UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Amendment No. 1)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 1, 2011
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-20269
DUCKWALL-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 NO X
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:
3,841,895 shares of common stock, $.0001 par value (the issuer's only class of common stock), were outstanding as of May 1, 2011.
Explanatory Note:
This Amendment No. 1 to the Form 10-Q for the quarterly period ended May 1, 2011 is being filed for the sole purpose of adding the Chief Execuitve Officer and Chief Financial Officer certifications to the Form 10-Q found at Exhibits 31.1, 31.2, 32.1 and 32.2, which certifications were not attached to the original Form 10-Q filed on June 10, 2011. Such certifications are currently dated and certify the information found in this Form 10-Q/A, which includes the language of the original Form 10-Q in its entirety.
The original Form 10-Q filed on June 10, 2011 has been revised solely to reflect the changes above, and no other amendments, revisions or modificaitons have been made to the original Form 10-Q. This Form 10-Q/A speaks only as of the date the original Form 10-Q was filed, and the Company has not undertaken herein to amend, supplement or update any information contained in the original Form 10-Q to give effect to any subsequent events. Accordingly, this Form 10-Q/A should be read in conjunction with the original Form 10-Q and the Company's other reports filed with the Securities Exchange Commission subsequent to the filing of the original Form 10-Q, including any amendments to those filings.
DUCKWALL-ALCO STORES, INC.
| TABLE OF CONTENTS | |||
| PART I | |||
| Item 1. | 3 | ||
| Item 2. | 9 | ||
| Item 3. | 14 | ||
| PART II | |||
| Item 1. | 14 | ||
| Item 1A. | Risk Factors | 14 | |
| Item 2. | 14 | ||
| Item 3. | 14 | ||
| Item 4. | Reserved | 14 | |
| Item 5. | 14 | ||
| Item 6. | 16 | ||
| Signature | 18 | ||
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Duckwall-ALCO Stores, Inc.
(dollars in thousands, except share and per share amounts)
May 1, 2011 | January 30, 2011 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 5,720 | $ | 4,189 | ||||
| Receivables | 7,011 | 6,847 | ||||||
| Prepaid income taxes | 131 | 168 | ||||||
| Inventories | 160,873 | 151,079 | ||||||
| Prepaid expenses | 3,133 | 3,720 | ||||||
| Deferred income taxes | 3,662 | 2,563 | ||||||
| Property held for sale | 884 | 884 | ||||||
| Total current assets | 181,414 | 169,450 | ||||||
| Property and equipment, at cost: | ||||||||
| Land and land improvements | 1,496 | 1,496 | ||||||
| Buildings and building improvements | 11,840 | 11,828 | ||||||
| Furniture, fixtures and equipment | 69,555 | 69,924 | ||||||
| Transportation equipment | 1,330 | 1,305 | ||||||
| Leasehold improvements | 16,545 | 16,449 | ||||||
| Construction work in progress | 552 | 350 | ||||||
| Total property and equipment | 101,318 | 101,352 | ||||||
| Less accumulated depreciation and amortization | 74,259 | 72,788 | ||||||
| Net property and equipment | 27,059 | 28,564 | ||||||
| Property under capital leases | 22,254 | 22,254 | ||||||
| Less accumulated amortization | 10,918 | 10,727 | ||||||
| Net property under capital leases | 11,336 | 11,527 | ||||||
| Deferred income taxes — non-current | 2,201 | 2,180 | ||||||
| Other non-current assets | 983 | 990 | ||||||
| Total assets | $ | 222,993 | $ | 212,711 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities: | ||||||||
| Current maturities of long-term debt | $ | 1,036 | $ | 1,414 | ||||
| Current maturities of capital lease obligations | 602 | 703 | ||||||
| Accounts payable | 33,020 | 25,969 | ||||||
| Accrued salaries and commissions | 4,382 | 4,133 | ||||||
| Accrued taxes other than income | 4,599 | 4,822 | ||||||
| Self-insurance claim reserves | 4,135 | 4,139 | ||||||
| Other current liabilities | 3,907 | 4,607 | ||||||
| Total current liabilities | 51,681 | 45,787 | ||||||
| Notes payable under revolving loan | 51,655 | 45,282 | ||||||
| Capital lease obligations - less current maturities | 11,522 | 11,673 | ||||||
| Deferred gain on leases | 3,729 | 3,826 | ||||||
| Other non-current liabilities | 1,883 | 1,850 | ||||||
| Total liabilities | 120,470 | 108,418 | ||||||
| Stockholders’ equity: | ||||||||
| Common stock, $.0001 par value, authorized 20,000,000 shares; issued and outstanding 3,841,895 shares at May 1, 2011 and January 30, 2011 | 1 | 1 | ||||||
| Additional paid-in capital | 40,093 | 40,003 | ||||||
| Retained earnings | 62,429 | 64,289 | ||||||
| Total stockholders’ equity | 102,523 | 104,293 | ||||||
| Total liabilities and stockholders’ equity | $ | 222,993 | $ | 212,711 | ||||
See accompanying notes to unaudited financial statements.
