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 OCTOBER 28, 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 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
--------------------------
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 November 15, 1995.
Exhibit Index on page 13
Page 1 of 15 (including exhibits)
AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTER ENDED October 28, 1995
I N D E X
Page
Part I: Financial Information
Consolidated Condensed Statements of Operations 3
for the Thirteen and Thirty-nine Weeks Ended
October 28, 1995 and October 29, 1994
Consolidated Condensed Balance Sheets at 4
October 28, 1995, January 28, 1995, and
October 29, 1994
Consolidated Condensed Statements of Cash Flows 5
for the Thirty-nine Weeks Ended
October 28, 1995 and October 29, 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 Thirty-nine
Weeks Ended Weeks Ended
----------------------- -------------------------
October 28, October 29, October 28, October 29,
1995 1994 1995 1994
----------- ----------- ------------ ------------
TOTAL SALES $528,803 $537,093 $1,519,852 $1,510,931
Less: Leased department sales 22,871 25,825 68,064 72,608
----------- ----------- ------------ ------------
NET SALES 505,932 511,268 1,451,788 1,438,323
COSTS, EXPENSES AND (INCOME):
Cost of merchandise sold 371,795 374,092 1,066,306 1,048,898
Selling, general and administrative expenses 140,504 143,488 410,762 423,939
Leased department and other operating income (7,182) (8,204) (21,144) (22,197)
Depreciation and amortization expense 2,343 1,590 6,427 3,611
Amortization of the excess of revalued net assets
over equity under fresh-start reporting (1,538) (1,538) (4,615) (4,614)
Interest and debt expense, net 7,014 6,887 18,550 19,646
Gain on disposition of properties - - (6,090) (3,535)
Nonrecurring gain - litigation settlement - - - (12,001)
Distribution center closing costs - 2,500 - 2,500
----------- ----------- ------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM (7,004) (7,547) (18,408) (17,924)
Income tax benefit (provision) 2,120 2,445 5,571 5,807
----------- ----------- ------------ ------------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM (4,884) (5,102) (12,837) (12,117)
Extraordinary item - loss on early extinguishment
of debt (net of tax benefit of $727) - - - (1,517)
----------- ----------- ------------ ------------
NET INCOME (LOSS) ($4,884) ($5,102) ($12,837) ($13,634)
=========== =========== ============ ============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 20,127 20,127 20,127 20,127
=========== =========== ============ ============
INCOME (LOSS) PER SHARE BEFORE EXTRAORDINARY ITEM ($0.24) ($0.25) ($0.64) ($0.60)
EXTRAORDINARY GAIN (LOSS) PER SHARE - - - (0.08)
----------- ----------- ------------ ------------
NET INCOME (LOSS) PER SHARE ($0.24) ($0.25) ($0.64) ($0.68)
=========== =========== ============ ============
<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)
October 28, January 28, October 29,
1995 1995 1994
ASSETS ------------ ------------ ------------
Current Assets:
Unrestricted cash and short-term investments $19,998 $28,402 $26,910
Restricted cash and short-term investments - 2,047 722
------------ ------------ ------------
Total cash and short-term investments 19,998 30,449 27,632
Receivables 39,293 16,807 45,843
Merchandise inventories 600,230 430,152 596,926
Prepaid expenses and other current assets 19,017 8,999 17,833
------------ ------------ ------------
Total current assets 678,538 486,407 688,234
------------ ------------ ------------
Fixed Assets 69,316 48,653 45,332
Less - Accumulated depreciation and amortization (14,239) (7,620) (5,873)
------------ ------------ ------------
Net fixed assets 55,077 41,033 39,459
------------ ------------ ------------
Other assets and deferred charges 4,176 5,948 6,633
------------ ------------ ------------
$737,791 $533,388 $734,326
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable:
Trade $203,134 $130,737 $200,480
Other 38,119 33,794 39,728
------------ ------------ ------------
Total accounts payable 241,253 164,531 240,208
Note payable - revolver 175,747 - 153,737
Current portion of long-term debt
and capital lease obligations 19,049 19,156 18,831
Self-insurance reserves 43,808 46,413 49,908
Accrued expenses and other current liabilities 53,012 63,498 60,187
------------ ------------ ------------
Total current liabilities 532,869 293,598 522,871
------------ ------------ ------------
Long-term debt 25,445 39,030 41,013
Capital lease obligations 33,967 38,065 39,292
Other long-term liabilities 7,922 6,242 10,776
Unfavorable lease liability 21,491 22,903 23,426
Excess of revalued net assets over equity
