I - 1
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 April 24, 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 19,893,859 shares on June 1, 1999
Page 1 of 11
<PAGE>
THE DRESS BARN, INC.
FORM 10-Q
QUARTER ENDED APRIL 24, 1999
TABLE OF CONTENTS
Page
Number
Part I. FINANCIAL INFORMATION (Unaudited):
Item 1. Financial Statements:
Consolidated Balance Sheets
April 24, 1999 (unaudited)
and July 25, 1998 I-3
Consolidated Statements of Earnings
(unaudited) for the Thirteen weeks ended
April 24, 1999 and April 25, 1998 I-4
Consolidated Statements of Earnings
(unaudited) for the Thirty-nine weeks ended
April 24, 1999 and April 25, 1998 I-5
Consolidated Statements of Cash Flows
(unaudited) for the Thirty-nine weeks ended
April 24, 1999 and April 25, 1998 I-6
Notes to Unaudited Consolidated Financial
Statements (unaudited) I-7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations I-8 through I-10
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-11
* Not applicable in this filing.
<PAGE>
<TABLE>
The Dress Barn, Inc. and Subsidiaries
Consolidated Balance Sheets
Dollars in thousands except share data
<CAPTION>
April 24, July 25,
ASSETS 1999 1998
------------------ -----------------
<S> <C> <C>
Current Assets: (unaudited)
Cash & cash equivalents $4,524 $3,032
Marketable securities and investments 126,563 139,994
Merchandise inventories 111,310 102,706
Prepaid expenses and other 3,878 4,201
------------------ -----------------
Total Current Assets 246,275 249,933
------------------ -----------------
Property and Equipment:
Leasehold improvements 62,290 58,176
Fixtures and equipment 117,061 104,500
Computer software 9,935 9,018
Automotive equipment 546 415
------------------ -----------------
189,832 172,109
Less accumulated depreciation and amortization 103,145 86,399
------------------ -----------------
86,687 85,710
------------------ -----------------
Deferred Taxes 1,830 3,076
------------------ -----------------
Other Assets 2,727 6,410
================== =================
$337,519 $345,129
================== =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable- trade $50,169 $41,211
Accrued expenses 43,053 35,483
Customer credits 3,485 2,827
------------------ -----------------
Total Current Liabilities 96,707 79,521
------------------ -----------------
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- 24,603,659 and 24,300,225
shares, respectively
Outstanding- 19,853,859 and 23,060,225
shares, respectively 1,230 1,225
Additional paid-in capital 25,950 25,175
Retained earnings 280,974 259,104
Treasury stock, at cost (68,274) (21,005)
Unrealized holding gain on investments 932 1,109
------------------ -----------------
240,812 265,608
================== =================
$337,519 $345,129
================== =================
<FN>
See notes to condensed financial statements (unaudited)
</FN>
</TABLE>
<PAGE>
<TABLE>
The Dress Barn, Inc. and Subsidiaries
Consolidated Statements of Earnings - Third Quarter
Dollars in thousands except per share amounts
<CAPTION>
Thirteen Weeks Ended
----------------------------------------
April 24, April 25,
1999 1998
------------------ ------------------
<S> <C> <C>
Net sales $144,341 $144,341
Cost of sales, including
occupancy and buying costs 93,331 90,796
------------------ ------------------
Gross profit 51,010 53,545
Selling, general and
administrative expenses 36,159 34,762
Depreciation and amortization 6,270 4,700
------------------ ------------------
Operating income 8,581 14,083
Interest income- net 1,606 1,338
------------------ ------------------
Earnings before
income taxes 10,187 15,421
Income taxes 3,718 5,627
------------------ ------------------
Net earnings $6,469 $9,794
================== ==================
Earnings per share
Basic $0.32 $0.42
================== ==================
Diluted $0.31 $0.41
================== ==================
Weighted average shares outstanding:
Basic 20,350 23,141
------------------ ------------------
Diluted 20,685 23,840
------------------ ------------------
<FN>
See notes to consolidated financial statements (unaudited)
</FN>
</TABLE>
<PAGE>
<TABLE>
The Dress Barn, Inc. and Subsidiaries
Consolidated Statements of Earnings - Nine Months
Dollars in thousands except per share amounts
<CAPTION>
Thirty-Nine Weeks Ended
---------------------------------------
April 24, April 25,
1999 1998
------------------ -----------------
<S> <C> <C>
Net sales $449,283 $444,745
Cost of sales, including
occupancy and buying costs 293,850 284,821
------------------ -----------------
Gross profit 155,433 159,924
Selling, general and
administrative expenses 109,858 104,843
Depreciation and amortization 16,029 13,800
------------------ -----------------
Operating income 29,546 41,281
Interest income- net 4,894 4,230
------------------ -----------------
Earnings before
income taxes 34,440 45,511
Income taxes 12,570 16,611
------------------ -----------------
Net earnings $21,870 $28,900
================== =================
Earnings per share
Basic $1.00 $1.26
================== =================
Diluted $0.98 $1.22
================== =================
Weighted average shares outstanding:
Basic 21,844 23,004
------------------ -----------------
Diluted 22,259 23,653
------------------ -----------------
<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>
Thirty-Nine Weeks Ended
-----------------------------------
April 24, April 25,
1999 1998
--------------- ---------------
<S> <C> <C>
Operating Activities:
Net earnings $21,870 $28,900
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization of property and
