<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Amendment No. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 6, 1999
ShopKo Stores, Inc.
(Exact Name of Registrant As Specified In Charter)
Wisconsin
(State Or Other Jurisdiction Of Incorporation)
1-10876 41-0985054
(Commission File Number) (IRS Employer Identification No.)
700 Pilgrim Way; Green Bay, Wisconsin 54304
(Address Of Principal Executive Offices) (Zip Code)
(920) 429-2211
(Registrant's Telephone Number, Including Area Code)
Not Applicable
(Former Name Or Former Address, If Changed Since Last Report)
1
<PAGE> 2
This Form 8-K/A amends the Registrant's Current Report on Form 8-K dated July 6,
1999 to incorporate Item 7 - Financial Statements, Pro Forma Financial
Information and Exhibits. The Current Report on Form 8-K dated July 6, 1999
related to (i) the Registrant's acquisition of Pamida Holdings Corporation, and
(ii) exhibits filed in connection with the Registrant's Registration Statement
on Form S-3 (Reg. No. 333-79763).
Item 7: FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of the Business Acquired
The following financial statements for the acquired business are filed
herewith:
Independent Auditors' Report on Pamida Holdings Corporation and
Subsidiary Consolidated Financial Statements for the Fiscal Years ended
January 31, 1999, February 1, 1998, and February 2, 1997.
Pamida Holdings Corporation and Subsidiary: Consolidated Statements of
Operations for the Fiscal Years ended January 31, 1999, February 1, 1998,
and February 2, 1997.
Pamida Holdings Corporation and Subsidiary: Consolidated Balance Sheets
as of January 31, 1999 and February 1, 1998.
Pamida Holdings Corporation and Subsidiary: Consolidated Statements of
Stockholders' Equity for the Fiscal Years ended January 31, 1999, February
1, 1998, and February 2, 1997.
Pamida Holdings Corporation and Subsidiary: Consolidated Statements of
Cash Flows for the Fiscal Years ended January 31, 1999, February 1, 1998,
and February 2, 1997.
Notes to the Consolidated Financial Statements.
Pamida Holdings Corporation and Subsidiary: Unaudited Consolidated
Balance Sheets as of May 2, 1999 and May 3, 1998.
Pamida Holdings Corporation and Subsidiary: Unaudited Consolidated
Statements of Operations and Consolidated Statements of Cash Flows for the
thirteen weeks ended May 2, 1999 and May 3, 1998.
Notes to the Consolidated Financial Statements.
2
<PAGE> 3
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
3
<PAGE> 4
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLAR AMOUNTS IN THOUSANDS - EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------------------------------------
January 31, February 1, February 2,
1999 1998 1997
(52 weeks) (52 Weeks) (53 Weeks)
-------------- -------------- -------------
<S> <C> <C> <C>
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)
======== ========= =========
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 5
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(DOLLAR AMOUNTS IN THOUSANDS - EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
January 31, February 1,
ASSETS 1999 1998
----------- -----------
<S> <C> <C>
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
========= ===========
</TABLE>
See notes to consolidated financial statements.
5
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PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Nonvoting Additional
Common Common Paid-in (Accumulated
Stock Stock Capital Deficit)
--------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
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)
=== === ======= ========
</TABLE>
See notes to consolidated financial statements.
6
<PAGE> 7
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Fiscal Year Ended
----------------------------------------
January 31, February 1, February 2,
1999 1998 1997
(52 Weeks) (52 Weeks) (53 Weeks)
---------- ---------- ----------
<S> <C> <C> <C>
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
======== ======== ========
</TABLE>
7
<PAGE> 8
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLAR AMOUNTS IN THOUSANDS) - (CONTINUED)
<TABLE>
<CAPTION>
Fiscal Year Ended
----------------------------------------------------
January 31, February 1, February 2,
1999 1998 1997
(52 weeks) (52 Weeks) (53 Weeks)
------------------- ------------- -----------------
<S> <C> <C> <C>
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) -
</TABLE>
See notes to consolidated financial statements.
