-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ESk54U0vSpRcOsXp2sk4gXv5GLgwuKTSyi73PzXxhzPlU5Bn4SG4105qJ+92NF/p kc3/xt/bqXBXlNeHDELlGg== 0000028917-97-000003.txt : 19970429 0000028917-97-000003.hdr.sgml : 19970429 ACCESSION NUMBER: 0000028917-97-000003 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19970201 FILED AS OF DATE: 19970428 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DILLARD DEPARTMENT STORES INC CENTRAL INDEX KEY: 0000028917 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-DEPARTMENT STORES [5311] IRS NUMBER: 710388071 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-06140 FILM NUMBER: 97588897 BUSINESS ADDRESS: STREET 1: 1600 CANTRELL RD CITY: LITTLE ROCK STATE: AR ZIP: 72201 BUSINESS PHONE: 5013765200 10-K 1 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 February 1, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ________________. Commission file number 1-6140 DILLARD DEPARTMENT STORES, INC. (Exact name of registrant as specified in its charter) DELAWARE 71-0388071 (State or other (IRS Employer jurisdiction of incorporation Identification or organization) Number) 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. [ ] State the aggregate market value of the voting stock held by non-affiliates of the Registrant as of March 31, 1997: $3,339,189,882 Indicate the number of shares outstanding of each of the Registrant's classes of common stock as of March 31, 1997: Class A Common Stock, $.01 par value 108,293,001 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 February 1, 1997 (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 17, 1997 (the "Proxy Statement") are incorporated by reference into Part III. PART I ITEM 1. BUSINESS. General Dillard Department Stores, 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 heading "Dillard's Locations," page 14 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. Name Age Position and Office Family Relationships William Dillard 82 Chairman of the Board; Father of William Chief Executive Officer Dillard, II, Drue Corbusier, Alex Dillard and Mike Dillard William Dillard, II 52 Director; President Son of & Chief Operating Officer William Dillard Alex Dillard 47 Director; Executive Son of Vice President William Dillard Mike Dillard 45 Director; Executive Son of Vice President William Dillard H. Gene Baker 58 Vice President None G. Kent Burnett 52 Vice President None Drue Corbusier 50 Director; Vice President Daughter of William Dillard James E. Darr, Jr. 53 Senior Vice President; None Secretary and General Counsel David M. Doub 50 Vice President None John A. Franzke 65 Vice President None James I. Freeman 47 Director; Senior Vice None President; Chief Financial Officer Randal L. Hankins 46 Vice President None T. R. Gastman 67 Vice President None Bernard Goldstein 64 Vice President None Roy J. Grimes 59 Vice President None Harry D. Passow 57 Vice President None 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 250 stores in operation with gross square footage of 40,000,000. The Company owned or leased from a wholly-owned subsidiary a total of 186 stores with 30,100,000 square feet. The Company leased 64 stores from third parties which totalled 9,900,000 square feet. For additional information with respect to the Registrant's properties and leases, reference is made to information contained on page 12 under the heading "Dillard's Locations," and Notes 4, 9 and 10, "Notes to Consolidated Financial Statements," on pages 27, 30 and 31 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 page 32 of the Report, which information is incorporated herein by reference. As of March 31, 1997, there were 6,113 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 14 and 15 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 16 through 19 of the Report, which information is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The consolidated financial statements and notes thereto included on pages 20 through 31 of the Report 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 4 through 6 under the heading "Nominees for Election as Directors" and page 10 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 10 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 6 under the heading "Compensation of Directors and Executive Officers" and concluding on page 8 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 3 under the heading "Principal Holders of Voting Securities" and page 4 under the heading "Nominees for Election as Directors" and continuing through footnote 11 on page 5 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 10 under the heading "Certain Relationships and Transactions" in the Proxy Statement and to the information regarding Mr. Davis on page 8 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: Consolidated Balance Sheets - February 1, 1997 and February 3, 1996 Consolidated Statements of Income - Fiscal years ended February 1, 1997, February 3, 1996 and January 28, 1995 Consolidated Statements of Stockholders' Equity - Fiscal years ended February 1, 1997, February 3, 1996 and January 28, 1995 Consolidated Statements of Cash Flows - Fiscal years ended February 1, 1997, February 3, 1996 and January 28, 1995 Notes to Consolidated Financial Statements - Fiscal years ended February 1, 1997, February 3, 1996 and January 28, 1995 (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 * 3(a) Restated Certificate of Incorporation (Exhibit 3 to Form 10-Q for the quarter ended August 1, 1992 in 1-6140) * 3(b) By-Laws as currently in effect. (Exhibit 3(b) to Form 10- K for the fiscal year ended January 30, 1993 in 1-6140) * 4(a) Indenture between the Registrant and Chemical Bank, Trustee, dated as of October 1, 1985 (Exhibit (4) in 2- 85556) * 4(b) Indenture between the Registrant and Chemical Bank, Trustee, dated as of October 1, 1986 (Exhibit (4) in 33- 8859) * 4(c) Indenture between Registrant and Chemical Bank, Trustee, dated as of April 15, 1987 (Exhibit 4.3 in 33-13534) * 4(d) Indenture between Registrant and Chemical Bank, Trustee, dated as of May 15, 1988, as supplemented (Exhibit 4 in 33-21671, Exhibit 4.2 in 33-25114 and Exhibit 4(c) to Current Report on Form 8-K dated September 26, 1990 in 1- 6140) * 4(e) Indenture between Dillard Investment Co., Inc. and Chemical Bank, Trustee, dated as of April 15, 1987, as supplemented (Exhibit 4.1 in 33-13535 and Exhibit 4.2 in 33-25113) 10(a) Retirement Contract of William Dillard dated March 8, 1997 *10(b) 1990 Incentive and Nonqualified Stock Option Plan (Exhibit 10(b) to Form 10-K for the fiscal year ended January 30, 1993 in 1-6140) *10(c) Corporate Officers Non-Qualified Pension Plan (Exhibit 10(c) to Form 10-K for the fiscal year ended January 29, 1994 in 1-6140) *10(d) Senior Management Cash Bonus Plan (Exhibit 10(d) to Form 10-K for the fiscal year ended January 28, 1995 in 1-6140) 11 Statement Re: Computation of Per Share Earnings 12 Statement Re: Computation of Ratio of Earnings to Fixed Charges 13 Incorporated portions of the Annual Stockholders Report for the fiscal year ended February 1, 1997 21 Subsidiaries of the Registrant 23 Consent of Independent Auditors ____________ * Incorporated herein by reference as indicated. 