Duckwall-ALCO Stores, Inc.
(dollars in thousands, except share and per share amounts)
(Unaudited)
| Thirteen Week Periods Ended | ||||||||
May 1, 2011 | May 2, 2010* | |||||||
| Net sales | $ | 114,559 | $ | 108,479 | ||||
| Cost of sales | 81,374 | 75,261 | ||||||
| Gross margin | 33,185 | 33,218 | ||||||
| Selling, general and administrative | 32,983 | 33,376 | ||||||
| Depreciation and amortization expenses | 2,189 | 2,474 | ||||||
| Total operating expenses | 35,172 | 35,850 | ||||||
| Operating loss from continuing operations | (1,987 | ) | (2,632 | ) | ||||
| Interest expense | 1,069 | 674 | ||||||
| Loss from continuing operations before income taxes | (3,056 | ) | (3,306 | ) | ||||
| Income tax benefit | (1,136 | ) | (1,072 | ) | ||||
| Loss from continuing operations | (1,920 | ) | (2,234 | ) | ||||
| Earnings (loss) from discontinued operations, net of income tax expense (benefit) of $36 in 2012 and ($25) in 2011 | 60 | (41 | ) | |||||
| Net loss | $ | (1,860 | ) | $ | (2,275 | ) | ||
| Earnings (loss) per share | ||||||||
| Basic | ||||||||
| Continuing operations | $ | (0.50 | ) | $ | (0.59 | ) | ||
| Discontinued operations | 0.02 | (0.01 | ) | |||||
| Net loss per share | $ | (0.48 | ) | $ | (0.60 | ) | ||
| Earnings (loss) per share | ||||||||
| Diluted | ||||||||
| Continuing operations | $ | (0.50 | ) | $ | (0.59 | ) | ||
| Discontinued operations | 0.02 | (0.01 | ) | |||||
| Net loss per share | $ | (0.48 | ) | $ | (0.60 | ) | ||
______________________________
*Fiscal year 2011 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.
(dollars in thousands)
(Unaudited)
| Thirteen Week Periods Ended | |||||||
May 1, 2011 | May 2, 2010* | ||||||
| Cash flows from operating activities: | |||||||
| Net loss | $ | (1,860 | ) | $ | (2,275 | ) | |
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | |||||||
| Depreciation and amortization | 2,189 | 2,482 | |||||
| Gain on sale of assets | (23 | ) | (8 | ) | |||
| Share-based compensation | 100 | 81 | |||||
| Tax impact of stock options exercised (expired) | (9 | ) | 13 | ||||
| Deferred income tax expense, net | (1,119 | ) | 10 | ||||
| Changes in: | |||||||
| Receivables | (22 | ) | 1,585 | ||||
| Prepaid expenses | 587 | 598 | |||||
| Inventories | (9,794 | ) | 2,829 | ||||
| Prepaid income taxes | 38 | (1,011 | ) | ||||
| Accounts payable | 7,050 | 3,376 | |||||
| Accrued salaries and commissions | 249 | 713 | |||||
| Accrued taxes other than income | (223 | ) | 183 | ||||
| Self-insured claims reserves | (4 | ) | (155 | ) | |||
| Other assets and liabilities | (758 | ) | (1,821 | ) | |||
| Net cash provided by (used in) operating activities | (3,599 | ) | 6,600 | ||||
| Cash flows from investing activities: | |||||||
| Proceeds from the sale of assets | 28 | 487 | |||||
| Acquisition of property and equipment | (641 | ) | (1,944 | ) | |||
| Net cash used in investing activities | (613 | ) | (1,457 | ) | |||
| Cash flows from financing activities: | |||||||
| Net borrowings (pay downs) under revolving loan credit agreement | 6,373 | (3,229 | ) | ||||
| Proceeds from exercise of outstanding stock options | — | 265 | |||||
| Refinancing costs on revolving loan and term loan fees | — | (1,300 | ) | ||||
| Pay downs under term loan | (378 | ) | (354 | ) | |||
| Principal payments under capital lease obligations | (252 | ) | (503 | ) | |||
| Net cash provided by (used in) financing activities | 5,743 | (5,121 | ) | ||||
| Net increase in cash and cash equivalents | 1,531 | 22 | |||||
| Cash and cash equivalents at beginning of year | 4,189 | 5,164 | |||||
| Cash and cash equivalents at end of quarter | $ | 5,720 | $ | 5,186 | |||
______________________________
*Fiscal year 2011 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.
Duckwall-ALCO Stores, Inc.
Notes to Unaudited Financial Statements
(1) Basis of Presentation
The accompanying unaudited financial statements of Duckwall-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. It is suggested that the accompanying unaudited financial statements be read in conjunction with the financial statements included in the Company's fiscal 2011 Annual Report. 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 2012 and 2011 are both 52-week fiscal years consisting of four thirteen week periods referred to as quarters. The thirteen weeks ended May 1, 2011 and May 2, 2010 are referred to herein as the first quarter of fiscal 2012 and 2011, respectively.
