-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CF+6v54ooNkExk2gGFaEEmgQ26575xpfghTKLBxoDLXg2ha3homOZdYBU9Tk17b5 8da3iWv1k46wL75XW2HjfQ== 0000808304-96-000015.txt : 19961212 0000808304-96-000015.hdr.sgml : 19961212 ACCESSION NUMBER: 0000808304-96-000015 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19961027 FILED AS OF DATE: 19961211 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PAMIDA INC /DE/ CENTRAL INDEX KEY: 0000808304 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-VARIETY STORES [5331] IRS NUMBER: 470626426 STATE OF INCORPORATION: DE FISCAL YEAR END: 0201 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 033-57990 FILM NUMBER: 96679294 BUSINESS ADDRESS: STREET 1: 8800 F ST CITY: OMAHA STATE: NE ZIP: 68127 BUSINESS PHONE: 4023392400 MAIL ADDRESS: STREET 1: P O BOX 3856 CITY: OMAHA STATE: NE ZIP: 68103-0856 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR [X] 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended October 27, 1996 Commission File Number 33-57990 PAMIDA, INC (Exact name of registrant as specified in its charter) Delaware 47-0626426 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification Number) 8800 "F" Street, Omaha, Nebraska 68127 (Address of principal executive offices) (Zip Code) (402) 339-2400 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: Class of Common Stock Outstanding at December 11, 1996 Common Stock 1,000 Shares PART I - FINANCIAL INFORMATION Item 1. Financial Statements PAMIDA INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in Thousands) (Unaudited) October 27, January 28, ASSETS: 1996 1996 Current assets: -------- -------- Cash $ 9,890 $ 7,298 Accounts receivable, less allowance for doubtful accounts of $50 18,521 11,824 Merchandise inventories 183,633 150,837 Property held for sale 1,854 - Prepaid expenses 3,434 2,953 -------- -------- Total current assets 217,332 172,912 Property, buildings and equipment, less accumulated depreciation and amortization of $59,189 and $55,464 43,334 46,371 Leased property under capital leases, less accumulated amortization of $16,158 and $13,496 28,687 30,977 Deferred financing costs 3,302 3,746 Other assets 8,500 4,464 -------- -------- $301,155 $258,470 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY: Current liabilities: Accounts payable $ 90,527 $ 63,087 Loan and security agreement 62,797 31,588 Accrued compensation 2,759 5,923 Accrued interest 2,494 6,353 Store closing reserve 4,344 7,818 Other accrued expenses 11,768 10,823 Income taxes payable 9,574 9,716 Current maturities of long-term debt 46 1,334 Current obligations under capital leases 1,614 1,847 -------- -------- Total current liabilities 185,923 138,489 Long-term debt, less current maturities 140,376 140,411 Obligations under capital leases, less current obligations 35,425 36,559 Other long-term liabilities 3,270 4,237 Commitments and contingencies - - Common stockholders' equity: Common stock, $.01 par value; 10,000 shares authorized; 1,000 shares issued and outstanding, - - Additional paid-in capital 17,000 17,000 Retained earnings (80,839) (78,226) -------- -------- Total common stockholders' equity (63,839) (61,226) -------- -------- $301,155 $258,470 ======== ======== See notes to consolidated financial statements. PAMIDA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in Thousands) (Unaudited) Three Months Ended Nine Months Ended October 27, October 29, October 27, October 29, 1996 1995 1996 1995 -------- -------- -------- -------- Sales $151,980 $176,206 $439,583 $517,120 Cost of goods sold 115,534 133,404 334,466 392,867 -------- -------- -------- -------- Gross profit 36,446 42,802 105,117 124,253 Expenses: Selling, general and administrative 28,815 36,071 89,272 107,748 Interest 6,318 6,612 18,458 19,232 -------- -------- -------- -------- 35,133 42,683 107,730 126,980 Income (loss) before income tax provision (credit) 1,313 119 (2,613) (2,727) Income tax provision (credit) - 33 - (1,418) -------- -------- -------- -------- Net income (loss) $ 1,313 $ 86 $ (2,613) $ (1,309) ======== ======== ======== ======== See notes to consolidated financial statements. PAMIDA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Thousands) (Unaudited) Nine Months Ended October 27, October 29, 1996 1995 -------- -------- Cash Flows From Operating Activities: Net loss $(2,613) $(1,309) -------- -------- Adjustments to reconcile net loss to net cash used in operations: Depreciation and amortization 8,427 11,507 Provision for LIFO inventory valuation 450 750 Deferred retirement benefit - 36 Other (40) (1,095) Decrease in store closing reserve (4,663) - Increase in merchandise inventories (33,246) (53,803) Increase in other operating assets (6,322) (6,725) Increase