FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended January 28, 1995
-------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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AMES DEPARTMENT STORES, INC.
- ----------------------------------------- ------------
(Exact Name of Registrant as Specified In Its Charter)
DELAWARE 04-2269444
- ------------------------------- --------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
2418 Main Street, Rocky Hill, Connecticut 06067
- ----------------------------------------- --------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (203) 257-2000
------------------------
Securities Registered Pursuant to Section 12(b) of the Act: None
Securities Registered Pursuant to Section 12(g) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
- ------------------- -----------------------------------------
Common Stock, $.01 par value NASDAQ
Series B Warrants None
Series C Warrants NASDAQ
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.
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of
securities under a plan confirmed by a court.
Yes X No
----- -----
As of April 1, 1995, the aggregate market value of voting stock held
by non-affiliates of the Registrant was $52,774,884 based on the last
reported sale price of the Registrant's Common Stock on the NASDAQ National
Market System.
20,127,269 shares of Common Stock were outstanding on April 1, 1995.
Documents Incorporated by Reference: Portions of the Registrant's
definitive proxy statement to be filed pursuant to Regulation 14A within
120 days after the end of the Registrant's fiscal year are incorporated by
reference in Part III.
Page 1 of 77 pages (including Exhibits) Exhibit Index on page 57
PART I
Item 1. Description of Business
(a) General
Ames Department Stores, Inc. and its subsidiaries (collectively,
"Ames" or the "Company") are retail merchandisers. As of April 1,
1995, Ames operates 305 discount department stores under the Ames name
in 14 states in the Northeast, Middle Atlantic and Mid-West regions
and the District of Columbia. The Company's stores are located in
rural communities, some of which are not served by other large retail
stores, high-traffic suburban sites, small cities and several major
metropolitan areas. The stores largely serve middle and lower-middle
income customers.
Ames is a Delaware corporation organized in 1962 as a successor to
a business originally founded in 1958. Ames was reorganized in
December, 1992 under Chapter 11 of the United States Bankruptcy Code
("Chapter 11"). The principal executive offices are located at 2418
Main Street, Rocky Hill, Connecticut 06067, and the telephone number
is (203) 257-2000.
The Company has changed its method of designating fiscal years.
Previously, the year ended January 28, 1995 would have been referred
to as fiscal 1995. Since the majority of retailers commonly refer to
this year as fiscal 1994, and because 11 of the 12 months in the
fiscal year were in 1994, Ames will now use this designation.
Fiscal 1994
The Company took several steps in the fiscal year ended January
28, 1995 ("Fiscal 1994") to improve operations and its long-term
competitive position:
- In-Season Opportunistic Purchases: In an attempt to further
differentiate its merchandise selection from the competition,
the Company began a special purchase program ("Special Buys") in
the second half of Fiscal 1994 that includes, among other items,
odd-lot and closeout products. Special Buys allow the Company
to offer brand name merchandise for significantly less than the
original retail prices, and to offer customers different
merchandise each week. In addition, these Special Buys,
especially in apparel, can be obtained closer to and during the
selling season and later in the merchandise buying cycle than is
true for many of the Company's competitors.
- Deemphasis on Certain Long-Term Purchase Commitments: The
Company has begun to deemphasize long-term merchandise purchase
commitments for fashion merchandise. The Company believes it
can respond more effectively to trends by buying closer to
customer needs and reducing the merchandise flow cycle time.
The Company will, however, continue to utilize imports, overseas
sources and other long-term merchandise commitments for several
hardlines areas.
- Targeted Advertising and Micro-marketing: As an example of
targeted advertising and micro-marketing, in September, 1994
Ames launched a new senior citizen discount program ("55 Gold")
that offers customers aged 55 and older a ten percent discount
each Tuesday on all merchandise, including all sale items and
Special Buys. The 55 Gold program allows Ames to better serve
this important and growing segment of its customer base, many of
whom may prefer to shop in the Company's stores rather than
competitors' larger-size stores. To qualify for the discounts,
shoppers are asked to complete a form and obtain a 55 Gold card.
This process provides Ames with names and addresses for future
targeted marketing. The Company believes micro-marketing, for
example through the 55 Gold program and specific store location
needs, can further differentiate Ames from its larger
competitors.
- Remodeling and New Stores: The first new store in more than
four years was reopened in November, 1994 in Mt. Pocono, PA.
This store, which has been very successful and will serve as a
prototype store for future new and remodeled stores, includes,
among other things, a wide variety and assortment of merchandise
for the entire family; an easier-to-shop layout with "soft
corner concepts" highlighting expanded domestics and furniture
areas; an updated apparel presentation in the center of the
store with more feature racks at different angles and plus-size
items; large, bright signage; party, pets and crafts
departments; and customer assistance phones, home delivery, gift
wrapping, faxing and other services.
Ames installed new apparel fixtures in all of its stores during
Fiscal 1994 and continued the roll-out of party and pet departments
within the stores. The Company also completed smaller scale remodels
in 52 stores.
The Company believes its operating performance and the
availability of its financing facilities will provide sufficient
liquidity to allow the Company to meet its financial obligations.
The Company continually reviews the profitability of its stores in
the ordinary course of business and closes or sells stores whose
performance is thought to be inadequate. The Company will consider
relocating certain stores and opening new stores, particularly in
selected markets that would reinforce marketing programs, enhance
name recognition, and/or achieve market penetration. Three new
stores are currently expected to be opened by the Company in the
fiscal year ending January 27, 1996 ("Fiscal 1995"). Ames announced
in December, 1994 that the Camp Hill, PA store would close in the
first quarter of Fiscal 1995.
(b) Financial Information about Industry Segments.
Ames operates self-service retail discount department stores
selling a broad range of merchandise. There are no other reportable
industry segments.
(c) Narrative Description of Business.
(i) Services, Markets and Distribution
Ames sells primarily brand name general merchandise,
including the following items: family apparel and
accessories, shoes, housewares, home furnishings, crafts,
hardware and automotive accessories, sporting goods, toys,
small appliances and consumer electronics, pre-recorded
tapes and compact discs, jewelry, health and beauty
products, household products, camera and photographic
supplies, pet products, party and paper products, and
school and office supplies. Although Ames attempts to be
competitive on everyday pricing, the Company primarily
employs a high/low promotional pricing strategy with an
emphasis on quality weekly circular advertising. The
Company will continue to stress depth and breadth of
products in selected merchandise categories; clean, neat
and well-maintained facilities; appealing merchandise
presentation; and customer service.
Merchandise is purchased centrally by Ames associates at
the Rocky Hill, CT headquarters for all stores and is
shipped by vendors either directly to individual stores or
to Ames' distribution centers/warehouses in Massachusetts
and Pennsylvania which then make deliveries to stores.
For the last three fiscal years, women's apparel has been
the only class of product that exceeded 10% of total
sales, accounting for an average of approximately 13% of
total sales. An average of approximately 21% of sales for
the last three fiscal years were made using third party
credit cards and the remainder were made by cash or check.
The table below sets forth the number of retail stores in operation
in each state at the end of each of the last three fiscal years.
Stores in Operation at Fiscal Year End
--------------------------------------
1994(a) 1993 1992
-------- -------- --------
Connecticut 15 15 15
Delaware 4 4 4
District of Columbia 1 1 1
Maine 28 28 28
Maryland 25 25 25
Massachusetts 31 32 32
New Hampshire 18 19 19
New Jersey 5 5 5
New York 81 81 81
Ohio 11 11 11
Pennsylvania 54 54 55
Rhode Island 7 7 7
Vermont 13 13 13
Virginia 6 6 6
West Virginia 7 7 7
--- --- ---
Total 306 308 309
=== === ===
(a) Includes one Pennsylvania store in the process of closing at
year-end.
(ii) New Products.
As discussed earlier, the Company began a special purchase
program (see Item 1(a) - Fiscal 1994), and continued the
roll-out of certain specialty departments during Fiscal 1994.
These specialty departments included expanded party and paper
products and expanded pet products. The Company intends to
continue the expansion of successful specialty strategies to
new and remodeled stores, as well as its offering of casual
apparel and home products.
(iii) Raw Materials.
The Company does not rely on any one or a few suppliers for a
material portion of its purchases, and there is no current or
anticipated problem with respect to the availability of
merchandise.
(iv) Patents, Trademarks and Licenses.
The mark "Ames" is registered with the United States Patent
and Trademark Office. The Company considers this mark and
the associated name recognition to be valuable to its
business. The Company has a significant number of other
trademarks, trade names, and service marks, some of which,
such as "Crafts & More," "Pawsitively Pets," and "Party
Plaza," are used in connection with certain of the Company's
specialty departments within the stores. Although the
Company considers these additional marks and its patents and
licenses to be valuable in the aggregate, none of them
individually is currently considered to have a material
impact on the Company's business.
(v) Seasonality of Business.
The Company's sales are greater during the second half of the
fiscal year as a result of the back-to-school and Christmas
shopping seasons. Sales are highest in the last fiscal
quarter.
(vi) Working Capital.
As of January 28, 1995, the Company's current ratio (current
assets divided by current liabilities) was 1.7 to 1. See
Item 7(b) - Management's Discussion and Analysis - Liquidity
and Capital Resources for discussion of liquidity and plans
to meet future liquidity needs.
The demand for working capital is heaviest in April and May,
and from August through November, when sufficient merchandise
must be purchased for the spring, back-to-school and
Christmas seasons, respectively.
(vii) Customers.
No material part of the Company's business is dependent upon
a single customer or a few customers. During Fiscal 1994,
Ames had no single customer or affiliated group of customers
to whom sales were made in an amount which accounted for 10%
or more of the Company's total sales for such period.
As is customary in the discount store industry, the Company's
retail operations allow merchandise to be returned by
customers. In addition, the Company has a program that
allows for the matching of its sales prices to the advertised
sales prices of its local competitors upon presentation of
proper proof of the competitor's advertised price on the same
item. The Company also started a new senior citizen discount
program in Fiscal 1994 (see Item 1(a) - Fiscal 1994).
Merchandise may be purchased under the Ames' layaway plan.
(viii) Backlog.
Backlog is not a significant factor in the Company's
business.
(ix) Government Contracts.
Ames has no material contracts with any government agency.
(x) Competition.
Ames operates in a highly competitive environment. Ames
competes with other stores, including large national and
regional chains, in the purchase and sale of merchandise, as
well as for store locations. Ames currently anticipates a
further increase in competition from other discount store
chains and is continuing the modification of its store
operations, advertising, merchandise mix, and merchandise
presentation (see Item 1(a) - Fiscal 1994).
Many of the Company's stores are located in smaller
communities and are, in some cases, the largest non-food
retail store in their market area. They compete, however,
with many smaller stores offering a similar range of
products. The Company's stores located in suburban sites and
urban areas are in direct competition with other discount
stores, including other large national and regional chains.
The policy of Ames is to compete with non-discount retail
competitors primarily on the basis of price and selection of
merchandise, and with all retail competitors primarily on the
basis of convenience of location, price of merchandise,
special purchases, depth and breadth of products in selected
merchandise categories, and customer service.
(xi) Research and Development.
Research and development activities are not a material aspect
of the Company's business.
(xii) Environmental Matters.
To date, compliance with federal, state and local laws and
regulations enacted to regulate the discharge of materials
into the environment has not had, and is not expected to
have, a material effect upon the Company's business.
(xiii) Employees.
At April 1, 1995, Ames employed approximately 22,200 people.
(d) Foreign and Domestic Operations and Export Sales.
The information called for by this item is not relevant to the
Company's business.
Item 2. Properties
As of January 28, 1995, the Company's stores occupied a total of
approximately 18,670,299 square feet. The average store size is
approximately 61,000 square feet. On average, approximately 82% is selling
area.
The construction of one store located in Monroeville, PA was financed
with an industrial development bond. Ames has an option to purchase this
location at nominal cost at the expiration of the lease term in May, 2003.
The land and buildings for seven store locations are owned by Ames (one of
which was being offered for sale at January 28, 1995). The seven owned
locations (with operating stores) are: Woodsville, NH; Bethel Park, Ellwood
City, Grove City, Irwin, and No. Huntingdon, PA; and Lewiston, ME. The
Bethel Park and Huntingdon, PA locations are subject to mortgages. The
remainder of the Company's stores are leased, with the leases expiring at
various times between 1995 and 2018. The leases generally have renewal
options permitting extensions for at least five years. In addition, the
leases typically provide for fixed annual rentals, payment of certain
taxes, insurance and other charges, and additional rentals based on a
percentage of sales in excess of certain fixed amounts. Except for certain
point-of-sale equipment that is leased, vendor-owned greeting card
equipment and leased department equipment, Ames owns the fixtures and
equipment in its stores, some of which are subject to various financing
arrangements.
The Company's warehouse and distribution facilities in Leesport, PA,
Clinton, MA, and Mansfield, MA are owned and occupy an aggregate of
approximately 2,543,500 square feet. The construction of the facility in
Clinton, MA was financed with industrial development bonds and the
Mansfield, MA facility is subject to a mortgage. The Clinton, MA facility
(459,000 square feet) is expected to be sold in the second quarter of
Fiscal 1995. Transfer of the Clinton operations to the Company's
distribution center in Leesport, PA began in January, 1995 and is expected
to be completed by June, 1995. A former distribution center in McKeesport,
PA is also currently being offered for sale or lease.
Ames leases approximately 386,000 square feet of space in Rochester,
NY under a lease expiring on December 31, 1997, with three ten-year renewal
options. These premises have been subleased to an unaffiliated tenant for
the remainder of the lease term. In early Fiscal 1995, Ames received
payment for a lease and sublease to a 260,000 square foot warehouse in
Indianapolis, IN for which it had assigned its interest in early 1993.
Ames owns and occupies its 217,000 square foot corporate office in
Rocky Hill, CT. The Company also has a lease for 135,000 square feet of
combined storage, office and printing space in East Hartford, CT.
Item 3. Litigation
Ames is involved in various litigation as detailed in Note 12 to the
Consolidated Financial Statements included in this Form 10-K.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted during the fourth quarter of Fiscal
1994 to a vote of security holders, through the solicitation of proxies or
otherwise.
PART II
Item 5. Market for the Registrant's Common Stock and Related
Matters Concerning Security Holders.
The Company's common stock is listed on the NASDAQ National Market
System ("NASDAQ"; symbol: AMES). As of April 1, 1995, Ames had 5,529
shareholders of record. Certain restrictions applied to the purchase and
trading of the common stock through December, 1994. Low and high prices of
the Company's common stock for Fiscal 1994 and for the fiscal year ended
January 29, 1994 ("Fiscal 1993"), as reported on NASDAQ, are shown in the
table below:
Fiscal 1994 Fiscal 1993
Low High Low High
------------------ -----------------
1st Quarter $2 6/16 $6 1/2 $2 5/8 $4 5/8
2nd Quarter 2 14/16 5 1/4 2 1/8 3 7/16
3rd Quarter 2 14/16 4 5/16 1 1/2 2 3/4
4th Quarter 2 1/4 3 5/8 1 9/16 3 -
There were no quarterly dividends paid by Ames to the holders of its
common stock during these periods. Dividends cannot be declared under the
terms of the Company's revolving credit facility. On November 30, 1994,
the Company adopted a Stock Purchase Rights Agreement as described in Note
7 to the Consolidated Financial Statements.
Item 6. Selected Financial Data
The following selected financial data of Ames should be read in
conjunction with the Consolidated Financial Statements and related Notes
appearing elsewhere in this Form 10-K.
(in thousands except per share data)
------------------------------------------------------------------------------------------
Fiscal Year Fiscal Year Five Weeks Forty-eight Fiscal Year Fiscal Year
Ended Ended Ended Weeks Ended Ended Ended
Jan. 28, 1995 Jan. 29,1994 Jan. 30, 1993 Dec. 26, 1992 Jan. 25, 1992 Jan. 26, 1991
------------- ------------- ------------- -------------- ------------- --------------
Net sales $2,142,827 $2,123,527 $142,349 | $2,284,026 $2,819,435 $3,109,080
Net income (loss) $17,026(a) $10,823(b) ($23,892) | $718,888(c) ($282,382)(d) ($793,459)(e)
Net income (loss) |
per common sh. $.79(a) $.51(b) ($1.19) | - (c) ($7.87)(d) ($21.47)(e)
Total assets $533,388 $567,131 $638,046 $725,026 | $1,389,645 $1,617,448
Long-term debt & |
capital leases $77,095 $93,309 $176,239 $176,484 | $64,445 $84,002
Liab.'s subject |
to settlement - - - - $1,776,634 | $1,726,621
<FN>
Note: In accordance with fresh-start reporting, the purchase method of
accounting was used to record the fair value of assets and assumed
liabilities as of December 26, 1992. Accordingly, the selected
financial data above for January 1995, 1994, and 1993, and December
1992 is not comparable in certain material respects to such data for
prior periods.
(a) Includes an extraordinary loss of $1.5 million, or $.07 per share, for
the early extinguishment of debt; after-tax property gains of $5.7
million; an after-tax charge of $.9 million for the costs associated
with closing the Clinton, MA distribution center; and an after-tax
non-recurring gain of $8.3 million for a litigation settlement.
(b) Includes an extraordinary gain of $0.9 million, or $.04 per share, for
the early extinguishment of debt and after-tax property gains of $1.0
million.
(c) Excludes the results of 60 stores after the date of their announced
closings (October 30, 1992), closed as part of the Company's final
restructuring prior to its emergence from Chapter 11. Includes an
extraordinary gain of approximately $1.25 billion on debt discharged
pursuant to the plan of reorganization; a charge for revaluation of
assets and liabilities under fresh-start reporting of $391.2 million;
restructuring charges of $88.5 million (for the costs of rejected
leases, closing costs associated with the 60 closed stores, costs for
discontinuance of private-label children's apparel, and certain home
office and field employee severance costs); and bankruptcy expenses of
$25.5 million. Net earnings per share was not presented for the
forty-eight week period ended December 26, 1992 because such
presentation would not be meaningful. The old common stock was
canceled under the plan of reorganization and the new common stock was
not issued until December 30, 1992.
(d) Excludes the results of 84 stores after the date of their announced
closings (January 26, 1991 for 7 stores and September 28, 1991 for 77
stores), closed as part of the Company's restructuring. Includes
bankruptcy expenses of $28.0 million and restructuring charges of
$147.2 million for the costs of rejected leases, closing 77 stores and
other facilities, and associated restructuring.
(e) Excludes the results of 227 stores after the date of their announced
closings (April 28, 1990 for 221 stores and October 27, 1990 for 6
stores), closed as part of the Company's restructuring. Includes
bankruptcy expenses ($22.5 million) and adjustments necessary to
provide for a reserve for costs associated with rejected leases and
closing stores and other facilities under the Company's restructuring
($373.5 million); estimated settlements of accounts payable amounts
resulting from the bankruptcy claims filing process ($40.0 million);
inventory markdown reserves required for planned special promotions
($124.5 million); and the write-off of certain capitalized costs
($28.0 million).
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
(a) Results of Operations
Fiscal Year Ended
------------------------------------------------------------------
January 28, 1995 January 29, 1994 January 30, 1993*
----------------- ---------------- -----------------
Discount Discount Discount Crafts
Stores Stores Stores & More
--------- -------- -------- ------
Stores, beg. of period 308 309 371 13
New stores 1 (a) - - -
Closed stores (3)(b) (1)(a) (62)(c) (13)(c)
---- ---- ----- ----
Stores, end of period 306 308 309 0
==== ==== ===== ====
<FN>
* Includes the forty-eight weeks ended December 26, 1992
(pre-consummation) and five weeks ended January 30, 1993
(post-consummation).
(a) Represents the Mt. Pocono, PA store that was destroyed by fire on
November 2, 1993, rebuilt by the landlord, and reopened by the Company
in November, 1994.
(b) Does not include one store in the process of closing at year-end.
(c) Includes 60 discount stores and 3 Crafts & More stores in the process
of closing at January 30, 1993.
The historical results of operations exclude the results of the 60 stores
(closed in March, 1993 as part of the Company's restructuring) after the date of
their announced closings (October 30, 1992).
The following discussion and analysis is based on the results of
operations of the Company for Fiscal 1994 and 1993, the five-week period
ended January 30, 1993 and the forty-eight week period ended December 26,
1992 (combined - "Fiscal 1992"). The Company's results of operations for
Fiscal 1994 and 1993 and for the five-week period ended January 30, 1993
are not comparable in certain material respects to its results of
operations for prior periods due to the Company's adoption of fresh-start
reporting as of December 26, 1992 (Note 2 to the Consolidated Financial
Statements). For purposes of the following discussion, comparison of the
Company's results of operations for Fiscal 1994 and 1993 and for the
five-week period ended January 30, 1993 to prior periods are made only
when, in the Company's opinion, such comparisons are meaningful. The
financial information set forth below should be read in conjunction with
the Consolidated Financial Statements of Ames Department Stores, Inc. and
its subsidiaries included elsewhere in this filing.
The Company's business is seasonal in nature, with a large portion
(33% in Fiscal 1994) of its net sales occurring in the fourth quarter,
which includes the Christmas selling season. Total sales, including sales
from leased departments, for the last three fiscal years and the respective
total sales percentage increases/decreases and comparable store sales
percentage increases/decreases over the prior year for stores that have
been open and operated by Ames for at least the prior full fiscal year
were:
(000's omitted) Percentage Increases (Decreases)
--------------- -----------------------------------
Fiscal Year Ended Total Sales Total Sales Comparable Stores
------------------- --------------- ------------- -------------------
January 28, 1995 $2,242,270 0.6% 1.7%
January 29, 1994 $2,228,135 (12.4)% (2.3)%
January 30, 1993 $2,543,573(a) (14.0)% 0.0%
<FN>
The rate of inflation did not have a significant effect on sales during these
periods.
(a) Represents the total sales from the combined fifty-three weeks
ended January 30, 1993.
Results of Operations for Fiscal 1994 Compared to Fiscal 1993
The Company reported improvements in Fiscal 1994 in sales, EBITDA (as
defined in Note 5) and net earnings. The sales and EBITDA improvements
reflected, in part, the beginning of the Company's efforts to generate
customer excitement and sales through opportunistic purchases, targeted
advertising and micro-marketing, remodeling, and maintaining an improved
in-stock inventory position.
Total sales increased 0.6% from Fiscal 1993 due to an increase of
1.7% in comparable store sales, partially offset by the closing of three
stores during Fiscal 1994 and a 4.1% decline in leased department (shoes)
comparable store sales. The major causes for the improvement in comparable
store sales were an improved in-stock inventory position, additional
circular advertising, opportunistic purchases, and a new senior citizen
discount program, partially offset by additional new discount store
competition and a continued weak apparel sales market.
