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 April 26, 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 No X
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 22,859,429 shares on June 6, 1997
<PAGE>
THE DRESS BARN, INC. AND SUBSIDIARIES
INDEX
Page
Number
Part I. FINANCIAL INFORMATION:
Item 1. Financial Statements:
Consolidated Balance Sheets
April 26, 1997 (unaudited)
and July 27, 1996 I-3
Consolidated Statements of Earnings
(unaudited) for the Thirteen and
Thirty-nine weeks ended
April 26, 1997 and April 27, 1996 I-4 and I-5
Consolidated Statements of Cash Flows
(unaudited) for the Thirty-nine weeks ended
April 26, 1997 and April 27, 1996 I-6
Notes to Consolidated Financial
Statements (unaudited) I-7 thru I-9
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations I-10 thru I-12
Part II. OTHER INFORMATION:
Item 1. Legal Proceedings *
Item 2. Changes in Securities *
Item 3. Defaults Upon Senior Securities *
Item 4. Submission of Matters to a Vote
of Security Holders *
Item 5. Other Information *
Item 6. Exhibits and Reports on Form 8-K I-10
* Not applicable in this filing.
<PAGE>
The Dress Barn, Inc. and Subsidiaries
Consolidated Balance Sheets
April 26, July 27,
ASSETS 1997 1996
------------- -------------
Current Assets: (unaudited)
Cash & cash equivalents ....................$ 1,180,453 $ 9,517,302
Marketable securities ...................... 114,135,716 81,787,882
Merchandise inventories .................... 102,643,525 89,790,984
Prepaid expenses and other ................. 2,813,802 2,769,809
------------- -------------
Total Current Assets .................... 220,773,496 183,865,977
------------- -------------
Property and Equipment:
Leasehold improvements ..................... 55,778,538 51,008,298
Fixtures and equipment ..................... 96,545,826 88,454,311
Computer software .......................... 8,592,140 7,603,314
Automotive equipment ....................... 379,150 342,283
------------- -------------
161,295,654 147,408,206
Less accumulated depreciation
and amortization ......................... 81,343,829 66,503,707
------------- -------------
79,951,825 80,904,499
------------- -------------
Other Assets .................................... 1,146,447 952,211
============= -------------
$ 301,871,768 $ 265,722,687
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable- trade ....................$ 45,073,443 $ 37,198,907
Accrued expenses ........................... 25,462,946 20,903,368
Customer credits ........................... 2,486,958 2,062,184
Income taxes payable ....................... 1,414,044 971,762
------------- -------------
Total Current Liabilities ............... 74,437,391 61,136,221
------------- -------------
Deferred Income Taxes ........................... 1,808,562 1,990,562
------------- -------------
Long Term Debt .................................. 3,500,000 3,500,000
------------- -------------
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- 23,859,429 and 23,281,640
shares, respectively
Outstanding- 22,854,429 and 22,276,640
shares, respectively ............. 1,199,899 1,178,673
Additional paid-in capital ................. 18,647,240 16,529,497
Retained earnings .......................... 207,664,645 187,110,242
Treasury stock, at cost .................... (5,705,612) (5,705,612)
Unrealized investments gains ............... 319,643 (16,896)
------------- -------------
222,125,815 199,095,904
============= =============
$ 301,871,768 $ 265,722,687
============= =============
See notes to consolidated financial statements (unaudited)
<PAGE>
The Dress Barn, Inc. and Subsidiaries
Consolidated Statements of Earnings- Third Quarter
Unaudited
Thirteen Weeks Ended
--------------------------
April 27, April 26,
1997 1996
-------------------------
Net sales ...................................... $ 134,103,320$ 125,174,377
Cost of sales, including
Occupancy and buying costs ............... 85,794,536 81,390,921
------------------------------
Gross profit .................................... 48,308,784 43,783,456
Selling, general and administrative expenses .... 32,808,185 31,613,939
Depreciation and amortization ................... 5,106,214 4,813,098
Interest (income) - net ......................... (1,201,785 (798,893)
------------------------------
Earnings before income taxes ............ 11,596,170 8,155,312
------------------------------
Income taxes .................................... 4,232,000 3,018,000
------------------------------
Net Earnings ............................$ 7,364,170$ 5,137,312
==============================
Earnings per share ..............................$ 0.32$ 0.23
==============================
