-----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, SnbXHbLGZMQWRWtff7pPkv0BurELFlQ+39s/7rvixa97qFosFhoJ2uVPMa3pI5W6 +EEEGB8kyWd9e1X/PiI/Zg== 0000864760-98-000002.txt : 19980421 0000864760-98-000002.hdr.sgml : 19980421 ACCESSION NUMBER: 0000864760-98-000002 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19980201 FILED AS OF DATE: 19980420 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: PAMIDA HOLDINGS CORP/DE/ CENTRAL INDEX KEY: 0000864760 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-VARIETY STORES [5331] IRS NUMBER: 470696125 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-10619 FILM NUMBER: 98597287 BUSINESS ADDRESS: STREET 1: 8800 F STREET 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-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended February 1, 1998 Commission File Number 1-10619 PAMIDA HOLDINGS CORPORATION ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 47-0696125 ------------------------------- ---------------------------- (State or other jurisdiction of (IRS Employer Identification incorporation or organization) Number) 8800 "F" Street, Omaha, Nebraska 68127 --------------------------------------- --------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (402) 339-2400 Securities Registered Pursuant to Section 12(b) of the Act: Title of Each Name of Each Exchange Class on Which Registered ------------ -------------------------- Common Stock American Stock Exchange Securities Registered Pursuant to Section 12(g) of the Act: NONE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. The aggregate market value of the voting stock held by non-affiliates of the registrant as of March 24, 1998, was $24,938,602 based upon the closing price for such stock on the American Stock Exchange on such date. Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date: Outstanding at CLASS OF STOCK March 24, 1998 ---------------------- ---------------- Common Stock 5,970,439 shares Nonvoting Common Stock 3,050,473 shares DOCUMENTS INCORPORATED BY REFERENCE: Portions of the registrant's proxy statement dated March 25, 1998, for the annual meeting of the registrant's stockholders to be held on May 21, 1998, are incorporated by reference into Part III. PART I ITEM 1. BUSINESS. FORWARD-LOOKING STATEMENTS This 10-K contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the "1995 Act"). Such statements are made in good faith by the Company pursuant to the safe-harbor provisions of the 1995 Act. In connection with these safe-harbor provisions, this 10-K 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. 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. GENERAL. Pamida Holdings Corporation conducts its general merchandise retail business through its wholly-owned subsidiary, Pamida, Inc., a Delaware corporation. Unless the context indicates otherwise, the terms "Pamida" and "Company" refer collectively to Pamida Holdings Corporation, its direct and indirect subsidiaries and their predecessors, and "Holdings" refers only to Pamida Holdings Corporation. Holdings is a Delaware corporation incorporated in 1986 to acquire all of the capital stock of Pamida, Inc., which, directly since 1981 and through a predecessor prior to 1981, had been engaged in the general merchandise retail business since 1963. The capital stock of Pamida, Inc. is the only significant asset of Holdings, and Holdings has no material operations of its own. On January 19, 1996, the Company announced its intention to close 40 stores located in unprofitable or highly competitive markets. Store closing sales began on January 29, 1996, and the Company completed all of such store closings during the second quarter of the fiscal year ended February 2, 1997. References in this Form 10-K to the "40 Closed Stores" mean such 40 stores. STORES. At February 1, 1998, Pamida operated 148 general merchandise retail stores located in 148 small towns (having an average population of approximately 5,500) in 15 Midwestern, North Central and Rocky Mountain states. Pamida's strategic objective is to be the dominant general merchandise retailer in the communities it serves. The Company believes that it holds the leading market position in over 77% of the communities in which its stores are located. Pamida stores generally are located in small towns, normally county seats, where there often is little or no competition from another major general merchandise retailer and which the Company considers to be either too small to support more than one major general merchandise retailer (thereby creating a potential barrier to entry by a major competitor) or too small to attract competitors whose stores generally are designed to serve larger populations. At February 1, 1998, 115 of the Company's 148 stores faced no direct local competition from other major general merchandise retailers. The Company's stores average approximately 30,000 square feet of sales area and range in size from approximately 6,000 to 51,000 square feet of sales area. At February 1, 1998, Pamida's stores had an aggregate sales area of approximately 4,408,000 square feet. The following table indicates the states in which Pamida's stores were located as of February 1, 1998: State No. of ----- Stores Percent ------ ------- Minnesota............................................ 29 19.6% Iowa................................................. 25 16.9 Nebraska............................................. 15 10.1 Wisconsin............................................ 14 9.5 Michigan............................................ 12 8.1 Ohio................................................ 10 6.8 Wyoming.............................................. 9 6.1 North Dakota......................................... 7 4.7 South Dakota......................................... 7 4.7 Montana.............................................. 7 4.7 Indiana.............................................. 4 2.7 Kansas............................................... 3 2.0 Illinois............................................. 3 2.0 Kentucky ............................................ 2 1.4 Missouri ............................................ 1 0.7 --- ----- 148 100.0% === ===== The following tables show the number of the Company's store openings, relocations and closings and the aggregate year-end store sales area by fiscal year since fiscal 1994: Fiscal Year Ended -------------------------------- 1998 1997 1996 1995 1994 ---- ---- ---- ---- ---- Beginning of year 148 144 184 173 178 Stores opened in new markets 1 6 7 17 8 Stores relocated in existing markets 2 2 3 -- -- Stores closed (includes relocated stores) (3) (4) (10) (6) (13) ---- ---- ---- ---- ---- End of year 148 148 184 184 173 ==== ==== ==== ==== Less 40 Closed Stores (40) ---- 144 ==== Fiscal Year Ended -------------------------------- 1998 1997 1996 1995 1994 ---- ---- ---- ---- ---- Square feet of store sales area at year-end (in millions) 4.41 4.35 5.22 5.09 4.68 Less 40 Closed Stores (1.09) ---- 4.13 ==== Pamida regularly evaluates all of its stores and from time to time closes stores which no longer meet its standards for sales, profitability, selling area or other applicable criteria. STORE EXPANSION PROGRAM. Pamida's store expansion program is subject to the Company's ability to negotiate satisfactory leases, to the ability of prospective landlords to obtain financing for new store buildings and to various zoning, site acquisition, environmental, traffic, construction and other contingencies. Eight new stores, two of which are replacement stores, are expected to commence operations this year. Pamida has identified numerous communities which are potential sites for the Company's prototype stores and in which Pamida believes it can achieve a leading market position, although there is no assurance that Pamida will open stores in such communities or on any particular time schedule. The Company began operations in a new 200,000 square foot distribution center in Lebanon, Indiana, during the second quarter of fiscal 1998. Pamida believes that its existing distribution facilities (including the new expandable Lebanon, Indiana facility), senior and middle management staff as well as corporate infrastructure should allow the Company to accommodate its anticipated growth. The Company typically invests approximately $1,450,000 to $1,700,000 in a new prototype store. Such expenditures consist primarily of approximately $1,000,000 to $1,200,000 for the initial store inventory, a portion of which is financed by vendor trade credit, and approximately $450,000 to $500,000 for store fixtures and equipment. In most cases, building and land costs of approximately $1,450,000 to $1,750,000 per store are financed by unaffiliated developers who lease the real estate to Pamida. To expedite the construction process, Pamida occasionally may construct stores on sites which it acquires, with the expectation that it subsequently will enter into sale-leaseback transactions with respect to such stores with unaffiliated investors. SALES AND MERCHANDISING. Pamida's merchandising policy is to provide customers with reliable and convenient family shopping and to feature nationally advertised brand-name products as well as some private-label merchandise at attractive prices. Pamida operates its stores on a self-service, primarily cash-and-carry basis and runs weekly advertised promotions throughout the year. All of Pamida's stores accept bank credit cards, which accounted for 14.8% of total store sales during the fiscal year ended February 1, 1998. Pamida's typical customers are price-conscious families across the income spectrum. To effectively serve such customers, the Company's stores are open seven days a week for an average of at least 75 hours per week. Pamida's two basic merchandise divisions are softlines and hardlines. The softlines division includes mens', womens', childrens' and infants' clothing, footwear, accessories and jewelry. The hardlines division includes categories such as health and beauty aids, automotive accessories, housewares, cleaning supplies, hardware, paint, sporting goods, toys, stationery, small appliances and electronic items, videos, compact discs and tapes, lawn and garden supplies, linens and other domestics, cameras and accessories, pet supplies, consumables and candy items. The Company currently owns and operates pharmacies in 44 of its larger stores, and eight of Pamida's other stores contain prescription pharmacies leased to and operated by independent pharmacists. The pharmacies have proved to be effective in building customer loyalty and attracting customers who are likely to purchase other items in addition to prescription drugs. Pamida intends, subject to regulatory and personnel considerations and where space permits, to include a pharmacy in each of its new prototype stores and to add pharmacies to existing stores. During the fiscal year ended February 1, 1998, the hardlines division accounted for approximately 72% of Pamida's total sales, while the apparel division and the pharmacies accounted for 22% and 6%, respectively, of Pamida's total sales. Among the methods that the Company employs to build customer loyalty and satisfaction are weekly advertised specials, competitive pricing, clean and orderly stores, friendly well-trained personnel, a liberal return policy and a wide variety of special customer services (such as wheelchairs for the elderly and handicapped, restroom facilities and water fountains, seating benches, speedy check-out lanes and expedited check cashing and raincheck and layaway processing) offered under various customer-oriented themes such as "Hometown Values", "We Care" and "We're Listening". Pamida places special emphasis on maintaining a strong in-stock position in all merchandise categories, particularly with respect to advertised items. Pamida's business, like that of most other general merchandise retailers, is seasonal. First quarter sales (February through April) are lower than sales during the other three fiscal quarters, while fourth quarter sales (November through January) in recent years have increased to approximately 29% of the full year's sales and normally involve a greater proportion of higher margin merchandise. ADVERTISING AND PROMOTION. The Company's extensive advertising primarily utilizes colorful weekly circulars developed by a centralized advertising department at Pamida's headquarters. Such circulars advertise brand-name and other merchandise at significant price reductions and are inserted into local newspapers or mailed directly to customers. Pamida also uses local shoppers publications and coupon books. During fiscal 1998, Pamida spent approximately $10,468,000 (net of promotional allowances provided by vendors) on advertising, which represented approximately 1.6% of fiscal 1998 sales. PURCHASING AND DISTRIBUTION. Pamida maintains a centralized purchasing and store planning staff at its executive offices. The merchandising department includes two general merchandise managers, five hardlines divisional merchandise managers and three apparel divisional merchandise managers. Each of the divisional merchandise managers supervises from five to seven buyers. Members of the Company's experienced buying staff regularly attend major trade shows, visit both domestic and overseas markets and meet with vendor representatives at the Company's headquarters. The merchandise in the Company's stores is purchased from over 3,000 primary manufacturers and suppliers and numerous other vendors. Centralized purchasing enables Pamida to more effectively control the cost of merchandise and to take advantage of promotional programs and volume discounts offered by certain vendors. The Company continuously seeks to optimize merchandise costs, including promotional allowances offered by its suppliers. Pamida also has centralized the management of returned merchandise, which enables the Company to most effectively secure vendor credits and refunds with respect to such merchandise. The Company's point-of-sale data capture equipment located in its stores provides current information to Pamida's buyers to assist them in managing inventories, effecting prompt reorders of popular items, eliminating slow-selling merchandise and reducing markdowns. Seaway Importing Company, a wholly-owned subsidiary of Pamida, Inc., imports a wide variety of merchandise, including sporting goods, pet supplies, toys, electronic items, apparel, hair care items, painting supplies, automotive items and hardware, for sale in Pamida's stores. During fiscal 1998, approximately 79% of Pamida's merchandise was distributed to the stores through Pamida's own distribution centers, while the remaining merchandise was supplied directly to the stores by manufacturers or distributors. COMPETITION. The general merchandise retail business is highly competitive. The Company's stores generally compete with other general merchandise retailers, supermarkets, drug and specialty stores, mail order and catalog merchants and, in some communities, department stores.. Competitors consist both of independent stores and of regional and national chains, some of which have substantially greater resources than the Company. The type and degree of competition and the number of competitors which Pamida's stores face vary significantly by market. Pamida believes that the principal areas of competition in the general merchandise retail industry are store location, price, merchandise selection, quality and customer service, although numerous other factors also affect the competitive position of any particular store. Among the methods that the Company employs to build customer loyalty and satisfaction are weekly advertised specials, reliable in-stocks, competitive pricing, clean and orderly stores, friendly well-trained personnel, a liberal return policy and a wide variety of special customer services offered under themes such as "Hometown Values", "We Care" and "We're Listening". Pamida stores generally are located in small towns, normally county seats, where there is no direct local competition from another major general merchandise retailer and which may be either too small to support more than one major general merchandise retailer (thereby creating a potential barrier to entry by a major competitor) or too small to attract competitors whose stores generally are designed to serve larger populations. The Company believes that, in terms of sales, it is the leading general merchandise retailer in over 77% of the communities in which its stores are located. At February 1, 1998, 115 of Pamida's 148 stores were located in communities in which there was no direct local competition from other major general merchandise retailers. As of that date, Kmart, Alco, Wal-Mart, Target and ShopKo had stores in 16, 11, 10, 2 and 1 communities, respectively, where Pamida stores are located; however, because some of these communities have more than one of such competitors, only 33 Pamida stores face direct local competition from such retail chains. In recent years the Company's business strategy has been to focus its store expansion program on communities with less likelihood of the entry of a new major competitor, but there can be no assurance that in the future major competitors will not open additional stores in the Company's markets. Merchandise prices generally are established on a zone basis at Pamida's executive offices, although store managers are given discretion to adjust prices of key items to meet local competition and to match a competitor's advertised prices. Zone pricing allows the Company to establish prices at different levels in different trade territories, based primarily on competitive conditions within such territories, rather than having a uniform pricing structure throughout the entire chain. Pamida conducts a continuous program of competitor price comparisons that enables the Company to make merchandise price adjustments, when necessary, to assure that the Company maintains a competitive position. EMPLOYEES. As of February 1, 1998, Pamida had approximately 5,600 employees, of whom approximately 2,700 were full-time and 2,900 were part-time. The number of employees varies on a seasonal basis. Pamida's employees are not represented by a labor union, and the Company believes that its relations with its employees are good. At February 1, 1998, the average length of service of the Company's management staff was as follows: Average Years Number of Service ------ ---------- Top Management 2 16.2 Senior Vice Presidents and Vice Presidents 18 7.1 District Managers 12 20.5 Pharmacy District Supervisors 4 5.3 Store Managers 148 11.4 Pharmacy Managers 44 3.4 Pamida's human resources department is responsible for company-wide salary and wage administration, as well as all benefits. The human resources department works closely with store operations in the development and administration of Pamida's store-level employee training programs. In addition, Pamida has an ongoing program for the development of management personnel to fill positions in all facets of the Company's operations and makes a concerted effort to identify and train potential successors for all of its key middle and senior managers. ITEM 2. PROPERTIES. At February 1, 1998, the Company owned 19 of its 148 store buildings, while its remaining 129 stores operated in leased premises. A substantial majority of the Company's leases have renewal options, with approximately 53% of the leases having unexpired current terms of five years or more. The following table provides information relating to the remaining lease terms for the Company's leased stores at February 1, 1998: Leases the Fiscal Number of Leased Stores Year Ending During(1) 2/01/98 --------------------- ----------------------- 1999 13 2000 24 2001 5 2002 8 2003 6 Thereafter 73 --- Total 129 === (1) Includes renewal options. Pamida's management believes that the physical condition of the Company's stores generally is very good. All of the Company's stores are continuously updated to conform to Pamida's operating and merchandising standards. The Company's general offices and one of its three distribution centers are located in a 215,000 square foot building in Omaha, Nebraska, owned by the Company. This facility contains approximately 135,000 square feet of warehouse space and approximately 80,000 square feet of office space. Pamida's primary distribution center is a 336,000 square foot "flow-through" facility situated on a 22-acre tract of land in Omaha approximately one mile from the distribution center described above. This facility, which is owned by Pamida, serves primarily as a redistribution center for bulk shipments and promotional merchandise on which cost savings can be realized through quantity purchasing. Pamida also owns an additional 10-acre tract of land adjacent to such distribution center which would permit that facility to be further expanded by almost 60%. In July 1997, the Company began operations in a new 200,000 square foot distribution center in Lebanon, Indiana. The facility, which is leased through April 2007, redistributes bulk shipments and promotional merchandise to stores in the Company's eastern sales districts. Future expansion of the facility is being considered. This distribution facility replaced a 100,000 square foot warehouse facility previously operated by the Company in the Milwaukee, Wisconsin area. Pamida also has a warehouse facility in Omaha which contains approximately 41,000 square feet of space and is located immediately adjacent to the Company's general offices. This warehouse, which is owned by Pamida, is used for the processing of merchandise to be returned to vendors and by the advertising department in connection with its printing operations. In addition to its retail stores, distribution centers and warehouse facility, Pamida's tangible assets include inventories, warehouse and store fixtures and equipment, merchandise handling equipment, office and data processing equipment, motor vehicles and an airplane. ITEM 3. LEGAL PROCEEDINGS. Pamida is a party to a number of lawsuits incidental to its business, the outcome of which, both individually and in the aggregate, is not expected to have a material adverse effect on the Company's operations or financial condition. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. (a) A special meeting of stockholders (the "Special Meeting") of Holdings was held on November 14, 1997. (b) The meeting did not involve the election of directors. (c)(1) Votes were cast at the Special Meeting with respect to approval of the Note Amendment Agreement No.3 between Holdings and 399 Venture Partners, Inc. and the transactions contemplated thereby as follows: For: 3,792,221 Against: 12,832 Abstain: 3,700 There were broker nonvotes as to 858,928 shares on this matter. This matter received sufficient votes to pass. (2) Votes were cast at the Special Meeting with respect to approval of an amendment to the Restated Certificate of Incorporation of Holdings to change and reclassify all of the outstanding shares of Preferred Stock of Holdings into shares of Common Stock of Holdings as follows: For: 4,447,649 Against: 217,032 Abstain: 2,500 There were broker nonvotes as to 500 shares on this matter. This matter received sufficient votes to pass. (3) Votes were cast at the Annual Meeting with respect to approval of an amendment to the Restated Certificate of Incorporation of Holdings to increase the number of authorized shares of Common Stock of Holdings and correspondingly adjust the total number of shares of stock which Holdings is authorized to issue as follows: For: 4,444,149 Against: 222,832 Abstain: 200 There were broker nonvotes as to 500 shares on this matter. This matter received sufficient votes to pass. (4) Votes were cast at the Special Meeting with respect to approval of an amendment to the Restated Certificate of Incorporation of Holdings to increase the number of authorized shares of Nonvoting Common Stock of Holdings and correspondingly adjust the total number of shares of stock which Holdings is authorized to issue as follows: For: 4,431,349 Against: 234,832 Abstain: 1,200 There were broker nonvotes as to 300 shares on this matter. This matter received sufficient votes to pass. (5) Votes were cast at the Special Meeting with respect to approval of an amendment to the Restated Certificate of Incorporation of Holdings to amend the conversion terms of the Nonvoting Common Stock of Holdings and delete certain obsolete provisions as follows: For: 3,792,021 Against: 15,332 Abstain: 1,200 There were broker nonvotes as to 859,128 shares on this matter. This matter received sufficient votes to pass. (6) Votes were cast at the Special Meeting with respect to approval of amendments to the Restated Certificate of Incorporation of Holdings to reduce the number of authorized shares of Junior Cumulative Preferred Stock of Holdings, correspondingly decrease the total number of shares of stock which Holdings is authorized to issue, and delete certain obsolete provisions as follows: For: 3,797,320 Against: 11,233 Abstain: 0 There were broker nonvotes as to 859,128 shares on this matter. This matter received sufficient votes to pass. (7) Votes were cast at the Special Meeting with respect to approval of the issuance of shares of Common Stock of Holdings to 399 Venture Partners, Inc. or its assignee upon the future conversion of shares of Nonvoting Common Stock of Holdings issued to 399 Venture Partners, Inc. as follows: For: 3,778,861 Against: 17,772 Abstain: 1,200 There were broker nonvotes as to 869,848 shares on this matter. This matter received sufficient votes to pass. (d) Not Applicable. * * * EXECUTIVE OFFICERS OF THE REGISTRANT. The present executive officers of Holdings are Steven S. Fishman (Chairman of the Board, President and Chief Executive Officer), Frank A. Washburn (Executive Vice President, Chief Operating Officer and Secretary), and George R. Mihalko (Senior Vice President, Chief Financial Officer, Treasurer and Assistant Secretary). Information concerning such executive officers appears in the following paragraphs: Mr. Fishman, age 47, has served as President and Chief Executive Officer of Holdings and Pamida, Inc. since April 1993 and as Chairman of the Board of Holdings and Pamida, Inc. since August 1993. From 1988 to March 1993, Mr. Fishman was employed by Caldor, Inc. as Senior Vice President and General Merchandise Manager-Homelines. Mr. Fishman has been a director of Holdings since 1993 and also is a director of Pamida, Inc. Mr. Washburn, age 49, has served as Chief Operating Officer of Holdings and Pamida, Inc. since March 1997, Executive Vice President of Holdings since September 1995 and Executive Vice President of Pamida, Inc. since February 1995. Mr. Washburn previously served as Senior Vice President - Human Resources of Pamida, Inc. from 1993 to 1995 and as Vice President - Human Resources of Pamida, Inc. from 1987 to 1993. Mr. Washburn also serves as Secretary of Holdings and Pamida, Inc. Mr. Washburn joined Pamida's predecessor in 1965. Mr. Washburn has been a director of Holdings since 1995 and also is a director of Pamida, Inc. Mr. Mihalko, age 43, has served as Senior Vice President, Chief Financial Officer, Treasurer and Assistant Secretary of Holdings and Pamida, Inc. since September 1995. From February 1993 to September 1995, Mr. Mihalko was employed by Pier 1 Imports, Inc. as Vice President and Treasurer. From July 1990 to February 1993, Mr. Mihalko was employed by Burlington Northern Railroad as Assistant Treasurer. The executive officers of Holdings may be removed from their respective positions as such officers at any time by the Board of Directors of Holdings, subject to any rights which they may have under employment agreements with the Company. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The Common Stock of Holdings is listed and traded on the American Stock Exchange. The high and low sales prices for the Common Stock of Holdings on the American Stock Exchange for fiscal 1998 and fiscal 1997 are as follows: Fiscal 1998: High Low ------------ ---- --- 4th Quarter 6 1/8 4 1/4 3rd Quarter 6 7/16 4 1/8 2nd Quarter 4 1/8 2 3/4 1st Quarter 3 1/2 2 Fiscal 1997: High Low ------------ ---- --- 4th Quarter 2 5/16 1 1/2 3rd Quarter 2 3/8 1 5/8 2nd Quarter 3 1/4 2 1/8 1st Quarter 3 1/4 2 1/8 As of March 23, 1998 there were 281 record holders of the Common Stock of Holdings. There is no market for the Nonvoting Common Stock of Holdings, all of which presently is owned by 399 Venture Partners, Inc., an indirect wholly-owned subsidiary of Citicorp. Holdings has never declared or paid any cash dividends on its Common Stock or Nonvoting Common Stock and does not intend to pay any such dividends in the foreseeable future. The obligations of Pamida, Inc. under certain of its financing arrangements are guaranteed by Holdings. Such financing arrangements presently prohibit the payment of dividends by Holdings on its Common Stock or Nonvoting Common Stock and also significantly restrict the ability of Pamida, Inc. to pay dividends or make other distributions to Holdings. ITEM 6. SELECTED FINANCIAL DATA.
