UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 28, 2012
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-20269
ALCO STORES, INC.
(Exact name of registrant as specified in its charter)
| Kansas | 48-0201080 |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
401 Cottage Street Abilene, Kansas | 67410-2832 |
| (Address of principal executive offices) | (Zip Code) |
Registrant's telephone number including area code: (785) 263-3350
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.0001 per share
(Title of Class)
Indicate by check mark 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
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES X NO
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of "accelerated filer", "large accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
| Large accelerated filer [ ] | Accelerated filer [ ] |
| Non-accelerated filer [ ] | Smaller reporting company [x] |
| (Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES NO X
APPLICABLE ONLY TO CORPORATE ISSUERS:
3,257,817 shares of common stock, $.0001 par value (the issuer's only class of common stock), were outstanding as of December 7, 2012.
1
ALCO STORES, INC.
| TABLE OF CONTENTS | |||
| PART I | FINANCIAL INFORMATION | ||
| Item 1. | 3 | ||
| 3 | |||
| 4 | |||
| 5 | |||
| Item 2. | 10 | ||
| Item 3. | 18 | ||
| PART II | OTHER INFORMATION | ||
| Item 1. | 18 | ||
| Item 1A. | 18 | ||
| Item 2. | 19 | ||
| Item 3. | 19 | ||
| Item 4. | 19 | ||
| Item 5. | 19 | ||
| Item 6. | 20 | ||
| Signatures | 22 | ||
2
PART I – FINANCIAL INFORMATION
ALCO Stores, Inc.
(dollars in thousands, except share data)
October 28, 2012 | January 29, 2012 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash | $ | 1,179 | $ | 2,491 | ||||
| Receivables | 10,413 | 10,334 | ||||||
| Inventories | 192,008 | 156,215 | ||||||
| Prepaid expenses | 4,049 | 3,603 | ||||||
| Deferred income tax assets | 6,147 | 5,607 | ||||||
| Property held for sale | 568 | 568 | ||||||
| Total current assets | 214,364 | 178,818 | ||||||
| Property and equipment, at cost: | ||||||||
| Land and land improvements | 1,544 | 1,508 | ||||||
| Buildings and building improvements | 10,469 | 10,488 | ||||||
| Furniture, fixtures and equipment | 73,404 | 71,518 | ||||||
| Transportation equipment | 846 | 861 | ||||||
| Leasehold improvements | 20,450 | 19,289 | ||||||
| Construction work in progress | 5,621 | 1,177 | ||||||
| Total property and equipment | 112,334 | 104,841 | ||||||
| Less accumulated depreciation and amortization | 81,851 | 76,563 | ||||||
| Net property and equipment | 30,483 | 28,278 | ||||||
| Property under capital leases | 27,956 | 24,054 | ||||||
| Less accumulated amortization | 12,191 | 11,498 | ||||||
| Net property under capital leases | 15,765 | 12,556 | ||||||
| Other non-current assets | 770 | 754 | ||||||
| Total assets | $ | 261,382 | $ | 220,405 | ||||
| Liabilities and Stockholders' Equity | ||||||||
| Current liabilities: | ||||||||
| Current maturities of capital lease obligations | $ | 583 | $ | 570 | ||||
| Accounts payable | 61,859 | 26,695 | ||||||
| Accrued salaries and commissions | 4,221 | 3,984 | ||||||
| Accrued taxes other than income taxes | 5,664 | 4,845 | ||||||
| Self-insurance claim reserves | 3,898 | 4,112 | ||||||
| Income taxes payable | 154 | — | ||||||
| Other current liabilities | 4,513 | 4,327 | ||||||
| Total current liabilities | 80,892 | 44,533 | ||||||
| Notes payable under revolving loan | 58,000 | 52,063 | ||||||
| Capital lease obligations – less current maturities | 16,162 | 12,804 | ||||||
| Deferred gain on leases | 3,149 | 3,439 | ||||||
| Deferred income taxes – non-current | 537 | 643 | ||||||
| Other non-current liabilities | 2,511 | 2,483 | ||||||
| Total liabilities | 161,251 | 115,965 | ||||||
| Stockholders' equity: | ||||||||
| Common stock, $.0001 par value, authorized 20,000,000 shares; 3,257,817 and 3,842,745 shares issued and outstanding, respectively | 1 | 1 | ||||||
| Additional paid-in capital | 36,479 | 40,115 | ||||||
| Retained earnings | 63,651 | 64,324 | ||||||
| Total stockholders' equity | 100,131 | 104,440 | ||||||
| Total liabilities and stockholders' equity | $ | 261,382 | $ | 220,405 | ||||
See accompanying notes to unaudited financial statements.
3
ALCO Stores, Inc.
(dollars in thousands, except share data)
(Unaudited)
| Thirteen Week Periods Ended | Thirty-Nine Week Periods Ended | |||||||||||||||
October 28, 2012 | October 30, 2011* | October 28, 2012 | October 30, 2011* | |||||||||||||
| Net sales | $ | 108,185 | $ | 108,149 | $ | 345,812 | $ | 340,688 | ||||||||
| Cost of sales | 74,528 | 75,012 | 238,057 | 235,363 | ||||||||||||
| Gross margin | 33,657 | 33,137 | 107,755 | 105,325 | ||||||||||||
| Selling, general and administrative expenses | 32,676 | 32,480 | 99,355 | 96,267 | ||||||||||||
| Depreciation and amortization expenses | 2,204 | 2,084 | 6,436 | 6,368 | ||||||||||||
| Total operating expenses | 34,880 | 34,564 | 105,791 | 102,635 | ||||||||||||
| Other operating income | — | 2,270 | — | 2,270 | ||||||||||||
| Operating income (loss) from continuing operations | (1,223 | ) | 843 | 1,964 | 4,960 | |||||||||||
| Interest expense | 859 | 619 | 2,395 | 3,336 | ||||||||||||
| Earnings (loss) from continuing operations before income taxes | (2,082 | ) | 224 | (431 | ) | 1,624 | ||||||||||
| Income tax expense (benefit) | (839 | ) | 48 | (183 | ) | 632 | ||||||||||
| Earnings (loss) from continuing operations | (1,243 | ) | 176 | (248 | ) | 992 | ||||||||||
| Loss from discontinued operations, net of income tax benefit of $80, $77, $260, and $103, respectively | (130 | ) | (127 | ) | (425 | ) | (169 | ) | ||||||||
| Net earnings (loss) | $ | (1,373 | ) | $ | 49 | $ | (673 | ) | $ | 823 | ||||||
| Earnings (loss) per share | ||||||||||||||||
| Basic | ||||||||||||||||
| Continuing operations | $ | (0.34 | ) | $ | 0.04 | $ | (0.07 | ) | $ | 0.25 | ||||||
| Discontinued operations | (0.03 | ) | (0.03 | ) | (0.11 | ) | (0.04 | ) | ||||||||
| Net earnings (loss) per share | $ | (0.37 | ) | $ | 0.01 | $ | (0.18 | ) | $ | 0.21 | ||||||
| Earnings (loss) per share | ||||||||||||||||
| Diluted | ||||||||||||||||
| Continuing operations | $ | (0.34 | ) | $ | 0.04 | $ | (0.07 | ) | $ | 0.25 | ||||||
| Discontinued operations | (0.03 | ) | (0.03 | ) | (0.11 | ) | (0.04 | ) | ||||||||
| Net earnings (loss) per share | $ | (0.37 | ) | $ | 0.01 | $ | (0.18 | ) | $ | 0.21 | ||||||
*Fiscal year 2012 amounts have been revised to reflect the change in accounting for inventory. See Note 2 for more information.
See accompanying notes to unaudited financial statements.
4
(dollars in thousands)
(Unaudited)
| Thirty-Nine Week Periods Ended | ||||||||
October 28, 2012 | October 30, 2011* | |||||||
| Cash flows from operating activities: | ||||||||
| Net earnings (loss) | $ | (673 | ) | $ | 823 | |||
| Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: | ||||||||
| Depreciation and amortization | 6,479 | 6,434 | ||||||
| Loss (gain) on sale of assets | 4 | (87 | ) | |||||
| Share-based compensation | 327 | 274 | ||||||
| Tax impact of stock options expired | — | (134 | ) | |||||
| Deferred income taxes | (646 | ) | 617 | |||||
| Proceeds from insurance settlement | — | (2,270 | ) | |||||
| Changes in: | ||||||||
| Receivables | (79 | ) | (1,846 | ) | ||||
| Prepaid expenses | (446 | ) | (69 | ) | ||||
| Inventories | (35,793 | ) | (46,526 | ) | ||||
| Prepaid income taxes | — | 96 | ||||||
| Accounts payable | 35,164 | 22,495 | ||||||
| Accrued salaries and commissions | 237 | 55 | ||||||
| Accrued taxes other than income | 819 | 169 | ||||||
| Self-insured claims reserves | (214 | ) | (206 | ) | ||||
| Income taxes payable | 154 | — | ||||||
| Other assets and liabilities | (89 | ) | 948 | |||||
| Net cash provided by (used in) operating activities | 5,244 | (19,227 | ) | |||||
| Cash flows from investing activities: | ||||||||
| Proceeds from the sale of assets | 486 | 458 | ||||||
| Proceeds from insurance settlement | — | 2,270 | ||||||
| Acquisition of property and equipment | (8,485 | ) | (5,184 | ) | ||||
| Net cash used in investing activities | (7,999 | ) | (2,456 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Net borrowings under revolving loan credit agreement | 5,937 | 22,935 | ||||||
| Payments for repurchase of stock | (3,963 | ) | — | |||||
| Refinancing costs on revolving loan and term loan fees | — | (520 | ) | |||||
| Pay downs under term loan | — | (1,151 | ) | |||||
| Principal payments under capital lease obligations | (531 | ) | (645 | ) | ||||
| Net cash provided by financing activities | 1,443 | 20,619 | ||||||
| Net decrease in cash | (1,312 | ) | (1,064 | ) | ||||
| Cash at beginning of period | 2,491 | 4,189 | ||||||
| Cash at end of period | $ | 1,179 | $ | 3,125 | ||||
*Fiscal year 2012 amounts have been revised to reflect the change in accounting for inventory. See Note 2 for more information.
