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 November 1, 1997
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'S, 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 November 1, 1997 107,063,180
CLASS B COMMON STOCK as of November 1, 1997 4,016,929
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<TABLE>
PART I FINANCIAL INFORMATION
ITEM 1 Financial Statements
CONSOLIDATED BALANCE SHEETS
DILLARD'S, INC.
(Unaudited)
(Thousands)
November 1 February 1 November 2
1997 1997 1996
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $65,509 $64,094 $65,217
Trade accounts receivable 1,054,062 1,130,504 1,028,652
Merchandise inventories 2,255,564 1,556,958 2,046,085
Other current assets 35,017 9,080 22,982
TOTAL CURRENT ASSETS 3,410,152 2,760,636 3,162,936
INVESTMENTS AND OTHER ASSETS 103,125 107,157 102,129
PROPERTY AND EQUIPMENT, NET 2,428,734 2,131,843 2,110,737
CONSTRUCTION IN PROGRESS 20,792 55,024 32,743
BUILDINGS UNDER CAPITAL LEASES 4,338 5,066 5,411
$5,967,141 $5,059,726 $5,413,956
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable and accrued expenses $1,002,641 $536,695 $950,033
Commercial paper 463,209 128,738 237,730
Federal and state income taxes 43,325 46,220 19,617
Current portion of long-term debt 106,564 181,564 131,088
Current portion of capital lease obligations 1,620 1,529 1,556
TOTAL CURRENT LIABILITIES 1,617,359 894,746 1,340,024
LONG-TERM DEBT 1,318,159 1,173,018 1,225,004
CAPITAL LEASE OBLIGATIONS 12,588 13,690 14,243
DEFERRED INCOME TAXES 261,094 261,094 226,689
STOCKHOLDERS' EQUITY
Preferred stock 440 440 440
Common stock 1,143 1,136 1,136
Additional paid-in capital 649,758 641,388 638,728
Retained earnings 2,207,735 2,074,214 1,967,692
Less Treasury stock (101,135) 0 0
2,757,941 2,717,178 2,607,996
$5,967,141 $5,059,726 $5,413,956
See notes to consolidated financial statements.
</TABLE>
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<TABLE>
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
DILLARD'S, INC.
(Unaudited)
(Thousands, except per share data)
Three Months Ended Nine Months Ended Twelve Months Ended
November 1 November 2 November 1 November 2 November 1 November 2
1997 1996 1997 1996 1997 1996
<S> <C> <C> <C> <C> <C> <C>
Net sales $1,592,118 $1,496,578 $4,560,615 $4,290,206 $6,497,994 $6,210,798
Service charges, interest, and other 47,217 46,689 140,617 141,643 183,449 182,428
1,639,335 1,543,267 4,701,232 4,431,849 6,681,443 6,393,226
Cost and expenses:
Cost of sales 1,056,303 1,005,123 2,997,625 2,832,724 4,289,666 4,104,111
Advertising, selling, administrative
and general expenses 415,031 394,606 1,184,812 1,121,876 1,601,386 1,540,158
Depreciation and amortization 53,901 52,539 156,429 153,116 197,032 193,255
Rentals 10,494 10,503 31,961 32,566 55,161 57,486
Interest and debt expense 33,219 30,308 97,158 89,117 128,640 122,191
Impairment charges 0 0 0 0 0 126,559
1,568,948 1,493,079 4,467,985 4,229,399 6,271,885 6,143,760
INCOME BEFORE INCOME TAXES 70,387 50,188 233,247 202,450 409,558 249,466
Federal and state income taxes 26,040 18,570 86,300 74,905 151,535 92,775
NET INCOME 44,347 31,618 146,947 127,545 258,023 156,691
Retained earnings at beginning
of period 2,167,838 1,940,617 2,074,214 1,851,507 1,967,692 1,825,763
Cash dividends declared (4,450) (4,543) (13,426) (11,360) (17,980) (14,762)
RETAINED EARNINGS AT END
OF PERIOD $2,207,735 $1,967,692 $2,207,735 $1,967,692 $2,207,735 $1,967,692
Net income per common share $0.40 $0.28 $1.31 $1.12 $2.29 $1.38
Cash dividends declared per common share $0.04 $0.04 $0.12 $0.10 $0.16 $0.13
Average shares outstanding 112,115 114,005 112,260 114,053 112,644 113,830
See notes to consolidated financial statements.
