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ALCO Stores, Inc. Reports Operating Results for First Half of Fiscal 2014

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COPPELL, Texas, Sept. 17, 2013 (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 second quarter ended August 4, 2013.

Net sales from continuing operations, excluding fuel, increased 3.9% to $122.4 million during the second quarter of fiscal 2014, compared to $117.9 million in the second quarter of fiscal 2013. Same-store sales, excluding fuel centers, increased 1.4% to $119.3 million during the second quarter of fiscal 2014. For the 26 weeks ended August 4, 2013, net sales from continuing operations, excluding fuel, increased 2.0% to $236.2 million, compared to the same period of the prior year. Same-store sales, excluding fuel centers, decreased 0.8% to $229.4 million during the 26 weeks ended August 4, 2013.

Net income was $0.5 million, or $0.15 per diluted share, for the second quarter of fiscal 2014 compared to net income of $2.0 million, or $0.52 per diluted share, for the second quarter of fiscal 2013.

Results in the second quarter of fiscal 2014 included $1.8 million ($1.2 million net of tax benefit) of non-recurring expenses attributable to the relocation of the corporate office and the pending merger. On an adjusted basis, net income from continuing operations was $1.8 million, or $0.54 per diluted share, for the second quarter of fiscal 2014.

Net loss for the 26 weeks ended August 4, 2013 was $1.2 million, or $0.36 per diluted share, compared to net income of $0.7 million, or $0.18 per diluted share, for the 26 weeks ended July 29, 2012.

Results in the first half of fiscal 2014 also included $1.8 million ($1.2 million net of tax benefit) of non-recurring expenses attributable to the relocation of the corporate office and the pending merger. On an adjusted basis, net income from continuing operations was $0.2 million, or $0.04 per diluted share, for the 26 weeks ended August 4, 2013.

Richard Wilson, President and CEO, commented, "Operating results in the second quarter benefited from an increase in average market basket and same-store sales as ALCO shoppers embraced the value proposition and merchandise mix in our stores. Excluding the non-recurring costs associated with our pending merger and the now-completed headquarters move to the Dallas area, net income per share increased modestly from the prior-year period. This summer also marked the beginning of a strategic change for ALCO Stores following the July 25 announcement of a proposed merger agreement, which shareholders will read about in the upcoming proxy filing."

Supplemental Data

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

Certain Non-GAAP Financial Measures

The Company has included Adjusted 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. 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 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 EBITDA may not reflect important aspects of the results of the Company's operations.

ALCO Stores, Inc.

ALCO Stores, Inc. is a broad-line retailer, primarily located in small underserved communities across 23 states. The Company has 213 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 112 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.

