SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 30, 1999
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 jurisdiction (IRS Employer
of incorporation or organization) Identification Number)
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1600 CANTRELL ROAD, LITTLE ROCK, ARKANSAS 72201
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (501)376-5200
Securities registered pursuant to Section 12(b) of the Act:
Title of each Class Name of each exchange on which registered
Class A Common Stock New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
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 by checkmark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X ]
State the aggregate market value of the voting stock held by
non-affiliates of the Registrant as of March 31, 1999:
$2,458,357,247
Indicate the number of shares outstanding of each of the Registrant's classes of common stock as of March 31, 1999:
Class A Common Stock, $.01 par value 102,906,719 Class B Common Stock, $.01 par value 4,016,929
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Stockholders Report for the fiscal year ended January 30, 1999 (the "Report") are incorporated by reference into Parts I and II.
Portions of the Proxy Statement for the Annual Meeting of Stockholders to be held May 15, 1999 (the "Proxy Statement") are incorporated by reference into Part III.
The Company cautions that any forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995) contained in this report or made by management of the Company involve risks and uncertainties and are subject to change based on various important factors. The following factors, among others, could affect the Company's financial performance and could cause actual results for 1999 and beyond to differ materially from those expressed or implied in any such forward- looking statements: economic and weather conditions in the regions in which the Company's stores are located and their effect on the buying patterns of the Company's customers, changes in consumer spending patterns and debt levels, trends in personal bankruptcies and the impact of competitive market forces.
PART I
ITEM 1. BUSINESS.
General
Dillard's, Inc. ("Company" or "Registrant") is an outgrowth of a department store originally founded in 1938 by William Dillard. The Company was incorporated in Delaware in 1964. The Company operates retail department stores located primarily in the southwest, southeast and midwest.
The department store business is highly competitive. The Company has several competitors on a national and regional level as well as numerous competitors on a local level. Many factors enter into competition for the consumer's patronage, including price, quality, style, service, product mix, convenience and credit availability. The Company's earnings depend to a significant extent on the results of operations for the last quarter of its fiscal year. Due to holiday buying patterns, sales for that period average approximately one-third of annual sales.
For additional information with respect to the Registrant's business, reference is made to information contained on page 12 under the headings "Net Sales," "Net Income," "Total Assets" and "Number of Employees - Average," and page 32 of the Report, which information is incorporated herein by reference.
Executive Officers of the Registrant
The following table lists the names and ages of all Executive Officers of the Registrant, the nature of any family relationship between them, and all positions and offices with the Registrant presently held by each person named. All of the Executive Officers listed below have been in managerial positions with the Registrant for more than five years, except for Robin Sanderford, Paul J. Schroeder, Jr. and Charles Unfried. Mr. Sanderford has been employed by the Registrant as Vice President since August 1998. From 1995 throught 1998, Mr. Sanderford was the President of the Southeast Division for Mercantile Stores, Company, Inc.("Mercantile"). From 1993 through 1995, he served as Vice President & director of real estate and long range planning for Mercantile. Mr. Schroeder has been employed by the Registrant as Vice President since January 1998. Prior to that employment, he was a Partner in St. Louis based, international law firm Bryan Cave, LLP specializing in labor and employment law. Mr. Unfried has been employed by the Registrant as Vice President since August 1998. Prior to 1998, Mr. Unfried was President of Mercantile Credit Services and and Mercantile Stores National Bank, both subsidiaries of Mercantile.
Name Age Position and Office Family Relationships
William Dillard, II 54 Director; Chief Executive Son of
Officer William Dillard
Alex Dillard 49 Director; President Son of
William Dillard
Mike Dillard 47 Director; Executive Son of
Vice President William Dillard
H. Gene Baker 60 Vice President None
Joseph P. Brennan 54 Vice President None
G. Kent Burnett 54 Vice President None
Drue Corbusier 52 Director; Executive Daughter of
Vice President William Dillard
David M. Doub 52 Vice President None
James I. Freeman 49 Director; Senior Vice None
President; Chief Financial
Officer
Randal L. Hankins 48 Vice President None
T. R. Gastman 69 Vice President None
Robin Sanderford 52 Vice President None
Paul J. Schroeder, Jr. 50 Vice President None
Burt Squires 49 Vice President None
Charles Unfried 52 Vice President None
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ITEM 2. PROPERTIES.
All of the Registrant's stores are owned or leased from a wholly- owned subsidiary or from third parties. The Registrant's third- party store leases typically provide for rental payments based upon a percentage of net sales with a guaranteed minimum annual rent, while the lease terms between the Registrant and its wholly-owned subsidiary vary. In general, the Company pays the cost of insurance, maintenance and any increase in real estate taxes related to these leases. At fiscal year end there were 335 stores in operation with gross square footage of 55 million. The Company owned or leased from a wholly owned subsidiary a total of 243 stores with 39 million square feet. The Company leased 92 stores from third parties, which totaled 16 million square feet. For additional information with respect to the Registrant's properties and leases, reference is made to information contained in Notes 2, 14 and 12, "Notes to Consolidated Financial Statements," on pages 25, 26 and 30 of the Report, which information is incorporated herein by reference.
ITEM 3. LEGAL PROCEEDINGS.
The Company has no material legal proceedings pending against it.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
With respect to the market for the Company's common stock, market prices, and dividends, reference is made to information contained on page 33 of the Report, which information is incorporated herein by reference. As of March 31, 1999, there were 5,281 record holders of the Company's Class A Common Stock and 10 record holders of the Company's Class B Common Stock.
ITEM 6. SELECTED FINANCIAL DATA.
Reference is made to information under the heading "Table of Selected Financial Data" on pages 12 and 13 of the Report, which information is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Reference is made to information under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operation" on pages 14 through 17 of the Report, which information is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Reference is made to information under the heading "Quantitative and Qualitative Disclosures About Market Risk" on page 16 of the Report which information is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Reference is made to the consolidated financial statements and notes thereto included on pages 19 through 31 of the Report, which are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
A. Directors of the Registrant.
Information regarding directors of the Registrant is incorporated herein by reference to the information on pages 5 through 7 under the heading "Nominees for Election as Directors" and page 14 under the heading "Section 16(a) Beneficial Ownership Reporting Compliance" in the Proxy Statement.
B. Executive Officers of the Registrant.
Information regarding executive officers of the Registrant is incorporated herein by reference to Item 1 of this report under the heading "Executive Officers of the Registrant." Reference additionally is made to the information under the heading "Section 16(a) Beneficial Ownership Reporting Compliance" on page 14 in the Proxy Statement, which information is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
Information regarding executive compensation and compensation of directors is incorporated herein by reference to the information beginning on page 8 under the heading "Compensation of Directors and Executive Officers" and concluding on page 11 under the heading "Compensation Committee Interlocks and Insider Participation" in the Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
Information regarding security ownership of certain beneficial
owners and management is incorporated herein by reference to the
information on page 4 under the heading "Principal Holders of
Voting Securities" and page 4 under the heading "Nominees for
Election as Directors" and continuing through footnote 16 on page 7
in the Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and related transactions is incorporated herein by reference to the information on page 14 under the heading "Certain Relationships and Transactions" in the Proxy Statement and to the information regarding Mr. Davis on page 11 under the heading "Compensation Committee Interlocks and Insider Participation" in the Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a)(1)Financial Statements
The following consolidated financial statements of the Registrant and its consolidated subsidiaries included in the Report are incorporated herein by reference in Item 8 of this report.
Consolidated Balance Sheets - January 30, 1999 and January 31, 1998
Consolidated Statements of Income - Fiscal years ended January 30, 1999,
January 31, 1998 and February 1, 1997
Consolidated Statements of Stockholders; Equity - Fiscal years
ended January 30, 1999, January 31, 1998 and February 1, 1997
Consolidated Statements of Cash Flows - Fiscal years ended
January 30, 1999, January 31, 1998 and February 1, 1997
Notes to Consolidated Financial Statements - Fiscal years ended
January 30, 1999, January 31, 1998 and February 1, 1997
(a)(2)Financial Statement Schedules
The following consolidated financial statement schedule of the Registrant and its consolidated subsidiaries is filed pursuant to Item 14(d) (this schedule appears immediately following the signature page):
Schedule II - Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted.
(a)(3)Exhibits and Management Compensatory Plans Exhibits
The following exhibits are filed pursuant to Item 14(c):
Number Description
Management Compensatory Plans
Listed below are the management contracts and compensatory plans which are required to be filed as exhibits pursuant to Item 14(c):
Retirement Contract of William Dillard dated March 8, 1997 1998 Incentive and Nonqualified Stock Option Plan Corporate Officers Non-Qualified Pension Plan Senior Management Cash Bonus Plan
(b) Reports on Form 8-K filed during the fourth quarter:
None
(c) Exhibits
See the response to Item 14(a)(3).
(d) Financial statement schedules
See the response to Item 14(a)(2).
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
/s/ James I. Freeman
Date April 30,1999 James I. Freeman, Senior Vice President
and Chief Financial Officer
(Principal Financial & Accounting Officer)
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Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacity and on the date indicated.
/s/William Dillard /s/Drue Corbusier
William Dillard Drue Corbusier
Chairman Executive Vice President
and Director
/s/Calvin N. Clyde, Jr. /s/Robert C. Connor
Calvin N. Clyde, Jr. Robert C. Connor
Director Director
/s/Will D. Davis /s/Alex Dillard
Will D. Davis Alex Dillard
Director President and Director
/s/Mike Dillard /s/William Dillard, II
Mike Dillard William Dillard, II
Executive Vice President and Chief Executive Officer
Director and Director (Principal
Executive Officer)
/s/James I. Freeman /s/William H. Sutton
James I. Freeman William H. Sutton
Senior Vice President and Chief Director
Financial Officer and Director
/s/John Paul Hammerschmidt /s/William B. Harrison, Jr.
John Paul Hammerschmidt William B. Harrison, Jr.
Director Director
/s/Jackson T. Stephens /s/John H. Johnson
Jackson T. Stephens John H. Johnson
Director Director
/s/E. Ray Kemp
E. Ray Kemp
Director
Date April 30,1999
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INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Dillard's, Inc.
Little Rock, Arkansas
We have audited the consolidated financial statements of Dillard's, Inc. and subsidiaries (the "Company") as of January 30, 1999 and January 31, 1998, and for each of the three years in the period ended January 30, 1999, and have issued our report thereon dated March 15, 1999; such consolidated financial statements and report are included in your 1998 Annual Report to Stockholders and are incorporated herein by reference. Our audits also included the consolidated financial statement schedule of Dillard's, Inc. and subsidiaries, listed in Item 14. This consolidated financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as whole, presents fairly in all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
New York, New York
March 15, 1999
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
DILLARD'S, INC. AND SUBSIDIARIES
(DOLLAR AMOUNTS IN THOUSANDS)
COL. A COL. B COL. C COL.D COL. E COL. F
ADDITIONS
BALANCE CHARGED TO CHARGED TO BALANCE
AT BEGINNING COST AND OTHER ACCOUNTS DEDUCTIONS - AT END
DESCRIPTION OF PERIOD EXPENSES DESCRIBE DESCRIBE OF PERIOD
Allowance for losses on accounts
receivable:
Year ended
January 30, 1999: $27,809 62,766 17,854 (1) 70,942 (2) $37,487
Year ended
January 31, 1998: $24,169 55,816 52,176 (2) $27,809
Year ended
February 1, 1997: $19,528 66,629 23 (1) 62,011 (2) $24,169
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(1) Represents the allowance for losses on accounts acquired.
(2) Accounts written off and charged to allowance for losses on accounts receivable (net of recoveries).
EXHIBIT INDEX
Number Description
WHEREAS, the Board of Directors of the Company deems it in
the best interest of the Company that Key Employees and Outside
Directors of the Company be given an opportunity to acquire a
stake in the growth of the Company as a means of assuring their
maximum effort and continued association and employment with the
Company; and
WHEREAS, the Board of Directors believes that the Company
can best obtain these and other benefits by granting stock
options to such Key Employees and Outside Directors;
NOW, THEREFORE, BE IT RESOLVED:
That the Dillard's, Inc.1998 Incentive and Nonqualified
Stock Option Plan be adopted, and that it be effective commencing
May 16, 1998.
