10-Q 1 0001.htm SECURITIES AND EXCHANGE COMMISSION

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

[x]    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 29, 2000

OR

[  ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITES EXCHANGE ACT OF 1934

For the transition period from __________ to __________.

Commission file number 1-6140

DILLARD'S, INC.

(Exact name of registrant as specified in its charter)

DELAWARE                                                                71-0388071
State or other jurisdiction                                                            (IRS Employer
of incorporation or organization)                                                   Identification Number)

1600 CANTRELL ROAD, LITTLE ROCK, ARKANSAS 72201
(Address of principal executive office)
(Zip Code)

 

(501) 376-5200

(Registrant's telephone number, including area code)

 

Indicate by checkmark 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 time 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 the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

 

 

CLASS A COMMON STOCK as of April 29, 2000     89,584,720
CLASS B COMMON STOCK as of April 29, 2000       4,010,929

 

 

 

 

 

Index

DILLARD'S, INC.

 
 

Page

Part I. Financial Information

Number

 

Item 1. Financial Statements (Unaudited):
 

Consolidated Balance Sheets as of April 29, 2000, January 29, 2000 and May 1, 1999

 3
 

Consolidated Statements of Income and Retained Earnings for the Three and Twelve

  
 

Month Periods Ended April 29, 2000 and May 1, 1999

 4
 

Consolidated Statements of Cash Flows for the Three Months Ended April 29, 2000

  
 

And May 1, 1999

 5
 

Notes to Consolidated Financial Statements

 6

*

Item 2.

Management's Discussion and Analysis of Financial Condition

  
 

And Results of Operations

 8
     

Item 3.

Quantitative and Qualitative Disclosure About Market Risk

11
     

Part II. Other Information

    
     

Item 1.

Legal Proceedings

11
     

Item 2.

Changes in Securities and Use of Proceeds

11
     

Item 3.

Defaults Upon Senior Securities

11
     

Item 4.

Submissions of Matters to a Vote of Security Holders

11
     

Item 5.

Other Information

11
     

Item 6.

Exhibits and Reports on Form 8-K

11
     

Signatures

  

12

 

 

PART 1. FINANCIAL INFORMATION

ITEM 1. Financial Statements

DILLARD'S, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Amounts in Thousands)

April 29,

January 29,

May 1,

2000

2000

1999

Assets

Current Assets:

Cash and cash equivalents

$   246,277 

$   198,721 

$   182,281 

Trade accounts receivable, net

997,403 

1,104,925 

1,069,730 

Merchandise inventories

2,448,787 

2,047,830 

2,564,668 

Other current assets

61,875 

72,249 

28,623 

Total current assets

3,754,342 

3,423,725 

3,845,302 

Property and Equipment, net

3,598,622 

3,619,191 

3,631,274 

Goodwill, net

606,216 

610,180 

655,185 

Other Assets

273,596 

265,108 

419,168 

Total Assets

$ 8,232,776 

$ 7,918,204 

$ 8,550,929 

Liabilities and Stockholders' Equity

Current Liabilities:

Trade accounts payable and accrued expenses

$ 1,059,091 

$   667,626 

$ 1,179,857 

Federal and state income taxes

12,991 

32,404 

42,446 

Current portion of long-term debt

108,049 

108,049 

107,289 

Current portion of capital lease obligations

2,522 

2,515 

2,332 

Total current liabilities

1,182,653 

810,594 

1,331,924 

Long-term Debt

2,892,682 

2,894,616 

3,000,893 

Capital Lease Obligations

24,082 

24,659 

26,518 

Other liabilities

121,541 

121,455 

74,764 

Deferred Income Taxes

686,422 

702,467 

681,061 

Guaranteed Preferred Beneficial Interests in the

Company's Subordinated Debentures

531,579 

531,579 

531,579 

Stockholders' Equity:

Preferred stock

- 

-

440 

Common stock

1,155 

1,155 

1,150 

Additional paid-in capital

695,507 

695,507 

682,313 

Retained earnings

2,622,029 

2,579,567 

2,495,461 

Less treasury stock

(524,874)

(443,395)

(275,174)

Total stockholders' equity

2,793,817 

2,832,834 

2,904,190 

Total Liabilities and Stockholders' Equity

$ 8,232,776 

$ 7,918,204 

$ 8,550,929 

See notes to consolidated financial statements.

 

DILLARD'S, INC.

CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS

(Unaudited)

(Amounts in Thousands, Except Per Share Data)

Three Months Ended

Twelve Months Ended

April 29,

May 1,

April 29,

May 1,

2000

1999

2000

1999

Net Sales

$2,082,577 

$2,120,069 

$8,639,219 

$8,201,527 

Service Charges, Interest and Other

63,171 

64,868 

242,829 

232,182 

2,145,748 

2,184,937 

8,882,048 

8,433,709 

Costs and Expenses:

Cost of sales

1,384,057 

1,392,718 

5,753,770 

5,460,525 

Advertising, selling, administrative

and general expenses

536,358 

532,713 

2,204,342 

2,188,877 

Depreciation and amortization

75,976 

72,984 

295,660 

258,101 

Rentals

16,106 

15,830 

75,494 

73,521 

Interest and debt expense

58,726 

62,717 

232,575 

225,741 

Impairment charges

- 

- 

69,708 

- 

2,071,223 

2,076,962 

8,631,549 

8,206,765 

Income Before Income Taxes

74,525 

107,975 

250,499 

226,944 

Income Taxes

28,320 

41,030 

107,510 

87,810 

 

Net Income

46,205 

66,945 

142,989 

139,134 

Retained Earnings at Beginning

of the Period

2,579,567 

2,432,793 

2,495,461 

2,373,513 

2,625,772 

2,499,738 

2,638,450 

2,512,647 

Cash Dividends Declared

(3,743)

(4,277)

(16,421)

(17,186)

 

Retained Earnings at End of Period

$2,622,029 

$2,495,461 

$ 2,622,029 

$2,495,461 

Earnings per Common Share:

Basic

$0.48

$ 0.63

$1.39

$1.30

Diluted

$0.48

$ 0.63

$1.39

$1.30

Cash Dividends Declared Per

Common Share

$0.04

$0.04

$0.16

$0.16

 

 

 

 

See notes to consolidated financial statements.

 

 

DILLARD'S, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Amounts in Thousands)

Three Months Ended

April 29,

May 1,

2000

1999

Operating Activities:

Net income

$   46,205 

$   66,945 

Adjustments to reconcile net income to

net cash provided by operating activities:

Depreciation and amortization

76,701 

73,807 

Changes in operating assets and liabilities:

Decrease in trade accounts receivable, net

107,522 

122,842 

Increase in merchandise inventories and other current assets

(390,583)

(408,016)

Increase in other assets

(9,213)

(42,129)

Increase in trade accounts payable and accrued expenses,

other liabilities and income taxes

356,093 

375,517 

Net cash provided by operating activities

186,725 

188,966 

Investing Activities:

Purchases of property and equipment

(51,443)

(15,552)

Net cash used in investing activities

(51,443)

(15,552)

Financing Activities:

Principal payments on long-term debt and capital lease obligations

(2,504)

(59,248)

Cash dividends paid

(3,743)

(4,286)

Purchase of treasury stock

(81,479)

-

Net cash used in financing activities

(87,726)

(63,534)

Increase in Cash and Cash Equivalents

47,556 

109,880 

Cash and Cash Equivalents, Beginning of Period

198,721 

72,401 

 

Cash and Cash Equivalents, End of Period

$  246,277

$  182,281 

 

 

 

 

See notes to consolidated financial statements.

 

 

 

 

 

 

 

 

DILLARD'S, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

April 29, 2000

 

Note 1. Basis of Presentation

The accompanying unaudited consolidated financial statements of Dillard's, Inc. (the "Company") have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete fina

Note 2. Earnings Per Share Data

The following table sets forth the computation of basic and diluted earnings per share ("EPS") for the periods indicated (in thousands, except per share data).

 

Three Months Ended

    

Twelve Months Ended
 

April 29,

May 1,

    

April 29,

May 1,
 

2000

1999

    

2000

1999

Basic:

            

Net Income

$46,205

$66,945

    

$142,989

$139,134

Preferred stock dividends

-

(6)

    

(2)

(22)

Net earnings available for

            

per-share calculations

$46,205

$66,939

    

$142,987

$139,112

Average shares outstanding

95,648

106,924

    

102,646

106,832

Basic earnings per share

$ .48

$ .63

    

$ 1.39

$ 1.30
             

Diluted:

            

Net income

$46,205

$66,945

    

$142,989

$139,134

Preferred stock dividends

-

(6)

    

(2)

(22)

Net earnings available for

            

per-share calculations

$46,205

$66,939

    

$142,987

$139,112

Average shares outstanding

95,648

106,924

    

102,646

106,832

Stock options

-

44

    

142

308

Total average equivalent shares

95,648

106,968

    

102,788

107,140

Diluted earnings per share

$ .48

$ .63

    

$ 1.39

$ 1.30

 

Options to purchase 10,052,189 and 7,149,391 shares of Class A common stock at prices ranging from $18.13 to $40.22 per share were outstanding at April 29, 2000 and May 1, 1999, respectively, but were not included in the computation of diluted earnings per share because they would be antidilutive.