under fresh-start reporting 44,018 48,633 50,172
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) (8,881) 3,957 (26,703)
------------ ------------ ------------
Total stockholders' equity 72,079 84,917 46,776
------------ ------------ ------------
$737,791 $533,388 $734,326
============ ============ ============
<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 Thirty-nine
Weeks Ended
-----------------------
October 28, October 29,
1995 1994
----------- -----------
Cash flows from operating activities:
Net income (loss) ($12,837) ($13,634)
Adjustments to reconcile net loss to net cash
used for operating activities:
Extraordinary loss on early extinguishment of debt - 1,517
Income tax benefit (5,571) (5,807)
Distribution center closing costs - 2,500
Gain on disposition of properties (6,090) (3,535)
Depreciation and amortization of fixed assets 6,655 3,781
Amort. of the excess of revalued net assets over equity (4,615) (4,614)
Increase in accounts receivable (22,486) (27,651)
Increase in merchandise inventories (170,078) (154,728)
Increase (decrease) in accounts payable 76,722 130,072
Decrease in accrued expenses and other current liabs. (11,496) (75)
Increase in other working capital and other, net (1,049) 1,482
----------- -----------
Cash used for operations before restructuring items (150,845) (70,692)
Payments of restructuring costs (1,316) (4,399)
----------- -----------
Net cash used for operating activities (152,161) (75,091)
----------- -----------
Cash flows from investing activities:
Proceeds from the sale of properties 5,493 5,559
Purchases of fixed assets (20,103) (21,148)
Decrease in restricted cash and short-term investments 2,047 55,258
----------- -----------
Net cash used for investing activities (12,563) 39,669
----------- -----------
Cash flows from financing activities:
Payments of debt and capital lease obligations (18,385) (84,741)
Short-term borrowings under the revolver, net 175,747 138,377
Increase in deferred financing costs (1,042) (7,769)
----------- -----------
Net cash provided by financing activities 156,320 45,867
----------- -----------
Increase (decr.) in unrest. cash and short-term invest. (8,404) 10,445
Unrestricted cash and short-term invest., beg. of period 28,402 16,465
----------- -----------
Unrestricted cash and short-term invest., end of period $19,998 $26,910
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest and debt fees not capitalized $12,775 $14,731
Income taxes 1 7
<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 October 28, 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 shares outstanding. There were no exercises of
warrants during the thirty-nine weeks ended October 28, 1995 and
October 29, 1994. Common stock equivalents and fully diluted
earnings per share were excluded as their inclusion would have
reduced the reported loss per share.
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
October 29, 1994, Ames restricted approximately $0.2 and $0.7
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 $.7 million at October 29, 1994. No LIFO
reserve was necessary at October 28, 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 October 28,
1995.
As of October 28, 1995, borrowings of $175.7 million were
outstanding under the Credit Agreement. In addition, $27.7 and
$2.7 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 9.9% and
10.1% for the thirteen and thirty-nine weeks ended October 28,
1995, respectively. The peak borrowing level through October 28,
1995 was $175.7 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 ($17.6 million as
of October 28, 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 thirty-nine weeks ended October 28, 1995
and October 29, 1994 to compute non-cash income tax benefits of
$5.6 and $5.8 million, respectively. The same method was used to
compute income tax benefits of $2.1 and $2.4 million for the third
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 period. The income tax
benefits are included in other current assets in the balance sheets
as of October 28, 1995 and October 29, 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 OCTOBER 28, 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
---------------------------------------------
October 28, January 28, October 29,
1995 1995 1994
--------- ----------- -----------
307 306 305
The following discussion and analysis is based on the historical results of operations for the
thirteen and thirty-nine weeks ended October 28, 1995 and Ocober 29, 1994. In September, 1995, the
Company opened two new stores: Dudley, MA and Mt. Olive, NJ. During this year's first three
quarters, one store was closed; during last year's first three quarters, three stores were closed.
