DUCK Alco Stores, Inc. (MM)

Duckwall-ALCO Stores, Inc. (Nasdaq:DUCK), which provides a superior selection of essential products for everyday life in small-town America, today announced operating results for its fourth quarter and fiscal year ended January 31, 2010.

Net sales from continuing operations for the fourth quarter of fiscal 2010 decreased 2.5% to $136.5 million and same-store sales decreased 2.9%. Net sales from continuing operations for the fiscal year decreased 0.2% to $488.7 million and same-store sales decreased 0.7%.

Net earnings for the fourth quarter were $1.5 million, or $0.37 per diluted share, compared to a net loss of $715,000, or ($0.19) per diluted share, for the fourth quarter of fiscal 2009. Adjusted EBITDA increased $885,000 for the fourth quarter of fiscal 2010 compared to the same period in the prior year due to a reduction in Adjusted Selling, General and Administrative (SG&A) expenses of $634,000 and a $251,000 increase in gross margin.

Despite a difficult economy, net earnings for fiscal 2010 were $3.0 million, or $0.77 per diluted share, compared to a net loss of $5.0 million, or ($1.31) per diluted share, in the prior fiscal year.  Operating income from continuing operations increased $10.5 million, compared to the prior fiscal year. This improvement is attributable to reduced SG&A expenses of $6.5 million, or 4.4%, and increased gross margin dollars of $4.7 million, or 3.1%, somewhat offset by increased depreciation and amortization. 

The increased operating income and better inventory management, in addition to income tax refunds, enabled the Company to generate $16.2 million in cash from operating activities in fiscal 2010. We used this positive cash flow to fund capital expenditures of $7.0 million and to reduce outstanding debt by $8.8 million for the fiscal year.

Rich Wilson, President and CEO, commented, "Our small decline in same-store sales for fiscal 2010 was disappointing. While the country did suffer a severe economic shock, the Company did not respond adequately to the shift in consumer demand for better value. As we move into a new year, we are quickly updating our merchandise to better reflect the needs of our core customers, and to provide more value in our assortment. We remain committed to providing an easy-to-shop environment, with a product selection at competitive prices that meets the needs of the communities we serve."

Wilson added, "In fiscal 2011 we plan to continue building on our improved SG&A rates and inventory control, implementing new merchandising initiatives to improve shareholder return."

Investor Conference Call

The Company will host an investor conference call at 10:00 a.m. Central Daylight Time on April 16, 2010, to discuss operating results for the fourth quarter and fiscal year ended January 31, 2010.   The dial-in number for the conference call is 888-819-8018 (international/local participants dial 913-661-9178), and the Confirmation Code is 8644557. Parties interested in participating in the conference call should dial in approximately five minutes prior to 10:00 a.m. Central Daylight Time. A replay of the call will be available from two hours after completion on April 16, 2010 through April 21, 2010 by dialing 888-203-1112 or for international/local callers by dialing 719-457-0820. The Replay Passcode is 8644557. A replay of the call will also be available four hours after completion of the call by visiting the Investors page on the Company's website, www.ALCOstores.com.

Supplemental Data

The Company has included certain tables in this press release that are set forth fully in the Company's 10-K.

Certain Non-GAAP Financial Measures

The Company has included Adjusted Gross Margin and Adjusted EBITDA, non-GAAP performance measures, as part of its disclosure as a means to enhance its communications with stockholders. Certain stockholders have specifically requested this information to assist them in comparing the Company to other retailers that disclose similar non-GAAP performance measures. Further, management utilizes these measures in internal evaluation, review of performance and comparison with the Company's financial measures to those of its peers. Adjusted EBITDA differs from the most comparable GAAP financial measure (earnings [loss] from continuing operations) in that it does not include certain items, as does Adjusted Gross Margin. These items are excluded by management to better evaluate normalized operational cash flow and expenses excluding unusual, inconsistent and non-cash charges.  To compensate for the limitations of evaluating the Company's performance using Adjusted Gross Margin and Adjusted EBITDA, management also utilizes GAAP performance measures such as gross margin return on investment, return on equity and cash flow from operating activities.  As a result, Adjusted Gross Margin and Adjusted EBITDA may not reflect important aspects of the results of the Company's operations.

About Duckwall-ALCO Stores, Inc.

Duckwall-ALCO Stores, Inc. is a regional broad line retailer that specializes in meeting the needs of smaller, underserved communities across 23 states, primarily in the central United States. The Company offers an exceptional selection of quality products and recognized brand names at reasonable prices. Its specialty is delivering those products with the friendly, personal service its customers have come to expect. With 254 stores, Duckwall-ALCO Stores is proud to have continually provided excellent products at good value prices to its customers for 109 years. To learn more about Duckwall-ALCO Stores, Inc. visit www.ALCOstores.com.

