Table of Contents

 

 

 

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 ended July 31, 2010

 

or

 

o              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 jurisdiction

 

(I.R.S. Employer

of incorporation or organization)

 

Identification No.)

 

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 check mark 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. x Yes   ¨ No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes   ¨ No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer x

 

Accelerated filer ¨

 

 

 

Non-accelerated filer ¨

 

Smaller reporting company ¨

(Do not check if a smaller reporting company)

 

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ 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 August 28, 2010

 

62,068,681

 

 

CLASS B COMMON STOCK as of August 28, 2010

 

4,010,929

 

 

 

 



Table of Contents

 

Index

 

DILLARD’S, INC.

 

 

 

Page

 

 

Number

PART I.  FINANCIAL INFORMATION

 

 

 

 

Item 1.

Financial Statements (Unaudited):

 

 

 

 

 

Condensed Consolidated Balance Sheets as of July 31, 2010, January 30, 2010 and August 1, 2009

3

 

 

 

 

Condensed Consolidated Statements of Operations and Retained Earnings for the Three and Six Months Ended July 31, 2010 and August 1, 2009

4

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the Six Months Ended July 31, 2010 and August 1, 2009

5

 

 

 

 

Notes to Condensed Consolidated Financial Statements

6

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

14

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

26

 

 

 

Item 4. 

Controls and Procedures

26

 

 

 

PART II.  OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

27

 

 

 

Item 1A.

Risk Factors

27

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

28

 

 

 

Item 6.

Exhibits

28

 

 

 

SIGNATURES

29

 

2



Table of Contents

 

PART I.  FINANCIAL INFORMATION

 

Item 1.  Financial Statements

DILLARD’S, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In Thousands)

 

 

 

July 31,

 

January 30,

 

August 1,

 

 

 

2010

 

2010

 

2009

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

      214,713

 

$

   341,693

 

$

      116,902

 

Accounts receivable, net

 

59,644

 

63,222

 

68,924

 

Merchandise inventories

 

1,328,228

 

1,300,680

 

1,413,993

 

Federal income tax receivable

 

111

 

217

 

3,869

 

Other current assets

 

43,885

 

43,717

 

46,339

 

 

 

 

 

 

 

 

 

Total current assets

 

1,646,581

 

1,749,529

 

1,650,027

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

2,697,691

 

2,780,837

 

2,868,621

 

Other assets

 

69,408

 

75,961

 

79,201

 

 

 

 

 

 

 

 

 

Total assets

 

$

4,413,680

 

$

4,606,327

 

$

  4,597,849

 

 

 

 

 

 

 

 

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Trade accounts payable and accrued expenses

 

$

701,695

 

$

 676,501

 

$

     672,783

 

Current portion of long-term debt

 

1,758

 

1,719

 

25,571

 

Current portion of capital lease obligations

 

848

 

1,775

 

1,739

 

Other short-term borrowings

 

 

 

67,000

 

Federal and state income taxes including current deferred taxes

 

36,483

 

89,027

 

41,645

 

 

 

 

 

 

 

 

 

Total current liabilities

 

740,784

 

769,022

 

808,738

 

 

 

 

 

 

 

 

 

Long-term debt

 

746,698

 

747,587

 

751,839

 

Capital lease obligations

 

9,655

 

22,422

 

23,279

 

Other liabilities

 

209,526

 

213,471

 

219,368

 

Deferred income taxes

 

331,350

 

349,722

 

366,036

 

Subordinated debentures

 

200,000

 

200,000

 

200,000

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

Common stock

 

1,211

 

1,209

 

1,209

 

Additional paid-in capital

 

785,404

 

782,746

 

782,760

 

Accumulated other comprehensive loss

 

(21,346

)

(22,298

)

(16,207

)

Retained earnings

 

2,534,594

 

2,484,447

 

2,402,828

 

Less treasury stock, at cost

 

(1,124,196

)

(942,001

)

(942,001

)

 

 

 

 

 

 

 

 

Total stockholders’ equity

 

2,175,667

 

2,304,103

 

2,228,589

 

 

 

 

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

  4,413,680

 

$

 4,606,327

 

$

  4,597,849

 

 

See notes to condensed consolidated financial statements.

 

3



Table of Contents

 

DILLARD’S, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS

(Unaudited)

(In Thousands, Except Per Share Data)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

July 31,

 

August 1,

 

July 31,

 

August 1,

 

 

 

2010

 

2009

 

2010

 

2009

 

Net sales

 

$

1,388,910

 

$

1,427,771

 

$

2,842,506

 

$

2,901,641

 

Service charges and other income

 

31,880

 

27,398

 

60,945

 

58,824

 

 

 

 

 

 

 

 

 

 

 

 

 

1,420,790

 

1,455,169

 

2,903,451

 

2,960,465

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

930,436

 

1,001,011

 

1,844,697

 

1,980,590

 

Advertising, selling, administrative and general expenses

 

392,054

 

396,721

 

785,696

 

811,005

 

Depreciation and amortization

 

64,455

 

66,391

 

128,171

 

131,915

 

Rentals

 

11,943

 

13,936

 

24,957

 

28,436

 

Interest and debt expense, net

 

18,462

 

19,011

 

37,318

 

37,419

 

Gain on disposal of assets

 

(4,122

)

(589

)

(4,226

)

(657

)

Asset impairment and store closing charges

 

 

 

2,208

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before income taxes and equity in losses of joint ventures

 

7,562

 

(41,312

)

84,630

 

(28,243

)

Income taxes (benefit)

 

(240

)

(15,040

)

27,040

 

(10,390

)

Equity in losses of joint ventures

 

(974

)

(385

)

(1,928

)

(1,141

)

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

6,828

 

(26,657

)

55,662

 

(18,994

)

 

 

 

 

 

 

 

 

 

 

Retained earnings at beginning of period

 

2,530,433

 

2,432,438

 

2,484,447

 

2,427,727

 

Cash dividends declared

 

(2,667

)

(2,953

)

(5,515

)

(5,905

)

 

 

 

 

 

 

 

 

 

 

Retained earnings at end of period

 

$

2,534,594

 

$

2,402,828

 

$

2,534,594

 

$

2,402,828

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per share:

 

 

 

 

 

 

 

 

 

Basic and Diluted

 

$

0.10

 

$

(0.36

)

$

0.80

 

$

(0.26

)

 

 

 

 

 

 

 

 

 

 

Cash dividends declared per common share

 

$

0.04

 

$

0.04

 

$

0.08

 

$

0.08

 

 

See notes to condensed consolidated financial statements.

 

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Table of Contents

 

DILLARD’S, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In Thousands)

 

 

 

Six Months Ended

 

 

 

July 31,

 

August 1,

 

 

 

2010

 

2009

 

 

 

 

 

 

 

Operating activities:

 

 

 

 

 

Net income (loss)

 

$

55,662

 

$

(18,994

)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization of property and deferred financing costs

 

129,103

 

132,870

 

Gain on disposal of property and equipment

 

(4,226

)

(657

)

Gain on repurchase of debt

 

 

(1,476

)

Excess tax benefits from share-based compensation

 

(346

)

 

Asset impairment and store closing charges

 

2,208

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

Decrease in accounts receivable

 

3,578

 

19,074

 

Increase in merchandise inventories

 

(27,548

)

(39,599

)

Decrease in federal income tax receivable

 

106

 

70,546

 

(Increase) decrease in other current assets

 

(721

)

6,786

 

Decrease in other assets

 

5,697

 

5,846

 

Increase in trade accounts payable and accrued expenses and other liabilities

 

35,727

 

22,832

 

Decrease in income taxes payable

 

(70,570

)

(14,153

)

 

 

 

 

 

 

Net cash provided by operating activities

 

128,670

 

183,075

 

 

 

 

 

 

 

Investing activities:

 

 

 

 

 

Purchases of property and equipment

 

(57,600

)

(20,571

)

Proceeds from disposal of property and equipment

 

4,122

 

1,605

 

 

 

 

 

 

 

Net cash used in investing activities

 

(53,478

)

(18,966

)

 

 

 

 

 

 

Financing activities:

 

 

 

 

 

Principal payments on long-term debt and capital lease obligations

 

(14,544

)

(5,140

)

Cash dividends paid

 

(5,801

)

(5,890

)

Purchase of treasury stock

 

(182,559

)

 

Proceeds from stock issuance

 

386

 

 

Excess tax benefits from share-based compensation

 

346

 

 

Decrease in short-term borrowings

 

 

(133,000

)

 

 

 

 

 

 

Net cash used in financing activities

 

(202,172

)

(144,030

)

 

 

 

 

 

 

(Decrease) increase in cash and cash equivalents

 

(126,980

)

20,079

 

Cash and cash equivalents, beginning of period

 

341,693

 

96,823

 

 

 

 

 

 

 

Cash and cash equivalents, end of period

 

$

214,713

 

$

116,902

 

 

 

 

 

 

 

Non-cash transactions:

 

 

 

 

 

Accrued capital expenditures

 

$

2,600

 

$

6,306

 

Stock awards

 

2,292

 

1,708

 

 

See notes to condensed consolidated financial statements.

