Notes
to
Condensed Consolidated Financial Statements
(unaudited)
1.
Basis
of Presentation
The
unaudited condensed consolidated financial statements included in this Form
10-Q
have been prepared by The Dress Barn, Inc., and its wholly-owned subsidiaries
(collectively, “we”, “our” the “Company” or similar terms) pursuant to the rules
and regulations of the United States Securities and Exchange Commission. Certain
information and disclosures normally included in financial statements prepared
in accordance with accounting principles generally accepted in the United States
of America have been condensed, or omitted, pursuant to such rules and
regulations, although we believe that the disclosures made are adequate to
make
the information not misleading. These unaudited condensed consolidated financial
statements should be read in conjunction with the consolidated financial
statements and related notes included in our Annual Report on Form 10-K for
the
fiscal year ended July 28, 2007 (“our 10-K”). The interim periods presented in
this report are the thirteen weeks ended October 27, 2007 (the “first quarter”)
and the thirteen weeks ended October 28, 2006 (the “prior period”). The results
of operations for these interim periods are not necessarily indicative of
results to be expected for the fiscal year. In the opinion of management, the
information contained herein reflects all adjustments necessary to make the
results of operations for the interim periods a fair statement of such
operations. All such adjustments are of a normal recurring nature.
The
July
28, 2007 condensed consolidated balance sheet amounts have been derived from
audited financial statements of our 10-K.
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
certain estimates and assumptions that affect the reported amounts of assets
and
liabilities, and disclosure of contingent assets and liabilities at the date
of
the financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Cost
of
sales consists of all costs of merchandise (net of purchase discounts and vendor
allowances), freight on inbound, outbound and internally transferred
merchandise, merchandise acquisition costs (primarily commissions and import
fees), occupancy costs excluding utilities and depreciation and all costs
associated with the buying and distribution functions. Our cost of sales may
not
be comparable to those of other entities, since some entities include all costs
related to their distribution network including depreciation and all buying
and
occupancy costs in their cost of sales, while other entities, including us,
exclude a portion of these expenses from cost of sales and include them in
selling, general and administrative expenses or depreciation. We include
depreciation related to our distribution centers and corporate headquarters
in
depreciation and amortization, and utilities and insurance expenses, among
other
expenses, in selling, general and administrative expenses on the consolidated
statements of earnings.
Selling,
general and administrative expenses consist of compensation and employee benefit
expenses, other than for our design and sourcing team, our buyers and our
distribution centers personnel. Such compensation and employee benefit expenses
include salaries, incentives and related benefits associated with our stores
and
corporate headquarters, except as previously noted. Selling, general and
administrative expenses also include advertising costs, supplies for our stores
and home office, communication costs, travel and entertainment, leasing costs
and services purchased.
We
identified an error in the way we had previously classified our deferred
compensation between current liabilities and long-term liabilities. This
reclassification of deferred compensation required our consolidated cash flow
statement for the prior period to be restated, and affected our previously
reported changes in accrued salaries, wages and related expenses and other
long-term liabilities on our consolidated statements of cash flows. These
reclassifications do not affect the net cash provided by operating activities,
net cash used in investing activities or net cash provided by (used in)
financing activities. See Note 11 to the condensed consolidated financial
statements of this report for a summary of the effects of this restatement.
The
Dress
Barn, Inc. and Subsidiaries
Notes
to
Condensed Consolidated Financial Statements
(unaudited)
2
.
Recent Accounting Pronouncements
In
June
2006, the Financial Accounting Standards Board (“FASB”) issued FASB
Interpretation No. 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes -
an interpretation of FASB Statement No. 109, which clarifies the accounting
for
uncertainty in income taxes recognized in financial statements in accordance
with FASB Statement No. 109, Accounting for Income Taxes. FIN 48 provides
guidance on the financial statement recognition and measurement of a tax
position taken or expected to be taken in a tax return. FIN 48 requires that
companies recognize in their consolidated financial statements the impact of
a
tax position that is more likely than not to be sustained upon examination
based
on the technical merits of the position. The Company has recorded the cumulative
effect of applying FIN 48 of $4.9 million as an adjustment to the opening
balance of retained earnings on July 29, 2007. See Note 6, “Income Taxes,” for
additional information.
