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 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 18,223,052 shares on March 1, 2000
Page 1 of 11
<PAGE>
THE DRESS BARN, INC.
FORM 10-Q
QUARTER ENDED JANUARY 29, 2000
TABLE OF CONTENTS
Page
Number
Part I. FINANCIAL INFORMATION (Unaudited):
Item 1. Financial Statements:
Consolidated Balance Sheets
January 29, 2000 (unaudited)
and July 25, 1998 I-3
Consolidated Statements of Earnings
(unaudited) for the Thirteen weeks ended
January 29, 2000 and January 23, 1999 I-4
Consolidated Statements of Earnings
(unaudited) for the Twenty-Six weeks ended
January 29, 2000 and January 23, 1999 I-5
Consolidated Statements of Cash Flows
(unaudited) for the Twenty-Six weeks ended
January 29, 2000 and January 23, 1999 I-6
Notes to Unaudited Consolidated Financial
Statements (unaudited) I-7 and I-8
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations I-9 through I-12
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-13
Item 5. Other Information *
Item 6. Exhibits and Reports on Form 8-K I-13
* Not applicable in this filing.
<PAGE>
The Dress Barn, Inc. and Subsidiaries
Consolidated Balance Sheets
Dollars in thousands except share data
<TABLE>
<CAPTION>
January 29, July 31,
ASSETS 2000 1999
------------------ -----------------
<S> <C> <C>
Current Assets: (unaudited)
Cash & cash equivalents $13,802 $17,492
Marketable securities and investments 146,819 139,400
Merchandise inventories 86,272 110,138
Prepaid expenses and other 4,423 2,038
------------------ -----------------
Total Current Assets 251,316 269,068
------------------ -----------------
Property and Equipment:
Leasehold improvements 56,046 55,542
Fixtures and equipment 123,631 119,723
Computer software 10,832 7,007
Automotive equipment 562 499
------------------ -----------------
191,071 182,771
Less accumulated depreciation and amortization 109,719 101,416
------------------ -----------------
81,352 81,355
------------------ -----------------
Deferred Taxes 9,302 9,866
------------------ -----------------
Other Assets 4,297 3,290
================== =================
$346,267 $363,579
================== =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable- trade $45,299 $62,215
Accrued expenses 43,997 38,504
Customer credits 5,184 3,364
Income taxes payable 747 5,896
------------------ -----------------
Total Current Liabilities 95,227 109,979
------------------ -----------------
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- 24,858,132 and 24,646,278
shares, respectively
Outstanding- 19,014,632 and 19,936,478
shares, respectively 1,243 1,232
Additional paid-in capital 30,659 28,797
Retained earnings 308,161 292,428
Treasury stock, at cost (87,413) (68,274)
Unrealized holding gain on investments (1,610) (583)
------------------ -----------------
251,040 253,600
================== =================
$346,267 $363,579
================== =================
<FN>
See notes to condensed financial statements (unaudited)
</FN>
</TABLE>
<PAGE>
The Dress Barn, Inc. and Subsidiaries
Consolidated Statements of Earnings - Second Quarter
Dollars in thousands except per share amounts
<TABLE>
<CAPTION>
Thirteen Weeks Ended
---------------------------------------
January 29, January 23,
2000 1999
------------------ -----------------
<S> <C> <C>
Net sales $149,548 $146,170
Cost of sales, including
occupancy and buying costs 97,252 97,172
------------------ -----------------
Gross profit 52,296 48,998
Selling, general and
administrative expenses 39,326 35,997
Depreciation and amortization 5,562 4,809
------------------ -----------------
Operating income 7,408 8,192
Interest income- net 2,346 1,614
------------------ -----------------
Earnings before
income taxes 9,754 9,806
Income taxes 3,561 3,579
------------------ -----------------
Net earnings 6,193 $6,227
================== =================
Earnings per share
Basic $0.32 $0.28
================== =================
Diluted $0.31 $0.27
================== =================
Weighted average shares outstanding:
Basic 19,459 22,415
------------------ -----------------
Diluted 19,876 22,817
------------------ -----------------
<FN>
See notes to accompanying condensed financial statements (unaudited)
</FN>
</TABLE>
<PAGE>
The Dress Barn, Inc. and Subsidiaries
Consolidated Statements of Earnings - Six Months
Dollars in thousands except per share amounts
<TABLE>
<CAPTION>
Twenty-Six Weeks Ended
---------------------------------------
January 29, January 23,
2000 1999
------------------ -----------------
<S> <C> <C>
Net sales $317,486 $304,942
Cost of sales, including
occupancy and buying costs 206,255 200,519
------------------ -----------------
Gross profit 111,231 104,423
Selling, general and
administrative expenses 79,442 73,699
Depreciation and amortization 10,812 9,759
------------------ -----------------
Operating income 20,977 20,965
Interest income- net 3,889 3,288
------------------ -----------------
Earnings before
income taxes 24,866 24,253
Income taxes 9,076 8,852
------------------ -----------------
Net earnings $15,790 $15,401
================== =================
Earnings per share
Basic $0.80 $0.68
================== =================
Diluted $0.78 $0.67
================== =================
Weighted average shares outstanding:
Basic 19,718 22,587
------------------ -----------------
Diluted 20,134 23,067
------------------ -----------------
<FN>