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 1990 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 Department Stores, Inc. Registrant April 25, 1997 /s/ James I. Freeman Date James I. Freeman, Senior Vice President and Chief Financial Officer (Principal Financial & Accounting Officer) 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 and Chief Executive Vice President and Director Officer (Principal Executive Officer) /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 Executive Vice President and Director /s/Mike Dillard /s/William Dillard, II Mike Dillard William Dillard, II Executive Vice President and President and Chief Operating Director Officer and Director /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/J. M. Hessels /s/John H. Johnson J. M. Hessels John H. Johnson Director Director /s/E. Ray Kemp E. Ray Kemp Director April 25, 1997 Date INDEPENDENT AUDITOR'S REPORT To the Board of Directors and Stockholders of Dillard Department Stores, Inc. Little Rock, Arkansas We have audited the consolidated financial statements of Dillard Department Stores, Inc. and subsidiaries as of February 1, 1997 and February 3, 1996, and for each of the three years in the period ended February 1, 1997, and have issued our report thereon dated February 25, 1997; such consolidated financial statements and report (which report includes an explanatory paragraph relating to a change in accounting for the impairment of long-lived assets and for long-lived assets to be disposed of) are included in your 1996 Annual Report to Stockholders and are incorporated herein by reference. Our audits also included the consolidated financial statement schedule of Dillard Department Stores, 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 February 25, 1997 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS DILLARD DEPARTMENT STORES, 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 February 1, 1997: $19,528 66,629 23 (1) 62,011 (2) $24,169 Year ended February 3, 1996: $15,307 52,522 708 (1) 49,009 (2) $19,528 Year ended January 28, 1995: $15,214 44,922 44,829 (2) $15,307 (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 * 3(a) Restated Certificate of Incorporation (Exhibit 3 to Form 10-Q for the quarter ended August 1, 1992 in 1-6140) * 3(b) By-Laws as currently in effect (Exhibit 3(b) to Form 10-K for the fiscal year ended January 30, 1993, in 1-6140) * 4(a) Indenture between the Registrant and Chemical Bank, Trustee, dated as of October 1, 1985 (Exhibit (4) in 2-85556) * 4(b) Indenture between the Registrant and Chemical Bank, Trustee, dated as of October 1, 1986 (Exhibit (4) in 33-8859) * 4(c) Indenture between Registrant and Chemical Bank, Trustee, dated as of April 15, 1987 (Exhibit 4.3 in 33-13534) * 4(d) Indenture between Registrant and Chemical Bank, Trustee, dated as of May 15, 1988, as supplemented (Exhibit 4 in 33-21671, Exhibit 4.2 in 33-25114 and Exhibit 4(c) to Current Report on Form 8-K dated September 26, 1990 in 1-6140) * 4(e) Indenture between Dillard Investment Co., Inc. and Chemical Bank, Trustee, dated as of April 15, 1987, as supplemented (Exhibit 4.1 in 33-13535 and Exhibit 4.2 in 33-25113) 10(a) Retirement Contract of William Dillard dated March 8,1997 *10(b) 1990 Incentive and Nonqualified Stock Option Plan (Exhibit 10(b) to Form 10-K for the fiscal year ended January 30, 1993 in 1-6140) *10(c) Corporate Officers Non-Qualified Pension Plan (Exhibit 10(c) to Form 10-K for the fiscal year ended January 29, 1994 in 1-6140) *10(d) Senior Management Cash Bonus Plan (Exhibit 10(d) to Form 10-K for the fiscal year ended January 28, 1995 in 1-6140) 11 Statement Re: Computation of Per Share Earnings 12 Statement Re: Computation of Ratio of Earnings to Fixed Charges 13 Incorporated portions of the Annual Stockholders Report for the fiscal year ended February 1, 1997 21 Subsidiaries of the Registrant 23 Consent of Independent Auditors __________________ * Incorporated herein by reference as indicated. EX-10 2 CONTRACT This contract is made and entered into on this 8th day of March, 1997, by and between Dillard Department Stores, Inc., a Delaware corporation with its principal place of business in Little Rock, Pulaski County, Arkansas (hereinafter called "DDS") and William Dillard, an individual residing in Little Rock, Pulaski County, Arkansas (hereinafter called "Dillard"). W I T N E S S E T H: WHEREAS, DDS is a Delaware corporation with its corporate headquarters in Little Rock, Pulaski County, Arkansas, and Dillard serves as Chairman of the Board of Directors and Chief Executive Officer of DDS; WHEREAS, Dillard serves in the above capacity by election of the Board of Directors of DDS; WHEREAS, the Board of Directors of DDS desires to ensure that DDS will continue to receive the advice and counsel of Dillard on a consulting basis after the time he should choose to retire from full-time employment by DDS; WHEREAS, the Board of Directors of DDS further desires to retain for as long a period of time as possible the public image of DDS as created and personified by Dillard; WHEREAS, Dillard and DDS entered into a contract dated October 17, 1990 (the "1990 Contract"), which outlined the terms pursuant to which Dillard would provide consulting services to DDS following Dillard's retirement; and WHEREAS, Dillard and DDS now desire to enter into this contract to replace the 1990 Contract. NOW, THEREFORE, Dillard and DDS now enter into this contract upon the terms and conditions hereinafter set forth: I. Dillard, having attained the age of 65 on September 2, 1979, may elect to retire from full-time employment by DDS at the end of any calendar month by giving ninety (90) days written notice to the Board of Directors or the Executive Committee of DDS. II. At all times after the effective date of the retirement of Dillard in accordance with the provisions set forth in Paragraph I, Dillard agrees to make himself available on a reasonable basis to provide consulting services to the Board of Directors and officers of DDS and further agrees not to compete with DDS. III. Upon his retirement as set forth in Paragraph I, Dillard shall be paid for the remainder of his lifetime, as a consulting fee, an annual amount equal to one and one-half percent (1-1/2%) of the average of the five highest amounts of total annual compensation paid to Dillard by DDS for his employment during such fiscal years multiplied by his total years of employment with DDS. Dillard's employment shall be deemed to have begun January 1, 1938. The annual fee is to be paid in twelve (12) equal monthly installments beginning as of the first day of the month following the date of retirement. On the third anniversary of the retirement of Dillard and every three (3) years thereafter, the annual fee will be adjusted for the increase in the Consumer Price Index for all cities published by the Bureau of Labor Statistics of the United States Department of Labor using the index number for the month of Dillard's retirement as the base number. Each adjustment shall be calculated by multiplying the fee determined in the first sentence of this Paragraph III by a fraction the numerator of which shall be the Index number for the month preceding the month in which the adjustment is to be made and the denominator of which shall be the base number. IV. If, in the opinion of a competent and disinterested physician, Dillard shall become disabled, physically or mentally, so as to be unable to continue his full-time duties as directed by the Board of Directors, or to perform consulting services after retirement as provided in Paragraph II, Dillard shall be paid for the remainder of his lifetime an amount equal to the consulting fee that would have been paid under the provisions of Paragraph III. V. Upon the death of Dillard, whether while serving in a full-time capacity or while being compensated following retirement pursuant to Paragraph III or disability pursuant to Paragraph