in accounts payable 27,440 38,978 Decrease in other operating liabilities ( 5,998) (11,041) -------- -------- Total Adjustments (13,952) (21,393) -------- -------- Net cash used in operating activities (16,565) (22,702) -------- -------- Cash Flows From Investing Activities: Proceeds from disposal of fixed assets 40 1,154 Assets acquired for sale, net 364 - Construction notes receivable (5,207) (2,248) Capital expenditures (4,521) (6,024) Other 12 11 -------- -------- Net cash used in investing activities (9,312) (7,107) -------- -------- Cash Flows From Financing Activities: Borrowings under loan and security agreement, net 31,209 35,306 Principal payments on capital lease obligations (1,367) (1,572) Principal payments on long-term debt (1,323) (142) Payments for deferred finance costs (50) (13) -------- -------- Net cash provided by financing activities 28,469 33,579 -------- -------- Net increase in cash 2,592 3,770 Cash at beginning of year 7,298 7,059 -------- -------- Cash at end of period $ 9,890 $10,829 ======== ======== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid (received) during the period for: Interest $22,317 $23,104 Income taxes: Payments to taxing authorities 312 3,477 Payments to Pamida Holdings Corporation for benefit of loss from operations - 888 Refunds received from taxing authorities (170) (72) SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITY: Capital lease obligations incurred when the Company entered into lease agreements for new store facilities. $ - $ 7,630 See notes to consolidated financial statements. PAMIDA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NINE MONTHS ENDED OCTOBER 27, 1996 AND OCTOBER 29, 1995 (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 Inc. (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 28, 1996. 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 October 27, 1996 and January 28, 1996 by $6,150 and $5,700 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. 3.Related Party Transactions In each of March, June and September 1995, the Company paid $79, $79 and $78, respectively, to Pamida Holdings Corporation (Holdings) to enable Holdings to make dividend payments to preferred stockholders. In September and October 1995, the Company paid a total of $652 to Holdings as a reimbursement for certain tax benefits, which amount Holdings used to repurchase certain of its outstanding promissory notes and to repay to the Company certain intercompany advances. No such payments have been made during fiscal 1997. 4.Committed Revolving Loan and Security Agreement Effective September 1, 1996, the term of the Company's committed Loan and Security Agreement (the Agreement) was extended by one additional year to March of 1999, and the Agreement was also amended to allow borrowings up to a maximum of $80,000 for the period from September 1, 1996 through December 10, 1996. 5.Reclassifications Certain reclassifications have been made to the prior year's financial statements to conform to the current year's presentation. ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Dollars in Thousands) The following is management's discussion and analysis of certain significant factors which have affected the company's results of operations and financial condition for the periods included in the accompanying consolidated financial statements. RESULTS OF OPERATIONS The following table sets forth an analysis of various components of the Consolidated Statements of Operations as a percentage of sales for the three and nine months ended October 27, 1996 and October 29, 1995: Three Months Ended Nine Months Ended Oct.27, Oct.29, Oct.27, Oct.29, 1996 1995 1996 1995 ------ ------ ------ ------ Sales 100.0% 100.0% 100.0% 100.0% Cost of goods sold 76.0% 75.7% 76.1% 76.0% ------ ------ ------ ------ Gross profit 24.0% 24.3% 23.9% 24.0% Selling, general and administrative expenses 19.0% 20.5% 20.3% 20.8% ------ ------ ------ ------ Operating income 5.0% 3.8% 3.6% 3.2% Interest expense 4.1% 3.7% 4.2% 3.7% ------ ------ ------ ------ Income (loss) before income tax provision (credit) 0.9% 0.1% (0.6%) (0.5%) Income tax provision (credit) - - - (0.3%) ------ ------ ------ ------ Net income (loss) 0.9% 0.1% (0.6%) (0.2%) ====== ====== ====== ====== Sales - As of the end of fiscal 1996, the Company closed forty stores in unprofitable or highly competitive markets which did not fit the Company's niche market strategy. Consequently, the Company experienced a decrease in total sales for the third quarter and first nine months of fiscal 1997. Sales for the third quarter of fiscal 1997 decreased by $24,226 or 13.8% compared to sales for the third quarter of fiscal 1996. Similarly, sales for the first nine months of