See accompanying notes to unaudited financial statements.
5
ALCO Stores, Inc.
Notes to Unaudited Financial Statements
(1) Basis of Presentation
The accompanying unaudited financial statements of ALCO Stores, Inc. (the "Company") are for interim periods and have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. The accompanying unaudited financial statements should be read in conjunction with the financial statements included in the Company's fiscal 2012 Annual Report on Form 10-K. In the opinion of management of the Company, the accompanying unaudited financial statements reflect all adjustments (consisting of normal recurring accruals) necessary to present fairly the financial position of the Company and the results of its operations and cash flows for the interim periods. Because the Company's business is moderately seasonal, the results from interim periods are not necessarily indicative of the results to be expected for the entire year.
Fiscal 2013 is a 53-week period consisting of three thirteen week periods and one fourteen week period with each period referred to as a quarter. During Fiscal 2013, the fourteen week period will occur in the fourth quarter. Fiscal 2012 was a 52-week period consisting of four thirteen week periods. The thirteen weeks ended October 28, 2012 and October 30, 2011 are referred to herein as the third quarter of fiscal 2013 and 2012, respectively.
The depreciation and amortization amounts from the Statements of Operations may not agree to the related amounts in the Statements of Cash Flows due to the fact that a portion of the depreciation and amortization is included in earnings (loss) from discontinued operations, net of income tax expense (benefit) line of the Statements of Operations.
(2) Change in Accounting Method
During the fourth quarter of fiscal 2012, the Company elected to change its method of accounting for inventory from the retail inventory method to the weighted average cost method. The change has been retroactively applied and increased cost of sales and decreased gross margin for the third quarter ended October 30, 2011 by $0.1 million and decreased cost of sales and increased gross margin for the thirty-nine weeks ended October 30, 2011 by $2.2 million, respectively. Additionally, inventory increased by $2.2 million as of October 30, 2011.
(3) Share-Based Compensation
The Company recognizes compensation expense for its share-based payments based on the fair value of the awards at grant date. Share-based payments consist of stock option grants and the related compensation cost is recognized over the requisite service period of the award. For both the third quarter of fiscal 2013 and the third quarter of fiscal 2012, share-based compensation decreased pre-tax income by $0.1 million. For both the thirty-nine weeks ended October 28, 2012 and October 30, 2011, share-based compensation decreased pre-tax income by $0.3 million.
Forfeitures are estimated at the time of valuation and reduce expense ratably over the vesting period. This estimate is adjusted periodically based on the extent to which actual forfeitures differ, or are expected to differ, from the previous estimate.
Equity Incentive Plans
On June 27, 2012, the Company's stockholders approved the Company's 2012 Equity Incentive Plan (the "Plan"), which is administered by the Compensation Committee of the Company's Board of Directors. Under the Plan, the Company may grant up to 500,000 shares of Company stock in the form of stock options, awards and rights to officers, key employees and consultants of the Company; provided however, the Company's directors are not permitted to be participants in the Plan. According to the terms of the Plan, the per share exercise price of stock options granted shall not be less than the fair market value of the stock on the date of grant and such options will expire no later than ten years from the date of grant. The stock options, awards and rights granted under the Plan vest over a certain period of time, as determined by the Compensation Committee in its sole discretion, beginning from the grant date unless certain Company events occur as further provided under the terms of the Plan. In the case of a stockholder owning more than 10% of the outstanding voting stock of the Company, the exercise price of an incentive stock option may not be less than 110% of the fair market value of the stock on the date of grant and such options will expire no later than five years from the date of grant. Also, the aggregate fair market value of the stock with respect to which incentive stock options are exercisable on a tax deferred basis for the first time by an individual in any calendar year may not exceed $100,000. In the event that the foregoing results in a portion of an option exceeding the $100,000 limitation, such portion of the option in excess of the limitation shall be treated as a non-qualified stock option. No more than 100,000 shares of the Company's stock may be awarded in a single calendar year to any individual participating in the Plan. As of October 28, 2012, the Company had 415,000 shares authorized for future option grants. Upon exercise, the Company issues these shares from the unissued shares authorized. The 2012 Plan will expire on June 27, 2022.
Under the Company's 2003 Incentive Stock Option Plan (the "2003 Plan"), options to purchase shares of Company stock may be granted to officers and key employees, not to exceed 500,000 shares. According to the terms of the 2003 Plan, the per share exercise price of options granted shall not be less than the fair market value of the stock on the date of grant and such options will expire no later than five years from the date of grant. The options vest in equal amounts over a four year requisite service period beginning from the grant date unless certain Company events occur. In the case of a stockholder owning more than 10% of the outstanding voting stock of the Company, the exercise price of an incentive stock option may not be less than 110% of the fair market value of the stock on the date of grant and such options will expire no later than five years from the date of grant. Also, the aggregate fair market value of the stock with respect to which incentive stock options are exercisable on a tax deferred basis for the first time by an individual in any calendar year may not exceed $100,000. In the event that the foregoing results in a portion of an option exceeding the $100,000 limitation, such portion of the option in excess of the limitation shall be treated as a non-qualified stock option. No more than 100,000 shares of the Company's stock may be awarded in a single calendar year to any individual participating in the 2003 Plan. As of October 28, 2012, the Company had 248,120 shares authorized for future option grants. Upon exercise, the Company issues these shares from the unissued shares authorized. The 2003 Plan will expire on May 22, 2013.
6
Under the Company's Non-Qualified Stock Option Plan for Non-Management Directors, options may be granted to Directors of the Company who are not otherwise officers or employees of the Company, not to exceed 200,000 shares. According to the terms of the plan, the per share exercise price of options granted shall not be less than the fair market value of the stock on the date of grant and such options will expire five years from the date of grant. The options vest in equal amounts over a four year requisite service period beginning from the grant date unless certain Company events occur. All options under the plan shall be non-qualified stock options. As of October 28, 2012, the Company had 73,957 shares remaining to be issued under this plan. Upon exercise, the Company will issue these shares from the unissued shares authorized.
The fair value of each option grant is separately estimated. The fair value of each option is amortized into share-based compensation on a straight-line basis over the requisite service period as discussed above. We have estimated the fair value of all stock option awards as of the date of the grant by applying a modified Black-Scholes pricing valuation model. The application of this valuation model involves assumptions that are judgmental and highly sensitive in the determination of share-based compensation, including expected stock price volatility. The assumptions used in determining the fair value of options granted and a summary of the methodology applied to develop each assumption are as follows:
The following summarizes information concerning stock option grants during fiscal 2013 and 2012:
| Fiscal 2012 Ended | Thirteen Week Periods Ended | Thirty-Nine Week Periods Ended | ||||||||||||||||||
| January 29, 2012 | October 28, 2012 | October 30, 2011 | October 28, 2012 | October 30, 2011 | ||||||||||||||||
| Stock options granted | 22,500 | — | — | 190,000 | 22,500 | |||||||||||||||
| Weighted average exercise price | $ | 10.60 | — | — | 9.41 | 10.60 | ||||||||||||||
| Weighted average grant date fair value | $ | 4.65 | — | — | 3.92 | 4.65 | ||||||||||||||
| Expected price volatility | 58.4 | % | N/A | N/A | 48.2 | % | 58.4 | % | ||||||||||||
| Risk-free interest rate | 0.9 | % | N/A | N/A | 0.6 | % | 0.9 | % | ||||||||||||
| Weighted average expected lives in years | 3.8 | N/A | N/A | 7.2 | 3.8 | |||||||||||||||
| Dividend yield | 0.0 | % | N/A | N/A | 0.0 | % | 0.0 | % | ||||||||||||
EXPECTED PRICE VOLATILITY -- This is a measure of the amount by which a price has fluctuated or is expected to fluctuate. The Company uses actual historical changes in the market value of its stock to calculate expected price volatility because management believes that this is the best indicator of future volatility. The Company calculates monthly market value changes from the date of grant over a past period to determine volatility. An increase in the expected volatility will increase share-based compensation.