IV, DDS shall make the payments referred to in Paragraph III to Dillard's wife, Alexa Dillard, for the remainder of her lifetime beginning on the first day of the month following the month of Dillard's demise. VI. So long as Dillard shall perform the consulting services referred to in Paragraph II, he shall be entitled to participate in all fringe benefits as may be authorized and adopted from time to time by DDS. VII. This agreement is drawn to be effective in and shall be constructed in accordance with the laws of the state of Arkansas. This agreement shall inure to the benefit of, and shall be binding upon, the respective parties, their heirs, successors, and assigns; provided, however, Dillard shall not have the right to transfer or assign his benefits hereunder. IN WITNESS WHEREOF, DDS and Dillard have executed this agreement on the day and year first above written. DILLARD DEPARTMENT STORES, INC. By: /s/ James I. Freeman Its Senior Vice President ATTEST: /s/ James E. Darr, Jr. /s/ William Dillard William Dillard EX-11 3 EXHIBIT 11 - STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS Year Ended February 1, February 3, January 28, 1997 1996 1995 Average shares outstanding 113,482,159 113,046,620 112,999,406 Net effect of dilutive stock options based on the treasury stock method using average market price 506,474 97,222 14,592 Total 113,988,633 113,143,842 113,013,998 Net income $238,621,000 $167,183,500 $251,790,500 Less preferred dividends (22,000) (22,000) (22,000) Income available to common shares $238,599,000 $167,161,500 $251,768,500 Per share $2.09 $1.48 $2.23 EX-12 4 EXHIBIT 12 - STATEMENT RE: COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (DOLLAR AMOUNTS IN THOUSANDS) Fiscal Year Ended FEBRUARY 1, FEBRUARY 3, JANUARY 28, JANUARY 29, JANUARY 30, 1997 1996 1995 1994 1993 Consolidated pretax income $378,761 $269,653 $406,110 $399,534 $375,330 Fixed charges (less capitalized interest) 139,188 139,666 145,921 152,568 142,857 EARNINGS $517,949 $409,319 $552,031 $552,102 $518,187 Interest $120,599 $120,054 $124,282 $130,915 $121,940 Capitalized interest 4,420 3,567 2,545 1,882 1,646 Interest factor in rent expense 18,589 19,612 21,639 21,653 20,917 FIXED CHARGES $143,608 $143,233 $148,466 $154,450 $144,503 Ratio of earnings to fixed charges 3.61 2.86 3.72 3.57 3.59
EX-13 5 1996 Dillard's Annual Report Dillard's The Corporation Founded in 1938 by William Dillard, Dillard Department Stores, Inc. is a regional group of traditional department stores offering a distinctive mix of name-brand and private-label merchandise. With everyday pricing and special emphasis on fashion apparel and home furnishings, Dillard's appeals to middle- and upper-middle-income consumers. The Company's philosophy continues to embrace an ambitious program of expansion and remodeling as well as aggressive responses to industry trends in merchandise and pricing. Table of Contents 3 Letter to the Stockholders 7 Narrative 11 New Stores and Expansions 17 Corporate Organization 18 Operating Divisions 21 Financial Review Message to Dillard's Stockholders In 1996, Dillard's sales climbed to $6.2 billion. This shows a 5% increase over our $5.9 billion in sales for fiscal 1995, which included 53 weeks. Using an equivalent 52-week basis, sales rose 7%. By the same measure, sales in comparable stores increased 2%. Net income for 1996 was $238.6 million versus $167.1 in 1995. Net income per share was $2.09 versus $1.48. Earnings for 1995 included a non-cash after-tax asset impairment charge of $78.5 million ($.69 per share). Stockholders' equity increased to $2.7 billion in 1996 from $2.5 billion in 1995. Our store opening schedule for 1996 was the most aggressive in the history of the Company. We opened 16 new stores, one of which was a replacement store. These stores were located in Naples, Florida; Lake Wales, Florida; Henderson, Nevada; El Paso, Texas; Sarasota, Florida; Sugar Land, Texas; Alpharetta, Georgia; Columbia, South Carolina; Albuquerque, New Mexico; Denver, Colorado; Bowling Green, Kentucky; Ocoee, Florida; Strongsville, Ohio; Spartanburg, South Carolina; Niles, Ohio; and Vero Beach, Florida. We closed three stores during the fourth quarter. These stores, along with our remodeled and expanded stores added a net 2,728,000 square feet to our retail space. In management's opinion, these stores will follow our normal patterns of contribution to our profits in their second and third years. At the end of 1996, we operated 250 stores in 24 states. For 1997, we plan to build 11 new stores. In acquisitions, we have entered into an agreement with Proffitt's Inc. to purchase seven stores located in the Richmond and Tidewater areas of Virginia. We have also agreed to purchase ten Mervyn's stores in Florida, six of which will be remodeled and open in 1997. Additionally, we will buy three Macy's stores in Houston, Texas. We are excited about the prospects for these stores which will add well over three million square feet to our store base in 1997. Our balance sheet remains strong. Our long-term debt to total capitalization ratio dropped to 30.4% at the end of 1996 compared to 32.2% at the end of 1995, placing us in the ranks of the most strongly capitalized retailers. In March 1997, we announced the implementation of a Class A common stock repurchase program of up to $300 million. This program underscores our confidence in the financial strength of your Company. We are poised for growth and are constantly looking for opportunities to leverage our strengths. Above all, 1996 gave us a chance to reveal our true depth. Backed by our 43,470 associates, we emerged as a strong, confident and efficient player in a field of intense competition. We remain committed to continuing that success. William Dillard Chairman of the Board and Chief Executive Officer March 31, 1997 Sales by Merchandise Category (percentage of total sales) Women's & Junior's Clothing 29.9 Shoes, Accessories & Lingerie 19.9 Men's Clothing & Accessories 19.5 Cosmetics 12.9 Home 10.8 Children's Clothing 6.5 Leased Departments .5 Declaration of Our Direction and Performance Strong. Confident. Efficient. These words best define the business of Dillard Department Stores in 1996. In an extremely competitive retail environment, the Company sought to leverage the benefits brought about by its internal reorganization. Dillard's goal was to more efficiently manage its inventory levels and to deliver improved value to the customers through an enhanced private-label merchandising program. Strong. The Company continued to strengthen its financial position in 1996. Total stockholders' equity grew by $239 million while long-term debt increased only slightly. As a result of these factors, the Company's long-term debt to capitalization ratio fell from 32.2% at the end of 1995 to 30.4% at the end of 1996. The Company has one of the strongest balance sheets within the retail industry. Confident. The Board of Directors believed the Company's stock was underpriced in view of the Company's performance and potential. After careful consideration, the Board authorized management to implement a Class A common share repurchase program of up to $300 million. With this aggressive move, Dillard's sought to bolster stockholders' interest. Within hours after the decision was announced, the stock price rose an average of 6% - a strong indication of positive investor confidence in Dillard's. Efficient. In March 1996, Dillard's announced the realignment of the operating divisions, reducing seven regional offices to five, enabling regional management to concentrate