The following table sets forth the results of operations for the
fiscal year ended January 28, 1995 and for the fiscal year ended January
29, 1994 in millions and as a percentage of net sales:
Fiscal Year Ended Fiscal Year Ended
January 28, 1995 January 29, 1994
-------------------- ---------------------
$ mil. % of Sales $ mil. % of Sales
------- ----------- ------- -----------
Net sales $2,142.8 100.0% $2,123.5 100.0%
Costs, expenses and (income):
Cost of merchandise sold 1,571.2 73.3 1,537.4 72.4
Selling, gen.and admin. expenses 569.6 26.6 586.3 27.6
Leased dept. and other oper. income (30.3) (1.4) (34.4) (1.6)
Depreciation and amort. expense 5.3 0.2 2.1 0.1
Amort. of the excess of revalued
net assets over equity (6.1) (0.3) (6.2) (0.3)
Interest and debt expense, net 25.4 1.2 26.4 1.3
Gain on disposition of properties (8.3) (0.4) (1.3) (0.1)
Nonrecurring gain-litigation settle. (12.0) (0.6) - -
Distribution center closing costs 1.3 0.1 - -
--------- ------ --------- -------
Income before income taxes
and extraordinary item 26.7 1.3 13.2 0.6
Income tax provision (8.2) (0.4) (3.3) (0.1)
--------- ------ --------- -------
Income before extraordinary item 18.5 0.9 9.9 0.5
Extraordinary gain (loss) (1.5) (0.1) .9 0.0
--------- ------ --------- -------
Net income $17.0 0.8% $10.8 0.5%
======= ===== ======= =====
Gross margin declined $14.5 million or 0.9% as a percentage of net
sales in Fiscal 1994 compared to Fiscal 1993. Sales of certain higher-
margin items, such as ladies apparel, accessories, and crafts, declined;
distribution center inventory shortage was higher; and purchase discounts
were significantly lower in Fiscal 1994. In addition, advertising and
clearance markdowns were both higher in Fiscal 1994 compared to Fiscal
1993. These factors were partially offset by strong performances in
childrens apparel, domestics and housewares in Fiscal 1994. The Company
expects the decline in gross margin as a percentage of net sales to
continue in the first and second quarters of Fiscal 1995.
Selling, general and administrative expenses decreased $16.7 million
or 1.0% as a percentage of net sales in Fiscal 1994 compared to Fiscal
1993. Reductions in store non-payroll, advertising, home office and field
support expenses were partially offset by an increase in store payroll
expense in Fiscal 1994. This reflects the Company's commitment to reduce
expenses and invest, where possible, in areas directly affecting customer
service. The Company's self-insurance expense was lower in Fiscal 1994
compared to Fiscal 1993 due to a continued improved trend in claims
experience.
Leased department and other operating income declined $4.1 million or
0.2% as a percentage of net sales in Fiscal 1994 compared to Fiscal 1993.
This decline was due, in part, to the decline in leased department sales.
Depreciation and amortization expense increased $3.2 million or 0.1%
as a percentage of net sales in Fiscal 1994 compared to Fiscal 1993. The
adoption of fresh-start reporting at December 26, 1992 resulted in the
write-off of all of the Company's noncurrent assets at that date, and
therefore depreciation and amortization expense for Fiscal 1994 was for
capital additions subsequent to December 26, 1992. The amortization of the
excess of revalued net assets over equity under fresh-start reporting
remained approximately the same. The Company is using a ten-year life for
the period of amortization.
Interest and debt expense declined $1.0 million or 0.1% of net sales
in Fiscal 1994 compared to Fiscal 1993. The Company had a daily weighted
average of $96.1 million in outstanding debt under its revolving credit
facilities during Fiscal 1994 compared to $89.3 million in Fiscal 1993. In
June, 1994, the Company prepaid approximately $69 million of debt utilizing
a portion of the New Facility (Note 5) and the funds that were no longer
required to be restricted for the collateralization of letters of credit.
The favorable impact on interest expense from this prepayment has been
partially offset by an increase in market interest rates and the
amortization of the financing costs associated with the New Facility.
During Fiscal 1994, the Company sold several properties (Note 15) for
a combined total of $8.8 million in proceeds and recognized gains totalling
$8.3 million.
The closing on the Wertheim Settlement Agreement (Note 12) occurred
in June, 1994 and the Company recognized a nonrecurring gain for its $12
million portion of the settlement.
During Fiscal 1994, the Company announced its decision to close the
Clinton, MA distribution center in June, 1995 and recorded a provision of
$1.3 million in Fiscal 1994 for the estimated costs associated with the
closing (Note 16). Transfer of the Clinton operations to the Company's
Leesport, PA distribution center is expected to be completed in June, 1995.
This consolidation is part of the Company's continuing productivity
enhancement and expense-reduction efforts. Use of enhanced automation
capabilities in the Leesport facility will allow the Company to efficiently
service its stores with fewer distribution centers. The Company currently
anticipates this consolidation will result in future pre-tax savings of
approximately $3 million per year.
As a consequence of fresh-start reporting and SFAS No. 109 (Note 9),
the Company recorded a non-cash income tax provision of $8.2 million for
Fiscal 1994 with an associated increase of $8.2 million in additional paid-
in capital.
As a result of the debt refinancing and associated prepayment of
certain debt, the Company recorded a non-cash extraordinary charge of $1.5
million, net of tax benefit of $0.7 million, in Fiscal 1994. The charge
was primarily for the write-off of deferred financing costs and debt
discounts related to the debt that was prepaid.
Results of Operations for Fiscal 1993 Compared to Fiscal 1992
Despite a continued difficult economic environment in the Northeast
and a decline in comparable store sales, the Company reported improvements
in Fiscal 1993 in its gross margin rate, operating earnings and net
earnings, reflecting, in part, its emphasis on higher-margin sales and
inventory and expense controls.
Total sales declined 12.4% from Fiscal 1992 due to the closing of 62
stores during Fiscal 1992, one less week in Fiscal 1993, and a decrease of
2.3% in comparable store sales. The major causes for the decline in
comparable store sales were the Company's de-emphasis of several
lower-margin hardline categories, reduced broadcast advertising, severe
winter weather during the first and fourth quarters of Fiscal 1993, a weak
apparel market, and increased discount store competition, partially offset
by sales increases from remodeled stores, expansions of certain specialty
departments, and additional circular advertising.
Sales of the Company's leased departments were $104.6 million or 4.7%
of total sales for Fiscal 1993 compared to $117.2 million or 4.6% of total
sales for Fiscal 1992. The decline of $12.6 million in leased department
sales was due to the closing of the 62 stores, one less week, and a
decrease of 1.2% in leased department comparable store sales.
To facilitate a comparison of the Company's operating results for
Fiscal 1993 with results achieved in Fiscal 1992, including the
predecessor's results, the following discussion and analysis incorporates
certain pro forma data of the Company, which is summarized in the note
titled "Pro Forma Summary Information (Unaudited)" in the Notes to the
Consolidated Financial Statements. The pro forma data was prepared under
the assumption that the closing of the 60 stores (announced in October,
1992) and the reorganization and related financing occurred at the
beginning of Fiscal 1992.
In the Company's judgement, the pro forma data enhances the ability
to understand the results of operations of the Company for the 52 weeks
ended January 29, 1994 compared with those for the combined 53 weeks ended
January 30, 1993. The pro forma data is for illustrative purposes only and
should not be construed to be indicative of the Company's results of
operations that actually would have resulted if the transactions were
consummated on the date assumed and do not project the Company's results of
operations or trends for any future date or period.
The following table sets forth the historical operating results for
the 52 weeks ended January 29, 1994 and the unaudited pro forma operating
results for the 53 weeks ended January 30, 1993 in millions and as a
percentage of net sales:
Unaudited
Pro Forma
Fiscal Year Ended Fiscal Year Ended
January 29, 1994 January 30, 1993
-------------------- --------------------
$ mil. % of Sales $ mil. % of Sales
-------- ---------- ------- -----------
Net sales $2,123.5 100.0% $2,208.6 100.0%
Costs, expenses and (income):
Cost of merchandise sold 1,537.4 72.4 1,640.6 74.3
Selling, gen. and admin. expenses 586.3 27.6 597.9 27.1
Leased dept. and other oper. income (34.4) (1.6) (34.9) (1.6)
Depreciation and amort. expense 2.1 0.1 1.2 0.1
Amort. of the excess of revalued
net assets over equity (6.2) (0.3) (6.0) (0.3)
Interest and debt expense, net 26.4 1.3 23.0 1.0
Gain on disposition of properties (1.3) (0.1) - -
--------- ------ --------- --------
Income (loss) before income taxes
and extraordinary item 13.2 0.6 (13.2) (0.6)
Income tax provision (3.3) (0.1) - -
--------- ------ --------- -------
Income (loss) before extraord. item 9.9 0.5 (13.2) (0.6)
Extraordinary gain 0.9 0.0 - -
--------- ------ --------- -------
Net Income (loss) $10.8 0.5% ($13.2) (0.6)%
========= ====== ========= =======
Gross margin increased $18.1 million or 1.9% as a percentage of net
sales in Fiscal 1993 compared to pro forma Fiscal 1992. The Company
emphasized higher- margin products in its merchandise mix and in its
advertising in Fiscal 1993. For example, Ames continued with the
installation within the stores of certain specialty departments, such as
Crafts & More, Party Plaza and Pawsitively Pets departments, and the
remodeling and expansions of jewelry departments. Broadcast advertising,
which resulted in higher sales but lower margins in Fiscal 1992, was
reduced and more narrowly focused by limiting the percents-off primarily to
specific merchandise departments. In addition, although advertising
markdowns were significantly higher in Fiscal 1993, clearance markdowns and
inventory shrink were significantly lower due primarily to tighter
inventory (and other operating) controls. Inventory shortage was reduced
by 0.6% of net sales. Pro forma gross profit for Fiscal 1992 included a
LIFO credit of $5.8 million as compared to no LIFO charge or credit in
Fiscal 1993.
Selling, general and administrative expenses decreased $11.6 million
but increased as a percentage of net sales by 0.5% in Fiscal 1993 compared
to pro forma Fiscal 1992. The dollar decrease was primarily due to
reductions in home office expenses and one less week in Fiscal 1993, while
the increase as a percentage of net sales was primarily due to the lower
sales base upon which the percentage is calculated. Advertising expense
was slightly higher in Fiscal 1993 compared to pro forma Fiscal 1992 due to
additional circular advertising, partially offset by less broadcast
advertising. Store payroll expense was slightly higher but other store
expenses were slightly lower in Fiscal 1993 compared to pro forma Fiscal
1992. The Company began a program to improve customer service in Fiscal
1993 by, among other things, increasing its investment in store payroll.
The Company's self-insurance expense was significantly reduced in Fiscal
1993 due to an improved trend in claims experience. Field support expenses
were constant between the two fiscal years.
Leased department and other operating income declined $0.5 million in
Fiscal 1993 compared to pro forma Fiscal 1992, but remained the same as a
percentage of sales. The decline was primarily attributable to the
decrease in leased department (shoes) sales.
Depreciation and amortization expense increased $0.9 million but
remained the same as a percentage of sales in Fiscal 1993 compared to pro
forma Fiscal 1992. The adoption of fresh-start reporting at December 26,
1992 resulted in the write-off of all of the Company's noncurrent assets at
that date, and therefore depreciation and amortization expense for Fiscal
1993 was for capital additions subsequent to December 26, 1992. The
amortization of the excess of revalued net assets over equity under
fresh-start reporting resulted in a $6.2 million credit to the Fiscal 1993
results. The Company is using a ten-year life for the period of
amortization.
Interest and debt expense increased $3.4 million or 0.3% of net sales
in Fiscal 1993 compared to pro forma Fiscal 1992. Approximately $1.3
million of fees related to the Credit Agreement (Note 5) and the Letter of
Credit Facility (Note 5) were charged to interest and debt expense in
Fiscal 1993. The Company had a daily weighted average of $89.3 million in
outstanding debt during Fiscal 1993 under the revolving credit portion of
the Credit Agreement. These borrowings were utilized for seasonal
inventory purchases and for the required cash collateralization of
outstanding letters of credit.
During Fiscal 1993, the Company sold a shopping plaza and its
corporate jet for a combined total of $3.4 million in proceeds and
recognized gains totalling $1.3 million.
As a consequence of the adoption of fresh-start reporting and SFAS
No. 109, the Company recorded a non-cash income tax provision of $3.3
million for Fiscal 1993 with an associated increase of $3.3 million in
additional paid-in capital.
The Company recorded an extraordinary gain of $.9 million, before and
after income taxes, from the early settlement of certain tax notes during
Fiscal 1993.
(b) Liquidity and Capital Resources.
Credit Facilities - Fiscal 1994 and Fiscal 1993
The Company's principal sources of liquidity are certain available
credit facilities, cash from operations, and cash on hand. On April 28,
1994, the Company entered into an agreement with BankAmerica Business
Credit, Inc., as agent, and a syndicate consisting of seven other banks and
financial institutions, for a secured revolving credit facility of up to
$300 million (the "New Facility") that contains terms, covenants and
interest rates that the Company believes are generally more favorable than
those in the prior Credit Agreement. The New Facility is in effect until
June 22, 1997, is secured by substantially all of the assets of the
Company, and requires the Company to meet certain quarterly financial
covenants. Ames is in compliance with the financial covenants through
January, 1995. Reference can be made to Note 5 for a further description
of the New Facility.
In June, 1994, the Company used the funds that were no longer
restricted for the collateralization of letters of credit, and funds from
the New Facility, to prepay the then-outstanding Series A, B and D Notes, a
$1.2 million term note, and the outstanding borrowings under the Credit
Agreement. The Company's peak borrowing level in Fiscal 1994 under the New
Facility was $177.5 million. Ames repaid all such borrowings by December,
1994, and fulfilled its "clean-up" requirement (Note 5) in January, 1995.
Upon consummation of the plan of reorganization in December, 1992,
Ames had obtained $210 million of post-emergence financing (the "Credit
Agreement"), including approximately $176 million in the form of revolving
credit financing (the "Revolver"). In addition, Ames obtained a $90
million letter of credit facility (the "Letter of Credit Facility") which
was later increased to $120 million. The Company's historical borrowing
patterns changed as a result of the Letter of Credit Facility. That
facility required cash collateralization at 105% of outstanding letters of
credit, which in turn required an average incremental increase of
approximately $60 million in outstanding revolving credit borrowings in
Fiscal 1993. The Company's peak borrowing level was $161.9 million under
the Revolver in Fiscal 1993. Ames repaid all borrowings under the Revolver
in December, 1993 before borrowing $15.4 million in January, 1994.
Before Reorganization
Other than payments approved by the Bankruptcy Court made to secured
creditors as adequate protection payments, or costs to cure defaults on
leases and contracts assumed in the Chapter 11 case, principal and interest
payments on indebtedness incurred prior to the filing of the petitions
under Chapter 11 on April 25, 1990 (the "Filing Date") were not made during
the Chapter 11 proceedings. Virtually all pre-petition indebtedness of
Ames was subject to settlement under the reorganization case as a result of
the filing of the petitions under Chapter 11.
Chemical Bank, as agent for a group of banks, initially provided the
Company with a $250 million Debtor-in-Possession Revolving Credit Agreement
(the "DIP Facility") during Chapter 11. The DIP Facility provided Ames, at
variable interest rates, with a line of credit and letter of credit
facility that could be used to purchase inventory and for other corporate
purposes. The DIP Facility was lowered to $200 million in August, 1992 and
expired, in accordance with its terms, on December 30, 1992, the
consummation date of the Company's plan of reorganization (the
"Consummation Date").
Review of Cash Flows, Liquidity and Financial Condition
The Company's unrestricted cash position increased $11.9 million
during Fiscal 1994. This increase was primarily due to $83.5 million in
net cash provided by operations and $53.9 million of restricted cash
withdrawals, partially offset by $24.5 million of fixed asset purchases,
the paydown of $15.4 million in the outstanding balance under revolving
credit facilities, and the payments of $87.8 million on debt and capital
lease obligations, including the prepayments of $67.7 million on certain
debt described above. Please see below for further discussions of
activities affecting cash and liquidity for Fiscal 1994.
Ames experienced a decline of $15.4 million in unrestricted cash
during Fiscal 1993. This decline was primarily due to the payment of
approximately $15.0 million of deferred distributions under the plan of
reorganization, payments of $13.7 million of other debt and capital lease
obligations, payments of $32.4 million of restructuring costs, purchases of
$20.2 million of fixed assets, and the paydown of $7.6 million in the
outstanding balance under the Revolver, partially offset by a combined
$40.5 million of cash proceeds on sales of net assets held for disposition
and other properties, $27.7 million of restricted cash withdrawals, and
$7.3 million in net cash provided by operations prior to the payment of
restructuring costs. Please see below for further discussions of
activities affecting cash and liquidity for Fiscal 1993.
Ames experienced a total cash decrease of $25.6 million for the
forty-eight weeks ended December 26, 1992, prior to the consummation cash
distributions. The Company's unrestricted cash position declined $21.2
million for the five weeks ended January 30, 1993. The 48-week decline was
primarily due to the operating loss incurred, partially offset by the
proceeds from the sale of assets held for disposition (primarily from the
77 store closings). The 48-week cash decline caused Ames to increase its
peak borrowings by $40 million under the DIP Facility as compared to the
prior year. The January cash decrease was primarily a result of the
reduction of accounts payable and the operating loss incurred, partially
offset by the initial proceeds from the sale of inventories at the 60
closing stores and short-term borrowings under the Revolver. Please see
below for further discussions of activities affecting cash and liquidity
for Fiscal 1992.
The New Facility does not require cash collateralization of letters
of credit, except in limited instances. As of January 29, 1994 and January
30, 1993, approximately $55.0 and $57.4 million, respectively, was placed
for collateral pledge and consignment with Republic National Bank of New
York as a condition precedent to the issuance of letters of credit under
the Letter of Credit Facility. This cash collateral was included in
"Restricted cash and short-term investments." Approximately $66.3 million
had been placed as such collateral at the Consummation Date. The amounts
of cash collateral changed as the balances outstanding under the Letter of
Credit Facility changed, since the cash collateral had to equal 105% of the
Company's outstanding obligations, including $5.5 and $6.5 million at
January 29, 1994 and January 30, 1993, respectively, for future increases
to standby letters of credit to cover expected workers' compensation
claims. Ames earned interest on the invested cash collateral.
As of January 28, 1995, January 29, 1994 and January 30, 1993, Ames
also restricted approximately $0.2, $1.0 and $26.3 million of cash,
respectively, for expected payments of certain remaining administrative and
priority claims under the plan of reorganization. This amount was also
included in "Restricted cash and short-term investments." The associated
liability was included in "Accrued expenses." Approximately $37.7 million
had been placed on deposit for such claims at the Consummation Date. The
Company earns interest on invested segregated funds. As of January 28,
1995, the Company also had $1.8 million of cash received in escrow from the
December, 1994 sale of a store's lease interest. The cash was released
from escrow in February, 1995.
The changes in working capital and other, net, in the consolidated
statements of cash flows exclude reclassifications related to the
restructuring and Chapter 11 proceedings. The following two paragraphs
detail the components of restricted cash prior to the Company's emergence
from Chapter 11 and the related cash flows from the sale of assets held for
disposition through December 26, 1992.
Ames received and segregated through December 26, 1992, pursuant to
Bankruptcy Court orders or agreements with creditors, $244.9 million of
proceeds from the sales of inventory, lease contracts, furniture and
equipment pursuant to the closing of 221 stores and other asset sales and
$27.1 million of interest on such proceeds. Pursuant to a Bankruptcy Court
order and agreements with creditors, Ames was authorized to draw up to
$51.0 million of such segregated proceeds and interest to pay for actual
expenses incurred in connection with the closing of the 221 stores and
related restructuring costs. Furthermore, Ames applied for and received
Bankruptcy Court approval to use certain additional segregated proceeds.
Through December 26, 1992, Ames had drawn $62.3 million of these funds
($41.4 million representing the reimbursement for actual expenses incurred
in connection with the closing of the 221 stores). In addition, other
funds totalling $21.8 million were segregated for payment of sales and
payroll taxes and utilities incurred after the Filing Date, as well as for
the payment of certain mortgages. Prior to distribution on the
Consummation Date, Ames had on hand $231.5 million of cash and short-term
investments related to the 221 stores and related escrow funds whose use
was restricted and subject primarily to Bankruptcy Court approval.
In addition, Ames received and segregated through December 26, 1992,
pursuant to Bankruptcy Court orders, $42.2 million of proceeds from the
sales of inventory and other assets pursuant to the closing of 77 stores
and $8.5 million from the sale of Mathews & Boucher, Inc. ("M&B"), the
Company's former wholesale sporting goods distributor, and $1.0 and $.3
million of interest on such proceeds, respectively. Through December 26,
1992, Ames had drawn $17.6 and $.4 million from the 77 store funds and M&B
funds, respectively, to pay for expenses incurred in connection with the
closings and sale. Prior to the distribution on the Consummation Date,
Ames had on hand $25.7 million and $8.3 million of cash and short-term
investments related to the 77 stores and M&B, respectively, whose use was
restricted and subject primarily to Bankruptcy Court approval.
Merchandise inventories declined $12.0 million during Fiscal 1994
primarily due to strong fourth quarter sales. Inventories had declined
$22.4 million during Fiscal 1993 primarily as a result of planned
reductions and stringent inventory controls. Inventories had also declined
$13.4 million during the five weeks ended January 30, 1993, primarily as a
result of January clearance sales. Inventories had increased $38.0 million
to $478.0 million at December 26, 1992 from $440.0 million at January 25,
1992 due primarily to the lower than planned Christmas season sales, the
timing of inventory shipments and clearance sales, and the elimination of
the LIFO reserve of $34.3 million at December 26, 1992, partially offset by
the effect of the closing of the 60 stores, which contained approximately
$67.9 million of inventory at January 25, 1992. Inventory shipments were
unusually low immediately prior to January 25, 1992 and post-Christmas
clearance sales took place after December 26, 1992. The LIFO reserve as of
December 26, 1992 was eliminated in connection with the adoption of
fresh-start reporting. Ames remained on the LIFO method after emergence
from Chapter 11, but there was no LIFO charge or credit in Fiscal 1994,
1993 and January, 1993 because inventory levels declined, the Company's
merchandise mix continued to change, and inflation was insignificant during
those periods.
Accounts payable increased $54.4 million during Fiscal 1994, due
primarily to longer payment terms. During Fiscal 1994, the Company began a
concerted effort to return to normal industry payment terms by lengthening
its payment terms with merchandise vendors. Accounts payable had increased
$4.8 million during Fiscal 1993, due primarily to the timing of inventory
shipments prior to January 29, 1994, and declined $57.1 million during the
five weeks ended January 30, 1993, primarily as a result of the timing of
inventory shipments at December 26, 1992 and the curtailment of purchases
at the 60 closing stores. Trade accounts payable at January 30, 1993 were
almost twice the level at January 25, 1992 due to the unusually low level
of inventory shipments prior to the previous year-end. Accounts payable
had increased $57.9 million during the forty-eight weeks ended December 26,
1992 primarily due to the inventory build-up and the timing of inventory
shipments discussed above, partially offset by the curtailment of purchases
at the 60 closing stores. During Fiscal 1994, 1993 and 1992, the Company
paid its trade payables within the terms negotiated with vendors.
