Dillard's, Inc.
1600 Cantrell Road
Little Rock, AR 72201
News Release
Contact: Julie J. Bull (501) 376-5965 For Immediate Release
Dillard's, Inc. Reports Record Fourth Quarter
Earnings per Share of $1.21
March 5, 2002 -- Little Rock, Arkansas -- Dillard's, Inc. (DDS-NYSE) (the "Company" or "Dillard's") today announced record fourth quarter net earnings per share of $1.21 for the 13 weeks ended February 2, 2002. Net income for the 13-week period was $102 million ($1.21 fully diluted earnings per common share) compared to $66 million ($.78 per fully diluted share) for the 14 weeks ended February 3, 2001. Chief Executive Officer, William Dillard, II, stated, "It is a great pleasure to announce a record fourth quarter performance at Dillard's. We consider our accomplishments in the fourth quarter to be solid affirmation that we are on the right track with our strategies. We planned to become a more successful retailer with these changes. This is certainly a huge step in the right direction." Dillard's management is extremely pleased with the following significant accomplishments during the thirteen-week period ended February 2, 2002: o The Company achieved gross margin improvement of 100 basis points of sales. o Dillard's decreased year-end comparable store inventory 5% - following a 13% year-over-year comparable store inventory decline in the prior year. o The Company managed selling, general and administrative expenses well. These expenses declined 70 basis points of sales. The Company will host a conference call to discuss these results today, March 5, 2002, at 11:00 a.m. Eastern. The live call is available to all interested parties on the Internet at WWW.DILLARDS.COM and ---------------- www.vcall.com. A replay of the call will be available at those two Internet addresses. Interested - ------------- parties may also hear a telephone replay of the call at approximately 1:00 p.m. Eastern by dialing 1-877-519-4471. The reservation number is 3156887. This replay will be available until 6:00 p.m. - -------------- ------- Eastern. Revenues - -------- Sales for the 13 weeks ended February 2, 2002 were $2.534 billion compared to sales for the 13 weeks ended February 3, 2001 of $2.533 billion. Total sales were essentially unchanged for the 13-week period. Sales decreased 1% for the period on a comparable store basis. Sales for the 14 weeks* ended February 3, 2001 were $2.662 billion. Sales for the 52 weeks ended February 2, 2002 were $8.155 billion compared to sales for the 52 weeks ended February 3, 2001 of $8.425 billion. Sales decreased 3% on both a total and comparable store basis for the 52-week period. Sales for the 53-week period* ended February 3, 2001 were $8.567 billion. *The fiscal reporting periods of 2000 included 14 weeks and 53 weeks for the fourth quarter and fiscal year, respectively. These reporting periods ended on February 3, 2001. For comparison purposes herein, sales are reported based upon13-week and 52-week periods of the most similar weeks. Income - ------- Net income for the 13 weeks ended February 2, 2002 was $102 million, or $1.21 per fully diluted share compared to $66 million, or $.78 per fully diluted share, in the prior year. Net income for the 52 weeks ended February 2, 2002 was $72 million, or $.85 per share, compared to a net loss of $6 million, or $.06 per share in the prior year. During the fourth quarter and fiscal year ended February 2, 2002, the Company recorded pre-tax charges for asset impairment and store closing costs of $2 million ($1 million after-tax or $.01 per fully diluted share) and $4 million ($2 million after-tax, or $.03 per fully diluted share), respectively. During the fourth quarter and fiscal year ended February 3, 2001, the Company recorded pre-tax charges of $51 million ($36 million after-tax, or $.40 per fully diluted share) for asset impairment and store closing costs. Included in net income for the fourth quarter and fiscal year ended February 2, 2002 were after-tax extraordinary gains from early extinguishment of debt in the amount of $1 million ($.01 per fully diluted share) and $6 million ($.07 per fully diluted share), respectively. Included in net income for the fourth quarter and fiscal year ended February 3, 2001 were after-tax extraordinary gains from early extinguishment of debt in the amount of $7 million ($.09 per fully diluted share) and $ 27 million ($.30 per fully diluted share), respectively. Effective the beginning of fiscal 2000, the Company changed its method of accounting for inventories under the retail inventory method. Financial statements for all periods presented herein incorporate this method of accounting for inventories under the retail inventory method and are comparable for analytical purposes. The change principally relates to the Company's accounting for allowances received from vendors, from recording such allowances directly as a reduction to cost of sales to recording such allowances as a reduction to inventoriable product cost. The cumulative effect of the accounting change was