on specific geographic and climatic areas. This reorganization better allows the Company to capitalize on supply chain efficiencies, such as buying, warehousing and distribution. The net result is more effective placement of inventories within the store system, which has allowed Dillard's to remain one of the retail industry's lowest cost operators. This consolidation has already reduced buying and merchandising costs and will continue to do so in the long term. To complement this realignment, Dillard's developed a corporate planning group to forecast ideal reorder points and inventory levels in each store and within the divisions. Working in concert with store and merchandising management, this group will help optimize the inventory levels in each store, maximizing inventory turnover. Dillard's was a company of many qualities in 1996. Strong in financial position. Confident in performance. Efficient in infrastructure. And most importantly, intelligent - to make all the parts work together to build an impressive bottom line. Progress Through Development and Acquisition New Stores. Expansions. Acquisitions. Each is a key part of Dillard's carefully planned growth strategy. Given limited growth opportunities, due to the increasingly small number of acceptable retail locations, Dillard's made great strides in all these areas in the past year. As of February, 1997, the Company operated 250 stores in 24 states. New Stores. In 1996, Dillard's entered two new major markets - Denver, Colorado and Atlanta, Georgia. The Denver store was the most successful entry into a new market in the history of the Company. With these and other new stores in existing markets, the Company opened 16 stores, ranging in size from 100,000 to 250,000 square feet. All of these newly constructed stores are wholly owned by the Company. In 1997, Dillard's will be moving into several new markets - two of which are Cheyenne, Wyoming and Stockton, California. These new stores will give the Company a firm regional foothold, allowing a test of the retail waters and opening the doors to future opportunities in those areas. Expansions. Dillard's expanded six stores in 1996, adding over 400,000 square feet of store space. In addition, the Company remodeled a significant number of stores throughout the year. Two basic conditions make expansions/remodels necessary - first, to expand square footage due to growing customer demands and, secondly, to update store facilities and fixtures. By updating numerous locations each year, the Company keeps store resources modern, efficient and competitive. In keeping with this plan, a number of stores in various markets are slated for remodeling and expansion in 1997. Acquisitions. Dillard's plans to acquire 20 stores in 1997, ranging in size from 65,000 to 210,000 square feet. The Company has agreed to purchase seven Proffitt's stores in Virginia, a new market for the Company. In Florida, Dillard's has entered into agreements to buy ten stores of the Mervyn's chain and in Houston, Texas, three Macy's stores will be acquired. These stores have the potential to increase the Company's selling space by an extra 1.7 million square feet - representing a 4% increase. More importantly, once purchased, they will position Dillard's as a leading department store in each market. In some shopping malls where the Company needs more space and a Dillard's already exists, an acquired store will become a second Dillard's store. This double-anchor concept, pioneered by Dillard's, has proven successful and, in fact, has been emulated by other retail chains. New Stores Opened - 1996 January, Naples, FL - Coastland Mall - 180,000 sq. ft. (replacing 80,000 sq.ft.) February, Lake Wales, FL - Eagle Ridge Center - 126,000 sq. ft. February, Henderson, NV - Galleria at Sunset - 200,000 sq. ft. March, El Paso, TX - Bassett Shopping Center - 140,000 sq. ft. March, Sarasota, FL - Sarasota Square - 100,000 sq. ft. March, Sugar Land, TX - First Colony - 200,000 sq. ft. March, Alpharetta, GA - North Point Mall - 250,000 sq. ft. May, Columbia, SC - Columbia Mall - 180,000 sq. ft. July, Albuquerque, NM - Cottonwood Mall - 180,000 sq. ft. August, Denver, CO - Park Meadows Mall - 240,000 sq. ft. September, Bowling Green, KY - Greenwood Mall - 122,000 sq. ft. October, Ocoee, FL - West Oaks - 200,000 sq. ft. October, Strongsville, OH - SouthPark Center - 200,000 sq. ft. October, Spartanburg, SC - Westgate Mall - 150,000 sq. ft. October, Niles, OH - Eastwood Mall - 120,000 sq. ft. November, Vero Beach, FL - Indian River Mall - 127,000 sq. ft. New Stores To Be Opened - 1997 February, Macon, GA - Macon Mall - 175,000 sq. ft. February, Memphis, TN - Wolfchase Galleria - 200,000 sq. ft. March, Colorado Springs, CO - Chapel Hills Mall - 180,000 sq. ft. March, Cheyenne, WY - Frontier Mall - 85,000 sq. ft. March, Longmont, CO - Twin Peaks Mall - 94,000 sq. ft. August, Waterloo, IA - Crossroads Mall - 150,000 sq. ft. September, Sandy, UT - South Towne Square - 200,000 sq. ft. October, Meridian, MS - Bonita Lakes Mall - 126,000 sq. ft. October, Stockton, CA - Weberstown - 200,000 sq. ft. October, Richmond, IN - Richmond Square - 86,000 sq. ft. October, Baton Rouge, LA - Mall of Louisiana - 200,000 sq. ft. Stores Expanded and Remodeled - 1996 March, Houma, LA - Southland Mall - 50,000 sq. ft. April, Las Vegas, NV - The Meadows - 56,000 sq. ft. August, Tulsa, OK - Promenade - 74,000 sq. ft. August, Fayetteville, AR - Northwest - 100,000 sq. ft. September, Texarkana, TX - Central - 25,000 sq. ft. November, Daytona Beach, FL - Volusia Mall - 100,000 sq. ft. Board of Directors William Dillard Chairman of the Board Chief Executive Officer Dillard Department Stores Calvin N. Clyde, Jr. Chairman of the Board T.B. Butler Publishing Co., Inc. Tyler, Texas Robert C. Connor Investments Drue Corbusier Vice President Dillard Department Stores Will D. Davis Partner Heath, Davis & McCalla Attorneys Austin, Texas Alex Dillard Executive Vice President Dillard Department Stores Mike Dillard Executive Vice President Dillard Department Stores William Dillard, II President Chief Operating Officer Dillard Department Stores James I. Freeman Senior Vice President Chief Financial Officer Dillard Department Stores John Paul Hammerschmidt Retired Member of Congress Harrison, Arkansas William B. Harrison, Jr. Vice Chairman Chase Manhattan Corporation New York, New York J.M. Hessels Chairman, Executive Board Vendex International N.V. Amsterdam, The Netherlands John H. Johnson President and Publisher Johnson Publishing Company, Inc. Chicago, Illinois E. Ray Kemp Retired Vice Chairman and Chief Administrative Officer Dillard Department Stores William H. Sutton Managing Partner Friday, Eldredge & Clark Attorneys Little Rock, Arkansas Senior Management William Dillard Chairman of the Board and Chief Executive Officer William Dillard, II President, Chief Operating Officer Alex Dillard Executive Vice President Mike Dillard Executive Vice President James I. Freeman Senior Vice President, Chief Financial Officer James E. Darr, Jr. Senior Vice President, Secretary and General Counsel Vice Presidents W.R. Appleby, II Gregg Athy H. Gene Baker Jan E. Bolton Michael Bowen Joseph P. Brennan G. Kent Burnett Larry Cailteux Wynelle Chapman Neil Christensen Drue Corbusier Daniel Demicell David M. Doub Richard Eagan Robert L. Edwards John A. Franzke T.R. Gastman Bernard Goldstein Roy J. Grimes Randal L. Hankins G. William Haviland John Hawkins Mark Killingsworth David Kolmer Gaston Lemoine Denise Mahaffy Robert G. McGushin Michael S. McNiff Jeff Menn Anthony Menzie