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 November 2, 2008
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 if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes_____ No __
X
_
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Exchange Act. Yes___ No _
X
__
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 if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [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 [X] Non-accelerated filer (Do not check if a smaller
reporting company) [ ] 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:
3,806,113
shares of common stock, $.0001 par value (the issuer's only class of common
stock), were outstanding as of November 2, 2008.
DUCKWALL-ALCO
STORES, INC.
TABLE
OF CONTENTS
|
|
|
|
|
PART
I
|
|
|
|
Item
1.
|
|
3
|
|
Item
2.
|
|
9
|
|
Item
3.
|
|
15
|
|
Item
4.
|
|
15
|
|
|
|
|
PART
II
|
|
|
|
Item
1.
|
|
16
|
|
Item
1A.
|
|
16
|
|
Item
2.
|
|
16
|
|
Item
3.
|
|
16
|
|
Item
4.
|
|
17
|
|
Item
5.
|
|
17
|
|
Item
6.
|
|
17
|
|
|
|
|
Signature
|
|
|
18
|
Duckwall-ALCO
Stores, Inc. and Subsidiaries
|
|
Consolidated
Balance Sheets
|
|
(in
thousands, except share amounts)
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
November
2,
|
|
|
February
3,
|
|
|
|
2008
|
|
|
2008
|
|
|
|
(Unaudited)
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
5,320
|
|
|
|
5,501
|
|
Receivables
|
|
|
3,520
|
|
|
|
4,905
|
|
Prepaid
income taxes
|
|
|
4,731
|
|
|
|
768
|
|
Prepaid
expenses
|
|
|
3,871
|
|
|
|
3,101
|
|
Inventories
|
|
|
166,404
|
|
|
|
128,545
|
|
Deferred
income taxes
|
|
|
5,430
|
|
|
|
7,094
|
|
Total
current assets
|
|
|
189,276
|
|
|
|
149,914
|
|
|
|
|
|
|
|
|
|
|
Property
and equipment, at cost:
|
|
|
|
|
|
|
|
|
Land
and land improvements
|
|
|
2,758
|
|
|
|
2,205
|
|
Buildings
and building improvements
|
|
|
12,121
|
|
|
|
11,931
|
|
Furniture,
fixtures and equipment
|
|
|
62,485
|
|
|
|
58,911
|
|
Transportation
equipment
|
|
|
1,322
|
|
|
|
1,310
|
|
Leasehold
improvements
|
|
|
13,843
|
|
|
|
15,419
|
|
Construction
work in progress
|
|
|
1,078
|
|
|
|
1,282
|
|
Total
property and equipment
|
|
|
93,607
|
|
|
|
91,058
|
|
Less
accumulated depreciation
|
|
|
63,605
|
|
|
|
64,019
|
|
Net
property and equipment
|
|
|
30,002
|
|
|
|
27,039
|
|
|
|
|
|
|
|
|
|
|
Property
under capital leases
|
|
|
11,622
|
|
|
|
13,571
|
|
Less
accumulated amortization
|
|
|
8,109
|
|
|
|
8,654
|
|
Net
property under capital leases
|
|
|
3,513
|
|
|
|
4,917
|
|
|
|
|
|
|
|
|
|
|
Other
non-current assets
|
|
|
227
|
|
|
|
262
|
|
Deferred
income taxes
|
|
|
1,181
|
|
|
|
3,254
|
|
Total
assets
|
|
$
|
224,199
|
|
|
|
185,386
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and Stockholders' Equity
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Current
maturities of long-term debt
|
|
$
|
1,340
|
|
|
|
1,278
|
|
Current
maturities of capital lease obligations
|
|
|
1,833
|
|
|
|
1,860
|
|
Accounts
payable
|
|
|
37,513
|
|
|
|
19,134
|
|
Accrued
salaries and commissions
|
|
|
5,589
|
|
|
|
3,711
|
|
Accrued
taxes other than income
|
|
|
4,844
|
|
|
|
4,301
|
|
Self-insurance
claim reserves
|
|
|
4,318
|
|
|
|
4,571
|
|
Other
current liabilities
|
|
|
4,618
|
|
|
|
7,360
|
|
Total
current liabilities
|
|
|
60,055
|
|
|
|
42,215
|
|
|
|
|
|
|
|
|
|
|
Long
term debt, less current maturities
|
|
|
3,214
|
|
|
|
4,227
|
|
Notes
payable under revolving loan
|
|
|
48,388
|
|
|
|
20,715
|
|
Capital
lease obligations - less current maturities
|
|
|
3,528
|
|
|
|
4,933
|
|
Deferred
gain on leases
|
|
|
4,695
|
|
|
|
4,985
|
|
Other
noncurrent liabilities
|
|
|
1,617
|
|
|
|
1,139
|
|
Total
liabilities
|
|
|
121,497
|
|
|
|
78,214
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
|
Common
stock, $.0001 par value, authorized 20,000,000 shares; issued and
outstanding
|
|
|
|
|
|
|
|
|
3,806,113
shares and 3,810,591 shares respectively
|
|
|
1
|
|
|
|
1
|
|
Additional
paid-in capital
|
|
|
38,557
|
|
|
|
38,766
|
|
Retained
earnings
|
|
|
64,144
|
|
|
|
68,405
|
|
Total
stockholders' equity
|
|
|
102,702
|
|
|
|
107,172
|
|
Total
liabilities and stockholders' equity
|
|
$
|
224,199
|
|
|
|
185,386
|
|
See
accompanying notes to unaudited consolidated financial
statements.
|
|
Duckwall-ALCO
Stores, Inc. and Subsidiaries
|
|
Consolidated
Statements of Operations
|
|
(dollars
in thousands, except per share amounts)
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
the Thirteen Week
|
|
|
For
the Thirty-Nine Week
|
|
|
|
Periods
Ended
|
|
|
Periods
Ended
|
|
|
|
November
2, 2008
|
|
|
October
28, 2007
|
|
|
November
2, 2008
|
|
|
October
28, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$
|
115,472
|
|
|
|
110,258
|
|
|
|
351,010
|
|
|
|
335,537
|
|
Cost
of sales
|
|
|
78,234
|
|
|
|
74,447
|
|
|
|
238,504
|
|
|
|
227,459
|
|
Gross
margin
|
|
|
37,238
|
|
|
|
35,811
|
|
|
|
112,506
|
|
|
|
108,078
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative
|
|
|
38,217
|
|
|
|
35,487
|
|
|
|
110,315
|
|
|
|
100,785
|
|
Depreciation
and amortization
|
|
|
2,119
|
|
|
|
1,820
|
|
|
|
5,799
|
|
|
|
5,359
|
|
Total
operating expenses
|
|
|
40,336
|
|
|
|
37,307
|
|
|
|
116,114
|
|
|
|
106,144
|
|
Operating
income (loss) from continuing operations
|
|
|
(3,098
|
)
|
|
|
(1,496
|
)
|
|
|
(3,608
|
)
|
|
|
1,934
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense, net
|
|
|
63
|
|
|
|
929
|
|
|
|
1,219
|
|
|
|
2,526
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from continuing operations before income taxes
|
|
|
(3,161
|
)
|
|
|
(2,425
|
)
|
|
|
(4,827
|
)
|
|
|
(592
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
tax benefit
|
|
|
(1,647
|
)
|
|
|
(979
|
)
|
|
|
(2,354
|
)
|
|
|
(249
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from continuing operations
|
|
|
(1,514
|
)
|
|
|
(1,446
|
)
|
|
|
(2,473
|
)
|
|
|
(343
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from discontinued operations, net of income tax benefit
|
|
|
(151
|
)
|
|
|
(189
|
)
|
|
|
(1,788
|
)
|
|
|
(930
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(1,665
|
)
|
|
|
(1,635
|
)
|
|
|
(4,261
|
)
|
|
|
(1,273
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing
operations
|
|
|
(0.40
|
)
|
|
|
(0.38
|
)
|
|
|
(0.65
|
)
|
|
|
(0.09
|
)
|
Discontinued
operations
|
|
|
(0.04
|
)
|
|
|
(0.05
|
)
|
|
|
(0.47
|
)
|
|
|
(0.24
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
per share
|
|
|
(0.44
|
)
|
|
|
(0.43
|
)
|
|
|
(1.12
|
)
|
|
|
(0.33
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing
operations
|
|
|
(0.40
|
)
|
|
|
(0.38
|
)
|
|
|
(0.65
|
)
|
|
|
(0.09
|
)
|
Discontinued
operations
|
|
|
(0.04
|
)
|
|
|
(0.05
|
)
|
|
|
(0.47
|
)
|
|
|
(0.24
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
per share
|
|
$
|
(0.44
|
)
|
|
|
(0.43
|
)
|
|
|
(1.12
|
)
|
|
|
(0.33
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to unaudited consolidated financial
statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Duckwall-ALCO
Stores, Inc. and Subsidiaries
|
|
Consolidated
Statements of Cash Flows
|
|
(dollars
in thousands)
|
|
(Unaudited)
|
|
|
|
For
the Thirty-Nine Week
|
|
|
|
Periods
Ended
|
|
|
|
November
2, 2008
|
|
|
October
28, 2007
|
|
|
|
|
|
|
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
Net loss
|
|
$
|
(4,261
|
)
|
|
|
(1,273
|
)
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
5,836
|
|
|
|
5,652
|
|
Gain
on sale of assets
|
|
