SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR
[X] 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly periodended May 2, 1999
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Commission File Number 1-10619
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PAMIDA HOLDINGS CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 47-0696125
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification
Number)
8800 "F" Street, Omaha, Nebraska 68127
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(Address of principal executive offices) (Zip Code)
(402) 339-2400
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to
such filing requirements for the past 90 days. YES[X] NO[ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
Class of Common Stock Outstanding at June 8, 1999
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Common Stock 6,026,495 shares
Nonvoting Common Stock 3,050,473 shares
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
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PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
<S> <C> <C>
ASSETS: May 2, January 31,
Current assets: 1999 1999
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Cash $ 9,568 $ 7,588
Accounts receivable, less allowance for
doubtful accounts of $50 11,598 10,125
Merchandise inventories 187,867 180,063
Prepaid expenses 4,020 3,698
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Total current assets 213,053 201,474
Property, buildings and equipment, less accumulated
depreciation and amortization of $70,911 and $69,093 39,419 38,411
Leased property under capital leases, less accumulated
amortization of $18,679 and $18,024 27,599 28,254
Deferred financing costs 2,127 2,301
Other assets 34,107 27,775
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$316,305 $ 298,215
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LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 57,412 $ 53,772
Loan and security agreement 90,404 66,497
Accrued compensation 3,532 5,405
Accrued interest 2,708 6,614
Other accrued expenses 15,684 12,196
Income taxes - deferred and current payable 8,980 11,740
Current maturities of long-term debt 47 47
Current obligations under capital leases 1,908 1,874
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Total current liabilities 180,675 158,145
Long-term debt, less current maturities 140,231 140,242
Obligations under capital leases, less current obligations 35,423 35,925
Other long-term liabilities 11,686 11,442
Commitments and contingencies - -
Common stockholders' equity:
Common stock, $.01 par value; 25,000,000 shares
authorized; 6,026,495 and 6,025,595 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 30,779 30,776
Accumulated deficit (82,579) (78,405)
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Total common stockholders' deficit (51,710) (47,539)
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$316,305 $ 298,215
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See notes to consolidated financial statements.
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PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Per Share Amounts)
(Unaudited)
Three Months Ended
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May 2, May 3,
1999 1998
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Sales $154,370 $144,532
Cost of goods sold 118,853 110,172
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Gross profit 35,517 34,360
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Expenses:
Selling, general and administrative 35,600 31,580
Interest 6,741 6,509
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42,341 38,089
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Loss before income tax benefit (6,824) (3,729)
Income tax benefit 2,650 1,428
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Net loss $ (4,174) $ (2,301)
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Basic and diluted loss per common share $ (.46) $ (.26)
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See notes to consolidated financial statements.
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
Three Months Ended
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May 2, May 3,
1999 1998
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (4,174) $ (2,301)
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Adjustments to reconcile net loss to net cash from operations:
Depreciation and amortization of fixed assets
and intangibles 3,739 3,023
Provision for LIFO inventory valuation 100 250
(Gain) loss on disposal of assets 2 (999)
Decrease in store closing reserve (238) (670)
Increase in merchandise inventories (7,904) (15,803)
Increase in other operating assets (1,806) (1,359)
Increase in accounts payable 3,640 19,197
Decrease in interest payable (3,906) (4,413)
Decrease in income taxes payable (2,760) (2,626)
Increase in other operating liabilities 2,097 1,526
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Total adjustments (7,036) (1,874)
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Net cash from operating activities (11,210) (4,175)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Changes in constructed stores to be refinanced
through lease financing (6,267) (278)
Capital expenditures (2,980) (2,495)
Capitalized software costs (1,019) (2,040)
Proceeds from disposal of assets 5 2,071
Principal payments received on notes receivable 5 5
Proceeds from sale-leaseback of store facility - 1,592
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Net cash from investing activities (10,256) (1,145)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under loan and security agreement, net 23,907 10,729
Principal payments on capital lease obligations (468) (475)
Refunds received for deferred finance costs 15 -
Principal payments on other long-term debt (11) (12)
Proceeds from exercise of stock options 3 -
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Net cash from financing activities 23,446 10,242
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Net increase in cash 1,980 4,922
Cash at beginning of year 7,588 6,816
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Cash at end of period $ 9,568 $ 11,738
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
(1) Cash paid (received) during the period for:
Interest $ 10,488 $ 10,774
Income taxes:
Payments to taxing authorities 940 1,315
Refunds received from taxing authorities (830) (117)
See notes to consolidated financial statements.
