR AMOUNTS IN THOUSANDS)
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF CASH FLOWS
YEARS ENDED JANUARY 31, 1999, FEBRUARY 1, 1998 AND FEBRUARY 2, 1997
- --------------------------------------------------------------------------------
1999 1998 1997
------ ------ ------
Cash flows from operating activities:
Net income (loss) ........................... $4,546 $5,021 $ (796)
------ ------ ------
Adjustments to reconcile net income (loss)
to net cash from operating activities:
Equity in income of subsidiary ............ (4,503) (6,633) (3,696)
Noncash interest expense .................. - 3,850 4,313
Accretion of original issue
debt discount ........................... - 124 160
Amortization of intangible assets ......... - 8 11
Extraordinary item related to
retirement of debt ...................... - (1,735) -
(Increase) decrease in refundable
income tax .............................. 27 (644) -
Increase (decrease) in operating
liabilities ............................. (260) 659 8
------ ------ ------
Total adjustments ...................... (4,736) (4,371) 796
------ ------ ------
Net cash from operating activities ..... (190) 650 -
------ ------ ------
Cash flows from financing activities:
Fees related to payment of debt and
reclassification of preferred stock ...... - (650) -
Proceeds from sale of stock ................ 190 - -
------ ------ ------
Net cash from financing activities ..... 190 (650) -
------ ------ ------
Net change in cash .......................... - - -
Cash at beginning of year ................... - - -
------ ------ ------
Cash at end of year ......................... $ - $ - $ -
====== ====== ======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the year for interest ... $ - $ - $ -
SUPPLEMENTAL SCHEDULE OF NONCASH
FINANCING ACTIVITY:
Amortization of discount on junior
cumulative preferred stock recorded
as a direct charge to retained earnings $ - $ 38 $ 49
Payment of interest in kind by
increasing the principal
amount of the notes .................... - 3,561 4,141
See notes to Parent Company Only financial statements.
PAMIDA HOLDINGS CORPORATION
(PARENT COMPANY ONLY)
(DOLLAR AMOUNTS IN THOUSANDS)
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
A. The Condensed Financial Statements include the Registrant only and reflect
the equity method of accounting for its benefically owned subsidiary,
Pamida, Inc.
B. The registrant files a consolidated U.S. federal tax return with Pamida,
Inc. The Company has a tax sharing agreement with Pamida, Inc. that
provides that taxes will be allocated among the companies based upon the
tax expense or benefit that was derived on a consolidated basis from each
entity's operations. Income tax effects included in these financial
statements are calculated on a stand-alone basis for Pamida Holdings
Corporation. Related to the Company's payment of debt with common stock and
reclassification of preferred stock into common stock which was effective
November 18, 1997, income tax expense allocated to the extraordinary item
totaled $379 and income tax expense charged directly to stockholders'
equity was $1,821. These amounts are net of a change in the beginning of
year valuation allowance of $1,659.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
The information required by this Part III is incorporated by reference from
the registrant's definitive proxy statement for the 1999 annual meeting of the
registrant's stockholders to be held on May 20, 1999, which involves the
election of directors. Such definitive proxy statement will be filed with the
Securities and Exchange Commission not later than 120 days after the end of the
fiscal year covered by this Form 10-K. However, information concerning the
registrant's executive officers will be omitted from such proxy statement and is
furnished in a separate item captioned "Executive Officers of the Registrant"
included in Part I of this Form 10-K.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) The following documents are filed as a part of this report in Item 8
of Part II:
1. FINANCIAL STATEMENTS.
Pamida Holdings Corporation and Subsidiary
- Independent Auditors' Report
- Consolidated Statements of Operations for the Years Ended January
31, 1999, February 1, 1998 and January 2, 1997
- Consolidated Balance Sheets at January 31, 1999 and February 1, 1998
- Consolidated Statements of Stockholders' Equity for the Years Ended
January 31, 1999, February 1, 1998, and February 2, 1997
- Consolidated Statements of Cash Flows for the Years Ended January
31, 1999, February 1, 1998 and February 2, 1997
- Notes to Consolidated Financial Statements for the Years Ended
January 31, 1999, February 1, 1998 and February 2, 1997
2. FINANCIAL STATEMENT SCHEDULES.
- Independent Auditors' Report on Schedule I
- Schedule I - Condensed Financial Information of Registrant
All other schedules of the registrant for which provision is made in the
applicable accounting regulations of the Securities and Exchange Commission are
not required under the related instructions, are inapplicable or have been
disclosed in the Notes to Consolidated Financial Statements and, therefore, have
been omitted.
3. EXHIBITS.
(11) 3.1 - Restated Certificate of Incorporation of Pamida Holdings Corporation
(March 12, 1998).
(2) 3.2 - Revised By-Laws of Pamida Holdings Corporation.
(2) 4.1 - Form of certificate representing shares of the Common Stock of
Pamida Holdings Corporation.
(5) 4.2 - Indenture dated as of March 15, 1993, among Pamida, Inc. as Issuer,
Pamida Holdings Corporation as Guarantor, and State Street Bank
and Trust Company as Trustee relating to 11 3/4% Senior Subordinated
Notes due 2003 of Pamida, Inc.
(5) 4.3 - Specimen form of 11 3/4% Senior Subordinated Note due 2003 of
Pamida, Inc.
(3) 10.1 - Form of Indemnification Agreement between Pamida Holdings
Corporation and its officers and directors.
(4) 10.2 - Tax-Sharing Agreement dated as of February 2, 1992, among
Pamida Holdings Corporation, Pamida, Inc., Seaway Importing Company,
and Pamida Transportation Company.
(6) 10.3 - Pamida Holdings Corporation 1992 Stock Option Plan.
(8) 10.4 - Employment Agreement dated September 22, 1995, among Pamida
Holdings Corporation, Pamida, Inc. and Steven S. Fishman.
(9) 10.5 - Amendment No. 1 to Employment Agreement among Pamida Holdings
Corporation, Pamida, Inc., and Steven S. Fishman dated August 29,
1996 (amends Exhibit 10.4).
(10)10.6 - Amendment No. 2 to Employment Agreement among Pamida Holdings
Corporation, Pamida, Inc., and Steven S. Fishman dated March 6, 1997
(amends Exhibit 10.4).
(11)10.7 - Amendment No. 3 to Employment Agreement among Pamida Holdings
Corporation, Pamida, Inc., and Steven S. Fishman dated May 22, 1997
(amends Exhibit 10.4).
(11)10.8 - Amendment No. 4 to Employment Agreement among Pamida Holdings
Corporation, Pamida Inc., and Steven S. Fishman dated March 5, 1998
(amends Exhibit 10.4).
(7) 10.9 - Pamida, Inc. 1995 Deferred Compensation Plan.
(10)10.10- Employment Agreement dated as of March 6, 1997, among Pamida
Holdings Corporation, Pamida, Inc., and Frank A. Washburn.
(11)10.11- Amendment No. 1 to Employment Agreement among Pamida Holdings
Corporation, Pamida, Inc., and Frank A. Washburn dated
March 5, 1998 (amends Exhibit 10.10).
(10)10.12- Employment Agreement dated as of March 6, 1997, among Pamida
Holdings Corporation, Pamida, Inc., and George R. Mihalko.
(11)10.13- Amendment No.1 to Employment Agreement among Pamida Holdings
Corporation, Pamida, Inc., and George R. Mihalkodated March 5, 1998
(amends Exhibit 10.12).
(10)10.14- Long-Term Incentive Award Agreement dated as of March 6, 1997,
between Pamida, Inc., and Steven S. Fishman.
(10)10.15- Long-Term Incentive Award Agreement dated as of March 6, 1997,
between Pamida, Inc., and Frank A. Washburn.
(10)10.16- Long-Term Incentive Award Agreement dated as of March 6, 1997,
between Pamida, Inc., and George R. Mihalko.
(12)10.17- Amended and Restated Loan and Security Agreement by and among
Congress Financial Corporation (Southwest) and BankAmerica Business
Credit, Inc., as Lenders, Congress Financial Corporation
(Southwest), as Agent for Lenders, and Pamida, Inc and Seaway
Importing Company, as Borrowers, dated July 2, 1998.
(12)10.18- Reaffirmation of Guarantee and Security Agreement by Pamida Holdings
Corporation dated July 2, 1998, and original Guarantee of Holdings
Corporation dated March 30, 1993 (relates to Exhibit 10.17)
(13)10.19- Pamida Holdings Corporation 1998 Stock Incentive Plan.
10.20- Amendment No. 6 to Employment Agreement among Pamida Holdings
Corporation, Pamida, Inc., and Steven S. Fishman dated March 25,
1999 (amends Exhibit 10.4).
10.21- Amendment No. 2 to Employment Agreement among Pamida Holdings
Corporation, Pamida, Inc., and Frank A. Washburn dated March 25,
1999 (amends Exhibit 10.10).
10.22- Amendment No. 3 to Employment Agreement among Pamida Holdings
Corporation, Pamida, Inc., and George R. Mihalko dated March 25,
1999 (amends Exhibit 10.12).
10.23- Retention Bonus Agreement between Pamida, Inc. and Steven S. Fishman
dated April 2, 1999.
10.24- Retention Bonus Agreement between Pamida, Inc. and Frank A. Washburn
dated April 2, 1999.
10.25- Retention Bonus Agreement between Pamida, Inc. and George R. Mihalko
dated April 2, 1999.
(1) 22.1 - Subsidiary of Pamida Holdings Corporation.
23.1 - Consent of Deloitte & Touche LLP.
24.1 - Powers of Attorney
27.1 - Financial Data Schedule (EDGAR filing only)
- -------------------------
(1) Previously filed as an exhibit to Registration Statement of Pamida Holdings
Corporation on Form S-1 (Registration No. 33-35324) and incorporated herein
by this reference.
(2) Previously filed as an exhibit to Form 10-Q Quarterly Report of Pamida
Holdings Corporation for the period ended October 28, 1990, and
incorporated herein by this reference.