|
14
|
|
|
|
(118
|
)
|
Share-based
compensation
|
|
|
34
|
|
|
|
893
|
|
Tax
benefit of stock options exercised
|
|
|
-
|
|
|
|
11
|
|
Deferred
income tax expense, net
|
|
|
3,595
|
|
|
|
(231
|
)
|
Changes
in:
|
|
|
|
|
|
|
|
|
Receivables
|
|
|
1,385
|
|
|
|
(1,471
|
)
|
Prepaid
income taxes
|
|
|
(3,963
|
)
|
|
|
(4,382
|
)
|
Inventories
|
|
|
(37,859
|
)
|
|
|
(26,905
|
)
|
Prepaid
expenses
|
|
|
(770
|
)
|
|
|
(1,792
|
)
|
Other
assets
|
|
|
35
|
|
|
|
31
|
|
Accounts
payable
|
|
|
18,379
|
|
|
|
12,383
|
|
Accrued
salaries and commissions
|
|
|
1,878
|
|
|
|
(173
|
)
|
Accrued
taxes other than income
|
|
|
543
|
|
|
|
1,647
|
|
Self-insurance
claim reserves
|
|
|
(253
|
)
|
|
|
997
|
|
Other
liabilities
|
|
|
(2,554
|
)
|
|
|
(568
|
)
|
Net
cash used in operating activities
|
|
|
(17,961
|
)
|
|
|
(15,299
|
)
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
Proceeds
from the sale of assets
|
|
|
169
|
|
|
|
637
|
|
Acquisition
of fixtures, equipment and leasehold improvements
|
|
|
(7,578
|
)
|
|
|
(9,854
|
)
|
Net
cash used in investing activities
|
|
|
(7,409
|
)
|
|
|
(9,217
|
)
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Net borrowings under revolving loan credit agreement
|
|
|
27,673
|
|
|
|
27,384
|
|
Repurchase of common stock
|
|
|
(191
|
)
|
|
|
-
|
|
Proceeds for stock sale
|
|
|
90
|
|
|
|
-
|
|
Proceeds from exercise of outstanding stock options
|
|
|
-
|
|
|
|
276
|
|
Excess tax benefit on stock options exercised
|
|
|
-
|
|
|
|
11
|
|
Net
pay downs under term loan
|
|
|
(951
|
)
|
|
|
-
|
|
Principal payments under capital lease obligations
|
|
|
(1,432
|
)
|
|
|
(1,613
|
)
|
Net
cash provided by financing activities
|
|
|
25,189
|
|
|
|
26,058
|
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash and cash equivalents
|
|
|
(181
|
)
|
|
|
1,542
|
|
Cash
and cash equivalents at beginning of period
|
|
|
5,501
|
|
|
|
2,983
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at end of period
|
|
$
|
5,320
|
|
|
|
4,525
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
Cash
paid (received) during the period for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
1,834
|
|
|
|
2,385
|
|
Income taxes
|
|
|
(828
|
)
|
|
|
3,784
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to unaudited consolidated financial
statements.
|
|
|
|
|
|
|
|
|
Duckwall-ALCO
Stores, Inc. and Subsidiaries
Notes
to Unaudited Consolidated Financial Statements
(dollars
in thousands, except per share amounts unless otherwise noted)
(1)
Basis of
Presentation
The
accompanying unaudited consolidated financial statements of Duckwall-ALCO
Stores, Inc. and Subsidiaries (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, Regulation G 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 consolidated financial statements be read in conjunction
with the consolidated financial statements included in the Company's fiscal 2008
Annual Report. In the opinion of management of the Company, 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. 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
year 2009 is a 52-week year following a 53-week year, fiscal 2008.
The fiscal quarters of the Company are normally thirteen weeks. The
only time that the fiscal quarter would not consist of thirteen weeks is
the fourth quarter of a 53-week fiscal year, the fourth quarter would then be
fourteen weeks.
The
depreciation and amortization amount from the Consolidated Statements of
Operations will not agree to the Consolidated Statements of Cash Flows due to
the fact that a portion of the depreciation and amortization from the
Consolidated Statements of Cash Flows is included in the loss from discontinued
operations, net of income tax benefit line of the Consolidated Statements of
Operations.
(2)
Principles of
Consolidation
The
consolidated financial statements include the accounts of Duckwall-ALCO Stores,
Inc. and Subsidiaries. All significant intercompany transactions
and balances have been eliminated in consolidation.
(3)
Reclassification
The
Company reclassified the change in outstanding checks in excess of bank balances
of $4,651 from net cash provided by financing activities to net cash used in
operating activities for the thirty-nine week period ending October 28, 2007.
The Company's policy is to reflect changes in outstanding checks in excess of
bank balances as cash flow from operating activities which is consistent with
the treatment for the fiscal years ending February 3, 2008 and January 29,
2007.
(4)
Share-Based
Compensation
Effective
with fiscal 2007, the Company adopted Statement of Financial Accounting
Standards No. 123(R)
Share-Based Payment
(SFAS
123(R)) and began recognizing compensation expense for its share-based payments
based on the fair value of the awards. Share-based payments consist of stock
option grants. SFAS 123(R) requires share based compensation expense to be based
on the following: a) grant date fair value estimated in accordance with the
original provisions of SFAS 123 for unvested options granted prior to the
adoption date and b) grant date fair value estimated in accordance with the
provisions of SFAS 123(R) for all share-based payments granted subsequent to the
adoption date. For the thirteen weeks ended November 2, 2008 and
October 28, 2007, share-based compensation expense decreased pre-tax income by
$169 and $317, respectively and $34 and $893 for the thirty-nine weeks
ended November 2, 2008 and October 28, 2007, respectively.
Under
SFAS 123(R), 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.
On July
1, 2008, the Company entered into a Non-Qualified Stock Option Agreement with
Lawrence J. Zigerelli as part of his starting employment with the
Company. Under the terms of the Agreement Mr. Zigerelli was granted
the right to purchase 10,000 shares of the Company’s common stock at a purchase
price of $9.05, which is equal to the closing price of the stock on the NASDAQ
Global Market on the grant date. The options will vest in equal
amounts over a four year period unless certain Company events
occur. The options will terminate if Mr. Zigerelli ceases to be a
full time employee of the Company. The options will also terminate
five years from the date of grant. The Company issues these grants
from the unissued shares authorized.
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. In the case of a stockholder owning more than 10% of the outstanding
voting stock of the Company, the exercise price of an incentive stock option may
not be less than 110% of the fair market value of the stock on the date of grant
and such options will expire no later than five years from the date of
grant. Also, the aggregate fair market value of the stock with
respect to which incentive stock options are exercisable on a tax deferred basis
for the first time by an individual in any calendar year may not exceed
$100,000. In the event that the foregoing results in a portion of an option
exceeding the $100,000 limitation, such portion of the option in excess of the
limitation shall be treated as a non-qualified stock option. At
November 2, 2008, the Company had 80,750 shares authorized for future option
grants. The Company issues these grants 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. All options under the plan shall be non-qualified stock
options. There are 45,000 shares remaining to be issued under this
plan.