 

5



Table of Contents

 

DILLARD’S, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Note 1.  Basis of Presentation

 

The accompanying unaudited interim condensed consolidated financial statements of Dillard’s, Inc. and its subsidiaries (the “Company”) have been prepared in accordance with the rules of the Securities and Exchange Commission (“SEC”).  Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements.  In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement have been included.  Operating results for the three and six months ended July 31, 2010 are not necessarily indicative of the results that may be expected for the fiscal year ending January 29, 2011 due to the seasonal nature of the business.

 

These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 30, 2010 filed with the SEC on March 26, 2010.

 

Reclassifications — Certain items have been reclassified from their prior year classifications to conform to the current year presentation.

 

Note 2.  Business Segments

 

The Company operates in two reportable segments:  the operation of retail department stores and a general contracting construction company.  The construction segment (“CDI”) that was purchased on August 29, 2008, is engaged in the general contracting and construction business.  CDI also constructs and remodels stores for the Company.

 

For the Company’s retail operations reportable segment, the Company determined its operating segments on a store by store basis.  Each store’s operating performance has been aggregated into one reportable segment.  The Company’s operating segments are aggregated for financial reporting purposes because they are similar in each of the following areas: economic characteristics, class of consumer, nature of products and distribution methods. Revenues from external customers are derived from merchandise sales, and the Company does not rely on any major customers as a source of revenue. Across all stores, the Company operates one store format under the Dillard’s name where each store offers the same general mix of merchandise with similar categories and similar customers.  The Company believes that disaggregating its operating segments would not provide meaningful additional information.

 

6



Table of Contents

 

The following tables summarize certain segment information, including the reconciliation of those items to the Company’s consolidated operations:

 

(in thousands of dollars)

 

Retail
Operations

 

Construction

 

Consolidated

 

Three Months Ended July 31, 2010:

 

 

 

 

 

 

 

Net sales from external customers

 

$

1,358,694

 

$

30,216

 

$

1,388,910

 

Gross profit

 

457,261

 

1,213

 

458,474

 

Depreciation and amortization

 

64,410

 

45

 

64,455

 

Interest and debt expense (income), net

 

18,503

 

(41

)

18,462

 

Income before income taxes and equity in losses of joint ventures

 

7,424

 

138

 

7,562

 

Equity in losses of joint ventures

 

(974

)

 

(974

)

Total assets

 

4,339,006

 

74,674

 

4,413,680

 

 

 

 

 

 

 

 

 

Three Months Ended August 1, 2009:

 

 

 

 

 

 

 

Net sales from external customers

 

$

1,365,858

 

$

61,913

 

$

1,427,771

 

Gross profit

 

423,956

 

2,804

 

426,760

 

Depreciation and amortization

 

66,350

 

41

 

66,391

 

Interest and debt expense (income), net

 

19,083

 

(72

)

19,011

 

(Loss) income before income taxes and equity in losses of joint ventures

 

(43,022

)

1,710

 

(41,312

)

Equity in losses of joint ventures

 

(385

)

 

(385

)

Total assets

 

4,506,129

 

91,720

 

4,597,849

 

 

 

 

 

 

 

 

 

Six Months Ended July 31, 2010:

 

 

 

 

 

 

 

Net sales from external customers

 

$

2,787,544

 

$

54,962

 

$

2,842,506

 

Gross profit

 

997,568

 

241

 

997,809

 

Depreciation and amortization

 

128,081

 

90

 

128,171

 

Interest and debt expense (income), net

 

37,402

 

(84

)

37,318

 

Income (loss) before income taxes and equity in losses of joint ventures

 

86,322

 

(1,692

)

84,630

 

Equity in losses of joint ventures

 

(1,928

)

 

(1,928

)

Total assets

 

4,339,006

 

74,674

 

4,413,680

 

 

 

 

 

 

 

 

 

Six Months Ended August 1, 2009:

 

 

 

 

 

 

 

Net sales from external customers

 

$

2,780,549

 

$

121,092

 

$

2,901,641

 

Gross profit

 

915,662

 

5,389

 

921,051

 

Depreciation and amortization

 

131,830

 

85

 

131,915

 

Interest and debt expense (income), net

 

37,534

 

(115

)

37,419

 

(Loss) income before income taxes and equity in losses of joint ventures

 

(31,228

)

2,985

 

(28,243

)

Equity in losses of joint ventures

 

(1,141

)

 

(1,141

)

Total assets

 

4,506,129

 

91,720

 

4,597,849

 

 

Intersegment construction revenues of $6.1 million and $12.7 million for the three and six months ended July 31, 2010, respectively, and intersegment construction revenues of $12.9 million and $21.0 million for the three and six months ended August 1, 2009, respectively, were eliminated during consolidation and have been excluded from net sales for the respective periods.

 

7



Table of Contents

 

Note 3.  Stock-Based Compensation

 

The Company has various stock option plans that provide for the granting of options to purchase shares of Class A Common Stock to certain key employees of the Company.  Exercise and vesting terms for options granted under the plans are determined at each grant date.  There were no stock options granted during the three and six months ended July 31, 2010 and August 1, 2009.

 

Stock option transactions for the three months ended July 31, 2010 are summarized as follows:

 

 

 

 

 

Weighted Average

 

Fixed Options

 

Shares

 

Exercise Price

 

Outstanding, beginning of period

 

4,029,369

 

$

25.79

 

Granted

 

 

 

Exercised

 

 

 

Expired

 

(20,000

)

25.74

 

Outstanding, end of period

 

4,009,369

 

$

25.79

 

Options exercisable at period end

 

4,009,369

 

$

25.79

 

 

At July 31, 2010, the intrinsic value of outstanding and exercisable stock options was $0.

 

Note 4.  Asset Impairment and Store Closing Charges

 

There were no asset impairment and store closing costs recorded during the three months ended July 31, 2010 or the three and six months ended August 1, 2009.

 

During the six months ended July 31, 2010, the Company recorded a pretax charge of $2.2 million for asset impairment and store closing costs.  The charge was for the write-down of one property currently held for sale.

 

Following is a summary of the activity in the reserve established for store closing charges for the six months ended July 31, 2010:

 

(in thousands)

 

Balance
Beginning
of Period

 

Adjustments
and Charges

 

Cash Payments

 

Balance
End of Period

 

Rent, property taxes and utilities

 

$

2,498

 

$

383

 

$

1,089

 

$

1,792

 

 

Reserve amounts are included in trade accounts payable and accrued expenses and other liabilities.

 

8



Table of Contents

 

Note 5.  Earnings (Loss) Per Share Data

 

The following table sets forth the computation of basic and diluted earnings (loss) per share for the periods indicated (in thousands, except per share data).

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

July 31,

 

August 1,

 

July 31,

 

August 1,

 

 

 

2010

 

2009

 

2010

 

2009

 

Basic:

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

6,828

 

$

(26,657

)

$

55,662

 

$

(18,994

)

 

 

 

 

 

 

 

 

 

 

Weighted average shares of common stock outstanding

 

67,688

 

73,827

 

69,991

 

73,736

 

 

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per share

 

$

0.10

 

$

(0.36

)

$

0.80

 

$

(0.26

)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

July 31,

 

August 1,

 

July 31,

 

August 1,

 

 

 

2010

 

2009

 

2010

 

2009

 

Diluted:

 

 

 

 

 

 

 

 

 

Net earnings (loss)

 

$

6,828

 

$

(26,657

)

$

55,662

 

$

(18,994

)

 

 

 

 

 

 

 

 

 

 

Weighted average shares of common stock Outstanding

 

67,688

 

73,827

 

69,991

 

73,736

 

Dilutive effect of stock-based compensation

 

 

 

 

 

Total weighted average equivalent shares

 

67,688

 

73,827

 

69,991

 

73,736

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings (loss) per share

 

$

0.10

 

$

(0.36

)

$

0.80

 

$

(0.26

)

 

Total stock options outstanding were 4,009,369 and 4,184,369 at July 31, 2010 and August 1, 2009, respectively.  Of these, options to purchase 3,985,588 and 4,184,369 shares of Class A Common Stock at prices ranging from $25.74 to $26.57 and $24.73 to $26.57 were outstanding at July 31, 2010 and August 1, 2009, respectively, but were not included in the computations of diluted earnings (loss) per share because the effect of their inclusion would be antidilutive.  A negligible amount of dilution, included in the weighted average shares computation for the three and six months ended July 31, 2010, was insignificant for presentation in the table above.