RISK-FREE INTEREST RATE -- This is the applicable U.S. Treasury rate for the date of the grant over the expected term. An increase in the risk-free interest rate will increase share-based compensation.
EXPECTED LIVES -- This is the period of time over which the options granted are expected to remain outstanding and is based on management's expectations in relation to the holders of the options. Options granted have a maximum term of five or ten years. An increase in the expected life will increase share-based compensation.
DIVIDEND YIELD --- The Company has not made any dividend payments nor does it have plans to pay dividends in the foreseeable future. An increase in the dividend yield will decrease share-based compensation.
As of October 28, 2012, total unrecognized share-based compensation related to non-vested stock options is $0.5 million with a weighted average expense recognition period of 2.4 years.
(4) Accounting for Income Taxes
The statute of limitations for the Company's federal income tax returns is open for fiscal 2009 through fiscal 2012. The Company files in numerous state jurisdictions with varying statutes of limitation. The Company's state returns are subject to examination by the taxing authorities for fiscal 2008 through fiscal 2012 or fiscal 2009 through fiscal 2012, depending on each state's statute of limitations.
7
(5) Fair Value Measurements
The financial instruments of the Company consist of cash, short-term receivables, property held for sale, and accounts payable, accrued expenses and long-term debt instruments, including capital leases. Property held for sale is presented at the lower of cost or fair value less costs of disposal. For notes payable under revolving loan, fair value approximates the carrying value due to the variable interest rate. For capital leases, the carrying value approximates the fair value. For all other financial instruments, including cash, short-term receivables, accounts payable and accrued expenses, the carrying amounts approximate fair value due to the short maturity of those instruments.
(6) Earnings Per Share
Basic earnings per share is computed by dividing net earnings by the weighted average number of shares outstanding. Diluted earnings per share reflects the potential dilution that could occur if contracts to issue securities (such as stock options) were exercised, except for those periods with a loss where the effect would be anti-dilutive. The weighted average number of shares used in computing earnings per share was as follows:
| Thirteen Week Periods Ended | Thirty-Nine Week Periods Ended | ||||||
| October 28, 2012 | October 30, 2011 | October 28, 2012 | October 30, 2011 | ||||
| Basic | 3,677,357 | 3,842,745 | 3,769,234 | 3,842,745 | |||
| Diluted | 3,677,357 | 3,842,745 | 3,769,234 | 3,842,745 | |||
(7) Store Closings and Discontinued Operations
When the operation of a store is discontinued and the store is closed, the Company reclassifies historical operating results from continuing operations to discontinued operations. The Company closed one store during the third quarter of fiscal 2013, whereas the Company did not close any stores during the third quarter of fiscal 2012. During the thirty-nine weeks of fiscal 2013, the Company closed four stores, whereas the Company closed one store during the thirty-nine weeks of fiscal 2012.
(8) Long-Term Debt
On July 21, 2011, the Company entered into a five-year revolving Credit Agreement (the "Facility") with Wells Fargo Bank, National Association and Wells Capital Finance, LLC (collectively "Wells Fargo"). The $120.0 million Facility replaced the Company's previous $120.0 million credit facility with Bank of America, N.A. and Wells Fargo Retail Finance, LLC, and expires July 20, 2016. The completion of the agreement for the new Facility resulted in the accelerated amortization of the remaining deferred financing fees associated with the participation of Bank of America, N.A in the previous facility. The accelerated costs were $0.5 million and included nominal fees paid to Bank of America, N.A. upon the termination of the former facility. Additional costs paid to Wells Fargo in connection with the new facility were $0.5 million. Those fees have been deferred and will be amortized over the term of the new facility. The loan agreement contains various restrictions that are applicable when outstanding borrowings exceed $102.0 million, including limitations on additional indebtedness, prepayments, acquisition of assets, granting of liens, certain investments and payments of dividends. The revolving loan note payable of $58.0 million together with outstanding letters of credit at October 28, 2012 resulted in an available line of credit at that date of approximately $53.4 million, subject to a borrowing base calculation.The Company's loan agreement contains various covenants including limitations on additional indebtedness and certain financial tests, as well as various subjective acceleration clauses. The balance sheet classification of the borrowings under the revolving loan credit facility has been determined in accordance with ASC 470, Balance Sheet Classification of Borrowings Outstanding under Revolving Credit Agreements that Include both a Subjective Acceleration Clause and a Lock-Box Arrangement. As of October 28, 2012, the Company was in compliance with all covenants and subjective acceleration clauses of the debt agreements. Accordingly, this obligation has been classified as a long-term liability in the accompanying balance sheet.
Based on the Company's average excess availability, the amount advanced to the Company on any Base Rate Loan (as such term is defined in the Facility) bears interest at the highest of (a) the rate of interest in effect for such day as publicly announced from time to time by Wells Fargo as its "prime rate"; (b) the Federal Funds Rate for such day, plus 1.0%; and (c) the LIBO Rate for a 30 day interest period as determined on such day, plus 2.0%. Amounts advanced with respect to any LIBO Borrowing for any Interest Period (as those terms are defined in the Facility) shall bear interest at an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of one percent) equal to (a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate (as defined in the Facility). The interest rates on outstanding borrowings at October 28, 2012 were 2.25% on $50.0 million and 2.23% on $8.0 million.
8
(9) Stock Repurchase
On July 27, 2012, the Company entered into a new Rule 10b5-1 and Rule 10b-18 Stock Repurchase Agreement with William Blair and Company, LLC (the "Stock Repurchase Agreement") whereby the Company authorized the repurchase of up to 175,000 shares of the Company's Common Stock under the Company's stock repurchase program (the "Program").
The Program was initially authorized by the Company on March 23, 2006, whereby the Board of Directors of the Company authorized the repurchase of 200,000 shares of the Company's Common Stock, and the Company repurchased 3,337 shares of Common Stock under the Program. The Company's Board of Directors reinstated the Program on August 13, 2008 and the Company repurchased 22,197 shares of Common Stock under the Program during such period of reinstatement. The Board of Directors of the Company approved the reinstatement of the Program again on January 6, 2012 and the Company repurchased an additional 34,407 shares of Common Stock during such reinstatement. On April 25, 2012, the Board of Directors of the Company authorized the Company to repurchase an additional 500,000 shares of Common Stock for a total of 700,000 shares of Common Stock authorized for repurchase under the Program. The Stock Repurchase Agreement only authorizes William Blair and Company, LLC to repurchase a portion of the total shares available for repurchase under the Program as stated above. Under the terms of the Program, the Company can terminate the proposed buy back at any time.
During the third quarter of fiscal 2013, the Company repurchased 550,521 shares of Common Stock under the Program, which resulted in a decrease to additional paid-in capital of $3.7 million. During the thirty-nine weeks of fiscal 2013, the Company repurchased 584,928 shares of Common Stock under the Program, which resulted in a decrease to additional paid-in capital of $4.0 million. As of October 28, 2012, the Company had repurchased a total of 610,462 shares under the Program since it was initially approved in 2006. Therefore, there were 89,538 shares of Common Stock available to be repurchased by the Company, as of October 28, 2012. As of December 7, 2012, the Company has not repurchased any additional shares of Common Stock under the Program. The Company subsequently retires all repurchased shares.
9
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS AND FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS, FINANCIAL CONDITION OR BUSINESS
Certain statements contained in this Quarterly Report on Form 10-Q that are not statements of historical fact may constitute "forward-looking statements" within the meaning of Section 21E of the Exchange Act. These statements are subject to risks and uncertainties, as described below. Examples of forward-looking statements include, but are not limited to: (i) projections of revenues, income or loss, earnings or loss per share, capital expenditures, store openings, store closings, payment or non-payment of dividends, capital structure and other financial items, (ii) statements of plans and objectives of the Company's management or Board of Directors, including plans or objectives relating to inventory, store development, marketing, competition, business strategy, store environment, merchandising, purchasing, pricing, distribution, transportation, store locations and information systems, (iii) statements of future economic performance, and (iv) statements of assumptions underlying the statements described in (i), (ii) and (iii). Forward-looking statements can often be identified by the use of forward-looking terminology, such as "believes," "expects," "may," "will," "should," "could," "intends," "plans," "estimates", "projects" or "anticipates," variations thereof or similar expressions.
Forward-looking statements are not guarantees of future performance or results. They involve risks, uncertainties and assumptions. The Company's future results of operations, financial condition and business operations may differ materially from the forward-looking statements or the historical information stated in this Quarterly Report on Form 10-Q. Stockholders and investors are cautioned not to put undue reliance on any forward-looking statement.
There are a number of factors and uncertainties that could cause actual results of operations, financial condition or business contemplated by the forward-looking statements to differ materially from those discussed in the forward-looking statements made herein or elsewhere orally or in writing, by, or on behalf of, the Company, including those factors described below. Other factors not identified herein could also have such an effect. Factors that could cause actual results to differ materially from those discussed in the forward-looking statements and from historical information include, but are not limited to, those factors described below.