fiscal 1997 decreased by $77,537 or 15.0%. Comparable store sales during the third quarter and first nine months of fiscal 1997 decreased $3,997 or 2.7% and $10,874 or 2.6%, respectively. This decrease can be traced to a combination of factors including clearance activity, shifting of advertising break dates and the residual effects of the warehouse management system implementation discussed in the Form 10-Q filing for the second quarter of fiscal 1997. The Company operated 149 stores at the end of the third quarter of fiscal 1997 as compared with 181 stores at the end of the third quarter of fiscal 1996. Since October 29, 1995, the Company has opened ten stores in new markets, relocated three stores and closed forty-two stores. Gross profit - The company's merchandise gross profit as a percentage of sales improved .7% in the first nine months of fiscal 1997 and improved .6% in the the third quarter as compared to the same periods of fiscal 1996. However, this improvement was offset by additional costs in the warehouse and distribution areas during the implementation of the new warehouse management system this year, which were disclosed in the Form 10-Q for the second quarter of fiscal 1997. Accordingly, as a percentage of sales, gross profit decreased slightly from 24.3% for the third quarter of fiscal 1996 to 24.0% for the third quarter of fiscal 1997. Gross profit as a percentage of sales was 23.9% for the first nine months of fiscal 1997 and 24.0% for the first nine months of fiscal 1996. Selling, general and administrative (SG&A) expense decreased $7,256 or 20.1% for the third quarter of fiscal 1997 compared to the third quarter of fiscal 1996 and decreased $18,476 or 17.1% for the first nine months of fiscal 1997 compared to the first nine months of fiscal 1996. As a percentage of sales, SG&A expense was 19.0% for the third quarter of fiscal 1997 and 20.5% for the third quarter of fiscal 1996 and was 20.3% for the first nine months of fiscal 1997 compared to 20.8% for the first nine months of fiscal 1996. The reduction in SG&A expense for the third quarter of fiscal 1997 was primarily attributable to a 16.5% decrease in store payroll costs and a 13.2% decrease in store occupancy costs. In addition, store controllable and advertising costs decreased 20.7% and 41.6% respectively. All of these areas of expense were impacted by the elimination of costs related to the forty stores which were closed as of the end of fiscal 1996. SG&A costs were also positively impacted by reduced accruals for management bonuses and the elimination of amortization of goodwill and favorable leasehold interests resulting from the write-off of these items in the fourth quarter of fiscal 1996. The decreases in SG&A costs were offset by a $391 reduction in other income which was attributable largely to one-time gains realized in fiscal 1996 primarily from the sale of idle transportation company assets. The reduction in SG&A expense for the first nine months of fiscal 1997 was primarily attributable to a 15.4% decrease in store payroll costs and a 14.1% decrease in store occupancy costs. In addition, store controllable and advertising costs decreased 18.1% and 31.3% respectively. These areas of expense were impacted by the elimination of costs related to the forty stores closed as of the end of fiscal 1996. SG&A costs were also positively impacted by reduced accruals for management bonuses and the elimination of amortization of goodwill and favorable leasehold interests resulting from the write-off of these items in the fourth quarter of fiscal 1996. The decreases in SG&A costs were offset by a $1,394 reduction in other income which was attributable largely to one-time gains realized in fiscal 1996 primarily from the sale of idle transportation company assets. Interest expense decreased $294 or 4.4% for the third quarter of fiscal 1997 compared to the same period of fiscal 1996 and decreased $774 or 4.0% for the first nine months of fiscal 1997 compared to the same period of fiscal 1996. The decrease was due to a reduction in interest related to capital leases, primarily as a result of the forty stores closed as of the end of fiscal 1996, and a decrease in interest costs related to industrial development bonds which were paid off in August of 1996. These decreased costs were offset somewhat by increased costs of revolver borrowings. Income tax benefit - No income tax expense was recorded on income in the third quarter of fiscal 1997 due to the existence of unutilized tax loss carry forwards from prior year store closing charges. Similarly, no income tax benefit was recorded on losses for the first nine months of fiscal 1997 due to the uncertainty of realization of those tax