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 24, 1998
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 23,074,141 shares on March 1, 1998
Page 1 of 10
<PAGE>
THE DRESS BARN, INC. AND SUBSIDIARIES
INDEX
Page
Number
Part I. FINANCIAL INFORMATION (Unaudited):
Item 1. Financial Statements:
Consolidated Balance Sheets
January 24, 1998 and July 26, 1997 I-3
Consolidated Statements of Income
for the Thirteen and
Twenty-Six weeks ended
January 24, 1998 and January 25, 1997 I-4 and I-5
Consolidated Statements of Cash Flows
for the Twenty-Six weeks ended
January 24, 1998 and January
25, 1997 I-6
Notes to Condensed Financial
Statements I-7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations I-8 and I-9
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-10
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
Dollars in thousands except share data
<TABLE>
<CAPTION>
January 24, July 26,
ASSETS 1998 1997
------------------- -------------------
<S> <C> <C>
Current Assets: (unaudited)
Cash & cash equivalents $7,282 $1,124
Marketable securities and investments 139,521 122,888
Merchandise inventories 85,326 99,835
Prepaid expenses and other 2,666 2,469
------------------- -------------------
Total Current Assets 234,795 226,316
------------------- -------------------
Property and Equipment:
Leasehold improvements 56,193 54,261
Fixtures and equipment 99,259 92,438
Computer software 8,467 7,924
Automotive equipment 440 301
------------------- -------------------
164,359 154,924
Less accumulated depreciation
and amortization 82,271 73,171
------------------- -------------------
82,088 81,753
------------------- -------------------
Other Assets 7,093 1,433
------------------- -------------------
$323,976 $309,502
=================== ===================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable- trade $32,255 $40,168
Accrued expenses 30,767 27,814
Customer credits 3,410 2,489
Income taxes payable 162 2,266
------------------- -------------------
Total Current Liabilities 66,594 72,737
------------------- -------------------
Deferred Income Taxes 365 443
------------------- -------------------
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- 24,300,225 and 23,887,538
shares, respectively
Outstanding- 23,060,225 and 22,742,538
shares, respectively 1,214 1,194
Additional paid-in capital 19,105 19,856
Retained earnings 241,991 218,877
Treasury stock, at cost (10,439) (8,214)
Unrealized holding gains on investments 1,646 1,109
------------------- -------------------
253,517 232,822
=================== ===================
$323,976 $309,502
=================== ===================
<FN>
See notes to condensed financial statements (unaudited)
</FN>
</TABLE>
<PAGE>
The Dress Barn, Inc. and Subsidiaries
Consolidated Statements of Earnings - Second Quarter
Dollars in thousands except per share amounts
<TABLE>
<CAPTION>
Thirteen Weeks Ended
-----------------------------------------------
January 24, January 25,
1998 1997
------------------- -------------------
<S> <C> <C>
Net sales $144,210 $131,457
Cost of sales, including
occupancy and buying costs 94,306 87,510
------------------- -------------------
Gross profit 49,904 43,947
Selling, general and
administrative expenses 34,169 32,254
Depreciation and amortization 4,550 4,568
------------------- -------------------
Operating income 11,185 7,125
Interest income- net 1,431 1,171
------------------- -------------------
Earnings before
income taxes 12,616 8,296
Income taxes 4,606 3,028
------------------- -------------------
Net earnings $8,010 $5,268
=================== ===================
Earnings per share
Basic $0.35 $0.23
=================== ===================
Diluted $0.34 $0.23
=================== ===================
Weighted average shares outstanding:
Basic 23,032 22,695
------------------- -------------------
Diluted 23,765 23,341
------------------- -------------------
<FN>
See notes to accompanying condensed financial statements
</FN>
</TABLE>
<PAGE>
The Dress Barn, Inc. and Subsidiaries
Consolidated Statements of Earnings - Six Months
Dollars in thousands except per share amounts
<TABLE>
<CAPTION>
Twenty-Six Weeks Ended
-----------------------------------------------
January 24, January 25,
1998 1997
------------------- -------------------
<S> <C> <C>