(3) Previously filed as an exhibit to Form 10-K Annual Report of Pamida
Holdings Corporation for the fiscal year ended February 3, 1991, and
incorporated herein by this reference.
(4) Previously filed as an exhibit to Registration Statement of Pamida, Inc.
and Pamida Holdings Corporation on Form S-1 (Registration No. 33-57990) and
incorporated herein by this reference.
(5) Previously filed as an exhibit to Form 10-Q Quarterly Report of Pamida
Holdings Corporation for the period ended May 2, 1993, and incorporated
herein by this reference.
(6) Previously filed as an exhibit to Form 10-Q Quarterly Report of Pamida
Holdings Corporation for the period ended August 1, 1993, and incorporated
herein by this reference.
(7) Previously filed as an exhibit to Form 10-K Annual Report of Pamida
Holdings Corporation for the fiscal year ended January 29, 1995, and
incorporated herein by this reference.
(8) Previously filed as an exhibit to Form 10-Q Quarterly Report of Pamida
Holdings Corporation for the period ended October 29, 1995, and
incorporated herein by this reference.
(9) Previously filed as an exhibit to Form 10-Q Quarterly Report of Pamida
Holdings Corporation for the period ended October 27, 1996, and
incorporated herein by this reference.
(10) Previously filed as an exhibit to Form 10-K Annual Report of Pamida
Holdings Corporation for the fiscal year ended February 2, 1997, and
incorporated herein by this reference.
(11) Previously filed as an exhibit to Form 10-K Annual Report of Pamida
Holdings Corporation for the fiscal year ended February 1, 1998, and
incorporated herein by this reference.
(12) Previously filed as an exhibit to Form 10-Q Quarterly Report of Pamida
Holdings Corporation for the period ended August 2, 1998, and incorporated
herein by this reference.
(13) Previously filed as an exhibit to Form 10-Q Quarterly Report of Pamida
Holdings Corporation for the period ended November 1, 1998, and
incorporated herein by this reference.
* * *
(b) No reports on Form 8-K were filed during the last quarter of the
period covered by this report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: April 20, 1999 PAMIDA HOLDINGS CORPORATION
By: /S/Steven S. Fishman
Steven S. Fishman, Chairman
of the Board, President, and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/S/ STEVEN S. FISHMAN Chairman of the Board, April 20, 1999
- ------------------------ President, Chief Executive
Steven S. Fishman Officer and Director
/S/ GEORGE R. MIHALKO Senior Vice President, April 20, 1999
- ------------------------ Chief Financial Officer
George R. Mihalko and Treasurer
/S/ TODD D. WEYHRICH Vice President, Controller April 20, 1999
- ----------------------- and Principal Accounting
Todd D. Weyhrich Officer
/S/ FRANK A. WASHBURN Director April 20, 1999
- -----------------------------
Frank A. Washburn
*
_______________________ Director April 20, 1999
L. David Callaway, III
*
_______________________ Director April 20, 1999
Stuyvesant P. Comfort
*
_______________________ Director April 20, 1999
M. Saleem Muqaddam
*
_______________________ Director April 20, 1999
Peter J. Sodini
* By:/S/ GEORGE R. MIHALKO
George R. Mihalko,
Attorney-in-Fact
PAMIDA HOLDINGS CORPORATION
FORM 10-K -- FEBRUARY 1, 1998
EXHIBIT INDEX
Exhibit# Description
- ---------------=================================================================
(11) 3.1 Restated Certificate of Incorporation of Pamida Holdings
Corporation (March 12, 1998).
- ---------------=================================================================
(2) 3.2 Revised By-Laws of Pamida Holdings Corporation.
- ---------------=================================================================
(2) 4.1 Form of certificate representing shares of the Common Stock of
Pamida Holdings Corporation.
- ---------------=================================================================
(5) 4.2 Indenture dated as of March 15, 1993, among Pamida, Inc. as
Issuer, Pamida Holdings Corporation as Guarantor, and State
Street Bank and Trust Company as Trustee relating to 11 3/4%
Senior Subordinated Notes due 2003 of Pamida, Inc.
- ---------------=================================================================
(5) 4.3 Specimen form of 11 3/4% Senior Subordinated Note due 2003 of
Pamida, Inc.
- ---------------=================================================================
(3) 10.1 Form of Indemnification Agreement between Pamida Holdings
Corporation and its officers and directors.
- ---------------=================================================================
(4) 10.2 Tax-Sharing Agreement dated as of February 2, 1992, among Pamida
Holdings Corporation, Pamida, Inc., Seaway Importing Company,
and Pamida Transportation Company.
- ---------------=================================================================
(6) 10.3 Pamida Holdings Corporation 1992 Stock Option Plan.
- ---------------=================================================================
(8) 10.4 Employment Agreement dated September 22, 1995, among Pamida
Holdings Corporation, Pamida, Inc. and Steven S. Fishman.
- ---------------=================================================================
(9) 10.5 Amendment No. 1 to Employment Agreement among Pamida Holdings
Corporation, Pamida, Inc., and Steven S. Fishman dated August 29,
1996 (amends Exhibit 10.4).
- ---------------=================================================================
(10) 10.6 Amendment No. 2 to Employment Agreement among Pamida Holdings
Corporation, Pamida, Inc., and Steven S. Fishman dated March 6,
1997 (amends Exhibit 10.4).
- ---------------=================================================================
(11) 10.7 Amendment No. 3 to Employment Agreement among Pamida Holdings
Corporation, Pamida, Inc., and Steven S. Fishman dated May 22,
1997 (amends Exhibit 10.4).
- ---------------=================================================================
(11) 10.8 Amendment No. 4 to Employment Agreement among Pamida Holdings
Corporation, Pamida Inc., and Steven S. Fishman dated March 5,
1998 (amends Exhibit 10.4).
- ---------------=================================================================
(7) 10.9 Pamida, Inc. 1995 Deferred Compensation Plan.
- ---------------=================================================================
(10) 10.10 Employment Agreement dated as of March 6, 1997, among Pamida
Holdings Corporation, Pamida, Inc., and Frank A. Washburn.
- ---------------=================================================================
(11) 10.11 Amendment No. 1 to Employment Agreement among Pamida Holdings
Corporation, Pamida, Inc., and Frank A. Washburn dated March 5,
1998 (amends Exhibit 10.10).
- ---------------=================================================================
(10) 10.12 Employment Agreement dated as of March 6, 1997, among Pamida
Holdings Corporation, Pamida, Inc., and George R. Mihalko.
- ----------------================================================================
(11) 10.13 Amendment No. 1 to Employment Agreement among Pamida Holdings
Corporation, Pamida, Inc., and George R. Mihalko dated March 5,
1998 (amends Exhibit 10.12).
- ----------------================================================================
(10) 10.14 Long-Term Incentive Award Agreement dated as of March 6, 1997,
between Pamida, Inc., and Steven S. Fishman.
- ----------------================================================================
(10) 10.15 Long-Term Incentive Award Agreement dated as of March 6, 1997,
between Pamida, Inc., and Frank A. Washburn.
- ----------------================================================================
(10) 10.16 Long-Term Incentive Award Agreement dated as of March 6, 1997,
between Pamida, Inc., and George R. Mihalko.
- ----------------================================================================
(12) 10.1 7 Amended and Restated Loan and Security Agreement by and among
Congress Financial Corporation (Southwest) and BankAmerica
Business Credit, Inc., as Lenders, Congress Financial Corporation
(Southwest), as Agent for Lenders, and Pamida, Inc. and Seaway
Importing Company, as Borrowers, dated July 2, 1998.
- ----------------================================================================
(12) 10.18 Reaffirmation of Guarantee and Security Agreement by Pamida
Holdings Corporation dated July 2, 1998, and original Guarantee
of Holdings Corporation dated March 30, 1993 (relates to
Exhibit 10.17).
- ----------------================================================================
(13) 10.19 Pamida Holdings Corporation 1998 Stock Incentive Plan.
- ----------------================================================================
10.20 Amendment No., 6 to Employment Agreement among Pamida Holdings
Corporation, Pamida, Inc., and Steven S. Fishman dated March 25,
1999 (amends Exhibit 10.4).
- ----------------================================================================
10.21 Amendment No. 2 to Employment Agreement among Pamida Holdings
Corporation, Pamida, Inc., and Frank A. Washburn dated March 25,
1999 (amends Exhibit 10.10).
- ----------------================================================================
10.22 Amendment No. 3 to Employment Agreement among Pamida Holdings
Corporation, Pamida, Inc., and George R. Mihalko dated March 25,
1999 (amends Exhibit 10.12).
- ----------------================================================================
10.23 Retention Bonus Agreement between Pamida, Inc. and Steven S.
Fishman dated April 2, 1999.
- ----------------================================================================
10.24 Retention Bonus Agreement between Pamida, Inc. and Frank A.
Washburn dated April 2, 1999.
- ----------------================================================================
10.25 Retention Bonus Agreement between Pamida, Inc. and George R.
Mihalko dated April 2, 1999.
- ----------------================================================================
(1) 22.1 Subsidiary of Pamida Holdings Corporation.
- ----------------================================================================
23.1 Consent of Deloitte & Touche LLP.
- ----------------================================================================
24.1 Powers of Attorney
- ----------------================================================================
27.1 Financial Data Schedule (EDGAR filing only).
- ----------------================================================================
- -------------------------
(1) Previously filed as an exhibit to Registration Statement of Pamida Holdings
Corporation on Form S-1 (Registration No. 33-35324) and incorporated herein
by this reference.
(2) Previously filed as an exhibit to Form 10-Q Quarterly Report of Pamida
Holdings Corporation for the period ended October 28, 1990, and
incorporated herein by this reference.
(3) Previously filed as an exhibit to Registration Statement of Pamida, Inc. on
Form S-l (Registration No. 33-10980) and incorporated herein by this
reference.
(4) Previously filed as an exhibit to Form 10-K Annual Report of Pamida
Holdings Corporation for the fiscal year ended February 3, 1991, and
incorporated herein by this reference.