to reduce fiscal 2000 net income by $130 million ($1.42 per fully diluted share). Gross Margin/Inventory - ---------------------- Dillard's improved gross margin as a percentage of sales 100 basis points during the 13-week period ended February 2, 2002. Management attributes this margin improvement to the successful execution of specific merchandising initiatives to improve the Company's merchandise mix and competitive position. The Company improved gross margin as a percentage of sales 30 basis points for the fifty-two-week period ended February 2, 2002. Dillard's continues to practice key merchandise strategies which management believes are directly responsible for the fourth quarter and fiscal year margin improvement. These strategies are: o Increased penetration and marketing of Dillard's private brand merchandise - The Company continues to work diligently to build penetration and recognition of its private brand merchandise as a means to provide superior price and value choices to its customers. Dillard's management recognizes significant opportunities for increased control over its merchandise mix and better gross margin performance through expansion of its private brand program. During the fourth quarters ended February 2, 2002 and February 3, 2001 sales of private brand merchandise as a percent of total sales (in merchandise categories in which private brand goods are presented) were 24.9% and 20.4%, respectively. During the fiscal years ended February 2, 2002 and February 3, 2001, sales of private brand merchandise as a percent of total sales (in merchandise categories in which private brand goods are presented) were 18.4% and 15.9%, respectively. In October of 2001, Dillard's announced that it is developing an exclusive brand program in women's shoes under the leadership of Vince Camuto, founder and former chief executive officer of The Nine West Group, Inc. The team has developed four new lines of women's shoes which are available exclusively to Dillard's customers. The shoes are currently featured in Dillard's stores. Dillard's management continues to seek opportunities to develop similar exclusive brand programs in other merchandise areas. Other strategies include: o Enhanced markdown strategy* o Product-First Buying Philosophy* o Reconfiguration of assortments of basic merchandise* *See the Company's report on Form 10-K for the year ended February 3, 2001 for a more detailed discussion of these initiatives. Debt and Share Repurchase - ------------------------- During the fiscal year ended February 2, 2002 Dillard's continued its focus on debt reduction and decreased long-term debt approximately $361 million. The Company accomplished this reduction of indebtedness by repurchasing debt securities prior to their maturity dates and by normal payment of debt upon maturity. As a result of the Company's reduced debt levels, interest and debt expense declined approximately $9 million and $34 million during the 13-week and 52-week period ended February 2, 2002, respectively. Interest expense for the thirteen weeks ended February 2, 2002 was $47 million compared to $56 million for the fourteen weeks ended February 3, 2001. Interest expense for the fiscal years ended February 2, 2002 and February 3, 2001 was $190 million and $224 million, respectively. During the quarter ended February 2, 2002, Dillard's repurchased $22.2 million of its outstanding unsecured notes, resulting in after-tax gain of approximately $1 million dollars. During the fourth quarter the Company paid upon maturity $150 million of 5.79% outstanding notes. During the 52 weeks ended February 2, 2002, the Company repurchased $91.3 million of its outstanding unsecured notes, resulting in an after-tax gain of approximately $6 million. During the 52 weeks ended February 2, 2002, the Company also retired $100 million of its 6.17% Reset Put Securities due August 1, 2011 prior to their maturity date. During the 52 weeks ended February 2, 2002, Dillard's repurchased $22 million of its Class A Common Stock under the existing $200 million share repurchase program. The program was authorized by the Company's board of directors in May of 2000. Approximately $75 million in share repurchase authorization remained under this open-ended plan at February 2, 2002. At February 2, 2002, the Company had 83.9 million shares of its Class A Common Stock and Class B shares outstanding. Advertising, Selling, Administrative and General Expenses - --------------------------------------------------------- The Company effectively managed Advertising, selling, administrative and general expenses for the thirteen-week period ended February 2, 2002, decreasing these expenses approximately 70 basis points of sales. The decrease is primarily a result of the reduction of payroll expense as a percent of sales. These expenses were $571 million (22.6% of sales) for the 13 weeks ended February 2, 2002 and $620 (23.3% of sales) million for the 14 weeks ended February 3, 2001. Advertising, selling, general and administrative expenses