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 29, 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)
(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 17,859,975 shares on June 1, 2000
Page 1 of 12
<PAGE>
THE DRESS BARN, INC.
FORM 10-Q
QUARTER ENDED APRIL 29, 2000
TABLE OF CONTENTS
Page
Number
Part I. FINANCIAL INFORMATION (Unaudited):
Item 1. Financial Statements:
Consolidated Balance Sheets
April 29, 2000 (unaudited)
and July 31, 1999 I-3
Consolidated Statements of Earnings
(unaudited) for the Thirteen weeks ended
April 29, 2000 and April 24, 1999 I-4
Consolidated Statements of Earnings
(unaudited) for the Thirty-nine weeks ended
April 29, 2000 and April 24, 1999 I-5
Consolidated Statements of Cash Flows
(unaudited) for the Thirty-nine weeks ended
April 29, 2000 and April 24, 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
o Not applicable in this filing.
<PAGE>
The Dress Barn, Inc. and Subsidiaries
Consolidated Balance Sheets
Dollars in thousands except share data
<TABLE>
<CAPTION>
April 29, July 31,
ASSETS 2000 1999
------------------ -----------------
<S> <C> <C>
Current Assets: (unaudited)
Cash & cash equivalents $10,253 $17,492
Marketable securities and investments 147,796 139,400
Merchandise inventories 110,855 110,138
Prepaid expenses and other 4,723 2,038
------------------ -----------------
Total Current Assets 273,627 269,068
------------------ -----------------
Property and Equipment:
Leasehold improvements 57,580 55,542
Fixtures and equipment 128,148 119,723
Computer software 11,424 7,007
Automotive equipment 595 499
------------------ -----------------
197,747 182,771
Less accumulated depreciation and amortization 113,699 101,416
------------------ -----------------
84,048 81,355
------------------ -----------------
Deferred Taxes 9,003 9,866
------------------ -----------------
Other Assets 4,367 3,290
------------------ -----------------
$371,045 $363,579
================== =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable- trade $68,238 $62,215
Accrued expenses 47,453 38,504
Customer credits 4,485 3,364
Income taxes payable 3,026 5,896
------------------ -----------------
Total Current Liabilities 123,202 109,979
------------------ -----------------
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- 24,915,764 and 24,646,278
shares, respectively
Outstanding- 18,229,264 and 19,936,478
shares, respectively 1,245 1,232
Additional paid-in capital 31,260 28,797
Retained earnings 316,617 292,428
Treasury stock, at cost (99,625) (68,274)
Unrealized holding loss on investments (1,654) (583)
------------------ -----------------
247,843 253,600
------------------ -----------------
$371,045 $363,579
================== =================
<FN>
See notes to unaudited condensed financial statements
</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 29, April 24,
2000 1999
------------------ ------------------
<S> <C> <C>
Net sales $162,992 $144,341
Cost of sales, including
occupancy and buying costs 104,878 93,331
------------------ ------------------
Gross profit 58,114 51,010
Selling, general and
administrative expenses 40,942 36,159
Depreciation and amortization 5,952 6,270
------------------ ------------------
Operating income 11,220 8,581
Interest income- net 2,005 1,606
------------------ ------------------
Income before
income taxes 13,225 10,187
Income taxes 4,827 3,718
------------------ ------------------
Net Income $8,398 $6,469
================== ==================
Earnings per share
Basic $0.45 $0.32
================== ==================
Diluted $0.44 $0.31
================== ==================
Weighted average shares outstanding:
Basic 18,465 20,350
------------------ ------------------
Diluted 18,875 20,685
------------------ ------------------
<FN>
See notes to unaudited condensed financial statements
</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 29, April 24,
2000 1999
------------------ -----------------
<S> <C> <C>
Net sales $480,478 $449,283
Cost of sales, including
