December 06, 2012 at 16:15 PM EST
ALCO Stores, Inc. Reports Operating Results for Third Quarter and Year-to-Date Fiscal 2013

ABILENE, Kan., Dec. 6, 2012 (GLOBE NEWSWIRE) -- ALCO Stores, Inc. (Nasdaq:ALCS), which specializes in providing a superior selection of essential products for everyday life in small-town America, today announced operating results for its third quarter ended October 28, 2012.

Net sales from continuing operations, excluding fuel, for the third quarter of fiscal 2013 increased 0.2% to $106.6 million, compared to the third quarter of fiscal 2012. Same-store sales, excluding fuel, decreased 3.3%. Net sales from continuing operations, excluding fuel, for the 39 weeks ended October 28, 2012, increased 1.7% to $340.7 million, compared to the same period of the prior year. Same-store sales, excluding fuel, decreased 1.2%.

Net loss for the third quarter of fiscal 2013 was $1.4 million, or $0.37 per diluted share, compared to net earnings of $0.1 million, or $0.01 per diluted share, for the third quarter of fiscal 2012. In the third quarter of fiscal 2012, an after-tax gain of $1.4 million, or $0.37 per share, was recorded for an insurance settlement that represented an appearance allowance for the roofs at the Company's corporate office and distribution center in Abilene, Kansas. On an adjusted basis, results for the prior year's third quarter were a loss of $1.3 million, or $0.36 cents per share.

Net loss for the 39 weeks ended October 28, 2012, was $0.7 million, or $0.18 per diluted share, compared to net earnings of $0.8 million, or $0.21 per diluted share, for the same period of the prior year. On a comparative basis year-over-year, results were affected by two one-time events that occurred during the 39 weeks ended October 30, 2011, the first being the insurance settlement noted above. In addition, during the second quarter of fiscal 2012, the Company entered into a new revolving credit agreement with Wells Fargo Bank, National Association and Wells Capital Finance, LLC, generating a non-cash after-tax charge of $0.3 million, or $0.08 per share. This charge represented accelerated recognition of deferred financing fees under the previous revolving credit agreement.  On an adjusted basis, results for the prior year's 39 weeks ended October 30, 2011 were a loss of $0.3 million, or $0.08 cents per share. 

Adjusted EBITDA for the third quarter of fiscal 2013 was $1.4 million, compared to $1.0 million in the same quarter of the prior year. In the 39 weeks ended October 28, 2012, adjusted EBITDA was $9.4 million, compared to $9.6 million in the same period of the prior year.

Richard Wilson, President and CEO, commented, "Sales efforts in the third quarter and for fiscal 2013 year-to-date struggled to overcome weak consumer demand due to warm weather and the ongoing impact of drought in rural areas across our Midwestern footprint. Our stronger pricing disciplines delivered improvement in gross margin, but we clearly need to drive top-line growth to increase operating income and returns for ALCO Stores, Inc. shareholders. We are executing several initiatives to add momentum to our sales, including the launch of frozen and expanded refrigerated foods beginning late in the third quarter, our regional merchandising roll-out focusing on increasing quality in winter apparel and sporting goods targeting local needs, new leadership and upgraded merchandising in our apparel areas, and marketing of our robust Ecommerce platform, which has expanded our offering to over 20,000 value-priced items on our website ALCOstores.com."

Investor Conference Call

ALCO Stores, Inc. will host an investor conference call at 10:00 a.m. Central Time on Friday, December 7, 2012, to discuss operating results for the fiscal year's third quarter, ended October 28, 2012. The dial-in number for the conference call is 800-289-0493 (international/local participants dial 913-312-0655), and the Conference Code is 1788646. 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 7, 2012, through December 12, 2012, by dialing 888-203-1112 (international/local participants dial 719-457-0820), and the Replay Code is 1788646. 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 SG&A and Adjusted EBITDA, non-GAAP performance measures, as part of its disclosure as a means to enhance its communications with stockholders. Certain stockholders have specifically requested this information 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 SG&A. These items are excluded by management to better evaluate normalized operational cash flow and expenses excluding unusual, inconsistent and non-cash charges.  To compensate for the limitations of evaluating the Company's performance using Adjusted SG&A and Adjusted EBITDA, management also utilizes GAAP performance measures such as gross margin return on investment, return on equity and cash flow from operating activities.  As a result, Adjusted SG&A and Adjusted EBITDA may not reflect important aspects of the results of the Company's operations.

About ALCO Stores, Inc.

ALCO Stores, Inc. is a broad-line retailer, primarily located in small underserved communities across 23 states. The Company currently has 217 ALCO stores that offer both name brand and private label products of exceptional quality at reasonable prices. We are proud to have continually provided friendly, personal service to our customers for the past 111 years. To learn more about the Company, visit www.ALCOstores.com.

