10-K/A 1 d10ka.htm AMENDMENT NO. 1 TO FORM 10-K Amendment No. 1 to Form 10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

AMENDMENT NO. 1

x   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year (52 weeks) ended February 1, 2003

 

OR

 

¨   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from            to            

 

Commission file number 1-10876

SHOPKO STORES, INC.

(Exact name of registrant as specified in its Charter)

Wisconsin

  

41-0985054

(State or other jurisdiction

of incorporation or organization)

  

(I.R.S. Employer Identification No.)

700 Pilgrim Way, Green Bay, Wisconsin

  

54304

(Address of principal executive offices)

  

(Zip Code)

 

Registrant’s telephone number, including area code (920) 429-2211

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

  

Name of each exchange on which registered

Common Stock, par value $0.01 per share

  

New York Stock Exchange

Series B Preferred Stock Purchase Rights

  

New York Stock Exchange

 

Securities registered pursuant to Section 12 (g) of the Act: None.

 

 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K   x.

 

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).    Yes  x    No  ¨

 

The aggregate market value of the voting stock held by non-affiliates of the Registrant as of August 3, 2002 was approximately $434,631,987 (based upon the closing price of Registrant’s Common Stock on the New York Stock Exchange on such date).

 

Number of shares of $0.01 par value Common Stock outstanding as of March 28, 2003: 29,090,531.

 

 

DOCUMENTS INCORPORATED BY REFERENCE

 

Part III incorporates by reference portions of the definitive Proxy Statement for the Registrant’s Annual Meeting of Shareholders to be held on May 28, 2003.

 

EXPLANATION OF AMENDMENT

 

Due to a printing error, Note A to the Consolidated Financial Statements, filed with the Company’s Annual Report on Form 10-K filed on April 11, 2003, contained a typographical error which transposed certain lines from the section of the Note related to Discontinued Operations to the section related to Stock-based Employee Compensation Plans. We are amending Item 15 in its entirety to correct the typographical error. No other changes have been made to the Annual Report.

 

(Cover page 2 of 2 pages)

PART IV

 

Item 15.    Exhibits, Financial Statement Schedules and Reports on Form 8-K

 

(a)   Documents filed as part of this report:

 

1.     Consolidated Financial Statements:

 

See “Index to Consolidated Financial Statements and Financial Statement Schedule” on page 2, the Independent Auditors’ Report on page 3 and the Consolidated Financial Statements on pages 4 to 22, all of which are incorporated herein by reference.

 

2.     Financial Statement Schedule:

 

See “Index to Consolidated Financial Statements and Financial Statement Schedule” on page 2 and the Financial Statement Schedule on page 23, all of which are incorporated herein by reference.

 

3.     Exhibits:

 

See “Exhibit Index” on pages 27 to 30, which is incorporated herein by reference.

 

Pursuant to Regulation S-K, Item 601(b) (4) (iii), the Registrant hereby agrees to furnish to the Commission, upon request, a copy of each instrument and agreement with respect to long-term debt of the Registrant and its consolidated subsidiaries which does not exceed 10 percent of the total assets of the Registrant and its subsidiaries on a consolidated basis.

 

(b)   Reports on Form 8-K:

 

The Registrant filed Current Reports on Form 8-K with respect to the fourth fiscal quarter of fiscal 2002 as follows:

 

  1.   Form 8-K dated January 7, 2003, with respect to Item 5. Other Events, regarding the appointment of Richard A. Zona to its board of directors effective January 6, 2003.

 

1

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

AND FINANCIAL STATEMENT SCHEDULE

 

    

Page

Index to Consolidated Financial Statements of ShopKo Stores, Inc. and Subsidiaries

     

Independent Auditors’ Report

   

3

Consolidated Statements of Operations for each of the three years in the period ended February 1, 2003

   

4

Consolidated Balance Sheets as of February 1, 2003 and February 2, 2002

   

5

Consolidated Statements of Cash Flows for each of the three years in the period ended February 1, 2003

   

6

Consolidated Statements of Shareholders’ Equity for each of the three years in the period ended February 1, 2003

   

7

Notes to Consolidated Financial Statements

   

8-22

Index to Financial Statement Schedule

     

Schedule II-Valuation and Qualifying Accounts

   

23

 

All other schedules are omitted because they are not applicable or not required.

 

2

INDEPENDENT AUDITORS’ REPORT

 

To the Board of Directors and Shareholders

ShopKo Stores, Inc.:

 

We have audited the consolidated balance sheets of ShopKo Stores, Inc. and subsidiaries as of February 1, 2003 and February 2, 2002, and the related consolidated statements of operations, shareholders’ equity and cash flows for the year (52 weeks) ended February 1, 2003, the year (52 weeks) ended February 2, 2002 and the year (53 weeks) ended February 3, 2001. Our audits also included the financial statement schedule listed in the Index at Item 15. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits.

 

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of ShopKo Stores, Inc. and subsidiaries as of February 1, 2003 and February 2, 2002, and the results of their operations and their cash flows for the year (52 weeks) ended February 1, 2003, the year (52 weeks) ended February 2, 2002 and the year (53 weeks) ended February 3, 2001, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

 

As discussed in Note A to the consolidated financial statements, effective February 3, 2002, the Company adopted Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets.”

 

/s/    DELOITTE & TOUCHE LLP        

Deloitte & Touche LLP

 

Milwaukee, Wisconsin

March 12, 2003

 

3

SHOPKO STORES, INC. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

 

    

February 1, 2003 (52 Weeks)

     

February 2, 2002 (52 Weeks)

   

February 3, 2001 (53 Weeks)

  

Revenues:

                         

Net sales

   

$

3,240,187

 

   

$

3,373,935

   

$

3,517,112

 

Licensed department rentals and other income

   

 

12,622

 

   

 

13,054

   

 

13,423

 

    
  
  
    

 

3,252,809

 

   

 

3,386,989

   

 

3,530,535

 

Costs and Expenses:

                         

Cost of sales, including restructuring charge of $10,447 in fiscal 2000

   

 

2,406,887

 

   

 

2,567,800

   

 

2,652,155

 

Selling, general and administrative expenses

   

 

635,909

 

   

 

611,930

   

 

673,542

 

Special charges

   

 

0

 

   

 

0

   

 

9,224

 

Restructuring charge

   

 

6,030

 

   

 

0

   

 

114,585

 

Depreciation and amortization expenses

   

 

83,337

 

   

 

91,662

   

 

94,079

 

    
  
  
    

 

3,132,163

 

   

 

3,271,392

   

 

3,543,585

 

Earnings (loss) from operations

   

 

120,646

 

   

 

115,597

   

 

(13,050

)

Interest expense—net

   

 

52,264

 

   

 

65,765

   

 

65,961

 

    
  
  

Earnings (loss) from continuing operations before income taxes

   

 

68,382

 

   

 

49,832

   

 

(79,011

)

Provision (credit) for income taxes

   

 

27,149

 

   

 

21,615

   

 

(29,036

)

    
  
  

Earnings (loss) from continuing operations

   

 

41,233

 

   

 

28,217

   

 

(49,975

)

Discontinued operations:

                         

Earnings from discontinued operations, net of income taxes of $1,201

   

 

0

 

   

 

0

   

 

1,567

 

Gain on sale of discontinued business, net of income taxes of $14,496

   

 

0

 

   

 

0

   

 

32,590

 

    
  
  

Earnings (loss) before accounting change

   

 

41,233

 

   

 

28,217

   

 

(15,818

)

Cumulative effect of accounting change

   

 

(186,052

)

   

 

0

   

 

0

 

    
  
  

Net earnings (loss)

   

$

(144,819

)

   

$

28,217

   

$

(15,818

)

    
  
  

Earnings (loss) per share of common stock:

                         

Basic:

                         

Earnings (loss) from continuing operations

   

$

1.43

 

   

$

0.98

   

$

(1.72

)

Earnings from discontinued operations

   

 

0

 

   

 

0

   

 

0.05

 

Gain on sale of discontinued business

   

 

0

 

   

 

0

   

 

1.12

 

Cumulative effect of accounting change

   

 

(6.46

)

   

 

0

   

 

0

 

    
  
  

Net earnings (loss)

   

$

(5.03

)

   

$

0.98

   

$

(0.55

)

    
  
  

Diluted:

                         

Earnings (loss) from continuing operations

   

$

1.41

 

   

$

0.98

   

$

(1.72

)

Earnings from discontinued operations

   

 

0

 

   

 

0

   

 

0.05

 

Gain on sale of discontinued business

   

 

0

 

   

 

0

   

 

1.12

 

Cumulative effect of accounting change

   

 

(6.36

)

   

 

0

   

 

0

 

    
  
  

Net earnings (loss)

   

$

(4.95

)

   

$

0.98

   

$

(0.55

)

    
  
  

Weighted average number of common shares outstanding—basic

   

 

28,791

 

   

 

28,699

   

 

29,014

 

Weighted average number of common shares outstanding—diluted

   

 

29,218

 

   

 

28,838

   

 

29,014

 

See notes to consolidated financial statements.

