<PAGE>
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 October 29, 1994
OR
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission file number 1-6140
DILLARD DEPARTMENT STORES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 71-0388071
(State or other (IRS Employer
jurisdiction of incorporation Identification Number)
or organization)
1600 CANTRELL ROAD, LITTLE ROCK, ARKANSAS 72201
(Address of principal executive offices)
(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 period 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 October 29, 1994 108,987,158
CLASS B COMMON STOCK as of October 29, 1994 4,017,061
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1 Financial Statements
CONSOLIDATED BALANCE SHEETS
DILLARD DEPARTMENT STORES, INC.
(Unaudited)
(Thousands)
<TABLE>
October 29 January 29 October 30
1994 1994 1993
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $46,318 $51,244 $41,784
Trade accounts receivable 999,248 1,096,530 997,530
Merchandise inventories 1,742,353 1,299,944 1,636,555
Other current assets 18,807 8,976 22,687
TOTAL CURRENT ASSETS 2,806,726 2,456,694 2,698,556
INVESTMENTS AND OTHER ASSETS 66,741 52,110 51,276
PROPERTY AND EQUIPMENT, NET 1,918,933 1,878,077 1,837,778
CONSTRUCTION IN PROGRESS 28,931 13,977 23,079
BUILDINGS UNDER CAPITAL LEASES 23,745 29,416 29,990
$4,845,076 $4,430,274 $4,640,679
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable and accrued expenses $853,510 $529,475 $758,058
Commercial paper 150,107 145,276 226,258
Federal and state income taxes 31,524 54,011 39,804
Current portion of long-term debt 115,742 65,061 54,379
Current portion of capital lease obligations 2,146 2,242 2,197
TOTAL CURRENT LIABILITIES 1,153,029 796,065 1,080,696
LONG-TERM DEBT 1,179,593 1,238,293 1,307,079
CAPITAL LEASE OBLIGATIONS 22,827 31,621 32,199
DEFERRED INCOME TAXES 282,648 282,648 251,851
STOCKHOLDERS' EQUITY
Preferred stock 440 440 440
Common stock 1,130 1,130 1,129
Additional paid-in capital 623,024 622,634 618,914
Retained earnings 1,582,385 1,457,443 1,348,371
2,206,979 2,081,647 1,968,854
$4,845,076 $4,430,274 $4,640,679
See notes to consolidated financial statements.
</TABLE>
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
DILLARD DEPARTMENT STORES, INC.
(Unaudited)
(Thousands, except per share data)
<TABLE>
Three Months Ended Nine Months Ended Twelve Months Ended
October 29 October 30 October 29 October 30 October 29 October 30
1994 1993 1994 1993 1994 1993
<S> <C> <C> <C> <C> <C> <C>
Net sales (including leased
departments) $1,333,630 $1,228,065 $3,801,887 $3,495,962 $5,436,573 $5,035,841
Service charges, interest, and other 44,775 44,547 138,345 137,392 182,699 179,643
1,378,405 1,272,612 3,940,232 3,633,354 5,619,272 5,215,484
Cost and expenses:
Cost of sales 866,249 785,969 2,494,126 2,249,796 3,551,087 3,247,220
Advertising, selling, administrative
and general expenses 336,329 312,776 957,366 898,380 1,298,035 1,222,085
Depreciation and amortization 50,966 47,025 142,695 128,236 185,640 155,837
Rentals 12,176 13,620 38,183 38,855 64,286 64,957
Interest and debt expense 30,748 32,345 93,569 98,772 125,712 130,693
1,296,468 1,191,735 3,725,939 3,414,039 5,224,760 4,820,792
INCOME BEFORE INCOME TAXES 81,937 80,877 214,293 219,315 394,512 394,692
Federal and state income taxes 31,135 38,500 81,430 89,525 150,305 154,445
NET INCOME 50,802 42,377 132,863 129,790 244,207 240,247
Retained earnings at beginning
of period 1,534,973 1,308,249 1,457,443 1,225,353 1,348,371 1,126,526
Cash dividends declared (3,390) (2,255) (7,921) (6,772) (10,193) (9,032)
Issuance of common stock under stock option,
employee savings and stock bonus plans (9,370)
RETAINED EARNINGS AT END
OF PERIOD $1,582,385 $1,348,371 $1,582,385 $1,348,371 $1,582,385 $1,348,371
Net income per common share $0.45 $0.38 $1.18 $1.15 $2.16 $2.13
Cash dividends declared per common share $0.03 $0.02 $0.07 $0.06 $0.09 $0.08
Average shares outstanding 113,004 112,840 113,016 112,748 113,009 112,729
See notes to consolidated financial statements.