Note 3. Acquisition

The Company acquired the Mercantile Stores Company, Inc. ("Mercantile") on August 13, 1998 ("Mercantile Acquisition"). The Mercantile Acquisition was accounted for as a purchase and, accordingly, the results of operations of Mercantile have been included in the Company's results of operations from August 13, 1998. In connection with the Mercantile Acquisition, the Company entered into two separate agreements; whereby the Company either sold or exchanged certain of th

The following unaudited pro-forma condensed statements of operations give effect to the Mercantile Acquisition and related financing transactions as if such transactions had occurred at the beginning of the periods presented (amounts in thousands, except per share data):

     

Twelve Months
     

Ended
     

May 1,
     

1999

Net sales

    

$8,818,277

Net income

    

125,765
       

Basic EPS

    

1.18

Diluted EPS

    

1.17
       

The pro-forma amounts reflect the results of operations of the Company, the acquired business and the following adjustments: (i) elimination of sales, cost of goods sold and operating expenses related to the stores subsequently sold, (ii) depreciation on property and equipment and amortization of intangible assets based on the purchase price allocation, (iii) interest expense on debt incurred in connection with the Mercantile Acquisition, and (iv) adjustment of

The foregoing unaudited pro-forma information is provided for illustrative purposes only and does not purport to be indicative of results that actually would have been achieved had the Mercantile Acquisition been consummated on the first day of the periods presented or of future results.

 

Note 4. Common Stock Repurchase

On September 14, 1999, the Company announced that the Board of Directors had authorized the repurchase of up to $250 million of Class A Common Stock. During the quarter ended April 29, 2000, the Company repurchased approximately $82 million of Class A Common Stock, representing 5.2 million shares at an average price of $15.8 per share, completing the total purchases authorized under the Share Repurchase Program.

On May 20, 2000 the Board of Directors of the Company authorized the repurchase of up to an additional $200 million of its Class A Common Stock.

 

 

ITEM 2. Management's Discussion And Analysis Of Financial

Condition And Results Of Operations

Results of Operations

The following table sets forth the results of operations, expressed as a percentage of net sales, for the periods indicated:

Three Months Ended

Twelve Months Ended

April 29,

May 1,

April 29,

May 1,

2000

1999

2000

1999

Net sales

100.0

%

100.0

%

100.0

%

100.0

%

Cost of sales

66.5

65.7

66.6

66.6

Gross profit

33.5

34.3

33.4

33.4

Advertising, selling, administrative

and general expenses

25.8

25.1

25.5

26.7

Depreciation and amortization

3.5

3.4

3.4

3.1

Rentals

0.8

0.8

0.9

0.9

Interest and debt expense

2.8

3.0

2.7

2.7

Impairment charges

-

-

0.8

-

Total operating expenses

32.9

32.3

33.3

33.4

Service charges, interest and other

3.0

3.1

2.8

2.8

Income before income taxes

3.6

5.1

2.9

2.8

Income taxes

1.4

1.9

1.2

1.1

Net income

2.2

%

3.2

%

1.7

%

1.7

%

Net Sales

Net sales decreased 2% for the three month period ended April 29, 2000, compared to the three month period ended May 1, 1999. These decreases were primarily due to decreases in comparable store sales with declines most prevalent in the junior and accessories product lines. Net sales increased 5% for the twelve month period ended April 29, 2000 compared to the same period in 1999. These increases were primarily due to (i) increases in comparable store sales, (ii) incremental revenue

Comparable store sales for the Company decreased 2% during the three month period ended April 29, 2000 and increased 2% during the twelve month period ended April 29, 2000 compared to the same periods of 1999.

Cost of Sales

Cost of sales, as a percent of net sales, was 66.5%% and 66.6% for the three and twelve month periods ended April 29, 2000 compared to 65.7% and 66.6% for the three and twelve month periods ended May 1, 1999

Cost of sales for the three months ended April 29, 2000 was negatively impacted by markdowns resulting from continued focus on reducing excess store inventory levels and lower than expected sales levels. Comparable store inventories decreased by 5% over last year's first quarter levels.

Advertising, Selling, Administrative and General Expenses

Advertising, selling, administrative and general expenses ("SG&A expenses"), as a percentage of net sales, were 25.8% and 25.5% for the three and twelve month periods ended April 29, 2000 compared to 25.1% and 26.7% for the comparable 1999 periods.

The increase in SG&A expenses as a percent of sales is primarily due to lower than expected sales levels and slight increases in selling payroll expense.

Depreciation and Amortization Expense

Depreciation and amortization expense, as a percent of net sales, increased for the three and twelve month periods ended April 29, 2000 compared to similar periods in 1999, due primarily to the increased levels of property and equipment and increased amortization of goodwill related to the Acquisition in the third quarter of fiscal 1998. Goodwill amortization was $16.6 million and $11.6 million for the twelve months ended April 29, 2000 and May 1, 1999, respecti v

Rentals

Rental expense, as a percent of net sales, remained constant for the three and twelve month periods ended April 29, 2000 at .8% and .9%, respectively, compared to .8% and .9%, respectively, for the three and twelve month periods ended May 1, 1999.