8
<PAGE> 9
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.
9
<PAGE> 10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY
(DOLLAR AMOUNTS IN THOUSANDS - EXCEPT PER SHARE DATA) - (CONTINUED)
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>
<CAPTION>
1999 1998 1997
---------------------------- --------------------------- ----------------------------
Per Share Per Share Per Share
Income Shares Amount Income Shares Amount Loss Shares Amount
---------------------------- --------------------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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>
10
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY
(DOLLAR AMOUNTS IN THOUSANDS - EXCEPT PER SHARE DATA) - (CONTINUED)
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:
<TABLE>
<CAPTION>
Jan. 31, Feb. 1,
1999 1998
---------- ---------
<S> <C> <C>
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
========== =========
</TABLE>
E. OTHER ASSETS
Other assets consist of:
<TABLE>
<CAPTION>
Jan. 31, Feb. 1,
1999 1998
---------- ---------
<S> <C> <C>
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
========== =========
</TABLE>
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.
11
<PAGE> 12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY
(DOLLAR AMOUNTS IN THOUSANDS - EXCEPT PER SHARE DATA) - (CONTINUED)
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:
<TABLE>
<CAPTION>
Jan. 31, Feb. 1,
1999 1998
---------- ---------
<S> <C> <C>
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
========== =========
</TABLE>
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.
12
<PAGE> 13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY
(DOLLAR AMOUNTS IN THOUSANDS - EXCEPT PER SHARE DATA) - (CONTINUED)
G. INCOME TAXES
Components of the income tax provision (benefit) from continuing
operations are as follows:
<TABLE>
<CAPTION>
Year Ended
----------------------------------
Jan. 31, Feb. 1, Feb. 2,
1999 1998 1997
--------- -------- ---------
<S> <C> <C> <C>
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 $ - $ -
========= ======== =========
</TABLE>
The differences between the U.S. Federal statutory tax rate and the
Company's effective tax rate are as follows:
<TABLE>
<CAPTION>
Year Ended
----------------------------------
Jan. 31, Feb. 1, Feb. 2,
1999 1998 1997
--------- -------- --------
<S> <C> <C> <C>
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% - -
========= ======== ========
</TABLE>
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:
<TABLE>
<CAPTION>
Year Ended
Jan. 31, Feb. 1,
1999 1998
--------- --------
<S> <C> <C>
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
--------- -------
</TABLE>
13
<PAGE> 14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY
(DOLLAR AMOUNTS IN THOUSANDS - EXCEPT PER SHARE DATA) - (CONTINUED)
<TABLE>
<CAPTION>
Jan. 31, Feb. 1,
1999 1998
--------- --------
<S> <C> <C>
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
========= ========
</TABLE>
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 noncancellable
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:
<TABLE>
<CAPTION>
Fiscal Year Ending Capital Operating
Leases Leases
--------- ----------
<S> <C> <C>
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
=========
</TABLE>
The minimum rentals under operating leases have not been reduced by
minimum sublease rental income of $89 due in the future under noncancellable
subleases of stores.
14
<PAGE> 15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY
(DOLLAR AMOUNTS IN THOUSANDS - EXCEPT PER SHARE DATA) - (CONTINUED)
Total rental expense related to all operating leases (including those
with terms less than one year) is as
follows:
<TABLE>
<CAPTION>
Year Ended
----------------------------------
Jan. 31, Feb. 1, Feb. 2,
1999 1998 1997
--------- -------- --------
<S> <C> <C> <C>
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
========= ======== ========
</TABLE>
I. OTHER INCOME
The following non-recurring other income items reduced selling, general
and administrative costs during the:
<TABLE>
<CAPTION>
Year Ended
----------------------------------
Jan. 31, Feb. 1, Feb. 2,
1999 1998 1997
--------- -------- --------
<S> <C> <C> <C>
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
========= ======== =======
</TABLE>
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.