occupancy and buying costs 311,133 293,850
------------------ -----------------
Gross profit 169,345 155,433
Selling, general and
administrative expenses 120,384 109,858
Depreciation and amortization 16,764 16,029
------------------ -----------------
Operating income 32,197 29,546
Interest income- net 5,894 4,894
------------------ -----------------
Income before
income taxes 38,091 34,440
Income taxes 13,903 12,570
------------------ -----------------
Net Income $24,188 $21,870
================== =================
Earnings per share
Basic $1.25 $1.00
================== =================
Diluted $1.23 $0.98
================== =================
Weighted average shares outstanding:
Basic 19,300 21,844
------------------ -----------------
Diluted 19,711 22,259
------------------ -----------------
<FN>
See notes to unaudited condensed financial statements
</FN>
</TABLE>
<PAGE>
The Dress Barn, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Dollars in thousands
<TABLE>
<CAPTION>
Thirty-Nine Weeks Ended
-------------------------------------
April 29, April 24,
2000 1999
------------------ ----------------
<S> <C> <C>
Operating Activities:
Net income $24,188 $21,870
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization of property and
equipment 16,764 16,029
Change in deferred income taxes 863 1,246
Deferred compensation --- 15
Changes in assets and liabilities:
Increase in merchandise inventories (717) (8,604)
(Increase) decrease in prepaid expenses (2,685) 323
(Increase) decrease in other assets (1,077) 3,683
Increase in accounts payable- trade 6,023 8,958
Increase in accrued expenses 8,949 7,570
Increase in customer credits 1,121 658
Decrease in income taxes payable (2,870) ---
------------------ ----------------
Total adjustments 26,371 29,878
------------------ ----------------
Net cash provided by operating activities 50,559 51,748
------------------ ----------------
Investing Activities:
Purchases of property and equipment - net (19,457) (17,006)
Sales and maturities of marketable securities and investments 54,734 75,338
Purchases of marketable securities and investments (64,201) (62,085)
------------------ ----------------
Net cash used in investing activities (28,924) (3,753)
------------------ ----------------
Financing Activities:
Proceeds from Employee Stock Purchase Plan 84 138
Purchase of treasury stock (31,351) (47,269)
Proceeds from stock options exercised 2,393 628
------------------ ----------------
Net cash provided by financing activities (28,874) (46,503)
------------------ ----------------
Net (decrease) increase in cash and cash equivalents (7,239) 1,492
Cash and cash equivalents- beginning of period 17,492 3,032
------------------ ----------------
Cash and cash equivalents- end of period $10,253 $4,524
================== ================
Supplemental Disclosure of Cash Flow Information:
Cash paid for income taxes $18,345 $16,588
================= ================
<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 April 29, 2000 and July 31, 1999, the consolidated results of
its operations for the thirteen and thirty-nine weeks ended April 29, 2000 and
April 24, 1999, and cash flows for the thirty-nine weeks ended April 29, 2000
and April 24, 1999. 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 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 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 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 April 29,
2000, the Company had repurchased 50,000 shares under the $50 million stock
repurchase plan at an aggregate purchase price of approximately $0.9 million.
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 nine months ended April 29, 2000 was $23.1 million
versus comprehensive income of $21.7 million for the nine months ended April 24,
1999. Total comprehensive income for the quarter ended April 29, 2000 was $8.3
million versus $5.8 million in the prior year. Total comprehensive income is
composed of net earnings and net unrealized losses on available for sale
securities.