</TABLE>
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
DILLARD'S, INC.
(Unaudited)
(Thousands)
Nine Months Ended
November 1 November 2
1997 1996
OPERATING ACTIVITITES
Net income $146,947 $127,545
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 157,552 154,224
Changes in operating assets and liabilities:
Decrease in trade accounts receivable 76,442 74,923
Increase in merchandise inventories and
other current assets (724,543) (572,859)
Decrease (Increase) in investments and other asset 2,909 (18,465)
Increase in trade accounts payable and
accrued expenses and income taxes 463,639 332,993
NET CASH PROVIDED BY OPERATING ACTIVITIES 122,946 98,361
INVESTING ACTIVITIES
Purchase of property and equipment (418,360) (266,469)
NET CASH USED IN INVESTING ACTIVITIES (418,360) (266,469)
FINANCING ACTIVITIES
Net increase in commercial paper 334,471 112,420
Proceeds from long-term borrowings 200,000 200,000
Principal payments on long-term debt and
capital lease obligations (130,870) (139,661)
Dividends paid (14,014) (11,360)
Proceeds from sale of common stock 8,377 13,484
Purchase of treasury stock (101,135) 0
NET CASH PROVIDED BY FINANCING ACTIVITIES 296,829 174,883
INCREASE IN CASH AND CASH EQUIVALENTS 1,415 6,775
Cash and cash equivalents at beginning of period 64,094 58,442
CASH AND CASH EQUIVALENTS AT END OF PERIOD $65,509 $65,217
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 November 1, 1997 are
not necessarily indicative of the results that may be expected for the
fiscal year ending January 31, 1998 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 1, 1997.
2. On May 19, 1997, the Company amended its Certificate of Incorporation in
order to change its name to Dillard's, Inc.
3. On February 4, 1997, the Company issued $100 million aggregate principal
amount of its 7.15% notes due February 1, 2007. On May 15, 1997, the
Company issued $100 million aggregate principal amount of its 7.75%
notes due May 15, 2027. The notes were sold in underwritten public
offerings.
4. On February 21, 1997, the Board of Directors authorized the
implementation of a Class A common stock repurchase program of up to
$300 million. For the nine months ended November 1, 1997, a total of
3.2 million shares were purchased for a total of $101.1 million.
5. In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 131, Disclosures about
Segments of an Enterprise and Related Information, which will be
effective for financial statements for fiscal years beginning after
December 15, 1997. SFAS No. 131 redefines how operating segments are
determined and requires expanded quantitative and qualitative
disclosures relating to a company's operating segments. The Company is
in the process of evaluating the impact, if any, that SFAS No. 131 will
have on its financial statements.
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<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
November 1 November 2 November 1 November 2 November 1 November 2
1997 1996 1997 1996 1997 1996
<S> <C> <C> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales 66.3 67.2 65.7 66.0 66.0 66.1
Gross profit 33.7 32.8 34.3 34.0 34.0 33.9
Advertising, selling, administrative
and general expenses 26.1 26.4 26.0 26.1 24.6 24.8
Depreciation and amortization 3.4 3.5 3.4 3.6 3.0 3.1
Rentals 0.7 0.7 0.7 0.8 0.9 0.9
Interest and debt expense 2.1 2.0 2.2 2.1 2.0 2.0
Impairment charges 0.0 0.0 0.0 0.0 0.0 2.0
Total operating expenses 32.3 32.6 32.3 32.6 30.5 32.8
Other income 3.0 3.1 3.1 3.3 2.8 2.9
Income before income taxes 4.4 3.3 5.1 4.7 6.3 4.0
Federal and state income taxes 1.6 1.2 1.9 1.7 2.3 1.5
Net income 2.8 2.1 3.2 3.0 4.0 2.5
</TABLE>
<PAGE>
Sales for the third quarter of 1997 were $1,592.1 million as compared to
$1,496.6 million for the third quarter of 1996. This was an increase of 6%.
The sales increase for comparable stores was 3%. For the nine month period
ended November 1, 1997 sales increased 6% over the first nine months of 1996.
The comparable stores increase for this period was 2%. For the twelve month
period ended November 1, 1997 sales increased 5% over the same period in
1996. The comparable stores increase for this period was 2%. The majority
of the increase in sales on a comparable store basis was attributable to an
increase in the volume of goods rather than an increase in the price of
goods.