Weighted average shares outstanding ..... 22,861,477 22,438,458
==============================
See notes to consolidated financial statements (unaudited)
<PAGE>
The Dress Barn, Inc. and Subsidiaries
Consolidated Statements of Earnings- Nine Months
Unaudited
Thirty Nine Weeks Ended
-------------------------------
April 27, April 26,
1997 1996
-------------- --------------
Net sales .......................................$ 408,315,718 $ 381,651,631
Cost of sales, including
Occupancy and buying costs ............... 266,106,463 250,731,721
-------------- --------------
Gross profit .................................... 142,209,255 130,919,910
Selling, general and administrative expenses .... 99,092,575 98,806,728
Depreciation and amortization ................... 14,063,867 14,100,000
Interest (income) - net ......................... (3,315,572) (2,453,234)
-------------- --------------
Earnings before income taxes ............ 32,368,385 20,466,416
Income taxes .................................... 11,814,000 7,573,000
-------------- --------------
Net Earnings ............................$ 20,554,385 $ 12,893,416
============== ==============
Earnings per share ..............................$ 0.90 $ 0.58
============== ==============
Weighted average shares outstanding ..... 22,718,056 22,367,126
============== ==============
See notes to consolidated financial statements (unaudited)
<PAGE>
The Dress Barn, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Unaudited
Thirty-Nine Weeks Ended
--------------------------
April 26, April 27,
1997 1996
----------- ---------
Operating Activities:
Net earnings .........................................$ 20,554,386 $ 12,893,416
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization of property
and equipment ............................... 12,659,206 12,300,000
Loss on disposal of closed store assets ..... 1,404,660 1,800,000
Increase (decrease) in deferred income taxes (182,000) 73,000
Deferred compensation ....................... 160,969 241,699
Changes in assets and liabilities:
Increase in merchandise inventories .... (12,852,541) (11,011,736)
Decrease (increase) in prepaid expenses (43,993) 409,969
(Increase) decrease in other assets .... (194,236) (169,040)
Increase in accounts payable- trade .... 7,874,536 10,766,340
Increase (decrease) in accrued expenses 4,559,578 (1,524,430)
Increase in customer credits ........... 424,774 303,119
Increase (decrease) in taxes paya 442,282 (1,111,068)
------------ ------------
Total adjustments ...................... 14,253,236 12,077,853
------------ ------------
Net cash provided by operating activities ............ 34,807,622 24,971,269
------------ ------------
Investing Activities
Purchases of property and equipment .................. (13,111,193) (12,951,732)
Purchases of marketable securities ................... (70,716,091) (56,035,227)
Sales of marketable securities ....................... 22,268,002 5,000,000
Maturities of marketable securities .................. 16,436,795 37,268,002
------------ ------------
Net cash used in investing activities ....... (45,122,487) (26,718,957)
------------ ------------
Financing Activities
Proceeds from Employee Stock Purchase Plan ........... 116,878 179,139
Proceeds from stock options exercised ................ 1,861,138 835,818
------------ ------------
Net cash provided by financing activities ... 1,978,015 1,014,957
------------ ------------
Net (decrease) increase in cash and cash equivalents . (8,336,849) (732,730)
Cash and cash equivalents- beginning of period ....... 9,517,302 7,378,747
------------ ------------
Cash and cash equivalents- end of period .............$ 1,180,453 $ 6,646,017
============ ============
Supplemental Disclosure of Cash Flow Information:
Cash paid for income taxes ..................$ 10,921,036 $ 8,611,068
============ ============
See notes to consolidated financial statements (unaudited)
<PAGE>
THE DRESS BARN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. Financial Statements
The preparation of the accompanying unaudited 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 in all
material respects the consolidated financial position of The Dress Barn, Inc.
and its wholly owned subsidiaries (the "Company") as of April 26, 1997 and July
27, 1996, the consolidated results of its operations for the thirteen and
thirty-nine weeks ended April 26, 1997 and April 27, 1996, and cash flows for
the thirty-nine weeks ended April 26, 1997 and April 27, 1996. The results of
operations for thirteen and thirty-nine 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 27, 1996 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. 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.
