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 January 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 22,802,138 shares on March 7, 1997
Page 1 of 11
<PAGE>
THE DRESS BARN, INC. AND SUBSIDIARIES
INDEX
Page
Number
Part I. FINANCIAL INFORMATION (Unaudited):
Item 1. Financial Statements:
Consolidated Balance Sheets
January 25, 1997 and July 27, 1996 I-3
Consolidated Statements of Income
for the Thirteen and
Twenty-Six weeks ended
January 25, 1997 and January 27, 1996 I-4 and I-5
Consolidated Statements of Cash Flows
for the Twenty-Six weeks ended
January 25, 1997 and January
27, 1996 I-6
Notes to Consolidated Financial
Statements I-7 and I-8
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations I-9 and I-10
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 I-11
Item 5. Other Information *
Item 6. Exhibits and Reports on Form 8-K I-11
* Not applicable in this filing.
<PAGE>
The Dress Barn, Inc. and Subsidiaries
Consolidated Balance Sheets
January 25, July 27,
ASSETS 1997 1996
------------- -------------
Current Assets: ................................... (unaudited)
Cash & cash equivalents ...................... $ 1,287,484 $ 9,517,302
Marketable securities and investments ........ 117,804,947 81,787,882
Merchandise inventories ...................... 75,374,503 89,790,984
Prepaid expenses and other ................... 1,562,856 2,769,809
------------- -------------
Total Current Assets ...................... 196,029,790 183,865,977
------------- -------------
Property and Equipment:
Leasehold improvements ....................... 53,354,606 51,008,298
Fixtures and equipment ....................... 92,479,082 88,454,311
Computer software ............................ 8,258,099 7,603,314
Automotive equipment ......................... 380,550 342,283
------------- -------------
154,472,337 147,408,206
Less accumulated depreciation
and amortization ........................... 76,075,213 66,503,707
------------- -------------
78,397,124 80,904,499
------------- -------------
Other Assets ...................................... 1,052,034 952,211
============= =============
$ 275,478,948 $ 265,722,687
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable- trade ...................... $ 27,065,095 $ 37,198,907
Accrued expenses ............................. 23,787,193 20,903,368
Customer credits ............................. 2,908,849 2,062,184
Income taxes payable ......................... 1,373,712 971,762
------------- -------------
Total Current Liabilities ................. 55,134,849 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- 23,786,842 and 23,347,020
Shares, respectively
Outstanding- 22,781,842 and 22,342,020
Shares, respectively ............... 1,189,336 1,178,673
Additional paid-in capital ................... 18,112,355 16,529,497
Retained earnings ............................ 200,300,232 187,110,242
Treasury stock, at cost ...................... (5,705,612) (5,705,612)
Unrealized holding gains (loss) on investments 1,139,226 (16,896)
------------- -------------
215,035,537 199,095,904
------------- -------------
$ 275,478,948 $ 265,722,687
============= =============
See notes to consolidated financial statements (unaudited)
<PAGE>
The Dress Barn, Inc. and Subsidiaries
Consolidated Statements of Income - Second Quarter
Unaudited
Thirteen Weeks Ended
January 27, January 25,
1997 1996
------------- -------------
Net sales ........................................ $ 131,457,380 $ 119,126,704
Cost of sales, including
occupancy and buying costs ................ 87,509,916 80,376,800
------------- -------------
Gross profit .............................. 43,947,464 38,749,904
Selling, general and administrative expenses ..... 32,255,006 32,362,422
Depreciation and amortization .................... 4,567,308 4,550,828
Interest (income)net ...... .................... (1,170,922) (911,223)
------------- -------------
Income before income taxes ............... 8,296,072 2,747,877
Provision for income taxes ....................... 3,028,000 1,017,000
------------- -------------
Net income ............................... $ 5,268,072 $ 1,730,877
============= =============
Net income per share ............................. $ 0.23 $ 0.08
============= =============
Weighted average shares outstanding ...... 22,694,850 22,338,635
============= =============
See notes to consolidated financial statements (unaudited)
<PAGE>
The Dress Barn, Inc. and Subsidiaries
Consolidated Statements of Income- Six Months
Unaudited
Twenty-Six Weeks Ended
January 27, January 25,
1997 1996
------------- -------------
Net sales ........................................ $ 274,212,398 $ 256,477,254
Cost of sales, including
occupancy and buying costs ................ 180,305,055 169,340,800
------------- -------------
Gross profit .............................. 93,907,343 87,136,454
Selling, general and administrative expenses ..... 66,289,527 67,192,789
Depreciation and amortization .................... 8,957,652 9,286,902
Interest (income) net .......................... (2,113,787) (1,654,341)
------------- -------------
Income before income taxes ............... 20,773,951 12,311,104