Steven K. Nelson Steven T. Nicoll Harry D. Passow M.E. Ritchie, Jr. Richard Roberds James Schatz Linda Sholtis-Tucker Burt Squires Joseph W. Story Ralph Stuart David Terry Richard B. Willey Linda Zwern Operating Divisions Ft. Worth Drue Corbusier Chairman H. Gene Baker President Gregg Athy Vice President, Merchandising Wynelle Chapman Vice President, Merchandising Gaston Lemoine Vice President, Stores Anthony Menzie Vice President, Stores Richard Roberds Vice President, Stores James Schatz Vice President, Stores William B. Warner Vice President, Sales Promotion Little Rock Mike Dillard Chairman John A. Franzke President David Terry Vice President, Merchandising Burt Squires Vice President, Stores Richard B. Willey Vice President, Stores Ken Eaton Vice President, Sales Promotion Phoenix G. Kent Burnett Chairman Bernard Goldstein President Joseph P. Brennan Vice President, Merchandising Robert G. McGushin Vice President, Stores Jeff Menn Vice President, Stores Robert E. Baker Vice President, Sales Promotion St. Louis Roy J. Grimes Chairman Harry D. Passow President Daniel Demicell Vice President, Merchandising Mark Killingsworth Vice President, Merchandising Larry Cailteux Vice President, Stores Neil Christensen Vice President, Stores Richard Eagan Vice President, Stores David Kolmer Vice President, Stores Howard Hall Vice President, Sales Promotion Tampa T.R. Gastman Chairman David M. Doub President Linda Zwern Vice President, Merchandising W.R. Appleby, II Vice President, Stores Robert L. Edwards Vice President, Stores Steven T. Nicoll Vice President, Stores Linda Sholtis-Tucker Vice President, Stores Louise Platt Vice President, Sales Promotion Dillard's Locations Year-End, 1996 1996 1995 1994 Texas 64 63 62 Florida 34 30 27 Missouri 16 16 16 Louisiana 15 16 16 Ohio 15 13 13 North Carolina 14 14 13 Oklahoma 14 14 14 Arizona 13 13 13 Tennessee 12 12 12 Kansas 9 9 9 Arkansas 7 7 7 South Carolina 7 6 6 New Mexico 5 4 4 Kentucky 4 3 1 Nebraska 4 4 4 Nevada 4 3 3 Mississippi 3 3 3 Colorado 2 1 Illinois 2 2 2 Utah 2 2 2 Alabama 1 1 1 Georgia 1 Indiana 1 1 Iowa 1 1 1 Total 250 238 229 Table of Contents 14 Table of Selected Financial Data 16 Management's Discussion and Analysis 20 Independent Auditors' Report 21 Consolidated Balance Sheets 22 Consolidated Statements of Income 23 Consolidated Statements of Stockholders' Equity 24 Consolidated Statements of Cash Flows 25 Notes to Consolidated Financial Statements 32 Annual Meeting and General Information 32 Stock Prices and Dividends by Quarter Financial Review Table of Selected Financial Data Dillard Department Stores, Inc. And Subsidiaries (In thousands of dollars, except per share data) 1996 1995* 1994 1993 1992 1991 1990 Net Sales $6,227,585 $5,918,038 $5,545,803 $5,130,648 $4,713,987 $4,036,392 $3,605,518 Percent Increase 5% 7% 8% 9% 17% 12% 18% Cost of Sales 4,124,765 3,893,786 3,614,628 3,306,757 3,043,348 2,565,904 2,287,891 Percent of Sales 66.2% 65.8% 65.2% 64.4% 64.5% 63.6% 63.5% Interest and Debt Expense 120,599 120,054 124,282 130,915 121,940 109,386 97,032 Income Before Taxes 378,761 269,653 (a) 406,110 399,534 375,330 322,157 280,778 Income Taxes 140,140 102,470 154,320 158,400 138,900 116,000 98,000 Net Income 238,621 167,183 (a) 251,790 241,134 236,430 206,157 182,778 Per Common Share ** Income 2.09 1.48 2.23 2.14 2.11 1.84 1.67 Dividends 0.14 0.12 0.10 0.08 0.08 0.07 0.07 Book Value 23.91 21.91 20.55 18.42 16.28 14.19 12.31 Average Number of Shares Outstanding ** 113,988,633 113,143,842 113,013,998 112,808,262 112,292,575 111,832,758 109,351,914 Accounts Receivable - Total 1,154,673 1,123,103 1,117,411 1,111,744 1,106,710 1,004,496 932,544 Merchandise Inventories 1,556,958 1,486,045 1,362,756 1,299,944 1,178,562 1,052,683 889,333 Property and Equipment 2,186,867 2,024,342 1,960,922 1,892,054 1,662,181 1,318,027 1,066,562 Total Assets 5,059,726 4,778,535 4,577,757 4,430,274 4,107,114 3,498,506 3,007,979 Long-term Debt 1,173,018 1,157,864 1,178,503 1,238,293 1,381,676 1,008,967 839,490 Capitalized Lease Obligations 13,690 20,161 22,279 31,621 32,381 29,489 31,284 Deferred Income Taxes - Total 261,094 248,468 302,801 284,981 178,311 143,463 115,854 Stockholders' Equity 2,717,178 2,478,327 2,323,567 2,081,647 1,832,018 1,583,475 1,364,885 Number of Employees - Average 43,470 40,312 37,832 35,536 33,883 32,132 31,786 Gross Square Footage (in thousands) 40,000 37,300 35,300 34,900 33,200 29,100 26,600 Number of Stores Opened 15 9 7 10 11 10 4 Acquired 0 0 0 0 12 7 23 Closed 3 0 5 1 3 5 3 Total - End of Year 250 238 229 227 218 198 186 * 53 Weeks ** Restated 3 for 1 stock split (a) Includes Impairment charges of $126.6 million before taxes ($78.5 million after tax).
Table of Selected Financial Data Dillard Department Stores, Inc. and Subsidiaries (in thousands of dollars, except per share data) 1989* 1988 1987 Net Sales $ 3,049,062 $ 2,558,395 $ 2,206,347 Percent of Sales 19% 16% 19% Cost of Sales 1,926,971 1,636,861 1,398,808 Percent of Sales 63.2% 64.0% 63.4% Interest and Debt Expense 91,836 80,979 64,179 Income Before Taxes 227,892 172,529 155,223 Income Taxes 79,800 58,700 64,000 Net income 148,092 113,829 91,223 Per Common Share ** Income 1.45 1.18 0.94 Dividends 0.06 0.05 0.05 Book Value 10.23 7.80 6.67 Average Number of Shares Outstanding ** 101,890,272 96,655,737 96,571,272 Accounts Receivable - Total 759,803 654,333 605,299 Merchandise Inventories 716,054 527,931 500,831 Property and Equipment 897,847 787,210 694,991 Total Assets 2,496,277 2,067,517 1,888,033 Long-term Debt 739,597 620,956 594,773 Capitalized Lease Obligations 32,900 25,157 26,443 Deferred Income Taxes - Total 108,426 128,565 125,828 Stockholders' Equity 1,094,721 752,178 643,386 Number of Employees - Average 26,304 23,114 21,168 Gross Square Footage (in thousands) 23,500 20,800 18,500 Number of Stores Opened 3 7 6 Acquired 19 4 17 Closed 6 0 3 Total - End of Year 162 146 135 * 53 weeks ** Restated for 3 for 1 stock split
Management's Discussion And Analysis of Financial Condition And Results of Operations Dillard Department Stores, Inc. and Subsidiaries Sales The sales increases for the past three years on a comparable 52-week basis have been: 1996 1995 1994 Sales Increase 7% 5% 8% Comparable store sales increases by quarter for the past three years on a comparable 13-week basis have been: 1996 1995 1994 First Quarter 6% 1% 7% Second Quarter 2 4 4 Third Quarter 1 2 5 Fourth Quarter 0 3 4 Year 2 2 5 Comparable store sales include sales for those stores which were in operation for a full period in both the current quarter and the corresponding quarter for the prior year. The slower comparable store sales gains experienced in 1996 and 1995 reflect the challenges of a difficult environment for apparel retailers. Management believes that the majority of the increase in sales on a comparable 52-week basis and in comparable store sales on a comparable 13-week basis 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 and percent of total sales has been: 1996 1995 1994 Cosmetics 12.9% 12.7% 12.5% Women's & Junior's Clothing 29.9 30.0 30.4 Children's Clothing 6.5 6.5 6.7 Men's Clothing & Accessories 19.5 18.9 18.6 Shoes, Accessories & Lingerie 19.9 19.5 19.1 Home 10.8 11.7 11.9 Leased Departments .5 .7 .8 Total 100.0% 100.0% 100.0% At year end there were 250 stores in operation. Average gross square footage and sales per average square foot for the past three years on a comparable 52-week basis have been: 1996 1995 1994 Average Gross Square Footage (000) 39,000 36,400 35,300 Sales per Average Square Foot $ 160 $ 160 $ 157 Cost Of Sales Cost