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 October 27, 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 67410-2832
(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:
4,900,823 shares of common stock, $.0001 par value (the issuer's
only class of common stock), were outstanding as of October 27, 1996.
PART I. Financial Information.
ITEM 1. Financial Statements.
Duckwall-ALCO Stores, Inc.
And Subsidiary
Consolidated Balance Sheets
(Dollars in Thousands)
October 27,1996 January 28,1996
(Unaudited)
_______________ _______________
ASSETS
Current assets:
Cash on deposit and on hand $1,685 $177
Receivables 3,824 2,545
Inventories 89,812 71,635
Property held for resale 41 41
Other current assets 1,879 1,210
Total current assets 97,241 75,608
Property and equipment:
Land 2,575 2,297
Buildings 20,053 16,867
Furniture, fixtures and equipment 25,189 22,354
Transportation equipment 1,600 1,473
Leasehold improvements 4,074 3,164
Construction in progress 3,538 1,389
Total property and equipment 57,029 47,544
Less accumulated depreciation 25,736 23,676
Net property and equipment 31,293 23,868
Property under capital leases 20,407 20,541
Less accumulated for amortization 12,892 12,404
Net property under capital leases 7,515 8,137
Debt financing cost 90 110
Total assets $136,139 $107,723
<FN>
See accompanying notes to unaudited consolidated financial statements.
Duckwall-ALCO Stores, Inc.
And Subsidiary
Consolidated Balance Sheets
(Dollars in Thousands)
October 27, 1996 January 28,1996
(Unaudited)
_______________ _______________
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of:
Long term debt $1,163 $545
Capital lease obligations 607 637
Accounts payable 24,618 16,335
Income taxes payable 901 820
Accrued salaries and commissions 2,255 3,614
Accrued taxes other than income 2,721 2,203
Deferred taxes 2,492 2,467
Other current liabilities 1,504 1,598
Total current liabilities 36,261 28,219
Notes payable under revolving loan 17,146 12,015
Long term debt
less current maturities 3,170 1,599
Capital lease obligations
less current maturities 9,307 9,755
Deferred income taxes 2,356 2,329
Other non-current liabilities 818 745
Total liabilities 69,058 54,662
stockholders' equity:
Common stock, $.0001 par value, authorized
20,000,000 shares; issued and outstanding 1 1
4,900,823 shares at October 27, 1996
3,999,510 shares at January 28, 1996
Additional paid-in capital 52,082 40,690
Retained earnings since June 2, 1991 14,998 12,370
Total stockholders' equity 67,081 53,061
Total liabilities and stockholders' equity $136,139 $107,723
<FN>
See accompanying notes to consolidated financial statements.
Duckwall-ALCO Stores, Inc.
And Subsidiary
Consolidated Statement of Operations
(Dollars in Thousands Except Per Share Amounts)
(Unaudited)
For the Thirteen For the Thirty-nine
Week Periods Week Periods
October 27 October 29 October 27 October 29
1996 1995 1996 1995
______________________ ______________________
Net sales ................ $64,857 $60,795 $192,631 $178,327
Cost of sales ............ 43,201 41,115 129,013 120,254
Gross margin ........ 21,656 19,680 63,618 58,073
Selling, general
and administrative .. 18,661 17,108 54,119 49,992
Depreciation
and amortization .... 943 794 2,732 2,291
Total operating exp.. 19,604 17,902 56,851 52,283
Income from operations ... 2,052 1,778 6,767 5,790
Interest expense.......... 912 823 2,504 2,240
Earnings
before income taxes .. 1,140 955 4,263 3,550
Income tax expense ....... 439 363 1,635 1,349
Net earnings ........ $701 $592 $2,628 $2,201
Earnings per common and
common equivalent share . $0.17 $0.15 $0.65 $0.55
<FN>
See accompanying notes to unaudited consolidated financial statements.
Duckwall-ALCO Stores, Inc.