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MAY 2, 1999 AND MAY 3, 1998
(Unaudited)
(Dollars in Thousands)
1. MANAGEMENT REPRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information. In the opinion of management, all
adjustments necessary for a fair presentation of the results of operations
for the interim periods have been included. All such adjustments are of a
normal recurring nature. Because of the seasonal nature of the business,
results for interim periods are not necessarily indicative of a full year's
operations. The accounting policies followed by Pamida Holdings Corporation
(the "Company") and additional footnotes are reflected in the consolidated
financial statements contained in the Form 10-K Annual Report of the
Company for the fiscal year ended January 31, 1999.
2. INVENTORIES
Substantially all inventories are stated at the lower of cost (last-in,
first-out) or market. Total inventories would have been higher at May 2,
1999 and January 31, 1999 by $7,665 and $7,565 respectively, had the FIFO
(first-in, first-out) method been used to determine the cost of all
inventories. Quarterly LIFO inventory determinations reflect assumptions
regarding fiscal year-end inventory levels and the estimated impact of
annual inflation. Actual inventory levels and annual inflation could vary
from estimates made on a quarterly basis.
3. EARNINGS PER COMMON SHARE
Basic income per common share are based on the weighted average outstanding
common shares during the period. Diluted income per share are based on the
weighted average outstanding common shares and the effect of all dilutive
potential common shares, including stock options.
4. NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, The Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 133, "Accounting
for Derivative Instruments and Hedging Activities," which established
accounting and reporting standards for derivative instruments and for
hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial position and
measure those instruments at fair value. This statement is effective for
the Company in the first quarter of fiscal year 2002. The Company has not
yet determined the effect of this statement.
5. PENDING MERGER WITH SHOPKO
On May 10, 1999, the Company entered into an Agreement and Plan of Merger
(the "Agreement") with ShopKo Stores, Inc. ("ShopKo") and a wholly owned
subsidiary of ShopKo (the "Merger Sub") pursuant to which the Merger Sub on
May 17, 1999, began a tender offer for all of the outstanding shares of
Common Stock of the Company at a price of $11.50 in cash net to the seller
(the "Offer"). Following the completion of the Offer, the Merger Sub will
be merged into the Company, all remaining outstanding shares of Common
Stock and Nonvoting Common Stock of the Company (other than shares owned by
the Company, ShopKo, the Merger Sub, and any of their direct or indirect
wholly owned subsidiaries, which will be canceled) will be converted into
the right to receive $11.50 per share, and the Company will become a wholly
owned subsidiary of ShopKo.
6. RECLASSIFICATIONS
Certain reclassifications have been made to the prior year's financial
statements to conform to the current year's presentation.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in Thousands)
The following is management's discussion and analysis of certain significant
factors which have affected the Company's results of operations and financial
condition for the periods included in the accompanying consolidated financial
statements.
RESULTS OF OPERATIONS
The following table sets forth an analysis of various components of the
Consolidated Statements of Operations as a percentage of sales for the three
months ended May 2, 1999 and May 3, 1998:
Three Months Ended
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May 2, May 3,
1999 1998
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Sales 100.0% 100.0%
Cost of goods sold 77.0 76.2
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Gross profit 23.0 23.8
Selling, general and administrative expenses 23.0 21.9
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Operating income 0.0 1.9
Interest expense 4.4 4.5
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Loss before income tax benefit (4.4) (2.6)
Income tax benefit 1.7 1.0
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Net loss (2.7) (1.6)
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SALES for the first quarter of fiscal 2000 increased by $9,838 or 6.8% from
sales for the first quarter of fiscal 1999. Comparable store sales for the first
quarter increased by 5.5% compared to last year. Sales during the first quarter
of last year were lower than the usual first quarter level due to a lesser
amount of markdown and clearance goods available for sale. Because of more
normal seasonal weather conditions, sales trends during the first two months of
the first quarter of fiscal 2000 were substantially stronger than during the
final month. The weather in most of the Company's geographical region remained
very cool during most of the month of April 1999.
