UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended July 28, 1996
OR
( ) Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission file Number 0-20269
DUCKWALL-ALCO STORES, INC.
(Exact name of registrant as specified in its charter.)
Kansas 48-0201080
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
401 Cottage Street
Abilene, Kansas 67410-0129
(Address of principal executive offices (Zip Code)
Registrant's telephone number, including area code:
(913) 263-3350
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 [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
3,999,510 shares of common stock, $.0001 par value (the issuer's
only class of common stock), were outstanding as of July 28, 1996.
<PAGE>
<TABLE>
PART I. Financial Information.
ITEM 1. Financial Statements.
Duckwall-ALCO Stores, Inc.
And Subsidiary
Consolidated Balance Sheets
(Dollars in Thousands)
<CAPTION>
July 28,1996 January 28,1996
(Unaudited)
_______________ _______________
<S> <C> <C>
ASSETS
Current assets:
Cash on deposit and on hand $1,804 $177
Receivables 2,828 2,545
Inventories 80,119 71,635
Property held for resale 41 41
Other current assets 1,973 1,210
Total current assets 86,765 75,608
Property and equipment:
Land 2,379 2,297
Buildings 18,070 16,867
Furniture, fixtures and equipment 23,978 22,354
Transportation equipment 1,580 1,473
Leasehold improvements 3,837 3,164
Construction in progress 3,652 1,389
Total property and equipment 53,496 47,544
Less accumulated depreciation 25,011 23,676
Net property and equipment 28,485 23,868
Property under capital leases 20,541 20,541
Less accumulated for amortization 12,819 12,404
Net property under capital leases 7,722 8,137
Debt financing cost 100 110
Total assets $123,072 $107,723
<FN>
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
Duckwall-ALCO Stores, Inc.
And Subsidiary
Consolidated Balance Sheets
(Dollars in Thousands)
<CAPTION>
July 28,1996 January 28,1996
(Unaudited)
_______________ _______________
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of:
Long term debt $752 $545
Capital lease obligations 637 637
Accounts payable 20,015 16,335
Income taxes payable 476 820
Accrued salaries and commissions 2,096 3,614
Accrued taxes other than income 2,430 2,203
Deferred taxes 2,492 2,467
Other current liabilities 1,081 1,598
Total current liabilities 29,979 28,219
Notes payable under revolving loan 21,353 12,015
Long term debt
less current maturities 3,540 1,599
Capital lease obligations
less current maturities 9,437 9,755
Deferred income taxes 2,355 2,329
Other non-current liabilities 794 745
Total liabilities 67,458 54,662
Shareholders' equity:
Common stock, $.0001 par value, authorized
20,000,000 shares; issued and outstanding 1 1
3,999,510 shares
Additional paid-in capital 41,316 40,690
Retained earnings since June 2, 1991 14,297 12,370
Total shareholders' equity 55,614 53,061
Total liabilities and shareholders' equity $123,072 $107,723
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
Duckwall-ALCO Stores, Inc.
And Subsidiary
Consolidated Statement of Operations
(Dollars in Thousands Except Per Share Amounts)
(Unaudited)
<CAPTION>
For the Thirteen For the Twenty-six
Week Periods Week Periods
July 28 July 30 July 28 July 30
1996 1995 1996 1995
_________________ ___________________
<S> <C> <C> <C> <C>
Net sales .................... $68,426 $62,592 $127,774 $117,532
Cost of sales ................ 46,106 42,381 85,812 79,139
Gross margin ............ 22,320 20,211 41,962 38,393
Selling, general
and administrative ...... 18,546 17,048 35,458 32,884
Depreciation
and amortization ........ 925 760 1,789 1,497
Total operating expenses 19,471 17,808 37,247 34,381
Income from operations ....... 2,849 2,403 4,715 4,012
Interest expense.............. 860 782 1,592 1,417
Earnings before income taxes . 1,989 1,621 3,123 2,595
Income tax expense ........... 765 616 1,196 986
Net earnings ............ $1,224 $1,005 $1,927 $1,609
Earnings per common and
common equivalent share . $0.30 $0.25 $0.48 $0.40
<FN>
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
Duckwall-ALCO Stores, Inc.