And Subsidiary
Consolidated Statements of Cash Flow
(Dollars in Thousands)
(Unaudited)
For the Thirty-nine Week Periods Ended
October 27,1996 October 29, 1995
_______________ ________________
CASH FLOWS FROM OPERATING ACTIVITIES
Net Earnings $2,628 $2,201
Adjustments to reconcile
net earnings to net cash
used in operating activities
Amortization of
debt financing costs 30 135
Deferred income tax benefit 52 (654)
Depreciation and amortization 2,732 2,291
LIFO Expense 180 250
Increase in inventories (18,357) (20,572)
Increase in accounts payable 8,283 11,955
Increase in receivables (1,279) (864)
Decrease (Increase)
in other current assets (669) (255)
Increase in accrued taxes
other than income 518 977
Increase (Decrease) in accrued
salaries and commissions (1,359) (1,259)
(Decrease) in income taxes payable 717 (532)
Decrease in other liabilities (21) (977)
Net cash used in
operating activities (6,545) (7,304)
CASH FLOW FROM INVESTING ACTIVITIES
Capital expenditures (9,537) (6,818)
Net cash used in
investing activities (9,537) (6,818)
CASH FLOW FROM FINANCING ACTIVIES
Decrease in bank overdrafts 0 (76)
Increase in revolving loan 5,131 16,281
Principal payments on
long term notes (636) (684)
Principal payments on
capital leases (478) (472)
Increase in long term notes 2,826 0
Debt issue costs (10) (110)
Proceeds from stock issuance 10,757 0
Net cash provided by
financing activities 17,590 14,939
Net increase in cash 1,508 817
Cash at beginning of period 177 0
Cash at end of period $1,685 $817
<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 accurals) necessary to present
fairly the financial position of the Company and the results of
its operations and cash flows for the interm 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
October 27, 1996 4,147,651
October 29, 1995 4,026,838
Thirty-nine Weeks Ending
October 27, 1996 4,072,455
October 29, 1995 4,015,598
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 October 27, 1996 and October 29, 1995 are referred
to herein as the third 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
Net sales for the third quarter of fiscal 1997 increased $4,062 or 6.7%
to $64,857 compared to $60,795 for the third quarter of fiscal 1996.
During the third quarter of fiscal 1997, the Company opened 6 stores and
closed one store, resulting in a quarter end total of 175 stores. All of
the new store openings were in new non-competitive markets and the store
that was closed was in a competitive market. This increased the
percentage of stores in non-competitive markets at the end of the quarter
to 74%. Net sales for all comparable stores (open the full thirty-nine
week period in both fiscal 1997 and fiscal 1996) decreased $2,273 in the
third quarter, or 4.0%. The same store sales decrease was primarily
attributable to decreases in sales in competitive ALCO markets. The
prototype Class 18 stores and the Duckwall variety stores produced
decreases of $120 or .7% and $37 or 1.4% respectively.
Net sales for the thirty-nine week period ending October 27, 1996,
increased $14,304 or 8.0% to $192,631 compared to $178,327 of the
comparable thirty-nine week period of the prior fiscal year. Net sales of
comparable stores decreased by $3,965, or 2.4% for the thirty-nine week
period ending October 27, 1996 compared to the thirty-nine week period of
the prior fiscal year.
Gross margin for the third quarter of fiscal 1997 increased $1,976 or 10.0%
to $21,656 compared to $19,680 in the third quarter of fiscal 1996. Gross
margin as a percentage of sales was 33.4% for the third quarter of fiscal
1997 compared to 32.4% in the third quarter of fiscal 1996. The improvement
in the gross margin percentage was due to a higher markup on purchases and
lower shrinkage.
Gross margin for the thirty-nine week period ended October 27, 1996 was
$63,618, which was $5,545 or 9.6% higher than last year's thirty-nine week
gross margin of $58,073. As a percent of net sales, gross margin for the
thirty-nine week period ended October 27, 1996 was 33.0% compared to 32.6%
in the thirty-nine week period of the prior fiscal year.
