UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended April 28, 1996
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 Street
Abilene, Kansas 67410-0129
(Address of principal executive offices (Zip Code)
Registrant's telephone number, including area code:
(913) 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 ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13 or
15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
YES [X] NO [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
3,999,510 shares of common stock, $.0001 par value (the issuer's
only class of common stock), were outstanding as of April 28, 1996.
PART I. Financial Information.
ITEM 1. Financial Statements.
Duckwall-ALCO Stores, Inc.
And Subsidiary
Consolidated Balance Sheets
(Dollars in Thousands)
April 28,1996 January 28,1996
(Unaudited)
_______________ _______________
ASSETS
Current assets:
Cash on deposit and on hand $1,053 $177
Receivables 2,834 2,545
Inventories 81,319 71,635
Property held for resale 41 41
Other current assets 1,669 1,210
Total current assets 86,916 75,608
Property and equipment:
Land 2,379 2,297
Buildings 17,996 16,867
Furniture, fixtures and equipment 23,400 22,354
Transportation equipment 1,581 1,473
Leasehold improvements 3,642 3,164
Construction in progress 2,081 1,389
Total property and equipment 51,079 47,544
Less accumulated depreciation 24,297 23,676
Net property and equipment 26,782 23,868
Property under capital leases 20,541 20,541
Less accumulated for amortization 12,611 12,404
Net property under capital leases 7,930 8,137
Debt financing cost 110 110
Total assets $121,738 $107,723
<FN>
See accompanying notes to unaudited consolidated financial statements.
Duckwall-ALCO Stores, Inc.
And Subsidiary
Consolidated Balance Sheets
(Dollars in Thousands)
April 28,1996 January 28,1996
(Unaudited)
_______________ _______________
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of:
Long term debt $719 $545
Capital lease obligations 637 637
Accounts payable 22,398 16,335
Income taxes payable 206 820
Accrued salaries and commissions 823 3,614
Accrued taxes other than income 2,463 2,203
Deferred taxes 2,467 2,467
Other current liabilities 1,690 1,598
Total current liabilities 31,403 28,219
Notes payable under revolving loan 21,360 12,015
Long term debt
less current maturities 2,363 1,599
Capital lease obligations
less current maturities 9,596 9,755
Deferred income taxes 2,329 2,329
Other non-current liabilities 767 745
Total liabilities 67,818 54,662
Shareholders' equity:
Common stock, $.0001 par value, authorized
20,000,000 shares; issued and outstanding 1 1
3,999,510 shares
Additional paid-in capital 40,846 40,690
Retained earnings since June 2, 1991 13,073 12,370
Total shareholders' equity 53,920 53,061
Total liabilities and shareholders' equity $121,738 $107,723
<FN>
See accompanying notes to consolidated financial statements.
Duckwall-ALCO Stores, Inc.
And Subsidiary
Consolidated Statement of Operations
(Dollars in Thousands)
For the Thirteen Week Periods
April 28,1996 April 30, 1995
(Unaudited)
_______________ _______________
Net sales ....................... $59,348 $54,940
Cost of sales ................... 39,706 36,758
Gross margin ............... 19,642 18,182
Selling, general
and administrative ......... 16,929 15,920
Depreciation
and amortization ........... 864 738
Total operating expenses ... 17,793 16,658
Income from operations .......... 1,849 1,524
Interest expense................. 732 635
Other expense (income) (17) (85)
Earnings before income taxes .... 1,134 974
Income tax expense .............. 431 370
Net earnings ............... 703 604
Earnings per common and
common equivalent share .... $0.18 $0.15
<FN>
See accompanying notes to unaudited consolidated financial statements.
Duckwall-ALCO Stores, Inc.
And Subsidiary
Consolidated Statements of Cash Flow
(Dollars in Thousands)
For the Thirteen Week Periods
April 28,1996 April 30, 1995
_______________ _______________
CASH FLOWS FROM OPERATING ACTIVITIES
Net Earnings $703 $604
Adjustments to reconcile
net earnings to net cash
used in operating activities
Amortization of
debt financing costs 10 45
Deferred income tax benefit (0) (221)
Depreciation and amortization 864 737
Increase in inventories (9,684) (9,960)
Increase in accounts payable 6,062 9,263
Increase in receivables (289) (329)
Decrease (Increase)
in other current assets (459) (156)
Decrease in accrued expenses (2,531) (1,224)
(Decrease) in income taxes payable (457) (808)
Decrease in other liabilities 114 (1,133)
Net cash used in
operating activities (5,667) (3,182)
CASH FLOW FROM INVESTING ACTIVITIES
Capital expenditures (3,571) (1,687)
Net cash used in
investing activities (3,571) (1,687)
CASH FLOW FROM FINANCING ACTIVIES
Decrease in bank overdrafts 0 (76)
Increase in revolving loan 9,345 7,316
Principal payments on
long term notes (62) (251)
Principal payments on
capital leases (159) (157)
Increase in long term notes 1,000 0
Debt financing costs (10) 0
Net cash provided by
financing activities 10,114 6,832
Net increase in cash 876 1,963
Cash at beginning of period 177 0
Cash at end of period $1,053 $1,963
<FN>
See accompanying notes to unaudited consolidated financial statements.
Duckwall-ALCO Stores, Inc.
And Subsidiary
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 1996 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 subsidiary.
All significant intercompany transactions and balances have
been eliminated in consolidation.
