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 October 25, 1997
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 0-11736
The Dress Barn, Inc.
Exact name of registrant as specified in its charter)
Connecticut 06-0812960
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
30 Dunnigan Drive, Suffern, New York 10901
(Address of principal executive offices) (Zip Code)
(914) 369-4500
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
APPLICABLE ONLY TO ISSUERS INVOLVED
IN BANKRUPTCY PROCEEDINGS DURING
THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
.05 par value 23,038,075 shares on December 3, 1997
Page 1 of 9
<PAGE>
THE DRESS BARN, INC. AND SUBSIDIARIES
INDEX
Page
Number
Part I. FINANCIAL INFORMATION (Unaudited):
Item 1. Financial Statements:
Consolidated Balance Sheets
October 25, 1997 (unaudited)
and July 26, 1997 I-3
Consolidated Statements of Earnings
(unaudited) for the Thirteen weeks ended
October 25, 1997 and October 26, 1996 I-4
Consolidated Statements of Cash Flows
(unaudited) for the Thirteen weeks ended
October 25, 1997 and October 26, 1996 I-5
Notes to Unaudited Consolidated Financial
Statements (unaudited) I-6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations I-7 and I-8
Part II. OTHER INFORMATION:
Item 1. Legal Proceedings *
Item 2. Changes in Securities *
Item 3. Defaults Upon Senior Securities *
Item 4. Submissions of Matters to a Vote
of Security Holders *
Item 5. Other Information *
Item 6. Exhibits and Reports on Form 8-K I-9
* Not applicable in this filing.
<PAGE>
<TABLE>
The Dress Barn, Inc. and Subsidiaries
Consolidated Balance Sheets
Dollars in thousands except share data
<CAPTION>
October 25, July 26,
ASSETS 1997 1997
------------------ ------------------
(unaudited)
<S> <C> <C>
Current Assets:
Cash & cash equivalents $8,012 $1,124
Marketable securities and investments 135,635 122,888
Merchandise inventories 108,726 99,835
Prepaid expenses and other 3,963 2,469
------------------ ------------------
Total Current Assets 256,336 226,316
------------------ ------------------
Property and Equipment:
Leasehold improvements 55,181 54,261
Fixtures and equipment 95,793 92,438
Computer software 8,032 7,924
Automotive equipment 316 301
------------------ ------------------
159,322 154,924
Less accumulated depreciation
and amortization 77,721 73,171
------------------ ------------------
81,601 81,753
------------------ ------------------
Other Assets 1,540 1,433
================== ==================
$339,477 $309,502
================== ==================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable- trade $47,077 $40,168
Accrued expenses 34,587 27,814
Customer credits 2,203 2,489
Income taxes payable 5,921 2,266
------------------ ------------------
Total Current Liabilities 89,788 72,737
------------------ ------------------
Deferred Income Taxes 361 443
------------------ ------------------
Long Term Debt 3,500 3,500
------------------ ------------------
Commitments
Shareholders' Equity:
Preferred stock, par value $.05 per share:
Authorized- 100,000 shares
Issued and outstanding- none -- --
Common stock, par value $.05 per share:
Authorized- 30,000,000 shares
Issued- 24,124,730 and 23,887,538
shares, respectively
Outstanding- 22,979,730 and 22,742,538
shares, respectively 1,206 1,194
Additional paid-in capital 21,751 19,856
Retained earnings 229,976 218,877
Treasury stock, at cost (8,214) (8,214)
Unrealized holding gain on investments 1,109 1,109
------------------ ------------------
245,828 232,822
================== ==================
$339,477 $309,502
================== ==================
<FN>
See notes to condensed financial statements (unaudited)
</FN>
</TABLE>
<PAGE>
<TABLE>
The Dress Barn, Inc. and Subsidiaries
Consolidated Statements of Earnings
Dollars in thousands except per share amounts
<CAPTION>
Thirteen Weeks Ended
-----------------------------------------------
October 25, October 26,
1997 1996
------------------ -------------------
<S> <C> <C>
Net sales $156,194 $142,755
Cost of sales, including
occupancy and buying costs 99,718 92,795
------------------ -------------------
Gross profit 56,476 49,960
Selling, general and
administrative expenses 35,912 34,035
Depreciation and amortization 4,550 4,390
------------------ -------------------
Operating income 16,014 11,535
Interest income- net 1,460 943
------------------ -------------------
Earnings before
income taxes 17,474 12,478
Income taxes 6,378 4,554
------------------ -------------------
Net earnings $11,096 $7,924
================== ===================
Earnings per share