Interest and Debt Expense

Interest and debt expense for the three months ended April 29, 2000 decreased to $58.7 million or 2.8% of net sales compared to $62.7 million or 3.0% of net sales for the three months ended May 1, 1999. This reduction is due primarily to a decrease in the average amount of outstanding debt in the first quarter of 2000 compared to the first quarter of 1999.

Interest and debt expense, as a percent of net sales, was flat in the twelve month period ended April 29, 2000, compared to the similar period in 1999.

Service Charges, Interest and Other Income

Service charges, interest and other income for the three months ended April 29, 2000 decreased to $63.2 million or 3.0% of net sales compared to $64.9 million or 3.1% of net sales for the three months ended May 1, 1999. This decrease is due to a decrease in the average amount of outstanding accounts receivable in the first quarter of 2000 compared to the first quarter of 1999.

.

Income Taxes

The effective federal and state income tax rates for the three month period ended April 29, 2000 and May 1, 1999 was 38%. The effective federal and state income tax rates for the twelve month period ended April 29, 2000 was 43% compared to 39% for the twelve month period ended May 1, 1999. The increase in the effective tax rate is the result of the nondeductible portion of the impairment charge recorded in the fourth quarter of fiscal 1999.

Financial Condition

Cash provided by operating activities totaled $186.7 million and $189.0 million for the three months ended April 29, 2000 and May 1, 1999, respectively.

The Company invested $51.4 million in capital expenditures for the three months ended April 29, 2000 compared to $15.6 million for the three months ended May 1, 1999.

During the three months ended April 29, 2000, the Company opened the Palm Beach store in West Palm Beach, Florida. The Company anticipates opening an additional three new stores in 2000, resulting in an addition of approximately 350,000 square feet of retail space. In addition, the Company embarked on a major expansion at the Willowbrook store in Houston, Texas and completed a replacement store at La Plaza in McAllen, Texas.

Cash used in financing activities for the three months ended April 29, 2000 totaled $87.7 million compared to $63.5 million for the three months ended May 1, 1999. During the three months ended April 29, 2000 and May 1, 1999, the Company reduced its level of outstanding debt by $2.5 million and $59.2 million, respectively.

On September 14, 1999, the Company announced that the Board of Directors had authorized a Class A Common Stock repurchase program, whereby the Company may repurchase up to $250 million of Class A Common Stock. During the three months ended April 29, 2000, the Company has repurchased approximately 5.2 million Class A Common Shares for approximately $81.5 million.

On May 20, 2000 the Board of Directors of the Company authorized the repurchase of up to an additional $200 million of its Class A Common Stock.

Management of the Company believes that cash generated from operations will be sufficient to cover its reasonably foreseeable working capital, capital expenditure, stock repurchase and debt service requirements. Depending on conditions in the capital markets and other factors, the Company will from time to time consider the issuance of debt or other securities, or other possible capital market transactions, the proceeds of which could be used to refinance current indebtedness or for othe

Forward-Looking Information

Statements in the Management's Discussion and Analysis of Financial Condition and Results of Operations include certain "forward-looking statements", including (without limitation) statements with respect to anticipated future operating and financial performance, growth and acquisition opportunities and other similar forecasts and statements of expectation. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," and "should" and

Item 3. Quantitative and Qualitative Disclosure About Market Risk.

None

PART II OTHERII OTHER INFORMATION

 

Item 1. Legal Proceedings

None

Item 2. Changes in Securities and Use of Proceeds

None

 

Item 3. Defaults Upon Senior Securities

None

 

Item 4. Submission of Matters to a Vote of Security Holders

None

Item 5. Other Information

Ratio of Earnings to Fixed Charges:

The Company has calculated the ratio of earnings to fixed charges pursuant to Item 503 of Regulation S-K of the Securities and Exchange Act as follows:

Three Months Ended

  

Fiscal Year Ended

April 29,

May 1,

January 29,

January 30,

January 31,

February 1,

February 3,

2000

  

1999

  

2000

  

1999

  

1998

  

1997

  

1996*

2.12

  

2.58

  

2.04

  

1.97

  

3.69

  

3.61

  

2.86

* 53 week year.

 

Item 6. Exhibits and Reports on Form 8-K

  1. Exhibit (12): Statement re: Computation of Earnings to Fixed Charges

  2. Reports of Form 8-K filed during the first quarter: None

 

 

 

 

 

 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 
 

(Registrant)
   
   
   

Date: June 13, 2000

/s/ James I. Freeman
 

James I. Freeman
 

Senior Vice-President & Chief Financial Officer
 

(Principal Financial and Accounting Officer)