OVERVIEW
Economic Conditions and Other External Factors. The economic slowdown and uncertainty around various political topics, as well as concerns about the fiscal cliff, continue to cause disruptions and significant volatility in financial markets, increased rates of mortgage loan default and personal bankruptcy, and declining consumer and business confidence, which has led to decreased customer traffic and reduced levels of consumer spending, particularly on discretionary items. This decline in consumer and business confidence and the decreased levels of customer traffic and consumer spending have negatively impacted our business. We cannot predict how long the current economically challenging conditions will persist and how such conditions might affect us and our customers. Decreased customer traffic and reduced consumer spending, particularly on discretionary items, would, however, over an extended period of time negatively affect our financial condition, operating performance, revenues and earnings. In addition, we cannot predict how current or worsening economic conditions will affect our critical suppliers and distributors and any negative impact on our critical suppliers or distributors may also have an adverse impact on our business results or financial condition. Lastly, our markets have experienced unseasonably warm temperatures which have negatively impacted consumer spending habits in our colder weather categories. Severe drought has also affected the majority of our trading area and the agricultural business in the Midwest.
Management does not believe that its merchandising operations, net sales, revenue or results from continuing operations have been materially impacted by inflation during the past two fiscal years.
Operations. The Company is a regional broad line retailer operating in 23 states.
The Company's fiscal year ends on the Sunday closest to January 31. Fiscal 2013 is a 53-week period consisting of three thirteen week periods and one fourteen week period with each period referred to as a quarter. During Fiscal 2013, the fourteen week period will occur in the fourth quarter. Fiscal 2012 was a 52-week period consisting of four thirteen week periods. For purposes of this management's discussion and analysis of financial condition and results of operations, the financial numbers are presented in thousands unless otherwise noted.
Strategy. The Company's overall business strategy involves identifying and opening stores in locations that will provide the Company with the highest return on investment. The Company competes for retail sales with national and broad line retail stores as well as other entities, such as mail order companies, specialty retailers, stores, manufacturer's outlets and the internet.
The Company initiated a transactional web site during November 2011. In July 2012, the Company expanded the product selection on its website which now includes more than 20,000 items of high-quality merchandise. Products offered on the ALCOstores.com website include video games and electronics, housewares, appliances and furniture, health & beauty aids, baby goods, office supplies, automotive and sporting goods, and much more. As in traditional ALCO Stores, consumers can choose from a wide range of well-known brand names. In addition, the website includes brands not found in the Company's retail stores.
During the second quarter of fiscal 2013, the Company has also adopted regional pricing and merchandising. Regional pricing will allow the Company to identify opportunities to price specific items differently in different ALCO markets, depending on regional competitive situations, while maintaining ALCO's superior value positioning with shoppers in each market. Regional merchandising consists of tailoring product offerings for specific needs in ALCO regions, such as adding fire-retardant clothing in stores in oil-drilling areas and higher-end outdoor apparel in areas frequented by outdoors enthusiasts, such as Colorado and other Western states.
10
The Company uses a variety of broad-based targeted marketing and advertising strategies to reach consumers. These strategies include full-color photography advertising circulars of eight to 20 pages distributed through newspaper insertion or, in the case of inadequate newspaper coverage, through direct mail. During fiscal 2013, the Company will distribute approximately 48 circulars in ALCO markets. The Company also uses in-store marketing. The Company's merchandising and marketing teams work together to present the products in an engaging and innovative manner, which is coordinated so that it is consistent with the current print advertisements. The Company regularly changes its banners and in-store promotions, which are advertised throughout the year, to attract consumers to the stores, to generate strong customer frequency and to increase average sales per customer. Net marketing and promotion costs represented approximately 1.1% and 0.6% of net sales in the third quarter of fiscal year 2013 and in the third quarter of fiscal year 2012, respectively. Management believes it has developed a comprehensive marketing strategy that will increase customer traffic and same-store sales. The Company continues to operate as a high-low retailer and has included cross departmental products in many of its marketing vehicles. For example, the Company has used an Elder Care page with over-the-counter products, "as seen on TV" items, and dry meals—all targeting customers who have reached retirement age. The Company believes that by providing the breadth of these key items to this targeted audience we can serve our customers' needs more efficiently and garner a greater share of the purchases made by this demographic. The Company's stores offer a broad line of merchandise consisting of approximately 35,000 items, including automotive, consumables and commodities, crafts, domestics, electronics, furniture, hardware, health and beauty aids, housewares, jewelry, ladies', men's and children's apparel and shoes, pre-recorded music and video, sporting goods, seasonal items, stationery and toys. During the third quarter of fiscal year 2013, the Company began to expand its offering of temperature controlled food and will continue to do so in the fourth quarter.
The Company is constantly evaluating the appropriate mix of merchandise to improve sales and gross margin performance. Corporate merchandising is provided to each store to ensure a consistent Company-wide store presentation. To facilitate long-term merchandising planning, the Company divides its merchandise into three core categories: primary, secondary, and convenience. The primary core receives management's primary focus, with a wide assortment of merchandise being placed in the most accessible locations within the stores and receiving significant promotional consideration.
The secondary core consists of categories of merchandise for which the Company maintains a strong assortment that is easily and readily identifiable by its customers. The convenience core consists of categories of merchandise for which the Company maintains convenient (but limited) assortments, focusing on key items that are in keeping with customers' expectations for a broad line retail store. Secondary and convenience cores include merchandise that the Company believes is important to carry, as the target customer expects to find them within a broad line retail store and they ensure a high level of customer traffic. The Company continually evaluates and ranks all product lines, shifting product classifications when necessary to reflect the changing demand for products. In addition, the Company's merchandising systems are designed to integrate the key retailing functions of seasonal merchandise planning, purchase order management, merchandise distribution, sales information and inventory maintenance and replenishment. All of the Company's stores have point-of-service computer terminals that capture sales information and transmit such information to the Company's data processing facilities where it is used to drive management, financial, and supply chain functions.
Store Expansion. The continued growth of the Company is dependent, in large part, upon the Company's ability to open and operate new stores on a timely and profitable basis. The Company will have opened a total of five stores during fiscal 2013. While the Company believes that adequate sites are available for future store openings, the rate of new store openings is subject to various contingencies, many of which are beyond the Company's control. These material contingencies include:
| · | the Company's ability to hire, train, and retain qualified personnel; |
| · | the availability of adequate capital resources for us to purchase inventory, equipment, and fixtures and make other capital expenditures necessary for store expansion; and |
| · | the ability of our landlords and developers to find appropriate financing in the current credit market to develop property to be leased by the Company. |
Historically, we have been able to hire, train, and retain qualified personnel and we anticipate being able to do so in the future. In order to address the increase in demand for qualified management, the Company will continue to recruit for those interested in working and living in our communities. Once hired, the management personnel will complete an in-store, hands-on management training program coupled with e-learning modules to ensure operational efficiencies and align to the Company priorities. We believe this training process will allow the Company to see the benefits of prompt time-to-productivity, employee engagement and commitment, and overall employee retention.
We currently believe that we will have the capital resources necessary to purchase the inventory, equipment, and fixtures, and to fund the other capital expenditures necessary for future store expansions. If we lack such capital resources, however, it would limit our expansion plans and negatively impact our operations going forward. The Company has been working closely with multiple developers and landlords that the Company believes have the financial resources to develop property to be leased by the Company and hold such property as a long-term investment in their portfolios. If such developers and landlords do not have, and cannot obtain, the financial resources to develop and hold such property, it would limit our expansion plans and negatively impact our operations going forward.
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Financial Risk. The Company is closely monitoring Internal Revenue Section 382 regarding technical change of control. This particular section of the tax code monitors the shift in 5% shareholders. Should the aggregate shift in 5% shareholders exceed 50% ("tripping event") in the preceding 36 months, then an annual limitation is placed on the ability of the Company to use its net operating loss carry-forwards ("NOLs") and credit carry-forwards. This annual limitation is equal to 3% of the Company's market capitalization just prior to the tripping event. It is management's belief that if the tripping event occurs, the Company will still be able to take advantage of the NOL's and credit carry-forwards prior to their expiration, albeit that the NOL's and credit carry-forwards will be utilized over a longer period of time.
The Company has begun initial assessments of the financial impacts of health care reform and the Affordable Care Act. While the Company cannot currently project the full amount of providing health insurance to all employees or the penalties that would be imposed if the Company did not offer health care to all employees, the Company believes that a reasonable range of incremental costs could be between $1.0 and $4.0 million, annually.
Recent Events
| · | On October 5, 2012, Edmond C. Beaith resigned from his position as Senior Vice President - Supply Chain, Chief Information Officer as stated on Form 8-K filed by the Company with the Securities and Exchange Commission on October 11, 2012. |
| · | On October 10, 2012, the Company issued a press release relating to the repurchase of 460,158 shares of its common stock with a par value of $.0001 under the Program, representing approximately 12% of the outstanding shares of common stock, in a transaction with a major shareholder, as stated on Form 8-K filed by the Company with the Securities and Exchange Commission on October 15, 2012. |
Key Items in Third Quarter Fiscal 2013.