In
September 2006, the FASB issued
Statements
of Financial Accounting Standards (“
SFAS”)
No. 157, Fair Value Measurements, which defined fair value, establishes a
framework for measuring fair value under GAAP, and expands disclosures about
fair value measurements. SFAS No. 157 applies to other accounting pronouncements
that require or permit fair value measurement. SFAS No. 157 is effective for
financial statements issued for fiscal years beginning after November 15, 2007
(our Fiscal 2009), and for interim periods within those fiscal years. We have
not completed our evaluation of the potential impact, if any, of the adoption
of
SFAS No. 157 on our consolidated financial position, results of operations
and
cash flows.
In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities – Including an Amendment of FASB Statement
No. 115, which provides companies with an option to measure, at specified
election dates, many financial instruments and certain other items at fair
value
that are not currently measured at fair value. A company will report unrealized
gains and losses on items for which the fair value option has been elected
in
earnings at each subsequent reporting date. This Statement also establishes
presentation and disclosure requirements designed to facilitate comparisons
between entities that choose different measurement attributes for similar types
of assets and liabilities. SFAS No. 159 is effective as of the beginning of
an
entity’s first fiscal year that begins after November 15, 2007 (our Fiscal
2009). We have not completed our evaluation of the potential impact, if any,
of
the adoption of SFAS No. 159 on our consolidated financial position, results
of
operations and cash flows.
In
December 2007, the FASB issued SFAS No. 141 (revised 2007), Business
Combinations, which replaces FASB Statement No. 141. SFAS No. 141R establishes
principles and requirements for how an acquirer recognizes and measures in
its
financial statements the identifiable assets acquired, the liabilities assumed,
any non controlling interest in the acquiree and the goodwill acquired. The
Statement also establishes disclosure requirements which will enable users
to
evaluate the nature and financial effects of the business combination. SFAS
No.
141R is effective as of the beginning of an entity’s fiscal year that begins
after December 15, 2008 (our Fiscal 2010). We have not completed our evaluation
of the potential impact, if any, of the adoption of SFAS No. 141R on our
consolidated financial position, results of operations and cash flows.
In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements – an amendment of Accounting Research
Bulletin No. 51, which establishes accounting and reporting standards for
ownership interests in subsidiaries held by parties other than the parent,
the
amount of consolidated net income attributable to the parent and to the
noncontrolling interest, changes in a parent’s ownership interest and the
valuation of retained noncontrolling equity investments when a subsidiary is
deconsolidated. The Statement also establishes reporting requirements that
provide sufficient disclosures that clearly identify and distinguish between
the
interests of the parent and the interests of the noncontrolling owners. SFAS
No.160 is effective as of the beginning of an entity’s fiscal year that begins
after December 15, 2008 (our Fiscal 2010). We have not completed our evaluation
of the potential impact, if any, of the adoption of SFAS No. 160 on our
consolidated financial position, results of operations and cash flows.
The
Dress
Barn, Inc. and Subsidiaries
Notes
to
Condensed Consolidated Financial Statements
(unaudited)
3.
Marketable
Securities
and Investments
We
purchase short-term investments and marketable securities that have been
designated as “available-for-sale” as required by SFAS No. 115,
Accounting
for Certain Investments in Debt and Equity Securities
.
Available-for-sale securities are carried at fair value with the unrealized
gains and losses reported in shareholders’ equity under the caption “Accumulated
Other Comprehensive Income.” The cost of securities sold is based on the
specific identification method.
The
amortized cost and estimated fair value based on published closing prices of
securities at October 27, 2007 and July 28, 2007, are shown
below.
|
|
|
October
27, 2007
|
|
July
28, 2007
|
|
|
(Amounts
in thousands)
|
|
Estimated
Fair
Value
|
|
Amortized
Cost
|
|
Estimated
Fair
Value
|
|
Amortized
Cost
|
|
|
|
|
|
Tax-exempt
auction rate securities
|
|
$
|
79,050
|
|
$
|
79,050
|
|
$
|
107,575
|
|
$
|
107,575
|
|
|
Municipal
bonds
|
|
|
71,542
|
|
|
71,381
|
|
|
69,871
|
|
|
69,832
|
|
|
Total
|
|
$
|
150,592
|
|
$
|
150,431
|
|
$
|
177,446
|
|
$
|
177,407
|
|
We
periodically review our investment portfolio to determine if there is an
impairment that is other than temporary, and to date we have not experienced
any
impairment in our investments that were other than temporary. In evaluating
whether the individual investments in the investment portfolio are not other
than temporarily impaired, we consider the credit rating of the individual
securities, the cause of the impairment of the individual securities, and the
severity of the impairment of the individual securities.
