<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 May 4, 1996
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 May 4, 1996 109,452,874
CLASS B COMMON STOCK as of May 4, 1996 4,016,929
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1 Financial Statements
CONSOLIDATED BALANCE SHEETS
DILLARD DEPARTMENT STORES, INC.
(Unaudited)
(Thousands)
<TABLE>
May 4 February 3 April 29
1996 1996 1995
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $70,696 $58,442 $48,889
Trade accounts receivable 1,038,569 1,103,575 1,034,356
Merchandise inventories 1,750,318 1,486,045 1,584,719
Other current assets 6,237 10,163 9,410
TOTAL CURRENT ASSETS 2,865,820 2,658,225 2,677,374
INVESTMENTS AND OTHER ASSETS 87,803 84,772 75,653
PROPERTY AND EQUIPMENT, NET 2,010,346 1,980,790 1,942,851
CONSTRUCTION IN PROGRESS 38,975 43,552 33,399
BUILDINGS UNDER CAPITAL LEASES 9,347 11,196 22,831
$5,012,291 $4,778,535 $4,752,108
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable and accrued expenses $700,305 $559,011 $660,364
Commercial paper 165,503 125,310 129,825
Federal and state income taxes 43,805 51,832 44,967
Current portion of long-term debt 206,378 131,378 55,865
Current portion of capital lease obligations 1,835 2,149 2,038
TOTAL CURRENT LIABILITIES 1,117,826 869,680 893,059
LONG-TERM DEBT 1,081,004 1,157,864 1,173,998
CAPITAL LEASE OBLIGATIONS 18,400 20,161 22,046
DEFERRED INCOME TAXES 252,503 252,503 294,450
STOCKHOLDERS' EQUITY
Preferred Stock 440 440 440
Common Stock 1,135 1,131 1,130
Additional paid-in capital 636,475 625,249 624,086
Retained earnings 1,904,508 1,851,507 1,742,899
2,542,558 2,478,327 2,368,555
$5,012,291 $4,778,535 $4,752,108 **********
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 Twelve Months End
May 4 April 29 May 4 April 29
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net sales (including leased
departments) $1,453,302 $1,326,754 $6,044,586 $5,588,616 **********
Service charges, interest, and 48,451 47,522 180,029 182,285
1,501,753 1,374,276 6,224,615 5,770,901
Cost and expenses:
Cost of sales 955,797 881,928 3,967,655 3,643,477
Advertising, selling, administrative
and general expenses 366,353 327,460 1,475,339 1,344,603
Depreciation and amortization 50,334 47,816 194,323 192,399
Rentals 11,158 11,629 58,364 63,150
Interest and debt expense 28,585 27,414 121,225 121,044
Impairment charges - - 126,559 -
1,412,227 1,296,247 5,943,465 5,364,673
INCOME BEFORE INCOME TAXES 89,526 78,029 281,150 406,228
Federal and state income taxes 33,125 29,650 105,945 154,365
NET INCOME 56,401 48,379 175,205 251,863
Retained earnings at beginning
of period 1,851,507 1,697,911 1,742,899 1,503,488
1,907,908 1,746,290 1,918,104 1,755,351
Cash dividends declared (3,400) (3,391) (13,596) (12,452)
RETAINED EARNINGS AT END
OF PERIOD $1,904,508 $1,742,899 $1,904,508 $1,742,899
Net income per common share $0.50 $0.43 $1.55 $2.23
Cash dividends declared per com $0.03 $0.03 $0.12 $0.11
Average shares outstanding 113,794 113,046 113,331 113,025
See notes to consolidated financial statements.
</TABLE>
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
DILLARD DEPARTMENT STORES, INC.