15
<PAGE> 16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY
(DOLLAR AMOUNTS IN THOUSANDS - EXCEPT PER SHARE DATA) - (CONTINUED)
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>
<CAPTION>
Jan. 31, 1999 Feb. 1, 1998 Feb. 2, 1997
----------------------------- ----------------------------- ------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Number Price Number Price Number Price
------ -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
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.
16
<PAGE> 17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY
(DOLLAR AMOUNTS IN THOUSANDS - EXCEPT PER SHARE DATA) - (CONTINUED)
The following table summarizes information about stock options
outstanding as of January 31, 1999:
<TABLE>
<CAPTION>
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
- --------------- ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$1.94 - $2.78 68,240 7.5 Years $2.34 22,760 $2.32
3.06 37,137 8.1 Years 3.06 6,977 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
============= ======= ========= ===== ======= =====
</TABLE>
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:
<TABLE>
<CAPTION>
Jan. 31, Feb. 1, Feb. 2,
1999 1998 1997
-------- ------- --------
<S> <C> <C> <C> <C>
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)
</TABLE>
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:
<TABLE>
<CAPTION>
Jan. 31, Feb. 1, Feb. 2,
1999 1998 1997
-------- ------- --------
<S> <C> <C> <C>
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
</TABLE>
17
<PAGE> 18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY
(DOLLAR AMOUNTS IN THOUSANDS - EXCEPT PER SHARE DATA) - (CONTINUED)
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.
18
<PAGE> 19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY
(DOLLAR AMOUNTS IN THOUSANDS - EXCEPT PER SHARE DATA) - (CONTINUED)
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.
19
<PAGE> 20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY
(DOLLAR AMOUNTS IN THOUSANDS - EXCEPT PER SHARE DATA) - (CONTINUED)
The 1996 store closing reserve activity and amounts included in the
balance sheets are as follows:
<TABLE>
<CAPTION>
1996 Store Closing Reserves
------------------------------------------------------------
Amount included Amount included
in other accrued in other long-
expenses term liabilities Total
------------------ ----------------- -------
<S> <C> <C> <C>
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
================== ================= =======
</TABLE>
20
<PAGE> 21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY
(DOLLAR AMOUNTS IN THOUSANDS - EXCEPT PER SHARE DATA) - (CONTINUED)
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>
<CAPTION>
Fiscal 1999 May 3, August 2, November 1, January 31,
- ----------- 1998 1998 1998 1999 Year
--------- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
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
========= ========= ========= ========= =========
<CAPTION>
Fiscal 1998 May 4, August 3, November 2, February 1,
- ----------- 1997 1997 1997 1998 Year
--------- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
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>
21
<PAGE> 22
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
ASSETS: May 2, May 3,
Current assets: 1999 1998
--------- ---------
<S> <C> <C>
Cash $ 9,568 $ 11,738
Accounts receivable, less allowance for
doubtful accounts of $50 in both years 11,598 8,457
Merchandise inventories 187,867 168,480
Prepaid expenses 4,020 3,817
--------- ---------
Total current assets 213,053 192,492
Property, buildings and equipment, less accumulated
depreciation and amortization of $70,911 and $64,492 39,419 40,342
Leased property under capital leases, less accumulated
amortization of $18,679 and $16,023 27,599 24,545
Deferred financing costs 2,127 2,607
Other assets 34,107 21,050
--------- ---------
$ 316,305 $ 281,036
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 57,412 $ 66,884
Loan and security agreement 90,404 55,923
Accrued compensation 3,532 4,169
Accrued interest 2,708 2,255
Store closing reserve 973
Other accrued expenses 15,684 14,393
Income taxes - deferred and current payable 8,980 9,920
Current maturities of long-term debt 47 47
Current obligations under capital leases 1,908 1,827
--------- ---------
Total current liabilities 180,675 156,391
Long-term debt, less current maturities 140,231 140,277
Obligations under capital leases, less current obligations 35,423 31,697
Other long-term liabilities 11,686 7,247
Commitments and contingencies -- --
Common stockholders' equity:
Common stock, $.01 par value; 25,000,000 shares authorized; 6,026,495 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 30,779 30,586
Accumulated deficit (82,579) (85,252)
--------- ---------
Total common stockholders' deficit (51,710) (54,576)
--------- ---------
$ 316,305 $ 281,036
========= =========
</TABLE>
See notes to consolidated financial statements.