1. Purpose. The purpose of the Dillard's, Inc. 1998
Incentive and Nonqualified Stock Option Plan is to encourage
ownership of stock in the Company by Key Employees and Outside
Directors, and thereby cause such Key Employees and Outside
Directors to increase their efforts on behalf of the Company, to
effect savings, and to otherwise promote the best interests of
the Company. It is intended that options granted under this Plan
to Key Employees will qualify as Incentive Stock Options,
provided, however, that Nonqualified Stock Options may also be
granted to Key Employees and Outside Directors which do not
qualify as Incentive Stock Options.
2. Definitions. As used herein, the following definitions
shall apply.
a. "Board" shall mean the Board of Directors of the
Company.
b. "Common Stock" shall mean Common Stock, Class A,
$.01 par value per share, of the Company.
c. "Code" shall mean the Internal Revenue Code of
1986, as amended.
d. "Committee" shall mean the Committee appointed by
the Board in accordance with paragraph 4(a) of the Plan.
e. "Company" shall mean Dillard's, Inc.
f. "Continuous Employment" or "Continuous Status as
an Employee" shall mean the absence of any interruption or
termination of employment by the Company. Employment shall not
be considered interrupted in the case of sick leave, military
leave, or any other leave of absence approved by the Company.
g. "Effective Date" shall mean May 16, 1998.
h. "Employee" shall mean any person employed on a
full-time basis by the Company or of any subsidiaries of the
Company (as defined in 425(f) of the Code).
i. "Incentive Stock Option" shall mean an Option
which meets the requirements of 422(b) of the Code.
j. "Key Employee" shall mean an Employee who, in the
opinion of the Committee, can contribute significantly to the
growth and profitability of, or perform services of major
importance to, the Company or any subsidiaries of the Company.
k. "Nonqualified Stock Option" means an Option which
does not receive the special tax treatment received by an
Incentive Stock Option.
l. "Option" shall mean a right to acquire Common
Stock which is granted pursuant to this Plan.
m. "Option Agreement" shall mean a written agreement
which sets forth the terms of each Option and is signed by an
authorized officer of the Company.
n. "Optioned Stock" shall mean Common Stock subject
to an Option granted pursuant to this Plan.
o. "Optionee" shall mean an Employee or Outside
Director who receives an Option.
p. "Outside Director" shall mean a member of the
Board who is not also an Employee.
q. "Plan" shall mean the Dillard's, Inc.1998
Incentive and Nonqualified Stock Option Plan.
r. "Share" shall mean one share of the Common Stock.
3. Shares Subject to the Plan. Except as otherwise
required by the provisions of paragraph 13 hereof, the aggregate
number of Shares of Common Stock deliverable upon the exercise of
Options pursuant to the Plan shall not exceed six million
(6,000,000) Shares. Such Shares may either be authorized but
unissued or treasury shares. If an Option should expire or
become unexercisable for any reason without having been exercised
in full, the unpurchased Shares which were subject thereto shall,
unless the Plan shall have been terminated, be available for the
grant of other Options under the Plan. No Optionee may receive
options covering more than one million (1,000,000) shares in any
single fiscal year of the Company under the Plan.
4. Administration of the Plan.
a. Composition of Committee. The Plan shall be
administered by the Executive Compensation and Stock Option
Committee or any successor thereto of the Board or such other
committee as determined by the Board (the "Committee"). The
Committee shall solely be composed of two (2) or more "outside
directors" of the Board within the meaning of 162(m) of the Code
and applicable Treasury Regulations, or any successor to such
provisions, and who are also "non-employee directors" within the
meaning of Rule 16b-3, or any successor to such Rule, of the
Securities Exchange Commission.
b. Powers of the Committee. The Committee is
authorized (but only to the extent not contrary to the express
provisions of the Plan or to resolutions adopted by the Board) to
interpret the Plan, to prescribe, amend, and rescind rules and
regulations relating to the Plan, to determine the terms and
conditions upon which Options may be exercised, to determine the
form and content of Option Agreements, to construe and interpret
the Plan and Option Agreements, to accelerate the exercisability
of any Option, to make such other determinations necessary or
advisable for the administration of the Plan and shall have and
may exercise such other power and authority as may be delegated
to it by the Board from time to time. A majority of the entire
Committee shall constitute a quorum, and the action of a majority
of the members present at any meeting at which a quorum is
present shall be deemed the action of the Committee. The
Committee shall, from time to time, have the power to designate
from among the Key Employees and Outside Directors the persons to
whom Options will be granted. Such designation shall be in the
absolute discretion of the Committee, and shall be final without
approval of the Board or the stockholders. On the occasion of
the designation of the Optionees, the Committee may grant
additional Options to Optionees then holding Options, to some of
them, or may grant Options solely or partially to new Optionees.
As of the date of grant, the Committee shall fix the number of
Shares to be optioned and whether the Option shall be treated as
an Incentive Stock Option or as a Nonqualified Stock Option;
however, no Option shall be treated as an Incentive Stock Option
ten (10) years from the date this Plan is adopted by the Board or
the date the Plan is approved by the stockholders of the Company,
whichever is earlier. In addition, to the extent the aggregate
fair market value (determined at the time the Option is granted)
of Shares treated as acquired pursuant to Incentive Stock Options
which are exercisable by the Optionee for the first time during
any calendar year (under all incentive stock option plans of the
Company or subsidiaries thereof (as defined in 425(f) of the
Code)) exceeds $100,000, such Options (taking them into account
in the order in which they were granted) shall not be treated as
Incentive Stock Options. In making the determination as to whom
Options shall be granted, and as to the number of Shares to be
covered by such Options, the Committee shall take into account
the duties and responsibilities of the proposed Optionees, their
present and potential contribution to the success of the Company,
their past record, and such other factors as the Committee shall
deem relevant in connection with accomplishing the purposes of
this Plan. Certain officers of the Company as designated by the
Committee are hereby authorized to execute Option Agreements on
behalf of the Company and to cause them to be delivered to the
Optionees or other participants.
c. Effect of Committee's Decision. All decisions,
determinations, and interpretations of the Committee shall be
final and conclusive on all persons affected thereby.
5. Option Price. The exercise price of Incentive Stock
Options granted under the Plan shall not be less than one hundred
percent (100%) of the fair market value of a Share on the date
the Option is granted, or, if the Optionee owns (within the
meaning of 425(d) of the Code) ten percent (10%)or more of the
total combined voting power of all classes of stock of the
Company, one hundred ten percent (110%) of the fair market value
of a Share on the date the Option is granted. The exercise price
of Nonqualified Stock Options granted under the Plan shall be
determined by the Committee in its complete discretion, but in no
event shall the exercise price of Nonqualified Stock Options be
less than one hundred percent (100%) of the fair market value of
a Share on the date the Option is granted. The fair market value
of a Share on a particular date shall be deemed to be the mean
between the highest and lowest sales prices per share of the
Common Stock on the principal national securities exchange on
which the Common Stock may be listed from time to time on that
date or, in either case, if there shall have been no sale on that
date on the last preceding date on which such sale or sales were
effected on such exchange. In the event that the method just
described for determining the fair market value of the Shares
shall not remain consistent with the provisions of the Code and
applicable Treasury Regulations, then the fair market value per
Share shall be determined by such other method consistent with
the Code or Treasury Regulations as the Committee shall in its
discretion elect and apply at the time of grant of the Options
concerned.
6. Term of Option and Limitations on Exercise. Subject to
the terms of the Plan, the Committee shall, in its discretion,
establish the term of each Option granted pursuant to the Plan.
Notwithstanding the foregoing, (a) an Incentive Stock Option
granted under the Plan by its terms shall not be exercisable
after the expiration of ten (10) years from the date such Option
is granted, or, five (5) years if the Optionee owns (within the
meaning of 425(d) of the Code) ten percent (10%) or more of the
total combined voting power of all classes of stock of the
Company, and (b) a Nonqualified Stock Option granted under the
Plan by its terms shall not be exercisable after the expiration
of ten (l0) years from the date such option is granted. The
Committee may also, in its discretion, establish a period or
periods during which an Option may not be exercised in whole or
in part or any other limitation or restriction, subject to the
terms of the Plan, which the Committee may determine as a
condition precedent to exercising an Option, including such
provisions as deemed advisable to permit qualification of Options
as Incentive Stock Options.
7. Procedures for Exercise. Any Option granted hereunder
shall be exercisable at such times and under such conditions as
shall be permissible under the terms of the Plan and of the
Option granted to an Optionee. An Option may not be exercised
for a fractional Share. An Option granted pursuant to the Plan
may be exercised, subject to provisions relating to its
termination and limitations on its exercise, only by (a) written
notice to exercise the Option with respect to a specified number
of Shares, and (b)(i) payment to the Company (contemporaneously
with delivery of each such notice), in cash or Common Stock, of
the amount of the Option price of the number of Shares with
respect to which the Option is then being exercised, or (ii)
causing the Company to receive from a broker funds to pay for the
option upon the broker's receipt of stock certificates from the
Company. Each such notice and payment shall be delivered, or
mailed by prepaid registered or certified mail, addressed to the
Treasurer of the Company at the Company's executive offices.
8. Reload Options. If payment for Shares upon the
exercise of an Option ("Original Option") is made in the form of
Common Stock, the Optionee shall be granted on the date of
exercise an Option ("Reload Option") to purchase the number of
Shares that equals the number of Shares tendered to the Company.
The number of Shares tendered shall include Common Stock which is
tendered in order to satisfy applicable tax withholding
obligations. The price per Share at which each Reload Option may
be exercised shall be equal to the fair market value of the
Shares on the date of grant of the Reload Option. The term of
each Reload Option shall expire on the same date as that of the
Original Option. Reload Options shall not be granted to (a) an
Optionee who was formerly an Employee and is no longer employed
by the Company, (b) an Optionee who was formerly an Outside
Director and is no longer a member of the Board, or (c) any other
person other than the Optionee.
9. Exercise During Employment or Following Death. Unless
otherwise provided in the Option Agreement, an Option may be
exercised by an Optionee who is an Employee only while the
Optionee is an Employee and has maintained Continuous Status as
an Employee since the date of the grant of the Option, or after
the termination of the Optionee's status as an Employee within
one (1) year after such termination (but not later than the date
on which the Option would otherwise expire) if the Optionee
becomes Disabled, as determined by the Committee, or for any
other termination within three (3) months after such termination
(but not later than the date on which the Option would otherwise
expire), except if the Optionee would have been entitled to
exercise the Option immediately prior to death, such Option of
the deceased Optionee may be exercised within twelve (12) months
(but not later than the date on which the Option would otherwise
expire) from the date of death by the personal representatives of
the Optionee's estate, or person or persons to whom the
Optionee's rights under such Option shall have passed by will or
by laws of descent and distribution. The Committee's
determination whether an Optionee's employment has ceased, and
the effective date thereof, shall be final and conclusive on all
persons affected thereby.
10. Form of Stock Certificates. Stock certificates to be
issued or transferred pursuant to Options granted under this Plan
shall be made in favor of the Optionee, or the Optionee and
Optionee's spouse as joint tenants.
11. Optionee's Certification. If the underlying Shares are
not registered under the Securities Act of 1933 and applicable
state securities laws at the time of exercise of an Option, then
the Optionee shall agree that the Optionee will purchase the
Shares under such Option for investment and not with any present
intention to re-sell the same, and shall agree to sign a
certificate to such effect at the time of exercising the Option.
12. Non-Transferability of Options. Options granted under
the Plan may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or
by the laws of descent and distribution. Notwithstanding the
foregoing sentence to the contrary, the Committee may, in its
sole discretion, permit an Optionee to transfer all or a portion
of an Option to the Optionee's family members, a trust or
partnership for the benefit of the Optionee's family members or
to a charity. An Option may be exercised, during the lifetime of
the Optionee, only by the Optionee.
