FOR IMMEDIATE RELEASE
DUCKWALL-ALCO STORES REPORTS OPERATING RESULTS
FOR THIRD QUARTER AND YEAR-TO-DATE FISCAL 2012
ABILENE, Kan. (December 8, 2011) -- Duckwall-ALCO Stores, Inc. (Nasdaq: DUCK), which specializes in providing a
superior selection of essential consumer products for everyday life in the communities it serves, today announced
operating results for its third quarter ended October 30, 2011.
Net sales from continuing operations for the third quarter of fiscal 2012 increased 3.6% to $109.8 million, compared to
third quarter of fiscal 2011. Same-store sales, excluding fuel center sales, increased 2.7%. Net sales from continuing
operations for the 39 weeks ended October 30, 2011, increased 5.8% to $346.0 million, compared to the same period of
the prior year. Same-store sales, excluding fuel center sales, increased 4.4%.
Net earnings for the third quarter of fiscal 2012 were $0.1 million, or $0.02 per diluted share, compared to a net loss of
$2.1 million, or $0.55 per diluted share, for the third quarter of fiscal 2011. During the third quarter, the Company received
an insurance settlement for damage sustained during the second quarter of fiscal 2012, due to wind and hail. The
settlement amount represented an appearance allowance for the roofs at the Company’s corporate office and distribution
center in Abilene, Kansas. As such, the Company recorded a one-time gain of approximately $2.3 million (approximately
$1.4 million after-tax or, $0.37 per diluted share). Excluding this one-time gain, net loss for the third quarter of fiscal 2012
was $1.3 million, or $0.35 per diluted share, compared to a net loss of $2.1 million, or $0.55 per diluted share, for the third
quarter of fiscal 2011.
Net loss for the 39 weeks ended October 30, 2011, was $0.6 million, or $0.14 per diluted share, compared to a net loss of
$5.4 million, or $1.42 per diluted share, for the same period of the prior year. Excluding the one-time gain described
above and the charge of $0.3 million or $0.08 per diluted share recorded in the second quarter for the accelerated
amortization of financing fees related to the Company’s new bank agreement, net loss for the 39 weeks ended October
30, 2011, was $1.7 million, or $0.43 per diluted share, compared to a net loss of $5.4 million, or $1.42 per diluted share,
for the same period of the prior year.
Richard Wilson, President and CEO, commented, “We are pleased with the improvement of our third-quarter operating
results. The continued improvement in top-line sales marks our fourth consecutive quarter of same-store sales increases.
We continued to experience top line growth in the Commodities, Home, and Softlines divisions, with the top-performing
departments for the quarter being Candy/Food, Personal Care, Shoes, Furniture, and Infants.”
Mr. Wilson added, “While our gross margin rate was down from the third quarter of the prior year, primarily due to mix of
business in lower-margin categories and increased transportation expense, we were able to improve operating results.
Our merchandising strategies delivered strong same-store sales growth, our cost-reduction initiatives reduced SG&A
expenses, and our new credit agreement benefited us during the entire third quarter.”
Mr. Wilson concluded, “We are looking forward to this holiday selling season and are riveted to our strategy of providing
ALCO customers with top-quality merchandise and exceptional value. Consumers are responding well to the ALCO value
proposition: ‘Shop Smart. Save Smart.’ ”
Investor Conference Call
The Company will host an investor conference call at 10:00 a.m. Central Time on Friday, December 9, 2011, to discuss
operating results for the third quarter ended October 30, 2011. The dial-in number for the conference call is 888-219-
1467 (international/local participants dial 913-312-0389), and the Conference Code is 4966266. Parties interested in
participating in the conference call should dial in approximately five minutes prior to 10:00 a.m. Central Time. A replay of
the call will be available after 1:30 p.m. Central Time December 9, 2011, through December 13, 2011, by dialing 888-203-
1112 (international/local participants dial 719-457-0820), and the Replay Code is 4966266. A replay of the call will also
be available four hours after completion of the call by visiting the Investors page on the Company’s website,
www.ALCOstores.com.
Supplemental Data
The Company has included certain tables in this press release that are set forth fully in the Company’s 10-Q.
Certain Non-GAAP Financial Measures
The Company has included Adjusted Gross Margin and Adjusted EBITDA, non-GAAP performance measures, as part of
its disclosure as a means to enhance its communications with stockholders. Certain stockholders have specifically
requested this information to assist them in comparing the Company to other retailers that disclose similar non-GAAP
performance measures. Further, management utilizes these measures in internal evaluation, review of performance and
in comparing the Company’s financial measures to those of its peers. Adjusted EBITDA differs from the most comparable
GAAP financial measure (earnings [loss] from continuing operations) in that it does not include certain items, as does
Adjusted Gross Margin. These items are excluded by management to better evaluate normalized operational cash flow
and expenses excluding unusual, inconsistent and non-cash charges. To compensate for the limitations of evaluating the
Company's performance using Adjusted Gross Margin and Adjusted EBITDA, management also utilizes GAAP
performance measures such as gross margin, return on investment, return on equity and cash flow from operating
activities. As a result, Adjusted Gross Margin and Adjusted EBITDA may not reflect important aspects of the results of the
Company’s operations.
