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
1600 CANTRELL ROAD, LITTLE ROCK, ARKANSAS 72201
(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 89,584,720CLASS B COMMON STOCK as of April 29, 2000 4,010,929
Index
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
Changes in Securities and Use of Proceeds
Defaults Upon Senior Securities
Item 4.
Submissions of Matters to a Vote of Security Holders
Item 5.
Other Information
Item 6.
Exhibits and Reports on Form 8-K
Signatures
12
PART 1. FINANCIAL INFORMATION
ITEM 1. Financial Statements
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(
April 29,
January 29,
May 1,
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
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
Stockholders' Equity:
Preferred stock
-
440
Common stock
1,155
1,150
Additional paid-in capital
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
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(Amounts in Thousands, Except Per Share Data)
Three Months Ended
Twelve Months Ended
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
2,432,793
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
Earnings per Common Share:
Basic
$0.48
$ 0.63
$1.39
$1.30
Diluted
Cash Dividends Declared Per
Common Share
$0.04
$0.16
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
Operating Activities:
Net income
$ 46,205
$ 66,945
Adjustments to reconcile net income to
net cash provided by operating activities:
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
Financing Activities:
Principal payments on long-term debt and capital lease obligations
(2,504)
(59,248)
Cash dividends paid
(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
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 finaNote 2. Earnings Per Share DataThe following table sets forth the computation of basic and diluted earnings per share ("EPS") for the periods indicated (in thousands, except per share data).
Note 2. Earnings Per Share Data
Basic:
$46,205
$66,945
$142,989
$139,134
Preferred stock dividends
(6)
(2)
(22)
Net earnings available for
per-share calculations
$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:
Stock options
44
142
308
Total average equivalent shares
106,968
102,788
107,140
Diluted earnings per share
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
Net sales
$8,818,277
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:
100.0
%
66.5
65.7
66.6
Gross profit
33.5
34.3
33.4
25.8
25.1
25.5
26.7
3.5
3.4
3.1
0.8
0.9
2.8
3.0
2.7
Total operating expenses
32.9
32.3
33.3
Service charges, interest and other
Income before income taxes
3.6
5.1
2.9
Income taxes
1.4
1.9
1.2
1.1
2.2
3.2
1.7
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
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.
.
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.
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
Item 2. Changes in Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
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:
Fiscal Year Ended
January 30,
January 31,
February 1,
February 3,
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
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)