See notes to accompanying condensed financial statements (unaudited)
</FN>
</TABLE>
<PAGE>
The Dress Barn, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Dollars in thousands
<TABLE>
<CAPTION>
Twenty-Six Weeks Ended
-------------------------------------
January 29, January 23,
2000 1999
------------------ ----------------
<S> <C> <C>
Operating Activities:
Net earnings $15,789 $15,401
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization of property and
equipment 10,812 9,759
Change in deferred income taxes 564 885
Deferred compensation --- 5
Changes in assets and liabilities:
Decrease in merchandise inventories 23,866 12,194
Increase in prepaid expenses (2,385) (921)
(Increase) decrease in other assets (1,007) 3,630
Decrease in accounts payable- trade (16,916) (4,550)
Increase in accrued expenses 5,493 4,217
Increase in customer credits 1,820 1,193
Decrease in income taxes payable (5,149) ---
------------------ ----------------
Total adjustments 17,098 26,412
------------------ ----------------
Net cash provided by operating activities 32,887 41,813
------------------ ----------------
Investing Activities:
Purchases of property and equipment - net (10,809) (11,281)
Sales and maturities of marketable securities and investments 10,019 42,657
Purchases of marketable securities and investments (18,465) (33,164)
------------------ ----------------
Net cash used in investing activities (19,255) (1,788)
------------------ ----------------
Financing Activities:
Proceeds from Employee Stock Purchase Plan 56 68
Purchase of treasury stock (19,139) (16,500)
Proceeds from stock options exercised 1,761 362
------------------ ----------------
Net cash provided by financing activities (17,322) (16,070)
------------------ ----------------
Net (decrease) increase in cash and cash equivalents (3,690) 23,955
Cash and cash equivalents- beginning of period 17,492 3,032
------------------ ----------------
Cash and cash equivalents- end of period $13,802 $26,987
================== ================
Supplemental Disclosure of Cash Flow Information:
Cash paid for income taxes $13,087 $10,180
================== ==================
<FN>
See notes to condensed financial statements (unaudited)
</FN>
</TABLE>
<PAGE>
THE DRESS BARN, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED 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 29, 2000 and July 31, 1999, the consolidated results of
its operations for the thirteen and twenty-six weeks ended January 29, 2000 and
January 23, 1999, and cash flows for the twenty-six weeks ended January 29, 2000
and January 23, 1999. 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 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 January 29, 2000, the Company had acquired 4.2 million shares at an
aggregate purchase price of $65.6 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 six months ended January 29, 2000 was $15.1 million
versus comprehensive income of $15.8 million for the six months ended January
23, 1999. Total comprehensive income for the quarter ended January 29, 2000 was
$6.0 million versus $5.9 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
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
The following table sets forth the percentage change in dollars from
last year for the thirteen and twenty-six week periods ended January 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>
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 2.3% 4.1%
Cost of Sales, including
Occupancy & Buying 0.1% 65.0% 66.5% 2.9% 65.0% 65.8%
Gross Profit 6.7% 35.0% 33.5% 6.5% 35.0% 34.2%
Selling, General and
Admin. Expenses 9.3% 26.3% 24.6% 7.8% 25.0% 24.2%
Depreciation and Amortization 15.7% 3.7% 3.3% 10.8% 3.4% 3.2%
Operating Income -9.6% 5.0% 5.6% 0.1% 6.6% 6.8%
Interest Income - Net 45.4% 1.6% 1.1% 18.3% 1.2% 1.1%
Earnings Before Income Taxes -0.5% 6.6% 6.7% 2.5% 7.8% 7.9%
Net Earnings -0.5% 4.2% 4.3% 2.5% 4.9% 5.0%
</TABLE>
Net sales for the thirteen weeks ended January 29, 2000 (the "second
quarter") increased by 2.3% to $149.5 million from $146.2 million for the
thirteen weeks ended January 23, 1999 (the "prior period"). Net sales for the
second quarter were negatively impacted by a 3% decrease in comparable store
sales, in part due to the harsh winter weather in January across the majority of
the Company's trading areas. Net sales for the twenty-six weeks ended January
29, 2000 (the "six months") increased by 4.1% to $317.5 million from $304.9
million for the twenty-six weeks ended January 23, 1999 (the "prior six
months"). Comparable store sales for the six months decreased 1% versus the
prior six months. Store square footage increased an average of 7% versus the
prior six months. The increase in square footage was due to the opening of 25
new stores during the six months (23 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 21 single-format stores into combo
stores during the six months. These store openings offset the square footage
reduction from the closing of 30 underperforming stores during the six months
(19 of which were closed during the second quarter). During the second quarter,
which includes the holiday season, the Company opened 2 new Combo stores and
converted one single-format store into a combo store. These store openings
offset the square footage reduction from the closing of 30 underperforming
stores during the six months (19 of which were closed during the second
quarter).
