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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended January 30, 2000
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________ to ___________
Commission File Number 0-20269
DUCKWALL-ALCO STORES, INC.
(Exact name of registrant as specified in its charter)
Kansas 48-0201080
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
401 Cottage Street
Abilene, Kansas 67410-2832
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (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 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 has filed all
documents and reports required to be filed by Section 12, 13 or 15(d) of
the Securities Exchange Act of 1934 subsequent to the distribution of
securities under a plan confirmed by a court. Yes [X] No [ ]
At March 17, 2000 there were 4,599,099 shares of Common Stock
outstanding, of which 3,320,495 shares were owned by affiliates.
Documents incorporated by reference: portions of the Registrant's
Proxy Statement for the 2000 Annual Meeting of Stockholders are incorporated
by reference in Part III hereof.
PART I
ITEM 1. BUSINESS
History
Duckwall-ALCO Stores, Inc., (the "Company" or "Registrant"), was
founded as a general merchandising operation at the turn of the century in
Abilene, Kansas by A. L. Duckwall. From its founding until 1968, the Company
conducted its retail operations as small variety or "dime" stores. In 1968,
the Company followed an emerging trend to discount retailing when it opened
its first ALCO discount store. In 1991, the Company adopted its current
business strategy that focuses on under-served markets that have no direct
competition from another full-line discount retailer. This strategy includes
opening either an ALCO discount store or a Duckwall variety store, depending
upon the market size. As of April 28, 2000, the Company operates 266 retail
stores located in the central United States, consisting of 172 ALCO retail
discount stores and 94 Duckwall variety stores.
The Company was incorporated on July 2, 1915 under the laws of Kansas.
The Company's executive offices are located at 401 Cottage Street, Abilene,
Kansas 67410-2832, and its telephone number is (785) 263-3350.
General
The Company, which was established in 1901, is a regional retailer
operating 266 stores in 19 states in the central United States. The Company's
strategy is to target smaller markets not served by other regional or national
full-line retail discount chains and to provide the most convenient access to
retail shopping within each market. The Company's ALCO discount stores offer
a full line of merchandise consisting of approximately 35,000 items, including
automotive, candy, crafts, domestics, electronics, fabrics, furniture,
hardware, health and beauty aids, housewares, jewelry, ladies', men's and
children's apparel and shoes, pre-recorded music and video, sporting goods,
seasonal items, stationery and toys. The Company's smaller Duckwall variety
stores offer a more limited selection of merchandise.
Of the Company's 172 ALCO discount stores, 128 stores are located in
communities that do not have another full-line discounter. The Company
intends to continue its strategy of opening ALCO stores in markets that do
not have other full-line discount retailers and where the opening of an ALCO
store is likely to be preemptive to the entry by other competitors in the
market. The ALCO discount stores account for 91% of the Company's net sales.
While the current ALCO stores average 21,150 square feet of selling space,
the Company's store expansion program is primarily directed toward stores
with a design prototype of approximately 18,000 square feet of selling space
("Class 18 Stores"), which, based on the Company's experience, has been a
design that maximizes return on investment for newly-constructed stores.
The Company's 94 Duckwall variety stores are primarily located in
communities of less than 2,500 residents and are designed to act as the
primary convenience retailer in these smaller communities. These stores,
which account for the remaining 9% of the Company's net sales, average
approximately 5,700 square feet of selling space and offer approximately
12,000 items. Operating Duckwall stores offers the Company the opportunity
to serve the needs of a community that would not support a full-line retail
discount store with a reduced investment per store and a higher return on
investment than the Company's average.
All of the Company's discount and variety stores are serviced by
the Company's 352,000 square foot distribution center in Abilene, Kansas.
Business Strategy
The Company believes that its improved operating performance and
financial condition over the last five fiscal years is the result of the
focused execution of a business strategy that includes the following key
components:
Markets: The Company intends to open ALCO stores in towns with
populations of typically less than 5,000 that are in trade areas with
populations of less than 16,000 where: (1) there is no direct competition
from national or regional full-line discount retailers; (2) economic and
demographic criteria indicate the market is able to commercially support
a discount retailer; and (3) the opening of an ALCO store would significantly
reduce the likelihood of the entry into such market by another full-line
discount retailer. This key component of the Company's strategy has guided
the Company in both its opening of new stores and in the closing of existing
stores. Since 1991, the Company has opened 114 ALCO discount stores (with
an approximate average size of 18,400 square feet of selling space) and 87
Duckwall variety stores. Except for eight stores, each of the new ALCO and
Duckwall stores was opened in a primary market in which there was no direct
competition from a national or regional full-line discount retailer.
Market Selection: The Company has a detailed process that it uses
to analyze under-served markets which includes examining factors such as
distance from competition, trade area, disposable income and retail sales
levels. Markets that are determined to be sizable enough to support an ALCO
or a Duckwall store, and that have no direct competition from another
discount retailer, are examined closely and eventually selected or passed
over by the Company's experienced management team.
Store Expansion: The Company's expansion program is designed around
the prototype Class 18 Store. This prototype details for each new store
plans for shelf space, merchandise presentation, store items to be offered,
parking, storage, as well as other store design considerations. The 18,000
square feet of selling space is large enough to permit a full line of the
Company's merchandise, while minimizing capital expenditures, required labor
costs and general overhead costs. The Company will also consider opportunities
in acceptable markets to open ALCO stores in available space in buildings
already constructed. The Company's expansion strategy for its Duckwall
variety stores is based on opportunities presented to the Company in and by
smaller communities where there is a need and where existing premises are
available for lease with a relatively low cost and which provide the Company
with limited exposure.
Technology: The Company is continually improving its management
information technologies to support the operation of the Company. In fiscal
1999, the Company implemented a new system for merchandise administration
and distribution. In fiscal 2000, the Company completed the roll-out of new
point-of-sale (POS) store software that has extended the life and capabilities
of its POS hardware. In conjunction with this, the stores received radio
frequency hand held devices to allow for additional operating efficiencies.
The Company also devoted resources to identify and fix or replace software
and hardware that was not year 2000 compliant.
Advertising and Promotion: The Company utilizes full-color
photography advertising circulars of 8 to 28 pages distributed by insertion
into newspapers or by direct mail where newspaper service is inadequate.
During fiscal 2000, these circulars were distributed 35 times in ALCO markets.
In its Duckwall markets, the Company advertises approximately 13 times a year
during seasonal promotions. The Company's marketing program is designed to
create an awareness, on the part of its identified target customer base, of
the Company's comprehensive selection of merchandise and its competitive
pricing. During fiscal 1999, the Company began market research and planning
for the initial roll-out in Fiscal 2000, of its new pricing strategy "New Low
Prices Everyday" (NLPE). This strategy has benefited customers by offering
sharper prices everyday on products that typically would have been subject to
promotional pricing and markdowns. NLPE will also reduce the Company's
reliance on advertising circulars and promotions to drive traffic into its
stores. During fiscal 2001, the Company will distribute approximately 36
circulars in ALCO markets plus four additional circulars for stores in
competitive markets.
Store Environment: The Company's stores are open, clean, bright and
offer a pleasant atmosphere with disciplined product presentation, attractive
displays and efficient check-out procedures. The Company endeavors to staff
its stores with courteous, highly motivated, knowledgeable store associates
in order to provide a convenient, friendly and enjoyable shopping experience.
Store Development
The Company plans to open approximately 5 ALCO stores during fiscal
year 2001, and a minimum of 7 ALCO stores and no Duckwall stores during each
of the fiscal years 2002 and 2003.
The Company's strategy regarding store development is to increase
sales and profitability at existing stores by continually refining the
merchandising mix and improving operating efficiencies, and through new
store openings in the Company's targeted base of under-served markets in the
central United States. Since fiscal 1995, the Company has opened a total of
82 ALCO stores with an average selling area of approximately 18,600 square
feet, and 67 Duckwall stores. The following table summarizes the Company's
growth during the past three fiscal years:
Year-to-Date
1998 1999 2000 2001
ALCO DUCKWALL ALCO DUCKWALL ALCO DUCKWALL ALCO DUCKWALL
Stores Opened 25 15 16 20 12 9 1 0
Stores Closed 0 0 2 2 5 4 2 2
Net New Stores 25 15 14 18 7 5 -1 -2
The Company intends to utilize the 18,000 square foot store profile
for new ALCO store openings. Currently, the Company owns 16 ALCO and 2
Duckwall locations, and leases 156 ALCO and 92 Duckwall store locations.
The Company's present intention is to lease all new Duckwall stores. The
Company may own some of the ALCO locations, but will, in general try to
lease those store locations.
Before entering a new market with an ALCO store, the Company
analyzes available competitive, market, and demographic data to evaluate
the suitability and attractiveness of the potential market as part of a
screening process. The process involves an objective review of selection
criteria including, among other factors, distance and drive time to discount
retail competitors, demographics, retail sales levels, existence and
stability of major employers, location of county government and distance
from the Company's warehouse. The screening process also involves a visit
by officers of the Company to more subjectively evaluate the potential new
site. There are currently approximately 150 communities known by the
Company to have met the Company's market selection process. The Company is
in the site selection and/or procurement process in approximately 14 of those
markets, each of which has been approved by the Company for a new ALCO
location. The Company performs a similar site selection process with new
Duckwall stores. However, the process is condensed given the low opening
and closing costs of a Duckwall location.
The estimated investment to open a new Class 18 Store is
approximately $1.25 million for the land, building, equipment, inventory and
pre-opening costs.
Store Environment and Merchandising
The Company manages its stores to attractively and conveniently
display a full line of merchandise within the confines of the stores'
available square footage. Corporate merchandising direction is provided to
each ALCO and Duckwall store to ensure a consistent company-wide store
presentation. To facilitate long-term merchandising planning, the Company
divides its merchandise into three core categories driven by the Company's
customer profile: primary, secondary, and convenience. The primary core
receives management's primary focus, with a wide assortment of merchandise
being placed in the most accessible locations within the stores and receiving
significant promotional consideration. The secondary core consists of
categories of merchandise for which the Company maintains a strong assortment
that is easily and readily identifiable by its customers. The convenience
core consists of categories of merchandise for which ALCO will maintain
convenient, but limited, assortments, focusing on key items that are in
keeping with customers' expectations for a discount store. Secondary and
convenience cores include merchandise that the Company feels is important
to carry as the target customer expects to find them within a discount store
and they ensure a high level of customer traffic. The Company continually
evaluates and ranks all product lines, shifting product classifications
when necessary to reflect the changing demand for products.
Purchasing
Procurement and merchandising of products is directed by the
Company's Vice President - Merchandise, who reports to the Company's
President. The Vice President - Merchandise is supported by a staff of
four divisional merchandise managers who are each responsible for specific
product categories. The Company employs 22 merchandise buyers and one
assistant buyer who each report to a divisional merchandise manager.
Buyers are assisted by a management information system that provides them
with current price and volume information by SKU, thus allowing them to
react quickly with buying and pricing adjustments dictated by customer
buying patterns.
The Company purchases its merchandise from approximately 2,400
suppliers. The Company generally does not utilize long-term supply contracts.
No single supplier accounted for more than 6% of the Company's total purchases
in fiscal 2000 and competing brand name and private label products are
available from other suppliers at competitive prices. The Company believes
that its relationships with its suppliers are good and that the loss of any
one or more of its suppliers would not have a material adverse effect on the
Company.
Pricing
Merchandise pricing is done at the corporate level and is essentially
the same for all of the ALCO stores, regardless of the level of local
competition. This pricing strategy, with its promotional activities, is
designed to bring consistent value to the customer. In fiscal 2001,
promotions on various items will be offered approximately 35 times through
advertising circulars. Even though the same general pricing and advertising
activities are carried out for all ALCO stores, the impact of such activities
is significantly different depending upon the level of competition in the
market.
