-----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, R/77GKalUlDDElO1C3iy0PPxxpGpgbeFYNgR4pHGjm1iz/pPkguJIvxdacI+nDG9 4naXbfZ5/eFbygoKw4J7Qg== 0000864760-97-000020.txt : 19970918 0000864760-97-000020.hdr.sgml : 19970918 ACCESSION NUMBER: 0000864760-97-000020 CONFORMED SUBMISSION TYPE: 424B3 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19970911 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: 0202 FILING VALUES: FORM TYPE: 424B3 SEC ACT: SEC FILE NUMBER: 033-57990 FILM NUMBER: 97678917 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 424B3 1 - -------------------------------------------------------------------------------- -------------------- PROSPECTUS SUPPLEMENT To Prospectus dated May 16, 1997 -------------------- $140,000,000 PAMIDA, INC. 11 3/4% Senior Subordinated Notes Due 2003 September 11, 1997 - -------------------------------------------------------------------------------- RECENT DEVELOPMENTS Attached hereto and incorporated herein by this reference are copies of the Quarterly Reports on Form 10-Q of Pamida, Inc. and Pamida Holdings Corporation for the quarterly period ended August 3, 1997. ------------------------------------------------------- This Prospectus Supplement, together with the Prospectus dated May 16, 1997 (including the Prospectus Appendix), is to be used by Citicorp Securities, Inc. in connection with offers of the Notes referred to above in market-making transactions at negotiated prices related to prevailing market prices at the time of sale. Citicorp Securities, Inc. may act as principal or agent in such transactions. 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 August 3, 1997 -------------- 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 September 11, 1997 - --------------------- --------------------------------- Common Stock 1,000 Shares
PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS PAMIDA INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in Thousands) (Unaudited) ASSETS: August 3, February 2, 1997 1997 --------- ----------- Current assets: Cash ................................................... $ 8,485 $ 6,973 Accounts receivable, less allowance for doubtful accounts of $50 ............................. 7,705 6,935 Merchandise inventories ................................ 147,240 157,490 Prepaid expenses ....................................... 3,619 2,993 Property held for sale ................................. -- 1,748 --------- ----------- Total current assets ................................. 167,049 176,139 Property, buildings and equipment, less accumulated depreciation and amortization of $64,805 and $61,364 ... 43,494 42,403 Leased property under capital leases, less accumulated amortization of $15,900 and $14,604 .................... 26,417 27,713 Deferred financing costs ................................. 3,051 3,124 Other assets ............................................. 20,244 19,773 --------- ----------- $ 260,255 $ 269,152 ========= =========== LIABILITIES AND STOCKHOLDER'S EQUITY: Current liabilities: Accounts payable ....................................... $ 53,315 $ 54,245 Loan and security agreement ............................ 47,210 57,115 Accrued compensation ................................... 4,320 3,860 Accrued interest ....................................... 6,358 6,857 Store closing reserve .................................. 2,158 4,521 Other accrued expenses ................................. 13,499 10,112 Income taxes - deferred and current payable ............ 12,723 8,956 Current maturities of long-term debt ................... 47 47 Current obligations under capital leases ............... 1,749 1,781 --------- ----------- Total current liabilities ........................... 141,379 147,494 Long-term debt, less current maturities .................. 140,341 140,364 Obligations under capital leases, less current obligations 33,140 33,999 Other long-term liabilities .............................. 5,355 4,825 Commitments and contingencies ............................ -- -- Common stockholder's equity: Common stock, $.01 par value; 10,000 shares authorized; 1,000 shares issued and outstanding, ................. -- -- Additional paid-in capital ............................. 17,000 17,000 Accumulated deficit .................................... (76,960) (74,530) --------- ----------- Total common stockholder's equity .................... (59,960) (57,530) --------- ----------- $ 260,255 $ 269,152 ========= ===========
See notes to consolidated financial statements.
PAMIDA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in Thousands) (Unaudited) Three Months Ended Six Months Ended August 3, July 28, August 3, July 28, 1997 1996 1997 1996 --------- --------- --------- --------- Sales ..................... $ 163,217 $ 155,817 $ 307,781 $ 287,603 Cost of goods sold ........ 121,715 118,721 233,011 218,932 --------- --------- --------- --------- Gross profit .............. 41,502 37,096 74,770 68,671 --------- --------- --------- --------- Expenses: Selling, general and administrative ........ 33,271 31,251 64,240 60,457 Interest ................ 6,415 6,060 12,960 12,140 --------- --------- --------- --------- 39,686 37,311 77,200 72,597 Income (loss) before income tax provision (credit) .. 1,816 (215) (2,430) (3,926) Income tax provision ...... -- -- -- -- --------- --------- --------- --------- Net income (loss) ......... $ 1,816 $ (215) $ (2,430) $ (3,926) ========= ========= ========= =========
See notes to consolidated financial statements.
