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 ....... April 30, 2000
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 (I.R.S. Employer
incorporation or organization) Identification No.)
401 Cottage Avenue
Abilene, Kansas 67410-2832
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(785) 263-3350
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 [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
4,478,899 shares of common stock, $.0001 par value (the issuer's
only class of common stock), were outstanding as of April 30, 2000.
PART I. Financial Information.
ITEM 1. Financial Statements.
Duckwall-ALCO Stores, Inc.
And Subsidiaries
Consolidated Balance Sheets
(Dollars in Thousands)
April 30, January 30,
2000 2000
(Unaudited)
___________ __________
ASSETS
Current assets:
Cash and cash equivalents $ 9,537 $14,002
Receivables 2,798 2,370
Inventories 127,320 121,863
Prepaid expenses 496 467
Total current assets 140,151 138,702
Property and equipment 74,840 73,648
Less accumulated depreciation 41,008 39,729
Net property and equipment 33,832 33,919
Property under capital leases 20,407 20,407
Less accumulated amortization 15,177 15,028
Net property under capital leases 5,230 5,379
Other non-current assets 149 179
Total assets $179,362 $178,179
<FN>
See accompanying notes to unaudited consolidated financial statements.
Duckwall-ALCO Stores, Inc.
And Subsidiaries
Consolidated Balance Sheets
(Dollars in Thousands)
April 30, January 30,
2000 2000
(Unaudited) (Unaudited)
___________ ____________
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of:
Long term debt $1,033 $1,187
Capital lease obligations 607 607
Accounts payable 32,875 26,781
Notes payable under revolving loan 30,299 0
Income taxes payable 673 1,843
Accrued salaries and commissions 3,185 4,812
Accrued taxes other than income 4,735 4,022
Other current liabilities 1,507 1,907
Deferred income taxes 1,682 1,682
Total current liabilities 76,596 42,841
Notes payable under revolving loan 0 30,420
Long term debt
less current maturities 1,886 2,065
Capital lease obligations
less current maturities 7,330 7,482
Other noncurrent liabilities 2,118 2,143
Deferred revenue 789 852
Deferred income taxes 2,158 2,158
Total liabilities 90,877 87,961
Stockholders' equity:
Common stock, $.0001 par value, authorized
20,000,000 shares; issued and outstanding
4,478,899 shares and 4,772,299 shares
respectively 1 1
Additional paid-in capital 49,043 51,481
Retained earnings since June 2, 1991 39,441 38,736
Total stockholders' equity 88,485 90,218
Total liabilities and
stockholders' equity $179,362 $178,179
<FN>
See accompanying notes to unaudited consolidated financial statements.
Duckwall-ALCO Stores, Inc.
And Subsidiaries
Consolidated Statement of Operations
(Dollars in Thousands Except Per Share Amounts)
(Unaudited)
For the Thirteen Week
Periods Ended
April 30, May 2,
2000 1999
___________ ___________
Net sales ............................... $91,660 $87,028
Cost of sales ........................... 61,117 57,890
Gross margin .................. 30,543 29,138
Selling, general
and administrative ................. 27,054 25,525
Depreciation
and amortization ................... 1,549 1,577
Total operating expenses ...... 28,603 27,102
Income from operations .................. 1,940 2,036
Interest expense......................... 782 905
Earnings before income taxes ............ 1,158 1,131
Income tax ....... ...................... 453 430
Net earnings ............................ $ 705 $ 701
Earnings per share
Basic ................................... $ 0.15 $ 0.14
Diluted ................................. $ 0.15 $ 0.14
<FN>
See accompanying notes to unaudited consolidated financial statements.
Duckwall-ALCO Stores, Inc.
And Subsidiaries
Consolidated Statements of Cash Flow
(Dollars in Thousands)
(Unaudited)
For the Thirteen Week
Periods Ended
April 30, 2000 May 2, 1999
---------------- ----------------
Cash flows from operating activities:
Net Earnings $ 705 $ 701
Adjustments to reconcile
net earnings to net cash
provided by operating activities
Amortization of debt financing costs 30 30
Depreciation and amortization 1,549 1,577
Loss on disposal and impairment of
assets 245 0
LIFO expense 175 177
Increase in inventories ( 5,632) (10,075)
Increase in accounts payable 6,094 11,679
Decrease (increase)in receivables (428) 390
Increase in other current assets (29) (73)
Increase in accrued taxes other than
income 713 326
Decrease in accrued salaries and
commissions (1,627) (1,643)
Decrease in income taxes payable (1,170) (1,695)
Decrease in other liabilities (488) (1,045)
Net cash provided by operating activities 137 349
Cash flow from investing activities:
Capital expenditures (1,558) (1,644)
Increase in other assets 0 (44)
Net cash used in investing activities (1,558) (1,688)
Cash flow from financing activities:
Proceeds from exercise of outstanding
stock options 0 70
Common stock redemption (2,438) (490)
Decrease in revolving loan (121) (537)
Principal payments on long term notes (333) (309)
Principal payments on capital leases (152) (134)
Net cash used in financing activities (3,044) (1,400)
Net decrease in cash (4,465) (2,739)
Cash at beginning of period 14,002 10,423
Cash at end of period $9,537 $7,684
<FN>
See accompanying notes to unaudited consolidated financial statements.