equipment 16,029 13,800
Change in deferred income taxes 1,246 (121)
Deferred compensation 15 35
Changes in assets and liabilities:
Increase in merchandise inventories (8,604) (7,512)
Decrease (increase) in prepaid expenses 323 (4,002)
Decrease (increase) in other assets 3,683 (10,467)
Decrease in accounts payable- trade 8,958 9,254
Increase in accrued expenses 7,570 10,754
Increase in customer credits 658 371
Decrease in income taxes payable --- (2,266)
--------------- ---------------
Total adjustments 28,378 9,846
--------------- ---------------
Net cash provided by operating activities 51,748 38,746
--------------- ---------------
Investing Activities:
Purchases of property and equipment - net (17,006) (17,352)
Sales and maturities of marketable securities and investments 75,338 57,235
Purchases of marketable securities and investments (62,085) (72,290)
--------------- ---------------
Net cash used in investing activities (3,753) (32,407)
--------------- ---------------
Financing Activities:
Proceeds from Employee Stock Purchase Plan 138 94
Purchase of treasury stock (47,269) (2,225)
Repayment of long-term debt --- (3,500)
Proceeds from stock options exercised 628 4,204
--------------- ---------------
Net cash provided by financing activities (46,503) (1,427)
--------------- ---------------
Net (decrease) increase in cash and cash equivalents 1,492 4,912
Cash and cash equivalents- beginning of period 3,032 1,124
--------------- ---------------
Cash and cash equivalents- end of period $4,524 $6,036
=============== ===============
Supplemental Disclosure of Cash Flow Information:
Cash paid for income taxes $16,588 $18,887
=============== ===============
<FN>
See notes to consolidated financial statements (unaudited)
</FN>
</TABLE>
<PAGE>
THE DRESS BARN, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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 April 24, 1999 and July 25, 1998, the consolidated results of
its operations for the thirteen and thirty-nine weeks ended April 24, 1999 and
April 25, 1998, and cash flows for the thirty-nine weeks ended April 24, 1999
and April 25, 1998. 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 25, 1998 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 April 24, 1999, the Company had acquired 2,9 million shares under this
program for an aggregate $44.6 million.
3. Recent Accounting Pronouncements
In June, 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No.130, "Reporting
Comprehensive Income." SFAS No. 131 requires disclosure of total comprehensive
income, which is composed of net income and unrealized gains or losses on
available-for-sale securities. This statement is required to be adopted by the
Company as of the end of the fiscal year ending July 31, 1999.
In June 1997, the Financial Accounting Standards Board issued SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information." This
statement is required to be adopted by the Company as of the end of the fiscal
year ending July 31, 1999. SFAS No. 131 requires disclosure of certain
information about operating segments, products and services, geographic areas of
operations, and major customers, and the factors used by management to determine
reportable segments. The company's operations include only activities related to
the sale of apparel through similar stores throughout the United States and
therefore comprise only one segment.
<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 24, 1999,
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 0.0% 1.0%
Cost of Sales, including
Occupancy & Buying 2.8% 64.7% 62.9% 3.2% 65.4% 64.0%
Gross Profit -4.7% 35.3% 37.1% -2.8% 34.6% 36.0%
Selling, General and
Admin. Expenses 4.0% 25.1% 24.1% 4.8% 24.5% 23.6%
Depreciation and Amortization 33.4% 4.3% 3.3% 16.2% 3.6% 3.1%
Operating Income -39.1% 5.9% 9.8% -28.4% 6.6% 9.3%
Interest Income - Net 20.0% 1.1% 0.9% 15.7% 1.1% 1.0%
Earnings Before Income Taxes -33.9% 7.1% 10.7% -24.3% 7.7% 10.2%
Net Earnings -33.9% 4.5% 6.8% -24.3% 4.9% 6.5%
</TABLE>
Net sales were flat during the thirteen-week period ended April 24,
1999 ("three-month period") and increased 1.0% during the thirty-nine week
period ending April 24, 1999 ("nine-month period"). Net sales were negatively
impacted by comparable store sales decreases of 6% and 4% for the three-month
and nine-month periods, respectively. The Company attributes the comparable
store sales decreases to the shifting from career fashions to casual fashions by
its core customers, which has a negative impact the average transaction size,
and, with respect to the nine-month period, the heavy department store
promotional activity primarily during the Christmas season and the unseasonably
warm weather in September and October. These factors were offset by an
approximate 6% increase in store square footage versus each of the prior
periods. The increase in square footage was due to the opening of new
combination Dress Barn/Dress Barn Woman stores ("combo stores"), which carry
both Dress Barn and Dress Barn Woman merchandise, and the conversion of
single-format stores into combo stores. This offset the square footage reduction
from the closing of underperforming stores. As of April 24, 1999, the Company
had 688 stores in operation, (304 Dress Barn stores, 66 Dress Barn Woman stores
and 318 combo stores), versus 681 as of April 25, 1998. The Company's strategy
for the remainder of fiscal 1999 is to continue opening primarily combo stores
and converting its existing single-format stores into combo stores, while
continuing to close underperforming locations.