PAMIDA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Thousands) (Unaudited) SIX MONTHS ENDED --------------------- August 3, July 28, 1997 1996 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss ................................................ $ (2,430) $ (3,926) -------- -------- Adjustments to reconcile net loss to net cash from operating activities: Depreciation and amortization of fixed assets and intangibles ..................................... 5,885 5,462 Provision for LIFO inventory valuation ................ 433 300 Gain on disposal of assets ............................ (77) (28) Decrease in merchandise inventories ................... 9,817 13,501 Increase in other operating assets .................... (4,271) (3,262) Increase (decrease) in accounts payable ............... (930) 2,119 Increase (decrease) in other operating liabilities .... 7,310 (864) Decrease in store closing reserve ..................... (2,028) (3,365) -------- -------- Total adjustments .................................. 16,139 13,863 -------- -------- Net cash from operating activities .............. 13,709 9,937 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from disposal of assets ........................ 1,906 672 (Increase) decrease in construction notes receivable .... 1,765 (3,022) Capital expenditures .................................... (4,833) (3,148) Assets acquired for sale, net ........................... -- (391) Other ................................................... 9 8 -------- -------- Net cash used in investing activities ............. (1,153) (5,881) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings under loan and security agreement, net ....... (9,905) 667 Principal payments on capital lease obligations ......... (891) (884) Payments for deferred finance costs ..................... (225) -- Principal payments on long-term debt .................... (23) (104) -------- -------- Net cash by used in financing activities (11,044) (321) -------- -------- Net increase in cash ....................................... 1,512 3,735 Cash at beginning of year .................................. 6,973 7,298 -------- -------- Cash at end of period ...................................... $ 8,485 $ 11,033 ======== ======== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: (1) Cash paid (received) during the period for: Interest $ 13,459 $ 12,158 Income taxes: Payments to taxing authorities 32 257 Refunds received from taxing authorities (3,798) (169)
See notes to consolidated financial statements. PAMIDA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SIX MONTHS ENDED AUGUST 3, 1997 AND JULY 28, 1996 (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 February 2, 1997. 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 August 3, 1997 and February 2, 1997 by $7,007 and $6,574 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. 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 six months ended August 3, 1997 and July 28, 1996: Three Months Ended Six Months Ended ------------------- ------------------- August 3, July 28, August 3, July 28, 1997 1996 1997 1996 ------ ------ ------ ------ Sales .......................... 100.0% 100.0% 100.0% 100.0% Cost of goods sold ............. 74.6% 76.2% 75.7% 76.1% ------ ------ ------ ------ Gross profit ................... 25.4% 23.8% 24.3% 23.9% Selling, general and administrative expenses ...... 20.4% 20.0% 20.9% 21.0% ------ ------ ------ ------ Operating income ............... 5.0% 3.8% 3.4% 2.9% Interest expense ............... 3.9% 3.9% 4.2% 4.2% ------ ------ ------ ------ Income (loss) before income tax provision ................ 1.1% -0.1% -0.8% -1.3% Income tax provision ........... -- -- -- -- ------ ------ ------ ------ Net income (loss) .............. 1.1% -0.1% -0.8% -1.3% ====== ====== ====== ====== SALES - During the second quarter and first six months of fiscal 1998, sales in comparable stores increased $5,300 or 3.5% and $13,907 or 5.0%, respectively, as compared to the second quarter and first six months last year. Total sales for the second quarter and the first six months of fiscal 1998 increased by $7,400 or 4.8% and $20,178 or 7.0%, respectively, as compared to the same periods last year. The Company operated 149 stores at the end of the first quarter of fiscal 1998 as compared with 144 stores at the end of the first quarter last year and operated 149 stores at the end of the second quarter of fiscal 1998 as compared with 146 stores at the end of the second quarter last year. Since July 28, 1996 the Company has opened four stores in new markets, reopened a store which had been closed due to storm damage, relocated one store and closed two stores. The increase in total sales was primarily attributable to comparable store sales increases and the effects of the net increase in the number of stores in operation during the respective periods this year as compared with last year. The Company experienced sales increases in most merchandise categories during the second quarter of fiscal 1998. The largest dollar increases were in the pharmacy prescriptions, sporting goods, housewares, men's denim apparel, women's shoes, toys, stationary, appliances and misses tops categories. The Company experienced sales declines in only a few categories, with men's fashions experiencing the largest decrease. GROSS PROFIT increased $4,406 or 11.9% and $6,099 or 8.9% for the second quarter and first six months, respectively, of fiscal 1998 compared to the same periods last year. As a percentage of sales, gross profit increased to 25.4% from 23.8% and to 24.3% from 23.9% for the second quarter and first six months, respectively, of fiscal 1998 compared to the same periods last year. The Company improved its in-stock positions in most merchandise categories during the second quarter of fiscal 1998 as compared with the second quarter of fiscal 1997. Sales improved in most merchandise categories this year, with a marked increase in sales of higher margin basic goods which experienced substantial out-of-stocks during the second quarter last year. Also, the Company realized substantial decreases in warehousing and distribution costs during the first half of fiscal 1998 compared to last year. SELLING, GENERAL AND ADMINISTRATIVE (SG&A) expense increased $2,020 or 6.5% for the second quarter of fiscal 1998 compared to the second quarter of fiscal 1997 and increased $3,783 or 6.3% for the first six months of fiscal 1998 compared to the same period last year. As a percentage of sales, SG&A expense was 20.4% and 20.0%, respectively, for the second quarter of fiscal 1998 and 1997. As a percentage of sales, SG&A expense was 20.9% and 21.0%, respectively, for the first half of fiscal 1998 and 1997. Most of the total net