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 28, 2000 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)
(845) 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 18,307,986 shares on November 30, 2000
Page 1 of 12
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THE DRESS BARN, INC.
FORM 10-Q
QUARTER ENDED OCTOBER 28, 2000
TABLE OF CONTENTS
Page
Number
Part I. FINANCIAL INFORMATION (Unaudited):
Item 1. Financial Statements:
Consolidated Balance Sheets
October 28, 2000 (unaudited)
and July 29, 2000 I-3
Consolidated Statements of Earnings
(unaudited) for the Thirteen weeks ended
October 28, 2000 and October 30, 1999 I-4
Consolidated Statements of Cash Flows
(unaudited) for the Thirteen weeks ended
October 28, 2000 and October 30, 1999 I-6
Notes to Unaudited Condensed Financial
Statements (unaudited) I-7 through I-8
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations I-9 through I-11
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-12
* Not applicable in this filing.
<PAGE>
<TABLE>
The Dress Barn, Inc. and Subsidiaries
Consolidated Balance Sheets
Dollars in thousands except share data
<CAPTION>
October 28, July 29,
ASSETS 2000 2000
-------------------- -----------------
<S> <C> <C>
Current Assets: (unaudited)
Cash & cash equivalents $11,782 $2,978
Marketable securities and investments 170,260 154,050
Merchandise inventories 104,195 111,901
Prepaid expenses and other 3,703 4,851
-------------------- -----------------
Total Current Assets 289,940 273,780
-------------------- -----------------
Property and Equipment:
Leasehold improvements 56,567 54,749
Fixtures and equipment 132,495 128,300
Computer software 12,688 12,294
Automotive equipment 613 560
-------------------- -----------------
202,363 195,903
Less accumulated depreciation and amortization 114,917 109,146
-------------------- -----------------
87,446 86,757
-------------------- -----------------
Deferred Taxes 9,509 9,864
-------------------- -----------------
Other Assets 3,871 3,835
-------------------- -----------------
$390,766 $374,236
==================== =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable- trade $56,690 $64,780
Accrued expenses 45,693 39,633
Customer credits 5,227 5,255
Income taxes payable 8,135 5,007
-------------------- -----------------
Total Current Liabilities 115,745 114,675
-------------------- -----------------
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- 25,280,047 and 25,094,847
shares, respectively
Outstanding- 18,170,847 and 17,985,647
shares, respectively 1,263 1,255
Additional paid-in capital 38,783 37,083
Retained earnings 341,955 329,170
Treasury stock, at cost (107,162) (107,162)
Accumulated other comprehensive income (loss) 182 (785)
-------------------- -----------------
275,021 259,561
-------------------- -----------------
$390,766 $374,236
==================== =================
<FN>
See notes to unaudited condensed financial statements
</FN>
</TABLE>
<PAGE>
<TABLE>
The Dress Barn, Inc. and Subsidiaries
Consolidated Statements of Earnings - First Quarter
Dollars in thousands except per share amounts
<CAPTION>
Thirteen Weeks Ended
----------------------------------------
October 29, October 30,
2000 1999
------------------ ------------------
<S> <C> <C>
Net sales $188,328 $167,938
Cost of sales, including
occupancy and buying costs 121,019 109,004
------------------ ------------------
Gross profit 67,309 58,934
Selling, general and
administrative expenses 43,616 40,116
Depreciation and amortization 5,770 5,250
------------------ ------------------
Operating income 17,923 13,568
Interest income- net 2,212 1,543
------------------ ------------------
Earnings before
income taxes 20,135 15,111
Income taxes 7,349 5,515
------------------ ------------------
Net earnings $12,786 $9,596
================== ==================
Earnings per share
Basic $0.71 $0.48
================== ==================
Diluted $0.68 $0.47
================== ==================
Weighted average shares outstanding:
Basic 18,031 20,084
------------------ ------------------
Diluted 18,885 20,507
------------------ ------------------
<FN>
See notes to unaudited condensed financial statements
</FN>
</TABLE>
<PAGE>
<TABLE>
The Dress Barn, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Dollars in thousands
<CAPTION>
Thirteen Weeks Ended
-------------------------------------
October 28, October 30,
2000 1999
------------------ ----------------
<S> <C> <C>
Operating Activities:
Net income $12,786 $9,596
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization of property and
equipment 5,770 5,250
Change in deferred income taxes 355 1,325
Deferred compensation --- ---
Changes in assets and liabilities:
Decrease in merchandise inventories 7,706 2,863
Decrease (increase) in prepaid expenses 1,148 (1,430)
(Increase) decrease in other assets (36) 153
Decrease in accounts payable- trade (8,090) (7,440)
Increase in accrued expenses 6,060 7,410
Decrease in customer credits (28) (178)
Increase in income taxes payable 3,128 3,093
------------------ ----------------
Total adjustments 16,013 11,046
------------------ ----------------
Net cash provided by operating activities 28,799 20,642
------------------ ----------------
Investing Activities:
Purchases of property and equipment - net (6,459) (7,108)
Sales and maturities of marketable securities and investments 12,966 55,913
Purchases of marketable securities and investments (28,209) (63,948)
------------------ ----------------
Net cash used in investing activities (21,702) (15,143)
------------------ ----------------
Financing Activities:
Proceeds from Employee Stock Purchase Plan 26 28
Purchase of treasury stock -- --
Proceeds from stock options exercised 1,681 1,163
------------------ ----------------
Net cash provided by financing activities 1,707 1,191
------------------ ----------------
Net increase in cash and cash equivalents 8,804 6,690
Cash and cash equivalents- beginning of period 2,978 17,492
------------------ ----------------
Cash and cash equivalents- end of period $11,782 $24,182
================== ================
Supplemental Disclosure of Cash Flow Information:
Cash paid for income taxes $2,500 $1,097
================== ================
<FN>
See notes to unaudited condensed financial statements
</FN>
</TABLE>
<PAGE>
THE DRESS BARN, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED 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 28, 2000 and July 29, 2000, the consolidated results of
its operations for the thirteen weeks ended October 28, 2000 and October 30,
1999, and cash flows for the thirteen weeks ended October 28, 2000 and October
30, 1999. The results of operations for a thirteen-week period 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 29, 2000 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 Programs
In October 1998, the Board of Directors authorized the Company to
repurchase its outstanding common stock at prevailing market prices for up to an
aggregate amount of $75 million. The $75 million stock repurchase plan was
completed in March 2000, with a total of approximately 4.8 million shares
repurchased at an average price of $15.47 per share. On March 30, 2000, The
Board of Directors authorized an additional $50 million stock repurchase plan.