Duckwall-ALCO Stores, Inc.
And Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(1) Basis of Presentation
The accompanying unaudited consolidated financial
statements are for interim periods and, consequently, do not
include all disclosures required by generally accepted
accounting principles for annual financial statements. It is
suggested that the accompanying unaudited consolidated
financial statements be read in conjunction with the
consolidated financial statements included in the Company's
fiscal 2000 Annual Report. In the opinion of management of
Duckwall-ALCO Stores, Inc., the accompanying unaudited
consolidated 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.
(2) Principles of Consolidation
The consolidated financial statements include the accounts
of Duckwall-ALCO Stores, Inc. and its wholly-owned subsidiaries.
All significant intercompany transactions and balances have
been eliminated in consolidation.
(3) 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.
The average number of shares used in computing earnings per share
was as follows:
Thirteen Weeks Ending Basic Diluted
April 30, 2000 4,643,765 4,654,104
May 2, 1999 5,081,216 5,081,216
Duckwall-ALCO Stores, Inc.
And Subsidiaries
[CAPTION]
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(Dollars in thousands)
The thirteen weeks ended April 30, 2000 and May 2, 1999 are referred to
herein as the first quarter of fiscal 2001 and 2000, respectively.
As used below the term "competitive market" refers to any market wherein
there is one or more national or regional full-line discount stores located
in the market served by the Company. The term "non-competitive market"
refers to any market where there is no national or regional full-line
discount store located in the market served by the Company. Even in a
non-competitive market, the Company faces competition from a variety of
sources.
RESULTS OF OPERATIONS
Thirteen Weeks Ended April 30, 2000 Compared to Thirteen Weeks Ended May 2,
1999.
The Company continues to execute its basic strategy of opening stores
in under-served markets that have no competition from national or regional
full-line discount retailers. During the first quarter of fiscal 2001, the
Company opened 1 store and closed 4 stores, resulting in a quarter end total
of 266 stores. The store opened was in a new, non-competitive market. The
two ALCO stores closed were in competitive markets. At quarter end, over
80% of the total stores were located in non-competitive markets.
Net sales for the first quarter of fiscal 2001 increased $4,632 or
5.3% to $91,660 compared to $87,028 for the first quarter of fiscal 2000.
Net sales for stores open the full period in both the first quarter of fiscal
2001 and fiscal 2000 (comparable stores) increased $1,908 or 2.3%. Net sales
for these comparable stores in non-competitive markets increased $2,073 or
3.4%. Net sales for non-comparable stores increased $2,724 for the first
quarter of fiscal 2001 compared to the first quarter of fiscal 2000.
Gross margin for the first quarter of fiscal 2001 increased $1,405 or
4.8% to $30,543 compared to $29,138 in the first quarter of fiscal 2000.
Gross margin as a percentage of sales was 33.3% for the first quarter of
fiscal 2001 compared to 33.5% in the first quarter of fiscal 2000. The
decrease in the margin percentage was due primarily to higher transportation
costs.
Selling, general and administrative expense increased $1,529 or
6.0% to $27,054 in the first quarter of fiscal 2001 compared to $25,525 in
the first quarter of fiscal 2000, primarily due to the increase in total
stores. As a percentage of net sales, selling, general and administrative
expenses were 29.5% in the first quarter of fiscal 2001 compared to 29.3% in
the first quarter of fiscal 2000. The increase in the selling, general and
administrative expense percent was due to higher than normal inflationary
increases in wage rates and medical insurance costs as well as store closing
expenses and the sale-leaseback of ten ALCO stores in January. The sale
leaseback impacts selling, general and administrative expense through higher
store rent expense, with a corresponding reduction in depreciation and
interest expense.
Depreciation and amortization expense decreased $28 or 1.8% to $1,549
in the first quarter of fiscal 2001 compared to $1,577 in the first quarter
of fiscal 2000. The decrease is due to the store sale leaseback discussed
in the previous paragraph.
Income from operations decreased $96 or 4.7% to $1,940 in the first
quarter of fiscal 2001 compared to $2,036 in the first quarter of fiscal 2000.
Income from operations as a percentage of net sales decreased to 2.1% in the
first quarter of fiscal 2001 compared to 2.3% in the first quarter of fiscal
2000.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of funds are cash flow from operations,
borrowing under its revolving loan credit facility and vendor trade credit
financing (increases in accounts payable).
