SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JULY 29, 1995
------------------------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
--------------- -----------------
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
incorporation or organization) Identification Number
2418 Main Street, Rocky Hill, Connecticut 06067
----------------------------------------- --------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (203) 257-2000
--------------
None
--------------------------------------------------------------------
Former name, former address and former fiscal year if changed since
last report
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
----- -----
APPLICABLE ONLY TO ISSUERS 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
Sections 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
----- -----
20,127,269 shares of Common Stock were outstanding on August 15, 1995.
Exhibit Index on page 14
Page 1 of 16 (including exhibits)
AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTER ENDED JULY 29, 1995
I N D E X
Page
Part I: Financial Information
Consolidated Condensed Statements of Operations 3
for the Thirteen and Twenty-six Weeks Ended
July 29, 1995 and July 30, 1994
Consolidated Condensed Balance Sheets at 4
July 29, 1995, January 28, 1995, and
July 30, 1994
Consolidated Condensed Statements of Cash Flows 5
for the Thirteen and Twenty-six Weeks Ended
July 29, 1995 and July 30, 1994
Notes to Consolidated Condensed Financial Statements 6
Management's Discussion and Analysis of Financial 9
Condition and Results of Operations
Part II: Other Information
Submission of Matters to a Vote of Security Holders 13
and Exhibits and Reports on Form 8-K
PART I
FINANCIAL INFORMATION
AMES DEPARTMENT STORES, INC. AND SUSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Amounts)
(Unaudited)
For the Thirteen For the Twenty-six
Weeks Ended Weeks Ended
----------------------- -------------------------
July 29, July 30, July 29, July 30,
1995 1994 1995 1994
----------- ----------- ------------ ------------
TOTAL SALES $530,601 $517,685 $991,049 $973,838
Less: Leased department sales 26,437 26,385 45,193 46,783
----------- ----------- ------------ ------------
NET SALES 504,164 491,300 945,856 927,055
COSTS, EXPENSES AND (INCOME):
Cost of merchandise sold 368,164 355,090 694,511 674,806
Selling, general and administrative expenses 137,217 141,599 270,258 280,451
Leased department and other operating income (7,708) (7,771) (13,962) (13,993)
Depreciation and amortization expense 2,143 1,082 4,084 2,021
Amortization of the excess of revalued net assets
over equity under fresh-start reporting (1,539) (1,538) (3,077) (3,076)
Interest and debt expense, net 6,415 6,802 11,536 12,759
Gain on disposition of properties (5,099) (1,733) (6,090) (3,535)
Nonrecurring gain - litigation settlement - (12,001) - (12,001)
----------- ----------- ------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM 4,571 9,770 (11,404) (10,377)
Income tax benefit (provision) (1,383) (3,161) 3,451 3,362
----------- ----------- ------------ ------------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM 3,188 6,609 (7,953) (7,015)
Extraordinary item - loss on early extinguishment
of debt (net of tax benefit of $727) - - - (1,517)
----------- ----------- ------------ ------------
NET INCOME (LOSS) $3,188 $6,609 ($7,953) ($8,532)
=========== =========== ============ ============
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES OUTSTANDING 21,531 21,541 20,127 20,127
=========== =========== ============ ============
INCOME (LOSS) PER SHARE BEFORE EXTRAORDINARY ITEM $0.15 $0.31 ($0.40) ($0.35)
EXTRAORDINARY LOSS PER SHARE - - - (0.07)
----------- ----------- ------------ ------------
NET INCOME (LOSS) PER SHARE $0.15 $0.31 ($0.40) ($0.42)
=========== =========== ============ ============
<FN>
(The accompanying notes are an integral part of these condensed financial statements.)