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

Forward-looking statements

This press release contains forward-looking statements, as referenced in the Private Securities Litigation Reform Act of 1995 ("the Act"). 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.

ALCO Stores, Inc.
Balance Sheets
(dollars in thousands, except share data)
 
 October 28, 2012January 29,
2012
  (Unaudited)
Assets
Current assets:
Cash $ 1,179 $ 2,491
Receivables 10,413 10,334
Inventories 192,008 156,215
Prepaid expenses 4,049 3,603
Deferred income tax assets 6,147 5,607
Property held for sale 568 568
Total current assets 214,364 178,818
Property and equipment, at cost:
Land and land improvements 1,544 1,508
Buildings and building improvements 10,469 10,488
Furniture, fixtures and equipment 73,404 71,518
Transportation equipment 846 861
Leasehold improvements 20,450 19,289
Construction work in progress 5,621 1,177
Total property and equipment 112,334 104,841
Less accumulated depreciation and amortization 81,851 76,563
Net property and equipment 30,483 28,278
Property under capital leases 27,956 24,054
Less accumulated amortization 12,191 11,498
Net property under capital leases 15,765 12,556
Other non-current assets 770 754
Total assets $ 261,382 $ 220,405
Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of capital lease obligations $ 583 $ 570
Accounts payable 61,859 26,695
Accrued salaries and commissions 4,221 3,984
Accrued taxes other than income taxes 5,664 4,845
Self-insurance claim reserves 3,898 4,112
Income taxes payable 154
Other current liabilities 4,513 4,327
Total current liabilities 80,892 44,533
Notes payable under revolving loan 58,000 52,063
Capital lease obligations – less current maturities 16,162 12,804
Deferred gain on leases 3,149 3,439
Deferred income taxes – non-current 537 643
Other non-current liabilities 2,511 2,483
Total liabilities 161,251 115,965
Stockholders' equity:
Common stock, $.0001 par value, authorized 20,000,000 shares; 3,257,817 and 3,842,745 shares issued and outstanding, respectively 1 1
Additional paid-in capital 36,479 40,115
Retained earnings 63,651 64,324
Total stockholders' equity 100,131 104,440
Total liabilities and stockholders' equity $ 261,382 $ 220,405
ALCO Stores, Inc.
Statements of Operations
(dollars in thousands, except share data)
(Unaudited)
 
 Thirteen Week Periods EndedThirty-Nine Week Periods Ended
 October 28, 2012October 30, 2011*October 28, 2012October 30, 2011*
Net sales $ 108,185 $ 108,149 $ 345,812 $ 340,688
Cost of sales 74,528 75,012 238,057 235,363
Gross margin 33,657 33,137 107,755 105,325
  
Selling, general and administrative expenses 32,676 32,480 99,355 96,267
Depreciation and amortization expenses 2,204 2,084 6,436 6,368
  
Total operating expenses 34,880 34,564 105,791 102,635
  
Other operating income 2,270 2,270
  
Operating income (loss) from continuing operations (1,223) 843 1,964 4,960
  
Interest expense 859 619 2,395 3,336
  
Earnings (loss) from continuing operations before income taxes (2,082) 224 (431) 1,624
  
Income tax expense (benefit) (839) 48 (183) 632
Earnings (loss) from continuing operations (1,243) 176 (248) 992
  
Loss from discontinued operations, net of income tax benefit of $80, $77, $260, and $103, respectively (130) (127) (425) (169)
Net earnings (loss) $ (1,373) $ 49 $ (673) $ 823
  
Earnings (loss) per share  
Basic  
Continuing operations $ (0.34) $ 0.04 $ (0.07) $ 0.25
Discontinued operations (0.03) (0.03) (0.11) (0.04)
  
Net earnings (loss) per share $ (0.37) $ 0.01 $ (0.18) $ 0.21
  
Earnings (loss) per share  
Diluted 
Continuing operations $ (0.34) $ 0.04 $ (0.07) $ 0.25
Discontinued operations (0.03) (0.03) (0.11) (0.04)
  
Net earnings (loss) per share $ (0.37) $ 0.01 $ (0.18) $ 0.21
*Fiscal year 2012 amounts have been revised to reflect the change in accounting for inventory.
Weighted-average shares outstanding:
Basic 3,677,357 3,842,745 3,769,234 3,842,745
Diluted 3,677,357 3,842,745 3,769,234 3,842,745
ALCO Stores, Inc.
Schedule of Adjusted SG&A
(Unaudited)
 