The Company experienced sales increases in numerous merchandise categories
during the three months ended May 2, 1999. The largest increases were in the
pharmacy prescriptions, groceries, electronics, yarns and crafts, lawn and
garden, bedding and window covering and paint and electric areas. The Company
experienced sales declines in several areas, with candy, automotive, misses
tops, stationery and misses bottoms sales areas having the largest decreases.
The Company operated 150 stores at the end of the first quarter of fiscal 2000
compared to 149 at the end of the first quarter of fiscal 1999. Since May 3,
1998, the Company has opened nine stores in new markets, expanded three stores,
relocated one store and closed eight stores. Included in the continuing stores
are four general merchandise stores which were closed and reopened as Heartland
Home Furnishings stores. These changes resulted in a net increase in selling
area since May 3, 1998 of approximately 92,700 square feet. As of May 3, 1999,
the Company had a total of approximately 4,552,000 square feet of sales area.
GROSS PROFIT increased $1,157 or 3.4% for the first quarter of fiscal 2000
compared to the first quarter of last year as a result of the increased sales.
As a percent of sales, gross profit decreased to 23.0% for the first quarter of
fiscal 2000 as compared to 23.8% for the first quarter last year. This was
primarily caused by a normal level of clearance and markdown activity this year
as compared with the lower level experienced the first quarter of last year.
Also, during fiscal 1999, the Company implemented more competitive pricing on
many softlines goods which has had a negative effect on gross margin as a
percent of sales. Many sales categories experienced increases in gross margin
dollars for the quarter. Categories with the largest increases in gross margin
dollars were pharmacy and prescriptions, paper and cleaning, sporting goods,
yarns and crafts, cameras, housewares, pet supplies and athletic shoes. The
largest decreases in gross margin dollars were in the candy, lawn and garden,
misses tops, grocery, misses bottoms, stationery, men's basics and automotive
categories.
SELLING, GENERAL AND ADMINISTRATIVE (SG&A) Expense increased $4,020 or 12.7% for
the first quarter of fiscal 2000 compared to the first quarter of fiscal 1999.
As a percent of sales, SG&A expense increased to 23.0% for the first quarter of
fiscal 2000 as compared to 21.9% last year. Approximately 77.3%, or $3,109, of
the net increase in SG&A expense was attributable to higher corporate general
and administrative expenses. Primary components of this increase include $1,256
in increased incentive compensation expenses directly related to changes in the
Company's stock trading value, $465 of merger related expenses, and, to lesser
degrees, ordinary increases in payroll and increased insurance and telephone
costs. The store payroll component of SG&A costs increased $742, or 6.1%, over
last year, to accommodate normal compensation increases and accounted for 18.4%
of the total increase in SG&A. Store fixed expenses increased by $610, or 9.7%,
primarily due to the effect of higher costs of new store locations. These
increases in costs were offset by a decrease in charges related to closed stores
compared with last year.
INTEREST expense increased $232 or 3.6% for the first quarter of fiscal 2000
compared to the same period of fiscal 1999. Average revolver borrowings
increased $26,169 or 52.7% to $75,816, and the interest rate paid on these
borrowings decreased as explained in the liquidity section below. These items
together caused interest on the revolver to increase by $271. The Company also
experienced a $101, or 10.5%, increase in interest on capital leases due to new
leases consummated after the end of the first quarter of fiscal 1999. These
increases in interest expense were offset by increased capitalization of
interest on store construction and reduced revolver facility fees.
INCOME TAX BENEFIT - An income tax benefit was recorded in the first quarter of
fiscal 2000 at the Company's normal effective tax rate. The Company expects that
operations in the future will continue to be taxable at a normal tax rate.
LIQUIDITY AND CAPITAL RESOURCES
The Company's business is seasonal with first quarter sales (February through
April) being lower than sales during the other three quarters; fourth quarter
sales (November through January) have represented approximately 29% of the full
year's sales in recent years and normally involve a greater proportion of higher
margin sales.
The Company has satisfied its seasonal liquidity requirements primarily through
a combination of funds provided from operations and from a revolving credit
facility. Funds used by operating activities totaled $11,210 for the first
quarter of fiscal 2000, and totaled $4,175 in the first quarter of fiscal 1999.
The change in cash flow from operating activities from fiscal 1999 to fiscal
2000 was primarily the result of a smaller increase in accounts payable compared
to last year and the increased net loss. These reductions in cash flow were
offset by a smaller increase in merchandise inventories this year compared to
last year.