22
<PAGE> 23
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
------------------
May 2, May 3,
1999 1998
-------------------------
<S> <C> <C>
Sales $ 154,370 $ 144,532
Cost of goods sold 118,853 110,172
--------- ---------
Gross profit 35,517 34,360
--------- ---------
Expenses:
Selling, general and administrative 35,600 31,580
Interest 6,741 6,509
--------- ---------
42,341 38,089
--------- ---------
Loss before income tax benefit (6,824) (3,729)
Income tax benefit 2,650 1,428
--------- ---------
Net loss $ (4,174) $ (2,301)
========= =========
Basic and diluted loss per common share $ (.46) $ (.26)
========= =========
</TABLE>
See notes to consolidated financial statements.
23
<PAGE> 24
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
-------------------
May 2, May 3,
1999 1998
-------- --------
<S> <C> <C>
CASHFLOWS FROM OPERATING ACTIVITIES:
Net loss $ (4,174) $ (2,301)
-------- --------
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
-------- --------
Total adjustments (7,036) (1,874)
-------- --------
Net cash from operating activities (11,210) (4,175)
-------- --------
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
-------- --------
Net cash from investing activities (10,256) (1,145)
-------- --------
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 --
-------- --------
Net cash from financing activities 23,446 10,242
-------- --------
Net increase in cash 1,980 4,922
Cash at beginning of year 7,588 6,816
-------- --------
Cash at end of period $ 9,568 $ 11,738
======== ========
</TABLE>
24
<PAGE> 25
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
Three Months Ended
------------------
May 2, May 3,
1999 1998
---- ----
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.
25
<PAGE> 26
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 May 3, 1998 by $7,665 and $7,430 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.
26
<PAGE> 27
6. Reclassifications
Certain reclassifications have been made to the prior year's financial
statements to conform to the current year's presentation.
(b) Pro Forma Financial Information
The following unaudited pro forma consolidated financial statements are
filed herewith:
Pro Forma Consolidated Balance Sheet as of May 1, 1999.
Pro Forma Consolidated Statement of Operations for the thirteen weeks
ended May 1, 1999.
Pro Forma Consolidated Statement of Operations for the Fiscal Year
ended January 31, 1999.
Notes to the Pro Forma Consolidated Financial Statements
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma combined condensed financial statements give
effect to the acquisition of Pamida Holdings Corporation ("Pamida") by ShopKo
Stores, Inc. (the "Company"), through its wholly-owned subsidiary, ShopKo Merger
Corp. ("Merger Corp."). The acquisition of Pamida by the Company (the "Pamida
Acquisition") was consummated pursuant to an Agreement and Plan of Merger, dated
as of May 10, 1999, by and among the Company, Merger Corp. and Pamida (the
"Merger Agreement").
In consummation of the acquisition, a total of $104.4 million was disbursed as
follows:
(i) $67.9 million was disbursed on July 6, 1999 to tendering holders
of the voting common stock;
(ii) $35.1 was disbursed on July 6, 1999 to 399 Venture Partners; and
(iii) $1.4 was disbursed to non-tendering holders of the voting common
stock.
The Company utilized cash from its operations to fund the Pamida Acquisition.
The Pamida Acquisition will be accounted for under the purchase method of
accounting, and as such, the final calculated purchase price will be allocated
to the fair value of tangible assets and the excess of cost over net assets
acquired.
