Dillard's, Inc. (NYSE: DDS) (the "Company" or "Dillard's")
announced operating results for the 13 and 52 weeks ended January
28, 2012. This release contains certain forward-looking statements.
Please refer to the Company's cautionary statements regarding
forward-looking information included below under "Forward-Looking
Information".
Fourth Quarter Results
Dillard’s reported income for the 13 weeks ended January 28,
2012 of $141.5 million, or $2.77 per share. Included in net income
for the 13 weeks ended January 28, 2012 is a $44.5 million pre-tax
credit ($28.7 million after tax or $0.56 per share) related to the
settlement of a lawsuit with JDA Software Group. Excluding this
credit, the Company would have recorded net income of $112.8
million or $2.21 per share marking a record-setting fourth quarter
earnings per share performance.
Other highlights of the 13 weeks ended January 28, 2012
included:
- A 3% increase in comparable store
sales
- Control of advertising, selling,
administrative and general expenses (“operating expenses”) which
declined 40 basis points of sales
- Repurchase of $98.8 million (2.1
million shares) of Class A Common Stock
Dillard’s Chief Executive Officer, William T. Dillard, II,
stated, “We are pleased with our progress in 2011 where we
delivered a record setting performance. With strong operating cash
flow, we purchased $491 million of our Class A Common Stock during
the year with $99 million accomplished in the fourth quarter. In
2012, we will remain focused on creating a clearly distinctive
shopping experience at Dillard’s in merchandise selection as well
as in customer service.”
For the prior year fourth quarter, the 13 weeks ended January
29, 2011, Dillard’s reported net income of $109.6 million, or $1.75
per share. Included in net income for the prior year fourth quarter
are pre-tax credits totaling $9.7 million ($12.7 million after tax
or $0.20 per share) which is comprised of the following items:
- $7.5 million proceeds received as final
payment related to hurricane losses ($4.8 million after tax or
$0.08 per share).
- a $2.2 million pretax gain on disposal
of assets primarily related to the sale of three closed stores
($1.4 million after tax or $0.02 per share).
- a $6.5 million income tax benefit
($0.10 per share) primarily related to net decreases in
unrecognized tax benefits, interest and penalties due to
resolutions of federal and state examinations, decreases in state
net operating loss valuation allowances, and a decrease in a
capital loss valuation allowance.
Excluding these after-tax credits, the Company would have
recorded net income of $96.9 million or $1.55 per share for the
prior year fourth quarter.
Fiscal Year Results
Dillard’s reported net income for the 52 weeks ended January 28,
2012 of $463.9 million, or $8.52 per share. Included in net income
for the 52 weeks ended January 28, 2012 is a net pre-tax credit
totaling $50.9 million ($234.5 million after tax or $4.31 per
share) which is comprised of the following items:
- approximately $201.6 million ($3.70 per
share) in tax benefit due to the reversal of a valuation allowance
related to a deferred tax asset consisting of a capital loss
carryforward
- a $44.5 million net pretax credit
($28.7 million after tax or $0.53 per share) related to the
settlement of a lawsuit with JDA Software Group, Inc. for $57.0
million
- a $4.2 million pretax gain ($2.7
million after tax or $0.05 per share) related to a distribution
from a mall joint venture
- non-cash pretax asset impairment and
store closing charges of $1.2 million ($0.8 million after-tax or
$0.01 per share)
- a $2.1 million pretax gain ($1.4
million after tax or $0.03 per share) relating to the sale of an
interest in a mall joint venture
- a $1.3 million pretax gain ($0.9
million after tax or $0.02 per share) related to the sale of two
former retail store locations
Excluding this net after-tax credit, the Company would have
recorded net income of $229.4 million or $4.21 per share for the 52
weeks ended January 28, 2012 which is a record-setting earnings per
share performance.
Other highlights of the 52 weeks ended January 28, 2012
included:
- A 4% increase in comparable store
sales
- Control of advertising, selling,
administrative and general expenses (“operating expenses”) which
declined 60 basis points of sales
- Cash flow from operations of $501.1
million
- Repurchase of $491.1 million (11.4
million shares) of Class A Common Stock
For the prior fiscal year, the 52 weeks ended January 29, 2011,
Dillard’s reported net income of $179.6 million, or $2.67 per
share. Included in net income for the prior year fiscal year are
net pre-tax credits totaling $10.4 million ($16.4 million after tax
or $0.24 per share) which is comprised of the following items:
- $7.5 million proceeds received as final
payment related to hurricane losses ($4.8 million after tax or
$0.07 per share).
- non-cash pretax asset impairment and
store closing charges of $2.2 million ($1.4 million after tax or
$0.02 per share).