increase in SG&A expense for the second quarter of fiscal 1998 as compared to the second quarter last year was attributable to planned higher corporate general and administrative expenses, primarily involving increases in payroll and incentive compensation. As planned, store occupancy costs also increased over last year to accommodate the higher sales activity. These increases were offset partially by a $224 increase in other income, primarily due to a gain on the sale of a parcel of land and business interruption insurance settlements related to two stores. Most of the total net increase in SG&A expense for the first half of fiscal 1998 as compared to the first half of last year was attributable to planned higher corporate general and administrative expenses, primarily involving increases in payroll, incentive compensation expenses and professional fees. As planned, store controllable, occupancy and payroll costs also increased over last year to accommodate the higher sales activity. These increases were offset partially by a $135 increase in other income. INTEREST expense increased $355 or 5.9% for the second quarter of fiscal 1998 compared to the same period of fiscal 1997 and increased $820 or 6.8% for the first half of fiscal 1998 compared to the same period of fiscal 1997. The increases were due primarily to increased revolver borrowings to support higher investments in basic inventory and the Company's seasonal operating pattern. INCOME TAX BENEFIT - No income tax benefit on losses will be recorded until the Company can establish with a reasonable degree of certainty the potential utilization of certain tax loss carryforwards from prior year store closing charges. 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 30% of the full year's sales in recent years and normally involve a greater proportion of higher margin sales. Funds provided by operating activities were $13,709 in the first half of fiscal 1998 compared to $9,937 in the first half of fiscal 1997. This $3,772 improvement in net cash generated by operating activities during the first half of fiscal 1998 resulted primarily from changes in other operating liabilities and the store closing reserve as well as the decreased net loss for the period, offset somewhat by changes in inventory, accounts payable and operating assets. Effective March 17, 1997, the term of the Company's committed Loan and Security Agreement (the Agreement) was extended to March 2000 and the maximum borrowing limit of the facility was increased to $95,000. Prior to March 17, 1997, borrowings under the Agreement bore interest at a rate of 0.75% per annum greater than the applicable prime rate. Effective March 17, 1997, borrowings under the Agreement bear interest at a rate 0.50% per annum greater than the applicable prime rate or a rate which is tied to the London Interbank Offered Rate (LIBOR), generally at the Company's discretion. The amounts the Company is permitted to borrow are determined by a formula based upon the amount of the Company's eligible inventory. 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 of the Company 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 $47,210 at August 3, 1997 and $32,255 at July 28, 1996. As noted above, this facility expires in March 2000, and the Company intends to refinance any outstanding balance by such date. Borrowings under the Agreement are senior to the Senior Subordinated Notes of the Company. The Company had long-term debt and obligations under capital leases of $173,481 at August 3, 1997 and $176,300 at July 28, 1996. The Company's ability to satisfy scheduled principal and interest payments under such obligations in the ordinary course of business is dependent primarily upon the sufficiency of the Company's operating cash flow and continued access to financial markets. At August 3, 1997, the Company was in compliance with all covenants contained in its various financing agreements. Since Holdings conducts no operations of its own, the only cash requirement of Holdings relates to preferred stock dividends in the aggregate annual amount for fiscal 1998 totaling approximately $503; 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, generally 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 accumulated deficit resulting primarily from the store closings and the write-off of goodwill and other long-lived assets recognized in the fourth quarter of fiscal 1996, the Company and Holdings did not declare or pay any cash dividends in fiscal 1997 or the first half of fiscal 1998 and may pay cash dividends in future periods only to the extent that the Company and Holdings satisfy the applicable statutory standards which include Holding's having a net worth equal to at least the aggregate par value of the preferred stock which amounts to $2. 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. Holdings has proposed to change and reclassify all of its outstanding preferred stock into shares of its common stock. Such transaction is subject, among other things, to approval by the holders of a majority of the presently outstanding shares of common stock of Holdings. Additional information concerning such proposed transaction and related matters appears in the Form 10-Q Quarterly Report filed by Holdings for the quarterly period ended August3, 1997. The Company made capital expenditures of $4,833 in the first half of fiscal 1998 compared to $3,148 during the first half of fiscal 1997. The Company plans to open a total of three new stores in fiscal 1998, two of which were opened in the first half, and will consider additional opportunities for new store locations as they arise. Total capital expenditures are expected to total approximately $10,000 in fiscal 1998. The Company expects to fund these expenditures from cash flow from its operations. The costs of buildings and land for new store locations are expected to be financed by operating or capital leases with unaffiliated landlords. The Company's expansion program also will require inventory of approximately $1,000 to $1,200 for each new market store, which the Company expects to finance through trade credit, borrowings under the Agreement and cash flow from operations. The recent changes to the Agreement, along with expected improvements in the Company's cash flow from operations, should provide adequate resources to meet the Company's near-term liquidity requirements. On a long-term basis, the Company's expansion will require continued investments in store locations, 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 capital structure changes. Currently, it is not possible for the Company to predict with any certainty either the timing or the availability of such additional financing. INFLATION The Company uses the LIFO