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 January 23, 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 19,851,898 shares on March 1, 1999
Page 1 of 11
<PAGE>
THE DRESS BARN, INC.
FORM 10-Q
QUARTER ENDED JANUARY 23, 1999
TABLE OF CONTENTS
Page
Number
Part I. FINANCIAL INFORMATION (Unaudited):
Item 1. Financial Statements:
Consolidated Balance Sheets
January 23, 1999 (unaudited)
and July 25, 1998 I-3
Consolidated Statements of Earnings
(unaudited) for the Thirteen weeks ended
January 23, 1999 and January 24, 1998 I-4
Consolidated Statements of Earnings
(unaudited) for the Twenty-Six weeks ended
January 23, 1999 and January 24, 1998 I-5
Consolidated Statements of Cash Flows
(unaudited) for the Twenty-Six weeks ended
January 23, 1999 and January 24, 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 I-11
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>
January 23, July 25,
ASSETS 1999 1998
------------------ -----------------
<S> <C> <C>
Current Assets: (unaudited)
Cash & cash equivalents $26,987 $3,032
Marketable securities and investments 131,183 139,994
Merchandise inventories 90,512 102,706
Prepaid expenses and other 5,122 4,201
------------------ -----------------
Total Current Assets 253,804 249,933
------------------ -----------------
Property and Equipment:
Leasehold improvements 61,054 58,176
Fixtures and equipment 113,010 104,500
Computer software 9,528 9,018
Automotive equipment 500 415
------------------ -----------------
184,092 172,109
Less accumulated depreciation and amortization 96,860 86,399
------------------ -----------------
87,232 85,710
------------------ -----------------
Deferred Taxes 2,191 3,076
------------------ -----------------
Other Assets 2,780 6,410
================== =================
$346,007 $345,129
================== =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable- trade $36,661 $41,211
Accrued expenses 39,700 35,483
Customer credits 4,020 2,827
Income taxes payable -- --
------------------ -----------------
Total Current Liabilities 80,381 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- 24,551,658 and 24,300,225
shares, respectively
Outstanding- 21,843,358 and 23,060,225
shares, respectively 1,228 1,225
Additional paid-in capital 25,607 25,175
Retained earnings 274,505 259,104
Treasury stock, at cost (37,505) (21,005)
Unrealized holding gain on investments 1,791 1,109
------------------ -----------------
265,626 265,608
================== =================
$346,007 $345,129
================== =================
<FN>
See notes to condensed financial statements (unaudited)
</FN>
</TABLE>
<PAGE>
<TABLE>
The Dress Barn, Inc. and Subsidiaries
Consolidated Statements of Earnings - Second Quarter
Dollars in thousands except per share amounts
<CAPTION>
Thirteen Weeks Ended
---------------------------------------
January 23, January 24,
1999 1998
------------------ -----------------
<S> <C> <C>
Net sales $146,170 $144,210
Cost of sales, including
occupancy and buying costs 97,172 94,306
------------------ -----------------
Gross profit 48,998 49,904
Selling, general and
administrative expenses 35,997 34,169
Depreciation and amortization 4,809 4,550
------------------ -----------------
Operating income 8,192 11,185
Interest income- net 1,614 1,431
------------------ -----------------
Earnings before
income taxes 9,806 12,616
Income taxes 3,579 4,606
------------------ -----------------
Net earnings $6,227 $8,010
================== =================
Earnings per share
Basic $0.28 $0.35
================== =================
Diluted $0.27 $0.34
================== =================
Weighted average shares outstanding:
Basic 22,415 23,032
------------------ -----------------
Diluted 22,817 23,765
------------------ -----------------
<FN>
See notes to accompanying condensed financial statements (unaudited)
</FN>
</TABLE>
<PAGE>
<TABLE>
The Dress Barn, Inc. and Subsidiaries
Consolidated Statements of Earnings - Six Months
Dollars in thousands except per share amounts
<CAPTION>
Twenty-Six Weeks Ended
---------------------------------------
January 23, January 24,
1999 1998
------------------ -----------------
<S> <C> <C>
Net sales $304,942 $300,404
Cost of sales, including
occupancy and buying costs 200,519 194,025
------------------ -----------------
Gross profit 104,423 106,379
Selling, general and
administrative expenses 73,699 70,081
Depreciation and amortization 9,759 9,100
------------------ -----------------
Operating income 20,965 27,198
Interest income- net 3,288 2,892
------------------ -----------------
Earnings before
income taxes 24,253 30,090
Income taxes 8,852 10,984
------------------ -----------------
Net earnings $15,401 $19,106
================== =================
Earnings per share
Basic $0.68 $0.83
================== =================
Diluted $0.67 $0.81
================== =================
Weighted average shares outstanding:
Basic 22,587 22,935
------------------ -----------------
Diluted 23,067 23,635
------------------ -----------------
<FN>
See notes to accompanying condensed financial statements (unaudited)
</FN>
</TABLE>
<PAGE>
<TABLE>
The Dress Barn, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Dollars in thousands
<CAPTION>
Twenty-Six Weeks Ended
-----------------------------------
January 23, January 24,
1999 1998
--------------- ---------------
<S> <C> <C>
Operating Activities:
Net earnings $15,401 $19,106
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization of property and
equipment 9,759 9,100
Change in deferred income taxes 885 (78)
Deferred compensation 5 22
Changes in assets and liabilities:
Increase in merchandise inventories 12,194 14,509
Increase in prepaid expenses (921) (197)
Decrease (increase) in other assets 3,630 (5,660)
Decrease in accounts payable- trade (4,550) (7,913)
Increase in accrued expenses 4,217 2,953
Increase in customer credits 1,193 921
Decrease in income taxes payable --- (2,104)
--------------- ---------------
Total adjustments 26,412 11,553
--------------- ---------------
Net cash provided by operating activities 41,813 30,659
--------------- ---------------
Investing Activities:
Purchases of property and equipment - net (11,281) (9,435)
Sales and maturities of marketable securities and investments 42,657 38,143
Purchases of marketable securities and investments (33,164) (54,239)
--------------- ---------------
Net cash used in investing activities (1,788) (25,531)
--------------- ---------------
Financing Activities:
Proceeds from Employee Stock Purchase Plan 68 64
Purchase of treasury stock (16,500) (2,225)
Proceeds from stock options exercised 362 3,191
--------------- ---------------
Net cash provided by financing activities (16,070) 1,030
--------------- ---------------
Net (decrease) increase in cash and cash equivalents 23,955 6,158
Cash and cash equivalents- beginning of period 3,032 1,124
--------------- ---------------
Cash and cash equivalents- end of period $26,987 $7,282
=============== ===============
Supplemental Disclosure of Cash Flow Information:
Cash paid for income taxes $10,180 $13,087
=============== ===============
<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 January 23, 1999 and July 25, 1998, the consolidated results of
its operations for the thirteen and twenty-six weeks ended January 23, 1999 and
January 24, 1998, and cash flows for the twenty-six weeks ended January 23, 1999
and January 24, 1998. 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 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 January 23, 1999, the Company had acquired 919,400 shares under this
program for an aggregate amount of $13.8 million.