The depreciation and amortization amount from the Statements of Operations may not agree to the amount reflected in the Statements of Cash Flows due to the fact that a portion of the depreciation and amortization is included in the loss from discontinued operations, net of income tax benefit line of the Statements of Operations.
(2) Change in Accounting Method
During the fourth quarter of fiscal year 2011, the Company elected to change its method of accounting for inventory from last-in, first-out (LIFO) to first-in, first-out (FIFO). The change has been applied retroactively and increased cost of sales, operating loss, and net loss by $0.3 million for the quarter ended May 2, 2010. Additionally, inventory increased by $0.3 million as of May 2, 2010.
(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. For both thirteen weeks ended May 1, 2011 and May 2, 2010, share-based compensation decreased pre-tax income by $0.1 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.
Stock Incentive Plan
Under our 2003 Incentive Stock Option Plan, options may be granted to officers and key employees, not to exceed 500,000 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 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 $0.1 million. In the event that the foregoing results in a portion of an option exceeding the $0.1 million limitation, such portion of the option in excess of the limitation shall be treated as a non-qualified stock option. As of May 1, 2011, the Company had 217,220 shares authorized for future option grants. Upon exercise, the Company issues these shares from the unissued shares authorized.
Under our 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 May 1, 2011 the Company had 78,957 shares remaining to be issued under this plan. Upon exercise, the Company issues 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 following summarizes information concerning stock option grants during fiscal years 2012 and 2011:
| Fiscal 2011 Ended | Thirteen Week Periods Ended | |||||||||||
| January 30, 2011 | May 1, 2011 | May 2, 2010 | ||||||||||
| Stock options granted | 145,000 | — | 100,000 | |||||||||
| Weighted average exercise price | $ | 13.91 | — | 9.37 | ||||||||
| Weighted average grant date fair value | $ | 6.12 | — | 6.36 | ||||||||
The weighted average for key assumptions used in determining the fair value of options granted in the thirteen week period ended May 1, 2011 and May 2, 2010, and a summary of the methodology applied to develop each assumption are as follows:
| Fiscal 2011 Ended | Thirteen Week Periods Ended | |||||||||||
| January 30, 2011 | May 1, 2011 | May 2, 2010 | ||||||||||
| Expected price volatility | 52.01 | % | N/A | 51.12 | % | |||||||
| Risk-free interest rate | 1.27 | % | N/A | 1.50 | % | |||||||
| Weighted average expected lives in years | 4.6 | N/A | 4.8 | |||||||||
| Dividend yield | 0.00 | % | N/A | 0.00 | % | |||||||
| N/A – No stock options were issued during the thirteen week period ended May 1, 2011. | ||||||||||||
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 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 May 1, 2011, total unrecognized share-based compensation related to non-vested stock options is $0.7 million with a weighted average expense recognition period of 2.7 years.
(4) Accounting for Income Taxes
The Company recorded decreases in gross unrecognized tax benefits, inclusive of related interest, of $0.1 million for both thirteen week periods ended May 1, 2011 and May 2, 2010. None of the amounts recorded as unrecognized tax benefits would impact the effective income tax rate if recognized.
The statute of limitations for the Company’s federal income tax returns is open for fiscal 2008 through fiscal 2010. The Company files in numerous state jurisdictions with varying statutes of limitation. The statute of limitations for the Company’s state returns are open from fiscal 2007 through fiscal 2010 or fiscal 2008 through fiscal 2010, depending on each state’s statute of limitations.
(5) Fair Value Measurements
The financial instruments of the Company consist of cash and cash equivalents, short-term receivables and accounts payable, accrued expenses and long-term debt instruments, including capital leases. For notes payable under revolving loan, fair value approximates the carrying value due to the variable interest rate. Based on the borrowing rates currently available to the Company for debt with similar terms, the fair value of term debt at May 1, 2011 approximates its carrying amount of $1.0 million. For all other financial instruments including cash and cash equivalents, 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 net earnings per share is computed by dividing net earnings by the weighted average number of shares outstanding. Diluted net 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 their effect would be anti-dilutive. The average number of shares used in computing earnings per share was as follows:
| Thirteen Week Periods Ended | ||||||||
| May 1, 2011 | May 2, 2010 | |||||||
| Basic | 3,841,895 | 3,811,153 | ||||||
| Diluted | 3,841,895 | 3,811,153 | ||||||
(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. During fiscal 2011, one ALCO store was closed and 49 Duckwall stores were closed. No stores were closed during the first quarter of fiscal 2012.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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: The economic slowdown we have experienced and continue to experience has caused 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 income.
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.
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 years 2012 and 2011 consist of 52 weeks. For purposes of this management’s discussion and analysis of financial condition and results of operations, the financial numbers are presented in thousands.
