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 endedApril 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
State or other jurisdiction (IRS Employer
of incorporation or organization) Identification Number)
1600 CANTRELL ROAD, LITTLE ROCK, ARKANSAS 72201
(Address of principal executive office)
(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 time that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesx 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 89,584,720
CLASS B COMMON STOCK as of April 29, 2000 4,010,929
Index
DILLARD'S, INC.
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 | 11 | ||
Item 2. | Changes in Securities and Use of Proceeds | 11 | ||
Item 3. | Defaults Upon Senior Securities | 11 | ||
Item 4. | Submissions of Matters to a Vote of Security Holders | 11 | ||
Item 5. | Other Information | 11 | ||
Item 6. | Exhibits and Reports on Form 8-K | 11 | ||
Signatures | 12 |
PART 1. FINANCIAL INFORMATION | |||||||||
ITEM 1. Financial Statements | |||||||||
DILLARD'S, INC. | |||||||||
CONSOLIDATED BALANCE SHEETS | |||||||||
(Unaudited) | |||||||||
(Amounts in Thousands) | |||||||||
April 29, | January 29, | May 1, | |||||||
2000 | 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 | 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 | 531,579 | 531,579 | ||||||
Stockholders' Equity: | |||||||||
Preferred stock | - | - | 440 | ||||||
Common stock | 1,155 | 1,155 | 1,150 | ||||||
Additional paid-in capital | 695,507 | 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 | $ 8,232,776 | $ 7,918,204 | $ 8,550,929 |
See notes to consolidated financial statements.
DILLARD'S, INC. | ||||||||||
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS | ||||||||||
(Unaudited) | ||||||||||
(Amounts in Thousands, Except Per Share Data) | ||||||||||
Three Months Ended | Twelve Months Ended | |||||||||
April 29, | May 1, | April 29, | May 1, | |||||||
2000 | 1999 | 2000 | 1999 | |||||||
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 | 2,579,567 | 2,432,793 | 2,495,461 | 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 | $2,495,461 | ||||||
Earnings per Common Share: | ||||||||||
Basic | $0.48 | $ 0.63 | $1.39 | $1.30 | ||||||
Diluted | $0.48 | $ 0.63 | $1.39 | $1.30 | ||||||
Cash Dividends Declared Per | ||||||||||
Common Share | $0.04 | $0.04 | $0.16 | $0.16 | ||||||
See notes to consolidated financial statements.
DILLARD'S, INC. | ||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||
(Unaudited) | ||||
(Amounts in Thousands) | ||||
Three Months Ended | ||||
April 29, | May 1, | |||
2000 | 1999 | |||
Operating Activities: | ||||
Net income | $ 46,205 | $ 66,945 | ||
Adjustments to reconcile net income to | ||||
net cash provided by operating activities: | ||||
Depreciation and amortization | 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 | (51,443) | (15,552) | ||
Financing Activities: | ||||
Principal payments on long-term debt and capital lease obligations | (2,504) | (59,248) | ||
Cash dividends paid | (3,743) | (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 | $ 246,277 | $ 182,281 | ||
See notes to consolidated financial statements.
DILLARD'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 fina
Note 2. Earnings Per Share Data
The following table sets forth the computation of basic and diluted earnings per share ("EPS") for the periods indicated (in thousands, except per share data).
Three Months Ended | Twelve Months Ended | |||||
April 29, | May 1, | April 29, | May 1, | |||
2000 | 1999 | 2000 | 1999 | |||
Basic: | ||||||
Net Income | $46,205 | $66,945 | $142,989 | $139,134 | ||
Preferred stock dividends | - | (6) | (2) | (22) | ||
Net earnings available for | ||||||
per-share calculations | $46,205 | $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: | ||||||
Net income | $46,205 | $66,945 | $142,989 | $139,134 | ||
Preferred stock dividends | - | (6) | (2) | (22) | ||
Net earnings available for | ||||||
per-share calculations | $46,205 | $66,939 | $142,987 | $139,112 | ||
Average shares outstanding | 95,648 | 106,924 | 102,646 | 106,832 | ||
Stock options | - | 44 | 142 | 308 | ||
Total average equivalent shares | 95,648 | 106,968 | 102,788 | 107,140 | ||
Diluted earnings per share | $ .48 | $ .63 | $ 1.39 | $ 1.30 |
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 | |||
May 1, | |||
1999 | |||
Net sales | $8,818,277 | ||
Net income | 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:
Three Months Ended | Twelve Months Ended | ||||||||
April 29, | May 1, | April 29, | May 1, | ||||||
2000 | 1999 | 2000 | 1999 | ||||||
Net sales | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |
Cost of sales | 66.5 | 65.7 | 66.6 | 66.6 | |||||
Gross profit | 33.5 | 34.3 | 33.4 | 33.4 | |||||
Advertising, selling, administrative | |||||||||
and general expenses | 25.8 | 25.1 | 25.5 | 26.7 | |||||
Depreciation and amortization | 3.5 | 3.4 | 3.4 | 3.1 | |||||
Rentals | 0.8 | 0.8 | 0.9 | 0.9 | |||||
Interest and debt expense | 2.8 | 3.0 | 2.7 | 2.7 | |||||
Impairment charges | - | - | 0.8 | - | |||||
Total operating expenses | 32.9 | 32.3 | 33.3 | 33.4 | |||||
Service charges, interest and other | 3.0 | 3.1 | 2.8 | 2.8 | |||||
Income before income taxes | 3.6 | 5.1 | 2.9 | 2.8 | |||||
Income taxes | 1.4 | 1.9 | 1.2 | 1.1 | |||||
Net income | 2.2 | % | 3.2 | % | 1.7 | % | 1.7 | % | |
Net Sales
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
Rentals
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.
.
Income Taxes
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.
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.
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
None
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
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:
Three Months Ended | Fiscal Year Ended | |||||||||||
April 29, | May 1, | January 29, | January 30, | January 31, | February 1, | February 3, | ||||||
2000 | 1999 | 2000 | 1999 | 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
- Exhibit (12): Statement re: Computation of Earnings to Fixed Charges
- Reports of Form 8-K filed during the first quarter: None
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) |