</TABLE>
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
DILLARD DEPARTMENT STORES, INC.
(Unaudited)
(Thousands)
Nine Months Ended
October 29 October 30
1994 1993
OPERATING ACTIVITITES
Net income $132,863 $129,790
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 143,868 129,470
Changes in operating assets and liabilities:
Decrease in trade accounts receivable 97,282 92,690
Increase in merchandise inventories and
other current assets (452,240) (475,167)
Decrease in investments and other assets (15,804) (1,050)
Increase in trade accounts payable and
accrued expenses and income taxes 300,429 219,881
NET CASH PROVIDED BY OPERATING ACTIVITIES 206,398 95,614
INVESTING ACTIVITIES
Purchase of property and equipment (192,834) (243,127)
NET CASH USED IN INVESTING ACTIVITIES (192,834) (243,127)
FINANCING ACTIVITIES
Net increase in commercial paper 4,831 169,637
Principal payments on long-term debt and
capital lease obligations (16,909) (77,710)
Dividends paid (6,802) (9,032)
Common stock sold 390 13,818
NET CASH (USED IN) PROVIDED BY
FINANCING ACTIVITIES (18,490) 96,713
DECREASE IN CASH AND CASH EQUIVALENTS (4,926) (50,800)
Cash and cash equivalents at beginning of period 51,244 92,584
CASH AND CASH EQUIVALENTS AT END OF PERIOD $46,318 $41,784
See notes to consolidated financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles 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 generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for
the nine month period ended October 29, 1994 are not necessarily indicative
of the results that may be expected for the fiscal year ended January 28,
1995 due to the seasonal nature of the business. For further information,
refer to the consolidated financial statements and footnotes thereto included
in the Company's annual report on Form 10-K for the fiscal year ended January
29, 1994.
2. The retail last-in, first-out (LIFO) inventory method is used to value
merchandise inventories, with such LIFO merchandise inventories not being
carried in excess of current cost. Under this method, at October 29, 1994,
and October 30, 1993, the LIFO cost of merchandise inventories was
approximately $16.3 million and $16.4 million, respectively, less than
current cost. At January 29, 1994, the LIFO cost of merchandise inventories
was approximately $13.2 million less than current cost.
3. Net sales include leased department sales of $8.9 million and $13.3
million for the quarters ended October 29, 1994 and October 30, 1993,
respectively. Leased department sales for the nine months ended October 29,
1994 and October 30, 1993 were $27.8 million and $43.0 million, respectively.
Leased department sales for the twelve months ended October 29, 1994 and
October 30, 1993 were $51.3 million and $79.9 million, respectively.
4. The effective income tax rate was 38% for the first nine months of 1994
and 41% for the first nine months of 1993. During the third quarter of 1993,
Congress passed the Omnibus Budget Reconciliation Act of 1993 (the "Act")
which raised the federal income tax rate by 1% effective January 1, 1993.
Included in income tax expense for the three and nine months ended October
30, 1993 is a charge of approximately $8 million for the retroactive effect
of the Act on the earnings for the first half of 1993 and for the cumulative
effect of the Act on the Company's deferred income taxes. No allocation
between current and deferred income taxes was made during the interim periods
as such amounts would not be material to the consolidated balance sheets.