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 prefers markets that do not have direct competition from national or regional broad line retail stores. The Company also competes for retail sales with other entities, such as mail order companies, specialty retailers, stores, manufacturer’s outlets and the internet.
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 2011, these circulars were distributed 47 times in ALCO markets. During fiscal 2012, the Company will distribute approximately 49 circulars. 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. The Company also utilizes email and social media websites, such as Facebook and Twitter, to communicate additional savings and as reminders of advertisements in weekly circulars. Email blasts are sent to approximately 250,000 subscribers, two or three times per week. Net marketing and promotion costs represented approximately 1.0% of net sales in both fiscal years 2011 and 2010. 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 in many of its marketing vehicles cross departmental products. 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, 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. 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 feels 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.
During fiscal 2011, the Company announced a new partnership with Associated Wholesale Grocers (“AWG”), whereby the Company began procuring several categories of product, previously procured from multiple vendors. The partnership with AWG allowed for the reduction of inventory, improved inventory turnover and lower operating expenses at its distribution facility in Abilene, Kansas. Through an extensive distribution network and eight distribution centers, AWG and its subsidiaries deliver to over 2,500 retail outlets in 24 states.
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 currently intends to open no less than three stores in fiscal 2012. While the Company believes that adequate sites are currently available, 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 |
| · | 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 this contingency, the Company has initiated an Assistant Manager Training Program whereby the Company provides general management training to manager candidates at monthly seminars held at the Company’s corporate offices. We anticipate that this program will increase our ability to train and retain qualified personnel. 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 the 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.
Key Items in First Quarter Fiscal 2012.
The Company measures itself against a number of financial metrics to assess its performance. Some of the important financial items during the first quarter of fiscal 2012 were:
| · | Net sales from continuing operations increased $6.1 million, or 5.6%, to $114.6 million compared to $108.5 million for the first quarter of fiscal 2011. |
| · | Gross margin percentage decreased to 29.0% of sales compared to 30.6% in the first quarter of fiscal 2011. |
| · | Net loss per share was $0.48 compared to a net loss of $0.60 per share in the first quarter of fiscal 2011. |
| · | Earnings from continuing operations before interest, taxes, depreciation and amortization, share-based compensation, pre-opening costs, and executive severance (“Adjusted EBITDA”) was $0.4 million compared to ($0.1) million in the first quarter of fiscal 2011. |
RESULTS OF OPERATIONS
Thirteen Weeks Ended May 1, 2011 Compared to Thirteen Weeks Ended May 2, 2010
Net Sales
Net sales from continuing operations increased $6.1 million, or 5.6%, in the first quarter of fiscal 2012 to $114.6 million compared to $108.5 million for the first quarter of fiscal 2011. The increase in net sales is largely due to the 3.2% improvement in same store sales and sales generated by the five new stores opened during fiscal 2011. The increase in net sales from new stores open the entire 13 weeks during the quarter ended May 1, 2011, but not open the entire 13 weeks during the quarter ended May 2, 2010, was $2.5 million. The Company experienced consistent growth in its consumable categories as a result of expanded selling square footage, enhanced value proposition, and expanded product selection. In addition, integration of new private label brands and stronger marketing and merchandise assortments are resonating with the customer.
Gross Margin
For both thirteen weeks ended May 1, 2011 and May 2, 2010, gross margin was $33.2 million. As a percentage of sales, gross margin was 29.0% for the first quarter of fiscal 2012 compared to 30.6% in the first quarter of fiscal 2011. The decrease in gross margin percentage was primarily attributable to increases in mix of lower margin businesses, primarily consumable categories and electronics, and increases in freight expenses. The increases in mix of lower margin businesses was not offset by commensurate growth in higher margin businesses such as seasonal apparel and outdoor categories, due to unseasonably cool temperatures and regional weather disruptions. The Company believes as weather conditions return to more typical patterns, the mix of higher margin businesses will improve and gross margin, as a percentage of sales, will also improve.
SG&A
Selling, general and administrative (SG&A) expense decreased $0.4 million, or 1.2%, to $33.0 million in the first quarter of fiscal 2012 compared to $33.4 million in the first quarter of fiscal 2011. As a percentage of net sales, SG&A expense was 28.8% in the first quarter of fiscal 2012, compared to 30.8% in the first quarter fiscal 2011. SG&A expense, excluding share-based compensation expense, executive severance, and preopening costs, (“Adjusted SG&A Expense”), was $32.8 million, or 28.7% of sales, in the first quarter of fiscal 2012 compared to $33.1 million, or 30.5% of sales, in the first quarter of fiscal 2011. The decrease in SG&A expense is primarily attributable to reductions in corporate overhead ($0.5 million), reductions in warehouse overhead ($0.3 million), reduced same store expenses ($0.1 million), and partially offset by increases in non-same store expenses ($0.5 million).
Depreciation and Amortization Expense
Depreciation and amortization expense was $2.2 million in the first quarter of fiscal 2012 compared to $2.5 million in the first quarter of fiscal 2011. Depreciation and amortization expense from continuing operations increased $0.2 million, primarily due to new stores opened in fiscal 2011.
