SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended October 30, 1999 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)
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
Common Stock $.05 par value
Indicate 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 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 19,264,862 shares on December 8, 1999
Page 1 of 9
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THE DRESS BARN, INC.
FORM 10-Q
QUARTER ENDED OCTOBER 30, 1999
TABLE OF CONTENTS
Page
Number
Part I. FINANCIAL INFORMATION (Unaudited):
Item 1. Financial Statements:
Consolidated Balance Sheets
October 30, 1999 (unaudited)
and July 31, 1999 I-3
Consolidated Statements of Earnings
(unaudited) for the Thirteen weeks ended
October 30, 1999 and October 24, 1998 I-4
Consolidated Statements of Cash Flows
(unaudited) for the Thirteen weeks ended
October 30, 1999 and October 24, 1998 I-5
Notes to 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 30, July 31,
ASSETS 1999 1999
------------------ -----------------
<S> <C> <C>
Current Assets: (unaudited)
Cash & cash equivalents $24,182 $17,492
Marketable securities and investments 146,974 139,400
Merchandise inventories 107,275 110,138
Prepaid expenses and other 3,468 2,038
------------------ -----------------
Total Current Assets 281,899 269,068
------------------ -----------------
Property and Equipment:
Leasehold improvements 57,673 55,542
Fixtures and equipment 124,413 119,723
Computer software 7,272 7,007
Automotive equipment 521 499
------------------ -----------------
189,879 182,771
Less accumulated depreciation and amortization 106,666 101,416
------------------ -----------------
83,213 81,355
------------------ -----------------
Deferred Taxes 8,541 9,866
------------------ -----------------
Other Assets 3,137 3,290
================== =================
$376,790 $363,579
================== =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable- trade $54,775 $62,215
Accrued expenses 45,914 38,504
Customer credits 3,186 3,364
Income taxes payable 8,989 5,896
------------------ -----------------
Total Current Liabilities 112,864 109,979
------------------ -----------------
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- 24,794,295 and 24,544,005
shares, respectively
Outstanding- 20,084,495 and 22,755,105
shares, respectively 1,239 1,232
Additional paid-in capital 29,981 28,797
Retained earnings 302,024 292,428
Treasury stock, at cost (68,274) (68,274)
Unrealized holding loss on investments (1,044) (583)
------------------ -----------------
263,926 253,600
================== =================
$376,790 $363,579
================== =================
<FN>
See notes to consolidated 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 30, October 24,
1999 1998
------------------- ------------------
<S> <C> <C>
Net sales $167,938 $158,772
Cost of sales, including
occupancy and buying costs 109,004 103,347
------------------- ------------------
Gross profit 58,934 55,425
Selling, general and
administrative expenses 40,116 37,702
Depreciation and amortization 5,250 4,950
------------------- ------------------
Operating income 13,568 12,773
Interest income- net 1,543 1,674
------------------- ------------------
Earnings before
income taxes 15,111 14,447
Income taxes 5,515 5,273
------------------- ------------------
Net earnings $9,596 $9,174
=================== ==================
Earnings per share
Basic $0.48 $0.40
=================== ==================
Diluted $0.47 $0.39
=================== ==================
Weighted average shares outstanding:
Basic 20,084 22,760
------------------- ------------------
Diluted 20,507 23,295
------------------- ------------------
<FN>
See notes to consolidated financial statements (unaudited)
</FN>
</TABLE>
<PAGE>
<TABLE>
The Dress Barn, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Dollars in thousands
<CAPTION>
Thirteen Weeks Ended
-----------------------------------
October 30, October 24,
1999 1998
--------------- ---------------
<S> <C> <C>
Operating Activities:
Net earnings $9,596 $9,174
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization of property and
equipment 5,250 4,950
Change in deferred income taxes 1,325 530
Deferred compensation --- 5
Changes in assets and liabilities:
Decrease (increase) in merchandise inventories 2,863 (11,295)
(Increase) decrease in prepaid expenses (1,430) 320
Decrease in other assets 153 1,722
(Decrease) increase in accounts payable- trade (7,440) 8,501
Increase in accrued expenses 7,410 6,552
Decrease in customer credits (178) (161)
Increase in income taxes payable 3,093 3,857
--------------- ---------------
Total adjustments 11,046 14,981
--------------- ---------------
Net cash provided by operating activities 20,642 24,155
--------------- ---------------
Investing Activities:
Purchases of property and equipment - net (7,108) (8,072)
Sales and maturities of marketable securities and investments 55,913 12,613
Purchases of marketable securities and investments (63,948) (28,727)
--------------- ---------------
Net cash used in investing activities (15,143) (24,186)
--------------- ---------------
Financing Activities:
Proceeds from Employee Stock Purchase Plan 28 35
Purchase of treasury stock -- (2,699)
Proceeds from stock options exercised 1,163 296
--------------- ---------------
Net cash provided by (used in) financing activities 1,191 (2,368)
--------------- ---------------
Net increase (decrease) in cash and cash equivalents 6,690 (2,399)
Cash and cash equivalents- beginning of period 17,492 3,032
--------------- ---------------
Cash and cash equivalents- end of period $24,182 $633
=============== ===============
Supplemental Disclosure of Cash Flow Information:
Cash paid for income taxes $1,097 $886
=============== ===============
<FN>
See notes to consolidated financial statements (unaudited)
</FN>
</TABLE>
<PAGE>
THE DRESS BARN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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 the consolidated
financial position of The Dress Barn Inc. and its wholly owned subsidiaries (the
"Company") as of October 30, 1999 and July 31, 1999, the consolidated results of
its operations for the thirteen weeks ended October 30, 1999 and October 24,
1998, and cash flows for the thirteen weeks ended October 30, 1999 and October
24, 1998. 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 31, 1999 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. Stock Repurchase Program
The Board of Directors approved a stock repurchase plan on October 15,
1998. The Board authorized the Company to repurchase its outstanding common
stock at prevailing market prices for up to an aggregate amount of $75 million.
As of October 30, 1999, the Company had acquired 2.9 million shares at an
aggregate purchase price of $44.7 million under this program.
3. Comprehensive Income
The Company's short-term investments are classified as available for sale
securities, and therefore, are carried at fair value, with unrealized gains and
losses reported as a component of other comprehensive income. Total
comprehensive income for the quarter ended October 30, 1999 was $9.1 million
versus comprehensive income of $9.9 million for the quarter ended October 24,
1998. Total comprehensive income is composed of net earnings and net unrealized
losses on available for sale securities.
4. Recent Accounting Pronouncements
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS No. 133"), effective for
fiscal years beginning after June 15, 1999, establishes standards for the
recognition and measurement of derivatives and hedging activities. The Company
does not currently engage in these types of risk management or investment
activities. Therefore, SFAS No. 133 is not anticipated to have any impact on the
Company's financial position or results of operations.
<PAGE>
THE DRESS BARN, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Net sales for the thirteen weeks ended October 30, 1999 (the "first
quarter") increased by 5.8% to $167.9 million from $158.8 million for the
thirteen weeks ended October 24, 1998. (the "prior period"). Comparable store
sales for the first quarter were flat versus the prior period. Store square
footage increased 8% versus the prior period. The increase in square footage was
due to the opening of 23 new stores (21 of which were combination Dress
Barn/Dress Barn Woman stores ("combo stores"), which carry both Dress Barn and
Dress Barn Woman merchandise), and the conversion of 20 single-format stores
into combo stores. This offset the square footage reduction from the closing of
11 underperforming stores.
As of October 30, 1999, the Company had 689 stores in operation, (271 Dress
Barn stores, 58 Dress Barn Woman stores and 360 combo stores), versus 681 as of
October 24, 1998 (329 Dress Barn stores, 66 Dress Barn Woman stores and 286
combo stores). The Company's strategy for fiscal 2000 is to continue opening
primarily combo stores and converting its existing single-format stores into
combo stores, while closing its underperforming locations. Store expansion will
focus primarily on expanding in the Company's existing major trading markets, in
many cases seeking a downtown location and/or adding to a cluster of suburban or
other locations. The Company anticipates closing approximately 20 stores during
the next fiscal quarter.
During the first quarter, the Company mailed its first Dress Barn Catalog
to approximately 1.5 million households. The Company's earnings per share-
diluted for the first quarter were reduced by approximately $.03 due to the
startup costs of launching the catalog and building the infrastructure to
support its continued expansion.