Primary $0.47 $0.35
================== ===================
Fully Diluted $0.47 $0.35
================== ===================
Weighted average shares outstanding:
Primary 23,808 22,598
------------------ -------------------
Fully Diluted 23,848 22,598
------------------ -------------------
<FN>
See notes to accompanying condensed financial statements
</FN>
</TABLE>
<PAGE>
<TABLE>
The Dress Barn, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Dollars in thousands
<CAPTION>
Thirteen Weeks Ended
--------------------------------------------
October 25, October 26,
1997 1996
------------------- -------------------
<S> <C> <C>
Operating Activities:
Net earnings $11,096 $7,924
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization of property and
equipment 4,550 4,390
Change in deferred income taxes (82) 0
Deferred compensation 5 70
Changes in assets and liabilities:
Increase in merchandise inventories (8,891) (9,891)
Increase in prepaid expenses (1,494) (1,256)
Increase in other assets (107) (104)
Increase in accounts payable- trade 6,909 9,220
Increase in accrued expenses 6,773 1,971
Decrease in customer credits (286) (129)
Increase in income taxes payable 3,655 3,841
------------------- -------------------
Total adjustments 11,032 8,112
------------------- -------------------
Net cash provided by operating activities 22,128 16,036
------------------- -------------------
Investing Activities:
Purchases of property and equipment - net (4,398) (3,078)
Sales and maturities of marketable securities and investments 38,845 21,418
Purchases of marketable securities and investments (51,592) (25,187)
------------------- -------------------
Net cash used in investing activities (17,145) (6,847)
------------------- -------------------
Financing Activities:
Proceeds from Employee Stock Purchase Plan 30 43
Proceeds from stock options exercised 1,875 504
------------------- -------------------
Net cash provided by financing activities 1,905 547
------------------- -------------------
Net increase in cash and cash equivalents 6,888 9,736
Cash and cash equivalents- beginning of period 1,124 9,517
------------------- -------------------
Cash and cash equivalents- end of period $8,012 $19,253
=================== ===================
Supplemental Disclosure of Cash Flow Information:
Cash paid for income taxes $2,723 $713
=================== ===================
<FN>
See notes to consolidated financial statements (unaudited)
</FN>
</TABLE>
<PAGE>
THE DRESS BARN, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain 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 amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. In the
opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments (consisting of normal recurring adjustments)
which management considers necessary to present fairly and consolidated
financial position of The Dress Barn Inc. and its wholly owned subsidiaries (the
"Company") as of October 25, 1997 and July 26, 1997, the consolidated results of
its operations for the thirteen weeks ended October 25, 1997 and October 26,
1996, and cash flows for the thirteen weeks ended October 25, 1997 and October
26, 1996. The results of operations for thirteen week periods may not be
indicative of the results for the entire year.
These consolidated financial statements should be read in conjunction
with the audited financial statements and notes thereto included in the
Company's July 26, 1997 Annual Report to Shareholders. Accordingly, significant
accounting policies and other disclosures necessary for complete financial
statements in conformity with generally accepted accounting principles have been
omitted since such items are reflected in the Company's audited financial
statements and related notes thereto.
2. Reclassification
Certain reclassifications have been made to prior year's financial
statements to conform with the current year's presentation.
3. Recent Pronouncements
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share." This
statement is effective for financial statements issued for periods ending after
December 15, 1997 and will require restatement of all prior period comparative
amounts. Under this statement, primary and fully diluted earnings per share
calculations will be replaced by basic and diluted earnings per share
calculations. Diluted earnings per share does not differ materially from primary
earnings per share as currently reported. Basic earnings per share for the
three-month periods ended October 25, 1997 and October 26, 1996 were $0.49 and
$0.35, respectively.