-3-
AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In Thousands)
(Unaudited)
July 29, January 28, July 30,
1995 1995 1994
ASSETS ------------------------------------
Current Assets:
Unrestricted cash and short-term investments $19,783 $28,402 $30,784
Restricted cash and short-term investments - 2,047 969
------------------------------------
Total cash and short-term investments 19,783 30,449 31,753
Receivables 23,388 16,807 23,410
Merchandise inventories 498,260 430,152 484,357
Prepaid expenses and other current assets 13,249 8,999 15,793
------------------------------------
Total current assets 554,680 486,407 555,313
------------------------------------
Fixed Assets 59,607 48,653 34,265
Less - Accumulated depreciation and amortization (11,828) (7,620) (4,218)
------------------------------------
Net fixed assets 47,779 41,033 30,047
------------------------------------
Other assets and deferred charges 4,834 5,948 7,310
------------------------------------
$607,293 $533,388 $592,670
====================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable:
Trade $126,210 $130,737 $99,630
Other 34,202 33,794 42,779
------------------------------------
Total accounts payable 160,412 164,531 142,409
Note payable - revolver 114,051 - 106,369
Current portion of long-term debt and capital lease obligations 19,485 19,156 18,116
Self-insurance reserves 43,850 46,413 50,204
Accrued expenses and other current liabilities 56,221 63,498 55,409
------------------------------------
Total current liabilities 394,019 293,598 372,507
Long-term debt 25,919 39,030 41,666
Capital lease obligations 34,799 38,065 40,086
Other long-term liabilities 8,074 6,242 10,873
Unfavorable lease liability 21,961 22,903 23,950
Excess of revalued net assets over equity under fresh-start reporting 45,557 48,633 51,710
Stockholders' Equity:
Priority common stock - - 23
Common stock 201 201 178
Additional paid-in capital 80,759 80,759 73,278
Retained earnings (accumulated deficit) (3,996) 3,957 (21,601)
------------------------------------
Total stockholders' equity 76,964 84,917 51,878
------------------------------------
$607,293 $533,388 $592,670
====================================
<FN>
(The accompanying notes are an integral part of these condensed financial statements.)
-4-
AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
For the Twenty-six
Weeks Ended
---------------------
July 29, July 30,
1995 1994
---------- ----------
Cash flows from operating activities:
Net income (loss) ($7,953) ($8,532)
Adjustments to reconcile net loss to net cash
used for operating activities:
Extraordinary loss on early extinguishment of debt - 1,517
Income tax benefit (3,451) (3,362)
Gain on disposition of properties (6,090) (3,535)
Depreciation and amortization of fixed assets 4,233 2,126
Amort. of the excess of revalued net assets over equity (3,077) (3,076)
Increase in accounts receivable (6,581) (5,218)
Increase in merchandise inventories (68,108) (42,159)
Increase (decrease) in accounts payable (4,119) 32,273
Decrease in accrued expenses and other current liabs. (8,328) (2,235)
Increase in other working capital and other, net 1,847 -
---------- ----------
Cash used for operations before restructuring items (101,627) (32,201)
Payments of restructuring costs (1,134) (2,916)
---------- ----------
Net cash used for operating activities (102,761) (35,117)
---------- ----------
Cash flows from investing activities:
Proceeds from the sale of properties 5,393 4,122
Purchases of fixed assets (10,312) (10,740)
Decrease in restricted cash and short-term investments 2,047 55,011
---------- ----------
Net cash used for investing activities (2,872) 48,393
---------- ----------
Cash flows from financing activities:
Payments of debt and capital lease obligations (16,275) (82,420)
Short-term borrowings under the revolver, net 114,051 91,009
Increase in deferred financing costs (762) (7,546)
---------- ----------
Net cash provided by financing activities 97,014 1,043
---------- ----------
Increase (decr.) in unrest. cash and short-term invest. (8,619) 14,319
Unrestricted cash and short-term invest., beg. of period 28,402 16,465
---------- ----------
Unrestricted cash and short-term invest., end of period $19,783 $30,784
========== ==========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest and debt fees not capitalized $8,413 $10,397
Income taxes 1 18
<FN>
(The accompanying notes are an integral part of these condensed financial
statements.)
- 5 -
AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation:
In the opinion of management, the accompanying unaudited
consolidated condensed financial statements of Ames Department
Stores, Inc. (a Delaware Corporation) and subsidiaries
(collectively "Ames" or the "Company") contain all adjustments
(consisting of normal recurring adjustments) necessary for a fair
presentation of such financial statements for the interim periods.