At April 30, 2000 working capital (defined as current assets less
current liabilities) was $63,555 compared to $95,861 at the end of fiscal
2000. The decrease in working capital was due to the classification of the
revolving loan as a current liability as it becomes due in April 2001. While
no commitments are in place, management expects to renew or replace the
revolving loan prior to April, 2001.
Cash provided by operating activities was $137 and $349 in the first
quarters of fiscal 2001 and 2000, respectively. The decrease in the amount
of cash generated by operating activities in the first quarter of fiscal
2001 compared to the first quarter of fiscal 2000 was primarily due to a
smaller increase in accounts payable compared to the corresponding increase
in inventory.
The Company used cash from financing activities in the amount of
$3,044 and $1,400 in fiscal 2001 and fiscal 2000, respectively. Cash was
used for stock redemption, as well as to make payments on the revolving loan,
long term notes, and capital leases.
Cash used for acquisition of property and equipment in the first
quarters of fiscal 2001 and 2000 totaled $1,558 and $1,644, respectively.
Total anticipated cash payments for acquisition of property and equipment
in fiscal 2001, principally for store buildings and fixtures, fixture and
equipment upgrades, and computer hardware and software are $7,250.
BUSINESS OPERATIONS AND SEGMENT INFORMATION
The Company's business activities include operation of ALCO discount
stores in towns with populations which are typically less than 5,000 not
served by other regional or national full-line discount chains and Duckwall
variety stores that offer a more limited selection of merchandise which are
primarily located in communities of less than 2,500 residents.
For financial reporting purposes, the Company has established two
operating segments: "ALCO Discount Stores", and "All Other", which includes
the Duckwall variety stores and other business activities, such as general
office, warehouse and distribution activities.
For the Thirteen Week
Periods Ended
April 30, May 2,
Segment Information 2000 1999
Net Sales:
ALCO Discount Stores $83,273 $79,085
All Other:
External 8,387 7,943
Intercompany 58,427 53,859
$150,087 $140,887
Depreciation and Amortization:
ALCO Discount Stores $1,007 $990
All Other 542 587
$1,549 $1,577
Income (expense) from Operations:
ALCO Discount Stores $6,484 $6,311
All Other (4,371) (4,083)
$2,113 $ 2,228
Capital Expenditures:
ALCO Discount Stores $1,409 $915
All Other 149 729
$1,558 $1,644
Identifiable Assets:
ALCO Discount Stores $140,607 $142,172
All Other 38,110 36,475
$178,717 $178,647
Income from operations as reflected in the above segment information has
been determined differently than income from operations in the accompanying
consolidated statements of operations as follows:
Intercompany Sales
Intercompany sales represent transfers of merchandise from the warehouse to
ALCO discount stores and Duckwall variety stores.
Intercompany Expense Allocations
General and administrative expenses incurred at the general office have not
been allocated to the ALCO Discount Stores for purposes of determining
income from operations for the segment information.
Warehousing and distribution costs including freight applicable to merchandise
purchases, have been allocated to the ALCO Discount Stores segment based on
the Company's customary method of allocation for such costs (primarily as a
stipulated percentage of merchandise purchases).
Inventories
Inventories are based on the FIFO method for segment information purposes and
on the LIFO method for the consolidated statements of operations.
Leases
All leases are accounted for as operating leases for purposes of determining
income from operations for purposes of determining the segment information
for the ALCO Discount Stores whereas capital leases are accounted for as such
in the consolidated statements of operations.
Identifiable assets as reflected in the above segment information include
cash and cash equivalents, receivables, inventory, property and equipment,
and property under capital leases.
A reconciliation of the segment information to the amounts reported in the
consolidated financial statements is presented below:
For The Thirteen Week
Periods Ended
April 30, May 2,
2000 1999
Net sales per above segment information $150,087 140,887
Intercompany elimination (58,427) (53,859)
Net sales per consolidated statements
of operations $91,660 $87,028
Income from operations per above segment
information $2,113 $2,228
Inventory method (175) (177)
Leases 2 (15)
Income from operations per consolidated
statements of operations $1,940 $2,036
OTHER INFORMATION
PART II
Item 1. Legal Proceedings
No legal proceedings except those covered by insurance occurred
during the thirteen week period ended April 30, 2000.
Item 2. Changes in Securities
Not applicable
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) None
(b) Reports on Form 8-K
No reports filed
Duckwall-ALCO Stores, Inc.
And Subsidiaries
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
DUCKWALL-ALCO STORES, INC.
(Registrant)
Date, June 12, 2000 /s/Richard A. Mansfield
Richard A. Mansfield
Vice President - Finance
Chief Financial Officer
Signing on behalf of the
registrant and as principal
financial officer