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY SELECTED CONSOLIDATED FINANCIAL DATA (AMOUNTS IN THOUSANDS - EXCEPT PER SHARE, NUMBER OF SHARES AND OTHER DATA) Fiscal Year Ended ----------------------------------------------------------- February 1, February 2, January 28, January 29, January 30, 1998 1997 (1) 1996 1995 1994 ----------- ----------- ----------- ----------- ----------- INCOME STATEMENT DATA: Sales .............................................. $ 657,017 $ 633,189 $ 736,315 $ 711,019 $ 656,910 Gross profit ....................................... 161,935 154,090 177,688 177,367 158,906 Selling, general and administrative expenses .......................... 129,031 125,105 151,096 143,585 133,921 ----------- ----------- ----------- ----------- ----------- Operating income ................................... 32,904 28,985 26,592 33,782 24,985 Interest expense ................................... 29,618 29,781 29,526 27,367 26,588 Long-lived asset write-off ......................... - - 78,551 - - Store closing costs ................................ - - 21,397 - - Income (loss) before provision for income taxes and extraordinary item ..................... 3,286 (796) (102,882) 6,415 (1,603) Income tax (benefit) provision ..................... - - (7,863) 3,500 427 ----------- ----------- ----------- ----------- ----------- Income (loss) before extraordinary item ............ 3,286 (796) (95,019) 2,915 (2,030) Extraordinary item ................................. 1,735 - 371 - (4,943) ----------- ----------- ----------- ----------- ----------- Net income (loss) .................................. 5,021 (796) (94,648) 2,915 (6,973) Effect of preferred stock reclassification ......... 756 - - - - Less preferred dividends and discount amortization ........................ (407) (391) (362) (361) (359) ----------- ----------- ----------- ----------- ----------- Net income (loss) available for common shares ................................ $ 5,370 $ (1,187) $ (95,010) $ 2,554 $ (7,332) =========== =========== =========== =========== =========== Weighted average number of basic shares outstanding ...................................... 5,843,441 5,004,942 5,002,853 4,999,984 4,999,984 Weighted average number of diluted shares outstanding ...................................... 5,875,463 5,004,942 5,002,853 5,039,684 4,999,984 Basic net income (loss) per share: Income (loss) before extraordinary item.. $ .62 $ (.24) $ (19.07) $ .51 $ (.48) Extraordinary item ...................... .30 - .08 - (.99) ----------- ----------- ----------- ----------- ----------- Basic income (loss)....................... $ .92 $ (.24) $ (18.99) $ .51 $ (1.47) =========== =========== =========== =========== =========== Diluted net income (loss) per share: Income (loss) before extraordinary item.... $ .62 $ (.24) $ (19.07) $ .51 $ (.48) Extraordinary item......................... .29 - .08 - (.99) ----------- ----------- ----------- ----------- ----------- Diluted income (loss)...................... $ .91 $ (.24) $ (18.99) $ .51 $ (1.47) =========== =========== =========== =========== =========== BALANCE SHEET DATA: Working capital.............................. $ 37,421 $ 28,673 $ 34,082 $ 46,725 $ 41,323 Total assets................................. 260,081 269,188 258,525 354,367 314,621 Long-term debt............................... 140,289 168,000 163,746 162,505 160,315 Obligations under capital leases............. 32,156 33,999 36,559 43,050 35,618 Redeemable preferred stock.................... - 1,875 1,826 1,779 1,734 Common shareholders' (deficit) equity......... (52,275) (87,303) (86,116) 8,876 6,322 OTHER DATA: Team members.................................. 5,600 5,700 7,200 7,200 6,100 Number of stores.............................. 148 148 184 184 173 Retail square feet (in millions).............. 4.41 4.35 5.22 5.09 4.68 (1) Represents a 53-week year.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY MANAGEMENT'S DISCUSSION AND ANALYSIS (DOLLAR AMOUNTS IN THOUSANDS) YEAR ENDED FEBRUARY 1, 1998 COMPARED TO YEAR ENDED FEBRUARY 2, 1997 SALES - Total sales during the 52-week fiscal 1998 period increased by $23,828, or 3.8%, from the 53-week fiscal 1997 period. On a 52 to 52-week basis, total net sales increased by 5.2%. During fiscal 1998, sales in comparable stores increased by $24,135, or 4.0%. During fiscal 1998, the Company opened three new stores, of which one is located in a new market and two were relocations; the Company also closed one store (which will be replaced during fiscal 1999 by a new store in the same market), resulting in a net increase in selling area during the fiscal year of approximately 61,000 square feet to a total of approximately 4,408,000 square feet. The Company experienced sales increases in most merchandise categories during fiscal 1998. The most significant increases occurred in pharmacy prescriptions, housewares, toys, athletic shoes and team sports apparel. Other categories experiencing gains were stationery, sporting goods, appliances, paper and cleaning supplies and pets. The Company experienced sales decreases in several categories. The largest dollar decreases were in the automotive, mens' fashion apparel, jewelry and watches and juniors' apparel categories. GROSS PROFIT - Gross profit for the 52-week fiscal 1998 period increased by $7,845, or 5.1%, compared to the 53-week fiscal 1997 period. As a percentage of sales, gross profit improved to 24.6% from 24.3%. The Company's merchandise gross margin as a percentage of sales decreased to 27.6% in fiscal 1998 from 27.8% in fiscal 1997. The decrease in merchandise gross margin percent of sales was offset by substantial expense reductions in the warehouse and distribution areas made possible by operating efficiencies gained largely from a new warehouse management system implemented during fiscal 1997. During the prior fiscal year, the Company incurred higher than normal labor cost in the warehouse and distribution areas due to implementation issues related to the warehouse management system. Total warehouse and distribution costs amounted to 2.8% of sales compared to 3.3% last year. SELLING, GENERAL AND ADMINISTRATIVE (SG&A) expense increased $3,926, or 3.1%, to $129,031 in fiscal 1998 from $125,105 in fiscal 1997. As a percentage of sales, SG&A expense decreased to 19.6% from 19.8% last year. Most of the total net increase in SG&A expense for the year was attributable to higher corporate general and administrative expenses, primarily involving planned increases in payroll and incentive compensation expenses. Store occupancy costs increased by $1,030, but remained at 3.9% as a percentage of net sales for both fiscal 1998 and 1997. Store payroll costs and controllable costs decreased by $391 and $163, respectively, during fiscal 1998 as compared to last year. As a percentage of net sales, store payroll costs and controllable costs decreased from 8.0% to 7.7% and 3.0% to 2.9% for the fiscal periods ended 1998 and 1997, respectively. INTEREST expense decreased by $163, or 0.5%, for fiscal 1998 compared to fiscal 1997. As described in Note B to the financial statements, the decrease in interest expense for fiscal 1998 was attributable to the payment of certain promissory notes of the Company with common stock in November 1997, thereby relieving the Company of the quarterly compounding interest obligation which had previously been paid-in-kind. That decrease was offset in part by an increase in interest expense of approximately $900 related to higher outstanding balances on the revolving line of credit resulting from higher investments in basic inventory during the year as well as the funding of certain of the Company's information systems initiatives. INCOME TAX PROVISION - The Company's loss carryforwards from store closing charges recorded in fiscal 1996 were utilized during fiscal 1998 to completely offset income taxes from normal operating activities of the Company and to reduce income taxes related to the Note repayment and preferred stock reclassification transactions which are described in Note B to the financial statements. The Company expects that operations in future periods will be taxed at a normal tax rate. No income tax benefit on losses for fiscal 1997 was recorded as the Company could not establish, as of fiscal year end 1997, with a reasonable degree of certainty, the potential utilization of loss carryforwards. YEAR ENDED FEBRUARY 2, 1997 COMPARED TO YEAR ENDED JANUARY 28, 1996 SALES - As discussed in Note Q to the financial statements, the Company closed forty stores at the end of fiscal 1996 in unprofitable or highly competitive markets which did not fit the Company's niche market strategy. Consequently, the Company experienced a planned decrease in total sales for fiscal 1997 of $103,126 or 14.0% compared to fiscal 1996 due primarily to the reduced number of stores. During fiscal 1997 the Company opened eight new prototype stores, of which six are located in new markets and two were relocations; the Company also closed two stores, resulting in a net increase in selling area during the fiscal year of approximately 216,000 square feet (not including changes relating to the forty stores closed as of fiscal year end 1996) to a total of 4,348,000 square feet. As of February 2, 1997, the Company's store base included 35 of the Company's most recent store prototype, which represented 28.7% of the Company's total selling square feet. Comparable store sales during the 53-week fiscal 1997 period decreased by $8,893 or 1.5% from the 52-week fiscal 1996 period. Comparable store sales on a 53-week to 53-week basis decreased by 2.6%. Sales were affected primarily by slowed warehouse distributions to stores as a result of the implementation of a new warehouse inventory management system initiated in the first quarter of fiscal 1997. The slowed distributions caused a deterioration of merchandise in-stock positions in most of the Company's stores, resulting in lost sales. While implementation of the warehouse system was largely completed by August 1996, and in-stock positions at the stores improved thereafter, sales remained below management expectations due to reduced customer traffic continuing in the third and fourth quarters. Comparable sales also were affected during much of the year by low-margin clearance sales in fiscal 1996 which were not necessary at the same level in fiscal 1997. However, beginning late in the holiday shopping season and continuing through fiscal year end, sales improved as the Company demonstrated to customers its improved in-stock position in all product categories. The Company experienced substantial comparable store sales increases in fiscal 1997 in several merchandise categories, the most dramatic of which were in the pharmacy prescription, junior apparel, grocery and ready-to-wear areas. Comparable store sales gains also were generated in the hosiery, team sports, camera, stationery, health aids and bath categories. The Company experienced comparable store sales decreases in several categories. The largest dollar decreases on a comparable store basis were in the electronics, automotive, misses bottoms, men's shoes, electrical and appliance areas. Management believes that subtle adjustments made to the Company's softlines strategy at the end of fiscal 1996 to meet customer demand for a deeper selection of basic apparel had a positive impact on sales and margins in softlines during fiscal 1997. GROSS PROFIT - Gross profit dollars were affected by the reduced number of stores in operation during fiscal 1997 as compared to fiscal 1996. The Company's merchandise gross profit as a percentage of sales improved to 27.8% in fiscal 1997 from 26.8% in fiscal 1996. However, this improvement was diluted by additional costs related to the implementation of the new warehouse inventory management system discussed above. Warehouse costs increased to $13,457 from $11,066 the previous year and increased as a percent of sales to 2.1% from 1.5% the previous year. Delivery costs decreased to $7,637 in fiscal 1997 from $8,845 the previous year and amounted to 1.2% of sales in both years. Accordingly, gross profit decreased by $23,598, or 13.3%, to $154,090 in fiscal 1997 from $177,688 in fiscal 1996 but, as a percentage of sales, increased to 24.3% in fiscal 1997 from 24.1% in fiscal 1996. SELLING, GENERAL AND ADMINISTRATIVE EXPENSE Decreased $25,991, or 17.2%, to $125,105 in fiscal 1997 from $151,096 in fiscal 1996. As a percentage of sales, selling, general and administrative expense decreased to 19.8% from 20.5% last year. This reduction was largely attributable to reductions in store level expenses. Store payroll, controllable and occupancy expenses accounted for 64.2% of the total decrease in selling, general and administrative expense and decreased by 14.5%, 17.5% and 13.9%, respectively. Selling, general and administrative expense also was positively impacted by a 28.9% reduction in advertising costs which accounted for 18.2% of the gross decrease in selling, general and administrative expense. 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. Selling, general and administrative expense also was impacted by an 11.0% decrease in corporate general and administrative costs which accounted for 11.3% of the gross decreases in selling, general and administrative expense. The major components of this decrease were decreases in the net costs of insurance, professional fees, management bonuses and related fringe benefits. Selling, general and administrative expense also was positively impacted by 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 selling, general and administrative expense were offset by a $1,246 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 increased marginally by $255 or 0.9% for fiscal 1997 compared to fiscal 1996. The increase in interest expense for fiscal 1997 was attributable primarily to higher usage of the revolving line of credit and to the outstanding promissory notes of the Company which require quarterly compounding interest payments to be paid-in-kind. These increases were largely offset by decreased interest related to lower average outstanding capitalized lease obligations in fiscal 1997 compared to fiscal 1996. INCOME TAX PROVISION - No income tax benefit on losses for fiscal 1997 were recorded since the Company could not establish with a reasonable degree of certainty the potential utilization of certain tax loss carry forwards from prior year store closing charges. The effective tax rate in fiscal 1996 was 7.6% and was impacted by the non-deductible amortization and write-off of goodwill and the reserves recorded to offset the deferred tax assets. LIQUIDITY AND CAPITAL RESOURCES The Company's business is seasonal with first quarter sales (February through April) being lower than sales during the other three quarters, while fourth quarter sales (November through January) have represented approximately 29% of the full year's retail sales in recent years and normally involve a greater proportion of higher margin sales. The Company has satisfied its seasonal liquidity requirements primarily through a combination of funds provided from operations and from a revolving credit facility. Funds provided by operating activities totaled $17,640 in fiscal 1998, and funds used by operating activities totaled $11,577 in fiscal 1997. Funds provided from operations totaled $4,967 in fiscal 1996. The positive change in cash flow from operating activities from fiscal 1997 to fiscal 1998 was primarily the result of improved operating results, a net decrease in inventory and increases in operating and tax liabilities. The change in cash flow from operating activities from fiscal 1996 to fiscal 1997 was primarily the result of planned net increases in inventory and other operating assets and decreases in accounts payable and other operating liabilities. These decreases in cash flow were offset in part by changes in deferred income taxes. 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 from $70,000, which had been the limit throughout fiscal 1997. Prior to March 17, 1997, borrowings under the Agreement bore interest at a rate which was .75% per annum greater than the applicable prime rate. Effective March 17, 1997, borrowings under the Agreement bear interest at a rate which is tied to prime rate or 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 from time to time. Such borrowings are secured by security interests in all of the current assets (including inventory) of Pamida and by liens on certain real estate interests and other property of Pamida. The Company and two subsidiaries of Pamida have guaranteed the payment and performance of Pamida's obligations under the Loan and Security 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 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 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-lease-back 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 $45,194 at February 1, 1998 and $57,115 at February 2, 1997. 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 $172,445 at February 1, 1998 and $201,999 at February 2, 1997. 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 February 1, 1998, 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 had been repaid, the quarterly interest payments on the promissory notes of the Company were to be paid-in-kind. As discussed in Note B to the financial statements, the Company repaid all of the promissory notes with common stock of the Company on November 18, 1997. As described in Note B to the financial statements, the Company reclassified all preferred stock into common stock effective November 18, 1997. Accordingly, the Company has no remaining obligations related to the preferred stock as of the end of fiscal 1998. Pamida paid the Company $315 in fiscal 1996 under a tax-sharing agreement to enable the Company to pay quarterly dividends to its preferred stockholders. During fiscal 1996, the Company received $967 from Pamida under a tax-sharing agreement as a reimbursement for certain tax benefits derived by Pamida. Such remittance, along with $18 from the exercise of certain stock options, was used by the Company to redeem Subordinated Promissory Notes as described in Note N to the financial statements, to repay intercompany balances totaling $29, and to pay quarterly dividends on preferred stock. Since the Company conducts no operations of its own, prior to the November 18, 1997 reclassification of the preferred stock, the only cash requirement of the Company related to preferred stock dividends in the aggregate annual amount of approximately $316; and Pamida was expressly permitted under its 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, 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 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. The Company made capital expenditures of $6,654 in fiscal 1998 compared to $4,947 during fiscal 1997. The Company also made expenditures of $3,848 and $3,680 in fiscal 1998 and 1997, respectively, related to information systems software. The Company plans to open eight new stores in fiscal 1999 and will consider additional opportunities for new store locations as they arise. Capital expenditures and information systems software costs are expected to total approximately $13,000 in fiscal 1999. 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 1997 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, distribution and infrastructure enhancements and working capital. 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 additional capital structure changes. Currently, it is not possible for the Company to predict with any certainty either the timing or the availability of such additional financing. YEAR 2000 COMPLIANCE The Company has developed a comprehensive plan to mitigate the Company's exposure to potential problems with its systems' ability to properly process data beyond the calendar year 1999, which is commonly referred to as Year 2000 compliance. The Company has completed implementation of several new systems and is at various stages of implementation of others which replace legacy systems. The Company plans to complete installation of current releases or upgrades for all of these systems no later than July, 1999 to help ensure that these systems will be Year 2000 compliant. All of these systems have substantially improved functionality over the Company's legacy systems which they replace and will, therefore, be capitalized. Failure to implement such releases or upgrades, or the failure of the vendors of the aforementioned software to have eliminated the potential Year 2000 issues within the software, could materially and adversely affect the Company's operations and financial results. The cost of directly addressing Year 2000 compliance for legacy systems which are not planned to be replaced by new systems is being charged to expense as incurred and is not expected to be material. 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, Year 2000 compliance 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. The Company further cautions that the forward-looking information contained herein is not exhaustive or exclusive. The Company does not undertake to update any forward-looking statements which may be made from time to time by or on behalf of the Company. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY INDEPENDENT AUDITORS' REPORT INDEPENDENT AUDITORS' REPORT Board of Directors Pamida Holdings Corporation Omaha, Nebraska We have audited the accompanying consolidated balance sheets of Pamida Holdings Corporation and subsidiary as of February 1, 1998 and February 2, 1997, and the related consolidated statements of operations, common stockholders' equity and cash flows for each of the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. The consolidated statements of operations, common stockholders' equity and cash flows of Pamida Holdings Corporation and subsidiary for the year ended January 28, 1996, were audited by other auditors, whose report, dated March 26, 1996, expressed an unqualified opinion on those statements and included an explanatory paragraph that described the adoption of Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such 1998 and 1997 financial statements present fairly, in all material respects, the financial position of Pamida Holdings Corporation and subsidiary as of February 1, 1998 and February 2, 1997, and the results of their operations and their cash flows for the years then ended in conformity with generally accepted accounting principles. /s/ DELOITTE & TOUCHE LLP DELOITTE & TOUCHE LLP Omaha, Nebraska March 5, 1998 REPORT OF INDEPENDENT ACCOUNTANTS Board of Directors Pamida Holdings Corporation Omaha, Nebraska We have audited the accompanying consolidated statements of operations, common stockholders' equity and cash flows of Pamida Holdings Corporation and Subsidiary for the year ended January 28, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the results of operations and cash flows of Pamida Holdings Corporation and Subsidiary for the year ended January 28, 1996, in conformity with generally accepted accounting principles. As discussed in Note P to the consolidated financial statements, the Company adopted Statement of Financial Accounting Standards No 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets To Be Disposed of." /s/ Coopers & Lybrand L.L.P. Chicago, Illinois March 26, 1996
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLAR AMOUNTS IN THOUSANDS - EXCEPT PER SHARE DATA) Fiscal Year Ended ------------------------------------- February 1, February 2, January 28, 1998 1997 1996 (52 Weeks) (53 Weeks) (52 Weeks) --------- --------- --------- Sales .......................................................... $ 657,017 $ 633,189 $ 736,315 Cost of goods sold ............................................. 495,082 479,099 558,627 --------- --------- --------- Gross profit ................................................... 161,935 154,090 177,688 --------- --------- --------- Expenses: Selling, general and administrative ........................ 129,031 125,105 151,096 Interest ................................................... 29,618 29,781 29,526 Long-lived asset write-off ................................. - - 78,551 Store closing costs ........................................ - - 21,397 --------- --------- --------- 158,649 154,886 280,570 --------- --------- --------- Income (loss) before provision for income taxes and extraordinary item ............................... 3,286 (796) (102,882) Income tax benefit ............................................. - - (7,863) --------- --------- --------- Income (loss) before extraordinary item ........................ 3,286 (796) (95,019) Extraordinary item ............................................. 1,735 - 371 --------- --------- --------- Net income (loss) .............................................. 5,021 (796) (94,648) Effect of preferred stock reclassification ..................... 756 - - Less provision for preferred dividends and discount amortization (407) (391) (362) --------- --------- --------- Net income (loss) available for common shares .................. $ 5,370 $ (1,187) $ (95,010) ========= ========= ========= Basic income (loss) per share: Income (loss) before extraordinary item..................... $ .62 $ (.24) $ 19.07) Extraordinary item.......................................... .30 - .08 --------- --------- --------- Basic income (loss)......................................... $ .92 $ (.24) $ (18.99) ========= ========= ========= Diluted income (loss) per share: Income (loss) before extraordinary item..................... $ .62 $ (.24) $ (19.07) Extraordinary item.......................................... .29 - .08 --------- --------- ---------- Diluted income (loss)....................................... $ .91 $ (.24) $ (18.99) ========= ========= ========= See notes to consolidated financial statements.