benefits. Due to the amount of unutilized tax loss carry forwards available, the Company does not expect to tax-effect quarterly income or losses for any period in fiscal 1997. In the prior year, no such tax loss carry forwards existed, and a tax expense of $33 was recorded in the third quarter of fiscal 1996 and a tax benefit of $1,418 was recorded in fiscal 1996 for the first nine months, consistent with the company's expected effective 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 retail sales in recent years and normally involve a greater proportion of higher margin sales. Funds used in operating activities were $16,565 in the first nine months of fiscal 1997 compared to a usage of $22,702 in the first nine months of fiscal 1996. This $6,137 reduction in net cash used by operating activities resulted primarily from changes in inventories and other operating liabilities, offset somewhat by changes in accounts payable, results of operations and store closing reserves. The Company satisfies its seasonal liquidity requirements primarily through a combination of funds provided from operations and from the company's committed Loan and Security Agreement (the Agreement) which provides for revolving borrowings of up to $70,000. Borrowings under the Agreement bear interest at a rate which is .75% per annum greater than the applicable prime rate. The amounts the Company is permitted to borrow are determined by a formula based upon the amount of the company's eligible inventory from time to time. Such borrowings are secured by security interests in all of the current assets (including inventory) of the Company and by liens on certain real estate interests and other property of the Company. Pamida Holdings Corporation (Holdings) and two subsidiaries of the Company have guaranteed the payment and performance of the company's obligations under the Agreement and have pledged some or all of their respective assets, including the stock of the Company owned by Holdings, to secure such guarantees. The Agreement contains provisions imposing operating and financial restrictions on the Company. Certain provisions of the Agreement require the maintenance of specified amounts of tangible net worth (as defined) and working capital (as defined) and the achievement of specified minimum amounts of cash flow (as defined). Other restrictions in the Agreement and those provided under the Indenture relating to the Senior Subordinated Notes will affect, among other things, the ability of the Company to incur additional indebtedness, pay dividends, repay indebtedness prior to its stated maturity, create liens, enter into leases, sell assets or engage in mergers or acquisitions, make capital expenditures and make investments. These covenants currently have not had an impact on the Company's ability to fully utilize the revolving credit facility. However, certain of the covenants, such as those which restrict the ability of the Company to incur indebtedness or encumber its property or which impose restrictions on or otherwise limit the Company's ability to engage in sale-leaseback transactions, may at some future time prevent the Company from pursuing its store expansion program at the rate that the Company desires. Obligations under the Agreement were $62,797 at October 27, 1996 and $55,909 at October 29, 1995. These borrowings are senior to the Senior Subordinated Notes of the Company. The Company had long-term debt and obligations under capital leases of $175,801 as of October 27, 1996 and $189,566 at October 29, 1995. The Company's ability to satisfy scheduled principal and interest payments under such obligations in the ordinary course of business is dependent primarily upon the sufficiency of the Company's operating cash flow. At October 27, 1996, the Company was in compliance with all covenants contained in its various financing agreements. The Company paid Holdings $79, $79 and $78, during the first, second and third quarters respectively, of fiscal 1996 under a tax-sharing agreement to enable Holdings to pay quarterly dividends to its preferred stockholders. Since Holdings conducts no operations of its own, the only cash requirement of Holdings relates to preferred stock dividends in the aggregate annual amount of approximately $315; and the Company is expressly permitted under its existing credit facilities to pay dividends to Holdings to fund such preferred stock dividends. However, the General Corporation Law of the State of Delaware, under which the Company and Holdings are incorporated, allows a corporation to declare or pay a dividend only from its surplus or from the current or the prior year's earnings. Due to the retained deficit, resulting primarily from the forty