 

Note 6.  Comprehensive Income (Loss)

 

The following table shows the computation of comprehensive income (loss) (in thousands):

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

July 31,

 

August 1,

 

July 31,

 

August 1,

 

 

 

2010

 

2009

 

2010

 

2009

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

6,828

 

$

(26,657

)

$

55,662

 

$

(18,994

)

Other comprehensive income:

 

 

 

 

 

 

 

 

 

Amortization of retirement plan and other retiree benefit adjustments, net of taxes

 

476

 

333

 

952

 

665

 

Total comprehensive income (loss)

 

$

7,304

 

$

(26,324

)

$

56,614

 

$

(18,329

)

 

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Table of Contents

 

Note 7.  Commitments and Contingencies

 

On May 27, 2009, a lawsuit was filed in the United States District Court for the Eastern District of Arkansas styled Steven Harben, Derivatively on Behalf of Nominal Defendant Dillard’s, Inc. v. William Dillard II et al, Case Number 4:09-IV-395. The lawsuit generally seeks return of monies and alleges that certain officers and directors of the Company have been overcompensated and/or received improper benefits at the expense of the Company and its shareholders.  The named officers and directors intend to contest these allegations vigorously.

 

On June 10, 2009, a lawsuit was filed in the Circuit Court of Pulaski County, Arkansas styled Billy K. Berry, Derivatively on behalf of Dillard’s, Inc. v. William Dillard II et al, Case Number CV-09-4227-2. The lawsuit generally seeks return of monies and alleges that certain officers and directors of the Company have been overcompensated and/or received improper benefits at the expense of the Company and its shareholders.  On February 18, 2010, the Circuit Court entered an “Order of Dismissal with Prejudice and Final Judgment” dismissing the case as to all parties defendant.  Plaintiff has appealed the Court’s Order.  The named officers and directors will continue to contest these allegations vigorously.

 

Various other legal proceedings in the form of lawsuits and claims, which occur in the normal course of business, are pending against the Company and its subsidiaries.  In the opinion of management, disposition of these matters is not expected to have a material adverse effect on the Company’s financial position, cash flows or results of operations.

 

At July 31, 2010, letters of credit totaling $89.2 million were issued under the Company’s revolving credit facility.

 

Note 8.  Benefit Plans

 

The Company has an unfunded, nonqualified defined benefit plan (“Pension Plan”) for its officers.  The Pension Plan is noncontributory and provides benefits based on years of service and compensation during employment.  Pension expense is determined using various actuarial cost methods to estimate the total benefits ultimately payable to officers and allocates this cost to service periods.  The actuarial assumptions used to calculate pension costs are reviewed annually.  The Company made contributions to the Pension Plan of $1.1 million and $2.1 million during the three and six months ended July 31, 2010.  The Company expects to make contributions to the Pension Plan of approximately $3.6 million for the remainder of fiscal 2010.

 

The components of net periodic benefit costs are as follows (in thousands):

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

July 31,

 

August 1,

 

July 31,

 

August 1,

 

 

 

2010

 

2009

 

2010

 

2009

 

Components of net periodic benefit costs:

 

 

 

 

 

 

 

 

 

Service cost

 

$

721

 

$

771

 

$

1,443

 

$

1,542

 

Interest cost

 

1,817

 

1,826

 

3,634

 

3,651

 

Net actuarial loss

 

594

 

368

 

1,188

 

737

 

Amortization of prior service cost

 

157

 

157

 

313

 

313

 

Net periodic benefit costs

 

$

3,289

 

$

3,122

 

$

6,578

 

$

6,243

 

 

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Table of Contents

 

Note 9.  Revolving Credit Agreement

 

At July 31, 2010, the Company maintained a $1.2 billion revolving credit facility (“credit agreement”) with JPMorgan Chase Bank (“JPMorgan”) as the lead agent for various banks, secured by the inventory of Dillard’s, Inc. operating subsidiaries.  The credit agreement expires December 12, 2012.

 

Borrowings under the credit agreement accrue interest starting at either JPMorgan’s Base Rate minus 0.5% or LIBOR plus 1.0% (1.31% at July 31, 2010) subject to certain availability thresholds as defined in the credit agreement.

 

Limited to 85% of the inventory of certain Company subsidiaries, availability for borrowings and letter of credit obligations under the credit agreement was $813.7 million at July 31, 2010.  No borrowings were outstanding at July 31, 2010.  Letters of credit totaling $89.2 million were issued under this credit agreement leaving unutilized availability under the facility of approximately $725 million at July 31, 2010.  There are no financial covenant requirements under the credit agreement provided availability exceeds $100 million.  The Company pays an annual commitment fee to the banks of 0.25% of the committed amount less outstanding borrowings and letters of credit.

 

Under the credit agreement, the Company unilaterally reduced the $1.2 billion credit facility by $200 million to $1.0 billion, effective September 1, 2010, in order to save on unused fees.   Planned inventory levels would not allow for utilization of the full $1.2 billion.  All other aspects of the credit agreement remain unchanged.

 

Note 10.  Stock Repurchase Program

 

The Company was authorized by its board of directors in November 2007 to repurchase up to $200 million of its Class A Common Stock under an open-ended plan (“Stock Plan”).  This authorization permitted the Company to repurchase its Class A Common Stock in the open market or through privately negotiated transactions.

 

During the three and six months ended July 31, 2010, the Company repurchased 3.0 million and 7.2 million shares of stock for approximately $77.6 million and $182.6 million at an average price of $26.12 and $25.39 per share, respectively, which completed the remaining authorization under the Stock Plan.  No shares were repurchased under the Stock Plan during the three and six months ended August 1, 2009.

 

In August 2010, the Company was authorized by its board of directors to repurchase up to $250 million of its Class A Common Stock under a new open-ended plan.  This authorization permits the Company to repurchase its Class A Common Stock in the open market or through privately negotiated transactions.

 

Note 11.  Income Taxes

 

The total amount of unrecognized tax benefits as of July 31, 2010 and August 1, 2009 was $14.7 million and $27.6 million, respectively, of which $10.8 million and $19.8 million, respectively, would, if recognized, affect the effective tax rate.  The Company classifies accrued interest expense and penalties relating to income tax in the condensed consolidated financial statements as income tax expense.  The total interest and penalties recognized in the condensed consolidated statements of income and retained earnings during the three months ended July 31, 2010 and August 1, 2009 was $(1.4) million and $0.0 million, respectively, and during the six months ended July 31, 2010 and August 1, 2009 was $(1.4) million and $0.3 million, respectively.  The total accrued interest and penalties in the condensed consolidated balance sheets as of July 31, 2010 and August 1, 2009 was $4.9 million and $9.7 million, respectively.  The estimated range of the reasonably possible uncertain tax benefit decrease in the next twelve months is between $3 million and $5 million.  No significant changes occurred in the tax years subject to examination by major tax jurisdictions during the three and six months ended July 31, 2010.  Changes in the Company’s assumptions and judgments can materially affect amounts recognized in the consolidated balance sheets and statements of operations.

 

During the three months ended July 31, 2010, income taxes included the recognition of tax benefits primarily due to a state administrative settlement.  During the three months ended August 1, 2009, income taxes included the recognition of tax benefits primarily due to federal tax credits.

 

During the six months ended July 31, 2010, income taxes included the recognition of tax benefits primarily due to a state administrative settlement and federal tax credit refund claims.  During the six months ended August 1,

 

11



Table of Contents

 

2009, income taxes included the increase in unrecognized tax benefits, interest and penalties and the recognition of tax benefits primarily due to federal tax credits.

 

Note 12.  Gain on Disposal of Assets

 

During the three months ended July 31, 2010, we received proceeds of $4.0 million from the sale of a former retail store location, resulting in a gain of $4.0 million that was recorded in gain on disposal of assets.

 

Note 13.  Note Repurchase

 

No notes were repurchased during the six months ended July 31, 2010.  During the six months ended August 1, 2009, the Company repurchased $5.0 million face amount of 9.125% notes with an original maturity on August 1, 2011.  This repurchase resulted in a pretax gain of approximately $1.5 million which was recorded in net interest and debt expense.

 

Note 14.  Fair Value Disclosures

 

The estimated fair values of financial instruments which are presented herein have been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is required in interpreting market data to develop estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of amounts the Company could realize in a current market exchange.

 

The fair value of the Company’s long-term debt and subordinated debentures is based on market prices or dealer quotes (for publicly traded unsecured notes) and on discounted future cash flows using current interest rates for financial instruments with similar characteristics and maturities (for bank notes and mortgage notes).

 

The fair value of the Company’s cash and cash equivalents and trade accounts receivable approximates their carrying values at July 31, 2010 due to the short-term maturities of these instruments. The fair value of the Company’s long-term debt at July 31, 2010 was approximately $699 million.  The carrying value of the Company’s long-term debt at July 31, 2010 was $748 million.  The fair value of the Company’s subordinated debentures at July 31, 2010 was approximately $169 million.   The carrying value of the Company’s subordinated debentures at July 31, 2010 was $200 million.