 

4

SHOPKO STORES, INC. AND SUBSIDIARIES

 

CONSOLIDATED BALANCE SHEETS

(In thousands)

 

    

February 1, 2003

     

February 2, 2002

  

Assets

                  

Current assets:

                  

Cash and cash equivalents

   

$

33,753

 

   

$

30,169

 

Receivables, less allowance for losses of $2,611 and $3,220, respectively

   

 

49,509

 

   

 

48,738

 

Merchandise inventories

   

 

562,731

 

   

 

613,911

 

Other current assets

   

 

13,745

 

   

 

15,840

 

    
  

Total current assets

   

 

659,738

 

   

 

708,658

 

Other assets and deferred charges

   

 

12,570

 

   

 

11,185

 

Intangible assets—net

   

 

20,475

 

   

 

22,119

 

Goodwill

   

 

0

 

   

 

186,052

 

Property and equipment—net

   

 

812,184

 

   

 

892,022

 

    
  

Total assets

   

$

1,504,967

 

   

$

1,820,036

 

    
  

Liabilities and Shareholders’ Equity

                  

Current liabilities:

                  

Short-term debt

   

$

40,022

 

   

$

47,808

 

Accounts payable—trade

   

 

241,166

 

   

 

255,630

 

Accrued compensation and related taxes

   

 

44,957

 

   

 

45,145

 

Deferred taxes and other accrued liabilities

   

 

128,809

 

   

 

143,906

 

Accrued income and other taxes

   

 

49,998

 

   

 

23,249

 

Current portion of long-term obligations and leases

   

 

95,554

 

   

 

79,942

 

    
  

Total current liabilities

   

 

600,506

 

   

 

595,680

 

Long-term obligations and leases, less current portions

   

 

319,577

 

   

 

505,467

 

Other long-term obligations

   

 

16,744

 

   

 

6,199

 

Deferred income taxes

   

 

19,769

 

   

 

22,642

 

Shareholders’ equity:

                  

Preferred stock; none outstanding

   

 

0

 

   

 

0

 

Common stock; shares issued, 30,974 at February 1, 2003 and 30,628 at February 2, 2002

   

 

310

 

   

 

306

 

Additional paid-in capital

   

 

389,177

 

   

 

384,745

 

Retained earnings

   

 

199,134

 

   

 

345,247

 

Less treasury stock—at cost; 1,904 shares

   

 

(40,250

)

   

 

(40,250

)

    
  

Total shareholders’ equity

   

 

548,371

 

   

 

690,048

 

    
  

Total liabilities and shareholders’ equity

   

$

1,504,967

 

   

$

1,820,036

 

    
  

 

 

See notes to consolidated financial statements.

 

5

SHOPKO STORES, INC. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 

    

February 1, 2003
(52 Weeks)

     

February 2, 2002
(52 Weeks)

     

February 3, 2001
(53 Weeks)

  

Cash flows from operating activities:

                           

Earnings (loss) from continuing operations

   

$

41,233

 

   

$

28,217

 

   

$

(49,975

)

Adjustments to reconcile earnings (loss) to net cash provided by operating activities:

                           

Depreciation and amortization

   

 

83,337

 

   

 

91,662

 

   

 

94,079

 

Provision for losses on receivables, net of recoveries

   

 

578

 

   

 

394

 

   

 

618

 

(Gain) / Loss on the sale of property and equipment

   

 

2,188

 

   

 

(974

)

   

 

(306

)

Restructuring charge

   

 

6,030

 

   

 

0

 

   

 

125,032

 

Impairment charges

   

 

147

 

   

 

4,825

 

   

 

0

 

Deferred income taxes

   

 

7,079

 

   

 

23,425

 

   

 

(19,343

)

Change in assets and liabilities (excluding effects of business acquisitions):

                           

Receivables

   

 

(1,349

)

   

 

8,449

 

   

 

(1,739

)

Merchandise inventories

   

 

51,180

 

   

 

100,014

 

   

 

(69,657

)

Other current assets

   

 

2,095

 

   

 

(2,630

)

   

 

53

 

Other assets and intangibles

   

 

623

 

   

 

11,054

 

   

 

(15,393

)

Accounts payable

   

 

(14,464

)

   

 

(22,545

)

   

 

(51,196

)

Accrued liabilities

   

 

16,310

 

   

 

(4,170

)

   

 

23,054

 

    
  
  

Net cash provided by operating activities of continuing
operations

   

 

194,987

 

   

 

237,721

 

   

 

35,227

 

Net cash flows from discontinued operations

   

 

0

 

   

 

0

 

   

 

(28,061

)

Cash flows from investing activities:

                           

Payments for property and equipment

   

 

(30,880

)

   

 

(17,198

)

   

 

(196,247

)

Proceeds from the sale of property and equipment

   

 

11,876

 

   

 

14,857

 

   

 

4,500

 

Proceeds from the sale of discontinued business

   

 

0

 

   

 

0

 

   

 

143,381

 

Business acquisitions, net of cash acquired

   

 

0

 

   

 

0

 

   

 

(2,070

)

    
  
  

Net cash used in investing activities

   

 

(19,004

)

   

 

(2,341

)

   

 

(50,436

)

Cash flows from financing activities:

                           

Net proceeds from debt borrowings

   

 

37,471

 

   

 

147,808

 

   

 

117,000

 

Net payments of debt and capital lease obligations

   

 

(210,316

)

   

 

(380,190

)

   

 

(58,582

)

Debt issuance costs

   

 

(1,380

)

   

 

(8,163

)

   

 

(924

)

Change in common stock from stock options

   

 

1,826

 

   

 

0

 

   

 

2,892

 

Purchase of treasury stock

   

 

0

 

   

 

0

 

   

 

(20,222

)

    
  
  

Net cash provided by / (used in) financing activities

   

 

(172,399

)

   

 

(240,545

)

   

 

40,164

 

    
  
  

Net increase / (decrease) in cash and cash equivalents

   

 

3,584

 

   

 

(5,165

)

   

 

(3,106

)

Cash and cash equivalents at beginning of year

   

 

30,169

 

   

 

35,334

 

   

 

38,440

 

    
  
  

Cash and cash equivalents at end of year

   

$

33,753

 

   

$

30,169

 

   

$

35,334

 

    
  
  

Supplemental cash flow information:

                           

Noncash investing and financial activities—

                           

Capital lease obligations incurred

   

$

18

 

   

$

78

 

   

$

42,364

 

Capital lease obligations terminated

   

$

11,000

 

   

$

  0

 

   

$

  0

 

Cash paid (refunds received) during the period for:

                           

Interest

   

$

49,661

 

   

$

65,258

 

   

$

66,147

 

Income taxes

   

$

(4,410

)

   

$

3,867

 

   

$

24,473

 

 

 

See notes to consolidated financial statements.

 

6

SHOPKO STORES, INC. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In thousands)

 

    

Common Stock

  

Additional Paid-in Capital

  

Retained Earnings

    

Treasury Stock

    

Total

  
  

Shares

  

Amount

      

Shares

    

Amount

    

Shares

    

Amount

  

Balances at January 29,
2000

   

30,400

  

$

304

  

$

381,354

  

$

332,872

 

  

(816

)

  

$

(20,028

)

  

29,584

 

  

$

694,502

 

Net loss

                   

 

(15,818

)

                      

 

(15,818

)

Sale of common stock under option plans

   

203

  

 

2

  

 

2,890

                        

203

 

  

 

2,892

 

Income tax benefit related to stock options

             

 

319

                              

 

319

 

Restricted stock
expense

                   

 

74

 

                      

 

74

 

Purchase of treasury
stock

                           

(1,088

)

  

 

(20,222

)

  

(1,088

)

  

 

(20,222

)

    
 
 
 
 
 
 
 

Balances at February 3, 2001

   

30,603

  

 

306

  

 

384,563

  

 

317,128

 

  

(1,904

)

  

 

(40,250

)

  

28,699

 

  

 

661,747

 

Net earnings

                   

 

28,217

 

                      

 

28,217

 

Issuance of restricted
stock

   

25

        

 

182

  

 

(182

)

                

25

 

  

 

0

 

Restricted stock expense

                   

 

84

 

                      

 

84

 

    
 
 
 
 
 
 
 

Balances at February 2, 2002

   

30,628

  

 

306

  

 

384,745

  

 

345,247

 

  

(1,904

)

  

 

(40,250

)

  

28,724

 

  

 

690,048

 

Net loss

                   

 

(144,819

)

                      

 

(144,819

)

Sale of common stock under option plans

   

229

  

 

3

  

 

1,823

                        

229

 

  

 

1,826

 

Income tax benefit related to stock options

             

 

774

                              

 

774

 

Issuance of restricted
stock

   

117

  

 

1

  

 

1,835

  

 

(1,836

)

                

117

 

  

 

0

 

Restricted stock
expense

                   

 

542

 

                      

 

542

 

    
 
 
 
 
 
 
 

Balances at February 1, 2003

   

30,974

  

$

310

  

$

389,177

  

$

199,134

 

  

(1,904

)

  

$

(40,250

)

  

29,070

 

  

$

548,371

 

    
 
 
 
 
 
 
 

 

 

 

 

See notes to consolidated financial statements.