13. Effect of Change in Stock Subject to the Plan. In the
event that each of the outstanding Shares of Common Stock (other
than Shares held by dissenting shareholders) shall be changed
into or exchanged for a different number or kind of Shares of
stock of the Company or another corporation (whether by reason of
merger, consolidation, recapitalization, reclassification, stock
dividend, split-up, combination of Shares, or otherwise), then,
in the sole discretion of the Committee, there shall be
substituted for each Share of Common Stock then under Option or
available for Option the number and kind of Shares of stock into
which each outstanding Share of Common Stock (other than Shares
held by dissenting shareholders) shall be so changed or for which
each such Share shall be so exchanged, together with an
appropriate adjustment of the Option Price. In the event there
shall be any other change in the number of, or kind of, issued
Shares of Common Stock, or of any stock or other securities into
which such Common Stock shall have been changed, or for which it
shall have been exchanged, then if the Committee shall, in its
sole discretion, determine that such change equitably requires an
adjustment in the number, or kind, or Option price of Shares then
subject to an Option or available for Option, such adjustment
shall be made by the Board and shall be effective and binding for
all purposes of this Plan.
14. Time of Granting Options. The date of grant of an
Option under the Plan shall, for all purposes, be the date
reflected on the written grant of the Option to the Optionee. An
Option Agreement shall be given to each Employee or Outside
Director to whom an Option is so granted within a reasonable time
after the date of such grant.
15. Modification of Options. At any time and from time to
time the Committee may modify any outstanding Option, provided no
such modification shall impair the Option without the consent of
the holder of the Option. Any Incentive Stock Options
outstanding under the Plan may be amended, if necessary, in order
to retain such qualification.
16. Tax Withholding. The Company shall have the right to
deduct or withhold any taxes required by law to be withheld upon
the exercise of an Option. The Committee may require the Optionee
(or, in the event of the death of the Optionee, the personal
representatives of the Optionee's estate, or person or persons to
whom the Optionee's rights under such Option shall have passed by
will or by laws of descent and distribution) to remit to the
Company the amount of any taxes required to be withheld, or, in
lieu thereof, the Company may withhold (or the Optionee may be
provided the opportunity to elect to tender) the number of shares
of Common Stock equal in fair market value to the amount required
to be withheld.
17. Amendment and Termination of the Plan. The Committee
or Board of Directors may amend, alter or discontinue the Plan,
but no amendment or alteration shall be made without the approval
of the stockholders of the Company if such approval is necessary
to comply with the performance-based compensation exception under
162(m) of the Code and applicable Treasury Regulations. No
amendment, alteration or discontinuation of the Plan shall
adversely affect any Options granted prior to the time of such
amendment, alteration or discontinuation.
18. Conditions Upon Issuance of Shares. Shares must not be
issued with respect to any Option granted under the Plan unless
the issuance and delivery of such Shares shall comply with all
relevant provisions of law, including, without limitation, the
Securities Act of 1933, as amended, the rules and regulations
promulgated thereunder, any applicable state securities law, and
the requirements of any stock exchange upon which the Shares may
then be listed. Inability of the Company to obtain from any
regulatory body or authority deemed by the Company's counsel to
be necessary to the lawful issuance and sale of any Shares
hereunder shall relieve the Company of any liability in respect
of the non-issuance or sale of such Shares. As a condition to
the exercise of an Option, the Company may require the person
exercising an Option to make such representations or warranties
as may be necessary to assure the availability of an exemption
from the registration requirements of federal or state securities
law.
19. Reservation of Shares. The Company, during the term of
this Plan, will reserve and keep available a number of Shares
sufficient to satisfy the requirements of the Plan.
EXHIBIT 12 - STATEMENT RE: COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLAR AMOUNTS IN THOUSANDS)
Fiscal Year Ended
JANUARY 30, JANUARY 31, FEBRUARY 1, FEBRUARY 3, JANUARY 28,
1999 1998 1997 1996 1995
Consolidated pretax income $219,084 $410,035 $378,761 $269,653 $406,110
Fixed charges (less capitalized interest) 219,341 147,466 139,188 139,666 145,921
EARNINGS $438,425 $557,501 $517,949 $409,319 $552,031
Interest $196,680 $129,237 $120,599 $120,054 $124,282
Capitalized interest 3,050 3,644 4,420 3,567 2,545
Interest factor in rent expense 22,661 18,229 18,589 19,612 21,639
FIXED CHARGES $222,391 $151,110 $143,608 $143,233 $148,466
Ratio of earnings to fixed charges 1.97 3.69 3.61 2.86 3.72
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Challenge & Opportunity
Dillard's, Inc.
1998 Annual Report
Dillard's Corporate Profile
Sixty years ago, William Dillard established the first Dillard's
store in Nashville, Arkansas. From this humble beginning, the
Company has emerged as one of the most successful retail chains in
the United States, with annual sales of more than $7.8 billion.
Today, Dillard's, Inc. comprises 328 traditional stores and seven
clearance centers in 29 states, offering a distinctive mix of name-
brand and private-label merchandise. With everyday value pricing
and special emphasis on fashion apparel and home furnishings,
Dillard's appeals to a broad range of consumers.
The Company's philosophy continues to embrace an ambitious program
of expansion and remodeling, as well as aggressive response to
industry trends in merchandising and pricing.
Dillard's Merchandising Philosophy
Dillard's caters to a broad cross-section of the population in our
respective markets. Our merchandise emphasis is on branded goods,
both in fashion apparel and home furnishings.
By carrying branded merchandise in a range of price levels -
moderate and better - we create a fashion image designed to appeal
to the maximum number of customers.
Our competitive leadership is based on these:
1. Presenting fashion and trends as they emerge, capitalizing on being the first in our areas to offer such merchandise.
2. Offering a strong basic stock consistently, so that customers can always find their staple fashion and home furnishing needs, and thus think of Dillard's as the place to go for all their families' needs.
3. Keeping stores fully stocked in both fashion and basic merchandise.
Particularly, we strive to have the right goods at the right price, at the right time - without sacrificing any of those concepts for promotional gain. Our merchandise should be recognizable as branded, supplemented with quality goods marketed under the Dillard's label.
Table of Contents
1. Financial Highlights
2. Letter to Shareholders
10. Store Locations and Acquisitions
12. Table of Selected Financial Data
14. Management's Discussion and Analysis of Financial Condition
and Results of Operations
18. Independent Auditors' Report
19. Consolidated Balance Sheets
20. Consolidated Statements of Income
21. Consolidated Statements of Stockholders' Equity
22. Consolidated Statements of Cash Flows
23. Notes to Consolidated Financial Statements
32. Corporate Organization
Inside Back Cover
Board of Directors
Shareholder Information
Selected Financial Highlights
(dollars in thousands, except per share amounts)
1998 1997 1996 1995 1994
Income Statement Data:
Net sales $7,796,741 $6,631,752 $6,227,585 $5,918,038 $5,545,803 Net income 135,259 258,325 238,621 167,183 251,790 Diluted earnings per common share 1.26 2.31 2.09 1.48 2.23 Balance Sheet Data: Current assets $3,437,711 $2,998,057 $2,760,636 $2,658,225 $2,524,802 Current liabilities 1,093,802 1,098,850 894,746 869,680 758,958 Long-term debt 3,002,595 1,365,716 1,173,018 1,157,864 1,178,503 Guaranteed Preferred Beneficial Interests in the Company's Subordinated Debentures 531,579 - - - - Stockholders' equity 2,841,522 2,807,938 2,717,178 2,478,327 2,323,567 Operational Data: Number of stores 335 270 250 238 229 Number of employees 54,921 44,616 43,470 40,312 37,832 Gross square footage (in thousands) 55,000 43,000 40,000 37,300 35,300 |
Dear Shareholder,
1998 has been the most exciting and pivotal year in Dillard's 60-
year history. We had clearly reached a strategic turning point in
our ongoing development as a major player in the retail industry,
and the continuing consolidation in the broadline retail sector
presented us with both challenge and opportunity. The challenge:
remaining competitive in an environment where size matters and
relationships with valued vendors increasingly affect
relationships with valued customers. The opportunity: seeking out
ways to capitalize on this industry consolidation, utilizing both
our financial strength and experience in acquiring and integrating
stores into our network.
In the spring of 1998, the opportunity to purchase Mercantile Stores Company, Inc. arose - and we were ready. Based in Fairfield, Ohio, Mercantile operated 106 department stores and 16 home fashion stores spanning 17 states. We had admired this operation for many years, both as respected retail managers and formidable competitors. On May 18, 1998, we announced a tender offer of $80 per share for the outstanding shares of Mercantile Stores Company, Inc., and completed the acquisition three months later on August 13, 1998. We remain confident that this was by far the best thing we could do for our shareholders, our Company and our associates. The time was right. The opportunity was right. And all financial and operational aspects of such an undertaking were measured and carefully considered. The answer was clear: this was right for the future of Dillard's.
The Time Was Right
The timing of the Mercantile opportunity could not have been better. By the spring of 1998, we had purchased $275 million of the $300 million authorized under our Share Repurchase Plan which was approved by the Board of Directors in February 1997. Our Company was financially strong with favorable cash flow and a low debt-to-equity position. We had reached a crossroads on further driving shareholder value when the Mercantile opportunity enabled us to capitalize on our strengths and maximize our Company's potential.
The Opportunity Was Right
The location of the Mercantile stores offered a great fit for integration into our existing network. Operating in both urban and less-urban areas as we do, they had maintained the number-one position in over 70 percent of their markets. Some experts had dubbed Mercantile "the jewel" of potential acquisitions in our industry - and we strongly shared that belief. The locations gave us opportunities to enter several new markets and to expand our presence in existing markets. We added our 29th state with three new locations in Montana, and greatly increased our presence in Alabama, Florida and Ohio, among other states. In addition, we strengthened our position in attractive markets such as Denver, Colorado, and Nashville, Tennessee.
Financial and Operational Considerations
As broadline retail consolidation continues, the need for critical
mass becomes more apparent to us. At year-end 1997, we operated
270 stores across 27 states with 43.3 million square feet of
selling space. Despite this accomplishment, we recognized the need
to place ourselves in the top tier of our industry. The
acquisition of Mercantile is just what we needed to achieve that
objective. Dillard's now ranks among the top three fashion apparel
retailers in the country, boasting 328 traditional stores spanning
29 states and offering 55 million square feet of space, an
increase of 27 percent. Operating behind the largest nameplate in
the fashion apparel industry, we are now firmly in the top tier
and are firmly committed to continued progress.
The locations of the former Mercantile stores, as mentioned above,
were remarkably attractive considering the regions in which we
operated and the markets in which we desired to operate. As
expected with an acquisition of this size, some stores did not fit
within our strategy, mainly because of overlap with existing
Dillard's locations. Rather than a liability, we saw this as an
opportunity. We were well aware of the value of these locations,
as were other retailers. In two agreements, we sold 26 locations
and realized proceeds of approximately $1 billion, in line with
our best expectations. In another transaction, we swapped seven
former Mercantile locations for nine new locations, including
eight sites in Virginia, a region of exciting potential for us
going forward.
Among the greatest financial benefits of the Mercantile opportunity is one of the least measurable at this point - enhanced buying power. We never underestimate the effect of valued vendor relationships on our business and strive to develop and nurture these associations. Just as we expect excellence from our vendors, they expect excellence from us in return. Quite simply, we now have more to offer our vendors - namely, our greatly expanded buying needs, additional square footage in which to promote their merchandise, more associates to learn and market their products, and increased advertising opportunities. Likewise, we now have more to offer our customers - more of the merchandise they desire, delivered at exceptional value.
In combining the two companies, we have recognized a tremendous opportunity for cost savings. By quickly eliminating duplicate operations corporate-wide - from merchandising and distribution to corporate overhead functions - we have put into place a solid platform from which to capitalize on these synergies. We have been excited about this aspect of the acquisition from the beginning, and we continue to view these cost-savings opportunities as extremely compelling.
Integration
The integration of the former Mercantile stores continues. We are
quite pleased with the effort to date, and to a large degree, the
most challenging portion is behind us. We assumed operation of the
new stores on August 13, 1998, and just over a week later, merged
all ongoing data processing systems of the new stores with our
existing network. As a result of many long weeks of preparation, this conversion proceeded smoothly and is among the many well- planned and well-executed areas of transition.