Due to the seasonality of the Company's operations, the results of
its operations for the interim period ended July 29, 1995 may not
be indicative of total results for the full year. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to
the rules and regulations promulgated by the Securities and
Exchange Commission. Certain prior year amounts have been
reclassified to conform to the presentation used for the current
year. The consolidated condensed balance sheet at January 28, 1995
was taken from audited financial statements previously filed with
the Commission in the Company's Form 10-K for the fiscal year ended
January 28, 1995 (the "Fiscal 1994 Form 10-K"). The accompanying
unaudited consolidated condensed financial statements should be
read in conjunction with the financial statements and notes thereto
included in the Company's Fiscal 1994 Form 10-K.
2. Earnings Per Common Share:
Earnings per share was determined using the weighted average
number of common and common equivalent shares outstanding. There
were no exercises of warrants during the twenty-six weeks ended
July 29, 1995 and July 29, 1994. Common stock equivalents and
fully diluted earnings per share were excluded for the periods with
net losses as their inclusion would have reduced the reported loss
per share. Fully diluted earnings per share was equal to primary
earnings per share for the quarters ended July 29, 1995 and July
30, 1994.
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
leasehold 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
July 30, 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 Company's plan of
reorganization. These amounts were also included in "Restricted
cash and short-term investments." The associated liability was
included in "Accrued expenses".
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. If the
first-in, first-out (FIFO) cost method had been used, inventories
would have increased by $.5 million at July 30, 1994. No LIFO
reserve was necessary at July 30, 1995 and January 28, 1995.
5. Debt:
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
"Credit Agreement"). The Credit Agreement 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. In addition, each year the Company must have
no outstanding borrowings (other than borrowings, not to exceed $20
million, related to certain expenditures) under the Credit
Agreement for a consecutive 30-day period between November 15th and
February 15th of the following year. The Company is in compliance
with the financial covenants through the quarter ended July 29,
1995.
As of July 29, 1995, borrowings of $114.1 million were
outstanding under the Credit Agreement. In addition, $27.7 and
$11.3 million of standby and trade letters of credit, respectively,
were outstanding under the Credit Agreement. The weighted average
interest rate on borrowings under the Credit Agreement was 10.0%
and 10.2% for the thirteen and twenty-six weeks ended July 29,
1995, respectively. The peak borrowing level through July 29, 1995
was $129.1 million.
In June, 1994, the Company utilized funds that were no longer
restricted for the collateralization of letters of credit under the
Letter of Credit Facility (as defined below) and funds from the
Credit Agreement, to prepay its then outstanding Series A, B and D
Notes, a $1.2 million term note, and the outstanding borrowings
under the Prior Credit Agreement (as defined below). As a result
of the refinancing and associated commitment to prepay the above
debt, a non-cash extraordinary charge of approximately $1.5
million, net of tax benefit of approximately $.7 million, was
recorded in last year's first quarter, primarily for the write-off
of deferred financing costs and debt discounts related to the debt
to be prepaid.
The amount of borrowing under the Credit Agreement generally
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 ($18.7 million as
of July 29, 1995). In addition, the Credit Agreement provides for
potential establishment of other reserves contingent upon the
Company's financial performance. In addition, each Agent 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. Reference can be made to the
Fiscal 1994 Form 10-K for further descriptions of the Credit
Agreement and the obligations summarized below, and for
descriptions of the Company's other obligations not discussed
herein.
Prior Credit Agreement
Citibank, N.A., was the agent in a post-Chapter 11 credit
agreement (the "Prior Credit Agreement") which combined a $175.9
million revolving credit facility and a $1.2 million term note.
The Prior Credit Agreement was between the Company, Citibank, and a
syndicate consisting of other banks and financial institutions.
The Prior Credit Agreement was terminated when the Credit Agreement
became effective.
Letter of Credit Facility
The Company had a $120 million letter of credit facility with
Republic National Bank of New York (the "Letter of Credit
Facility") that had sublimits of $60 million for trade letters of
credit and $60 million for standby letters of credit. Before the
Credit Agreement became effective and the Letter of Credit Facility
was terminated, all letters of credit outstanding under the Letter
of Credit Facility had to be cash collateralized at 105% from the
date of issuance.