of sales as a percentage of sales for the past three years has been 66.2% for 1996, 65.8% for 1995 and 65.2% for 1994. The increases in the cost of sales for 1996 over 1995 and for 1995 over 1994 were caused principally by a higher level of markdowns necessitated by competitive pressures. Expenses Expenses as a percent of sales for the past three years are as follows: 1996 1995 1994 Advertising, Selling, Administrative & General Expenses 24.7% 24.3% 24.0% Depreciation & Amortization 3.1 3.3 3.4 Rentals .9 1.0 1.2 Interest & Debt Expense 2.0 2.0 2.2 Advertising, selling, administrative and general expenses increased as a percentage of sales in 1996 and 1995 primarily because of a higher payroll expense in the selling area and higher bad debt expense in 1996. Depreciation and amortization decreased slightly as a percentage of sales during 1996 and 1995. This was caused by the write down of the carrying values of property and equipment at certain stores in the fourth quarter of 1995 (see Impairment Charges below). Rentals decreased slightly as a percentage of sales during 1996 and 1995, primarily due to a higher proportion of the Company's properties being owned rather than leased. Interest and debt expense remained constant as a percentage of sales in 1996 and 1995 reflecting a lower level of debt relative to sales than the 1994 debt level. Impairment Charges Effective October 29, 1995, the Company adopted Statement of Financial Accounting Standards No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The Company evaluated its investment in long-lived assets to be held and used in operations on an individual store basis and determined that, based upon the history of operating results and updated operating projections, the property and equipment at 20 stores were impaired. The Company estimated the fair value of the assets at these stores based on operating projections and future discounted cash flows and recorded an after-tax charge of approximately $78.5 million ($.69 per share), which represents the amount required to write down the carrying value of property and equipment to their estimated fair value of approximately $112 million at February 3, 1996. Liquidity & Capital Resources The relevant ratios regarding liquidity and capital resources for the past three years are: 1996 1995 1994 Working Capital (000) $1,865,890 $1,788,545 $1,765,844 Current Ratio 3.1 3.1 3.3 Long-term debt to capitalization 30.4% 32.2% 34.1% Stockholders' equity to total assets 53.7% 51.9% 50.8% The ratio of long-term debt to capitalization is calculated by dividing the total amount of long-term debt and capitalized lease obligation by the sum of the total amount of long-term debt and capitalized lease obligation plus total equity. The Company continues to finance the growth of the business primarily through operating earnings. The Company sold $100 million 7.375% and $100 million 7.75% unsecured notes in 1996. The proceeds were used to reduce commercial paper borrowings. The Company sold $100 million 6.875% unsecured notes in 1995. The proceeds were used to reduce the balance of commercial paper outstanding and for general corporate purposes. The Company did not issue long-term debt during fiscal 1994. At the end of 1996, the Company had an outstanding shelf registration for unsecured notes in the amount of $200 million. For the past several years, Dillard Investment Co., Inc. ("DIC"), a wholly-owned finance subsidiary has sold commercial paper in the public market. At February 1, 1997, the amount of commercial paper outstanding was $129 million. The Company has line of credit agreements with various banks aggregating $110 million. Additionally, the Company and DIC have a revolving line of credit in the amount of $500 million. No funds were borrowed under the revolving line of credit or the line of credit agreements during fiscal 1996, 1995 or 1994. During 1996, the Company generated $289.3 million in cash from operating activities, as compared to $299.1 million in fiscal 1995 and $395.3 million in fiscal 1994. The primary reason for the decrease in 1995 over 1994 was the increase in merchandise inventories. Merchandise inventories increased by approximately 5% in 1996 and 9% in 1995. There was no increase in the Company's merchandise inventories on a comparable store basis in 1996 or 1994. The increase in the Company's merchandise inventories on a comparable store basis was 4% in 1995. Capital expenditures for 1996 were $350.1 million compared to $347.2 million for 1995 and $253.0 million for 1994. During 1996, the Company opened 16 new stores (one of which was a replacement store), expanded six stores and closed three stores. During 1995, the Company opened 11 new stores (two of which were replacement stores) and expanded six stores. During 1994, the Company opened nine new stores (two of which were replacement stores), expanded two stores and closed five stores. For 1997, the Company plans to open 11 stores and plans to expand and remodel an additional ten stores. In addition, the Company has entered into an agreement with Proffitt's Inc. to purchase seven department stores located in Richmond and the Tidewater area of Virginia. The Company has also entered into an agreement with Mervyn's for the purchase of ten department stores located in South Florida. The Company has agreed to purchase three Macy's stores in Houston, Texas from Federated Department Stores, Inc. The combined capital expenditures for 1997 including all of the stores mentioned above is expected to be approximately $475 million. 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. The Company will make purchases pursuant to this program through open-market transactions, depending on market conditions. The Company will finance its capital expenditures, common stock repurchase activity as well as its working capital requirements including required debt repayments from cash flows generated from operations and by issuing new debt. Recent Accounting Pronouncements In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS No. 128"), which is effective for the Company on January 31, 1998. SFAS No. 128 simplifies the standards for computing earnings per share previously found in Accounting Principles Board Opinion No. 15 and establishes new standards for computing and presenting earnings per share. Application of SFAS No. 128 is not expected to have a significant effect on the Company's earnings per share. Independent Auditors' Report Dillard Department Stores, Inc. and Subsidiaries To the Stockholders and Board of Directors of Dillard Department Stores, Inc. Little Rock, Arkansas We have audited the accompanying consolidated balance sheets of Dillard Department Stores, Inc. and subsidiaries as of February 1, 1997 and February 3, 1996, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended February 1, 1997. 