store closings and the write-off of goodwill and other long-lived assets recognized in the fourth quarter of fiscal 1996, the Company and Holdings may pay dividends in fiscal 1997 and in ensuing years only to the extent that the Company and Holdings satisfy the applicable statutory standards which includes holdings' having a net worth equal to at least the aggregate par value of the preferred stock which amounts to $2. The Company did not declare or pay any dividends to Holdings during the first three quarters of fiscal 1997, and Holdings did not declare or pay the preferred stock dividends payable on February 29, 1996, May 31, 1996, August 31, 1996 or November 30, 1996. The cumulative dividend rate on the preferred stock increases by 0.5% per quarter (with a maximum aggregate increase of 5%) on each quarterly dividend payment date on which the preferred stock dividends are not paid currently on a cumulative basis. Any unpaid dividends are added to the liquidation value until paid in cash. Such nonpayment of preferred stock dividends does not accelerate the redemption rights of the preferred stockholders. The Company made capital expenditures of $4,521 during the first nine months of fiscal 1997 compared to $6,024 during the first nine months of fiscal 1996. The Company has opened a total of eight new stores in fiscal 1997 and will consider additional opportunities for new store locations as they arise. Capital expenditures are expected to total approximately $5,400 in fiscal 1997 and to be funded from cash flow from operations. The costs of buildings and land for new store locations are expected to be financed by operating or capital leases with unaffiliated landlords. The Company's expansion program will require inventory of approximately $1,000 to $1,200 for each store in a new market, which the Company expects to finance through trade credit, borrowings under the Agreement and cash flow from operations. On a long-term basis, the Company's expansion will require continued investments in store locations, working capital and distribution and infrastructure enhancements. The Company expects to continue to finance some of these investments through leases from unaffiliated landlords, trade credit, borrowings under the Agreement and cash flow from operations, but ultimately will need to explore additional sources of funds which may include both debt (mid-term to long-term) and equity capital. Currently, it is not possible for the Company to predict with any certainty either the timing or the availability of any such additional financing. INFLATION The Company uses the LIFO method of inventory valuation in its financial statements; as a result, the cost of merchandise sold approximates current costs. Due to the revaluation of property, buildings and equipment in connection with the purchase transaction in 1986, as well as the recent opening of new stores, depreciation expense closely approximates current costs. The Company's rental expense is generally fixed and, except for small amounts of percentage rentals, has not been affected by inflation. PART II - OTHER INFORMATION Items 1-5: None Item 6: (a) Exhibits. - 10.1 Amendment No. 3 to Loan and Security Agreement among Pamida, Inc. and Seaway Importing Company, as Borrowers, Congress Financial Corporation (Southwest) and BankAmerica Business Credit, Inc., as Lenders, and Congress Financial Corporation (Southwest), as Agent, dated September 16, 1996 - 10.2 Amendment No. 1 to Employment Agreement among Pamida Holdings Corporation, Pamida, Inc., and Steven S. Fishman dated August 29, 1996 - 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 October 16, 1996, and related to Item 4, Changes in Registrant's Certifying Accountant. An amendment to such Form 8-K was filed on November 1, 1996. 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, INC. (Registrant) Date: December 11, 1996 By: /s/ Steven S. Fishman Steven S. Fishman, Chairman, President and Chief Executive Officer Date: December 11, 1996 By: /s/ Todd D. Weyhrich Todd D. Weyhrich Vice President - Controller EX-10 2 Exhibit 10.1 AMENDMENT NO. 3 TO LOAN AND SECURITY AGREEMENT PAMIDA, INC. 8800 F Street Omaha, Nebraska 68127 SEAWAY IMPORTING COMPANY 8800 F Street Omaha, Nebraska 68127 September 16, 1996 Congress Financial Corporation (Southwest) 1201 Main Street Dallas, Texas 75250 BankAmerica Business Credit, Inc. 40 East 52nd Street New York, New York 10017 Gentlemen: Congress Financial Corporation (Southwest), a Texas corporation in its individual capacity ("Congress"), BankAmerica Business Credit, Inc., formerly known as BA Business Credit Inc., a Delaware corporation ("BABC," together with Congress each individually a "Lender" and