The pro forma condensed consolidated balance sheet as of May 1, 1999 assumes the
acquisition took place on that date and is based on the respective unaudited
historical consolidated balance sheets, reported on both the Company's and
Pamida's Form 10-Q, filed with the Securities and Exchange Commission. The pro
forma adjustments record the proforma purchase price of $104.4 million, which
includes professional fees and other costs, and allocate the pro forma purchase
price to the assets acquired and the liabilities assumed based on their
preliminary estimated fair market values on the date of acquisition.
The pro forma consolidated statements of operations for the thirteen weeks ended
May 1, 1999 and for the fiscal year ended January 30, 1999 ("Fiscal 1998")
assume that the transaction was consummated at the beginning of Fiscal 1998, and
are based on the respective historical consolidated statements of operations,
reported on both the Company's and Pamida's Form 10-Q and Form 10-K.
The unaudited pro forma financial information and related notes are provided for
informational purposes only and are not necessarily indicative of what the
Company's actual financial position or results of operations would have been had
the foregoing transaction been consummated on such dates, nor does it give
effect to the synergies, cost savings and other charges expected to result from
the Pamida Acquisition. Accordingly, the pro forma financial information does
not purport to be indicative of the Company's financial position or results of
operations as of the date hereof or for any period ended on the date hereof or
as of or for any other future dates or periods.
27
<PAGE> 28
ShopKo Stores, Inc. and Pamida Holdings Corporation
Unaudited Pro Forma Combined Condensed Consolidated Balance Sheet
As of May 1, 1999
(In thousands)
<TABLE>
<CAPTION>
Historical Pro Forma Adjustments
---------- ---------------------
Pro Forma
ShopKo Pamida Conforming Acquisition Combined
------ ------ ---------- ----------- --------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 84,240 $ 9,568 (a) $ (83,808) $ 10,000
Receivables, less allowance for losses 124,860 11,598 -- 136,458
Merchandise inventories 483,876 187,867 -- (b) (24,895) 646,848
Other current assets 11,594 4,020 -- 15,614
----------- ----------- ----------- ----------- -----------
Total Current Assets 704,570 213,053 -- (108,703) 808,920
Other assets and deferred charges 6,980 36,234 (31,009)(c) 33,374 45,579
Intangible assets - net 73,637 (d) 162,055 235,692
Property and equipment at cost:
Property building and equipment 1,168,811 110,330 31,009 (ce) (21,506) 1,288,644
Property under capital leases 58,004 46,278 -- 104,282
----------- ----------- ----------- ----------- -----------
1,226,815 156,608 31,009 (21,506) 1,392,926
Less accumulated depreciation and amortization:
Property and equipment 503,238 70,911 (e) (70,911) 503,238
Property under capital leases 10,235 18,679 -- 28,914
----------- ----------- ----------- ----------- -----------
Net property and equipment 713,342 67,018 31,009 49,405 860,774
Total assets $ 1,498,529 $ 316,305 $ -- $ 136,131 $ 1,950,965
=========== =========== =========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 159,000 $ 90,404 (f) $ 22,035 $ 271,439
Accounts payable - trade 240,423 57,412 -- 297,835
Accrued compensation and related taxes 35,488 3,532 (g) 8,839 47,859
Accrued other liabilities 146,080 18,392 (h) 38,034 202,506
Accrued income and other taxes 17,429 8,980 (i) 8,884 35,293
Current portion of long-term obligations 2,734 1,955 (j) 146,629 151,318
----------- ----------- ----------- ----------- -----------
Total current liabilities 601,154 180,675 -- 224,421 1,006,250
Long-term obligations 409,543 187,340 (5,581)(k) (140,000) 451,302
Deferred income taxes 26,831 5,581 (k) -- 32,412
Shareholders' equity:
Common stock 262 90 (l) (90) 262
Additional paid-in capital 229,652 30,779 (l) (30,779) 229,652
Retained earnings 231,087 (82,579) (l) 82,579 231,087
----------- ----------- ----------- ----------- -----------
Total shareholders' equity 461,001 (51,710) -- 51,710 461,001
Total liabilities and shareholders'
equity $ 1,498,529 $ 316,305 $ -- $ 136,131 $ 1,950,965
=========== =========== =========== =========== ===========
</TABLE>
* All letter references correspond to Note 1
28
<PAGE> 29
ShopKo Stores, Inc. and Pamida Holdings Corporation