During Fiscal 1993 and January 1993, accrued expenses and the
restructuring reserve both declined significantly as a result of payments
out of the segregated account and payments associated with the 60 closing
stores. Accrued expenses had increased significantly at December 26, 1992
from January 25, 1992 primarily due to the segregated account liability,
which contained a larger accumulation of professional fees and assumed
lease liabilities.
The Company and its pre-petition lenders agreed to a restructuring of
the Company's obligations as part of the plan of reorganization. The new
obligations consisted primarily of secured notes that certain banks elected
to receive, which were prepaid in Fiscal 1994, and deferred cash
distributions. The major component of the "Current portion of long-term
debt" at January 28, 1995 and January 29, 1994 related primarily to cash
distributions of $8.0 million paid on January 31, 1995 and January 31, 1994
pursuant to the plan of reorganization.
There were no outstanding borrowings under the New Facility as of
January 28, 1995. The "Note payable" of approximately $15.4 million at
January 29, 1994 was the amount outstanding under the Revolver. The
"Unfavorable lease liability" was recorded as part of fresh-start reporting
and "Other long-term liabilities" consist primarily of the long-term
portion of unemployment tax reserves. The unemployment tax reserves were
recorded at October 24, 1992 for the higher unemployment taxes to be paid
as a result of the large number of store closings and associated reductions
in work force during the Company's restructuring.
No dividends were paid while Ames was under the protection of Chapter
11, or since its emergence from Chapter 11. The Company is restricted from
declaring dividends under the New Facility.
Capital Expenditures
Capital expenditures for Fiscal 1994 were $24.5 million and included,
among other things, new apparel fixtures for all stores, small-scale
remodeling of 52 stores, and the rollout of certain specialty departments
to additional stores. The increase in capital expenditures from Fiscal
1993 was due primarily to the Fiscal 1994 expenditures for the new apparel
fixtures. The decrease from the Fiscal 1992 expenditures of $29.0 million
was due primarily to the Fiscal 1992 costs related to the complete
remodeling of 18 stores.
Capital spending is expected to be approximately $25.0 million for
Fiscal 1995, primarily for small-scale remodels at 22 stores, complete
remodels at 20 stores and the anticipated opening of three new stores. The
Company expects to finance equipment purchases, new store fixtures and
equipment, and the remodeling of existing stores through
internally-generated funds. The Company adjusts the plans for making such
expenditures depending on the amount of internally-generated funds
available. Land, buildings and improvements are financed principally
through either long-term capital or operating leases.
Summary
The Company believes the ability to meet its financial obligations
and make planned capital expenditures will depend on the Company's future
operating performance, which will be subject to financial, economic and
other factors affecting the industry and operations of the Company,
including factors beyond its control. The Company believes its operating
performance and the availability of its financing facilities will provide
sufficient liquidity to allow the Company to meet its financial
obligations.
Ames currently anticipates the following investment and financing
activities for Fiscal 1995: capital expenditures as described above,
seasonal borrowings and payments under the New Facility, planned payments
of debt and capital lease obligations, and the sale of certain properties
and lease interests.
The Company believes the actions set forth above and the availability
of its financing facilities, together with the Company's available cash and
expected cash flows from Fiscal 1995 operations and beyond, will enable
Ames to fund its expected needs for working capital, capital expenditures
and debt service requirements. Achievement of expected cash flows from
operations and compliance with the EBITDA covenant (Note 5) is dependent
upon the Company's attainment of sales, gross profit, and expense levels
that are reasonably consistent with its financial projections.
The Company expects from time to time to consider possible capital
market transactions, debt refinancing, and other transactions to further
enhance the Company's financial flexibility.
The significant net operating loss carryforwards remaining after
Fiscal 1994, subject to limitations pursuant to Internal Revenue Code Sec.
382, should offset income on which taxes would otherwise be payable in
future years.
Item 8. Financial Statements and Supplementary Data
See Index to Consolidated Financial Statements.
Item 9. Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Officers and Directors of the Registrant
Information as to the directors of the registrant required by Item 10
is incorporated herein by reference from the information set forth under
the caption "ELECTION OF DIRECTORS" of the Company's definitive proxy
statement to be filed pursuant to Regulation 14A within 120 days after the
close of its fiscal year.
The following table indicates the names of all executive officers of
Ames and the offices held by each. Other than the employment contracts
with Mr. Ettore and Mr. Lemire described in the Company's proxy statement,
there are no other arrangements or understandings between any officer below
and any other person pursuant to which he was selected as an officer.
Joseph R. Ettore ................ President, Chief Executive Officer,
and Director
John F. Burtelow ................ Executive Vice President, Chief
Financial Officer
John W. Hermsen ................. Executive Vice President, Stores and
Distribution
Denis T. Lemire ................. Executive Vice President, Merchandising
Eugene E. Bankers ............... Senior Vice President, Marketing
Richard L. Carter ............... Senior Vice President, Human Resources
David H. Lissy .................. Senior Vice President, General Counsel
and Corporate Secretary
Cornelius F. Moses, III ......... Senior Vice President, Treasury
William C. Najdecki ............. Senior Vice President, Chief
Accounting Officer
John M. Pascucci ................ Senior Vice President, Management
Information Systems
Ronald T. Raymond ............... Senior Vice President, Asset Protection
Grant C. Sanborn ................ Senior Vice President, Store Operations
Joseph R. Ettore, age 55, joined Ames as President, Chief Executive
Officer and Director in June, 1994. Prior to joining Ames, he was
President, Chief Executive Officer and Director of Jamesway
Corporation("Jamesway") from July, 1993 to June, 1994; President, Chief
Operating Officer and Director of Jamesway in June, 1993; Chairman of the
Board and Chief Executive Officer of Stuarts Department Stores,
Inc.("Stuarts") from October, 1992 to June, 1993; and President, Chief
Operating Officer and Director of Stuarts from October, 1989 to October,
1992. He remained a Director of Stuarts until May, 1994. Jamesway filed
for protection under Chapter 11 of the Bankruptcy Code ("Chapter 11") in
July, 1993 and emerged from the Chapter 11 case in January, 1995. Stuarts
filed under Chapter 11 in December, 1990 and emerged from the Chapter 11
case in October, 1992.
John F. Burtelow, age 47, joined Ames as Executive Vice President,
Chief Financial Officer in August, 1994. Prior to joining Ames, he was
Senior Vice President, Chief Financial Officer of Venture Stores, Inc. from
March, 1989 to May, 1994. He held a number of increasingly senior
financial positions with The May Department Stores Company between 1979 and
1989.
John W. Hermsen, age 48, became Executive Vice President, Stores and
Distribution in July, 1994. He joined Ames as Senior Vice President, Store
Operations in June, 1993. Prior to joining Ames, he was employed at Shopko
Stores, Inc. as Vice President for Store Operations, Loss Prevention and
Health Services from 1986 to 1993.
Denis T. Lemire, age 47, joined Ames as Executive Vice President,
Merchandising in August, 1994. Prior to joining Ames, he was President and
Chief Operating Officer of Stuarts Department, Inc. ("Stuarts") from
November, 1993 to August, 1994 and Senior Vice President, Merchandising for
Stuarts from April, 1990 to November, 1993. Stuarts filed for protection
under Chapter 11 in December, 1990 and emerged from the Chapter 11 case in
October, 1992. Mr. Lemire was a General Merchandise Manager at American
Eagle Outfitters, Inc., a subsidiary of Retail Ventures, Inc., from July,
1989 to April, 1990.
Eugene E. Bankers, age 55, joined Ames as Senior Vice President,
Marketing in December, 1993. Prior to joining Ames, he was employed at
Shopko Stores, Inc. as Vice President, Communications and Investor
Relations from 1991 to 1993, and Vice President of Advertising, Sales
Promotions, Special Events and Public Relations from 1982 to 1991.
Richard L. Carter, age 46, joined Ames as Senior Vice President,
Human Resources in February, 1993. Prior to joining Ames, he was Senior
Vice President, Human Resources at G. Fox & Co., Inc. from 1989 to 1993.
David H. Lissy, age 51, became Senior Vice President, General Counsel
and Corporate Secretary in December, 1992. He began work on the Ames
Chapter 11 cases in June, 1990, and in July, 1990 was named Vice President,
Legal Services. He was appointed Vice President, General Counsel and
Corporate Secretary in October, 1991. He has been owner of Samuel Lehrer &
Co., Inc., a wholesaler of fine quality fabrics, since 1988.
Cornelius F. Moses, III, age 36, became Senior Vice President,
Treasury in December, 1992. He joined Ames in June, 1990 as Vice
President, Special Projects. He became Vice President, Associate Treasurer
in September, 1990 and Vice President and Treasurer in September, 1991.
Prior to joining Ames, he served as Director-Project Development,
Manager-Project Finance, and Financial Analyst for Wheelabrator
Technologies, Inc. from 1985 to June, 1990.
William C. Najdecki, age 44, became Senior Vice President, Chief
Accounting Officer in December, 1992. He joined Ames in April, 1991 as
Vice President, Bankruptcy Administration and became Vice President,
Controller in July, 1991. Prior to joining Ames, he was Hardlines
Controller for Montgomery Ward from 1989 to 1991.
John M. Pascucci, age 52, became Senior Vice President, Management
Information Systems (MIS) in September, 1994. He joined Ames in April,
1994 as Vice President, System Development. Prior to joining Ames, he was
Vice President, MIS for Shopko Stores, Inc. from September, 1991 to
January, 1994 and Vice President, MIS at P.A. Bergner and Company from
January, 1986 to August, 1991.
Ronald T. Raymond, age 51, became Senior Vice President, Asset
Protection in April, 1993. Since joining Ames in 1987, he has served in a
number of Loss Prevention positions, from Corporate Director to Assistant
Vice President to Vice President, and became Vice President, Internal Audit
and Loss Prevention in December, 1992.
Grant C. Sanborn, age 43, became Senior Vice President, Store
Operations in January, 1995. Since joining Ames in 1971, he has served in
a number of store operations positions, including Assistant Regional
Manager from July, 1989 to May, 1991; Regional Director from May, 1991 to
July, 1991; Director, Store Operations from July, 1991 to October, 1993;
and Vice President, Store Operations from October, 1993 to January, 1995.
Item 11. Executive Compensation
The information required by Item 11 is incorporated herein by
reference from the information set forth under the sections titled
"Executive Compensation," "Board Meetings and Committees," "Compensation of
Directors," "Employment Contracts, Termination, Severance and
Change-of-Control Arrangements," "Additional Information with respect to
Board of Directors Interlocks and Insider Participation in Compensation
Decisions," "The Board of Directors Report on Executive Compensation," and
"Performance Graph" of the Company's definitive proxy statement to be filed
pursuant to Regulation 14A within 120 days after the close of its fiscal
year.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by Item 12 is incorporated herein by
reference from the information set forth under the sections titled
"Security Ownership of Management" and "Security Ownership of Certain
Beneficial Owners" of the Company's definitive proxy statement to be filed
pursuant to Regulation 14A within 120 days after the close of its fiscal
year.
Item 13. Certain Relationships and Related Transactions
The information required by Item 13 is incorporated herein by
reference from the information set forth under the section titled
"Transactions with Management" of the Company's definitive proxy statement
to be filed pursuant to Regulation 14A within 120 days after the close of
its fiscal year.
PART IV
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K
(a) Documents Filed as Part of this Form 10-K
1. Financial Statements
The Financial Statements listed in the accompanying Index
to Consolidated Financial Statements are filed as part of
this Form 10-K.
2. Financial Statement Schedule
The Financial Statement Schedule listed in the
accompanying Index to Consolidated Financial Statements
is filed as part of this Form 10-K.
3. Exhibits
The Exhibits filed as part of this Form 10-K are listed
on the Exhibit Index immediately preceding such Exhibits,
incorporated herein by reference.
(b) Reports on Form 8-K
Reports on Form 8-K were filed with the Securities and
Exchange Commission during the fourth quarter as follows:
Date of Report Date of Filing Item # Description
---------------- --------------- ------ ---------------------------------------------
November 23, 1994 November 23, 1994 5 Disclosure of fiscal October 1994 results.
December 8, 1994 December 8, 1994 5 Disclosure of fiscal November 1994 results.
January 12, 1995 January 12, 1995 5 Disclosure of fiscal December 1994 results.
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.
AMES DEPARTMENT STORES, INC.
(Registrant)
Dated: April 7, 1995 /s/ Joseph R. Ettore
-----------------------------------------
Joseph R. Ettore, President, Chief
Executive Officer and Director
Dated: April 7, 1995 /s/ John F. Burtelow
-----------------------------------------
John F. Burtelow, Executive Vice
President, Chief Financial Officer
Dated: April 7, 1995 /s/ William C. Najdecki
-----------------------------------------
William C. Najdecki, Senior Vice
President, Chief Accounting 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.
Dated: April 7, 1995 /s/ Paul M. Buxbaum
---------------------------------------
Paul M. Buxbaum, Director and Chairman
Dated: April 7, 1995 /s/ Francis X. Basile
-----------------------------------------
Francis X. Basile, Director
Dated: April 7, 1995 /s/ Alan Cohen
-----------------------------------------
Alan Cohen, Director
Dated: April 7, 1995 /s/ Richard M. Felner
-----------------------------------------
Richard M. Felner, Director
Dated: April 7, 1995 /s/ Sidney S. Pearlman
-----------------------------------------
Sidney S. Pearlman, Director
Dated: April 7, 1995 /s/ Laurie M. Shahon
-----------------------------------------
Laurie M. Shahon, Director
AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
----------------------------------
FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
(FORM 10-K)
EXHIBITS
For the Fiscal Years Ended January 28, 1995 and
January 29, 1994, the Five Weeks Ended January 30, 1993,
and the Forty-eight Weeks Ended December 26, 1992
(With Report of Independent Public Accountants)
-----------------------------------
AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
Index to Consolidated Financial Statements and Financial
Statement Schedule for the Fiscal Years Ended January 28, 1995
and January 29, 1994, the Five Weeks Ended January 30, 1993,
and the Forty-eight Weeks Ended December 26, 1992
Financial Statements:
Report of Independent Public Accountants.
Consolidated Statements of Operations for the fiscal years ended January
28, 1995 and January 29, 1994, the five weeks ended January 30, 1993, and
the forty-eight weeks ended December 26, 1992.
Consolidated Balance Sheets as of January 28, 1995 and January 29, 1994.
Consolidated Statements of Changes in Stockholders' Equity (Deficit) for
the fiscal years ended January 28, 1995 and January 29, 1994, the five
weeks ended January 30, 1993, and the forty-eight weeks ended December 26,
1992.
Consolidated Statements of Cash Flows for the fiscal years ended January
28, 1995 and January 29, 1994, the five weeks ended January 30, 1993, and
the forty-eight weeks ended December 26, 1992.
Notes to Consolidated Financial Statements.
Schedule:
II. Valuation and Qualifying Accounts for the fiscal years ended January
28, 1995 and January 29, 1994, the five weeks ended January 30,
1993, and the forty-eight weeks ended December 26, 1992.
Schedules Omitted:
All other schedules are omitted as they are not applicable or the
information is shown in the consolidated financial statements or notes
thereto.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of
AMES DEPARTMENT STORES, INC.:
We have audited the accompanying consolidated balance sheets of Ames
Department Stores, Inc. (a Delaware corporation) and subsidiaries as of
January 28, 1995 and January 29, 1994, and the related consolidated
statements of operations, changes in stockholders' equity (deficit) and
cash flows for the fifty-two weeks ended January 28, 1995 and January 29,
1994, the five weeks ended January 30, 1993, and the forty-eight weeks
ended December 26, 1992. These consolidated financial statements and the
schedule referred to below are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
consolidated financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Ames Department
Stores, Inc. and subsidiaries as of January 28, 1995 and January 29, 1994,
and the results of their operations and their cash flows for the fifty-two
weeks ended January 28, 1995 and January 29, 1994, the five weeks ended
January 30, 1993, and the forty-eight weeks ended December 26, 1992 in
conformity with generally accepted accounting principles.
On December 30, 1992, the Company emerged from bankruptcy. As
discussed in Note 2 to the financial statements, effective December 26,
1992, the Company accounted for the reorganization, adopted "fresh-start
reporting" and changed its methods of accounting for post-retirement
benefits other than pensions and income taxes. As a result of the
reorganization and adoption of fresh-start reporting, the consolidated
statements of operations and cash flows for the fifty-two weeks ended
January 28, 1995 and January 29, 1994 and the five weeks ended January 30,
1993 are not comparable to the consolidated statements of operations and
cash flows for the forty-eight weeks ended December 26, 1992 since they
present the consolidated results of operations and cash flows of the
reorganized entity.
Our audits were made for the purpose of forming an opinion on the
basic financial statements taken as a whole. The schedule listed in the
index to the consolidated financial statements is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not
part of the basic financial statements. This schedule has been subjected
to the auditing procedures applied in the audits of the basic financial
statements and, in our opinion, fairly states in all material respects the
financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
/s/ ARTHUR ANDERSEN LLP
New York, New York
March 20, 1995
AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Amounts)
Fiscal Year Fiscal Year Five Weeks Forty-eight
Ended Ended Ended Weeks Ended
January 28, January 29, January 30, December 26,
1995 1994 1993 1992
Registrant Registrant Registrant Predecessor
------------ ------------ ---------- ------------
TOTAL SALES $2,242,270 $2,228,135 $148,003 | $2,395,570
Less: Leased department sales 99,443 104,608 5,654 | 111,544
------------ ------------ ---------- |------------
NET SALES 2,142,827 2,123,527 142,349 | 2,284,026
|
COSTS, EXPENSES AND (INCOME): |
Cost of merchandise sold 1,571,181 1,537,400 121,369 | 1,687,469
Selling, general and administrative expenses 569,645 586,267 45,886 | 614,626
Leased department and other operating income (30,296) (34,357) (2,081) | (35,537)
Depreciation and amortization expense 5,288 2,105 2 | 43,919
Amortization of the excess of revalued net assets |
over equity under fresh-start reporting (6,153) (6,215) (530) | -
Interest and debt expense 26,502 28,883 1,916 | 9,917
Interest income (1,135) (2,449) (321) | (11,196)
Gain on disposition of properties (8,255) (1,340) - | -
Non-recurring gain - litigation settlement (12,001) - - | -
Distribution center closing costs 1,300 - - | -
Bankruptcy expenses - - - | 25,500
Restructuring charges - - - | 88,500
------------ ------------ ---------- |------------
|
INCOME (LOSS) BEFORE FRESH-START REVALUATION, |
INCOME TAXES, AND EXTRAORDINARY ITEMS 26,751 13,233 (23,892) | (139,172)
|
Revaluation of assets and liabilities pursuant to adoption |
of fresh-start reporting - - - | (391,204)
------------ ------------ ---------- |------------
|
INCOME (LOSS) BEFORE INCOME TAXES AND EXTRAORDINARY ITEMS 26,751 13,233 (23,892) | (530,376)
|
|
Income tax provision (8,208) (3,338) - | -
------------ ------------ ---------- |------------
|
INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS 18,543 9,895 (23,892) | (530,376)
|
Extraordinary item - gain (loss) on early extinguishment of debt |
(net of tax benefit of $727 in the fiscal year ended |
January 28, 1995) (1,517) 928 - | -
Extraordinary item - gain on debt discharge - - - | 1,249,264
------------ ------------ ---------- |------------
|
|
NET INCOME (LOSS) $17,026 $10,823 ($23,892) | $718,888
============ ============ ========== |============
|
|
WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON EQUIVALENT |
SHARES USED IN THE CALCULATION OF EARNINGS PER SHARE 21,499 21,183 20,000 | *
============ ============ ========== |
|
INCOME (LOSS) PER SHARE BEFORE EXTRAORDINARY ITEM $0.86 $0.47 ($1.19) | *
|
EXTRAORDINARY GAIN (LOSS) (0.07) 0.04 - | *
------------ ------------ ---------- |
|
NET INCOME (LOSS) PER SHARE $0.79 $0.51 ($1.19) | *
============ ============ ========== |
<FN>
* Earnings per share was not presented for the forty-eight weeks ended December 26, 1992
because such presentation would not be meaningful. The predecessor's stock was cancelled under
the plan of reorganization and the registrant's stock was not issued until the Consummation Date.
(The accompanying notes are an integral part of these consolidated financial statements.)
AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Amounts)
January 28, January 29,
ASSETS 1995 1994
---------- ----------
Current Assets:
Unrestricted cash and short-term investments $28,402 $16,465
Restricted cash and short-term investments 2,047 55,980
---------- ----------
Total cash and short-term investments 30,449 72,445
---------- ----------
Receivables:
Trade 8,834 6,562
Other 7,973 12,141
---------- ----------
Total receivables 16,807 18,703
---------- ----------
Merchandise inventories 430,152 442,198
Prepaid expenses and other current assets 8,999 10,130
---------- ----------
Total current assets 486,407 543,476
---------- ----------
Fixed Assets:
Land and buildings 845 541
Property under capital leases 687 -
Fixtures and equipment 35,130 16,642
Leasehold improvements 11,991 6,503
---------- ----------
48,653 23,686
Less - Accumulated depreciation and amortization (7,620) (2,098)
---------- ----------
Net fixed assets 41,033 21,588
Other assets and deferred charges 5,948 2,067
---------- ----------
$533,388 $567,131
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable:
Trade $130,737 $74,091
Other 33,794 36,045
---------- ----------
Total accounts payable 164,531 110,136
---------- ----------
Note payable - revolver - 15,360
Current portion of long-term debt 15,168 14,821
Long-term debt classified as current (Note 5) - 67,702
Current portion of capital lease obligations 3,988 3,788
Self-insurance reserves 46,413 48,493
Accrued compensation 20,129 22,044
Accrued expenses 43,369 40,164
---------- ----------
Total current liabilities 293,598 322,508
---------- ----------
Long-term debt 39,030 51,423
Capital lease obligations 38,065 41,886
Other long-term liabilities 6,242 11,046
Unfavorable lease liability 22,903 25,072
Excess of revalued net assets over equity under fresh-start reporting 48,633 54,786
Commitments and contingencies (Notes 6, 11, & 12)
Stockholders' Equity:
Priority common stock (automatically converted to common stock on December 30, 1994;
12,000,000 shares had been authorized and issued; 3,860,058 shares were outstanding
at January 29, 1994; par value $.01) - 38
Common stock (40,000,000 shares authorized; 20,127,269 and 16,267,211 shares
outstanding at January 28, 1995 and January 29, 1994, respectively; par value $.01) 201 163
Additional paid-in capital 80,759 73,278
Retained earnings (accumulated deficit) 3,957 (13,069)
---------- ----------
Total Stockholders' Equity 84,917 60,410
---------- ----------
$533,388 $567,131
========== ==========
<FN>
(The accompanying notes are an integral part of these consolidated balance sheets.)
AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
(In Thousands)
Priority Pref. St Treasury Additional Retained Total
Common Stock Common Stock Preferred Stock Div. Pay Stock Paid-In Earnings Equity
Shares Amount Shares Amount Shares Amount Amount Shares Amount Capital (Deficit) (Deficit)
Balance, Jan. 25, 1992 37,987 $18,994 425 $144,242 $6,424 (405) ($3,857) $223,348 ($1,108,542) ($719,391)
Conversion of Subordinated
Debentures into Common
Stock 23 12 491 503
Cancellation of Former
Equity Interests under
Plan of Reorganization (38,010) (19,006) (425) (144,242) (6,424) 405 3,857 (223,839) 389,654 0
Net Income 718,888 718,888
Issuance of New Equity
Interests in Connection
with Emerg. from Ch. 11 8,000 80 12,000 120 69,800 70,000
-----------------------------------------------------------------------------------------------------------
Balance, Dec. 26, 1992 8,000 $80 12,000 $120 0 $0 $0 0 $0 $69,800 $0 $70,000
(Fresh-start Report. Date)
Conversion of Priority
Common Stock into
Common Stock 962 10 (962) (10) 0
Net Loss (23,892) (23,892)
-----------------------------------------------------------------------------------------------------------
Balance, Jan. 30, 1993 8,962 $90 11,038 $110 $69,800 ($23,892) $46,108
Conversion of Priority
Common Stock into
Common Stock 7,178 72 (7,178) (72) 0
Exercise of Series C
Warrants 127 1 140 141
Utilization of Tax
Attributes 3,338 3,338
Net Income 10,823 10,823
-----------------------------------------------------------------------------------------------------------
Balance, Jan. 29, 1994 16,267 $163 3,860 $38 $73,278 ($13,069) $60,410
Conversion of Priority
Common Stock into
Common Stock 3,860 $38 (3,860) 38 0
Utilization of Tax
Attributes 7,481 7,481
Net Income 17,026 17,026
-----------------------------------------------------------------------------------------------------------
Balance, Jan. 28, 1995 20,127 $201 0 $76 $80,759 $3,957 $84,917
===========================================================================================================
<FN>
(The accompanying notes are an integral part of these consolidated financial statements.)
AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
Fiscal Fiscal Forty-eight
Year Year Five Weeks Weeks
Ended Ended Ended Ended
January 28, January 29, January 30, December 26,
1995 1994 1993 1992
Registrant Registrant Registrant | Predecessor
----------- ----------- ----------- | -----------
|
Cash flows from operating activities: |
Net income (loss) $17,026 $10,823 ($23,892) | $718,888
Expenses not requiring the outlay of cash: |
Extraordinary loss (gain) on early extinguishment of debt 1,517 (928) - | -
Income tax provision 8,208 3,338 - | -
Depreciation and amortization of fixed assets and leaseholds 5,528 2,167 4 | 47,582
Amortization of the excess of revalued net assets over equity (6,153) (6,215) (530) | -
Amortization of the unfavorable lease liability (2,094) (2,123) (177) | -
Amortization of debt discounts and deferred financing costs 5,843 5,834 483 | -
Gain on disposition of properties (8,255) (1,340) - | -
Other, net (855) (725) 2 | 232
----------- ----------- ----------- | -----------
Cash provided by (used for) operations before changes in working |
capital and reorganization and restructuring items 20,765 10,831 (24,110) | 766,702
Changes in working capital: |
(Increase) decrease in receivables 1,385 5,484 8,137 | (3,260)
(Increase) decrease in merchandise inventories 12,046 22,358 12,787 | (67,253)
(Increase) decrease in prepaids and other current assets 1,131 (1,056) 1,118 | (3,129)
Increase (decrease) in accounts payable 54,986 4,798 (57,119) | 55,832
Increase (decrease) in accrued expenses and other current liabilities (1,050) (35,069) (19,574) | 15,007
Changes due to reorganization and restructuring activities: |
Fresh-start revaluation charge - - - | 391,204
Extraordinary gain on debt discharge - - - | (1,249,264)
Restructuring charges - - - | 88,500
Payments of restructuring costs (5,737) (32,448) (6,123) | (26,799)
Increase in pre-petition interest - - - | 635
----------- ----------- ----------- | -----------
Net cash provided by (used for) operating activities 83,526 (25,102) (84,884) | (31,825)
Cash flows from investing activities: |
Proceeds from the disposition of properties 8,821 3,439 - | -
Proceeds from the sale of assets held for disposition 1,458 37,012 24,977 | 53,524
Purchases of fixed assets (24,470) (20,215) (3,493) | (25,466)
Decrease in restricted cash 53,933 27,687 20,310 | 133,268
----------- ----------- ----------- | -----------
Net cash provided by investing activities 39,742 47,923 41,794 | 161,326
----------- ----------- ----------- | -----------
Cash flows from financing activities: |
Borrowings (payments) under revolving credit facilities, net (15,360) (7,600) 22,960 | -
Payments on debt and capital lease obligations (87,828) (28,685) (1,028) | (2,853)
Deferred financing costs (8,143) (2,067) - | -
Proceeds from exercise of Series C Warrants - 141 - | -
Payments of liabilities subject to settlement before consummation - - - | (18,946)
Consummation cash distributions - - - | (282,644)
----------- ----------- ----------- | -----------
Net cash provided by (used for) financing activities (111,331) (38,211) 21,932 | (304,443)
----------- ----------- ----------- | -----------
Increase (decrease) in unrestricted cash and short-term investments 11,937 (15,390) (21,158) | (174,942)
Unrestricted cash and short-term investments, beginning of period 16,465 31,855 53,013 | 227,955
----------- ----------- ----------- | -----------
Unrestricted cash and short-term investments, end of period $28,402 $16,465 $31,855 | $53,013
=========== =========== =========== | ===========
<FN>
(The accompanying notes are an integral part of these consolidated financial statements).
AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies:
(a) Basis of Presentation:
Ames Department Stores, Inc. (a Delaware corporation) and
its subsidiaries (collectively "Ames" or the "Company") filed
petitions under Chapter 11 of the U.S. Bankruptcy Code ("Chapter
11") on April 25, 1990. From that time until December 30, 1992,
Ames operated its business as a debtor-in-possession subject to
the jurisdiction of the United States Bankruptcy Court for the
Southern District of New York (the "Bankruptcy Court"). On
December 30, 1992, Ames emerged from bankruptcy (Note 2).
Certain prior year items have been reclassified to conform
to the current year presentation.
(b) Fiscal year:
The Company's fiscal year ends on the last Saturday in
January. The fiscal years ended January 28, 1995 (Fiscal 1994)
and January 29, 1994 (Fiscal 1993) included 52 weeks. The
fiscal year ended January 30, 1993 (Fiscal 1992) included 53
weeks and was comprised of the forty-eight weeks ended December
26, 1992 (pre-emergence) and the five weeks ended January 30,
1993 (post-emergence).
(c) Principles of consolidation:
The consolidated financial statements include the accounts
of Ames and its subsidiaries, all of which are wholly-owned.
All material intercompany accounts and transactions have been
eliminated.
(d) Cash and short-term investments:
Ames considers all highly liquid investments with a maturity
of three months or less when purchased to be cash and short-term
investments.
(e) Inventory valuation:
Substantially all inventories are stated at the lower of
cost, using the retail last-in, first-out (LIFO) method, or
market and include transportation and distribution center costs.
(f) Fixed assets:
Land and buildings, fixtures and equipment, and leasehold
improvements are recorded at cost. All fixed assets at December
26, 1992 were written-off under fresh-start reporting (Note 2).
Major replacements and betterments are capitalized. Maintenance
and repairs are charged to earnings as incurred. The cost of
assets sold or retired and the related amounts of accumulated
depreciation are eliminated from the accounts in the year of
disposal, with the resulting gain or loss included in earnings.
(g) Depreciation and amortization:
Buildings, fixtures and equipment are recorded at cost and
are depreciated on a straight-line basis over their estimated
useful lives. Property under capital leases and leasehold
improvements are depreciated over the shorter of their estimated
useful lives or their related lease terms.
The unfavorable lease liability (recorded under fresh-start
reporting) is being amortized on a straight-line basis over the
applicable lease terms.
The excess of revalued net assets over equity under
fresh-start reporting is being amortized over a 10 year period
(Note 2).
(h) Deferred charges:
Expenses related to new store openings are expensed in the
fiscal year in which the store opens.
Debt transaction costs and related issue expenses are
deferred and amortized over the term of the associated debt.
(i) Leaseholds:
All leaseholds and accumulated amortization at December 26,
1992 were written-off under fresh-start reporting. Leaseholds
represented the present value of the economic benefit of leases
at stores acquired and were amortized on a straight-line basis
over their average remaining lease lives. For the forty-eight
weeks ended December 26, 1992, $9.7 million of net leaseholds
were written-off or sold as part of the Company's restructuring.
Amortization of leaseholds was approximately $3.5 million in the
forty-eight weeks ended December 26, 1992.
(j) Income taxes:
Ames and its subsidiaries file a consolidated federal income
tax return. Ames adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("SFAS No.
109") under fresh-start reporting. Under this method, any
deferred income taxes recorded are provided for at currently
enacted statutory rates on the differences in the basis of
assets and liabilities for tax and financial reporting purposes.
If recorded, deferred income taxes are classified in the balance
sheet as current or non-current based upon the expected future
period in which such deferred income taxes are anticipated to
reverse.
(k) Self-insurance reserves:
The Company is self-insured for workers' compensation,
general liability, property and casualty, and accident and
health insurance claims, subject to certain limitations. The
Company has insurance coverage for losses that may occur above
certain levels. The Company determines its liability for claims
incurred but not reported based on its historical claims
experience. As of January 28, 1995, Ames had established a
self-insurance reserve of $46.4 million, a major portion of
which may not be paid within a year. As of January 29, 1994,
Ames had established a self-insurance reserve of $48.5 million.
(l) Leased department sales and income:
Ames has an agreement with an independent contractor that
allows the independent contractor to operate shoe departments
within the Ames stores. Ames receives a percentage of the sales
under the agreement.
(m) Earnings per common share:
Net income per common share for Fiscal 1994 and 1993 was
determined by using the weighted average number of common and
common equivalent shares outstanding during each fiscal year.
Primary and fully-diluted earnings per share were the same in
each year. Common stock equivalents represented the assumed
exercise of the outstanding Series C Warrants.
Net loss per common share for the five weeks ended January
30, 1993 was determined using the weighted average number of
common shares outstanding. Common stock equivalents and fully-
diluted loss per share were excluded for the five weeks ended
January 30, 1993 as their inclusion would have had an
anti-dilutive impact on the loss per share.
Net earnings per share for the forty-eight weeks ended
December 26, 1992 was not presented because such presentation
would not be meaningful, as the old stock was cancelled under
the plan of reorganization and the new stock was not issued
until consummation.
2. Reorganization Case and Fresh-Start Reporting:
Reorganization Case
As discussed in Note 1, Ames and its subsidiaries filed
petitions for reorganization under Chapter 11 on April 25, 1990 (the
"Filing Date"). The Company's disclosure statement relating to its
Third Amended and Restated Joint Plan of Reorganization dated October
23, 1992 (the "Amended Plan") was approved by the Bankruptcy Court on
October 29, 1992. The Amended Plan was confirmed by the Bankruptcy
Court on December 18, 1992 and consummated on December 30, 1992 (the
"Consummation Date").
The Amended Plan provided for, among other things, the payment
of $303.5 million of cash (including $46.5 million in deferred cash
distributions), $68.9 million in secured notes, the reinstatement of
certain obligations, and the distribution of all of the new common
stock of the reorganized Ames to creditors to settle approximately
$1.6 billion of total estimated claims against the Company that
existed as of the Filing Date.
Fresh-Start Reporting
As discussed above, the Company's Amended Plan was consummated
on December 30, 1992 and Ames emerged from Chapter 11. Pursuant to
the guidance provided by the American Institute of Certified Public
Accountants in Statement of Position 90-7, "Financial Reporting by
Entities in Reorganization Under the Bankruptcy Code" ("SOP 90-7"),
the Company adopted fresh-start reporting and reflected the
consummation distributions in the consolidated balance sheet as of
December 26, 1992 (the fiscal month-end for December, 1992). The
consummation distributions included the payment of certain fees
related to the Credit Agreement (Note 5). Under fresh-start
reporting, the reorganization value of the Company was allocated to
the emerging Company's net assets on the basis of the purchase method
of accounting.
In connection with the adoption of fresh-start reporting, the
Company adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("SFAS No. 109"), which had no impact
on Ames. Also in connection with the adoption of fresh-start
reporting, the Company adopted Statement of Financial Standard No.
106, "Employers' Accounting for Post-retirement Benefits other than
Pensions" ("SFAS No. 106"), which requires that the cost of the these
benefits be recognized in the financial statements over an employee's
term of service with the Company.
The resulting charge of $391.2 million from all fresh-start
adjustments, including the write-off of all revalued non-current
assets but excluding the write-off of the old stock, was presented as
"Revaluation of assets and liabilities pursuant to adoption of
fresh-start reporting" in the consolidated statement of operations
for the forty-eight weeks ended December 26, 1992.
The Company's reorganization value was less than the fair value
of the current assets at the Consummation Date. In accordance with
the purchase method of accounting, the excess of book value over fair
value was allocated to reduce proportionately the values assigned to
non-current assets in determining their fair values. Because this
allocation reduced the non-current assets to zero value, the
remainder was classified as a deferred credit ("Excess of revalued
net assets over equity under fresh-start reporting" or "negative
goodwill") and is being amortized systematically to income over the
period estimated to be benefited (ten years). Depreciation and
amortization of fixed assets is for capital additions after December
26, 1992.
Since the purchase method of accounting was used to record the
fair values of assets and assumed liabilities of the reorganized
company at December 26, 1992, the consolidated statements of
operations and the consolidated statements of cash flows for the
fiscal years ended January 28, 1995 and January 29, 1994, and for the
five weeks ended January 30, 1993, are not comparable in certain
material respects to such predecessor statements for any prior
periods. The consolidated financial statements for periods after
December 26, 1992 are those of the reorganized entity (the
registrant).
3. Cash and Short-Term Investments:
As of January 28, 1995, the Company had $1.8 million of cash
received in escrow from the December, 1994 sale of a store's lease
interest. This cash was included in "Restricted cash and short-term
investments" at January 28, 1995 and was released from escrow in
February, 1995. In addition, as of January 28, 1995 and January 29,
1994, Ames restricted approximately $0.2 and $1.0 million of cash,
respectively, for expected payments of certain remaining
administrative and priority claims under the Amended Plan. These
amounts are also included in "Restricted cash and short-term
investments." The associated liability is included in "Accrued
expenses."
As of January 29, 1994, approximately $55.0 million was placed
for collateral pledge and consignment with Republic National Bank of
New York as a condition precedent to the issuance of letters of
credit under the Letter of Credit Facility (Note 5). This cash
collateral was included in "Restricted cash and short-term
investments" at January 29, 1994. The amount of cash collateral
changed as the balance outstanding under the Letter of Credit
Facility changed, since the cash collateral had to equal 105% of the
Company's outstanding obligations, including $5.5 million at January
29, 1994 for future increases to standby letters of credit to cover
expected workers' compensation claims. Ames earned interest on the
invested cash collateral.
4. Inventories:
Substantially all inventories are valued at the lower of cost or
market. Cost is determined by the retail last-in, first-out (LIFO)
cost method for all merchandise inventories. No LIFO reserve was
necessary as of January 28, 1995 and January 29, 1994.
5. Debt:
The New Facility
On April 28, 1994, the Company entered into an agreement with
BankAmerica Business Credit, Inc., as agent, two financial
institutions as co-agents (together with the agent, the "Agents"),
and a syndicate consisting of five other banks and financial
institutions, for a secured revolving credit facility of up to $300
million, with a sublimit of $100 million for letters of credit (the
"New Facility"). The Company believes the New Facility contains
terms, covenants and interest rates that are generally more favorable
than those in the original post-emergence Credit Agreement. The New
Facility is in effect until June 22, 1997, is secured by
substantially all of the assets of the Company, and requires the
Company to meet certain quarterly financial covenants. The New
Facility has no requirement for cash collateralization of letters of
credit, except in limited instances. The funds under the New
Facility may only be used for working capital and for the payment of
certain debt described below. The interest rate per annum on the New
Facility is equal to the Reference Rate (as defined in the New
Facility) plus 2% of the first $270 million of Advances (subject to
downward adjustments) or 5% of the last $30 million of Advances.
Alternatively, the first $270 million of Advances under the New
Facility may be made at the interest rate per annum equal to the
Eurodollar Rate (as defined in the New Facility) plus 3.75% (subject
to downward adjustments).
As of January 28, 1995, the interest rate on the New Facility
was 10.5%. For Fiscal 1994, the weighted average interest rate on
the Company's revolving credit facilities was 9.1%. The peak
borrowing level under the New Facility during Fiscal 1994 was $177.5
million. As of January 28, 1995, approximately $9.2 and $29.2
million was outstanding in trade and standby letters of credit,
respectively, under the New Facility.
The amount of borrowing under the New Facility shall not exceed
the sum of (i) an amount equal to 55% of inventory not covered by any
outstanding letter of credit plus (ii) an amount equal to 50% of
inventory covered by any outstanding letter of credit less (iii) a
reserve for reinstated debt ($31.0 million as of January 28, 1995).
In addition, the New Facility provides for the potential
establishment of other reserves contingent upon the Company's
financial performance. Each Agent, in addition, reserves the right
in good faith, based upon such collateral consideration as such Agent
may in its sole discretion deem necessary or appropriate to adjust
the total available to be borrowed by establishing reserves, making
determinations of eligible inventory, revising standards of
eligibility or decreasing from time to time the percentages set forth
above.
The quarterly financial covenants under the New Facility are
limited to: capital expenditure limits; minimum earnings, without
giving effect to any extraordinary gains/losses or accounting
changes, before interest expense, income tax provision, depreciation
and amortization, LIFO expense, stock appreciation right accruals,
restructuring charges, and other non-cash charges, plus or minus the
amount of cash received or expended relating to stock appreciation
right accruals or restructuring charges ("EBITDA"); and minimum
EBITDA to cash interest expense. Compliance with the EBITDA covenant
will be dependent upon the Company's attainment of results that are
reasonably consistent with its financial projections reported on Form
8-K dated February 16, 1995. In addition, each year Ames must have
no outstanding borrowings under the New Facility for a consecutive
30-day period between November 15th and February 15th of the
following year (the "clean-up" requirement). The Company is in
compliance with the financial covenants through January 28, 1995.
Fees required under the New Facility include: (1) quarterly
commitment fees of .5% per annum on the unused portion of the
facility during each quarter, (2) an initial facility fee of $5.4
million paid on the closing date and an additional facility fee of
$3.0 million ($1.0 million paid at closing and the remainder due in
quarterly installments of $250,000 each beginning in the second
year), and (3) prepayment fees of 3.0%, 2.0%, and 1.0% of the amount
of the Tranche A portion (as defined in the New Facility) reduced or
terminated prior to the first, second, and third (six months or more
prior to the maturity date) anniversary of the New Facility,
respectively.
In June, 1994, the Company utilized the funds that were no
longer restricted for the collateralization of letters of credit
(Note 3), and funds from the New Facility, to prepay its then
outstanding Series A, B and D Notes, a $1.2 million term note, and
the outstanding borrowings under the Credit Agreement. As a result
of the refinancing and associated commitment to prepay the above
debt, a non-cash extraordinary charge of $1.5 million, net of tax
benefit of $0.7 million, was recorded in the quarter ended April 30,
1994, primarily for the write-off of deferred financing costs and
debt discounts related to the debt to be prepaid.
Other Debt
The Company's outstanding debt as of January 28, 1995 and
January 29, 1994 is listed and described below. Pursuant to the
Amended Plan, the Company and its lenders agreed to a restructuring
of the Company's obligations at December 26, 1992. The differences
between the pre-consummation debt obligations and the present values
of the new and reinstated debt obligations were included in the
calculation of the "Extraordinary gain on debt discharge" in the
forty-eight weeks ended December 26, 1992.
New and reinstated debt obligations that carried face interest
rates significantly lower than market rates (for financing of a
similar nature) as of the Consummation Date were discounted to their
present values using estimated market rates. The discount amounts
are being amortized to interest expense over the terms of the related
obligations using the effective interest method. The determination
of appropriate interest rates was based upon an evaluation of Ames'
credit standing, the nature of the collateral, if any, and other
terms pertaining to the debt, and the prevailing rates for similar
instruments of issues with similar credit ratings. The market
interest rates used to determine the present values at December 26,
1992 are shown in the table below.
Upon consummation of the Amended Plan, Ames obtained $210
million of post-emergence financing. Of this amount, $175.9 million
was in the form of a revolving credit facility (the "Revolver") and
$1.2 million was in the form of a two-year term note. Citibank was
the agent in the post-emergence credit agreement (the "Credit
Agreement" - see below) which combined the $175.9 million Revolver
and the $1.2 million term note. The balance of the $210 million
post-emergence financing ($32.9 million) represented the two-year
portion of the 8% Senior Secured Notes (the "Series D Notes") issued
under an Indenture with Fleet Bank as indenture trustee.
Upon consummation of the Amended Plan, the Company also entered
into a one-year $90 million letter of credit facility with Republic
National Bank of New York (the "Letter of Credit Facility" - see
below). In September, 1993, the Letter of Credit Facility was
increased to $120 million and extended to November 28, 1994.
During Fiscal 1993, Ames recognized an extraordinary gain of
approximately $0.9 million on the early extinguishment of certain tax
obligations.
As of January 28, 1995, payments due on long-term debt for the
next five years and thereafter were as follows:
(000's Omitted)
Fiscal Year Ending January Amount
-------------------------- ---------------
1996 $15,168
1997 14,024
1998 12,469
1999 3,152
2000 9,940
Thereafter 2,817
Outstanding debt at January 28, 1995 and January 29, 1994 is
listed below. Further explanations of certain of the obligations
follow the table.
(000's omitted)
---------------------
1/28/95 1/29/94
--------- ---------
Secured Debt -
Revolving Credit Facility (Note Payable): $ - $15,360
Senior Debt:
Series A Secured Term notes due 6/95 to 12/96,
variable interest rate. - 25,306
8% Senior Secured Notes (Series D)
due 6/95 to 12/96. Discount rate 9%. - 38,178
8% Series B Secured Term Notes due 12/96,
non-interest bearing through 12/95.
Discount rate 10%. - 4,218
8% Secured Term Notes due 12/94. Disc. rate 9%. - 1,207
Guaranteed First Mortgage Notes, int. rate of
9.5%, due 3/97 through 3/99. Disc. rate 11%. 12,500 12,500
Real Estate Mortgages, interest rates
ranging from 6% to 9%, due through 1/02.
