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 3, 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)
DILLARD DEPARTMENT STORES, INC.
(Former name if changed since last report)
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 3, 1997 107,696,901
CLASS B COMMON STOCK as of May 3, 1997 4,016,929
PART I FINANCIAL INFORMATION
ITEM 1 Financial Statements
CONSOLIDATED BALANCE SHEETS
DILLARD'S, INC.
(Unaudited)
(Thousands)
May 3 February 1 May 4
1997 1997 1996
ASSETS
CURRENT ASSETS
Cash and cash equivalents $72,246 $64,094 $70,696
Trade accounts receivable 1,046,856 1,130,504 1,038,569
Merchandise inventories 1,874,310 1,556,958 1,750,318
Other current assets 9,897 9,080 6,237
TOTAL CURRENT ASSETS 3,003,309 2,760,636 2,865,820
INVESTMENTS AND OTHER ASSETS 106,553 107,157 87,803
PROPERTY AND EQUIPMENT, NET 2,191,609 2,131,843 2,010,346
CONSTRUCTION IN PROGRESS 107,221 55,024 38,975
BUILDINGS UNDER CAPITAL LEASES 4,823 5,066 9,347
$5,413,515 $5,059,726 $5,012,291
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable and
accrued expenses $793,654 $536,695 $700,305
Commercial paper 194,653 128,738 165,503
Federal and state income taxes 58,751 46,220 43,805
Current portion of long-term debt 106,564 181,564 206,378
Current portion of capital lease
obligations 1,559 1,529 1,835
TOTAL CURRENT LIABILITIES 1,155,181 894,746 1,117,826
LONG-TERM DEBT 1,271,409 1,173,018 1,081,004
CAPITAL LEASE OBLIGATIONS 13,330 13,690 18,400
DEFERRED INCOME TAXES 261,094 261,094 252,503
STOCKHOLDERS' EQUITY
Preferred Stock 440 440 440
Common Stock 1,136 1,136 1,135
Additional paid-in capital 641,437 641,388 636,475
Retained earnings 2,127,980 2,074,214 1,904,508
Less Treasury Stock (58,492) 0 0
2,712,501 2,717,178 2,542,558
$5,413,515 $5,059,726 $5,012,291
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
DILLARD'S, INC.
(Unaudited)
(Thousands, except per share data)
Three Months Ended Twelve Months Ended
May 3 May 4 May 3 May 4
1997 1996 1997 1996
Net sales $1,515,344 $1,453,302 $6,289,627 $6,044,586
Service charges, interest and
other 47,213 48,451 183,237 180,029
1,562,557 1,501,753 6,472,864 6,224,615
Cost and expenses:
Cost of sales 995,203 955,797 4,164,171 3,967,655
Advertising, selling,
administrative and general
expenses 382,590 366,353 1,554,687 1,475,339
Depreciation and amortization 51,202 50,334 194,587 194,323
Rentals 10,630 11,158 55,238 58,364
Interest and debt expense 30,459 28,585 122,473 121,225
Impairment charges 0 0 0 126,559
1,470,084 1,412,227 6,091,156 5,943,465
INCOME BEFORE INCOME TAXES 92,473 89,526 381,708 281,150
Income taxes 34,215 33,125 141,230 105,945
NET INCOME 58,258 56,401 240,478 175,205
Retained earnings at beginning
of period 2,074,214 1,851,507 1,904,508 1,742,899
2,132,472 1,907,908 2,144,986 1,918,104
Cash dividends declared (4,492) (3,400) (17,006) (13,596)
RETAINED EARNINGS AT END
OF PERIOD $2,127,980 $1,904,508 $2,127,980 $1,904,508
Net income per common share $0.52 $0.50 $2.11 $1.55
Cash dividends declared
per common share $0.04 $0.03 $0.15 $0.12
Average shares outstanding 112,996 113,794 113,789 113,331
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
DILLARD'S, INC.