- a $5.1 million pretax gain on disposal
of assets primarily related to the sale of five closed stores ($3.3
million after tax or $0.05 per share).
- a $9.7 million income tax benefit
($0.14 per share) primarily related to net decreases in
unrecognized tax benefits, interest and penalties due to
resolutions of federal and state examinations, decreases in state
net operating loss valuation allowances, and a decrease in a
capital loss valuation allowance.
Excluding this net after-tax credit, the Company would have
recorded net income of $163.2 million or $2.43 per share for the
prior fiscal year.
Net Sales – 13 Weeks
Net sales for the 13 weeks ended January 28, 2012 were $1.970
billion compared to net sales for the 13 weeks ended January 29,
2011 of $1.934 billion. Net sales include the operations of the
Company’s construction business, CDI Contractors, LLC (“CDI”).
Total merchandise sales (which exclude CDI) for the 13-week
period ended January 28, 2012 were $1.946 billion compared to
$1.912 billion for the 13-week period ended January 29, 2011. Total
merchandise sales increased 2% during the fourth quarter. Sales in
comparable stores increased 3%.
Net Sales – 52 Weeks
Net sales for the 52 weeks ended January 28, 2012 were $6.264
billion compared to net sales for the 52 weeks ended January 29,
2011 of $6.121 billion.
Total merchandise sales for the 52-week period ended January 28,
2012 were $6.194 billion compared to $6.020 billion for the 52-week
period ended January 29, 2011. Total merchandise sales increased 3%
during the fiscal year. Sales in comparable stores increased
4%.
Service Charges and Other
Income
Included in service charges and other income for the 13 weeks
ended January 29, 2011 is $7.5 million proceeds received as final
payment related to hurricane losses ($4.8 million after tax or
$0.08 per share).
Gross Margin/Inventory
Gross margin from retail operations (which excludes CDI) was
34.4% (of sales) for the 13 weeks ended January 28, 2012 compared
to 34.5% for the prior year fourth quarter. Gross margin from
retail operations for the 52 weeks ended January 28, 2012 improved
30 basis points (of sales) to 35.9% compared to 35.6% for the prior
fiscal year.
Consolidated gross margin for the 13 weeks ended January 28,
2012 was 34.0% compared to 34.1% during the prior year fourth
quarter. Consolidated gross margin for the 52 weeks ended January
28, 2012 improved 50 basis points to 35.5% compared to 35.0% for
the prior year fiscal year.
Inventory in comparable stores increased 3% at January 28, 2012
compared to January 29, 2011.
Advertising, Selling, Administrative
and General Expenses
Advertising, selling, administrative and general expenses
(“operating expenses”) decreased approximately 40 basis points of
sales during the 13 weeks ended January 28, 2012 compared to the 13
weeks ended January 29, 2011. Operating expenses were $440.8
million (22.4% of sales) and $441.6 million (22.8% of sales),
respectively. Specific areas of operating expense savings during
the fourth quarter included advertising and utilities partially
offset by increased services purchased.
Operating expense decreased approximately 60 basis points of
sales during the 52 weeks ended January 28, 2012 compared to the 52
weeks ended January 29, 2011. Operating expenses were $1,630.9
million (26.0% of sales) and $1,625.8 million (26.6% of sales),
respectively.
Gain on Litigation
Settlement
During the 13 weeks ended January 28, 2012, the Company recorded
a $44.5 million pre-tax credit net of legal fees and costs ($28.7
million after tax or $0.56 per share) related to the settlement of
a lawsuit with JDA Software Group for $57.0 million.
Share Repurchase
During the 13 weeks ended January 28, 2012, Dillard’s
repurchased approximately $98.8 million (2.1 million shares) of
Class A Common Stock. The Company repurchased approximately $491.1
million (11.4 million shares) of Class A Common Stock during the 52
weeks ended January 28, 2012. At January 28, 2012, $27.5 million of
authorization remained under the Company’s $250 million share
repurchase program.
Total shares outstanding (Class A and Class B Common Stock) at
January 28, 2012 and January 29, 2011 were 49.4 million and 60.0
million, respectively.
Credit Facility
Letters of credit totaling $83.7 million were outstanding under
the Company’s $1.0 billion revolving credit facility as of January
28, 2012.
Store Information
At January 28, 2012, the Company operated 288 Dillard's
locations and 16 clearance centers spanning 29 states and an
Internet store at www.dillards.com. Total square footage at January
28, 2012 was 52.7 million.
Sales Reporting
Dillard’s will no longer report monthly sales results. Sales
performance information will be included in the Company’s quarterly
press releases. Management believes that providing sales
information quarterly with operating results provides a more
complete representation of the Company’s performance.