4.
Goodwill and Other Intangible Assets
In
January 2005, we acquired Maurices Incorporated, and accounted for the
acquisition as a purchase using the accounting standards established in SFAS
No.
141, Business Combinations, and, accordingly, the excess purchase price over
the
fair market value of the underlying net assets acquired was allocated to
goodwill.
In
accordance with SFAS No. 142,
Goodwill
and Other Intangible Assets
,
we
perform an impairment test at least annually on or about June 30th or whenever
events or changes in business circumstances necessitate determining whether
an
impairment charge related to the carrying value of our recorded goodwill or
indefinite life intangible assets is needed. Other identifiable intangible
assets consist of trade names, customer relationships and proprietary
technology. Trade names have an indefinite life and therefore are not amortized.
Customer relationships and proprietary technology constitute our identifiable
intangible assets subject to amortization, which are amortized on a
straight-line basis over their useful lives. The estimated annual amortization
expense over the next five fiscal years is as follows: $1.1 million, $0.9
million, $0.5 million, $0.3 million and $0.1 million, respectively.
The
Dress
Barn, Inc. and Subsidiaries
Notes
to
Condensed Consolidated Financial Statements
(unaudited)
5
.
Debt
Debt
consists of the following:
|
|
|
October
27,
2007
|
|
July
28,
2007
|
|
|
(Amounts
in thousands)
|
|
|
|
|
|
|
|
|
|
Dunnigan
Mortgage
|
|
$
|
29,454
|
|
$
|
29,751
|
|
|
Convertible
Senior Notes
|
|
|
115,000
|
|
|
115,000
|
|
|
Total
|
|
$
|
144,454
|
|
$
|
144,751
|
|
The
Dunnigan mortgage loan was borrowed in connection with the purchase of the
Suffern, New York facility, of which the major portion is our corporate offices
and
dressbarn’s
distribution center. Payments of principal and interest on the mortgage, a
20-year fully amortizing loan, continue through 2023.
Our
2.50%
Convertible Senior Notes (“Convertible Senior Notes”), which have an aggregate
principal amount of $115 million, are due in 2024. We may redeem some or all
of
the Convertible Senior Notes for cash at any time on or after December 22,
2011
at a redemption price equal to 100% of the principal amount of the notes plus
accrued interest. Holders may convert their notes into cash and shares of our
common stock, if any, at a conversion rate of 95.1430 shares per $1,000
principal amount of Convertible Senior Notes (equal to a conversion price of
approximately $10.51 per share), during specified periods. Upon conversion,
we
would deliver cash for the aggregate principal amount of Convertible Senior
Notes to be converted. The excess, if any, of the price of our common stock
above $10.51 per share would be payable in common shares. If the market price
of
the common stock exceeds the conversion price, we are required to use the
treasury stock method in calculating diluted earnings per share for the number
of shares to be issued for the excess value. As of October 29, 2007 and
continuing through January 25, 2008, the holders of the Convertible Senior
Notes
may convert their notes as described above because our stock price closed at
or
above $12.61 per share for twenty trading days within the thirty trading day
period ended on October 26, 2007. Accordingly, this obligation is classified
as
a current liability in the accompanying consolidated balance sheets.
On
October 26, 2007, the market value of the Convertible Senior Notes was $182.8
million as valued on PORTAL (Private Offering Resale and Trading through
Automated Linkage).
On
December 21, 2005, we entered into a credit agreement with several lenders
(the
“Credit Agreement”). Our credit agreement provides a senior secured revolving
credit facility that provides for borrowings and issuance of letters of credit
for up to $100 million, which we may request be increased up to $150 million.
The Credit Agreement will terminate on December 21, 2010 or earlier under
certain conditions. Borrowings under the Credit Agreement are based on either
LIBOR or the higher of the prime rate of JPMorgan Chase Bank, N.A. or the
Federal Funds Effective Rate plus 0.50%. The interest rates under the Credit
Agreement vary depending upon our adjusted leverage ratio. The Credit Agreement
contains affirmative, negative and financial covenants customary for facilities
of this type. The Credit Agreement is secured by substantially all of our
assets; and none of our subsidiaries have guaranteed the Credit Agreement.