(Unaudited)
(Thousands)
Three Months
May 4 April 29
1996 1995
OPERATING ACTIVITITES
Net income $56,401 $48,379
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 50,716 48,153
Changes in operating assets and liabilities:
Decrease in trade accounts receivable 65,006 67,748
Increase in merchandise inventories and
other current assets (260,347) (222,526)
Increase in investments and other assets (3,413) (7,180)
Increase in trade accounts payable and accrued
expenses and income taxes 133,267 94,365
NET CASH PROVIDED BY OPERATING ACTIVITIES 41,630 28,939
INVESTING ACTIVITIES
Purchase of property and equipment (73,464) (62,752)
NET CASH USED IN INVESTING ACTIVITIES (73,464) (62,752)
FINANCING ACTIVITIES
Net increase in commercial paper 40,193 39,919
Principal payments on long-term debt and
capital lease obligations (3,935) (4,911)
Dividends paid (3,400) (3,401)
Common stock issued 11,230 -
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES 44,088 31,607
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 12,254 (2,206)
Cash and cash equivalents at beginning of period 58,442 51,095
CASH AND CASH EQUIVALENTS AT END OF PERIOD $70,696 $48,889
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 three month period ended May 4, 1996 are not
necessarily indicative of the results that may be expected for the
fiscal year ending February 1, 1997 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 February 3, 1996.
2. The retail last-in, first-out (LIFO) inventory method is used to value
merchandise inventories. Under this method, at May 4, 1996 the LIFO
cost of merchandise inventories was approximately equal to the first-in,
first-out (FIFO) cost. At April 29, 1995, the LIFO cost of merchandise
inventories was approximately $500,000 less than the first-in, first-out
(FIFO) cost. At February 3, 1996 and January 28, 1995, the LIFO cost of
merchandise inventories was approximately equal to FIFO cost.
3. Net sales include leased department sales of $7 million and $7.3 million
for the quarters ended May 4, 1996 and April 29, 1995, respectively.
Leased department sales for the twelve months ended May 4, 1996 and
April 29, 1995 were $38.2 million and $44.6 million, respectively.
4. In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting
for Stock-Based Compensation," which is effective for the Company
beginning February 4, 1996. SFAS No. 123 requires expanded disclosures
of stock-based compensation arrangements with employees and encourages
(but does not require) compensation cost to be measured based on fair
value of the equity instrument awarded. Companies are permitted,
however, to continue to apply APB Opinion No. 25, which recognizes
compensation cost based on the intrinsic value of the equity instrument
awarded. The Company will continue to apply APB Opinion No. 25 to its
stock based compensation awards to employees and will disclose the
required pro forma effect on net income and earnings per share.
5. On June 7, 1996, the Company issued $100 million aggregate principal
amount of its 7.375% notes due June 1, 2006. The notes were sold in an
underwritten public offering.
<PAGE>
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 Twelve Months Ended
May 4 April 29 May 4 April 29
1996 1995 1996 1995
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 65.8 66.5 65.6 65.2
Gross Profit 34.2 33.5 34.4 34.8
Advertising, selling, administrative
and general expenses 25.2 24.7 24.4 24.1
Depreciation and amortization 3.4 3.6 3.2 3.4
Rentals 0.8 0.9 1.0 1.1
Interest and debt expense 1.9 2.0 2.0 2.2
Impairment charges 0.0 0.0 2.1 0.0
Total operating expenses 31.3 31.2 32.7 30.8
Other income 3.3 3.6 3.0 3.3
Income before income taxes 6.2 5.9 4.7 7.3
Federal and state income taxes 2.3 2.2 1.8 2.8
Net income 3.9 3.7 2.9 4.5
<PAGE>
Sales for the first quarter of 1996 were $1,453.3 million as compared to
$1,326.8 million for the first quarter of 1995. This is an increase of
10%. The sales increase for comparable stores was 6%. The twelve month
sales increase for 1996 over 1995 was 8%; for comparable stores the
increase was 4%. The majority of the increase in sales on a comparable
store basis was attributable to an increase in the volume of goods sold
rather than an increase in the price of goods.
Cost of sales decreased from 66.5% of net sales for the first quarter of
1995 to 65.8% for the first quarter of 1996. This decrease was due to
a lower level of markdowns in the first quarter of 1996 than in the
first quarter of 1995. For the twelve months ended May 4, 1996 and
April 29, 1995, the cost of sales increased from 65.2% to 65.6% of net
sales. This increase was due to a slightly higher level of markdowns
than in the prior year.