<PAGE>
THE DRESS BARN, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Gross profit (net sales less cost of goods sold, including occupancy
and buying costs) decreased as a percentage of net sales for both the
three-month and nine-month periods by 4.7% and 2.8%, respectively. The decrease
in gross profit as a percentage of net sales was primarily the result of the
relatively fixed costs of occupancy expenses being measured against a decrease
in same store sales. Merchandise margins as a percentage of sales, for both the
three-month and nine-month periods, remained consistent with the prior periods.
Selling, general and administrative (SG&A) expenses increased 4.0% and
4.8% for the three-month and nine-month periods, respectively, versus the prior
year's comparable periods. These increases were mainly due to an increase in
store operating costs, resulting from the approximate 9% increase in square
footage. As a percent of sales, SG&A expenses (excluding depreciation) increased
1.0% for the three month period and 0.9% for the nine month period versus the
prior year's comparable periods. These increases were the result of negative
leverage from the decreases in comparable store sales for both periods.
Depreciation expense increased 33.4% and 16.2% for the three-month and
nine-month periods, respectively, over the prior year's comparable periods.
These increases were mainly the result of $24.2 million in fixed asset purchases
during the last twelve months and provision during the three-month period for
anticipated future store relocations and closings.
Interest income for the nine-month period increased to approximately
$4.9 million this year versus $4.2 million in the prior period as the increase
in the funds available for investment offset generally lower prevailing interest
rates.
The effective tax rates for both the three-month and nine-month periods
were 36.5%, the same as for the fiscal year ended July 25, 1998.
As a result of the above factors, net income for the three month period
was $6.5 million, a decrease of 33.9% versus the $9.8 million net income in the
same period for the prior year. Net income for the nine-month period decreased
24.3% to $21.9 million, versus $29.0 million for the prior year's comparable
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.
<PAGE>
THE DRESS BARN, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
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 25, 1998.
Information Systems and "Year 2000" Compliance
The Company has completed a comprehensive review of its information
systems and is involved in an enterprise-wide program to update computer systems
and applications in preparation for the Year 2000. The Company considers the
programming process to be complete, with a final company-wide simulation
covering all systems scheduled for July 4, 1999. 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. Total costs
related to remediation to bring current systems into compliance, testing,
conversion, the purchase of new package systems and upgrading system
applications are not expected to be material. However, no assurance can be given
that all of the Company's systems will be Year 2000 compliant, or that the
ultimate costs required to address the Year 2000 issue or the impact of any
failure to achieve Year 2000 compliance will not have a material adverse effect
on the Company's business.
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 or will be Year 2000 compliant. The
Company does not anticipate any of its other key suppliers and key third party
service providers primary service providers will not be Year 2000 compliant. If
any provider is not Year 2000 compliant, the Company would seek a substitute
provider.
<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>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-31-1999
<PERIOD-START> JUL-26-1998
<PERIOD-END> APR-24-1999
<CASH> 4524
<SECURITIES> 126563
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 111310
<CURRENT-ASSETS> 246275
<PP&E> 189832
<DEPRECIATION> 103145
<TOTAL-ASSETS> 337519
<CURRENT-LIABILITIES> 96707
<BONDS> 0
0
0
<COMMON> 1230
<OTHER-SE> 239582
<TOTAL-LIABILITY-AND-EQUITY> 337519
<SALES> 449283
<TOTAL-REVENUES> 449283
<CGS> 293850
<TOTAL-COSTS> 109858
<OTHER-EXPENSES> 16029
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (4894)
<INCOME-PRETAX> 34440
<INCOME-TAX> 12570
<INCOME-CONTINUING> 21870
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21870
<EPS-BASIC> 1.00
<EPS-DILUTED> .98
</TABLE>