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS (DOLLAR AMOUNTS IN THOUSANDS - EXCEPT PER SHARE DATA) February 1, February 2, ASSETS 1998 1997 ----------- ----------- Current assets: Cash................................................................................ $ 6,816 $ 6,973 Accounts receivable, less allowance for doubtful accounts of $50 in both years...... 8,384 6,919 Merchandise inventories............................................................. 152,927 157,490 Prepaid expenses.................................................................... 2,838 2,993 Property held for sale.............................................................. - 1,748 ----------- ----------- Total current assets............................................................. 170,965 176,123 Property, buildings and equipment, net.................................................. 40,812 42,403 Leased property under capital leases, less accumulated amortization of $15,387 and $14,604, respectively................................... 25,181 27,713 Deferred financing costs................................................................ 2,755 3,176 Other assets............................................................................ 20,368 19,773 ----------- ----------- $ 260,081 $ 269,188 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable.................................................................... $ 47,687 $ 54,245 Loan and security agreement......................................................... 45,194 57,115 Accrued compensation................................................................ 5,768 3,860 Accrued interest.................................................................... 6,668 7,668 Store closing reserve............................................................... 1,564 4,521 Other accrued expenses.............................................................. 12,227 10,112 Income taxes - deferred and current payable......................................... 12,546 8,101 Current maturities of long-term debt................................................ 47 47 Current obligations under capital leases............................................ 1,843 1,781 ----------- ----------- Total current liabilities........................................................ 133,544 147,450 Long-term debt, less current maturities................................................. 140,289 168,000 Obligations under capital leases, less current obligations.............................. 32,156 33,999 Reserve for dividends................................................................... - 342 Other long-term liabilities............................................................. 6,367 4,825 Commitments and contingencies (Note O).................................................. - - Preferred stock subject to mandatory redemption: 16-1/4% senior cumulative preferred stock, $1 par value; 514 shares authorized; 0 and 514 shares issued and outstanding................... - 514 14-1/4% junior cumulative preferred stock, $1 par value; 1,627 and 6,986 shares authorized; 0 and 1,627 shares issued and outstanding; redemption amount of $0 and $1,627, less unamortized discount.................... - 1,361 Common stockholders' equity: Common stock, $.01 par value; 25,000,000 and 10,000,000 shares authorized; 5,970,439 and 5,004,942 shares issued and outstanding...................................... 60 50 Nonvoting common stock, $.01 par value; 4,000,000 and 2,000,000 shares authorized; 3,050,473 and 0 shares issued and outstanding.................................... 30 - Additional paid-in capital.......................................................... 30,586 968 Accumulated deficit................................................................. (82,951) (88,321) ----------- ----------- Total common stockholders' deficit............................................... (52,275) (87,303) ----------- ----------- $ 260,081 $ 269,188 =========== =========== See notes to consolidated financial statements.
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY (DOLLAR AMOUNTS IN THOUSANDS) Retained Nonvoting Additional Earnings Common Common Paid-in (Accumulated Stock Stock Capital Deficit) --------- --------- --------- --------- Balance at January 29, 1995............................. $ 50 $ - $ 950 $ 7,876 Net loss.............................................. - - - (94,648) Amortization of discount on 14-1/4% junior cumulative preferred........................ - - - (47) Cash dividends to preferred stockholders.............. - - - (315) Stock sold under incentive stock option plan.......... - - 18 - --------- --------- --------- --------- Balance at January 28, 1996............................. 50 - 968 (87,134) Net loss.............................................. - - - (796) Amortization of discount on 14-1/4% junior cumulative preferred........................ - - - (49) Accrued dividends for preferred stockholders - - (342) --------- --------- --------- --------- Balance at February 2, 1997............................. 50 - 968 (88,321) Net income............................................ - - _ 5,021 Amortization of discount on 14-1/4% junior cumulative preferred..................... - - - (38) Accrued dividends for preferred stockholders.......... - - - (369) Reclassification of preferred stock into common stock. 3 - 1,811 756 Payment of notes with common stock.................... 7 30 20,236 - Gain on payment of notes held by Venture (net of tax). - - 7,571 - --------- --------- --------- --------- Balance at February 1, 1998............................. $ 60 $ 30 $ 30,586 $ (82,951) ========= ========= ========= ========= See notes to consolidated financial statements.
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLAR AMOUNTS IN THOUSANDS) Fiscal Year Ended ------------------------------------------- February 1, February 2, January 28, 1998 1997 1996 (52 Weeks) (53 Weeks) (52 Weeks) ----------- ----------- ----------- Cash flows from operating activities: Net income (loss) $ 5,021 $ (796) $ (94,648) ----------- ----------- ----------- Adjustments to reconcile net income (loss) to net cash from operating activities: Depreciation and amortization............................... 12,593 11,658 15,345 Provision (credit) for LIFO inventory valuation............. 606 874 (585) Provision (credit) for deferred income taxes................ (3,297) 3,305 (6,647) Noncash interest expense.................................... 3,974 4,473 3,910 Gain on disposal of assets.................................. (150) (56) (982) Deferred retirement benefits................................ (142) (125) 13 Extraordinary item.......................................... (1,735) - (371) Long-lived assets write-off................................. - - 78,551 Store closing costs......................................... (3,457) (3,726) 21,397 Decrease (increase) in merchandise inventories.............. 3,957 (7,527) 4,532 Increase in other operating assets.......................... (4,730) (5,622) (3,847) Decrease in accounts payable................................ (6,558) (8,842) (6,749) Increase (decrease) in income taxes payable................. 3,537 (3,250) (4,607) Increase (decrease) in other operating liabilities.......... 8,021 (1,943) (345) ----------- ----------- ----------- Total adjustments............................................. 12,619 (10,781) 99,615 ----------- ----------- ----------- Net cash from operating activities............................ 17,640 (11,577) 4,967 ----------- ----------- ----------- Cash flows from investing activities: Capital expenditures............................................ (6,654) (4,947) (9,265) Proceeds from disposal of assets................................ 1,701 917 1,163 Principal payments received on notes receivable................. 18 16 15 Assets acquired for sale........................................ - (391) - Changes in constructed stores to be refinanced through lease financing.................................................... 1,790 (5,845) (4,412) ----------- ----------- ----------- Net cash from investing activities............................ (3,145) (10,250) (12,499) ----------- ----------- ----------- Cash flows from financing activities: Borrowings (payments) under loan and security agreement, net.... (11,921) 25,527 10,986 Principal payments on other long-term debt...................... (75) (1,335) (193) Dividends paid on preferred stock............................... - - (315) Principal payments on promissory notes.......................... - - (641) Payments for deferred finance costs............................. (225) (54) (13) Principal payments on capital lease obligations................. (1,781) (2,636) (2,071) Fees related to payment of debt and reclasification of preferred stock............................................ (650) - - Proceeds from sale of stock..................................... - - 18 ----------- ----------- ----------- Net cash from financing activities............................ (14,652) 21,502 7,771 ----------- ----------- ----------- Net (decrease) increase in cash................................. (157) (325) 239 Cash at beginning of year....................................... 6,973 7,298 7,059 ----------- ----------- ----------- Cash at end of year............................................. $ 6,816 $ 6,973 $ 7,298 =========== =========== =========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid (received) during the year for: Interest...................................................... $ 25,834 $ 24,804 $ 25,691 Income taxes: Payments to taxing authorities.............................. 112 386 3,622 Refunds received from taxing authorities.................... (3,952) (442) (231) SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES: Capital lease obligations incurred when the Company entered into lease agreements for new store facilities and equipment. $ - $ 11 $ 620 Capital lease obligations terminated............................ - - 154 Amortization of discount on junior cumulative preferred stock recorded as a direct charge to retained earnings............. 38 49 47 Payment of interest in kind by increasing the principal amount of the notes................................ 3,561 4,141 3,702 Provision for dividends payable................................. 369 342 - Common stock issued in payment of notes and reclassification of preferred stock...................... 8,690 - - Nonvoting common stock issued in payment of notes............... 27,454 - - Notes paid with, and preferred stock reclassified into, common stock................................................. (36,144) - - See notes to consolidated financial statements.
PAMIDA HOLDINGS CORPORATION AND SUBSIDIARY NOTES TO CONSOLDIATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS - EXCEPT PER SHARE DATA) A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Pamida Holdings Corporation (the "Company") was formed for the sole purpose of acquiring Pamida, Inc. ("Pamida") through a merger in a leveraged buy-out transaction which was consummated on July 29, 1986. CONSOLIDATION - The consolidated financial statements include the results of operations, account balances and cash flows of the Company and its wholly-owned subsidiary, Pamida, and of Seaway Importing Company ("Seaway") and Pamida Transportation Company, wholly-owned subsidiaries of Pamida. All material intercompany accounts and transactions have been eliminated in consolidation. FISCAL YEAR - All references in these financial statements to fiscal years are to the calendar year in which the fiscal year ends. LINE OF BUSINESS - Through Pamida, the Company is engaged in the operation of general merchandise retail stores in a fifteen-state Midwestern, North Central and Rocky Mountain area. Seaway imports primarily seasonal merchandise for sale to Pamida. Pamida Transportation Company operated as a contract carrier for Pamida until July 1995, at which time independent contractors were engaged to provide all transportation needs of the Company. Because of the similarity in nature of the Company's businesses, the Company considers itself to be a single business segment. REVENUE RECOGNITION - Pamida operates its stores on a self-service, primarily cash-and-carry basis. Because of the insignificance of sales returns, revenue is recognized at the point-of-sale without allowance for returns. CASH FLOW REPORTING - For purposes of the statement of cash flows, the Company considers all temporary cash investments purchased with a maturity of three months or less to be cash equivalents. There were no temporary investments at February 1, 1998 and February 2, 1997. MERCHANDISE INVENTORIES - Substantially all of the Company's inventory is stated at the lower of cost (last-in, first-out) or market. PROPERTY, BUILDINGS AND EQUIPMENT - Property, buildings and equipment are stated at cost and depreciated on the straight-line method over the estimated useful lives. Buildings and building improvements are generally depreciated over 8-40 years, while store, warehouse and office equipment, vehicles and aircraft equipment are generally depreciated over 3-10 years. Leasehold improvements are depreciated over the life of the lease or the estimated life of the asset, whichever is shorter. LEASED PROPERTY UNDER CAPITAL LEASES - Noncancellable financing leases are capitalized at the estimated fair value of the leasehold interest and are amortized on the straight-line method over the terms of the leases. LONG-LIVED ASSETS - When facts and circumstances indicate potential impairment, the Company evaluates the recoverability of asset carrying values, including associated goodwill, using estimates of future cash flows over remaining asset lives. When impairment is indicated, any impairment loss is measured by the excess of carrying values over fair values. DEFERRED FINANCING COSTS AND ORIGINAL ISSUE DEBT DISCOUNT - Deferred financing costs are being amortized using the straight-line method over the terms of the issues which approximates the effective interest method. Original issue debt discount is being amortized using the effective interest method over the terms of the issues. ADVERTISING COSTS - Advertising costs are expensed as incurred and totaled $10,468, $11,653 and $16,381 for fiscal years 1998, 1997 and 1996, respectively. PRE-OPENING EXPENSES - Costs related to opening new stores are expensed as incurred. STOCK-BASED COMPENSATION - The Company accounts for its stock-based compensation under the provisions of Accounting Principles Board Opinion 25, Accounting for Stock Issued to Employees (APB 25). EARNINGS PER SHARE - In February 1997, the Financial Accounting Standards Board ("FASB") adopted Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share." SFAS 128 requires dual presentation of basic and diluted earnings per share for all periods for which an income statement is presented. Basic income per common share is based on the weighted average outstanding common shares during the respective period. Diluted income per share is based on the weighted average outstanding common shares and the effect of all dilutive potential common shares, including stock options. All prior period income per share data has been restated in accordance with SFAS 128. USE OF ESTIMATES - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NEW ACCOUNTING PRONOUNCEMENTS - In June 1997, the FASB adopted SFAS No. 130, "Reporting Comprehensive Income", and No. 131, "Disclosures about Segments of an Enterprise and Related Information". SFAS 130 establishes standards for reporting and display of comprehensive income and its components in a full set of general purpose financial statements. This statement is effective for the Company's fiscal 1999 financial statements. SFAS 131, also effective in fiscal 1999, redefines how operating segments are determined and requires disclosure of certain financial and descriptive information about a company's operating segments. The Company currently complies with most provisions of the statements and any incremental disclosure required is expected to be minimal. RECLASSIFICATIONS - Certain reclassifications have been made to prior years' financial statements to conform to the current year presentation. B. EXCHANGE OF DEBT AND PREFERRED STOCK FOR COMMON STOCK AND RELATED EXTRAORDINARY ITEM On November 14, 1997, the stockholders of the Company approved various proposals necessary to effect the payment of all of the Company's outstanding Senior Promissory Notes, Subordinated Promissory Notes and Junior Subordinated Promissory Notes (collectively, the "Notes") with common stock and to change and reclassify all of the Company's outstanding preferred stock into common stock. In connection with these transactions, which became effective on November 18, 1997, the Company issued 965,497 shares of Common Stock and 3,050,473 shares of Nonvoting Common Stock. The Nonvoting Common Stock was issued only to 399 Venture Partners, Inc. ("Venture"), an affiliate of Citicorp, and is convertible into Common Stock on a share-for-share basis upon certain conditions. Common Stock was issued to all other holders of Notes and to all holders of Preferred Stock. The aggregate redemption value of the Preferred Stock at the effective date of the transactions was $2,968, comprised of $1,000 per share stated liquidation value plus accrued dividends. The aggregate principal amount and accrued interest on the Notes at the effective date of the transactions was $33,175. Based upon a value of $9 per share for purposes of the transactions, (i) 329,815 shares of Common Stock were issued to the holders of Preferred Stock resulting in a net gain to the Company of $756, credited directly to retained earnings, (ii) 635,682 shares of Common Stock were issued to Note holders other than Venture resulting in a net gain to the Company of $1,735, reflected as an extraordinary item in the consolidated statement of operations, and (iii) 3,050,473 shares of Nonvoting Common Stock were issued to Venture resulting in a net gain to the Company of $7,571, credited directly to paid-in capital. These net gains represent the excess of the value of the Common Stock for purposes of the transactions over the value of the stock as determined by the closing market price of the Common Stock as of the transaction date, net of applicable transaction costs, unamortized discounts, and income taxes. C. NET INCOME PER COMMON SHARE The following table provides a reconciliation between basic and diluted income per share (income and shares in thousands):
1998 1997 1996 --------------------------- --------------------------- --------------------------- Per-Share Per-Share Per-Share Income Shares Amount Income Shares Amount Income Shares Amount --------------------------- --------------------------- --------------------------- Income (loss) before extraordinary item $3,286 $ (796) $(95,019) Less provision for preferred dividends and discount amortization (407) (391) (362) Effect of preferred stock reclassification 756 - - ------ ------ -------- Basic income (loss) per share before extraordinary item 3,635 5,843 $ .62 (1,187) 5,005 $ (. 24) (95,381) 5,003 $ (19.07) Effect of dilutive stock options - 32 - - - - --------------------------- --------------------------- --------------------------- Diluted income (loss) per share before extraordinary item $3,635 5,875 $ .62 $(1,187) 5,005 $ (.24) $(95,381) 5,003 $ (19.07) =========================== =========================== ============================
D. MERCHANDISE INVENTORIES Total inventories would have been higher at February 1, 1998 and February 2, 1997 by $7,180 and $6,574, respectively, had the FIFO (first-in, first-out) method been used to determine the cost of all inventories. On a FIFO basis, net income (loss) before extraordinary item would have been $3,892, $78 and $(95,604), respectively, for fiscal years 1998, 1997, and 1996. During fiscal years 1998, 1997, and 1996, certain inventory quantities were reduced resulting in a liquidation of certain LIFO layers carried at costs which were lower than the cost of current purchases, the effect of which increased net income by $263, $116, and $125, respectively. E. PROPERTY, BUILDINGS AND EQUIPMENT Property, buildings and equipment consists of: Feb. 1, Feb. 2, 1998 1997 --------- --------- Land and land improvements..................... $ 4,030 $ 4,013 Buildings and building improvements............ 22,183 22,076 Store, warehouse and office equipment.......... 59,842 59,668 Vehicles and aircraft equipment................ 1,551 1,513 Leasehold improvements......................... 16,944 16,497 --------- --------- 104,550 103,767 Less accumulated depreciation and amortization. 63,738 61,364 --------- --------- $ 40,812 $ 42,403 ========= ========= F. OTHER ASSETS Other assets consist of: Feb. 1, Feb. 2, 1998 1997 --------- --------- Constructed stores to be refinanced through lease financing.............................. $ 7,969 $ 10,257 Unamortized software costs, net................ 10,435 7,541 Other.......................................... 1,964 1,975 --------- --------- $ 20,368 $ 19,773 ========= ========= The Company contracted for the construction of two and five store locations during the periods ended January 28, 1996 and February 2, 1997, respectively. The construction costs capitalized are recorded as other long-term assets during the period of construction and for the period following completion of construction to the date of sale of such stores through a lease financing arrangement. The construction costs for five stores remain in Other Assets at February 1, 1998. The cost of construction has been financed through the Company's working capital and cash flow from operations. The Company expects to obtain lease financing under favorable terms for each of the constructed stores in the near future. G. FINANCING AGREEMENTS Effective March 17, 1997, the term of Pamida'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 from $70,000, which had been the limit throughout fiscal 1997. Prior to March 17, 1997, borrowings under the Agreement bore interest at a rate which was 0.75% per annum greater than the applicable prime rate. Effective March 17, 1997, borrowings under the Agreement bear interest at a rate which is tied to the applicable prime rate or the London Interbank Offered Rate (LIBOR), generally at Pamida's discretion. The amounts Pamida is permitted to borrow under the Agreement are determined by a formula based upon the amount of Pamida's eligible inventory from time to time. Borrowings of Pamida under the Agreement are secured by security interests in substantially 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 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 will affect, among other things, the ability of Pamida to incur additional indebtedness, pay dividends, repay indebtedness prior to its stated maturity, create liens, enter into leases, sell assets or engage in mergers or acquisitions, make capital expenditures and make investments. The maximum amount of borrowings under the Agreement during fiscal 1998 and 1997 was $66,461 and $69,256, respectively. The weighted average amounts of borrowings under the Agreement for fiscal 1998 and 1997 were $52,869 and $43,002, respectively; and the weighted average interest rates were 9.8% and 10.0%, respectively. Long-term debt consists of: Feb. 1, Feb. 2, 1998 1997 -------- -------- Senior Subordinated Notes, 11.75%, due March 2003 .. $140,000 $140,000 Industrial development bond, 5.5%, due in monthly installments through 2005......................... 