Advertising, selling, administrative and general expenses increased from
24.7% of net sales for the first quarter of 1995 to 25.2% for the first
quarter of 1996. For the twelve months ended May 4, 1996 and April 29,
1995, these expenses increased from 24.1% to 24.4% of net sales. The
Company expensed the preopening costs associated with the seven new
stores opened in the first quarter of 1996. In prior years the Company
expensed all preopening costs for the year in the fourth quarter. Also,
the bad debt expense increased as a percent of sales for the first
quarter of 1996 as compared to the first quarter of 1995.
Depreciation and amortization expense decreased slightly as a percentage
of sales from 1995 in the three and twelve month periods ended May 4,
1996. This decrease was due to the write down of certain impaired
assets in the fourth quarter of 1995, somewhat offset by the fact that
a higher proportion of the Company's properties are owned rather than
leased.
Rental expense decreased slightly from .9% of net sales for the first
quarter of 1995 to .8% for the first quarter of 1996. For the twelve
months ended May 4, 1996 and April 29, 1995 the decrease was from 1.1%
to 1.0%. This was due to a higher proportion of the Company's
properties being owned rather than leased.
Interest and debt expense decreased from 2.0% of net sales for the first
quarter of 1995 to 1.9% of net sales for the first quarter of 1996. For
the twelve months ended May 4, 1996 and April 29, 1995 the decrease was
from 2.2% to 2.0%. Interest and debt expense declined as a percentage
of net sales due to a lower level of debt relative to sales, partially
offset by higher interest rates on short-term debt.
Service charges, interest and other income decreased to 3.3% of net
sales in the first quarter of 1996 from 3.6% of net sales in 1995. For
the twelve months ended May 4, 1996 and April 29, 1995 this decrease was
from 3.3% to 3.0%. 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 37% for the first
quarter of 1996 and 38% for the first quarter of 1995.
<PAGE>
Financial Condition
The Company's working capital was $1,747,994,000 at May 4, 1996,
$1,788,545,000 at February 3, 1996, and $1,784,315,000 at April 29,
1995. The current ratio for these periods was 2.6, 3.1 and 3.0,
respectively. The long-term debt to capitalization ratio was 30.19%,
32.2% and 33.6% at May 4, 1996, February 3, 1996, and April 29, 1995,
respectively. The ratio of long-term debt to capitalization is
calculated by dividing the total amount of long-term debt and
capitalized lease obligations by the sum of the total amount of long-
term debt and capitalized lease obligations plus total equity. The
changes in the above ratios were primarily caused by the increase in
current maturity of long-term debt and the corresponding decrease in
long-term debt.
On June 7, 1996, the Company issued $100 million 7.375% notes due June
1, 2006. The proceeds were used to reduce short term borrowings.
The Company invested $73,464,000 in capital expenditures for the three
months ended May 4, 1996 as compared to $62,752,000 for the three months
ended April 29, 1995. In 1996, the Company plans to build sixteen new
stores, one of which will be a replacement store, and to expand and
remodel three existing stores. In 1995, the Company opened eleven new
stores, two of which were replacement stores, and expanded
six stores.
Merchandise inventories increased by 10% from $1,584,719,000 at April
29, 1995 to $1,750,318,000 at May 4, 1996. The Company operated 13 more
stores at May 4, 1996 versus April 29, 1995. This was the primary
reason for the increase in inventory. On a comparable store basis, the
rate of increase in merchandise inventories was 5%.
Fluctuations in certain other balance sheet accounts between February 3,
1996 and May 4, 1996 reflect normal seasonal variations within the
retail industry. The levels of merchandise inventories and accounts
receivable fluctuate due to the seasonal nature of the retail business.
Along with the fluctuations in these current assets, there is also a
corresponding fluctuation in trade accounts payable and commercial
paper.
<PAGE>
PART II OTHER INFORMATION
ITEM 4 Submission of Matters to a Vote of Security Holders
The annual meeting of stockholders of the Company was held on May 18, 1996.