method of inventory valuation in its financial statements; as a result, the cost of merchandise sold approximates current costs. The Company's rental expense is generally fixed and, except for small amounts of percentage rents and rentals adjusted by cost-of-living increases tied to the Consumer Price Index or interest rates, has not been affected by inflation. FORWARD-LOOKING STATEMENTS This management's discussion and analysis contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the "1995 Act"). Such statements are made in good faith by the Company pursuant to the safe-harbor provisions of the 1995 Act. In connection with these safe-harbor provisions, this management's discussion and analysis contains certain forward-looking statements which reflect management's current views and estimates of future economic circumstances, industry conditions, company performance and financial results. The statements are based on many assumptions and factors including sales results, expense levels, competition and interest rates as well as other risks and uncertainties inherent in the Company's business, capital structure and the retail industry in general. Any changes in these factors could result in significantly different results for the Company. The Company further cautions that the forward-looking information contained herein is not exhaustive or exclusive. The Company does not undertake to update any forward-looking statements which may be made from time to time by or on behalf of the Company. PART II - OTHER INFORMATION ITEMS 1 -5: None. ITEM 6: (a) Exhibits. - 27.1 Financial Data Schedule (EDGAR version only) (b) Reports on Form 8-K. No reports on Form 8-K have been filed during the quarter for which this report is filed. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PAMIDA, INC. ------------ (Registrant) Date: September 11, 1997 By: /S/ STEVEN S. FISHMAN Steven S. Fishman, Chairman, President and Chief Executive Officer Date: September 11, 1997 By: /S/ TODD D. WEYHRICH Todd D. Weyhrich Chief Accounting Officer 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 August 3, 1997 -------------- Commission File Number 1-10619 ------- PAMIDA HOLDINGS CORPORATION - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 47-0696125 - -------------------------------- ----------------------- (State or other jurisdiction of (IRS Employer 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 September 5, 1997 - --------------------- -------------------------------- Common Stock 5,004,942 Shares PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS (Dollars in Thousands) (Unaudited) ASSETS: August 3, February 2, Current assets: 1997 1997 ---------- ----------- Cash ...................................................... $ 8,485 $ 6,973 Accounts receivable, less allowance for doubtful accounts of $50 ................................ 7,679 6,919 Merchandise inventories ................................... 147,240 157,490 Prepaid expenses .......................................... 3,624 2,993 Property held for sale .................................... -- 1,748 ---------- ----------- Total current assets ................................... 167,028 176,123 Property, buildings and equipment, less accumulated depreciation and amortization of $64,805 and $61,364 ...... 43,494 42,403 Leased property under capital leases, less accumulated amortization of $15,900 and $14,604 ....................... 26,417 27,713 Deferred financing costs .................................... 3,098 3,176 Other assets ................................................ 20,244 19,773 ---------- ----------- $ 260,281 $ 269,188 ========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY: Current liabilities: Accounts payable .......................................... $ 53,315 $ 54,245 Loan and security agreement ............................... 47,210 57,115 Accrued compensation ...................................... 4,320 3,860 Accrued interest .......................................... 7,217 7,668 Store closing reserve ..................................... 2,158 4,521 Other accrued expenses .................................... 13,499 10,112 Income taxes - deferred and current payable ............... 11,867 8,101 Current maturities of long-term debt ...................... 47 47 Current obligations under capital leases .................. 1,749 1,781 ---------- ----------- Total current liabilities .............................. 141,382 147,450 Long-term debt, less current maturities ..................... 170,386 168,000 Obligations under capital leases, less current obligations .. 33,140 33,999 Other long-term liabilities ................................. 5,355 4,825 Commitments and contingencies ............................... -- -- Preferred stock subject to mandatory redemption and reserve for dividends payable ......................... 2,487 2,217 Common stockholders' equity: Common stock, $.01 par value; 10,000,000 shares authorized; 5,004,942 shares issued and outstanding, ................ 50 50 Additional paid-in capital ................................ 968 968 Accumulated deficit ....................................... (93,487) (88,321) ---------- ----------- Total common stockholders' equity ....................... (92,469) (87,303) ---------- ----------- $ 260,281 $ 269,188 ========== ===========
See notes to consolidated financial statements.
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in Thousands, Except Per Share Amounts) (Unaudited) Three Months Ended Six Months Ended --------------------- --------------------- August 3, July 28, August 3, July 28, 1997 1996 1997 1996 --------- --------- --------- --------- Sales ...................... $ 163,217 $ 155,817 $ 307,781 $ 287,603 Cost of goods sold ......... 121,715 118,721 233,011 218,932 --------- --------- --------- --------- Gross profit ............... 41,502 37,096 74,770 68,671 Expenses: Selling, general and administrative ......... 33,275 31,262 64,249 60,473 Interest ................. 7,664 7,128 15,417 14,234 --------- --------- --------- --------- 40,939 38,390 79,666 74,707 --------- --------- --------- --------- Income (loss) before income tax provision ............ 563 (1,294) (4,896) (6,036) Income tax provision ....... -- -- -- -- --------- --------- --------- --------- Net income (loss) .......... 563 (1,294) (4,896) (6,036) Less provision for preferred dividends and discount amortization ............. 165 97 270 190 --------- --------- --------- --------- Net income (loss) available for common stock ......... $ 398 $ (1,391) $ (5,166) $ (6,226) ========= ========= ========= ========= Income (loss) per common share $ .08 $ (.27) $ (1.03) $ (1.24) ========= ========= ========= =========
See notes to consolidated financial statements.