Deferred Cash Distributions
The Company's plan of reorganization, which was consummated on
December 30, 1992, provided that $46.5 million of cash
distributions in respect to several classes of claims would be paid
subsequent to the consummation date. On January 31, 1993, January
31, 1994, and January 31, 1995, $15.0, $8.0 and $8.0 million,
respectively, of these deferred cash distributions were paid as
scheduled. The remaining unsecured amounts are due as follows,
with interest that began accruing on February 1, 1994 at 5% per
annum: $8.0 million due on January 31, 1996; and $7.5 million due
on January 31, 1997.
6. Income Taxes:
The Company's estimated annual effective income tax rate for
each year was applied to the loss incurred before income taxes and
extraordinary item for the twenty-six weeks ended July 29, 1995 and
July 30, 1994 to compute non-cash income tax benefits of $3.5 and
$3.4 million, respectively. The same method was used to compute
income tax provisions of $1.4 and $3.2 million for the second
quarters of 1995 and 1994, respectively. The Company currently
expects that, as a result of the seasonality of the Company's
business, this year's income tax benefit will be offset by non-cash
income tax expense in the remaining interim periods. The income
tax benefits are included in other current assets in the balance
sheets as of July 29, 1995 and July 30, 1994.
7. Litigation:
Reference can be made to the Company's Fiscal 1994 Form 10-K
(Note 12 to the Consolidated Financial Statements) for various
litigation involving the Company, for which there were no material
changes since the filing date of the Fiscal 1994 Form 10-K.
AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
FISCAL QUARTER ENDED JULY 29, 1995
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
----------------------
The following table sets forth the number of stores in operation as of the dates indicated:
Number of Stores in Operation
---------------------------------------------
July 29, January 28, July 30,
1995 1995 1994
--------- ----------- -----------
305 306 305
The following discussion and analysis is based on the historical results of operations for the
thirteen and twenty-six weeks ended July 29, 1995 and July 30, 1994. One store was closed during
this year's first two quarters; three stores were closed during last year's first two quarters.
During this year's first two quarters, the Company announced the opening of two new stores in
September, 1995: Dudley, MA and Mt. Olive, NJ.
The following table sets forth the historical operating results expressed as a percentage of net
sales for the periods indicated:
Thirteen Twenty-six
Weeks Ended Weeks Ended
------------------ -------------------
Jul. 29, Jul. 30, Jul. 29, Jul. 30,
1995 1994 1995 1994
------- -------- ------- ---------
Net sales 100.0 % 100.0 % 100.0 % 100.0 %
Cost of merchandise sold 73.0 72.3 73.4 72.8
------- ------- ------- --------
Gross margin 27.0 27.7 26.6 27.2
Expenses and (income):
Selling, general and administrative expenses 27.2 28.8 28.6 30.3
Leased department and other operating income (1.5) (1.6) (1.5) (1.5)
Depreciation and amortization expense 0.4 0.2 0.4 0.2
Amortization of the excess of revalued net
assets over equity (0.3) (0.3) (0.3) (0.3)
Interest and debt expense, net 1.3 1.4 1.2 1.4
Gain on disposition of properties (1.0) (0.4) (0.6) (0.4)
Nonrecurring gain - litgation settlement - (2.4) - (1.3)
------- ------- ------- --------
Income (loss) before income taxes and
extraordinary item 0.9 2.0 (1.2) (1.2)
Income tax benefit (provision) (0.3) (0.6) 0.4 0.4
------- ------- ------- --------
Income (loss) before extraordinary item 0.6 1.4 (0.8) (0.8)
Extraordinary loss - - - (0.2)
------- ------- ------- --------
Net income (loss) 0.6 % 1.4 % (0.8)% (1.0)%
======= ======= ======= ========
- 9 -
Total sales (which include leased department sales) for the
thirteen weeks ended July 29, 1995 increased $12.9 million or 2.5%
from the prior-year's second quarter. Net sales for the same
period increased $12.9 million or 2.6% from the prior year. These
increases were due to an increase of 2.8% in comparable store sales
on a 304-store base. The increase in comparable store sales was
primarily due to the sales generated by the "55 Gold" senior
citizen discount program, partially offset by a planned deemphasis
in jewelry and the effect of additional new competition.
Total sales for the twenty-six weeks ended July 29, 1995
increased $17.2 million or 1.8% from the same prior year period.