The matters submitted to a vote of the stockholders were the election of
directors and a stockholder proposal requesting preparation of an employment
practices report. The holders of Class A Common Stock elected five directors
and the holders of Class B Common Stock elected ten directors. The
individuals elected as directors and the votes received were as follows:
Nominee For Against
Class A Nominees
Robert C. Connor 94,501,305 2,163,555
Will D. Davis 94,493,359 2,171,501
John Paul Hammerschmidt 92,977,522 3,687,338
William B. Harrison 81,732,108 14,932,752
J.M. Hessels 82,654,913 14,009,947
Class B Nominees
William Dillard 4,010,760 0
Calvin N. Clyde 4,010,760 0
Drue Corbusier 4,010,760 0
Alex Dillard 4,010,760 0
Mike Dillard 4,010,760 0
William Dillard II 4,010,760 0
James I. Freeman 4,010,760 0
John H. Johnson 4,010,760 0
E. Ray Kemp 4,010,760 0
William H. Sutton 4,010,760 0
The votes cast in connection with the stockholder proposal were as follows:
For 11,640,136.70 Against 72,209,279.65 Abstain 11,906,486.65
<PAGE>
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:
Three Months Ended Fiscal Year Ended
May 4 April 29 February 3 January 28 January 29 January 30 February 1
1996 1995 1996 1995 1994 1993 1992
3.69 3.37 2.76 3.72 3.57 3.59 3.41
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 first quarter:
The Company filed a report dated June 4, 1996 relating to the issue
of $100 million aggregate principal amount of 7.375% Notes maturing
on June 1, 2006.
<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: June 17, 1996 /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
EXHIBIT 11 - STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
<TABLE>
Three Months Ended Twelve Months Ended
May 4 April 29 May 4 April 29
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Average shares outstanding 113,219,578 113,045,656 113,090,100 113,012,890
Net effect of dilutive stock options based
on the treasury stock method using
average market price 574,431 0 240,830 12,163
Total 113,794,009 113,045,656 113,330,930 113,025,053
Net Income $56,401,000 $48,379,000 $175,205,000 $251,863,000
Less preferred dividends (5,500) (5,500) (22,000) (22,000)
Net income available to common shares $56,395,500 $48,373,500 $175,183,000 $251,841,000
Per share $0.50 $0.43 $1.55 $2.23
</TABLE>
EXHIBIT 12 - STATEMENT RE: COMPUTATION OF RATIO OF EARNINGS TO FIXED
CHARGES
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
Three Months Ended Fiscal Year Ended
May 4 April 29 February 3 January 28 January 29 January 30 February 1
1996 1995 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated pretax income $89,526 $78,029 $269,653 $406,110 $399,534 $375,330 $322,157
Fixed charges (less
capitalized interest) 32,304 31,290 139,666 145,921 152,568 142,857 128,891
EARNINGS $121,830 $109,319 $409,319 $552,031 $552,102 $518,187 $451,048
Interest $28,585 $27,414 $120,054 $124,282 $130,915 $121,940 109,386
Capitalized interest 750 1,195 3,567 2,545 1,882 1,646 3,574
Interest factor in rent
expense 3,719 3,876 19,612 21,639 21,653 20,917 19,505
FIXED CHARGES $33,054 $32,485 $143,233 $148,466 $154,450 $144,503 $132,465
Ratio of earnings to fixed
charges 3.69 3.37 2.86 3.72 3.57 3.59 3.41
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-END> MAY-4-1997
<CASH> 70,696
<SECURITIES> 0
<RECEIVABLES> 1,038,569
<ALLOWANCES> 18,272
<INVENTORY> 1,750,318
<CURRENT-ASSETS> 2,865,820
<PP&E> 3,266,958
<DEPRECIATION> 1,208,290
<TOTAL-ASSETS> 5,012,291
<CURRENT-LIABILITIES> 1,117,826
<BONDS> 1,099,404
0
440
<COMMON> 1,135
<OTHER-SE> 2,540,983
<TOTAL-LIABILITY-AND-EQUITY> 5,012,291
<SALES> 1,453,302
<TOTAL-REVENUES> 1,501,753
<CGS> 955,797
<TOTAL-COSTS> 955,797
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 15,710
<INTEREST-EXPENSE> 28,585
<INCOME-PRETAX> 89,526
<INCOME-TAX> 33,125
<INCOME-CONTINUING> 56,401
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 56,401
<EPS-PRIMARY> .50
<EPS-DILUTED> .50
</TABLE>