(5) Previously filed as an exhibit to Registration Statement of Pamida, Inc.
and Pamida Holdings Corporation on Form S-1 (Registration No. 33-57990) and
incorporated herein by this reference.
(6) Previously filed as an exhibit to Form 10-Q Quarterly Report of Pamida
Holdings Corporation for the period ended May 2, 1993, and incorporated
herein by this reference.
(7) Previously filed as an exhibit to Form 10-Q Quarterly Report of Pamida
Holdings Corporation for the period ended August 1, 1993, and incorporated
herein by this reference.
(8) Previously filed as an exhibit to Form 10-K Annual Report of Pamida
Holdings Corporation for the fiscal year ended January 29, 1995, and
incorporated herein by this reference.
(9) Previously filed as an exhibit to Form 10-Q Quarterly Report of Pamida
Holdings Corporation for the period ended October 29, 1995, and
incorporated herein by this reference.
(10) Previously filed as an exhibit to Form 10-K Annual Report of Pamida
Holdings Corporation for the fiscal year ended January 28, 1996, and
incorporated herein by this reference.
(11) Previously filed as an exhibit to Form 10-Q Quarterly Report of Pamida
Holdings Corporation for the period ended October 27, 1996, and
incorporated herein by this reference.
(12) Previously filed as an exhibit to Form 10-K Annual Report of Pamida
Holdings Corporation for the fiscal year ended February 2, 1997, and
incorporated herein by this reference.
(13) Previously filed as an exhibit to Form 8-K Current Report of Pamida
Holdings Corporation (Date of Report: July 22, 1997) and incorporated
herein by this reference.
(14) Previously filed as an exhibit to Form 10-Q Quarterly Report of Pamida
Holdings Corporation for the period ended May 4, 1997, and incorporated
herein by this reference.
AMENDMENT NO. 6 TO EMPLOYMENT AGREEMENT
This Amendment No. 6 to Employment Agreement is made and entered into on
the 25th day of March, 1999, among PAMIDA HOLDINGS CORPORATION ("Holdings"), a
Delaware corporation, PAMIDA, INC. ("Pamida"), a Delaware corporation, and
STEVEN S. FISHMAN (the "Executive"). Holdings and Pamida collectively are
referred to in this Amendment No. 6 as the "Companies".
* * *
WHEREAS, the Companies and the Executive are parties to an Employment
Agreement dated September 22, 1995 (the "Employment Agreement"); and
WHEREAS, the Companies and the Executive now desire to amend the Employment
Agreement as more particularly set forth below;
NOW, THEREFORE, the Companies and the Executive agree as follows:
1. Pursuant to Paragraph 6 of the Employment Agreement, the Companies and
the Executive agree that the Executive's incentive bonus program for the fiscal
year of Holdings ending January 30, 2000 ("Fiscal 2000") shall be the following:
(a) If (i) the consolidated earnings of Holdings and its
subsidiaries (on a first-in, first-out basis with respect to
merchandise inventories) before interest, taxes,
depreciation, and amortization (the "EBITDA") for Fiscal
2000 (the "FY2000 EBITDA") are less than $48,500,000 or (ii)
the percentage increase in the comparable store sales of
Pamida for Fiscal 2000 compared with the fiscal year ended
January 31, 1999 (the "Comparable Store Sales Increase") is
less than 3%, then the Executive shall not be entitled to
any incentive bonus for Fiscal 2000.
(b) If the FY2000 EBITDA equals or exceeds $48,500,000 and the
Comparable Store Sales Increase equals or exceeds 3%, then
the Executive's incentive bonus for Fiscal 2000 shall be
determined as a percentage of the Executive's base salary
from the matrix attached to this Amendment No. 6 taking into
account (i) the FY2000 EBITDA and (ii) the Comparable Store
Sales Increase. The Comparable Store Sales Increase shall be
determined in accordance with Pamida's historical practices.
(c) For purposes of such matrix, a Comparable Store Sales
Increase of more than 9% shall be treated as an increase of
9%, and FY2000 EBITDA of more than $56,000,000 shall be
treated as FY2000 EBITDA of $56,000,000.
(d) For purposes of applying such matrix, the Executive's base
salary shall be the Executive's base salary in effect on
January 30, 2000.
(e) The maximum incentive bonus that the Executive shall have
the opportunity to earn for Fiscal 2000 is 125% of the
Executive's applicable base salary.
(f) FY2000 EBITDA amounts between whole millions of dollars and
a Comparable Store Sales Increase between whole percentages
shall be interpolated on a straight-line basis for purposes
of applying such matrix.
(g) Solely by way of illustration of the application of such
matrix, if the FY2000 EBITDA is $50,500,000 and the
Comparable Store Sales Increase for Fiscal 2000 is 4.6%,
then the Executive's incentive bonus for Fiscal 2000 would
be 55% of the Executive's applicable base salary.
The Executive's incentive bonus for Fiscal 2000 (if any) shall be paid to the
Executive as soon as practicable after Holdings has received the final audit
report with respect to Fiscal 2000 from its independent accountants.
2. The provisions of Paragraph 1 of this Amendment No. 6 are intended to
satisfy the requirements of Paragraph 6 of the Employment Agreement for the
fiscal year of Holdings ending in 2000.
3. Paragraph 12 of the Employment Agreement hereby is amended in its
entirety so as to read as follows:
"12. NOTICE OF NONRENEWAL. If, during or after the
expiration of the term of this agreement, the Companies determine
not to continue the employment of the Executive at a base salary
at least equal to the Base Salary which is in effect as of the
last day of the term of this agreement and with fringe benefits
and an incentive bonus program reasonably comparable to those in
effect as of the last day of the term of this agreement, then the
Companies shall so notify the Executive in writing (the "Notice")
promptly after such determination has been made. If the Executive
receives the Notice either at a time when there are less than
twelve (12) months left in the term of this agreement or after
the expiration of the term of this agreement while the Executive
is still in the employ of the Companies, then regardless of the
expiration of the term of this agreement the Executive shall be
entitled to receive the following payments and benefits from the
Companies:
(a) Continued payment of the Executive's Base
Salary, at the annual rate in effect on the
last day of the term of this agreement, until
that date (the "Extended Payment Date") which
is twelve (12) months after the date on which
the Executive received the Notice; provided,
that such payments shall be reduced by the
aggregate amount of salary or consulting fees
which the Executive derives from employment
with another employer (for purposes of this
Paragraph 12, the "Other Employment"),
whether as an employee or as a consultant,
during the period from the effective date of
the termination of the Executive's employment
by the Companies pursuant to the Notice
through the Extended Payment Date (the
"Extended Payment Period"). In no event,
however, shall the Executive be required to
repay to the Companies any portion of any
payments made to the Executive pursuant to
this subparagraph 12(a) for any periods prior
to the periods during which the Executive
earned such salary or consulting fees from
the Other Employment.
(b) An incentive bonus in an amount equal to (i)
the average amount of the incentive bonuses
received by the Executive from the Companies
for the three fiscal years of the Companies
ended prior to March 5, 2000, multiplied by
(ii) a fraction whose numerator is the number
of days in the Extended Payment Period and
whose denominator is 365, such incentive
bonus to be paid on the last day of the
Extended Payment Period; provided, that such
incentive bonus shall be reduced by any
bonuses received or receivable by the
Executive from the Other Employment (if any)
for services performed by him during the
Extended Payment Period.
(c) Continued participation in the following
benefit plans or programs of the Companies
which may be in effect from time to time, to
the extent that continued participation by
the Executive is permitted under the terms
and conditions of such plans or programs
(unless such continued participation is
restricted or prohibited by applicable
governmental regulations governing such plans
or programs), until the first to occur of the
expiration of the Extended Payment Period or
(separately with respect to the termination
of each benefit) the provision of a
substantially equivalent benefit to the
Executive by another employer of the
Executive:
(1) Group medical/hospital insurance,
(2) Group dental insurance,
(3) Group life insurance,
(4) Executive life insurance,
(5) Group long-term disability
insurance,
(6) Executive long-term disability
insurance,
(7) Exec-U-Care medical expense
reimbursement insurance,
(8) Professional financial, tax, and
estate planning services,
(9) Automobile allowance,
(10) Annual physical examination,
(11) Business club membership.
If continued participation by the Executive
in any of the foregoing benefit plans or
programs of the Companies is not permitted
under the terms and conditions of any of such
plans or programs, then in lieu of continued
participation in such plan or program the
Companies shall pay to the Executive in cash
an amount equal to the cost that the
Companies would have incurred with respect to
the Executive if the Executive were permitted
to continue as a participant in such plan or
program during the applicable period. The
Companies agree not to unilaterally take any
action which would prevent the Executive from
continuing to participate in any of such
plans or programs unless such action
similarly affects all other participants in
such plans or programs.
The Executive promptly shall notify the Companies of his
acceptance of the Other Employment and of the amount of
compensation and benefits which the Executive receives or is
entitled to receive from the Other Employment during the Extended
Payment Period. In the event of the Executive's death prior to
the end of the Extended Payment Period, the payments and benefits
provided for in this Paragraph 12 shall cease and terminate as of
the date of the Executive's death, except as otherwise required
by applicable law. The provisions of this Paragraph 12, if they
become applicable to the Executive, shall survive the expiration
of the term of this agreement unless, by written agreement
between the Executive and the Companies, this agreement is
terminated."
4. This Amendment No. 6 shall be effective as of February 1, 1999.
5. As hereby amended, the Employment Agreement shall remain in full
force and effect.
IN WITNESS WHEREOF, the Companies and the Executive have executed this
Amendment No. 6 to Employment Agreement on the day and year first above
written.
PAMIDA HOLDINGS CORPORATION,
a Delaware corporation
By: /s/ Frank A. Washburn
---------------------
Frank A. Washburn, Executive Vice
President
PAMIDA, INC., a Delaware corporation
By: /s/ Frank A. Washburn
---------------------
Frank A. Washburn, Executive Vice
President
/s/ Steven S. Fishman
---------------------
Steven S. Fishman
AMENDMENT NO. 2 TO EMPLOYMENT AGREEMENT
This Amendment No. 2 to Employment Agreement is made and entered into on
the 25th day of March, 1999, among PAMIDA HOLDINGS CORPORATION ("Holdings"), a
Delaware corporation, PAMIDA, INC. ("Pamida"), a Delaware corporation, and FRANK
A. WASHBURN (the "Executive"). Holdings and Pamida collectively are referred to
in this Amendment No. 2 as the "Companies".