The Company measures itself against a number of financial metrics to assess its performance. Some of the important financial items during the third quarter of fiscal 2013 were:
| · | Net sales from continuing operations, excluding fuel, increased $0.2 million, or 0.2%, to $106.6 million compared to $106.3 million for the third quarter of fiscal 2012. |
| · | Gross margin percentage increased to 31.1% of net sales compared to 30.6% in the third quarter of fiscal 2012. |
| · | Net loss per share was $0.37 compared to net earnings per share of $0.01 per share in the third quarter of fiscal 2012, which included an after-tax gain of $1.4 million, or $0.37 per share, for an insurance settlement that represented an appearance allowance for wind and hail damage sustained during second quarter of 2012 for the roofs at the Company's corporate office and distribution center in Abilene, Kansas. |
| · | Earnings (loss) from continuing operations before interest, taxes, depreciation and amortization, share-based compensation, preopening store costs, executive and corporate staff severance, and gain/loss on sale of assets ("Adjusted EBITDA") was $1.4 million compared to $1.0 million in the third quarter of fiscal 2012. |
12
RESULTS OF OPERATIONS
Thirteen Weeks Ended October 28, 2012 Compared to Thirteen Weeks Ended October 30, 2011
Net Sales
Net sales from continuing operations, excluding fuel, increased $0.2 million, or 0.2%, in the third quarter of fiscal 2013 to $106.6 million compared to $106.3 million for the third quarter of fiscal 2012. Non-comparable store sales increased $3.8 million due to the opening of seven new stores subsequent to the third quarter of fiscal 2012; one store opened during the third quarter of fiscal 2013, two stores opened during the second quarter of fiscal 2013, one store opened during the third quarter of fiscal 2012, and three stores opened during the fourth quarter of fiscal 2012.
Sales from comparable stores, excluding fuel, decreased $3.5 million, or 3.3%, in the third quarter of fiscal 2013, primarily due to a 6.8% decrease in comparable store transactions and partially offset by a 3.7% increase in average transaction size. Sales have been negatively impacted by unseasonably warm temperatures and severe drought across most of our Midwestern footprint.
Gross Margin
Gross margin in the third quarter of fiscal 2013 was $33.7 million, or 31.1% of net sales, compared to $33.1 million, or 30.6% of net sales, in the third quarter of fiscal 2012. The increase in gross margin was primarily attributable to competitive pricing opportunities implemented during the second quarter of fiscal 2013, partially offset by changes in product mix, including lower margin commodities growth.
SG&A
Selling, general and administrative (SG&A) expenses increased $0.2 million, or 0.6%, to $32.7 million during the third quarter of fiscal 2013 compared to $32.5 million during the third quarter of fiscal 2012. As a percentage of net sales, SG&A expenses during the third quarter of fiscal 2013 were 30.2%, compared to 30.0% during the third quarter of fiscal 2012. SG&A, excluding share-based compensation, preopening store costs, executive and corporate staff severance, and gain/loss on sale of assets, ("Adjusted SG&A"), was $32.3 million, or 29.8% of net sales, in the third quarter of fiscal 2013 compared to $32.1 million, or 29.7% of net sales, during the third quarter of fiscal 2012. The increase in Adjusted SG&A is primarily attributable to the increase of store support center expenses ($0.5 million) offset by a decrease in warehouse expenses ($0.4 million).
Depreciation and Amortization Expense
Depreciation and amortization expense from continuing operations was $2.2 million and $2.1 million in the third quarter of fiscal 2013 and in the third quarter of fiscal 2012, respectively.
Interest Expense
Interest expense increased $0.2 million, or 39.0%, to $0.9 million during the third quarter of fiscal 2013 compared to $0.6 million during the third quarter of fiscal 2012. The increase in interest expense is primarily attributable to capital lease interest for four additional capital lease stores in the third quarter of fiscal 2013 compared to the third quarter of fiscal 2012.
Income Taxes
The Company's effective tax rate on loss from continuing operations before income tax benefit during the third quarter of fiscal 2013 was 40.3%. The Company's effective tax rate on earnings from continuing operations before income taxes during the third quarter of fiscal 2012 was 21.6%. The effective tax rate for continuing operations is adjusted each quarter to reflect current business conditions. During fiscal 2012, the application of the effective tax rate to year-to-date earnings from continuing operations resulted in a lower calculated effective tax rate for the third quarter. In addition, the prior year effective tax rate benefited from certain employment tax credits, some of which are currently pending approval in Congress for the current year.
Discontinued Operations
Loss from discontinued operations, net of income tax benefit, was $0.1 million during the third quarter of fiscal 2013 compared to $0.1 million during the third quarter of fiscal 2012. The Company closed one store during the third quarter of fiscal 2013, whereas the Company did not close any stores during the third quarter of fiscal 2012.
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Thirty-nine Weeks Ended October 28, 2012 Compared to Thirty-nine Weeks Ended October 30, 2011
Net Sales
Net sales from continuing operations, excluding fuel, increased $5.7 million, or 1.7%, for the thirty-nine weeks ended October 28, 2012 to $340.7 million compared to $335.0 million for the thirty-nine weeks ended October 30, 2011. Non-comparable store sales increased $9.8 million due to the opening of six new stores subsequent to the third quarter of fiscal 2012.
Sales from comparable stores, excluding fuel, decreased $4.1 million, or 1.2%, for the thirty-nine weeks ended October 28, 2012, primarily due to a 5.0% decrease in comparable store transactions and partially offset by a 4.0% increase in average transaction size. Sales have been negatively impacted by unseasonably warm temperatures and severe drought across most of our Midwestern footprint.
Gross Margin
Gross margin for the thirty-nine weeks ended October 28, 2012 was $107.8 million, or 31.2% of net sales, compared to $105.3 million, or 31.0% of net sales, for the thirty-nine weeks ended October 30, 2011. The increase in gross margin was attributable to the increase in net sales from continuing operations, as well as the result of competitive pricing opportunities implemented during the second quarter of fiscal 2013, partially offset by changes in product mix, including lower margin commodities growth.
SG&A
Selling, general and administrative (SG&A) expenses increased $3.1 million, or 3.2%, to $99.4 million during the thirty-nine weeks ended October 28, 2012 compared to $96.3 million during the thirty-nine weeks ended October 30, 2011. As a percentage of net sales, SG&A expenses were 28.7% during the thirty-nine weeks ended October 28, 2012 compared to 28.3% during the thirty-nine weeks ended October 30, 2011. SG&A, excluding share-based compensation, preopening store costs, executive and corporate staff severance, and gain/loss on sale of assets, ("Adjusted SG&A"), was $98.3 million, or 28.4% of net sales, during the thirty-nine weeks ended October 28, 2012 compared to $95.8 million, or 28.1% of net sales, during the thirty-nine weeks ended October 30, 2011. The increase in Adjusted SG&A is primarily attributable to the increase of non-same store expenses ($3.2 million) and store support center expenses ($0.4 million), partially offset by reductions in warehouse expenses ($0.6 million).
Depreciation and Amortization Expense
Depreciation and amortization expense from continuing operations was $6.4 million during both the thirty-nine weeks ended October 28, 2012 and the thirty-nine weeks ended October 30, 2011.
Interest Expense
Interest expense decreased $0.9 million, or 28.2%, to $2.4 million during the thirty-nine weeks ended October 28, 2012 compared to $3.3 million during the thirty-nine weeks ended October 30, 2011. The decrease in interest expense is primarily attributable to the recognition of unamortized financing fees, in the amount of $0.5 million, from the Company's previous credit agreement during the thirty-nine weeks ended October 30, 2011. The remaining decrease is attributed to lower interest rates assessed under the current credit agreement with Wells Fargo Bank, National Association and Wells Capital Finance, LLC, including utilization of various LIBOR tranches at interest rates below base rates.
Income Taxes
The Company's effective tax rate on loss from continuing operations before income tax benefit during the thirty-nine weeks ended October 28, 2012 was 42.5%. The Company's effective tax rate on earnings from continuing operations before income taxes during the thirty-nine weeks ended October 30, 2011 was 38.9%. The prior year effective tax rate benefited from certain employment tax credits, some of which are currently pending approval in Congress for the current year.
Discontinued Operations
Loss from discontinued operations, net of income tax benefit, was $0.4 million during the thirty-nine weeks ended October 28, 2012 compared to $0.2 million during the thirty-nine weeks ended October 30, 2011. The Company closed four stores during the thirty-nine weeks ended October 28, 2012, whereas the Company closed one store during the thirty-nine weeks ended October 30, 2011.