 

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

 

The FASB’s accounting guidance utilizes a fair value hierarchy that prioritizes the inputs to the valuation techniques used to measure fair value into three broad levels:

 

·                        Level 1:  Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities

 

·                        Level 2:  Inputs, other than quoted prices, that are observable for the asset or liability, either directly or indirectly; these include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active

 

·                        Level 3:  Unobservable inputs that reflect the reporting entity’s own assumptions

 

12



Table of Contents

 

 

 

 

 

Basis of Fair Value Measurements

 

 

 

 

 

Quoted Prices

 

Significant

 

 

 

 

 

 

 

In Active

 

Other

 

Significant

 

 

 

Fair Value

 

Markets for

 

Observable

 

Unobservable

 

 

 

of Assets

 

Identical Items

 

Inputs

 

Inputs

 

(in thousands)

 

(Liabilities)

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

 

 

 

 

 

 

 

 

 

 

Long-lived assets held for sale

 

 

 

 

 

 

 

 

 

As of July 31, 2010

 

$

31,748

 

$

 

$

 

$

31,748

 

As of January 30, 2010

 

33,956

 

 

 

33,956

 

As of August 1, 2009

 

30,625

 

 

 

30,625

 

 

During the six months ended July 31, 2010, long-lived assets held for sale with a carrying value of $34.0 million were written down to their fair value of $31.7 million, resulting in an impairment charge of $2.2 million, which was included in earnings for the period.  The inputs used to calculate the fair value of these long-lived assets included selling prices from commercial real estate transactions for assets in markets that we estimated would be used by a market participant in valuing these assets.

 

Note 15.  Recently Issued Accounting Standards

 

Consolidation of Variable Interest Entities

On January 31, 2010, the Company adopted changes issued by the Financial Accounting Standards Board (FASB) to accounting for variable interest entities. These changes require an enterprise to perform an analysis to determine whether the enterprise’s variable interest or interests give it a controlling financial interest in a variable interest entity; to require ongoing reassessments of whether an enterprise is the primary beneficiary of a variable interest entity; to eliminate the solely quantitative approach previously required for determining the primary beneficiary of a variable interest entity; to add an additional reconsideration event for determining whether an entity is a variable interest entity when any changes in facts and circumstances occur such that holders of the equity investment at risk, as a group, lose the power from voting rights or similar rights of those investments to direct the activities of the entity that most significantly impact the entity’s economic performance; and to require enhanced disclosures that will provide users of financial statements with more transparent information about an enterprise’s involvement in a variable interest entity.  The adoption of these changes had no material impact on the Company’s condensed consolidated financial statements.

 

Fair Value Measurements and Disclosures

In January 2010, the FASB issued ASU 2010-06, an update to Topic 820, Fair Value Measurements and Disclosures.  ASU 2010-06 provides an update specifically to Subtopic 820-10 that requires new disclosures including, details of significant transfers in and out of Level 1 and Level 2 measurements and the reasons for the transfers and a gross presentation of activity within the Level 3 roll forward, presenting separately information about purchases, sales, issuances, and settlements.  ASU 2010-06 is effective for the first interim or annual reporting period beginning after December 15, 2009, except for the gross presentation of the Level 3 roll forward, which is required for interim and annual reporting periods beginning after December 15, 2010.  The adoption of ASU 2010-06 did not have a material impact on the Company’s condensed consolidated financial statements.

 

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Table of Contents

 

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

The following discussion should be read in conjunction with the condensed consolidated financial statements and the footnotes thereto included elsewhere in this report, as well as the financial and other information included in our Annual Report on Form 10-K for the year ended January 30, 2010.

 

EXECUTIVE OVERVIEW

 

Despite lackluster sales in the still fragile economy, Dillard’s, Inc. (the “Company”, “we”, “us” or “our”) experienced an improved second quarter of fiscal 2010 over the prior year.  Net sales from retail operations were $1,358.7 million during the quarter ended July 31, 2010, a decrease of $7.2 million or 1% from the quarter ended August 1, 2009, while sales in comparable stores remained unchanged.  Gross profit from retail operations improved 270 basis points of retail sales, primarily due to our inventory management efforts and resulting decrease in markdown activity.

 

Net sales from construction operations during the quarter ended July 31, 2010 were $30.2 million, down $31.7 million or 51% from the quarter ended August 1, 2009.  Gross profit from construction operations decreased 50 basis points of construction sales.  The construction industry continues to experience a decline in demand for construction services coupled with competitive pricing pressures.

 

Advertising, selling, administrative and general expenses company-wide were reduced by $4.7 million during the quarter ended July 31, 2010 compared to the quarter ended August 1, 2009, primarily as a result of the Company’s cost control measures combined with store closures.

 

The Company recorded net income for the second quarter of 2010 of $6.8 million, or $0.10 per share, compared to a net loss of $26.7 million, or $0.36 per share, for the second quarter of 2009.  Included in net income for the quarter ended July 31, 2010 was a $4.0 million pretax gain ($2.6 million after tax or $0.04 per share) on the sale of a retail store building and a $2.0 million income tax benefit ($0.03 per share) related to a state administrative settlement.

 

As of July 31, 2010, we had working capital of $905.8 million, cash and cash equivalents of $214.7 million and $948.5 million of total debt outstanding, excluding capital lease obligations.  Cash flows from operating activities were $128.7 million for the six months ended July 31, 2010.  Our improved cash position enabled us to repurchase $77.6 million (approximately 3.0 million shares) of our Class A Common Stock during the quarter.

 

As of July 31, 2010, we operated 310 total stores, including 14 clearance centers, and one internet store, a decrease of 4 stores from the same period last year.

 

Key Performance Indicators

 

We use a number of key indicators of financial condition and operating performance to evaluate our business, including the following:

 

 

 

Three Months Ended2

 

 

 

July 31,
2010

 

August 1,
2009

 

Net sales (in millions)

 

$

1,388.9

 

$

1,427.8

 

Net sales trend1

 

(3

)%

(15

)%

Gross profit (in millions)

 

$

458.5

 

$

426.8

 

Gross profit as a percentage of net sales

 

33.0

%

29.9

%

Cash flow from operations (in millions)

 

$

128.7

 

$

183.1

 

Total store count at end of period

 

310

 

314

 

Retail sales per square foot

 

$

25

 

$

25

 

Retail store sales trend

 

(1

)%

(15

)%

Comparable retail store sales trend

 

0

%

(13

)%

Comparable retail store inventory trend

 

(6

)%

(18

)%

Retail merchandise inventory turnover

 

2.7

 

2.5

 

 


1The net sales trend rate for the three months ended August 1, 2009 is based on retail segment sales only for comparability with the quarter ended August 2, 2008.

2Cash flow from operations data is for the six months ended July 31, 2010 and August 1, 2009.

 

14



Table of Contents

 

Seasonality and Inflation

 

Our business, like many other retailers, is subject to seasonal influences, with a significant portion of sales and income typically realized during the last quarter of our fiscal year due to the holiday season.  Because of the seasonality of our business, results from any quarter are not necessarily indicative of the results that may be achieved for a full fiscal year.

 

We do not believe that inflation has had a material effect on our results during the periods presented; however, there can be no assurance that our business will not be affected by such in the future.

 

RESULTS OF OPERATIONS

 

The following table sets forth the results of operations and percentage of net sales for the periods indicated.

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

July 31,

 

August 1,

 

July 31,

 

August 1,

 

 

 

2010

 

2009

 

2010

 

2009

 

Net sales

 

100.0

%

100.0

%

100.0

%

100.0

%

Service charges and other income

 

2.3

 

1.9

 

2.1

 

2.0

 

 

 

102.3

 

101.9

 

102.1

 

102.0

 

Cost of sales

 

67.0

 

70.1

 

64.9

 

68.3

 

Advertising, selling, administrative and general expenses

 

28.2

 

27.8

 

27.6

 

27.9

 

Depreciation and amortization

 

4.6

 

4.6

 

4.5

 

4.5

 

Rentals

 

0.9

 

1.0

 

0.9

 

1.0

 

Interest and debt expense, net

 

1.3

 

1.3

 

1.3

 

1.3

 

Gain on disposal of assets

 

(0.3

)

(0.0

)

(0.1

)

(0.0

)

Asset impairment and store closing charges

 

0.0

 

0.0

 

0.0

 

0.0

 

Income (loss) before income taxes and equity in losses of joint ventures

 

0.6

 

(2.9

)

3.0

 

(1.0

)

Income taxes (benefit)

 

(0.0

)

(1.0

)

0.9

 

(0.3

)

Equity in losses of joint ventures

 

(0.1

)

(0.0

)

(0.1

)

(0.0

)

Net income (loss)

 

0.5

%

(1.9

)%

2.0

%

(0.7

)%

 

15



Table of Contents

 

Net Sales

 

 

 

Three Months Ended

 