(3) Earnings Per Share
Earnings per share has been computed based on the weighted
average number of common shares outstanding during the period
plus common stock equivalents, when dilutive, consisting of
stock options.
The average number of shares used in computing earnings
per share was as follows:
Thirteen Weeks Ending
April 28, 1996 4,016,552
April 30, 1995 4,005,688
Duckwall-ALCO Stores, Inc.
And Subsidiary
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION.
(Dollars in thousands)
[CAPTION]
The thirteen weeks ended April 28, 1996 and April 30, 1995
are referred to herein as the first quarter of fiscal 1997 and
1996, respectively.
As used below the term "competitive market" refers to any
market wherein there is one or more national or regional
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 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 28, 1996 Compared to Thirteen
Weeks ended April 30, 1995.
Net sales for the first quarter of fiscal 1997 increased
$4,408 or 8.0% to $59,348 compared to $54,940 for the first
quarter of fiscal 1996. During the first quarter of fiscal
1997, the Company opened 10 stores in new non-competitive
markets, resulting in a quarter end total of 166 stores. Net
sales for all stores open the full period in both the first
quarter of fiscal 1997 and fiscal 1996 (comparable stores)
decreased $1,147 or 2.1%. Net sales for these comparable stores
in non-competitive markets decreased by $183 or .6%. Net sales
for noncomparable stores increased $5,555 for the first quarter
of fiscal 1997 compared to the first quarter of fiscal 1996.
The same store sales decrease was attributable to a change in
the promotional calendar. Two promotional circulars were
replaced with smaller in-store promotions.
Gross margin for the first quarter of fiscal 1997 increased
$1,460 or 8.0% to $19,642 compared to $18,182 in the first
quarter of fiscal 1996. Gross margin as a percentage of sales
was 33.1% for the first quarter of both fiscal years.
Selling, general and administrative expense increased
$1,009 or 6.3% to $16,929 in the first quarter of fiscal 1997
compared to $15,920 in the first quarter of fiscal 1996,
primarily due to the increase in total stores. As a percentage
of net sales, selling, general and administrative expenses in
the first quarter of fiscal 1997 decreased by .5% from the first
quarter of fiscal 1996. As more new stores are opened, selling,
general and administration expenses as a percentage of sales are
expected to decline, as the relatively fixed costs of operating
the general office and warehouse are spread over a larger sales
base.
Depreciation and amortization expense increased $126 or
17.1% to $864 in the first quarter of fiscal 1997 compared to
$738 in the first quarter of fiscal 1996. The increase is due
to additional buildings and equipment associated with the store
expansion program.
Income from operations increased $325 or 21.3% to $1,849
in the first quarter of fiscal 1997 compared to $1,524 in the
first quarter of fiscal 1996. Income from operations as a
percentage of net sales increased to 3.1% in the first quarter
of fiscal 1997 compared to 2.8% in the first quarter of fiscal
1996.
Interest expense increased $97 or 15.3% in the first
quarter of fiscal 1997 compared to the first quarter of fiscal
1996. The increase results from higher borrowing levels due to
purchases of inventory, buildings and equipment to support the
new store openings.
Income tax expense was $431 in the first quarter of fiscal
1997 compared to $370 in the first quarter of fiscal 1996.
Income tax expense has been provided in both quarters at
applicable Federal and state statutory rates.
Net earnings for the first quarter of fiscal 1997 were
$703, an increase of $99 or 16.4% over the net earnings of $604
for the first quarter of fiscal 1996.
Duckwall-ALCO Stores, Inc.
And Subsidiary
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION (continued).
(Dollars in thousands)
[CAPTION]
The Company has recorded a tax benefit of $156 in the first
quarter of fiscal 1997 as an increase to additional paid in
capital based on utilization of $413 of the pre-reorganization
NOL carry forward, which aggregated $1,754 for Federal income
tax purposes at January 28, 1996. The actual NOL carry forward
utilization for fiscal 1997 will be dependent on full fiscal
year results.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of funds are cash flow from
operations, borrowings under its revolving loan credit facility
and vendor trade credit financing (increases in accounts
payable).
At April 28, 1996 working capital (defined as current
assets less current liabilities) was $55,513 compared to $47,389
at the end of fiscal 1996.
Cash used by operating activities in the first quarter of
fiscal 1997 and 1996 was $5,667 and $3,182 respectively. The
increase in the amount of cash used by operating activities in
the first quarter of fiscal 1997 compared to the first quarter
of fiscal 1996 was primarily due to a smaller increase in the
trade accounts payable build up relative to the overall increase
in inventory levels.
The Company generated cash from financing activities in the
first quarter of fiscal 1997 and 1996 of $10,114 and $6,832,
respectively. This was generated by borrowing under the
revolving loan credit facility, as well as a $1,000 mortgage
secured by certain company fixed assets.
Cash used for acquisition of property and equipment in the
first quarters of fiscal 1997 and 1996 totaled $3,571 and
$1,687, respectively. Total anticipated cash payments for
acquisition of property and equipment in fiscal 1997,
principally for store buildings and store and warehouse fixtures
and equipment, are $12,578.
Duckwall-ALCO Stores, Inc.
And Subsidiary
PART II. OTHER INFORMATION.
Item 1. Legal Proceedings
No legal proceedings except those covered by insurance
occurred during the thirteen week period ended
April 28, 1996.
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 Subsidiary
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 11, 1996 /s/ Bryan M. DeCordova
Bryan M. DeCordova
Vice President - Finance
Chief Financial Officer
Signing on behalf of the
registrant and as principal
financial officer