Distribution and Transportation
The Company operates a 352,000 square foot distribution center in
Abilene, Kansas, from which it services each of the 172 ALCO discount stores
and 94 Duckwall variety stores. This distribution center is responsible for
distributing approximately 80% of the Company's merchandise, with the balance
being delivered directly to the Company's stores by its vendors. This
distribution center ships to each of the Company's stores once a week,
primarily through irregular route common carriers. The Company also utilizes
its wholly owned subsidiary, SPD Truck Line, Inc. (the "Subsidiary") for
delivery to the stores. The distribution center is fully integrated into
the Company's management information system, allowing the Company to utilize
such cost cutting efficiencies as perpetual inventories, safety programs,
and employee productivity software.
The Subsidiary acts as a contract carrier for the Company in
transporting goods to and from its stores. The Subsidiary leases and uses
five tractors and 24 trailers for such deliveries.
Management Information Systems
Commencing in fiscal 1989, the Company committed significant resources
to the purchase and application of available computer hardware and software
to its discount retailing operations with the intent to lower costs, improve
customer service and enhance general business planning.
In general, the Company's merchandising systems are designed to
integrate the key retailing functions of seasonal merchandise planning,
purchase order management, merchandise distribution, sales information and
inventory maintenance and replenishment. All of the Company's discount
stores have point-of-sale computer terminals that record certain sales data
in a format that can be transmitted nightly to the Company's data processing
facility where it is used to produce daily and weekly management reports.
In fiscal 1999, the Company implemented a new system for merchandise
administration and distribution. In fiscal 2000, the Company completed the
roll-out of new point-of-sale (POS) store software that has extended the life
and capabilities of its POS hardware. In conjunction with this, the stores
received radio frequency hand held devices to allow for additional operating
efficiencies.
Approximately 650 of the Company's merchandise suppliers currently
participate in the Company's electronic data interchanges ("EDI") system,
which makes it possible for the Company to place purchase orders
electronically. When fully implemented, EDI will permit these and additional
vendors to transmit invoices and advance shipment notices to the Company and
receive sales history and purchase orders from the Company.
Store Locations
As of April 28, 2000, the Company operated 172 ALCO stores in 19
states located in smaller communities in the central United States. Of the
ALCO stores, 16 are owned and 156 are operated under real estate leases.
The ALCO stores average approximately 21,150 square feet of selling space,
with an additional 5,000 square feet utilized for merchandise processing,
temporary storage and administration. The Company also operates 94 Duckwall
stores in 11 states, two of which are owned, and 92 are leased. The
geographic distribution of the Company's stores is as follows:
Duckwall Stores (94)
Arkansas (1) Colorado (6) Iowa (6) Kansas (38) Missouri (1) Nebraska (8)
New Mexico (1) North Dakota (1) Oklahoma (8) South Dakota (3) Texas (21)
ALCO Stores (172)
Arizona (5) Arkansas (6) Colorado (9) Idaho (2) Illinois (8) Indiana (15)
Iowa (9) Kansas (25) Minnesota (7) Missouri (3) Nebraska (17) New Mexico (7)
North Dakota (7) Oklahoma (8) Ohio (6) South Dakota (8) Texas (25) Utah (2)
Wyoming (3)
Competition
While the discount retail business in general is highly competitive,
the Company's business strategy is to locate its ALCO discount stores in
smaller markets where there is no direct competition with larger national
or regional full-line discount chains, and where it is believed no such
competition is likely to develop. Accordingly, the Company's primary
method of competing is to offer its customers a conveniently located store
with a wide range of merchandise at discount prices in a primary trade area
population under 16,000 that does not have a large national or regional
full-line discount store. The Company believes that trade area size is a
significant deterrent to larger national and regional full-line discount
chains. Duckwall variety stores, being located in very small markets, face
limited competition and, like the ALCO stores, emphasize the convenience of
location to the primary customer base.
In the discount retail business in general, price, merchandise
selection, merchandise quality, advertising and customer service are all
important aspects of competing. The Company encounters direct competition
with national full-line discount stores in 31 of its ALCO markets, and
another 13 ALCO stores are in direct competition with regional full-line
discount stores. The competing regional and national full-line discount
retailers are generally larger than the Company and the stores of such
competitors in the Company's markets are substantially larger, have a
somewhat wider selection of merchandise and are very price competitive
in some lines of merchandise. Where there are no discount retail stores
directly competing with the Company's ALCO stores, the Company's customers
nevertheless shop at retail discount stores and other retailers located in
regional trade centers, and to that extent the Company competes with such
discount stores and retailers. The Company also competes for retail sales
with mail order companies, specialty retailers, mass merchandisers,
manufacturers outlets, and the internet. In the 115 Class 18 markets in
which the Company operates a store, there is no direct competition from a
national or regional full-line discount retailer.
Employees
As of April 1, 2000, the Company employed approximately 5,050 people,
of whom approximately 520 were employed in the general office and distribution
center in Abilene, 3,920 in the ALCO stores and 610 in the Duckwall stores.
Approximately 3,000 additional employees are hired on a seasonal basis, most
of whom are sales personnel. There is no collective bargaining agent for
any of the Company's employees. The Company considers its relations with its
employees to be excellent.
ITEM 2. PROPERTIES.
The Company owns facilities in Abilene, Kansas that consist of a
general office (approximately 35,000 square feet), the Distribution Center
(approximately 352,000 square feet) and additional warehouse space adjacent
to the general office.
Sixteen of the ALCO stores and two of the Duckwall stores operate
in buildings owned by the Company. The remainder of the stores operate in
leased properties. Such ALCO leases expire as follows: approximately 156,841
square feet (3.4%) expire between April 28, 2000 and January 31, 2001;
approximately 581,535 square feet (12.7%) expire between February 1, 2001 and
January 31, 2002; and approximately 410,612 square feet (9.0%) expire between
February 1, 2002 and January 31, 2003. The remainder expire through 2020.
All Duckwall store leases have terms remaining of five years or less.
ITEM 3. LEGAL PROCEEDINGS.
The Company has been a party to various legal proceedings which have
been reported in this Item 3 of Form 10-K for certain prior fiscal years.
The Company's legal proceedings have been resolved sufficiently to render
outstanding matters immaterial, in management's opinion, for purposes of
disclosure pursuant to this Item 3.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of the stockholders of the
Company during the fourth quarter of the fiscal year ended January 30, 2000.
ITEM 4A. EXECUTIVE OFFICERS OF THE COMPANY.
The following table sets forth the names, ages, positions and
certain other information regarding the executive officers of the Company as
of April 28, 2000.
Name Age Position
_______________________ ____ ____________________________________
Glen L. Shank 55 Chairman of the Board and President
James E. Schoenbeck 56 Vice President - Operations and
Advertising
James R. Fennema 49 Vice President - Merchandise
Richard A. Mansfield 44 Vice President - Finance and Treasurer
Charles E. Bogan 64 Vice President, Secretary and General
Counsel
__________
Except as set forth below, all of the executive officers have been associated
with the Company in their present position or other capacity for more than
the past five years. There are no family relationships among the executive
officers of the Company.
Glen L. Shank has served as President of the Company since June 1988
and as Chairman of the Board since May 1991. Between 1982 and 1988, Mr. Shank
served as Vice President of Merchandising of the Company. Prior to 1982,
Mr. Shank served as a Buyer and as a Merchandise Manager for the Company.
Mr. Shank has approximately 33 years of experience in the retail industry.
James E. Schoenbeck has served as Vice President of Store Operations
and Advertising since 1988. From 1979 to 1988, Mr. Schoenbeck served as the
Vice President of Administration. Mr. Schoenbeck has approximately 26 years
of experience in the retail industry.
James R. Fennema has served as Vice President-Merchandise of the
Company since March 1993. For the four years prior to that he served as Vice
President and a divisional merchandise manager with Caldor, Inc., a chain of
regional discount stores in New England and the mid-Atlantic states of the
United States. For more than the four years prior to that he served as a
divisional merchandise manager of Fishers Big Wheel, a regional chain discount
retailer. Mr. Fennema has approximately 27 years of experience in the retail
industry.
Richard A. Mansfield has served as Vice President-Finance and
Treasurer of the Company since May 1997. For the two years prior to that he
served as Chief Financial Officer of Country General Stores, Inc., a regional
chain of specialty farm and ranch stores located in the midwest. For the
three years prior to that he served as Chief Financial Officer of American
Laminates, Inc. and Relco, Inc. Mr. Mansfield has approximately 19 years of
experience in the retail industry.
Charles E. Bogan has been the Secretary of the Company since 1972.
He has served as Vice President and General Counsel since 1984, and was
Secretary and a member of the Board of Directors during the period from
1972 to 1985. Prior to becoming the Company's General Counsel, he served
as a partner in private practice with the law firm of Bogan & Johnson,
beginning in 1970.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
The Common Stock of the Company is quoted on the Nasdaq National
Market under the symbol "DUCK." The following table sets forth the range of
high and low bid information for the Company's Common Stock for each quarter
of fiscal 2000, 1999, 1998, 1997 and 1996 and for the fourth quarter of
fiscal 1995, (the only full quarter period during that fiscal year for which
the Common Stock was so quoted).
High Low
_____________ _______________ _______ ______
Fiscal 1995 Fourth quarter $ 9.75 $ 9.00
Fiscal 1996 First quarter $ 9.75 $ 8.75
Second quarter 10.75 8.75
Third quarter 11.88 10.38
Fourth quarter 11.25 9.50
Fiscal 1997 First quarter $11.63 $ 8.75
Second quarter 15.50 12.88
Third quarter 14.50 12.25
Fourth quarter 16.75 12.25
Fiscal 1998 First quarter $14.50 $13.00
Second quarter 13.88 11.50
Third quarter 17.50 12.75
Fourth quarter 15.88 14.50
Fiscal 1999 First quarter $18.50 $13.25
Second quarter 19.38 16.75
Third quarter 17.88 10.13
Fourth quarter 13.75 11.25
Fiscal 2000 First quarter $13.25 $8.88
Second quarter 11.00 9.25
Third quarter 10.13 7.75
Fourth quarter 9.25 5.63
As of April 7, 2000, there were approximately 1,320 holders of
record of the Common Stock of the Company. The Company has not paid cash
dividends on its Common Stock during the last five fiscal years, and is
currently prohibited from paying such dividends by the terms of the Third
Amended and Restated Loan Agreement dated as of December 31, 1998, among
the Company, BA Business Credit, Inc., and Transamerica Business Credit
Corporation.
ITEM 6. SELECTED FINANCIAL DATA.
SELECTED CONSOLIDATED FINANCIAL DATA
(dollars in thousands, except per share and store data)
The selected consolidated financial data presented below for, and
as of the end of, each of the last five fiscal years under the captions
Statements of Operations Data and Balance Sheet Data have been derived from
the audited consolidated financial statements of the Company. This data
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" (Item 7) and the consolidated
financial statements, related notes, and other financial information included
herein.