The Duckwall-ALCO Stores, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=5865

Forward-looking statements

This press release contains forward-looking statements, as referenced in the Private Securities Litigation Reform Act of 1995 ("the Act"). Any forward-looking statements are made by the Company in good faith, pursuant to the safe-harbor provisions of the Act. These forward-looking statements reflect management's current views and projections regarding economic conditions, retail industry environments, and Company performance. Factors which could significantly change results include but are not limited to: sales performance, expense levels, competitive activity, interest rates, changes in the Company's financial condition, and factors affecting the retail category in general. Additional information regarding these and other factors may be included in the Company's 10-K filings and other public documents, copies of which are available from the Company on request and are available from the United States Securities and Exchange Commission.

Duckwall-ALCO Stores, Inc.

Consolidated Statements of Operations

(dollars in thousands, except share and per share amounts)

 

 

 

 

 

 

For the Thirteen Week Periods Ended

Fiscal 2010

Fiscal 2009

 

January 31, 2010

February 1, 2009

January 31, 2010

February 1, 2009

Net sales

 $ 136,501

 140,061

 488,691

 489,753

Cost of sales

94,596

98,407

330,179

335,934

Gross margin

41,905

41,654

158,512

153,819

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

36,023

37,818

141,208

147,735

Depreciation and amortization

3,011

3,509

9,983

9,302

Total operating expenses

39,034

41,327

151,191

157,037

 

 

 

 

 

Operating income (loss) from

 continuing operations

2,871

327

7,321

(3,218)

Interest expense, net

559

648

2,149

1,867

 

 

 

 

 

Earnings (loss) from continuing

 operations before income taxes

2,312

(321)

5,172

(5,085)

Income tax expense (benefit)

825

317

2,135

(2,080)

 

 

 

 

 

Earnings (loss) from continuing operations

1,487

(638)

3,037

(3,005)

 

 

 

 

 

Loss from discontinued

 operations, net of income tax benefit

 (36)

(77)

(42)

(1,971)

Net earnings (loss)

 $ 1,451

 (715)

 2,995

 (4,976)

 

 

 

 

 

Earnings (loss) per diluted share

 

 

 

 

 Continuing operations

 $ 0.38

 (0.17)

 0.78

 (0.79)

 Net earnings (loss)

 $ 0.37

 (0.19)

 0.77

 (1.31)

 

 

 

 

 

Weighted-average shares outstanding:

 

 

 

 

Basic

 3,798

 3,800

 3,798

 3,809

Diluted

 3,888

 3,817

 3,880

 3,809

 

 

 

 

 

Supplemental Data: 

 

 

 

 

 

For the Thirteen Week Periods Ended

Fiscal 2010

Fiscal 2009

 

January 31, 2010

February 1, 2009

January 31, 2010

February 1, 2009

 

 

 

 

 

Gross margin as reported

 $ 41,905

41,654

158,512

153,819

Inventory review initiative

 -- 

 -- 

 -- 

 1,345

Adjusted Gross Margin

 $ 41,905

 41,654

 158,512

 155,164

 

 

 

 

 

Same-store adjusted gross

 margin dollar change

 (3.8)%

 (12.9)%

 (0.4)%

 (8.4)%

Same-store SG&A dollar change

 (1.8)%

 (7.0)%

 (3.5)%

 (6.1)%

Same-store total customer count change

 (0.6)%

 (13.7)%

 (0.1)%

 (10.4)%

Same-store average sale per ticket change

 (2.1)%

 4.4%

 (0.6)%

 4.0%

 

 

 

 

 

 

 

 For the Thirty-Nine 

 Trailing Twelve 

For the Thirteen

 

 

52 Weeks

Week Periods Ended

Periods Ended

Week Periods Ended

52 Weeks

 

Fiscal 2009

November 1, 2009

November 2, 2008

November 1, 2009

January 31, 2010

February 1, 2009

Fiscal 2010

Net earnings (loss) from continuing operations (1)

 $ (3,005)

 1,549

 (2,368)

 912

 1,487

 (638)

 3,037

Plus:

 

 

 

 

 

 

 

Interest

 1,867

 1,590

 1,219

 2,238

 559

 648

 2,149

Taxes (1)

 (2,080)

 1,310

 (2,397)

 1,627

 825

 317

 2,135

Depreciation and amortization (1)

 9,302

 6,973

 5,794

 10,481

 3,011

 3,509

 9,983

Share-based compensation

 186

 601

 34

 753

 156

 152

 757

Preopening store costs (2)