Interest Expense
Interest expense increased $0.4 million, or 58.6%, to $1.1 million in the first quarter of fiscal 2012 compared to $0.7 million in the first quarter of fiscal 2011. The increase was primarily attributable to a higher outstanding balance on the Company’s revolving loan credit facility during the first quarter of fiscal 2012, due to increase of inventory versus first quarter of fiscal 2011.
Income Taxes
The Company’s effective tax rate on earnings from continuing operations before income taxes in the first quarter of fiscal 2012 was 37.2% compared to 36.1% in the first quarter of fiscal 2011. The increase in the effective tax rate is partially due to the impact of the anticipated decrease in federal and state tax credits estimated for fiscal 2012.
Loss from Discontinued Operations
Earnings from discontinued operations, net of income tax expense, was $0.1 million in the first quarter of fiscal 2012 compared to a loss of $0.1 million, net of income tax benefit, in the first quarter of fiscal 2011. During fiscal 2011, one ALCO store was closed and 49 Duckwall stores were closed. No stores were closed during the first quarter of fiscal 2012.
Certain Non-GAAP Financial Measures
The Company has included Adjusted Gross Margin, 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 in 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 (loss from continuing operations) in that it does not include certain items, as does Adjusted Gross Margin and 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 Gross Margin, 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 Gross Margin, Adjusted SG&A and Adjusted EBITDA may not reflect important aspects of the results of the Company’s operations.
| Thirteen Week Periods Ended | ||||||||
(dollars in thousands, except square footage ratios) | May 1, 2011 | May 2, 2010 | ||||||
| SG&A Expenses Breakout | ||||||||
| Store support center (1) | $ | 5,363 | $ | 5,830 | ||||
| Distribution center | 1,915 | 2,175 | ||||||
| 401K expense | — | 24 | ||||||
| Same-store SG&A | 24,951 | 25,092 | ||||||
| Non same-store SG&A (2) | 654 | 174 | ||||||
| Share-based compensation | 100 | 81 | ||||||
| SG&A as reported | 32,983 | 33,376 | ||||||
| Less: | ||||||||
| Share-based compensation | (100 | ) | (81 | ) | ||||
| Preopening store costs (2) | — | (199 | ) | |||||
| Executive and staff severance (1) | (48 | ) | — | |||||
| Adjusted SG&A | $ | 32,835 | $ | 33,096 | ||||
| Adjusted SG&A % of sales | 28.7 | % | 30.5 | % | ||||
| Sales per average selling square foot (3) | $ | 26.01 | $ | 25.31 | ||||
| Adjusted Gross Margin dollars per average selling square foot (3) | $ | 7.54 | $ | 7.75 | ||||
| Adjusted SG&A per average selling square foot (3) | $ | 7.47 | $ | 7.72 | ||||
| Adjusted EBITDA per average selling square foot (3)(4) | $ | 0.08 | $ | (0.02 | ) | |||
| Average inventory per average selling square foot (3)(5)(6) | $ | 31.03 | $ | 26.71 | ||||
| Average selling square feet (3) | 4,404 | 4,286 | ||||||
| Total stores operating beginning of period | 214 | 258 | ||||||
| Total stores operating end of period | 214 | 255 | ||||||
| Total stores less than twelve months old | 5 | 2 | ||||||
| Total non same-stores | 5 | 2 | ||||||
| Supplemental Data: | ||||||||
| Same-store adjusted gross margin dollar change | 0.8 | % | (2.1 | )% | ||||
| Same-store SG&A dollar change | (0.6 | ) % | (0.9 | )% | ||||
| Same-store total customer count change | (3.4 | ) % | (3.0 | )% | ||||
| Same-store average sale per ticket change | 6.8 | % | 0.7 | % | ||||
______________________________
| (1) Store support center includes severance for first quarter fiscal 2012. |
| (2) | Non same-stores are those stores which have not reached their fourteenth period of operation |
| (3) Average selling square feet is calculated as beginning square feet plus ending square feet divided by 2 |
| (4) Adjusted EBITDA per average selling square foot is calculated as Adjusted EBITDA divided by average selling square feet |
| (5) Average store level merchandise inventory is calculated as beginning inventory plus ending inventory divided by 2 |
| (6) Excludes inventory for unopened stores |
Fiscal 2012 Compared to Fiscal 2011
Store support center expenses decreased $0.5 million, or 8.0%. The net decrease reflects reduced expenses of $0.7 million - legal fees ($0.4 million), payroll and benefits ($0.2 million), and relocation expense ($0.1 million); and partially offset by a decrease in other income of $0.2 million. The decrease in other income pertains to a one-time settlement, received during the first quarter of fiscal 2011.
Same-store SG&A expenses decreased $0.1 million, or 0.6%. The decrease was primarily attributable to reduced labor and benefits ($0.3 million), reduced floor care costs ($0.1 million), and partially offset by an increase of net advertising costs ($0.3 million).