The provision for income taxes is based on an estimated annual effective tax
rate.
<PAGE>
<TABLE>
ITEM 2 Management's Discussion And Analysis Of
Financial Condition And Results Of Operations
Results of Operations
The following table sets forth operating results expressed as a percentage
of net sales for the periods indicated:
Three Months Ended Nine Months Ended Twelve Months Ended
October 29 October 30 October 29 October 30 October 29 October 30
1994 1993 1994 1993 1994 1993
<S> <C> <C> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales 65.0 64.0 65.6 64.3 65.3 64.5
Gross Profit 35.0 36.0 34.4 35.7 34.7 35.5
Advertising, selling, administrative
and general expenses 25.2 25.5 25.2 25.7 23.9 24.3
Depreciation and amortization 3.8 3.8 3.7 3.7 3.4 3.1
Rentals 0.9 1.1 1.0 1.1 1.2 1.3
Interest and debt expense 2.3 2.6 2.5 2.8 2.3 2.6
Total operating expenses 32.2 33.0 32.4 33.3 30.8 31.3
Other income 3.3 3.6 3.6 3.9 3.4 3.6
Income before income taxes 6.1 6.6 5.6 6.3 7.3 7.8
Federal and state income taxes 2.3 3.1 2.1 2.6 2.8 3.1
Net income 3.8 3.5 3.5 3.7 4.5 4.8
</TABLE>
<PAGE>
Sales for the third quarter of 1994 were $1,333.6 million as compared to
$1,228.1 million for the third quarter of 1993. This was an increase of 9%.
The sales increase for comparable stores was 5%. The nine month sales
increase for 1994 over 1993 was 9%. The year to date comparable stores sales
increase was 5%. The twelve month sales increase for 1994 over 1993 was 8%;
for comparable stores the increase was 5%.
Cost of sales increased from 64.0% of net sales for the third quarter of 1993
to 65.0% for the third quarter of 1994. For the nine months ended October
29, 1994 the cost of sales as a percent of net sales increased to 65.6% from
64.3% for the same period in 1993. For the twelve months ended October 29,
1994 and October 30, 1993, the increase was from 64.5% to 65.3%. This
increase in cost of sales as a percentage of sales in the current year
periods was due primarily to a higher level of markdowns and a slightly lower
initial markup on merchandise purchases.
Advertising, selling, administrative and general expenses decreased from
25.5% of net sales for the third quarter of 1993 to 25.2% for the third
quarter of 1994. For the nine months ended October 29, 1994 and October 30,
1993 advertising, selling, administrative and general expenses as a
percentage of net sales decreased from 25.7% to 25.2%. For the twelve months
ended October 29, 1994 and October 30, 1993 advertising, selling,
administrative and general expenses as a percentage of net sales decreased
from 24.3% to 23.9%. The Company continues to control these expenses as
sales increase.
Depreciation and amortization expense as a percentage of net sales remained
constant at 3.8% in the third quarter of 1994 and 1993 and at 3.7% for the
nine months ended October 29, 1994 and October 30, 1993. For the twelve
months ended October 29, 1994 and October 30, 1993 depreciation and
amortization expense as a percentage of net sales increased from 3.1% to
3.4%. This was due to a higher proportion of the Company's properties being
owned rather than leased.
<PAGE>
Rental expense decreased to .9% from 1.1% of net sales for the three months
ended October 29, 1994 and October 30, 1993. For the nine months ended
October 29, 1994 rental expense as a percentage of net sales decreased from
1.1% of net sales in 1993 to 1.0% of net sales in 1994. For the twelve
months ended October 29, 1994 rental expense decreased from 1.3% of net sales
in 1993 to 1.2% of net sales in 1994. This was due to a higher proportion of
the Company's properties being owned rather than leased.