Gross profit (net sales less cost of goods sold, including occupancy and
buying costs) increased by 6.3% to $58.9 million, or 35.1% of net sales, for the
first quarter from $55.4 million, or 34.9% of net sales, for the prior period.
The increase in gross profit as a percentage of net sales was due primarily to
higher initial margins from the Company's continued increase in the percentage
of sales from its private brands, and lower markdowns as a percentage of sales.
As a result, merchandise margins as a percentage of sales increased versus the
prior period.
Selling, general and administrative (SG&A) expenses were $40.1 million for
the first quarter, compared to $37.7 million for the prior period. The increase
SG&A expenses was primarily due to an increase in store operating costs,
primarily selling costs resulting from the tight labor market. In addition, SG&A
expenses included start-up costs for the Dress Barn Catalog. SG&A expenses
(excluding depreciation) increased as a percentage of sales from 23.7% of sales
in the prior period to 23.9% in 1999. The percentage increase was also affected
by the negative leverage from flat comparable store sales.
<PAGE>
Depreciation increased to $5.2 million in the first quarter from $4.9
million in the prior period as a result of $26.5 million in fixed asset
purchases during the last twelve months.
Interest income for the first quarter decreased to approximately $1.5
million this year versus $1.7 million in the prior period. Funds available for
investment in the first quarter were lower than the prior period primarily due
to the $44.7 million of available funds used in the Share Repurchase Program
during the last twelve months.
The effective tax rate for first quarter was 36.5%, the same as that in
effect for the fiscal year ended July 31, 1999.
Principally as a result of the above factors, net income for the first
quarter was $9.6 million, an increase of 4.6% versus the $9.2 million net income
in the prior period.
Liquidity and Capital Resources
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 budgeted capital expenditures, other operating requirements and
other proposed or contemplated expenditures. Inventories were current and in
line with sales projections.
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 in the
Company's Annual Report on Form 10-K for its fiscal year ended July 31, 1999.
Information Systems and "Year 2000" Compliance
The Company has completed a comprehensive review of its information systems
and an enterprise-wide program to update computer systems and applications in
preparation for the year 2000. The Company has successfully tested its systems
and believes it is year 2000 compliant. The Company incurred internal staff
costs as well as outside consulting and other expenditures related to this
process. Total costs related to remediation to bring current systems into
compliance, testing, conversion, the purchase of new package systems and
upgrading system applications were not material. The Company has not developed
any contingency plans in the event that the Company itself should fail to become
year 2000 compliant, as it believes it to be in compliance now.
<PAGE>
The Company has contacted its key suppliers and other key third party
service providers to determine their year 2000 readiness. Although the Company
is not currently aware of material year 2000 compliance issues relating to
systems of other companies with which the Company does business, there is no
assurance that the Company will not be adversely affected by such issues
affecting the systems of such other companies. If any of the Company's
merchandise vendors fail to be in compliance, a vendor that is in compliance
will be substituted. The Company's most reasonably likely worst case year 2000
scenario relates to the inability of the banking system to insure the Company's
access to its funds. The Company has received assurances from its primary
financial service providers that they are year 2000 compliant. The Company does
not anticipate that any of its other key third party service providers will not
be year 2000 compliant. If any such provider is not year 2000 compliant, the
Company would seek a substitute provider. The Company does not believe that the
year 2000 compliance issue will have a material effect on its financial
condition or results of operations. However, no assurance can be given that any
failure to achieve year 2000 compliance will not have a material adverse impact
on the Company.
<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)
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<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-29-2000
<PERIOD-START> AUG-01-1999
<PERIOD-END> OCT-30-1999
<CASH> 24182
<SECURITIES> 146974
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 107275
<CURRENT-ASSETS> 281899
<PP&E> 189879
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<CURRENT-LIABILITIES> 112864
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0
0
<COMMON> 1239
<OTHER-SE> 262687
<TOTAL-LIABILITY-AND-EQUITY> 376790
<SALES> 167938
<TOTAL-REVENUES> 167938
<CGS> 109004
<TOTAL-COSTS> 40116
<OTHER-EXPENSES> 5250
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<INTEREST-EXPENSE> (1543)
<INCOME-PRETAX> 15111
<INCOME-TAX> 5515
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</TABLE>