However, as might be expected in an undertaking of this magnitude, there were some surprises in spite of our best efforts to prevent them - some pleasant and some unpleasant. Our most unpleasant surprise occurred in the area of merchandise distribution. As the Mercantile-ordered merchandise was received, we learned that the receiving system conversion was not adequate. This disruption delayed a substantial amount of fall merchandise from reaching our stores in time for maximum initial sell-though, affecting our core Dillard's locations as well as the newly acquired stores. We reacted to this problem quickly and decisively, and by mid- December our distribution process was largely back on track.
On a more pleasant note, we were extremely pleased with the speed at which the overlapping stores were sold to other retailers. These transactions were negotiated much more quickly than we had originally planned, allowing us to focus on integrating the retained stores even sooner and more effectively. The proceeds we realized from these store sales were in line with our best expectations and enabled us to pay down a significant portion of the debt incurred to finance the acquisition. Additionally, the cost of funds associated with this debt met our best expectations as well.
Learning From Mercantile
We are convinced the former Mercantile operation did many things right. After an open-minded look at Mercantile and an inward look at ourselves, we have adopted many of Mercantile's best practices. One area we admired greatly about them was their success in credit services. Under visionary leadership, they had developed a top- notch credit operation, offering customers a wide array of services from the basic credit card to VIP programs to gift cards. We have retained the leadership talent of this operation and have empowered them to work with our existing credit professionals to develop these programs for all Dillard's customers. In November 1998, we replaced our gift certificate system with the first Dillard's gift card, bringing our customers a much more flexible gift-giving alternative. Other efforts to enhance our credit marketing operation are well underway, and we remain excited about the opportunities there for our customers and for our Company.
We believe our increasingly busy core customer values a little special attention and pampering. Many of the Mercantile stores had achieved tremendous success in meeting this need by offering day spa and hair and nail salon services under one roof. We see the opportunity to develop this further as a highly profitable business, complementing our continuing emphasis on fashion apparel. We have retained the former Mercantile leadership of this area, as well, and have charged them to develop this approach
further for our Dillard's customers. In fact, our newly constructed Dillard's store in Norfolk, Virginia, which opened in March, offers a wide range of day spa and hair and nail services in a new 2,500-square-foot facility. We are committed to the development of this business and are looking forward to much success in this area.
For many years, the big and tall business of Mercantile has served the special size needs of larger male shoppers. We view this well- executed merchandising area with a continually profitable return as an exciting opportunity for the ongoing combined business. Currently, we are planning to roll the big and tall business into our existing Dillard's stores, as well as maintain the position in the former Mercantile stores. By mid-fall 1999, we hope to offer big and tall in all areas of the men's store in approximately 200 locations, and ultimately to offer these special sizes in the large majority of our stores.
While the Mercantile acquisition and integration were underway in 1998, we successfully opened eight new stores in strategic markets and remodeled several of our most promising locations. The opening of our Boise Towne Square store in Boise, Idaho, gave us a foothold in a new state, and we look forward to serving our new Idaho customers.
Our Ongoing Focus
As we go forward, our focus will remain on the continued and successful integration of our newly acquired stores. Indeed, many of them now reflect the inventory selection and approach to merchandising our customers have come to expect of us. We anticipate full integration in all units by the fall of the current year.
We appreciate and applaud the long hours and hard work our associates have invested in the Mercantile acquisition. The teamwork displayed company-wide has been remarkable. We welcome our new associates from the former Mercantile operation to our Company and look forward to many years of mutually profitable partnership.
Although we are now a much larger and more complex company, our purpose remains as simple as it was 60 years ago - superior service and exceptional value for our customers. In closing, we want to reiterate our continuing belief that the Mercantile acquisition and the steps we took to grow Dillard's in 1998 were by far the best thing we could do for our shareholders, our associates and our Company. We remain excited about the future of Dillard's.
William Dillard, II
Chief Executive Officer
Alex Dillard
President
Table of Selected Financial Data
Dillard's, Inc. And Subsidiaries
(In thousands of dollars, except per share data)
1998 1997 1996 1995* 1994
Net sales $7,796,741 $6,631,752 $6,227,585 $5,918,038 $5,545,803
Percent increase 18% 6% 5% 7% 8%
Cost of sales 5,218,095 4,393,291 4,124,765 3,893,786 3,614,628
Percent of sales 66.9% 66.2% 66.2% 65.8% 65.2%
Interest and debt expense 196,680 129,237 120,599 120,054 124,282
Income before taxes 219,084 410,035 378,761 269,653 406,110
Income taxes 83,825 151,710 140,140 102,470 154,320
Net income 135,259 258,325 238,621 167,183 251,790
Per Common Share
Diluted earnings per share 1.26 2.31 2.09 1.48 2.23
Dividends 0.16 0.16 0.14 0.12 0.10
Book value 26.57 25.70 23.91 21.91 20.55
Average number of shares
outstanding 107,636,260 111,993,814 113,988,63 113,143,842 113,013,998
Accounts receivable - total 1,230,059 1,186,491 1,154,673 1,123,103 1,117,411
Merchandise inventories 2,157,010 1,784,765 1,556,958 1,486,045 1,362,756
Property and equipment 3,684,629 2,501,492 2,191,933 2,035,538 1,984,145
Total assets 8,177,559 5,591,847 5,059,726 4,778,535 4,577,757
Long-term debt 3,002,595 1,365,716 1,173,018 1,157,864 1,178,503
Capitalized lease obligations 27,000 12,205 13,690 20,161 22,279
Deferred income taxes - total 700,727 314,971 261,094 248,469 302,801
Guaranteed Preferred Beneficial
Interests in the Company's
Subordinated Debentures 531,579 - - - -
Stockholders' equity 2,841,522 2,807,938 2,717,178 2,478,327 2,323,567
Number of employees - average 54,921 44,616 43,470 40,312 37,832
Gross square footage
(in thousands) 56,055 43,300 40,000 37,300 35,300
Number of stores
Opened 5 12 15 9 7
Acquired 65 11 0 0 0
Closed 5 3 3 0 5
Total - end of year 335 270 250 238 229
* 53 Weeks
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Table of Selected Financial Data
Dillard's, Inc. And Subsidiaries
(In thousands of dollars, except per share data)
1993 1992 1991 1990 1989*
Net sales $5,130,648 $4,713,987 $4,036,392 $3,605,518 $3,049,062
Percent increase 9% 17% 12% 18% 19%
Cost of sales 3,306,757 3,043,348 2,565,904 2,287,891 1,926,971
Percent of sales 64.4% 64.5% 63.6% 63.5% 63.2%
Interest and debt expense 130,915 121,940 109,386 97,032 91,836
Income before taxes 399,534 375,330 322,157 280,778 227,892
Income taxes 158,400 138,900 116,000 98,000 79,800
Net income 241,134 236,430 206,157 182,778 148,092
Per common share
Diluted earnings per share 2.14 2.11 1.84 1.67 1.45
Dividends 0.08 0.08 0.07 0.07 0.06
Book value 18.42 16.28 14.19 12.31 10.23
Average number of shares
outstanding 112,808,262 112,292,575 111,832,758 109,351,914 101,890,272
Accounts receivable - total 1,111,744 1,106,710 1,004,496 932,544 759,803
Merchandise inventories 1,299,944 1,178,562 1,052,683 889,333 716,054
Property and equipment 1,921,470 1,688,682 1,338,434 1,088,753 921,820
Total assets 4,430,274 4,107,114 3,498,506 3,007,979 2,496,277
Long-term debt 1,238,293 1,381,676 1,008,967 839,490 739,597
Capitalized lease obligations 31,621 32,381 29,489 31,284 32,900
Deferred income taxes - total 284,981 178,311 143,463 115,854 108,426
Guaranteed Preferred Beneficial
Interests in the Company's
Subordinated Debentures - - - - -
Stockholders' equity 2,081,647 1,832,018 1,583,475 1,364,885 1,094,721
Number of employees - average 35,536 33,883 32,132 31,786 26,304
Gross square footage
(in thousands) 34,900 33,200 29,100 26,600 23,500
Number of stores
Opened 10 11 10 4 3
Acquired 0 12 7 23 19
Closed 1 3 5 3 6
Total - end of year 227 218 198 186 162
* 53 Weeks
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Management's Discussion and Analysis of Financial Condition and
Results of Operations
Dillard's, Inc. and Subsidiaries
Acquisition
During fiscal 1998, the Company completed its acquisition (the
"Acquisition") of Mercantile Stores Company, Inc. ("Mercantile")
for approximately $3 billion in cash. Mercantile was a
conventional department store retailer engaged in the general
merchandising business, operating 106 department and home fashion
stores under 13 different names in a total of 17 states.
The Acquisition was accounted for under the purchase method and, accordingly, the results of operations have been included in the Company's results of operations since August 13, 1998, and the purchase price has been allocated to Mercantile's assets and liabilities based on their estimated fair values as of that date. The excess of cost over net assets acquired is approximately $666 million.
In connection with the Acquisition, the Company entered into two separate agreements whereby the Company sold in the aggregate 26 of the acquired stores to Proffitt's, Inc. and The May Department Stores Company. In addition, the Company entered into an agreement with Belk, Inc. to exchange seven of the acquired stores for nine Belk, Inc. stores. The results of operations of the sold or exchanged stores are included in the accompanying statements of operations from the date of acquisition to the date of sale or exchange.
Sales
The sales increases were 18%, 6% and 7% for 1998, 1997 and 1996,
respectively. The sales increase for 1998 is primarily
attributable to the Acquisition. The comparable store sales
increase was 1% for 1998 and 2% for 1997 and 1996, respectively.
Comparable store sales include sales for those stores which were
in operation for a full period in both the current month and the
corresponding month for the prior year.
Management believes that the majority of the increase in sales in comparable stores was attributable to an increase in the volume of goods sold rather than an increase in the price of goods.
The sales mix for the past three years by category as a percent of total sales has been:
1998 1997 1996
Cosmetics 12.7% 12.7% 12.9%
Women's and
Juniors' Clothing 30.7 30.6 29.9
Children's Clothing 6.6 6.4 6.5
Men's Clothing
and Accessories 19.8 19.5 19.5
Shoes, Accessories
and Lingerie 19.8 20.2 19.9
Home 9.5 10.2 10.8
Leased Departments .9 .4 .5
Total 100.0% 100.0% 100.0%
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Cost of Sales
Cost of sales as a percentage of sales was 66.9%, 66.2% and 66.2%
for 1998, 1997 and 1996, respectively. Cost of sales for fiscal
1998 includes a charge of $39 million for inventory valuation
adjustments resulting from the alignment of Mercantile inventories
to reflect the Company's merchandising and pricing philosophy.
Additionally, during the fourth quarter of 1998, the Company
experienced significant merchandise processing and distribution
delays due to systems integration problems during consolidation of
the Dillard and Mercantile distribution systems. The delays
resulted in later than planned store receipts and subsequent
higher levels of markdowns in the post-holiday selling season.
Expenses
Expenses as a percentage of sales for the past three years were as
follows:
1998 1997 1996
Advertising, selling,
administrative and
general expenses 26.6% 24.6% 24.7%
Depreciation and
amortization 3.1 3.0 3.1
Rentals .9 .8 .9
Interest and
debt expense 2.5 2.0 2.0
|
Included in advertising, selling, administrative and general expenses ("SG&A") for fiscal 1998 were certain business integration and consolidation expenses ("BICE") associated with the integration of Mercantile into the Company. BICE included $43 million of severance costs, $26 million of lease rejection costs for facilities closed subsequent to the Acquisition and $22 million of costs associated with operating Mercantile central office functions for a transitional period. Excluding such charges, SG&A expenses as a percentage of net sales were 25.4% for fiscal 1998. The Company is continuing the process of consolidating various administrative support functions such as marketing, buying, advertising, accounting and management information systems, as well as aligning store operating and distribution methodologies. The Company estimates that SG&A expenses for fiscal 1998 included additional payroll and other systems integration expenses of approximately $30 million primarily relating to transitional distribution cost incurred to process Mercantile-ordered merchandise in Dillard's receiving systems. The Company has taken steps to reduce payroll and other overhead expenses, and expects to achieve cost reductions as a result of a more efficient overhead expense structure and to increase purchasing power derived from the combination of the two companies. SG&A expenses decreased as a percentage of sales during fiscal 1997 primarily due to a reduction in bad debt expense, offset by an increase in payroll expense. Payroll expense in the selling area increased as a percentage of sales in fiscal 1997 as the Company sought to invest more in its sales force. Depreciation and amortization increased slightly as a percentage of sales during 1998. This increase is primarily due to the amortization of goodwill related to the Acquisition. Rentals increased slightly as a percentage of sales during fiscal 1998 reflecting the relatively higher percentage of leased property of Mercantile. A higher level of borrowing due to the Acquisition caused the increase in interest and debt expense as a percentage of net sales for fiscal 1998.