Discount rates 10% to 12%. 10,720 12,043
Loan and Security Agreement, non-interest
bearing, due 5/95. Discount rate 10%. 717 4,588
Equipment Notes, int. rates at 9% to 10%, due
12/94 through 12/97. Disc. rate 11% to 12%. 2,542 3,197
8.5% Industrial Development Bonds, due in
installments through 12/09. Disc. rate 11%. 2,671 2,755
-------- --------
Total Face Value of Secured Debt $ 29,150 $119,352
-------- --------
Unsecured Debt -
Senior Debt:
Allowed Priority Tax Obligations,
5% interest rate. Discount rate 9%. $4,173 $5,234
Subordinated Debt:
Deferred Cash Distributions due 1/31/94 through
1/31/97, 5% interest rate beginning 2/94.
Discount rate 12%. 23,500 31,500
TJX Expense Note, 10% interest rate,
due 1/98 (Note 11) 747 198
-------- --------
Total Face Value of Unsecured Debt $28,420 $36,932
-------- --------
Total Face Value of Debt 57,570 156,284
Less: Current Portion 15,168 14,821
Long-term Debt Classified
as Current - 67,702
Debt Discounts 3,372 6,978
Note Payable - Revolver - 15,360
-------- --------
Amount Due After One Year $39,030 $51,423
======== ========
The Credit Agreement
The Credit Agreement was between Ames and Citibank, as agent,
and a syndicate consisting of other banks and financial institutions
and was terminated when the New Facility became effective in June,
1994. The Credit Agreement provided the $175.9 million Revolver and
a $1.2 million term loan. The amount outstanding under the Revolver
at the time of the funding of the New Facility, along with the term
loan, were prepaid out of the funds from the New Facility.
The funds under the Credit Agreement had to be used for working
capital, except that up to $10 million could be used for any purpose.
The interest rate per annum on the Revolver was equal to the Base
Rate (as defined in the Credit Agreement) plus 2 1/2%. As of January
29, 1994, the interest rate on the Revolver was 8.5%. For the fiscal
year ended January 29, 1994 and for the five weeks ended January 30,
1993, the weighted average interest rate was 8.6%. Approximately
$15.4 million was outstanding under the Revolver at January 29, 1994.
The peak borrowing level under the Revolver was approximately $161.9
and $32.8 million during Fiscal 1993 and during the five weeks ended
January 30, 1993, respectively. The face interest rate on the term
loan was 8% per annum.
Fees required under the Credit Agreement included: (1) a
commitment fee of .5% per annum of the unused portion of the
Revolver, (2) an initial facility fee of $4.0 million (paid on the
Consummation Date and written-off in conjunction with the recording
of the Amended Plan) and a subsequent facility fee of $.9 million
paid in December, 1993, (3) a usage fee of $.8 million paid when the
sum of advances under the Revolver plus a portion of the Series D
Notes exceeded $100 million, and (4) an agent's fee of $1.0 million
paid in December, 1993 (the initial agent's fee of $1.0 million was
paid on the Consummation Date and written-off in conjunction with the
recording of the Amended Plan).
The Credit Agreement was secured by substantially all of the
assets of Ames and contained certain financial and operating
covenants including current ratio; the maintenance of certain
inventory levels; maximum capital expenditures; minimum interest and
fixed charge coverages; and minimum EBITDA. In addition, Ames could
not have any outstanding borrowings (other than borrowings used to
cash collateralize letters of credit) under the Credit Agreement for
a consecutive 30-day period beginning between November 15 of each
fiscal year and the last day of such fiscal year.
Series A Notes
Certain banks from the pre-petition Citibank syndicate elected
to receive Series A Notes as part of their distribution under the
Amended Plan. The total amount issued was $25.3 million and was due
in installments at June 30, 1995, December 31, 1995, and December 31,
1996. The annual face interest rate on these notes was equal to the
Base Rate (as defined in the Credit Agreement) plus 3 1/2%. The
Series A Notes were secured in the same manner as the Credit
Agreement and contained the same financial covenants as in the Credit
Agreement. The Series A Notes were prepaid at the time of the
funding under the New Facility and, accordingly, were classified as a
component of "Long-term Debt Classified as Current" as of January 29,
1994.
Series B Notes
Certain banks from the pre-petition Citibank syndicate elected
to receive Series B Notes as part of their distribution under the
Amended Plan. The total amount issued was $4.2 million and was due
December 31, 1996. These notes were non-interest bearing until
December 31, 1995 when they would have begun to bear face interest at
8.0% per annum. The Series B Notes were secured in the same manner
as the Credit Agreement and contained the same financial covenants as
the Series A Notes. The Series B Notes were prepaid at the time of
the funding under the New Facility and, accordingly, were classified
as a component of "Long-term Debt Classified as Current" as of
January 29, 1994.
Series D Notes
Certain banks from the pre-petition Citibank syndicate elected
to receive Series D Notes as part of their distribution under the
Amended Plan and, for the two-year term note portion of the Series D
Notes ($32.9 million), made a net cash contribution to the Company
rather than providing the Company with revolving credit financing.
The total amount issued was $38.2 million, $32.9 million of which was
due on the earlier of June 30, 1995 or 45 days after the termination
of the Credit Agreement. The remainder was due in installments at
December 31, 1995 and December 31, 1996. The Series D Notes yielded
a face interest rate of 8.0% per annum and were secured in the same
manner as the obligations under the Credit Agreement. There were no
financial covenants under the Indenture. The Series D Notes were
prepaid at the time of the funding under the New Facility and,
accordingly, were classified as a component of "Long-term Debt
Classified as Current" as of January 29, 1994.
The Letter of Credit Facility
The $120 million Letter of Credit Facility with Republic
National Bank of New York ("Republic") had sublimits of $60 million
for trade letters of credit and $60 million for standby letters of
credit. The Letter of Credit Facility was terminated when the New
Facility became effective in June, 1994. As of January 29, 1994,
approximately $11.3 and $35.6 million was outstanding in trade and
standby letters of credit, respectively, under the Letter of Credit
Facility. All letters of credit outstanding under the Letter of
Credit Facility had to be cash collateralized at 105% from the date
of issuance (Note 3).
Allowed Priority Tax Obligations
Allowed priority tax obligations consist of remaining claims
entitled to priority under the Bankruptcy Code, including claims
based on retail sales made by Ames (the proceeds of which are deemed
to be held in trust by Ames for the benefit of various state taxing
authorities). Unless otherwise agreed to in writing with Ames, the
holder of an allowed priority tax claim receives deferred cash
payments in a principal amount equal to the amount of such claim over
a period not exceeding six years from the date of assessment of the
tax on which the claim is based. The deferred cash payments may be
made in annual installments equal to 10% of the allowed priority tax
claim together with simple interest at the rate of 5% per annum. The
remaining unpaid principal and accrued interest thereon will be paid
on the first business day following the date that is the sixth
anniversary of the date of assessment of the tax on which the claim
is based. During Fiscal 1993, the Company paid approximately $1.9
million to certain state taxing authorities in early settlement of
approximately $2.8 million of tax obligations (Note 21).
Deferred Cash Distributions
The Amended Plan provided that approximately $46.5 million of
cash distributions in respect to several classes of claims would be
paid subsequent to the Consummation Date. Approximately $15.0, $8.0
and $8.0 million of these deferred cash distributions were paid as
scheduled on January 31, 1993, January 31, 1994 and January 31, 1995,
respectively, and the remaining unsecured amounts are due as follows,
with interest that began on February 1, 1994 at 5% per annum: $8.0
million due January 31, 1996 and $7.5 million due January 31, 1997.
Before Reorganization
Contractual interest expense not recorded on certain pre-
petition debt totaled approximately $76.2 million for the forty-eight
weeks ended December 26, 1992.
To finance seasonal working capital requirements during the
Chapter 11 period, Ames and Chemical Bank, as agent, were parties to
a Debtor-in-Possession Revolving Credit Agreement (the "DIP
Facility"), under which Ames was allowed to borrow up to $250 million
($200 million beginning in August, 1992) for general corporate
purposes, working capital, letters of credit, and inventory
purchases.
The maximum amount borrowed under the DIP Facility, exclusive of
letters of credit, was $70.0 million during the forty-eight weeks
ended December 26, 1992. The average interest rate on the DIP
Facility was 7.6% in the forty-eight weeks ended December 26, 1992.
6. Lease Commitments and Unfavorable Lease Liability:
Ames is committed under long-term leases for various retail
stores, warehouses and equipment expiring at various dates through
2018 with varying renewal options and escalating lease clauses. Some
leases are classified as capital leases under Statement of Financial
Accounting Standards No. 13. Capital lease obligations were revalued
under fresh-start reporting. Ames generally pays for real estate
taxes, insurance, and specified maintenance costs under real property
leases. Certain leases also provide for contingent rentals based on
percentages of sales in excess of specified amounts.
Future minimum lease payments for leases as of January 28, 1995
were as follows:
(000's Omitted)
Lease Payments
-----------------------
Fiscal Year Capital Operating
Ending January Leases Leases
------------------- --------- ---------
1996 $8,356 $41,387
1997 7,757 39,922
1998 6,746 36,040
1999 5,745 33,132
2000 4,905 30,095
Thereafter 44,829 209,113
------- --------
Total minimum lease payments 78,338 $389,689
========
Less: amount representing
estimated executory costs 1,105
-------
Net minimum lease payments 77,233
Less: amount representing interest 35,180
-------
Present value of net minimum
lease payments 42,053
Less: currently payable 3,988
-------
Long-term capital
lease obligations $38,065
=======
Total payments have not been reduced by minimum sublease rentals
to be received in the aggregate under noncancellable subleases of
capital leases and operating leases of approximately $3.5 and $3.1
million, respectively, as of January 28, 1995.
Amortization of capital lease assets was approximately $0.1,
$0.0, and $4.0 million for Fiscal 1994, Fiscal 1993, and for the
forty-eight weeks ended December 26, 1992, respectively.
Rent expense (income), excluding the benefit from the amortization of
the unfavorable lease liability, was as follows:
(000's Omitted)
-----------------------------------------------------------
Fiscal Year Fiscal Year Five Weeks Forty-eight
Ended Ended Ended Weeks Ended
January 28, January 29, January 30, December 26,
1995 1994 1993 1992
----------- ---------- ----------- ------------
Minimum rent on operating leases $42,913 $42,646 $3,716 | $47,527
Contingent rental expense 6,214 6,414 453 | 6,459
Sublease rental income (2,757) (3,206) (315) | (4,730)
The unfavorable lease liability in the Consolidated Balance
Sheet was recorded as part of fresh-start reporting and represents
the estimated liability related to lease commitments that exceeded
market rents for similar locations. This liability is being
amortized as a reduction of rent expense in the Consolidated
Statements of Operations over the remaining lease terms.
7. Stockholder's Equity:
Common Stock and Priority Common Stock
As provided under the Amended Plan, the authorized capital stock
of the reorganized Ames consisted of 40,000,000 shares of common
stock (20,127,269 and 16,267,211 shares outstanding as of January 28,
1995 and January 29, 1994, respectively), par value $.01 per share
(the "Common Stock"), and 12,000,000 shares of priority common stock
(0 and 3,860,058 shares outstanding as of January 28, 1995 and
January 29, 1994, respectively), par value $.01 per share (the
"Priority Common Stock"). The outstanding shares of the Priority
Common Stock as of December 30, 1994 were automatically converted
into an equal number of fully paid and nonassessable shares of Common
Stock. Such conversion was deemed to have occurred on such date
without any notice or other action on the part of the Company or the
holder of such Priority Common Stock.
Holders of shares of Common Stock are entitled to one vote per
share on all matters to be voted upon by stockholders and are
entitled to receive dividends when, as and if declared by the Board
of Directors. In the event of any liquidation, dissolution or
winding up of the Company during the two years ended December 30,
1994, whether voluntary or involuntary, the holders of the Priority
Common Stock were entitled to be paid out of the assets of the
Company available for distribution to its stockholders an amount
equal to $8.75 for each share outstanding. The holders of the
previously outstanding shares of Priority Common Stock could at such
holder's option, at any time and from time to time, convert any or
all such shares into an equal number of fully paid and nonassessable
shares of Common Stock.
The Common Stock does not have any preemptive right or
subscription or redemption privilege. The Common Stock also does not
have cumulative voting rights, which means the holder or holders of
more than half of the shares voting for the election of directors can
elect all the directors then being elected. All of the shares of
Common Stock are fully paid and nonassessable.
All equity interests existing immediately prior to the
consummation of the Amended Plan were cancelled pursuant to the
Amended Plan and the accumulated deficit was eliminated under
fresh-start reporting.
Warrants
An aggregate of 200,000 Series B Warrants were issued under the
Amended Plan. Each such warrant entitles the holder to purchase one
share of the Common Stock at any time from six months after the
Consummation Date through the eighth anniversary of the Consummation
Date. The exercise price is $5.92 per share. No Series B Warrants
have yet been exercised.
An aggregate of 2,120,000 Series C Warrants were issued
(1,992,715 outstanding as of January 28, 1995) under the Amended
Plan. Each such warrant entitles the holder to purchase one share of
the Common Stock at any time from six months after the Consummation
Date through January 31, 1999. The exercise price is $1.11 per
share. There were no exercises of the Series C Warrants during
Fiscal 1994.
The exercise prices of the above warrants are subject to
adjustment upon the occurrence of certain events, including, among
other things, the payment of a stock dividend with respect to the
Company's Common Stock, the subdivision, combination or
reclassification of Common Stock, the merger or consolidation of the
reorganized Company, and the issuance for consideration of rights,
options or warrants (other than rights to purchase Common Stock
issued to shareholders generally) to acquire Common Stock of the
Company. Rights, options or warrants distributed to holders of
Common Stock prior to the warrant expiration dates will be
distributed to holders of such warrants as if the warrants had been
exercised immediately prior to the record date for such distribution.
Upon the exercise of warrants, a holder of such warrants is entitled
to receive any distributions (other than distributions described
above, distributions in connection with the total liquidation,
dissolution, or winding-up of the Company or dividends payable out of
current earnings) made to holders of Common Stock prior to expiration
of such warrants as if the holder had exercised such warrants prior
to the record date of such distribution. In this case, the holder,
upon conversion, would also receive interest at a rate of 10% per
annum on any cash payable, as well as any income earned on
distributed assets, property or securities from the distribution date
to the date of exercise. The exercise prices and number of shares
issuable upon exercise will also be adjusted in certain circumstances
if the Company issues certain securities at below market prices.
A holder of any of the warrants described above as such will not
be entitled to any rights as a stockholder of the Company, including
without limitation the right to vote with respect to the shares of
Common Stock of the Company, until such holder has properly exercised
the warrants in accordance with the terms of the respective warrant
agreement.
Stock Purchase Rights Agreement
On November 30, 1994, the Company adopted a Stock Purchase
Rights Agreement (the "Agreement"). Under the terms of the
Agreement, one purchase right ("Right"), with an exercise price of
$14.00, is attached to each share of the Company's Common Stock
outstanding as of, or issued subsequent to, November 30, 1994 but
prior to the occurrence of certain events (as more fully described in
the Agreement). The Rights become exercisable in the event that a
person or group (an "Acquiring Person") either acquires 15% or more
of the Company's outstanding voting stock or announces an intention
to acquire 20% or more of such stock. Once exercisable, each Right
will, depending on the circumstances, entitle a holder, other than an
Acquiring Person, to purchase shares of either the Company or an
acquiring company having a market value equal to twice the exercise
price. The Agreement was adopted to assure that all of the Company's
shareholders receive full value for their investment in the event of
stock accumulation by an Acquiring Person. Unless previously
redeemed by the Company, the Rights will expire on November 29, 2004.
8. Stock Options:
Pursuant to the 1994 Management Stock Option Plan (the "Option
Plan") approved by shareholders in June, 1994, the Company may grant
options with respect to an aggregate of up to 1,700,000 shares of
Common Stock, with no individual optionee to receive in excess of
200,000 shares of Common Stock upon exercise of options granted under
the Option Plan. The exercise prices of the options are equal to the
fair market value of the Common Stock on the date the options are
granted. The options become exercisable over three to five years and
terminate after five to six years from the grant date.
The following table sets forth the stock option activity for Fiscal
1994.
1994
---------------------------
Exercise
Shares Prices
---------- ------------
Outstanding at beginning of year -0- ---
Granted 1,608,500 $3.50-$5.12
Exercised ---
Terminated (309,000) $3.81-$5.06
----------
Outstanding at end of year 1,299,500 $3.50-$5.12
==========
Exercisable at end of year -0-
==========
9. Income Taxes:
For reasons discussed below, the Company recorded income tax
provisions of approximately $8.2 and $3.3 million for Fiscal 1994 and
1993, respectively. There were no provisions for income taxes for
the five weeks ended January 30, 1993 and for the forty-eight weeks
ended December 26, 1992.
The Company adopted SFAS No. 109 in conjunction with the
adoption of fresh-start reporting. Under SFAS No. 109, deferred
income taxes are recognized by applying the enacted statutory tax
rates in future years to the changes in "cumulative temporary
differences" (the differences between financial statement carrying
values and the tax basis of assets and liabilities).
As a consequence of the adoption of fresh-start reporting and
SFAS No. 109, any tax benefits realized for tax purposes after the
Consummation Date for pre-consummation cumulative temporary
differences, as well as for the pre-consummation net operating loss
carryovers, are reported as additions to paid-in-capital (see
Consolidated Statements of Changes in Stockholders' Equity) rather
than as reductions in the tax provisions in the statements of
operations. Tax benefits or liabilities realized for book purposes
after the Consummation Date will be segregated from the
pre-consummation deferred tax assets. Ames, although not likely to
pay income taxes in the near future, is expecting to record tax
provisions on any book income. However, the utilization of post-
consummation deferred tax assets may reduce future income tax
provisions. Such income tax provisions have no impact on the
Company's taxes payable or cash flows.
Ames has the following deferred tax assets from pre-consummation
("Pre") and post-consummation ("Post") periods, as of the following
dates ($ in millions):
As of As of
January 28, 1995 January 29, 1994
------------------- ------------------
Pre Post Total Pre Post Total
----- ---- ----- ----- ---- -----
Fixed assets $60 ($2) $58 $80 $- $80
Self insurance reserves 13 6 19 11 3 14
Restructuring reserves 5 - 5 8 - 8
Leases 20 9 29 22 10 32
Vacation pay res. and other (3) 10 7 - 8 8
Net operating loss
carryovers 183 - 183 167 - 167
----- ---- ----- ----- ---- -----
Total deferred tax assets 278 23 301 288 21 309
Valuation allowances (278) (23) (301) (288) (21) (309)
----- ---- ----- ----- ---- -----
Net deferred tax assets $0 $0 $0 $0 $0 $0
===== ==== ===== ===== ==== =====
The Company has fully reserved for its deferred tax assets
because of the current uncertainty of the future recognition of such
deductions. In subsequent periods, Ames may reduce the valuation
allowances, provided that the possibility of utilization of the
deferred tax asset is more likely than not, as defined by SFAS No.
109. Any such reduction in the pre-consummation valuation allowance
in the near future will result in a corresponding addition to
paid-in-capital.
The Company has treated "pre-emergence net operating losses"
(qualified losses incurred prior to the Consummation Date) under
Section 382(l)(5) of the Internal Revenue Service ("IRS") Code
(hereafter "L-5"). Under "L-5," there is approximately $295 million
in pre-emergence net operating losses currently available as
carryovers without any annual limitation, which could result in
future tax benefits of approximately $118 million at currently
enacted tax rates.
Ames also has a "post-emergence net operating loss" carryover
(incurred after the Consummation Date) of approximately $162 million.
Both pre and post emergence net operating loss carryovers will expire
between 2007 and 2010. In addition, Ames has targeted jobs tax
credit carryovers of approximately $7 million and alternative minimum
tax credit carryovers of approximately $3 million, which will expire
in 2007 and 2004, respectively. Federal net operating loss
carryovers for fiscal years subsequent to January 27, 1990 are
subject to future adjustments, if any, by the IRS.
Ames has substantial potential state net operating loss
carryovers. It is difficult, however, to quantify the utilizable
amounts of such state operating losses because of the uncertainty
related to the mix of future profits in specific states.
10. Benefit and Compensation Plans:
Retirement and Savings Plan
Ames has a defined contribution retirement and savings plan (the
"Retirement and Savings Plan") that is qualified under Sections
401(a) and 401(k) of the Internal Revenue Code of 1986, as amended,
for employees who have reached the age of 21, and after one year of
service, provided they have completed at least 1,000 hours of service
in a 12-month period. For each participant's contribution (up to a
maximum of 5% of such participant's total compensation), the Company
contributes to the Retirement and Savings Plan an amount equal to 50%
of such contribution. A participant may contribute to the plan from
1% to 18% of annual compensation on a pre-tax or after-tax basis, or
a combination of both. Participants who terminate their employment
with the Company are entitled to receive the full amount of their
contributions and, depending on the length of the participant's
service to Ames, a portion of the Company's matching contributions.
Ames funds all administrative costs incurred by the plan. Ames'
expense associated with this plan amounted to approximately $3.1,
$2.6, $.2, and $2.5 million, in Fiscal 1994, Fiscal 1993, in the five
weeks ended January 30, 1993, and in the forty-eight weeks ended
December 26, 1992, respectively.
Income Continuation Plan
Certain officers of Ames participate in an Income Continuation
Plan ("ICP"), which guarantees up to one year's salary in the event
of termination other than for cause. As of January 28, 1995, the
Company has reserved for its known obligations under the ICP.
Stock Appreciation Rights
In connection with the Amended Plan, stock appreciation rights
("SARs") exercisable only for cash, equivalent to 1.2 million shares
of the new Common Stock were granted to certain members of management
as compensation for their efforts in restructuring Ames and enabling
it to emerge from Chapter 11. After exercises and terminations, SARs
equivalent to 228,367 shares were outstanding at January 28, 1995.
One-third of the SARs vested on the Consummation Date, one-third
vested on December 30, 1993, and the remaining one-third vested on
December 30, 1994. Each SAR entitles the recipient, upon exercise
(which may not be later than five years after the Consummation Date),
to receive in cash the excess of the average closing price of a share
of Common Stock during the ten trading days prior to the exercise
date, over the average closing price of a share of Common Stock
during the 60 trading days after the Consummation Date ($2.96). The
average closing price for the last 10 trading days of Fiscal 1994 was
$2.70 per share. Therefore, no reserve was necessary at January 28,
1995. During Fiscal 1994, a total of 594,965 SARs were exercised.
Key Employee Continuity Benefit Plan
Ames has a Key Employee Continuity Benefit Plan (the "Continuity
Plan") that covers all officers, Vice President and above, and
certain other employees of Ames. If the employment of any
participant in the Continuity Plan is terminated, other than for
death, disability, cause (as defined in the Continuity Plan) or by
the participant other than for good reason (as defined in the
Continuity Plan), within 18 months after a change of control of Ames,
the participant will receive a lump sum cash severance payment. The
severance payment is 2.99 times Base Compensation for the President
and Executive Vice Presidents, 2 times Base Compensation for Senior
Vice Presidents and selected Vice Presidents and 1 times Base
Compensation for other Vice Presidents. Base Compensation is defined
generally as the sum of the participant's annual base compensation in
effect immediately prior to the participant's termination plus
one-third of the value of the cash and stock bonuses paid to the
participant during the 36 months ending on the date of termination.