Non-same store SG&A expenses increased $0.5 million, or 275.90%. The Company opened five stores subsequent to the first quarter of fiscal 2011.
Reconciliation and Explanation of Non-GAAP Financial Measures
The following table shows the reconciliation of Adjusted EBITDA to net earnings (loss) from continuing operations:
| 52 Weeks | Thirteen Week Periods Ended | Trailing Twelve Periods Ended | ||||||||||||||
(dollars in thousands) | Fiscal 2011 | May 1, 2011 | May 2, 2010 | May 1, 2011 | ||||||||||||
| Net earnings (loss) from continuing operations (1) | $ | (3,594 | ) | (1,920 | ) | (2,234 | ) | (3,280 | ) | |||||||
| Plus: | ||||||||||||||||
| Interest | 3,502 | 1,069 | 674 | 3,897 | ||||||||||||
| Tax benefit (1) | (2,446 | ) | (1,136 | ) | (1,072 | ) | (2,510 | ) | ||||||||
| Depreciation and amortization (1) | 10,014 | 2,189 | 2,474 | 9,729 | ||||||||||||
| Share-based compensation | 316 | 100 | 81 | 335 | ||||||||||||
| Preopening store costs (2) | 543 | — | 199 | 344 | ||||||||||||
| Executive and staff severance | 540 | 48 | — | 588 | ||||||||||||
| Store reset costs | 895 | — | — | 895 | ||||||||||||
| AWG transition costs | 210 | — | — | 210 | ||||||||||||
| =Adjusted EBITDA (1) (3)(4) | 9,980 | 350 | 122 | 10,208 | ||||||||||||
| Cash | 4,189 | 5,720 | 5,186 | 5,720 | ||||||||||||
| Debt | 59,072 | 64,815 | 35,606 | 64,815 | ||||||||||||
| Debt, net of cash | $ | 54,883 | 59,095 | 30,420 | 59,095 | |||||||||||
| (1) These amounts may not agree with 10-Qs 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) For the trailing twelve periods ended May 1, 2011 the average open weeks for the Company’s five non same-stores was 39 weeks. |
| (4) During fiscal year 2011, the Company made changes in its executive management team and warehouse operations. For the trailing twelve periods ended May 1, 2011, these initiatives resulted in approximately $1.6 million reduced SG&A expenses when compared to the same prior year trailing twelve periods. The initiatives include, but are not limited to, executive and staff reduction. |
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of funds are cash flows from operations and borrowings under its revolving loan credit facility.
At May 1, 2011, working capital (defined as current assets less current liabilities) was $129.7 million compared to $110.8 million at May 2, 2010. The increase in working capital was primarily attributable to increased inventory.
The Company uses its revolving loan credit facility and vendor trade credit financing (accounts payable) to fund the build-up 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 million of financing in the form of notes payable and letters of credit. The loan agreement expires in January 2014. The revolving loan note payable and letter of credit balance at May 1, 2011 was $58.9 million, resulting in an available line of credit at that date of $52.1 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 $96.0 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. As of June 10, 2011, the Company believes it is in compliance with all covenants and subjective acceleration clauses of the debt agreements.
The balance sheet classification of the borrowings under the revolving loan credit facility has been determined in accordance with Emerging Issues Task Force (EITF) Issue 95- 22, Balance Sheet Classification of Borrowings Outstanding under Revolving Credit Agreements that Include both a Subjective Acceleration Clause and a Lock-Box Arrangement. 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 provided by (used in) operating activities in the first quarters of fiscal 2012 and fiscal 2011 was ($3.6) million and $6.6 million, respectively. The decrease in net cash used in the thirteen week period of fiscal 2012 compared to the same period of fiscal 2011 was primarily due to $8.6 million increase in inventory, net of accounts payable increase.
Cash used in investing activities in the first quarters of fiscal 2012 and 2011 were $0.6 million and $1.5 million, respectively.
Cash provided by (used in) financing activities in the first quarters of fiscal 2012 and 2011 were $5.7 million and ($5.1) million, respectively. Net borrowings on the revolving loan provided cash of $6.4 million during the thirteen week period ended May 1, 2011 compared to net cash used of $4.5 million in the first quarter of fiscal 2011.
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 30, 2011. There have been no significant developments with respect to our contractual obligations since January 30, 2011.
As of June 10, 2011, the Company has repurchased 25,534 shares of stock. The average price paid was $15.16. Since the fiscal year ended January 30, 2011, the Company has not repurchased any shares.
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 for the first quarter of fiscal 2012 and 2011, respectively:
| Thirteen Week Periods Ended | ||||||||
May 1, 2011 | May 2, 2010 | |||||||
| Merchandise Category: | ||||||||
| Consumables and commodities | 38 | % | 37 | % | ||||
| Hardlines | 32 | % | 32 | % | ||||
| Apparel and accessories | 16 | % | 16 | % | ||||
| Home furnishings and décor | 14 | % | 15 | % | ||||
| Total | 100 | % | 100 | % | ||||
ITEM 3. CONTROLS AND PROCEDURES
(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 May 1, 2011. Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of May 1, 2011, 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 2012 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
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.