collectively, "Lenders"), Pamida, Inc., a Delaware corporation ("Pamida"), Seaway Importing Company, a Nebraska corporation ("Seaway," together with Pamida, collectively, "Borrowers") and Congress Financial Corporation (Southwest), a Texas corporation, as Agent for Lenders (in such capacity, "Agent") have entered into certain financing arrangements pursuant to the Loan and Security Agreement, dated March 30, 1993, by and among Agent, Lenders and Borrowers (as amended by Amendment No. 1 to Loan and Security Agreement dated as of January 23, 1995 and Amendment No. 2 to Loan and Security Agreement dated as of January 28, 1996 and as amended hereby, the "Loan Agreement", and together with all agreements, documents and instruments at any time executed and/or delivered in connection therewith or related thereto, as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, collectively, the "Financing Agreements"). Borrowers have requested that the "Maximum Credit" provided for in the Financing Agreements be temporarily increased and that certain other provisions of the Financing Agreements be amended, and Agent and Lenders are willing to temporarily increase the Maximum Credit and amend certain other provisions of the Financing Agreements, subject to the terms and conditions contained herein. By this Amendment, Agent, Lenders and Borrowers desire and intend to evidence such amendments. In consideration of the foregoing and the agreements and covenants contained herein, the parties hereto agree as follows: 1. Definitions. (a) All references to the term "Maximum Credit" in any of the Financing Agreements shall be deemed, and each such reference is hereby amended, to mean (i) from September 1, 1996 through and including December 10, 1996, the amount of $80,000,000 and (ii) Thereafter, the amount of $70,000,000. (b) All references to the term "Renewal Date" in any of the Financing Agreements shall be deemed, and each such reference is hereby amended, to mean March 31, 1999. (c) All capitalized terms used herein shall have the meanings assigned hereto in the other Financing Agreements, unless otherwise defined herein. 2. Revolving Loans; Advance Rate. Section 2.1(a) of the Loan Agreement is hereby deleted in its entirety and the following substituted therefore: (a) Subject to, and upon the terms and conditions contained herein and in the other Financing Agreements, at the request of Borrowers, each of Lenders severally, but not jointly, agrees to lend to Borrowers and authorizes and appoints Agent to make Loans to Borrowers, for the account of and as Agent for Lenders, in such amounts from time to time as Agent shall determine, in its discretion, at Borrowers' request during the periods indicated below of up to the percent of the value of Eligible Inventory of Borrowers indicated for such period (or such greater or lesser percentage thereof as Agent may determine from time to time): Period Percent ------ ------- (i) from September 1, 1996 through 50% and including December 10, 1996 (ii) thereafter, in any year: (A) from March 1 through and 45% including April 30 (B) from October 1 through and 45% including November 30 (C) at all other times 40% 3. Representations, Warranties and Covenants. In addition to the continuing representations, warranties and covenants heretofore or hereafter made by Borrowers to Agent and Lenders pursuant to the Financing Agreements, Borrowers hereby represent, warrant and covenant with and to Agent and Lenders as follows (which representations, warranties and covenant are continuing and shall survive the execution and delivery hereof and shall be incorporated into and made a part of the Financing Agreements): (a) No Event of Default exists on the date of this Amendment (after giving effect to the amendments to the Financing Agreements made by this Amendment). (b) This Amendment and the other amendment agreements delivered in connection herewith, have been duly authorized, executed and delivered by each of Borrowers and are in full force and effect as of the date hereof, and the agreements and obligations of each of Borrowers contained herein and therein constitute legal, valid and binding obligations of each of Borrowers enforceable against each of Borrowers in accordance with their respective terms. (c) All required consents or approvals of any persons other than Lenders and Agent to the authorization, execution and delivery of this Amendment and the other amendment agreements delivered in connection herewith have been obtained by each of Borrowers and Guarantors, and the authorization, execution and delivery hereof does not violate or breach any provision of or constitute a default under any material indenture, mortgage, deed of trust, agreement or instrument to which any of Borrowers or Guarantors is or may be bound, including, without limitation, the Note Indenture. 