Liquidity and Capital Resources
Net cash flows from operations were $643 million for 1998. In
addition to cash flows from operations, the Company borrowed
$1,650 million by issuing unsecured notes in underwritten public
offerings and borrowed $200 million by issuing Capital Securities
in an underwritten public offering. A subsidiary of the Company
issued $332 million in preferred stock during the year. These
borrowings were used primarily to fund the Acquisition.
Capital expenditures were $248 million for 1998. During 1998, the Company constructed seven new stores (two of which were replacement stores) and expanded and remodeled four stores. During 1998, the Company repaid $134 million of its long-term debt and capitalized lease obligations and repaid $419 million in commercial paper.
In February 1997, the Company announced that the Board of Directors had authorized the implementation of a Class A common share repurchase program of up to $300 million. As of January 30, 1999, the Company has purchased 8,059,700 shares of Class A Common Stock at a cost of $275 million.
During 1998, the Company's merchandise inventories increased by $372 million, primarily due to the Acquisition and the store expansions discussed above. On a comparable store basis, the merchandise inventories were flat. During 1998, the Company transferred all of its credit card receivables to a trust in exchange for a certificate representing an undivided interest in the trust. The Company then sold a certificate with a market value of $300 million to a third party.
For 1999, the Company plans to construct eight stores (two of which will be replacement stores) and expand two stores. Capital expenditures are projected to be approximately $200 million for 1999. Maturities of the Company's long-term debt over the next five years are $164 million, $108 million, $209 million, $110 million and $160 million, respectively.
The Company and its wholly-owned finance subsidiary, Dillard Investment Company, have a revolving line of credit in the amount of $750 million. The revolving line of credit requires that consolidated stockholders' equity be maintained at $1 billion or more. No funds were borrowed under the revolving line of credit during fiscal 1998. At the end of 1998, the Company had an outstanding shelf registration for securities in the amount of $750 million.
The Company expects to finance its capital expenditures and its working capital requirements including required debt repayments from cash flows generated from operations and by issuing new debt.
Quantitative and Qualitative Disclosures About Market Risk The table below provides information about the Company's obligations that are sensitive to changes in interest rates. The table presents maturities of the Company's long-term debt and Guaranteed Beneficial Interests in the Company's Subordinated Debentures along with the related weighted average interest rates by expected maturity dates.
Expected Maturity Date (fiscal year)
(dollar amounts in thousands)
1998 1999 2000 2001 2002 Thereafter Total Fair Value
Long-term debt $164,289 $108,012 $208,985 $109,913 $160,407 $2,415,278 $3,166,884 $3,321,827
Average interest rate 7.3% 9.3% 6.9% 7.5% 6.4% 7.1% 7.1%
Guaranteed Beneficial
Interests in the
Company's
Subordinated
Debentures $ - $ - $ - $ - $ - $ 531,579 $ 531,579 $ 532,059
Average interest rate -% -% -% -% -% 6.9% 6.9%
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Year 2000 Readiness Statement
The Company is actively addressing the issues related to the date change in year 2000. This is necessary because many computer systems were written using only two digits to contain the year in date fields. On January 1, 2000, many of these programs will fail to perform date calculations correctly and produce erroneous results. This could temporarily prevent the Company from processing business transactions. The Company began efforts as early as 1996 to address this issue.
Currently, all computer systems including both IT and non-IT systems have been assessed and work is well underway to remediate the systems that are not year 2000 compliant. The non-IT systems are primarily systems with embedded processors such as telephone and security systems. The non-IT systems have substantially been remediated. Approximately 80% of the IT systems have been remediated or were originally developed as year 2000 compliant. The remediation of the remaining IT systems is expected to be complete no later than the second quarter of 1999 with the exception of two systems. These two systems are expected to be complete by the end of August. The Company has obtained letters of certification from its mission-critical computer systems and software vendors.
The external cost (payments to equipment and service vendors) of remediating non-compliant systems incurred thus far is approximately $1.2 million. The Company believes the external cost to remediate all systems will not exceed $2.5 million in total. Additionally, the Company has incurred and will continue to incur internal costs in its remediation process. These internal costs relate principally to the payroll costs of the information systems group and other costs related to the normal operation of the Company's data centers. The Company does not track these costs separately. All costs associated with year 2000 issues will be funded from the Company's existing sources of liquidity.
There are significant risks associated with the year 2000 issues. Many of these risks such as those associated with electrical power and/or telecommunications are outside the reasonable control of the Company. Also, the failure of a significant number of the Company's business partners could have a material impact on the Company's operations. These risks are largely outside the control of the Company. Although the Company believes its remediation and contingency planning efforts adequately identify and address the year 2000 issues that are within the Company's reasonable control, there can be no assurance that the Company's efforts will be fully effective. Due to these significant risks the Company's management is monitoring these efforts very closely. The Audit Committee of the Board of Directors is periodically updated concerning the status of the year 2000 efforts.
Business resumption contingency plans have been completed for the mission-critical systems. These plans address how the Company will continue to do business until the mission-critical system that failed has been remediated. These plans will be periodically reviewed to determine if changing business conditions necessitate a change in the contingency plan.
Forward-Looking Information
The Company cautions that any forward-looking statements (as such
term is defined in the Private Securities Litigation Reform Act of
1995) contained in this report, the Company's annual report on
Form 10-K or made by management of the Company, involve risks and
uncertainties and are subject to change based on various important
factors. The following factors, among others, could affect the
Company's financial performance and could cause actual results for
1999 and beyond to differ materially from those expressed or
implied in any such forward-looking statements: economic and
weather conditions in the regions in which the Company's stores
are located and their effect on the buying patterns of the
Company's customers, changes in consumer spending patterns and
debt levels, trends in personal bankruptcies and the impact of
competitive market factors.
Challenge & Opportunity
1998 Annual Report
Independent Auditors' Report
To the Stockholders and Board of Directors of
Dillard's, Inc.
Little Rock, Arkansas
We have audited the accompanying consolidated balance sheets of Dillard's, Inc. and subsidiaries as of January 30, 1999 and January 31, 1998, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended January 30, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Dillard's, Inc. and subsidiaries as of January 30, 1999 and January 31, 1998, and the results of their operations and their cash flows for each of the three years in the period ended January 30, 1999 in conformity with generally accepted accounting principles.
Deloitte and Touche LLP
New York, New York
March 15, 1999
Dillard's, Inc.
Consolidated Balance Sheets
Amounts in Thousands, Except Share Data
Assets January 30, 1999 January 31, 1998
Current Assets:
Cash and cash equivalents $ 72,401 $ 41,833
Accounts receivable (net of allowance for
doubtful accounts of $37,487 and $27,809) 1,192,572 1,158,682
Merchandise inventories 2,157,010 1,784,765
Other current assets 15,728 12,777
Total current assets 3,437,711 2,998,057
Property and Equipment:
Land and land improvements 126,047 36,045
Buildings and leasehold improvements 2,567,943 1,799,072
Furniture, fixtures and equipment 2,624,799 2,125,688
Buildings under construction 38,965 37,691
Buildings under capital leases 50,123 25,148
Less accumulated depreciation and amortization (1,723,248) (1,522,152)
3,684,629 2,501,492
Goodwill (net of accumulated
amortization of $7,475) 659,262 -
Other Assets 395,957 92,298
Total Assets $ 8,177,559 $ 5,591,847
Liabilities and Stockholders' Equity
Current Liabilities:
Trade accounts payable and accrued expenses $ 921,187 $ 530,034
Commercial paper - 419,136
Current portion of long-term debt 164,289 107,268
Current portion of capital lease obligations 2,396 1,651
Federal and state income taxes 5,930 40,761
Total current liabilities 1,093,802 1,098,850
Long-term Debt 3,002,595 1,365,716
Capital Lease Obligations 27,000 12,205
Deferred Income Taxes 681,061 307,138
Operating Leases and Commitments
Guaranteed Preferred Beneficial Interests in the
Company's Subordinated Debentures 531,579 -
Stockholders' Equity:
Preferred stock - 4,400 shares issued and
outstanding 440 440
Common stock, Class A - 110,966,419
and 110,251,634 shares issued;
102,906,719 and 105,207,134 shares outstanding 1,110 1,103
Common stock, Class B (convertible)
- 4,016,929 shares issued and outstanding 40 40
Additional paid-in capital 682,313 657,137
Retained earnings 2,432,793 2,314,709
Less treasury stock, at cost, Class A
- 8,059,700 and 5,044,500 shares (275,174) (165,491)
Total stockholders' equity 2,841,522 2,807,938
Total Liabilities and Stockholders' Equity $ 8,177,559 $ 5,591,847
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See notes to consolidated financial statements.
Dillard's, Inc.
Consolidated Statements Of Income
Amounts in Thousands, Except Per Share Data
Year Ended
January 30, 1999 January 31, 1998 February 1, 1997
Net Sales $7,796,741 $6,631,752 $6,227,585
Service Charges, Interest
and Other Income 214,983 185,157 184,475
8,011,724 6,816,909 6,412,060
Costs and Expenses:
Cost of sales 5,218,095 4,393,291 4,124,765
Advertising, selling,
administrative and general
expenses 2,070,212 1,629,721 1,538,450
Depreciation and amortization 239,671 199,939 193,719
Rentals 67,982 54,686 55,766
Interest and debt expense 196,680 129,237 120,599
Total costs and expenses 7,792,640 6,406,874 6,033,299
Income Before Income Taxes 219,084 410,035 378,761
Income Taxes 83,825 151,710 140,140
Net Income $ 135,259 $ 258,325 $ 238,621
Basic Earnings
Per Common Share $ 1.26 $ 2.32 $ 2.10
Diluted Earnings
Per Common Share $ 1.26 $ 2.31 $ 2.09
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See notes to consolidated financial statements.
Dillard's, Inc.
Consolidated Statements of Stockholders' Equity
Amounts in Thousands, Except Share and Per Share Data
Additional
Preferred Common Stock Paid-in Retained Treasury
Stock Class A Class B Capital Earnings Stock Total
Balance, February 3, 1996 $ 440 $ 1,091 $ 40 $ 625,249 $1,851,507 $ - $2,478,327
Issuance of 523,805 shares
under stock option,
employee savings and
stock bonus plans - 5 - 16,139 - - 16,144
Net income - - - - 238,621 - 238,621
Cash dividends declared:
Preferred stock, $5 per share - - - - (22) - (22)
Common stock, $.14 per share - - - - (15,892) - (15,892)
Balance, February 1, 1997 $ 440 $ 1,096 $ 40 $ 641,388 $2,074,214 $ - $2,717,178
Issuance of 657,138 shares
under stock option,
employee savings and
stock bonus plans - 7 - 15,749 - - 15,756
Purchase of treasury stock (165,491) (165,491)
Net income - - - - 258,325 - 258,325
Cash dividends declared:
Preferred stock, $5 per share - - - - (22) - (22)
Common stock, $.16 per share - - - - (17,808) - (17,808)
Balance, January 31, 1998 $ 440 $ 1,103 $ 40 $ 657,137 $2,314,709 $(165,491) $2,807,938
Issuance of 714,785 shares
under stock option,
employee savings and
stock bonus plans - 7 - 25,176 - - 25,183
Purchase of treasury stock (109,683) (109,683)
Net income - - - - 135,259 - 135,259
Cash dividends declared:
Preferred stock, $5 per share - - - - (22) - (22)
Common stock, $.16 per share - - - - (17,153) - (17,153)
Balance, January 30, 1999 $ 440 $ 1,110 $ 40 $ 682,313 $2,432,793 $(275,174) $2,841,522
See notes to consolidated financial statements.
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Dillard's, Inc.