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Certain Non-GAAP Financial Measures
The Company has included Adjusted SG&A and Adjusted EBITDA, non-GAAP performance measures, as part of its disclosure as a means to enhance its communications with stockholders. Certain stockholders have specifically requested this information to assist them in comparing the Company to other retailers that disclose similar non-GAAP performance measures. Further, management utilizes these measures with respect to internal evaluation, review of performance and to compare the Company's financial measures to those of its peers. Adjusted EBITDA differs from the most comparable GAAP financial measure (earnings (loss) from continuing operations) in that it does not include certain items, as does Adjusted SG&A. These items are excluded by management to better evaluate normalized operational cash flow and expenses excluding unusual, inconsistent and non-cash charges. To compensate for the limitations of evaluating the Company's performance using Adjusted SG&A and Adjusted EBITDA, management also utilizes GAAP performance measures such as gross margin, return on investment, return on equity and cash flow from operations. As a result, Adjusted SG&A and Adjusted EBITDA may not reflect important aspects of the results of the Company's operations.
| Thirteen Week Periods Ended | Thirty-Nine Week Periods Ended | |||||||||||||||
| (dollars and average selling square feet in thousands, except square footage ratios) | October 28, 2012 | October 30, 2011 | October 28, 2012 | October 30, 2011 | ||||||||||||
| SG&A Expenses Breakout | ||||||||||||||||
| Store support center (1) | $ | 5,245 | 4,755 | 15,207 | 14,812 | |||||||||||
| Distribution center | 1,667 | 2,051 | 5,087 | 5,665 | ||||||||||||
| 401K benefit | — | (53 | ) | — | (53 | ) | ||||||||||
| Same-store SG&A (2) | 24,308 | 25,292 | 75,184 | 75,223 | ||||||||||||
| Non same-store SG&A (3) | 1,359 | 343 | 3,550 | 346 | ||||||||||||
| Share-based compensation | 97 | 92 | 327 | 274 | ||||||||||||
| SG&A as reported | 32,676 | 32,480 | 99,355 | 96,267 | ||||||||||||
| Less: | ||||||||||||||||
| Share-based compensation | (97 | ) | (92 | ) | (327 | ) | (274 | ) | ||||||||
| Preopening store costs (3) | (171 | ) | (233 | ) | (416 | ) | (236 | ) | ||||||||
| Executive and corporate staff severance (1) | (49 | ) | — | (271 | ) | (131 | ) | |||||||||
| Gain (loss) on sale of assets (1) | (87 | ) | (9 | ) | 4 | 126 | ||||||||||
| Adjusted SG&A | $ | 32,272 | 32,146 | 98,345 | 95,752 | |||||||||||
| Adjusted SG&A % of sales | 29.8 | % | 29.7 | % | 28.4 | % | 28.1 | % | ||||||||
| Sales per average selling square foot (4) | $ | 24.50 | 25.41 | 78.77 | 80.06 | |||||||||||
| Gross Margin dollars per average selling square feet (4) | $ | 7.62 | 7.79 | 24.54 | 24.75 | |||||||||||
| Adjusted SG&A per average selling square foot (4) | $ | 7.31 | 7.55 | 22.40 | 22.50 | |||||||||||
| Adjusted EBITDA per average selling square foot (4)(5) | $ | 0.31 | 0.23 | 2.14 | 2.25 | |||||||||||
| Average inventory per average selling square foot (4)(6)(7) | $ | 33.98 | 35.24 | 33.83 | 34.13 | |||||||||||
| Average selling square feet (4) | 4,416 | 4,255 | 4,390 | 4,255 | ||||||||||||
| Total stores operating beginning of period | 215 | 213 | 216 | 214 | ||||||||||||
| Total stores operating end of period | 215 | 214 | 215 | 214 | ||||||||||||
| Total non same-stores | 6 | 1 | 6 | 1 | ||||||||||||
| Supplemental Data: | ||||||||||||||||
| Same-store gross margin dollar change | (2.1 | )% | 0.3 | % | (0.7 | )% | 0.9 | % | ||||||||
| Same-store SG&A dollar change | (3.8 | )% | 0.1 | % | 0.0 | % | (1.0 | )% | ||||||||
| Same-store total customer count change | (6.8 | )% | (3.9 | )% | (5.0 | )% | (3.0 | )% | ||||||||
| Same-store average sale per ticket change | 3.7 | % | 6.9 | % | 4.0 | % | 7.7 | % | ||||||||
| (1) | Store support center includes severance and gain (loss) on sale of assets |
| (2) | These amounts may not agree with 10-Qs and 10-Ks of previous quarters due to stores that had reached their fourteenth period of operation. In addition, these amounts may not agree with 10-Qs and 10-Ks of previous quarters due to subsequent store closures. These closed stores are now included in discontinued operations. |
| (3) | Non same-stores are those stores which have not reached their fourteenth period of operation |
| (4) | Average selling square feet is calculated as beginning square feet plus ending square feet divided by 2 |
| (5) | Adjusted EBITDA per average selling square foot is calculated as Adjusted EBITDA divided by average selling square feet |
| (6) | Average store level merchandise inventory is calculated as beginning inventory plus ending inventory divided by 2 |
| (7) | Excludes inventory for unopened stores |
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Fiscal Year-to-Date 2013 Compared to Fiscal Year-to-Date 2012
SG&A expenses for the thirty-nine week period ended October 28, 2012 increased $3.1 million which was attributable to the increase of non-same store expenses ($3.2 million) partially offset by overall reductions in store support center and warehouse expenses ($0.2 million).
Reconciliation and Explanation of Non-GAAP Financial Measures
The following table shows the reconciliation of Adjusted EBITDA to net earnings (loss) from continuing operations:
| Twenty-Six Week Periods Ended | Trailing 52 Weeks Ended | Thirteen Week Periods Ended | Trailing 52 Weeks Ended | |||||||||||||||||||||||||
| (dollars in thousands) | 52 Weeks Fiscal 2012 | July 29, 2012 | July 31, 2011 | July 29, 2012 | October 28, 2012 | October 30, 2011 | October 28, 2012 | |||||||||||||||||||||
| Net earnings (loss) from continuing operations (1) | $ | 1,839 | 995 | 817 | 2,017 | (1,243 | ) | 176 | 598 | |||||||||||||||||||
| Plus: | ||||||||||||||||||||||||||||
| Interest | 4,207 | 1,536 | 2,718 | 3,025 | 859 | 619 | 3,265 | |||||||||||||||||||||
| Tax expense (benefit) (1) | 753 | 656 | 583 | 826 | (839 | ) | 48 | (61 | ) | |||||||||||||||||||
| Depreciation and amortization (1) | 8,569 | 4,232 | 4,283 | 8,518 | 2,204 | 2,084 | 8,638 | |||||||||||||||||||||
| Share-based compensation | 257 | 229 | 182 | 304 | 97 | 92 | 309 | |||||||||||||||||||||
| Preopening store costs (2) | 557 | 245 | 3 | 799 | 171 | 233 | 737 | |||||||||||||||||||||
| Executive and corporate staff severance (3) | 143 | 222 | 131 | 234 | 49 | — | 283 | |||||||||||||||||||||
| (Gain) loss on sale of assets | 252 | (92 | ) | (135 | ) | 295 | 87 | 9 | 373 | |||||||||||||||||||
| Insurance proceeds (4) | (2,270 | ) | — | — | (2,270 | ) | — | (2,270 | ) | — | ||||||||||||||||||
| =Adjusted EBITDA (1) (3)(4) | 14,307 | 8,023 | 8,582 | 13,748 | 1,385 | 991 | 14,142 | |||||||||||||||||||||
| Cash | 2,491 | 2,407 | 6,431 | 2,407 | 1,179 | 3,125 | 1,179 | |||||||||||||||||||||
| Debt | 65,437 | 56,567 | 65,380 | 56,567 | 74,745 | 80,211 | 74,745 | |||||||||||||||||||||
| Debt, net of cash | $ | 62,946 | 54,160 | 58,949 | 54,160 | 73,566 | 77,086 | 73,566 | ||||||||||||||||||||
| (1) | These amounts may not agree with 10-Qs and 10-Ks of previous quarters due to subsequent store closures. These closed stores are now included in discontinued operations. |
| (2) | These costs are not consistent quarter to quarter as the Company does not open the same number of stores in each quarter of each fiscal year. These costs are directly associated with the number of stores that have been or will be opened and are incurred prior to the grand opening of each store. |
| (3) | During fiscal years 2013 and 2012, the Company made departmental restructuring changes resulting in severance. |
| (4) | On September 9, 2011, the Company received a $2.3 million settlement from Factory Mutual Insurance Company for damage sustained during the second quarter of fiscal 2012, due to wind and hail. |
16
LIQUIDITY AND CAPITAL RESOURCES
At October 28, 2012, working capital (defined as current assets less current liabilities) was $133.5 million compared to $134.3 million at the end of fiscal 2012.
The Company's primary sources of funds are cash flow from operations, borrowings under its revolving loan credit facility, and vendor trade credit financing.
Net cash provided by (used in) operating activities aggregated $5.2 million and ($19.2) million, for the thirty-nine week periods ended October 28, 2012 and October 30, 2011, respectively.
On July 21, 2011, the Company entered into a five-year revolving Credit Agreement (the "Facility") with Wells Fargo Bank, National Association and Wells Capital Finance, LLC (collectively "Wells Fargo"). The $120.0 million Facility replaced the Company's previous $120.0 million credit facility with Bank of America, N.A. and Wells Fargo Retail Finance, LLC, and expires July 20, 2016. The completion of the agreement for the new Facility resulted in the accelerated amortization of the remaining deferred financing fees associated with the participation of Bank of America, N.A in the previous facility. The accelerated costs were $0.5 million and included nominal fees paid to Bank of America, N.A. upon the termination of the former facility. Additional costs paid to Wells Fargo in connection with the new facility were $0.5 million. Those fees have been deferred and are being amortized over the term of the new facility. During the thirty-nine weeks of fiscal 2013, the Company had net borrowings of $5.9 million on its revolving credit facility.