The fair
value of each option grant is separately estimated for each grant. The fair
value of each option is amortized into compensation expense on a straight-line
basis from the grant date for the award 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
compensation expense, including expected stock price volatility.
The
following summarizes information concerning stock option grants during fiscal
2009 and 2008:
|
|
|
|
|
For
the Thirteen Week
|
|
|
For
the Thirty-Nine Week
|
|
|
|
|
|
|
Periods
Ended
|
|
|
Periods
Ended
|
|
|
|
February
3, 2008
|
|
|
November
2, 2008
|
|
|
October
28, 2007
|
|
|
November
2, 2008
|
|
|
October
28, 2007
|
|
Stock
options granted
|
|
|
88,000
|
|
|
|
10,000
|
|
|
|
25,000
|
|
|
|
384,500
|
|
|
|
88,000
|
|
Weighted
average exercise price
|
|
$
|
39.02
|
|
|
|
14.08
|
|
|
|
39.67
|
|
|
|
12.43
|
|
|
|
39.02
|
|
Weighted
average grant date fair value
|
|
$
|
10.93
|
|
|
|
5.19
|
|
|
|
10.72
|
|
|
|
4.18
|
|
|
|
10.93
|
|
The
weighted average for key assumptions used in determining the fair value of
options granted in the thirteen and thirty-nine weeks ended November 2,
2008 and October 28, 2007 and a summary of the methodology applied to develop
each assumption are as follows:
|
|
|
|
|
For
the Thirteen Week
|
|
|
For
the Thirty-Nine Week
|
|
|
|
|
|
|
Periods
Ended
|
|
|
Periods
Ended
|
|
|
|
February
3, 2008
|
|
|
November
2, 2008
|
|
|
October
28, 2007
|
|
|
November
2, 2008
|
|
|
October
28, 2007
|
|
Expected
price volatility
|
|
|
25.6
|
%
|
|
|
38.0
|
%
|
|
|
25.3
|
%
|
|
|
36.1
|
%
|
|
|
25.6
|
%
|
Risk-free
interest rate
|
|
|
4.8
|
%
|
|
|
2.9
|
%
|
|
|
4.8
|
%
|
|
|
2.6
|
%
|
|
|
4.8
|
%
|
Weighted
average expected lives in years
|
|
|
3.8
|
|
|
|
4.8
|
|
|
|
3.8
|
|
|
|
4.5
|
|
|
|
3.8
|
|
Dividend
yield
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
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 compensation expense.
RISK-FREE
INTEREST RATE -- This is the U.S. Treasury rate for the date of the grant over
the expected term. An increase in the risk-free interest rate will
increase compensation expense.
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 compensation
expense.
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 compensation expense.
As of
November 2, 2008, total unrecognized compensation expense related to non-vested
stock options is $2.0 million with a weighted average expense recognition period
of 2.9 years.
(5)
Accounting for Income
Taxes
The
Company recorded decreases in gross unrecognized tax benefits of approximately
$2.3 million for the thirty-nine week period ended November 2, 2008 and
increases of $93 for the thirty-nine week period ended October 28,
2007. The Company filed a request for an automatic tax accounting
method change with the Internal Revenue Service during the quarter which
eliminated the remainder of the gross unrecognized tax benefits. None
of these amounts impacted the effective income tax rate. The Company
also recognized a related decrease in interest expense of approximately $605 in
its statement of operations respectively for the third quarter fiscal 2009 and
year-to-date fiscal 2009.
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.
The
average number of shares used in computing earnings per share was as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen
Weeks Ended
|
|
Basic
|
|
|
Diluted
|
|
|
|
|
|
|
|
|
November
2, 2008
|
|
|
3,811,943
|
|
|
|
3,811,943
|
|
October
28, 2007
|
|
|
3,809,363
|
|
|
|
3,809,363
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirty-Nine
Weeks Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November
2, 2008
|
|
|
3,812,249
|
|
|
|
3,812,249
|
|
October
28, 2007
|
|
|
3,805,795
|
|
|
|
3,805,795
|
|
(7)
Store Closings and
Discontinued Operations
The
Company closed 14 stores (ten ALCO stores and four Duckwall stores) in the first
quarter of fiscal 2009. The Company incurred costs associated with the
store closings in the thirty-nine week period of fiscal 2009 consisting
primarily of $399 of future lease costs (net of estimated sublease income of
$848), lease termination costs of $470, and severance costs of
$30. The operations of these stores were reclassified to discontinued
operations in the thirty-nine week period of fiscal 2009, as well as prior years
presented. In addition to the 14 stores that were closed in the first
quarter of fiscal 2009, three Duckwall stores were closed and replaced by an
ALCO store. These three stores are shown in continuing
operations.
The
future lease costs were adjusted during the thirteen weeks ended November 2,
2008 for a change in estimate regarding a reduction of sublease income expected
to be received. The actual results of the future lease costs could vary
from these estimates. A rollforward of the future lease costs balance is
seen below:
Beginning
balances as of August 3, 2008
|
|
$
|
369
|
|
Lease
payments made
|
|
|
(152
|
)
|
Impact
of change in estimate
|
|
|
182
|
|
Ending
balance as of November 2, 2008
|
|
$
|
399
|
|
In
addition to the above store closing costs, the Company incurred severance costs
of $1.9 million during the thirty-nine week period of fiscal 2009, of which,
$937 was actually paid out during the same time period.
(8)
New Accounting
Pronouncements
In
September 2006, the FASB issued Statement of Financial Accounting Standards
No. 157,
Fair Value
Measurement
(SFAS 157). SFAS 157 provides a definition of fair
value, provides guidance for measuring fair value in U.S. GAAP and expands
disclosures about fair value measurements. Effective February 4, 2008, the
Company adopted the provisions of SFAS No. 157,
Fair Value Measurements (SFAS
157)
, for financial assets and financial liabilities. In accordance with
Financial Accounting Standards Board Staff Position No. 157-2, Effective
Date of FASB Statement No. 157, the Company will delay application of SFAS
No. 157 for non-financial assets and non-financial liabilities, until
February 2, 2009. SFAS No. 157 defines fair value, establishes a framework
for measuring fair value in generally accepted accounting principles and expands
disclosures about fair value measurements. Adoption of SFAS No. 157 did not
have a material impact on our consolidated financial position, results of
operations, or cash flows.
Certain
non-financial assets measured at fair value on a non-recurring basis include
non-financial long-lived assets measured at fair value for impairment
assessment. As stated above, SFAS No. 157 will be applicable to these fair
value measurements beginning February 2, 2009.
In
February 2007, the FASB issued SFAS 159,
The Fair Value Option for Financial
Assets and Financial Liabilities - Including an Amendment of SFAS 115
(SFAS 159), which permits entities to choose to measure many financial
instruments and certain other items at fair value. The fair value option
established by this standard permits all entities to choose to measure eligible
items at fair value at specified election dates. Entities choosing the fair
value option would be required to report unrealized gains and losses on items
for which the fair value option has been elected in earnings at each subsequent
reporting date. Adoption is required for fiscal years beginning after November
15, 2007. Adoption of SFAS No. 159 did not have a material impact on
our consolidated financial position, results of operations, or cash
flows.
In
April 2008, the FASB issued FASB Staff Position (“FSP”) No. FAS 142-3,
“Determination of the Useful Life of Intangible Assets”, which amends the
factors that must be considered in developing renewal or extension assumptions
used to determine the useful life over which to amortize the cost of a
recognized intangible asset under SFAS 142, “Goodwill and Other Intangible
Assets.” The FSP requires an entity to consider its own assumptions about
renewal or extension of the term of the arrangement, consistent with its
expected use of the asset, and is an attempt to improve consistency between the
useful life of a recognized intangible asset under SFAS 142 and the period of
expected cash flows used to measure the fair value of the asset under SFAS 141,
“Business Combinations.” The FSP is effective for fiscal years beginning after
December 15, 2008, and the guidance for determining the useful life of a
recognized intangible asset must be applied prospectively to intangible assets
acquired after the effective date. The FSP is not expected to have a significant
impact on our financial condition, results of operations or cash
flows.