Fiscal Year Ended
---------------------------------------------------------------------------
January 30, January 31, February 1, February 2, January 28,
2000 1999 1998 1997 1996
----------- ----------- ----------- ----------- -----------
Statements of Operations Data
Net sales $ 380,504 $ 363,509 $ 323,254 $ 278,819 $ 256,454
Cost of sales 252,691 239,442 212,982 186,531 173,296
Gross margin 127,813 124,067 110,272 92,288 83,158
Selling, general and administrative
expenses 107,168 102,357 89,661 75,630 69,018
Depreciation and amortization 6,396 5,974 4,805 3,773 3,093
Income from operations 14,249 15,736 15,806 12,885 11,047
Interest expense 3,672 4,234 3,525 3,033 2,958
Other expense, net 0 0 0 0 (185)
Earnings before income taxes 10,577 11,502 12,281 9,852 8,274
Income tax expense 4,019 4,287 4,790 3,794 3,144
Earnings before cumulative effect
of accounting change 6,558 7,215 7,491 6,058 5,130
Cumulative effect of accounting
change, net of income
tax benefit of $611(1) 0 (956) 0 0 0
Net earnings $ 6,558 6,259 $ 7,491 $ 6,058 $ 5,130
Per Share Information:
Earnings per share - basic:(2)
Earnings before cumulative
effect of accounting change $ 1.32 $ 1.41 $ 1.47 $ 1.41 $ 1.28
Cumulative effect of
accounting change 0.00 (0.19) 0.00 0.00 0.00
Net earnings $ 1.32 $ 1.22 $ 1.47 $ 1.41 $ 1.28
Earnings per share - diluted:(2)
Earnings before cumulative
effect of accounting change $ 1.32 $ 1.40 $ 1.46 $ 1.40 $ 1.28
Cumulative effect of accounting
change 0.00 (0.19) 0.00 0.00 0.00
Net earnings $ 1.32 $ 1.21 $ 1.46 $ 1.40 $ 1.28
Weighted average shares
outstanding:(2)
Basic 4,967,332 5,111,461 5,096,322 4,299,502 3,999,488
Diluted 4,967,332 5,154,860 5,148,818 4,399,822 4,014,351
Operating Data
Stores open at year-end 269 257 225 185 156
Stores in non-competitive markets
at year-end (3) 220 206 176 137 110
Percentage of total stores in
non-competitive markets (3) 81.78% 80.20% 78.20% 74.10% 70.50%
Net sales of stores in
non-competitive markets (3) $ 271,804 $ 259,524 $ 224,117 $ 177,939 $ 151,733
Percentage of net sales
from stores in
non-competitive markets (3) 73.90% 71.40% 69.30% 63.80% 59.20%
Comparable store sales
for all stores (4) (0.10%) 0.90% 0.60% (2.90%) (3.20%)
Comparable store sales
for stores in
non-competitive markets (3)(4) 1.80% 1.40% 1.60% (1.30%) (1.00%)
Balance Sheet Data
Total assets $ 178,179 $ 172,474 $ 158,114 $ 132,808 $ 107,723
Total debt (includes capital
lease obligation and current
maturities) 41,761 45,608 39,718 26,285 24,551
Stockholders' equity 90,218 86,426 80,394 72,825 53,061
(1) Effective November 1, 1998, the Company adopted AICPA Statement of
Position 98-5, Reporting on the Costs of Start up Activities,
retroactive to the beginning of the year. Under the new method,
the Company expenses store preopening costs as incurred rather than
over the initial 12-months of a store's operation.
(2) The Company has adopted SFAS No. 128, Earnings Per Share which
requires a dual presentation of basic earnings per share (based on
the weighted average number of common shares outstanding) and diluted
earnings per share which reflects the potential dilution that could
occur if contracts to issue securities (such as stock options) were
exercised.
(3) "Non-competitive" markets refer to those markets where there is not
a national or regional full-line discount store located in the primary
market served by the Company. The Company's stores in such non-
competitive markets nevertheless face competition from various
sources. See Item 1 "Business-Competition."
(4) Percentages, as adjusted to a comparable 52 week year, reflect the
increase or decrease based upon a comparison of the applicable fiscal
year with the immediately preceding fiscal year for stores open during
the entirety of both years.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE STATEMENTS
MADE IN THIS REPORT ON FORM 10-K ARE FORWARD-LOOKING STATEMENTS THAT INVOLVE
RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS, FINANCIAL CONDITION
OR BUSINESS COULD DIFFER MATERIALLY FROM ITS HISTORICAL RESULTS, FINANCIAL
CONDITION OR BUSINESS, OR THE RESULTS OF OPERATIONS, FINANCIAL CONDITION OR
BUSINESS CONTEMPLATED BY SUCH FORWARD-LOOKING STATEMENTS. FACTORS THAT
COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED
TO, THOSE DISCUSSED BELOW UNDER THE CAPTION "FACTORS THAT MAY AFFECT FUTURE
RESULTS OF OPERATIONS, FINANCIAL CONDITION OR BUSINESS," AS WELL AS THOSE
DISCUSSED ELSEWHERE IN THE COMPANY'S REPORTS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.
Reference is hereby made to the description of the Company's business
appearing in Item 1.
The Company's fiscal year ends on the Sunday closest to January 31.
Fiscal 2000, 1999 and 1998 each consisted of 52 weeks.
As used below, the term "competitive market" refers to any market in
which there is one or more national or regional full-line discount stores
located in the primary market served by the Company. The term "non-competitive
market" refers to any market in which there is no national or regional full-
line discount store located in the primary market served by the Company.
Even in a non-competitive market, the Company faces competition from a
variety of sources. See Item 1.
Results of Operations
The following table sets forth, for the fiscal years indicated, the
components of the Company's consolidated statements of operations expressed
as a percentage of net sales:
Fiscal Year Ended
_______________________________________
January 30, January 31, February 1,
2000 1999 1998
____________________________________________ ___________ ___________ ___________
Net sales................................. 100.0% 100.0% 100.0%
Cost of sales............................. 66.4 65.9 65.9
Gross margin.............................. 33.6 34.1 34.1
Selling, general and
administrative expenses................. 28.2 28.2 27.7
Depreciation and amortization............. 1.7 1.6 1.5
Total operating expenses.................. 29.9 29.8 29.2
Income from operations.................... 3.7 4.3 4.9
Interest expense.......................... 1.0 1.1 1.1
Earnings before income taxes.............. 2.7 3.2 3.8
Income tax expense........................ 1.0 1.2 1.5
Earnings before cumulative effect
of accounting change.................... 1.7 2.0 2.3
Cumulative effect of accounting change,
net of tax.............................. .0 .3 .0
Net earnings.............................. 1.7% 1.7% 2.3
Fiscal 2000 Compared to Fiscal 1999
Net sales for fiscal 2000 increased $17.0 million or 4.7% to $380.5
million compared to $363.5 million for fiscal 1999. During fiscal 2000, the
Company opened 21 stores, all of which were in new non-competitive markets.
Nine stores were closed, resulting in a year end total of 269 stores.
Substantially all of the increase in net sales was due to new stores opened
over the last two fiscal years. Net sales for all stores open the full year
in both fiscal 2000 and 1999 (comparable stores), decreased by $.4 million
or .1% in fiscal 2000 compared to fiscal 1999. Sales in the 18,000 square
foot ALCO stores, the main focus of the Company's expansion efforts,
increased $1.3 million, or 1.0%. Sales were impacted by the implementation
of the Company's New Low Prices Everyday (NLPE) pricing strategy, which was
launched in February 1999 in the Company's ALCO discount stores. This
strategy eliminated eight advertising circulars and other promotional
activity while instituting a consistent, competitively advantageous, pricing
strategy designed to generate increased sales over the long term.
Gross margin for fiscal 2000 increased $3.7 million or 3.0% to
$127.8 million compared to $124.1 million in fiscal 1999. As a percentage
of net sales, gross margin decreased to 33.6% in fiscal 2000 compared to
34.1% in fiscal 1999. Although promotional markdowns decreased as a
percentage of sales due to the implementation of NLPE, the gross margin
percentage was negatively impacted in fiscal 2000 by reduced LIFO income
in the amount of $2.4 million. Excluding the LIFO impact, gross margin as
a percent of sales improved to 33.6% in fiscal 2000 compared to 33.5% in
fiscal 1999.
Selling, general and administrative expenses increased $4.8 million
or 4.7% to $107.2 million in fiscal 2000 compared to $102.4 million in fiscal
1999, primarily due to the increase in total stores. As a percentage of
net sales, selling, general and administrative expenses was 28.2% in both
fiscal 2000 and fiscal 1999. Although advertising expenses declined due to
the implementation of everyday low pricing, selling, general and administrative
expense was unfavorably impacted by the sale-leaseback that was completed at
the end of fiscal 1999. The sale-leaseback impacts selling, general and
administrative expense through higher store rent expense, with a corresponding
reduction in depreciation and interest expense.
Income from operations decreased $1.5 million, or 9.4% to $14.2
million in fiscal 2000 compared to $15.7 million in fiscal 1999. Income from
operations as a percentage of net sales decreased to 3.7% in fiscal 2000
from 4.3% in fiscal 1999. Excluding the impact of LIFO, income from operations
increased $962,000, or 7.2% in fiscal 2000 compared to fiscal 1999.
Interest expense decreased $562,000 or 13.2% in fiscal 2000 compared
to fiscal 1999. The reduction in interest expense is due primarily to the
reduction in borrowing due to the sale-leaseback transaction for $6.2 million
that was completed at the end of fiscal 1999.
Income taxes were $4.0 million in fiscal 2000 compared to $4.3
million in fiscal 1999. The Company's effective tax rate was 38.0% in
fiscal 2000, and 37.3% in fiscal 1999.
Earnings before the cumulative effect of accounting change for
fiscal 2000 decreased by $657,000 or 9.1% to $6.6 million compared to $7.2
million in fiscal 1999. Excluding the impact of LIFO, net income increased
by $878,000, or 15.5% in fiscal 2000 compared to fiscal 1999.
Fiscal 1999 Compared to Fiscal 1998
Net sales for fiscal 1999 increased $40.3 million or 12.5% to $363.5
million compared to $323.3 million for fiscal 1998. During fiscal 1999, the
Company opened 36 stores, 34 of which were in new non-competitive markets.
Four stores were closed, resulting in a year end total of 257 stores.
Substantially all of the increase in net sales was due to new stores opened
over the last two fiscal years. Net sales for all stores open the full year
in both fiscal 1999 and 1998 (comparable stores), increased by $2.5 million
or .9% in fiscal 1999 compared to fiscal 1998. Sales in non-competitive
ALCO stores increased $2.1 million, or 1.3% and the Duckwall variety stores
produced an increase of $418,000, or 2.3%.
Gross margin for fiscal 1999 increased $13.8 million or 12.5% to
$124.1 million compared to $110.3 million in fiscal 1998. As a percentage
of net sales, gross margin remained the same at 34.1% in both fiscal years.
Although initial markon on purchases was higher in fiscal 1999, this was
offset by higher markdowns (primarily in the fourth quarter). The gross
margin percentage was also favorably impacted in fiscal 1999 by a larger
LIFO income than in fiscal 1998. The Company anticipates that pre-LIFO
gross margin as a percentage of net sales should improve in future periods
as the new stores opened in non-competitive markets contribute an increasing
percentage of total sales. This improvement should occur because stores in
non-competitive markets have a higher gross margin percetage (due to a lower
percentage of net sales at promotional pricing and with a lower promotional
markdown rate), than the average of all stores (including those stores in
competitive markets), and because the Company expects to continue to focus
its store expansion in additional non-competitive markets. Management does
not anticipate LIFO income to be a general trend for future years, in as much
as there is a general expectation for moderate inflation in the cost of
merchandise, a factor that generally yields LIFO expense.
Selling, general and administrative expenses increased $12.7
million or 14.2% to $102.4 million in fiscal 1999 compared to $89.7
million in fiscal 1998, primarily due to the increase in total
stores. As a percentage of net sales, selling, general and
administrative expenses increased to 28.2% in fiscal 1999 from 27.7% in fiscal
1998. The increase in the percentage was due to operating expenses rising
faster than the overall same store sales growth. Expense increases included
the partial year impact of the minimum wage increase that went into effect
September 1, 1997.
Income from operations decreased $70,000, or .4% to $15.7 million
in fiscal 1999 compared to $15.8 million in fiscal 1998. Income from operations
as a percentage of net sales decreased to 4.3% in fiscal 1999 from 4.9% in
fiscal 1998.