Cost of sales decreased from 67.2% of net sales for the third quarter of 1996
to 66.3% for the third quarter of 1997. For the nine months ended November
1, 1997 and November 2, 1996 cost of sales decreased from 66.0% of net sales
in 1996 to 65.7% of net sales in 1997. The decrease for the three and nine
month periods was caused by a lower level of markdowns in 1997 versus 1996.
For the twelve months ended November 1, 1997 and November 2, 1996, the cost
of sales decreased slightly from 66.1% to 66.0% of net sales.
Advertising, selling, administrative and general (SG&A) expenses decreased to
26.1% of net sales for the third quarter of 1997 compared to 26.4% for the
third quarter of 1996. The decline in this expense ratio was caused by an
improvement in bad debt expense. This was partially offset by an increase
selling payroll expense. The Company is investing more in selling payroll to
enhance customer service and sales. For the nine months ended November 1,
1997 and November 2, 1996, SG&A expenses decreased slightly from 26.1% of net
sales in 1996 to 26.0% of net sales in 1997. For the twelve months ended
November 1, 1997 and November 2, 1996, SG&A expenses decreased from 24.8% of
net sales in 1996 to 24.6% of net sales in 1997.
Depreciation and amortization expense decreased slightly as a percentage of
sales from 1996 in the three, nine and twelve month periods ended November 1,
1997.
Rental expense remained constant at .7% of net sales for the three months
ended November 1, 1997 and November 2, 1996. For the nine months ended
November 1, 1997 and November 2, 1996 rental expense decreased from .8% of
net sales in 1996 to .7% in 1997. For the twelve months ended November 1,
1997 and November 2, 1996 rental expense remained constant at .9% of net
sales.
Interest and debt expense increased slightly from 2.0% of net sales for the
third quarter of 1996 to 2.1% of net sales for the third quarter of 1997.
For the nine months ended November 1, 1997 and November 2, 1996 interest and
debt expense as a percentage of net sales increased slightly from 2.1% in
1996 to 2.2% in 1997. This was caused by a relatively higher level of debt
in 1997 compared to 1996. For the twelve months ended November 1, 1997 and
November 2, 1996 interest and debt expense was 2.0% of net sales.
Service charges, interest and other income decreased from 3.1% of net sales
for the third quarter in 1996 to 3.0% of net sales in the third quarter of
1997. For the nine months ended November 1, 1997 and November 2, 1996 the
decrease was from 3.3% of net sales in 1996 to 3.1% of net sales in 1997.
For the twelve months ended November 1, 1997 and November 2, 1996 the
decrease was from 2.9% of net sales in 1997 to 2.8% of net sales in 1996.
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 third quarter
of 1997 and 1996.
<PAGE>
Financial Condition
The Company's working capital was $1.8 billion at November 1, 1997, $1.9
billion at February 1, 1997, and $1.8 billion at November 2, 1996. The
current ratio for each of these periods was 2.1, 3.1 and 2.4, respectively.
The changes in the current ratio were caused by a higher level of inventory
and an increase in trade accounts payable and commercial paper at November 1,
1997 compared to February 1, 1997 and November 2, 1996.
The ratio of long-term debt to capitalization was 32.6%, 30.4% and 32.2% at
November 1, 1997, February 1, 1997, and November 2, 1996, respectively. The
ratio of long-term debt to capitalization is calculated by dividing the total
amount of long-term debt and capital lease obligations by the sum of the
total amount of long-term debt and capitalized lease obligations plus total
equity. This ratio has increased due to the issuance of long-term debt as
described below as well as the repurchase of $101.1 million of the Company's
Class A common stock during 1997.
On February 4, 1997, the Company issued $100 million 7.15% notes due February
1, 2007. On May 15, 1997, the Company issued $100 million 7.75% notes due
May 15, 2027. The proceeds were used to reduce commercial paper borrowings.
The Company invested $418 million in capital expenditures for the nine months
ended November 1, 1997 as compared to $266 million for the nine months ended
November 2, 1996. In the first nine months of 1997, the Company opened eleven
new stores, acquired seven stores from Proffitt's, Inc. in Virginia, acquired
ten Mervyn's stores in Florida and acquired three Macy's stores in Houston.
Additionally , the Company expanded and remodeled four stores and closed two
stores. For the balance of the year the Company plans to open one new store.