 

7

 

SHOPKO STORES, INC. AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

A.    Summary of Significant Accounting Policies

 

Organization and Basis of Presentation

 

The consolidated financial statements include the accounts of ShopKo Stores, Inc. and its majority owned subsidiaries (“ShopKo” or the “Company”). All significant intercompany accounts and transactions have been eliminated.

 

ShopKo is engaged in the business of providing general merchandise and retail health services through its two retail store chains. ShopKo Retail stores are operated in the Midwest, Western Mountain and Pacific Northwest states. Pamida, Inc. (“Pamida”) Retail stores are operated in the Midwest, North Central and Rocky Mountain states.

 

Cash and Cash Equivalents

 

The Company records all highly liquid investments with an original maturity of three months or less as cash equivalents.

 

Receivables

 

Receivables consist of amounts collectible from third party pharmacy insurance carriers; from retail store customers for optical and pharmacy purchases; and from merchandise vendors for promotional and advertising allowances. Substantially all amounts are expected to be collected within one year.

 

Merchandise Inventories

 

Merchandise inventories are stated at the lower of cost or market. Cost, which includes certain distribution and transportation costs, is determined through use of the last-in, first-out (LIFO) method for substantially all inventories. If the first-in, first-out (FIFO) method had been used to determine cost of inventories, the Company’s inventories would have been higher by approximately $2.9 million at February 2, 2002. There was no difference between the LIFO and FIFO cost methods at February 1, 2003.

 

Property and Equipment—Net

 

Property and equipment are carried at cost. The cost of buildings and equipment is depreciated over the estimated useful lives of the assets. Buildings and certain equipment (principally computer and retail store equipment) are depreciated using the straight-line method. Remaining properties are depreciated on an accelerated basis. Useful lives generally assigned are: buildings-25 to 50 years; retail store equipment-8 to 10 years; warehouse, transportation and other equipment-3 to 10 years. Costs of leasehold improvements are amortized over the period of the lease or the estimated useful life of the asset, whichever is shorter, using the straight-line method. Property under capital leases is amortized over the related lease term using the straight-line method.

 

8

 

The components of property and equipment are:

 

    

Feb. 1,
2003

   

Feb. 2,
2002

    

(In thousands)

Property and equipment at cost:

              

Land

   

$

125,505

   

$

128,347

Buildings

   

 

667,783

   

 

675,079

Equipment

   

 

551,325

   

 

538,231

Leasehold improvements

   

 

72,482

   

 

71,497

Property under construction

   

 

3,057

   

 

1,133

Property under capital leases

   

 

132,711

   

 

142,932

    
  
    

 

1,552,863

   

 

1,557,219

Less accumulated depreciation and amortization:

              

Property and equipment

   

 

677,487

   

 

611,637

Property under capital leases

   

 

46,063

   

 

40,216

Less reserve for impairment on assets to be disposed

   

 

17,129

   

 

13,344

    
  

Net property and equipment

   

$

812,184

   

$

892,022

    
  

 

Goodwill and Intangible Assets—Net

 

Prior to the adoption of SFAS No. 142, “Goodwill and Other Intangible Assets”, as discussed below, goodwill and trademarks were amortized using the straight-line method over 15 to 40 years. The Company’s intangible assets are composed of assets with finite and indefinite lives. Intangible assets with finite lives are amortized using the straight-line method. Underwriting and issuance costs of long-term obligations are amortized over the term of the obligations. Customer lists are generally amortized over 15 years.

 

The Company adopted SFAS No. 142 effective February 3, 2002. Under SFAS No. 142, goodwill and other intangible assets with indefinite useful lives are no longer amortized, but instead are reviewed for impairment and any excess in carrying value over the estimated fair value is charged to results of operations.

 

The following table summarizes goodwill and intangible assets by major asset class as of February 1, 2003 and February 2, 2002:

 

    

February 1, 2003

     

February 2, 2002

  
    

Gross Carrying Amount

   

Accumulated Amortization

     

Gross Carrying Amount

   

Accumulated Amortization

  
    

(In thousands)

  

Goodwill (Pamida retail segment)

   

$

 

   

$

 

 

   

$

198,696

   

$

(12,644

)

    
  
  
  

Intangible assets with indefinite lives:

                                

Trademark

   

$

7,800

   

$

(506

)

   

$

7,800

   

$

(506

)

    
  
  
  

Intangible assets with finite lives:

                                

Debt issuance costs

   

$

10,609

   

$

(6,071

)

   

$

11,403

   

$

(4,693

)

Customer lists and other*

   

 

16,735

   

 

(8,092

)

   

 

14,479

   

 

(6,364

)

    
  
  
  
    

$

27,344

   

$

(14,163

)

   

$

25,882

   

$

(11,057

)

    
  
  
  
*   Customer lists and other is principally composed of lists of prescription drug customers that the Company has acquired through its retail health operations.

 

9

 

Amortization expense was $5.3 million and $9.3 million for fiscal 2002 and 2001, respectively. Estimated fiscal year amortization expense will be as follows: 2003 - $3.6 million; 2004 - $1.4 million; 2005 - $1.2 million; 2006 - $1.0 million; 2007 - $0.9 million.

 

Impairment of Long Lived Assets

 

The Company evaluates whether events and circumstances have occurred that indicate the remaining estimated useful lives of long-lived assets may warrant revision or that the remaining balance of an asset may not be recoverable. The measurement of possible impairment is based on the ability to recover the balance of assets from expected future operating cash flows on an undiscounted basis. Impairment losses, if any, would be measured by comparing the carrying amount of the asset to its fair value, determined based on appraised values or as the present value of the cash flows using discounted rates that reflect the inherent risks of the underlying business. In the fourth quarter of fiscal 2001, the Company recorded in selling, general and administrative expense, an impairment charge of $2.7 million associated with the decision to close the Bethany Distribution Center in the first quarter of fiscal 2002, as well as a charge of $2.1 million for the impairment of an office building held for sale. Both of the facilities were disposed in the first quarter of fiscal 2002. In the opinion of management, except for assets identified herein and as disclosed in Note C of the Notes to the Consolidated Financial Statements, no such impairment existed as of February 1, 2003 or February 2, 2002.

 

Revenue Recognition

 

Revenues from the Company’s retail stores are recognized at the time customers take possession of merchandise purchased or services are rendered, net of estimated returns, which are based on historical experience. Revenues from licensed departments are recorded at the net amounts to be received from licensees.

 

Vendor Allowances

 

The Company records vendor allowances and discounts in the income statement when the purpose for which those monies were designated is fulfilled. Allowances provided by vendors generally relate to profitability of inventory recently sold and, accordingly, are reflected as reductions of cost of merchandise sold. Vendor allowances received for advertising or fixturing programs reduce the Company’s expense for the related advertising or fixturing program.

 

Advertising

 

The Company expenses advertising costs, net of vendor reimbursements, in the period incurred. Advertising expense was $26.0 million, $18.3 million and $31.1 million in fiscal 2002, 2001 and 2000, respectively.

 

Stock-based Employee Compensation Plans

 

At February 1, 2003, the Company has four stock-based employee compensation plans, which are described more fully in Note G. The Company accounts for those plans under the recognition and measurement principles of APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and related Interpretations. No stock-based employee compensation cost is reflected in results of operations for stock option awards, as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of FASB Statement No. 123, “Accounting for Stock-Based Compensation,” to

 

10

stock-based employee compensation. The expense associated with restricted stock awards has not been separately identified in the following table, as the expense would be the same under either standard.

 

    

Year Ended

  
    

February 1, 2003

     

February 2,

2002

     

February 3,

2001

  

Net earnings (loss) as reported

   

$

(144,819

)

   

$

28,217

 

   

$

(15,818

)

Deduct: Total stock-based employee compensation expense determined under fair value method for all option awards, net of related tax effects

   

 

(1,340

)

   

 

(1,253

)

   

 

(1,081

)

    
  
  

Pro forma net earnings (loss)

   

$

(146,159

)

   

$

26,964

 

   

$

(16,899

)

    
  
  

Net Earnings (loss) per share:

                           

Basic—as reported

   

$

(5.03

)

   

$

0.98

 

   

$

(0.55

)

Basic—pro forma

   

$

(5.08

)

   

$

0.94

 

   

$

(0.59

)

Diluted—as reported

   

$

(4.95

)

   

$

0.98

 

   

$

(0.55

)

Diluted—pro forma

   

$

(5.00

)

   

$

0.96

 

   

$

(0.59

)

 

Pre-opening Costs

 

The Company expenses pre-opening costs of retail stores as incurred.