Consolidated Statements of Cash Flows
Amounts in Thousands
Year Ended
January 30, 1999 January 31, 1998 February 1, 1997
Operating Activities:
Net income $ 135,259 $ 258,325 $ 238,621
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 241,914 201,410 195,186
Deferred income taxes (118,553) 53,877 12,625
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable, net 110,103 (28,178) (26,929)
Decrease (increase) in merchandise inventories 87,848 (227,807) (70,913)
Decrease (increase) in other current assets 1,301 (3,697) 1,083
Decrease (increase) in other assets 12,647 13,388 (23,852)
Increase (decrease) in trade accounts payable
and accrued expenses and income taxes 172,191 (19,853) (36,516)
Net cash provided by operating activities 642,710 247,465 289,305
Investing Activities:
Purchase of property and equipment (248,485) (509,498) (350,114)
Acquisition, net of cash acquired and
assets held for sale (2,189,815) - -
Net cash used in investing activities (2,438,300) (509,498) (350,114)
Financing Activities:
Net (decrease) increase in commercial paper (419,136) 290,398 3,428
Proceeds from accounts receivable
securitization 300,000 - -
Proceeds from long-term borrowings 1,650,000 300,000 200,000
Proceeds from Guaranteed Preferred
Beneficial Interests in the Company's
Subordinated Debentures 531,579 - -
Principal payments on long-term debt and
capital lease obligations (134,442) (182,961) (141,751)
Cash dividends paid (17,343) (17,930) (11,360)
Proceeds from issuance of common stock 25,183 15,756 16,144
Purchase of treasury stock (109,683) (165,491) -
Net cash provided by financing activities 1,826,158 239,772 66,461
Increase (Decrease) in Cash and Cash Equivalents 30,568 (22,261) 5,652
Cash and Cash Equivalents, Beginning of Year 41,833 64,094 58,442
Cash and Cash Equivalents, End of Year $ 72,401 $ 41,833 $ 64,094
See notes to consolidated financial statements.
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Notes to Consolidated Financial Statements
1. Description of Business and Summary of Significant Accounting Policies
Description of Business - Dillard's, Inc. (the "Company") operates retail department stores located primarily in the Southeastern, Southwestern and Midwestern areas of the United States. The Company's fiscal year ends on the Saturday nearest January 31. Fiscal year 1998, 1997 and 1996 ended on January 30, 1999, January 31, 1998 and February 1, 1997, respectively, and included 52 weeks.
Consolidation - The accompanying consolidated financial statements include the accounts of Dillard's, Inc. and its wholly-owned subsidiaries. Intercompany accounts and transactions are eliminated in consolidation. Investments in and advances to joint ventures in which the Company has a 50% ownership interest are accounted for by the equity method.
Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash Equivalents - The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.
Accounts Receivable - Customer accounts receivable are classified as current assets and include some which are due after one year, consistent with industry practice. Concentrations of credit risk with respect to customer receivables are limited due to the large number of customers comprising the Company's credit card base, and their dispersion across the country.
In August 1998, the Company transferred, through a subsidiary, substantially all of its credit card receivables to a trust in exchange for a certificate representing an undivided interest in the trust. In January 1999, a Class A certificate with a market value of $300 million was sold to a third party. The Company owns the remaining undivided interest in the trust not represented by Class A certificates, which is classified in accounts receivable. The undivided interest in the trust represents securities that the Company intends to hold to maturity in accordance with Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity Securities." Due to the short-term revolving nature of the credit card portfolio, the carrying value of the Company's undivided interest in the trust approximates fair value. This transaction had no significant impact on the Company's earnings in fiscal 1998.
Merchandise Inventories - The retail last-in, first-out ("LIFO") inventory method is used to value merchandise inventories. At January 30, 1999 and January 31, 1998, the LIFO cost of merchandise was approximately equal to the first-in, first-out ("FIFO") cost of merchandise.
Property and Equipment - Property and equipment owned by the Company is stated at cost, which includes related interest costs incurred during the construction period, less accumulated depreciation and amortization. Capitalized interest was $3.1 million, $3.6 million and $4.4 million in fiscal 1998, 1997 and 1996, respectively. For tax reporting purposes, accelerated depreciation or cost recovery methods are used and the related deferred income taxes are included in noncurrent deferred income taxes in the consolidated balance sheets. For financial reporting purposes, depreciation is computed by the straight-line method over estimated useful lives:
Buildings and leasehold improvements 20 - 40 years Furniture, fixtures and equipment 3 - 10 years
Properties leased by the Company under lease agreements which are determined to be capital leases are stated at an amount equal to the present value of the minimum lease payments during the lease
term, less accumulated amortization. The properties under capital leases and leasehold improvements under operating leases are being amortized on the straight-line method over the shorter of their useful lives or their related lease terms. The provision for amortization of leased properties is included in depreciation and amortization expense.
Goodwill - Goodwill, which represents the cost in excess of the fair value of net assets acquired, is amortized on the straight- line basis over 40 years.
The Company will assess the recoverability of the cost in excess of net assets acquired annually based on existing facts and circumstances and projected earnings before interest, depreciation and amortization on an undiscounted basis. Should the Company's assessment indicate an impairment of this asset in the future, an appropriate write-down will be recorded.
Revenue Recognition - The Company recognizes revenue at the "point of sale." Finance charge revenue earned on customer accounts, serviced by the Company under its private-label credit card program, is recognized in the period in which it is earned. Advertising - Advertising and promotional costs, which include newspaper, television, radio and other media advertising, are expensed as incurred and were $220 million, $178 million and $168 million for fiscal year 1998, 1997 and 1996, respectively.
Store Preopening - Preopening costs of new stores are expensed in the quarter that the store opens. The adoption of the American Institute of Certified Public Accountants' Statement of Position (SOP) 98-5, "Reporting on the Costs of Start-Up Activities," in fiscal 1999, which will require such costs to be expensed as incurred, will not have a material impact on the results of operations.
Income Taxes - In accordance with SFAS No. 109, "Accounting for Income Taxes," deferred income taxes reflect the future tax consequences of differences between the tax bases of assets and liabilities and their financial reporting amounts at year-end. Comprehensive Income - In February 1998, the Company adopted the provisions of SFAS No. 130, "Reporting Comprehensive Income," which is required for fiscal years beginning after December 15, 1997. Comprehensive income is equivalent to the Company's net income for fiscal years 1998, 1997 and 1996.
Segment Reporting - In February 1998, the Company adopted the provisions of SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." SFAS No. 131 is effective for fiscal years beginning after December 15, 1997, and establishes standards for reporting information about a company's operating segments. It also establishes standards for related disclosures about products and services, geographic areas and major customers. The Company operates in a single operating segment - the operation of retail department stores. Revenues from external customers are derived from merchandise sales and service charges and interest on the Company's private-label credit card. The Company's merchandise sales mix by product category for the last three years was as follows:
Product Categories 1998 1997 1996 Cosmetics 12.7% 12.7% 12.9% Women's and Juniors' Clothing 30.7 30.6 29.9 Children's Clothing 6.6 6.4 6.5 Men's Clothing and Accessories 19.8 19.5 19.5 Shoes, Accessories and Lingerie 19.8 20.2 19.9 Home 9.5 10.2 10.8 Leased Departments .9 .4 .5 Total Merchandise Sales 100.0% 100.0% 100.0% |
The Company does not rely on any major customers as a source of revenue.
Reclassification - Certain reclassifications have been made to prior-year financial statements to conform with fiscal 1998 presentation.
2. Acquisition The Company completed its acquisition (the "Acquisition") of Mercantile Stores Company, Inc. ("Mercantile") on August 13, 1998 for a cash purchase price of approximately $3 billion. Mercantile was a conventional department store retailer engaged in the general merchandising business, operating 106 department and home fashion stores under 13 different names in a total of 17 states.
The Acquisition was accounted for under the purchase method and, accordingly, the results of operations have been included in the Company's results of operations since August 13, 1998, and the purchase price has been allocated to Mercantile's assets and liabilities based on their estimated fair values as of that date. The purchase price of $3 billion includes $2.95 billion of cash paid for stock, $30 million of investment banking and transaction costs, and $20 million of contractually obligated severance payments. The excess cost over the fair value of net assets acquired was allocated to goodwill. A total of $666 million was allocated to goodwill and will be amortized on a straight-line basis over 40 years.
In connection with the Acquisition, the Company entered into two separate agreements whereby the Company sold in the aggregate 26 of the acquired stores to Proffitt's, Inc. and The May Department Stores Company. In addition, the Company entered into an agreement with Belk, Inc. to exchange seven of the acquired stores for nine Belk, Inc. stores with a fair market value of approximately $70 million. The results of operations of the sold or exchanged stores are included in the accompanying statements of operations from the date of acquisition to the date of sale or exchange.
The following unaudited pro forma condensed statements of operations give effect to the Acquisition and related financing transactions as if such transactions had occurred at the beginning of the periods presented:
(in millions, except per share data) January 30,1999 January 31, 1998 Net sales $8,937 $8,980 Net income 111 266 Basic income per share 1.04 2.39 Diluted income per share 1.03 2.38 |
The pro forma amounts reflect the results of operations of the Company, the acquired business and the following adjustments: (1) elimination of sales, cost of goods sold and operating expenses related to the stores subsequently sold, (2) depreciation on property and equipment and amortization of intangible assets based on the estimated purchase price allocation, (3) interest expense on the debt incurred in connection with the Acquisition, and (4) adjustment of income tax expense related to the above.
The foregoing unaudited pro forma information is provided for illustrative purposes only and does not purport to be indicative of results that actually would have been achieved had the Acquisition been consummated on the first day of the periods presented or of future results.
Subsequent to the Acquisition, the Company closed the Mercantile Corporate headquarters and consolidated six Mercantile distribution centers into existing operations. Included in advertising, selling, administrative and general expenses for fiscal 1998 were certain business integration expenses, including $43 million of severance costs and $26 million of lease rejection costs relating to facilities closed subsequent to the Acquisition. As of January 30, 1999, the Company paid approximately $45 million of such costs, and the remaining $24 million (primarily lease rejection costs) are included in the consolidated balance sheet in accrued expenses.
3. Commercial Paper and Revolving Credit Agreement At January 30, 1999, there were no commercial paper borrowings outstanding. At January 31 1998, there were $419 million of commercial paper borrowings outstanding. At January 31, 1998, the weighted-average interest rate for outstanding commercial paper was 5.57%. The average amount of commercial paper outstanding during fiscal 1998 was $225 million, at a weighted-average interest rate of 5.75%. The average amount of commercial paper outstanding during fiscal 1997 was $244 million, at a weighted- average interest rate of 5.46%.
At January 30, 1999, the Company and a subsidiary, Dillard Investment Co., Inc. ("DIC"), had revolving line of credit agreements with various banks aggregating $750 million. The line of credit agreements require that consolidated stockholders' equity be maintained at $1 billion or more. These agreements expire on May 9, 2002. A commitment fee of .10% of the committed amount is paid to the banks to secure these line of credit agreements, which cannot be withdrawn except in the case of defaults by the Company or DIC. Interest may be fixed for periods from one to six months at the election of the Company or DIC. Interest is payable at the lead bank's certificate of deposit rate, alternative base rate or Eurodollar rate. There were no funds borrowed under the revolving line of credit agreements during fiscal 1996 through fiscal 1998.
4. Long-term Debt Long-term debt consists of the following:
(in thousands of dollars) January 30,1999 January 31, 1998
Unsecured notes
at rates ranging from
5.79% to 9.5%,
due 1999 through 2028 $3,007,000 $1,300,000
Unsecured 9.25% note
of DIC due 2001 100,000 100,000
Mortgage notes, payable
monthly or quarterly
(some with balloon payments)
over periods up to 31 years
from inception and bearing
interest at rates ranging from
9.25% to 12.5% 59,884 72,984
3,166,884 1,472,984
Current portion (164,289) (107,268)
$3,002,595 $1,365,716
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Building, land, land improvements and equipment with a carrying value of $81.7 million at January 30, 1999 are pledged as collateral on the mortgage notes.
Maturities of long-term debt over the next five years are $164.3 million, $108 million, $209 million, $109.9 million and $160.4 million.