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Thousands) (Unaudited) Six Months Ended -------------------- August 3, July 28, 1997 1996 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss .......................................................... $ (4,896) $ (6,036) -------- -------- Adjustments to reconcile net loss to net cash from operations: Depreciation and amortization ................................. 5,890 5,468 Provision for LIFO inventory valuation ........................ 433 300 Non-cash interest expense ..................................... 2,375 2,015 Gain on disposal of assets .................................... (77) (28) Other ......................................................... 82 79 Decrease in store closing reserve ............................. (2,028) (3,365) Decrease in merchandise inventories ........................... 9,817 13,501 Increase in other operating assets ............................ (4,266) (3,252) Increase (decrease) in accounts payable ....................... (930) 2,119 Increase (decrease) in other operating liabilities ............ 7,309 (864) -------- -------- Total adjustments .......................................... 18,605 15,973 -------- -------- Net cash from operating activities ....................... 13,709 9,937 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures ............................................. (4,833) (3,148) Construction notes receivable .................................... 1,765 (3,022) Proceeds from disposal of fixed assets ........................... 1,906 672 Assets acquired for sale, net .................................... -- (391) Other ............................................................ 9 8 -------- -------- Net cash from investing activities ........................ (1,153) (5,881) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings under loan and security agreement, net ................ (9,905) 667 Principal payments on capital lease obligations .................. (891) (884) Principal payments on long-term debt ............................. (23) (104) Payments for deferred finance costs .............................. (225) -- -------- -------- Net cash from financing activities ....................... (11,044) (321) -------- -------- Net increase in cash ................................................ 1,512 3,735 Cash at beginning of year ........................................... 6,973 7,298 -------- -------- Cash at end of period ............................................... $ 8,485 $ 11,033 ======== ======== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: (1) Cash paid (received) during the period for: Interest ..................................................... $ 13,459 $ 12,158 Income taxes: Payments to taxing authorities ............................. 32 257 Refunds received from taxing authorities ................... (3,798) (169) SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITY: (1) Amortization of discount on junior cumulative preferred stock recorded as a direct charge to retained earnings ....... 25 24 (2) Provision for dividends payable ................................ 245 166 (3) In-kind payment of accrued interest on promissory notes: Promissory notes ............................................. 2,327 1,989 Accrued interest ............................................. (2,327) (1,989)
See notes to consolidated financial statements. PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SIX MONTHS ENDED AUGUST 3, 1997 AND JULY 28, 1996 (Unaudited) (Dollars in Thousands) 1. MANAGEMENT REPRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. In the opinion of management, all adjustments necessary for a fair presentation of the results of operations for the interim periods have been included. All such adjustments are of a normal recurring nature. Because of the seasonal nature of the business, results for interim periods are not necessarily indicative of a full year's operations. The accounting policies followed by Pamida Holdings Corporation (the Company) and additional footnotes are reflected in the consolidated financial statements contained in the Form 10-K Annual Report of the Company for the fiscal year ended February 2, 1997. 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 August 3, 1997 and February 2, 1997 by $7,007 and $6,574 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. INCOME (LOSS) PER COMMON SHARE Income (loss) per common share was calculated using the weighted average common shares and dilutive common share equivalents outstanding during the period using the treasury stock method. 4. RECENTLY ISSUED ACCOUNTING STANDARDS In February 1997, the Financial Accounting Standards Board issued SFAS No. 128, "Earnings Per Share" which specifies the computation, presentation and disclosure requirements for earnings per share. The objective of the statement is to simplify the computation of earnings per share. The impact on the Company's earnings per share is not materially different than earnings per share determined in accordance with current guidance. SFAS No. 128 is applicable for fiscal years ending after December 15, 1997. 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 six months ended August 3, 1997 and July 28, 1996: August 3, July 28, August 3, July 28, 1997 1996 1997 1996 --------- -------- --------- -------- Sales 100.0% 100.0% 100.0% 100.0% Cost of goods sold 74.6% 76.2% 75.7% 76.1% --------- -------- --------- -------- Gross profit 25.4% 23.8% 24.3% 23.9% Selling, general and administrative expenses 20.4% 20.0% 20.9% 21.0% --------- -------- --------- -------- Operating income 5.0% 3.8% 3.4% 2.9% Interest expense 4.7% 4.6% 5.0% 5.0% --------- -------- --------- -------- Income (loss) before income tax provision 0.3% -0.8% -1.6% -2.1% Income tax provision -- -- -- -- --------- -------- --------- -------- Net income (loss) 0.3% -0.8% -1.6% -2.1% ========= ======== ========= ======== SALES - During the second quarter and first six months of fiscal 1998, sales in comparable stores increased $5,300 or 3.5% and $13,907 or 5.0%, respectively, as compared to the second quarter and first six months last year. Total sales for the second quarter and the first six months of fiscal 1998 increased by $7,400 or 4.8% and $20,179 or 7.0%, respectively, as compared to the same periods last year. The Company operated 149 stores at the end of the first quarter of fiscal 1998 as compared with 144 stores at the end of the first quarter last year and operated 149 stores at the end of the second quarter of fiscal 1998 as compared with 