 

Special Charges

 

The Company incurs various costs in connection with business acquisitions related to process and systems integration, employee retention programs, and store conversions. These costs are classified as special charges in the accompanying consolidated statements of operations. In fiscal 2000, the Company incurred $4.8 million of integration and employee retention costs associated with the Pamida acquisition and $4.4 million of store conversion costs associated with the Places acquisition.

 

Net Earnings (Loss) Per Common Share

 

Basic net earnings (loss) per common share is computed by dividing net earnings (loss) by the weighted average number of common shares outstanding. Diluted net earnings (loss) per common share is computed by dividing net earnings by the weighted average number of common shares outstanding increased by the number of dilutive potential common shares based on the treasury stock method. During fiscal 2002, 2001 and 2000, options to purchase 1,654,646 shares, 2,071,525 shares and 2,155,333 shares, respectively, were excluded from the diluted earnings per share computation as the effects of such options would have been anti-dilutive.

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Discontinued Operations

 

On July 19, 1999, ProVantage Health Services, Inc. (“ProVantage”), a then wholly-owned subsidiary of the Company, completed an initial public offering of its common shares. As a result of this transaction, the Company’s ownership interest in ProVantage was reduced to 64.5%. ProVantage provided health benefit management services, pharmacy mail services, vision benefit management services and health information technology and clinical support services.

 

11

 

On June 16, 2000, the Company sold its remaining interest in ProVantage pursuant to a tender offer by a third party to acquire all of the outstanding shares of ProVantage, for proceeds of approximately $143.4 million, resulting in a gain of $32.6 million, net of income taxes.

 

The results of operations of ProVantage have been presented as discontinued operations. Net sales of ProVantage for the 20 weeks ended June 17, 2000 were $397.9 million.

 

Litigation

 

In the normal course of business, the Company has been named as a defendant in various lawsuits. Some of these lawsuits involve claims for substantial amounts. Although the ultimate outcome of these lawsuits cannot be ascertained at this time, it is the opinion of management, after consultation with counsel, that the resolution of such suits will not have a material adverse effect on the consolidated financial statements of the Company.

 

Reclassifications

 

Certain prior year amounts have been reclassified to conform with the current year presentation.

 

Recent Accounting Pronouncements

 

In January 2003, the Emerging Issues Task Force (“EITF”), issued EITF Issue No. 02-16, “Accounting By a Customer (Including a Reseller) for Certain Consideration Received From a Vendor”, applicable to fiscal years beginning after December 15, 2002. Issue No. 02-16 provides accounting guidance on how a customer, including a reseller, should characterize consideration received from a vendor and when to recognize and how to measure that consideration in its income statement. The Company has not completed the process of evaluating the impact of EITF Issue 02-16. However, the Company does not expect that its adoption in fiscal 2003 will have a material impact on its consolidated financial statements, but it may change the classification of some consideration received from vendors within the Consolidated Statements of Operations.

 

In December 2002, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 148, “Accounting for Stock-Based Compensation Transition and Disclosure”. SFAS No. 148 amends SFAS No. 123 to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. It amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. As of February 1, 2003, the Company has not elected to expense stock options. The potential impact on consolidated financial statements of expensing of stock options is disclosed in a preceding section of Note A.

 

In November 2002, the FASB issued FASB Interpretation No. (“FIN”) 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others”. FIN 45 requires that guarantors record the fair value of its obligations under certain guarantees and requires disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued. The recognition and initial measurement provisions of this Interpretation are applicable on a prospective basis to guarantees issued or modified after December 31, 2002, irrespective of the guarantor’s fiscal year-end. The disclosure requirements are effective for interim and annual financial statements ending after December 15, 2002. The Company does not expect the adoption of this FASB Interpretation to have a material impact on its consolidated financial statements.

 

12

 

In June 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (“SFAS”) No. 146, “Accounting for Costs Associated With Exit or Disposal Activities”. SFAS No. 146 nullifies EITF Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (Including Certain Costs Incurred in a Restructuring)”. SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. Therefore, SFAS No. 146 eliminates the definition and requirements for recognition of exit costs in EITF No. 94-3. The provisions of SFAS No. 146 are effective for exit or disposal activities that are initiated after December 31, 2002. The Company does not expect the adoption of this statement to have a material impact on its consolidated financial statements.

 

The Company adopted SFAS No. 142, “Goodwill and Other Intangible Assets”, effective February 3, 2002. Under SFAS No. 142, the Company no longer amortizes goodwill and other intangible assets with indefinite useful lives. Instead, the carrying value is evaluated for impairment on an annual basis. During fiscal 2002, based on the analysis of an independent appraiser, the Company completed its assessment of the impairment of goodwill of the Pamida Retail segment in accordance with the guidelines provided by SFAS No. 142. The fair value of the Pamida Retail segment was determined by the appraiser based on a combination of a discounted cash flow analysis and an analysis of market prices of other retail companies. The fair values of the underlying assets and liabilities were determined using standard valuation practices, including income capitalization, sales comparisons, market rent analysis, relief from royalty and replacement cost. As a result of this assessment, the Company recorded a charge of $186.1 million related to the write down of all goodwill recorded on the Company’s balance sheet, all of which related to the Pamida Retail segment. The Company has received a report from an independent appraiser containing an analysis of intangible assets with indefinite lives, which primarily consist of a trademark associated with the Pamida Retail segment. No impairment was recorded as a result of this assessment.

 

The results for periods prior to adoption of SFAS No. 142 have not been restated. The following table reflects consolidated results from operations for fiscal 2001 and 2000 as if the adoption of SFAS No. 142 had occurred on January 30, 2000.

 

      

Fiscal Years Ended

  
      

February 2,
2002

     

February 3,
2001

  
      

(In thousands, except per share data)

  

Earnings (loss) from continuing operations:

                    

Reported earnings (loss) before accounting
change

     

$

28,217

     

$

(49,975

)

Goodwill and trademark amortization, net of tax

     

 

5,082

     

 

5,056

 

      
    

Pro forma

     

$

33,299

     

$

(44,919

)

      
    

Basic earnings (loss) per share from continuing operations:

                    

Earnings (loss) before accounting change:

                    

As reported

     

$

0.98

     

$

(1.72

)

Goodwill and trademark amortization, net of tax

     

 

0.18

     

 

0.17

 

      
    

Pro forma

     

$

1.16

     

$

(1.55

)

      
    

Diluted earnings (loss) per share from continuing operations:

                    

Earnings (loss) before accounting change:

                    

As reported

     

$

0.98

     

$

(1.72

)

Goodwill and trademark amortization, net of tax

     

 

0.18

     

 

0.17

 

      
    

Pro forma

     

$

1.16

     

$

(1.55

)

      
    

 

13

 

B.    Acquisition

 

On June 29, 2000, the Company acquired all of the outstanding stock of P.M. Place Stores (“Places”) for $2.1 million in cash and approximately $28.8 million in assumed debt and accrued liabilities. Places was headquartered in Bethany, Missouri and operated discount stores in Missouri, Iowa, Kansas and Illinois. The pro forma effect of this acquisition was not material to the Company’s consolidated statements of operations.

 

C.    Restructuring Reserve

 

In the fourth quarter of fiscal 2000, the Company announced a strategic reorganization plan to close 23 ShopKo retail stores, a distribution center, and to downsize its corporate workforce. In connection with the reorganization plan, the Company incurred a pre-tax charge of $125.0 million, including $67.6 million related to inventory and property write-downs, $45.8 million related to lease termination and property carrying costs, and $11.6 million for employee separation and other costs. The inventory and fixed asset write-down reserves were recorded in the fourth quarter of fiscal 2000. All stores and the distribution center were closed and approximately 2,500 employees were terminated in the first quarter of fiscal 2001. The Company utilized all of the employee severance reserve prior to fiscal 2002. For balance sheet reporting, the portion of the reserve for the lease termination, property carrying and other costs to be paid in the next 12 months is reported in accrued expenses as a current liability and the remainder ($14.0 million) is recorded in other long-term obligations at February 1, 2003.

 

During fiscal 2002, eight leases were terminated and one owned property was sold. There are nine remaining properties covered by the restructuring reserve. Due to continuing softness in the retail climate in general, as well as a growing number of vacant retail properties coming on the market as the Company’s competitors continue to restructure and downsize their operations, in the fourth quarter of 2002, the Company utilized a real estate consulting firm to evaluate the lease obligations of the remaining four closed stores and potential sales prices for the five closed store properties that are owned by the Company. Based on this evaluation, the Company lowered the estimated valuations of the properties and believes disposition of some properties may take longer than originally estimated. As a result, the Company recorded a $5.6 million pre-tax additional impairment charge on the owned properties and a $0.4 million additional charge for future lease obligations on the leased properties.