For purposes of the Continuity Plan, a change of control includes but
is not limited to the acquisition by any person of beneficial
ownership of 20% or more of Ames outstanding voting securities or the
failure of the individuals who constituted the Board of Directors at
the beginning of any period of 12 consecutive months to continue to
constitute a majority of the Board during such period.
Annual Incentive Compensation Plan
The Company has an Annual Incentive Compensation Plan (the
"Annual Bonus Plan") that is subject to annual review by the Board of
Directors. The Annual Bonus Plan provides annual incentive cash
bonuses based on the achievement of the Company's financial goals for
the year (and customer service goals for store and field management).
Bonus expense recorded under the plan was $1.6, $2.8 and $1.9 million
for Fiscal 1994, 1993 and 1992, respectively.
Retirement Plan
Ames has an unfunded Retirement Plan for Officers/Directors (the
"Retirement Plan"). Every person who is employed by Ames when he or
she retires, dies or becomes disabled and who (i) served as both a
full-time officer and a director of Ames and has completed five years
of service, not necessarily consecutive, in both of these capacities,
or (ii) served as a director of Ames and has completed 10 years, not
necessarily consecutive, of service to Ames, is eligible for benefits
under the Retirement Plan.
Benefits are payable upon termination of employment due to
retirement, death or disability. The annual benefit is equal to
two-thirds of the participant's average annual base salary during the
five-year period of highest compensation preceding such termination
of employment. The maximum annual benefit under the Retirement Plan
is $100,000, reduced by an amount equal to certain of such
participant's annual Social Security benefits. Each participant in
the Retirement Plan is entitled to benefits for a period of 10 years.
Upon the earlier death of the participant, at the Company's option,
the future payments as scheduled or the then present value of all
unpaid benefits will be paid to the participant's estate. The
Company has a reserve established for potential payments under the
Retirement Plan. No payments were made under this plan during the
periods presented.
The G.C. Murphy Company Life Insurance Plan
The G.C. Murphy Company Life Insurance Plan granted a flat
dollar amount (defined benefit) of group term life insurance at no
cost to certain retired employees. This plan excludes G.C. Murphy
Co. employees who retired from Ames after January 31, 1986. The
amount of coverage varies by retiree, is payable only upon death, and
has no loan or cash value. There were 2,209 retirees covered by this
plan as of January 28, 1995. The Company has a reserve established
for the projected payments under this plan.
11. Commitments and Contingencies:
As part of the Company's settlement with TJX Companies, Inc.
("TJX") under the Amended Plan, Ames must reimburse TJX for various
obligations, fees, and expenses that may be paid by TJX relating to
various properties that were under leases rejected by Ames. The
obligations, fees, and expenses are subject to certain maximum
amounts and the total reimbursement may not exceed $2.7 million and
will be in the form of an unsecured note payable due on January 31,
1998 (the "TJX Expense Note"). TJX provides Ames with the amounts
paid, if any, during each quarter and those amounts,after appropriate
review, become the principal due under the TJX Expense Note. As of
January 28, 1995, the amount claimed as due by TJX and recorded by
Ames as the TJX Expense Note was approximately $.7 million (see Note
5). Interest is being accrued on the principal amounts due at 10%
per annum and will be payable on January 31, 1998.
The Amended Plan states that portions of any "Excess cash flow
amount" must be distributed to holders of claims in certain classes
in the order set forth in the Amended Plan. "Excess cash flow
amount" is defined as, with respect to the fiscal years ending
January 27, 1996 and January 25, 1997, 50% of the excess of (i)
EBITDA (as defined in the Credit Agreement) of reorganized Ames for
such fiscal year over (ii)(a) $99.1 million with respect to the
fiscal year ending January 27, 1996 and (b) $114.7 million with
respect to the fiscal year ending January 25, 1997; provided,
however, that excess cash flow amounts shall not be paid with respect
to any fiscal year after the fiscal year ending January 25, 1997.
There are a number of events that must occur before these classes
will receive any payments from the excess cash flow amount. First,
Ames must realize cash flows that exceed the level of projected cash
flows in the Amended Plan. Second, if there is cash flow exceeding
those projections, it will be allocated to pay the other
distributions scheduled under the Amended Plan before any of the
classes entitled to receive excess cash flow payments will receive
any payments from the excess cash flow amount. Thus, if Ames has
excess cash flow, some of the deferred distributions provided in the
Amended Plan may be paid earlier than otherwise scheduled. Third,
the excess will be measured at the end of each fiscal year through
January 25, 1997. This means that if the required earnings levels
are not reached during those years, no excess cash flow amount will
ever be paid. There were no excess cash flow amounts through January
28, 1995 and none are anticipated in the Company's latest
projections.
The Amended Plan further states that portions of any Wertheim
Claim Proceeds (Note 12) and Litigation Claims (as defined in the
Amended Plan) must be distributed to certain classes of claims. As
to the Wertheim Claim Proceeds received in June, 1994, after
distribution of $7 million to the Class AG-6A Trust, Ames retained
the remaining $12 million. To the Company's knowledge, the relevant
creditor groups have not formed the Litigation Trust which would be
responsible for pursuing any Litigation Claims. Any future net
proceeds from Litigation Claims would be distributed pursuant to the
Amended Plan.
12. Litigation:
On April 25, 1990, Ames filed for protection under Chapter 11 of
the United States Bankruptcy Code in the United States Bankruptcy
Court for the Southern District of New York, Case Nos. 90B11233
through 11285. By Order dated as of December 18, 1992 (and modified
subsequently) (the "Confirmation Order"), the Bankruptcy Court
confirmed the Amended Plan. The Amended Plan was consummated on
December 30, 1992.
The Confirmation Order, among other things, dismissed with
prejudice all pending litigation, and released all claims that could
have been brought in litigation, between the Company and the Citibank
Group, TJX (to the extent provided in the Ames-TJX Release), and the
creditors of the Company, including but not limited to Claims arising
in (a) the Tax Refund Motion, (b) the Citibank Lift Stay Motion, (c)
the Ames Declaratory Judgment Action, (d) the Substantive
Consolidation Motion (as terms (a) through (d) are defined on pages
24 and 25 of the October 23, 1992 Disclosure Statement and Restated
Joint Plan of Reorganization of Ames Department Stores, Inc. and
Other Members of the Ames Group), and (e) an action filed under seal
in the Bankruptcy Court on April 24, 1992 by the members of the Ames
Group as Adversary Proceeding No. 92-9016A (JAG).
A number of claims filed in connection with the Ames Chapter 11
cases remain unresolved, only some of which are asserted to be
administrative, priority or secured claims. To the extent that such
claims are properly asserted or found to be unpaid administrative,
priority or secured claims, they would be the responsibility of the
Company. Based on its continuing review of these claims, the Company
believes that some have, in fact, already been fully satisfied,
others are pre-petition unsecured claims which are not the
responsibility of the Company, and some will be without any validity.
In the aggregate, the Company does not believe the remaining pre-
petition claims for which it will be liable under the Amended Plan
will be material.
On February 1, 1994, a civil complaint was filed against the
Company in the Circuit Court for Prince George's County, Maryland,
entitled Robert S. Wilson and Lillian Wilson vs Ames Department
Stores, Inc. et. al. This complaint arose from an incident on
February 15, 1993 in an Ames store in which one of the plaintiffs,
Robert S. Wilson, was apprehended for allegedly shoplifting
merchandise and was injured in a struggle with Ames store personnel.
The complaint alleged that the plaintiff was permanently disabled
and, among other things, that Ames personnel used excessive force.
On February 1, 1995 Ames and its insurance carriers reached an out-
of-court settlement with the plaintiffs, and on February 21, 1995 the
case was dismissed with prejudice.
Wertheim Proceeding
On October 13, 1992, Ames commenced an adversary proceeding
against Wertheim Schroder & Co., Inc. ("Wertheim") and James A.
Harmon ("Harmon") (Wertheim & Harmon, collectively the "Defendants").
In this proceeding (the "Wertheim Proceeding"), Ames sought damages
and equitable relief for breach of fiduciary duty, professional
malpractice, fraudulent conveyance and transfer pursuant to the
Bankruptcy Code and New York law, and other improper conduct relating
to Ames' acquisition from Zayre Corporation ("Zayre") of Zayre's
discount stores division in October 1988 (the "Zayre Acquisition").
Wertheim was investment advisor to both Ames and Zayre in connection
with the Zayre Acquisition; Harmon at the time of the Zayre
Acquisition served as Chairman of the Board of Directors of Ames and
as Chairman of Wertheim.
On November 20, 1992, the Defendants answered the complaint,
denied its material allegations and interposed ten counterclaims
against Ames, asserting (i) contribution claims under common law and
the 1933 Securities Act, and (ii) claims for indemnity under Ames'
articles of incorporation, Ames' engagement letter with Wertheim,
other agreements between Wertheim and Ames, Delaware law and common
law.
On March 31, 1994, Ames entered into a settlement agreement with
the Defendants (the "Settlement Agreement"), which was subject to
the approval of the Bankruptcy Court. In summary, the Settlement
Agreement provided for a $19 million settlement payment by the
Defendants and dismissal of all claims and counterclaims in the
Wertheim Proceeding. The Settlement Agreement also provided for the
Bankruptcy Court to enter an order (the "Bar Order") barring the
assertion of further claims arising out of the Zayre Acquisition
against the Defendants by Ames and holders of Allowed Claims (as
defined in the Amended Plan). The Settlement Agreement also required
Ames to indemnify the Defendants in the event that the assertion of
Zayre-related claims by Ames against any third party results in that
third party bringing a claim over against either of the Defendants.
A hearing on the motion to approve the Settlement Agreement and enter
the Bar Order was held on April 26, 1994.
Subsequent to the hearing, the Bankruptcy Court entered an order
approving the Settlement Agreement, and the closing on the Wertheim
Settlement Agreement took place in June, 1994. At that time, the
Company recorded a nonrecurring gain for its $12 million portion of
the settlement. The Class AG-6A Trust received $7 million for its
portion of the settlement.
Other Matters:
Both prior and subsequent to the Filing Date, various class
action suits were commenced on behalf of certain prior stockholders
and debenture holders of Ames Department Stores, Inc. A settlement
of these class actions, dated May 14, 1993, was reached between the
plaintiffs and defendants and was approved by the United States
District Court, Southern District of New York, on July 14, 1993. Any
claim against Ames arising out of these suits were discharged as part
of and in accordance with the terms of the Amended Plan which was
confirmed on December 18, 1992. Accordingly, the settlement of these
cases has no financial impact on Ames beyond the terms of the Amended
Plan.
Ames has owned and/or leased current and former facilities that
are subject to several environmental laws relating to the operation
and maintenance of those facilities, particularly with respect to the
facilities' 200 or more underground storage tanks. The vast majority
of those tanks have been cleanly removed. Some residual
contamination exists at a limited number of facilities, the extent of
which has not been determined at this time. Environmental
liabilities associated with these facilities may be shared with
facility landlords, tenants, subtenants, or other third parties. In
some states, clean-ups may be eligible for financing from state
funds. Based on currently available information, no liabilities
material to the Company will result from any underground storage tank
residual contamination. The Company believes that adequate
liabilities have been recorded related to any potential costs.
Under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 as amended by the Superfund Amendments and
Reauthorization Act of 1986 ("Superfund"), liability may be imposed
on waste generators, site owners and operators, and others regardless
of fault or the legality of the original waste disposal activity.
Ames may be liable for costs at several sites under Superfund or
similar state laws either for generating wastes, including waste oils
disposed of at those sites, or in connection with the assumption by
Ames of certain Zayre Discount Division liabilities. Ames believes
that it has been connected to most of these sites based on relatively
small amounts of wastes and that many other parties are involved at
these sites and may share in the ultimate liability. Ames does not
have sufficient information to determine its relative responsibility
for, or contribution to (if any), all of these sites at this time.
At the Peak Oil Superfund site in Florida, four Zayre stores
were among a number of parties which received unilateral orders from
the United States Environmental Protection Agency ("EPA") in 1990
requiring them to participate in an immediate removal action at that
site. Subsequently, that removal action was performed by the EPA.
In December 1994, the EPA notified the Company of its eligibility to
participate in a deminimis settlement. In January 1995, the Company
agreed to enter into the Deminimis Administrative Order on Consent.
The Company is a party to various claims and legal proceedings
covering a wide range of matters that arise in the ordinary course of
its business activities. The Company believes that its likely
liability as to these matters will not have a material adverse effect
on the consolidated financial position or results of operations of
the Company.
13. Supplemental Cash Flow Information:
Cash paid for interest and income taxes were as follows:
(000's Omitted)
------------------------------------------------------
Fiscal Year Fiscal Year Five Weeks Forty-eight
Ended Ended Ended Weeks Ended
January 28, January 29, January 30, December 26,
1995 1994 1993 1992
----------- ----------- ---------- ------------
Interest $19,953 $23,204 $258 | $11,844
Income taxes 7 19 - | 10
Ames entered into other non-cash investing and financing activities as
follows:
(000's Omitted)
-----------------------------------------------------
Fiscal Year Fiscal Year Five Weeks Forty-eight
Ended Ended Ended Weeks Ended
January 28, January 29, January 30, December 26,
1995 1994 1993 1992
----------- ----------- ----------- ------------
New capital lease obligations $687 $ - $ - | $204
Conversion of subordinated |
debentures into Common Stock - - - | 503
Conversion of Priority Common |
Stock into Common Stock 38 72 10 | -
14. Fair Values of Financial Instruments:
The Financial Accounting Standards Board requires disclosure of
the fair value of financial instruments under Statement of Financial
Accounting Standards No. 107, "Disclosures About Fair Value of
Financial Instruments" ("SFAS No. 107"). The following methods and
assumptions were used by the Company in estimating the fair value
disclosures for its financial instruments.
The Company's financial instruments as of January 28, 1995 and
January 29, 1994 were cash and short-term investments, long-term
debt, and the Series C Warrants. For cash and short-term
investments, the carrying amounts reported in the Consolidated
Balance Sheets approximated fair values. For long-term debt
obligations, the fair values were estimated using a discounted cash
flow analysis (based upon the Company's incremental borrowing rates
for similar types of borrowing arrangements). The fair values of
those debt instruments at January 29, 1994 expected to be paid-off
from the proceeds of the New Facility (Note 5) were stated at their
face amounts. The estimates of the fair values of the other debt
instruments at January 29, 1994 approximated their carrying amounts.
The fair value of the Series C Warrants was based on the market
trading price at year-end less the exercise price, times the number
of such warrants that were outstanding.
The carrying amounts and fair values of the Company's financial
instruments at January 28, 1995 and January 29, 1994 were as follows:
(000's Omitted)
----------------------------------------
January 28, 1995 January 29, 1994
------------------- -------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
--------- ------- --------- --------
Cash and short-term investments $30,449 $30,449 $ 72,445 $ 72,445
Long-term debt
Secured debt 27,312 27,091 100,069 101,240
Unsecured debt 26,886 26,611 33,877 33,877
Series C Warrants - 1,462 - 1,026
15. Gain on Disposition of Properties:
The following is a summary of the major components of the "Gain
on disposition of properties":
(000's Omitted)
------------------------------------
Fiscal Year Fiscal Year
Ended Ended
January 28, 1995 January 29, 1994
---------------- ----------------
Sales of lease interests
at closed locations $2,965 $ -
Sale of office building 2,870 -
Sale of shopping center 1,649 844
Sale of corporate jet - 496
Insurance proceeds and other 771 -
------ ------
$8,255 $1,340
====== ======
16. Distribution Center Closing Costs:
On November 1, 1994, the Company announced it would close the
distribution center in Clinton, Massachusetts in June, 1995 and
recorded a provision of $2.5 million in the third quarter for the
estimated costs associated with closing the facility. The Company
has entered into an agreement to sell the Clinton facility in the
second quarter of Fiscal 1995, earlier than originally anticipated.
Due to this earlier-than-expected sale, the Company reduced the
provision to $1.3 million in the fourth quarter to eliminate the
reserve amounts established for real estate taxes and other estimated
property holding costs. Transfer of the Clinton operations to the
Company's distribution center in Leesport, Pennsylvania began in
January, 1995.
Approximately $0.6 million of estimated termination benefits was
included in the provision. Approximately 330 employees will be
affected by the closing. The following items represent the major
components (in thousands) of the total provision for the Clinton
closing costs:
Termination benefits and other
human resources costs $776
Asset write-off 145
Other closing costs 379
------
$1,300
======
17. Restructuring:
As part of its restructuring prior to emergence from Chapter 11,
the Company announced in October, 1992 that in early 1993 it would
close 60 discount stores and the three remaining (freestanding)
Crafts & More stores. All of these stores were closed as planned in
March, 1993. In connection with the 60 store closings and related
restructuring (including the closing of a distribution
center/warehouse and office consolidation), the Company recorded a
restructuring charge of $72.5 million in October, 1992. The
restructuring charge represented profits or losses from store
operations from the date of announcement until closing, estimated
lease liabilities (including amounts that were subject to
settlement), employee payroll and severance costs, losses on
liquidation of inventories, losses on disposition of owned assets and
leasehold interests, and other related restructuring costs. In
December, 1992, the Company recorded an additional restructuring
charge of $16.0 million, primarily to provide a reserve for expected
markdowns associated with the discontinuance of private-label
children's apparel and for additional home office and field employee
severance costs associated with the continued restructuring of the
Company.
The non-cash decrease in merchandise inventories due to
restructuring activities totalled $57.8 million for the forty-eight
weeks ended December 26, 1992. The following items represent the
major components of the total restructuring charge for the
forty-eight weeks ended December 26, 1992:
($ in millions)
-----------------
Forty-eight
Weeks Ended
Item December 26, 1992
---- -----------------
Lease costs (a) $23.4
Net fixed asset and leasehold
write-down 28.3
Write-down of inventories 9.3
Severance and other human
resource costs 18.2
Reserve for discontinuance of
private-label children's apparel 12.1
Various other (including post-
announcement operating results
for closing stores) (2.8)
------
$88.5
======
(a) The lease costs relate to the closing of stores/facilities and
rejected leases as part of the Chapter 11 case.
Net assets held for disposition are recorded net of related
anticipated costs associated with the sale of such assets. Assets
other than merchandise inventories are sold as market conditions
permit.
In December, 1992, the Company entered into an agreement (the
"60-Store Agency Agreement") with an agent to assist the Company with
the disposition of merchandise inventory in "going-out-of-business"
(GOB) sales at the 60 discount stores and three Crafts & More stores.
The GOB sales commenced in January, 1993, were completed in March,
1993, and the Company realized approximately $46 million in cash for
the merchandise inventory after payment of all direct GOB expenses as
defined in the 60-Store Agency Agreement. This represented
approximately 52% of the beginning GOB retail inventory value at the
closed stores.
18. Pro Forma Summary Information (Unaudited):
As discussed in Note 17, during the forty-eight weeks ended
December 26, 1992, Ames announced its plan to close 60 discount
stores in early Fiscal 1993. The announcement was made on October
30, 1992 and the stores were closed in March, 1993. Results of
closing stores' operations are applied against the restructuring
reserve from the date of announcement. Therefore the operating
results of the 60 stores were included in the statement of operations
only through October, 1992.
The following unaudited pro forma summary information for the
forty-eight weeks ended December 26, 1992 represents the estimated
results of operations of the Company as if the Amended Plan was
effective at the beginning of Fiscal 1992 and the 60 closed stores
were excluded from operations for the forty-eight weeks ended
December 26, 1992. The adjustments reflected in the information
below include: (1) the estimated effects of the Amended Plan; (2) the
reversal of the restructuring charge and operating results of the 60
stores; (3) interest expense and interest income adjustments related
to inventory levels at the closed stores and additional funds on
hand; (4) income tax expense for the forty-eight week period; and (5)
adjustment to the earnings per common share based on the new common
shares issued under the Amended Plan.
Pro Forma Summary Information
(In Thousands, Except Per Share Amount)
(Unaudited)
Forty-eight Weeks
Ended
December 26, 1992
-----------------
Total Sales $2,167,658
Net Income $8,594
Net Income Per Common Share $ .43
Although reductions were made in corporate office and field
expenses in connection with the store closings, no estimates of such
reductions were included in any of the pro forma adjustments. Only
expenses directly attributable to the closing stores' operations were
removed from the historical expense totals. The pro forma data is
for illustrative purposes only and should not be construed to be
indicative of the Company's results of operations that actually would
have resulted if the transactions were consummated on the date
assumed and do not project the Company's results of operations or
trends for any future date or period.
19. Leased Department and Other Operating Income:
(000's Omitted)
-----------------------------------------------------
Fiscal Year Fiscal Year Five Weeks Forty-eight
Ended Ended Ended Weeks Ended
January 28, January 29, January 30, December 26,
1995 1994 1993 1992
----------- ----------- ----------- ------------
Leased department income $17,900 $18,829 $1,018 | $20,078
Concession and vending income 1,342 1,620 - | 2,064
Layaway service fees 3,163 3,109 149 | 3,192
Various other 7,891 10,799 914 | 10,203
------- ------- ------ | -------
$30,296 $34,357 $2,081 | $35,537
======= ======= ======= =======
20. Bankruptcy Expenses:
Bankruptcy expenses represented primarily professional fees and
incremental internal costs incurred as a result of the Chapter 11
cases. Costs totalling $25.5 million were expensed during the
forty-eight weeks ended December 26, 1992, relating primarily to
accounting, legal and consulting services provided to Ames and
various official creditors' committees (which were required to be
paid by Ames while in Chapter 11).
21. Extraordinary Items:
The Company prepaid certain debt (Note 5) during Fiscal 1994 and
recorded a non-cash extraordinary charge of $1.5 million, net of tax
benefit of $0.7 million, primarily for the write-off of deferred
financing costs and debt discounts.
During Fiscal 1993, the Company paid $1.9 million to certain
state taxing authorities in early settlement of $2.8 million of tax
obligations and recorded the difference of $0.9 million as an
extraordinary gain.
The Company stated its liabilities at December 26, 1992 at the
present value of the amounts to be paid pursuant to the Amended Plan.
The resulting non-taxable gain of approximately $1.25 billion from
the debt discharge was presented as an extraordinary gain in the
accompanying consolidated statement of operations for the forty-eight
weeks ended December 26, 1992.