<PAGE>
THE DRESS BARN, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
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 and thirty-nine week periods ended April 29, 2000, 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 12.9% 6.9%
Cost of Sales, including
occupancy & Buying 12.4% 64.3% 64.7% 5.9% 64.8% 65.4%
Gross Profit 13.9% 35.7% 35.3% 9.0% 35.2% 34.6%
Selling, General and
admin. Expenses 13.2% 25.1% 25.1% 9.6% 25.1% 24.5%
Depreciation and
amortization -5.1% 3.7% 4.3% 4.6% 3.4% 3.6%
Operating Income 30.8% 6.9% 5.9% 9.0% 6.7% 6.6%
Interest Income - Net 24.8% 1.2% 1.1% 20.4% 1.2% 1.1%
Income Before
income Taxes 29.8% 8.1% 7.1% 10.6% 7.9% 7.7%
Net Income 29.8% 5.2% 4.5% 10.6% 5.0% 4.9%
</TABLE>
Net sales for the thirteen weeks ended April 29, 2000 (the "third quarter")
increased by 12.9% to $163.0 million from $144.3 million for the thirteen weeks
ended April 24, 1999 (the "prior period"). Net sales for the third quarter were
favorably impacted by a 6% increase in comparable store sales versus a 6%
decrease in comparable store sales in the prior period. Net sales for the
thirty-nine weeks ended April 29, 2000 (the "nine months") increased by 6.9% to
$480.5 million from $449.3 million for the thirty-nine weeks ended April 24,
1999 (the "prior nine months"). Comparable store sales for the nine months
increased 1% versus the prior nine months. Store square footage increased an
average of 7% versus the prior nine months. The increase in square footage was
due to the opening of 46 new stores during the nine months (40 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 29
single-format stores into combo stores during the nine months. These store
openings offset the square footage reduction from the closing of 34
underperforming stores during the nine months (4 of which were closed during the
third quarter) versus 40 stores closed during the prior nine months (5 of which
were closed during the prior period). During the third quarter the Company
opened 17 new Combo stores and converted 8 single-format stores into combo
stores.
<PAGE>
THE DRESS BARN, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
As of April 29, 2000, the Company had 691 stores in operation, (252 Dress
Barn stores, 57 Dress Barn Woman stores and 382 combo stores), versus 688 stores
in operation at April 24, 1999, (304 Dress Barn stores, 66 Dress Barn Woman
stores and 304 combo stores). The Company's strategy is to continue opening
primarily combo stores and converting its existing single-format stores into
combo stores, while closing its underperforming locations. Store expansion
continues to 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 opening
approximately 10 stores and closing approximately 15 stores during the last
quarter of the fiscal year.
In September 1999, the Company mailed its first Dress Barn catalog. The
Company's earnings per share- diluted for the third quarter and nine months were
reduced by approximately $.05 and $.14, respectively, 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) for the third quarter increased by 13.9% to $58.1 million, or
35.7% of net sales, from $51.0 million, or 35.3% of net sales, for the prior
period. For the nine months, gross profit increased 9.0%, to $169.3 million from
$155.4 million from the prior nine months. The increase in gross profit as a
percentage of net sales for both the third quarter and the nine months versus
the prior periods 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 each of the prior periods.
Selling, general and administrative (SG&A) expenses were $40.9 million in
the third quarter as compared to $36.2 million in the prior quarter. For the
nine months, SG&A expenses were $120.4 million versus $109.9 million last year.
These increases in SG&A expenses were primarily due to increases in store
operating costs, primarily selling costs resulting from the tight labor market,
and increases in advertising and marketing expenses. In addition, SG&A expenses
included start-up costs for the Dress Barn Catalog. SG&A expenses (excluding
depreciation) as a percentage of sales were 25.1% of sales for the both third
quarter and the prior period as the leverage from the increase in comparable
store sales offset the increase in actual SG&A expenses from the prior period.
For the nine month period, SGA expenses as a percentage of sales increased from
24.5% to 25.1% of sales in the nine months. The percentage of sales increase for
the nine-month period resulted from not achieving any leverage from the 1%
increase in comparable store sales.
<PAGE>
THE DRESS BARN, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Depreciation expense was $6.0 million in the third quarter and $16.8
million in the nine months as compared to $6.3 million and $16.0 million in the
prior periods, respectively. 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 nine months versus the prior nine months.
Interest income increased to $2.0 million in the third quarter this year
and $5.9 million in the nine months versus $1.6 million in the prior quarter and
$4.9 million in the prior nine months. These increases were primarily due to
increases in tax-free investment rates from the prior periods. The increases
were offset in part by the $31.4 million of available funds for investment used
for the stock repurchase plan during the last twelve months.
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 31, 1999.
Principally as a result of the above factors, net income for the third
quarter was $8.4 million, an increase of 29.8% from the $6.5 million of net
income in the prior period. Net income for the nine months increased 10.6% to
$24.2 million, versus $21.9 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 fiscal 2000 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.
<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)