 

As of February 1, 2003, the remaining reserve for lease terminations and related property carrying costs, as well as other costs, was $15.1 million and the remaining property write-down reserve was $16.1 million. With the adjustments described above, the Company believes the reserves are adequate. The Company continues to negotiate lease terminations with landlords and actively market closed stores for sale. However, due to a soft retail real estate market and the number of available properties on the market, sales of owned stores and lease terminations have been slower than anticipated. Accordingly, the level of reserves could prove to be inadequate such that additional charges may be required. The Company will continue to evaluate the adequacy of the amounts reserved as it proceeds with the disposition of the real estate and termination of the leases.

 

14

 

Following is an analysis of the change in the restructuring reserve (in thousands) during fiscal 2001 and 2002:

 

      

Lease Termination
and Property
Carrying Costs

     

Employee Separation Costs

     

Other

Costs

  

Balance as of Feb. 3, 2001

     

$

45,752

 

   

$

9,134

 

   

$

1,300

 

Cash Payments

     

 

(13,691

)

   

 

(7,282

)

   

 

(1,072

)

Other Adjustments

     

 

731

 

   

 

(1,852

)

   

 

0

 

      
  
  

Balance as of Feb. 2, 2002

     

$

32,792

 

   

$

0

 

   

$

228

 

Additions

     

 

439

 

            

 

0

 

Cash Payments

     

 

(18,260

)

            

 

(113

)

Other Adjustments

     

 

0

 

            

 

0

 

      
  
  

Balance as of Feb. 1, 2003

     

$

14,971

 

   

$

0

 

   

$

115

 

      
  
  

 

Net sales of the stores closed totaled $56.0 and $208.9 million in fiscal 2001 and 2000, respectively.

 

D.    Short-Term Debt

 

The Company had outstanding $40.0 million and $47.8 million under the revolving credit portion of its Secured Credit Facility (see Note E), as of February 1, 2003 and February 2, 2002, respectively. The related weighted average interest rates on borrowings outstanding at February 1, 2003 and February 2, 2002 were 3.5% and 4.2%, respectively.

 

The Company also authorizes letters of credit to be issued during the ordinary course of business as required by foreign vendors. As of February 1, 2003 and February 2, 2002, the Company had outstanding letters of credit for $15.8 million and $19.8 million, respectively.

 

E.    Long-Term Obligations and Leases

 

    

Feb. 1, 2003

   

Feb. 2, 2002

    

(in thousands)

Senior Unsecured Notes, 9.0% due November 15, 2004, less unamortized discount of $8 and $12, respectively

   

$

59,797

   

$

72,698

Senior Unsecured Notes, 8.5% due March 15, 2002

   

 

0

   

 

70,207

Senior Unsecured Notes, 9.25% due March 15, 2022, less unamortized discount of $366 and $386, respectively

   

 

99,634

   

 

99,614

Senior Unsecured Notes, 6.5% due August 15, 2003, less unamortized discount of $13 and $42, respectively

   

 

89,182

   

 

99,958

Secured Credit Facility—term loan, 5.3% at February 2, 2002

   

 

0

   

 

100,000

Mortgage and other obligations

   

 

55,062

   

 

15,637

Capital lease obligations

   

 

111,456

   

 

127,295

    
  
    

 

415,131

   

 

585,409

Less current portion

   

 

95,554

   

 

79,942

    
  

Long-term obligations

   

$

319,577

   

$

505,467

    
  

 

15

 

The notes contain certain covenants which, among other things, restrict the ability of the Company to consolidate, merge or convey, transfer or lease its properties and assets substantially as an entirety, to create liens or to enter into sale and leaseback transactions. Payments due under the Senior Unsecured Notes could be accelerated in the event the Company defaults on any obligation in excess of $25 million.

 

On March 12, 2001, the Company entered into a $600.0 million senior secured revolving credit and term loan facility (the “Secured Credit Facility”). The Secured Credit Facility, which terminates on March 12, 2004, provided for revolving credit loans of up to $500.0 million and a term loan of $100.0 million, and may be extended for an additional year at the Company’s option, subject to certain conditions. On December 10, 2002, the Company voluntarily terminated the term loan portion of the Secured Credit Facility, reducing the overall commitment under the facility from $600.0 million to $500.0 million. Amounts available under the Senior Credit Facility are limited based on a percentage of inventory and accounts receivable. A total of $300.2 million was available as of February 1, 2003. Borrowings under the facility are secured by accounts receivable and inventory and bear interest at the bank’s base rate plus a margin of 0.0% to 0.5% or the Eurodollar rate plus a margin of 2.0% to 2.5%, depending on borrowing availability under the facility and the Company’s operating cash flow. The Secured Credit Facility prohibits the payment of dividends, limits new indebtedness, repurchases of common stock and capital expenditures, and requires the Company to meet financial performance covenants relating to borrowing availability and minimum operating cash flows.

 

During the first quarter of fiscal 2002, the Company closed on a $50.0 million private placement mortgage financing. The loan has a term of 10 years at an interest rate of 11 percent and is secured by 13 ShopKo stores and one distribution center. Principal payments are based on a 25-year amortization schedule with a balloon payment due March 2012. Prepayments are permitted subject to certain penalties. The loan was used to retire five lease liabilities associated with closed stores controlled by affiliates of the lender, to provide additional liquidity, and to add a layer of longer term debt to the Company’s capital structure.

 

The interest rates on the mortgage and other obligations range from 5.4% to 11.0% with maturities ranging from October 2003 to March 2012 and are collateralized by property with a net book value of $60.6 million at February 1, 2003.

 

Approximate annual maturities of long-term obligations, excluding capital leases, for the five years subsequent to the year ended February 1, 2003 are as follows (in thousands):

 

Fiscal
Year
   

Long-Term

Obligations

2003

   

$

90,024

2004

   

 

60,612

2005

   

 

877

2006

   

 

960

2007

   

 

4,582

Later

   

 

146,620

    

Total maturities

   

$

303,675

    

 

The Company leases certain stores and equipment under capital leases. Many of these leases include renewal options, and occasionally, include options to purchase. In addition to its capital leases, the Company is obligated under operating leases, primarily for land, buildings and computer equipment.

 

16

 

Minimum future obligations under capital and operating leases in effect at February 1, 2003 are as follows (in thousands):

 

Fiscal Year
   

Capital Lease Obligations

       

Operating Lease Obligations (1)

2003

   

$

16,390

 

     

$

17,918

2004

   

 

16,003

 

     

 

15,830

2005

   

 

15,294

 

     

 

14,051

2006

   

 

13,856

 

     

 

13,601

2007

   

 

13,567

 

     

 

13,247

Later

   

 

125,114

 

     

 

85,477

    
    

Total minimum future obligations

   

 

200,224

 

     

$

160,124

               

Less interest

   

 

(88,768

)

         
    
        

Present value of minimum future obligations

   

$

111,456

 

         
    
        
(1)   Operating lease obligations excluding closed stores.

 

The present values of minimum future obligations shown above are calculated based on interest rates ranging from 6.5% to 16.4% for capital leases determined to be applicable at the inception of the capital leases.

 

Contingent rent expense, based primarily on sales performance, for capital and operating leases was $0.8 million in fiscal 2002, $0.8 million in fiscal 2001 and $1.0 million in fiscal 2000. Total minimum rental expense, net of sublease income, related to all operating leases with terms greater than one year was $17.8, $19.9 and $26.1 million in fiscal 2002, 2001 and 2000, respectively. Certain operating leases require payments to be made on an escalating basis. The accompanying consolidated statements of operations reflect rent expense on a straight-line basis over the term of the leases.

 

The Company is contingently liable on the lease payments for two former retail stores, which were assumed by an unrelated party. Total remaining lease obligations for the stores are $10.9 million as of February 1, 2003. The Company also indemnifies its directors for claims that may arise in performing their duties as directors of the Company. There are no specified limits as to the exposure of the Company, however, the Company does insure against this exposure with reputable insurance providers in amounts deemed sufficient to cover any reasonable risk of loss.

 

F.    Income Taxes

 

Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. For balance sheet reporting purposes, the current deferred tax liability of $29.8 million and $19.9 million at February 1, 2003 and February 2, 2002, respectively, is included in deferred taxes and other accrued liabilities.