In
May 2008, the FASB issued SFAS No. 162 (“SFAS 162”), “The Hierarchy of
Generally Accepted Accounting Principles.” The statement is intended to improve
financial reporting by identifying a consistent hierarchy for selecting
accounting principles to be used in preparing financial statements that are
prepared in conformance with generally accepted accounting principles. The
statement is effective 60 days following the SEC’s pending approval of the
Public Company Accounting Oversight Board (PCAOB) amendments to AU
Section 411, “The Meaning of Present Fairly in Conformity with GAAP,” and
is not expected to have any impact on the Company’s financial condition, results
of operations or cash flows.
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
Operations
. The
Company is a multi-regional discount retailer operating 259 stores in 23 states
in the central United States. The thirteen weeks ended November 2,
2008 and October 28, 2007 are referred to herein as the third quarter of fiscal
2009 and 2008, respectively. For purposes of this management's
discussion and analysis of financial condition and results of operations, the
financial numbers are presented in thousands, except as
noted.
Strategy.
The
Company's overall business strategy involves identifying and opening stores in
towns that will provide the Company with the highest return on
investment. The Company competes for retail sales with other
entities, such as specialty retailers, mass merchandisers, dollar
stores and the internet.
The
Company is routinely evaluating the appropriate mix of merchandise to improve
sales and gross margin performance. The Company uses centralized
purchasing, merchandising, pricing and warehousing to obtain volume discounts,
improve efficiencies and achieve consistency among stores and the best overall
results. The Company utilizes information obtained from its
point-of-sale system and perpetual inventory system to make more fact based
decisions.
The
Company is aggressively reviewing its inventory levels and marketing strategies
to address its same-store sales decline. The inventory level of the
Company was allowed to decline too far during the fourth quarter of fiscal
2008. The Company believes that this was a significant factor in the
same-store sales decline it experienced during the first quarter of fiscal
2009.
Company
Initiatives.
·
|
Marketing
initiative: The Company is aggressively reviewing its fiscal
2009 marketing strategies to find the most effective and cost efficient
method to reach its customers.
|
·
|
Operational
initiative: The Company is aggressively looking to improve its
operational effectiveness. This includes both store operations
and corporate office expense
structures.
|
Recent Events
.
·
|
On
September 3, 2008, the Company entered into an agreement with Accenture,
LLP to provide the Company with consulting services to increase the
Company’s operating efficiency and reduce shrink ("store transformation
project").
|
|
Key Items
in Third Quarter Fiscal 2009
The
Company measures itself against a number of financial metrics to assess its
performance. Some of the important financial items during the third
quarter of fiscal 2009 were:
·
|
Net
sales increased 4.7% to $115.5 million. Same store sales
decreased 6.3% compared to the prior year third
quarter.
|
·
|
Gross
margin percentage decreased to 32.2% of sales, when compared to 32.5% in
the prior year third quarter.
|
·
|
Net
loss per share was $0.44 in the third quarter of fiscal 2009 compared to
$0.43 net loss per share in the prior year third
quarter.
|
·
|
The
Company’s earnings from continuing operations before interest, taxes,
depreciation and amortization, share-based compensation expense,
preopening store costs, inventory review initiative and
executive, staff severance and Accenture store transformation
project fees(“Adjusted EBITDA”) for the third quarter 2009 was $469
to the prior year third quarter of $1.8
million.
|
Same
store sales growth is a measure which may indicate whether existing stores are
maintaining their market share. Other factors, such as the overall
economy, may also affect same store sales. The Company defines same
stores as those stores that were open as of the first day of the prior fiscal
year and remain open at the end of the reporting period. The same
store sales for all Company stores decreased 6.3% compared to the prior year
third quarter. In the third quarter ended November 2, 2008, the
Company opened three ALCO stores.
RESULTS OF
OPERATIONS
Thirteen
Weeks Ended November 2, 2008 Compared to Thirteen Weeks Ended October 28,
2007.
Net
Sales
Net sales
for the third quarter of fiscal 2009 increased $5,214, or 4.7%, to $115,472
compared to $110,258 for the third quarter of fiscal 2008. Same store
sales decreased 6.3% when compared with the prior year same
quarter.
Gross
Margin
Gross margin for the third quarter of fiscal 2009 increased $1,427, or
4.0%, to $37,238 compared to $35,811 in the third quarter of fiscal
2008. Gross margin as a percentage of sales was 32.2% for the third
quarter of fiscal 2009, which decreased when compared to 32.5% for the third
quarter of fiscal 2008. The slight decrease in the gross margin
percentage was primarily due to increased markdowns, increased
freight costs and lower rebates and new store allowances offset
by continued reduction in shrink and reduced LIFO
expense.
SG&A
Selling,
general and administrative (SG&A) expense increased $2,730 or 7.7%, to
$38,217 in the third quarter of fiscal 2009 compared to $35,487 in the third
quarter of fiscal 2008. This increase is primarily attributable to
operating 31 new stores along with $937 in fees to Accenture associated with the
store transformation project. As a percentage of net sales, selling,
general and administrative expenses for the third quarter of fiscal 2009
were 33.1%, compared to 32.2% for fiscal 2008. Of the 31 new stores,
three were opened in the third quarter of fiscal 2009. Six new stores
were opened in the third quarter of fiscal 2008. This increase of new
stores contributed to increased real property rent of $1.7
million. In addition to the Accenture store transformation
project fees of $937, also impacting SG&A expenses were reduced co-op
advertising offset of $622 offset by reduced floor care services of $168 and
reduced advertising expense of $243. Excluding share-based
compensation expense, preopening store costs, Accenture store transformation
project fees and executive and staff severance (Adjusted SG&A expenses)
were 31.8% and 30.8% respectively for the third quarter fiscal 2009 and
third quarter fiscal 2008.
Depreciation
and Amortization Expense
Depreciation
and amortization expense increased $299, or 16.4%, to $2,119 in the third
quarter of fiscal 2009 compared to $1,820 in the third quarter of fiscal
2008.
Interest
Expense
Interest
expense decreased $866, or 93.2%, to $63 in the third quarter of fiscal 2009
compared to $929 in the third quarter of fiscal 2008. The decrease in
interest expense was due the reversal of accrued interest of $605 related to the
FIN 48 liability of the Company.
Income
Taxes
The
Company’s effective tax rate on earnings from continuing operations before
income taxes in the third quarter of fiscal 2009 was 52.1% compared to 40.4% in
the third quarter of fiscal 2008. The effective tax rate is higher
due to the impact of permanent book and tax differences which have remained
relatively constant over the reporting periods as compared to a decrease in book
income.
Loss
from Discontinued Operations
Loss from
discontinued operations, net of income benefit, was $151 in the third quarter of
fiscal 2009, compared to loss of $189 in the third quarter of fiscal
2008. Three Duckwall stores closed during fiscal year 2009 and
replaced by an ALCO store are shown in continuing operations.
Thirty-nine
Weeks Ended November 2, 2008 Compared to Thirty-nine Weeks Ended October 28,
2007.
Net
Sales
Net sales
for the thirty-nine week period of fiscal 2009 increased $15,473, or 4.6%, to
$351,010 compared to $335,537 for the thirty-nine week period of fiscal
2008. Same store sales decreased 5.5% when compared with the prior
year same quarter.
Gross
Margin
Gross
margin for the thirty-nine week period of fiscal 2009 increased $4,428, or 4.1%,
to $112,506 compared to $108,078 in the thirty-nine week period of fiscal
2008. Gross margin as a percentage of sales was 32.1% for the
thirty-nine week period of fiscal 2009, which decreased slightly when compared
to 32.2% for the thirty-nine week period of fiscal 2008. The
decrease in the gross margin percentage was primarily due to inventory review
initiative expense and increased freight costs offset by continued
shrink improvement.
SG&A
Selling,
general and administrative (SG&A) expense increased $9,530 or 9.5%, to
$110,315 in the thirty-nine week period of fiscal 2009 compared to $100,785 in
the thirty-nine week period of fiscal 2008. As a percentage of net
sales, selling, general and administrative expenses for the thirty-nine
week period of fiscal 2009 were 31.4%, compared to 30.0% for fiscal
2008.