As of
October 27, 2007, $55 million was available under the Credit Agreement, which
represents the $100 million from our senior secured revolving credit facility
less $45 million of outstanding letters of credit at October 27, 2007.
On
October 31, 2007, we entered into a first amendment to the Credit Agreement.
This amendment amends the Credit Agreement by allowing repurchases of our common
stock pursuant to our stock buyback program, in an aggregate amount not to
exceed $125 million in any fiscal year and permits investments in unconsolidated
entities that do not constitute subsidiaries not to exceed an aggregate amount
of $10 million.
6.
Income Taxes
We
adopted the provisions of FASB Interpretation No. 48, “Accounting for
Uncertainty in Income Taxes”, on July 29, 2007. As a result of adoption, we
recognized a charge of approximately $4.9 million to the July 29, 2007 retained
earnings balance. As of the adoption date, we had gross tax affected
unrecognized tax benefits of $27.2 million of which $19.4 million, if
recognized, would affect the effective tax rate. Also as of the adoption date,
we had accrued interest expense related to the unrecognized tax benefits of
$6.5
million and accrued penalties of $.5 million. We recognize interest and
penalties related to unrecognized tax benefits as a component of income tax
expense.
We
file
income tax returns in the U.S. federal jurisdiction and various state
jurisdictions. Our federal tax return for fiscal period ended July 31, 2005
is
currently under examination. We are no longer subject to U.S. federal tax
examinations for years before fiscal 2004. State jurisdictions that remain
subject to examination range from fiscal 2001 to 2006, with few exceptions.
We
do not believe there will be any material changes in our unrecognized tax
positions over the next 12 months.
The
Dress
Barn, Inc. and Subsidiaries
Notes
to
Condensed Consolidated Financial Statements
(unaudited)
7.
Share-Based
Compensation
Our
2001
Stock Incentive Plan, as amended November 30, 2005, provides for the granting
of
either ISO’s or non-qualified options to purchase shares of common stock, with a
total of 12 million shares authorized for grant. As of October 27, 2007 there
were approximately 5.9 million shares under the 2001 plan available for future
grant. All of our prior stock option plans have expired as to the ability to
grant new options.
Stock
option awards outstanding under our current plans have generally been granted
at
exercise prices which are equal to the market value of our stock on the date
of
grant, generally vest over five years and expire no later than ten years after
the grant date. We recognize compensation expense ratably over the vesting
period, net of estimated forfeitures. During the first quarter of fiscal 2008
and 2007, we recognized a total of approximately $2.0 million and $1.3 million,
respectively, in share-based compensation expense. As of October 27, 2007,
there
was $12.7 million of total unrecognized compensation cost related to nonvested
options, which is expected to be recognized over a remaining weighted-average
vesting period of 3.1 years. The total intrinsic value of options exercised
during the first quarter was approximately $0.4 million.
Following
is a summary of the changes in stock options outstanding during the first
quarter:
|
|
|
Shares
|
|
Weighted
Average
Exercise
Price
|
|
Weighted
Average
Remaining
Contractual
Term (Years)
|
|
Aggregate
Intrinsic
Value (000’s)
|
|
|
Options
outstanding at July 28, 2007
|
|
|
5,677,329
|
|
$
|
10.35
|
|
|
6.8
|
|
|
|
|
|
Granted
|
|
|
597,650
|
|
|
16.99
|
|
|
|
|
|
|
|
|
Forfeited
or expired
|
|
|
(36,300
|
)
|
|
13.09
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(42,200
|
)
|
|
6.58
|
|
|
|
|
|
|
|
|
Options
outstanding at October 27, 2007
|
|
|
6,196,479
|
|
$
|
11.00
|
|
|
6.9
|
|
$
|
34,888.5
|
|
|
Vested
and exercisable at October 27, 2007
|
|
|
2,772,969
|
|
$
|
7.84
|
|
|
5.4
|
|
$
|
22,456.0
|
|
The
2001
Stock Incentive Plan also allows for the issuance of restricted shares. Prior
to
January 2005, restricted shares did not count against the 2001 Stock Incentive
Plan. Effective January 2005, any shares of restricted stock are counted against
the shares available for future grant limit as three shares for every one
restricted share granted. In general, if options are cancelled for any reason
or
expire, the shares covered by such options again become available for grant.