 

 

 

 

July 31,

 

August 1,

 

 

 

(in thousands of dollars)

 

2010

 

2009

 

$ Change

 

Net sales:

 

 

 

 

 

 

 

Retail operations segment

 

$

1,358,694

 

$

1,365,858

 

$

(7,164

)

Construction segment

 

30,216

 

61,913

 

(31,697

)

Total net sales

 

$

1,388,910

 

$

1,427,771

 

$

(38,861

)

 

The percent change by category in the Company’s retail operations segment sales for the three months ended July 31, 2010 compared to the three months ended August 1, 2009 as well as the percentage by segment and category to total net sales is as follows:

 

 

 

Three Months

 

 

 

% Change
2010-2009

 

% of
Net Sales

 

Retail operations segment

 

 

 

 

 

Cosmetics

 

(0.5

)%

14

%

Ladies’ apparel and accessories

 

1.0

 

40

 

Juniors’ and children’s apparel

 

(3.3

)

8

 

Men’s apparel and accessories

 

(2.8

)

17

 

Shoes

 

2.2

 

14

 

Home and furniture

 

(8.0

)

5

 

 

 

 

 

98

 

Construction segment

 

 

 

2

 

Total

 

 

 

100

%

 

Net sales from the retail operations segment decreased $7.2 million or 1% during the three months ended July 31, 2010 compared to the three months ended August 1, 2009 while sales in comparable stores remained flat between the same periods.  Sales of home and furniture items declined significantly during the quarter.  Sales of ladies’ apparel and accessories were up slightly over the same quarter last year, and sales of shoes were up moderately.

 

The number of sales transactions was flat for the three months ended July 31, 2010 over the comparable prior year period while the average dollars per sales transaction decreased less than 1%.  We recorded an allowance for sales returns of $8.0 million and $6.6 million as of July 31, 2010 and August 1, 2009, respectively.

 

Net sales from the construction segment decreased $31.7 million or 51% during the three months ended July 31, 2010 compared to the three months ended August 1, 2009 primarily because the fragile United States economy continues to have a negative impact on demand for construction projects in private industry.

 

16



Table of Contents

 

 

 

Six Months Ended

 

 

 

 

 

July 31,

 

August 1,

 

 

 

(in thousands of dollars)

 

2010

 

2009

 

$ Change

 

Net sales:

 

 

 

 

 

 

 

Retail operations segment

 

$

2,787,544

 

$

2,780,549

 

$

6,995

 

Construction segment

 

54,962

 

121,092

 

(66,130

)

Total net sales

 

$

2,842,506

 

$

2,901,641

 

$

(59,135

)

 

The percent change by category in the Company’s retail operations segment sales for the six months ended July 31, 2010 compared to the six months ended August 1, 2009 as well as the percentage by segment and category to total net sales is as follows:

 

 

 

Six Months

 

 

 

% Change
2010-2009

 

% of
Net Sales

 

Retail operations segment

 

 

 

 

 

Cosmetics

 

(1.8

)%

15

%

Ladies’ apparel and accessories

 

1.1

 

39

 

Juniors’ and children’s apparel

 

(1.9

)

8

 

Men’s apparel and accessories

 

0.1

 

17

 

Shoes

 

5.3

 

14

 

Home and furniture

 

(8.6

)

5

 

 

 

 

 

98

 

Construction segment

 

 

 

2

 

Total

 

 

 

100

%

 

Net sales from the retail operations segment increased $7.0 million, or less than 1%, during the six months ended July 31, 2010 compared to the six months ended August 1, 2009 while sales in comparable stores increased 1% between the same periods.  Sales of shoes were up significantly during the period.  Sales of cosmetics and juniors’ and children’s apparel declined moderately during the period while sales of home and furniture items declined significantly.

 

The number of sales transactions decreased 1% for the six months ended July 31, 2010 over the comparable prior year period while the average dollars per sales transaction were up slightly.

 

Storewide sales penetration of exclusive brand merchandise for the six months ended July 31, 2010 was 23.1% compared to 24.1% during the six months ended August 1, 2009.

 

Net sales from the construction segment decreased $66.1 million or 55% during the six months ended July 31, 2010 compared to the six months ended August 1, 2009 primarily because the fragile United States economy continues to have a negative impact on demand for construction projects in private industry.  We expect this decreased demand will continue throughout fiscal 2010 and into the first half of fiscal 2011.

 

We continue to believe that in light of recent signs of modest economic improvement in the United States, we may continue to see some sales growth in the retail operations segment during the coming months; however, there is no guarantee of improved sales performance.  Any further deterioration in the United States economy could have an adverse affect on consumer confidence and consumer spending habits, which could result in reduced customer traffic and comparable store sales, higher inventory levels and markdowns, and lower overall profitability.

 

17



Table of Contents

 

Service Charges and Other Income

 

 

 

Three Months Ended

 

Six Months Ended

 

Three
Months

 

Six
Months

 

(in thousands of dollars)

 

July 31,
2010

 

August 1,
2009

 

July 31,
2010

 

August 1,
2009

 

$ Change
2010-2009

 

$ Change
2010-2009

 

Service charges and other income:

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail operations segment

 

 

 

 

 

 

 

 

 

 

 

 

 

Leased department income

 

$

2,331

 

$

2,622

 

$

4,532

 

$

6,061

 

$

(291

)

$

(1,529

)

Income from GE marketing and servicing alliance

 

23,013

 

19,369

 

43,207

 

41,731

 

3,644

 

1,476

 

Shipping and handling income

 

3,951

 

3,556

 

7,889

 

7,116

 

395

 

773

 

Other

 

2,529

 

1,809

 

4,896

 

3,673

 

720

 

1,223

 

 

 

31,824

 

27,356

 

60,524

 

58,581

 

4,468

 

1,943

 

Construction segment

 

56

 

42

 

421

 

243

 

14

 

178

 

Total

 

$

31,880

 

$

27,398

 

$

60,945

 

$

58,824

 

$

4,482

 

$

2,121

 

 

Service charges and other income is composed primarily of income generated through the long-term marketing and servicing alliance (“Alliance”) with GE Consumer Finance (“GE”), which owns and manages the Dillard’s branded proprietary credit cards.  Income from the Alliance increased during the three and six months ended July 31, 2010 compared to the three and six months ended August 1, 2009 primarily due to decreased credit losses partially offset by a lower penetration rate of Dillard’s branded proprietary card.  Leased department income declined primarily because the licensee for the fine jewelry department ceased operations of all licensed outlets during fiscal 2009.

 

Gross Profit

 

(in thousands of dollars)

 

July 31, 2010

 

August 1, 2009

 

$ Change

 

% Change

 

Gross profit:

 

 

 

 

 

 

 

 

 

Three months ended

 

 

 

 

 

 

 

 

 

Retail operations segment

 

$

457,261

 

$

423,956

 

$

33,305

 

7.9

%

Construction segment

 

1,213

 

2,804

 

(1,591

)

(56.7

)

Total gross profit

 

$

458,474

 

$

426,760

 

$

31,714

 

7.4

%

 

 

 

 

 

 

 

 

 

 

Six months ended

 

 

 

 

 

 

 

 

 

Retail operations segment

 

$

997,568

 

$

915,662

 

$

81,906

 

8.9

%

Construction segment

 

241

 

5,389

 

(5,148

)

(95.5

)

Total gross profit

 

$

997,809

 

$

921,051

 

$

76,758

 

8.3

%

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

July 31, 2010

 

August 1, 2009

 

July 31, 2010

 

August 1, 2009

 

Gross profit as a percentage of segment net sales:

 

 

 

 

 

 

 

 

 

Retail operations segment

 

33.7

%

31.0

%

35.8

%

32.9

%

Construction segment

 

4.0

 

4.5

 

0.4

 

4.5

 

Total gross profit as a percentage of net sales

 

33.0

 

29.9

 

35.1

 

31.7

 

 

Gross profit improved 310 basis points of sales and 340 basis points of sales during the three and six months ended July 31, 2010 compared to the three and six months ended August 1, 2009, respectively.

 

Gross profit from retail operations improved 270 basis points of sales and 290 basis points of sales during the three and six months ended July 31, 2010 compared to the three and six months ended August 1, 2009, respectively, as a result of continuing inventory management measures leading to reduced markdown activity.  These inventory management measures include considerable adjustments to receipt cadence to shorten the period of time from receipt to sale, to reduce markdown risk and to keep customers engaged with a more continuous flow of fresh merchandise selections throughout the season.  Inventory declined 6% in both total and comparable stores as of July 31, 2010

 

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Table of Contents

 

compared to August 1, 2009.  A 1% change in markdowns would have impacted net income by approximately $2 million and $4 million for the three and six months ended July 31, 2010, respectively.