 

17

 

Components of the Company’s net deferred tax liability are as follows (in thousands):

 

    

2002

     

2001

  

Deferred tax liabilities:

                  

Property and equipment

   

$

41,743

 

   

$

44,220

 

Intangibles

   

 

8,441

 

   

 

10,535

 

Inventory valuation

   

 

48,431

 

   

 

36,020

 

Other

   

 

5,337

 

   

 

5,667

 

    
  

Total deferred tax liabilities

   

 

103,952

 

   

 

96,442

 

    
  

Deferred tax assets:

                  

Reserves and allowances

   

 

(26,308

)

   

 

(24,298

)

Restructuring and impairment reserves

   

 

(9,332

)

   

 

(14,959

)

Capital leases

   

 

(10,416

)

   

 

(9,290

)

Compensation and benefits

   

 

(8,335

)

   

 

(5,413

)

    
  

Total deferred tax assets

   

 

(54,391

)

   

 

(53,960

)

    
  

Net deferred tax liability

   

$

49,561

 

   

$

42,482

 

    
  

 

The amounts reflected in the provision for income taxes are based on applicable federal statutory rates, adjusted for permanent differences between financial and taxable income. The provision (credit) for federal and state income taxes related to continuing operations includes the following (in thousands):

 

    

2002

   

2001

     

2000

  

Current

                         

Federal

   

$

17,892

   

$

(967

)

   

$

(8,699

)

State

   

 

2,178

   

 

(843

)

   

 

(994

)

Deferred

   

 

7,079

   

 

23,425

 

   

 

(19,343

)

    
  
  

Total provision (credit)

   

$

27,149

   

$

21,615

 

   

$

(29,036

)

    
  
  

 

The effective tax rate related to continuing operations varies from the statutory federal income tax rate for the following reasons:

 

    

2002

     

2001

     

2000

  

Statutory income tax rate

   

35.0

%

   

35.0

%

   

(35.0

)%

State income taxes, net of federal tax benefits

   

4.1

 

   

4.6

 

   

(3.7

)

Goodwill

   

0.0

 

   

3.6

 

   

2.4

 

Other

   

0.6

 

   

0.2

 

   

(0.4

)

    
  
  

Effective income tax rate (benefit)

   

39.7

%

   

43.4

%

   

(36.7

)%

    
  
  

 

G.    Preferred and Common Stock

 

The Company has 20,000,000 shares of $0.01 preferred stock authorized but unissued. There are 75,000,000 shares of $0.01 par value common stock authorized.

 

The Company’s Stock Option Plans and Stock Incentive Plans allow the granting of stock options and other equity-based awards to various officers, directors and other employees of the Company at prices not less than 100 percent of fair market value, determined by the closing price on the date of grant. The Company has 570,985 shares available for issuance under the plans as of February 1, 2003. Options vest generally over two to five years. Most stock options vest immediately upon a change of control.

 

18

 

Option activity is summarized as follows (shares/options in thousands):

 

    

Shares

     

Price Range

     

Weighted Ave.

Exercise Price

Outstanding, January 29, 2000

   

2,638

 

   

$10.00 - $37.63

     

$

22.62

Granted

   

800

 

   

5.31 - 18.19

     

 

8.37

Exercised

   

(203

)

   

10.00 - 17.88

     

 

14.26

Cancelled and forfeited

   

(429

)

   

5.31 - 34.88

     

 

24.79

    
  
    

Outstanding, February 3, 2001

   

2,806

 

   

5.31 - 37.63

     

 

18.83

Granted

   

807

 

   

7.30 - 10.10

     

 

8.61

Exercised

   

0

 

   

N/A

     

 

N/A

Cancelled and forfeited

   

(546

)

   

5.31 - 37.63

     

 

17.55

    
  
    

Outstanding, February 2, 2002

   

3,067

 

   

5.31 - 37.63

     

 

16.37

Granted

   

684

 

   

11.70 - 19.85

     

 

14.29

Exercised

   

(229

)

   

5.31 - 17.06

     

 

16.49

Cancelled and forfeited

   

(412

)

   

5.31 - 36.44

     

 

16.17

    
  
    

Outstanding February 1, 2003

   

3,110

 

   

$5.31 - $37.63

     

$

16.55

    
  
    

 

    

Options Exercisable

     

Weighted Ave.

Exercise Price

February 1, 2003

   

1,729

     

$

19.32

February 2, 2002

   

1,347

     

 

20.36

February 3, 2001

   

988

     

 

19.10

 

The following tables summarize information about stock options outstanding at February 1, 2003 (shares in thousands):

 

      

Options Outstanding

Range of Exercise

Prices

     

Shares Outstanding at
Feb. 1, 2003

     

Weighted Average
Remaining Contractual
Life

     

Weighted Average
Exercise Price

$5.31 to $15.00

     

1,609

     

          8.4 years

     

$

9.90

15.88 to   23.31

     

991

     

6.0         

     

 

20.66

24.56 to   37.63

     

510

     

5.5         

     

 

29.53

     
    
    

$5.31 to $37.63

     

3,110

     

          7.2 years

     

$

16.55

     
    
    

 

     

Options Exercisable

Range of Exercise
Prices

     

Shares Exercisable at
Feb. 1, 2003

     

Weighted Average
Exercise Price

$5.31 to  $15.00

     

468

     

$

8.41

15.88  to   23.31

     

820

     

 

20.39

24.56  to   37.63

     

441

     

 

28.90

     
    

$5.31 to  $37.63

     

1,729

     

$

19.32

     
    

 

The weighted average fair value of options granted was $7.54, $3.58 and $3.50 per share in fiscal 2002, 2001 and 2000, respectively. The fair value of stock options is computed as the estimated present value at grant date using the Black-Scholes option-pricing model with weighted average assumptions as follows:

 

    

2002

     

2001

     

2000

  

Risk-free interest rate

   

3.2

%

   

4.3

%

   

5.2

%

Expected volatility

   

66.6

%

   

59.3

%

   

55.4

%

Dividend yield

   

0.0

%

   

0.0

%

   

0.0

%

Expected option life, standard option (years)

   

4.0

 

   

1.0 to 5.0

 

   

1.0 to 5.0

 

 

19

 

In fiscal 1993, the Company adopted a Restricted Stock Plan, which provides awards of up to 200,000 shares of common stock to key employees of the Company. Plan participants are entitled to cash dividends, if any, and to vote their respective shares. Restrictions limit the sale or transfer of the shares during a restricted period. During fiscal 2002 and 2001, the Company issued 117,500 and 25,000 shares, respectively, of restricted stock with a fair value as of the grant date between $11.70 and $19.60 per share in fiscal 2002 and $7.30 per share in fiscal 2001. There were 142,500 shares and 25,000 shares of restricted stock outstanding at February 1, 2003 and February 2, 2002, respectively.

 

H.    Employee Benefits

 

Substantially all employees of the Company are covered by a defined contribution profit sharing plan. The plan for ShopKo and Pamida employees was amended in fiscal 2001 and provides for two types of company contributions: an amount determined annually by the Board of Directors and an employer matching contribution equal to one hundred percent of the first 3 percent and fifty percent of the next 2 percent of compensation contributed by participating employees. The matching contribution in fiscal 2000 was equal to one-half of the first 6 percent of compensation for ShopKo employees and one-half of the first 5 percent of compensation for Pamida employees. Contributions were $14.3, $7.4 and $5.3 million for fiscal 2002, 2001 and 2000, respectively.

 

The Company also provides certain postretirement benefits, other than pensions. Costs associated with these benefits are accrued during the employee’s service period. The annual cost and accumulated benefit obligation associated with these benefits are not material.

 

I.    Fair Values of Financial Instruments

 

The carrying amounts of cash and cash equivalents, receivables, accounts payable, accrued liabilities and short-term debt approximate their fair value. The fair values of the Company’s long-term obligations are estimated using quoted market values or discounted cash flow analysis based on interest rates that are currently available to the Company for issuance of debt with similar terms and remaining maturities.

 

The carrying amounts and fair values of the Company’s long-term obligations (excluding capital leases) at February 1, 2003 and February 2, 2002 are as follows (amounts in thousands):

 

    

February 1, 2003

   

February 2, 2002

Carrying amount

   

$

303,675

   

$

458,114

Fair value

   

 

299,832

   

 

399,652

 

J.    Business Segment Information

 

The Company’s reportable segments are based on the Company’s strategic business operating units, and include a ShopKo Retail segment (which includes ShopKo stores hardlines and softlines merchandise and Retail Health operations, comprised of pharmacy and optical centers) and a Pamida Retail segment (which includes Pamida stores hardlines and softlines merchandise and retail pharmacy operations).

 

The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The Company evaluates performance based on operating earnings of the respective business segments.