336 411 Senior promissory notes, 15.5%, interest paid in kind quarterly................................. - 4,926 Subordinated promissory notes, 16%, interest paid in kind quarterly................................. - 13,454 Junior subordinated promissory notes, 16.25%, net of unamortized discount of $0 and $878, interest paid in kind quarterly................................. - 9,256 -------- -------- 140,336 168,047 Less current maturities............................. 47 47 -------- -------- $140,289 $168,000 ======== ======== As of February 1, 1998, the fair value of long-term debt was $144,489 compared to its recorded value of $140,289. The fair value of long-term debt was estimated based on quoted market values for the notes. The aggregate maturities of long-term debt totals $47 in each of the next five fiscal years. The Senior Subordinated Notes are unsecured and are subordinate borrowings under the Agreement. Presently, under the most restrictive debt covenants, the Company is not permitted to pay dividends on its common stock. The senior, subordinated and junior subordinated promissory notes of the Company were amended to provide that, until the obligations of the Company and Pamida under certain loan agreements had been paid in full, the quarterly interest payments on the notes were to be paid-in-kind by increasing the principal amount of each note on the applicable quarterly payment date by the amount of accrued interest then being paid-in-kind. Interest on the notes paid-in-kind accrued at a rate which, in each case, was two percentage points higher than the applicable cash interest rate. See Note B describing the transaction effecting the payment of these notes with shares of common stock of the Company which was effective November 18, 1997. H. INCOME TAXES Components of the income tax provision (benefit) from continuing operations are as follows: Year Ended ---------------------------- Feb. 1, Feb. 2, Jan. 28, 1998 1997 1996 ------- ------- ------- Current: Federal..................................... $ 491 $(3,155) $ (993) State....................................... 311 (150) (223) ------- ------- ------- 802 (3,305) (1,216) ------- ------- ------- Deferred: Federal..................................... (1,616) 3,189 (5,865) State....................................... (330) 116 (782) Utilization of tax benefit carryforward....... 2,718 - - Change in beginning of year valuation allowance......................... (1,574) - - ------- ------- ------- (802) 3,305 (6,647) ------- ------- ------- Total benefit from continuing operations...... $ - $ - $(7,863) ======= ======= ======= The differences between the U.S. Federal statutory tax rate and the Company's effective tax rate are as follows: Year Ended ---------------------------- Feb. 1, Feb. 2, Jan. 28, 1998 1997 1996 ------- ------- ------- Statutory rate................................ 34.0% (34.0)% (34.0)% State income tax effect....................... 4.6 (2.8)% (1.3)% Amortization of the excess of cost over net assets acquired......................... - - 23.9 Valuation allowance........................... (40.9) 25.1 3.6 Accretion of discount on junior subordinated debt........................... 1.3 6.8 0.1 Other......................................... 1.0 4.9 0.1 ------- ------- ------- - - (7.6)% ======= ======= ======= In fiscal 1998, income tax expense allocated to the extraordinary item was $379 and income tax expense charged directly to stockholders' equity was $1,821. These amounts are net of a change in the beginning of year valuation allowance of $2,495. Significant temporary differences between reported and taxable income that give rise to deferred tax assets and liabilities were as follows: Feb. 1, Feb. 2, 1998 1997 ------- ------- Net current deferred tax liabilities: Inventories................................. $13,910 $15,302 Prepaid insurance........................... 172 210 Other....................................... 423 412 Post employment health costs................ (135) (189) Accrued expenses............................ (2,192) (941) Store closing costs......................... (1,246) (2,570) ------- ------- Net current deferred tax liabilities...... 10,932 12,224 ------- ------- Net long-term deferred tax liabilities: Property, buildings and equipment........... 2,096 2,862 Other....................................... 1,836 1,436 Valuation allowance......................... - 4,069 Capital leases.............................. (3,377) (3,089) Tax benefit carryforward.................... (800) (3,518) ------- ------- Net long-term deferred tax (asset) liabilities (245) 1,760 ------- ------- Net total deferred tax liabilities............ $10,687 $13,984 ======= ======= Net long-term deferred tax (asset) liabilities are classified with other assets or other long-term liabilities in the consolidated balance sheets of the Company. As of February 1, 1998 the Company had alternative minimum tax credit carryforwards totaling $800, which do not expire. I. LEASES The majority of store facilities are leased under noncancelable leases. Substantially all of the leases are net leases which require the payment of property taxes, insurance and maintenance costs in addition to rental payments. Certain leases provide for additional rentals based on a percentage of sales and have renewal options for one or more periods totaling from one to twenty years. At February 1, 1998 the future minimum lease payments under capital and operating leases with rental terms of more than one year amounted to: Fiscal Year Ending Capital Operating Leases Leases -------- -------- 1999....................................... $ 5,659 $ 10,996 2000....................................... 5,442 8,867 2001....................................... 5,352 7,554 2002....................................... 5,267 6,788 2003....................................... 5,255 6,076 Later years................................ 36,129 61,356 -------- -------- Total minimum obligations.................. 63,104 $101,637 -------- ======== Less amount representing interest.......... 29,105 -------- Present value of net minimum lease payments 33,999 Less current portion....................... 1,843 -------- Long-term obligations...................... $ 32,156 ======== The minimum rentals under operating leases have not been reduced by minimum sublease rentals of $157 due in the future under noncancelable subleases. Total rental expense related to all operating leases (including those with terms less than one year) is as follows: Year Ended --------------------------- Feb. 1, Feb. 2, Jan. 28, 1998 1997 1996 ------- ------- ------- Minimum rentals............................ $11,669 $10,938 $11,715 Contingent rentals......................... 272 258 399 Less sublease rental income................ (705) (735) (852) ------- ------- ------- $11,236 $10,461 $11,262 ======= ======= ======= J. SAVINGS AND OTHER POSTEMPLOYMENT BENEFITS PLANS Pamida has adopted a 401(k) plan that covers all employees who are 21 years of age with one or more years of service. Participants can contribute from 1% to 15% of their pre-tax compensation. Pamida has currently elected to match 50% of the participant's contribution up to 5% of compensation. Pamida's savings plan contribution expenses for fiscal years 1998, 1997 and 1996, were $765, 770, and $749, respectively. Prior to December 1993, the Company had agreed to continue to provide health insurance coverage and pay a portion of the health insurance premiums until age 65 for individuals who retire if the individual was eligible to participate in the plan, had attained age 55, had completed ten or more consecutive years of service and elected to continue on the Company plan. The plan is unfunded, and the Company had the right to modify or terminate these benefits. In December 1993, the Company amended the Plan to no longer offer postretirement health benefits for employees retiring after February 1, 1994. The components of periodic expense for postretirement benefits in fiscal 1998, 1997 and 1996 were as follows: Feb. 1, Feb. 2, Jan. 28, 1998 1997 1996 ------ ------ ------ Annual postretirement benefit expense: Interest cost............................... $ 11 $ 16 $ 32 Amortization of unrecognized net obligations (73) (44) (6) ------ ------ ------ Annual postretirement benefit (income) expense $ (62) $ (28) $ 26 ====== ====== ====== The accumulated postretirement benefit obligation consists of: Feb. 1, Feb. 2, 1998 1997 ------ ------ Accumulated postretirement benefit obligation.......................... $ 163 $ 194 Unrecognized gain............................. 189 299 ------ ------ Accrued expense............................... $ 352 $ 493 ====== ====== A 5% increase in the cost of covered health care benefits was assumed for both fiscal 1998 and 1997. The rate of 5% is assumed to remain level after fiscal 1998. Assuming a 1% increase in the health care trend rate, the annual postretirement benefit expense would remain the same for both fiscal 1998 and 1997, and the unfunded accumulated postretirement benefit obligation would increase by $2 and $4 for fiscal 1998 and 1997, respectively. The weighted average discount rate used in determining the accumulated postretirement benefit obligation was 7.0% for both fiscal 1998 and 1997. K. PREFERRED STOCK SUBJECT TO MANDATORY REDEMPTION See Note B describing the change and reclassification of all preferred stock into common stock of the Company, effective November 18, 1997. Prior to the reclassification, the Company was obligated to redeem all outstanding shares of senior cumulative and junior cumulative preferred stock on December 31, 2001, at a price not to exceed the liquidation value which was $1,000 per share plus any accrued dividends. Subject to certain loan restrictions, the Company could, at any time, have redeemed all or any portion of the preferred stock outstanding at a price of $1,000 per share plus any accrued dividends. Each share of senior cumulative and junior cumulative preferred stock entitled its holder to receive a quarterly dividend of 16.25% and 14.25% per annum, respectively, of the liquidation value from the date of issuance until redeemed. Both series of preferred stock were nonvoting, and any unpaid dividends were added to the liquidation value until paid. The General Corporation Law of the State of Delaware, under which the Company and Pamida 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 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 1998 or 1997 and could pay cash dividends in ensuing years only to the extent that the Company and Pamida satisfied the applicable statutory standards which included the Company's having a net worth equal to at least the aggregate par value of the preferred stock which amounted to $2. A provision for preferred stock dividends has been recorded in the fiscal 1998 and 1997 financial statements. The cumulative dividend rate on the preferred stock increased by 0.5% per quarter (with a maximum aggregate increase of 5%) on each quarterly dividend payment date on which the preferred stock dividends were not paid currently on a cumulative basis. As a result of the reclassification of the preferred stock into common stock, the Company's obligation for further preferred stock dividend payments or accrual has been eliminated. The difference between the fair value of the junior cumulative preferred stock at issuance and the mandatory redemption value was recorded through periodic accretions, using the effective interest method with a related charge to retained earnings. L. STOCK OPTIONS On November 24, 1992, the Board of Directors of the Company adopted the Pamida Holdings Corporation 1992 Stock Option Plan (the "Plan"), which was approved by the Company's stockholders in May 1993. The Plan, administered by a Committee of the Board of Directors, provides for the granting of options to key employees of the Company and its subsidiaries to purchase up to an aggregate of 350,000 shares of Common Stock of the Company. Options granted under the Plan may be either incentive stock options, within the meaning of Section 422 of the Internal Revenue Code, or non-qualified options. Options granted under the Plan will be exercisable during the period fixed by the Committee for each option; however, in general, no option will be exercisable earlier than one year after the date of its grant, and no incentive stock option will be exercisable more than ten years after the date of its grant. The option exercise price must be at least 100% of the fair market value of the Common Stock on the date of the option grant. No compensation expense related to stock options was recorded during fiscal 1998, 1997 or 1996. On March 5, 1998, the Board of Directors of the Company adopted the Pamida Holdings Corporation 1998 Stock Incentive Plan (the "1998 Plan") which will require approval by the stockholders to become effective. The 1998 Plan authorizes 500,000 shares of Common Stock for option grants or other awards to eligible officers and other key employees of the Corporation. No grants or other awards have been made under the 1998 Plan. The Company accounts for its stock-based compensation under the provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB Opinion No. 25), which utilizes the intrinsic value method. A summary of the Company's stock-based compensation activity related to stock options for the last three fiscal years is as follows:
Feb. 1, 1998 Feb. 2, 1997 Jan. 28, 1996 ------------------ ------------------ ------------------ Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise Number Price Number Price Number Price ------- -------- ------- -------- ------- -------- Outstanding - beginning of year 302,816 $ 4.39 296,546 $ 5.05 227,545 $ 4.33 Granted 40,700 3.06 86,800 2.37 122,205 6.80 Expired/terminated 21,083 4.93 80,530 4.66 48,246 6.22 Exercised - - - - 4,958 3.63 ------- -------- ------- -------- ------- -------- Outstanding - end of year 322,433 $ 4.19 302,816 $ 4.39 296,546 $ 5.05 ======= ======== ======= ======== ======= ========
There were 161,093, 123,616 and 85,474 options exercisable at February 1, 1998, February 2, 1997 and January 28, 1996, respectively. The following table summarizes information about stock options outstanding as of February 1, 1998: Options Outstanding Options Exercisable - ------------------------------------------------------- ---------------------- Weighted Average Weighted Weighted Remaining Average Average Range of Number Contractual Exercise Number Exercise Exercise Prices Outstanding Life Price Exercisable Price - --------------- ----------- ------------ -------- ----------- -------- $ 1.94 - $2.78 77,300 8.5 Years $ 2.36 15,460 $ 2.36 3.06 39,200 9.1 Years 3.06 - 0.00 3.63 - 5.75 167,933 6.2 Years 4.61 130,433 4.37 7.19 38,000 7.1 Years 7.19 15,200 7.19 - --------------- ----------- ------------ -------- ----------- -------- $ 1.94 - $7.19 322,433 7.2 Years $ 4.19 161,093 $ 4.45 =============== =========== ============ ======== =========== =======- If compensation cost for the Company's Plan had been determined based on the fair value at the grant dates for awards under the Plan consistent with the method of SFAS No. 123, Accounting for Stock-Based Compensation, the Company's net income and net income per share would have been reduced to the pro forma amounts indicated below: Feb. 1, Feb. 2, Jan. 28, 1998 1997 1996 ------ ------- -------- Net income (loss) As reported $5,370 $(1,187) $(95,010) Pro forma 5,326 (1,235) (95,046) Basic income (loss) per share As reported .92 (.24) (18.99) Pro forma .91 (.25) (19.00) Diluted income (loss) per share As reported .91 (.24) (18.99) Pro forma .91 (.25) (19.00) The weighted average fair value of options granted during the year was $1.43, $0.70 and $2.86 per option for fiscal 1998, 1997 and 1996, respectively. The fair value of options granted under the Plan was estimated at the date of grant using a binomial options pricing model with the following assumptions: Feb. 1, Feb. 2, Jan. 28, 1998 1997 1996 ------ ------ ------- Risk-free interest rate 6.5% 6.0% 7.0% Dividend yield 0.0% 0.0% 0.0% Expected volatility 8.4% 8.1% 8.1 % Expected life (years) 6.0 years 6.6 years 6.7 years M. CAPITAL STOCK As described in Note B, the Company issued an additional 965,497 shares of Common Stock and 3,050,473 shares of Nonvoting Common Stock during fiscal 1998. Accordingly, the Company had 5,970,439 shares of Common Stock and 3,050,473 shares of Nonvoting Common Stock outstanding at February 1, 1998. The Nonvoting Common Stock is held entirely by 399 Venture Partners, Inc. which is also the Company's largest holder of Common Stock. The Nonvoting Common Stock is convertible into Common Stock on a share-for-share basis upon certain conditions. The Company had 5,004,942 shares of Common Stock and no shares of Nonvoting Common Stock outstanding at February 2, 1997. N. EXTRAORDINARY ITEMS As described in Note B, on November 18, 1997 the Company issued 635,682 shares of common stock to certain holders of Notes which resulted in an extraordinary gain. On July 31, 1995, the Company made an offer to purchase for cash 39.5% of the aggregate outstanding principal amount of 14% Subordinated Promissory Notes (Notes) of Pamida Holdings Corporation. The offered purchase price was 50% of the principal amount to be purchased. In the third quarter of fiscal 1996, the Company redeemed Notes tendered in the aggregate principal amount of $1,281 and made cash payments of $641, resulting in an after-tax gain of $371. O. COMMITMENTS AND CONTINGENCIES Pamida has employment agreements with three key executive officers which expire in 2000 and 2001. In addition to a base salary, the agreements provide for a bonus to be paid if certain Company performance goals are achieved. Also, in March 1997, the Board of Directors approved a long-term incentive compensation program in order to enhance retention of certain key members of management. Payout under such program is tied to continued employment and future Company common stock price appreciation. During fiscal 1996, the Company received $967 from Pamida as a reimbursement for certain tax benefits derived by Pamida. Such remittance, along with $18 from the exercise of certain stock options, was used by the Company to redeem Subordinated Promissory Notes as described in Note N, to repay to Pamida intercompany balances totaling $29, and to pay quarterly dividends on preferred stock totaling $315. On February 1, 1998, the Company had standby letters of credit outstanding totaling $2,379 related to the Company's self-insured retention of worker's compensation liabilities and future rental payments on a warehouse. Additional letters of credit outstanding totaling $5,017 were committed for purchases of merchandise inventory. P. IMPAIRMENT OF LONG-LIVED ASSETS RECORDED IN FISCAL 1996 During fiscal 1996, weak trends in the retail industry combined with increasing competition lowered the operating results of the Company. Therefore, during the fourth quarter of fiscal 1996, management reviewed its expectations for near- and long-term performance of the Company and revised its income projections to reflect developing and projected trends, primarily in comparable-store-sales growth, gross margins, operating expenses and interest expenses. Consequently, the recoverability of the Company's long-lived assets was also reassessed. In the fourth quarter of fiscal 1996, the Company adopted Statement of Financial Accounting Standards No. 121 Accounting For the Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of (SFAS 121). This financial accounting standard requires the Company to perform an analysis of the recoverability of the net book value of long-lived assets. The Company analyzed cash flows on an individual store basis to assess recoverability of store level long-lived assets including allocated goodwill. As a result of this analysis, impairment was indicated at certain stores, and a noncash pre-tax charge was recorded as illustrated in the table below. The impairment losses were based on fair value which was determined through discounted cash flows for the particular stores utilizing a rate commensurate with the associated risks. The effect of this accounting change was to increase the net loss for the year by $24,693, or $4.94 per basic and diluted share. The Company also analyzed the value of its remaining goodwill and favorable leasehold interests not impaired under the store-level SFAS 121 analysis using its historical method under Accounting Principles Board Opinion No. 17 (APB 17) and determined that such remaining amounts also were impaired. For this analysis the value of the goodwill and favorable leasehold interests was determined by projecting aggregate net income and adjusting it by adding back amortization of intangible assets. With respect to the projections of net income used to evaluate intangible assets impairment, management made several assumptions in projecting their best estimate of the results of future operations of the Company. The most significant assumptions were an estimated remaining useful life of goodwill of fifteen years, modest annual comparable store sales growth, gross margin rates consistent with those experienced over the past fiscal year in the stores not being closed, an annual expense escalation consistent with recent inflation trends and the ability to refinance debt maturities as they come due. These assumptions resulted in aggregate undiscounted adjusted net income for the fifteen-year forecast period of approximately $5,186, which reflects aggregate pre-tax interest expense of approximately $398,000 payable in cash and $86,000 payable "in kind" (PIK). The $5,186 of aggregate adjusted net income for the fifteen-year forecast period also reflected projected adjusted net losses for fiscal 1997 of $4,522, which included cash interest expense of $26,242 and PIK interest of $4,453, and for fiscal 1998 of $2,863, which included cash interest expense of $26,581 and PIK interest of $5,121. For fiscal 1999, the Company projected adjusted net income of approximately $967, which included cash interest expense of approximately $26,581 and PIK interest of $5,889. Due to the uncertainty of projections beyond 1999, this level of adjusted net income was assumed to continue for each of the remaining fiscal years in the projection period. As a result of this evaluation in fiscal 1996, management concluded that the remaining goodwill and favorable leasehold interests were fully impaired. Pre-Tax Components of Long-Lived Asset Write-Off As Reflected in the Statement of Operations for the year ended January 28, 1996: SFAS APB 121 17 Total ------- ------- ------- Goodwill.......................... $20,607 $49,406 $70,013 Favorable leasehold interests..... 4,245 1,917 6,162 Property, buildings and equipment. 2,376 - 2,376 ------- ------- ------- Total............................. $27,228 $51,323 $78,551 ======= ======= ======= The goodwill was originally recorded in July 1986 when Pamida Holdings Corporation acquired Pamida, Inc. through a leveraged buy-out and represented the excess of the purchase price over the fair value of the net assets acquired. Goodwill had been amortized on a straight-line basis over a forty-year period but, due to the trends cited above, its estimated remaining useful life was adjusted to fifteen years during the fourth quarter of fiscal 1996. Q. STORE CLOSINGS IN FISCAL 1996 As discussed in Note P above, the Company's operating performance during fiscal 1996 was below plan. Management's analysis of individual stores' operations and cash flows resulted in the identification of forty unprofitable or competitive market stores which did not fit the Company's niche market strategy. Consequently, a charge was recorded at January 28, 1996 as indicated below to cover the costs necessary to close these stores. The Company received positive net cash flow from closing the stores due to cash generated from the disposition of related inventories. The amounts the Company will ultimately realize from the disposal of assets or pay on the resolution of liabilities may differ from the estimated amounts utilized in arriving at the income statement effect. Pre-Tax Components of fiscal 1996 Store Closing Costs: Income Statement Effect -------- Real estate exit costs and write-off of property, buildings, and equipment........................ $ 11,455 Inventory liquidation............................ 9,080 Professional charges............................. 314 Severance and other costs and fees............... 548 -------- Total............................................ $ 21,397 ======== The store closing reserve balance as of January 28, 1996 included amounts related to real estate, inventory, severance, professional fees and other costs of closing the forty stores. The liquidation of the closing stores inventory was completed in the second quarter of fiscal 1997. All known ancillary costs of the store closings have been paid except those related to the remaining real estate. During fiscal years 1997 and 1998, the Company negotiated settlements on twenty-five closed store properties which had been leased, three which had been subleased, and sold eight closed store properties which had been owned. As of February 1, 1998, the Company remains liable for lease obligations on seven closed store properties. The Company anticipates that final disposition of the remaining obligations will be completed in fiscal 1999 and 2000. There were no adjustments made during fiscal 1998 and 1997 to the store closing reserve other than cash inflows and outflows related to the store closings. The store closing reserve is presented in the balance sheets as follows: Feb. 1, Feb. 2, 1998 1997 -------- -------- Store closing reserve (short-term)............... $ 1,564 $ 4,521 Amount included in other long-term liabilities.......................... 1,690 2,190 -------- -------- Total............................................ $ 3,254 $ 6,711 ======== ======== R. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) The following is a summary of the quarterly results of operations for the years ended February 1, 1998 and February 2, 1997:
May 4, August 3, November 2, February 1, Fiscal 1998 1997 1997 1997 1998 Year - -------------------------------- ----------- ----------- ----------- ----------- ----------- Sales .......................... $ 144,564 $ 163,217 $ 158,749 $ 190,487 $ 657,017 Gross profit.................... 33,268 41,502 37,854 49,311 161,935 (Loss) income before extraordinary item............ (5,459) 563 340 7,842 3,286 Extraordinary item.............. - - - 1,735 1,735 Net (loss) income (5,459) 563 340 9,577 5,021 Effect of preferred stock reclassification.............. - - - 756 756 Less provision for preferred dividends and discount amortization.................. (105) (165) (137) - (407) ----------- ----------- ----------- ----------- ----------- Net (loss) income available for common shares $ (5,564) $ 398 $ 203 $ 10,333 $ 5,370 =========== =========== =========== =========== =========== Basic (loss) income per share: (Loss) income before extraordinary item.......... $ (1.11) $ .08 $ .04 $ 1.03 $ .62 Extraordinary item............ - - - .21 .30 ----------- ----------- ----------- ----------- ----------- Basic (loss) income........... $ (1.11) $ .08 $ .04 $ 1.24 $ .92 =========== =========== =========== =========== =========== Diluted (loss) income per share: (Loss) income before extraordinary item.......... $ (1.11) $ .08 $ .04 $ 1.02 $ .62 Extraordinary item............ - - - .21 .29 ----------- ----------- ----------- ----------- ----------- Diluted (loss) income......... $ (1.11) $ .08 $ .04 $ 1.23 $ .91 =========== =========== =========== =========== =========== April 28, July 28, October 27, February 2, Fiscal 1997 1996 1996 1996 1997 Year - -------------------------------- ----------- ----------- ----------- ----------- ----------- Sales........................... $ 131,786 $ 155,817 $ 151,980 $ 193,606 $ 633,189 Gross profit.................... 31,575 37,096 36,446 48,973 154,090 Net (loss) income............... (4,742) (1,294) 189 5,051 (796) Less provision for preferred dividends and discount amortization.................. (93) (97) (99) (102) (391) ----------- ----------- ----------- ----------- ----------- Net (loss) income available for common shares................. $ (4,835) $ (1,391) $ 90 $ 4,949 $ (1,187) =========== =========== =========== =========== =========== Basic and diluted (loss) income per share.............. $ (.97) $ (.28) $ .02 $ .99 $ (.24) =========== =========== =========== =========== ===========
INDEPENDENT AUDITORS' REPORT Board of Directors Pamida Holdings Corporation Omaha, Nebraska We have audited the consolidated balance sheets of Pamida Holdings Corporation and subsidiary as of February 1, 1998 and February 2, 1997, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the years then ended and have issued our report thereon dated March 5, 1998; such financial statements and report are included in this Annual Report on Form 10-K. Our audits also included the financial statement schedule of Pamida Holdings Corporation and subsidiary as of February 1, 1998 and February 2, 1997, and for each of the years then ended listed in Item 14(a)2. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. /s/ DELOITTE & TOUCHE LLP DELOITTE & TOUCHE LLP Omaha, Nebraska March 5, 1998 REPORT OF INDEPENDENT ACCOUNTANTS Our report on the consolidated financial statements of Pamida Holdings Corporation and Subsidiary for fiscal 1996 is included in this Form 1O-K. In connection with our audit of such financial statements, we have also audited the related financial statement Schedule I Condensed Financial Information of Registrant for such year included in this Form l0-K. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information required to he included therein. /s/ Coopers & Lybrand L.L.P. Chicago, Illinois March 26, 1996 PAMIDA HOLDINGS CORPORATION (Parent Company Only) (Dollar amounts in thousands) SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT BALANCE SHEETS - FEBRUARY 1, 1998 AND FEBRUARY 2, 1997 - -------------------------------------------------------------------------------- ASSETS 1998 1997 -------- -------- Current assets: Refundable income taxes due from subsidiary $ 2,335 $ 855 Investment in subsidiary (50,898) (57,531) Deferred financing costs - 52 -------- -------- $(48,563) $(56,624) ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accrued interest $ - $ 811 Other accrued expense 160 - Payable to Pamida, Inc. 516 15 -------- -------- Total current liabilities 676 826 Long-term debt - 27,636 Dividends payable - 342 Other long-term liabilities 3,036 - Preferred stock subject to mandatory redemption: 16-1/4% senior cumulative preferred stock, $1 par value; 514 shares authorized, 0 and 514 issued and outstanding - 514 14-1/4% junior cumulative preferred stock, $1 par value; 1,627 and 6,986 shares authorized; 0 and 1,627 shares issued and outstanding; redemption amount of $0 and $1,627 less unamortized discount - 1,361 Common stockholders' equity: Common stock, $.01 par value; 25,000,000 and 10,000,000 shares authorized; 5,970,439 and 5,004,942 shares issued and 0 shares issued and outstanding 60 50 Nonvoting common stock, $.01 par value; 4,000,000 and 2,000,000 shares authorized; 3,050,473 and 0 shares issued and outstanding 30 - Additional paid-in capital 29,895 968 Accumulated deficit (82,260) (88,321) -------- -------- Total common stockholders' deficit (52,275) (87,303) -------- -------- $(48,563) $(56,624) ======== ======== See notes to Parent Company Only financial statements.
PAMIDA HOLDINGS CORPORATION (Parent Company Only) (Dollar amounts in thousands) SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT STATEMENTS OF COMMON STOCKHOLDERS' EQUITY - -------------------------------------------------------------------------------- Retained Nonvoting Additional Earnings Common Common Paid-in (Accumulated Stock Stock Capital Deficit) ------- ------ --------- ------------ Balance at January 29, 1995............................. $ 50 $ - $ 950 $ 7,876 Net loss.............................................. - - - (94,648) Amortization of discount on 14-1/4% junior cumulative preferred......................... - - - (47) Cash dividends to preferred stockholders.............. - - - (315) Stock sold under incentive stock option plan.......... - - 18 - ------- ------ --------- ------------ Balance at January 28, 1996............................. 50 - 968 (87,134) Net loss.............................................. - - - (796) Amortization of discount on 14-1/4% junior cumulative preferred......................... - - - (49) Accrued dividends for preferred stockholders - - - (342) ------- ------ --------- ------------ Balance at February 2, 1997............................. 50 - 968 (88,321) Net income............................................ - - - 5,712 Amortization of discount on 14-1/4% junior cumulative preferred......................... - - - (38) Accrued dividends for preferred stockholders.......... - - - (369) Reclassification of preferred stock into common stock. 3 - 1,811 756 Payment of notes with common stock.................... 7 30 20,236 - Gain on payment of notes held by Venture (net of tax). - - 6,880 - ------- ------ --------- ------------ Balance at February 1, 1998............................. $ 60 $ 30 $ 29,895 $ (82,260) ======= ====== ========= ============ See notes to Parent Company Only financial statements.
PAMIDA HOLDINGS CORPORATION (Parent Company Only) (Dollar amount in thousands except for per share data) SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT STATEMENTS OF OPERATIONS AND RETAINED (DEFICIT) EARNINGS YEARS ENDED FEBRUARY 1, 1998, FEBRUARY 2, 1997 AND JANUARY 28, 1996 - -------------------------------------------------------------------------------- 1998 1997 1996 -------- -------- -------- Equity in income (loss) of subsidiary $ 6,633 $ 3,696 $(92,527) Expenses: General and administrative 17 19 33 Interest 3,974 4,473 3,910 -------- -------- -------- 3,991 4,492 3,943 -------- -------- -------- Income (loss) before provision for income taxes and extraordinary item 2,642 (796) (96,470) Income tax benefit (1,480) - (1,451) -------- -------- -------- Income (loss) before extraordinary item 4,122 (796) (95,019) Extraordinary item 1,590 - 371 -------- -------- -------- Net income (loss) 5,712 (796) (94,648) Effect of preferred stock reclassification 756 - - Amortization of discount on 14-1/4% junior cumulative preferred (38) (49) (47) Cash dividends paid to preferred stockholders - - (315) Accrued dividends for preferred stockholders (369) (342) - -------- -------- -------- Net income (loss) available for common shares $ 6,061 $ (1,187) $(95,010) ======== ======== ======== Basic income (loss) per share: Income (loss) before extraordinary item $ .77 $ (.24) $ (19.07) Extraordinary item .27 - .08 -------- -------- -------- Basic income (loss) $ 1.04 $ (.24) $ (18.99) ======== ======== ======== Diluted income (loss) per share Income (loss) before extraordinary item $ .76 $ (.24) $ (19.07) Extraordinary item .27 - .08 -------- -------- -------- Diluted income (loss) $ 1.03 $ (.24) $ (18.99) ======== ======== ======== See notes to Parent Company Only financial statements.
PAMIDA HOLDINGS CORPORATION (Parent Company Only) (Dollar amounts in thousands) SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT STATEMENTS OF CASH FLOWS YEARS ENDED FEBRUARY 1, 1998, FEBRUARY 2, 1997 AND JANUARY 28, 1996 - -------------------------------------------------------------------------------- 1998 1997 1996 Cash flows from operating activities: -------- -------- -------- Net income (loss) ................................. $ 5,712 $ (796) $(94,648) -------- -------- -------- Adjustments to reconcile net income (loss) to net cash from operating activities: Equity in (income) loss of subsidiary .......... (6,633) (3,696) 92,527 Noncash interest expense ....................... 3,850 4,313 3,756 Accretion of original issue debt discount ...... 124 160 154 Amortization of intangible assets .............. 8 11 10 Extraordinary item related to retirement of debt (1,590) - (371) (Increase) decrease in refundable income tax ... (1,480) - (483) Increase (decrease) in operating liabilities ... 659 8 (7) -------- -------- -------- Total adjustments ........................... (5,062) 796 95,586 -------- -------- -------- Net cash from operating activities .......... 650 - 938 -------- -------- -------- Cash flows from investing activities: Dividends received from subsidiary ................ - - - Cash flows from financing activities: Fees related to payment of debt and reclassification of preferred stock .............. (650) - - Proceeds from sale of stock ....................... - - 18 Principal payments on promissory notes ............ - - - Payments to redeem subordinated notes ............. - - (641) Dividends paid to preferred stockholders .......... - - (315) -------- -------- -------- Net cash from financing activities .......... (650) - (938) -------- -------- -------- Net change in cash .................................. - - - Cash at beginning of year ........................... - - - -------- -------- -------- Cash at end of year ................................. $ - $ - $ - ======== ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the year for interest $ - $ - $ - SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITY: Amortization of discount on junior cumulative preferred stock recorded as a direct charge to retained earnings $ 38 $ 49 $ 47 Payment of interest in kind by increasing the principal amount of the notes 3,561 4,141 3,702 See notes to Parent Company Only financial statements.
PAMIDA HOLDINGS CORPORATION (Parent Company Only) (Dollar Amounts In Thousands) SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT NOTES TO FINANCIAL STATEMENTS A. The Condensed Financial Statements include the Registrant only and reflect the equity method of accounting for its benefically wned subsidiary, Pamida, Inc. B. The registrant files a consolidated U.S. federal tax return with Pamida, Inc. The Company has a tax sharing agreement with Pamida, Inc. that provides that taxes will be allocated among the companies based upon the tax expense or benefit that was derived on a consolidated basis from each entity's operations. Income tax effects included in these financial statements are calculated on a stand-alone basis for Pamida Holdings Corporation. Related to the Company's payment of debt with common stock and reclassification of preferred stock into common stock which was effective November 18, 1997, income tax expense allocated to the extraordinary item totaled $524 and income tax expense charged to stockholders' equity was $2,512. These amounts are net of a change in the beginning of year valuation allowance of $1,659. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. The information required by this item has been previously reported in the Form 8-K Current Report of the registrant dated October 16, 1996. PART III The information required by this Part III is incorporated by reference from the registrant's definitive proxy statement for the 1998 annual meeting of the registrant's stockholders to be held on May 21, 1998, which involves the election of directors. Such definitive proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the end of the fiscal year covered by this Form 10-K. However, information concerning the registrant's executive officers will be omitted from such proxy statement and is furnished in a separate item captioned "Executive Officers of the Registrant" included in Part I of this Form 10-K. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (a) The following documents are filed as a part of this report in Item 8 of Part II: 1. Financial Statements. Pamida Holdings Corporation and Subsidiary - Independent Auditors' Report - Consolidated Statements of Operations for the Years Ended February 1, 1998, January 2, 1997 and January 28, 1996 - Consolidated Balance Sheets at February 1, 1998 and February 2, 1997 - Consolidated Statements of Common Stockholders' Equity for the Years Ended February 1, 1998, February 2, 1997 and January 28, 1996 - Consolidated Statements of Cash Flows for the Years Ended February 1, 1998, February 2, 1997 and January 28, 1996 - Notes to Consolidated Financial Statements for the Years Ended February 1, 1998, February 2, 1997 and January 28, 1996 2. Financial Statement Schedules. - Independent Auditors' Report on Schedule I - Schedule I - Condensed Financial Information of Registrant All other schedules of the registrant for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions, are inapplicable or have been disclosed in the Notes to Consolidated Financial Statements and, therefore, have been omitted. 3. Exhibits. 3.1 - Restated Certificate of Incorporation of Pamida Holdings Corporation (March 12, 1998). (2) 3.2 - Revised By-Laws of Pamida Holdings Corporation. (2) 4.1 - Form of certificate representing shares of the Common Stock of Pamida Holdings Corporation. (6) 4.2 - Indenture dated as of March 15, 1993, among Pamida, Inc. as Issuer, Pamida Holdings Corporation as Guarantor, and State Street Bank and Trust Company as Trustee relating to 11 3/4% Senior Subordinated Notes due 2003 of Pamida, Inc. (6) 4.3 - Specimen form of 11 3/4% Senior Subordinated Note due 2003 of Pamida, Inc. (3) 10.1 - Stock and Note Purchase Agreement dated as of July 29, 1986, among Pamida Holdings Corporation, Citicorp Venture Capital, Ltd., Citicorp Capital Investors, Ltd., and the individual purchasers who are parties thereto. (1) 10.2 - Amendment to Stock and Note Purchase Agreement, dated July 31, 1990 (amends Exhibit 10.1). (1) 10.3 - Second Amendment to Stock and Note Purchase Agreement, dated August 10, 1990 (amends Exhibit 10.1). (1) 10.4 - Third Amendment to Stock and Note Purchase Agreement, dated September 13, 1990 (amends Exhibit 10.1). (1) 10.5 - Exchange Agreement dated August 10, 1990, among Pamida Holdings Corporation, Citicorp Venture Capital, Ltd. and Court Square Capital Limited. (1) 10.6 - Agreement dated September 13, 1990, among Pamida Holdings Corporation, Citicorp Venture Capital, Ltd. and Court Square Capital Limited. (2) 10.7 - Agreement dated September 20, 1990, among Pamida Holdings Corporation, Citicorp Venture Capital, Ltd. and Court Square Capital Limited. (4) 10.8 - Exchange Agreement dated as of December 1, 1990 between Pamida Holdings Corporation, Citicorp Venture Capital, Ltd. and Court Square Capital Limited. (4) 10.9 - Form of 14.25% Junior Subordinated Promissory Note of Pamida Holdings Corporation. (4) 10.10- Form of Indemnification Agreement between Pamida Holdings Corporation and its officers and directors. (5) 10.11- Note Amendment Agreement dated as of December 18, 1992, between Pamida Holdings Corporation and Court Square Capital Limited. (5) 10.12- Note Amendment Agreement No. 2 dated as of March 1, 1993, between Pamida Holdings Corporation and Citicorp Investments Inc. (13) 10.13- Note Amendment Agreement No. 3 dated July 22, 1997, between Pamida Holdings Corporation and 399 Venture Partners, Inc. (5) 10.14- Tax-Sharing Agreement dated as of February 2, 1992, among Pamida Holdings Corporation, Pamida, Inc., Seaway Importing Company, and Pamida Transportation Company. (6) 10.15- Loan and Security Agreement dated March 30, 1993, by and among Congress Financial Corporation (Southwest) and BA Business Credit, Inc. as Lenders, Congress Financial Corporation (Southwest) as Agent for the Lenders, and Pamida, Inc. and Seaway Importing Company as Borrowers. (9) 10.16- Amendment No. 1 to Loan and Security Agreement, dated January 23, 1995, among Pamida, Inc. and Seaway Importing Company as Borrowers, Congress Financial Corporation (Southwest) as a Lender and Agent, and BA Business Credit Inc. as a Lender (amends Exhibit 10.15). (10) 10.17- Amendment No. 2 to Loan and Security Agreement, dated January 28, 1996, among Pamida, Inc. and Seaway Importing Company as Borrowers, Congress Financial Corporation (Southwest) as a Lender and Agent, and BankAmerica Business Credit as a Lender (amends Exhibit 10.15). (11) 10.18- 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 (amends Exhibit 10.15). (12) 10.19- Amendment No. 4 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 January 31, 1997 (amends Exhibit 10.15). (12) 10.20- Amendment No. 5 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 March 17, 1997 (amends Exhibit 10.15). (14) 10.21- Amendment No. 6 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 May 8, 1997 (amends Exhibit 10.15). (7) 10.22- Pamida Holdings Corporation 1992 Stock Option Plan. (9) 10.23- Employment Agreement dated September 22, 1995, among Pamida Holdings Corporation, Pamida, Inc. and Steven S. Fishman. (11) 10.24- Amendment No. 1 to Employment Agreement among Pamida Holdings Corporation, Pamida, Inc., and Steven S. Fishman dated August 29, 1996 (amends Exhibit 10.23). (12) 10.25- Amendment No. 2 to Employment Agreement among Pamida Holdings Corporation, Pamida, Inc., and Steven S. Fishman dated March 6, 1997 (amends Exhibit 10.23). 10.26- Amendment No. 3 to Employment Agreement among Pamida Holdings Corporation, Pamida, Inc., and Steven S. Fishman dated May 22, 1997 (amends Exhibit 10.23). 10.27- Amendment No. 4 to Employment Agreement among Pamida Holdings Corporation, Pamida Inc., and Steven S. Fishman dated March 5, 1998 (amends Exhibit 10.23). (8) 10.28- Pamida, Inc. 1995 Deferred Compensation Plan. (12) 10.29- Employment Agreement dated as of March 6, 1997, among Pamida Holdings Corporation, Pamida, Inc., and Frank A. Washburn. 10.30- Amendment No. 1 to employment Agreement among Pamida Holdings Corporation, Pamida, Inc., and Frank A. Washburn dated March 5, 1998 (amends Exhibit 10.29). (12) 10.31- Employment Agreement dated as of March 6, 1997, among Pamida Holdings Corporation, Pamida, Inc., and George R. Mihalko. 10.32- Amendment No. 1 to Employment Agreement among Pamida Holdings Corporation, Pamida, Inc., and George R. Mihalko dated March 5, 1998 (amends Exhibit 10.31). (12) 10.33- Long-Term Incentive Award Agreement dated as of March 6, 1997, between Pamida, Inc., and Steven S. Fishman. (12) 10.34- Long-Term Incentive Award Agreement dated as of March 6, 1997, between Pamida, Inc., and Frank A. Washburn. (12) 10.35- Long-Term Incentive Award Agreement dated as of March 6, 1997, between Pamida, Inc., and George R. Mihalko. (1) 22.1 - Subsidiaries of Pamida Holdings Corporation. 