 

All merchandise categories experienced gross margin improvement during the three and six months ended July 31, 2010 compared to the three and six months ended August 1, 2009.  During the three months ended July 31, 2010, slight gross margin improvements were noted in cosmetics and ladies’ apparel and accessories, moderate improvements were noted in home and furniture, juniors’ and children’s apparel and shoes and significant improvements were noted in men’s apparel and accessories.  During the six months ended July 31, 2010, all merchandise categories experienced moderate improvements in gross margin compared to the six months ended August 1, 2009 with the exception of cosmetics, which improved slightly.

 

Gross profit from the construction segment declined 50 basis points of sales and 410 basis points of sales during the three and six months ended July 31, 2010 compared to the three and six months ended August 1, 2009.  This decrease was the result of the decline in demand for construction services that has created pricing pressures in an already competitive marketplace.  This decrease was also due to job delays from bad weather and job underperformance resulting in the recognition of a $2.2 million loss during the first quarter of fiscal 2010 on certain electrical contracts.

 

Advertising, Selling, Administrative and General Expenses (“SG&A”)

 

(in thousands of dollars)

 

July 31, 2010

 

August 1, 2009

 

$ Change

 

% Change

 

SG&A:

 

 

 

 

 

 

 

 

 

Three months ended

 

 

 

 

 

 

 

 

 

Retail operations segment

 

$

390,938

 

$

395,576

 

$

(4,638

)

(1.2

)%

Construction segment

 

1,116

 

1,145

 

(29

)

(2.5

)

Total SG&A

 

$

392,054

 

$

396,721

 

$

(4,667

)

(1.2

)%

 

 

 

 

 

 

 

 

 

 

Six months ended

 

 

 

 

 

 

 

 

 

Retail operations segment

 

$

783,382

 

$

808,368

 

$

(24,986

)

(3.1

)%

Construction segment

 

2,314

 

2,637

 

(323

)

(12.2

)

Total SG&A

 

$

785,696

 

$

811,005

 

$

(25,309

)

(3.1

)%

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

July 31, 2010

 

August 1, 2009

 

July 31, 2010

 

August 1, 2009

 

SG&A as a percentage of segment net sales:

 

 

 

 

 

 

 

 

 

Retail operations segment

 

28.8

%

29.0

%

28.1

%

29.1

%

Construction segment

 

3.7

 

1.8

 

4.2

 

2.2

 

Total SG&A as a percentage of net sales

 

28.2

 

27.8

 

27.6

 

27.9

 

 

The decline in SG&A during the periods presented primarily resulted from the Company’s expense savings measures combined with store closures.

 

The three-month decline in SG&A was most noted in payroll and payroll related taxes ($5.5 million) and advertising ($4.5 million) partially offset by an increase in services purchased ($3.3 million) and supplies ($2.6 million).

 

The six-month decline in SG&A was most noted in payroll and payroll related taxes ($19.6 million) and advertising ($14.6 million) partially offset by an increase in supplies ($4.3 million) and services purchased ($4.1 million).

 

The decline in payroll and payroll related taxes for the three and six-month periods presented was a direct result of the Company’s continued efforts to match the appropriate levels of staff to its current needs.  The decline in advertising expense for the three and six-month periods was primarily a result of the Company’s migration from newspaper media to less expensive internet marketing sources.

 

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Table of Contents

 

Depreciation and Amortization Expense

 

(in thousands of dollars)

 

July 31, 2010

 

August 1, 2009

 

$ Change

 

% Change

 

Depreciation and amortization expense:

 

 

 

 

 

 

 

 

 

Three months ended

 

 

 

 

 

 

 

 

 

Retail operations segment

 

$

64,410

 

$

66,350

 

$

(1,940

)

(2.9

)%

Construction segment

 

45

 

41

 

4

 

9.8

 

Total depreciation and amortization expense

 

$

64,455

 

$

66,391

 

$

(1,936

)

(2.9

)%

 

 

 

 

 

 

 

 

 

 

Six months ended

 

 

 

 

 

 

 

 

 

Retail operations segment

 

$

128,081

 

$

131,830

 

$

(3,749

)

(2.8

)%

Construction segment

 

90

 

85

 

5

 

5.9

 

Total depreciation and amortization expense

 

$

128,171

 

$

131,915

 

$

(3,744

)

(2.8

)%

 

The decrease of depreciation and amortization expense for the three and six months ended July 31, 2010 compared to the three and six months ended August 1, 2009 is primarily a result of the Company’s continuing efforts to reduce capital expenditures and of store closures.

 

Rentals

 

(in thousands of dollars)

 

July 31, 2010

 

August 1, 2009

 

$ Change

 

% Change

 

Rentals:

 

 

 

 

 

 

 

 

 

Three months ended

 

 

 

 

 

 

 

 

 

Retail operations segment

 

$

11,920

 

$

13,914

 

$

(1,994

)

(14.3

)%

Construction segment

 

23

 

22

 

1

 

4.5

 

Total rentals

 

$

11,943

 

$

13,936

 

$

(1,993

)

(14.3

)%

 

 

 

 

 

 

 

 

 

 

Six months ended

 

 

 

 

 

 

 

 

 

Retail operations segment

 

$

24,911

 

$

28,392

 

$

(3,481

)

(12.3

)%

Construction segment

 

46

 

44

 

2

 

4.5

 

Total rentals

 

$

24,957

 

$

28,436

 

$

(3,479

)

(12.2

)%

 

The decrease in rental expense for the three and six months ended July 31, 2010 compared to the three and six months ended August 1, 2009 is primarily due to a decrease in the amount of equipment leased by the Company.

 

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Table of Contents

 

Interest and Debt Expense, Net

 

(in thousands of dollars)

 

July 31, 2010

 

August 1, 2009

 

$ Change

 

% Change

 

Interest and debt expense (income), net:

 

 

 

 

 

 

 

 

 

Three months ended

 

 

 

 

 

 

 

 

 

Retail operations segment

 

$

18,503

 

$

19,083

 

$

(580

)

(3.0

)%

Construction segment

 

(41

)

(72

)

31

 

(43.1

)

Total interest and debt expense, net

 

$

18,462

 

$

19,011

 

$

(549

)

(2.9

)%

 

 

 

 

 

 

 

 

 

 

Six months ended

 

 

 

 

 

 

 

 

 

Retail operations segment

 

$

37,402

 

$

37,534

 

$

(132

)

(0.4

)%

Construction segment

 

(84

)

(115

)

31

 

(27.0

)

Total interest and debt expense, net

 

$

37,318

 

$

37,419

 

$

(101

)

(0.3

)%

 

The decrease of net interest and debt expense for the three-month period is primarily attributable to lower average debt.

 

The decrease of net interest and debt expense for the six-month period is primarily attributable to lower average debt levels partially offset by a gain on repurchased debt recorded during the six months ended August 1, 2009.

 

Total weighted average debt outstanding at July 31, 2010 decreased approximately $130.1 million and $124.0 million during the three and six months ended July 31, 2010 compared to the three and six months ended August 1, 2009, respectively.

 

Gain on Disposal of Assets

 

(in thousands of dollars)

 

July 31, 2010

 

August 1, 2009

 

$ Change

 

% Change

 

Gain on disposal of assets:

 

 

 

 

 

 

 

 

 

Three months ended

 

 

 

 

 

 

 

 

 

Retail operations segment

 

$

4,110

 

$

589

 

$

3,521

 

597.8

%

Construction segment

 

12

 

 

12

 

 

Total gain on disposal of assets

 

$

4,122

 

$

589

 

$

3,533

 

599.8

%

 

 

 

 

 

 

 

 

 

 

Six months ended

 

 

 

 

 

 

 

 

 

Retail operations segment

 

$

4,214

 

$

653

 

$

3,561

 

545.3

%

Construction segment

 

12

 

4

 

8

 

200.0

 

Total gain on disposal of assets

 

$

4,226

 

$

657

 

$

3,569

 

543.2

%

 

During the three months ended July 31, 2010, we received proceeds of $4.0 million from the sale of a retail store location, resulting in a gain of $4.0 million that was recorded in gain on disposal of assets.

 

Asset Impairment and Store Closing Charges

 

There were no asset impairment and store closing charges recorded during the three months ended July 31, 2010 and the three and six months ended August 1, 2009.

 

During the six months ended July 31, 2010, the Company’s retail operations segment recorded a pretax charge of $2.2 million for asset impairment and store closing costs.  The charge was for the write-down of one property currently held for sale.