<PAGE>
THE DRESS BARN, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
As of January 29, 2000, the Company had 672 stores in operation, (255 Dress
Barn stores, 57 Dress Barn Woman stores and 360 combo stores), versus 673 stores
in operation at January 23, 1999, (310 Dress Barn stores, 65 Dress Barn Woman
stores and 298 combo stores). The Company's strategy for the remainder of 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
opening approximately 25 stores and closing approximately 20 stores during the
remainder of the fiscal year.
In September 1999, the Company mailed its first Dress Barn catalog. The
Company's earnings per share- diluted for the second quarter and six months were
reduced by approximately $.03 and $.06, 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 second quarter increased by 6.7% to $52.3 million, or
35.0% of net sales, from $48.9 million, or 33.5% of net sales, for the prior
period. For the six months, gross profit increased 6.5%, to $111.2 million from
$104.4 million from the prior six months. The increase in gross profit as a
percentage of net sales for both the second quarter and the six 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 the prior period.
Selling, general and administrative (SG&A) expenses were $39.3 million in
the second quarter as compared to $36.0 million in the prior quarter. For the
six months, SG&A expenses were $79.4 million versus $73.7 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) increased as a percentage of sales from 24.6% to 26.3% for the
second quarter and from 24.2% to 25.0% of sales in the six months. These
percentage of sales increases also resulted from not achieving increases in
comparable store sales.
<PAGE>
THE DRESS BARN, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Depreciation increased to $5.6 million in the second quarter and $10.8
million in the six months from $4.8 million and $9.8 million in the prior
periods. These increases were primarily the result of increases in fixed asset
purchases during the last twelve months.
Interest income increased to $2.3 million in the second quarter this year
and $3.9 million in the six months versus $1.6 million in the prior quarter and
$3.3 million in the prior six 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 $65.6 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 six-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 second
quarter was $6.2 million, approximately equal to the $6.2 million net income in
the prior period. Net income for the six months increased 2.5% to $15.8 million,
versus $15.4 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>
THE DRESS BARN, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Information Systems and "Year 2000" Compliance
The Company 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, and successfully tested its systems to insure
Year 2000 compliance. The Company also contacted its key suppliers and other key
third party service providers to determine their year 2000 readiness. The
Company believes that its key third party service providers are year 2000
compliant. The Company has not experienced any business interruption as a result
of the year 2000 transition.
<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 21, 1999.
(b) The Company's shareholders voted for the reelection of Edward D.
Solomon and Klaus Eppler, as Directors of the Company (17,787,625 and
17,730,825 shares, respectively, voted for reelection and 160,108 and
216,908 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-29-2000
<PERIOD-START> AUG-01-1999
<PERIOD-END> JAN-29-2000
<CASH> 13802
<SECURITIES> 146819
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 86272
<CURRENT-ASSETS> 251316
<PP&E> 191071
<DEPRECIATION> 109719
<TOTAL-ASSETS> 346267
<CURRENT-LIABILITIES> 95227
<BONDS> 0
0
0
<COMMON> 1243
<OTHER-SE> 249797
<TOTAL-LIABILITY-AND-EQUITY> 346267
<SALES> 317486
<TOTAL-REVENUES> 317486
<CGS> 206255
<TOTAL-COSTS> 79442
<OTHER-EXPENSES> 10812
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (3889)
<INCOME-PRETAX> 24866
<INCOME-TAX> 9076
<INCOME-CONTINUING> 15790
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15790
<EPS-BASIC> 0.80
<EPS-DILUTED> 0.78
</TABLE>