Interest and debt expense decreased from 2.6% of net sales for the third
quarter of 1993 to 2.3% for the third quarter of 1994 . For the nine months
ended October 29, 1994 interest and debt expense decreased from 2.8% of net
sales in 1993 to 2.5% of net sales in 1994. For the twelve months ended
October 29, 1994 interest and debt expense decreased from 2.6% of net sales
in 1993 to 2.3% of net sales in 1994. This was due to a lower level of debt
for the first nine months of this year compared to last year.
Service charges, interest and other income decreased from 3.6% of net sales
in the three months of 1993 to 3.3% of net sales in 1994. For the nine
months ended October 29, 1994 the decrease was from 3.9% of net sales in 1993
to 3.6% of net sales in 1994. For the twelve months ended October 29, 1994
this decreased to 3.4% of net sales in 1994 from 3.6% of net sales in 1993.
This decline is caused by a decline in credit sales as a percentage of total
sales.
The effective federal and state income tax rate was 38% for the third quarter
of 1994 and 48% for the third quarter of 1993. During the third quarter of
1993, Congress passed the Omnibus Budget Reconciliation Act of 1993 (the
"Act"), which raised the federal income tax rate by 1% effective January 1,
1993. Included in income tax expense for the three and nine months ended
October 30, 1993 is a charge of approximately $8 million for the retroactive
effect of the Act on the earnings for the first half of 1993 and for the
cumulative effect of the Act on the Company's deferred income taxes.
Excluding the above described charge, the effective federal and state income
tax rate was 38% for the third quarter of 1993.
Net income for the three months ended October 29, 1994 was $50.8 million as
compared to $42.4 million for the three months ended October 30, 1993. This
was an increase of 20%. For the nine months ended October 29, 1994, net
income increased 2% to $132.9 million as compared to $129.8 million for the
same period in 1993. For the twelve month period ended October 29, 1994, the
increase was 2% from the prior period.
Financial Condition
The Company's working capital was $1,653.7 million at October 29, 1994,
$1,660.6 million at January 29, 1994, and $1,617.9 million at October 30,
1993. The current ratio for these periods was 2.4, 3.1 and 2.5,
respectively. The ratio of long-term debt and capitalized lease obligations
as a percentage of equity was 54.5%, 61.0% and 68.0% at October 29, 1994,
January 29, 1994, and October 30, 1993, respectively. This ratio decreased
due to reductions in long-term debt as well as an increase in stockholders'
equity.
The Company invested $192.8 million in capital expenditures for the nine
months ended October 29, 1994 as compared to $243.1 million for the nine
months ended October 30, 1993. In 1994, the Company has built eight new
stores, one replacement store and remodeled significantly four additional
stores. In 1993, the Company opened ten new stores and remodeled
significantly twelve stores.
Merchandise inventories increased by 6.5% from $1,636.6 million at October
30, 1993 to $1,742.4 million at October 29, 1994. This increase was due to
the opening of eight new stores in 1994 and an increase in comparable store
inventory levels. On a comparable store basis, the rate of increase in
merchandise inventories was slightly lower than the rate of increase for
comparable stores sales.
Fluctuations in certain other balance sheet accounts between January 29, 1994
and October 29, 1994 reflect normal seasonal variations within the retail
industry.
<PAGE>
PART II OTHER INFORMATION
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 Commission as
follows:
Nine Months Ended Fiscal Year Ended
Oct 29 Oct 30 January 29 January 30 February 1 February 2 February 3
1994 1993 1994 1993 1992 1991 1990*
2.97 2.92 3.57 3.59 3.40 3.38 3.07
*53 weeks
ITEM 6 Exhibits and Reports on Form 8-K
(a) Exhibit (11): Statement re: Computation of Per Share Earnings
Exhibit (12): Statement re: Computation of Ratio of Earnings to
Fixed Charges
Exhibit (27): Financial Data Schedule
(b)Reports on Form 8-K filed during the third quarter:
None.
<PAGE>
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.
DILLARD DEPARTMENT STORES, INC.