* * *
WHEREAS, the Companies and the Executive are parties to an Employment
Agreement dated March 6, 1997 (the "Employment Agreement"); and
WHEREAS, the Companies and the Executive now desire to amend the Employment
Agreement as more particularly set forth below;
NOW, THEREFORE, the Companies and the Executive agree as follows:
1. Pursuant to Paragraph 6 of the Employment Agreement, the Companies and
the Executive agree that the Executive's incentive bonus program for the fiscal
year of Holdings ending January 30, 2000 ("Fiscal 2000") shall be the following:
(a) If (i) the consolidated earnings of Holdings and its
subsidiaries (on a first-in, first-out basis with respect to
merchandise inventories) before interest, taxes,
depreciation, and amortization (the "EBITDA") for Fiscal
2000 (the "FY2000 EBITDA") are less than $48,500,000 or (ii)
the percentage increase in the comparable store sales of
Pamida for Fiscal 2000 compared with the fiscal year ended
January 31, 1999 (the "Comparable Store Sales Increase") is
less than 3%, then the Executive shall not be entitled to
any incentive bonus for Fiscal 2000.
(b) If the FY2000 EBITDA equals or exceeds $48,500,000 and the
Comparable Store Sales Increase equals or exceeds 3%, then
the Executive's incentive bonus for Fiscal 2000 shall be
determined as a percentage of the Executive's base salary
from the matrix attached to this Amendment No. 2 taking into
account (i) the FY2000 EBITDA and (ii) the Comparable Store
Sales Increase. The Comparable Store Sales Increase shall be
determined in accordance with Pamida's historical practices.
(c) For purposes of such matrix, a Comparable Store Sales
Increase of more than 9% shall be treated as an increase of
9%, and FY2000 EBITDA of more than $56,000,000 shall be
treated as FY2000 EBITDA of $56,000,000.
(d) For purposes of applying such matrix, the Executive's base
salary shall be the Executive's base salary in effect on
January 30, 2000.
(e) The maximum incentive bonus that the Executive shall have
the opportunity to earn for Fiscal 2000 is 115% of the
Executive's applicable base salary.
(f) FY2000 EBITDA amounts between whole millions of dollars and
a Comparable Store Sales Increase between whole percentages
shall be interpolated on a straight-line basis for purposes
of applying such matrix.
(g) Solely by way of illustration of the application of such
matrix, if the FY2000 EBITDA is $50,500,000 and the
Comparable Store Sales Increase for Fiscal 2000 is 4.6%,
then the Executive's incentive bonus for Fiscal 2000 would
be 49.25% of the Executive's applicable base salary.
The Executive's incentive bonus for Fiscal 2000 (if any) shall be paid to the
Executive as soon as practicable after Holdings has received the final audit
report with respect to Fiscal 2000 from its independent accountants.
2. The provisions of Paragraph 1 of this Amendment No. 2 are intended to
satisfy the requirements of Paragraph 6 of the Employment Agreement for the
fiscal year of Holdings ending in 2000.
3. Paragraph 12 of the Employment Agreement hereby is amended in its
entirety so as to read as follows:
"12. NOTICE OF NONRENEWAL. If, during or after the
expiration of the term of this agreement, the Companies determine
not to continue the employment of the Executive at a base salary
at least equal to the Base Salary which is in effect as of the
last day of the term of this agreement and with fringe benefits
and an incentive bonus program reasonably comparable to those in
effect as of the last day of the term of this agreement, then the
Companies shall so notify the Executive in writing (the "Notice")
promptly after such determination has been made. If the Executive
receives the Notice either at a time when there are less than
twelve (12) months left in the term of this agreement or after
the expiration of the term of this agreement while the Executive
is still in the employ of the Companies, then regardless of the
expiration of the term of this agreement the Executive shall be
entitled to receive the following payments and benefits from the
Companies:
(a) Continued payment of the Executive's Base
Salary, at the annual rate in effect on the
last day of the term of this agreement, until
that date (the "Extended Payment Date") which
is twelve (12) months after the date on which
the Executive received the Notice; provided,
that such payments shall be reduced by the
aggregate amount of salary or consulting fees
which the Executive derives from employment
with another employer (for purposes of this
Paragraph 12, the "Other Employment"),
whether as an employee or as a consultant,
during the period from the effective date of
the termination of the Executive's employment
by the Companies pursuant to the Notice
through the Extended Payment Date (the
"Extended Payment Period"). In no event,
however, shall the Executive be required to
repay to the Companies any portion of any
payments made to the Executive pursuant to
this subparagraph 12(a) for any periods prior
to the periods during which the Executive
earned such salary or consulting fees from
the Other Employment.
(b) An incentive bonus in an amount equal to (i)
the average amount of the incentive bonuses
received by the Executive from the Companies
for the three fiscal years of the Companies
ended prior to March 5, 2000, multiplied by
(ii) a fraction whose numerator is the number
of days in the Extended Payment Period and
whose denominator is 365, such incentive
bonus to be paid on the last day of the
Extended Payment Period; provided, that such
incentive bonus shall be reduced by any
bonuses received or receivable by the
Executive from the Other Employment (if any)
for services performed by him during the
Extended Payment Period.
(c) Continued participation in the following
benefit plans or programs of the Companies
which may be in effect from time to time, to
the extent that continued participation by
the Executive is permitted under the terms
and conditions of such plans or programs
(unless such continued participation is
restricted or prohibited by applicable
governmental regulations governing such plans
or programs), until the first to occur of the
expiration of the Extended Payment Period or
(separately with respect to the termination
of each benefit) the provision of a
substantially equivalent benefit to the
Executive by another employer of the
Executive:
(1) Group medical/hospital insurance,
(2) Group dental insurance,
(3) Group life insurance,
(4) Executive life insurance,
(5) Group long-term disability
insurance,
(6) Executive long-term disability
insurance,
(7) Exec-U-Care medical expense
reimbursement insurance,
(8) Professional financial, tax, and
estate planning services,
(9) Automobile allowance,
(10) Annual physical examination,
(11) Business club membership.
If continued participation by the Executive
in any of the foregoing benefit plans or
programs of the Companies is not permitted
under the terms and conditions of any of such
plans or programs, then in lieu of continued
participation in such plan or program the
Companies shall pay to the Executive in cash
an amount equal to the cost that the
Companies would have incurred with respect to
the Executive if the Executive were permitted
to continue as a participant in such plan or
program during the applicable period. The
Companies agree not to unilaterally take any
action which would prevent the Executive from
continuing to participate in any of such
plans or programs unless such action
similarly affects all other participants in
such plans or programs.
The Executive promptly shall notify the Companies of his
acceptance of the Other Employment and of the amount of
compensation and benefits which the Executive receives or is
entitled to receive from the Other Employment during the Extended
Payment Period. In the event of the Executive's death prior to
the end of the Extended Payment Period, the payments and benefits
provided for in this Paragraph 12 shall cease and terminate as of
the date of the Executive's death, except as otherwise required
by applicable law. The provisions of this Paragraph 12, if they
become applicable to the Executive, shall survive the expiration
of the term of this agreement unless, by written agreement
between the Executive and the Companies, this agreement is
terminated."
4. This Amendment No. 2 shall be effective as of February 1, 1999.
5. As hereby amended, the Employment Agreement shall remain in full force
and effect.
IN WITNESS WHEREOF, the Companies and the Executive have executed
this Amendment No. 2 to Employment Agreement on the day and year first
above written.
PAMIDA HOLDINGS CORPORATION,
a Delaware corporation
By: /s/Steven S. Fishman,
---------------------
Steven S. Fishman, Chairman of the
Board and Chief Executive Officer
PAMIDA, INC., a Delaware corporation
By: /s/Steven S. Fishman
--------------------
Steven S. Fishman, Chairman of the
Board and Chief Executive Officer
/s/Frank A. Washburn
--------------------
Frank A. Washburn
AMENDMENT NO. 3 TO EMPLOYMENT AGREEMENT
This Amendment No. 3 to Employment Agreement is made and entered into on
the 25th day of March, 1999, among PAMIDA HOLDINGS CORPORATION ("Holdings"), a
Delaware corporation, PAMIDA, INC. ("Pamida"), a Delaware corporation, and
GEORGE R. MIHALKO (the "Executive"). Holdings and Pamida collectively are
referred to in this Amendment No. 3 as the "Companies".
* * *
WHEREAS, the Companies and the Executive are parties to an Employment
Agreement dated March 6, 1997 (the "Employment Agreement"); and
WHEREAS, the Companies and the Executive now desire to amend the Employment
Agreement as more particularly set forth below;
NOW, THEREFORE, the Companies and the Executive agree as follows:
1. Pursuant to Paragraph 6 of the Employment Agreement, the Companies and
the Executive agree that the Executive's incentive bonus program for the fiscal
year of Holdings ending January 30, 2000 ("Fiscal 2000") shall be the following:
(a) If (i) the consolidated earnings of Holdings and its
subsidiaries (on a first-in, first-out basis with respect to
merchandise inventories) before interest, taxes,
depreciation, and amortization (the "EBITDA") for Fiscal
2000 (the "FY2000 EBITDA") are less than $48,500,000 or (ii)
the percentage increase in the comparable store sales of
Pamida for Fiscal 2000 compared with the fiscal year ended
January 31, 1999 (the "Comparable Store Sales Increase") is
less than 3%, then the Executive shall not be entitled to
any incentive bonus for Fiscal 2000.