 

20

 

Summarized financial information concerning the Company’s reportable segments is shown in the following table (in thousands):

 

    

Fiscal Years

  
    

2002

     

2001

     

2000

  

Net sales

                           

ShopKo Retail

   

$

2,456,094

 

   

$

2,538,920

 

   

$

2,710,885

 

Pamida Retail

   

 

784,093

 

   

 

835,015

 

   

 

806,227

 

    
  
  

Total net sales

   

$

3,240,187

 

   

$

3,373,935

 

   

$

3,517,112

 

    
  
  

Earnings (loss) from operations

                           

ShopKo Retail

   

$

147,075

 

   

$

151,393

 

   

$

118,735

 

Pamida Retail

   

 

11,256

 

   

 

(12,668

)

   

 

23,150

 

Corporate(1)

   

 

(37,685

)

   

 

(23,128

)

   

 

(154,935

)

    
  
  

Earnings (loss) from operations

   

$

120,646

 

   

$

115,597

 

   

$

(13,050

)

    
  
  

Depreciation and amortization expenses

                           

ShopKo Retail

   

$

60,051

 

   

$

64,164

 

   

$

70,602

 

Pamida Retail

   

 

22,641

 

   

 

26,693

 

   

 

22,350

 

Corporate

   

 

645

 

   

 

805

 

   

 

1,127

 

    
  
  

Total depreciation and amortization expenses

   

$

83,337

 

   

$

91,662

 

   

$

94,079

 

    
  
  

Capital expenditures

                           

ShopKo Retail

   

$

22,742

 

   

$

13,662

 

   

$

110,089

 

Pamida Retail

   

 

8,073

 

   

 

3,485

 

   

 

84,769

 

Corporate

   

 

65

 

   

 

51

 

   

 

1,389

 

    
  
  

Total capital expenditures

   

$

30,880

 

   

$

17,198

 

   

$

196,247

 

    
  
  

Category Sales Analysis:

                           

ShopKo Retail

                           

Hardlines

   

$

1,302,926

 

   

$

1,397,252

 

   

$

1,539,642

 

Softlines

   

 

491,918

 

   

 

521,310

 

   

 

584,515

 

Retail Health

   

 

661,250

 

   

 

620,358

 

   

 

586,728

 

    
  
  

Total net sales

   

$

2,456,094

 

   

$

2,538,920

 

   

$

2,710,885

 

    
  
  

Pamida Retail

                           

Hardlines

   

$

523,423

 

   

$

579,080

 

   

$

564,132

 

Softlines

   

 

137,201

 

   

 

150,822

 

   

 

157,309

 

Retail Pharmacy

   

 

123,469

 

   

 

105,113

 

   

 

84,786

 

    
  
  

Total net sales

   

$

784,093

 

   

$

835,015

 

   

$

806,227

 

    
  
  

 

    

As of February 1,
2003

   

As of February 2,
2002

   

As of February 3,
2001

Assets

                     

ShopKo Retail

   

$

1,075,964

   

$

1,148,847

   

$

1,300,080

Pamida Retail

   

 

410,634

   

 

653,492

   

 

704,202

Corporate

   

 

18,369

   

 

17,697

   

 

22,654

    
  
  

Total assets

   

$

1,504,967

   

$

1,820,036

   

$

2,026,936

    
  
  
(1)   Included in Corporate are restructuring charges of $6.0 million and $125.0 million in fiscal 2002 and 2000, respectively, and special charges of $9.2 million in fiscal 2000.

 

21

 

K. Unaudited Quarterly Financial Information

 

Unaudited quarterly financial information is as follows:

 

      

Fiscal Year Ended February 1, 2003

  
      

First
(13 Weeks)

     

Second
(13 Weeks)

   

Third
(13 Weeks)

     

Fourth (13 Weeks)(3)

     

Year

(52 Weeks)

  
      

(In thousands, except per share data)

  

Net sales

     

$728,764

 

   

$783,369

   

$769,610

 

   

$958,444

 

   

$3,240,187

 

Gross margin

     

184,925

 

   

199,467

   

190,903

 

   

258,005

 

   

833,300

 

Earnings from continuing operations

     

472

 

   

7,205

   

877

 

   

32,679

(3)

   

41,233

(3)

Net earnings (loss)

     

(185,580

)(1)

   

7,205

   

877

 

   

32,679

(3)

   

(144,819

)(1),(3)

Basic earnings from continuing operations per
common share

     

$0.02

 

   

$0.25

   

$0.03

 

   

$1.13

(3)

   

$1.43

(3)

Diluted earnings from continuing operations per
common share

     

$0.02

 

   

$0.25

   

$0.03

 

   

$1.12

(3)

   

$1.41

(3)

Weighted average shares—diluted

     

29,210

 

   

29,320

   

29,267

 

   

29,253

 

   

29,218

 

Price range per common share (2)

     

$22.48
- $12.51

  

   

$21.46
- $15.15

   

$17.00
- $11.00

  

   

$16.21
- $10.76

  

   

$22.48
- $10.76

  

      

Fiscal Year Ended February 2, 2002

  
      

First
(13 Weeks)

     

Second (13 Weeks)

   

Third
(13 Weeks)

     

Fourth
(13 Weeks)

     

Year
(52 Weeks)

  
      

(In thousands, except per share data)

  

Net sales

     

$781,824

 

   

$791,181

   

$797,540

 

   

$1,003,390

 

   

$3,373,935

 

Gross margin

     

175,020

 

   

184,945

   

177,904

 

   

268,266

 

   

806,135

 

Earnings (loss) from continuing operations

     

(4,045

)

   

2,594

   

(5,218

)

   

34,886

 

   

28,217

 

Net earnings (loss)

     

(4,045

)

   

2,594

   

(5,218

)

   

34,886

 

   

28,217

 

Basic (loss) earnings from continuing operations per common share

     

$(0.14

)

   

$0.09

   

$(0.18

)

   

$1.22

 

   

$0.98

 

Diluted (loss) earnings from continuing operations per common share

     

$(0.14

)

   

$0.09

   

$(0.18

)

   

$1.21

 

   

$0.98

 

Weighted average shares—diluted

     

28,699

 

   

28,808

   

28,699

 

   

28,869

 

   

28,838

 

Price range per common share (2)

     

$10.70
- $7.35

  

   

$9.00
- $6.79

   

$9.74
- $7.20

  

   

$12.68
-   $8.56

  

   

$12.68
- $6.79

  

(1)   Includes cumulative effect of a change in accounting principle for goodwill of $186,052 ($6.36 per dilutive share).
(2)   Price range per common share reflects the highest and lowest stock market prices on the New York Stock exchange during each quarter.
(3)   Includes pre-tax restructuring charge of $6.0 million.

 

22

 

ShopKo Stores, Inc. and Subsidiaries

 

Schedule II.    Valuation and Qualifying Accounts

 

    

Balance
At
Beginning
of Year

   

Charges
to
Costs &
Expenses

   

Deductions
(Additions)

     

Balance
at End of
Year

    

(In thousands)

Year (53 weeks) ended February 3, 2001:

                              

Allowance for losses

   

$

2,713

   

$

618

   

$

969

*

   

$

2,362

Inventory valuation reserves

   

 

2,400

          

 

1,585

 

   

 

815

Year (52 weeks) ended February 2, 2002:

                              

Allowance for losses

   

$

2,362

   

$

394

   

$

(464

)*

   

$

3,220

Inventory valuation reserves

   

 

815

          

 

(1,765

)

   

 

2,580

Year (52 weeks) ended February 1, 2003:

                              

Allowance for losses

   

$

3,220

   

$

578

   

$

1,187 

*

   

$

2,611

Inventory valuation reserves

   

 

2,580

          

 

282

 

   

 

2,298

*   Net of charges to accounts other than bad debt expense, primarily promotion and advertising.

 

Note: Schedule excludes accounts of discontinued operations

 

23

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.

 

   

SHOPKO STORES, INC. (Registrant)

Date:  April 21, 2003

  

By:

  

/s/    BRIAN W. BENDER        

       

Brian W. Bender,

Senior Vice President, Chief Financial Officer

(Duly Authorized Officer of Registrant)

 

24

CERTIFICATIONS

 

I, Sam K. Duncan, certify that:

 

  1.   I have reviewed this annual report on Form 10-K of ShopKo Stores, Inc.;

 

  2.   Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

 

  3.   Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

 

  4.   The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

 

  (a)   designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

 

  (b)   evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and

 

  (c)   presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

 

  5.   The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

 

  (a)   all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

 

  (b)   any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

 

  6.   The registrant’s other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

 

Date:  April 21, 2003

 

   

/s/    SAM K. DUNCAN        

By:

Title:

  

Sam K. Duncan
Chief Executive Officer, President

 

25

I, Brian W. Bender, certify that:

 

  1.   I have reviewed this annual report on Form 10-K of ShopKo Stores, Inc.;

 

  2.   Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

 

  3.   Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

 

  4.   The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

 

  (a)   designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

 

  (b)   evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and

 

  (c)   presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

 

  5.   The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

 

  (a)   all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

 

  (b)   any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

 

  6.   The registrant’s other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

 

Date:  April 21, 2003

 

   

/s/    BRIAN W. BENDER        

By:

Title:

  

Brian W. Bender
Senior Vice President, Chief Financial Officer

 

26

EXHIBIT INDEX

SHOPKO STORES, INC.

10-K REPORT

 

Exhibit Number

   

Exhibit

     

Sequential Page Number In Manually Signed Original

2.1

   

Agreement and Plan of Merger dated as of May 10, 1999, by and among the Company, ShopKo Merger Corp. and Pamida Holdings Corporation, incorporated by reference to Exhibit 99(c) (1) to the Registrant’s Schedule 14D-1 filed May 17, 1999.