Unaudited Pro Forma Combined Condensed Consolidated Statement of Operations
For the First Quarter (Thirteen Weeks) Ended May 1, 1999
(In thousands, except per share data)
<TABLE>
<CAPTION>
Historical Pro Forma Adjustments
-----------------------------------------------------------------------------
Pro Forma
ShopKo Pamida Conforming Acquisition Combined
------ ------ ---------- ----------- --------
<S> <C> <C> <C> <C> <C>
Revenues:
Net sales $ 759,857 $154,370 $ 914,227
Licensed department rentals and other
income 2,918 2,918
--------- -------- ----------- ------------ ------------
762,775 154,370 - - 917,145
Costs and Expenses:
Cost of sales 607,662 118,853 726,515
Selling, general and administrative
expenses 120,669 35,600 (3,739)(a) 152,530
Nonrecurring charge -
Depreciation and amortization expenses 17,648 3,739 (abc) 2,664 24,051
--------- -------- ----------- ------------ ------------
745,979 154,453 - 2,664 903,096
Income from operations 16,796 (83) - (2,664) 14,049
Interest expense - net 9,692 6,741 (d) (590) 15,843
--------- -------- ---------- ------------ ------------
Earnings before income taxes and
extraordinary item 7,104 (6,824) - (2,074) (1,794)
Provision for income taxes 2,791 (2,650) (e) (1,762) (1,621)
--------- -------- ---------- ------------ ------------
Earnings before extraordinary item 4,313 (4,174) - (312) (173)
Extraordinary (loss) on early retirement of debt,
net of income taxes of $2,443 (3,776) (3,776)
--------- -------- ---------- ------------ ------------
Net earnings $ 537 $ (4,174) $ - $ (312) $ (3,949)
========= ======== ========= ============ ============
Basic earnings per common share $0.16 $(0.46) $(0.01)
Extraordinary (loss) on early retirement of debt (0.14) (0.14)
--------- -------- ------------
Basic net earnings per common share $0.02 $(0.46) $(0.15)
--------- -------- ------------
Weighted average number of common shares
outstanding 26,140 9,074 26,140
Basic earnings per common share $0.16 $(0.01)
Extraordinary (loss) on early retirement of debt (0.14) (0.14)
--------- ------------
Basic net earnings per common share $0.02 $(0.15)
--------- ------------
Weighted average number of common shares
outstanding 26,591 26,591
</TABLE>
* All letter references correspond to Note 2
** Pamida diluted loss per share is the same as basic loss per share due to
the small number of dilutive shares
29
<PAGE> 30
ShopKo Stores, Inc. and Pamida Holdings Corporation
Unaudited Pro Forma Combined Condensed Consolidated Statement of Operations
For the Year Ended January 30, 1999
(In thousands, except per share data)
<TABLE>
<CAPTION>
Historical Pro Forma Adjustments
-------------------------- -------------------------------- --------------
ShopKo Pamida Pro Forma
52 weeks 52 weeks Conforming Acquisition Combined
-------------- ---------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Revenues:
Net sales $ 2,981,451 $ 672,394 $3,653,845
Licensed department rentals and other
income 12,325 12,325
------------- ----------- ----------- -------------- ----------
2,993,776 672,394 3,666,170
- -
Costs and Expenses:
Cost of sales 2,318,979 504,826 2,823,805
Selling, general and administrative
expenses 471,546 134,288 (13,456) (a) 592,378
Nonrecurring charge 5,723 5,723
Depreciation and amortization expenses 67,590 13,456 (abc) 10,657 91,703
------------- ----------- ----------- ------------- ----------
2,863,838 639,114 - 10,657 3,513,609
Income from operations 129,938 33,280 - (10,657) 152,561
Interest expense - net 38,311 25,847 (d) (2,362) 61,796
------------- ----------- ----------- ------------- ----------
Earnings before income taxes 91,627 7,433 - (8,295) 90,765
Provision for income taxes 35,991 2,887 (e) (1,249) 37,629
------------- ------------ ----------- ------------- ----------
Net earnings $ 55,636 $ 4,546 $ - $ (7,046) $ 53,136
============= =========== =========== ============= ==========
Basic net earnings per common share $ 2.14 $ 0.50 $ 2.04
Weighted average common shares 26,035 9,092 26,035
============= =========== ==========
Diluted net earnings per common share $ 2.10 $ 2.00
Weighted average common and common equivalent
shares 26,517 26,517
============= ==========
</TABLE>
* All letter references correspond to Note 2
** Pamida diluted loss per share is the same as basic loss per share due to
the small number of dilutive shares
30
<PAGE> 31
Notes to accompany the unaudited pro forma combined financial statements.