(b) If the FY2000 EBITDA equals or exceeds $48,500,000 and the
Comparable Store Sales Increase equals or exceeds 3%, then
the Executive's incentive bonus for Fiscal 2000 shall be
determined as a percentage of the Executive's base salary
from the matrix attached to this Amendment No. 3 taking into
account (i) the FY2000 EBITDA and (ii) the Comparable Store
Sales Increase. The Comparable Store Sales Increase shall be
determined in accordance with Pamida's historical practices.
(c) For purposes of such matrix, a Comparable Store Sales
Increase of more than 9% shall be treated as an increase of
9%, and FY2000 EBITDA of more than $56,000,000 shall be
treated as FY2000 EBITDA of $56,000,000.
(d) For purposes of applying such matrix, the Executive's base
salary shall be the Executive's base salary in effect on
January 30, 2000.
(e) The maximum incentive bonus that the Executive shall have
the opportunity to earn for Fiscal 2000 is 115% of the
Executive's applicable base salary.
(f) FY2000 EBITDA amounts between whole millions of dollars and
a Comparable Store Sales Increase between whole percentages
shall be interpolated on a straight-line basis for purposes
of applying such matrix.
(g) Solely by way of illustration of the application of such
matrix, if the FY2000 EBITDA is $50,500,000 and the
Comparable Store Sales Increase for Fiscal 2000 is 4.6%,
then the Executive's incentive bonus for Fiscal 2000 would
be 49.25% of the Executive's applicable base salary.
The Executive's incentive bonus for Fiscal 2000 (if any) shall be paid to the
Executive as soon as practicable after Holdings has received the final audit
report with respect to Fiscal 2000 from its independent accountants.
2. The provisions of Paragraph 1 of this Amendment No. 3 are intended to
satisfy the requirements of Paragraph 6 of the Employment Agreement for the
fiscal year of Holdings ending in 2000.
3. Paragraph 12 of the Employment Agreement hereby is amended in its
entirety so as to read as follows:
"12. NOTICE OF NONRENEWAL. If, during or after the
expiration of the term of this agreement, the Companies determine
not to continue the employment of the Executive at a base salary
at least equal to the Base Salary which is in effect as of the
last day of the term of this agreement and with fringe benefits
and an incentive bonus program reasonably comparable to those in
effect as of the last day of the term of this agreement, then the
Companies shall so notify the Executive in writing (the "Notice")
promptly after such determination has been made. If the Executive
receives the Notice either at a time when there are less than
twelve (12) months left in the term of this agreement or after
the expiration of the term of this agreement while the Executive
is still in the employ of the Companies, then regardless of the
expiration of the term of this agreement the Executive shall be
entitled to receive the following payments and benefits from the
Companies:
(a) Continued payment of the Executive's Base
Salary, at the annual rate in effect on the
last day of the term of this agreement, until
that date (the "Extended Payment Date") which
is twelve (12) months after the date on which
the Executive received the Notice; provided,
that such payments shall be reduced by the
aggregate amount of salary or consulting fees
which the Executive derives from employment
with another employer (for purposes of this
Paragraph 12, the "Other Employment"),
whether as an employee or as a consultant,
during the period from the effective date of
the termination of the Executive's employment
by the Companies pursuant to the Notice
through the Extended Payment Date (the
"Extended Payment Period"). In no event,
however, shall the Executive be required to
repay to the Companies any portion of any
payments made to the Executive pursuant to
this subparagraph 12(a) for any periods prior
to the periods during which the Executive
earned such salary or consulting fees from
the Other Employment.
(b) An incentive bonus in an amount equal to (i)
the average amount of the incentive bonuses
received by the Executive from the Companies
for the three fiscal years of the Companies
ended prior to March 5, 2000, multiplied by
(ii) a fraction whose numerator is the number
of days in the Extended Payment Period and
whose denominator is 365, such incentive
bonus to be paid on the last day of the
Extended Payment Period; provided, that such
incentive bonus shall be reduced by any
bonuses received or receivable by the
Executive from the Other Employment (if any)
for services performed by him during the
Extended Payment Period.
(c) Continued participation in the following
benefit plans or programs of the Companies
which may be in effect from time to time, to
the extent that continued participation by
the Executive is permitted under the terms
and conditions of such plans or programs
(unless such continued participation is
restricted or prohibited by applicable
governmental regulations governing such plans
or programs), until the first to occur of the
expiration of the Extended Payment Period or
(separately with respect to the termination
of each benefit) the provision of a
substantially equivalent benefit to the
Executive by another employer of the
Executive:
(1) Group medical/hospital insurance,
(2) Group dental insurance,
(3) Group life insurance,
(4) Executive life insurance,
(5) Group long-term disability
insurance,
(6) Exec-U-Care medical expense
reimbursement insurance,
(7) Professional financial, tax, and
estate planning services,
(8) Automobile allowance,
(9) Annual physical examination.
If continued participation by the Executive in any
of the foregoing benefit plans or programs of the
Companies is not permitted under the terms and
conditions of any of such plans or programs, then
in lieu of continued participation in such plan or
program the Companies shall pay to the Executive
in cash an amount equal to the cost that the
Companies would have incurred with respect to the
Executive if the Executive were permitted to
continue as a participant in such plan or program
during the applicable period. The Companies agree
not to unilaterally take any action which would
prevent the Executive from continuing to
participate in any of such plans or programs
unless such action similarly affects all other
participants in such plans or programs.
The Executive promptly shall notify the Companies of his
acceptance of the Other Employment and of the amount of
compensation and benefits which the Executive receives or is
entitled to receive from the Other Employment during the Extended
Payment Period. In the event of the Executive's death prior to
the end of the Extended Payment Period, the payments and benefits
provided for in this Paragraph 12 shall cease and terminate as of
the date of the Executive's death, except as otherwise required
by applicable law. The provisions of this Paragraph 12, if they
become applicable to the Executive, shall survive the expiration
of the term of this agreement unless, by written agreement
between the Executive and the Companies, this agreement is
terminated."
4. This Amendment No. 3 shall be effective as of
February 1, 1999.
5. As hereby amended, the Employment Agreement shall
remain in full force and effect.
IN WITNESS WHEREOF, the Companies and the Executive have executed this
Amendment No. 3 to Employment Agreement on the day and year first above written.
PAMIDA HOLDINGS CORPORATION,
a Delaware corporation
By: /s/Steven S. Fishman
--------------------
Steven S. Fishman, Chairman of the
Board and Chief Executive Officer
PAMIDA, INC., a Delaware corporation
By: /s/Steven S. Fishman
--------------------
Steven S. Fishman, Chairman of the
Board and Chief Executive Officer
/s/George R. Mihalko
--------------------
George R. Mihalko
RETENTION BONUS AGREEMENT
This Retention Bonus Agreement is entered into this 2nd day of April, 1999,
by and between PAMIDA, INC. ("Pamida"), a Delaware corporation, and STEVEN S.
FISHMAN (the "Employee").
W I T N E S S E T H:
WHEREAS, the Employee currently is a key executive of Pamida; and
WHEREAS, an entity which might have an interest in acquiring the business
of Pamida would be more likely to pursue such a transaction and to pay full
value for such business if such entity could reasonably expect the Employee to
remain in the employ of Pamida or Pamida's successor following such acquisition;
and
WHEREAS, Pamida desires to induce the Employee to remain in the employ of
Pamida or Pamida's successor if a Retention Event (as defined below) occurs;
NOW, THEREFORE, in consideration of the premises and of the covenants set
forth in this agreement, the parties hereto, intending to be legally bound,
agree as follows:
1. For purposes of this agreement, a "Retention Event" shall be deemed to
have occurred upon the happening of any of the following events:
(a) Pamida Holdings Corporation ("Holdings") is merged or
consolidated into another corporation, and immediately after
such merger or consolidation becomes effective the holders
of a majority of the outstanding shares of capital stock of
Holdings immediately prior to the effectiveness of such
merger or consolidation do not own (directly or indirectly)
a majority of the outstanding shares of voting capital stock
of the surviving or resulting corporation in such merger or
consolidation.
(b) Holdings ceases to own (directly or indirectly) a majority
of the outstanding shares of voting capital stock of Pamida
(unless such event results from the merger of Pamida into
Holdings, with no material change in the ownership of the
voting capital stock of Holdings, or from the dissolution of
Pamida and the continuation of its business by Holdings).
(c) Pamida is merged or consolidated into a corporation other
than Holdings, and at any time after such merger or
consolidation becomes effective Holdings does not own
(directly or indirectly) a majority of the outstanding
shares of voting capital stock of the surviving or resulting
corporation in such merger or consolidation.
(d) Pamida sells or otherwise disposes of all or substantially
all of the property and assets of Pamida, other than to an
entity or group of entities which immediately prior to such
transaction is under common ownership (directly or
indirectly) with Pamida.
(e) Any person, entity, or group of persons within the meaning
of Sections 13(d) or 14(d) of the Securities Exchange Act of
1934 (the "1934 Act") and the rules promulgated thereunder,
other than 399 Venture Partners, Inc. or any of its
affiliates (as defined in Rule 12b-2 under the 1934 Act),
becomes the beneficial owner (within the meaning of Rule
13d-3 under the 1934 Act) of thirty percent (30%) or more of
the outstanding voting capital stock of Holdings, and 399
Venture Partners, Inc. and its affiliates then collectively
own less than twenty percent (20%) of the aggregate number
of shares of Common Stock and Nonvoting Common Stock of
Holdings then outstanding (unless 399 Venture Partners, Inc.
and/or its affiliates are part of the group owning such 30%
or more).
(f) During any period of two consecutive years or less,
individuals who at the beginning of such period constituted
the Board of Directors of Holdings cease, for any reason, to
constitute at least a majority of the Board of Directors of
Holdings, unless the election or nomination for election of
each new director of Holdings who took office during such
period was approved by a vote of at least two-thirds of the
directors of Holdings still in office at the time of such
election or nomination for election who were directors of
Holdings at the beginning of such period or unless 399
Venture Partners, Inc. or Citicorp Venture Capital, Inc.
approves any such replacement director.