146 stores at the end of the second quarter last year. Since July 28, 1996 the Company has opened four stores in new markets, reopened a store which had been closed due to storm damage, relocated one store and closed two stores. The increase in total sales was primarily attributable to comparable store sales increases and the effects of the net increase in the number of stores in operation during the respective periods this year as compared with last year. The Company experienced sales increases in most merchandise categories during the second quarter of fiscal 1998. The largest dollar increases were in the pharmacy prescriptions, sporting goods, housewares, men's denim apparel, women's shoes, toys, stationary, appliances and misses tops categories. The Company experienced sales declines in only a few categories, with men's fashions experiencing the largest decrease. GROSS PROFIT increased $4,406 or 11.9% and $6,099 or 8.9% for the second quarter and first six months, respectively, of fiscal 1998 compared to the same periods last year. As a percentage of sales, gross profit increased to 25.4% from 23.8% and to 24.3% from 23.9% for the second quarter and first six months, respectively, of fiscal 1998 compared to the same periods last year. The Company improved its in-stock positions in most merchandise categories during the second quarter of fiscal 1998 as compared with the second quarter of fiscal 1997. Sales improved in most merchandise categories this year, with a marked increase in sales of higher margin basic goods which experienced substantial out-of-stocks during the second quarter last year. Also, the Company realized substantial decreases in warehousing and distribution costs during the first half of fiscal 1998 compared to last year. SELLING, GENERAL AND ADMINISTRATIVE (SG&A) expense increased $2,013 or 6.4% for the second quarter of fiscal 1998 compared to the second quarter of fiscal 1997 and increased $3,776 or 6.2% for the first six months of fiscal 1997 compared to the same period last year. As a percentage of sales, SG&A expense was 20.4% and 20.0%, respectively, for the second quarter of fiscal 1998 and 1997. As a percentage of sales, SG&A expense was 20.9% and 21.0%, respectively, for the first half of fiscal 1998 and 1997. Most of the total net increase in SG&A expense for the second quarter of fiscal 1998 as compared to the second quarter last year was attributable to planned higher corporate general and administrative expenses, primarily involving increases in payroll and incentive compensation. As planned, store occupancy costs also increased over last year to accommodate the higher sales activity. These increases were offset partially by a $224 increase in other income, primarily due to a gain on the sale of a parcel of land and business interruption insurance settlements related to two stores. Most of the total net increase in SG&A expense for the first half of fiscal 1998 as compared to the first half of last year was attributable to planned higher corporate general and administrative expenses, primarily involving increases in payroll, incentive compensation expenses and professional fees. As planned, store controllable, occupancy and payroll costs also increased over last year to accommodate the higher sales activity. These increases were offset partially by a $135 increase in other income. INTEREST expense increased $536 or 7.5% for the second quarter of fiscal 1998 compared to the same period of fiscal 1997 and increased $1,183 or 8.3% for the first half of fiscal 1998 compared to the same period of fiscal 1997. The increases were due primarily to increased revolver borrowings to support higher investments in basic inventory and the Company's seasonal operating pattern. There also was an increase in interest expense attributable to the promissory notes which require quarterly interest to be paid in kind. INCOME TAX BENEFIT - No income tax benefit on losses will be recorded until the Company can establish with a reasonable degree of certainty the potential utilization of certain tax loss carryforwards from prior year store closing charges. PROPOSED TRANSACTIONS - On July 22, 1997, the Company announced that it had entered into an agreement with 399 Venture Partners, Inc., a Citicorp subsidiary, providing for the payment of all of the presently outstanding Senior Promissory Notes, Subordinated Promissory Notes and Junior Subordinated Promissory Notes (the Notes) of the Company with shares of newly issued common stock and nonvoting common stock of the Company. 399 Venture Partners, Inc. owns approximately 82.75% of such Notes. Shares of the Company's stock will be issued in payment of the Notes at the rate of one share for each $9.00 of principal and accrued interest as of the effective date. 399 Venture Partners, Inc. will receive shares of nonvoting common stock, which may be converted into the same number of shares of common stock under certain conditions; and the remaining note holders will receive shares of common stock. The proposed transactions and the authorization of sufficient shares to accomplish such transactions are subject to stockholder approval. The Company presently anticipates that, if the requisite stockholder approvals are obtained, the proposed transactions described above will be completed during the Company's third fiscal quarter ending November 2, 1997. The proposed transactions described above also are subject to the simultaneous change and reclassification of all of the outstanding shares of preferred stock of the Company into shares of common stock at the rate of one share of common stock for each $9.00 of preferred stock liquidation value plus accrued dividends as of the effective date. Such change and reclassification of preferred stock has been approved by the holders of a majority of the shares of preferred stock but is subject to approval by the holders of a majority of the presently outstanding shares of common stock of the Company. The Company currently has outstanding 5,004,942 shares of common stock. Assuming approval by the stockholders of the Company and a November 2, 1997 effective date for the proposed transactions, a total of approximately 3,989,848 additional shares of common stock and nonvoting common stock would be issued in payment of the Notes and in connection with the change and reclassification of the preferred stock. If the proposed transactions are effected, the Company would be relieved of the obligation to repay the Notes in 2003 and to redeem the preferred stock (including the payment of accrued dividends) in December 