22. Quarterly Financial Data (Unaudited):
Summarized unaudited quarterly financial data (in thousands
except for per share amounts) for the last two fiscal years are shown
below. The prior-year's fourth quarter gross margin amount includes
certain reclassifications to conform to the current year
presentation.
Net Income (Loss)
Net Sales Gross Margin Net Income (Loss) Per Common Share
----------- ------------ ------------------- ------------------
Fiscal 1994:
------------
First $435,755 $114,098 ($15,141)(a,e) ($.75)(a,e)
Second 491,300 134,407 6,609 (b,e) .31 (b,e)
Third 511,268 134,781 (5,102)(e) (.25)(e)
Fourth 704,504 188,360 30,660 (e) 1.44 (e)
------- -------- ------- ----
Total $2,142,827 $571,646 $17,026 $.79 (c)
========== ======== ========= =====
Fiscal 1993:
------------
First $434,761 $118,145 ($17,992) ($.90)
Second 496,850 136,182 (9,955) (.50)
Third 526,502 143,779 (1,653)(d) (.08)(d)
Fourth 665,414 183,216 40,423 1.91
------- ------- --------- -----
Total $2,123,527 $581,322 $10,823 $.51 (c)
========== ======== ========= =====
<FN>
(a) Includes the extraordinary loss of $1.5 million, net of tax
benefit, related to the prepayment of certain debt (Note 21).
(b) Includes the nonrecurring gain of $8.3 million, net of tax
provision, for a litigation settlement (Note 12).
(c) Per share figures do not total due to the weighted average
number of common and common equivalent shares outstanding in
each quarter.
(d) Includes the extraordinary gain on early extinguishment of debt
of $0.9 million (Note 21).
(e) Fiscal 1994 quarterly results included income tax benefits
(provisions) of $6.5, ($3.2), $2.4 and ($14.0) million for the
first, second, third and fourth quarters, respectively. Fiscal
1993 quarterly results did not include an income tax benefit or
provision until the $3.3 million annual provision was recorded
in the fourth quarter.
SCHEDULE II
AMES DEPARTMENT STORES,INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(000's Omitted)
Balance at Charged to Balance at
Beginning of Cost and End of
Description Period Expense Reclassifications Deductions Period
- ----------- ------------ --------- ----------------- ---------- ----------
Fiscal Year Ended
- -----------------
January 28, 1995
----------------
Restructuring Reserve $6,992 - $1,623(a) ($5,737)(b) $2,878
included in Accrued
Expenses
Distribution Center
Closing Reserve
included in Accrued
Expenses - $2,500 $267(a) ($1,200)(c) $1,567
Fiscal Year Ended
- -----------------
January 29, 1994
-------------------
Restructuring Reserve $ 22,497 - $16,943(a) ($32,448)(b) $6,992
included in Accrued
Expenses
Five Weeks Ended
- ----------------
January 30, 1993
----------------
Restructuring Reserve $ 29,396 - ($776)(d) ($6,123) $22,497
Forty-eight Weeks Ended
- -----------------------
December 26, 1992
--------------------
Restructuring Reserve $ 33,812 $88,500 ($66,117)(d) ($26,799) $29,396
Reserve included in
Liabilities Subject to
Settlement Under the
Reorganization Case $ 40,000 - - ($40,000)(e) -
<FN>
(a) Represents reclassifications of costs associated with "Net assets held
for disposition" and other reclassifications.
(b) Represents payments of restructuring costs, including costs related to
"Net assets held for disposition."
(c) Represents reduction of amount charged to cost and expense to eliminate
the amounts established for real estate taxes and other estimated
property holding costs due to the earlier-than-expected sale.
(d) Represents reclassifications to reflect portions of the restructuring
charge that reduces "Net assets held for disposition" to net realizable
value and other reclassifications.
(e) Eliminated in connection with the consummation of the Company's plan of
reorganization.
E X H I B I T I N D E X
Cross-reference
Exhibit or page number
Number Exhibit in Form 10-K
- ------- -------- ---------------
2(a) Third Amended and Restated Plan of Reorganization
of the Ames Department Stores, Inc. and other
members of the Ames Group, Citibank, N.A. as
Agent, the Parent Creditor's Committee, the
Subsidiaries Creditor's Committee, the Bond-
holders' Committee and the Employees' Committee
dated October 23, 1992 (incorporated herein by
reference to Exhibit 2 of the Company's Report
on Form 8-K dated December 29, 1992 and filed
December 31, 1992).
2(b) Statement of Ames Group with respect to conditions
to Consummation of Third Amended and Restated
Joint Plan of Reorganization of Ames Department
Stores, Inc. other members of Ames Group,
Citibank, N.A., Parent Creditors' Committee,
Subsidiaries Creditors' Committee, Bondholders'
Committee and Employees' Committee dated
December 28, 1992 (incorporated herein by
reference to Exhibit 2B of the Company's Report
on Form 8-K dated December 29, 1992 and filed
December 31, 1992).
2(c) Ames Department Stores, Inc. Information
Supplementing Disclosure Statement dated
December 29, 1992 (incorporated herein by
reference to Exhibit 2C of the Company's
Report on Form 8-K dated December 29, 1992
and filed December 31, 1992).
3(a) Amended and Restated Certificate of Incorporation
of Ames Department Stores, Inc.
(incorporated herein by reference to
Form 8 dated and filed December 29, 1992).
3(b) Form of By-laws of Ames Department Stores, Inc. 62
as amended February 23, 1995.
4(a) Series B Warrant Certificate for Purchase of New
Common Stock of Ames Department Stores, Inc.
(incorporated herein by reference to Form 8-A
dated and filed December 11, 1992).
4(b) Series C Warrant Certificate for Purchase of New
Common Stock of Ames Department Stores, Inc.
(incorporated herein by reference to Form 8-A
dated and filed December 11, 1992).
4(c) Credit Agreement Among Ames Department Stores, Inc.
and Banks named herein as Banks and Citibank,
N.A. as Agent dated as of December 18, 1992
(incorporated herein by reference to Exhibit
28A-1 of the Company's Report on Form 8-K dated
January 7, 1993 and filed January 8, 1993).
4(d) Amendment No. 1, dated April 13, 1993, to the Credit
Agreement (Exhibit 4(c) above) Among Ames Depart-
ment Stores, Inc. and Banks named herein as Banks
and Citibank, N.A. as Agent (incorporated herein
by reference to Exhibit 4 of the Company's Report
on Form 8-K dated May 6, 1993 and filed May 7, 1993).
4(e) Inventory Security Agreement from Ames Department
Stores, Inc. and the Banks named herein as
Banks and Citibank, N.A. as Agent (incorporated
herein by reference to Exhibit 28A-2 of the
Company's Report on Form 8-K dated January 7,
1993 and filed January 8, 1993).
4(f) Shared Collateral Security Agreement from Ames
Department Stores, Inc. and the Subsidiaries
of Ames as Grantors to Citibank, N.A. as
Collateral Trustee (incorporated herein by
reference to Exhibit 28A-3 of the Company's
Report on Form 8-K dated January 7, 1993
and filed January 8, 1993).
4(g) Guaranty from the Subsidiaries of Ames Department
Stores, Inc. as Grantors in favor of the
Lenders Party to the Credit Agreement
referred to herein and Citibank, N.A. as Agent
(incorporated herein by reference to Exhibit
28A-4 of the Company's Report on Form 8-K
dated January 7, 1993 and filed January 8, 1993).
4(h) Collateral Trust Agreement among Ames Department
Stores, Inc. the other Collateral Grantors
and Citibank, N,A. the Collateral Trustee
(incorporated herein by reference to Exhibit
28A-5 of the Company's Report on Form 8-K
dated January 7, 1993 and filed January 8,
1993).
4(i) Indenture, dated as of December 29, 1992, by and
among Ames Department Stores, Inc. (8% Senior
Secured Notes (Series D) due December 31, 1996,
incorporated herein by reference to Exhibit
28B of the Company's Report on Form 8-K
dated January 7, 1993 and filed January 8,
1993).
4(j) Letter of Credit and Reimbursement Agreement dated
as of December 18, 1992 between Ames
Department Stores, Inc. and Republic National
Bank of New York (incorporated herein by
reference to Exhibit 28C of the Company's
Report on Form 8-K dated January 7, 1993 and
filed January 8, 1993).
4(k) Amendment, dated August 26, 1993, to the Letter of
Credit and Reimbursement Agreement (Exhibit 4(j)
above) between Ames Department Stores, Inc. and
Republic National Bank of New York (incorporated
herein by reference to Exhibit 4 of the Company's
Report on Form 8-K dated September 30, 1993 and
filed September 30, 1993).
4(l) Credit Agreement, dated April 28, 1994, between
BankAmerica Business Credit, Inc., as agent, and
Ames Department Stores, Inc. (incorporated herein
by reference to Exhibit 4 of the Company's Report
on Form 8-K dated and filed May 12, 1994).
4(m) Rights Agreement, dated as of November 30, 1994, between
Ames Department Stores, Inc. and Chemical Bank, as
Rights Agent (incorporated herein by reference to
Exhibit 4 of the Company's Quarterly Report on Form
10-Q for the quarterly period ended October 29, 1994
filed on December 13, 1994).
10(a) Performance Stock Unit Plan (incorporated
herein by reference to the Company's 1990
Annual Report on Form 10-K dated May 11, 1990
filed May 14, 1990).
10(b) Amendment No. 1 and No. 2 to Performance Stock
Unit Plan (incorporated herein by reference
to Exhibit 10(e) of the Company's 1985 Annual
Report on Form 10-K dated January 26, 1985
and filed April 24, 1985).
10(c) Deferred Compensation Plan for Directors
(incorporated herein by reference to the
Company's 1990 Annual Report on Form 10-K
dated May 11, 1990 filed May 14, 1990).
10(d) Restatement of the Retirement Plan for
Officers/Directors, effective January 1, 1985
(incorporated herein by reference to Exhibit
10(h) of the Company's 1985 Annual Report on
Form 10-K dated January 26, 1985 and filed
April 24, 1985).
10(e) Incentive Stock Option Plan (incorporated
herein by reference to the Company's
Registration Statement on Form S-8, File No.
2-80931).
10(f) Amendment, dated November 7, 1984, to the
Incentive Stock Option Plan (incorporated
herein by reference to Exhibit 10(j) of the
Company's 1985 Annual Report on Form 10-K
dated January 26, 1985 and filed April 24,
1985).
10(g) Agreement, dated December 9, 1983, between
United Air Lines, Inc. and the Company
(incorporated herein by reference to Exhibit
10(i) of the Company's 1984 Annual Report on
Form 10-K dated January 28, 1984 and filed
April 23, 1984).
10(h) Retirement and Savings Plan as restated
December 27, 1984, and Amendment No. 1
(incorporated herein by reference to Exhibit
10(n) of the Company's 1985 Annual Report on
Form 10-K dated January 26, 1985 and filed
April 24, 1985).
10(i) Ames Stock Ownership Plan, dated December 27,
1984 and proposed Amendment No. 1
(incorporated herein by reference to Exhibit
10(o) of the Company's 1985 Annual Report on
Form 10-K dated January 26, 1985 and filed
April 24, 1985).
10(j) 1989 Incentive Stock Option Plan (incorporated
herein by reference to the Company's
Registration Statement on Form S-8, File No.
33-29639).
10(k) Employment and Non-Competition Agreement with
Stephen L. Pistner (incorporated herein by
reference to the Company's 1990 Annual Report
on Form 10-K dated May 11, 1990 and filed
May 14, 1990).
10(l) Settlement Agreement, dated March 31, 1994, between
Ames Department Stores, Inc. and Subsidiaries
and Wertheim Schroder & Co. Incorporated and
James A. Harmon (incorporated herein by reference
to Exhibit 10 of the Company's Report on Form 8-K
dated and filed April 8, 1994).
10(m) 1994 Management Stock Option Plan (incorporated herein
by reference to the Company's definitive proxy
statement filed on May 5, 1994).
10(n) Employment Agreement, dated June 6, 1994, and Amendment
thereto, dated June 9, 1994, between Ames Department
Stores, Inc. and Joseph Ettore (incorporated herein
by reference to the Company's Report on Form 8-K
dated and filed June 21, 1994).
10(o) Employment Agreement, dated August 9, 1994, between Ames
Department Stores, Inc. and Denis Lemire (incorpor-
ated herein by reference to the Company's Quarterly
Report on Form 10-Q for the quarterly period ended
July 30, 1994 filed on September 9, 1994).
11 Schedule of computation of primary and fully-diluted 76
net earnings per share.
22 Subsidiaries of the Registrant. 77
Exhibit 3(b)
AMENDED AND RESTATED
BY-LAWS
OF
AMES DEPARTMENT STORES, INC.
(hereinafter called the "Corporation")
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of the Corporation
shall be in the City of Wilmington, County of New Castle, State of
Delaware.
SECTION 2. OTHER OFFICES. The Corporation may also have offices at
such other places both within and without the State of Delaware as the
Board of Directors of the Corporation (the "Board of Directors") may from
time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. PLACE OF MEETINGS. Meetings of the stockholders for the
election of directors or for any other purpose shall be held at such time
and place, either within or without the State of Delaware as shall be
designated from time to time by the Board of Directors and stated in the
notice of the meeting or in a duly executed waiver of notice thereof.
SECTION 2. ANNUAL MEETINGS. The annual meeting of stockholders shall
be held on such date and at such time as shall be designated from time to
time by the Board of Directors. At the Annual Meeting the stockholders
shall elect by a plurality vote the Board of Directors, and transact such
other business as may properly be brought before the meeting. Written
notice of the Annual Meeting stating the place, date and hour of the
meeting shall be given to each stockholder entitled to vote at such meeting
not less than ten nor more than sixty days before the date of the meeting.
SECTION 3. SPECIAL MEETINGS. Unless otherwise prescribed by law or by
the Certificate of Incorporation, special meetings of stockholders, for any
purpose or purposes, may be called at any time by either (i) the Chairman,
if there be one, (ii) the President, (iii) any Vice President, if there be
one, (iv) the Secretary or (v) any Assistant Secretary, if there be one,
and shall be called by any such officer at the request in writing of a
majority of the Board of Directors or at the request in writing of
stockholders owning a majority of the capital stock of the Corporation
issued and outstanding and entitled to vote. Such request shall state the
purpose or purposes of the proposed meeting. Written notice of a special
meeting stating the place, date and hour of the meeting and the purpose or
purposes for which the meeting is called shall be given not less than ten
nor more than sixty days before the date of the meeting to each stockholder
entitled to vote at such meeting.
SECTION 4. QUORUM. Except as otherwise provided by law or by the
Certificate of Incorporation, the holders of a majority of the capital
stock issued and outstanding and entitled to vote thereat, present in
person or represented by proxy, shall constitute a quorum at all meetings
of the stockholders for the transaction of business. If, however, such
quorum shall not be present or represented at any meeting of the
stockholders, the stockholders entitled to vote thereat, present in person
or represented by proxy, shall have the power to adjourn the meeting from
time to time, without notice other than announcement at the meeting, until
a quorum shall be present or represented. At such adjourned meeting at
which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
noticed. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given to each stockholder entitled to
vote at the meeting.
SECTION 5. VOTING. Unless otherwise required by law, the Certificate
of Incorporation or these By-Laws, any question brought before any meeting
of stockholders shall be decided by the vote of the holders of a majority
of the stock represented and entitled to vote thereat. Each stockholder
represented at a meeting of stockholders shall be entitled to cast one vote
for each share of the capital stock entitled to vote thereat held by such
stockholder. Such votes may be cast in person or by proxy but no proxy
shall be voted on or after three years from its date, unless such proxy
provides for a longer period. The Board of Directors, in its discretion, or
the officer of the Corporation presiding at a meeting of stockholders, in
his discretion, may require that any votes cast at such meeting shall be
cast by written ballot.
SECTION 6. CONSENT OF STOCKHOLDERS IN LIEU OF MEETING. Unless
otherwise provided in the Certificate of Incorporation, any action required
or permitted to be taken at any annual or special meeting of stockholders
of the Corporation, may be taken without a meeting, without prior notice
and without a vote, if a consent in writing setting forth the action so
taken, shall be signed by the holders of outstanding stock have 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 voted. Prompt notice of the taking of the corporate action
without a meeting by less than unanimous written consent shall be given to
those stockholders who have not consented in writing.
SECTION 7. LIST OF STOCKHOLDERS ENTITLED TO VOTE. The officer of the
Corporation who has charge of the stock ledger of the Corporation shall
prepare and make, at least ten days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged
in alphabetical order, and showing the address of each stockholder and the
number of shares registered in the name of each stockholder. Such list
shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at
least ten days prior to the meeting, either at a place within the city
where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the time
and place of the meeting during the whole time thereof, and may be
inspected by any stockholder of the Corporation who is present.
SECTION 8. STOCK LEDGER. The stock ledger of the Corporation shall be
the only evidence as to who are the stockholders entitled to examine the
stock ledger, the list required by Section 7 of this Article II or the
books of the Corporation, or to vote in person or by proxy at any meeting
of stockholders.
ARTICLE III
DIRECTORS
SECTION 1. NUMBER AND ELECTION OF DIRECTORS. The Board of Directors
shall consist of seven members except as provided in Section 2 of this
Article, directors shall be elected by a plurality of the votes cast at
annual meetings of stockholders, and each director so elected shall hold
office until his successor is elected and qualified or until his earlier
death or resignation. Any director may resign at any time upon written
notice to the Corporation. Directors need not be stockholders.
SECTION 2. VACANCIES. Vacancies occurring on the Board of Directors
for any reason may be filled by a majority of the directors then in office,
though less than a quorum, or by a sole remaining director, and the
directors so chosen shall hold office until the next annual election and
until their successors are duly elected and qualified, or until their
earlier resignation or removal.
SECTION 3. DUTIES AND POWERS. The business of the Corporation shall be
managed by or under the direction of the Board of Directors that may
exercise all such powers of the Corporation and do all such lawful acts and
things as are not by statute or by the Certificate of Incorporation or by
these By-Laws directed or required to be exercised or done by the
stockholders.
SECTION 4. MEETINGS. The Board of Directors of the Corporation may
hold meetings, both regular and special, either within or without the State
of Delaware. Regular meetings of the Board of Directors may be held without
notice at such time and at such place as may from time to time be
determined by the Board of Directors. Special Meetings of the Board of
Directors may be called by the Chairman, if there be one, the President, or
any directors. Notice thereof stating the place, date and hour of the
meeting shall be given to each director either by mail not less than
forty-eight (48) hours before the date of the meeting, by telephone or
telegram on twenty-four (24) hours' notice, or on such shorter notice as
the person or persons calling such meeting may deem necessary or
appropriate in the circumstances. Notice of a meeting of the Board of
Directors need not be given to any director who submits a signed waiver of
notice whether before or after the meeting, or who attends the meeting
without protesting, prior thereto or at its commencement, the lack of
notice to him. A notice, or waiver of notice, need not specify the business
to be transacted at or purpose of any meeting of the Board of Directors.
SECTION 5. QUORUM. Except as may be otherwise specifically provided by
law, the Certificate of Incorporation or these By-Laws, at all meetings of
the Board of Directors, a majority of the entire Board of Directors shall
constitute a quorum for the transaction of business and the act of a
majority of the directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors. If a quorum shall not be
present at any meeting of the Board of Directors, the directors present
thereat may adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum shall be present.
SECTION 6. ACTIONS OF BOARD BY WRITTEN CONSENT. Unless otherwise
provided by the Certificate of Incorporation or these By-Laws, any action
required or permitted to be taken at any meeting of the Board of Directors
or of any committee thereof may be taken without a meeting, prior notice,
or a vote, if all the members of the Board of Directors or committee, as
the case may be, consent thereto in writing, and the writing or writings
are filed with the minutes of proceedings of the Board of Directors or
committee.
SECTION 7. MEETINGS BY MEANS OF CONFERENCE TELEPHONE. Unless otherwise
provided by the Certificate of Incorporation or these By-Laws, members of
the Board of Directors of the Corporation, or any committee designated by
the Board of Directors, may participate in a meeting of the Board of
Directors or such committee by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to
this Section 7 shall constitute presence in person at such meeting.
SECTION 8. COMMITTEES. The Board of Directors may, by resolution
passed by a majority of the entire Board of Directors, designate one or
more committees, each committee to consist of one or more of the directors
of the Corporation. The Board of Directors may designate one or more
directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of any such committee. In the absence
or disqualification of a member of a committee, and in the absence of a
designation by the Board of Directors of an alternate member to replace the
absent or disqualified member, the member or members thereof present at any
meeting and not disqualified from voting, whether or not he or they
constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any absent or disqualified
member. Any committee, to the extent allowed by law and provided in the
resolution establishing such committee, shall have and may exercise all the
powers and authority of the Board of Directors in the management of the
business and affairs of the Corporation. Each committee shall keep regular
minutes and report to the Board of Directors when so requested by the Board
of Directors.
SECTION 9. COMPENSATION. The directors may be paid their expenses, if
any, of attendance at each meeting of the Board of Directors and for the
performance of their duties as directors and may be paid a fixed sum,
determined by the Board of Directors, for attendance at each meeting of the
Board of Directors or a stated salary as director. No such payment shall
preclude any director from serving the Corporation in any other capacity
and receiving compensation therefor. Members of special or standing
committees may be allowed like compensation for attending committee
meetings.
SECTION 10. INTERESTED DIRECTORS. No contract or transaction between
the Corporation and one or more of its directors or officers, or between
the Corporation and any other corporation, partnership, association, or
other organization in which one or more of its directors or officers are
directors or officers, or have a financial interest, shall be void or
voidable solely for this reason, or solely because the director or officer
is present at or participates in the meeting of the Board of Directors or
committee thereof that authorizes the contract or transaction, or solely
because his or their votes are counted for such purpose if (i) the material
facts as to his or their relationship or interest and as to the contract or
transaction are disclosed or are known to the Board of Directors or the
committee, and the Board of Directors or committee in good faith authorizes
the contract or transaction by the affirmative votes of a majority of the
disinterested directors, even though the disinterested directors be less
than a quorum; or (ii) the material facts as to his or their relationship
or interest and as to the contract or transaction are disclosed or are
known to the stockholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the
stockholders; or (iii) the contract or transaction is fair as to the
Corporation as of the time it is authorized, approved or ratified, by the
Board of Directors, a committee thereof or the stockholders. Common or
interested directors may be counted in determining the presence of a quorum
at a meeting of the Board of Directors or of a committee which authorizes
the contract or transaction.
ARTICLE IV
OFFICERS
SECTION 1. GENERAL. The officers of the Corporation shall be chosen by
the Board of Directors and shall be a President, a Secretary and a
Treasurer. The Board of Directors, in its discretion, may also choose a
Chairman of the Board of Directors (who must be a director) and one or more
Vice Presidents, Assistant Secretaries, Assistant Treasurers and other
officers. Any number of offices may be held by the same person, unless
otherwise prohibited by law, the Certificate of Incorporation or these
By-Laws. The officers of the Corporation need not be stockholders of the
Corporation nor, except in the case of the Chairman of the Board of
Directors, need such officers be directors of the Corporation.