2. If (i) a Retention Event occurs, (ii) the Employee is employed by Pamida
at the time the Retention Event occurs, and (iii) the Employee remains in the
employ of Pamida (or of the entity which succeeds to the business of Pamida upon
the occurrence of the Retention Event) for a continuous period of six (6) months
after the effective date of the Retention Event, then within ten (10) days after
the elapse of such 6-month period Pamida agrees to pay the Employee the sum of
$400,000.00 as a retention bonus in consideration of such continued employment.
3. If (i) a Retention Event occurs, (ii) the Employee is employed by Pamida
immediately prior to the time the Retention Event occurs, and (iii) either upon
the effective date of the Retention Event or within six (6) months after the
effective date of the Retention Event Pamida (or the entity which succeeds to
the business of Pamida upon the occurrence of the Retention Event) terminates
the employment of the Employee without cause, then within ten (10) days after
the effective date of such termination of employment Pamida agrees to pay the
Employee the sum of $400,000.00 in consideration of the Employee's willingness
to remain in the employ of Pamida or such successor after the occurrence of a
Retention Event.
4. For purposes of this agreement, "cause" shall mean only (i) the
Employee's confession or conviction of theft, fraud, embezzlement, or any other
crime involving dishonesty with respect to Pamida or any parent, subsidiary, or
affiliate of Pamida, (ii) the Employee's excessive absenteeism (other than by
reason of physical injury, disease, or mental illness) without reasonable cause,
(iii) the Employee's material violation of the provisions of any confidentiality
or nondisclosure agreement with Pamida or any parent, subsidiary, or affiliate
of Pamida, (iv) habitual and material negligence by the Employee in the
performance of the Employee's duties and responsibilities as an employee of
Pamida and the Employee's failure to cure such negligence within thirty (30)
days after the Employee's receipt of a written notice from the Board of
Directors or Chief Executive Officer of Pamida setting forth in reasonable
detail the particulars of such negligence, (v) material noncompliance by the
Employee with the Employee's obligations under any employment agreement with
Pamida to which the Employee is a party and the Employee's failure to correct
such non-compliance within thirty (30) days after the Employee's receipt of a
written notice from the Board of Directors or Chief Executive Officer of Pamida
setting forth in reasonable detail the particulars of such non-compliance, or
(vi) material failure by the Employee to comply with a lawful directive of the
Board of Directors or Chief Executive Officer of Pamida and the Employee's
failure to cure such non-compliance within thirty (30) days after the Employee's
receipt of a written notice from the Board of Directors or Chief Executive
Officer of Pamida setting forth in reasonable detail the particulars of such
non-compliance. For purposes of this Paragraph 4, neither the results of the
operations of Pamida nor any business judgment made in good faith by the
Employee shall constitute an independent basis for termination for cause of the
Employee's employment by Pamida. For purposes of this Paragraph 4, references to
"Pamida" shall include an entity which succeeds to the business of Pamida upon
the occurrence of a Retention Event. The provisions of this Paragraph 4 are
subject in all events to the provisions of Paragraph 8.
5. If the employment of the Employee by Pamida (or by the entity which
succeeds to the business of Pamida upon the occurrence of a Retention Event)
terminates either upon the effective date of the Retention Event or within six
(6) months after the Effective Date of the Retention Event for a reason other
than the termination of such employment by Pamida or such successor entity
without cause, then the Employee shall not be entitled to any payment under this
agreement.
6. If no Retention Event has occurred by the close of business on March 11,
2000, then this agreement automatically will terminate at such time; and, in
such event, Pamida will have no further obligation to the Employee under this
agreement.
7. This agreement shall be binding upon Pamida and Pamida's successors and
assigns and shall inure to the benefit of the Employee and the Employee's heirs
and personal representatives. In connection with any Retention Event, Pamida
shall take such actions as may be necessary to assure either that a sufficient
amount of its unencumbered funds will remain available to fully satisfy the
obligations of Pamida under this agreement or that such obligations are assumed
by a financially responsible entity whose creditworthiness is at least equal to
that of Pamida.
8. This agreement is not, and shall not for any purpose be deemed to
constitute, an employment or severance agreement between Pamida and the
Employee. Nothing in this agreement shall confer upon the Employee the right to
remain in the employ of Pamida for any particular period of time or in any
particular capacity or affect any right which Pamida or the Employee may have to
terminate the employment relationship between Pamida and the Employee at any
time, for any reason, with or without cause.
9. This agreement shall be governed by and construed in accordance with the
laws of Nebraska.
10. The Employee understands that Pamida desires to maintain the
confidentiality of this agreement and its terms and further desires to maintain
the confidentiality of any discussions or negotiations that Pamida may undertake
with respect to a possible Retention Event. Accordingly, the Employee agrees not
to disclose to or discuss with anyone the existence of this agreement or any of
the terms of this agreement without the prior written approval of the Chief
Executive Officer of Pamida prior to the written public disclosure of this
agreement and its terms by Pamida or Holdings, except that the Employee may
discuss this agreement with the Chief Executive Officer, Chief Operating
Officer, Chief Financial Officer, and Senior Vice President-Human Resources of
Pamida. The Employee further agrees not to disclose to or discuss with anyone
the existence or possible existence of any discussions or negotiations that
Pamida has undertaken or may undertake with respect to a possible Retention
Event so long as such discussions or negotiations have not been publicly
disclosed in writing by Pamida or Holdings; provided, that, at the direction of
the Chief Executive Officer, Chief Operating Officer, or Chief Financial Officer
of Pamida, the Employee may discuss matters relating to a possible Retention
Event with such persons and to such extent as may be specified by any such
executive officer of Pamida in such directions. If the Employee violates any of
the confidentiality provisions of this Paragraph 10 at any time prior to the
consummation of a Retention Event, then the Board of Directors of Pamida, in its
sole and absolute discretion, may terminate this agreement, and Pamida thereupon
shall have no further obligation or liability to the Employee under this
agreement.
IN WITNESS WHEREOF, Pamida and the Employee have executed this agreement on
the day and year first above written.
PAMIDA, INC., a Delaware corporation
By: /s/Frank A. Washburn
--------------------
Title: Executive Vice President
/s/Steven S. Fishman
--------------------
Steven S. Fishman, Employee
RETENTION BONUS AGREEMENT
This Retention Bonus Agreement is entered into this 2nd day of April, 1999,
by and between PAMIDA, INC. ("Pamida"), a Delaware corporation, and FRANK A.
WASHBURN (the "Employee").
W I T N E S S E T H:
WHEREAS, the Employee currently is a key executive of Pamida; and
WHEREAS, an entity which might have an interest in acquiring the business
of Pamida would be more likely to pursue such a transaction and to pay full
value for such business if such entity could reasonably expect the Employee to
remain in the employ of Pamida or Pamida's successor following such acquisition;
and
WHEREAS, Pamida desires to induce the Employee to remain in the employ of
Pamida or Pamida's successor if a Retention Event (as defined below) occurs;
NOW, THEREFORE, in consideration of the premises and of the covenants set
forth in this agreement, the parties hereto, intending to be legally bound,
agree as follows:
1. For purposes of this agreement, a "Retention Event" shall be deemed to
have occurred upon the happening of any of the following events:
(a) Pamida Holdings Corporation ("Holdings") is merged or
consolidated into another corporation, and immediately after
such merger or consolidation becomes effective the holders
of a majority of the outstanding shares of capital stock of
Holdings immediately prior to the effectiveness of such
merger or consolidation do not own (directly or indirectly)
a majority of the outstanding shares of voting capital stock
of the surviving or resulting corporation in such merger or
consolidation.
(b) Holdings ceases to own (directly or indirectly) a majority
of the outstanding shares of voting capital stock of Pamida
(unless such event results from the merger of Pamida into
Holdings, with no material change in the ownership of the
voting capital stock of Holdings, or from the dissolution of
Pamida and the continuation of its business by Holdings).
(c) Pamida is merged or consolidated into a corporation other
than Holdings, and at any time after such merger or
consolidation becomes effective Holdings does not own
(directly or indirectly) a majority of the outstanding
shares of voting capital stock of the surviving or resulting
corporation in such merger or consolidation.
(d) Pamida sells or otherwise disposes of all or substantially
all of the property and assets of Pamida, other than to an
entity or group of entities which immediately prior to such
transaction is under common ownership (directly or
indirectly) with Pamida.
(e) Any person, entity, or group of persons within the meaning
of Sections 13(d) or 14(d) of the Securities Exchange Act of
1934 (the "1934 Act") and the rules promulgated thereunder,
other than 399 Venture Partners, Inc. or any of its
affiliates (as defined in Rule 12b-2 under the 1934 Act),
becomes the beneficial owner (within the meaning of Rule
13d-3 under the 1934 Act) of thirty percent (30%) or more of
the outstanding voting capital stock of Holdings, and 399
Venture Partners, Inc. and its affiliates then collectively
own less than twenty percent (20%) of the aggregate number
of shares of Common Stock and Nonvoting Common Stock of
Holdings then outstanding (unless 399 Venture Partners, Inc.
and/or its affiliates are part of the group owning such 30%
or more).
(f) During any period of two consecutive years or less,
individuals who at the beginning of such period constituted
the Board of Directors of Holdings cease, for any reason, to
constitute at least a majority of the Board of Directors of
Holdings, unless the election or nomination for election of
each new director of Holdings who took office during such
period was approved by a vote of at least two-thirds of the
directors of Holdings still in office at the time of such
election or nomination for election who were directors of
Holdings at the beginning of such period or unless 399
Venture Partners, Inc. or Citicorp Venture Capital, Inc.
approves any such replacement director.
2. If (i) a Retention Event occurs, (ii) the Employee is employed by Pamida
at the time the Retention Event occurs, and (iii) the Employee remains in the
employ of Pamida (or of the entity which succeeds to the business of Pamida upon
the occurrence of the Retention Event) for a continuous period of six (6) months
after the effective date of the Retention Event, then within ten (10) days after
the elapse of such 6-month period Pamida agrees to pay the Employee the sum of
$200,000.00 as a retention bonus in consideration of such continued employment.