23.1 - Consent of Deloitte & Touche LLP. 23.2 - Consent of Coopers & Lybrand L.L.P. 24.1 - Powers of Attorney 27.1 - Financial Data Schedule (EDGAR filing only) 27.2 - Restated Financial Data Schedule - fiscal years ended January 28, 1996 and February 2, 1997 and the three, six and nine months ended April 28, 1996, July 28, 1996 and October 27, 1996, respectively. (EDGAR filing only) 27.3 - Restated Financial Data Schedule - three, six and nine months ended May 4, 1997, August 3, 1997 and November 2, 1997. (EDGAR filing only) - ------------------------- (1) Previously filed as an exhibit to Registration Statement of Pamida Holdings Corporation on Form S-1 (Registration No. 33-35324) and incorporated herein by this reference. (2) Previously filed as an exhibit to Form 10-Q Quarterly Report of Pamida Holdings Corporation for the period ended October 28, 1990, and incorporated herein by this reference. (3) Previously filed as an exhibit to Registration Statement of Pamida, Inc. on Form S-l (Registration No. 33-10980) and incorporated herein by this reference. (4) Previously filed as an exhibit to Form 10-K Annual Report of Pamida Holdings Corporation for the fiscal year ended February 3, 1991, and incorporated herein by this reference. (5) Previously filed as an exhibit to Registration Statement of Pamida, Inc. and Pamida Holdings Corporation on Form S-1 (Registration No. 33-57990) and incorporated herein by this reference. (6) Previously filed as an exhibit to Form 10-Q Quarterly Report of Pamida Holdings Corporation for the period ended May 2, 1993, and incorporated herein by this reference. (7) Previously filed as an exhibit to Form 10-Q Quarterly Report of Pamida Holdings Corporation for the period ended August 1, 1993, and incorporated herein by this reference. (8) Previously filed as an exhibit to Form 10-K Annual Report of Pamida Holdings Corporation for the fiscal year ended January 29, 1995, and incorporated herein by this reference. (9) Previously filed as an exhibit to Form 10-Q Quarterly Report of Pamida Holdings Corporation for the period ended October 29, 1995, and incorporated herein by this reference. (10) Previously filed as an exhibit to Form 10-K Annual Report of Pamida Holdings Corporation for the fiscal year ended January 28, 1996, and incorporated herein by this reference. (11) Previously filed as an exhibit to Form 10-Q Quarterly Report of Pamida Holdings Corporation for the period ended October 27, 1996, and incorporated herein by this reference. (12) Previously filed as an exhibit to Form 10-K Annual Report of Pamida Holdings Corporation for the fiscal year ended February 2, 1997, and incorporated herein by this reference. (13) Previously filed as an exhibit to Form 8-K Current Report of Pamida Holdings Corporation (Date of Report: July 22, 1997) and incorporated herein by this reference. (14) Previously filed as an exhibit to Form 10-Q Quarterly Report of Pamida Holdings Corporation for the period ended May 4, 1997, and incorporated herein by this reference. * * * (b) A report on Form 8-K was filed during the last quarter of the period covered by this report. Such report had a Date of Report of November 18, 1997, and related to Item 5, Other Events. No financial statements were filed with such report. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: April 20, 1998 PAMIDA HOLDINGS CORPORATION By: /s/ Steven S. Fishman Steven S. Fishman, Chairman of the Board, President, and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. /s/ Steven S. Fishman April 20, 1998 - ---------------------- Steven S. Fishman Chairman of the Board, President, Chief Executive Officer and Director /s/ George R. Mihalko April 20, 1998 - ---------------------- George R. Mihalko Senior Vice President, Chief Financial Officer and Treasurer /s/ Todd D. Weyhrich April 20, 1998 - ---------------------- Todd D. Weyhrich Vice President, Controller and Principal Accounting Officer /s/ Frank A. Washburn April 20, 1998 - ---------------------- Frank A. Washburn Director * April 20, 1998 - ---------------------- L. David Callaway, III Director * April 20, 1998 - ---------------------- Stuyvesant P. Comfort Director * April 20, 1998 - ---------------------- M. Saleem Muqaddam Director * April 20, 1998 - ---------------------- Peter J. Sodini Director * By:/s/ George R. Mihalko George R. Mihalko, Attorney-in-Fact PAMIDA HOLDINGS CORPORATION FORM 10-K -- FEBRUARY 2, 1997 EXHIBIT INDEX Exhibit # Description - ------------------============================================================== Restated Certificate of Incorporation of Pamida 3.1 Holdings Corporation, as amended. - ------------------============================================================== (2) 3.2 Revised By-Laws of Pamida Holdings Corporation. - ------------------============================================================== (2) 4.1 Form of certificate representing shares of the Common Stock of Pamida Holdings Corporation. - ------------------============================================================== (6) 4.2 Indenture dated as of March 15, 1993, among Pamida, Inc. as Issuer, Pamida Holdings Corporation as Guarantor, and State Street Bank and Trust Company as Trustee relating to 11 3/4% Senior Subordinated Notes due 2003 of Pamida, Inc. - ------------------============================================================== (6) 4.3 Specimen form of 11 3/4% Senior Subordinated Note due 2003 of Pamida, Inc. - ------------------============================================================== (3) 10.1 Stock and Note Purchase Agreement dated as of July 29, 1986, among Pamida Holdings Corporation, Citicorp Venture Capital, Ltd., Citicorp Capital Investors, Ltd., and the individual purchasers who are parties thereto. - ------------------============================================================== (1) 10.2 Amendment to Stock and Note Purchase Agreement, dated July 31, 1990 (amends Exhibit 10.1). - ------------------============================================================== (1) 10.3 Second Amendment to Stock and Note Purchase Agreement, dated August 10, 1990 (amends Exhibit 10.1). - ------------------============================================================== (1) 10.4 Third Amendment to Stock and Note Purchase Agreement, dated September 13, 1990 (amends Exhibit 10.1). - ------------------============================================================== (1) 10.5 Exchange Agreement dated August 10, 1990, among Pamida Holdings Corporation, Citicorp Venture Capital, Ltd. and Court Square Capital Limited. - ------------------============================================================== (1) 10.6 Agreement dated September 13, 1990, among Pamida Holdings Corporation, Citicorp Venture Capital, Ltd. and Court Square Capital Limited. - ------------------============================================================== (2) 10.7 Agreement dated September 20, 1990, among Pamida Holdings Corporation, Citicorp Venture Capital, Ltd. and Court Square Capital Limited. - ------------------============================================================== (4) 10.8 Exchange Agreement dated as of December 1, 1990 between Pamida Holdings Corporation, Citicorp Venture Capital, Ltd. and Court Square Capital Limited. - ------------------============================================================== (4) 10.9 Form of 14.25% Junior Subordinated Promissory Note of Pamida Holdings Corporation. - ------------------============================================================== (4) 10.10 Form of Indemnification Agreement between Pamida Holdings Corporation and its officers and directors. - ------------------============================================================== (5) 10.11 Note Amendment Agreement dated as of December 18, 1992, between Pamida Holdings Corporation and Court Square Capital Limited. - ------------------============================================================== (5) 10.12 Note Amendment Agreement No. 2 dated as of March 1, 1993, between Pamida Holdings Corporation and Citicorp Investments Inc. - ------------------============================================================== (13) 10.13 Note Amendment Agreement No. 3 dated July 22, 1997, between Pamida Holdings Corporation and 399 Venture Partners, Inc. - ------------------============================================================== (5) 10.14 Tax-Sharing Agreement dated as of February 2, 1992, among Pamida Holdings Corporation, Pamida, Inc., Seaway Importing company, and Pamida Transportation Company. - ------------------============================================================== (6) 10.15 Loan and Security Agreement dated March 30, 1993, by and among Congress Financial Corporation (Southwest) and BA Business Credit, Inc. as Lenders, Congress Financial Corporation (Southwest) as Agent for the Lenders, and Pamida, Inc. and Seaway Importing Company as Borrowers. - ------------------============================================================== (9) 10.16 Amendment No. 1 to Loan and Security Agreement, dated January 23, 1995, among Pamida, Inc. and Seaway Importing Company as Borrowers, Congress Financial Corporation (Southwest) as a Lender and Agent, and BA Business Credit Inc. as a Lender (amends Exhibit 10.15). - ------------------============================================================== (10) 10.17 Amendment No. 2 to Loan and Security Agreement, dated January 28, 1996, among Pamida, Inc. and Seaway Importing Company as Borrowers, Congress Financial Corporation (Southwest) as a Lender and Agent, and BankAmerica Business Credit as a Lender (amends Exhibit 10.15). - ------------------============================================================== (11) 10.18 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 (amends Exhibit 10.15). - ------------------============================================================== (12) 10.19 Amendment No. 4 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 January 31, 1997 (amends Exhibit 10.15). - ------------------============================================================== (12) 10.20 Amendment No. 5 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 March 17, 1997 (amends Exhibit 10.15). - ------------------============================================================== (14) 10.21 Amendment No. 6 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 May 8, 1997 (amends Exhibit 10.15). - ------------------============================================================== (7) 10.22 Pamida Holdings Corporation 1992 Stock Option Plan. - ------------------============================================================== (9) 10.23 Employment Agreement dated September 22, 1995, among Pamida Holdings Corporation, Pamida, Inc. and Steven S. Fishman. - ------------------============================================================== (11) 10.24 Amendment No. 1 to Employment Agreement among Pamida Holdings Corporation, Pamida, Inc., and Steven S. Fishman dated August 29, 1996 (amends Exhibit 10.23). - ------------------============================================================== (12) 10.25 Amendment No. 2 to Employment Agreement among Pamida Holdings Corporation, Pamida, Inc., and Steven S. Fishman dated March 6, 1997 (amends Exhibit 10.23). - ------------------============================================================== 10.26 Amendment No. 3 to Employment Agreement among Pamida Holdings Corporation, Pamida, Inc., and Steven S. Fishman dated May 22, 1997 (amends Exhibit 10.23). - ------------------============================================================== 10.27 Amendment No. 4 to Employment Agreement amount Pamida Holdings Corporation, Pamida Inc., and Steven S. Fishman dated March 5, 1998 (amends Exhibit 10.23). - ------------------============================================================== (8) 10.28 Pamida, Inc., 1995 Deferred Compensation Plan. - ------------------============================================================== (12) 10.29 Employment Agreement dated as of March 6, 1997, among Pamida Holdings Corporation, Pamida, Inc., and Frank A. Washburn. - ------------------============================================================== 10.30 Amendment No. 1 to Employment Agreement among Pamida Holdings Corporation, Pamida, Inc., and Frank A. Washburn dated March 5, 1998 (amends Exhibit 10.29) - ------------------============================================================== (12) 10.31 Employment Agreement dated as of March 6, 1997, among Pamida Holdings Corporation, Pamida, Inc., and George R. Mihalko. - ------------------============================================================== 10.32 Amendment No. 1 to Employment Agreement among Pamida Holdings Corporation, Pamida, Inc., and George R. Mihalko dated March 5, 1998 (amends Exhibit 10.31). - ------------------============================================================== (12) 10.33 Long-Term Incentive Award Agreement dated as of March 6, 1997, between Pamida, Inc. and, Steven S. Fishman. - ------------------============================================================== (12) 10.34 Long-Term Incentive Award Agreement dated as of March 6, 1997, between Pamida, Inc., and Frank A. Washburn. - ------------------============================================================== (12) 10.35 Long-Term Incentive Award Agreement dated as of March 6, 1997, between Pamida, Inc., and George R. Mihalko. - ------------------============================================================== (1) 22.1 Subsidiaries of Pamida Holdings Corporation. - ------------------============================================================== 23.1 Consent of Deloitte & Touche LLP. - ------------------============================================================== 23.2 Consent of Coopers & Lybrand L.L.P. - ------------------============================================================== 24.1 Powers of Attorney - ------------------============================================================== 27.1 Financial Data Schedule (EDGAR filing only) - ------------------============================================================== 27.2 Restated Financial Data Schedule - fiscal years ended January 28, 1996 and February 2, 1997 and the three, six and nine months ended April 28, 1996, July 28, 1996 and October 27, 1996, respectively. (EDGAR filing only) - ------------------============================================================== 27.3 Restated Financial Data Schedule - three, six and nine months ended May 4, 1997, August 3, 1997 and November 2, 1997. (EDGAR filing only) - ------------------============================================================== - ------------------------- (1) Previously filed as an exhibit to Registration Statement of Pamida Holdings Corporation on Form S-1 (Registration No. 33-35324) and incorporated herein by this reference. (2) Previously filed as an exhibit to Form 10-Q Quarterly Report of Pamida Holdings Corporation for the period ended October 28, 1990, and incorporated herein by this reference. (3) Previously filed as an exhibit to Registration Statement of Pamida, Inc. on Form S-l (Registration No. 33-10980) and incorporated herein by this reference. (4) Previously filed as an exhibit to Form 10-K Annual Report of Pamida Holdings Corporation for the fiscal year ended February 3, 1991, and incorporated herein by this reference. (5) Previously filed as an exhibit to Registration Statement of Pamida, Inc. and Pamida Holdings Corporation on Form S-1 (Registration No. 33-57990) and incorporated herein by this reference. (6) Previously filed as an exhibit to Form 10-Q Quarterly Report of Pamida Holdings Corporation for the period ended May 2, 1993, and incorporated herein by this reference. (7) Previously filed as an exhibit to Form 10-Q Quarterly Report of Pamida Holdings Corporation for the period ended August 1, 1993, and incorporated herein by this reference. (8) Previously filed as an exhibit to Form 10-K Annual Report of Pamida Holdings Corporation for the fiscal year ended January 29, 1995, and incorporated herein by this reference. (9) Previously filed as an exhibit to Form 10-Q Quarterly Report of Pamida Holdings Corporation for the period ended October 29, 1995, and incorporated herein by this reference. (10) Previously filed as an exhibit to Form 10-K Annual Report of Pamida Holdings Corporation for the fiscal year ended January 28, 1996, and incorporated herein by this reference. (11) Previously filed as an exhibit to Form 10-Q Quarterly Report of Pamida Holdings Corporation for the period ended October 27, 1996, and incorporated herein by this reference. (12) Previously filed as an exhibit to Form 10-K Annual Report of Pamida Holdings Corporation for the fiscal year ended February 2, 1997, and incorporated herein by this reference. (13) Previously filed as an exhibit to Form 8-K Current Report of Pamida Holdings Corporation (Date of Report: July 22, 1997) and incorporated herein by this reference. (14) Previously filed as an exhibit to Form 10-Q Quarterly Report of Pamida Holdings Corporation for the period ended May 4, 1997, and incorporated herein by this reference. EX-3.1 2 RESTATED CERTIFICATE OF INCORPORATION OF PAMIDA HOLDINGS CORPORATION Pamida Holdings Corporation (the "Corporation"), a corporation organized and existing under the General Corporation Law of the State of Delaware, hereby certifies as follows: 1. The present name of the Corporation is Pamida Holdings Corporation. The Corporation was originally incorporated under such name, and the original Certificate of Incorporation of the Corporation was filed with the Secretary of State of the State of Delaware on April 18, 1986. 2. Pursuant to Section 245 of the General Corporation Law of the State of Delaware, this Restated Certificate of Incorporation only restates and integrates and does not further amend the provisions of the Certificate of Incorporation of the Corporation as heretofore amended or supplemented, and there is no discrepancy between those provisions and the provisions of this Restated Certificate of Incorporation. 3. The Certificate of Incorporation of the Corporation as heretofore amended or supplemented hereby is restated so as to read in its entirety as follows: ARTICLE FIRST The name of the corporation is Pamida Holdings Corporation. ARTICLE SECOND The address of the corporation's registered office in the State of Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company. ARTICLE THIRD The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the Delaware General Corporation Law. ARTICLE FOURTH 4.1 GENERAL The total number of shares of stock which the corporation has authority to issue is 29,002,141 consisting of: (i) 514 shares of 16.25% Senior Cumulative Preferred Stock, par value $1.00 per share (the "Senior Preferred"); (ii) 1,627 shares of 14.25% Junior Cumulative Preferred Stock, par value $1.00 per share (the "Junior Preferred"); (iii)25,000,000 shares of Common Stock, par value $.01 per share (the "Common Stock"); and (iv) 4,000,000 shares of Nonvoting Common Stock, par value $.01 per share (the "Nonvoting Common Stock"). 4.2 RECLASSIFICATION OF PREFERRED STOCK Upon the effectiveness of this Certificate of Amendment of the Restated Certificate of Incorporation of the corporation (the "Effective Date"), each outstanding share of Senior Preferred and each outstanding share of Junior Preferred shall be changed and reclassified, without any other action being required on the part of the respective holders thereof, into the number of shares of Common Stock of the corporation calculated as follows: The number of shares of Common Stock to be issued for the outstanding shares of Senior Preferred and Junior Preferred held by each holder thereof shall be equal to the Liquidation Value of such holder's shares of Senior Preferred and Junior Preferred divided by nine (9) and rounded up to the next whole number. The "Liquidation Value" of each share of Senior Preferred or Junior Preferred shall mean the Liquidation Value as determined pursuant to the terms of Section 4.2 of Article Fourth of the Restated Certificate of Incorporation of the corporation as in effect immediately prior to the Effective Date plus any unpaid dividends not included in the Liquidation Value accrued from the most recent Dividend Reference Date (as such term is defined in the Restated Certificate of Incorporation of the corporation as in effect immediately prior to the Effective Date) to the close of business on the Effective Date. At and after the Effective Date, holders of shares of Senior Preferred and Junior Preferred, upon surrender of a certificate or certificates for such shares to the corporation, shall be entitled to receive in replacement thereof a certificate representing the number of shares of Common Stock of the corporation into which the aggregate number of shares of Senior Preferred or Junior Preferred represented by the certificate or certificates so surrendered shall have been changed and reclassified pursuant to the preceding paragraph of this Section 4.2. From and after the Effective Date, until surrendered and replaced in accordance with this paragraph, each such certificate representing shares of Senior Preferred or Junior Preferred shall be deemed for all corporate purposes to represent the number of shares of Common Stock of the corporation into which such shares of Senior Preferred or Junior Preferred shall have been changed and reclassified pursuant to the preceding paragraph of this Section 4.2; provided, however, that the rights of the holders of such certificates representing shares of Senior Preferred or Junior Preferred (i) to vote and (ii) to receive dividends and distributions, if any, payable to holders of Common Stock of the corporation shall be governed by the following provisions of this paragraph. After the Effective Date, no holder of shares of Senior Preferred or Junior Preferred shall have the right to vote on any matter submitted to a vote of the holders of Common Stock of the corporation until the corporation, in accordance with the provisions of this paragraph, has issued to such holder a certificate for the shares of Common Stock of the corporation into which such shares of Senior Preferred or Junior Preferred shall have been changed and reclassified pursuant to the preceding paragraph of this Section 4.2. Unless and until the certificate or certificates representing shares of Senior Preferred or Junior Preferred have been surrendered to the corporation as contemplated in this paragraph, no dividends or other distributions payable to holders of Common Stock of the corporation as of a record date at or after the Effective Date shall be paid to any holder of such certificate or certificates. Subject to the effect of unclaimed property, escheat, and other applicable laws, after the surrender of any such certificate for shares of Senior Preferred or Junior Preferred, there shall be paid to the record holder of the shares of Common Stock of the corporation issued in replacement of such certificate, without interest, (i) the amount of dividends or other distributions with a record date at or after the Effective Date but prior to such surrender theretofore paid with respect to such shares of Common Stock of the corporation and (ii) on the appropriate payment date, the amount of dividends or other distributions with a record date at or after the Effective Date but prior to such surrender and a payment date subsequent to such surrender payable with respect to such shares of Common Stock of the corporation. From and after the Effective Date, the stock transfer books of the corporation with respect to the Senior Preferred and the Junior Preferred shall be closed, and no transfer of any of such shares thereafter shall be made. If, after the Effective Date, certificates for shares of Senior Preferred or Junior Preferred are presented to the corporation for transfer, then such certificates shall be cancelled and replaced by certificates issued in the name of the transferee representing the appropriate number of shares of Common Stock of the corporation as provided in this paragraph. 