Interest expense increased $709,000 or 20.1% in fiscal 1999 compared
to fiscal 1998. The increase results from higher borrowing levels to fund
the purchases of merchandise, fixtures, and owned store buildings for the
store expansion program.
Income taxes were $4.3 million in fiscal 1999 compared to $4.8
million in fiscal 1998. The Company's effective tax rate was 37.3% in fiscal
1999, and 39.0% in fiscal 1998.
Earnings before the cumulative effect of the accounting change for
fiscal 1999 decreased by $276,000 or 3.7% to $7.2 million compared to $7.5
million in fiscal 1998.
Seasonality and Quarterly Results
The following table sets forth the Company's net sales, gross margin,
income from operations, and net earnings during each quarter of fiscal 1997,
1998, and 1999.
First Second Third Fourth
Quarter Quarter Quarter Quarter(1)
(dollars in millions)
- -------------------------- ---------- ---------- ---------- ----------
Fiscal 1998
Net Sales $ 69.3 $ 80.5 $ 76.2 $ 97.3
Gross Margin 23.7 26.7 26.7 33.2
Income from operations 2.1 3.3 2.5 7.9
Net Earnings 0.9 1.5 0.9 4.2
Fiscal 1999
Net Sales $ 81.1 $ 90.4 $ 85.3 $ 106.8
Gross Margin 28.2 30.6 29.3 36.0
Income from operations 2.6 3.6 2.9 6.6
Net Earnings (2) 1.0 1.8 1.1 3.3
Fiscal 2000
Net Sales $ 87.0 $ 94.2 $ 87.6 $ 111.7
Gross Margin 29.1 31.9 30.7 36.1
Income from operations 2.0 3.9 2.6 5.7
Net Earnings (2) 0.7 1.9 1.0 3.0
(1) See Note 10 to Consolidated Financial Statements regarding
certain Fourth Quarter Adjustments
(2) Represents earnings before the cumulative effect of accounting
change
The Company's business is subject to seasonal fluctuations. The
Company's highest sales levels occur in the fourth quarter of its fiscal
year which includes the holiday selling season. The Company's results of
operations in any one quarter are not necessarily indicative of the results
of operations that can be expected for any other quarter or for the full
fiscal year.
The Company's results of operations may also fluctuate from quarter
to quarter as a result of the amount and timing of net sales contributed by
new stores and the integration of the new stores into the operations of the
Company, as well as other factors. The addition of a large number of new
stores can, therefore, significantly affect the quarterly results of
operations.
Inflation
Management does not believe that its operations have been materially
affected by inflation over the past few years. The Company will continue to
monitor costs, take advantage of vendor incentive programs, selectively buy
from competitive vendors and adjust merchandise prices based on market
conditions.
Liquidity and Capital Resources
At the end of fiscal 2000, working capital (defined as current
assets less current liabilities) was $95.9 million compared to $90.1 million
at the end of fiscal 1999 and $76.0 million at the end of fiscal 1998.
The Company's primary sources of funds are cash flow from operations,
borrowings under its revolving loan credit facility, vendor trade credit
financing and lease financing. In both fiscal 2000 and fiscal 1999, the
Company completed a sale-leaseback of ten of its owned stores. The proceeds
from these transactions amounted to $6.1 million in fiscal 2000 and $6.2
million in fiscal 1999.
Cash provided by (used in) operating activities aggregated $10.5
million, $6.6 million, and($6.8) million in fiscal 2000, 1999 and 1998,
respectively. The increase in cash provided in fiscal 2000 relative to
fiscal 1999 resulted primarily from a larger increase in accounts payable
and increased earnings before considering the non-cash impact of LIFO.
The decrease in cash provided in fiscal 1998 resulted primarily from an
increase in inventory needed to support the 40 new store openings.
The Company uses its revolving loan credit facility and vendor
trade credit financing to fund the build up of inventories periodically
during the year for its peak selling periods and to meet other short-term
cash requirements. The revolving loan credit facility, which provides up
to $85 million of financing in the form of notes payable and letters of
credit, was executed in April, 1998 and will expire in April 2001. In
February 2000, the Company elected to reduce the facility to $70 million.
The Company had borrowings available at January 30, 2000 under the revolving
loan credit facility amounting to $42.9 million. 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.
In fiscal 2000, the Company made net cash payments on its revolving
credit facility of $178,000, made cash payments of $3.7 million to reduce its
long-term debt and capital lease obligations, and repurchased $2.8 million of
Company stock. In fiscal 1999 and 1998, the Company made net cash borrowings
of $5.9 million and $13.4 million, respectively. The Company executed
operating leases for 88 additional stores during the three year period
ending in fiscal 2000. The Company's long-range plan assumes growth in the
number of stores in smaller markets where there is less competition, and, in
accordance with this plan, 21 new stores were opened in fiscal 2000 and at
least 5 new stores are scheduled to be opened in fiscal 2001. The Company
believes that with the $70 million line of credit, sufficient capital is
available to fund the Company's planned expansion.
Cash used for acquisition of property and equipment in fiscal 2000,
1999 and 1998 totaled $6.4 million, $10.3 million, and $11.7 million,
respectively. Anticipated cash payments for acquisition of property and
equipment in fiscal 2001, principally for store buildings and fixtures, are
$7.6 million.
During fiscal 1999, the Company's Board of Directors approved a
plan to repurchase up to 411,000 shares of the Company's Common Stock (the
"Stock Repurchase Program"). During fiscal 2000, the Company's Board of
Directors approved the repurchase of an additional 1,000,000 shares.
Purchases pursuant to the Stock Repurchase Program are to be made from
time to time in the open market or directly from stockholders at prevailing
market prices. The Stock Repurchase Program is anticipated to be funded
with internally generated cash and borrowing under the Credit Facility.
As of January 30, 2000, the Company had purchased 387,600 shares of Common
Stock for $3.5 million. During the period from January 31, 2000 to April 7,
2000, the Company purchased and retired 287,200 shares of its common stock
for an aggregate purchase price of $2.4 million. Since the first buyback
was announced in fiscal 1999, the Company has repurchased a total of 674,800
shares, which represents 13% of its outstanding shares.
FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS, FINANCIAL CONDITION OR
BUSINESS
In order to take advantage of the safe harbor provisions for
forward-looking statements contained in Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, added to those Acts by the Private Securities Litigation Reform Act
of 1995, the Company is hereby identifying important risks and uncertainties
that could affect the Company's actual results of operations, financial
condition or business and could cause the Company's actual results of
operations, financial condition or business to differ materially from its
historical results of operations, financial condition or business, or the
results of operations, financial condition or business contemplated by
forward-looking statements made herein or elsewhere orally or in writing,
by, or on behalf of, the Company. Factors that could cause or contribute
to such differences include, but are not limited to, those factors described
below.
Expansion Plans
The continued growth of the Company is dependent, in large part,
upon the Company's ability to open and operate new stores on a timely and
profitable basis. The Company plans to open approximately 5 ALCO stores in
the current fiscal year and at least 7 ALCO stores in both fiscal 2002 and
2003. While the Company believes that adequate sites are currently available,
the rate of new store openings is subject to various contingencies, many of
which are beyond the Company's control. These contingencies include the
availability of acceptable communities for store locations, the Company's
ability to secure suitable store sites on a timely basis and on satisfactory
terms, the Company's ability to hire, train and retain qualified personnel,
the availability of adequate capital resources and the successful
integration of new stores into existing operations. There can be no assurance
that the Company will be able to continue to successfully identify and
obtain new store sites or that once obtained, the new stores will achieve
satisfactory sales or profitability.
Competition
The Company's strategy is to locate its ALCO stores in smaller
retail markets where there is no competing full-line discount retail store
within the primary trade area and where the Company believes the opening of
a store would significantly reduce the likelihood of such a competitor
entering the market. No assurance can be given, however, that competition
will not emerge in such markets which, if developed, could seriously reduce
the prospect of a profitable store in such market. In those markets in
which the Company has direct competition, it often competes with national
or regional full-line discount stores which often have substantially greater
financial and other resources than the Company.
Government Regulation
The Company is subject to numerous federal, state and local government
laws and regulations, including those relating to the development,
construction and operation of the Company's stores. The Company is also
subject to laws governing its relationship with employees, including minimum
wage requirements, laws and regulations relating to overtime, working and
safety conditions, and citizenship requirements. Material increases in the
cost of compliance with any applicable law or regulation and similar matters
could materially and adversely affect the Company.
In 1996, Congress enacted The Small Business Job Protection Act of
1996 (the "Act"), raising the hourly minimum wage from $4.25 to $4.75 effective
as of October 1, 1996 and to $5.15 effective as of September 1, 1997. The
majority of the Company's store employees were paid hourly wages below these
increased minimum wage rates. As a result, the Act increased the Company's
payroll expense. Additional increases in the minimum wage could have a
material impact on the results of the Company's operations if it were not able
to pass those increased costs on to customers or if sales were not increasing
at a rate large enough to offset the impact.
Control by Significant Stockholder
Kansas Public Employees Retirement System ("KPERS") is a principal
stockholder of the Company, beneficially owning approximately 15% of the
outstanding shares of Common Stock of the Company as of March 17, 2000.
Quarterly Fluctuations
Quarterly results of operations have historically fluctuated as a
result of retail consumers' purchasing patterns, with the highest quarter in
terms of sales and profitability being the fourth quarter. Quarterly results
of operations will likely continue to fluctuate significantly as a result of
such patterns and may fluctuate due to the timing of new store openings.
Economic Conditions
Similar to other retail businesses, the Company's operations may be
affected adversely by general economic conditions and events which result in
reduced consumer spending in the markets served by its stores. Also, smaller
communities where the Company's stores are located may be dependent upon a
few large employers or may be significantly affected by economic conditions
in the industry upon which the community relies for its economic viability,
such as the agricultural industry. This may make the Company's stores more
vulnerable to a downturn in a particular segment of the economy than the
Company's competitors, which operate in markets which are larger metropolitan
areas where the local economy is more diverse.
Dependence on Officers
The development of the Company's business has been largely dependent
on the efforts of its current management team headed by Glen L. Shank and
fourteen other officers. The loss of the services of one or more of these
officers could have a material adverse effect on the Company.
No Recent Dividend Payments; Restrictions on Payment of Dividends
The Company has not paid a cash dividend on the Common Stock for
more than five years, and it has no plans to commence paying cash dividends
on the Common Stock. The Company's current revolving loan credit facility
prohibits the payment of dividends.
The Year 2000 Issue
The Company has not experienced any significant disruptions to
its financial or operating activities caused by failure of its computerized
systems resulting from Year 2000 issues. The Company has no information
that indicates a significant vendor or service provider may be unable to
sell goods or provide services to the Company or that any significant
customer may be unable to purchase from the Company because of Year 2000
issues. The Company does not expect Year 2000 issues to have a material
adverse effect on its operations or financial results in fiscal 2001.