3. If (i) a Retention Event occurs, (ii) the Employee is employed by Pamida
immediately prior to the time the Retention Event occurs, and (iii) either upon
the effective date of the Retention Event or within six (6) months after the
effective date of the Retention Event Pamida (or the entity which succeeds to
the business of Pamida upon the occurrence of the Retention Event) terminates
the employment of the Employee without cause, then within ten (10) days after
the effective date of such termination of employment Pamida agrees to pay the
Employee the sum of $200,000.00 in consideration of the Employee's willingness
to remain in the employ of Pamida or such successor after the occurrence of a
Retention Event.
4. For purposes of this agreement, "cause" shall mean only (i) the
Employee's confession or conviction of theft, fraud, embezzlement, or any other
crime involving dishonesty with respect to Pamida or any parent, subsidiary, or
affiliate of Pamida, (ii) the Employee's excessive absenteeism (other than by
reason of physical injury, disease, or mental illness) without reasonable cause,
(iii) the Employee's material violation of the provisions of any confidentiality
or nondisclosure agreement with Pamida or any parent, subsidiary, or affiliate
of Pamida, (iv) habitual and material negligence by the Employee in the
performance of the Employee's duties and responsibilities as an employee of
Pamida and the Employee's failure to cure such negligence within thirty (30)
days after the Employee's receipt of a written notice from the Board of
Directors or Chief Executive Officer of Pamida setting forth in reasonable
detail the particulars of such negligence, (v) material noncompliance by the
Employee with the Employee's obligations under any employment agreement with
Pamida to which the Employee is a party and the Employee's failure to correct
such non-compliance within thirty (30) days after the Employee's receipt of a
written notice from the Board of Directors or Chief Executive Officer of Pamida
setting forth in reasonable detail the particulars of such non-compliance, or
(vi) material failure by the Employee to comply with a lawful directive of the
Board of Directors or Chief Executive Officer of Pamida and the Employee's
failure to cure such non-compliance within thirty (30) days after the Employee's
receipt of a written notice from the Board of Directors or Chief Executive
Officer of Pamida setting forth in reasonable detail the particulars of such
non-compliance. For purposes of this Paragraph 4, neither the results of the
operations of Pamida nor any business judgment made in good faith by the
Employee shall constitute an independent basis for termination for cause of the
Employee's employment by Pamida. For purposes of this Paragraph 4, references to
"Pamida" shall include an entity which succeeds to the business of Pamida upon
the occurrence of a Retention Event. The provisions of this Paragraph 4 are
subject in all events to the provisions of Paragraph 8.
5. If the employment of the Employee by Pamida (or by the entity which
succeeds to the business of Pamida upon the occurrence of a Retention Event)
terminates either upon the effective date of the Retention Event or within six
(6) months after the Effective Date of the Retention Event for a reason other
than the termination of such employment by Pamida or such successor entity
without cause, then the Employee shall not be entitled to any payment under this
agreement.
6. If no Retention Event has occurred by the close of business on March 11,
2000, then this agreement automatically will terminate at such time; and, in
such event, Pamida will have no further obligation to the Employee under this
agreement.
7. This agreement shall be binding upon Pamida and Pamida's successors and
assigns and shall inure to the benefit of the Employee and the Employee's heirs
and personal representatives. In connection with any Retention Event, Pamida
shall take such actions as may be necessary to assure either that a sufficient
amount of its unencumbered funds will remain available to fully satisfy the
obligations of Pamida under this agreement or that such obligations are assumed
by a financially responsible entity whose creditworthiness is at least equal to
that of Pamida.
8. This agreement is not, and shall not for any purpose be deemed to
constitute, an employment or severance agreement between Pamida and the
Employee. Nothing in this agreement shall confer upon the Employee the right to
remain in the employ of Pamida for any particular period of time or in any
particular capacity or affect any right which Pamida or the Employee may have to
terminate the employment relationship between Pamida and the Employee at any
time, for any reason, with or without cause.
9. This agreement shall be governed by and construed in accordance with the
laws of Nebraska.
10. The Employee understands that Pamida desires to maintain the
confidentiality of this agreement and its terms and further desires to maintain
the confidentiality of any discussions or negotiations that Pamida may undertake
with respect to a possible Retention Event. Accordingly, the Employee agrees not
to disclose to or discuss with anyone the existence of this agreement or any of
the terms of this agreement without the prior written approval of the Chief
Executive Officer of Pamida prior to the written public disclosure of this
agreement and its terms by Pamida or Holdings, except that the Employee may
discuss this agreement with the Chief Executive Officer, Chief Operating
Officer, Chief Financial Officer, and Senior Vice President-Human Resources of
Pamida. The Employee further agrees not to disclose to or discuss with anyone
the existence or possible existence of any discussions or negotiations that
Pamida has undertaken or may undertake with respect to a possible Retention
Event so long as such discussions or negotiations have not been publicly
disclosed in writing by Pamida or Holdings; provided, that, at the direction of
the Chief Executive Officer, Chief Operating Officer, or Chief Financial Officer
of Pamida, the Employee may discuss matters relating to a possible Retention
Event with such persons and to such extent as may be specified by any such
executive officer of Pamida in such directions. If the Employee violates any of
the confidentiality provisions of this Paragraph 10 at any time prior to the
consummation of a Retention Event, then the Board of Directors of Pamida, in its
sole and absolute discretion, may terminate this agreement, and Pamida thereupon
shall have no further obligation or liability to the Employee under this
agreement.
IN WITNESS WHEREOF, Pamida and the Employee have executed this agreement on
the day and year first above written.
PAMIDA, INC., a Delaware corporation
By: /s/Steven S. Fishman
--------------------
Title: Chairman of the Board and Chief
Executive Officer
/s/Frank A. Washburn
--------------------
Frank A. Washburn, Employee
RETENTION BONUS AGREEMENT
This Retention Bonus Agreement is entered into this 2nd day of April, 1999,
by and between PAMIDA, INC. ("Pamida"), a Delaware corporation, and GEORGE R.
MIHALKO (the "Employee").
W I T N E S S E T H:
WHEREAS, the Employee currently is a key executive of Pamida; and
WHEREAS, an entity which might have an interest in acquiring the business
of Pamida would be more likely to pursue such a transaction and to pay full
value for such business if such entity could reasonably expect the Employee to
remain in the employ of Pamida or Pamida's successor following such acquisition;
and
WHEREAS, Pamida desires to induce the Employee to remain in the employ of
Pamida or Pamida's successor if a Retention Event (as defined below) occurs;
NOW, THEREFORE, in consideration of the premises and of the covenants set
forth in this agreement, the parties hereto, intending to be legally bound,
agree as follows:
1. For purposes of this agreement, a "Retention Event" shall be deemed to
have occurred upon the happening of any of the following events:
(a) Pamida Holdings Corporation ("Holdings") is merged or
consolidated into another corporation, and immediately after
such merger or consolidation becomes effective the holders
of a majority of the outstanding shares of capital stock of
Holdings immediately prior to the effectiveness of such
merger or consolidation do not own (directly or indirectly)
a majority of the outstanding shares of voting capital stock
of the surviving or resulting corporation in such merger or
consolidation.
(b) Holdings ceases to own (directly or indirectly) a majority
of the outstanding shares of voting capital stock of Pamida
(unless such event results from the merger of Pamida into
Holdings, with no material change in the ownership of the
voting capital stock of Holdings, or from the dissolution of
Pamida and the continuation of its business by Holdings).
(c) Pamida is merged or consolidated into a corporation other
than Holdings, and at any time after such merger or
consolidation becomes effective Holdings does not own
(directly or indirectly) a majority of the outstanding
shares of voting capital stock of the surviving or resulting
corporation in such merger or consolidation.
(d) Pamida sells or otherwise disposes of all or substantially
all of the property and assets of Pamida, other than to an
entity or group of entities which immediately prior to such
transaction is under common ownership (directly or
indirectly) with Pamida.
(e) Any person, entity, or group of persons within the meaning
of Sections 13(d) or 14(d) of the Securities Exchange Act of
1934 (the "1934 Act") and the rules promulgated thereunder,
other than 399 Venture Partners, Inc. or any of its
affiliates (as defined in Rule 12b-2 under the 1934 Act),
becomes the beneficial owner (within the meaning of Rule
13d-3 under the 1934 Act) of thirty percent (30%) or more of
the outstanding voting capital stock of Holdings, and 399
Venture Partners, Inc. and its affiliates then collectively
own less than twenty percent (20%) of the aggregate number
of shares of Common Stock and Nonvoting Common Stock of
Holdings then outstanding (unless 399 Venture Partners, Inc.
and/or its affiliates are part of the group owning such 30%
or more).
(f) During any period of two consecutive years or less,
individuals who at the beginning of such period constituted
the Board of Directors of Holdings cease, for any reason, to
constitute at least a majority of the Board of Directors of
Holdings, unless the election or nomination for election of
each new director of Holdings who took office during such
period was approved by a vote of at least two-thirds of the
directors of Holdings still in office at the time of such
election or nomination for election who were directors of
Holdings at the beginning of such period or unless 399
Venture Partners, Inc. or Citicorp Venture Capital, Inc.
approves any such replacement director.
2. If (i) a Retention Event occurs, (ii) the Employee is employed by Pamida
at the time the Retention Event occurs, and (iii) the Employee remains in the
employ of Pamida (or of the entity which succeeds to the business of Pamida upon
the occurrence of the Retention Event) for a continuous period of six (6) months
after the effective date of the Retention Event, then within ten (10) days after
the elapse of such 6-month period Pamida agrees to pay the Employee the sum of
$160,000.00 as a retention bonus in consideration of such continued employment.
3. If (i) a Retention Event occurs, (ii) the Employee is employed by Pamida
immediately prior to the time the Retention Event occurs, and (iii) either upon
the effective date of the Retention Event or within six (6) months after the
effective date of the Retention Event Pamida (or the entity which succeeds to
the business of Pamida upon the occurrence of the Retention Event) terminates
the employment of the Employee without cause, then within ten (10) days after
the effective date of such termination of employment Pamida agrees to pay the
Employee the sum of $160,000.00 in consideration of the Employee's willingness
to remain in the employ of Pamida or such successor after the occurrence of a
Retention Event.