If
a share of restricted stock is forfeited for any reason, three shares
become available for grant.
In
accordance with SFAS No. 123R, the fair value of restricted stock awards is
estimated on the date of grant based on the market price of our stock and is
amortized to compensation expense on a straight-line basis over the related
vesting periods, which are generally five years. As of October 27, 2007, there
was $0.7 million of total unrecognized compensation cost related to nonvested
restricted stock awards, which is expected to be recognized over a remaining
weighted-average vesting period of 3.7 years. The unrecognized compensation
cost related to nonvested restricted stock awards is recorded as a reduction
in
additional paid-in capital. Compensation expense recognized for restricted
stock
awards during the first quarter was $0.2 million.
During
fiscal 2007, we established a Long-Term Incentive Plan (the “LTIP”) which
authorizes the grant of performance-based restricted stock to senior executives
based on the achievement of certain performance metrics versus planned amounts
over specified valuation periods. Each LTIP valuation period contains a payout
feature which will result in issuance of restricted shares in accordance with
the general terms of the LTIP if the performance metrics for that valuation
period are achieved. Restricted shares issued pursuant the various LTIP
valuation periods vest over a three-year period from the end of the valuation
period except for certain exceptions where the shares vest immediately due
to
the LTIP participant’s age and year of service at the time of issuance. We
recognize compensation expense relating to the various LTIP valuation periods
based upon the share price when the terms of the LTIP for that valuation period
were communicated to the participants and the restricted shares estimated to
be
issued at the end of the valuation period. In the first quarter of 2008, the
LTIP payout relating to fiscal 2007’s valuation period was made, resulting in
the issuance of 43,573 shares of restricted stock, of which 5,049 vested
immediately. As of October 27, 2007, there was $0.6 million of total
unrecognized compensation cost for the restricted shares issued for the fiscal
2007 valuation period. During the first quarter we recognized a total of $0.4
million of compensation expense relating to all existing LTIP valuation periods.
The
Dress
Barn, Inc. and Subsidiaries
Notes
to
Condensed Consolidated Financial Statements
(unaudited)
Following
is a summary of the changes in the shares of restricted stock outstanding during
the first quarter:
|
|
|
Number of
Shares
|
|
Weighted Average
Grant Date Fair
Value Per Share
|
|
|
Restricted
stock awards at July 28, 2007
|
|
|
137,167
|
|
$
|
13.59
|
|
|
Granted
|
|
|
43,573
|
|
|
20.79
|
|
|
Vested
|
|
|
(11,849
|
)
|
|
14.16
|
|
|
Forfeited
|
|
|
-
|
|
|
-
|
|
|
Restricted
stock awards at October 27, 2007
|
|
|
168,891
|
|
$
|
15.41
|
|
Our
Employee Stock Purchase Plan allows eligible full-time employees to purchase
a
limited number of shares of the Company’s common stock during each quarterly
offering period at a 10% discount through weekly payroll deductions. During
the
first quarter we sold approximately 4,700 shares to employees at an average
discount of $1.70 per share under the Employee Stock Purchase Plan. The
compensation expense recognized for the discount given under the Employee Stock
Purchase Plan was approximately $8,000 for the first quarter.
Prior
to
the adoption of SFAS No. 123R, we presented all tax benefits resulting from
the exercise of stock options as operating cash flows in the Condensed
Consolidated Statement of Cash Flows. SFAS No. 123R requires that cash
flows resulting from tax deductions in excess of the cumulative compensation
cost recognized for options exercised (“excess tax benefits”) be classified as
financing cash flows. For the first quarter, excess tax benefits realized from
the exercise of stock options was approximately $0.09 million.