Net sales $300,404 $274,212
Cost of sales, including
occupancy and buying costs 194,025 180,305
------------------- -------------------
Gross profit 106,379 93,907
Selling, general and
administrative expenses 70,081 66,289
Depreciation and amortization 9,100 8,958
------------------- -------------------
Operating income 27,198 18,660
Interest income- net 2,892 2,114
------------------- -------------------
Earnings before
income taxes 30,090 20,774
Income taxes 10,984 7,582
------------------- -------------------
Net earnings $19,106 $13,192
=================== ===================
Earnings per share
Basic $0.83 $0.58
=================== ===================
Diluted $0.81 $0.57
=================== ===================
Weighted average shares outstanding:
Basic 22,935 22,646
------------------- -------------------
Diluted 23,635 23,151
------------------- -------------------
<FN>
See notes to accompanying condensed financial statements
</FN>
</TABLE>
<PAGE>
The Dress Barn, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Dollars in thousands
<TABLE>
<CAPTION>
Twenty-Six Weeks Ended
-----------------------------------------------
January 24, January 25,
1998 1997
------------------- -------------------
<S> <C> <C>
Operating Activities:
Net earnings $19,106 $13,192
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization of property and
equipment 9,100 8,958
Change in deferred income taxes (78) (182)
Deferred compensation 22 139
Changes in assets and liabilities:
Decrease in merchandise inventories 14,509 14,416
(Increase) decrease in prepaid expenses (197) 1,207
Increase in other assets (5,660) (100)
Decrease in accounts payable- trade (7,913) (10,134)
Increase in accrued expenses 2,953 2,884
Increase in customer credits 921 847
(Decrease) increase in income taxes payable (2,104) 402
------------------- -------------------
Total adjustments 11,553 18,437
------------------- -------------------
Net cash provided by operating activities 30,659 31,629
------------------- -------------------
Investing Activities:
Purchases of property and equipment - net (9,435) (6,450)
Sales and maturities of marketable securities 38,143 25,896
Purchases of marketable securities (54,239) (60,757)
------------------- -------------------
Net cash used in investing activities (25,531) (41,311)
------------------- -------------------
Financing Activities:
Proceeds from stock options exercised 3,191 1,371
Proceeds from Employee Stock Purchase Plan 64 81
Purchase of treasury stock (2,225) 0
------------------- -------------------
Net cash provided by financing activities 1,030 1,452
------------------- -------------------
Net increase (decrease) in cash and cash equivalents 6,158 (8,230)
Cash and cash equivalents- beginning of period 1,124 9,517
------------------- -------------------
Cash and cash equivalents- end of period $7,282 $1,287
=================== ===================
Supplemental Disclosure of Cash Flow Information:
Cash paid for income taxes $13,087 $7,362
=================== ===================
<FN>
See notes to condensed financial statements (unaudited)
</FN>
</TABLE>
<PAGE>
THE DRESS BARN, INC. AND SUBSIDIARIES
NOTES TO CONDENSED 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 24, 1998 and July 26, 1997, the
consolidated results of its operations for the thirteen and twenty-six weeks
ended January 24, 1998 and January 25, 1997, and cash flows for the twenty-six
weeks ended January 24, 1998 and January 25, 1997. 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 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.
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.
Computation of Earnings Per Share
The Company has adopted Statement of Financial Accounting Standards
(SFAS) No. 128, "Earnings Per Share". This Statement requires the presentation
of basic and diluted earnings per share. Basic earnings per share is computed
using the weighted average number of common shares outstanding during the
period. Diluted earnings per share is computed using the weighted average number
of common and dilutive common equivalent shares outstanding during the period.
Dilutive common equivalent shares consist of unexercised stock options. The
Company has restated all prior period per share data presented as required by
SFAS No. 128.