       

3.1

   

Amended and restated Articles of Incorporation of the Company, incorporated by reference to the Registrant’s Current Report on Form 8-K dated May 22, 1998 (the “May 1998 Form 8-K”).

       

3.2

   

Amended and Restated Bylaws of the Company, incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the 13 weeks ended July 29, 2000.

       

4.1.1

   

Indenture dated as of March 12, 1992 between the Company and First Trust National Association, as trustee, with respect to senior notes due March 15, 2022 (“2022 Indenture”), incorporated by reference from the Registrant’s Form 10-K, Annual Report to the Securities and Exchange Commission for the 53 weeks ended February 29, 1992.

       

4.1.2

   

First Supplemental Indenture dated as of May 22, 1998, between the Company and U.S. Bank Trust, as Trustee, with respect to the 2022 Indenture, incorporated by reference to the May 1998 Form 8-K.

       

4.1.3

   

Indenture dated as of July 15, 1993 between the Company and First Trust National Association, as Trustee (“Senior Debt Indenture”), incorporated by reference from the Registrant’s Form 10-K, Annual Report to the Securities and Exchange Commission for the 52 weeks ended February 26, 1994.

       

4.1.4

   

First Supplemental Indenture, dated as of May 22, 1998, between the Company and U.S. Bank Trust, as Trustee, with respect to the Senior Debt Indenture, incorporated by reference to the May 1998 Form 8-K.

       

4.2

   

Rights Agreement between the Company and Norwest Bank Minnesota, National Association, dated as of July 3, 1992, as amended and restated as of September 24, 1997 (including form of preferred stock designation), (“Rights Agreement”) incorporated by reference from the Registrant’s Amendment No. 1 to Registration Statement on Form 8-A/A dated September 29, 1997.

       

4.2.1

   

Rights Agreement Amendment, incorporated by reference to May 1998 Form 8-K.

       

4.3

   

Loan and Security Agreement dated as of March 9, 2001 (“Secured Credit Facility”) among ShopKo Stores, Inc., Pamida, Inc., subsidiaries

       

 

27

Exhibit Number

   

Exhibit

     

Sequential Page Number In Manually Signed Original

    

of ShopKo Stores, Inc., named therein, as guarantors, the banks, named therein, and Fleet Retail Finance Inc., as Administrative Agent, incorporated by reference from the Registrant’s Form 10-K, Annual Report to the Securities and Exchange Commission for the 53 weeks ended February 3, 2001.

       

4.4

   

Loan Agreement between ShopKo Stores, Inc. and Kimco Select Investments, dated March 27, 2002, incorporated by reference to Exhibit 99.1 to the Registrant’s Current Report on Form 8-K dated March 27, 2002.

       

10.1

   

ShopKo Stores, Inc. 1991 Stock Option Plan, incorporated by reference to the Registrant’s Registration Statement on Form S-1 (Registration No. 33-42283). (1)

       

10.2

   

Amendment to Section 11 of ShopKo Stores, Inc. 1991 Stock Option Plan, incorporated by reference to the Registrant’s definitive Proxy Statement dated May 9, 1995 filed in connection with the Registrant’s 1995 Annual Meeting of Shareholders. (1)

       

10.3

   

Form of Stock Option Agreement and First Amendment thereto between the Company and certain Officers and Employees of the Company pursuant to the ShopKo Stores, Inc. 1991 Stock Option Plan, incorporated by reference from the Registrant’s Form 10-K, Annual Report to the Securities and Exchange Commission for the 52 weeks ended February 25, 1995. (1)

       

10.4

   

Alternative Form of Stock Option Agreement between the Company and certain Officers and Employees of the Company pursuant to the ShopKo Stores, Inc. 1991 Stock Option Plan, incorporated by reference from the Registrant’s Form 10-K, Annual Report to the Securities and Exchange Commission for the 52 weeks ended February 25, 1995. (1)

       

10.5

   

ShopKo Stores, Inc. 1995 Stock Option Plan, incorporated by reference from the Registrant’s Form 10-Q, Quarterly Report to the Securities and Exchange Commission for the 12 weeks ended December 2, 1995. (1)

       

10.6

   

Form of Change of Control Severance Agreement between the Company and Certain Officers and Employees of the Company, incorporated by reference from the Registrant’s Form 10-K, Annual Report to the Securities and Exchange Commission for the 52 weeks ended February 25, 1995. (1)

       

10.7

   

Form of Indemnification Agreement between the Company and directors and certain officers of the Company, incorporated by reference to the Registrant’s Form 10-Q, Quarterly Report to the Securities and Exchange Commission for the 13 weeks ended August 1, 1998.

       

 

28

Exhibit Number

   

Exhibit

     

Sequential Page Number In Manually Signed Original

10.8

   

ShopKo Senior Officers Deferred Compensation Plan, amended and restated effective August 21, 2002, incorporated by reference from the Registrant’s Form 10-Q, Quarterly Report to the Securities and Exchange Commission for the 13 weeks ended November 2, 2002. (1)

       

10.9

   

ShopKo Directors Deferred Compensation Plan, amended and restated effective August 21, 2002, incorporated by reference to the Registrant’s Form 10-Q, Quarterly Report to the Securities and Exchange Commission for the 13 weeks ended November 2, 2002. (1)

       

10.10

   

ShopKo Stores, Inc. 1993 Restricted Stock Plan, as amended, incorporated by reference to the Registrant’s definitive Proxy Statement dated May 19, 1994 filed in connection with the Registrant’s 1994 Annual Meeting of Shareholders. (1)

       

10.11

   

ShopKo Stores, Inc. 1998 Stock Incentive Plan, incorporated by reference to the Registrant’s definitive Proxy Statement dated April 10, 1998 filed in connection with the Registrant’s 1998 Annual Meeting of Shareholders. (1)

       

10.12

   

ShopKo Stores, Inc. 1999 Executive Incentive Plan incorporated by reference to the Registrant’s definitive Proxy Statement dated April 19, 1999 filed in conjunction with the Registrant’s 1999 Annual Meeting of Shareholders. (1)

       

10.13

   

ShopKo Stores, Inc. 2000 Executive Long-Term Incentive Plan, incorporated by reference from the Registrant’s definitive Proxy Statement dated April 17, 2000 filed in connection with the Registrant’s 2000 Annual Meeting of Shareholders. (1)

       

10.14

   

ShopKo Stores, Inc. Executive Retirement Plan, dated February 1999, incorporated by reference from the Registrant’s Annual Report on Form 10-K for the 52 weeks ended January 29, 2000. (1)

       

10.15

   

ShopKo Stores, Inc. 2001 Stock Incentive Plan, incorporated by reference to the Registrant’s definitive Proxy Statement dated May 1, 2001 filed in conjunction with the Registrant’s 2001 Annual Meeting of Shareholders. (1)

       

10.16

   

Letter Agreement, dated May 15, 2001, between ShopKo Stores, Inc. and Jack W. Eugster, incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the 13 weeks ended August 4, 2001. (1)

       

10.17

   

Form of Change of Control Severance Agreement between the Company and Certain Officers and Employees of the Company, incorporated by reference to the Registrant’s Annual Report on Form 10-K for the 52 weeks ended February 2, 2002. (1)

       

 

29

Exhibit Number

   

Exhibit

     

Sequential Page Number In Manually Signed Original

10.18

   

ShopKo Stores, Inc. Shared Savings Plan (2002 Restatement), formerly known as ShopKo Stores, Inc. Profit Sharing and Super Saver Plan Trust Agreement, incorporated by reference to the Registrant’s Annual Report on Form 10-K for the 52 weeks ended February 2, 2002. (1)

       

10.19

   

Employment Agreement, dated April 9, 2002 between ShopKo Stores, Inc. and Jeffrey C. Girard, incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the 13 weeks ended May 4, 2002. (1)

       

10.20

   

Letter Agreement, dated April 30, 2002, between ShopKo Stores, Inc. and William J. Podany, incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the 13 weeks ended May 4, 2002. (1)

       

10.21

   

Employment Agreement, dated October 28, 2002 between ShopKo Stores, Inc. and Sam K. Duncan, incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the 13 weeks ended November 2, 2002. (1)

       

21.1

   

Subsidiaries of the Registrant, incorporated by reference to the Registrant’s Annual Report on Form 10-K for the 52 weeks ended February 1, 2003.

       

23.1*

   

Consent of Deloitte & Touche LLP.

       

24.1

   

Directors’ Powers of Attorney, incorporated by reference to the Registrant’s Annual Report on Form 10-K for the 52 weeks ended February 1, 2003.

       

99.1*

   

Statement of Sam K. Duncan, Chief Executive Officer, President, pursuant to 18 U.S.C. ss. 1350

       

99.2*

   

Statement of Brian W. Bender, Senior Vice President, Chief Financial Officer, pursuant to 18 U.S.C. ss. 1350

       
 *   Filed herewith
(1)   A management contract or compensatory plan or arrangement.

 

30