Dillard’s, Inc. and Subsidiaries
Condensed Consolidated Statements of
Income (Unaudited)
(In Millions, Except Per Share Data)
13-Week Period Ended
January 28, 2012
January 29, 2011
% of % of
Amount
Net Sales
Amount
Net
Sales
Net sales $ 1,970.0
100.0.
% $ 1,934.3
100.0.
%
Service charges and other income 39.4 2.0 42.7 2.2 2,009.4
102.0 1,977.0 102.2 Cost of sales 1,300.3 66.0 1,273.9 65.9
Advertising, selling, administrative and general expenses 440.8
22.4 441.6 22.8 Depreciation and amortization 64.8 3.3 68.4 3.5
Rentals 13.3 0.7 14.4 0.7 Interest and debt expense, net 17.6 0.9
18.4 1.0 Gain on litigation settlement 44.5 2.3 - - Gain on
disposal of assets 0.1 0.0 2.3 0.1 Income before income taxes and
income on and equity in (losses) of joint ventures 217.2 11.0 162.6
8.4 Income taxes 76.1 51.4 Income on and equity in (losses) of
joint ventures 0.4 0.0 (1.6 ) (0.1 ) Net income $ 141.5 7.2 % $
109.6 5.7 % Basic earnings per share $ 2.82 $ 1.77
Diluted earnings per share $ 2.77 $ 1.75 Basic
weighted average shares 50.2 61.8 Diluted weighted average
shares 51.1 62.8
Dillard’s, Inc. and Subsidiaries
Condensed Consolidated Statements of
Income (Unaudited)
(In Millions, Except Per Share Data)
52-week Period Ended
January 28, 2012
January 29, 2011
% of % of
Amount
Net Sales
Amount
Net
Sales
Net sales $ 6,263.6 100.0 % $ 6,121.0 100.0 % Service
charges and other income 136.2 2.2 132.5
2.2 6,399.8 102.2 6,253.5 102.2 Cost of sales 4,041.6
64.5 3,976.1 65.0 Advertising, selling, administrative and general
expenses 1,630.9 26.0 1,625.8 26.6 Depreciation and amortization
257.7 4.1 261.5 4.3 Rentals 48.1 0.8 51.0 0.8 Interest and debt
expense, net 72.1 1.2 73.8 1.2 Gain on litigation settlement 44.5
0.7 - - Gain on disposal of assets 4.0 0.0 5.6 0.1 Asset impairment
and store closing charges 1.2 0.0 2.2 0.0
Income before income taxes and income on and equity in (losses) of
joint ventures 396.7 6.3 268.7 4.4 Income taxes (benefit) (62.5 )
84.5 Income on and equity in (losses) of joint ventures 4.7
0.1 (4.6 ) (0.1 ) Net income $ 463.9 7.4 % $ 179.6
2.9 % Basic earnings per share $ 8.67 $ 2.68
Diluted earnings per share $ 8.52 $ 2.67 Basic
weighted average shares 53.5 66.9 Diluted
weighted average shares 54.4 67.2 Dillard’s,
Inc. and Subsidiaries Condensed Consolidated Balance Sheets
(Unaudited) (In Millions) January 28, January 29,
2012 2011 Assets Current Assets: Cash and cash equivalents $ 224.3
$343.3 Accounts receivable 28.7 26.0 Merchandise inventories
1,304.1 1,290.1 Other current assets 34.6 42.5 Total current
assets 1,591.7 1,701.9 Property and equipment, net 2,440.3
2,595.5 Other assets 274.1 76.8 Total Assets $
4,306.1 $ 4,374.2 Liabilities and Stockholders' Equity
Current Liabilities: Trade accounts payable and accrued expenses
$
655.7
$ 689.3 Current portion of long-term debt and capital leases 79.1
51.4
Federal and state income taxes including
current deferred taxes
135.6 90.6 Total current liabilities 870.4 831.3
Long-term debt and capital leases 623.9 708.6 Other liabilities
256.3 205.9 Deferred income taxes 310.6 341.7 Subordinated
debentures 200.0 200.0 Stockholders' equity 2,044.9 2,086.7
Total Liabilities and Stockholders' Equity $ 4,306.1 $
4,374.2 Dillard’s, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash
Flows (Unaudited)
(In Millions)
52-week Period Ended January 28,
2012
January 29,
2011
Operating activities: Net income $ 463.9 $ 179.6
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization of property
and deferred financing cost
259.6
263.4
Deferred income taxes (9.5 ) 18.4 Gain on disposal of assets (4.0 )
(5.6 ) Asset impairment and store closing charges 1.2 2.2 Excess
tax benefits from share-based compensation (10.2 ) (3.4 ) Gain on
repurchase of debt (0.2 ) - Changes in operating assets and
liabilities: (Increase) decrease in accounts receivable (2.8 ) 37.3
(Increase) decrease in merchandise inventories (14.0 ) 10.5
Decrease in federal income tax receivable - 0.2 Decrease in other
current assets 7.9 0.6 (Increase) decrease in other assets (210.4 )
6.6 (Decrease) increase in trade accounts payable and accrued
expenses and other liabilities
(14.0
)
24.6
Increase (decrease) in income taxes payable 33.6
(21.5 ) Net cash provided by operating activities
501.1 512.9 Investing activities: Purchase of
property and equipment (115.6 ) (98.2 ) Proceeds from disposal of
assets 29.9 17.6 Distribution from joint venture 2.5 - Investment
in joint venture - (9.0 ) Net cash used in