 

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Table of Contents

 

Income Taxes

 

The total amount of unrecognized tax benefits as of July 31, 2010 and August 1, 2009 was $14.7 million and $27.6 million, respectively, of which $10.8 million and $19.8 million, respectively, would, if recognized, affect the effective tax rate.  The Company classifies accrued interest expense and penalties relating to income tax in the condensed consolidated financial statements as income tax expense.  The total interest and penalties recognized in the condensed consolidated statements of income and retained earnings during the three months ended July 31, 2010 and August 1, 2009 were $(1.4) million and $0.0 million, respectively, and during the six months ended July 31, 2010 and August 1, 2009 were $(1.4) million and $0.3 million, respectively.  The total accrued interest and penalties in the condensed consolidated balance sheets as of July 31, 2010 and August 1, 2009 were $4.9 million and $9.7 million, respectively.  The estimated range of the reasonably possible uncertain tax benefit decrease in the next twelve months is between $3 million and $5 million.  No significant changes occurred in the tax years subject to examination by major tax jurisdictions during the three and six months ended July 31, 2010.  Changes in the Company’s assumptions and judgments can materially affect amounts recognized in the consolidated balance sheets and statements of operations.

 

The Company’s estimated federal and state income tax rate, inclusive of equity in losses of joint ventures, was approximately (3.6)% and 36.1% for the three months ended July 31, 2010 and August 1, 2009, respectively.  During the three months ended July 31, 2010, income taxes included the recognition of tax benefits of approximately $2.0 million primarily due to a state administrative settlement.  During the three months ended August 1, 2009, income taxes included the recognition of tax benefits primarily due to federal tax credits.

 

The Company’s estimated federal and state income tax rate, inclusive of equity in losses of joint ventures, was approximately 32.7% and 35.4% for the six months ended July 31, 2010 and August 1, 2009, respectively.  During the six months ended July 31, 2010, income taxes included the recognition of tax benefits of approximately $2.7 million primarily due to a state administrative settlement and federal tax credit refund claims.  During the six months ended August 1, 2009, income taxes included the increase in unrecognized tax benefits, interest and penalties and the recognition of tax benefits primarily due to federal tax credits.

 

Our income tax rate for the remainder of fiscal 2010 is dependent upon results of operations and may change if the results for fiscal 2010 are different from current expectations.  We currently estimate that our effective rate for the remainder of fiscal 2010 will approximate 36%.

 

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Table of Contents

 

FINANCIAL CONDITION

 

Financial Position Summary

 

(in thousands of dollars)

 

July 31,
2010

 

January 30,
2010

 

$ Change

 

% Change

 

Cash and cash equivalents

 

$

214,713

 

$

341,693

 

$

(126,980

)

(37.2

)%

Other short-term borrowings

 

 

 

 

 

Current portion of long-term debt

 

1,758

 

1,719

 

39

 

2.3

 

Long-term debt

 

746,698

 

747,587

 

(889

)

(0.1

)

Subordinated debentures

 

200,000

 

200,000

 

 

 

Stockholders’ equity

 

2,175,667

 

2,304,103

 

(128,436

)

(5.6

)

 

 

 

 

 

 

 

 

 

 

Current ratio

 

2.22

 

2.28

 

 

 

 

 

Debt to capitalization

 

30.4

%

29.2

%

 

 

 

 

 

(in thousands of dollars)

 

July 31,
2010

 

August 1,
2009

 

$ Change

 

% Change

 

Cash and cash equivalents

 

$

214,713

 

$

116,902

 

$

97,811

 

83.7

%

Other short-term borrowings

 

 

67,000

 

(67,000

)

(100.0

)

Current portion of long-term debt

 

1,758

 

25,571

 

(23,813

)

(93.1

)

Long-term debt

 

746,698

 

751,839

 

(5,141

)

(0.7

)

Subordinated debentures

 

200,000

 

200,000

 

 

 

Stockholders’ equity

 

2,175,667

 

2,228,589

 

(52,922

)

(2.4

)

 

 

 

 

 

 

 

 

 

 

Current ratio

 

2.22

 

2.04

 

 

 

 

 

Debt to capitalization

 

30.4

%

31.9

%

 

 

 

 

 

Net cash flows from operations decreased to $128.7 million during the six months ended July 31, 2010 compared to $183.1 million for the six months ended August 1, 2009.  This decrease of $54.4 million was largely a result of a decrease of $125.1 million related to changes in working capital items, primarily of changes in income tax accruals and collection of an income tax receivable.  This decrease was partially offset by higher net income, as adjusted for non-cash items, of $70.7 million for the six months ended July 31, 2010 as compared to the six months ended August 1, 2009.

 

GE owns and manages Dillard’s branded proprietary credit card business under the Alliance that expires in fiscal 2014.  The Alliance provides for certain payments to be made by GE to the Company, including a revenue sharing and marketing reimbursement.  The Company received income of approximately $43.2 million and $41.7 million from GE during the six months ended July 31, 2010 and August 1, 2009, respectively.  While future cash flows under this Alliance are difficult to predict, the Company expects fiscal 2010 amounts to be reduced from prior year’s levels due to the challenging economy and new credit regulations.  The amount the Company receives is dependent on the level of sales on GE accounts, the level of balances carried on the GE accounts by GE customers, payment rates on GE accounts, finance charge rates and other fees on GE accounts, the level of credit losses for the GE accounts as well as GE’s funding costs.

 

During the six months ended July 31, 2010, we received proceeds of $4.0 million from the sale of a retail store location, resulting in a gain of $4.0 million that was recorded in gain on disposal of assets.

 

Capital expenditures were $57.6 million and $20.6 million for the six months ended July 31, 2010 and August 1, 2009, respectively.  These expenditures consisted primarily of the construction of new stores, remodeling of existing stores and investments in technology equipment and software.  During the six months ended July 31, 2010, the Company purchased two corporate aircraft for approximately $34 million that were previously leased under operating leases, and we opened our new store locations at The Domain in Austin, Texas (200,000 square feet) and The Village at Fairview in Fairview, Texas (155,000 square feet).  There are no other planned store openings for fiscal 2010.  Capital expenditures for fiscal 2010 are expected to be approximately $105 million compared to actual expenditures of $75.1 million during fiscal 2009.

 

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Table of Contents

 

During the six months ended July 31, 2010, we closed our store location in Helena, Montana (65,000 square feet) and recorded a negligible amount for store closing costs.  We remain committed to closing under-performing stores where appropriate and may incur future closing costs related to these stores when they close.

 

The Company had cash on hand of $214.7 million as of July 31, 2010.  As part of our overall liquidity management strategy and for peak working capital requirements, the Company has a $1.2 billion credit facility.  Limited to 85% of the inventory of certain Company subsidiaries, availability for borrowings and letter of credit obligations under the credit agreement was $813.7 million at July 31, 2010.  No borrowings were outstanding at July 31, 2010.  Letters of credit totaling $89.2 million were issued under this credit agreement leaving unutilized availability under the facility of approximately $725 million at July 31, 2010.

 

Under the credit agreement, the Company unilaterally reduced the $1.2 billion credit facility by $200 million to $1.0 billion, effective September 1, 2010, in order to save on unused fees.  Planned inventory levels would not allow for utilization of the full $1.2 billion.  All other aspects of the credit agreement remain unchanged.  Expected savings from the permanent reduction over the remaining term of the credit facility are approximately $1.1 million.

 

Cash used in financing activities for the six months ended July 31, 2010 totaled $202.2 million compared to cash used in financing activities of $144.0 million for the six months ended August 1, 2009.  This decrease of cash flow was primarily due to the repurchase of the Company’s Class A Common Stock and the payment of debt and capital lease obligations during the six months ended July 31, 2010 partially offset by debt and short-term borrowing payments during the six months ended August 1, 2009.

 

During the six months ended July 31, 2010, the Company repurchased 7.2 million shares of Class A Common Stock for $182.6 million at an average price of $25.39 per share under its Stock Plan, which completed the remaining authorization under the Stock Plan.  No shares were repurchased under the Stock Plan during the six months ended August 1, 2009.  In August 2010, the Company was authorized by its board of directors to repurchase up to $250 million of its Class A Common Stock under a new open-ended plan.  This authorization permits the Company to repurchase its Class A Common Stock in the open market or through privately negotiated transactions.

 

During the six months ended July 31, 2010, the Company made principal payments on long-term debt and capital lease obligations of $14.5 million, including the payoff of approximately $13 million in capital lease obligations for two corporate aircraft.  During the six months ended August 1, 2009, the Company made principal payments on long-term debt and capital lease obligations of $5.1 million, including the repurchase of $5.0 million face amount of 9.125% notes maturing on August 1, 2011.  This repurchase resulted in a pretax gain of approximately $1.5 million and was recorded in net interest and debt expense.

 

During the six months ended August 1, 2009, the Company also paid $133.0 million of short-term borrowings under the Company’s credit facility.  No short-term borrowings were outstanding under the credit facility during the six months ended July 31, 2010.

 

During fiscal 2010, the Company expects to finance its capital expenditures and its working capital requirements including required debt repayments and stock repurchases, if any, from cash on hand, cash flows generated from operations and utilization of the credit facility.  The Company expects peak borrowings under the credit facility during fiscal 2010 to be minimal.  Depending on conditions in the capital markets and other factors, the Company will from time to time consider other possible financing transactions, the proceeds of which could be used to refinance current indebtedness or for other corporate purposes.