Note 1 - Pro forma adjustments as of May 1, 1999
The pro forma adjustments to the unaudited pro forma combined condensed balance
sheet reflect the purchase of Pamida and the allocation of the pro forma
purchase price to the acquired assets and the assumed liabilities based on the
preliminary estimate of their fair market value at the date of acquisition. The
pro forma adjustments include the impact of conforming Pamida accounting
policies to those of the Company.
a) Cash and cash equivalents - The adjustment is the pro forma decrease in
cash used to fund a portion of the $104.4 million distributed in
consummation of the acquisition.
b) Merchandise inventories - The adjustment reflects the net value expected to
be realized upon liquidation of the inventory in the acquired Pamida
stores.
c) Other assets and deferred charges - The adjustment reflects the elimination
of historical deferred financing fees, the recording of preliminary
favorable leasehold and noncompete contract valuations. In addition,
certain Pamida historical assets were reclassed to property and equipment
to be consistent with the Company's historical financial statement
presentation.
d) Intangible assets, net - The adjustment reflects the goodwill and
identified intangible assets recorded in connection with the Pamida
Acquisition.
e) Fixed assets, net - The net adjustment includes a revaluation of all
categories of property and equipment to fair market value.
f) Short-term debt - The adjustment reflects the fee for early
termination of the Pamida facility and the pro forma increase for
borrowings necessary to fund a portion of the $104.4 million distributed in
consummation of the acquisition.
g) Accrued compensation and related taxes - The adjustment reflects employee
separation and severance agreement costs due to the merger.
h) Accrued other liabilities - The adjustment reflects the anticipated costs
associated with the closing of certain Pamida stores, in addition to
accrued expenses related to the transaction.
i) Accrued income and other taxes - The adjustment reflects the tax impact of
deductible accrued expenses and identifiable intangible assets.
j) Current portion of long-term obligations - The adjustment reflects the
reclassification of the outstanding Pamida Senior Subordinated Notes to
current liabilities as it is the Company's intention to repay the notes
within the succeeding twelve months. The balance was increased for the call
premium required in the Note agreement.
k) Long-term obligations - The adjustment reflects the reclass of certain
Pamida historical long-term obligations to deferred income taxes to be
consistent with the Company's historical financial statement presentation.
l) Shareholders' equity - The adjustments reflect the elimination of the
historical shareholders' equity of Pamida.
31
<PAGE> 32
Note 2 - Pro forma adjustments for the thirteen weeks ended May 1, 1999 and the
fiscal year ended January 30, 1999.
The adjustments to the unaudited pro forma combined consolidated income
statements reflect the purchase of Pamida and the conforming of Pamida's
financial statement presentation to that of the Company.
(a) Historical Depreciation and Amortization Expense is reclassed from
selling, general and administrative expenses.
(b) Depreciation and Amortization Expense was adjusted to reflect the fair
market revaluation of Pamida property and equipment.