As of the date of this filing, the Company had repurchased 472,700 shares under
the $50 million stock repurchase plan at an aggregate purchase price of
approximately $8.5 million, with no shares repurchased since the beginning of
the fiscal year.
<PAGE>
THE DRESS BARN, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
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 28, 2000 was $13.4 million
versus $9.5 million in the prior year. Total comprehensive income is composed of
net earnings and net unrealized gains or losses on available for sale
securities. The Board of Directors authorized an additional $50 million stock
repurchase plan. As of October 28, 2000, the Company had repurchased
approximately 473,000 shares under the $50 million stock repurchase plan at an
aggregate purchase price of approximately $8.5 million. Since the beginning of
the fiscal year the Company has not repurchased any additional shares
4. Recent Accounting Pronouncements
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS No. 133"), effective for
all fiscal quarters of all 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
The following table sets forth the percentage change in dollars from
last year for the thirteen-week period ended October 28, 2000, and the
percentage of net sales for each component of the Consolidated Statements of
Earnings for each of the periods presented:
<TABLE>
<CAPTION>
First Quarter
% Change % of Sales
----------
From L/Y T/Y L/Y
-------- --- ---
<S> <C> <C> <C>
Net Sales 12.1%
Cost of Sales, including occupancy & buying 11.1% 64.3% 64.9%
Gross Profit 14.2% 35.7% 35.1%
Selling, General and admin. Expenses 8.7% 23.2% 23.9%
Depreciation and amortization 9.9% 3.1% 3.1%
Operating Income 32.1% 9.5% 8.1%
Interest Income - Net 43.4% 1.2% 0.9%
Income Before income Taxes 33.2% 10.7% 9.0%
Net Income 33.2% 6.8% 5.7%
</TABLE>
Net sales increased by 12.1% to $188.3 million for the 13 weeks ended
October 28, 2000 ("first quarter"), from $167.9 million for the 13 weeks ended
October 30, 1999 ("last year"). The sales increase from last year was due a 5.6%
increase in comparable store sales and an approximately 8% increase in total
selling square footage. The Company believes the increase in comparable store
sales resulted in part from a number of its strategic initiatives including the
development of its Dress Barn(R) brand merchandise and brand image and the
Company's ability to react to the growing customer preference for casual career
wear and adapt its merchandise offerings accordingly.
The increase in store 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 foot reduction
from the closing of underperforming stores. The number of stores in operation
increased to 715 stores as of October 28, 2000, from 689 stores in operation as
of October 30, 1999. During the first quarter the Company opened 31 stores and
closed 5 underperforming locations. The Company's strategy for the remainder of
fiscal 2001 is to continue opening primarily combo stores and converting its
existing single-format stores into combo stores, while closing its
underperforming locations.
<PAGE>
THE DRESS BARN, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company mailed approximately 3.7 million catalogs during the first
quarter compared to approximately 1.5 million catalogs mailed during last year's
first quarter. During Spring 2000, the Company also started its e-commerce
operation, selling merchandise on the internet via its web site
(www.dressbarn.com). The Company's earnings per share - diluted for the first
quarter were negatively impacted by approximately $.07 due to operating losses
and continued expansion of its catalog and e-commerce operations. The Company
believes both the catalog and e-commerce operations represent complementary
channels of distribution to its existing core businesses and help drive store
traffic.
Gross profit (net sales less cost of goods sold, including occupancy
and buying costs) increased by 14.2% to $67.3 million, or 35.7% of net sales, in
the first quarter from $58.9 million, or 35.1% of net sales last year. The
increase in gross profit as a percentage of sales was primarily due to higher
initial margins and lower markdowns. Tight inventory controls helped to increase
inventory turns and minimize markdowns. Leverage from the increase in sales
offset higher store occupancy costs resulting from the increase in square
footage and higher rents for new stores, store expansions and lease renewals.
Selling, general and administrative ("SG&A") expenses increased by 8.7%
to $43.6 million, or 23.2% of net sales, in the first quarter from $40.1
million, or 23.9% of net sales, last year. Cost controls, productivity
improvements and increases in comparable store sales more than offset increases
in store operating costs, primarily selling costs due to wage pressures from a
tight labor market and the SG&A of the catalog and e-commerce operations.
Depreciation expense increased by 9.9% to $5.8 million in the first
quarter from $5.2 million last year. Increases in fixed asset purchases during
the last twelve months were offset in part by a reduction in the number of
closed stores during the first quarter versus last year.
Interest income - net increased by 43.4% to $2.2 million in the first
quarter from $1.5 million last year. The first quarter was favorably impacted by
increased funds available for investment and higher rates as compared to last
year.
Principally as a result of the above factors, net income for the first
quarter was $12.8 million, or 6.8% of net sales, an increase of 33.2% from the
$9.6 million, or 5.7% of net sales, for the first quarter of last year.
<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 2001 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 29, 2000.
<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)