Interest and debt expense consists of the following:
Fiscal Fiscal Fiscal
(in thousands of dollars) 1998 1997 1996
Long-term debt:
Interest $202,571 $118,466 $110,265
Amortization of
debt expense 2,243 1,471 1,422
204,814 119,937 111,687
Interest on capital
lease obligations 2,159 1,626 1,813
Commercial paper
interest 4,707 13,321 7,299
Other (15,000) (5,647) (200)
$196,680 $129,237 $120,599
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Interest paid during fiscal 1998, 1997 and 1996 was approximately $149.3 million, $135.7 million and $129.4 million, respectively.
5. Trade Accounts Payable and Accrued Expenses Trade accounts payable and accrued expenses consist of the following:
(in thousands of dollars) January 30,1999 January 31, 1998
Trade accounts payable $524,115 $317,774
Accrued expenses:
Taxes, other than income 68,994 48,497
Salaries, wages,
and employee benefits 98,857 57,894
Interest 90,796 36,523
Rent 42,112 11,245
Other 96,313 58,101
$921,187 $530,034
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6. Income Taxes The provision for federal and state income taxes is summarized as follows:
Fiscal Fiscal Fiscal
(in thousands of dollars) 1998 1997 1996
Current:
Federal $ 185,548 $ 89,839 $117,230
State 16,830 7,994 10,285
202,378 97,833 127,515
Deferred:
Federal (108,657) 49,292 11,310
State (9,896) 4,585 1,315
(118,553) 53,877 12,625
$ 83,825 $151,710 $140,140
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A reconciliation between income taxes computed using the effective income tax rate and the federal statutory income tax rate is presented below:
Fiscal Fiscal Fiscal
(in thousands of dollars) 1998 1997 1996
Income tax at the
statutory federal rate $76,679 $143,512 $132,377
State income taxes,
net of federal benefit 4,474 8,176 7,584
Nondeductible
goodwill amortization 2,616 - -
Other 56 22 179
$83,825 $151,710 $140,140
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Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets and liabilities as of January 30, 1999 and January 31, 1998 are as follows:
(in thousands of dollars) January 30,1999 January 31, 1998 Property and equipment bases and depreciation differences $506,820 $264,526 State income taxes 54,945 24,018 Differences between book and tax basis of inventory 33,577 27,607 Pension asset differences 93,110 - Joint venture bases differences 36,608 Other 16,675 2,789 Total deferred tax liabilities 741,735 318,940 Accruals not currently deductible (37,598) (3,639) State income taxes (3,410) (330) Total deferred tax assets (41,008) (3,969) Net deferred tax liabilities $700,727 $314,971 |
Deferred tax assets and liabilities are presented as follows in the accompanying consolidated balance sheets:
(in thousands of dollars) January 30,1999 January 31, 1998 Current deferred tax liabilities $ 19,666 $ 7,833 Noncurrent deferred tax liabilities 681,061 307,138 Net deferred tax liabilities $700,727 $314,971 |
Income taxes paid during fiscal 1998, 1997 and 1996 were approximately $229.9 million, $100.0 million and $116.4 million, respectively.
7. Guaranteed Preferred Beneficial Interests in the Company's Subordinated Debentures Guaranteed Preferred Beneficial Interests in the Company's Subordinated Debentures are comprised of $200 million liquidation amount of 7.5% Capital Securities, due August 1, 2038 (the "Capital Securities") representing beneficial ownership interest in the assets of Dillard's Capital Trust I, a wholly-owned subsidiary of the Company, and $331.6 million liquidation amount of LIBOR plus 1.56% Preferred Securities, due January 29, 2009 (the "Preferred Securities") by Horatio Finance V.O.F., a wholly- owned subsidiary of the Company.
Holders of the Capital Securities are entitled to receive cumulative cash distributions, payable quarterly, at the annual rate of 7.5% of the liquidation amount of $25 per Capital Security. The subordinated debentures are the sole asset of the Trust and the Capital Securities are subject to mandatory redemption upon repayment of the subordinated debentures.
Holders of the Preferred Securities are entitled to receive quarterly dividends at LIBOR plus 1.56%. The Preferred Securities are subject to mandatory redemption upon repayment of the debentures.
The Company's obligations under the debentures and related agreements, taken together, provide a full and unconditional guarantee of payments due on the Capital and Preferred Securities.
8. Benefit Plans The Company has a retirement plan with a 401(k) salary deferral feature for eligible employees. Under the terms of the plan, employees may contribute up to 5% of gross earnings which will be matched 100% by the Company. The contributions are used to purchase Class A Common Stock of the Company for the account of the employee. The terms of the plan provide a five-year cliff- vesting schedule for the Company contribution to the plan. The costs to the Company for the 401(k) plan were $16 million, $14 million and $13 million for fiscal 1998, 1997 and 1996, respectively.
Mercantile maintained formal, qualified and non-qualified, non- contributory, defined benefit pension plans. In connection with the Acquisition, the Company froze the benefits accreting to the employees covered by the Plans, and applied to the applicable governmental authorities to distribute the benefits owed to each participant, in the form of lump-sum payments or non-participating annuity contracts, at the participant's election. In connection with the Acquisition, the Company recognized as prepaid pension costs all remaining unrecognized plan assets in excess of the actuarial present value of the benefit obligations. The following table sets forth the Plan's funded status and amounts recognized in the Company's consolidated balance sheet:
(in thousands of dollars) Fiscal 1998
Actuarial present value of benefit obligation:
Accumulated benefit obligation $227,721
Projected benefit obligation 227,721
Plan assets at fair value, primarily
money market investments 422,011
Plan assets in excess of
accumulated benefit obligation
(included in other assets) $194,290
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The weighted-average discount rate used in determining the actuarial present value of the benefit obligations was approximately 6.33%.
9. Stockholders' Equity Capital stock is comprised of the following:
Par Shares
Type Value Authorized
Preferred (5% cumulative) $ 100 5,000
Additional preferred $ .01 10,000,000
Class A, common $ .01 289,000,000
Class B, common $ .01 11,000,000
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Holders of Class A are empowered as a class to elect one-third of the members of the Board of Directors and the holders of Class B are empowered as a class to elect two-thirds of the members of the Board of Directors. Shares of Class B are convertible at the option of any holder thereof into shares of Class A at the rate of one share of Class B for one share of Class A.
10. Earnings per Share In accordance with SFAS No. 128, "Earnings Per Share," basic earnings per share has been computed based upon the weighted average of Class A and Class B common shares outstanding, after deducting preferred dividend requirements. Diluted earnings per share gives effect to outstanding stock options.
Earnings per common share have been computed as follows:
Fiscal 1998 Fiscal 1997 Fiscal 1996
(dollar amounts in thousands,
except per share)
Basic Diluted Basic Diluted Basic Diluted
Net income $135,259 $135,259 $258,325 $258,325 $238,621 $238,621
Preferred stock dividends (22) (22) (22) (22) (22) (22)
Net earnings available for
per-share calculation $135,237 $135,237 $258,303 $258,303 $238,599 $238,599
Average shares common
stock outstanding 107,182 107,182 111,303 111,303 113,482 113,482
Stock options 454 691 507
Total average equivalent shares 107,182 107,636 111,303 111,994 113,482 113,989
Earnings per share $ 1.26 $ 1.26 $ 2.32 $ 2.31 $ 2.10 $ 2.09
Options to purchase 5,448,443, 2,618,406 and 4,806,120 shares of
Class A Common Stock at prices ranging from $31.25 to $ 45.13 per
share were outstanding in 1998, 1997 and 1996, respectively, but
were not included in the computation of diluted earnings per share
because the exercise price of the options exceed the average
market price and would have been antidilutive.
11. Stock Options
The Company's 1998 Incentive and Nonqualified Stock Option Plan
provides for the granting of options to purchase 6,000,000 shares
of Class A Common Stock to certain key employees of the Company.
Exercise and vesting terms for options granted under this plan are
determined at each grant date. All options were granted at not
less than fair market value at dates of grant. At the end of
fiscal 1998, 3,864,120 shares were available for grant under the
plan and 6,000,000 shares of Class A Common Stock were reserved
for issuance under the 1998 stock option plan.
The Company's 1990 Incentive and Nonqualified Stock Option Plan
provides for the granting of options to purchase 12 million shares
of Class A Common Stock to certain key employees of the Company.
Exercise and vesting terms for options granted under this plan are
determined at each grant date. All options were granted at not
less than fair market value at dates of grant. At the end of
fiscal 1998, 1,974,662 shares were available for grant under the
plan and 7,218,578 shares of Class A Common Stock were reserved
for issuance under the 1990 stock option plan.
SFAS No. 123, "Accounting for Stock-Based Compensation," was
effective for the Company for fiscal 1996. SFAS No. 123 encourages
(but does not require) compensation expense to be measured based
on the fair value of the equity instrument awarded. In accordance
with Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," no compensation cost has been
recognized in the consolidated statements of income for the
Company's stock option plans. If compensation cost for the
Company's stock option plans had been determined in accordance
with the fair value method prescribed by SFAS No. 123, the
Company's net income would have been $125 million, $245 million
and $229 million for 1998, 1997 and 1996, respectively. Diluted
earnings per share would have been $1.16, $2.18 and $2.01 for
1998, 1997 and 1996, respectively. Basic earnings per share would
have been $1.16, $2.20 and $2.02 for 1998, 1997 and 1996,
respectively. This pro forma information may not be representative
of the amounts to be expected in future years as the fair value
method of accounting prescribed by SFAS No. 123 has not been
applied to options granted prior to 1995.
|
Stock option transactions are summarized as follows: |
Fiscal 1998 Fiscal 1997 Fiscal 1996
Weighted-Average Weighted-Average Weighted-Average
Fixed Options Shares Exercise Price Shares Exercise Price Shares Exercise Price
Outstanding, beginning of year 6,549,340 $ 33.25 7,058,685 $ 33.85 6,448,006 $ 33.08
Granted 2,155,880 37.24 1,956,220 32.71 1,896,030 36.45
Exercised (931,687) 35.63 (1,815,180) 32.92 (848,366) 31.69
Forfeited (393,737) 33.73 (650,385) 39.05 (436,985) 37.91
Outstanding, end of year 7,379,796 $ 33.83 6,549,340 $ 33.25 7,058,685 $ 33.85
Options exercisable at year-end 4,508,051 $ 34.09 3,245,640 $ 32.41 3,079,350 $ 35.57
Weighted-average fair value of
options granted during the year $8.80 $7.78 $12.19
|
The following table summarizes information about stock options outstanding at January 30, 1999:
Options Outstanding Options Exercisable
Weighted-Average
Range of Options Remaining Weighted-Average Options Weighted-Average
Exercise Prices Outstanding Contractual Life (Yrs.) Exercise Price Exercisable Exercise Price
$27.25-$32.25 4,092,796 5.2 $ 29.88 2,382,901 $ 30.12
$37.00-$40.22 3,287,000 6.5 38.74 2,125,150 38.55
7,379,796 5.8 $ 33.83 4,508,051 $ 34.09
|
The fair value of each option grant is estimated on the date of each grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants in 1998, 1997, and 1996, respectively: risk free interest rate 5.38%, 6.13% and 6.27%; expected life 3.1 years, 2.9 years and 4.3 years; expected volatility of 25.6%, 25.9% and 29.4%; dividend yield .44%, .49% and .38%. The fair values generated by the Black- Scholes model may not be indicative of the future benefit, if any, that may be received by the option holder.
12. Leases Rental expense consists of the following:
Fiscal Fiscal Fiscal
(in thousands of dollars) 1998 1997 1996
Operating leases:
Buildings:
Minimum rentals $41,758 $29,639 $28,842
Contingent rentals 13,043 11,863 12,482
Equipment 11,545 11,661 13,100
66,346 53,163 54,424
Contingent rentals
on capital leases 1,636 1,523 1,342
$67,982 $54,686 $55,766
|
Contingent rentals on certain leases are based on a percentage of annual sales in excess of specified amounts. Other contingent rentals are based entirely on a percentage of sales.