Net sales for the same period increased $18.8 million or 2.0% from
the prior year. These increases were due to an increase of 2.4% in
comparable store sales on a 304-store base. The increase in
comparable store sales was primarily due to the same factors as
those cited above for the second quarter as well as the favorable
comparison to the prior year when merchandise shortages were
experienced in the first two months of the fiscal year due to the
temporary closure of the Leesport, PA distribution center.
Gross margin for the second quarter declined $.2 million, or
.7% as a percentage of net sales. Gross margin for the twenty-six
weeks declined $.9 million, or .6% as a percentage of net sales.
The second quarter and year-to-date gross margin rate was
negatively impacted by a lower markup on sales, reflecting a
strategy of lowering prices, and the impact of the discounts
related to the "55 Gold" senior citizen discount program. These
factors were partially offset in both periods by lower markdowns.
Selling, general and administrative expenses declined $4.4 and
$10.2 million, or 1.6% and 1.7% as a percentage of net sales, in
the thirteen and twenty-six weeks ended July 29, 1995,
respectively, compared to the same prior-year periods. Reductions
in store non-payroll, home office, and advertising expenses were
partially offset by an increase in store payroll.
Depreciation and amortization expense increased by $1.1 and
$2.1 million, or .2% of net sales, in the thirteen and twenty-six
weeks ended July 29, 1995, respectively, compared to the same
prior-year period. The adoption of fresh-start reporting as of
December 26, 1992 resulted in the write-off of all of the Company's
non-current assets at that date, and therefore depreciation and
amortization expense reflects capital additions after that date.
The amortization of the "excess of revalued net assets over
equity under fresh-start reporting" remained the same in the
current periods presented as compared to the prior year. The
Company is amortizing this amount over a ten-year period.
Interest and debt expense, net of interest income, declined by
$.4 and $1.2 million, or .1% and .2% of net sales, in the thirteen
and twenty-six weeks ended July 29, 1995, respectively. The
Company's average outstanding debt under its revolving credit
facilities increased in both periods presented: from $107.4 to
$115.9 million during the thirteen week period and from $83.0 to
$86.7 million during the twenty-six week period. In June, 1994,
the Company prepaid approximately $69 million of debt utilizing a
portion of the Credit Agreement (see below, under "Liquidity and
Capital Resources") and the funds that were no longer required to
be restricted for the collateralization of letters of credit. For
both periods presented, the favorable impact on interest expense
from this prepayment was partially offset by the reduction of
interest income resulting from the reduced restricted cash balance,
the amortization of the financing costs associated with the Credit
Agreement and an increase in interest rates.
The Company recognized $6.1 and $3.5 million of net property
gains during the twenty-six weeks ended July 29, 1995 and July 30,
1994, respectively. In this year's first quarter, the Company
completed the assignment of a lease for a warehouse which was not
part of Ames' operations and recognized a gain of $1.0 million.
During the second quarter, the Company in separate transactions
sold two distribution centers - one of which was closed in June,
1995; the other of which had been closed since March, 1993 - and
recognized gains totalling $5.1 million. In the first quarter of
1994, the Company recognized a gain of $1.1 million on the sale of
a store lease, which was an operating property until closed in
February, 1994, and also recognized a gain of $.7 million on the
settlement of the inventory portion of a property insurance claim.
In the second quarter of 1994, the Company recorded a property gain
of $1.7 million, primarily related to the sale of a shopping center
property. The Company maintained ownership of its store within the
shopping center.
The Company's estimated annual effective income tax rate for
each year was applied to the loss before income taxes and
extraordinary item for the twenty-six weeks ended July 29, 1995 and
July 30, 1994 to compute non-cash income tax benefits of $3.5 and
$3.4 million, respectively. The same method was used to compute
income tax provisions of $1.4 and $3.2 million for second quarters
of 1995 and 1994, respectively. The Company currently expects
that, as a result of the seasonality of the Company's business,
this year's income tax benefit will be offset by non-cash income
tax expense in the remaining interim periods.
As a result of the debt refinancing and associated commitment
to prepay certain debt, the Company recorded a non-cash
extraordinary charge of $1.5 million, net of tax benefit of $.7
million, in the first quarter of 1994. The charge was primarily
for the write-off of deferred financing costs and debt discounts
related to the debt to be prepaid.