The Company opened 15 new
stores in fiscal 2009 to-date, compared to eight new stores opened in
fiscal 2008 to-date. Of the 33 non same-stores for the Company, 21 of
them have been open less than 12 months.
The increased non
same-stores contributed to increased real property rent of $4.0 million,
increased real property taxes of $433 and preopening store costs of
$316. Also contributing to the increase were executive and staff
severance, related to the first quarter of fiscal 2009 corporate staff
reduction, of $1.9 million, reduced co-op advertising offset of $1.3 million and
Accenture consulting fees of $937, offset by reduced share-based compensation
expense of $859 and reduced costs for supplies of $227. Adjusted
SG&A expenses were 30.1% and 29.3% respectively for year-to-date fiscal 2009
and year-to-date fiscal 2008.
Depreciation
and Amortization Expense
Depreciation
and amortization expense increased $440, or 8.2%, to $5,799 in the thirty-nine
week period of fiscal 2009 compared to $5,359 in the thirty-nine week
period of fiscal 2008.
Interest
Expense
Interest
expense decreased $1,307, or 51.7%, to $1,219 in the thirty-nine week period of
fiscal 2009 compared to $2,526 in the thirty-nine week period of fiscal
2008. The decrease in interest expense was due to the reversal of
accrued interest of $605 related to the FIN 48 liability of the
Company.
Income
Taxes
The
Company’s effective tax rate on earnings from continuing operations before
income taxes in the thirty-nine week period of fiscal 2009 was 48.8% compared to
42.1% in the thirty-nine week period of fiscal 2008. The effective
tax rate is higher due to the impact of permanent book and tax differences which
have remained relatively constant over the reporting periods as compared to a
decrease in book income.
Loss
from Discontinued Operations
Loss from
discontinued operations, net of income benefit, was $1,788 in the thirty-nine
week period of fiscal 2009, compared to loss of $930 in the thirty-nine week
period of fiscal 2008. In the thirty-nine week period of fiscal 2009,
ten ALCO stores and four Duckwall stores were closed. The Company
closed one ALCO store and two Duckwall stores in the thirty-nine week period of
fiscal 2008. Stores closed where the Company has exited the market
are reflected in discontinued operations in all periods
presented. Three additional Duckwall stores were closed during
fiscal 2009 and replaced by an ALCO store. These stores are shown in
continuing operations.
Certain Non-GAAP Financial
Measures
The
Company has included Adjusted SG&A and Adjusted EBITDA, non-GAAP
performance measures, as part of its disclosure as a means to enhance its
communications with stockholders. Certain stockholders have specifically
requested this information as a means of 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 that of its peers. Adjusted
EBITDA differs from the most comparable GAAP financial measure (earnings from
continuing operations before discontinued operations) in that it does not
include certain items, as does Adjusted SG&A. These items are excluded
by management to better evaluate normalized operational cash flow and expenses
excluding unusual, inconsistent and non-cash charges. To compensate for
the limitations of evaluating the Company's performance using Adjusted SG&A
and Adjusted EBITDA, management also utilizes GAAP performance measures
such as gross margin return on investment, return on equity and free cash
flow. As a result, Adjusted SG&A and Adjusted EBITDA may not
reflect important aspects of the results of the Company’s
operations.
|
|
For
the Thirteen Week Periods Ended
|
|
|
For
the Thirty-Nine Week Periods Ended
|
|
SG&A
Expenses Breakout
|
|
November
2, 2008
|
|
|
October
28, 2007
|
|
|
November
2, 2008
|
|
|
October
28, 2007
|
|
Store
support center (1)
|
|
$
|
6,609
|
|
|
|
5,612
|
|
|
|
19,501
|
|
|
|
16,404
|
|
Distribution
center
|
|
|
2,608
|
|
|
|
2,506
|
|
|
|
7,186
|
|
|
|
6,947
|
|
401K
expense
|
|
|
115
|
|
|
|
118
|
|
|
|
359
|
|
|
|
356
|
|
Same-store
SG&A
|
|
|
23,795
|
|
|
|
25,004
|
|
|
|
69,715
|
|
|
|
73,133
|
|
Non
same-store SG&A (2)
|
|
|
4,921
|
|
|
|
1,930
|
|
|
|
13,520
|
|
|
|
3,052
|
|
Share-based
compensation expense
|
|
|
169
|
|
|
|
317
|
|
|
|
34
|
|
|
|
893
|
|
Final
SG&A as reported
|
|
|
38,217
|
|
|
|
35,487
|
|
|
|
110,315
|
|
|
|
100,785
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based
compensation expense
|
|
|
(169
|
)
|
|
|
(317
|
)
|
|
|
(34
|
)
|
|
|
(893
|
)
|
Preopening
store costs (2)
|
|
|
(342
|
)
|
|
|
(1,169
|
)
|
|
|
(1,837
|
)
|
|
|
(1,520
|
)
|
Executive
and staff severance (1)
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,942
|
)
|
|
|
-
|
|
Accenture
store transformation project
|
|
|
(937
|
)
|
|
|
-
|
|
|
|
(937
|
)
|
|
|
-
|
|
Adjusted
SG&A
|
|
$
|
36,769
|
|
|
|
34,001
|
|
|
|
105,565
|
|
|
|
98,372
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
SG&A as % of sales
|
|
|
31.8
|
%
|
|
|
30.8
|
%
|
|
|
30.1
|
%
|
|
|
29.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
per average selling square foot
|
|
$
|
25.59
|
|
|
|
27.98
|
|
|
|
79.86
|
|
|
|
80.50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
gross margin dollars per average selling square feet
(3)(4)
|
|
$
|
8.25
|
|
|
|
9.09
|
|
|
|
25.90
|
|
|
|
25.93
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
SG&A per average selling square foot (3)
|
|
$
|
8.15
|
|
|
|
8.63
|
|
|
|
24.02
|
|
|
|
23.60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA per average selling square foot (3)(5)
|
|
$
|
0.10
|
|
|
|
0.46
|
|
|
|
1.88
|
|
|
|
2.33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
inventory per average selling square feet (3)(6)(7)
|
|
$
|
28.63
|
|
|
|
32.86
|
|
|
|
28.43
|
|
|
|
28.38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
selling square feet (3)
|
|
|
4,513
|
|
|
|
3,941
|
|
|
|
4,395
|
|
|
|
4,168
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
stores operating beginning of period
|
|
|
257
|
|
|
|
255
|
|
|
|
262
|
|
|
|
256
|
|
Total
stores operating end of period
|
|
|
259
|
|
|
|
256
|
|
|
|
259
|
|
|
|
256
|
|
Total
stores less than twelve months old
|
|
|
|
|
|
|
|
|
|
|
21
|
|
|
|
10
|
|
Total
Non same-stores
|
|
|
|
|
|
|
|
|
|
|
33
|
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Same-store
sales change
|
|
|
-6.3
|
%
|
|
|
4.9
|
%
|
|
|
-5.5
|
%
|
|
|
4.2
|
%
|
Same-store
gross margin dollar change
|
|
|
-7.4
|
%
|
|
|
9.0
|
%
|
|
|
-6.3
|
%
|
|
|
10.1
|
%
|
Same-store
SG&A dollar change
|
|
|
-5.8
|
%
|
|
|
7.3
|
%
|
|
|
-4.7
|
%
|
|
|
9.2
|
%
|
Same-store
total customer count change
|
|
|
-10.5
|
%
|
|
|
-3.8
|
%
|
|
|
-9.2
|
%
|
|
|
-4.5
|
%
|
Same-store
average sale per ticket change
|
|
|
4.7
|
%
|
|
|
9.0
|
%
|
|
|
4.1
|
%
|
|
|
9.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
General office includes executive and staff severance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2)
Non same-stores are those stores opened in Fiscal 2009 & Fiscal 2008
and includes preopening costs
|
|
|
|
|
|
|
|
|
|
(3)
Average selling square feet is (beginning square feet plus ending square
feet) divided by 2.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4)
Adjusted gross margin includes inventory review initiative
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5)
Adjusted EBITDA per selling square foot is a non-GAAP financial measure
and is calculated as Adjusted EBITDA divided by selling square
feet.
|
|
(6)
Average inventory is (beginning inventory plus ending inventory) divided
by 2. This includes only the merchandise inventory at store
level.
|
|
(7)
Excludes inventory for unopened stores.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2009 Compared to
Fiscal 2008
Store
support center expenses for fiscal 2009 increased $3.1 million or
18.9%. The increase was primarily due to severance costs of $1.9
million and Accenture store transformation project fees of $937.