4. For purposes of this agreement, "cause" shall mean only (i) the
Employee's confession or conviction of theft, fraud, embezzlement, or any other
crime involving dishonesty with respect to Pamida or any parent, subsidiary, or
affiliate of Pamida, (ii) the Employee's excessive absenteeism (other than by
reason of physical injury, disease, or mental illness) without reasonable cause,
(iii) the Employee's material violation of the provisions of any confidentiality
or nondisclosure agreement with Pamida or any parent, subsidiary, or affiliate
of Pamida, (iv) habitual and material negligence by the Employee in the
performance of the Employee's duties and responsibilities as an employee of
Pamida and the Employee's failure to cure such negligence within thirty (30)
days after the Employee's receipt of a written notice from the Board of
Directors or Chief Executive Officer of Pamida setting forth in reasonable
detail the particulars of such negligence, (v) material noncompliance by the
Employee with the Employee's obligations under any employment agreement with
Pamida to which the Employee is a party and the Employee's failure to correct
such non-compliance within thirty (30) days after the Employee's receipt of a
written notice from the Board of Directors or Chief Executive Officer of Pamida
setting forth in reasonable detail the particulars of such non-compliance, or
(vi) material failure by the Employee to comply with a lawful directive of the
Board of Directors or Chief Executive Officer of Pamida and the Employee's
failure to cure such non-compliance within thirty (30) days after the Employee's
receipt of a written notice from the Board of Directors or Chief Executive
Officer of Pamida setting forth in reasonable detail the particulars of such
non-compliance. For purposes of this Paragraph 4, neither the results of the
operations of Pamida nor any business judgment made in good faith by the
Employee shall constitute an independent basis for termination for cause of the
Employee's employment by Pamida. For purposes of this Paragraph 4, references to
"Pamida" shall include an entity which succeeds to the business of Pamida upon
the occurrence of a Retention Event. The provisions of this Paragraph 4 are
subject in all events to the provisions of Paragraph 8.
5. If the employment of the Employee by Pamida (or by the entity which
succeeds to the business of Pamida upon the occurrence of a Retention Event)
terminates either upon the effective date of the Retention Event or within six
(6) months after the Effective Date of the Retention Event for a reason other
than the termination of such employment by Pamida or such successor entity
without cause, then the Employee shall not be entitled to any payment under this
agreement.
6. If no Retention Event has occurred by the close of business on March 11,
2000, then this agreement automatically will terminate at such time; and, in
such event, Pamida will have no further obligation to the Employee under this
agreement.
7. This agreement shall be binding upon Pamida and Pamida's successors and
assigns and shall inure to the benefit of the Employee and the Employee's heirs
and personal representatives. In connection with any Retention Event, Pamida
shall take such actions as may be necessary to assure either that a sufficient
amount of its unencumbered funds will remain available to fully satisfy the
obligations of Pamida under this agreement or that such obligations are assumed
by a financially responsible entity whose creditworthiness is at least equal to
that of Pamida.
8. This agreement is not, and shall not for any purpose be deemed to
constitute, an employment or severance agreement between Pamida and the
Employee. Nothing in this agreement shall confer upon the Employee the right to
remain in the employ of Pamida for any particular period of time or in any
particular capacity or affect any right which Pamida or the Employee may have to
terminate the employment relationship between Pamida and the Employee at any
time, for any reason, with or without cause.
9. This agreement shall be governed by and construed in accordance with the
laws of Nebraska.
10. The Employee understands that Pamida desires to maintain the
confidentiality of this agreement and its terms and further desires to maintain
the confidentiality of any discussions or negotiations that Pamida may undertake
with respect to a possible Retention Event. Accordingly, the Employee agrees not
to disclose to or discuss with anyone the existence of this agreement or any of
the terms of this agreement without the prior written approval of the Chief
Executive Officer of Pamida prior to the written public disclosure of this
agreement and its terms by Pamida or Holdings, except that the Employee may
discuss this agreement with the Chief Executive Officer, Chief Operating
Officer, Chief Financial Officer, and Senior Vice President-Human Resources of
Pamida. The Employee further agrees not to disclose to or discuss with anyone
the existence or possible existence of any discussions or negotiations that
Pamida has undertaken or may undertake with respect to a possible Retention
Event so long as such discussions or negotiations have not been publicly
disclosed in writing by Pamida or Holdings; provided, that, at the direction of
the Chief Executive Officer, Chief Operating Officer, or Chief Financial Officer
of Pamida, the Employee may discuss matters relating to a possible Retention
Event with such persons and to such extent as may be specified by any such
executive officer of Pamida in such directions. If the Employee violates any of
the confidentiality provisions of this Paragraph 10 at any time prior to the
consummation of a Retention Event, then the Board of Directors of Pamida, in its
sole and absolute discretion, may terminate this agreement, and Pamida thereupon
shall have no further obligation or liability to the Employee under this
agreement.
IN WITNESS WHEREOF, Pamida and the Employee have executed this agreement on
the day and year first above written.
PAMIDA, INC., a Delaware corporation
By: /s/Steven S. Fishman
--------------------
Title: Chairman of the Board and Chief
Executive Officer
/s/George R. Mihalko
--------------------
George R. Mihalko, Employee
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference in Registration Statements No.
33-83708 and 333-56669 of Pamida Holdings Corporation on Form S-8 of our reports
dated March 9, 1999 appearing in this Annual Report on Form 10-K of Pamida
Holdings Corporation for the year ended January 31, 1999.
/s/Deloitte & Touche LLP
Deloitte & Touche LLP
Omaha, Nebraska
March 9, 1999
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I do hereby constitute and appoint
Steven S. Fishman, Frank A. Washburn, and George R. Mihalko, and each of them
individually, as my true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for me and in my name, place, and
stead in my capacity as a director of Pamida Holdings Corporation to sign the
Annual Report on Form 10-K of Pamida Holdings Corporation for the fiscal year
ended January 31, 1999, and to file such Annual Report, with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto such attorneys-in-fact and agents, and each
of them individually and their substitutes, full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises in connection with such Annual Report as fully to all intents
and purposes as I might or could do in person, hereby ratifying and confirming
all that such attorneys-in-fact and agents or any of them, or their or his
substitutes or substitute, lawfully may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have executed this Power of Attorney this 29th day of
March, 1999.
/s/Stuyvesant P. Comfort
------------------------
Stuyvesant P. Comfort
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I do hereby constitute and appoint
Steven S. Fishman, Frank A. Washburn, and George R. Mihalko, and each of them
individually, as my true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for me and in my name, place, and
stead in my capacity as a director of Pamida Holdings Corporation to sign the
Annual Report on Form 10-K of Pamida Holdings Corporation for the fiscal year
ended January 31, 1999, and to file such Annual Report, with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto such attorneys-in-fact and agents, and each
of them individually and their substitutes, full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises in connection with such Annual Report as fully to all intents
and purposes as I might or could do in person, hereby ratifying and confirming
all that such attorneys-in-fact and agents or any of them, or their or his
substitutes or substitute, lawfully may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have executed this Power of Attorney this 29th day of
March, 1999.
/s/M. Saleem Muqaddam
---------------------
M. Saleem Muqaddam
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I do hereby constitute and appoint
Steven S. Fishman, Frank A. Washburn, and George R. Mihalko, and each of them
individually, as my true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for me and in my name, place, and
stead in my capacity as a director of Pamida Holdings Corporation to sign the
Annual Report on Form 10-K of Pamida Holdings Corporation for the fiscal year
ended January 31, 1999, and to file such Annual Report, with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto such attorneys-in-fact and agents, and each
of them individually and their substitutes, full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises in connection with such Annual Report as fully to all intents
and purposes as I might or could do in person, hereby ratifying and confirming
all that such attorneys-in-fact and agents or any of them, or their or his
substitutes or substitute, lawfully may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have executed this Power of Attorney this 31st day of
March, 1999.
/s/Peter J. Sodini
------------------
Peter J. Sodini
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I do hereby constitute and appoint
Steven S. Fishman, Frank A. Washburn, and George R. Mihalko, and each of them
individually, as my true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for me and in my name, place, and
stead in my capacity as a director of Pamida Holdings Corporation to sign the
Annual Report on Form 10-K of Pamida Holdings Corporation for the fiscal year
ended January 31, 1999, and to file such Annual Report, with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto such attorneys-in-fact and agents, and each
of them individually and their substitutes, full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises in connection with such Annual Report as fully to all intents
and purposes as I might or could do in person, hereby ratifying and confirming
all that such attorneys-in-fact and agents or any of them, or their or his
substitutes or substitute, lawfully may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have executed this Power of Attorney this 30th day of
March, 1999.
/s/L. David Callaway, III
-------------------------
L. David Callaway, III
<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 January 31,
1999 and the related Consolidated Statement of Operations for the 52 weeks then
ended and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0000864760
<NAME> Pamida Holdings Corporation
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-02-1998
<PERIOD-END> JAN-31-1999
<CASH> 7,588
<SECURITIES> 0
<RECEIVABLES> 10,175
<ALLOWANCES> 50
<INVENTORY> 180,063
<CURRENT-ASSETS> 201,474
<PP&E> 46,278
<DEPRECIATION> 18,024
<TOTAL-ASSETS> 298,215
<CURRENT-LIABILITIES> 158,145
<BONDS> 176,167
0
0
<COMMON> 90
<OTHER-SE> (47,629)
<TOTAL-LIABILITY-AND-EQUITY> 298,215
<SALES> 672,394
<TOTAL-REVENUES> 672,394
<CGS> 504,826
<TOTAL-COSTS> 639,114
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 25,847
<INCOME-PRETAX> 7,433
<INCOME-TAX> 2,887
<INCOME-CONTINUING> 4,546
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,546
<EPS-PRIMARY> .50
<EPS-DILUTED> .50
</TABLE>