In 1996, the Company opened sixteen new stores (one of which was a
replacement store), and expanded six stores and closed three stores.
Merchandise inventories increased by 10% from $2.0 billion at November 2,
1996 to $2.3 billion at November 1, 1997. This increase is caused primarily
by the merchandise inventory for new stores. The merchandise inventory in
comparable stores increased by 3% from November 2, 1996 to November 1, 1997.
At November 1, 1997, the Company had an outstanding shelf registration for
unsecured notes in the amount of $400 million.
Fluctuations in certain other balance sheet accounts between February 1, 1997
and November 1, 1997 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.
ITEM 3 Quantitative and Qualitative Disclosure About Market Risk
Interim information is not required until after the first fiscal year end in
which this item is applicable.
<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
November 1 November 2 February 1 February 3 January 28 January 29 January 30
1997 1996 1997 1996 1995 1994 1993
3.08 2.92 3.61 2.86 3.72 3.57 3.59
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 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'S, INC.
(Registrant)
DATE: December 12, 1997 /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
(Unaudited)
<TABLE>
Three Months Ended Nine Months Ended Twelve Months Ended
November 1 November 2 November 1 November 2 November 1 November 2
1997 1996 1997 1996 1997 1996
<S> <C> <C> <C> <C> <C> <C>
Average shares outstanding 110,868,597 113,573,347 111,563,599 113,451,037 112,066,580 113,350,655
Net effect of dilutive stock options based
on the treasury stock method using
average market price 1,246,774 431,623 696,448 602,257 577,118 479,241
Total 112,115,371 114,004,970 112,260,047 114,053,294 112,643,698 113,829,896
Net Income $44,347,000 $31,618,000 $146,947,000 $127,545,000 $258,023,000 $156,691,000
Less preferred dividends (5,500) (5,500) (16,500) (16,500) (22,000) (22,000)
Net income available to common shares $44,341,500 $31,612,500 $146,930,500 $127,528,500 $258,001,000 $156,669,000
Per share $0.40 $0.28 $1.31 $1.12 $2.29 $1.38
</TABLE>
<TABLE>
EXHIBIT 12 - STATEMENT RE: COMPUTATION OF RATIO OF EARNINGS TO FIXED
CHARGES
(Unaudited)
(Dollar amounts in thousands)
Nine Months Ended Fiscal Year Ended
November 1 November 2 February 1 February 3 January 28 January 29 January 30
1997 1996 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated pretax income $233,247 $202,450 $378,761 $269,653 $406,110 $399,534 $375,330
Fixed charges (less capitalized
interest) 107,812 99,972 139,188 139,666 145,921 152,568 142,857
EARNINGS $341,059 $302,422 $517,949 $409,319 $552,031 $552,102 $518,187
Interest $97,158 $89,117 $120,599 $120,054 $124,282 $130,915 $121,940
Capitalized interest 3,012 3,484 4,420 3,567 2,545 1,882 1,646
Interest factor in rent expense 10,654 10,855 18,589 19,612 21,639 21,653 20,917
FIXED CHARGES $110,824 $103,456 $143,608 $143,233 $148,466 $154,450 $144,503
Ratio of earnings to fixed charges 3.08 2.92 3.61 2.86 3.72 3.57 3.59
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> NOV-1-1997
<CASH> 65,509
<SECURITIES> 0
<RECEIVABLES> 1,054,062
<ALLOWANCES> 25,923
<INVENTORY> 2,255,564
<CURRENT-ASSETS> 3,410,152
<PP&E> 3,912,754
<DEPRECIATION> 1,458,890
<TOTAL-ASSETS> 5,967,141
<CURRENT-LIABILITIES> 1,617,359
<BONDS> 1,330,747
0
440
<COMMON> 1,143
<OTHER-SE> 2,756,358
<TOTAL-LIABILITY-AND-EQUITY> 5,967,141
<SALES> 4,560,615
<TOTAL-REVENUES> 4,701,232
<CGS> 2,997,625
<TOTAL-COSTS> 2,997,625
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 40,462
<INTEREST-EXPENSE> 97,158
<INCOME-PRETAX> 233,247
<INCOME-TAX> 86,300
<INCOME-CONTINUING> 146,947
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 146,947
<EPS-PRIMARY> 1.31
<EPS-DILUTED> 1.31
</TABLE>