The women's retail apparel industry is highly competitive. The Company
competes primarily with department stores, off-price retailers, specialty
stores, discount stores and mass merchandisers, many of which have substantially
greater financial, marketing and other resources than the Company. In addition,
many department stores have in the past been more promotional than they are now
and have reduced their selling prices, and certain of the Company's competitors
and vendors have opened outlet stores which offer off-price merchandise. The
Company's sales and results of operations may also be affected by close-outs and
going-out-of-business sales by other women's apparel retailers. Partially as a
result of such competition, apparel retailers have experienced price deflation
during the last several years. The Company may face periods of strong
competition in the future which could have an adverse effect on its financial
results.
The Company's quarterly results of operations may fluctuate materially
depending on, among other things, the timing of new store openings, net sales
contributed by new stores, increases or decreases in comparable store sales,
adverse weather conditions, shifts in timing of certain holidays, changes in the
Company's merchandise mix and the timing of acquisitions. The Company's success
depends in part on its ability to anticipate and respond to changing merchandise
trends and consumer preferences in a timely manner. Accordingly, any failure by
the Company to anticipate, identify and respond to changing fashion trends could
adversely affect consumer acceptance of the merchandise in the Company's stores,
which in turn could adversely affect the Company's business and its image with
its customers. In addition, the Company has increased its use of private brands.
The nature of the Company's obligations with respect to private brand purchases
may make it more difficult to respond to changing trends by reducing order
quantities. These factors could result in higher markdowns and lower gross
profits to the extent that sales of private brand merchandise are lower than
expected. The level of occupancy costs, merchandise, labor and other costs will
also affect future results of operations.
The Company utilizes three merchandising formats: Dress Barn ("DB"),
Dress Barn Woman ("DBW") and DB/DBW Combination stores ("Combos"). The growth of
the Company is dependent, in large part, upon the Company's ability to
successfully execute its strategy of adding new Combo Stores and aggressively
closing underperforming locations. The Company is planning to continue to close
or relocate underperforming stores (primarily single-format DB or DBW stores)
and replace them with larger and more productive Combo locations and maintain
tight cost controls in all areas with a view to increasing shareholder value.
The success of the Company's growth strategy will depend upon a number of
factors, including the identification of suitable markets and sites for new
Combo Stores, negotiation of leases on acceptable terms, construction or
renovation of sites in a timely manner at acceptable costs, and maintenance of
the productivity of the existing store base. There can be no assurance that the
Company will be able to successfully implement its growth strategies, continue
to introduce the Combo Stores or maintain its current growth levels. In
addition, future economic and industry trends that could impact revenue and
profitability remain difficult to predict.
The Company generally considers three types of acquisition
opportunities:(i) real estate oriented acquisitions, to gain access to
attractive sites and favorable lease terms; (ii) other retail operations that
could benefit from the Company's management and expertise, such as other apparel
chains offering a complementary product line; and (iii) alternate channels of
distribution, such as mail order catalogs. The Company has never completed an
acquisition of the types listed in (ii) and (iii) above. At any given time, the
Company may be in various stages of consideration of such opportunities. Such
acquisitions are subject to due diligence, the negotiation of definitive
agreements and other conditions typical in acquisition transactions, certain of
which may be beyond the Company's control. There is no assurance that the
Company will be able to identify desirable acquisition candidates or will be
successful in entering into any definitive agreements with respect to desirable
acquisitions. Moreover, even if definitive agreements are entered into, there is
no assurance that any future acquisition will thereafter be completed or, if
completed, that the anticipated benefits of the acquisition will be realized.
The Company relies upon its existing management information systems in
operating and monitoring all major aspects of the Company's business, including
sales, warehousing, distribution, purchasing, inventory control, merchandising
planning and replenishment, as well as various financial systems. Any disruption
in the operation of the Company's management information systems, or the
Company's failure to continue to upgrade, integrate or expend capital on such
systems as its business expands, would have a material adverse effect on the
Company. In addition, the Company operates a 510,000 square foot office and
distribution center in Suffern, New York. Any disruption in the operations of
the distribution center would have a material adverse effect on the Company's
business.
3. Reclassification
Certain amounts in prior years' financial statements have been
reclassified for comparative purposes.