Selling, general and administrative expense increased $1,553 or 9.1% to
$18,661 in the third quarter of fiscal 1997 compared to $17,108 in the
third 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 third quarter of fiscal 1997 was 28.8%, compared to 28.1%
in the third quarter of fiscal 1996. Store operating expenses decreased
on an average per store basis, but as a percent of sales, increased due to
the previously discussed comparable store sales decreases. Store closing
expenses and insurance expenses also contributed to the .7% increase in
selling, general and administrative expenses.
Selling, general and administrative expenses increased $4,127 or 8.3% to
$54,119 for the thirty-nine week period ended October 27, 1996 compared to
$49,992 for the comparable thirty-nine week period of the prior fiscal year.
Selling, general and administrative expense as a percent of net sales was
28.1% for the thirty-nine week period ended October 27, 1996
compared to 28.0% in the comparable thirty-nine week period last year.
The increase in selling, general and administrative expense in fiscal 1997
is primarily due to an increase in the number of stores.
Depreciation and amortization expense increased $149 or 18.8% to $943 in
the third quarter of fiscal 1997 compared to $794 in the third quarter of
fiscal 1996. The increase is due to additional buildings and equipment
associated with the store expansion program.
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]
Income from operations increased $274 or 15.4% to $2,052 in the third
quarter of fiscal 1997 compared to $1,778 in the third quarter of fiscal
1996. Income from operations as a percentage of net sales increased to
3.2% in the third quarter of fiscal 1997 compared to 2.9% in the third
quarter of fiscal 1996.
Income from operations increased $977 or 16.9% to $6,767 for the
thirty-nine week period ended October 27, 1996 compared to $5,790 in the
comparable thirty-nine week period of the prior fiscal year.
Interest expense increased $89 or 10.8% in the third quarter of fiscal 1997
compared to the third quarter of fiscal 1996. The increase is attributable
to higher borrowing levels due to purchases of inventory, buildings and
equipment to support the new store openings.
Net earnings for the third quarter of fiscal 1997 were $701, an increase
of $109 or 18.4% over the net earnings of $592 for the third quarter of
fiscal 1996.
The Company has recorded a tax benefit of $626 in the first two quarters
of fiscal 1997 as an increase to additional paid in capital based on
utilization of $1,754 of the NOL carry forward arising prior to the 1991
reorganization. No tax benefit was recorded in the third quarter of fiscal
1997, as the full NOL carryover available had been used in the first two
quarters of fiscal 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of funds are cash flow from operations,
borrowings under its revolving loan credit facility, mortgage financing,
and vendor trade credit financing (increases in accounts payable).
At October 27, 1996 working capital (defined as current assets less current
liabilities) was $60,980 compared to $47,389 at the end of fiscal 1996.
Cash used by operating activities for the thirty-nine week periods ended
October 27, 1996 and October 29, 1995 was $6,545 and $7,304 respectively.
The Company generated cash from financing activities for the thirty-nine
week periods ended October 27, 1996 and October 29, 1995 of $17,590
and $14,939, respectively. In fiscal 1997, cash was generated by borrowing
under the revolving loan credit facility in the amount of $5,131, new long
term notes on certain company fixed assets in the amount of $2,826, and
completion of a public offering of stock, net of expenses, in the amount
of $10,757. Subsequent to the end of the third quarter of fiscal 1997,
the company sold additional shares of stock to the underwriters to cover
over-allotments, raising an additional $2,311. In fiscal 1996, all of the
cash from financing activities was generated by borrowing under the
revolving loan credit facility.
Cash used for acquisition of property and equipment for the thirty-nine
week periods ended October 27, 1996 and October 29, 1995 totaled $9,537 and
$6,818, 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
October 27, 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, December 6, 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