(Unaudited)
(Thousands)
Three Months Ended
May 3 May 4
1997 1996
OPERATING ACTIVITITES
Net income $58,258 $56,401
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 51,487 50,716
Changes in operating assets and liabilities:
Decrease in trade accounts receivable 83,648 65,006
Increase in merchandise inventories and
other current assets (318,169) (260,347)
Decrease (Increase) in investments and other assets 319 (3,413)
Increase in trade accounts payable and
accrued expenses and income taxes 274,044 133,267
NET CASH PROVIDED BY OPERATING ACTIVITIES 149,587 41,630
INVESTING ACTIVITIES
Purchase of property and equipment (162,922) (73,464)
NET CASH USED IN INVESTING ACTIVITIES (162,922) (73,464)
FINANCING ACTIVITIES
Net increase in commercial paper 65,915 40,193
Proceeds from long-term borrowings 100,000 0
Principal payments on long-term debt and
capital lease obligations (76,939) (3,935)
Dividends paid (9,046) (3,400)
Common stock issued 49 11,230
Purchase of treasury stock (58,492) 0
NET CASH PROVIDED BY FINANCING ACTIVITIES 21,487 44,088
INCREASE (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS 8,152 12,254
Cash and cash equivalents at beginning of period 64,094 58,442
CASH AND CASH EQUIVALENTS AT END OF PERIOD $72,246 $70,696
See notes to consolidated financial statements.
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 3, 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. The
notes were sold in an underwritten public offering.
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 quarter ended May 3, 1997, a
total of 1.9 million shares were purchased for a total of
$58.5 million.
5. On March 31, 1997, the Company purchased seven stores in
Virginia from Proffitt's, Inc. and on April 14, 1997 the
Company purchased ten Mervyn's stores in Florida.
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 3 May 4 May 3 May 4
1997 1996 1997 1996
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 65.7 65.8 66.2 65.6
Gross Profit 34.3 34.2 33.8 34.4
Advertising, selling, administrative
and general expenses 25.2 25.2 24.7 24.4
Depreciation and amortization 3.4 3.4 3.1 3.2
Rentals 0.7 0.8 0.9 1.0
Interest and debt expense 2.0 1.9 1.9 2.0
Impairment charges 0.0 0.0 0.0 2.1
Total operating expenses 31.3 31.3 30.6 32.7
Other income 3.1 3.3 2.9 3.0
Income before income taxes 6.1 6.2 6.1 4.7
Income taxes 2.3 2.3 2.3 1.8
Net income 3.8 3.9 3.8 2.9
Sales for the first quarter of 1997 were $1,515.3 million as
compared to $1,453.3 million for the first quarter of 1996. This
is an increase of 4%. The sales in comparable stores were flat for
the period versus last year. The twelve month sales increase for
1997 over 1996 was 4%; for comparable stores the increase was 1%.
The majority of the increase in sales was attributable to an
increase in the volume of goods sold rather than an increase in the
price of goods.
Cost of sales decreased slightly from 65.8% of net sales for the
first quarter of 1996 to 65.7% for the first quarter of 1997. For
the twelve months ended May 3, 1997 and May 4, 1996, the cost of
sales increased from 65.6% to 66.2% of net sales. This increase
was due to a higher level of markdowns in the current year than in
the prior year.
Advertising, selling, administrative and general expenses remained
constant at 25.2% of net sales for the first quarters of 1997 and
1996. For the twelve months ended May 3, 1997 and May 4, 1996
these expenses increased from 24.4% to 24.7% of net sales. Bad
debt expense and payroll expense in the selling area were higher as
a percentage of net sales for the twelve months ended May 3, 1997
as compared to the twelve months ended May 4, 1996.
