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 25, 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 X 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 23,208,578 shares on June 1, 1998
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
April 25, 1998 and July 26, 1997 I-3
Consolidated Statements of Income
for the Thirteen and
Thirty-Nine weeks ended
April 25, 1998 and April 26, 1997 I-4 and I-5
Consolidated Statements of Cash Flows
for the Thirty-Nine weeks ended
April 25, 1998 and April
26, 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 to 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 *
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
Dollars in thousands except share data
<TABLE>
<CAPTION>
April 25, July 26,
ASSETS 1998 1997
------------------- -----------------
<S> <C> <C>
Current Assets: (unaudited)
Cash & cash equivalents $6,036 $1,124
Marketable securities 138,403 122,888
Merchandise inventories 107,347 99,835
Prepaid expenses and other 6,471 2,469
------------------- -----------------
Total Current Assets 258,257 226,316
------------------- -----------------
Property and Equipment:
Leasehold improvements 59,736 54,261
Fixtures and equipment 103,350 92,438
Computer software 8,697 7,924
Automotive equipment 481 301
------------------- -----------------
172,264 154,924
Less accumulated depreciation
and amortization 86,959 73,171
------------------- -----------------
85,305 81,753
------------------- -----------------
Other Assets 11,900 1,433
------------------- -----------------
$355,462 $309,501
=================== =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable- trade $49,422 $40,168
Accrued expenses 38,568 27,814
Customer credits 2,860 2,489
Income taxes payable -- 2,266
------------------- -----------------
Total Current Liabilities 90,850 72,737
------------------- -----------------
Deferred Income Taxes 322 443
------------------- -----------------
Long Term Debt -- 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- 24,454,225 and 23,887,538
shares, respectively
Outstanding- 23,214,225 and 22,742,538
shares, respectively 1,223 1,194
Additional paid-in capital 28,900 19,856
Retained earnings 243,037 218,877
Treasury stock, at cost (10,439) (8,214)
Unrealized holding gains on investments 1,569 1,109
------------------- -----------------
264,290 232,822
=================== =================
$355,462 $309,502
=================== =================
<FN>
See notes to accompanying condensed financial statements (unaudited)
</FN>
</TABLE>
<PAGE>
The Dress Barn, Inc. and Subsidiaries
Consolidated Statements of Earnings - Third Quarter
Dollars in thousands except per share amounts
<TABLE>
<CAPTION>
Thirteen Weeks Ended
--------------------------------------------
April 25, April 26,
1998 1997
------------------- ------------------
<S> <C> <C>
Net sales $144,341 $134,103
Cost of sales, including
occupancy and buying costs 90,796 85,802
------------------- ------------------
Gross profit 53,545 48,301
Selling, general and
administrative expenses 34,762 32,803
Depreciation and amortization 4,700 5,106
------------------- ------------------
Operating income 14,083 10,392
Interest income- net 1,338 1,202
------------------- ------------------
Earnings before
income taxes 15,421 11,594
Income taxes 5,627 4,232
------------------- ------------------
Net earnings $9,794 $7,362
=================== ==================
Earnings per share
Basic $0.42 $0.32
=================== ==================
Diluted $0.41 $0.31
=================== ==================
Weighted average shares outstanding:
Basic 23,141 22,861
------------------- ------------------
Diluted 23,840 23,528
------------------- ------------------
<FN>
See notes to accompanying condensed financial statements (unaudited)
</FN>
</TABLE>
<PAGE>
The Dress Barn, Inc. and Subsidiaries
Consolidated Statements of Earnings - Nine Months
Dollars in thousands except per share amounts
<TABLE>