 Thirteen Week Periods EndedThirty-Nine Week Periods Ended
 (dollars and average selling square feet in thousands, except square footage ratios)October 28,
2012
October 30,
2011
October 28,
2012
October 30,
2011
SG&A Expenses Breakout
Store support center (1) $ 5,245 4,755 15,207 14,812
Distribution center 1,667 2,051 5,087 5,665
401K benefit (53) (53)
Same-store SG&A (2) 24,308 25,292 75,184 75,223
Non same-store SG&A (3) 1,359 343 3,550 346
Share-based compensation 97 92 327 274
SG&A as reported 32,676 32,480 99,355 96,267
Less:
Share-based compensation (97) (92) (327) (274)
Preopening store costs (3) (171) (233) (416) (236)
Executive and corporate staff severance (1) (49) (271) (131)
Gain (loss) on sale of assets (1) (87) (9) 4 126
Adjusted SG&A $ 32,272 32,146 98,345 95,752
Adjusted SG&A % of sales 29.8% 29.7% 28.4% 28.1%

Sales per average selling square foot (4)
$ 24.50 25.41 78.77 80.06
Gross Margin dollars per average selling square feet (4) $ 7.62 7.79 24.54 24.75
Adjusted SG&A per average selling square foot (4) $ 7.31 7.55 22.40 22.50
Adjusted EBITDA per average selling square foot (4)(5) $ 0.31 0.23 2.14 2.25
Average inventory per average selling square foot (4)(6)(7) $ 33.98 35.24 33.83 34.13
Average selling square feet (4) 4,416 4,255 4,390 4,255
Total stores operating beginning of period 215 213 216 214
Total stores operating end of period 215 214 215 214
Total non same-stores 6 1 6 1
Supplemental Data:
Same-store gross margin dollar change (2.1)% 0.3% (0.7)% 0.9%
Same-store SG&A dollar change (3.8)% 0.1% 0.0% (1.0)%
Same-store total customer count change (6.8)% (3.9)% (5.0)% (3.0)%
Same-store average sale per ticket change 3.7% 6.9% 4.0% 7.7%

(1) Store support center includes severance and gain (loss) on sale of assets
(2) These amounts may not agree with 10-Qs and 10-Ks of previous quarters due to stores that had reached their fourteenth period of operation. In addition, these amounts may not agree with 10-Qs and 10-Ks of previous quarters due to subsequent store closures. These closed stores are now included in discontinued operations. 
(3) Non same-stores are those stores which have not reached their fourteenth period of operation
(4) Average selling square feet is calculated as beginning square feet plus ending square feet divided by 2
(5) Adjusted EBITDA per average selling square foot is calculated as Adjusted EBITDA divided by average selling square feet
(6) Average store level merchandise inventory is calculated as beginning inventory plus ending inventory divided by 2
(7) Excludes inventory for unopened stores
ALCO Stores, Inc.
Schedule of Adjusted EBITDA
(Unaudited)
 
  Twenty-Six Week 
Periods Ended
Trailing 
52 Weeks
Ended
Thirteen Week 
Periods Ended
Trailing
52 Weeks
Ended
 (dollars in thousands)52 Weeks
Fiscal 2012
July 29,
2012
July 31,
2011
July 29,
2012
October 28,
2012
October 30,
2011
October 28,
2012
Net earnings (loss) from continuing operations (1) $ 1,839 995 817 2,017 (1,243) 176 598
Plus:
Interest 4,207 1,536 2,718 3,025 859 619 3,265
Tax expense (benefit) (1) 753 656 583 826 (839) 48 (61)
Depreciation and amortization (1) 8,569 4,232 4,283 8,518 2,204 2,084 8,638
Share-based compensation 257 229 182 304 97 92 309
Preopening store costs (2) 557 245 3 799 171 233 737
Executive and corporate staff severance (3) 143 222 131 234 49 283
(Gain) loss on sale of assets 252 (92) (135) 295 87 9 373
Insurance proceeds (4) (2,270) (2,270) (2,270)
=Adjusted EBITDA (1) (3)(4) 14,307 8,023 8,582 13,748 1,385 991 14,142
Cash 2,491 2,407 6,431 2,407 1,179 3,125 1,179
Debt 65,437 56,567 65,380 56,567 74,745 80,211 74,745
Debt, net of cash $ 62,946 54,160 58,949 54,160 73,566 77,086 73,566

(1) These amounts may not agree with 10-Qs and 10-Ks 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 years 2013 and 2012, the Company made departmental restructuring changes resulting in severance.
(4) On September 9, 2011, the Company received a $2.3 million settlement from Factory Mutual Insurance Company for damage sustained during the second quarter of fiscal 2012, due to wind and hail.
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
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