- Tables to follow -

ALCO Stores, Inc.
Balance Sheets
(dollars in thousands, except share data) August 4, February 3,
2013 2013
Assets (Unaudited)
Current assets:
Cash $2,834 $3,160
Receivables 12,434 13,187
Inventories 174,528 166,671
Prepaid expenses 4,389 3,767
Deferred income taxes 4,079 3,081
Property held for sale 568 568
Total current assets 198,832 190,434
Property and equipment, at cost:
Land and land improvements 5,658 5,648
Buildings and building improvements 10,500 10,499
Furniture, fixtures and equipment 78,118 74,066
Transportation equipment 988 988
Leasehold improvements 21,138 21,138
Construction work in progress 5,575 5,083
Total property and equipment 121,977 117,422
Less accumulated depreciation and amortization 85,631 81,794
Net property and equipment 36,346 35,628
Property under capital leases 26,972 26,972
Less accumulated amortization 11,981 11,476
Net property under capital leases 14,991 15,496
Deferred income taxes — non current 1,538 1,693
Other non-current assets 1,955 624
Total assets $253,662 $243,875
Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of capital lease obligations $574 $580
Accounts payable 30,129 39,220
Accrued salaries and commissions 3,674 3,111
Accrued taxes other than income taxes 5,559 5,046
Self-insurance claim reserves 4,291 4,429
Other current liabilities 5,812 4,429
Total current liabilities 50,039 56,815
Notes payable under revolving loan 81,562 63,446
Capital lease obligations - less current maturities 15,621 15,936
Deferred gain on leases 2,860 3,053
Other noncurrent liabilities 2,361 2,462
Total liabilities 152,443 141,712
Stockholders' equity:
Common stock, $.0001 par value, authorized 20,000,000 shares; 3,258,163 and 3,808,338 shares issued and outstanding, respectively 1 1
Additional paid-in capital 36,761 36,533
Retained earnings 64,457 65,629
Total stockholders' equity 101,219 102,163
Total liabilities and stockholders' equity $253,662 $243,875
ALCO Stores, Inc.
Statements of Operations
(dollars in thousands, except share data)
(Unaudited)
Thirteen Week Periods Ended Twenty-Six Week Periods Ended
August 4, July 29, August 4, July 29,
2013 2012 2013 2012
Net sales $124,057 $119,817 $239,366 $235,095
Cost of sales 84,848 80,542 166,059 161,794
Gross margin 39,209 39,275 73,307 73,301
Selling, general and administrative 35,052 32,870 68,509 65,823
Depreciation and amortization expenses 2,194 2,116 4,361 4,214
Total operating expenses 37,246 34,986 72,870 70,037
Operating income 1,963 4,289 437 3,264
Interest expense 957 792 2,010 1,536
Earnings (loss) from continuing operations before income taxes 1,006 3,497 (1,573) 1,728
Income tax expense (benefit) 376 1,415 (589) 685
Earnings (loss) from continuing operations 630 2,082 (984) 1,043
Loss from discontinued operations, net of income tax benefit of $81, $59, $114, and $209 respectively (133) (97) (188) (343)
Net earnings (loss) $497 $1,985 $(1,172) $700
Earnings (loss) per share
Basic
Continuing operations $0.19 $0.55 $(0.30) $0.27
Discontinued operations (0.04) (0.03) (0.06) (0.09)
Net earnings (loss) per share $0.15 $0.52 $(0.36) $0.18
Earnings (loss) per share
Diluted
Continuing operations $0.19 $0.55 $(0.30) $0.27
Discontinued operations (0.04) (0.03) (0.06) (0.09)
Net earnings (loss) per share $0.15 $0.52 $(0.36) $0.18
ALCO Stores, Inc.
Schedule of Adjusted SG&A
(Unaudited)
Thirteen Week Periods Ended Twenty-Six Week Periods Ended
August 4, July 29, August 4, July 29,
2013 2012 2013 2012
SG&A Expenses from Continuing Operations
Store support center (1) $6,931 $4,678 $12,122 $9,963
Distribution center 1,343 1,632 3,169 3,420
401K expense 125 250
Same-store SG&A (2) 25,934 26,420 51,413 52,170
Non same-store SG&A (3) 631 40 1,327 40
Share-based compensation 88 100 228 230
SG&A as reported 35,052 32,870 68,509 65,823
(Less) add:
Share-based compensation (88) (100) (228) (230)
Pending merger (1) (1,208) (1,208)
Office relocation (1) (602) (602)
Gain (loss) on sale of fixed assets (1) (1) 92
Adjusted SG&A from Continuing Operations $33,154 $32,769 $66,471 $65,685
Adjusted SG&A as % of sales 26.7% 27.3% 27.8% 27.9%
Sales per average selling square feet (4) $28.03 $27.51 $54.08 $54.03
Gross Margin dollars per average selling square feet (4) $8.97 $9.16 $16.78 $17.10
Adjusted SG&A per average selling square feet (4) $7.59 $7.64 $15.21 $15.32
Adjusted EBITDA per average selling square feet (4)(5) $1.34 $1.49 $1.50 $1.66
Average inventory per average selling square feet (4)(6)(7) $38.35 $33.82 $35.30 $32.77
Average selling square feet (4) 4,369 4,287 4,369 4,287
Total stores operating beginning of period 217 214 217 216
Total stores operating end of period 213 215 213 215
Total stores less than twelve months old 3 6 3 6
Total non-same stores 3 6 3 6
Supplemental Data:
Same-store gross margin dollar change -2.7% -1.2% -2.9% 0.0%
Same-store SG&A dollar change 1.3% 2.5% 1.0% 1.9%
Same-store total customer count change -2.8% -6.1% -5.4% -4.1%
Same-store average sale per ticket change 4.3% 4.5% 4.9% 4.0%
(1) Store support center includes gain (loss) on disposal of fixed assets and costs associated with office relocation and pending merger.
(2) Same-stores are those stores which were open at the end of the reporting period, had reached their fourteenth month of operation, and include store locations, if any, that had experienced a remodel, an expansion, or relocation. Same-stores also include the Company's transactional website.
(3) Non same-stores are those stores which have not reached their fourteenth month 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)
Trailing Trailing
Thirteen Week Periods 53 Weeks Thirteen Week Periods 53 Weeks
53 Weeks Ended Ended Ended Ended
May 5, April 29, May 5, August 4, July 29, August 4,
Fiscal 2013 2013 2012 2013 2013 2012 2013
Net earnings (loss) $1,307 (1,668) (1,284) 923 497 1,985 (565)
Plus:
Interest 3,477 1,053 744 3,786 957 792 3,951
Taxes 311 (998) (880) 193 295 1,356 (868)
Depreciation and amortization 8,902 2,181 2,122 8,961 2,211 2,141 9,031
EBITDA 13,997 568 702 13,863 3,960 6,274 11,549
Plus:
Share-based compensation 381 140 130 391 88 100 379
Pending merger 602 602
Office relocation 1,208 1,208
(Gain) loss asset disposals 141 (92) 233 1 232
Adjusted EBITDA 14,519 708 740 14,487 5,858 6,375 13,970
Cash 3,160 2,923 612 2,923 2,834 2,407 2,834
Debt 79,962 87,979 53,208 87,979 97,757 56,567 97,757
Debt, net of cash $76,802 85,056 52,596 85,056 94,923 54,160 94,923

CONTACT: For more information, contact: Wayne S. Peterson Senior Vice President - Chief Financial Officer 469-322-2900 X1071 email: wpeterson@alcostores.com or Debbie Hagen Hagen and Partners 913-642-6363 email: dhagen@hagenandpartners.com

Source:ALCO Stores, Inc.