<CAPTION>
Thirty-Nine Weeks Ended
--------------------------------------------
April 25, April 26,
1998 1997
------------------- ------------------
<S> <C> <C>
Net sales $444,745 $408,316
Cost of sales, including
occupancy and buying costs 284,821 266,107
------------------- ------------------
Gross profit 159,924 142,209
Selling, general and
administrative expenses 104,843 99,093
Depreciation and amortization 13,800 14,064
------------------- ------------------
Operating income 41,281 29,052
Interest income- net 4,230 3,316
------------------- ------------------
Earnings before
income taxes 45,511 32,368
Income taxes 16,611 11,814
------------------- ------------------
Net earnings $28,900 $20,554
=================== ==================
Earnings per share
Basic $1.26 $0.90
=================== ==================
Diluted $1.22 $0.88
=================== ==================
Weighted average shares outstanding:
Basic 23,004 22,718
------------------- ------------------
Diluted 23,653 23,265
------------------- ------------------
<FN>
See notes to accompanying condensed financial statements (unaudited)
</FN>
</TABLE>
<PAGE>
The Dress Barn, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Dollars in thousands
<TABLE>
<CAPTION>
Thirty-Nine Weeks Ended
--------------------------------------------
April 25, April 26,
1998 1997
------------------- ------------------
<S> <C> <C>
Operating Activities:
Net earnings $28,900 $20,554
Adjustments to reconcile net earnings to net cash
Provided by operating activities:
Depreciation and amortization of property and
equipment 13,800 14,064
Change in deferred income taxes (121) (182)
Deferred compensation 35 161
Changes in assets and liabilities:
Increase in merchandise inventories (7,512) (12,853)
Increase in prepaid expenses (4,002) (44)
Increase in other assets (10,467) (194)
Increase in accounts payable- trade 9,254 7,875
Increase in accrued expenses 10,754 4,560
Increase in customer credits 371 425
(Decrease) increase in income taxes payable (2,266) 442
------------------- ------------------
Total adjustments 9,846 14,254
------------------- ------------------
Net cash provided by operating activities 38,746 34,808
------------------- ------------------
Investing Activities
Purchases of property and equipment - net (17,352) (13,111)
Purchases of marketable securities (72,290) (70,716)
Sales of marketable securities 25,866 22,267
Maturities of marketable securities 31,369 16,437
------------------- ------------------
Net cash used in investing activities (32,407) (45,123)
------------------- ------------------
Financing Activities
Proceeds from stock options exercised 4,204 1,861
Repayment of long term debt (3,500)
Purchase of treasury stock (2,225)
Proceeds from Employee Stock Purchase Plan 94 117
------------------- ------------------
Net cash provided by financing activities (1,427) 1,978
------------------- ------------------
Net (decrease) increase in cash and cash equivalents 4,912 (8,337)
Cash and cash equivalents- beginning of period 1,124 9,517
------------------- ------------------
Cash and cash equivalents- end of period $6,036 $1,180
=================== ==================
Supplemental Disclosure of Cash Flow Information:
Cash paid for income taxes $18,877 $10,921
=================== ==================
<FN>
See notes to accompanying 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 condensed
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 April 25, 1998 and July 26, 1997, the
consolidated results of its operations for the thirteen and thirty-nine weeks
ended April 25, 1998 and April 26, 1997, and cash flows for the thirty-nine
weeks ended April 25, 1998 and April 26, 1997. The results of operations for
thirteen and thirty-nine week periods may not be indicative of the results for
the entire year.
These condensed 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.
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.