<PAGE>
THE DRESS BARN, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The following summarizes the financial results for the thirteen and
thirty-nine week periods ended April 26, 1997, (the "third quarter" and "nine
month" periods, respectively), versus the comparable periods last year:
Third Quarter Nine Months
% Change % of Sales % Change % of Sales
from L/Y T/Y L/Y from L/Y T/Y L/Y
Net Sales 7.1% 7.0%
Gross Profit, less
Occupancy & Buying 10.3% 36.0% 35.0% 8.6% 34.8% 34.3%
Selling, General and
Admin. Expenses 3.8% 24.5% 25.3% 0.3% 24.3% 25.9%
Depreciation &
Amortization 6.1% 3.8% 3.8% -0.3% 3.4% 3.7%
Operating Income 41.3% 7.8% 5.9% 61.3% 7.1% 4.7%
Interest Income 50.4% 0.9% 0.6% 35.2% 0.8% 0.7%
Income Taxes 40.2% 3.1% 2.4% 56.0% 2.9% 1.9%
Net Income 43.3% 5.5% 4.1% 59.4% 5.0% 3.4%
Net sales increased by 7.0% to $408.3 million for the nine month period
from $381.7 million for last year's nine month period, due primarily to a 5%
increase in comparable store sales. The increase in comparable store sales
resulted primarily from better weather conditions during the 1997 period. The
improvement in net sales was also attributable to an approximately 1% increase
in total selling square footage, which was due to the opening of new Combo
Stores and the conversion of single-format stores into Combo Stores. This offset
the closing of underperforming stores, which resulted in the number of stores in
operation declining to 702 stores as of April 26, 1997, from 749 stores in
operation as of April 27, 1996. As of April 26, 1997, the Company had in
operation 425 Dress Barn stores, 86 DBW stores and 191 Combination stores. For
the third quarter, net sales increased by 7.1% to $134.1 million from $125.2
million for the last year's third quarter, due primarily to a 6% increase in
comparable store sales. The increase in net sales for the third quarter was
positively affected by the reaction to the Company's merchandise and an absence
of the adverse weather conditions that prevailed in the winter of 1996.
Gross profit (net sales less cost of goods sold, including occupancy
and buying costs) increased by 8.6% to $142.2 million, or 34.8% of net sales,
for the nine month period from $130.9 million, or 34.3% of net sales, for the
comparable 1996 period. For the third quarter, gross profit increased by 10.3%
to $48.3 million, or 36.0% of net sales, from $43.8 million, or 35.0% of net
sales, for the comparable 1996 period. The increase in gross profit as a
percentage of net sales for both periods was primarily due to higher initial
margins resulting from the 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 increased by 0.3%
to $99.1 million, or 24.3% of net sales, in the 1997 period from $98.8 million,
or 25.9% of net sales, in the 1996 period, reflecting the Company's continued
focus on cost reductions and productivity improvements.
Depreciation decreased as a percentage of sales in the nine-month
period as the Company closed 44 stores this year during the nine-month period
versus 46 last year during the comparable period.
Interest income increased in both periods as funds available for
investment increased.
The effective tax rate for the thirty-nine weeks ended April 26, 1997
was 36.5%, versus 37.0% for the fiscal year ended July 27, 1996. The Company's
tax planning strategies reduced its estimated effective rate for fiscal 1997.
Liquidity and Capital Resources
At April 26, 1997, the Company had working capital of approximately
$146 million and three bank credit lines totaling $95 million without any
outstanding borrowings. The Company had minimal long-term debt - a $3.5 million
below-market interest rate loan from the New York State Urban Development
Corporation. Inventories were current and in line with sales projections.
Expenditures for property and equipment totaled $13.1 million for the nine
months ended April 26, 1997, compared to $12.9 million of expenditures in last
year's first nine months.
The Company estimates that total fiscal 1997 capital expenditures will
approximate $16 million, including the opening of 5 additional Combo locations
and the conversion of 10 single format DB and DBW stores to Combos during the
fourth quarter. The remainder of capital expenditures are to upgrade existing
computer systems, add additional software technology, maintain existing
facilities and close approximately 15 additional underperforming locations
during fourth quarter.
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 proposed capital expenditures and other operating requirements.
<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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