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 $90,404 at May 2, 1999 and $55,923 at May
3, 1998. As noted above, this facility expires in July 2001, and refinancing is
subject to the pending merger with ShopKo. Borrowings under the Agreement are
senior to the Senior Subordinated Notes of the Company. The Company had
long-term debt and obligations under capital leases of $175,654 at May 2, 1999
and $171,974 at May 3, 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 May 2, 1999, the Company was in compliance with
all covenants contained in its various financing agreements.
The Company made capital expenditures of $2,980 in the first quarter of fiscal
2000 compared to $2,495 during the first quarter of fiscal 1999. The Company
also made expenditures of $1,019 and $2,040 in the first quarters of fiscal 2000
and 1999, respectively, related to information systems software. In addition,
the Company incurred construction costs related to new stores during the first
quarter of fiscal 2000 totaling $6,267 compared with $278 last year. Total
capital expenditures and information systems software costs are expected to be
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.
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, borrowings under the Agreement or other
financing which may become available as a result of the pending merger with
ShopKo.
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 also is addressing 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 2000, the Company has expensed less than $50 related directly
to Year 2000 readiness, and prior to fiscal 2000 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 3 - 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 May 2, 1999, the Company had fixed-rate long-term debt totaling $140,231
and having a fair value of $145,831. 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 $13,259 if interest rates were to
increase or decrease by 10% from their levels at May 2, 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 May 2, 1999, the Company had floating rate obligations of $90,404 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 May 2, 1999 levels, the Company's consolidated
interest expense for floating-rate obligations would increase or decrease by
approximately $56 during each month in which such change continued based upon
May 2, 1999 principal balances.
The Company's practice is not to hold or issue financial instruments for
trading purposes.
PART II - OTHER INFORMATION
ITEMS 1-4.
None
ITEM 5. OTHER EVENTS.
On May 10, 1999, the registrant entered into an Agreement and Plan of
Merger (the "Agreement") with ShopKo Stores, Inc. ("ShopKo") and a wholly owned
subsidiary of ShopKo (the "Merger Sub") pursuant to which the Merger Sub on May
17, 1999, began a tender offer for all of the outstanding shares of Common Stock
of the registrant at a price of $11.50 in cash net to the seller (the "Offer").
Following the completion of the Offer, the Merger Sub will be merged into the
registrant, all remaining outstanding shares of Common Stock and Nonvoting
Common Stock of the registrant (other than shares owned by the registrant,
ShopKo, the Merger Sub, and any of their direct or indirect wholly owned
subsidiaries, which will be canceled) will be converted into the right to
receive $11.50 per share, and the registrant will become a wholly owned
subsidiary of ShopKo.
The Board of Directors of the registrant, in approving the Agreement,
determined that the Agreement and the transactions contemplated thereby are fair
to and in the best interests of the stockholders of the registrant, declared the
Agreement and the transactions contemplated thereby to be advisable and in the
best interests of the stockholders of the registrant, and recommended that the
holders of shares of Common Stock of the registrant accept the Offer and that
the stockholders of the registrant approve and adopt the Agreement and the
transactions contemplated thereby.
ITEM 6.
(a) Exhibits.
27.1 Financial Data Schedule (EDGAR version only).
(b) Reports on Form 8-K.
A report on Form 8-K was filed during the quarter for which
this Form 10-Q is filed. Such report had a Date of Report of
April 27, 1999, and related to Item 5, Other Events. No
financial statements were filed with such report.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PAMIDA HOLDINGS CORPORATION
---------------------------
(Registrant)
Date: June 14, 1999 By: /s/ Steven S. Fishman
-----------------------------
Steven S. Fishman, Chairman,
President and Chief Executive
Officer
Date: June 14, 1999 By: /s/ Todd D. Weyhrich
------------------------------
Todd D. Weyhrich,
Vice President, Controller and
Chief Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Financial Data Schedule
Item 601(c) of Regulation S-K Commercial and
Industrial Companies Article 5 of Regulation S-X
(Dollars is thousands, except per share amounts)
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet of Pamida Holdings and Subsidiary as of May 2, 1999
and the related Consolidated Statement of Operations for the 13 weeks then ended
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
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<NAME> Pamida Holdings Corporation
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0
0
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