<PAGE>
THE DRESS BARN, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The following table sets forth the percentage change in dollars from
last year for the thirteen and twenty-six week periods ended January 24, 1998,
and the percentage of net sales for each component of the Consolidated
Statements of Earnings for each of the periods presented:
<TABLE>
<CAPTION>
Second Quarter Six Months
% Change % of Sales % Change % of Sales
from L/Y T/Y L/Y from L/Y T/Y L/Y
<S> <C> <C> <C> <C> <C> <C>
Net Sales 9.7% 9.6%
Cost of Sales, including
Occupancy & Buying 7.8% 65.4% 66.6% 7.6% 64.6% 65.8%
Gross Profit 13.6% 34.6% 33.4% 13.3% 35.4% 34.2%
Selling, General and
Admin. Expenses 5.9% 23.7% 24.5% 5.7% 23.3% 24.2%
Depreciation -0.4% 3.1% 3.5% 1.6% 3.0% 3.3%
Operating Income 57.0% 7.8% 5.4% 45.8% 9.1% 6.8%
Interest Income - Net 22.2% 1.0% 0.9% 36.8% 1.0% 0.8%
Income Taxes 52.1% 3.2% 2.3% 44.9% 3.7% 2.8%
Net Earnings 52.1% 5.6% 4.0% 44.8% 6.4% 4.8%
</TABLE>
Net sales increased 9.7% during the thirteen week period ended January
24, 1998 ("three month period") and 9.6% during the twenty-six week period
ending January 24, 1998 ("six month period"). These increases were primarily due
to same store sales increases of 5% and 6% for the three month and six month
periods, respectively. The same store sales increases reflect the positive
reaction to the Company's merchandise offerings during both fiscal periods. The
sales increases were also attributable to an approximately 6% 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 six months, the Company opened or converted to Combos 31 stores and
closed 26 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 679 stores as of January 24, 1998, from 707 stores in operation as of January
26, 1997. As of January 24, 1998, the Company had in operation 370 Dress Barn
stores, 76 Dress Barn Woman stores and 233 Combo stores. The Company anticipates
closing approximately 20 stores during the remainder of the fiscal year.
Gross profit less occupancy and buying costs for both the three-month
and six-month periods increased 1.2% as a percentage of net sales. These
increases in gross profit as a percentage of net sales were 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 same store sales.
<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 .8% and .9% as a percentage of net
sales for the three and six month periods, respectively, versus last year's
comparable periods. These decreases reflected the resulting leverage from the
increases in same store sales for the respective periods and the Company's
continued focus on cost reductions and productivity improvements. Depreciation
expense decreased .4% and .3% as a percentage of net sales for the three and six
month periods, respectively, versus last year.
As a result of the increases in net sales and reductions in cost of
sales and SG&A as a percentage of net sales, operating income increased to 7.8%
and 9.1% of net sales for the three month and six month periods, respectively,
from 5.4% and 6.8% in the prior year's comparable periods.
Interest income increased in both periods as funds available for
investment increased.
The effective tax rate for both the three-month and six-month periods
was 36.5%, the same as that in effect for the fiscal year ended July 26, 1997.
Liquidity and Capital Resources
At January 24, 1998, the Company had working capital of approximately
$168 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 $9.5 million for the six months ended January 24, 1998, compared to $6.5
million of expenditures in last year's six-month period.
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.
<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 15, 1997.
(b) The Company's shareholders voted for the reelection of Roslyn S.
Jaffe, Donald Jonas and Mark S. Handler as Directors of the Company
(21,039,545, 21,119,547 and 21,120,747 shares, respectively, voted for
reelection and 337,302, 257,300 and 256,100 shares, respectively,
withheld authority with respect for such nominees).
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>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-25-1998
<PERIOD-START> JUL-27-1997
<PERIOD-END> JAN-24-1998
<CASH> 7282
<SECURITIES> 139521
<RECEIVABLES> 2666
<ALLOWANCES> 0
<INVENTORY> 85326
<CURRENT-ASSETS> 234795
<PP&E> 164359
<DEPRECIATION> 82271
<TOTAL-ASSETS> 323976
<CURRENT-LIABILITIES> 66594
<BONDS> 3500
0
0
<COMMON> 1214
<OTHER-SE> 252303
<TOTAL-LIABILITY-AND-EQUITY> 323976
<SALES> 300404
<TOTAL-REVENUES> 300404
<CGS> 194025
<TOTAL-COSTS> 70081
<OTHER-EXPENSES> 9100
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (2892)
<INCOME-PRETAX> 30090
<INCOME-TAX> 10984
<INCOME-CONTINUING> 19106
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19106
<EPS-PRIMARY> .83
<EPS-DILUTED> .81
</TABLE>