SECTION 2. ELECTION. The Board of Directors at its first meeting held
after each annual meeting of stockholders shall elect the officers of the
Corporation who shall hold their offices for such terms and shall exercise
such powers and perform such duties as shall be determined from time to
time by the Board of Directors; and all officers of the Corporation shall
hold office until their successors are chosen and qualified, or until their
earlier resignation or removal. Any officer elected by the Board of
Directors may be removed at any time by the affirmative vote of a majority
of the Board of Directors. Any vacancy occurring in any office of the
Corporation shall be filled by the Board of Directors. The salaries of all
officers of the Corporation shall be fixed by the Board of Directors.
SECTION 3. VOTING SECURITIES OWNED BY THE CORPORATION. Powers of
attorney, proxies, waivers of notice of meeting, consents and other
instruments relating to securities owned by the Corporation may be executed
in the name of and on behalf of the Corporation by the President or any
Vice President and any such officer may, in the name of and on behalf of
the Corporation, take all such action as any such officer may deem
advisable to vote in person or by proxy at any meeting of security holders
of any corporation in which the Corporation may own securities and at any
such meeting shall possess and may exercise any and all rights and power
incident to the ownership of such securities and which, as the owner
thereof, the Corporation might have exercised and possessed if present. The
Board of Directors may, by resolution, from time to time confer like powers
upon any other person or persons.
SECTION 4. CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of the
Board of Directors, if there be one, shall preside at all meetings of the
stockholders and of the Board of Directors. Unless some other person is so
designated by the Board of Directors, he shall be the Chief Executive
Officer of the Corporation, and except where by law the signature of the
President is required, the Chairman of the Board of Directors shall possess
the same power as the President to sign all contracts, certificates and
other instruments of the Corporation which may be authorized by the Board
of Directors. During the absence or disability of the President, the
Chairman of the Board of Directors shall exercise all the powers and
discharge all the duties of the President. The Chairman of the Board of
Directors shall also perform such other duties and may exercise such other
powers as from time to time may be assigned to him by these By-Laws or by
the Board of Directors.
SECTION 5. PRESIDENT. The President shall, subject to the control of
the Board of Directors and, if there be one, the Chairman of the Board of
Directors, have general supervision of the business of the Corporation and
shall see that all orders and resolutions of the Board of Directors are
carried into effect. He shall execute all bonds, mortgages, contracts and
other instruments of the Corporation requiring a seal, under the seal of
the Corporation, except where required or permitted by law to be otherwise
signed and executed and except that the other officers of the Corporation
may sign and execute documents when so authorized by these By-Laws, the
Board of Directors or the President. In the absence or disability of the
Chairman of the Board of Directors, or if there be none, the President
shall preside at all meetings of the stockholders and the Board of
Directors. If there be no Chairman of the Board of Directors, the President
shall be the Chief Executive Officer of the Corporation. The President
shall also perform such other duties and may exercise such other powers as
from time to time may be assigned to him by these By-Laws or by the Board
of Directors.
SECTION 6. VICE PRESIDENTS. At the request of the President or in his
absence or in the event of his inability or refusal to act (and if there be
no Chairman of the Board of Directors), the Vice President or the Vice
Presidents if there is more than one (in the order designated by the Board
of Directors) shall perform the duties of the President, and when so
acting, shall have all the powers of and be subject to all the restrictions
upon the President. Each Vice President shall perform such other duties and
have such other powers as the Board of Directors from time to time may
prescribe. If there be no Chairman of the Board of Directors and no Vice
President, the Board of Directors shall designate the officer of the
Corporation who, in the absence of the President or in the event of the
inability or refusal of the President to act, shall perform the duties of
the President, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the President.
SECTION 7. SECRETARY. The Secretary shall attend all meetings of the
Board of Directors and all meetings of stockholders and record all the
proceedings thereat in a book or books to be kept for that purpose; the
Secretary shall also perform like duties for the standing committees when
required. The Secretary shall give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the Board of
Directors, and shall perform such other duties as may be prescribed by the
Board of Directors or President, under whose supervision he shall be. If
the Secretary shall be unable or shall refuse to cause to be given notice
of all meetings of the stockholders and special meetings of the Board of
Directors, and if there be no Assistant Secretary, then either the Board of
Directors or the President may choose another officer to cause such notice
to be given. The Secretary shall have custody of the seal of the
Corporation and the Secretary or any Assistant Secretary, if there be one,
shall have authority to affix the same to any instrument requiring it and
when so affixed, it may be attested by the signature of the Secretary or by
the signature of any such Assistant Secretary. The Board of Directors may
give general authority to any other officer to affix the seal of the
Corporation and to attest the affixing by his signature. The Secretary
shall see that all books, reports, statements, certificates and other
documents and records required by law to be kept or filed are properly kept
or filed, as the case may be.
SECTION 8. TREASURER. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit
of the Corporation in such depositories as may be designated by the Board
of Directors. The Treasurer shall disburse the funds of the Corporation as
may be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of
Directors, at its regular meetings, or when the Board of Directors so
requests, an account of all his transactions as Treasurer and of the
financial condition of the Corporation. If required by the Board of
Directors, the Treasurer shall give the Corporation a bond in such sum and
with such surety or sureties as shall be satisfactory to the Board of
Directors for the faithful performance of the duties of his office and for
the restoration to the Corporation, in case of his death, resignation,
retirement or removal from office, of all books, papers, vouchers, money
and other property of whatever kind in his possession or under his control
belonging to the Corporation.
SECTION 9. ASSISTANT SECRETARIES. Except as may be otherwise provided
in these By-Laws, Assistant Secretaries, if there be any, shall perform
such duties and have such powers as from time to time may be assigned to
them by the Board of Directors, the President, any Vice President, if there
be one, or the Secretary, and in the absence of the Secretary or in the
event of his disability or refusal to act, shall perform the duties of the
Secretary, and when so acting, shall have all the powers of and be subject
to all the restrictions upon the Secretary.
SECTION 10. ASSISTANT TREASURERS. Assistant Treasurers, if there be
any, shall perform such duties and have such powers as from time to time
may be assigned to them by the Board of Directors, the President, any Vice
President, if there be one, or the Treasurer, and in the absence of the
Treasurer or in the event of his disability or refusal to act, shall
perform the duties of the Treasurer, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the Treasurer. If
required by the Board of Directors, an Assistant Treasurer shall give the
Corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of his office and for the restoration to the Corporation, in case of
his death, resignation, retirement or removal from office, of all books,
papers, vouchers, money and other property of whatever kind in his
possession or under his control belonging to the Corporation.
SECTION 11. OTHER OFFICERS. Such other officers as the Board of
Directors may choose shall perform such duties and have such powers as from
time to time may be assigned to them by the Board of Directors. The Board
of Directors may delegate to any other officer of the Corporation the power
to choose such other officers and to prescribe their respective duties and
powers.
ARTICLE V
STOCK
SECTION 1. FORM OF CERTIFICATES. Every holder of stock in the
Corporation shall be entitled to have a certificate signed, in the name of
the Corporation (i) by the Chairman of the Board of Directors, the
President or a Vice President and (ii) by the Treasurer or an Assistant
Treasurer, or the Secretary or an Assistant Secretary of the Corporation,
certifying the number of shares owned by him in the Corporation.
SECTION 2. SIGNATURES. Where a certificate is countersigned by (i) a
transfer agent other than the Corporation or its employee, or (ii) a
registrar other than the Corporation or its employee, any other signature
on the certificate may be a facsimile. In case any officer, transfer agent
or registrar who has signed or whose facsimile signature has been placed
upon a certificate shall have ceased to be such officer, transfer agent or
registrar before such certificate is issued, it may be issued by the
Corporation with the same effect as if he were such officer, transfer agent
or registrar at the date of issue.
SECTION 3. LOST CERTIFICATES. The Board of Directors may direct a new
certificate to be issued in place of any certificate theretofore issued by
the Corporation alleged to have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the person claiming the certificate
of stock to be lost, stolen or destroyed. When authorizing such issue of a
new certificate, the Board of Directors may, in its discretion and as a
condition precedent to the issuance thereof, require the owner of such
lost, stolen or destroyed certificate, or his legal representative, to
advertise the same in such manner as the Board of Directors shall require
and/or to give the Corporation a bond in such sum as it may direct as
indemnity against any claim that may be made against the Corporation with
respect to the certificate alleged to have been lost, stolen or destroyed.
SECTION 4. TRANSFERS. Except as otherwise provided in the Certificate
of Incorporation, stock of the Corporation shall be transferable in the
manner prescribed by law and in these By-Laws. Transfers of stock shall be
made on the books of the Corporation only by the person named in the
certificate or by his attorney lawfully constituted in writing and upon the
surrender of the certificate therefor, which shall be cancelled before a
new certificate shall be issued.
SECTION 5. RECORD DATE. In order that the Corporation may determine
the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or entitled to express consent to
corporate action in writing without a meeting, or entitled to receive
payment of any dividend or other distribution or allotment of any rights,
or entitled to exercise any rights in respect of any change, conversion or
exchange of stock, or for the purpose of any other lawful action, the Board
of Directors may fix, in advance, a record date, which shall not be more
than sixty days nor less than ten days before the date of such meeting, nor
more than sixty days prior to any other action. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the
adjourned meeting.
SECTION 6. BENEFICIAL OWNERS. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and to
hold liable for calls and assessments a person registered on its books as
the owner of shares, and shall not be bound to recognize any equitable or
other claim to or interest in such share or shares on the part of any other
person, whether or not it shall have express or other notice thereof,
except as otherwise provided by law.
ARTICLE VI
NOTICES
SECTION 1. NOTICES. Whenever written notice is required by law, the
Certificate of Incorporation or these By-Laws, to be given to any director,
member of a committee or stockholder, such notice may be given by mail,
addressed to such director, member of a committee or stockholder, at his
address as it appears on the records of the Corporation, with postage
thereon prepaid, and such notice shall be deemed to be given at the time
when the same shall be deposited in the United States mail. Written notice
may also be given personally or by telegram, telex or cable.
SECTION 2. WAIVERS OF NOTICE. Whenever any notice is required by law,
the Certificate of Incorporation or these By-Laws, to be given to any
director, member of a committee or stockholder, a waiver thereof in
writing, signed by the person or persons entitled to said notice, whether
before or after the time stated therein, shall be deemed equivalent
thereto. Attendance of a stockholder at a meeting in person or by proxy
shall constitute a waiver of notice of such meeting, except when such
stockholder attends such meeting for the express purpose of objecting at
the beginning of such meeting, to the transaction of any business on the
grounds that notice of such meeting was inadequate or improperly given.
ARTICLE VII
GENERAL PROVISIONS
SECTION 1. DIVIDENDS. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation,
if any, may be declared by the Board of Directors at any regular or special
meeting, and may be paid in cash, in property, or in shares of the capital
stock. Before payment of any dividend, there may be set aside out of any
funds of the Corporation available for dividends such sum or sums as the
Board of Directors from time to time, in its absolute discretion, deems
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation,
or for any proper purpose, and the Board of Directors may modify or abolish
any such reserve.
SECTION 2. DISBURSEMENTS. All checks or demands for money and notes of
the Corporation shall be signed by such officer or officers or such other
person or persons as the Board of Directors may from time to time
designate.
SECTION 3. FISCAL YEAR. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors and may be changed from time
to time in the same manner.
SECTION 4. CORPORATE SEAL. The corporate seal shall have inscribed
thereon the name of the Corporation, the year of its organization and the
words "Corporate Seal, Delaware." The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE VIII
INDEMNIFICATION
SECTION 1. POWER TO INDEMNIFY IN ACTIONS, SUITS OR PROCEEDINGS OTHER
THAN THOSE BY OR IN THE RIGHT OF THE CORPORATION. Subject to Section 3 of
this Article VIII, the Corporation shall indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
the Corporation) by reason of the fact that he is or was a director or
officer of the Corporation, or is or was a director or officer of the
Corporation serving at the request of the Corporation as a director or
officer, employee or agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction,
or upon a plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
SECTION 2. POWER TO INDEMNIFY IN ACTIONS, SUITS OR PROCEEDINGS BY OR IN
THE RIGHT OF THE CORPORATION. Subject to Section 3 of this Article VIII,
the Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the Corporation to procure a judgment
in its favor by reason of the fact that he is or was a director or officer
of the Corporation, or is or was a director or officer of the Corporation
serving at the request of the Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with
the defense or settlement of such action or suit if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation; except that no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the Corporation unless and only to the extent
that the Court of Chancery of the State of Delaware or the court in which
such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for
such expenses which the Court of Chancery or such other court shall deem
proper.
SECTION 3. AUTHORIZATION OF INDEMNIFICATION. Any indemnification under
this Article VIII (unless ordered by a court) shall be made by the
Corporation only as authorized in the specific case upon a determination
that indemnification of the director or officer is proper in the
circumstances because he has met the applicable standard of conduct set
forth in Section 1 or Section 2 of this Article VIII, as the case may be.
Such determination shall be made (i) by the Board of Directors by a
majority vote of a quorum consisting of directors who were not parties to
such action, suit or proceeding, or (ii) if such a quorum is not
obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (iii) by the
stockholders. To the extent that a director or officer of the Corporation
has been successful on the merits or otherwise in defense of any action,
suit or proceeding described above, or in defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
therewith, without the necessity of authorization in the specific case.
SECTION 4. GOOD FAITH DEFINED. For purposes of any determination under
Section 3 of this Article VIII, a person shall be deemed to have acted in
good faith and in a manner he reasonably believed to be in or not opposed
to the best interests of the Corporation, or, with respect to any criminal
action or proceeding, to have had no reasonable cause to believe his
conduct was unlawful, if his action is based on the records or books of
account of the Corporation or another enterprise, or on information
supplied to him by the officers of the Corporation or another enterprise in
the course of their duties, or on the advice of legal counsel for the
Corporation or another enterprise or on information or records given or
reports made to the Corporation or another enterprise by an independent
certified public accountant or by an appraiser or other expert selected
with reasonable care by the Corporation or another enterprise. The term
"another enterprise" as used in this Section 4 shall mean any other
corporation or any partnership, joint venture, trust, employee benefit plan
or other enterprise of which such person is or was serving at the request
of the Corporation as a director, officer, employee or agent. The
provisions of this Section 4 shall not be deemed to be exclusive or to
limit in any way the circumstances in which a person may be deemed to have
met the applicable standard of conduct set forth in Section 1 or 2 of this
Article VIII, as the case may be.
SECTION 5. INDEMNIFICATION BY A COURT. Notwithstanding any contrary
determination in the specific case under Section 3 of this Article VIII,
and notwithstanding the absence of any determination thereunder, any
director or officer may apply to any court of competent jurisdiction in the
State of Delaware for indemnification to the extent otherwise permissible
under Section 1 and 2 of this Article VIII. The basis of such
indemnification by a court shall be a determination by such court that
indemnification of the director or officer is proper in the circumstances
because he has met the applicable standards of conduct set forth in Section
1 or 2 of this Article VIII, as the case may be. Neither a contrary
determination in the specific case under Section 3 of this Article VIII nor
the absence of any determination thereunder shall be a defense to such
application or create a presumption that the director or officer seeking
indemnification has not met any applicable standard of conduct. Notice of
any application for indemnification pursuant to this Section 5 shall be
given to the Corporation promptly upon the filing of such application. If
successful, in whole or in part, the director or officer seeking
indemnification shall also be entitled to be paid the expense of
prosecuting such application.
SECTION 6. EXPENSES PAYABLE IN ADVANCE. Expenses (including attorneys'
fees) incurred by a director or officer in defending or investigating a
threatened or pending action, suit or proceeding shall be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director
or officer to repay such amount if it shall ultimately be determined that
he is not entitled to be indemnified by the Corporation as authorized in
this Article VIII.
SECTION 7. NONEXCLUSIVITY OF INDEMNIFICATION AND ADVANCEMENT OF
EXPENSES. The indemnification and advancement of expenses provided by or
granted pursuant to this Article VIII shall not be deemed exclusive of any
other rights to which those seeking indemnification or advancement of
expenses may be entitled under any law, By-Law, agreement, contract, vote
of stockholders or disinterested directors or pursuant to the direction
(howsoever embodied) of any court of competent jurisdiction or otherwise,
both as to action in his official capacity and as to action in another
capacity while holding such office, it being the policy of the Corporation
that indemnification of the persons specified in Sections 1 and 2 of this
Article VIII shall be made to the fullest extent permitted by law. The
provisions of this Article VIII shall not be deemed to preclude the
indemnification of any person who is not specified in Section 1 or 2 of
this Article VIII but whom the Corporation has the power or obligation to
indemnify under the provisions of the General Corporation Law of the State
of Delaware, or otherwise.
SECTION 8. INSURANCE. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director or officer of
the Corporation, or is or was a director or officer of the Corporation
serving at the request of the Corporation as a director, officer, employee
or agent of an other corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise against any liability asserted
against him and incurred by him in any such capacity, or arising out of his
status as such, whether or not the Corporation would have the power or the
obligation to indemnify him against such liability under the provisions of
this Article VIII.
SECTION 9. CERTAIN DEFINITIONS. For purposes of this Article VIII,
references to "the Corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify
its directors or officers, so that any person who is or was a director or
officer of such constituent corporation, or is or was a director or officer
of such constituent corporation serving at the request of such constituent
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, shall stand in the same position under the provisions of
this Article VIII with respect to the resulting or surviving corporation as
he would have with respect to such constituent corporation if its separate
existence had continued. For purposes of this Article VIII, references to
"fines" shall include any excise taxes assessed on a person with respect to
an employee benefit plan; and references to "serving at the request of the
Corporation" shall include any service as a director, officer, employee or
agent of the Corporation which imposes duties on, or involves services by,
such director or officer with respect to an employee benefit plan, its
participants or beneficiaries; and a person who acted in good faith and in
a manner he reasonably believed to be in the interest of the participants
and beneficiaries of an employee benefit plan shall be deemed to have acted
in a manner "not opposed to the best interests of the Corporation" as
referred to in this Article VIII.
SECTION 10. SURVIVAL OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES.
The indemnification and advancement of expenses provided by, or granted
pursuant to, this Article VIII shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director or officer and shall inure to the benefit of the heirs, executors
and administrators of such a person.
SECTION 11. LIMITATION ON INDEMNIFICATION. Notwithstanding anything
contained in this Article VIII to the contrary, except for proceedings to
enforce rights to indemnification (which shall be governed by Section 5
hereof), the Corporation shall not be obligated to indemnify any director
or officer in connection with a proceeding (or part thereof) initiated by
such person unless such proceeding (or part thereof) was authorized or
consented to by the Board of Directors of the Corporation.
SECTION 12. INDEMNIFICATION OF EMPLOYEES AND AGENTS. The Corporation
may, to the extent authorized from time to time by the Board of Directors,
provide rights to indemnification and to the advancement of expenses to
employees and agents of the Corporation similar to those conferred in this
Article VIII to directors and officers of the Corporation.
ARTICLE IX
AMENDMENTS
SECTION 1. These By-Laws may be altered, amended or repealed, in whole
or in part, or new By-Laws may be adopted by the stockholders or by the
Board of Directors, provided, however, that notice of such alteration,
amendment, repeal or adoption of new By-Laws be contained in the notice of
such meeting of stockholders or Board of Directors as the case may be. All
such amendments must be approved by either the holders of a majority of the
outstanding capital stock entitled to vote thereon or by a majority of the
entire Board of Directors then in office.
SECTION 2. ENTIRE BOARD OF DIRECTORS. As used in this Article IX and
in these By-Laws generally, the term "entire Board of Directors" means the
total number of directors which the Corporation would have if there were no
vacancies.
Exhibit 11
AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
SCHEDULE OF COMPUTATION OF PRIMARY AND FULLY-DILUTED NET EARNINGS PER SHARE
(Amounts in thousands except per share amounts)
For the For the For the
Fiscal Year Fiscal Year Five Weeks
Ended Ended Ended
January 28, January 29, January 30,
1995 1994 1993
------------ ------------ ------------
Income (loss) before extraordinary item $18,543 $9,895 ($23,892)
Extraordinary gain (loss) (1,517) 928 -
------------ ------------ ------------
Primary and fully-diluted net income (loss) $17,026 $10,823 ($23,892)
============ ============ ============
For Primary Earnings per Share:
Weighted average number of common shares
outstanding during the period 20,127 20,049 20,000
Add: Common stock equivalent shares represented
by the Series B Warrants (a) (a) (b)
Common stock equivalent shares represented
by the Series C Warrants 1,372 1,134 (b)
Common stock equivalent shares represented
by management stock options granted during
the fiscal year ended January 28, 1995 (a) - -
------------ ------------ ------------
Weighted average number of common and common
equivalent shares used in the computation of primary
net earnings per share 21,499 21,183 20,000
============ ============ ============
Primary earnings per share:
Primary income (loss) per share before extraordinary item $0.86 $0.47 ($1.19)
Extraordinary gain (loss) (0.07) 0.04 -
------------ ------------ ------------
Primary net income (loss) per share $0.79 $0.51 ($1.19)
============ ============ ============
For Fully-Diluted Earnings per Share:
Weighted average number of common shares
outstanding during the period 20,127 20,049 20,000
Add: Common stock equivalent shares represented
by the Series B Warrants (a) (a) (b)
Common stock equivalent shares represented
by the Series C Warrants 1,372 1,165 (b)
Common stock equivalent shares represented
by management stock options granted during
the fiscal year ended January 28, 1995 (a) - -
------------ ------------ ------------
Weighted average number of common and common
equivalent shares used in the computation of fully-diluted
net earnings per share 21,499 21,214 20,000
============ ============ ============
Fully-diluted earnings per share:
Fully-diluted income (loss) per share before extraordinary item $0.86 $0.47 ($1.19)
Extraordinary gain (loss) (0.07) 0.04 -
------------ ------------ ------------
Fully-diluted net income (loss) per share $0.79 $0.51 ($1.19)
============ ============ ============
<FN>
(a) The Series B Warrants were not considered common stock equivalents because the exercise price
exceeded the market price of the common stock throughout the period.
(b) Common stock equivalents were not included because the effect would have been anti-dilutive.
NOTE:Earnings per share was not presented for the forty-eight weeks ended December 26, 1992.
EXHIBIT 22
AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
SUBSIDIARIES OF THE REGISTRANT
Name State of Incorporation
Ames Transportation Systems, Inc. Delaware
AMD, Inc. Delaware
Ames Realty II, Inc. Delaware
Zayre New England Corp. * Delaware
Zayre Central Corp.* Delaware
* Holds a 50% interest in Ames Stores, a partnership.