Same-store SG&A
expenses decreased $3.4 million or 4.7%. The decrease was primarily
due to labor efficiencies of $3.5 million, decreased advertising
expenses of $989, decreased floor care services expenses of $449 and decreased
general insurance expenses of $371 offset by reduced coop advertising of
$1.6 million and increased real property rent expense of $608.
Non
same-store SG&A expenses increased $10.5 million.
The Company has opened 25 stores since the third
quarter of fiscal 2008.
Reconciliation and
Explanation of Non-GAAP Financial Measures
The
following table shows the reconciliation of Adjusted EBITDA from net earnings
(loss) from continuing operations:
Adjusted
EBITDA from net earnings (loss) from continuing
operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
the Twenty-Six Week Periods Ended
|
|
|
Trailing
Twelve Periods Ended
|
|
|
For
the Thirteen Week Periods Ended
|
|
|
Trailing
Twelve Periods Ended
|
|
|
|
Fiscal
2008
|
|
|
August
3, 2008
|
|
|
July
29, 2007
|
|
|
August
3, 2008
|
|
|
November
2, 2008
|
|
|
October
28, 2007
|
|
|
November
2, 2008
|
|
Net
income (loss) from continuing operations (1)
|
|
$
|
522
|
|
|
|
(959
|
)
|
|
|
1,103
|
|
|
|
(1,540
|
)
|
|
|
(1,514
|
)
|
|
|
(1,446
|
)
|
|
|
(1,608
|
)
|
Plus:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
|
3,382
|
|
|
|
1,156
|
|
|
|
1,597
|
|
|
|
2,941
|
|
|
|
63
|
|
|
|
929
|
|
|
|
2,075
|
|
Taxes
(1)
|
|
|
538
|
|
|
|
(707
|
)
|
|
|
730
|
|
|
|
(899
|
)
|
|
|
(1,647
|
)
|
|
|
(979
|
)
|
|
|
(1,567
|
)
|
Depreciation
and amortization (1)
|
|
|
9,475
|
|
|
|
3,679
|
|
|
|
3,539
|
|
|
|
9,615
|
|
|
|
2,119
|
|
|
|
1,820
|
|
|
|
9,914
|
|
Share-based
compensation expense
|
|
|
1,130
|
|
|
|
(135
|
)
|
|
|
576
|
|
|
|
419
|
|
|
|
169
|
|
|
|
317
|
|
|
|
271
|
|
Preopening
store costs (2)
|
|
|
2,783
|
|
|
|
1,495
|
|
|
|
352
|
|
|
|
3,926
|
|
|
|
342
|
|
|
|
1,169
|
|
|
|
3,099
|
|
Inventory
review initiative
|
|
|
-
|
|
|
|
1,345
|
|
|
|
-
|
|
|
|
1,345
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,345
|
|
Executive
and staff severance
|
|
|
-
|
|
|
|
1,942
|
|
|
|
-
|
|
|
|
1,942
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,942
|
|
Accenture
store transformation project
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
937
|
|
|
|
-
|
|
|
|
937
|
|
=Adjusted
EBITDA (1)(3)(4)
|
|
|
17,830
|
|
|
|
7,816
|
|
|
|
7,897
|
|
|
|
17,749
|
|
|
|
469
|
|
|
|
1,810
|
|
|
|
16,408
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Same-stores
(5)
|
|
|
47,623
|
|
|
|
22,585
|
|
|
|
22,988
|
|
|
|
47,220
|
|
|
|
8,524
|
|
|
|
9,786
|
|
|
|
45,957
|
|
Non
same-stores (3)(5)
|
|
|
1,650
|
|
|
|
1,275
|
|
|
|
381
|
|
|
|
2,544
|
|
|
|
340
|
|
|
|
260
|
|
|
|
2,624
|
|
Store
support center (5)
|
|
|
(22,116
|
)
|
|
|
(11,279
|
)
|
|
|
(11,031
|
)
|
|
|
(22,364
|
)
|
|
|
(5,787
|
)
|
|
|
(5,730
|
)
|
|
|
(22,421
|
)
|
Warehouse
|
|
|
(9,327
|
)
|
|
|
(4,765
|
)
|
|
|
(4,441
|
)
|
|
|
(9,651
|
)
|
|
|
(2,608
|
)
|
|
|
(2,506
|
)
|
|
|
(9,753
|
)
|
Reconciled
Adjusted EBITDA (1)(3)(4)
|
|
17,830
|
|
|
|
7,816
|
|
|
|
7,897
|
|
|
|
17,749
|
|
|
|
469
|
|
|
|
1,810
|
|
|
|
16,408
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
5,501
|
|
|
|
4,653
|
|
|
|
4,217
|
|
|
|
4,653
|
|
|
|
5,320
|
|
|
|
4,525
|
|
|
|
5,320
|
|
Debt
|
|
|
33,013
|
|
|
|
36,964
|
|
|
|
37,698
|
|
|
|
36,964
|
|
|
|
58,303
|
|
|
|
55,759
|
|
|
|
58,303
|
|
Debt,
net of cash
|
|
$
|
27,512
|
|
|
|
32,311
|
|
|
|
33,481
|
|
|
|
32,311
|
|
|
|
52,983
|
|
|
|
51,234
|
|
|
|
52,983
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
These amounts will not agree with the 2008 fiscal 2008 10-K filing due to
the 14 stores the Company closed in the first quarter of fiscal
2009. These stores are now shown 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 or will
be opened and are incurred prior to the grand opening of each
store.
|
|
(3) For
the trailing twelve periods ended November 2, 2008 the average open weeks
for the Company's 33 non same-stores is 41 weeks.
|
(4) During
fiscal year 2009, the Company made a change in its Executive Management
team and Board of Directors resulting in several initiatives to reduce
SG&A expense. For the thirty-nine weeks ended November 2, 2008,
the Company has reduced SG&A approximately $4.6 million when compared
to the same period for the previous fiscal year. The initiatives
include, but are not limited to, executive and staff
reduction, reduced floor care services, professional service
providers' expense and travel expense.
|
|
(5)
Adjusted EBITDA amount of $321 was reclassified for an internal allocation
for the thirteen week period ended October 28, 2007 and the
twenty-six week period ended July 29, 2007.
|
|
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
November 2, 2008, working capital (defined as current assets less current
liabilities) was $129.2 million compared to $127.9 million at October 28,
2007. 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 $105 million of
financing in the form of notes payable and letters of credit. The loan agreement
expires in January 2011. The revolving loan note payable and letter of credit
balance at November 2, 2008 was $54.4 million, resulting in an available line of
credit at that date of $50.6 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 $77.5 million, including
limitations on additional indebtedness, prepayments, acquisition of assets,
granting of liens, certain investments and payments of dividends. The Company's
loan agreement contains various covenants including limitations on additional
indebtedness and certain financial tests, as well as various subjective
acceleration clauses. The balance sheet classification of the borrowings under
the revolving loan credit facility has been determined in accordance with
Emerging Issues Task Force of the Financial Accounting Board as set forth in
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
. As of December
11, 2008, the Company believes it is in compliance with all covenants and
subjective acceleration clauses of the debt agreements. Accordingly, this
obligation has been classified as a long-term liability in the accompanying
consolidated balance sheet. Short-term trade credit represents a
significant source of financing for inventory to the Company. Trade credit
arises from the willingness of the Company's vendors to grant payment terms for
inventory purchases.
Cash used
in operating activities in the thirty-nine week period of fiscal 2009 and 2008
was $17,961 and $15,299 respectively. The increase in the amount of
cash used in operating activities in the thirty-nine week period of fiscal
2009 compared to the thirty-nine week period of fiscal 2008 was primarily due
to an increase in inventory and decreased other liabilities offset by
increased accounts payable.