(c) Amortization of purchase price in excess of assets acquired was added (35
year amortization period).
(d) Interest expense was adjusted as follows (in thousands):
<TABLE>
<CAPTION>
Thirteen Weeks Fiscal Year
Ended Ended
May 1, 1999 January 30, 1999
---------------- ------------
<S> <C> <C>
Additional interest costs recorded
relating to the purchase of
Pamida $1,422 $ 5,688
Change in interest on revalued
debt (2,012) (8,050)
------- -------
$ (590) $(2,362)
======= =======
</TABLE>
(e) Income taxes were adjusted to record the tax effect of the additional
depreciation and amortization associated with the revaluation of assets
to fair market value and decreased interest expense.
Note 3
The costs of closing certain Pamida stores has been recorded in the pro
forma combined consolidated balance sheet. The pro forma combined consolidated
income statement has not been adjusted to reflect the impact that closing the
stores or reducing overhead will have on continuing operations. The store
closing reserves impact on earnings has not been reflected in the pro forma
combined consolidated financial statements.
Note 4
The payment of $7 million for employee retention agreements is a nonrecurring
charge directly attributable to this transaction and will be included in the
expenses of the Company within the twelve months succeeding the transaction. The
charge has not been reflected in the pro forma combined consolidated financial
statements.
(c) Exhibits
See the Exhibit Index which is incorporated herein by reference.
32
<PAGE> 33
INDEX TO EXHIBITS
Exhibit No. Description
1.1 Form of Purchase Agreement (incorporated by reference to the
Registrant's Current Report on Form 8-K dated July 6, 1999
(the "July 6, 1999 Form 8-K")).
2.1 Agreement and Plan of Merger dated as of May 10, 1999 by and
among ShopKo Stores, Inc. its wholly-owned subsidiary, ShopKo
Merger Corp., and Pamida Holdings Corporation (incorporated by
reference to Exhibit 99 (c) (1) to the ShopKo Stores, Inc. and
ShopKo Merger Corp. Schedule 14d-1 filed on May 17, 1999).
2.2 Stockholder and Purchase Agreement dated as of May 10, 1999 by
and among ShopKo Stores, Inc. its wholly-owned subsidiary,
ShopKo Merger Corp., and 399 Venture Partners, Inc.
(incorporated by reference to Exhibit 99 (c) (2) to the ShopKo
Stores, Inc. and ShopKo Merger Corp. Schedule 14D-1 filed on
May 17, 1999).
5.1 Opinion and Consent of Godfrey & Kahn, S.C. (incorporated by
reference to the July 6, 1999 Form 8-K).
23.1 Consent of Godfrey & Kahn, S.C. (included in Exhibit 5.1).
23.2 Consent of Deloitte & Touche LLP.
33
<PAGE> 34
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.
SHOPKO STORES, INC.
Registrant
Dated: September 20, 1999 By: /s/ Richard D. Schepp
-----------------------------
Richard D. Schepp
Senior Vice President General
Counsel and Secretary
(Duly Authorized Officer of
Registrant)
Dated: September 20, 1999 By: /s/ Jeffery R. Simons
-----------------------------
Jeffery R. Simons
Vice President and Controller
(Chief Financial Officer and
Duly Authorized Officer of
Registrant)
34
<PAGE> 1
Exhibit 23.2 - Independent Auditors' Consent
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements No.
33-43952, No. 33-58584, No. 33-70666, No. 33-81902, No. 333-948 and No.
333-53577, all on Form S-8 and in Registration Statement No. 333-79763 on Form
S-3, of ShopKo Stores, Inc., of our report dated March 9, 1999 with respect to
the consolidated financial statements of Pamida Holdings Corporation and
subsidiaries as of January 31, 1999 and February 1, 1998 and for each of the
fiscal years in the three fiscal year period ended January 31, 1999 appearing in
this Current Report on Form 8-K.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Omaha, Nebraska
September 17, 1999
35