The
fair
values of the options granted under the Company’s fixed stock option plans were
estimated on the date of grant using the Black-Scholes option pricing model
with
the following assumptions:
|
|
|
Thirteen
Weeks Ended
|
|
|
|
|
October
27,
2007
|
|
October
28,
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average risk-free interest rate
|
|
|
4.2
|
%
|
|
(1
|
)
|
|
Weighted
average expected life (years)
|
|
|
5.0
|
|
|
(1
|
)
|
|
Weighted
average expected volatility of the market price of the Company’s common
stock by grantee group
|
|
|
31.6
|
%
|
|
(1
|
)
|
|
Expected
dividend yield
|
|
|
0
|
%
|
|
(1
|
)
|
|
|
(1)
|
The
Company did not grant any options during the first quarter of fiscal
2007.
|
The
Black-Scholes option pricing model was developed for use in estimating the
fair
value of traded options, which have no vesting restrictions and are fully
transferable. The expected life of options represents the period of time the
options are expected to be outstanding and is based on historical trends. The
risk-free rate is based on the yield of a US Treasury strip rate with a maturity
date corresponding to the expected term of the option granted. The expected
volatility assumption is based on the historical volatility of our stock over
a
term equal to the expected term of the option granted. In addition, option
valuation models require input of highly subjective assumptions including the
expected stock price volatility. Because our employee stock options have
characteristics significantly different from those of traded options, and
because changes in subjective input assumptions can materially affect the fair
value estimate, the actual value realized at the time the options are exercised
may differ from the estimated values computed above.
The
Dress
Barn, Inc. and Subsidiaries
Notes
to
Condensed Consolidated Financial Statements
(unaudited)
8.
Stock Repurchase Programs
During
the thirteen weeks ended October 27, 2007, we completed our $75 million stock
buyback repurchase program which was originally announced on April 5, 2001.
The
remaining authorized amount for this stock repurchase program was $28 million
with which we purchased 1,634,060 shares at an average price of $17.34 in August
2007. Treasury (reacquired) shares are retired and treated as authorized but
unissued shares.
On
September 20, 2007, our Board of Directors authorized a new $100 million stock
repurchase program (the “2007 Program”). Under the 2007 Program purchases of
shares of our common stock may be made at our discretion from time to time,
subject to market conditions and at prevailing market prices, through open
market purchases or in privately negotiated transactions and will be subject
to
applicable SEC rules. The 2007 Program has no expiration date. As of the date
of
this filing, no shares were purchased under this stock repurchase program.
9
.
Earnings Per Share
Basic
earnings per share are computed based upon the weighted average number of common
shares outstanding. The computation of diluted earnings per share includes
the
foregoing and exercise of all stock options using the treasury stock method
and
conversion obligation of the Convertible Senior Notes (refer to Note 5), to
the
extent dilutive. Common equivalent shares outstanding consist of shares covered
by stock options and the Convertible Senior Notes, to the extent dilutive.
|
|
|
Thirteen
Weeks Ended
|
|
|
|
|
October
27,
2007
|
|
October
28,
2006
|
|
|
(Amounts
in thousands)
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares outstanding – basic
|
|
|
60,107
|
|
|
61,609
|
|
|
|
|
|
|
|
|
|
|
|
Net
effect of dilutive common share equivalents that include stock
options and
convertible securities based on the treasury stock method using
the
average market price
|
|
|
5,784
|
|
|
7,743
|
|
|
Weighted
average number of common shares outstanding –
diluted
|
|
|
65,891
|
|
|
69,352
|
|
|
|
|
|
|
|
|
|
|
|
Anti-dilutive
common stock equivalents
|
|
|
1,231
|
|
|
68
|
|
The
Convertible Senior Notes were dilutive to earnings per share at October 27,
2007
and October 28, 2006 since the average price of our stock for the first quarters
was more than the conversion price of the Convertible Senior Notes. In
accordance with Emerging Issues Task Force (“EITF”) Issue No. 04-8,
The
Effect of Contingently Convertible Debt on Diluted Earnings Per Share,
the
number of additional shares related to the dilutive effect of the Convertible
Senior Notes was approximately 4.1 million shares in the first quarter and
approximately 5.4 million shares for the prior period.
The
Dress
Barn, Inc. and Subsidiaries
Notes
to
Condensed Consolidated Financial Statements
(unaudited)
10.
Segments
Effective
with the acquisition of
maurices
in
January 2005, we operate and report in two segments, the
dressbarn
brand
and the
maurices
brand.