Compared with the projections for the second quarter of 1995
contained in the Form 8-K filed on February 16, 1995 (referred to
herein as the "Plan"), sales were $1.3 million higher than Plan and
EBITDA (earnings (loss) before net interest expense, income taxes,
LIFO expense, extraordinary or non-recurring items, depreciation
and amortization and other non-cash charges) was $5.7 million
higher than Plan. Year-to-date sales were $4.1 million less than
Plan; however, EBITDA was $5.5 million better than Plan. The year-
to-date EBITDA results reflected lower-than-planned expenses and
higher-than-planned property gains (a portion of which is
attributable to the timing of the sale of a property), partially
offset by lower-than-planned gross margin.
Liquidity and Capital Resources
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
"Credit Agreement"). The Company was in compliance with the
financial covenants of the Credit Agreement through the quarter
ended July 29, 1995.
Reference can be made to Note 5 of this Quarterly Report and
the latest Form 10-K for further descriptions of the Credit
Agreement and the Company's other obligations.
Merchandise inventories, valued on a LIFO basis, increased
$13.9 million from July 30, 1994 to July 29, 1995 due to a build-up
of inventories in apparel categories, partially offset by a planned
reduction in jewelry, crafts, and the health and beauty care
categories. The increase in inventories of $68.1 million from
January 28, 1995 to July 29, 1995 was principally the result of a
normal seasonal build-up of inventories.
Trade accounts payable increased $26.6 million from July 30,
1994 to July 29, 1995 due primarily to improved trade payment
terms. The decrease in trade accounts payable of $4.5 million from
January 28, 1995 to July 29, 1995 was principally a reflection of
the seasonal dating in effect as of January 28, 1995.
Capital expenditures for the twenty-six weeks ended July 29,
1995 totalled $10.3 million and for the balance of the year are
estimated to be approximately $18.0 million. The Company expects
that capital expenditures for the remainder of the year will be
principally for remodeling stores (both small-scale and complete
remodels), two new stores and management information systems. The
Company adjusts its plans for making such expenditures depending on
the amount of internally generated funds.
The net operating loss carryovers remaining after fiscal year
1995, subject to any limitations pursuant to Internal Revenue Code
Sec. 382, should offset income on which taxes would otherwise be
payable in future years.
The Company believes that available cash and expected cash
flows from the current fiscal year's operations and beyond, and the
availability of its financing facilities, will enable the Company
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
(as defined above) covenant in the Credit Agreement is dependent
upon the Company's attainment of sales, gross profit, and expense
levels that are reasonably consistent with its Plan.
Part II
OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Stockholders of the Company was
held Wednesday, May 24, 1995, to consider and act upon the
following matters: (a) the election of seven (7) directors for
a term of one year or until their successor(s) have been
elected and qualified; (b) the ratification and approval of
the appointment of Arthur Andersen LLP as the Company's
independent certified public accountants and auditors for the
fiscal year ending January 27, 1996; (c) the approval of the
Ames Department Stores, Inc. 1995 Long Term Incentive Plan, as
described in the Proxy Statement dated April 10, 1995 (the
"Proxy Statement");
(d) the approval of the Ames Department Stores, Inc. 1994 Non-
Employee Directors Stock Option Plan, as described in the
Proxy Statement; and (e) the transaction of such other
business as may properly come before the meeting or any
adjournments thereof.
Each nominee for director was elected as follows:
For Withheld
---------- --------
Francis X. Basile 16,248,351 218,032
Paul Buxbaum 16,246,874 219,509
Alan Cohen 16,241,695 224,688
Joseph R. Ettore 16,244,200 222,183
Richard M. Felner 16,173,284 293,099
Sidney S. Pearlman 16,164,084 302,299
Laurie M. Shahon 16,172,997 293,386
The appointment of Arthur Andersen LLP was approved by a
vote of 16,250,954 shares in favor with 188,804 against and
26,625 shares abstaining. The Company's 1995 Long Term
Incentive Plan was approved by a vote of 14,810,639 shares in
favor with 1,340,399 shares against and 315,345 shares
abstaining. The Company's 1994 Non-Employee Director Stock
Option Plan was approved by a vote of 13,697,298 shares in
favor with 1,911,088 shares against, 348,532 shares abstaining
and 509,465 broker non-votes.