Depreciation and amortization expense was constant as a percentage
of sales for the three months ended May 3, 1997 compared to the
three months ended May 4, 1996 and decreased slightly as a
percentage of sales from 1996 in the twelve month period ended May
3, 1997. 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 .8% of net sales for the
first quarter of 1996 to .7% for the first quarter of 1997. For
the twelve months ended May 3, 1997 and May 4, 1996 the decrease
was from 1.0% to .9% of net sales. This was due to a higher
proportion of the Company's properties being owned rather than
leased.
Interest and debt expense increased slightly from 1.9% of net sales
for the first quarter of 1996 to 2.0% of net sales for the first
quarter of 1997 due to a relatively higher level of debt for 1997
versus 1996. For the twelve months ended May 4, 1997 and May 3,
1996 it decreased slightly from 2.0% to 1.9% of net sales.
Service charges, interest and other income decreased from 3.3% of
net sales for the first quarter of 1996 to 3.1% of net sales for
the first quarter of 1997. For the twelve months ended May 3, 1997
and May 4, 1996 the decrease was from 3.0% to 2.9% of net sales.
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 1997 and 1996.
Financial Condition
The Company's working capital was $1.8 billion at May 3, 1997, $1.9
billion at February 1, 1997, and $1.7 billion at May 4, 1996. The
current ratio for these periods was 2.6, 3.1 and 2.6, respectively.
The changes in working capital and current ratio were caused by a
higher level of inventory at May 3, 1997 compared to February 1,
1997.
The long-term debt to capitalization ratio was 32.1%, 30.4% and
30.2% at May 3, 1997, February 1, 1997, and May 4, 1996,
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 increase in this ratio at May 3, 1997 was caused by a higher
level of long-term debt as well as the repurchase of $58.5 million
of the Company's Class A common stock during the quarter.
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 short term borrowings.
The Company invested $162.9 million in capital expenditures for the
three months ended May 3, 1997 as compared to $73.5 million for the
three months ended May 4, 1996. In the first quarter of 1997, the
Company opened five new stores. During 1997, the Company plans to
build six additional new stores and expand and remodel four
existing stores. Also, during the first quarter of 1997 the
Company completed the acquisition of seven stores in Virginia from
Proffitt's, Inc. and ten Mervyn's stores in Florida.These stores
are being remodeled and most will open during the third quarter of
1997.In June 1997, the Company plans to complete the purchase of
three Houston area stores from Macy's. In 1996, the Company opened
sixteen new stores (one of which was a replacement store), expanded
six stores and closed three stores.
Merchandise inventories increased by 7% from $1.75 million at May
4, 1996 to $1.87 million at May 3, 1997. The Company operated 10
more stores at May 3, 1997 versus May 4, 1996. This was the
primary reason for the increase in inventory. On a comparable
store basis, the rate of increase in merchandise inventories was
2%.
The Company's Registration Statement registering an additional $400
million in debt securities went effective on May 9, 1997.
Fluctuations in certain other balance sheet accounts between
February 1, 1997 and May 3, 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.
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:
Three Months Ended Fiscal Year Ended
May 3 May 4 Feb. 1 Feb. 3 Jan. 28 Jan. 29 Jan. 30
1997 1996 1997 1996 1995 1994 1993
3.63 3.69 3.61 2.86 3.72 3.57 3.59
ITEM 6 Exhibits and Reports on Form 8-K
(a) Exhibit (3): Restated Certificate of Incorporation, as
amended
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 on February 3, 1997 relating to the
issue of $100 million aggregate principal amount of 7.15% Notes
maturing on February 1, 2007.
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: June 6, 1997 /s/ James I. Freeman
James I. Freeman
Senior Vice President & Chief
Financial Officer
(Principal Financial & Accounting
Officer)
EXHIBIT INDEX
Exhibits to Form 10-Q
Exhibit Number Exhibit
3 Restated Certificate of Incorporation, as amended
11 Statement re: Computation of Per Share Earnings
12 Statement re: Computation of Ratio of Earnings
to Fixed Charges