Impact of change in Accounting Principle
Effective November 1, 1998, the Company adopted AICPA Statement of
Position 98-5, Reporting on the Costs of Start up Activities (SOP 98-5),
retroactive to the beginning of the year. Previously, the Company initially
capitalized and then amortized preopening costs over the initial 12-months of
a store's operation. Under the new method, the Company expenses such store
preopening costs as incurred. The effect of adopting the accounting change
on earnings before cumulative effect of accounting change, net earnings, and
net earnings per share for fiscal 1999 is to increase (decrease) such amounts
$529, ($427), and ($0.08), respectively. The change is considered a
cumulative effect-type accounting change and, accordingly, the cumulative
effect as of February 1, 1998 has been reported in the accompanying audited
financial statements. Financial statements for fiscal 1998 and prior periods
have not been restated but net earnings and earnings per share computed on a
pro forma basis have been reflected in the accompanying audited financial
statements for all periods presented as if the accounting change had been
applied consistently during all periods affected.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company does not invest in any market risk sensitive instruments.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
Page
DUCKWALL-ALCO STORES, INC. AND SUBSIDIARY
Independent Auditors' Report.......................... 17
Financial Statements:
Consolidated Balance Sheets --
January 30, 2000 and January 31, 1999 .......... 18
Consolidated Statements of Operations--
Fiscal Years Ended January 30, 2000,
January 31, 1999, and February 1, 1998 ......... 20
Consolidated Statements of Stockholders'
Equity --Fiscal Years Ended January 30, 2000,
January 31, 1999, and February 1, 1998 ......... 22
Consolidated Statements of Cash Flows --
Fiscal Years Ended January 30, 2000,
January 31, 1999, and February 1, 1998 ......... 23
Notes to Consolidated Financial Statements ...... 25
Financial Statement Schedules:
No financial statement schedules are included as they are
not applicable to the Company.
Independent Auditors' Report
The Board of Directors and Stockholders
Duckwall-ALCO Stores, Inc.:
We have audited the accompanying consolidated balance sheets of Duckwall-ALCO
Stores, Inc. and subsidiaries as of January 30, 2000 and January 31, 1999,
and the related consolidated statements of operations, stockholders' equity,
and cash flows for each of the years in the three-year period ended
January 30, 2000. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Duckwall-ALCO Stores, Inc. and subsidiaries as of January 30, 2000 and
January 31, 1999, and the results of their operations and their cash
flows for each of the years in the three-year period ended
January 30, 2000, in conformity with generally accepted accounting principles.
As discussed in note 1 of notes to consolidated financial statements,
the Company changed its method of accounting for store preopening costs
in the year ended January 31, 1999.
/s/KPMG LLP
KPMG LLP
Wichita, Kansas
March 17, 2000
DUCKWALL-ALCO STORES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
January 30, 2000 and January 31, 1999
(Dollars in thousands)
Assets 2000 1999
__________ ___________
Current assets:
Cash and cash equivalents $ 14,002 $ 10,423
Receivables (note 3) 2,370 3,557
Inventories (notes 2 and 3) 121,863 113,225
Prepaid expenses 467 359
Total current assets 138,702 127,564
Property and equipment, at cost (note 3):
Land and land improvements 2,773 2,847
Buildings and building improvements 17,356 21,130
Furniture, fixtures and equipment 40,859 37,879
Transportation equipment 2,250 2,197
Leasehold improvements 9,325 8,672
Construction work in progress 1,085 1,242
Total property and equipment 73,648 73,967
Less accumulated depreciation and amortization 39,729 35,340
Net property and equipment 33,919 38,627
Property under capital leases (note 5) 20,407 20,407
Less accumulated amortization 15,028 14,428
Net property under capital leases 5,379 5,979
Other assets 179 304
$ 178,179 $ 172,474
See accompanying notes to consolidated financial statements.
DUCKWALL-ALCO STORES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
January 30, 2000 and January 31, 1999
(Dollars in thousands)
Liabilities and Stockholders Equity 2000 1999
__________ ___________
Current liabilities:
Current maturities of long-term debt (note 3) $ 1,187 $ 1,556
Current maturities of capital lease obligations (note 5) 607 540
Accounts payable 26,781 20,488
Income taxes payable 1,843 1,780
Accrued salaries and commissions 4,812 4,705
Accrued taxes other than income 4,022 3,520
Other current liabilities 1,907 2,643
Deferred income taxes (note 6) 1,682 2,256
Total current liabilities 42,841 37,488
Notes payable under revolving loan credit facility (note 3) 30,420 30,598
Long-term debt, less current maturities (note 3) 2,065 4,825
Capital lease obligations, less current maturities (note 5) 7,482 8,089
Other noncurrent liabilities 2,143 1,484
Deferred revenue 852 1,075
Deferred income taxes (note 6) 2,158 2,489
Total liabilities 87,961 86,048
Stockholders equity (notes 4, 7 and 8):
Common stock, $.0001 par value, authorized 20,000,000 shares in
2000 and 1999; issued and outstanding 4,772,299 and 5,092,324
shares in 2000 and 1999, respectively 1 1
Additional paid-in capital 51,481 54,247
Retained earnings since June 2, 1991 38,736 32,178
Total stockholders equity 90,218 86,426
Commitments (note 5)
$ 178,179 $ 172,474
DUCKWALL-ALCO STORES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Fiscal years ended January 30, 2000, January 31, 1999, and February 1, 1998
(Dollars in thousands, except per share amounts)
2000 1999 1998
__________ ___________ ___________
Net sales $ 380,504 $ 363,509 323,254
Cost of sales 252,691 239,442 212,982
Gross margin 127,813 124,067 110,272
Selling, general and administrative (notes 4 and 5) 107,168 102,357 89,661
Depreciation and amortization 6,396 5,974 4,805
Total operating expenses 113,564 108,331 94,466
Income from operations 14,249 15,736 15,806
Interest expense (notes 3 and 5) 3,672 4,234 3,525
Earnings before income taxes and cumulative
effect of accounting change 10,577 11,502 12,281
Income tax expense (note 6) 4,019 4,287 4,790
Earnings before cumulative effect of accounting
change 6,558 7,215 7,491
Cumulative effect of accounting change, net of income
tax benefit of $611 (note 1) --- (956) ---
Net earnings $ 6,558 $ 6,259 7,491
Earnings per share - basic (note 9):
Earnings before cumulative effect of accounting change $ 1.32 1.41 1.47
Cumulative effect of accounting change --- (0.19) ---
Net earnings $ 1.32 1.22 1.47
Earnings per share - diluted (note 9):
Earnings before cumulative effect of accounting change $ 1.32 1.40 1.46
Cumulative effect of accounting change --- (0.19) ---
Net earnings $ 1.32 1.21 1.46
(Continued)
DUCKWALL-ALCO STORES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Fiscal years ended January 30, 2000, January 31, 1999, and February 1, 1998
(Dollars in thousands, except per share amounts)
1999 1998
__________ ___________
Pro forma amounts for effect of change in accounting
principle:
Net earnings $ 7,215 7,190
Basic earnings per share $ 1.41 1.41
Diluted earnings per share $ 1.40 1.40
See accompanying notes to consolidated financial statements.
DUCKWALL-ALCO STORES, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Fiscal years ended January 30, 2000, January 31, 1999, and February 1, 1998
(Dollars in thousands)
Retained
earnings Total
Additional since stock-
Common paid-in June 2, holders'
stock capital 1991 equity
__________ ___________ ___________ ___________
Balance, February 2, 1997 $ 1 54,396 18,428 72,825
Net earnings for the year ended February 1, 1998 --- --- 7,491 7,491
Exercise of outstanding options to pur-
chase 8,938 common shares --- 78 --- 78
Balance, February 1, 1998 1 54,474 25,919 80,394
Net earnings for the year ended January 31, 1999 --- --- 6,259 6,259
Exercise of outstanding options to purchase
53,563 common shares --- 442 --- 442
Repurchase and retirement of 60,000 common shares --- (669) --- (669)
Balance, January 31, 1999 1 54,247 32,178 86,426
Net earnings for the year ended January 30, 2000 --- --- 6,558 6,558
Exercise of outstanding options to purchase
7,575 common shares --- --- 70 70
Repurchase and retirement of 327,600 common shares --- (2,836) --- (2,836)
Balance, January 30, 2000 $ 1 51,481 38,736 90,218
See accompanying notes to consolidated financial statements.
DUCKWALL-ALCO STORES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Fiscal years ended January 30, 2000, January 31, 1999, and February 1, 1998
(Dollars in thousands)
2000 1999 1998
__________ ___________ ___________
Cash flows from operating activities:
Net earnings $ 6,558 6,259 7,491
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Cumulative effect of accounting change, net of
income tax benefit --- 956 ---
Depreciation and amortization 6,396 5,974 4,805
Amortization of debt financing costs 118 137 43
Deferred income taxes (905) (75) (138)
Loss on sale or disposition of property
and equipment 126 680 ---
LIFO income --- (2,449) (950)
Decrease (increase) in receivables 1,187 (399) 2
Increase in inventories (8,638) (7,331) (22,136)
Decrease (increase) in prepaid expenses (53) 205 (346)
Increase in other assets (44) --- ---
Increase in accounts payable 6,293 1,479 1,882
Increase (decrease) in income taxes payable 63 119 (73)
Increase (decrease) in accrued salaries and commissions 107 (179) 1,008
Increase in accrued taxes other than income 502 361 230
Increase (decrease) in other liabilities (986) 1,052 123
Increase (decrease) in deferred revenue (223) (197) 1,272
Net cash provided by (used in) operating activities 10,501 6,592 (6,787)
Cash flows from investing activities:
Proceeds from sale of property and equipment 6,104 6,232 ---
Acquisition of:
Buildings (1,797) (1,616) (4,112)
Fixtures, equipment, and leasehold improvements (4,616) (8,644) (7,550)
Net cash used in investing activities (309) (4,028) (11,662)
(Continued)
DUCKWALL-ALCO STORES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
Fiscal years ended January 30, 2000, January 31, 1999, and February 1, 1998
(Dollars in thousands)
2000 1999 1998
__________ ___________ ___________
Cash flows from financing activities:
Increase (decrease) in notes payable under revolving
loan credit facility $ (178) 5,007 13,496
Proceeds from exercise of outstanding stock options 70 442 78
Repurchase of stock (2,836) (669) ---
Proceeds from issuance of long-term debt --- 2,760 1,870
Principal payments on long-term debt (3,129) (1,358) (1,326)
Principal payments under capital lease obligations (540) (519) (607)
Debt financing costs --- (359) (45)
Net cash provided by (used in) financing activities (6,613) 5,304 13,466
Net increase (decrease) in cash and cash equivalents 3,579 7,868 (4,983)
Cash and cash equivalents at beginning of year 10,423 2,555 7,538
Cash and cash equivalents at end of year $ 14,002 10,423 2,555
See accompanying notes to consolidated financial statements.
DUCKWALL-ALCO STORES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
January 30, 2000, January 31, 1999, and February 1, 1998
(Dollars in thousands, except per share amounts)
(1) Summary of Significant Accounting Policies
(a) Nature of Business
Duckwall-ALCO Stores, Inc. and subsidiaries (the Company) is
engaged in the business of retailing general merchandise
throughout the midwestern and south central regions of the
United States through discount department and variety
store outlets. Merchandise is purchased for resale from many
vendors, and transactions with individual vendors and
customers do not represent a significant portion of total
purchases and sales.
(b) Principles of Consolidation
The consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries. All significant
intercompany account balances have been eliminated in
consolidation.
(c) Basis of Presentation
The Company's fiscal year ends on the Sunday nearest to
January 31. Fiscal 2000, 1999 and 1998 consist of 52 weeks.
(d) Inventories
Store inventories are stated at the lower of cost or net
realizable value as estimated by the retail inventory method.
Warehouse inventories are stated at the lower of cost or net
realizable value. The Company utilizes the last-in,
first-out (LIFO) method of determining cost of store and
warehouse inventories.
(e) Property and Equipment
Depreciation is computed on a straight-line basis over the
estimated useful lives of the assets. Amortization of
capital leases is computed on a straight-line basis over
the terms of the lease agreements. Leasehold improvements
are amortized on a straight-line basis over the lesser of
the remaining lease term, or ten years. Estimated useful
lives are as follows:
Buildings 25 years
Building improvements 10 years
Furniture, fixtures and equipment 3-8 years
Transportation equipment 3-5 years
Leasehold improvements 5-10 years
Major improvements are capitalized while maintenance and
repairs, which do not extend the useful life of the asset,
are charged to expense as incurred.