The Company uses its revolving loan credit facility and vendor trade credit financing to fund the buildup of inventories periodically during the year for its peak selling seasons and to meet other short-term cash requirements. The revolving loan credit facility provides up to $120.0 million of financing in the form of notes payable. The loan agreement expires July 20, 2016. The revolving loan note payable of $58.0 million together with outstanding letters of credit at October 28, 2012 resulted in an available line of credit at that date of approximately $53.4 million, subject to a borrowing base calculation. Loan advances are secured by a security interest in the Company's inventory and credit card receivables. The loan agreement contains various restrictions that are applicable when outstanding borrowings exceed $102.0 million, including limitations on additional indebtedness, prepayments, acquisition of assets, granting of liens, certain investments and payments of dividends. The Company's loan agreement contains various covenants including limitations on additional indebtedness and certain financial tests, as well as various subjective acceleration clauses. The balance sheet classification of the borrowings under the revolving loan credit facility has been determined in accordance with ASC 470, Balance Sheet Classification of Borrowings Outstanding under Revolving Credit Agreements that Include both a Subjective Acceleration Clause and a Lock-Box Arrangement. As of January 29, 2012, the Company was in compliance with all covenants and subjective acceleration clauses of the debt agreements. Accordingly, this obligation has been classified as a long-term liability in the accompanying balance sheet. Short-term trade credit represents a significant source of financing for inventory to the Company. Trade credit arises from the willingness of the Company's vendors to grant payment terms for inventory purchases.
Cash used in investing activities for the thirty-nine week periods ended October 28, 2012 and October 30, 2011 totaled $8.0 million and $2.5 million, respectively, and consisted primarily of capital expenditures.
For a discussion of our other contractual obligations, see a discussion of future commitments under Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," in our Form 10-K for the fiscal year ended January 29, 2012. There have been no significant developments with respect to our contractual obligations since January 29, 2012.
OFF-BALANCE SHEET ARRANGEMENTS
The Company has no off-balance sheet arrangements that affect the Company's current or future financial condition.
BUSINESS OPERATIONS
The following chart indicates the percentage of sales, excluding fuel sales, represented by each of our major product categories:
| Thirteen Week Periods Ended | Thirty-Nine Week Periods Ended | |||||||||
October 28, 2012 | October 30, 2011 | October 28, 2012 | October 30, 2011 | |||||||
| Merchandise Category: | ||||||||||
| Consumables and commodities | 38 | % | 37 | % | 36 | % | 35 | % | ||
| Hardlines | 30 | % | 29 | % | 33 | % | 33 | % | ||
| Home furnishings and décor | 17 | % | 17 | % | 16 | % | 16 | % | ||
| Apparel and accessories | 15 | % | 17 | % | 15 | % | 16 | % | ||
| Total | 100 | % | 100 | % | 100 | % | 100 | % | ||
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(a) Evaluation of Disclosure Controls and Procedures
The Company carried out an evaluation required by the Securities Exchange Act of 1934, as amended (the "1934 Act"), under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the 1934 Act) as of October 28, 2012. Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of October 28, 2012, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the 1934 Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms.
Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the 1934 Act is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
(b) Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during fiscal 2013 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
PART II - OTHER INFORMATION
There are no material pending legal proceedings, other than routine litigation incidental to the business, to which the Company is a party or to which any property is subject.
There have been no material changes to our risk factors as previously disclosed in our Form 10-K for the fiscal year ended January 29, 2012.
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On July 27, 2012, the Company entered into a new Rule 10b5-1 and Rule 10b-18 Stock Repurchase Agreement with William Blair and Company, LLC (the "Stock Repurchase Agreement") whereby the Company authorized the repurchase of up to 175,000 shares of the Company's Common Stock under the Company's stock repurchase program (the "Program").
The Program was initially authorized by the Company on March 23, 2006, whereby the Board of Directors of the Company authorized the repurchase of 200,000 shares of the Company's Common Stock, and the Company repurchased 3,337 shares of Common Stock under the Program. The Company's Board of Directors reinstated the Program on August 13, 2008 and the Company repurchased 22,197 shares of Common Stock under the Program during such period of reinstatement. The Board of Directors of the Company approved the reinstatement of the Program again on January 6, 2012 and the Company repurchased an additional 34,407 shares of Common Stock during such reinstatement. On April 25, 2012, the Board of Directors of the Company authorized the Company to repurchase an additional 500,000 shares of Common Stock for a total of 700,000 shares of Common Stock authorized for repurchase under the Program. The Stock Repurchase Agreement only authorizes William Blair and Company, LLC to repurchase a portion of the total shares available for repurchase under the Program as stated above. Under the terms of the Program, the Company can terminate the proposed buy back at any time.
During the third quarter of fiscal 2013, the Company repurchased 550,521 shares of Common Stock under the Program. During the thirty-nine weeks of fiscal 2013, the Company repurchased 584,928 shares of Common Stock under the Program. As of October 28, 2012, the Company had repurchased a total of 610,462 shares under the Program since it was initially approved in 2006. Therefore, there were 89,538 shares of Common Stock available to be repurchased by the Company, as of October 28, 2012. As of December 7, 2012, the Company has not repurchased any additional shares of Common Stock under the Program. The Company subsequently retires all repurchased shares.
The following are details of repurchases under this program for the period covered by this report, in accordance with Rule 10b-1 and Rule 10b-18 of the Securities Exchange Act of 1934:
| Period | Total Number of Shares Repurchased as Part of Publicly Announced Plans or Programs | Weighted Average Price Paid Per Share | Total Number of Shares Authorized to be Repurchased | Total Number of Shares that May Yet Be Repurchased Under The Plans or Programs | ||||||||||||
| As of January 29, 2012 | 25,534 | $ | 14.97 | 200,000 | 174,466 | |||||||||||
| Fiscal 2013: | ||||||||||||||||
| First quarter: | 34,407 | $ | 8.69 | 500,000 | 640,059 | |||||||||||
| Second quarter: | — | $ | — | — | 640,059 | |||||||||||
| Third quarter: | ||||||||||||||||
| Month 1 | 81,789 | $ | 6.87 | — | 558,270 | |||||||||||
| Month 2 | 8,574 | $ | 7.53 | — | 549,696 | |||||||||||
| Month 3 | 460,158 | $ | 6.60 | — | 89,538 | |||||||||||
As of October 28, 2012 | 610,462 | $ | 7.12 | 700,000 | 89,538 | |||||||||||
Not applicable.
Not applicable.
None.