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 Department Stores, Inc. and subsidiaries as of February 1, 1997 and February 3, 1996, and the results of their operations and their cash flows for each of the three years in the period ended February 1, 1997 in conformity with generally accepted accounting principles. As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for the impairment of long-lived assets and for long-lived assets to be disposed of effective October 29, 1995 to conform with Statement of Financial Accounting Standards No. 121. Deloitte & Touche LLP New York, New York February 25, 1997 Consolidated Balance Sheets Dillard Department Stores, Inc. and Subsidiaries (Amounts in thousands, except share data) Assets February 1, 1997 February 3, 1996 CURRENT ASSETS: Cash and cash equivalents $ 64,094 $ 58,442 Trade accounts receivable (net of allowance for doubtful accounts of $24,169 and $19,528) 1,130,504 1,103,575 Merchandise inventories 1,556,958 1,486,045 Other current assets 9,080 10,163 Total current assets 2,760,636 2,658,225 INVESTMENTS AND OTHER ASSETS 107,157 84,772 PROPERTY AND EQUIPMENT Land and land improvements 37,038 37,038 Buildings and leasehold improvements 1,576,058 1,394,551 Furniture, fixtures and equipment 1,839,970 1,728,789 Buildings under construction 55,024 43,552 Less accumulated depreciation and amortization (1,321,223) (1,179,588) 2,186,867 2,024,342 BUILDINGS UNDER CAPITAL LEASES - Less amortization of $20,082 and $23,977, respectively 5,066 11,196 TOTAL ASSETS $ 5,059,726 $ 4,778,535 Liabilities And Stockholders' Equity February 1, 1997 February 3,1996) CURRENT LIABILITIES: Trade accounts payable and accrued expenses $ 536,695 $ 559,011 Commercial paper 128,738 125,310 Federal and state income taxes 46,220 51,832 Current portion of long-term debt 181,564 131,378 Current portion of capital lease obligations 1,529 2,149 Total current liabilities 894,746 869,680 LONG-TERM DEBT 1,173,018 1,157,864 CAPITAL LEASE OBLIGATIONS 13,690 20,161 DEFERRED INCOME TAXES 261,094 252,503 OPERATING LEASES AND COMMITMENTS STOCKHOLDERS' EQUITY: Preferred stock - shares issued, 4,400 440 440 Common stock, Class A - shares issued, 109,594,496 and 109,070,691 1,096 1,091 Common stock, Class B (convertible) - shares issued, 4,016,929 40 40 Additional paid-in capital 641,388 625,249 Retained earnings 2,074,214 1,851,507 Total stockholders' equity 2,717,178 2,478,327 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,059,726 $ 4,778,535 See notes to consolidated financial statements. Consolidated Statements Of Income Dillard Department Stores, Inc. and Subsidiaries (Amounts in thousands, except per share data) Year Ended February 1, 1997 February 3, 1996 January 28, 1995 NET SALES $6,227,585 $5,918,038 $5,545,803 SERVICE CHARGES, INTEREST AND OTHER INCOME 184,475 179,100 182,785 6,412,060 6,097,138 5,728,588 COSTS AND EXPENSES: Cost of sales 4,124,765 3,893,786 3,614,628 Advertising, selling, administrative and general expenses 1,538,450 1,436,446 1,328,353 Depreciation and amortization 193,719 191,805 190,299 Rentals 55,766 58,835 64,916 Interest and debt expense 120,599 120,054 124,282 Impairment charges - 126,559 - Total costs and expenses 6,033,299 5,827,485 5,322,478 INCOME BEFORE INCOME TAXES 378,761 269,653 406,110 INCOME TAXES 140,140 102,470 154,320 NET INCOME $ 238,621 $ 167,183 $ 251,790 INCOME PER COMMON SHARE $ 2.09 $ 1.48 $ 2.23 See notes to consolidated financial statements.
Consolidated Statements Of Stockholders' Equity Dillard Department Stores, Inc. and Subsidiaries (Amounts in thousands, except per share data) Common Common Additional Preferred Stock Stock Paid-in Retained Stock Class A Class B Capital Earnings Total BALANCE, JANUARY 29, 1994 $440 $1,090 $40 $622,634 $1,457,443 $2,081,647 Issuance of 53,937 shares under stock option, employee savings and stock bonus plans - - - 1,452 - 1,452 Net income - - - - 251,790 251,790 Cash dividends: Preferred stock, $5 per share - - - - (22) (22) Common stock, $.10 per share - - - - (11,300) (11,300) BALANCE, JANUARY 28, 1995 $440 $1,090 $40 $624,086 $1,697,911 $2,323,567 Issuance of 41,964 shares under stock option, employee savings and stock bonus plans - 1 - 1,163 - 1,164 Net income - - - - 167,183 167,183 Cash dividends: Preferred stock, $5 per share - - - - (22) (22) Common stock, $.12 per share - - - - (13,565) (13,565) 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 - - - 16,139 - 16,144 Net income - - - - 238,621 238,621 Cash dividends: 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 See notes to consolidated financial statements.
Consolidated Statements Of Cash Flows Dillard Department Stores, Inc. and Subsidiaries (Amounts in thousands) Year Ended February 1, 1997 February 3, 1996 January 28, 1995 OPERATING ACTIVITIES: Net income $ 238,621 $ 167,183 $ 251,790 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 195,186 193,313 191,870 Deferred income taxes 12,625 (54,332) 17,820 Impairment charges - 126,559 - Changes in operating assets and liabilities: Increase in trade accounts receivable (26,929) (1,471) (5,574) Increase in merchandise inventories (70,913) (123,289) (62,812) Decrease (increase) in other current assets 1,083 (1,316) 129 Increase in investments and other assets (23,852) (23,176) (18,271) (Decrease) increase in trade accounts payable and accrued expenses and income taxes (36,516) 15,653 20,342 Net cash provided by operating activities 289,305 299,124 395,294 INVESTING ACTIVITIES: Purchase of property and equipment (350,114) (347,202) (252,974) Net cash used in investing activities (350,114) (347,202) (252,974) FINANCING ACTIVITIES: Net increase (decrease) in commercial paper 3,428 35,404 (55,370) Proceeds from long-term borrowings 200,000 100,000 - Principal payments on long-term debt and capital lease obligations (141,751) (64,155) (78,359) Dividends paid (11,360) (16,988) (10,192) Common stock issued 16,144 1,164 1,452 Net cash provided by (used in) financing activities 66,461 55,425 (142,469) INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 5,652 7,347 (149) CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 58,442 51,095 51,244 CASH AND CASH EQUIVALENTS, END OF YEAR $ 64,094 $ 58,442 $ 51,095 See notes to consolidated financial statements.
Notes To Consolidated Financial Statements Dillard Department Stores, Inc. and Subsidiaries Years Ended February 1, 1997, February 3, 1996, and January 28, 1995 1. Description Of Business And Summary Of Significant Accounting Policies Description of Business - Dillard Department Stores, 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 1996 ended on February 1, 1997 and included 52 weeks. Fiscal year 1995 ended on February 3, 1996 and included 53 weeks. Fiscal year 1994 ended on January 28, 1995 and included 52 weeks. Consolidation - The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, including its real estate subsidiary, Construction Developers, Inc. (which leases property principally to the Company), its wholly-owned finance subsidiary, Dillard Investment Co., Inc. ("DIC"), and Dillard National Bank ("DNB"), a wholly-owned subsidiary of DIC (which grants credit card loans to the Company's customers). 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. Costs, Expenses and Related Balance Sheet Accounts - The retail last-in, first-out ("LIFO") inventory method is used to value merchandise inventories. At February 1, 1997 and February 3, 1996, the LIFO cost of merchandise was approximately equal to the first-in, first-out ("FIFO") cost of merchandise. 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 $4.4 million, $3.6 million and $2.5 million in fiscal 1996, 1995 and 1994, 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 sheet. 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. Preopening costs of new stores are expensed in the quarter that the store opens. 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. 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. Earnings Per Common Share - Earnings per common share have been computed based on the weighted average of Class A and Class B common shares outstanding, after deducting preferred dividend requirements and giving effect to outstanding stock options. Shares used in computing earnings per common share were 113,988,633, 113,143,842 and 113,013,998 for fiscal 1996, 1995 and 1994, respectively. Cash Equivalents - The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Employees' Retirement Plan - 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. 