(Continued)
DUCKWALL-ALCO STORES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
January 30, 2000, January 31, 1999, and February 1, 1998
(Dollars in thousands, except per share amounts)
(f) Income Taxes
The Company accounts for income taxes under the asset and
liability method. Deferred tax assets and liabilities are
recognized for the future tax consequences attributable to
differences between the financial statement carrying
amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary
differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change
in tax rates is recognized in income in the period that
includes the enactment date.
(g) Net Sales
Sales are recorded in the period of sale. Sales returns, which
are not material, are recorded in the period of return as a
reduction of sales.
(h) Change in Accounting Principle
Effective November 1, 1998, the Company adopted AICPA
Statement of Position 98-5, Reporting on the Costs of Start up
Activities (SOP 98-5), retroactive to the beginning of the
year. Previously, the Company initially capitalized
and then amortized preopening costs over the initial 12-months
of a store's operation. Under the new method, the Company
expenses such store preopening costs as incurred. The effect
of adopting the accounting change on earnings before
cumulative effect of accounting change, net earnings, and net
earnings per share for fiscal 1999 is to increase (decrease)
such amounts $529, ($427), and ($.08), respectively. The
change is considered a cumulative effect-type accounting
change and, accordingly, the cumulative effect as of
February 1, 1998 has been reported in the accompanying
financial statements. Financial statements for fiscal 1998
and prior periods have not been restated but net earnings and
earnings per share computed on a pro forma basis have been
reflected in the accompanying financial statements for
fiscal 1999 and 1998 as if the accounting change had been
applied consistently during such periods.
(i) Net Earnings Per Share
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. See note 9.
(Continued)
DUCKWALL-ALCO STORES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
January 30, 2000, January 31, 1999, and February 1, 1998
(Dollars in thousands, except per share amounts)
(j) Consolidated Statements of Cash Flows
For purposes of the consolidated statements of cash flows, the
Company considers cash and cash equivalents to include
currency on hand and money market funds.
During fiscal 2000, 1999, and 1998, the following amounts were
paid for interest and income taxes:
2000 1999 1998
________ ________ ________
Interest, excluding
interest on capital lease
obligations and amortization
of debt financing costs (net
of capitalized interest of
$48 in fiscal 2000, $46 in
fiscal 1999, and $72 in fiscal
1998) $ 2,628 3,116 2,431
Income Taxes 4,928 4,383 5,001
(k) Use of Estimates
Management of the Company has made certain estimates and
assumptions in the reporting of assets and liabilities to
prepare these financial statements in conformity with
generally accepted accounting principles. Actual results
could differ from those estimates.
(l) Long-lived Assets
Long-lived assets and certain identifiable intangibles are
reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset
may not be recoverable. Recoverability of assets to be held
and used is measured by a comparison of the carrying amount of
an asset to estimated future net cash flows expected to be
generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the assets exceed the
fair value of the assets. For purposes of determining
impairment, the Company groups assets at the store level.
Assets to be disposed of are reported at the lower of the
carrying amount or fair value less costs to sell.
(Continued)
DUCKWALL-ALCO STORES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
January 30, 2000, January 31, 1999, and February 1, 1998
(Dollars in thousands, except per share amounts)
(m) Stock-based Compensation
The Company accounts for its stock options in accordance with
the provisions of Accounting Principles Board (APB) Opinion
No. 25, Accounting for Stock Issued to Employees. As such,
compensation expense would be recorded on the date of grant
only if the current market price of the underlying stock
exceeded the exercise price. In addition, SFAS No. 123,
Accounting for Stock-Based Compensation, requires that
pro forma net earnings and pro forma earnings per share
disclosures be provided for employee stock option grants
made in fiscal year 1996 and subsequent years as if the fair
value-based cost measurement method defined in SFAS No. 123
had been applied.
(2) Inventories
Inventories at January 30, 2000 and January 31, 1999 are stated at
the lower of cost or net realizable value as determined under the
LIFO method of accounting. Inventories at January 30, 2000 and
January 31, 1999 are summarized as follows:
2000 1999
FIFO cost $ 122,458 113,820
Less LIFO reserve (595) (595)
LIFO cost $ 121,863 113,225
Earnings before income taxes for fiscal 2000, 1999, and 1998 would
have decreased by $-0-, $2,449 and $950, respectively, if the FIFO
method of valuing inventories had been utilized.
(3) Credit Arrangements, Notes Payable and Long-term Debt
The Company's loan agreement with its lenders provides a revolving
loan credit facility of up to $85,000 (the Company elected to
reduce the facility to $70,000 effective February 5, 2000) of
long-term financing. The amount advanced (through a note or
letters of credit) to the Company bears interest at the prime rate
on the Revolving Rate Loan and LIBOR plus 1.50% on the LIBOR Rate
Loan and is generally limited to 65% of eligible inventory, as
defined. Advances are secured by a security interest in the
Company's inventory, accounts receivable and intangible assets. The
loan agreement contains various restrictions including limitations
on additional indebtedness, sales of assets, and financial
covenants related to the ratio of earnings to fixed charges and
tangible net worth, all as defined. The loan agreement prohibits
the payment of dividends. The loan agreement expires in April 2001
and automatically renews for successive one-year terms thereafter
unless terminated by the lenders or the Company.
Under this agreement, the Company converted $30,000 from the
Revolving Rate Loan to a 7.23% Fixed Rate Loan on April 15, 1998
which is due in April 2001.
(Continued)
DUCKWALL-ALCO STORES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
January 30, 2000, January 31, 1999, and February 1, 1998
(Dollars in thousands, except per share amounts)
Notes payable outstanding at January 30, 2000 and January 31, 1999
under the revolving loan credit facility aggregated $30,420 and
$30,598, respectively. The lender had also issued letters of
credit aggregating $2,373 and $2,261, respectively, at such dates
on behalf of the Company. The interest rate on outstanding
borrowings at January 30, 2000 was 8.5% on the Revolving Rate
Loan payable monthly. There were no borrowings outstanding under
the LIBOR Rate Loan at January 30, 2000 and January 31, 1999. The
Company had additional borrowings available at January 30, 2000
under the revolving loan credit facility amounting to $42,850.
Long-term debt, exclusive of notes payable under the revolving
loan credit facility as described above, at January 30, 2000 and
January 31, 1999 consisted of the following:
2000 1999
7.15% obligations for Industrial Revenue Bonds,
interest payable semiannually with principal
payments due annually until final
maturity in 1999 $ --- 175
9.875% mortgage note payable due in monthly
installments, including interest, through
September 2001 203 310
8.41% note payable due in monthly installments,
including interest, through March 2001,
secured by airplane 272 468
8.77% note payable due in monthly installments,
including interest, through September 2000,
secured by certain equipment 350 839
8.27% note payable due in monthly installments,
including interest, through December 2000,
secured by certain equipment 74 148
9.2% note payable due in monthly installments,
including interest, through March 2009, secured
by buildings --- 1,700
6.4% note payable due in monthly installments,
including interest, through January 2005,
secured by equipment 2,353 2,741
3,252 6,381
Less current maturities 1,187 1,556
Long-term debt, less current maturities $ 2,065 4,825
Interest expense on notes payable and long-term debt in fiscal
2000, 1999, and 1998 aggregated $2,692, $3,193, and $2,418,
respectively.
(Continued)
DUCKWALL-ALCO STORES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
January 30, 2000, January 31, 1999, and February 1, 1998
(Dollars in thousands, except per share amounts)
Maturities of long-term debt, including the notes payable under
the revolving loan credit facility, in each of the next five
years and thereafter in the aggregate as of January 30, 2000
are as follows:
Fiscal year
2001 $ 1,187
2002 30,984
2003 469
2004 500
2005 532
$ 33,672
(4) Employee Benefits
The Company has a trusteed Profit Sharing Plan (Plan) for the
benefit of eligible employees. The Plan provides for an annual
contribution of not more than 20% of earnings for the year
before the profit sharing contribution and Federal and state
income taxes, limited to 15% of the annual compensation of the
participants in the Plan. Contributions by the Company vest with
the participants over a seven-year period. The Company reserves
the right to discontinue its contributions at any time. The
Company made profit sharing contributions for fiscal 2000, 1999,
and 1998 of $700, $775, and $800, respectively.
At January 30, 2000 and January 31, 1999, the Plan owned 79,053
shares of the Company's common stock. The Plan sold all such
shares in February 2000.
(5) Leases
The Company is lessee under long-term capital leases expiring
at various dates. The components of property under capital
leases as of January 30, 2000 and January 31, 1999 are as
follows:
2000 1999
Buildings $ 16,624 16,624
Fixtures 3,783 3,783
20,407 20,407
Less accumulated amortization 15,028 14,428
Net property under capital leases $ 5,379 5,979
The Company also has noncancelable operating leases, primarily
for buildings and transportation equipment, that expire at
various dates.
(Continued)
DUCKWALL-ALCO STORES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
January 30, 2000, January 31, 1999, and February 1, 1998
(Dollars in thousands, except per share amounts)
Future minimum lease payments under all non-cancelable leases
together with the present value of the net minimum lease
payments pursuant to capital leases as of January 30, 2000 are
as follows:
Fiscal Year: Capital Operating
2001 $ 1,521 9,006
2002 1,521 7,907
2003 1,457 6,728
2004 1,384 5,597
2005 1,384 4,263
Later years 6,589 28,336
Total minimum
lease payments 13,856 $ 61,837
Less amount
representing
interest 5,767
Present value of
net minimum
lease payments 8,089
Less current
maturities 607
Capital lease
obligations,
less current
maturities $ 7,482
Minimum payments have not been reduced by minimum sublease
rentals of $118 under operating leases due in the future under
noncancelable subleases. They also do not include contingent
rentals which may be paid under certain store leases on the
basis of percentage of sales in excess of stipulated amounts.
Contingent rentals applicable to capital leases amounted to
$50, $53, and $59 for fiscal 2000, 1999, and 1998, respectively.
Interest on capital lease obligations in fiscal 2000, 1999,
and 1998 aggregated $980, $1,041, and $1,107, respectively.
The following schedule presents the composition of total rent
expense for all operating leases for fiscal 2000, 1999,
and 1998:
2000 1999 1998
Minimum rentals $ 9,397 8,216 7,545
Contingent rentals 320 415 316
Less sublease rentals (107) (109) (104)
$ 9,610 8,522 7,757
(Continued)
DUCKWALL-ALCO STORES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
January 30, 2000, January 31, 1999, and February 1, 1998
(Dollars in thousands, except per share amounts)
Sale-Leaseback Transaction
The Company entered into agreements in January 2000 and
December 1998 to sell and lease back ten stores (land and
buildings) in each transaction. The net proceeds from the
sale-leaseback transactions amounted to approximately $6,100
and $6,200 for fiscal 2000 and 1999, respectively. As a result
of the sale-leaseback transactions, the Company incurred gains
of $909 and $489 in fiscal 2000 and 1999, respectively, which
have been deferred for financial reporting purposes. Such
deferred gains are included within other noncurrent liabilities
and are being amortized over the term of the related leases
(20 years).