The future minimum rental commitments as of January 30, 1999 for all noncancelable leases for buildings and equipment are as follows:
(in thousands of dollars) Operating Capital Fiscal Year Leases Leases 1999 $57,276 $5,120 2000 52,061 5,035 2001 47,437 4,674 2002 41,825 4,282 2003 36,522 3,991 After 2003 438,741 34,365 Total minimum lease payments $673,862 $57,467 Less amount representing interest (28,071) Present value of net minimum lease payments (of which $2,396 is currently payable) $ 29,396 |
Renewal options from three to 25 years exist on the majority of leased properties. At January 30, 1999, the Company is committed to incur costs of approximately $169.1 million to acquire, complete and furnish certain stores.
13. 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 trade accounts receivable is determined by
discounting the estimated future cash flows at current market
rates, after consideration of credit risks and servicing costs
using historical rates. The fair value of the Company's long-term
debt and Guaranteed Preferred Beneficial Interests in the
Company's 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 maturity
(for bank notes and mortgage notes).
The fair value of the Company's cash and cash equivalents, trade
accounts receivable and commercial paper borrowings approximates
their carrying values at January 30, 1999 and January 31, 1998 due
to the short-term maturities of these instruments. The fair value
of the Company's long-term debt at January 30, 1999 and January
31, 1998 was $3,322 million and $1,618 million, respectively. The
carrying value of the Company's long-term debt at January 30, 1999
and January 31, 1998 was $3,167 million and $1,473 million,
respectively. The fair value and the carrying value of the
Guaranteed Preferred Beneficial Interests in the Company's
Subordinated Debentures at January 30, 1999 was $532 million.
14. Quarterly Results of Operations (unaudited)
The following is a tabulation of the unaudited quarterly results of operations for the years ended January 30, 1999 and January 31, 1998:
Fiscal 1998, Three Months Ended
(in thousands, except per share data)
May 2 August 1 October 31 January 30
Net sales $1,682,216 $1,504,504 $2,021,299 $2,588,722
Gross profit 564,995 540,360 653,033 820,258
Net income 63,070 47,946 (50,205) 74,448
Basic earnings (loss) per share .58 .45 (.47) .70
Diluted earnings (loss) per share .58 .45 (.47) .70
Fiscal 1997, Three Months Ended
(in thousands, except per share data)
May 3 August 2 November 1 January 31
Net sales $1,515,344 $1,453,152 $1,592,118 $2,071,138
Gross profit 520,141 507,033 535,815 675,472
Net income 58,258 44,342 44,347 111,378
Basic earnings per share .52 .40 .40 1.01
Diluted earnings per share .52 .40 .40 1.00
|
Corporate Organization
William Dillard, II, Chief Executive Officer
Drue Corbusier, Executive Vice President
James I. Freeman, Chief Financial Officer
Alex Dillard, President
Mike Dillard, Executive Vice President
Paul J. Schroeder, Jr., General Counsel
Vice Presidents
W.R. Appleby, II
Gregg Athy
H. Gene Baker
Donald A. Bogart
Jan E. Bolton
Michael Bowen
Joseph P. Brennan
Kent Burnett
Larry Cailteux
Wynelle Chapman
James W. Cherry, Jr.
Neil Christensen
David M. Doub
Karl G. Ederer
T. R. Gastman
Walter C. Grammer
Randal L. Hankins
Marva Harrell
G. William Haviland
John Hawkins
Gene D. Heil
William L. Holder, Jr.
Dan W. Jensen
Mark Killingsworth
Gaston Lemoine
Denise Mahaffy
Robert G. McGushin
Paul E. McLynch
Michael S. McNiff
Jeff Menn
Anthony Menzie
Richard Moore
Cindy Myers-Ray
Steven K. Nelson
Steven T. Nicoll
Tom C. Patterson
Grizelda Reeder
Robin Sanderford
James Schatz
Linda Sholtis-Tucker
Terry Smith
Burt Squires
Sandra Steinberg
Joseph W. Story
Ralph Stuart
Tom Sullivan
Julie A. Taylor
David Terry
Paul Thum Suden
Charles O. Unfried
Richard Vasey
Keith White
Ronald Wiggins
Kent Wiley
Richard B. Willey
Gary Wirth
Linda Zwern
Merchandising Division Management
Ft. Worth Division
Drue Corbusier
President
Gregg Athy
Vice President, Merchandising
Wynelle Chapman
Vice President, Merchandising
William B. Warner
Director of Sales Promotion
Little Rock Division
Mike Dillard
President
David Terry
Vice President, Merchandising
Keith White
Vice President, Merchandising
Ken Eaton
Director of Sales Promotion
Louisville Division
Robin Sanderford
President
Ronald Wiggins
Vice President, Merchandising
Sandra Gudorf
Director of Sales Promotion
Phoenix Division
Kent Burnett
President
Julie A. Taylor
Vice President, Merchandising
Tom Sullivan
Vice President, Merchandising
Robert E. Baker
Director of Sales Promotion
St. Louis Division
Joseph P. Brennan
President
Mark Killingsworth
Vice President, Merchandising
Mark Gastman
Director of Sales Promotion
Tampa Division
David Doub
President
Linda Zwern
Vice President, Merchandising
Louise Platt
Director of Sales Promotion
Corporate Organization
Board of Directors
William Dillard
Chairman of the Board
Calvin N. Clyde, Jr.
Chairman of the Board
T.B. Butler Publishing Co., Inc.
Tyler, Texas
Robert C. Connor
Investments
Drue Corbusier
Executive Vice President
Dillard's, Inc.
Will D. Davis
Partner
Heath, Davis & McCalla, Attorneys
Austin, Texas
Alex Dillard
President
Dillard's, Inc.
Mike Dillard
Executive Vice President
Dillard's, Inc.
William Dillard, II
Chief Executive Officer
Dillard's, Inc.
James I. Freeman
Senior Vice President, Chief Financial Officer
Dillard's, Inc.
John Paul Hammerschmidt
Retired Member of Congress
Harrison, Arkansas
William B. Harrison, Jr.
Vice Chairman
Chase Manhattan Corporation
New York, New York
John H. Johnson
President and Publisher
Johnson Publishing Company, Inc.
Chicago, Illinois
E. Ray Kemp
Retired Vice Chairman and Chief Administrative Officer
Dillard's, Inc.
Jackson T. Stephens
Chairman
Stephens Group, Inc.
Little Rock, Arkansas
William H. Sutton
Managing Partner
Friday, Eldredge & Clark, Attorneys
Little Rock, Arkansas
Shareholder Information
Annual Meeting
Saturday, May 15, 1999, at 9:30 a.m., Auditorium,
Dillard's Corporate Office, 1600 Cantrell Road,
Little Rock, Arkansas 72201
Form 10-K
Copies of the Company's 10-K Annual Report may be obtained by
written request to: James I. Freeman, Senior Vice President and
Chief Financial Officer, Post Office Box 486, Little Rock,
Arkansas 72203
Corporate Headquarters
1600 Cantrell Road, Little Rock, Arkansas 72201
Mailing Address
Post Office Box 486, Little Rock, Arkansas 72203
Telephone: 501-376-5200
Telex: 910-722-7322
Fax: 501-376-5917
Transfer Agent and Registrar
Chase Mellon, 85 Challenger Road, Overpeck Centre,
Ridgefield Park, New Jersey 07660
Listing
New York Stock Exchange, Ticker Symbol "DDS"
Stock Prices and Dividends by Quarter
Dividends
1998 1997 per Share
High Low High Low 1998 1997
First $39.63 $34.94 $32.50 $28.00 $0.04 $0.04
Second 44.50 32.81 38.06 30.63 0.04 0.04
Third 37.06 26.50 44.75 34.00 0.04 0.04
Fourth 36.25 24.75 41.38 32.56 0.04 0.04
|
Dillard's
1600 Cantrell Road
Little Rock, Arkansas 72201
www.dillards.com
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
STATE OF NAME UNDER WHICH
NAME INCORPORATION SUBSIDIARY IS DOING BUSINESS
Brownsville Shopping Center, Inc. Texas Brownsville Shopping Center, Inc.
Condev Mission, Inc. Arkansas Condev Mission, Inc.
Condev Nevada, Inc. Nevada Dillard's
Condev West, Inc. Arizona Dillard's
Construction Developers, Inc. Arkansas Construction Developers,Inc.
Dillard's, Inc. Delaware Dillard's
Dillard International, Inc. Nevada Dillard International,Inc.
Dillard Investment Co., Inc. Delaware Dillard Investment Co.,Inc.
Dillard National Bank National Banking Dillard National Bank
Association
Dillard Ticket Systems, Inc. Arizona Dillard Ticket Systems,Inc.
Dillard Travel, Inc. Arkansas Dillard Travel, Inc.
Dillard USA, Inc. Nevada Dillard's
Dillard's Nevada, Inc. Nevada Dillard's Nevada, Inc.
Dillard's Utah, Inc. Utah Dillard's Utah, Inc.
Dillard's Wyoming, Inc. Wyoming Dillard's
The Higbee Company Delaware Dillard's
J.B. Ivey & Company North Carolina Dillard's
Pulaski Realty Company Arkansas Pulaski Realty Company
Mercantile Stores Co., Inc. Delaware Dillard's
J. Bacon & Sons Kentucky Bacon's
The Castner-Knott Dry Goods Co. Tennessee Dillard's
C.J. Gayfer & Company, Inc. Delaware Dillard's
Gayfer Montgomery Fair Co. Delaware Dillard's
Hennessy Company Montana Dillard's
Mercantile Kansas City, Inc. Delaware Dillard's
Ishawn Beauty School, Inc. Missouri Dillard's
The Joslin Dry Goods Company Colorado Dillard's
The Lion Dry Goods Company Ohio Lion
The McAlpin Company Kentucky McAlpin
Mercantile Credit Corp. Louisiana Mercantile Credit Corp.
Mercantile International, Inc. Delaware Mercantile International,Inc.
Mercantile Logistics Company, Inc. Ohio Mercantile Logistics Company, Inc.
Mercantile Properties, Inc. Delaware Mercantile Properties, Inc.
Mercantile Real Estate Co., Inc. Delaware Mercantile Real Estate Co., Inc.
Mersco Development Company, Inc. Delaware Mersco Development Company, Inc.
Mersco Factors, Inc. Delaware Mersco Factors, Inc.
Mersco Finance Corporation Delaware Mersco Finance Corporation
Mersco Realty Co., Inc. Ohio Mersco Realty Co., Inc.
J.B. White & Company South Carolina Dillard's
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INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Number 33-42500 on Form S-8, in Registration Number 33-42499 on Form S-8, in Registration Statement Number 33-42553 on Form S-8, and in Registration Statement Number 333-59183 on Form S-3 of our report dated March 15, 1999, appearing in and incorporated by reference in this Annual Report on Form 10-K of Dillard's, Inc. and subsidiaries for the year ended January 30, 1999
DELOITTE & TOUCHE LLP
New York, New York
April 30, 1999
| ARTICLE 5 |
| MULTIPLIER: 1000 |
| PERIOD TYPE | YEAR |
| FISCAL YEAR END | JAN 30 1999 |
| PERIOD END | JAN 30 1999 |
| CASH | 72,401 |
| SECURITIES | 0 |
| RECEIVABLES | 1,192,572 |
| ALLOWANCES | 37,487 |
| INVENTORY | 2,157,010 |
| CURRENT ASSETS | 3,437,711 |
| PP&E | 5,407,877 |
| DEPRECIATION | 1,723,248 |
| TOTAL ASSETS | 8,177,559 |
| CURRENT LIABILITIES | 1,093,802 |
| BONDS | 3,029,595 |
| PREFERRED MANDATORY | 0 |
| PREFERRED | 440 |
| COMMON | 1,150 |
| OTHER SE | 2,839,932 |
| TOTAL LIABILITY AND EQUITY | 8,177,559 |
| SALES | 7,796,741 |
| TOTAL REVENUES | 8,011,724 |
| CGS | 5,218,095 |
| TOTAL COSTS | 5,218,095 |
| OTHER EXPENSES | 0 |
| LOSS PROVISION | 62,766 |
| INTEREST EXPENSE | 196,680 |
| INCOME PRETAX | 219,084 |
| INCOME TAX | 83,825 |
| INCOME CONTINUING | 135,259 |
| DISCONTINUED | 0 |
| EXTRAORDINARY | 0 |
| CHANGES | 0 |
| NET INCOME | 135,259 |
| EPS PRIMARY | 1.26 |
| EPS DILUTED | 1.26 |