And Subsidiary
Consolidated Statements of Cash Flow
(Dollars in Thousands)
(Unaudited)
<CAPTION>
For the Twenty-six Week Periods
July 28,1996 July 30, 1995
_______________ _______________
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Earnings $1,927 $1,609
Adjustments to reconcile
net earnings to net cash
used in operating activities
Amortization of
debt financing costs 20 90
Deferred income tax benefit 51 (0)
Depreciation and amortization 1,789 1,497
LIFO Expense 90 125
Increase in inventories (8,574) (8,349)
Increase in accounts payable 3,680 4,702
Increase in receivables (283) (40)
Decrease (Increase)
in other current assets (763) 70
Increase in accrued taxes
other than income 227 387
Increase (Decrease) in accrued
salaries and commissions (1,518) (1,013)
(Decrease) in income taxes payable 282 (944)
Decrease in other liabilities (468) (1,261)
Net cash used in
operating activities (3,540) (3,127)
CASH FLOW FROM INVESTING ACTIVITIES
Capital expenditures (5,991) (3,153)
Net cash used in
investing activities (5,991) (3,153)
CASH FLOW FROM FINANCING ACTIVIES
Decrease in bank overdrafts 0 (76)
Increase in revolving loan 9,338 8,853
Principal payments on
long term notes (520) (645)
Principal payments on
capital leases (318) (315)
Increase in long term notes 2,668 0
Debt issue costs (10) (25)
Net cash provided by
financing activities 11,158 7,792
Net increase in cash 1,627 1,512
Cash at beginning of period 177 0
Cash at end of period $1,804 $1,512
<FN>
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
<PAGE>
Duckwall-ALCO Stores, Inc.
And Subsidiary
Notes to Unaudited Consolidated Financial Statements
(1) Basis of Presentation
The accompanying unaudited consolidated financial
statements are for interim periods and, consequently, do not
include all disclosures required by generally accepted
accounting principles for annual financial statements. It is
suggested that the accompanying unaudited consolidated
financial statements be read in conjunction with the
consolidated financial statements included in the Company's
fiscal 1996 Annual Report. Certain amounts reported as other
income for the thirteen-week periods ended April 28, 1996 and
April 30, 1995 in the Form 10-Q for the quarter ended
April 28, 1996 have been reclassified as Selling, General and
Administrative Expense in the accompanying statements of
operations for the twenty-six week periods ended July 28, 1996
and July 30, 1995. The amounts reclassified amounted to $17
for 1996 and $85 for 1995. In the opinion of management of
Duckwall-ALCO Stores, Inc., the accompanying unaudited
consolidated financial statements reflect all adjustments
(consisting of normal recurring accurals) necessary to present
fairly the financial position of the Company and the results
of its operations and cash flows for the interim periods.
(2) Principles of Consolidation
The consolidated financial statements include the accounts
of Duckwall-ALCO Stores, Inc. and its wholly-owned subsidiary.
All significant intercompany transactions and balances have
been eliminated in consolidation.
(3) Earnings Per Share
Earnings per share has been computed based on the weighted
average number of common shares outstanding during the period
plus common stock equivalents, when dilutive, consisting of
stock options.
The average number of shares used in computing earnings
per share was as follows:
Thirteen Weeks Ending
July 28, 1996 4,049,620
July 30, 1995 4,009,874
Twenty-six Weeks Ending
July 28, 1996 4,033,522
July 30, 1995 4,007,909
<PAGE>
Duckwall-ALCO Stores, Inc.
And Subsidiary
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION.
(Dollars in thousands)
[CAPTION]
The thirteen weeks ended July 28, 1996 and July 30, 1995 are
referred to herein as the second quarter of fiscal 1997
and 1996, respectively.
As used below the term "competitive market" refers to any
market wherein there is one or more national or regional
discount stores located in the market served by the Company.