3. Recent Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("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 adoption of SFAS No. 131 will not affect the Company's financial position or
results of operations. Management has not completed its determination of the
effect that this statement will have on the Company's financial statement
disclosures.
<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 23, 1999,
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 1.4% 1.5%
Cost of Sales, including
Occupancy & Buying 3.0% 66.5% 65.4% 3.3% 65.8% 64.6%
Gross Profit -1.8% 33.5% 34.6% -1.8% 34.2% 35.4%
Selling, General and
Admin. Expenses 5.3% 24.6% 23.7% 5.2% 24.2% 23.3%
Depreciation and Amortization 5.7% 3.3% 3.1% 7.2% 3.2% 3.0%
Operating Income -26.8% 5.6% 7.8% -22.9% 6.8% 9.1%
Interest Income - Net 12.8% 1.1% 1.0% 13.7% 1.1% 1.0%
Earnings Before Income Taxes -22.3% 6.7% 8.8% -19.4% 7.9% 10.1%
Net Earnings -22.3% 4.3% 5.6% -19.4% 5.0% 6.4%
</TABLE>
Net sales increased 1.4% during the thirteen week period ended January
23, 1999 ("three month period") and 1.5% during the twenty-six week period
ending January 23, 1999 ("six month period"). Net sales were negatively impacted
by comparable store sales decreases of 4% and 3% for the three-month and
six-month periods, respectively. The Company attributes the comparable store
sales decreases to the heavy department store promotional activity primarily
during the three-month period, the unseasonably warm weather in September and
October, as well as a slowdown in sales of career apparel. These 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 January 23,1999, the Company
had 673 stores in operation, (310 Dress Barn stores, 65 Dress Barn Woman stores
and 298 combo stores), versus 679 as of January 24, 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 six-month periods by 1.1% and 1.2%, 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 six-month periods, remained consistent with the prior periods.
Selling, general and administrative (SG&A) expenses increased 5.3% and
5.2% for the three-month and six-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 6% increase in square
footage. As a percent of sales, SG&A expenses (excluding depreciation) increased
.9% in both the thirteen and twenty-six week periods 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 5.7% and 7.2% for the three-month and
six-month periods, respectively, over the prior year's comparable periods. These
increases were mainly the result of $23.6 million in fixed asset purchases
during the last twelve months.
Interest income for the six-month period increased to approximately
$3.3 million this year versus $2.9 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 six-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 $6.2 million, a decrease of 22.3% versus the $8.0 million net income in the
prior period. Net income for the six-month period decreased 19.4% to $15.4
million, versus $19.1 million for the prior year's comparable period.
<PAGE>
THE DRESS BARN, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
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 fiscal 1999 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 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 and will continue to contact its key
suppliers and other 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 is currently developing a contingency plan in the event
any of its other service providers fail to be Year 2000 compliant. The Company
expects to complete this plan by late Spring 1999.
<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 14, 1998.
(b) The Company's shareholders voted for the reelection of Elliot S.
Jaffe and Burt Steinberg as Directors of the Company (20,359,783 and
20,364,934 shares, respectively, voted for reelection and 528,297 and
523,146 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)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-1999
<PERIOD-START> JUL-26-1998
<PERIOD-END> JAN-23-1999
<CASH> 26987
<SECURITIES> 131183
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 90512
<CURRENT-ASSETS> 253804
<PP&E> 184092
<DEPRECIATION> 96860
<TOTAL-ASSETS> 346007
<CURRENT-LIABILITIES> 80381
<BONDS> 0
0
0
<COMMON> 1228
<OTHER-SE> 264398
<TOTAL-LIABILITY-AND-EQUITY> 346007
<SALES> 304942
<TOTAL-REVENUES> 304942
<CGS> 200519
<TOTAL-COSTS> 73699
<OTHER-EXPENSES> 9759
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (3288)
<INCOME-PRETAX> 24253
<INCOME-TAX> 8852
<INCOME-CONTINUING> 15401
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15401
<EPS-PRIMARY> .68
<EPS-DILUTED> .67
</TABLE>