Cash used
in investing activities (including acquisitions, divestitures and
remodeling of property and equipment) in the thirty-nine week period of fiscal
2009 and 2008 was $7,409 and $9,217, respectively.
Cash provided
by financing activities in the thirty-nine week period of fiscal 2009 and
2008 was $25,189 and $26,058 respectively. Net borrowings on the
revolving loan generated $27,673 during the thirty-nine week ended November 2,
2008, compared to $27,384 during the thirteen week period of the prior fiscal
year.
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
February 3, 2008. There have been no significant developments with respect to
our contractual obligations since February 3, 2008.
As of
December 1, 2008, the Company has repurchased 19,797 shares of stock since
August 15, 2008. The average price paid was $13.15. Since
fiscal quarter end November 2, 2008, the Company has repurchased 5,766 shares at
an average price of $11.93.
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 thirteen and
thirty-nine week periods of fiscal 2009 and 2008:
|
|
For
the Thirteen Weeks Ended
|
|
|
For
the Thirty-Nine Weeks Ended
|
|
|
|
November
2, 2008
|
|
|
October
28, 2007
|
|
|
November
2, 2008
|
|
|
October
28, 2007
|
|
Merchandise
Category:
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumables
and commodities
|
|
|
34
|
%
|
|
|
32
|
%
|
|
|
32
|
%
|
|
|
31
|
%
|
Electronics,
entertainment, sporting goods, toys and outdoor living
|
|
|
21
|
%
|
|
|
20
|
%
|
|
|
25
|
%
|
|
|
24
|
%
|
Apparel
and accessories
|
|
|
20
|
%
|
|
|
22
|
%
|
|
|
19
|
%
|
|
|
20
|
%
|
Home
furnishings and décor
|
|
|
14
|
%
|
|
|
14
|
%
|
|
|
13
|
%
|
|
|
14
|
%
|
Other
|
|
|
11
|
%
|
|
|
12
|
%
|
|
|
11
|
%
|
|
|
11
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
NEW ACCOUNTING
PRONOUNCEMENTS
|
In
September 2006, the FASB issued Statement of Financial Accounting Standards
No. 157,
Fair Value
Measurement
(SFAS 157). SFAS 157 provides a definition of fair
value, provides guidance for measuring fair value in U.S. GAAP and expands
disclosures about fair value measurements. Effective February 4, 2008, the
Company adopted the provisions of SFAS No. 157,
Fair Value Measurements (SFAS
157)
, for financial assets and financial liabilities. In accordance with
Financial Accounting Standards Board Staff Position No. 157-2, Effective
Date of FASB Statement No. 157, the Company will delay application of SFAS
No. 157 for non-financial assets and non-financial liabilities, until
February 2, 2009. SFAS No. 157 defines fair value, establishes a framework
for measuring fair value in generally accepted accounting principles and expands
disclosures about fair value measurements. Adoption of SFAS No. 157 did not
have a material impact on our consolidated financial position, results of
operations, or cash flows.
Certain
non-financial assets measured at fair value on a non-recurring basis include
non-financial long-lived assets measured at fair value for impairment
assessment. As stated above, SFAS No. 157 will be applicable to these fair
value measurements beginning February 2, 2009.
In
February 2007, the FASB issued SFAS 159,
The Fair Value Option for Financial
Assets and Financial Liabilities - Including an Amendment of SFAS 115
(SFAS 159), which permits entities to choose to measure many financial
instruments and certain other items at fair value. The fair value option
established by this standard permits all entities to choose to measure eligible
items at fair value at specified election dates. Entities choosing the fair
value option would be required to report unrealized gains and losses on items
for which the fair value option has been elected in earnings at each subsequent
reporting date. Adoption is required for fiscal years beginning after November
15, 2007. Adoption of SFAS No. 159 did not have a material impact on
our consolidated financial position, results of operations, or cash
flows.
In
April 2008, the FASB issued FASB Staff Position (“FSP”) No. FAS 142-3,
“Determination of the Useful Life of Intangible Assets”, which amends the
factors that must be considered in developing renewal or extension assumptions
used to determine the useful life over which to amortize the cost of a
recognized intangible asset under SFAS 142, “Goodwill and Other Intangible
Assets.” The FSP requires an entity to consider its own assumptions about
renewal or extension of the term of the arrangement, consistent with its
expected use of the asset, and is an attempt to improve consistency between the
useful life of a recognized intangible asset under SFAS 142 and the period of
expected cash flows used to measure the fair value of the asset under SFAS 141,
“Business Combinations.” The FSP is effective for fiscal years beginning after
December 15, 2008, and the guidance for determining the useful life of a
recognized intangible asset must be applied prospectively to intangible assets
acquired after the effective date. The FSP is not expected to have a significant
impact on our financial condition, results of operations or cash
flows.
In
May 2008, the FASB issued SFAS No. 162 (“SFAS 162”), “The Hierarchy of
Generally Accepted Accounting Principles.” The statement is intended to improve
financial reporting by identifying a consistent hierarchy for selecting
accounting principles to be used in preparing financial statements that are
prepared in conformance with generally accepted accounting principles. The
statement is effective 60 days following the SEC’s pending approval of the
Public Company Accounting Oversight Board (PCAOB) amendments to AU
Section 411, “The Meaning of Present Fairly in Conformity with GAAP,” and
is not expected to have any impact on the Company’s financial condition, results
of operations or cash flows.
INSTRUMENTS ENTERED INTO
OTHER THAN FOR TRADING – INTEREST RATE RISK
The
Company is exposed to various types of market risk in the normal course of its
business, including the impact of interest rate changes. The Company
may enter into interest rate swaps to manage its exposure to interest rate
changes, and we may employ other risk management strategies, including the use
of foreign currency forward contracts. The Company does not currently
hold any derivative instruments and would enter into such instruments solely for
cash flow hedging purposes and not for trading purposes.
As
described under "Management's Discussion and Analysis of Financial Condition and
Results of Operations-Liquidity and Capital Resources", the Company has a
variable interest rate debt facility that is subject to interest rate
risk. The Company uses this facility to meet the short-term needs of
its capital improvements and inventory purchases and other operating
activities. These obligations expose the Company to variability in
interest payments due to changes in interest rates. If interest rates
increase, interest expense increases. Conversely, if interest rates
decrease, interest expense also decreases. Based on the Company’s current
borrowings under its revolving credit facility, if interest rates were to
increase 100 basis points on an annual basis interest expense would increase
$290. The average interest rate for the thirteen week period and
thirty-nine week period ended November 2, 2008 was 5.6% and 5.3%,
respectively.
The
Company has and continues to analyze its debt structure in relation to interest
rate risk and believes the mix of debt instruments utilized by the Company
(revolving line of credit, term loans, capital leases and operating
leases) adequately addresses these risk issues. This process of
evaluation is continuous and the Company will adjust its debt structure as is
appropriate depending on market conditions.
(a)
Evaluation of Disclosure Controls and Procedures
Management
of the Company, with the participation of the President - Chief Executive
Officer and the Chief Financial Officer, evaluated the effectiveness of the
design and operation of the Company’s disclosure controls and procedures (as
defined in Rule 13a-15(e) of the Securities and Exchange Act of 1934, as
amended) as of November 2, 2008. Based upon this evaluation, the President
- Chief Executive Officer and the Chief Financial Officer have concluded
that the Company’s disclosure controls and procedures were not effective as of
November 2, 2008 because of the material weakness described in internal control
over financial reporting described below in Item 4(b).
(b) Management’s
Report on Internal Control over Financial Reporting
Management
of the Company is responsible for establishing and maintaining internal
control over financial reporting as defined in Rule 13a-15(f) under the
Securities and Exchange Act of 1934, as amended. The Company’s internal control
system is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements
for external reporting purposes in accordance with U.S. generally accepted
accounting principles. Because of its inherent limitations, internal control
over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may
deteriorate.
A
material weakness represents a deficiency or a combination
of deficiencies in internal controls over financial reporting, such that
there is a reasonable possibility that a material misstatement of the
Company's annual or interim financial statements will not be prevented or
detected on a timely basis.
Management
assessed the effectiveness of the Company’s internal control over financial
reporting as of November 2, 2008 based on the criteria established in
Internal Control- Integrated
Framework
issued
by the Committee of
Sponsoring Organizations of the Treadway Commission (“COSO”). As a result of
this assessment, management concluded that the Company’s internal control over
financial reporting was not effective as of November 2, 2008.