 

There have been no material changes in the information set forth under the caption “Contractual Obligations and Commercial Commitments” in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in the Company’s Annual Report on Form 10-K for the fiscal year ended January 30, 2010.

 

OFF-BALANCE-SHEET ARRANGEMENTS

 

The Company does not have any arrangements or relationships with entities that are not consolidated into the financial statements that are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operation, liquidity, capital expenditures or capital resources that is material to investors.

 

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Table of Contents

 

NEW ACCOUNTING STANDARDS

 

Consolidation of Variable Interest Entities

On January 31, 2010, the Company adopted changes issued by the Financial Accounting Standards Board (FASB) to accounting for variable interest entities. These changes require an enterprise to perform an analysis to determine whether the enterprise’s variable interest or interests give it a controlling financial interest in a variable interest entity; to require ongoing reassessments of whether an enterprise is the primary beneficiary of a variable interest entity; to eliminate the solely quantitative approach previously required for determining the primary beneficiary of a variable interest entity; to add an additional reconsideration event for determining whether an entity is a variable interest entity when any changes in facts and circumstances occur such that holders of the equity investment at risk, as a group, lose the power from voting rights or similar rights of those investments to direct the activities of the entity that most significantly impact the entity’s economic performance; and to require enhanced disclosures that will provide users of financial statements with more transparent information about an enterprise’s involvement in a variable interest entity.  The adoption of these changes had no material impact on the Company’s condensed consolidated financial statements.

 

Fair Value Measurements and Disclosures

In January 2010, the FASB issued ASU 2010-06, an update to Topic 820, Fair Value Measurements and Disclosures.  ASU 2010-06 provides an update specifically to Subtopic 820-10 that requires new disclosures including, details of significant transfers in and out of Level 1 and Level 2 measurements and the reasons for the transfers and a gross presentation of activity within the Level 3 roll forward, presenting separately information about purchases, sales, issuances, and settlements.  ASU 2010-06 is effective for the first interim or annual reporting period beginning after December 15, 2009, except for the gross presentation of the Level 3 roll forward, which is required for interim and annual reporting periods beginning after December 15, 2010.  The adoption of ASU 2010-06 did not have a material impact on the Company’s condensed consolidated financial statements.

 

FORWARD-LOOKING INFORMATION

 

This report contains certain forward-looking statements.  The following are or may constitute forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995:  statements including (a) words such as “may,” “will,” “could,” “believe,” “expect,” “future,” “potential,” “anticipate,” “intend,” “plan,” “estimate,” “continue,” or the negative or other variations thereof, and (b) statements regarding matters that are not historical facts.  The Company cautions that forward-looking statements contained in this report are based on estimates, projections, beliefs and assumptions of management and information available to management at the time of such statements and are not guarantees of future performance.  The Company disclaims any obligation to update or revise any forward-looking statements based on the occurrence of future events, the receipt of new information, or otherwise. Forward-looking statements of the Company involve risks and uncertainties and are subject to change based on various important factors. Actual future performance, outcomes and results may differ materially from those expressed in forward-looking statements made by the Company and its management as a result of a number of risks, uncertainties and assumptions.   Representative examples of those factors include (without limitation) general retail industry conditions and macro-economic conditions; economic and weather conditions for regions in which the Company’s stores are located and the effect of these factors on the buying patterns of the Company’s customers, including the effect of changes in prices and availability of oil and natural gas; the availability of consumer credit; the impact of competitive pressures in the department store industry and other retail channels including specialty, off-price, discount and Internet retailers; changes in consumer spending patterns, debt levels and their ability to meet credit obligations; changes in legislation, affecting such matters as the cost of employee benefits or credit card income; adequate and stable availability of materials, production facilities and labor from which the Company sources its merchandise; changes in operating expenses, including employee wages, commission structures and related benefits; system failures or data security breaches; possible future acquisitions of store properties from other department store operators; the continued availability of financing in amounts and at the terms necessary to support the Company’s future business; fluctuations in LIBOR and other base borrowing rates; potential disruption from terrorist activity and the effect on ongoing consumer confidence; epidemic, pandemic or other public health issues; potential disruption of international trade and supply chain efficiencies; world conflict and the possible impact on consumer spending patterns and other economic and demographic changes of similar or dissimilar nature.   The Company’s filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended January 30, 2010, contain other information on factors that may affect financial results or cause actual results to differ materially from forward-looking statements.

 

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Table of Contents

 

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

 

There have been no material changes in the information set forth under caption “Item 7A-Quantitative and Qualitative Disclosures About Market Risk” in the Company’s Annual Report on Form 10-K for the fiscal year ended January 30, 2010.

 

Item 4.  Controls and Procedures

 

The Company has established and maintains disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934).  The Company’s management, with the participation of our CEO and CFO, has evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the fiscal quarter covered by this quarterly report, and based on that evaluation, the Company’s CEO and CFO have concluded that these disclosure controls and procedures were effective.

 

There were no changes in our internal control over financial reporting that occurred during the fiscal quarter ended July 31, 2010 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

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Table of Contents

 

PART II.  OTHER INFORMATION

 

Item 1.  Legal Proceedings

 

On May 27, 2009, a lawsuit was filed in the United States District Court for the Eastern District of Arkansas styled Steven Harben, Derivatively on Behalf of Nominal Defendant Dillard’s, Inc. v. William Dillard II et al, Case Number 4:09-IV-395. The lawsuit generally seeks return of monies and alleges that certain officers and directors of the Company have been overcompensated and/or received improper benefits at the expense of the Company and its shareholders.  The named officers and directors intend to contest these allegations vigorously.

 

On June 10, 2009, a lawsuit was filed in the Circuit Court of Pulaski County, Arkansas styled Billy K. Berry, Derivatively on behalf of Dillard’s, Inc. v. William Dillard II et al, Case Number CV-09-4227-2. The lawsuit generally seeks return of monies and alleges that certain officers and directors of the Company have been overcompensated and/or received improper benefits at the expense of the Company and its shareholders.  On February 18, 2010, the Circuit Court entered an “Order of Dismissal with Prejudice and Final Judgment” dismissing the case as to all parties defendant.  Plaintiff has appealed the Court’s Order.  The named officers and directors will continue to contest these allegations vigorously.

 

From time to time, we are involved in other litigation relating to claims arising out of our operations in the normal course of business.  Such issues may relate to litigation with customers, employment related lawsuits, class action lawsuits, purported class action lawsuits and actions brought by governmental authorities.  As of September 2, 2010, we are not a party to any legal proceedings that, individually or in the aggregate, are reasonably expected to have a material adverse effect on our business, results of operations, financial condition or cash flows.  However, the results of these matters cannot be predicted with certainty, and an unfavorable resolution of one or more of these matters could have a material adverse effect on our business, results of operations, financial condition or cash flows.

 

Item 1A.  Risk Factors

 

There have been no material changes in the information set forth under caption “Item 1A-Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended January 30, 2010.

 

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

Issuer Purchases of Equity Securities

 

Period

 

(a) Total Number
of Shares
Purchased

 

(b) Average Price
Paid per Share

 

(c)Total Number of
Shares Purchased
as Part of Publicly

Announced Plans
or Programs

 

(d) Approximate
Dollar Value of
Shares that May
Yet Be Purchased
Under the Plans or
Programs

 

May 2, 2010 through May 29, 2010

 

1,394,044

 

$

26.97

 

1,394,044

 

$

39,971,550

 

May 30, 2010 through July 3, 2010

 

1,575,294

 

25.37

 

1,575,294

 

0

 

July 4, 2010 through July 31, 2010

 

 

 

 

0

 

Total

 

2,969,338

 

$

26.12

 

2,969,338

 

$

0

 

 

In November 2007, the Company’s board of directors authorized the Company to repurchase up to $200 million of the Company’s Class A Common Stock.  The plan had no expiration date.  During the three months ended July 31, 2010, the Company completed the remaining authorization under this plan.

 

In August 2010, the Company was authorized by its board of directors to repurchase up to $250 million of its Class A Common Stock under a new open-ended plan.  This authorization permits the Company to repurchase its Class A Common Stock in the open market or through privately negotiated transactions.

 

Item 6.  Exhibits

 

Number

 

Description

 

 

 

31.1

 

Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

 

Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1

 

Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).

32.2

 

Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).

101.INS*

 

XBRL Instance Document

101.SCH*

 

XBRL Taxonomy Extension Schema Document

101.CAL*

 

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*

 

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*

 

XBRL Taxonomy Extension Label Linkbase Document

101.PRE*

 

XBRL Taxonomy Extension Presentation Linkbase Document

 


*  Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

 

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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:

September 2, 2010

 

/s/ James I. Freeman

 

James I. Freeman

 

Senior Vice President and Chief Financial Officer

 

(Principal Financial and Accounting Officer)

 

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