were $2.191 billion (26.9% of sales) for the 52 weeks ended February 2, 2002 and $2.220 billion (25.9% of sales) for the 53 weeks ended February 3, 2001. Accounts Receivable - ------------------- Accounts receivable at February 2, 2002 were $1.075 billion compared to $979 million for the fiscal year ended February 3, 2001. Management attributes the increase in accounts receivable to increased penetration of Dillard's proprietary credit card sales. Dillard's has enjoyed positive customer response to recent credit marketing initiatives including the VIP Rewards Program TM. Additionally, the Company has automated the processing of new accounts under its new Express Credit program which enables faster approval of credit applications. Store Closings - --------------- Under the Company's continuing plan to close under-performing stores as conditions permit, Dillard's closed four stores during the 13 weeks ended February 2, 2002. The stores were located in Tulsa, Oklahoma; Cleveland, Ohio; San Antonio, Texas and Miami, Florida. The Company closed eight stores during the fiscal year ended February 2, 2002. Additionally, the Company has announced the upcoming closure of its Bannister Mall location in Kansas City, Missouri. The store is expected to close during the first quarter of 2002. Store Openings-2001 - ------------------- During 2001, Dillard's opened seven newly constructed Dillard's stores in the following locations: Location City Open Month Square Feet - -------- ---- ---------- Valley Hills Mall Hickory, NC March 160,000 Independence Mall Wilmington, NC March 160,000 The Shops at Willow Bend Plano, TX July 249,000 International Plaza+ Tampa, FL September 247,000 The Mall at Wellington Green Village of Wellington, FL September 200,000 Chandler Fashion Ctr. Chandler, AZ October 200,000 Mall at Stonecrest Dekalb, GA October 200,000 +Replacement store. The Company purchased four former ZCMI stores located in Idaho and Utah on April 18, 2001. Dillard's immediately opened these store under the Dillard's nameplate. Additionally, eight former Montgomery Ward ("Ward's") store locations were purchased on April 25, 2001. The Company opened the former Ward's building in Towne West Mall in Wichita, Kansas as an expansion of its existing Dillard's location there in January 2002. In February 2002, the Company opened the former Ward's building at Gulf View Square in Port Richey, Florida as a replacement to its existing location in the same center. Dillard's will open the former Ward's locations at Battlefield Mall in Springfield, Missouri and Penn Square in Oklahoma City, Oklahoma as expansions to existing locations in March and May of 2002, respectively. Dillard's continues to make progress with the other former Ward's locations, developing them for best use in their respective markets. Capital expenditures during the fiscal year ended February 2, 2002 were $271 million. At February 2, 2002 the Company operated 338 stores in 29 states all under one name - Dillard's. Store Openings-2002 - ------------------- During 2002, the Company plans to open newly constructed Dillard's stores in the following locations: Location City Open Month Square Feet - -------- ---- ---------- ----------- Prescott Gateway Prescott, AZ March 98,000 Lynnhaven Mall+ Virginia Beach, VA August 180,000 Triangle Town Center Raleigh, NC August 200,000 Randolph Mall Asheboro, NC October 62,000 Parkway Place Huntsville, AL October 180,000 Fashion Show Mall+ Las Vegas, NV October 200,000 +Replacement store. Actions of the Board of Directors - --------------------------------- The Company's Board of Directors has declared a cash dividend of 4 cents per share on the Class A and Class B Common Stock of the Company payable May 6, 2002 to shareholders of record as of March 29, 2002. The Company's Board of Directors has adopted a stockholder rights plan. The adoption of the rights plan provides protection against unfair takeover tactics, and should encourage anyone seeking to acquire the Company or a significant stake to negotiate with the Board first. The rights plan is similar to plans adopted by many public companies and other retail department store companies. The Company believes that the rights plan should provide a sound and reasonable means of safeguarding the interests of all stockholders should a hostile effort be made to acquire the Company or a significant stake. "The purpose of this rights plan is to ensure that our board of directors would have sufficient time to study and respond to any unsolicited attempt to acquire the company or a significant stake and enable all Dillard's stockholders to realize the full value of their investment," said William Dillard II, chief executive officer. "The adoption of this plan is part of our ongoing effort to implement and execute prudent business practices and is not in response to any proposal or attempt to acquire Dillard's." In connection with the adoption of the rights plan, the Board declared a dividend of one preferred share purchase right for each outstanding