Item 6. Exhibits and Reports on Form 8-K
(a) Index to Exhibits
Exhibit No. Exhibit Page No.
----------- ------- --------
11 Schedule of computation of primary 16
and fully diluted earnings per share
(b) Reports on Form 8-K:
-------------------
The following reports on Form 8-K were filed
with the Securities and Exchange Commission
during the second quarter:
Date of Report Date of Filing Item # Description
-------------- -------------- -------- -----------
May 17, 1995 May 17, 1995 5 Disclosure of the
fiscal 1995 April
results.
June 9, 1995 June 9, 1995 5 Disclosure of the
fiscal 1995 May
results.
July 13, 1995 July 13, 1995 5 Disclosure of the
fiscal 1995 June
results.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934
the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
AMES DEPARTMENT STORES, INC.
(Registrant)
Dated: August 24, 1995 /s/ Joseph R. Ettore
-------------------------------
Joseph R. Ettore
President, Director, and
Chief Executive Officer
Dated: August 24, 1995 /s/ John F. Burtelow
-------------------------------
John F. Burtelow
Executive Vice President and
Chief Financial Officer
Dated: August 24, 1995 /s/ William C. Najdecki
-------------------------------
William C. Najdecki
Senior Vice President,
Finance
Exhibit 11
AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
SCHEDULE OF COMPUTATION OF PRIMARY AND FULLY DILUTED EARNINGS
PER SHARE
(Amounts in thousands except per share amounts)
For the Thirteen For the Twenty-six
Weeks Ended Weeks Ended
-------------------- --------------------
July 29, July 30, July 29, July 30,
1995 1994 1995 1994
--------- --------- --------- ---------
Income (loss) before extraordinary item $3,188 $6,609 ($7,953) ($7,015)
Extraordinary loss - - - (1,517)
--------- --------- --------- ---------
Primary and fully diluted net income (loss) $3,188 $6,609 ($7,953) ($8,532)
========= ========= ========= =========
For Primary Earnings Per Share
------------------------------
Weighted average number of common shares
outstanding during the period 20,127 20,127 20,127 20,127
Add: Common stock equivalent shares represented by
- the Series B Warrants (a) (a) (b) (b)
- the Series C Warrants 1,108 1,414 (b) (b)
- management stock options 1 (a) (b) (b)
- non-employee director stock options (a) (c) (b) (c)
- senior management long term
incentive plan 295 (c) (b) (c)
--------- --------- --------- ---------
Weighted average number of common and common
equivalent shares used in the calculation
of primary earnings per share 21,531 21,541 20,127 20,127
========= ========= ========= =========
Primary earnings per share:
Primary income (loss) per share before
extraordinary item $0.15 $0.31 ($0.40) ($0.35)
Extraordinary loss - - - (0.07)
--------- --------- --------- ---------
Primary net income (loss) per share $0.15 $0.31 ($0.40) ($0.42)
========= ========= ========= =========
For Fully Diluted Earnings Per Share
---------------------------------------
Weighted average number of common shares
outstanding during the period 20,127 20,127 20,127 20,127
Add: Common stock equivalent shares represented by
- the Series B Warrants (a) (a) (b) (b)
- the Series C Warrants 1,170 1,414 (b) (b)
- management stock options 5 (a) (b) (b)
- non-employee director stock options (a) (c) (b) (c)
- senior management long term
incentive plan 295 (c) (b) (c)
--------- --------- --------- ---------
Weighted average number of common and common
equivalent shares used in the calculation
of fully diluted earnings per share 21,597 21,541 20,127 20,127
========= ========= ========= =========
Fully diluted earnings per share:
Fully diluted income (loss) per share before
extraordinary item $0.15 $0.31 ($0.40) ($0.35)
Extraordinary loss - - - (0.07)
--------- --------- --------- ---------
Fully diluted net income (loss) per share $0.15 $0.31 ($0.40) ($0.42)
========= ========= ========= =========
<FN>
(a) These options/warrants were not considered common stock equivalents because the
exercise price exceeded the market price of the common stock for all or substantially
all of the period.
(b) Common stock equivalents have not been included because the effect would be
anti-dilutive.
(c) The 1994 Non-Employee Directors Stock Option Plan and the 1995 Long Term Incentive
Plan were effective May 24, 1995.
- 16 -