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 table sets forth the percentage change in dollars from
last year for the thirteen and thirty-nine week periods ended April 25, 1998,
and the percentage of net sales for each component of the Consolidated
Statements of Earnings for each of the periods presented:
<TABLE>
<CAPTION>
Third Quarter Nine 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 7.6% 8.9%
Cost of Sales, including 5.8% 62.9% 64.0% 7.0% 64.0% 65.2%
Occupancy & Buying
Gross Profit 10.9% 37.1% 36.0% 12.5% 36.0% 34.8%
Selling, General and
Admin. Expenses 6.0% 24.1% 24.5% 5.8% 23.6% 24.3%
Depreciation -8.0% 3.3% 3.8% -1.9% 3.1% 3.4%
Operating Income 35.5% 9.8% 7.7% 42.1% 9.3% 7.1%
Interest Income - Net 11.3% 0.9% 0.9% 27.6% 1.0% 0.8%
Income Taxes 33.0% 3.9% 3.1% 40.6% 3.8% 2.9%
Net Earnings 33.0% 6.8% 5.5% 40.6% 6.5% 5.0%
</TABLE>
Net sales increased 7.6% during the thirteen week period ended April
25, 1998 ("three month period") and 8.9% during the thirty-nine week period
ending April 25, 1998 ("nine month period"). These increases were primarily due
to same store sales increases of 3% and 5% for the three month and nine 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 nine months, the Company opened or converted to Combos 60 stores and
closed 39 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 closing its underperforming locations.
This strategy resulted in the number of stores in operation declining to 681
stores as of April 25, 1998, from 702 stores in operation as of April 26, 1997.
As of April 25, 1998, the Company had in operation 355 Dress Barn stores, 72
Dress Barn Woman stores and 254 Combo stores. The Company anticipates closing
approximately 10 stores during the remainder of the fiscal year.
<PAGE>
THE DRESS BARN, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
Gross profit less occupancy and buying costs increased 1.1% and 1.2% as
a percentage of net sales, for the three-month and nine-month periods,
respectively. 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.
Selling, general and administrative (SG&A) expenses as a percentage of
net sales (excluding depreciation) decreased .4% and .7% 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 .5% and .3% as a percentage of net sales for the three and
nine month periods, respectively, versus last year, as a result of the smaller
number of stores closed as compared to the prior 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 9.8%
and 9.3% of net sales for the three month and nine month periods, respectively,
from 7.7% and 7.1% 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 nine month periods
was 36.5%, the same as that in effect for the fiscal year ended July 26, 1997.
Liquidity and Capital Resources
During the three month period, the Company repaid its $3.5 million loan
from New York State. At April 25, 1998, the Company had three unused bank credit
lines totaling $100 million, limited by approximately $42 million of outstanding
letters of credit for import merchandise purchases. Inventories were current and
in line with sales projections. Expenditures for property and equipment totaled
$17.4 million for the nine month period, compared to $13.1 million of
expenditures in last year's nine-month period.
The Company believes its available resources will be adequate to fund
the Company's fiscal 1998 capital expenditures, any acquisitions currently being
considered and other operating requirements.
<PAGE>
THE DRESS BARN, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
Impact of Year 2000
The Company has addressed the impact of the Year 2000 on the Company's
systems. Certain hardware and software maintained by the Company will require
modification. The Company is using both internal and external resources to
reprogram or replace and test all of its hardware and software for Year 2000
compliance. The cost of addressing Year 2000 issues has not been material to
date and is not expected to be in future periods. The Company is in discussions
with its significant vendors to ensure that their systems are Year 2000
compliant.
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)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-25-1998
<PERIOD-START> JUL-27-1997
<PERIOD-END> APR-25-1998
<CASH> 6036
<SECURITIES> 138403
<RECEIVABLES> 6471
<ALLOWANCES> 0
<INVENTORY> 107347
<CURRENT-ASSETS> 258257
<PP&E> 172264
<DEPRECIATION> 86959
<TOTAL-ASSETS> 355462
<CURRENT-LIABILITIES> 90850
<BONDS> 0
0
0
<COMMON> 1223
<OTHER-SE> 263067
<TOTAL-LIABILITY-AND-EQUITY> 355462
<SALES> 444745
<TOTAL-REVENUES> 444745
<CGS> 284821
<TOTAL-COSTS> 104843
<OTHER-EXPENSES> 13800
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (4230)
<INCOME-PRETAX> 45511
<INCOME-TAX> 16611
<INCOME-CONTINUING> 28900
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28900
<EPS-PRIMARY> 1.26
<EPS-DILUTED> 1.22
</TABLE>