share of the Company's common stock, which includes both the Company's Class A and Class B common stock. Each right, which is not presently exercisable, entitles the holder to purchase one one-thousandth of a share of Series A Junior Participating Preferred Stock. In the event that any person acquires 15% or more of the outstanding shares of common stock, each holder of a right (other than the acquiring person or group) will be entitled to receive, upon payment of the exercise price, shares of Class A common stock having a market value of two times the exercise price. In order to retain flexibility and the ability to maximize stockholder value in the event of unknown future transactions, the Board retains the power to redeem the rights for a set amount. Dillard's was advised by Simpson Thacher & Bartlett and JP Morgan in adopting the stockholder rights plan and setting its terms. The distribution of the rights will be made on March 18, 2002, payable to stockholders of record at the close of business on that date. In conjunction with the distribution, details of the rights will be contained in a letter that is being mailed to all holders of Dillard's common stock as of the record date. Supplemental Information:___________________________________________ - -------------------------------------------------------------------- Sales by Category - ------------------ Owned sales performance by category for the fourth quarter and fiscal year is provided below. Sales information is presented for the 13-week period and 52-week period ended February 2, 2002 compared to the periods of most comparable weeks ended February 3, 2001. 13 Weeks Ended 52 Weeks Ended February 2, 2002 February 2, 2002 Total Comparable Total Comparable ----- ---------- ----- ---------- Cosmetics 0% -1% 0% -1% Women's & Juniors Clothing 1% 1% -3% -3% Children's Clothing 4% 3% -1% -2% Men's Clothing and Accessories -3% -3% -6% -6% Shoes, Accessories and Lingerie 1% 0% -2% -2% Home -1% -2% -6% -7% Sales by Region - --------------- Sales performance by region for the fourth quarter and fiscal year: 13 Weeks Ended 52 Weeks Ended February 2, 2002 February 2, 2002 ---------------- ---------------- East 0% -3% Central -1% -4% West 6% 0% Sales Mix - --------- 13 Weeks Ended 52 Weeks Ended February 2, 2002 February 2, 2002 ---------------- ---------------- Cosmetics 14.7% 13.8% Women's & Juniors Clothing 27.2% 30.9% Children's Clothing 6.8% 6.9% Men's Clothing and Accessories 20.4% 19.0% Shoes, Accessories and Lingerie 19.9% 20.4% Home 11.0% 9.0% Estimates for 2002 - ------------------ The Company is providing the following estimates for certain income statement items for the fiscal year ended February 2, 2002, based upon current conditions. Actual results may differ significantly from these estimates as conditions and factors change - See "Forward Looking Information". In Millions ----------- 2002 2001 Estimated Actual --------- ------ Depreciation and amortization $ 300 $311 Rental expense 70 72 Interest expense 170 190 Capital expenditures 225 271 Forward-Looking Information - --------------------------- Certain of the information presented in this press release that addresses future results or expectations is considered "forward-looking" information within the definition of Federal securities laws. It is important to note that Dillard's, Inc.'s actual results could differ materially from those projected in such forward-looking statements. Factors that could cause actual results to differ materially from those expressed or implied in such forward-looking statements include, among others, economic and weather conditions in the regions in which the Company's stores are located and their effect on the buying patterns of the Company's customers, potential disruption due to uncertainties arising from the terrorist attacks on America on September 11, 2001 and the risks of continued terrorist activity and the effect on ongoing consumer confidence, adequate and stable availability of materials and production facilities, potential disruption of international trade and supply chain efficiencies, customer response to the Company's merchandise, changes in consumer spending patterns and debt levels, trends in personal bankruptcies and the impact of competitive market factors. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained from time to time in the Company's filings with the Securities and Exchange Commission, including but not limited to the Company's report on Form 10K for the year ended February 3, 2001. Copies of these filings may be obtained by contacting Dillard's, Inc. or the Securities and Exchange Commission. Filings with the Securities and Exchange Commission are also available via EDGAR on the Internet at www.sec.gov. Dillard's, Inc. and Subsidiaries Condensed Consolidated Statements of Income (Amounts in Millions, Except Per Share Data) 13 Weeks Ended 14 Weeks Ended ------------------------------------------------------------ February 2, 2002 February 3, 2001 ------------------------------------------------------------ % of % of Amount Net Sales Amount Net Sales -------------- ----------- ------------ ------------------ (Unaudited) (Unaudited) Net sales $ 2,534 - $ 2,662 - Total revenues 2,595 102.4 % 2,723 102.3 % Cost of sales 1,703 67.2 1,815 68.2 Advertising, selling, administrative and general expenses 571 22.6 620 23.3 Depreciation and amortization 78 3.1 74 2.8 Rentals 26 1.0 27 1.0 Interest and debt expense 47 1.8 56 2.1 Asset impairment and store closing charges 2 0.1 51 1.9 -------------- ----------- Total costs and expenses 2,427 2,643 -------------- ----------- Income before income taxes 168 6.6 80 3.0 Income taxes 67 21 -------------- ----------- Income before extraordinary item 101 4.0 59 2.2 2 Extraordinary gain on early extinguishment of debt, taxes net of taxes 1 - 7 0.3 -------------- ----------- ----------- ---------- Net income $ 102 4.0 % $ 66 2.5 % ============== =========== =========== ========== Basic earnings per share: Income before extraordinary item $ 1.20 $ 0.69 Extraordinary gain on early extinguishment of debt, net of taxes 0.01 0.09 -------------- ----------- Net income $ 1.21 $ 0.78 Diluted ============== =========== Diluted earnings per share: Income before extraordinary item $ 1.20 $ 0.69 Extraordinary gain on early extinguishment of debt, net of taxes 0.01 0.09 -------------- ----------- Net income $ 1.21 $ 0.78 Diluted ============== =========== Weighted average shares: Basic 83.7 85.6 ============== =========== Diluted 84.1 85.7 ============== ===========Dillard's, Inc. and Subsidiaries Condensed Consolidated Statements of Operations (Amounts in Millions, Except Per Share Data) 52 Weeks Ended 53 Weeks Ended --------------------------------------------------------- February 2, 2002 February 3, 2001 ------------------------------------------------------------ % of % of Amount Net Sales Amount Net Sales -------------- ----------- ------------ ----------- (Unaudited) (Unaudited) Net sales $ 8,155 - $ 8,567 - Total revenues 8,388 102.9 % 8,818 102.9 % Cost of sales 5,508 67.5 5,803 67.8 Advertising, selling, administrative and general expenses 2,191 26.9 2,220 25.9 Depreciation and amortization 311 3.8 303 3.5 Rentals 72 0.9 76 0.9 Interest and debt expense 190 2.4 224 2.6 Asset impairment and store closing charges 4 - 51 0.6 -------------- ------------ Total costs and expenses 8,276 8,677 -------------- ------------ Income before income taxes 112 1.4 141 1.6 Income taxes 46 44 -------------- ------------ Income before extraordinary item and cumulative effect of accounting change 66 0.8 97 1.1 Extraordinary gain on early extinguishment of debt, net of taxes 6 0.1 27 0.3 Cumulative effect of accounting change, net of taxes - - (130) (1.5) -------------- ----------- ------------ -------- Net income (loss) $ 72 0.9 % $ (6) (0.1) % ============== =========== ============ ======== Basic earnings per share: Income before extraordinary item and cumulative effect of accounting change $ 0.78 $ 1.06 Extraordinary gain on early extinguishment of debt, net of taxes 0.07 0.30 Cumulative effect of accounting change, net of taxes - (1.42) -------------- ------------ Net income (loss) $ 0.85 $ (0.06) ============== ============ Diluted earnings per share: Income before extraordinary item and cumulative effect of accounting change $ 0.78 $ 1.06 Extraordinary gain on early extinguishment of debt, net of taxes 0.07 0.30 Cumulative effect of accounting change, net of taxes - (1.42) -------------- ------------ Net income (loss) $ 0.85 $ (0.06) Diluted ============== ============ Weighted average shares: Basic 84.0 91.2 ============== ============ Diluted 84.5 91.2 ============== ============ Dillard's, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (Amounts in Millions) February 2, February 3, 2002 2001 ------------- ------------- Assets (Unaudited) Current Assets: Cash and cash equivalents $ 153 $ 194 Trade accounts receivable 1,075 979 Merchandise inventories 1,562 1,616 Other current assets 24 54 ------------ ------------- Total current assets 2,814 2,843 Property and equipment 3,456 3,508 Goodwill 570 585 Other assets 235 263 ------------ ------------- Total Assets $7,075 $ 7,199 ============ ============= Liabilities and Stockholders' Equity Current Liabilities: Trade accounts payable and accrued expenses $808 $ 648 Current portion of long-term debt and capital leases 101 211 Federal and state income taxes 19 17 ------------ ------------- Total current liabilities 928 876 Long-term debt and capital leases 2,146 2,397 Other liabilities 158 126 Deferred income taxes 644 639 Guaranteed preferred beneficial interests in the Company's subordinated debentures 531 531 Stockholders' equity 2,668 2,630 ------------ ------------- Total Liabilities and Stockholders' Equity $ 7,075 $ 7,199 ============ ============= Other Financial Information (Amounts in Millions) (Unaudited) February 2, February 3, 2002 2001 ------------ ----------- Square footage 56.8 56.5 ============ =========== Capital expenditures: Quarter ended $ 68.7 $ 69.5 Year ended 270.6 225.6