ITEM 1A. RISK FACTORS
There have been no material changes to our risk factors as previously disclosed in our Form 10-K for the fiscal year ended January 30, 2011.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On March 23, 2006, the Board of Directors of the Company authorized the Company to repurchase up to 200,000 shares of Common Stock, of which 25,534 shares had been purchased as of June 10, 2010. On August 13, 2008 the Company announced that it was resuming its stock repurchase program. Since August 13, 2008, 22,197 shares have been repurchased. 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 (or Units) Purchased | Average Price Paid Per Share (or Unit) | Total Number of Shares (or Units) Purchased as Part Of Publicly Announced Plans or Programs | Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under The Plans or Programs | |||
| As of January 30, 2011 | 25,534 | 15.16 | 25,534 | 174,466 | |||
| — | — | — | |||||
| First quarter: | |||||||
| Month 1 | — | — | — | ||||
| Month 2 | — | — | — | ||||
| Month 3 | — | — | — | ||||
| — | — | ||||||
| As of May 1, 2011 | 25,534 | $ | 15.16 | 25,534 | 174,466 | ||
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. RESERVED
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
See the Exhibit Index immediately following the signature page hereto.
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) 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.
DUCKWALL-ALCO STORES, INC.
(Registrant)
/s/ Richard E. Wilson
Richard E. Wilson
President and Chief Executive Officer
Signing on behalf of the registrant and as Principal Executive Officer
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 | Bylaws of Duckwall-ALCO Stores, Inc. (filed as Exhibit 3.2 to Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended August 1, 2004 and incorporated herein by reference). | |
| 3.3 | Amendment to Bylaws of Duckwall-ALCO Stores, Inc. is incorporated herein by reference to Exhibit 3.3 to the Current Report on Form 8-K of the Company dated April 20, 2010. | |
| 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, Bylaws described under 3.2 above, and Amendment to Bylaws under 3.3 above. | |
| 10.1 | Employment Agreement dated January 5, 2006 between the Company and Tom L. Canfield, Jr. is incorporated by reference as Exhibit 10.1 to the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2010. | |
| 10.2 | Addendum to Employment Agreement dated December 31, 2008 between the Company and Tom L. Canfield, Jr. is incorporated by reference as Exhibit 10.2 to the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2010. | |
| Stock Option Agreement between the Company and Tom Canfield, Jr. dated September 16, 2009 is incorporated herein by reference to Exhibit 10.3 to the Current Report on Form 8-K of the Company dated September 24, 2009. | ||
| 10.4 | Employment Agreement dated August 25, 2008 between the Company and Edmond C. Beaith is incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K of the Company dated August 25, 2008. | |
| 10.5 | Stock Option Agreement dated March 13, 2009 between the Company and Edmond C. Beaith is incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K of the Company dated March 20, 2009. | |
| 10.6 | Employment Agreement dated December 11, 2009 between the Company and James M. Spencer is incorporated by reference to Exhibit 10.6 to the Current Report on Form 8-K of the Company dated December 17, 2009. | |
| 10.7 | Addendum to Employment Agreement effective as of May 31, 2009 between the Company and Mr. Zigerelli is incorporated by reference to Exhibit 10.7 to the Current Report on Form 8-K of the Company dated June 3, 2009. | |
| 10.8 | Addendum to Employment Agreement effective as of May 31, 2009 between the Company and Ms. Gilmartin is incorporated by reference to Exhibit 10.8 to the Current Report on Form 8-K of the Company dated June 3, 2009. | |
| 10.9 | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements is incorporated by reference to Exhibit 10.9 to the Current Report on Form 8-K of the Company dated January 12, 2010. On December 31, 2009, Royce Winsten, the Chairman of the Board of Directors of the Company, was awarded a special bonus for the amount of $50,000. | |
| 10.10 | Separation Release, dated as of February 1, 2010, between the Company and James M. Spencer, is incorporated by reference to Exhibit 10.10 to the Current Report on Form 8-K of the Company dated February 1, 2010. | |
| 10.11 | Loan and Security Agreement, dated as of February 10, 2010, between the Company and Bank of America, N.A., and Wells Fargo Retail Finance, LLC incorporated by reference to Exhibit 10.11 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended May 2, 2010. | |
| 10.12 | Employment Agreement dated February 11, 2010 between the Company and Richard E. Wilson is incorporated by reference to Exhibit 10.12 to the Current Report on Form 8-K of the Company dated February 25, 2010. | |
| 10.13 | Stock Option Agreement dated February 11, 2010 between the Company and Richard E. Wilson is incorporated by reference to Exhibit 10.13 to the Current Report on Form 8-K of the Company dated February 25, 2010. | |