 1,845

 2

 1,837

 10

 127

 9

 128

Inventory review initiative

 1,345

 -- 

 1,345

 -- 

 -- 

 -- 

 -- 

Executive and staff severance

 1,942

 -- 

 1,942

 -- 

 -- 

 -- 

 -- 

Store transformation project costs

 2,220

 2,096

 937

 3,379

 -- 

 1,283

 2,096

=Adjusted EBITDA (1)(3)(4)(5)

 13,622

 14,121

 8,343

 19,400

 6,165

 5,280

 20,285

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash

 4,744

 5,703

 5,320

 5,703

 5,164

 4,744

 5,164

Debt

 49,841

 54,180

 58,303

 54,180

 40,992

 49,841

 40,992

Debt, net of cash

 $ 45,097

 48,477

 52,983

 48,477

 35,828

 45,097

 35,828

 

 

 

 

 

 

 

 

(1) These amounts will not agree with the fiscal 2009 first quarter 10-Q filing due to the one store the Company closed in the third quarter of fiscal 2009. These amounts will not agree with the fiscal year end 2009 or fiscal 2010 first quarter 10-Q filing due to the one store the Company closed in the second quarter of fiscal 2010. 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 been or will be opened and are incurred prior to the grand opening of each store.

(3) For the trailing twelve periods ended January 31, 2010 the average open weeks for the Company's one non same-store is 3 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 certain SG&A expenses. For the trailing twelve periods ended January 31, 2010, these initiatives resulted in approximately $4.3 million reduced SG&A expenses when compared to the same prior year trailing twelve periods.  The initiatives include, but are not limited to, executive and staff reduction, reduced ALCO same-store hourly wages, advertising expenses, net of coop offset and floor care services along with reduced total Company insurance and travel expenses.

(5) In addition to continued efforts regarding the fiscal 2009 cost reduction initiatives, the Company has also implemented new initiatives for fiscal year 2010. The fiscal 2010 initiatives include, but are not limited to, reduced point-of-sale hardware lease expense, energy expense and accident reduction programs. These initiatives achieved approximately $2.6 million in SG&A savings in fiscal 2010 when compared to the prior year same period.

 

Duckwall-ALCO Stores, Inc.

Consolidated Balance Sheets

(dollars in thousands, except share amounts)

 

 

 

 

January 31, 2010

February 1, 2009

Assets

 

 

 

Current assets:

 

 

Cash and cash equivalents

 $5,164

 $4,744

Receivables

 7,437

 5,142

Prepaid income taxes

 594

 5,753

Inventories

 140,375

 146,620

Prepaid expenses

 3,517

 4,143

Deferred income taxes

 3,863

 5,348

Assets held for sale

 1,631

 1,505

Total current assets

 162,581

 173,255

 

 

 

Property and equipment, at cost

 98,505

 97,849

Less accumulated depreciation

 67,959

 65,591

Net property and equipment

 30,546

 32,258

 

 

 

Property under capital leases, net of accumulated amortization

 1,630

 3,057

Other non-current assets

 51

 205

 

 

 

Total assets

 $194,808

 $208,775

 

 

 

Duckwall-ALCO Stores, Inc. 

Consolidated Balance Sheets

(dollars in thousands, except share amounts)

 

 

 

 

January 31, 2010

February 1, 2009

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

Current liabilities:

 

 

Current maturities of long-term debt

 $1,451

 $1,362

Current maturities of capital lease obligations

 1,623

 1,853

Accounts payable

 23,076

 30,233

Accrued salaries and commissions

 4,122

 5,375

Accrued taxes other than income

 4,913

 4,941

Self-insurance claim reserves

 4,852

 5,309

Other current liabilities

 4,499

 4,676

Total current liabilities

 44,536

 53,749

 

 

 

Long-term debt, less current maturities

 1,414

 2,865

Notes payable under revolving loan

 35,159

 40,714

Capital lease obligations - less current maturities

 1,345

 3,047

Deferred gain on leases

 4,212

 4,598

Deferred income taxes

 694

 138

Other noncurrent liabilities

 1,715

 1,624

Total liabilities

 89,075

 106,735

 

 

 

Stockholders' equity:

 

 

Common stock, $.0001 par value, authorized 20,000,000 shares; issued

 and outstanding 3,797,947 shares and 3,797,947 shares, respectively

 1

 1

Additional paid-in capital

 39,313

 38,615

Retained earnings

 66,419

 63,424

Total stockholders' equity

 105,733

 102,040

 

 

 

Total liabilities and stockholders' equity

 $194,808

 $208,775

 

 

 

CONTACT: Duckwall-ALCO Stores, Inc.

Donny R. Johnson, Executive Vice President -

Chief Financial Officer

785-263-3350 X164

djohnson@ALCOstores.com

Hagen and Partners

Debbie Hagen

913-652-6547

dhagen@hagenandpartners.com