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 July 29, 1995
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 Identification Number)
incorporation 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 July 29, 1995 109,028,595
CLASS B COMMON STOCK as of July 29, 1995 4,017,061
<PAGE>
<TABLE>
PART I FINANCIAL INFORMATION
ITEM 1 Financial Statements
CONSOLIDATED BALANCE SHEETS
DILLARD DEPARTMENT STORES, INC.
(Unaudited)
(Thousands)
July 29 January 28 July 30
1995 1995 1994
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ASSETS
CURRENT ASSETS
Cash and cash equivalents $48,564 $51,095 $49,502
Trade accounts receivable 996,252 1,102,104 986,112
Merchandise inventories 1,458,574 1,362,756 1,361,721
Other current assets 10,439 8,847 11,258
TOTAL CURRENT ASSETS 2,513,829 2,524,802 2,408,593
INVESTMENTS AND OTHER ASSETS 73,783 68,810 69,690
PROPERTY AND EQUIPMENT, NET 1,973,515 1,911,453 1,879,245
CONSTRUCTION IN PROGRESS 54,528 49,469 43,690
BUILDINGS UNDER CAPITAL LEASES 22,152 23,223 24,266
$4,637,807 $4,577,757 $4,425,484
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable and accrued expenses $572,831 $545,522 $525,591
Commercial paper 51,588 89,906 115,947
Federal and state income taxes 7,259 65,454 15,980
Current portion of long-term debt 130,768 55,903 115,501
Current portion of capital lease obligations 2,160 2,173 2,102
TOTAL CURRENT LIABILITIES 764,606 758,958 775,121
LONG-TERM DEBT 1,153,732 1,178,503 1,184,768
CAPITAL LEASE OBLIGATIONS 21,234 22,279 23,380
DEFERRED INCOME TAXES 294,450 294,450 282,648
STOCKHOLDERS' EQUITY
Preferred Stock 440 440 440
Common Stock 1,130 1,130 1,130
Additional paid-in capital 624,086 624,086 623,024
Retained earnings 1,778,129 1,697,911 1,534,973
2,403,785 2,323,567 2,159,567
$4,637,807 $4,577,757 $4,425,484
See notes to consolidated financial statements.
</TABLE>
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<TABLE>
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
DILLARD DEPARTMENT STORES, INC.
(Unaudited)
(Thousands, except per share data)
Three Months Ended Six Months Ended Twelve Months Ended
July 29 July 30 July 29 July 30 July 29 July 30
1995 1994 1995 1994 1995 1994
<S> <C> <C> <C> <C> <C> <C>
Net sales (including leased
departments) $1,265,066 $1,184,316 $2,591,820 $2,468,257 $5,669,366 $5,331,008
Service charges, interest, and other 44,826 45,548 92,348 93,570 181,563 182,471
1,309,892 1,229,864 2,684,168 2,561,827 5,850,929 5,513,479
Cost and expenses:
Cost of sales 824,946 774,798 1,706,874 1,627,877 3,693,625 3,470,807
Advertising, selling, administrative
and general expenses 330,961 309,827 658,421 621,037 1,365,737 1,274,482
Depreciation and amortization 50,354 46,013 98,170 91,729 196,740 181,699
Rentals 11,185 12,612 22,814 26,007 61,723 65,730
Interest and debt expense 30,133 32,169 57,547 62,821 119,008 127,309
1,247,579 1,175,419 2,543,826 2,429,471 5,436,833 5,120,027
INCOME BEFORE INCOME TAXES 62,313 54,445 140,342 132,356 414,096 393,452
Federal and state income taxes 23,680 20,690 53,330 50,295 157,355 157,670
NET INCOME 38,633 33,755 87,012 82,061 256,741 235,782
Retained earnings at beginning
of period 1,742,899 1,503,488 1,697,911 1,457,443 1,534,973 1,308,249
1,781,532 1,537,243 1,784,923 1,539,504 1,791,714 1,544,031
Cash dividends declared (3,403) (2,270) (6,794) (4,531) (13,585) (9,058)
RETAINED EARNINGS AT END
OF PERIOD $1,778,129 $1,534,973 $1,778,129 $1,534,973 $1,778,129 $1,534,973
Net income per common share $0.34 $0.30 $0.77 $0.73 $2.27 $2.09
Cash dividends declared per common share $0.03 $0.02 $0.06 $0.04 $0.12 $0.08
Average shares outstanding 113,106 113,042 113,076 113,022 113,041 112,968
See notes to consolidated financial statements.