The term "non-competitive market" refers to any market where
there is no national or regional discount store located in the
market served by the Company. Even in a non-competitive
market, the Company faces competition from a variety of sources.
RESULTS OF OPERATIONS
Net sales for the second quarter of fiscal 1997 increased
$5,834 or 9.3% to $68,426 compared to $62,592 for the second
quarter of fiscal 1996. During the second quarter of fiscal
1997, the Company opened 4 stores, 3 of which were in new non-
competitive markets, resulting in a quarter end total of 170
stores. Net sales for all stores open the full period in both
the second quarter of fiscal 1997 and fiscal 1996 (comparable
stores) decreased $523 or .9%. The same store sales decrease
was primarily attributable to increased competition in three
existing markets. The prototype Class 18 stores and the
Duckwall variety stores produced increases of $278 or 1.6% and
$90 or 3.2% respectively.
Net sales for the twenty-six week period ending July 28, 1996
increased $10,242 or 8.7% to $127,774 compared to $117,532 of
the comparable twenty-six week period of the prior fiscal year.
Net sales of comparable stores decreased by $1,670, or 1.5% for
the twenty-six week period ending July 28, 1996 compared to the
twenty-six week period of the prior fiscal year.
Gross margin for the second quarter of fiscal 1997 increased
$2,109 or 10.4% to $22,320 compared to $20,211 in the second
quarter of fiscal 1996. Gross margin as a percentage of sales
was 32.6% for the second quarter of fiscal 1997 compared to
32.3% in the second quarter of fiscal 1996. The improvement in the
gross margin percentage was due to a higher markup on purchases
and lower shrinkage.
Gross margin for the twenty-six week period ended July 28, 1996
was $41,962, which was $3,569 or 9.3% higher than last year's
twenty-six week gross margin of $38,393. As a percent of net
sales, gross margin for the twenty-six week period ended
July 28, 1996 was 32.8% compared to 32.7% in the twenty-six
week period of the prior fiscal year.
Selling, general and administrative expense increased $1,498 or
8.8% to $18,546 in the second quarter of fiscal 1997 compared
to $17,048 in the second quarter of fiscal 1996, primarily due
to the increase in total stores. As a percentage of net sales,
selling, general and administrative expenses in the second
quarter of fiscal 1997 was 27.1%, compared to 27.2% in the
second quarter of fiscal 1996. As more new stores are opened,
selling, general and administration expenses as a percentage of
sales are expected to decline, as the relatively fixed costs of
operating the general office and warehouse are spread over a
larger sales base.
Selling, general and administrative expenses increased $2,574
or 7.8% to $35,458 for the twenty-six week period ended
July 28, 1996 compared to $32,884 for the comparable twenty-six
week period of the prior fiscal year. Selling, general and
administrative expense as a percent of net sales was 27.8% for
the twenty-six week period ended July 28, 1996 compared to
28.0% in the comparable twenty-six week period last year. The
increase in selling, general and administrative expense in
fiscal 1996 is primarily due to a 16% increase in the number of
stores.
Depreciation and amortization expense increased $165 or 21.7%
to $925 in the second quarter of fiscal 1997 compared to $760
in the second quarter of fiscal 1996. The increase is due to
additional buildings and equipment associated with the store
expansion program.
<PAGE>
Duckwall-ALCO Stores, Inc.
And Subsidiary
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION (continued).
(Dollars in thousands)
[CAPTION]
Income from operations increased $446 or 18.6% to $2,849 in
the second quarter of fiscal 1997 compared to $2,403 in the
second quarter of fiscal 1996. Income from operations as a
percentage of net sales increased to 4.2% in the second quarter
of fiscal 1997 compared to 3.8% in the second quarter of fiscal
1996.
Income from operations increased $703 or 17.5% to $4,715 for
the twenty-six week period ended July 28, 1996 compared to
$4,012 in the comparable twenty-six week period of the prior
fiscal year.