Provision for income taxes ....................... 7,582,000 4,555,000
------------- -------------
Net income ............................... $ 13,191,951 $ 7,756,104
============= =============
Net income per share ............................. $ 0.58 $ 0.35
============= =============
Weighted average shares outstanding ...... 22,646,346 22,331,460
============= =============
See notes to consolidated financial statements (unaudited)
<PAGE>
The Dress Barn, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Unaudited
Twenty-Six Weeks Ended
January 27, January 25,
1997 1996
------------ ------------
Operating Activities:
Net Income .......................................... $ 13,191,951 $ 7,756,104
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization of property and
equipment ................................... 7,551,835 7,786,902
Loss on disposal of closed store assets ....... 1,405,817 1,500,000
(Decrease) increase in deferred income taxes .. (182,000) 92,000
Deferred compensation ......................... 139,507 92,775
Changes in assets and liabilities:
Decrease in merchandise inventories ........ 14,416,481 17,682,916
Decrease in prepaid expenses ............... 1,206,953 1,640,191
Increase in other assets ................... (99,823) (1,274,399)
Decrease in accounts payable- trade ........ (10,133,812) (16,688,621)
Increase (decrease) in accrued expenses .... 2,883,825 (4,595,829)
Increase in customer credits ............... 846,665 720,433
Increase (decrease) in income taxes payable 401,950 (556,066)
------------ ------------
Total adjustments ....................... 18,437,398 6,400,302
------------ ------------
Net cash provided by operating activities ... 31,629,349 14,156,406
------------ ------------
Investing Activities
Expenditures for property and equipment ......... (6,450,277) (8,338,778)
Purchases of marketable securities .............. (60,756,519) (23,484,093)
Sales of marketable securities .................. 14,458,781 2,345,000
Maturities of marketable securities ............. 11,436,795 14,009,805
------------ ------------
Net cash used in investing activities ......... (41,311,220) (15,468,066)
------------ ------------
Financing Activities
Proceeds from Employee Stock Purchase Plan ...... 80,807 124,357
Proceeds from stock options exercised ........... 1,371,246 160,183
------------ ------------
Net cash provided by financing activities ..... 1,452,053 284,540
------------ ------------
Net decrease in cash and cash equivalents ........... (8,229,818) (1,027,120)
Cash and cash equivalents- beginning of period ...... 9,517,302 7,378,747
============ ============
Cash and cash equivalents- end of period ............ $ 1,287,484 $ 6,351,627
============ ============
Supplemental Disclosure of Cash Flow Information:
Cash paid for income taxes ...................... $ 7,362,050 $ 4,519,067
============ ============
See notes to consolidated financial statements (unaudited)
<PAGE>
THE DRESS BARN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
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 the
consolidated financial position of The Dress Barn, Inc. and its wholly owned
subsidiaries (the "Company") as of January 25, 1997 and July 27, 1996, the
consolidated results of its operations for the thirteen and twenty-six weeks
ended January 25, 1997 and January 27, 1996, and cash flows for the twenty-six
weeks ended January 25, 1997 and January 27, 1996. The results of operations for
thirteen and twenty-six 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 woman's retail apparel industry in which the Company operates is
subject to rapid change and is highly competitive. It currently is plagued by
overcapacity. The industry is subject to changes in the retail environment which
may be affected by overall economic conditions, women's apparel fashions,
demographics, macroeconomic factors that may affect the level of spending for
the types of merchandise sold by the Company and other factors. Apparel
retailers have also experienced continuing price deflation during the last
several years. The Company's sales and results of operations may also be
affected by unusual weather patterns, the prevalence of discounting, close-outs
and going-out-of-business sales and other promotional activities by other
women's apparel retailers, among other factors. The level of occupancy costs,
merchandise, labor and other costs will affect future results of operations. The
Company's long term continued success also will depend upon its ability to open
and operate new stores on a profitable basis.
<PAGE>
The Company's strategy in what it believes to be a difficult retail
environment is a commitment to being leaner and more productive. The Company
utilizes three merchandising formats: Dress Barn ("DB"), Dress Barn Woman
("DBW") and DB/DBW Combination stores ("Combos"). 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. There can be no assurance that the Company' s strategy will
result in a continuation of revenue and profit growth. Future economic and
industry trends that could impact revenue and profitability remain difficult to
predict.