</TABLE>
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<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
DILLARD DEPARTMENT STORES, INC.
(Unaudited)
(Thousands)
Six Months Ended
July 29 July 30
1995 1994
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OPERATING ACTIVITITES
Net income $87,012 $82,061
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 98,910 92,533
Changes in operating assets and liabilities:
Decrease in trade accounts receivable 105,852 110,418
Increase in merchandise inventories and
other current assets (97,410) (64,059)
Increase in investments and other assets (5,713) (18,384)
Decrease in trade accounts payable and
accrued expenses and income taxes (30,887) (39,655)
NET CASH PROVIDED BY OPERATING ACTIVITIES 157,764 162,914
INVESTING ACTIVITIES
Purchase of property and equipment (164,220) (117,460)
NET CASH USED IN INVESTING ACTIVITIES (164,220) (117,460)
FINANCING ACTIVITIES
Net decrease in commercial paper (38,318) (29,329)
Proceeds from long-term borrowings 109,150
Principal payments on long-term debt and
capital lease obligations (60,114) (11,466)
Dividends paid (6,793) (6,791)
Common stock sold 390
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITES 3,925 (47,196)
DECREASE IN CASH AND CASH EQUIVALENTS (2,531) (1,742)
Cash and cash equivalents at beginning of period 51,095 51,244
CASH AND CASH EQUIVALENTS AT END OF PERIOD $48,564 $49,502
See notes to consolidated financial statements.
</TABLE>
<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
six month period ended July 29, 1995 are not necessarily
indicative of the results that may be expected for the fiscal
year ended February 3, 1996 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 28, 1995.
2. The retail last-in, first-out (LIFO) inventory method is used
to value merchandise inventories. Under this method, at July
29, 1995, and July 30, 1994, the LIFO cost of merchandise
inventories was approximately $1,000,000 and $15,500,000,
respectively, less than the first-in, first-out (FIFO) cost.
At January 28, 1995, the LIFO cost of merchandise inventories
was approximately equal to FIFO cost. At January 29, 1994 the
LIFO cost of merchandise inventories was approximately
$13,200,000 less than FIFO cost.
3. Net sales include leased department sales of $8,620,000 and
$10,035,000 for the quarters ending July 29, 1995 and July 30,
1994, respectively. Leased department sales for the six
months ending July 29, 1995 and July 30, 1994 were $15,892,000
and $18,893,000, respectively. Leased department sales for
the twelve months ending July 29, 1995 and July 30, 1994 were
$43,235,000 and $55,650,000, respectively.
4. On June 1, 1995, the Company issued $100,000,000 aggregate
principal amount of its 6.875% coupon, (6.99% yield to
maturity) notes due June 1, 2005. The notes were sold in an
underwritten public offering.
5. On July 13, 1995, the Company announced that it had entered
into an agreement for the acquisition of Gonzalez Padin Co.,
Inc., a San Juan, Puerto Rico based retailer. Gonzalez Padin
operates seven department stores in Puerto Rico with total
1994 sales volume of $65 million in 382,000 square feet.
<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 Six Months Ended Twelve Months Ended
July 29 July 30 July 29 July 30 July 29 July 30
1995 1994 1995 1994 1995 1994
<S> <C> <C> <C> <C> <C> <C>
Net sales 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Cost of sales 65.21% 65.42% 65.86% 65.95% 65.15% 65.10%
Gross profit 34.79% 34.58% 34.14% 34.05% 34.85% 34.90%
Advertising, selling, administrative
and general expenses 26.16% 26.16% 25.40% 25.16% 24.09% 23.91%
Depreciation and amortization 3.98% 3.89% 3.79% 3.72% 3.47% 3.41%
Rentals 0.89% 1.06% 0.88% 1.05% 1.08% 1.23%
Interest and debt expense 2.38% 2.72% 2.22% 2.55% 2.10% 2.39%
Total operating expenses 33.41% 33.83% 32.29% 32.48% 30.74% 30.94%
Other income 3.54% 3.85% 3.56% 3.79% 3.20% 3.42%
Income before income taxes 4.92% 4.60% 5.41% 5.36% 7.31% 7.38%
Federal and state income taxes 1.87% 1.75% 2.05% 2.04% 2.78% 2.96%
Net income 3.05% 2.85% 3.36% 3.32% 4.53% 4.42%
</TABLE>
<PAGE>
Sales for the second quarter of 1995 were $1,265,066,000 as
compared to $1,184,316,000 for the second quarter of 1994. This is
an increase of 7%. The sales increase for comparable stores was
4%. The six month sales increase for 1995 over 1994 was 5%. For
comparable stores the increase was 2%. The twelve month sales
increase for 1995 over 1994 was 6%, for comparable stores the
increase was 4%.