About Duckwall-ALCO Stores, Inc.
Duckwall-ALCO Stores, Inc. is a regional broad line retailer that specializes in meeting the needs of smaller, underserved
communities across 23 states, primarily in the central United States. The Company offers an exceptional selection of
quality products and recognized brand names at reasonable prices. Its specialty is delivering those products with the
friendly, personal service its customers have come to expect. With 217 ALCO stores, the Company is proud to have
continually provided excellent products at good value prices to its customers for 110 years. To learn more about the
Company visit www.ALCOstores.com.
Forward-looking statements
This press release contains forward-looking statements, as referenced in the Private Securities Litigation Reform Act of
1995 (“the Act”). Forward-looking statements can be identified by the inclusion of “will,” “believe,” “intend,” “expect,” “plan,”
“project” and similar future-looking terms. You should not rely unduly on these forward-looking statements. These forward-
looking statements reflect management’s current views and projections regarding economic conditions, retail industry
environments, and Company performance. Forward-looking statements inherently involve risks and uncertainties, and,
accordingly, actual results may vary materially. Factors which could significantly change results include but are not limited
to: sales performance, expense levels, competitive activity, interest rates, changes in the Company’s financial condition,
and factors affecting the retail category in general. Additional information regarding these and other factors may be
included in the Company’s 10-Q filings and other public documents, copies of which are available from the Company on
request and are available from the United States Securities and Exchange Commission.
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For more information, contact:
Wayne S. Peterson
Senior Vice President – Chief Financial Officer
785-263-3350 X164
email: wpeterson@alcostores.com
or
Debbie Hagen
Hagen and Partners
913-642-6363
email: dhagen@hagenandpartners.com
- Tables to follow -
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Duckwall-ALCO Stores, Inc.
Statements of Operations
(dollars in thousands, except share and per share amounts)
(Unaudited)
Thirteen Week Periods Ended Thirty-Nine Week Periods Ended
October 30, October 31, October 30, October 31,
2011 2010* 2011 2010*
Net sales $ 109,826 $ 106,055 $ 346,039 $ 327,200
Cost of sales 76,053 72,625 241,247 224,593
Gross margin 33,773 33,430 104,792 102,607
Selling, general and administrative 33,105 33,899 98,066 101,783
Depreciation and amortization expenses 2,106 2,570 6,432 7,533
Total operating expenses 35,211 36,469 104,498 109,316
Other Operating Income 2,270 — 2,270 —
Operating income (loss) from continuing operations 832 (3,039) 2,564 (6,709)
Interest expense 619 1,015 3,336 2,410
Earnings (loss) from continuing operations before income taxes 213 (4,054) (772) (9,119)
Income tax expense (benefit) 76 (2,067) (292) (3,741)
Earnings (loss) from continuing operations 137 (1,987) (480) (5,378)
Earnings (loss) from discontinued operations, net of income tax
(benefit) of ($35), ($74), ($43), and ($40), respectively (57) (122) (70) (65)
Net income (loss) $ 80 $ (2,109) $ (550) $ (5,443)
Earnings (loss) per share
Basic
Continuing operations $ 0.04 $ (0.52) $ (0.12) $ (1.40)
Discontinued operations (0.02) (0.03) (0.02) (0.02)
Net earnings (loss) per share $ 0.02 $ (0.55) $ (0.14) $ (1.42)
Earnings (loss) per share
Diluted
Continuing operations $ 0.04 $ (0.52) $ (0.12) $ (1.40)
Discontinued operations (0.02) (0.03) (0.02) (0.02)
Net earnings (loss) per share $ 0.02 $ (0.55) $ (0.14) $ (1.42)
Weighted-average shares outstanding:
Basic 3,843 3,841 3,843 3,829
Diluted 3,843 3,841 3,843 3,829
Thirteen Week Periods Ended Thirty-Nine Week Periods Ended
October 30, October 31, October 30, October 31,
2011 2010 2011 2010
Same-store adjusted gross margin dollar change 0.3% (2.7)% 0.9% (8.5)%
Same-store SG&A dollar change 0.1% 0.5% (1.0)% 0.7%
Same-store total customer count change (3.9)% (2.2)% (3.0)% (2.9)%
Same-store average sale per ticket change 6.9% 0.1% 7.7% (1.2)%
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Duckwall-ALCO Stores, Inc.