4. Conditions Precedent. The effectiveness of the amendments contained herein shall be subject to the satisfaction of each of the following conditions precedent in a manner satisfactory to Agent on behalf of Lenders: (a) Agent shall have received, in form and substance satisfactory to Agent, an executed original of this Amendment, duly authorized, executed and delivered by each of Borrowers and Guarantors; (b) Agent shall have received, in form and substance satisfactory to Agent, an executed original of Amendment No. 3 to Deed of Trust, Security Agreement and Assignment of Leases and Rents by Pamida in favor of Old Republic National Title Insurance Company, as trustee, for the benefit of Agent and Lenders, duly authorized, executed and delivered by the parties thereto; (c) Agent shall have received, in form and substance satisfactory to Agent, an executed original of Amendment No. 3 to Leasehold Deed of Trust, Security Agreement and Assignment of Leases and Rents by Pamida in favor of Old Republic National Title Insurance Company, as trustee, for the benefit of Agent and Lenders, duly authorized, executed and delivered by the parties thereto; (d) Agent shall have received, in form and substance satisfactory to Agent, an executed original of Amendment No. 3 to Co-Lending and Agency Agreement, duly authorized, executed and delivered by each of Agent and Lenders; (e) Agent shall have received, in form and substance satisfactory to Agent, a secretary's certificates for each of Borrowers and Guarantors with respect to directors' resolutions, incumbency and other matters as Agent may require, and (f) No Event of Default shall have occurred and be continuing and no event shall have occurred or condition be existing and continuing which, with notice or passage of time or both, would constitute an Event of Default. 5. Amendment Fee. Borrowers shall pay to Agent for the account of Lenders an amendment fee in an amount equal to $50,000, which amount shall be payable simultaneously with the execution hereof, which fee is fully earned as of the date hereof, shall be in addition to all other amounts payable under the Financing Agreements, shall constitute part of the Obligations and may, at Agent's option, be charged directly to any account(s) of Borrowers maintained with Agent or Lenders. 6. Effect of this Amendment. Except as modified pursuant hereto, no other changes or modifications to the Financing Agreements are intended or implied and in all other respects the Financing Agreements are hereby specifically ratified, restated and confirmed by all parties hereto as of the effective date hereof. To the extent of any conflict between the terms of this Amendment and the other Financing Agreements, the terms of this Amendment shall control. 7. Further Assurances. The parties hereto shall execute and deliver such additional documents and take such additional action as may be necessary or desirable to effectuate the provisions and purposes of this Amendment. 8. Governing Law. The rights and obligations hereunder of each of the parties hereto shall be governed by and interpreted and determined in accordance with the laws of the State of New York. 9. Binding Effect. This Amendment shall be binding upon and inure to the benefit of each of the parties hereto and their respective successors and assigns. 10. Counterparts. This Amendment may be executed in any number of counterparts, but all of such counterparts shall together constitute but one and the same agreement. In making proof of this Amendment, it shall not be necessary to produce or account for more than one counterpart thereof signed by each of the parties hereto. Please sign the enclosed counterpart of this Amendment in the space provided below, whereupon this Amendment, as so accepted by Agent and Lenders, shall become a binding agreement among Borrowers, Agent and Lenders. Very truly yours, PAMIDA, INC. By: /s/ George R. Mihalko Title: Sr. V.P. & CFO SEAWAY IMPORTING COMPANY By: /s/ George R. Mihalko Title: Sr. V.P. & CFO AGREED: CONGRESS FINANCIAL CORPORATION (SOUTHWEST), individually and as Agent By: /s/ Edward Franco Title: Vice President BANKAMERICA BUSINESS CREDIT, INC., formerly known as BA Business Credit Inc. By: /s/ Patrick J. Wilson Title: Vice President ACKNOWLEDGED AND AGREED: PAMIDA HOLDINGS CORPORATION By: /s/ George R. Mihalko Title: Sr. V.P. & CFO PAMIDA TRANSPORTATION COMPANY By: /s/ George R. Mihalko Title: Sr. V.P. & CFO Exhibit 10.2 AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT This Amendment No. 1 to Employment Agreement is made and entered into on the 29th day of August, 