Cost of sales decreased from 65.42% of net sales for the second
quarter of 1994 to 65.21% for the second quarter of 1995. For the
six months ended July 29, 1995 the decrease was from 65.95% to
65.86%. For the twelve months ended July 29, 1995 and July 30,
1994, there was a slight increase from 65.10% to 65.15%.
Advertising, selling, administrative and general expenses remained
constant at 26.16% of net sales for the second quarter of 1995
compared to the second quarter of 1994. For the six months ended
July 29, 1995 and July 30, 1994 these expenses increased as a
percentage of net sales from 25.16% to 25.40%. For the twelve
months ended July 29, 1995 and July 30, 1994 they increased from
23.91% to 24.09%. These increases were primarily due to an
increase in payroll expense in the selling area.
Depreciation and amortization expense as a percentage of net sales
increased from 3.89% in the second quarter of 1994 to 3.98% in the
second quarter of 1995. For the six months ended July 29, 1995 and
July 30, 1994 these expenses increased as a percentage or net sales
from 3.72% to 3.79%. For the twelve months ended July 29, 1995 and
July 30, 1994 the increase was from 3.41% to 3.47%. These
increases were primarily due to a higher proportion of the
Company's properties being owned rather than leased.
Rental expense decreased from 1.06% of net sales for the second
quarter of 1994 to .89% of net sales for the second quarter of
1995. For the six months ended July 29, 1995 and July 30, 1994
these expenses decreased as a percentage of sales from 1.05% to
.88%. For the twelve months ended July 29, 1995 and July 30, 1995
the decrease was from 1.23% to 1.08%. These decreases were
primarily due to a higher proportion of the Company's properties
being owned rather than leased.
Interest and debt expense decreased from 2.72% of net sales for the
second quarter of 1994 to 2.38% for the second quarter of 1995 .
For the six months ended July 29, 1995 and July 30, 1994 these
expenses decreased as a percentage of net sales from 2.55% to
2.22%. For the twelve months ended July 29, 1995 and July 30, 1994
the decrease was from 2.39% to 2.10%. Interest and debt expense
declined as a percentage of net sales due to an overall lower level
of debt partially offset by higher interest rates on short-term
debt.
Service charges, interest and other income decreased from 3.85% of
net sales in the second quarter of 1994 to 3.54% of net sales in
1995. For the six months ended July 29, 1995 and July 30, 1994 the
decrease was from 3.79% to 3.56%. For the twelve months ended July
29, 1995 and July 30, 1994 the decrease was from 3.42% to 3.20%.
The primary cause for this decrease was a decline in proprietary
credit card sales as a percentage of total sales.
The effective federal and state income tax rate was 38% for the
second quarter of 1995 and 1994.
<PAGE>
Financial Condition
The Company's working capital was $1,749,223,000 at July 29, 1995,
$1,765,844,000 at January 28, 1995, and $1,633,472,000 at July 30,
1994. The current ratio for these periods was 3.3, 3.3 and 3.1,
respectively. The long-term debt to capitalization ratio was
32.8%, 34.1% and 35.9% at July 29, 1995, January 28, 1995, and July
30, 1994, respectively.
On June 1, 1995, the Company issued $100,000,000 6.875% notes due
June 1, 2005. The proceeds were used to reduce short-term
borrowings. At July 29, 1995, the Company had available for
issuance $100 million aggregate principal amount of unsecured debt
covered by an effective registration statement.