·
|
The
Company did not have adequate transition plans to address turnover in
finance and accounting personnel. As a result, due to
significant changes in these personnel that occurred around the Company’s
February 3, 2008 year-end closing process, the Company did not have
sufficient trained resources to effectively operate the year-end closing
process controls. This resulted in misstatements that were
corrected prior to the issuance of the consolidated financial
statements. As a result of this material weakness, there is more
than a reasonable possibility that a material misstatement of the
Company’s annual or interim financial statements will not be prevented or
detected on a timely basis.
|
(c) Changes
in Internal Control over Financial Reporting
The
Company had significant changes to its accounting and finance personnel during
the first quarter of fiscal 2009. These changes resulted in
improvement in each position. The Company replaced three positions
with individuals who had obtained Bachelors of Science accounting
degrees. These positions were previously held by individuals without
this education. The Company replaced one position with an individual
who has achieved their certified public accountant license. The
person who had previously held this particular position did not have this
license. The Company believes that these changes have significantly
strengthened the Finance Department for the future.
The
President and Chief Executive Officer of the Company resigned on February 22,
2008. At that time the Board of Directors appointed the current
Senior Vice President – Chief Financial Officer to assume the duties of Interim
President and Chief Executive Officer. The Vice President –
Controller was appointed to assume the duties of Interim Chief Financial
Officer.
On July
1, 2008, the Company hired a President and Chief Executive
Officer. The Interim President and Chief Executive Officer returned
to the Chief Financial Officer position as Executive Vice President – Chief
Financial Officer. The Interim Chief Financial Officer returned to
the position of Vice President – Controller at that time also.
There are
no material pending legal proceedings other than routine litigation incidental
to the business to which the Company is party of or with any property is
subject.
There
have been no material changes to our risk factors as previously disclosed in our
Form 10-K for the fiscal year ended February 3, 2008.
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 17,368 shares had been
purchased as of November 2, 2008. On August 13, 2008 the Company
announced that it was resuming its stock repurchase program. Since August
13, 2008, 14,031 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:
|
|
|
|
|
|
|
Maximum
Number
|
|
|
|
|
|
|
Total
Number of
|
|
(or
Approximate Dollar
|
|
|
|
|
|
|
shares
(or Units)
|
|
Value)
of Shares (or
|
|
|
Total
Number
|
|
Average
Price
|
|
Purchased
as Part
|
|
Units)
that May Yet
|
|
|
Of
Shares (or
|
|
Paid
per Share
|
|
of
Publicly Announced
|
|
Be
Purchased Under
|
|
Period
|
Units)
Purchased
|
|
(or
Unit)
|
|
Plans
or Programs
|
|
the
Plans or Programs
|
|
August
4, 2008 - August 31, 2008
|
|
|
7,501
|
|
|
|
14.22
|
|
|
|
7,501
|
|
|
|
189,162
|
|
September
1, 2008 - October 5, 2008
|
|
|
3,020
|
|
|
|
13.42
|
|
|
|
3,020
|
|
|
|
186,142
|
|
October
6, 2008 - November 2, 2008
|
|
|
3,510
|
|
|
|
12.61
|
|
|
|
3,510
|
|
|
|
182,632
|
|
On July
1, 2008, the Company entered into a Stock Purchase Agreement with Lawrence J.
Zigerelli as part his starting employment at the Company. Mr.
Zigerelli purchased 10,000 shares of the Company’s common stock. The
purchase price was $9.05 which was the closing price of the stock on the NASDAQ
Global Market on the date of the agreement. The agreement was
executed in reliance upon the exemption from securities registration afforded by
Section 4(2) of the Securities Act. The proceeds of this transaction
were used by the Company for general purposes.
Not
applicable.
None.
None.
See the
Exhibit Index immediately following the signature page hereto.
SIGNATURE
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)
/s/ Donny R.
Johnson
Donny R. Johnson
Chief Financial Officer – Executive Vice President
Signing on behalf of the registrant and as Principal Financial
Officer
EXHIBIT
INDEX
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).
|
|
|
4.1
|
Specimen
of Duckwall-ALCO Stores, Inc. Common Stock Certificate. (filed
as Exhibit 4.1 to Company’s Quarterly Report on Form 10-Q for the fiscal
quarter ended August 3, 2008 and incorporated herein by
reference).
|
4.2
|
Reference
is made to the Amended and Restated Articles of Incorporation described
under 3.1 above and Bylaws described under 3.2 above.
|
|
|
10.1
|
Employment
Agreement dated July 1, 2008 between the Company and Lawrence J.
Zigerelli is incorporated by reference to Exhibit 10.1 to the Current
Report on Form 8-K of the Company dated July 3,
2008.
|
10.2
|
Stock
Purchase Agreement dated July 1, 2008 between the Company and Lawrence J.
Zigerelli is incorporated by reference to Exhibit 10.2 to the Current
Report on Form 8-K of the Company dated July 3, 2008.
|
|
|
10.3
|
Non-Qualified
Stock Option Agreement dated July 1, 2008 between the Company and Lawrence
J. Zigerelli is incorporated by reference to Exhibit 10.3 to the Current
Report on Form 8-K of the Company dated July 3,
2008.
|
10.4
|
Employment
Agreement dated July 24, 2008 between the Company and Jane F.
Gilmartin is incorporated by reference to Exhibit 10.4 to the Current
Report on Form 8-K of the Company dated July 24,
2008.
|
10.5
|
Employment
Agreement dated August 25, 2008 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 August 25, 2008.
|
|
|
10.6
|
Separation
Agreement and Release, dated as of August 1, 2008, between the Company and
Anthony C. Corradi, including consulting agreement is incorporated by
reference to Exhibit 10.6 to the Current Report on Form 8-K of the Company
dated August 1, 2008.
|
|
|
31.1
|
Certification
of Chief Executive Officer of Duckwall-ALCO Stores, Inc. dated December
11, 2008, pursuant to Rule 13a-4(a) under the Securities Exchange Act of
1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
|
31.2
|
Certification
of Chief Financial Officer of Duckwall-ALCO Stores, Inc. dated December
11, 2008, pursuant to Rule 13a-4(a) under the Securities Exchange Act of
1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
|
32.1
|
Certification
of Chief Executive Officer of Duckwall-ALCO Stores, Inc, dated December
11, 2008, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, which is furnished with
this Quarterly Report on Form 10-Q for the quarter ended November 2, 2008
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 December
11, 2008, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, which is furnished with
this Quarterly Report on Form 10-Q for the quarter ended November 2, 2008
and is not treated as filed in reliance upon § 601(b)(32) of
Regulations S-K.
|
Signature
and Title
|
|
|
Date
|
|
|
|
|
/s/
Lawrence J. Zigerelli
|
|
|
December
11, 2008
|
Lawrence
J. Zigerelli
|
|
|
|
President
and Chief Executive Officer
|
|
|
|
(Principal
Executive Officer)
|
|
|
|
|
|
|
|
/s/
Donny R. Johnson
|
|
|
December
11, 2008
|
Donny
R. Johnson
|
|
|
|
Executive
Vice President - Chief Financial Officer
|
|
|
|
(Principal
Financial and Accounting Officer)
|
|
|
|
|
|
|
|
/s/
Raymond A.D. French
|
|
|
December
11, 2008
|
Raymond
A.D. French
|
|
|
|
Director
|
|
|
|
|
|
|
|
/s/
James G. Hyde
|
|
|
December
11, 2008
|
James
G. Hyde
|
|
|
|
Director
|
|
|
|
|
|
|
|
/s/
Dennis E. Logue
|
|
|
December
11, 2008
|
Dennis
E. Logue
|
|
|
|
Director
|
|
|
|
|
|
|
|
/s/
Lolan C. Mackey
|
|
|
December
11, 2008
|
Lolan
C. Mackey
|
|
|
|
Director
|
|
|
|
|
|
|
|
/s/
Royce L. Winsten
|
|
|
December
11, 2008
|
Royce
L. Winsten
|
|
|
|
Director
- Chairman of Board
|
|
|
|
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