(6) Income Taxes
Income tax expense (benefit) for fiscal 2000, 1999, and 1998
consists of:
Current Deferred Total
___________ ____________ ____________
2000:
Federal $ 4,135 (727) 3,408
State 789 (178) 611
$ 4,924 (905) 4,019
1999:
Federal $ 3,669 (63) 3,606
State 693 (12) 681
$ 4,362 (75) 4,287
1998:
Federal $ 4,163 (116) 4,047
State 765 (22) 743
$ 4,928 (138) 4,790
Income tax expense was $4,019, $4,287, and $4,790 for fiscal
2000, 1999, and 1998, respectively, and differs from the
amounts computed by applying the Federal income tax rate of
35% in 2000, 1999, and 1998 as a result of the following:
2000 1999 1998
_______ _______ _______
Computed "expected"
tax expense $ 3,702 4,026 4,298
Reduction in income
taxes resulting from:
State income taxes,
net of the Federal
income tax benefit 397 501 483
Other, net (80) (240) 9
$ 4,019 4,287 4,790
(Continued)
DUCKWALL-ALCO STORES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
January 30, 2000, January 31, 1999, and February 1, 1998
(Dollars in thousands, except per share amounts)
The tax effects of temporary differences that give rise to
significant portions of deferred tax assets and liabilities
at January 30, 2000 and January 31, 1999 are presented below:
2000 1999
Deferred tax assets:
Capital leases $ 1,036 1,018
Other assets 136 244
Other liabilities 1,268 920
Net operating loss and
tax credit carryforwards 31 43
Total gross deferred
tax assets 2,471 2,225
Less - valuation allowance (31) (43)
Net deferred tax assets 2,440 2,182
Deferred tax liabilities:
Inventories, principally
due to differences in
the LIFO reserve arising
from a prior business
combination accounted for
as a purchase 2,518 2,911
Property and equipment, due
to differences in deprecia-
tion and a prior business
combination accounted for
as a purchase 3,762 4,016
Total gross deferred
tax liabilities 6,280 6,927
Net deferred tax
liability $ 3,840 4,745
At January 30, 2000, the Company has net operating loss
carryforwards for state income tax purposes in various states
aggregating $1,463 which are available to offset future state
taxable income in those states, if any, expiring at various
dates through fiscal 2006. The valuation allowance relates to
the net operating loss (NOL) and tax credit carryforwards.
(Continued)
DUCKWALL-ALCO STORES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
January 30, 2000, January 31, 1999, and February 1, 1998
(Dollars in thousands, except per share amounts)
(7) Stock Option Plan
During fiscal 1994, the Company adopted a stock option plan
under which options to purchase 125,000 shares of common stock
may be granted to key employees. The stock option plan was
amended in June 1994 to increase the number of options which may
be granted under the plan to 200,000, was amended in
March 1997 to increase to 450,000 and was further amended in
May 1999 to increase to 650,000. The plan provides that the
option price shall not be less than the fair market value of the
shares on the date of grant and that unexercised options
expire five years from that date. The options become exercisable
in equal amounts over a four-year period from the grant date.
Information regarding options which were outstanding at
January 30, 2000, January 31, 1999, and February 1, 1998 is
presented below:
Weighted
average
Number of exercise
shares price
Options outstanding, February 2, 1997 187,525 $ 10.06
Issued 82,750 $ 12.75
Exercised (8,938) $ 8.73
Canceled (14,262) $ 10.79
Options outstanding, February 1, 1998 247,075 $ 10.97
Issued 45,250 $ 18.50
Exercised (53,563) $ 8.25
Canceled (3,200) $ 12.84
Options outstanding, January 31, 1999 235,562 $ 13.00
Issued 375,550 $ 7.98
Exercised (7,575) $ 9.20
Canceled (54,550) $ 10.64
Options outstanding, January 30, 2000 548,987 $ 9.86
(Continued)
DUCKWALL-ALCO STORES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
January 30, 2000, January 31, 1999, and February 1, 1998
(Dollars in thousands, except per share amounts)
The Company has chosen to account for stock-based compensation
using the intrinsic value method prescribed in APB 25 and related
interpretations. Accordingly, compensation cost for stock options
is measured as the excess, if any, of the quoted market price of
the Company's stock at the date of the grant over the amount an
employee must pay to acquire the stock. If the Company had elected
to recognize compensation cost based on the fair value of the
options granted at grant date as prescribed by Statement 123, net
earnings and net earnings per share would have been decreased to
the pro forma amounts indicated in the table below:
2000 1999
Net earnings, as reported $ 6,558 7,215
Net earnings, pro forma 6,407 7,087
Net earnings per share,
as reported:
Basic 1.32 1.41
Diluted 1.32 1.40
Net earnings per share,
pro forma:
Basic 1.29 1.39
Diluted 1.29 1.38
The fair value of each option grant is estimated on the date of
grant using the Black-Scholes option-pricing model with the
following assumptions:
2000 1999
Expected dividend yield 0% 0%
Expected stock price volatility 36.3 34.6
Risk-free interest rate 6.2 5.6
Expected life of options 5 years 5 years
The weighted average grant date fair value of options granted
during 2000 and 1999 is $3.37 and $7.42 per share, respectively.
Options outstanding Options exercisable
________________________________________ ________________________
Number Weighted Number
Range outstanding average Weighted exercisable Weighted
of at remaining average at average
exercise January 30, contractual exercise January 30, exercise
price 2000 life price 2000 price
_________________ ____________ ____________ ____________ ____________ ___________
$7.98 to $12.88 508,387 4.00 $ 9.17 90,728 $ 12.29
$18.50 40,600 3.33 $ 18.50 10,150 $ 18.50
$7.98 to $18.50 548,987 100,878
(Continued)
DUCKWALL-ALCO STORES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
January 30, 2000, January 31, 1999, and February 1, 1998
(Dollars in thousands, except per share amounts)
(8) Stockholders' Equity
During 1998, the Company's Board of Directors approved a plan
to repurchase up to 411,000 shares of the Company's Common
Stock (the "Stock Repurchase Program"). During fiscal 2000, the
Company's Board of Directors approved the repurchase of an
additional 1,000,000 shares. Purchases pursuant to the Stock
Repurchase Program are to be made from time to time in the open
market or directly from stockholders at prevailing market
prices. The Stock Repurchase Program is anticipated to be funded
with internally generated cash and borrowings under the Credit
Facility. As of January 30, 2000, the Company had purchased
387,600 shares of Common Stock for $3,505. During the period
from January 31, 2000 to March 17, 2000, the Company purchased
and retired 173,200 shares of its common stock for an aggregate
purchase price of $1,357.
The Company has accounted for the confirmation of its plan of
reorganization under Chapter 11 of the Federal bankruptcy laws
which was confirmed by the Bankruptcy Court on May 17, 1991 as
a quasi-reorganization. Accordingly, the accumulated deficit at
June 2, 1991 was charged to additional paid-in capital and a new
retained earnings account was established effective the same
date. No adjustment was made to the carrying values of the
Company's assets and liabilities because such amounts were not
in excess of estimated fair values.
(9) Earnings Per Share
The following is a reconciliation of the outstanding shares
utilized in the computation of earnings per share:
2000 1999 1998
Outstanding shares:
Weighted average shares
outstanding (basic) 4,967,332 5,111,461 5,096,322
Effect of dilutive
options to purchase
common stock --- 43,399 52,496
As adjusted for
diluted
calculation 4,967,332 5,154,860 5,148,818
Net earnings -
basic and diluted $ 6,558 7,215 7,491
Earnings per share amounts have been computed on the absolute
amount of net earnings whereas the above net earnings amounts
have been rounded to the nearest thousand.
(Continued)
DUCKWALL-ALCO STORES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
January 30, 2000, January 31, 1999, and February 1, 1998
(Dollars in thousands, except per share amounts)
(10) Quarterly Financial Information (Unaudited)
Financial results by quarter are as follows:
First Second Third Fourth
quarter quarter quarter quarter
_____________________________ ___________ ___________ ___________ ___________
2000:
Net sales $ 87,028 94,144 87,624 111,708
Gross margin (a) 29,138 31,894 30,649 36,132
Net earnings 701 1,845 1,014 2,998
Net earnings per share (b):
Basic .14 .37 .20 .63
Diluted .14 .37 .20 .63
1999:
Net sales $ 81,052 90,360 85,308 106,789
Gross margin (a) 28,150 30,610 29,290 36,017
Earnings before cumulative
effect of accounting
change 954 1,833 1,119 3,309
Cumulative effect of
accounting change (956) --- --- ---
Net earnings (2) 1,833 1,119 3,309
Net earnings per share
before cumulative effect of
accounting change (b)
and (c):
Basic .19 .36 .22 .65
Diluted .18 .35 .22 .65
(a) The pretax LIFO inventory provision for the fiscal
year ended January 30, 2000 was estimated to be
expense of $177, $197 and $-0- in each of the first
three quarters, respectively. The annual provision
amounted to $-0- resulting in a credit of $374 in the
fourth quarter.
The pretax LIFO inventory provision for the fiscal
year ended January 31, 1999 was estimated to be
expense of $-0- in each of the first three quarters.
The annual provision amounted to $2,449 income
resulting in a credit of $2,449 in the fourth quarter.
(b) Earnings per share amounts are computed independently
for each of the quarters presented. Therefore, the sum
of the quarterly earnings per share in fiscal 2000 and
fiscal 1999 does not equal the total computed for the
year.
(c) The cumulative effect of adopting the accounting
change for store preopening costs was $(.19) in the
first quarter of fiscal 1999.
(Continued)
DUCKWALL-ALCO STORES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
January 30, 2000, January 31, 1999, and February 1, 1998
(Dollars in thousands, except per share amounts)
(11) Fair Value of Financial Instruments
The Company has determined the fair value of its financial
instruments in accordance with Statement of Financial
Accounting Standards No. 107, Disclosures About Fair Value of
Financial Instruments. For long-term debt, the fair value is
estimated by discounting the future cash flows at rates
currently available for similar types of debt instruments.
Such fair value approximated the carrying value of long-term
debt at January 30, 2000 and January 31, 1999. For notes
payable under revolving loan credit facility, fair value
approximates the carrying value due to the variable interest
rate.
For all other financial instruments including cash, receivables,
accounts payable, and accrued expenses, the carrying amounts
approximate fair value due to the short maturity of those
instruments.
(12) Related Party Transactions
Lease payments to related parties amounted to approximately
$660, $657, and $655 in fiscal 2000, 1999, and 1998,
respectively.
During fiscal 2000 and 1999, the Company paid a computer
consulting firm, whose president or chairman is a director of
the Company, $230 and $260, respectively, for point-of-sale
software and related services.
(13) Business Operations and Segment Information
The Company's business activities include operation of ALCO
Discount Stores in towns with populations which are typically
less than 5,000 not served by other regional or national
retail discount chains and Duckwall variety stores that offer
a more limited selection of merchandise which are primarily
located in communities of less than 2,500 residents.
For financial reporting purposes, the Company has established
two operating segments: "ALCO Discount Stores", and "All
Other", which includes the Duckwall variety stores and other
business activities, such as general office, warehouse and
distribution activities.
(Continued)
DUCKWALL-ALCO STORES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
January 30, 2000, January 31, 1999, and February 1, 1998
(Dollars in thousands, except per share amounts)
Segment Information
2000 1999 1998
__________ ___________ ___________
Net Sales:
ALCO Discount Stores $ 346,135 330,705 302,040
All Other:
External 34,369 32,804 21,214
Intercompany 204,043 200,465 189,330
$ 584,547 563,974 512,584
Depreciation and Amortization:
ALCO Discount Stores $ 4,111 3,300 2,554
All Other 2,285 2,674 2,251
$ 6,396 5,974 4,805
Income (expense) from Operations:
ALCO Discount Stores $ 31,490 29,241 28,086
All Other (17,299) (16,771) (14,037)
$ 14,191 12,470 14,049
Capital Expenditures:
ALCO Discount Stores $ 5,149 8,203 10,081
All Other 1,264 2,057 1,581
$ 6,413 10,260 11,662
Identifiable Assets:
ALCO Discount Stores $ 127,478 128,078 122,263
All Other 50,055 43,733 33,638
$ 177,533 171,811 155,901
(Continued)
DUCKWALL-ALCO STORES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
January 30, 2000, January 31, 1999, and February 1, 1998
(Dollars in thousands, except per share amounts)
Income from operations as reflected in the above segment
information has been determined differently than income from
operations in the accompanying consolidated statements of
operations as follows:
Intercompany Sales
Intercompany sales represent transfers of merchandise from
the warehouse to ALCO Discount Stores and Duckwall variety
stores.