2001. The transactions would also relieve the Company of substantial amounts of compounding non-cash interest expense on the Notes and from earnings per share dilution caused both by the preferred stock dividends and by discount amortization. Assuming a November 2, 1997 effective date for the proposed transactions, approximately $1,526,000 of interest expense, preferred stock dividends and discount amortization would be eliminated for the remainder of the current fiscal year. Scheduled interest and discount amortization on the Notes is $5,981,000, $6,958,000 and $8,119,000 for the fiscal years ending in 1999, 2000 and 2001, respectively. The scheduled provision for dividends and discount amortization on the preferred stock is $705,000, $845,000 and $1,016,000 for the fiscal years ending in 1999, 2000 and 2001, respectively. The proposed reclassification of the Company's preferred stock into common stock, if consummated, will be a tax-free reorganization for the Company and will have no direct tax impact on the corporation. However, if the proposed transaction involving the issuance of common stock of the Company in payment of the Company's Notes is approved by the common stockholders of the Company and consummated, then some of the Company's tax loss carryforwards may be utilized, potentially requiring tax expense to be recorded related to operations. The difference, if any, between the recorded value of the Notes and the fair market value of the common stock issued in payment of the Notes as of the effective date of such transaction would result in a taxable gain or loss on extinguishment of indebtedness for the Company which will be taxed as ordinary income or loss for federal income tax purposes. The amount of income taxes attributable to the taxable income or loss which may result from the consummation of such transaction would be reduced by the existing net operating loss and tax credit carryforwards. No assurances can be given that such transactions will be approved by the common stockholders of the Company or that the transactions will be consummated. Similarly, no assurances can be given regarding the potential impact of the tax consequences of the transactions if they are consummated. For financial statement purposes, any gain on extinguishment of the Notes held by persons other than 399 Venture Partners would be reflected on the Company's Statement of Operations as an extraordinary item (net of related taxes), separate from the operating results of the Corporation. Any gain related to the payment of Notes owned by 399 Venture Partners with nonvoting common stock would be considered to be a capital transaction; accordingly, such gain, net of taxes, would be recorded directly to additional paid-in capital on the Company's financial statements. The gain on the preferred stock exchange for common stock will be accounted for as a capital transaction. 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 30% of the full year's sales in recent years and normally involve a greater proportion of higher margin sales. Funds provided by operating activities were $13,709 in the first half of fiscal 1998 compared to $9,937 in the first half of fiscal 1997. This $3,772 improvement in net cash generated by operating activities during the first half of fiscal 1998 resulted primarily from changes in other operating liabilities and the store closing reserve as well as the decreased net loss for the period, offset somewhat by changes in inventory, accounts payable and operating assets. Effective March 17, 1997, the term of Pamida, Inc.'s (Pamida) committed Loan and Security Agreement (the Agreement) was extended to March 2000 and the maximum borrowing limit of the facility was increased to $95,000. Prior to March 17, 1997, borrowings under the Agreement bore interest at a rate of 0.75% per annum greater than the applicable prime rate. Effective March 17, 1997, borrowings under the Agreement bear interest at a rate 0.50% per annum greater than the applicable prime rate or a rate which is tied to the London Interbank Offered Rate (LIBOR), generally at Pamida's discretion. The amounts Pamida is permitted to borrow are determined by a formula based upon the amount of Pamida's eligible inventory. 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. 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 of Pamida will affect, among other things, the ability of Pamida to incur additional indebtedness, pay dividends, repay indebtedness prior to its stated maturity, create liens, enter into leases, sell assets or engage in mergers or acquisitions, make capital expenditures and make investments. These covenants currently have not had an impact on the Company's ability to fully utilize the revolving credit facility. However, certain of the covenants, such as those which restrict the ability of the Company to incur indebtedness 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 $47,210 at August 3, 1997 and $32,255 at July 28, 1996. As noted above, this facility expires in March 2000, and the Company intends to refinance any outstanding balance by such date. Borrowings under the Agreement are senior to the Senior Subordinated Notes of Pamida. The Company had long-term debt and obligations under capital leases of $203,526 at August 3, 1997 and $201,703 at July 28, 1996. The Company's ability to satisfy scheduled principal and interest payments under such obligations in the ordinary course of business is dependent primarily upon the sufficiency of the Company's operating cash flow and continued access to financial markets. At August 3, 1997, the Company was in compliance with all covenants contained in its various financing agreements. On December 18, 1992, the promissory notes of the Company were amended effective as of December 1, 1992 to provide that, until the obligations of Pamida and the Company under certain of Pamida's credit agreements have been repaid, the quarterly interest payments on the promissory notes of the Company will be paid in kind. Since the Company conducts no operations of its own, the only cash requirement of the Company relates to preferred stock dividends in the aggregate annual amount for fiscal 1998 totaling approximately $503; and Pamida is expressly permitted under its existing credit facilities to pay dividends to the Company to fund such preferred stock dividends. However, the General Corporation Law of the State of Delaware, under which the Company and Pamida are incorporated, generally 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 accumulated deficit resulting primarily from the store closings and the write-off of goodwill and other long-lived assets recognized in the fourth quarter of fiscal 1996, the Company and Pamida did not declare or pay any cash dividends in fiscal 1997 or the first half of fiscal 1998 and may pay cash dividends in future periods only to the extent that the Company and Pamida satisfy the applicable statutory standards which include the Company's having a net worth equal to at least the aggregate par value of the preferred stock which amounts to $2. 