Selected
financial information by reportable segment and a reconciliation of the
information by segment to the consolidated totals is as follows:
|
|
|
Thirteen
Weeks Ended
|
|
|
(Amounts
in millions)
|
|
October
27, 2007
|
|
October
28, 2006
|
|
|
Net
sales
|
|
|
|
|
|
|
dressbarn
and dressbarn woman
brands
|
|
$
|
228.2
|
|
$
|
242.1
|
|
|
maurices
brand
|
|
|
135.5
|
|
|
116.3
|
|
|
Consolidated
net sales
|
|
$
|
363.7
|
|
$
|
358.4
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
|
|
|
|
|
|
|
dressbarn
and dressbarn woman
brands
|
|
$
|
12.2
|
|
$
|
28.3
|
|
|
maurices
brand
|
|
|
19.0
|
|
|
16.1
|
|
|
Consolidated
operating income
|
|
|
31.2
|
|
|
44.4
|
|
|
Interest
income
|
|
|
1.5
|
|
|
1.3
|
|
|
Interest
expense
|
|
|
(1.2
|
)
|
|
(1.2
|
)
|
|
Other
income
|
|
|
0.4
|
|
|
0.4
|
|
|
Earnings
before provision for income taxes
|
|
$
|
31.9
|
|
$
|
44.9
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
|
|
|
|
|
|
dressbarn
and dressbarn woman
brands
|
|
$
|
6.8
|
|
$
|
6.6
|
|
|
maurices
brand
|
|
|
4.8
|
|
|
4.2
|
|
|
Consolidated
depreciation and amortization
|
|
$
|
11.6
|
|
$
|
10.8
|
|
|
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
|
|
|
|
|
|
|
dressbarn
and dressbarn woman
brands
|
|
$
|
7.6
|
|
$
|
7.0
|
|
|
maurices
brand
|
|
|
7.1
|
|
|
5.1
|
|
|
Consolidated
capital expenditures
|
|
$
|
14.7
|
|
$
|
12.1
|
|
|
(Amounts
in millions)
|
|
October
27, 2007
|
|
July
28, 2007
|
|
|
Identifiable
assets
|
|
|
|
|
|
|
|
|
dressbarn
and dressbarn woman
brands
|
|
$
|
781.6
|
|
$
|
822.3
|
|
|
maurices
brand
|
|
|
163.4
|
|
|
159.0
|
|
|
Total
identifiable assets
|
|
$
|
945.0
|
|
$
|
981.3
|
|
|
|
|
|
|
|
|
|
|
|
Merchandise
inventories
|
|
|
|
|
|
|
|
|
dressbarn
and dressbarn woman
brands
|
|
$
|
124.1
|
|
$
|
130.4
|
|
|
maurices
brand
|
|
|
69.4
|
|
|
66.7
|
|
|
Total
merchandise inventories
|
|
$
|
193.5
|
|
$
|
197.1
|
|
The
Dress
Barn, Inc. and Subsidiaries
Notes
to
Condensed Consolidated Financial Statements
(unaudited)
11.
Restatement
of Previously Issued Financial Statements
In
the
fourth quarter of Fiscal 2007, we identified an error in the way we had
previously classified
deferred
compensation on our balance sheet as of July 29, 2006.
This
reclassification of deferred compensation required our consolidated cash flow
statement for the thirteen weeks ended October 28, 2006 to be restated, and
affected our previously reported changes in accrued salaries, wages and related
expenses and other long-term liabilities on our consolidated statements of
cash
flows. These reclassifications do not affect the net cash provided by operating
activities, net cash used in investing activities or net cash provided by (used
in) financing activities.
Following
is a summary of the significant effects of these restatements on our condensed
consolidated statement of cash flows for the thirteen weeks ended October 28,
2006.
|
(Amounts
in thousands)
|
|
Condensed
Consolidated Statement of Cash Flows
|
|
|
As
of
October
28, 2006
|
|
Previously
reported
|
|
Adjustments
|
|
As
restated
|
|
|
Operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
A
ccrued
salaries, wages and related expenses
|
|
$
|
2,674
|
|
$
|
(190
|
)
|
$
|
2,484
|
|
|
O
ther
long -term liabilities (1)
|
|
|
1,057
|
|
|
190
|
|
|
1,247
|
|
|
Net
cash provided by operating activities
|
|
$
|
37,107
|
|
$
|
-
|
|
$
|
37,107
|
|
(1)
Previously deferred rent and lease incentives was combined with other long-term
liabilities in our Quarterly report on Form 10-Q Condensed Consolidated Balance
Sheets. However, our current Condensed Consolidated Balance Sheets as of October
28, 2006 presents separately $53.4 million of deferred rent and lease incentives
and $25.9 million of other long-term liabilities.