Schedule of Adjusted EBITDA
(dollars in thousands, except share and per share amounts)
(Unaudited)
Twenty-Six Trailing 52 Thirteen Trailing 52 Weeks
Week Periods Ended Weeks Ended Week Periods Ended Ended
October 30, October
July 31, August 1, July 31, 2011 31, October 30,
(dollars in thousands) Fiscal 2011 2011 2010 2011 2010 2011
Net earnings (loss) from continuing
operations (1) $ (3,471) (617) (3,391) (697) 137 (1,987) 1,427
Plus:
Interest 3,502 2,717 1,395 4,824 619 1,015 4,428
Tax expense (benefit) (1) (2,414) (368) (1,673) (1,109) 76 (2,067) 1,034
Depreciation and amortization (1) 10,001 4,327 4,963 9,365 2,106 2,570 8,901
Share-based compensation 333 182 200 315 92 68 339
Insurance settlement (4) — — — — (2,270) — (2,270)
Preopening store costs (2) 543 3 382 164 233 110 287
Executive and staff severance 540 131 480 191 — 60 131
Store reset costs 895 — — 895 — 895 —
AWG transition costs 210 — — 210 — — 210
=Adjusted EBITDA (1) (3) 10,139 6,375 2,356 14,158 993 664 14,487
Cash 4,189 6,431 3,690 6,431 3,125 5,356 3,125
Debt 59,072 65,380 40,090 65,380 80,211 64,571 80,211
Debt, net of cash $ 54,883 58,949 36,400 58,949 77,086 59,215 77,086
(1) These amounts may not agree with 10-Qs of previous quarters due to subsequent store closures. These closed stores are now included in
discontinued operations.
(2) These costs are not consistent quarter to quarter as the Company does not open the same number of stores in each quarter of each fiscal year.
These costs are directly associated with the number of stores that have been or will be opened and are incurred prior to the grand opening of
each store.
(3) During fiscal year 2011, the Company made changes in its executive management team and warehouse operations. For the trailing 52 weeks
ended October 30, 2011, these initiatives resulted in approximately $1.6 million reduced SG&A expenses when compared to the same prior year
trailing 52 weeks. The initiatives include, but are not limited to, executive and staff reduction.
(4) On September 9, 2011, the Company received a $2.3 million settlement from Factory Mutual Insurance Company (the “Insurer”) for damage
sustained during the second quarter of fiscal 2012, due to wind and hail. The settlement amount represented an appearance allowance for the
roofs at the Company’s corporate office and distribution center in Abilene, Kansas. The Insurer determined the roofs continue to be functional
as is without making repairs, that the life expectancy of the standing seam roofs were not compromised, and advised the Company that the
damage and subsequent settlement would not affect the future insurability of the roofs, nor would it affect any future property claims should
these roofs sustain future damage from an insured peril.
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Duckwall-ALCO Stores, Inc.
Balance Sheets
(dollars in thousands, except share and per share amounts)
October 30, January 30,
2011 2011
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 3,125 $ 4,189
Receivables 8,693 6,847
Prepaid income taxes 72 168
Inventories 195,368 151,079
Prepaid expenses 3,789 3,720
Deferred income taxes 3,965 2,563
Property held for sale 664 884
Total current assets 215,676 169,450
Property and equipment, at cost:
Land and land improvements 1,834 1,496
Buildings and building improvements 11,847 11,828
Furniture, fixtures and equipment 70,319 69,924
Transportation equipment 803 1,305
Leasehold improvements 16,899 16,449
Construction work in progress 3,495 350
Total property and equipment 105,197 101,352
Less accumulated depreciation and amortization 77,460 72,788
Net property and equipment 27,737 28,564
Property under capital leases 22,254 22,254
Less accumulated amortization 11,300 10,727
Net property under capital leases 10,954 11,527
Deferred income taxes — non current 1,025 2,180
Other non-current assets 823 990
Total assets $ 256,215 $ 212,711
Liabilities and Stockholders’ Equity
Current liabilities:
Current maturities of long-term debt $ 263 $ 1,414
Current maturities of capital lease obligations 553 703
Accounts payable 48,463 25,968
Accrued salaries and commissions 4,188 4,133
Accrued taxes other than income 4,991 4,822
Self-insurance claim reserves 3,933 4,139
Other current liabilities 4,556 4,608
Total current liabilities 66,947 45,787
Notes payable under revolving loan 68,217 45,282
Capital lease obligations - less current maturities 11,178 11,673
Deferred gain on leases 3,536 3,826
Other non-current liabilities 2,454 1,850
Total liabilities 152,332 108,418
Stockholders’ equity:
Common stock, $.0001 par value, 20,000,000 authorized shares; 3,842,745 and 3,841,895 shares
issued and outstanding at October 30, 2011 and January 30, 2011, respectively 1 1
Additional paid-in capital 40,143 40,003
Retained earnings 63,739 64,289
Total stockholders’ equity 103,883 104,293
Total liabilities and stockholders’ equity $ 256,215 $ 212,711
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