1996, among PAMIDA HOLDINGS CORPORATION ("Holdings"), a Delaware corporation, PAMIDA, INC. ("Pamida"), a Delaware corporation, and STEVEN S. FISHMAN (the "Executive"). Holdings and Pamida collectively are referred to in this Amendment No. 1 as the "Companies". WHEREAS, the Companies and the Executive are parties to an Employment Agreement dated September 22, 1995 (the "Employment Agreement"); and WHEREAS, the Companies and the Executive now desire to amend the Employment Agreement as more particularly set forth below; NOW, THEREFORE, the Companies and the Executive agree as follows: 1. Pursuant to Paragraph 6 of the Employment Agreement, the Companies and the Executive agree that the Executive's incentive bonus program for the fiscal year of Holdings ending February 2, 1997 ("Fiscal 1997") shall be the following: (a) If the consolidated earnings of Holdings and its subsidiaries (on a first-in, first-out basis with respect to merchandise inventories) before interest, taxes, depreciation, and amortization for Fiscal 1997 (the "EBITDA") is less than $43,000,000, then the Executive shall not be entitled to any incentive bonus for Fiscal 1997. (b) If the EBITDA equals or exceeds $43,000,000, then the Executive's incentive bonus for Fiscal 1997 shall be determined as a percentage of the Executive's base salary from the matrix attached to this Amendment No. 1 taking into account (i) the EBITDA and (ii) the percentage increase or decrease in the comparable store sales of Pamida for Fiscal 1997 compared with the fiscal year ended January 28, 1996. Comparable store sales percentage increases or decreases shall be determined in accordance with Pamida's historical practices. (c) For purposes of such matrix, comparable store sales percentage increases of more than 5% shall be treated as increases of 5%, comparable store sales decreases of more than 2% shall be treated as decreases of 2%, and EBITDA of more than $49,000,000 shall be treated as EBITDA of $49,000,000. (d) For purposes of applying such matrix, the Executive's base salary shall be deemed to be $500,000. (e) The maximum incentive bonus that the Executive shall have the opportunity to earn for Fiscal 1997 is $500,000. (f) EBITDA amounts between whole millions of dollars and comparable store sales percentage increases or decreases between whole percentages shall be interpolated on a straight-line basis for purposes of applying such matrix. (g) Solely by way of illustration of the application of such matrix, if the EBITDA is $44,250,000 and the comparable store sales percentage increase for Fiscal 1997 is 2.6%, then the Executive's incentive bonus for Fiscal 1997 would be $246,250. The Executive's incentive bonus for Fiscal 1997 (if any) shall be paid to the Executive as soon as practicable after Holdings has received the final audit report with respect to Fiscal 1997 from its independent accountants. 2. The provisions of this Amendment No. 1 are intended to satisfy the requirements of Paragraph 6 of the Employment Agreement for the fiscal year of Holdings ending in 1997. 3. This Amendment No. 1 shall be effective as of January 29, 1996. 4. As hereby amended, the Employment Agreement shall remain in full force and effect. IN WITNESS WHEREOF, the Companies and the Executive have executed this Amendment No. 1 to Employment Agreement on the day and year first above written. PAMIDA HOLDINGS CORPORATION, a Delaware corporation By: /s/ Frank A. Washburn Frank A. Washburn, Executive Vice President PAMIDA, INC., a Delaware corporation By: /s/ Frank A. Washburn Frank A. Washburn, Executive Vice President /s/ Steven S. Fishman Steven S. Fishman Pamida, Inc. Bonus a % of Pay Comp store sales increase EBITDA| -2.0%| -1.0%| 0.0%| 1.0%| 2.0%| 3.0%| 4.0%| 5.0% - -------|-------|-------|-------|-------|-------|-------|-------|------- <43| 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 43| 20.0%| 25.0%| 30.0%| 35.0%| 40.0%| 45.0%| 50.0%| 55.0% 44| 25.0%| 30.0%| 35.0%| 40.0%| 45.0%| 50.0%| 55.0%| 60.0% 45| 30.0%| 35.0%| 40.0%| 45.0%| 50.0%| 55.0%| 60.0%| 65.0% 46| 37.5%| 42.5%| 47.5%| 52.5%| 57.5%| 62.5%| 67.5%| 72.5% 47| 45.0%| 50.0%| 55.0%| 60.0%| 65.0%| 70.0%| 75.0%| 80.0% 48| 55.0%| 60.0%| 65.0%| 70.0%| 75.0%| 80.0%| 85.0%| 90.0% 49| 65.0%| 70.0%| 75.0%| 80.0%| 85.0%| 90.0%| 95.0%| 100.0% EX-27 3
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET OF PAMIDA, INC. AND SUBSIDIARIES AS OF OCTOBER 27, 1996 AND THE RELATED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS FEB-02-1997 OCT-27-1996 9,890 0 18,571 50 183,633 217,332 102,523 59,189 301,155 185,923 240,258 0 0 0 (63,839) 301,155 439,583 439,583 334,466 423,738 0 0 18,458 (2,613) 0 (2,613) 0 0 0 (2,613) 0 0
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