Intercompany Expense Allocations
General and administrative expenses incurred at the general
office have not been allocated to the ALCO Discount Stores
for purposes of determining income from operations for the
segment information.
Warehousing and distribution costs including freight
applicable to merchandise purchases, have been allocated to
the ALCO Discount Stores segment based on the Company's
customary method of allocation for such costs (primarily as
a stipulated percentage of merchandise purchases).
Inventories
Inventories are based on the FIFO method for segment
information purposes and on the LIFO method for the
consolidated statements of operations.
Property Costs
In fiscal 1999, for ALCO Discount Stores for which the
Company owns the store building, rent expense was charged
to, and the applicable depreciation expense was excluded
from, income from operations for purposes of determining
the segment information for the ALCO Discount Stores. In
fiscal 2000, for most such ALCO Discount Stores, no rent
expense was charged to, and applicable depreciation
expense was included in income from operations. The effect
of this change in accounting method did not have a
significant affect on income from operations for the ALCO
Discount Store segment in fiscal 2000. The Company also
sold and leased back ten stores in December 1998 for which
rent expense was charged in fiscal 1999.
Leases
All leases are accounted for as operating leases for
purposes of determining income from operations for purposes
of determining the segment information for the ALCO
Discount Stores whereas capital leases are accounted for as
such in the consolidated statements of operations.
Identifiable assets as reflected in the above segment information
include cash and cash equivalents, receivables, inventory,
property and equipment, and property under capital leases.
(Continued)
DUCKWALL-ALCO STORES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
January 30, 2000, January 31, 1999, and February 1, 1998
(Dollars in thousands, except per share amounts)
A reconciliation of the segment information to the amounts
reported in the consolidated financial statements is presented
below:
2000 1999 1998
_______________________________________ ___________ ___________ ___________
Net sales per above segment information $ 584,547 563,974 512,584
Intercompany elimination (204,043) (200,465) (189,330)
Net sales per consolidated
statements of operations $ 380,504 363,509 323,254
Income from operations per above
segment information $ 14,191 12,470 14,049
Inventory method --- 2,449 950
Property costs 117 916 911
Leases (59) (99) (104)
Income from operations per
consolidated statements of
operations $ 14,249 15,736 15,806
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The Registrant's Proxy Statement to be used in connection with the
Annual Meeting of Stockholders to be held on May 25, 2000, contains under
the caption "Election of Directors" certain information required by Item 10
of Form 10-K, and such information is incorporated herein by this reference.
The information required by Item 10 of Form 10-K as to executive officers is
set forth in Item 4A of Part I hereof.
The Registrant's Proxy Statement to be used in connection with the
Annual Meeting of Stockholders to be held on May 25, 2000, contains under
the caption "Compliance with Section 16(a) of the Securities Exchange Act
of 1934" certain information required by Item 10 of Form 10-K, and such
information is incorporated herein by this reference.
ITEM 11. EXECUTIVE COMPENSATION.
The Registrant's Proxy Statement to be used in connection with the
Annual Meeting of Stockholders to be held on May 25, 2000, contains under
the caption "Executive Compensation and Other Information" the information
required by Item 11 of Form 10-K, and such information is incorporated herein
by this reference (except that the information set forth under the following
subcaptions is expressly excluded from such incorporation: "Compensation
Committee Report" and "Company Performance").
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The Registrant's Proxy Statement to be used in connection with the
Annual Meeting of Stockholders to be held on May 25, 2000, contains under
the caption "Ownership of Duckwall Common Stock" the information required by
Item 12 of Form 10-K and such information is incorporated herein by this
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Registrant's Proxy Statement to be used in connection with the
Annual Meeting of Stockholders to be held on May 25, 2000, contains under
the caption "Insider Participation" the information required by Item 13 of
Form 10-K and such information is incorporated herein by this reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) Financial Statements, Financial Statement Schedules, and Exhibits
(1) Consolidated Financial Statements
The financial statements are listed in the index for Item 8 of
this Form 10-K.
(2) Financial Statement Schedules
No financial statement schedules are included as they are
not applicable to the Company.
(3) Exhibits
The exhibits filed with or incorporated by reference in this
report are listed below:
Number Description
3(a) Amended and Restated Articles of Incorporation (filed as
Exhibit 3(a) to Registrant's Registration Statement on Form
10 and hereby incorporated herein by reference).
3(b) Certificate of Amendment to the Articles of Incorporation
(filed as Exhibit 3(b) to Registrant's Annual Report on Form
10-K for the fiscal year ended January 29, 1995, and
incorporated herein by reference) (filed as Exhibit 3(b) to
Registrant's Annual Report on Form 10-K for the fiscal year
ended January 29, 1995, and incorporated herein by
reference).
3(c) Bylaws (filed as Exhibit 3(b) to Registrant's Registration
Statement on Form 10 and hereby incorporated herein by
reference).
4(a) Specimen Common Stock Certificates (filed as Exhibit 4.1 to
Registrant's Registration Statement on Form S-1 and
incorporated herein by reference).
4(b) Reference is made to the Amended and Restated Articles of
Incorporation and Bylaws described above under 3(a) and
3(c), respectively (filed as Exhibit 4(a) to Registrant's
Registration Statement on Form 10 and hereby incorporated
herein by reference).
4(c) Reference is made to the Certificate of Amendment to the
Articles of Incorporation described above under 3(b) (filed as
Exhibit 3(b) to Registrant's Annual Report on Form 10-K for
the fiscal year ended January 29, 1995, and incorporated
herein by reference).
4(d) Form of 10% Subordinated Notes (filed as Exhibit 4(c) to
Registrant's Registration Statement on Form 10 and hereby
incorporated herein by reference).
9(a) Voting Agreement and Irrevocable Proxy, dated as of May 29,
1991, among General Electric Capital Corporation, certain
stockholders of the Registrant and the Registrant (filed as
Exhibit 9 to Registrant's Registration Statement on Form 10
and hereby incorporated herein by reference).
9(b) Assignment, dated as of February 11, 1993, among General
Electric Credit Corporation, BA Business Credit, Inc. and
Transamerica Business Credit Corporation (filed as Exhibit 9(b)
to Registrant's Annual Report on Form 10-K for the fiscal year
ended January 31, 1993 and hereby incorporated herein by
reference).
10(a) Assignment, dated as of February 11, 1993, among General
Electric Credit Corporation, BA Business Credit, Inc. and
Transamerica Business Credit Corporation (filed as Exhibit 9(b)
to Registrant's Annual Report on Form 10-K for the fiscal year
ended January 31, 1993 and hereby incorporated herein by
reference).
10(b) Amended and Restated Loan Agreement, dated as of February 11,
1993 among the Registrant, BA Business Credit, Inc. and
Transamerica Business Credit Corporation (filed as Exhibit 10(e)
to Registrant's Annual Report on Form 10-K for the fiscal year
ended January 31, 1993 and hereby incorporated herein by
reference).
10(c) First Amendment to Security Agreement, dated as of February 11,
1993 among the Registrant, BA Business Credit, Inc. and
Transamerica Business Credit Corporation (filed as Exhibit 10(f)
to Registrant's Annual Report on Form 10-K for the fiscal year
ended January 31, 1993 and hereby incorporated herein by
reference).
10(d) Amendment No. 1, dated as of June 10, 1994, to the Amended
and Restated Loan Agreement, dated as of February 11, 1993,
among the Registrant, BA Business Credit, Inc. and Transamerica
Business Credit Corporation.
10(e) Stock Pledge Agreement, dated as of February 11, 1993 among
the Registrant, BA Business Credit, Inc. and Transamerica
Business Credit Corporation (filed as Exhibit 10(g) to
Registrant's Annual Report on Form 10-K for the fiscal year
ended January 31, 1993 and hereby incorporated herein by
reference).
10(f) Mortgage, Security Agreement, and Assignment of Leases and
Rents, dated as of February 11, 1993 among the Registrant, BA
Business Credit, Inc. and Transamerica Business Credit
Corporation (filed as Exhibit 10(h) to Registrant's Annual
Report on Form 10-K for the fiscal year ended January 31, 1993
and hereby incorporated herein by reference).
10(g) Mortgage, Security Agreement, and Assignment of Leases and
Rents, dated as of February 11, 1993 among the Registrant, BA
Business Credit, Inc. and Transamerica Business Credit
Corporation (filed as Exhibit 10(i) to Registrant's Annual
Report on Form 10-K for the fiscal year ended January 31, 1993
and hereby incorporated herein by reference).
10(h) Mortgage, Security Agreement, and Assignment of Leases and
Rents, dated as of February 11, 1993 among the Registrant, BA
Business Credit, Inc. and Transamerica Business Credit
Corporation (filed as Exhibit 10(j) to Registrant's Annual
Report on Form 10-K for the fiscal year ended January 31, 1993
and hereby incorporated herein by reference).
10(i) Deed of Trust, Security Agreement, and Assignment of Leases
and Rents, dated as of February 11, 1993 by the Registrant in
favor of The Public Trustee for Morgan County, Colorado (filed
as Exhibit 10(k) to Registrant's Annual Report on Form 10-K for
the fiscal year ended January 31, 1993 and hereby incorporated
herein by reference).
10(j) Deed of Trust, Security Agreement, and Assignment of Leases and
Rents, dated as of February 11, 1993 by the Registrant in
favor of The Public Trustee for Fremont County, Colorado (filed
as Exhibit 10(l) to Registrant's Annual Report on Form 10-K for
the fiscal year ended January 31, 1993 and hereby incorporated
herein by reference).
10(n) Employment Agreement, dated March 18, 1993 between the
Registrant and Glen L. Shank (filed as Exhibit 10(o) to
Registrant's Annual Report on Form 10-K for the fiscal year
ended January 31, 1993 and hereby incorporated herein by
reference). *
10(o) Second Amended and Restated Loan Agreement, dated as of
October 18, 1995, by and among the Registrant, BankAmerica
Business Credit, Inc. and Transamerica Business Credit
Corporation.
11 Computation of Company's Earnings Per Share.
22 Subsidiaries of the Registrant.
23 Consent of Independent Auditors.
27 Financial Data Schedule.
______________________
* Management contracts or compensation plans or arrangements required to be
identified by Item 14(a)(3).
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by Registrant during the fourth
quarter of the fiscal year ended January 30, 2000.
(c) Exhibits
The exhibits filed with this report are identified above under
Item 14(a)(3)
(d) Financial Statement Schedules.
No financial statement schedules are included as they are not
applicable to the Company.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
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.
by /s/ Glen L. Shank
Glen L. Shank
Chairman of the Board
and President
Dated: April 28, 2000
Pursuant to the requirement of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
Signature and Title Date
/s/ Glen L. Shank April 28, 2000
Glen L. Shank
Chairman of the Board
and President
(Principal Executive Officer)
/s/ Richard A. Mansfield April 28, 2000
Richard A. Mansfield
Vice President - Finance and Treasurer
(Principal Financial and Accounting Officer)
/s/ Dennis A. Mullin April 28, 2000
Dennis A. Mullin
Director
/s/ Lolan C. Mackey April 28, 2000
Lolan C. Mackey
Director
/s/ Jeffrey Macke April 28, 2000
Jeffrey Macke
Director
/s/ Robert L. Woodard April 28, 2000
Robert L. Woodard
Director