3. Reclassification
Certain reclassifications have been made to prior year's financial
statements to conform to the current year's presentation.
<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
twenty-six week periods ended January 25, 1997 versus the comparable periods
last year:
Second Quarter Six Months
% Change % of Sales % Change % of Sales
from L/Y T/Y L/Y from L/Y T/Y L/Y
Net Sales 10.4% 6.9%
Cost of Sales, including
Occupancy & Buying 8.9% 66.6% 67.5% 6.5% 65.8% 66.0%
Gross Profit 13.4% 33.4% 32.5% 7.8% 34.2% 34.0%
Selling, General and
Admin. Expenses -0.3% 24.5% 27.2% -1.3% 24.2% 26.2%
Depreciation 0.4% 3.5% 3.8% -3.5% 3.3% 3.6%
Operating Income 287.9% 5.4% 1.5% 75.1% 6.8% 4.2%
Interest Income 28.5% 0.9% 0.8% 27.8% 7.6% 0.6%
Income Taxes 197.7% 2.3% 0.8% 66.5% 2.8% 1.8%
Net Income 204.3% 4.0% 1.5% 70.1% 4.8% 3.0%
The increase in net sales in the current year resulted from the Company's
store development activity and comparable store sales increases of 9% in the
second quarter and 5% in the six-month period. The relatively mild winter,
especially in the eastern half of the country where the Company has its largest
concentration of stores, was the major factor in the strong comparable store
sales performance in the second quarter. Although the Company had 707 stores in
operation at January 25, 1997 as compared with 759 at January 27, 1996, the
Company increased its selling square footage approximately 1% by opening new
larger-sized combo stores and converting single-format stores into combo stores.
During the twenty-six weeks ended January 25, 1997, the Company opened or
converted to combo 32 stores and closed 34 underperforming stores (primarily
single-format locations). The Company's strategy for the remainder of fiscal
1997 is to continue to open primarily combo locations, while aggressively
closing its underperforming locations. The Company anticipates closing
approximately 16 stores during the next 6 months. As of January 25, 1997, the
Company had in operation 451 Dress Barn stores, 91 DBW stores and 165 combos.
Gross profit less occupancy and buying costs for both the second quarter
and the six months increased as a percentage of sales. This was due to a
decrease in markdowns, a decrease in store shrinkage and the comparable sales
increases for both periods which resulted in occupancy costs decreasing as a
percent of sales this year versus last year.
<PAGE>
THE DRESS BARN, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
Selling, general and administrative (SG&A) expenses as a percentage of net
sales (excluding depreciation) decreased 270 basis points in the second quarter
and 200 basis points in the six months versus last year's comparable periods.
The decreases reflected the resulting leverage from the comparable store sales
increases. The Company's company-wide focus on cost reductions and productivity
improvements continued. This will remain the company's strategy: to aggressively
manage operating expenses and to keep them in line with sales levels achieved.
Depreciation decreased as a percentage of sales in both periods as the Company
closed 34 stores this year during the six-month period versus 36 last year
during the comparable period.
Interest income increased in both periods as funds available for
investment increased.
The effective tax rate for the twenty-six weeks ended January 25, 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 January 25, 1997, the Company had working capital of approximately $141
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 New York State. Inventories were current and in line
with sales projections. Expenditures for property and equipment totaled $6.5
million for the six months ended January 25, 1997, compared to $8.3 million of
expenditures in last year's first six months.
The Company is currently planning very modest store development in fiscal
1997, pending more favorable business trends. The Company estimates that fiscal
1997 capital expenditures will approximate $16 million of which almost all will
be used for the opening of 60 new Combo locations and the conversion of 30
single format DB and DBW stores to Combos. The remainder of capital expenditures
are to upgrade existing computer systems, add additional software technology,
maintain existing facilities and close approximately 60 underperforming
locations.
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 4 -- Submission of Matters to a Vote of Security Holders
(a) The annual meeting of the Company's shareholders was held on
December 16, 1996.
(b) The Company's shareholders voted for the reelection of Klaus Eppler
and Edward D. Solomon as Directors (19,200,751 and 19,550,729 shares,
respectively, voted for reelection and 503,379 and 153,401 shares,
respectively, withheld authority for such election).
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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