| 10.14 | Resignation of Director. On March 2, 2010 James V. Worth resigned from the Board of Directors is incorporated by reference to Exhibit 10.14 to the Current Report on Form 8-K of the Company dated March 2, 2010. | |
| 10.15 | Separation Agreement and Release, dated as of March 17, 2010, between the Company and Lawrence J. Zigerelli, is incorporated by reference to Exhibit 10.15 to the Current Report on Form 8-K of the Company dated March 16, 2010. | |
| 10.16 | Employment Agreement dated September 20, 2010 between the Company and Wayne S. Peterson is incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of the Company dated September 22, 2010. | |
| 10.17 | Stock Option Agreement dated September 20, 2010 between the Company and Wayne S. Peterson is incorporated by reference to Exhibit 10.17 to the Current Report on Form 8-K of the Company dated September 22, 2010. | |
| 10.18 | 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 10.18 to the current Report on Form 8-K of the Company dated December 30, 2010. | |
| 10.19 | Separation and Release Agreement dated May 13, 2010 between the Company and Jane F. Gilmartin is incorporated herein by reference to Exhibit 10.19 to the Current Report on Form 8-K of the Company dated May 19, 2010. | |
| 10.20 | 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 10.20 on Current Report Form 8-K filed by the Company on June 18, 2010. | |
| 10.21 | Resignation of Donny Johnson incorporated herein by reference to Exhibit 10.21 on Current Report Form 8-K of the Company dated July 15, 2010. | |
| 10.22 | Indemnification Agreement between the Company and Richard E. Wilson dated August 24, 2010 incorporated herein by reference to Exhibit 10.22 on Current Report Form 8-K of the Company dated August 27, 2010. |
| 10.23 | Indemnification Agreement between the Company and Terrence M. Babilla dated September 2, 2010 incorporated herein by reference to Exhibit 10.23 on Current Report Form 8-K of the Company dated September 9, 2010. | |
| 10.24 | Stock Option Agreement between the Company and Terrence M. Babilla dated September 10, 2010 incorporated herein by reference to Exhibit 10.24 to Current Report Form 8-K of the Company dated September 16, 2010. | |
| 31.1 | Certification of Chief Executive Officer of Duckwall-ALCO Stores, Inc. dated June 10, 2011, 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 2003. | |
| 31.2 | Certification of Chief Financial Officer of Duckwall-ALCO Stores, Inc. dated June 10, 2011, 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 2003. | |
| 32.1 | Certification of Chief Executive Officer of Duckwall-ALCO Stores, Inc, dated June 10, 2011, 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 Annual Report on Form 10-K for the year ended January 30, 2011 and is not treated as filed in reliance upon § 601(b)(32) of Regulations S-K. | |
| 32.2 | Certification of Chief Financial Officer of Duckwall-ALCO Stores, Inc., dated June 10, 2011, 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 Annual Report on Form 10-K for the year ended January 30, 2011 and is not treated as filed in reliance upon § 601(b)(32) of Regulations S-K. |
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 | June 10, 2011 | ||
| Richard E. Wilson | |||
| President and Chief Executive Officer | |||
| (Principal Executive Officer) | |||
| /s/ Wayne S. Peterson | June 10, 2011 | ||
| Wayne S. Peterson | |||
| Senior Vice President - Chief Financial Officer | |||
| (Principal Financial and Accounting Officer) | |||
| /s/ Terrence M. Babilla | June 10, 2011 | ||
| Terrence M. Babilla | |||
| Director | |||
| /s/ Dennis E. Logue | June 10, 2011 | ||
| Dennis E. Logue | |||
| Director | |||
| /s/ Lolan C. Mackey | June 10, 2011 | ||
| Lolan C. Mackey | |||
| Director | |||
| /s/ Royce L. Winsten | June 10, 2011 | ||
| Royce L. Winsten | |||
| Director - Chairman of Board |
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) 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.
DUCKWALL-ALCO STORES, INC.
(Registrant)
/s/ Richard E. Wilson
Richard E. Wilson
President and Chief Executive Officer
Signing on behalf of the registrant and as Principal Executive Officer
Exhibit Index dated June 17, 2011
| 31.1 | Certification of Chief Executive Officer of Duckwall-ALCO Stores, Inc. dated June 17, 2011, 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 2003. | |
| 31.2 | Certification of Chief Financial Officer of Duckwall-ALCO Stores, Inc. dated June 17, 2011, 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 2003. | |
| 32.1 | Certification of Chief Executive Officer of Duckwall-ALCO Stores, Inc, dated June 17, 2011, 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 Annual Report on Form 10-K for the year ended January 30, 2011 and is not treated as filed in reliance upon § 601(b)(32) of Regulations S-K. | |
| 32.2 | Certification of Chief Financial Officer of Duckwall-ALCO Stores, Inc., dated June 17, 2011, 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 Annual Report on Form 10-K for the year ended January 30, 2011 and is not treated as filed in reliance upon § 601(b)(32) of Regulations S-K. |