<PAGE>
THE DRESS BARN, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Net sales increased by 9.4% to $156.2 million for the 13 weeks ended
October 25, 1997 from $142.8 million for last year's three month period, due
primarily to a 6% increase in comparable store sales. The increase in net sales
for the first quarter was positively affected by the reaction to the Company's
merchandise. The increase in net sales was also attributable to an approximately
4% increase in total selling square footage, which was due to the opening of new
combination ("combo") stores and the conversion of single-format stores into
combo stores. During the thirteen-week period, the Company opened or converted
to Combos 23 stores and closed 12 stores. The Company's strategy for the
remainder of fiscal 1998 is to continue opening primarily combo stores and
converting its existing single-format stores into combos, while aggressively
closing its underperforming locations. This strategy resulted in the number of
stores in operation declining to 691 stores as of October 25, 1997, from 728
stores in operation as of October 26, 1996. As of October 25, 1997, the Company
had in operation 384 Dress Barn stores, 80 Dress Barn Woman stores and 227 Combo
stores. The Company anticipates closing approximately 25 stores during the next
fiscal quarter.
Gross profit (net sales less cost of goods sold, including occupancy
and buying costs) increased by 13.0% to $56.5 million, or 36.2% of net sales,
for the three month period from $50.0 million, or 35.0% of net sales, for the
comparable 1996 period. The increase in gross profit as a percentage of net
sales was primarily due to higher initial margins resulting from the Company's
increased percentage of private brand merchandise, decreased markdowns and the
fixed nature of occupancy costs which were unaffected by the increases in
comparable store sales.
Selling, general and administrative (SG&A) expenses were $35.9 million
for the first quarter, compared to $34.0 million for last year's comparable
quarter. As a percent of sales, SG&A expenses (excluding depreciation) decreased
as a percentage of sales, from 23.8% of sales in 1996 to 23.0% in 1997. This
decrease reflected the resulting leverage from the 6% increase in comparable
store sales for the quarter and the Company's continued focus on cost reductions
and productivity improvements. Depreciation as a percent of sales decreased to
2.9% from 3.1% last year.
Interest income for the quarter increased to approximately $1.5 million
this year versus $.9 million in last year's first quarter as the funds available
for investment increased.
The effective tax rate for the thirteen weeks ended October 25, 1997
was 36.5%, the same as that in effect for the fiscal year ended July 26, 1997.
As a result of the above factors, net income for the quarter ended October
25, 1997 was $11.1 million, a increase of 40.0% versus the $7.9 million earned
for the same period a year earlier.
<PAGE>
THE DRESS BARN, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Liquidity and Capital Resources
At October 25, 1997, the Company had working capital of approximately
$167 million and three bank credit lines totaling $100 million without any
outstanding borrowings. The Company had minimal long-term debt - a $3.5 million
below-market interest rate loan from New York State. Inventories were current
and in line with sales projections. Expenditures for property and equipment
totaled $4.4 million for the three months ended October 25, 1997, compared to
$3.1 million of expenditures in last year's first three months.
The Company believes that its cash, cash equivalents and short-term
investments, together with cash flow from operations, will be adequate to fund
the Company's fiscal 1998 capital expenditures, any acquisitions currently being
considered and other operating requirements.
Forward-Looking Statements and Factors Affecting Future Performance
This Form 10-Q contains forward-looking statements within the meaning
of Section 21E of the Securities Exchange Act of 1934, as amended. These
statements reflect the Company's current views with respect to future events and
financial performance. The Company's actual results of operations and future
financial condition may differ materially from those expressed or implied in any
such forward looking statements as a result of certain factors set forth below
in the Company's Annual Report on Form 10-K for its fiscal year ended July 26,
1997.
<PAGE>
Part II - OTHER INFORMATION
Item 6 -- Exhibits and Reports on Form 8-K
(a) No exhibits are required to be filed herewith.
(b) No reports on Form 8-K have been filed during the quarter for
which this report is filed.
SIGNATURE
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.
BY: /s/ ARMAND CORREIA
Armand Correia
Senior Vice President
(Principal Financial
and Accounting Officer)
<PAGE>
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<PERIOD-START> JUL-27-1997
<PERIOD-END> OCT-25-1997
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<SECURITIES> 135635
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</TABLE>