(Registrant)
DATE: December 7, 1994 James I. Freeman
James I. Freeman
Senior Vice President & Chief Financial Officer
(Principal Financial & Accounting Officer)
<PAGE>
EXHIBIT INDEX
Exhibits to Form 10-Q
Exhibit Number Exhibit
11 Statement re: Computation of
Per Share Earnings
12 Statement re: Computation of
Ratio of Earnings to Fixed Charges
27 Financial Data Schedule
<PAGE>
EXHIBIT 11 - STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(Unaudited)
<TABLE>
Three Months Ended Nine Months Ended Twelve Months Ended
October 29 October 30 October 29 October 30 October 29 October 30
1994 1993 1994 1993 1994 1993
<S> <C> <C> <C> <C> <C> <C>
Average shares outstanding 113,004,219 112,814,450 112,996,435 112,683,895 112,984,329 112,590,514
Net effect of dilutive stock options based
on the treasury stock method using
average market price 0 25,453 19,456 64,590 24,488 138,410
Total 113,004,219 112,839,903 113,015,891 112,748,485 113,008,817 112,728,924
Net Income $50,802,000 $42,377,000 $132,863,000 $129,790,000 $244,207,000 $240,247,000
Less preferred dividends (5,500) (5,500) (16,500) (16,500) (22,000) (22,000)
Net income available to common shares $50,796,500 $42,371,500 $132,846,500 $129,773,500 $244,185,000 $240,225,000
Per share $0.45 $0.38 $1.18 $1.15 $2.16 $2.13
</TABLE>
<PAGE>
EXHIBIT 12 - STATEMENT RE: COMPUTATION OF RATIO OF EARNINGS TO FIXED
CHARGES
(Unaudited)
(Dollar amounts in thousands)
<TABLE>
Nine Months Ended Fiscal Year Ended
October 30 October 30 January 29 January 30 February 1 February 2 February 3
1993 1993 1994 1993 1992 1991 1990 *
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated pretax income $214,293 $219,315 $399,534 $375,330 $322,157 $280,778 $227,892
Fixed charges (less capitalized
interest) 106,324 111,751 152,604 142,892 128,925 115,125 107,782
EARNINGS $320,617 $331,066 $552,138 $518,222 $451,082 $395,903 $335,674
Interest $93,569 $98,772 $130,915 $121,940 $109,386 $97,032 $91,836
Preferred stock dividends 27 27 36 35 34 34 34
Capitalized interest 1,764 1,655 1,882 1,646 3,574 1,928 1,504
Interest factor in rent expense 12,728 12,952 21,653 20,917 19,505 18,059 15,912
FIXED CHARGES $108,088 $113,406 $154,486 $144,538 $132,499 $117,053 $109,286
Ratio of earnings to fixed charges 2.97 2.92 3.57 3.59 3.40 3.38 3.07
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-28-1995
<PERIOD-END> OCT-29-1994
<CASH> 46,318
<SECURITIES> 0
<RECEIVABLES> 999,248
<ALLOWANCES> 13,145
<INVENTORY> 1,742,353
<CURRENT-ASSETS> 2,806,726
<PP&E> 3,040,016
<DEPRECIATION> 1,068,407
<TOTAL-ASSETS> 4,845,076
<CURRENT-LIABILITIES> 1,153,029
<BONDS> 1,202,420
<COMMON> 1,130
0
440
<OTHER-SE> 2,205,409
<TOTAL-LIABILITY-AND-EQUITY> 4,845,076
<SALES> 3,801,887
<TOTAL-REVENUES> 3,940,232
<CGS> 2,494,126
<TOTAL-COSTS> 2,494,126
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 30,249
<INTEREST-EXPENSE> 93,569
<INCOME-PRETAX> 214,293
<INCOME-TAX> 81,430
<INCOME-CONTINUING> 132,863
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 132,863
<EPS-PRIMARY> 1.18
<EPS-DILUTED> 1.18
</TABLE>