4.3 COMMON STOCK AND NONVOTING COMMON STOCK Except as otherwise provided in this Section 4.3 or as otherwise required by applicable law, all shares of Common Stock and Nonvoting Common Stock shall be identical in all respects and shall entitle the holders thereof to the same rights and privileges, subject to the same qualifications, limitations, and restrictions. Part 1. VOTING RIGHTS. Except as otherwise provided in this Section 4.3 or in ARTICLE ELEVENTH or as otherwise required by applicable law, the holders of Common Stock shall be entitled to one vote per share on all matters to be voted on by the corporation's stockholders, and the holders of Nonvoting Common Stock shall have no right to vote on any matters to be voted on by the corporation's stockholders; provided, that the holders of Nonvoting Common Stock shall have the right to vote as a separate class on any merger or consolidation of the corporation with or into another entity or entities, or any recapitalization or reorganization, in which shares of Nonvoting Common Stock would receive or be exchanged for consideration different on a per share basis from the consideration received with respect to or in exchange for shares of Common Stock or would otherwise be treated differently from shares of Common Stock, except that shares of Nonvoting Common Stock may, without such a separate class vote, receive or be exchanged for non-voting securities which are otherwise identical on a per share basis in amount and form to the voting securities received with respect to or in exchange for the Common Stock so long as (i) such non-voting securities are convertible into voting securities on the same terms as Nonvoting Common Stock is convertible into Common Stock under Part 4 of this Section 4.3 and (ii) all other consideration is equal on a per share basis. Part 2. DIVIDENDS As and when dividends are declared or paid thereon, whether in cash, property, or securities of the corporation, the holders of Common Stock and the holders of Nonvoting Common Stock shall be entitled to participate in such dividends ratably on a per share basis; provided, that (i) if dividends are declared which are payable in shares of Common Stock or Nonvoting Common Stock, then dividends shall be declared which are payable at the same rate on both classes of stock, the dividends payable in shares of Common Stock shall be payable to holders of Common Stock, and the dividends payable in shares of Nonvoting Common Stock shall be payable to holders of Nonvoting Common Stock and (ii) if the dividends consist of other voting securities of the corporation, the corporation shall make available to each holder of Nonvoting Common Stock, at such holder's request, dividends consisting of non-voting securities of the corporation which are otherwise identical to such voting securities and which are convertible into or exchangeable for such voting securities on the same terms as Nonvoting Common Stock is convertible into Common Stock under Part 4 of this Section 4.3. Part 3. LIQUIDATION. Except as otherwise provided by applicable law or by the Restated Certificate of Incorporation of the corporation or any amendments thereto, in the event of any liquidation, dissolution, or winding up of the corporation, whether voluntary or involuntary, the holders of Common Stock and the holders of Nonvoting Common Stock shall be entitled to share, ratably according to the number of shares of Common Stock and Nonvoting Common Stock held by them, in all remaining assets of the corporation available for distribution to its stockholders. Part 4. CONVERSION. 4A.CONVERSION OF NONVOTING COMMON STOCK. Each holder of shares of Nonvoting Common Stock shall be entitled to convert into the same number of shares of Common Stock any or all of such holder's shares of Nonvoting Common Stock if (i) such conversion would not have the effect of causing such holder (or a group acting in concert as a partnership or other group of which such holder is a member) to become the beneficial owner (within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of securities of the corporation representing 30% or more of the combined voting power of the outstanding securities of the corporation ordinarily (and apart from rights arising under special circumstances) having the right to vote in the election of directors (hereinafter, a "30% Holder"); provided, however, that, notwithstanding the foregoing provisions of this clause (i), if immediately prior to a transfer of shares of Nonvoting Common Stock to a transferee holder, the transferor of such shares would have been a 30% Holder if its holdings of Nonvoting Common Stock were deemed converted into shares of Common Stock, then the transferee holder of such shares of Nonvoting Common Stock shall not have the right to convert such shares of Nonvoting Common Stock into shares of Common Stock until the sixty-first day after the date of the transfer, or (ii) the 11 3/4% Senior Subordinated Notes due 2003 of Pamida, Inc., a Delaware corporation (the "Senior Subordinated Notes") are not outstanding and have not been replaced with a debt issue with comparable provisions requiring redemption or otherwise imposing requirements or restrictions on the corporation or the issuer of such replacement debt issue in the event a person or group becomes a 30% Holder. For purposes of this Part 4, a "person" shall include any natural person and any corporation, partnership, joint venture, trust, unincorporated organization, or other entity or organization. 4B. CONVERSION PROCEDURE. (i) Each conversion of shares of Nonvoting Common Stock into shares of Common Stock pursuant to Part 4A above shall be effected by the surrender of the certificate or certificates representing the shares to be converted at the principal office of the corporation at any time during normal business hours, together with a written notice by the holder of such shares of Nonvoting Common Stock stating that such holder desires to convert the shares, or a stated number of the shares, of Nonvoting Common Stock represented by such certificate or certificates into shares of Common Stock. Each conversion shall be deemed to have been effected as of the close of business on the date on which such certificate or certificates have been surrendered and such notice has been received, and at such time the rights of the holder of the converted shares of Nonvoting Common Stock as such holder shall cease and the person or persons in whose name or names the certificate or certificates for shares of Common Stock are to be issued upon such conversion shall be deemed to have become the holder or holders of record of the shares of Common Stock represented thereby. (ii) Promptly after the surrender of such certificates and the receipt of such written notice, the corporation shall issue and deliver in accordance with the surrendering holder's instructions (a) the certificate or certificates for the shares of Common Stock issuable upon such conversion and (b) a certificate representing any shares of Nonvoting Common Stock which were represented by the certificate or certificates surrendered to the corporation in connection with such conversion but which were not converted. (iii) The issuance of certificates for shares of Common Stock upon conversion of shares of Nonvoting Common Stock will be made without charge to the holders of such shares for any issuance tax in respect thereof or other cost incurred by the corporation in connection with such conversion and the related issuance of shares of Common Stock. (iv) The corporation at all times shall reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of issuance upon the conversion of shares of Nonvoting Common Stock, such number of shares of Common Stock as may be issuable upon the conversion of all outstanding shares of Nonvoting Common Stock. All shares of Common Stock which are so issuable shall, when issued, be duly and validly issued, fully paid and nonassessable, and free from all taxes, liens, and charges. The corporation shall take all such actions as may be necessary to assure that all such shares of Common Stock may be so issued without violation of any applicable law or governmental regulation or any requirements of any domestic securities exchange upon which shares of Common Stock may be listed (except for official notice of issuance which will be immediately transmitted by the corporation upon issuance). (v) The corporation shall not close its books against the transfer of shares of Nonvoting Common Stock or shares of Common Stock issued or issuable upon conversion of shares of Nonvoting Common Stock in any manner which would interfere with the timely conversion of shares of Nonvoting Common Stock. (vi) If the corporation in any manner subdivides or combines the outstanding shares of Common Stock or Nonvoting Common Stock, then the outstanding shares of the other of such classes of stock shall be proportionately subdivided or combined in a similar manner. Part 5. AMENDMENT AND WAIVER. No amendment or waiver of any provision of this Section 4.3 shall be effective without the prior approval of the holders of a majority of the then outstanding shares of Nonvoting Common Stock voting as a separate class. ARTICLE FIFTH The corporation shall indemnify all officers and directors of the corporation to the fullest extent permitted by the Delaware General Corporation Law, as amended from time to time. To the fullest extent permitted by the Delaware General Corporation Law as it now exists or may hereafter be amended, no director of the corporation shall be liable to the corporation or its stockholders for monetary damages arising from a breach of fiduciary duty owed to the corporation. ARTICLE SIXTH The corporation is to have perpetual existence. ARTICLE SEVENTH In furtherance and not in limitation of the powers conferred by statute, the Board of Directors of the corporation is expressly authorized to make, alter or repeal the by-laws of the corporation. ARTICLE EIGHTH Meetings of stockholders may be held within or without the State of Delaware, as the by-laws of the corporation may provide. The books of the corporation may be kept outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the by-laws of the corporation. ARTICLE NINTH The corporation reserves the right to amend, alter, change or repeal any provision contained in this Restated Certificate of Incorporation in the manner now or hereafter prescribed herein and by the laws of the State of Delaware, and all rights conferred upon stockholders herein are granted subject to this reservation. ARTICLE TENTH This Restated Certificate of Incorporation supersedes and takes the place of the heretofore existing Certificate of Incorporation of this corporation and any amendments and supplements thereto. ARTICLE ELEVENTH The provisions of this ARTICLE ELEVENTH shall become operative on the effective date of the first registration statement filed by the corporation under the Securities Act of 1933, as amended, relating to the public offering of Common Stock of the corporation. 11.1 SECTION 203 NOT APPLICABLE The corporation shall not be governed by the provisions of Section 203 of the General Corporation Law of the State of Delaware. 11.2 SPECIAL MEETINGS OF STOCKHOLDERS; VOTING Special meetings of stockholders of the corporation may be called by the Board of Directors, such Person or Persons as may be authorized to call a special meeting by the corporation's by-laws, or by the holders of 20% (twenty percent) of the corporation's Voting Shares. The holders of a majority of the Voting Shares shall constitute a quorum at all meetings of stockholders. When a quorum is present or represented by proxy at any meeting, the vote of the holders of a majority of the Voting Shares present in person or represented by proxy and voting shall decide any question brought before the meeting, except as otherwise provided by law or the provisions of ARTICLE FOURTH or this ARTICLE ELEVENTH. All Voting Shares shall be entitled to one vote per share on any matter submitted to a vote of stockholders, except as otherwise provided by the provisions of this ARTICLE ELEVENTH. All proxies, ballots, votes, and tabulations that identify the particular vote of holders of Voting Shares shall be confidential and shall not be disclosed except (i) to independent election inspectors appointed by the corporation, who shall not be directors, officers, or employees of the corporation, (ii) as required by law, or (iii) when expressly requested by the voting stockholder. 11.3 ACTION BY STOCKHOLDERS IN LIEU OF A MEETING Any action required by Delaware law to be taken at any annual or special meeting of stockholders of the corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voting and shall be delivered to the corporation by delivery to its registered office in Delaware, the corporation's principal place of business, or an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. 11.4 ELECTION OF BOARD OF DIRECTORS (a) Annual Election. Directors of the corporation shall not be divided into classes, and the term of each director shall expire at the annual meeting of stockholders. (b) Cumulative Voting. At all elections of directors of the corporation, each holder of Voting Shares or of any class or classes or of a series or series thereof shall be entitled to as many votes as shall equal the number of votes which (except for this provision as to cumulative voting) he would be entitled to cast for the election of directors with respect to his Voting Shares multiplied by the number of directors to be elected by him, and he may cast all of such votes for a single director or may distribute them among the number to be voted for, or for any two or more of them, as he may see fit. (c) Vacancies. Vacancies on the corporation's Board of Directors and newly created directorships shall not be filled by the corporation's board of directors for a period of 90 days commencing on the effective date of such vacancy or new directorship, and, during such 90-day period, the holders of Voting Shares may fill such vacancy or newly created directorship. 11.5 STOCK ISSUANCES (a) Vote Required for Certain Sales of Securities. Except as set forth in subsection (b) of this Section 11.5, in addition to any affirmative vote of stockholders required by any provision of law, the Restated Certificate of Incorporation or by-laws of the corporation, or any policy adopted by the Board of Directors of the corporation, the corporation shall not, and shall not permit any Subsidiary to, on or after the date the corporation's stockholders adopt this Section 11.5, issue or sell any equity security of the corporation or any Subsidiary to any Person who would be, after giving effect to such issuance or sale, an Interested Person, without the affirmative vote of the holders of Voting Shares which represent at least a majority of the aggregate voting power of all outstanding Voting Shares, excluding Voting Shares beneficially owned by such Person, voting together as a single class. Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage may be specified, by law or any agreement with any national securities exchange or otherwise. (b) When a Vote is Not Required. The provisions of subsection (a) of this Section 11.5 shall not be applicable with respect to any issuance of shares of Nonvoting Common Stock and also shall not be applicable with respect to any issuance of any shares of stock (i) pursuant to any stock split-up or division effected by the corporation on a pro rata basis to all stockholders, (ii) pursuant to any dividend on shares of the corporation's stock that is paid by the corporation in shares of capital stock of the corporation or any Subsidiary on a pro rata basis to all stockholders, (iii) pursuant to any dividend reinvestment plan adopted by the corporation in which all stockholders are eligible to participate, or (iv) upon the exercise of rights or options of a type referred to in subsection (b) of Section 11.7. 11.6 RESTRICTION OF GREENMAIL (a) Vote Required for Certain Acquisitions of Securities. Except as set forth in subsection (b) of this Section 11.6, in addition to any affirmative vote of stockholders required by any provision of law, the Restated Certificate of Incorporation or by-laws of the corporation, or any policy adopted by the Board of Directors of the corporation, the corporation shall not, and shall not permit any Subsidiary to, knowingly effect any direct or indirect purchase or other acquisition (including, without limitation, redemptions and exchanges) of any equity security of a class of securities issued by the corporation which is registered pursuant to Section 12 of the Exchange Act, at a price which is in excess of the Market Price of such equity security on the date that the understanding to effect such transaction is entered into by the corporation (whether or not such transaction is concluded or a written agreement relating to such transaction is executed on such date, such date to be conclusively established by determination of the Board of Directors), from any Interested Person, without the affirmative vote of the holders of Voting Shares which represent at least a majority of the aggregate voting power of all outstanding Voting Shares, excluding Voting Shares beneficially owned by such Interested Person, voting together as a single class. Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage may be specified, by law or any agreement with any Person. (b) When a Vote is Not Required. The provisions of subsection (a) of this Section 11.6 shall not be applicable with respect to: (i) any purchase, acquisition, redemption, or exchange of Preferred Stock, the purchase, acquisition, redemption, or exchange of which is provided for in the provisions of the Restated Certificate of Incorporation of the corporation establishing the designations, rights, and preferences of such Preferred Stock; (ii) any purchase or other acquisition of equity securities made as part of a tender or exchange offer by the corporation to purchase securities of the same class made on the same terms to all holders of such securities and complying with the applicable requirements of the Exchange Act and the rules and regulations thereunder (or any successor provisions to such Act, rules, or regulations); or (iii) any acquisition by the corporation of shares of its Common Stock solely in exchange for the same number of shares of Nonvoting Common Stock. 11.7 RIGHTS AND OPTIONS (a) Vote Required for Rights and Option. Except as set forth in subsection (b) of this Section 11.7, the corporation shall not, and shall not permit any Subsidiary to, create or issue any rights or options entitling the holders thereof to purchase from the corporation or any such Subsidiary any shares of its capital stock of any class or classes without the affirmative vote of the holders of Voting Shares which represent at least a majority of the aggregate voting power of all outstanding Voting Shares. (b) When a Vote is Not Required. The provisions of subsection (a) of this Section 11.7 shall not be applicable with respect to any rights or options issued to employees of the corporation or any Subsidiary in connection with normal compensation arrangements entered into by the corporation or any Subsidiary in the ordinary course of business. 11.8 GOLDEN PARACHUTES The corporation shall not enter into or extend any agreements or arrangements pursuant to which compensation would be paid to any director, officer, or employee of the corporation which is contingent upon a change of control, merger, or acquisition of the corporation, without the affirmative vote of the holders of Voting Shares which represent at least a majority of the aggregate voting power of all outstanding Voting Shares, excluding Voting Shares beneficially owned by any Person that is a party to such agreement or arrangement, voting together as a single class. 11.9 CLASSES OF STOCK The designations, powers, preferences, rights, qualifications, limitations, and restrictions in respect of any class or classes of stock and any series of any class of stock of the corporation shall be set forth in the Restated Certificate of Incorporation of the corporation; and the Board of Directors of the corporation shall not have the authority to fix by resolution or resolutions any of such designations, powers, preferences, rights, qualifications, limitations, and restrictions. 11.10 CERTAIN DEFINITIONS For the purposes of this ARTICLE ELEVENTH: (i) "Affiliate" and "associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Exchange Act, as in effect on June 30, 1990. (ii) "Beneficial Owner" and "beneficial ownership" shall have the meanings ascribed to such terms in Rule 13d-3 and Rule 13d-5 of the General Rules and Regulations under the Exchange Act, as in effect on June 30, 1990. (iii) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. (iv) "Interested Person" shall mean any person (other than the corporation or any Subsidiary) that is the direct or indirect Beneficial Owner of more than 5% (five percent) of the aggregate voting power of the Voting Shares and any affiliate or associate of any such Person. For the purpose of determining whether a Person is an Interested Person, the outstanding Voting Shares shall include unissued shares of voting stock of the corporation of which the Interested Person is the Beneficial Owner but shall not include any other shares of voting stock of the corporation which may be issuable pursuant to any agreement, arrangement, or understanding, upon exercise of conversion rights, warrants, or options, or otherwise to any Person who is not the Interested Person. (v) "Market Price" of shares of a class of an equity security of the corporation on any day shall mean the highest sale price (regular way) of shares of such class of such equity security on such day, or if that day is not a trading day, then on the trading day immediately preceding such day, on the largest principal national securities exchange on which such class of stock is then listed or admitted to trading, or if such class of stock is not listed or admitted to trading on any national securities exchange, then the highest reported sale price for such shares in the over-the-counter market as reported on the NASDAQ National Market System, or if such sale price shall not be reported on such system, then the highest bid price so reported, or if such bid price shall not be reported thereon, then as such bid price shall be reported by the National Quotation Bureau Incorporated, or if the price is not determinable as set forth above, then as determined in good faith by the Board of Directors of the corporation. (vi) "Person" shall mean any individual, partnership, firm, corporation, association, trust, unincorporated organization, or other entity, as well as any syndicate or group deemed to be a person pursuant to Section 13(d)(5) of the Exchange Act, as in effect on June 30, 1990. (vii) "Subsidiary" shall mean any company of which the corporation owns, directly or indirectly, (A) a majority of the outstanding shares of equity securities or (B) shares having a majority of the voting power represented by all of the outstanding voting stock of such company entitled to vote generally in the election of directors. For the purpose of determining whether a company is a Subsidiary, the outstanding voting stock and shares of equity securities thereof shall include unissued shares of which the corporation is the Beneficial Owner but, except for the purpose of determining whether a company is a Subsidiary for the purpose of subsection (iv) hereof, shall not include any other shares which may be issuable pursuant to any agreement, arrangement, or understanding, or upon the exercise of conversion rights, warrants, or options, or otherwise to any Person who is not the corporation. (viii) "Voting Shares" shall mean the outstanding shares of capital stock of the corporation entitled to vote generally in the election of directors. 