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EXHIBIT INDEX
| Number | Description | |
| 3.1 | Articles of Incorporation of Duckwall-ALCO Stores, Inc., amended as of June 13, 1994 and restated solely for filing with the Securities and Exchange Commission (filed as Exhibit 3.1 to Company's Quarterly Report on Form 10-Q for the fiscal quarter ended August 1, 2004 and incorporated herein by reference). | |
| 3.2 | Amended and Restated Bylaws of Duckwall-ALCO Stores, Inc. is incorporated herein by reference to Exhibit 3.2 to the Company's Current Report on Form 8-K filed on June 27, 2011. | |
| 3.3 | Certificate of Amendment to the Articles of Incorporation of Duckwall-ALCO Stores, Inc. is incorporated herein by reference to Exhibit 3.3 to the Company's Current Report on Form 8-K filed on June 29, 2012. | |
| 4.1 | Specimen of Duckwall-ALCO Stores, Inc. Common Stock Certificate (filed as Exhibit 4.1 to Company's Quarterly Report on Form 10-Q for the fiscal quarter ended August 3, 2008 and incorporated herein by reference). | |
| 4.2 | Reference is made to the Amended and Restated Articles of Incorporation described under 3.1 above and the Amended and Restated Bylaws described under 3.2 above and the Certificate of Amendment to the Articles of Incorporation described under 3.3 above. | |
| 10.1 | Stock Option Agreement between the Company and Tom Canfield, Jr. dated September 16, 2009 is incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of the Company dated September 24, 2009. | |
| 10.2 | Stock Option Agreement dated March 13, 2009 between the Company and Edmond C. Beaith is incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K of the Company dated March 20, 2009. | |
| 10.3 | Employment Agreement dated February 11, 2010 between the Company and Richard E. Wilson is incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K of the Company dated February 25, 2010. | |
| 10.4 | Stock Option Agreement, dated February 11, 2010, between the Company and Richard E. Wilson is incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K of the Company dated February 25, 2010. | |
| 10.5 | Stock Option Agreement dated September 20, 2010 between the Company and Wayne S. Peterson is incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K of the Company dated September 22, 2010. | |
| 10.6 | Resignation of Director. On December 27, 2010 Raymond A.D. French resigned from the Board of Directors and such resignation is incorporated by reference to Exhibit 10.6 to the Current Report on Form 8-K of the Company dated December 30, 2010. | |
| 10.7 | Indemnification Agreements between the Company and Royce Winsten, Raymond A.D. French, Lolan C. Mackey and Dennis E. Logue all dated June 14, 2010 incorporated herein by reference to Exhibit 10.7 on Current Report Form 8-K filed by the Company on June 18, 2010. | |
| 10.8 | Indemnification Agreement between the Company and Richard E. Wilson dated August 24, 2010 incorporated herein by reference to Exhibit 10.8 on Current Report Form 8-K of the Company dated August 27, 2010. | |
| 10.9 | Indemnification Agreement between the Company and Terrence M. Babilla dated September 2, 2010 incorporated herein by reference to Exhibit 10.9 on Current Report Form 8-K of the Company dated September 9, 2010 | |
| 10.10 | Stock Option Agreement between the Company and Terrence M. Babilla dated September 10, 2010 incorporated herein by reference to Exhibit 10.10 to Current Report Form 8-K of the Company dated September 16, 2010. | |
| 10.11 | Credit Agreement dated July 21, 2011, between Duckwall-ALCO Stores, Inc. and Wells Fargo Bank, National Association incorporated by reference to Exhibit 10.11 on Current Report Form 8-K of the Company dated July 27, 2011. | |
| 10.12 | Independent Director Compensation Policy is incorporated by reference to Exhibit 10.12 to the Current Report on Form 8-K of the Company dated June 27, 2011. | |
| 10.13 | Employment Agreement dated September 20, 2010 between the Company and Wayne S. Peterson is incorporated by reference to Exhibit 10.13 to the Current Report on Form 8-K of the Company dated September 22, 2010. | |
| 10.14 | Employment agreement entered into by the Company and Wayne S. Peterson dated March 15, 2012 is incorporated by reference to Exhibit 10.14 to the Company's Current Report on Form 8-K dated March 22, 2012. |
20
| Number | Description | |
| 10.15 | Employment agreement entered into by the Company and Ted Beaith dated March 15, 2012 is incorporated by reference to Exhibit 10.15 to the Company's Current Report on Form 8-K dated March 22, 2012. | |
| 10.16 | Employment agreement entered into by the Company and Tom L. Canfield, Jr. dated March 15, 2012 is incorporated by reference to Exhibit 10.16 to the Company's Current Report on Form 8-K dated March 22, 2012. | |
| 10.17 | Stock Option Agreement between the Company and Wayne S. Peterson dated April 30, 2012 incorporated herein by reference to Exhibit 10.17 to Current Report Form 8-K of the Company dated May 3, 2012. | |
| 10.18 | Stock Option Agreement between the Company and Tom L. Canfield, Jr. dated April 30, 2012 incorporated herein by reference to Exhibit 10.18 to Current Report Form 8-K of the Company dated May 3, 2012. | |
| 10.19 | Stock Option Agreement between the Company and Edmond C. Beaith dated April 30, 2012 incorporated herein by reference to Exhibit 10.19 to Current Report Form 8-K of the Company dated May 3, 2012. | |
| 10.20 | Stock Option Agreement between the Company and Dennis E. Logue dated June 29, 2012 incorporated herein by reference to Exhibit 10.20 to Current Report Form 8-K of the Company dated July 10, 2012. | |
| 10.21 | Stock Option Agreement between the Company and Dennis E. Logue dated June 29, 2012 incorporated herein by reference to Exhibit 10.21 to Current Report Form 8-K of the Company dated July 10, 2012. | |
| 10.22 | Stock Option Agreement between the Company and Terrence M. Babilla dated June 29, 2012 incorporated herein by reference to Exhibit 10.22 to Current Report Form 8-K of the Company dated July 10, 2012. | |
| 10.23 | Stock Option Agreement between the Company and Lolan C. Mackey dated June 29, 2012 incorporated herein by reference to Exhibit 10.23 to Current Report Form 8-K of the Company dated July 10, 2012. | |
| 10.24 | Stock Option Agreement between the Company and Royce Winsten dated June 29, 2012 incorporated herein by reference to Exhibit 10.24 to Current Report Form 8-K of the Company dated July 10, 2012. | |
| 10.25 | 2012 Equity Incentive Plan is incorporated by reference to Exhibit 10.25 to the Form S-8 of the Company dated July 11, 2012. | |
| 10.26 | Incentive Bonus Plan is incorporated by reference to Exhibit 10.26 to the Current Report on Form 8-K of the Company dated July 13, 2012. | |
| 10.27 | Employment agreement entered into by the Company and Brent A. Streit dated March 15, 2012 is incorporated by reference to Exhibit 10.27 to the Company's Current Report on Form 8-K dated July 13, 2012. | |
| 10.28 | Time Based Incentive Stock Option Agreement between the Company and Richard E. Wilson dated July 6, 2012 incorporated herein by reference to Exhibit 10.28 to Current Report Form 8-K of the Company dated July 13, 2012. | |
| 10.29 | Performance Based Incentive Stock Option Agreement between the Company and Richard E. Wilson dated July 6, 2012 incorporated herein by reference to Exhibit 10.29 to Current Report Form 8-K of the Company dated July 13, 2012. | |
| 10.30 | Time Based Incentive Stock Option Agreement between the Company and Wayne S. Peterson dated July 6, 2012 incorporated herein by reference to Exhibit 10.30 to Current Report Form 8-K of the Company dated July 13, 2012. | |
| 10.31 | Performance Based Incentive Stock Option Agreement between the Company and Wayne S. Peterson dated July 6, 2012 incorporated herein by reference to Exhibit 10.31 to Current Report Form 8-K of the Company dated July 13, 2012. | |
| 10.32 | Time Based Incentive Stock Option Agreements between the Company and Tom L. Canfield dated July 6, 2012 incorporated herein by reference to Exhibit 10.32 to Current Report Form 8-K of the Company dated July 13, 2012. | |
| 10.33 | Performance Based Incentive Stock Option Agreements between the Company and Tom L. Canfield dated July 6, 2012 incorporated herein by reference to Exhibit 10.33 to Current Report Form 8-K of the Company dated July 13, 2012. | |
| 10.34 | Time Based Incentive Stock Option Agreements between the Company and Brent A. Streit dated July 6, 2012 incorporated herein by reference to Exhibit 10.34 to Current Report Form 8-K of the Company dated July 13, 2012. | |
| 10.35 | Time Based Incentive Stock Option Agreements between the Company and Edmond C. Beaith dated July 6, 2012 incorporated herein by reference to Exhibit 10.35 to Current Report Form 8-K of the Company dated July 13, 2012. | |
| 10.36 | Performance Based Incentive Stock Option Agreements between the Company and Edmond C. Beaith dated July 6, 2012 incorporated herein by reference to Exhibit 10.36 to Current Report Form 8-K of the Company dated July 13, 2012. | |
| 10.37 | Performance Based Incentive Stock Option Agreements between the Company and Brent A. Streit dated July 6, 2012 incorporated herein by reference to Exhibit 10.37 to Current Report Form 8-K of the Company dated July 13, 2012. | |
21
| Number | Description | |
| 10.38 | Appointment of new independent registered public accounting firm incorporated herein by reference to Exhibit 10.38 to Current Report Form 8-K of the Company dated July 17, 2012. | |
| 10.39 | Resignation of Officer. On October 5, 2012, Edmond C. Beaith resigned from the Company and such resignation is incorporated by reference to Exhibit 10.39 to the Current Report on Form 8-K of the Company dated October 5, 2012. | |
| 18.1 | LIFO Accounting Change Preferability Letter from Independent Registered Public Accounting Firm is incorporated by reference to the Company's Annual Report on Form 10-K dated April 15, 2011. | |
| 18.2 | Retail Accounting Change Preferability Letter from Independent Registered Public Accounting Firm is incorporated by reference to the Company's Annual Report on Form 10-K dated April 13, 2012. | |
| 31.1 | Certification of Chief Executive Officer of ALCO Stores, Inc., dated December 7, 2012, pursuant to Rule 13a-4(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 31.2 | Certification of Chief Financial Officer of ALCO Stores, Inc., dated December 7, 2012, pursuant to Rule 13a-4(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 32.1 | Certification of Chief Executive Officer of ALCO Stores, Inc., dated December 7, 2012, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, which is furnished with this Quarterly Report on Form 10-Q and is not treated as filed in reliance upon § 601(b)(32) of Regulations S-K. | |
| 32.2 | Certification of Chief Financial Officer of ALCO Stores, Inc., dated December 7, 2012, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, which is furnished with this Quarterly Report on Form 10-Q and is not treated as filed in reliance upon § 601(b)(32) of Regulations S-K. |
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
| Signature and Title | Date | ||
| /s/ Richard E. Wilson | December 7, 2012 | ||
| Richard E. Wilson | |||
| President and Chief Executive Officer | |||
| (Principal Executive Officer) | |||
| /s/ Wayne S. Peterson | December 7, 2012 | ||
| Wayne S. Peterson | |||
| Senior Vice President - Chief Financial Officer | |||
| (Principal Financial and Accounting Officer) | |||
22