investing activities (83.2 ) (89.6 ) Financing
activities: Principal payments on long-term debt and capital lease
obligations
(56.8
)
(17.4
)
Cash dividends paid (10.0 ) (11.1 ) Purchase of treasury stock
(491.1 ) (413.9 ) Excess tax benefits from share-based compensation
10.2 3.4 Proceeds from stock issuance 10.8
17.3 Net cash used in financing activities (536.9 )
(421.7 ) (Decrease) increase in cash and cash equivalents
(119.0 ) 1.6 Cash and cash equivalents, beginning of period
343.3 341.7 Cash and cash equivalents, end of
period $ 224.3 $ 343.3 Non-cash transactions: Accrued
capital expenditures $ 7.1 $ 1.6 Stock awards
Capital lease transactions
2.8
-
2.3
4.0
Estimates for 2012
The Company is updating the following estimates for certain
financial statement items for the fiscal year ending February 2,
2013 based upon current conditions. Actual results may differ
significantly from these estimates as conditions and factors change
– See “Forward-Looking Information”.
In millions 2012 Estimated 2011 Actual Depreciation
and amortization $ 257 $ 258 Rentals 34 48 Interest and debt
expense, net 70 72 Capital expenditures 175 116
Forward-Looking
Information
The foregoing contains certain “forward-looking statements”
within the definition of federal securities laws. The following are
or may constitute forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995: statements
including (a) words such as “may,” “will,” “could,” “believe,”
“expect,” “future,” “potential,” “anticipate,” “intend,” “plan,”
“estimate,” “continue,” or the negative or other variations
thereof, and (b) statements regarding matters that are not
historical facts. The Company cautions that forward-looking
statements contained in this report are based on estimates,
projections, beliefs and assumptions of management and information
available to management at the time of such statements and are not
guarantees of future performance. The Company disclaims any
obligation to update or revise any forward-looking statements based
on the occurrence of future events, the receipt of new information,
or otherwise. Forward-looking statements of the Company involve
risks and uncertainties and are subject to change based on various
important factors. Actual future performance, outcomes and results
may differ materially from those expressed in forward-looking
statements made by the Company and its management as a result of a
number of risks, uncertainties and assumptions. Representative
examples of those factors include (without limitation) general
retail industry conditions and macro-economic conditions; economic
and weather conditions for regions in which the Company’s stores
are located and the effect of these factors on the buying patterns
of the Company’s customers, including the effect of changes in
prices and availability of oil and natural gas; the availability of
consumer credit; the impact of competitive pressures in the
department store industry and other retail channels including
specialty, off-price, discount and Internet retailers; changes in
consumer spending patterns, debt levels and their ability to meet
credit obligations; changes in legislation, affecting such matters
as the cost of employee benefits or credit card income; adequate
and stable availability and pricing of materials, production
facilities and labor from which the Company sources its
merchandise; changes in operating expenses, including employee
wages, commission structures and related benefits; system failures
or data security breaches; possible future acquisitions of store
properties from other department store operators; the continued
availability of financing in amounts and at the terms necessary to
support the Company’s future business; fluctuations in LIBOR and
other base borrowing rates; potential disruption from terrorist
activity and the effect on ongoing consumer confidence; epidemic,
pandemic or other public health issues; potential disruption of
international trade and supply chain efficiencies; world conflict
and the possible impact on consumer spending patterns and other
economic and demographic changes of similar or dissimilar nature.
The Company’s filings with the Securities and Exchange Commission,
including its Annual Report on Form 10-K for the fiscal year ended
January 29, 2011, contain other information on factors that may
affect financial results or cause actual results to differ
materially from forward-looking statements.
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