The Company invested $164,220,000 in capital expenditures for the
six months ended July 29, 1995 as compared to $117,460,000 for the
six months ended July 30, 1994. In 1995, the Company plans to
build eleven stores, two of which will be replacement stores and to
remodel and expand eight additional stores. In 1994, the Company
opened nine stores, two of which were replacement stores, and
significantly remodeled and expanded two additional stores.
Merchandise inventories increased by 7% from $1,361,721,000 at July
30, 1994 to $1,458,574,000 at July 29, 1995. This increase was due
to the opening of seven new stores in 1994 and four stores in the
first six months of 1995. On a comparable store basis, the rate of
increase in merchandise inventories was 2.5%.
Fluctuations in certain other balance sheet accounts between
January 28, 1995 and July 29, 1995 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:
Six Months Ended Fiscal Year Ended
July 29 July 30 January 28 January 29 January 30 February 1 February 2
1995 1994 1995 1994 1993 1992 1991
3.05 2.81 3.72 3.57 3.59 3.40 3.38
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
(b) Reports on Form 8-K filed during the second 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: September 6, 1995 /s/ 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
<TABLE>
EXHIBIT 11 - STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
Three Months Ended Six Months Ended Twelve Months Ended
July 29 July 30 July 29 July 30 July 30 July 29
1995 1994 1995 1994 1995 1994
<S> <C> <C> <C> <C> <C> <C>
Average shares outstanding 113,045,656 112,993,367 113,045,656 112,992,543 113,025,962 112,936,886
Net effect of dilutive
stock options based on
the treasury stock method
using average market price 60,735 48,652 30,368 29,184 15,184 30,852
Total 113,106,391 113,042,019 113,076,024 113,021,727 113,041,146 112,967,738
Net Income $38,633,000 $33,755,000 $87,012,000 $82,061,000 $256,741,000 $235,782,000
Less preferred dividends (5,500) (5,500) (11,000) (11,000) (22,000) (22,000)
Net income available to
common shares $38,627,500 $33,749,500 $87,001,000 $82,050,000 $256,719,000 $235,760,000
Per share $0.34 $0.30 $0.77 $0.73 $2.27 $2.09
</TABLE>
<TABLE>
EXHIBIT 12 - STATEMENT RE: COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)
Six Months Ended Fiscal Year Ended
July 30 July 29 January 28 January 29 January 30 February 1 February 2
1995 1994 1995 1994 1993 1992 1991
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Consolidated pretax income $140,342 $132,356 $406,110 $399,534 $375,330 $322,157 $280,778
Fixed charges (less
capitalized interest) 65,170 71,508 145,957 152,604 142,892 128,925 115,125
EARNINGS $205,512 $203,864 $552,067 $552,138 $518,222 $451,082 $395,903
Interest $57,547 $62,821 $124,282 $130,915 $121,940 $109,386 $97,032
Preferred stock dividends 18 18 36 36 35 34 34
Capitalized interest 2,169 1,008 2,545 1,882 1,646 3,574 1,928
Interest factor in rent
expense 7,605 8,669 21,639 21,653 20,917 19,505 18,059
FIXED CHARGES $67,339 $72,516 $148,502 $154,486 $144,538 $132,499 $117,053
Ratio of earnings to
fixed charges 3.05 2.81 3.72 3.57 3.59 3.40 3.38
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-3-1996
<PERIOD-END> JUL-29-1995
<CASH> 48,564
<SECURITIES> 0
<RECEIVABLES> 996,252
<ALLOWANCES> 16,019
<INVENTORY> 1,458,574
<CURRENT-ASSETS> 2,513,829
<PP&E> 3,220,552
<DEPRECIATION> 1,170,357
<TOTAL-ASSETS> 4,637,807
<CURRENT-LIABILITIES> 764,606
<BONDS> 1,174,966
<COMMON> 1,130
0
440
<OTHER-SE> 2,402,215
<TOTAL-LIABILITY-AND-EQUITY> 4,637,807
<SALES> 2,591,820
<TOTAL-REVENUES> 2,684,168
<CGS> 1,706,874
<TOTAL-COSTS> 1,706,874
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 21,424
<INTEREST-EXPENSE> 57,547
<INCOME-PRETAX> 140,342
<INCOME-TAX> 53,330
<INCOME-CONTINUING> 87,012
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 87,012
<EPS-PRIMARY> .77
<EPS-DILUTED> .77
</TABLE>