The following table sets forth the historical operating results expressed as a percentage of net
sales for the periods indicated:
Thirteen Thirty-nine
Weeks Ended Weeks Ended
------------------ -------------------
Oct. 28, Oct. 29, Oct. 28, Oct. 29,
1995 1994 1995 1994
------- -------- ------- ---------
Net sales 100.0 % 100.0 % 100.0 % 100.0 %
Cost of merchandise sold 73.5 73.2 73.4 72.9
------- ------- ------- --------
Gross margin 26.5 26.8 26.6 27.1
Expenses and (income):
Selling, general and administrative expenses 27.8 28.1 28.3 29.5
Leased department and other operating income (1.4) (1.6) (1.5) (1.5)
Depreciation and amortization expense 0.5 0.3 0.5 0.3
Amortization of the excess of revalued net
assets over equity (0.3) (0.3) (0.3) (0.3)
Interest and debt expense, net 1.4 1.4 1.3 1.4
Gain on disposition of properties - - (0.4) (0.3)
Nonrecurring gain - litigation settlement - - - (0.8)
Distribution center closing costs - 0.5 - 0.2
------- ------- ------- --------
Income (loss) before income taxes and
extraordinary item (1.4) (1.5) (1.4) (1.4)
Income tax benefit (provision) 0.4 0.5 0.4 0.4
------- ------- ------- --------
Income (loss) before extraordinary item (1.0) (1.0) (1.0) (1.0)
Extraordinary gain (loss) - - - (0.1)
------- ------- ------- --------
Net income (loss) (1.0)% (1.0)% (1.0)% (1.1)%
======= ======= ======= ========
- 9 -
Total sales (which include leased department sales) for the
thirteen weeks ended October 28, 1995 decreased $8.3 million or
1.5% from the prior-year's third quarter. Net sales for the same
period decreased $5.3 million or 1.0% from the prior year. These
declines were due to a decrease of 1.6% in comparable store sales
on a 304-store base, partially offset by the impact of two
additional stores during the quarter. The decrease in comparable
store sales was primarily due to additional new competition, sales
declines in childrens apparel, domestics and toys as well as a
planned deemphasis in jewelry.
Total sales for the thirty-nine weeks ended October 28, 1995
increased $8.9 million or 0.6% from the same prior year period.
Net sales for the same period increased $13.5 million or 0.9% from
the prior year. These increases were due to an increase of 1.0% in
comparable store sales on a 304-store base. The increase in
comparable store sales was primarily due to sales generated by the
"55 Gold" senior citizen discount program, the favorable comparison
to the prior year when merchandise distribution difficulties were
experienced in the first two months due to the temporary closure of
the Leesport, PA distribution center and increases in apparel and
home entertainment, partially offset by additional new competition
and a planned deemphasis in jewelry.
Gross margin for the third quarter declined $3.0 million, or
.3% as a percentage of net sales. Gross margin for the thirty-nine
weeks declined $3.9 million, or .5% as a percentage of net sales.
The third quarter and year-to-date gross margin rate was negatively
impacted by a planned 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 $3.0 and
$13.2 million, or .3% and 1.2% as a percentage of net sales, in the
thirteen and thirty-nine weeks ended October 28, 1995,
respectively, compared to the same prior-year periods. For the
quarter, reductions in store payroll, home office, and advertising
expenses were partially offset by an increase in store non-payroll
expense. For the year-to-date period, reductions in store non-
payroll, home office and advertising expenses were partially offset
by an increase in store payroll expense.
Depreciation and amortization expense increased by $.8 and $2.8
million, or .2% of net sales, in the thirteen and thirty-nine weeks
ended October 28, 1995, respectively, compared to the same prior-
year periods. 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, increased by
$.1 million (flat as a percentage of net sales) in the thirteen
week period ended October 25, 1995, but declined by $1.1 million,
or .1% of net sales, for thirty-nine weeks ended October 28, 1995.
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. The Company's average outstanding debt under
its revolving credit facilities increased in both periods
presented: from $137.0 to $145.4 million during the thirteen week
period and from $101.0 to $106.3 million during the thirty-nine
week period. For the quarter, the increase in short-term interest
expense, reflecting the higher average short-term borrowings and an
increase in interest rates, and the reduction of interest income
resulting from the reduced restricted cash balance was nearly
offset by the favorable impact on interest expense from the June,
1994 prepayment. For the year-to-date, the favorable impact of the
June, 1994 prepayment was greater than the same unfavorable factors
cited for the quarter.