11.11 AMENDMENT Notwithstanding any provisions to the contrary of ARTICLE NINTH of the Restated Certificate of Incorporation of the corporation, the provisions of this ARTICLE ELEVENTH shall not be amended without the affirmative vote of the holders of Voting Shares which represent at least two-thirds of the aggregate voting power of all outstanding Voting Shares. 4. The foregoing Restated Certificate of Incorporation of Pamida Holdings Corporation has been duly adopted by the Board of Directors of the Corporation in accordance with the provisions of Section 245 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, this Restated Certificate of Incorporation has been duly executed by the Chairman of the Board and Chief Executive Officer of the Corporation this 6th day of March, 1998. PAMIDA HOLDINGS CORPORATION, a Delaware corporation By:/s/Steven S. Fishman Steven S. Fishman, Chairman of the Board and Chief Executive Officer EX-10.26 3 AMENDMENT NO. 3 TO EMPLOYMENT AGREEMENT This Amendment No. 3 to Employment Agreement is made and entered into on the 22nd day of May, 1997, 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. 3 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 have amended the Employment Agreement by Amendments No. 1 and No. 2 thereto; and WHEREAS, the Companies and the Executive now desire to further amend the Employment Agreement for the purpose of correcting an error in Amendment No. 2 to the Employment Agreement; NOW, THEREFORE, the Companies and the Executive agree as follows: 1. Paragraph 1(a) of Amendment No. 2 to the Employment Agreement hereby is amended so as to correctly read as follows: "(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 1998 (the "EBITDA") are less than $42,000,000, then the Executive shall not be entitled to any incentive bonus for Fiscal 1998." 2. As hereby amended, the Employment Agreement and Amendments No. 1 and No. 2 thereto shall remain in full force and effect. IN WITNESS WHEREOF, the Companies and the Executive have executed this Amendment No. 3 to Employment Agreement on the day and year first above written. PAMIDA HOLDINGS CORPORATION, a Delaware corporation /s/ Steven S. Fishman ----------------- By: /s/ Frank A. Washburn Steven S. Fishman ----------------- Frank A. Washburn, Executive Vice President PAMIDA, INC., a Delaware corporation By: /s/ Frank A. Washburn ----------------- Frank A. Washburn, Executive Vice President EX-10.27 4 AMENDMENT NO. 4 TO EMPLOYMENT AGREEMENT This Amendment No. 4 to Employment Agreement is made and entered into on the 5th day of March, 1998, 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. 4 as the "Companies". * * * WHEREAS, the Companies and the Executive are parties to an Employment Agreement dated September 22, 1995 (the "Employment Agreement"); and WHEREAS, the Companies and the Executive now desire to amend the Employment Agreement as more particularly set forth below; NOW, THEREFORE, the Companies and the Executive agree as follows: 1. Pursuant to Paragraph 6 of the Employment Agreement, the Companies and the Executive agree that the Executive's incentive bonus program for the fiscal year of Holdings ending January 31, 1999 ("Fiscal 1999") shall be the following: (a) If (i) the consolidated earnings of Holdings and its subsidiaries (on a first-in, first-out basis with respect to merchandise inventories) before interest, taxes, depreciation, and amortization (the "EBITDA") for Fiscal 1999 (the "FY99 EBITDA") are less than the EBITDA for Fiscal 1998 or (ii) the percentage increase in the comparable store sales of Pamida for Fiscal 1999 compared with the fiscal year ended February 1, 1998, is less than 3%, then the Executive shall not be entitled to any incentive bonus for Fiscal 1999. (b) If the FY99 EBITDA equals or exceeds the EBITDA for Fiscal 1998, then the Executive's incentive bonus for Fiscal 1999 shall be determined as a percentage of the Executive's base salary from the matrix attached to this Amendment No. 4 taking into account (i) the FY99 EBITDA and (ii) the percentage increase in the comparable store sales of Pamida for Fiscal 1999 compared with the fiscal year ended February 1, 1998. Comparable store sales percentage increases shall be determined in accordance with Pamida's historical practices. (c) For purposes of such matrix, comparable store sales percentage increases of more than 9% shall be treated as increases of 9%, and FY99 EBITDA of more than $52,000,000 shall be treated as FY99 EBITDA of $52,000,000. (d) For purposes of applying such matrix, the Executive's base salary shall be the Executive's base salary in effect on January 31, 1999. (e) The maximum incentive bonus that the Executive shall have the opportunity to earn for Fiscal 1999 is 100% of the Executive's applicable base salary. (f) FY99 EBITDA amounts between whole millions of dollars and comparable store sales percentage increases 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 FY99 EBITDA is $48,500,000 and the comparable store sales percentage increase for Fiscal 1999 is 4.6%, then the Executive's incentive bonus for Fiscal 1999 would be 51.4166% of the Executive's applicable base salary. The Executive's incentive bonus for Fiscal 1999 (if any) shall be paid to the Executive as soon as practicable after Holdings has received the final audit report with respect to Fiscal 1999 from its independent accountants. 2. The provisions of this Amendment No. 4 are intended to satisfy the requirements of Paragraph 6 of the Employment Agreement for the fiscal year of Holdings ending in 1999. 3. This Amendment No. 4 shall be effective as of February 2, 1998. 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. 4 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 EX-10.30 5 AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT This Amendment No. 1 to Employment Agreement is made and entered into on the 5th day of March, 1998, among PAMIDA HOLDINGS CORPORATION ("Holdings"), a Delaware corporation, PAMIDA, INC. ("Pamida"), a Delaware corporation, and FRANK A. WASHBURN (the "Executive"). Holdings and Pamida collectively are referred to in this Amendment No. 1 as the "Companies". * * * WHEREAS, the Companies and the Executive are parties to an Employment Agreement dated March 6, 1997 (the "Employment Agreement"); and WHEREAS, the Companies and the Executive now desire to amend the Employment Agreement as more particularly set forth below; NOW, THEREFORE, the Companies and the Executive agree as follows: 1. Pursuant to Paragraph 6 of the Employment Agreement, the Companies and the Executive agree that the Executive's incentive bonus program for the fiscal year of Holdings ending January 31, 1999 ("Fiscal 1999") shall be the following: (a) If (i) the consolidated earnings of Holdings and its subsidiaries (on a first-in, first-out basis with respect to merchandise inventories) before interest, taxes, depreciation, and amortization (the "EBITDA") for Fiscal 1999 (the "FY99 EBITDA") are less than the EBITDA for Fiscal 1998 or (ii) the percentage increase in the comparable store sales of Pamida for Fiscal 1999 compared with the fiscal year ended February 1, 1998, is less than 3%, then the Executive shall not be entitled to any incentive bonus for Fiscal 1999. (b) If the FY99 EBITDA equals or exceeds the EBITDA for Fiscal 1998, then the Executive's incentive bonus for Fiscal 1999 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 FY99 EBITDA and (ii) the percentage increase in the comparable store sales of Pamida for Fiscal 1999 compared with the fiscal year ended February 1, 1998. Comparable store sales percentage increases shall be determined in accordance with Pamida's historical practices. (c) For purposes of such matrix, comparable store sales percentage increases of more than 9% shall be treated as increases of 9%, and FY99 EBITDA of more than $52,000,000 shall be treated as FY99 EBITDA of $52,000,000. (d) For purposes of applying such matrix, the Executive's base salary shall be the Executive's base salary in effect on January 31, 1999. (e) The maximum incentive bonus that the Executive shall have the opportunity to earn for Fiscal 1999 is 100% of the Executive's applicable base salary. (f) FY99 EBITDA amounts between whole millions of dollars and comparable store sales percentage increases 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 FY99 EBITDA is $48,500,000 and the comparable store sales percentage increase for Fiscal 1999 is 4.6%, then the Executive's incentive bonus for Fiscal 1999 would be 51.4166% of the Executive's applicable base salary. The Executive's incentive bonus for Fiscal 1999 (if any) shall be paid to the Executive as soon as practicable after Holdings has received the final audit report with respect to Fiscal 1999 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 1999. 3. This Amendment No. 1 shall be effective as of February 2, 1998. 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/ Steven S. Fishman Steven S. Fishman, Chairman of the Board and Chief Executive Officer PAMIDA, INC., a Delaware corporation By:/s/ Steven S. Fishman Steven S. Fishman, Chairman of the Board and Chief Executive Officer /s/ Frank A. Washburn Frank A. Washburn EX-10.32 6 AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT This Amendment No. 1 to Employment Agreement is made and entered into on the 5th day of March, 1998, among PAMIDA HOLDINGS CORPORATION ("Holdings"), a Delaware corporation, PAMIDA, INC. ("Pamida"), a Delaware corporation, and GEORGE R. MIHALKO (the "Executive"). Holdings and Pamida collectively are referred to in this Amendment No. 1 as the "Companies". * * * WHEREAS, the Companies and the Executive are parties to an Employment Agreement dated March 6, 1997 (the "Employment Agreement"); and WHEREAS, the Companies and the Executive now desire to amend the Employment Agreement as more particularly set forth below; NOW, THEREFORE, the Companies and the Executive agree as follows: 1. Pursuant to Paragraph 6 of the Employment Agreement, the Companies and the Executive agree that the Executive's incentive bonus program for the fiscal year of Holdings ending January 31, 1999 ("Fiscal 1999") shall be the following: (a) If (i) the consolidated earnings of Holdings and its subsidiaries (on a first-in, first-out basis with respect to merchandise inventories) before interest, taxes, depreciation, and amortization (the "EBITDA") for Fiscal 1999 (the "FY99 EBITDA") are less than the EBITDA for Fiscal 1998 or (ii) the percentage increase in the comparable store sales of Pamida for Fiscal 1999 compared with the fiscal year ended February 1, 1998, is less than 3%, then the Executive shall not be entitled to any incentive bonus for Fiscal 1999. (b) If the FY99 EBITDA equals or exceeds the EBITDA for Fiscal 1998, then the Executive's incentive bonus for Fiscal 1999 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 FY99 EBITDA and (ii) the percentage increase in the comparable store sales of Pamida for Fiscal 1999 compared with the fiscal year ended February 1, 1998. Comparable store sales percentage increases shall be determined in accordance with Pamida's historical practices. (c) For purposes of such matrix, comparable store sales percentage increases of more than 9% shall be treated as increases of 9%, and FY99 EBITDA of more than $52,000,000 shall be treated as FY99 EBITDA of $52,000,000. (d) For purposes of applying such matrix, the Executive's base salary shall be the Executive's base salary in effect on January 31, 1999. (e) The maximum incentive bonus that the Executive shall have the opportunity to earn for Fiscal 1999 is 72% of the Executive's applicable base salary. (f) FY99 EBITDA amounts between whole millions of dollars and comparable store sales percentage increases 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 FY99 EBITDA is $48,500,000 and the comparable store sales percentage increase for Fiscal 1999 is 4.6%, then the Executive's incentive bonus for Fiscal 1999 would be 34.2% of the Executive's applicable base salary. The Executive's incentive bonus for Fiscal 1999 (if any) shall be paid to the Executive as soon as practicable after Holdings has received the final audit report with respect to Fiscal 1999 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 1999. 3. This Amendment No. 1 shall be effective as of February 2, 1998. 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/ Steven S. Fishman Steven S. Fishman, Chairman of the Board and Chief Executive Officer PAMIDA, INC., a Delaware corporation By:/s/ Steven S. Fishman Steven S. Fishman, Chairman of the Board and Chief Executive Officer /s/ George R. Mihalko George R. Mihalko EX-23.1 7 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement No. 33-83708 of Pamida Holdings Corporation on Form S-8 of our reports dated March 5, 1998 appearing in this Annual Report on Form 10-K of Pamida Holdings Corporation for the year ended February 1, 1998. /s/ DELOITTE & TOUCHE LLP DELOITTE & TOUCHE LLP Omaha, Nebraska April 10, 1998 EX-23.2 8 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in the registration statement of Pamida Holdings Corporation and Subsidiary on Form S-8 (File No. 33-83708) of our report dated March 26, 1996, on our audit of the fiscal 1996 consolidated financial statements and financial statement schedule of Pamida Holdings Corporation and Subsidiary as of January 28, 1996 and for the year then ended, which report is included in this Annual Report on Form 10-K. /s/ COOPERS & LYBRAND L.L.P. Chicago, Illinois April 15, 1998 EX-24.1 9 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I do hereby constitute and appoint Steven S. Fishman, Frank A. Washburn, and George R. Mihalko, and each of them individually, as my true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for me and in my name, place, and stead in my capacity as a director of Pamida Holdings Corporation to sign the Annual Report on Form 10-K of Pamida Holdings Corporation for the fiscal year ended February 1, 1998, and to file such Annual Report, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto such attorneys-in-fact and agents, and each of them individually and their substitutes, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises in connection with such Annual Report as fully to all intents and purposes as I might or could do in person, hereby ratifying and confirming all that such attorneys-in-fact and agents or any of them, or their or his substitutes or substitute, lawfully may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, I have executed this Power of Attorney this 19th day of March, 1998. /s/ Stuyvesant P. Comfort Stuyvesant P. Comfort POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I do hereby constitute and appoint Steven S. Fishman, Frank A. Washburn, and George R. Mihalko, and each of them individually, as my true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for me and in my name, place, and stead in my capacity as a director of Pamida Holdings Corporation to sign the Annual Report on Form 10-K of Pamida Holdings Corporation for the fiscal year ended February 1, 1998, and to file such Annual Report, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto such attorneys-in-fact and agents, and each of them individually and their substitutes, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises in connection with such Annual Report as fully to all intents and purposes as I might or could do in person, hereby ratifying and confirming all that such attorneys-in-fact and agents or any of them, or their or his substitutes or substitute, lawfully may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, I have executed this Power of Attorney this 19th day of March, 1998. /s/ L. David Callaway, III L. David Callaway, III POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I do hereby constitute and appoint Steven S. Fishman, Frank A. Washburn, and George R. Mihalko, and each of them individually, as my true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for me and in my name, place, and stead in my capacity as a director of Pamida Holdings Corporation to sign the Annual Report on Form 10-K of Pamida Holdings Corporation for the fiscal year ended February 1, 1998, and to file such Annual Report, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto such attorneys-in-fact and agents, and each of them individually and their substitutes, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises in connection with such Annual Report as fully to all intents and purposes as I might or could do in person, hereby ratifying and confirming all that such attorneys-in-fact and agents or any of them, or their or his substitutes or substitute, lawfully may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, I have executed this Power of Attorney this 23rd day of March, 1998. /s/ Peter J. Sodini Peter J. Sodini POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I do hereby constitute and appoint Steven S. Fishman, Frank A. Washburn, and George R. Mihalko, and each of them individually, as my true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for me and in my name, place, and stead in my capacity as a director of Pamida Holdings Corporation to sign the Annual Report on Form 10-K of Pamida Holdings Corporation for the fiscal year ended February 1, 1998, and to file such Annual Report, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto such attorneys-in-fact and agents, and each of them individually and their substitutes, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises in connection with such Annual Report as fully to all intents and purposes as I might or could do in person, hereby ratifying and confirming all that such attorneys-in-fact and agents or any of them, or their or his substitutes or substitute, lawfully may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, I have executed this Power of Attorney this 30th day of March, 1998. /s/ M. Saleem Muqaddam M. Saleem Muqaddam EX-27.1 10 FINANCIAL DATA SCHEDULE
5 Financial Data Schedule Item 601(c) of Regulation S-K Commercial and Industrial Companies Article 5 of Regulation S-X (Dollars is thousands, except per share amounts) This schedule contains summary financial information extracted from the Consolidated Balance Sheet of Pamida Holdings Corporation and Subsidiary as of February 1, 1998 and the related Consolidated Statement of Operations for the 52 weeks then ended and is qualified in its entirety by reference to such financial statements. 0000864760 Pamida Holdings Corporation 1,000 12-MOS FEB-01-1998 FEB-03-1997 FEB-01-1998 6,816 0 8,434 50 152,927 170,965 40,812 0 260,081 133,544 172,445 0 0 90 (52,365) 260,081 657,017 657,017 495,082 624,113 0 0 29,618 3,286 0 3,286 0 1,735 0 5,370 .92 .91
EX-27.2 11 RESTATED FINANCIAL DATA SCHEDULE
5 Restated Financial Data Schedule Item 601(c) of Regulation S-K Commercial and Industrial Companies Article 5 of Regulation S-X (Dollars is thousands, except per share amounts) This restated schedule contains summary financial information extracted from the Consolidated Balance Sheets of Pamida Holdings Corporation and Subsidiary as of January 28, 1996, February 2, 1997, April 28, 1996, July 28, 1996 and October 27, 1996, and the related Consolidated StatementS of Operations for the 52, 53, 13, 26 and 39 weeks then ended and is qualified in its entirety by reference to such financial statements. Certain reclassifications have been made to prior years' financial information to conform to the fiscal year end 1998 presentation. 0000864760 Pamida Holdings Corporation 1,000 12-MOS 12-MOS 3-MOS 6-MOS 9-MOS JAN-28-1996 FEB-02-1997 FEB-02-1997 FEB-02-1997 FEB-02-1997 JAN-30-1995 JAN-29-1996 JAN-29-1996 JAN-29-1996 JAN-29-1996 JAN-28-1996 FEB-02-1997 APR-28-1996 JUL-28-1996 OCT-27-1996 7,298 6,973 8,239 11,033 9,890 0 0 0 0 0 9,099 6,969 12,977 15,236 18,545 50 50 50 50 50 150,837 157,490 141,702 137,036 183,633 172,355 176,123 170,073 167,243 217,308 44,153 42,403 98,513 101,153 102,523 0 0 55,599 57,378 59,189 258,525 269,188 252,186 252,152 301,186 138,273 147,450 135,782 137,997 185,754 200,305 201,999 238,249 236,821 266,756 1,826 1,875 1,919 2,016 2,115 0 0 0 0 0 50 50 50 50 50 (86,166) (87,353) (91,001) (94,328) (92,302) 258,525 269,188 252,186 252,152 301,186 736,315 633,189 131,786 287,603 439,583 736,315 633,189 131,786 287,603 439,583 558,627 479,099 100,211 218,932 334,466 709,723 604,204 129,422 279,076 423,761 99,948 0 0 0 0 0 0 0 0 0 29,526 29,781 7,106 14,234 21,669 (102,882) (796) (4,742) (6,036) (5,847) (7,863) 0 0 0 0 (95,019) (796) (4,742) (6,036) (5,847) 0 0 0 0 0 371 0 0 0 0 0 0 0 0 0 (95,010) (1,187) (4,835) (6,226) (6,136) (18.99) (0.24) (0.97) (1.24) (1.23) (18.99) (0.24) (0.97) (1.24) (1.23)
EX-27.3 12 RESTATED FINANCIAL DATA SCHEDULE
5 Restated Financial Data Schedule Item 601(c) of Regulation S-K Commercial and Industrial Companies Article 5 of Regulation S-X (Dollars is thousands, except per share amounts) This restated schedule contains summary financial information extracted from the Consolidated Balance Sheets of Pamida Holdings Corporation and Subsidiary as of May 4, 1997, August 3, 1997 and November 2, 1997 and the related Consolidated Statements of Operations for the 13, 26 and 39 weeks then ended and is qualified in its entirety by reference to such financial statements. Certain reclassifications have been made to prior years' financial information to conform to the fiscal year end 1998 presentation. 0000864760 Pamida Holdings Corporation 1,000 3-MOS 6-MOS 9-MOS FEB-01-1998 FEB-01-1998 FEB-01-1998 FEB-03-1997 FEB-03-1997 FEB-03-1997 MAY-04-1997 AUG-03-1997 NOV-02-1997 9,003 8,485 9,022 0 0 0 8,744 7,729 10,326 50 50 50 159,294 147,240 187,243 180,154 167,028 210,161 105,719 108,299 109,561 62,955 64,805 66,639 274,085 260,281 302,859 156,967 141,382 182,682 202,740 203,526 204,361 2,322 2,487 2,624 0 0 0 50 50 50 (92,917) (92,519) (92,316) 274,085 260,281 302,859 144,564 307,781 466,530 144,564 307,781 466,530 111,296 233,011 353,906 142,270 297,260 448,037 0 0 0 0 0 0 7,753 15,417 23,049 (5,459) (4,896) (4,556) 0 0 0 (5,459) (4,896) (4,556) 0 0 0 0 0 0 0 0 0 (5,564) (5,166) (4,963) (1.11) (1.03) (0.99) (1.11) (1.03) (0.99)
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