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 $4,833 in the first half of fiscal 1998 compared to $3,148 during the first half of fiscal 1997. The Company plans to open a total of three new stores in fiscal 1998, two of which were opened in the first half, and will consider additional opportunities for new store locations as they arise. Total capital expenditures are expected to total approximately $10,000 in fiscal 1998. The Company expects to fund these expenditures from cash flow from its operations. The costs of buildings and land for new store locations are expected to be financed by operating or capital leases with unaffiliated landlords. The Company's expansion program also will require inventory of approximately $1,000 to $1,200 for each new market store, which the Company expects to finance through trade credit, borrowings under the Agreement and cash flow from operations. The recent changes to the Agreement, along with expected improvements in the Company's cash flow from operations, should provide adequate resources to meet the Company's near- term liquidity requirements. On a long-term basis, the Company's expansion will require continued investments in store locations, 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 capital structure changes. Currently, it is not possible for the Company to predict with any certainty either the timing or the availability of such additional financing. INFLATION The Company uses the LIFO method of inventory valuation in its financial statements; as a result, the cost of merchandise sold approximates current costs. The Company's rental expense is generally fixed and, except for small amounts of percentage rents and rentals adjusted by cost-of-living increases tied to the Consumer Price Index or interest rates, has not been affected by inflation. FORWARD-LOOKING STATEMENTS This management's discussion and analysis contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the "1995 Act"). Such statements are made in good faith by the Company pursuant to the safe-harbor provisions of the 1995 Act. In connection with these safe-harbor provisions, this management's discussion and analysis contains certain forward-looking statements which reflect management's current views and estimates of future economic circumstances, industry conditions, company performance and financial results. The statements are based on many assumptions and factors including sales results, expense levels, competition and interest rates as well as other risks and uncertainties inherent in the Company's business, capital structure and the retail industry in general. Any changes in these factors could result in significantly different results for the Company. The Company further cautions that the forward-looking information contained herein is not exhaustive or exclusive. The Company does not undertake to update any forward-looking statements which may be made from time to time by or on behalf of the Company. PART II - OTHER INFORMATION ITEMS 1-2: None ITEM 3: The General Corporation Law of Delaware, under which the registrant is incorporated, generally 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 store closings and the write-off of goodwill and other long-lived assets in the fourth quarter of fiscal 1996, the registrant was not permitted to pay dividends in fiscal 1997 and may pay dividends in fiscal 1998 and ensuing years only to the extent that the registrant satisfies the applicable statutory standards, which include the registrant's having a net worth equal to at least the aggregate par value of its outstanding preferred stock, which amounts to $2. Accordingly, the registrant was restricted from declaring or paying the quarterly dividends payable during fiscal 1997 and on February 28 and May 31, 1997, with respect to the outstanding 16.25% Senior Cumulative Preferred Stock and 14.25% Junior Cumulative Preferred Stock of the registrant and does not anticipate paying dividends on the registrant's preferred stock in the foreseeable future. Pursuant to the Certificate of Incorporation of the registrant, the dividend rate on the registrant's preferred stock increases cumulatively by 0.5% per quarter (with a maximum cumulative increase of 5%) on each quarterly dividend payment date on which the preferred stock dividends are not paid currently on a cumulative basis. As of the date of this report, the total preferred stock dividend arrearage was $586,952 representing six quarterly dividend payments at the applicable dividend rates. Any unpaid dividends are added to the liquidation value of the preferred stock until paid in cash. Such nonpayment of preferred stock dividends does not accelerate the redemption rights of the preferred stockholders. ITEM 4: (a) The 1997 annual meeting (the "Annual Meeting") of stockholders of the registrant was held on May 22, 1997. (b) The following persons were elected as directors at the Annual Meeting: L. David Callaway, III Stuyvesant P. Comfort M. Saleem Muqaddam Steven S. Fishman Peter J. Sodini Frank A. Washburn. No other director's term of office continued after the Annual Meeting. (c) Votes were cast or withheld in the election of directors at the Annual Meeting as follows: Director For Withheld ---------------------- --------- -------- L. David Callaway, III 4,516,580 20,865 Stuyvesant P. Comfort 4,517,580 19,865 M. Saleem Muqaddam 4,517,480 19,965 Steven S. Fishman 4,517,580 19,865 Peter J. Sodini 4,517,580 19,865 Frank A. Washburn 4,517,480 19,965 ITEM 5: None ITEM 6: (a) Exhibits. - 27.0 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 July 22, 1997, and related to Item 5, Other Events. No financial statements were filed with such report. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PAMIDA HOLDINGS CORPORATION --------------------------- (Registrant) Date: September 5, 1997 By: /s/ Steven S. Fishman Steven S. Fishman, Chairman of the Board, President and Chief Executive Officer Date: September 5, 1997 By: /s/ Todd D. Weyhrich Todd D. Weyhrich, Chief Accounting Officer -----END PRIVACY-ENHANCED MESSAGE-----