Interest expense increased $78 or 10.0% in the second quarter
of fiscal 1997 compared to the second quarter of fiscal 1996.
The increase is attributable to higher borrowing levels due to
purchases of inventory, buildings and equipment to support the
new store openings.
Net earnings for the second quarter of fiscal 1997 were $1,224,
an increase of $219 or 21.8% over the net earnings of $1,005
for the second quarter of fiscal 1996.
The Company has recorded a tax benefit of $470 in the second
quarter of fiscal 1997 as an increase to additional paid in
capital based on utilization of $1,341 of the NOL carry forward
arising prior to the 1991 reorganization, which aggregated
$1,754 for Federal income tax purposes at January 28, 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of funds are cash flow from
operations, borrowings under its revolving loan credit facility,
mortgage financing, and vendor trade credit financing
(increases in accounts payable).
At July 28, 1996 working capital (defined as current assets
less current liabilities) was $56,786 compared to $47,389 at
the end of fiscal 1996.
Cash used by operating activities in the second quarter of
fiscal 1997 and 1996 was $3,540 and $3,127 respectively. The
increase in the amount of cash used by operating activities in
the first quarter of fiscal 1997 compared to the first quarter
of fiscal 1996 was primarily due to a smaller increase in the
trade accounts payable build up relative to the overall
increase in inventory levels.
The Company generated cash from financing activities in the
second quarter of fiscal 1997 and 1996 of $11,158 and $7,792,
respectively. This was generated by borrowing under the
revolving loan credit facility, as well as a $1,000 mortgage
secured by certain company fixed assets and a $1,668 leaseback
of computer equipment.
Cash used for acquisition of property and equipment in the
second quarters of fiscal 1997 and 1996 totaled $5,991 and
$3,153, respectively. Total anticipated cash payments for
acquisition of property and equipment in fiscal 1997,
principally for store buildings and store and warehouse
fixtures and equipment, are $12,578.
<PAGE>
Duckwall-ALCO Stores, Inc.
And Subsidiary
PART II. OTHER INFORMATION.
Item 1. Legal Proceedings
No legal proceedings except those covered by insurance
occurred during the thirteen week period ended
July 28, 1996.
Item 2. Changes in Securities
Not Applicable
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) None
(b) Reports on Form 8-K
No reports filed
<PAGE>
Duckwall-ALCO Stores, Inc.
And Subsidiary
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.
DUCKWALL-ALCO STORES, INC.
(Registrant)
Date, September 9, 1996 /s/ Bryan M. DeCordova
Bryan M. DeCordova
Vice President - Finance
Chief Financial Officer
Signing on behalf of the
registrant and as principal
financial officer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> Year 3-MOS
<FISCAL-YEAR-END> Jan-28-1996 Feb-02-1997
<PERIOD-START> Jan-30-1995 Apr-29-1996
<PERIOD-END> Jan-28-1996 Jul-28-1996
<CASH> 177 1,804
<SECURITIES> 0 0
<RECEIVABLES> 2,545 2,828
<ALLOWANCES> 0 0
<INVENTORY> 71,635 80,119
<CURRENT-ASSETS> 75,608 86,765
<PP&E> 47,544 53,496
<DEPRECIATION> (23,676) (25,011)
<TOTAL-ASSETS> 107,723 123,072
<CURRENT-LIABILITIES> 28,219 29,979
<BONDS> 0 0
<COMMON> 1 1
0 0
0 0
<OTHER-SE> 53,060 55,613
<TOTAL-LIABILITY-AND-EQUITY> 107,723 123,072
<SALES> 256,454 68,426
<TOTAL-REVENUES> 256,454 68,426
<CGS> 173,296 46,106
<TOTAL-COSTS> 248,180 66,437
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 2,958 860
<INCOME-PRETAX> 8,274 1,989
<INCOME-TAX> 3,144 765
<INCOME-CONTINUING> 5,130 1,224
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 5,130 1,224
<EPS-PRIMARY> 1.28 .30
<EPS-DILUTED> 1.28 .30
</TABLE>