The Company recognized $6.1 and $3.5 million of net property
gains during the thirty-nine weeks ended October 28, 1995 and
October 29, 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 totaling $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, 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 thirty-nine weeks ended October 28, 1995
and October 29, 1994 to compute non-cash income tax benefits of
$5.6 and $5.8 million, 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 period.
Compared with the projections for the third quarter of 1995
contained in the Form 8-K filed on August 18, 1995 (referred to
herein as the "Plan"), sales 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) were $21.0 million and $9.9 million lower than Plan,
respectively. Year-to-date sales and EBITDA were $25.2 million and
$5.5 million lower than Plan, respectively. The year-to-date
EBITDA results reflected lower-than-planned gross margin, partially
offset by lower-than-planned expenses.
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 October 28, 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 $3.3
million from October 29, 1994 to October 28, 1995. The increase
in inventories of $170.1 million from January 28, 1995 to October
28, 1995 was principally the result of a normal seasonal build-up
of inventories.
Trade accounts payable increased $2.7 million from October 29,
1994 to October 28, 1995. The increase in trade accounts payable
of $72.4 million from January 28, 1995 to October 28, 1995 was
principally the result of the seasonal build-up of inventories.
Capital expenditures for the thirty-nine weeks ended October
28, 1995 totaled $20.1 million and for the balance of the year are
estimated to be approximately $6.0 million. The Company expects
that capital expenditures for the remainder of the year will be
principally for the completion of the remodeling of certain 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 earlier) 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
There were no matters submitted to a vote of security
holders during the third quarter ended October 28, 1995,
through the solicitation of proxies or otherwise.
Item 6. Exhibits and Reports on Form 8-K
(a) Index to Exhibits
Exhibit No. Exhibit Page No.
----------- ------- --------
11 Schedule of computation of primary 15
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 third quarter:
Date of Report Date of Filing Item # Description
-------------- -------------- ------ -----------
August 16, 1995 August 16, 1995 5 Disclosure of
the fiscal 1995
July results.
August 18, 1995 August 18, 1995 5 Disclosure of
the revised
fiscal 1995
summary
financial plan.
September 8, 1995 September 8, 1995 5 Disclosure of
the fiscal 1995
August results.
October 13, 1995 October 13, 1995 5 Disclosure of
the fiscal 1995
September 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: November 27, 1995 /s/ Joseph R. Ettore
--------------------------------
Joseph R. Ettore
President, Director, and
Chief Executive Officer
Dated: November 27, 1995 /s/ John F. Burtelow
--------------------------------
John F. Burtelow
Executive Vice President and
Chief Financial Officer
Dated: November 27, 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 EARNINGS PER SHARE
(Amounts in thousands except per share amounts)
For the Thirteen For the Thirty-nine
Weeks Ended Weeks Ended
------------------------ ------------------------
October 28, October 29, October 28, October 29,
1995 1994 1995 1994
----------- ----------- ----------- -----------
Income (loss) before extraordinary item ($4,884) ($5,102) ($12,837) ($12,117)
Extraordinary gain (loss) - - - (1,517)
----------- ----------- ----------- -----------
Primary net income (loss) ($4,884) ($5,102) ($12,837) ($13,634)
=========== =========== =========== ===========
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) (a) (a)
- the Series C Warrants (a) (a) (a) (a)
- management stock options (a) (a) (a) (a)
- non-employee director stock options (a) (b) (a) (b)
- senior management long term
incentive plan (a) (b) (a) (b)
----------- ----------- ----------- -----------
Weighted average number of common and common
equivalent shares used in the calculation
of primary earnings per share 20,127 20,127 20,127 20,127
=========== =========== =========== ===========
Primary earnings per share:
Primary income (loss) per share before
extraordinary item ($0.24) ($0.25) ($0.64) ($0.60)
Extraordinary gain (loss) - - - (0.08)
----------- ----------- ----------- -----------
Primary net income (loss) per share ($0.24) ($0.25) ($0.64) ($0.68)
=========== =========== =========== ===========
<FN>