2. Impairment Of Long-Lived Assets The Company adopted the provisions of Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" which provides guidance on when to assess and how to measure impairment of long-lived assets, certain intangibles and goodwill related to those assets to be held and used, and for long-lived assets and certain identifiable intangibles to be disposed of as of October 29, 1995. The Company evaluated its investment in long-lived assets to be held and used in operations on an individual store basis and determined that, based upon the history of operating results and updated operating projections, the property and equipment at certain stores was impaired. The Company estimated the fair value of the assets at these stores based on operating projections and future discounted cash flows. As a result, the Company recorded an after-tax charge of approximately $78.5 million in 1995 ($.69 per share) representing the amount required to write down the carrying value of the property and equipment to their estimated fair value of approximately $112 million at February 3, 1996. During 1996, the Company performed a similar review of its long-lived assets and determined that no additional impairment loss needed to be recognized. 3. Commercial Paper And Revolving Credit Agreement DIC commercial paper generally matures within 45 days from the date of issue at effective interest rates ranging from 5.29% to 5.43% at February 1, 1997. At February 1, 1997 and February 3, 1996, the weighted average interest rate for outstanding commercial paper was 5.37% and 5.46%, respectively. The average amount of commercial paper outstanding during fiscal 1996 was $134 million, at a weighted average interest rate of 5.43%. At February 1, 1997, the Company and DIC had revolving line of credit agreements with various banks aggregating $500 million. The line of credit agreements require that consolidated stockholders' equity be maintained at $1 billion or more. These agreements expire on July 13, 1999. 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, alternative base rate or Eurodollar rate. In addition, at February 1, 1997, the Company had line of credit agreements with various banks aggregating $110 million. The agreements have no fixed date of expiration, and interest on amounts drawn fluctuates daily based on market rates. There were no funds borrowed under the revolving line of credit agreements or line of credit agreements during fiscal 1994 through fiscal 1996. 4. Long-Term Debt Long-term debt consists of the following (in thousands of dollars): February 1, 1997 February 3, 1996 Unsecured notes at rates ranging from 6.875% to 9.625%, due 1997 through 2026 $1,100,000 $ 950,000 Unsecured 5.7% note to bank, due June 3, 1996 - 75,000 Unsecured 9.25% notes of DIC due 1997 through 2001 175,000 175,000 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 6.75% to 13.25% 79,582 89,242 1,354,582 1,289,242 Current portion (181,564) (131,378) $1,173,018 $1,157,864 Building, land, land improvements and equipment with a carrying value of $101.1 million at February 1, 1997 are pledged as collateral on the mortgage notes. Maturities of long-term debt over the next five years are $181.5 million, $107.3 million, $108.0 million, $108.8 million and $59.6 million. Interest and debt expense consists of the following (in thousands of dollars): Fiscal 1996 Fiscal 1995 Fiscal 1994 Long-term debt: Interest $110,265 $107,572 $110,945 Amortization of debt expense 1,422 1,400 1,404 111,687 108,972 112,349 Interest on capital lease obligations 1,813 2,241 2,324 Commercial paper interest 7,299 6,014 5,692 Other (200) 2,827 3,917 $120,599 $120,054 $124,282 Interest paid during fiscal 1996, 1995 and 1994 was approximately $129.4 million, $121.4 million and $123.9 million, respectively. 5. Trade Accounts Payable And Accrued Expenses Trade accounts payable and accrued expenses are comprised of the following (in thousands of dollars): February 1, 1997 February 3, 1996 Trade accounts payable $342,238 $376,363 Accrued expenses: Salaries, wages, and employee benefits 51,569 46,120 Taxes, other than income 41,528 48,644 Interest 34,969 30,370 Rent 13,105 13,688 Other 53,286 43,826 $536,695 $559,011 6. Income Taxes The provision for Federal and state income taxes is summarized as follows (in thousands of dollars): Fiscal 1996 Fiscal 1995 Fiscal 1994 Current: Federal $117,230 $138,102 $120,200 State 10,285 18,700 16,300 127,515 156,802 136,500 Deferred: Federal 11,310 (47,832) 16,400 State 1,315 (6,500) 1,420 12,625 (54,332) 17,820 $140,140 $102,470 $154,320 A reconciliation between income taxes computed using the effective income tax rate and the Federal statutory income tax rates is presented below (in thousands of dollars): Fiscal 1996 Fiscal 1995 Fiscal 1994 Income tax at the statutory Federal rate $132,377 $ 94,379 $142,139 State income taxes net of Federal benefit 7,584 7,970 10,686 Other 179 121 1,495 $140,140 $102,470 $154,320 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 February 1, 1997 and February 3, 1996 are as follows (in thousands of dollars): February 1, 1997 February 3, 1996 Property and equipment basis and depreciation differences $244,076 $213,497 State income taxes 21,111 28,466 Differences between book and tax basis of inventory 13,304 20,191 Other 3,016 5,606 Total deferred tax liabilities 281,507 267,760 Accruals not currently deductible (18,715) (16,985) State income taxes (1,698) (2,306) Total deferred tax assets (20,413) (19,291) Net deferred tax liability $261,094 $248,469 Deferred tax assets and liabilities are presented as follows in the accompanying consolidated balance sheets (in thousands of dollars): February 1, 1997 February 3, 1996 Net deferred tax liability - noncurrent $261,094 $252,503 Less net deferred tax asset - current - (4,034) Net deferred tax liability $261,094 $248,469 Income taxes paid during fiscal 1996, 1995 and 1994 were approximately $116.4 million, $158.0 million and $131.1 million, respectively. 7. Stockholders' Equity Capital stock is comprised of the following: Par Shares Shares Issued and Outstanding Type Value Authorized February 1, 1997 February 3, 1996 Preferred (5% cumulative) $100 5,000 4,400 4,400 Additional preferred $.01 10,000,000 Class A, common $.01 289,000,000 109,594,496 109,070,691 Class B, common $.01 11,000,000 4,016,929 4,016,929 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. 8. Stock Options 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 1996, 2,906,760 shares were available for grant under the plan and 9,965,445 shares of Class A common stock were reserved for issuance under the 1990 stock option plan. Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS No. 123"), 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 APB No. 25, 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 $229 million and $164 million for 1996 and 1995, respectively, and the earnings per share would have been $2.01 and $1.45 for 1996 and 1995, 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 below: 1996 1995 1994 Weighted- Weighted- Weighted- Average Average Average Exercise Exercise Exercise Fixed Options Shares Price Shares Price Shares Price Outstanding, beginning of year 6,448,006 $33.08 4,537,521 $35.63 2,630,026 $39.26 Granted 1,896,030 36.45 1,990,450 27.45 1,975,680 30.93 Exercised (848,366) 31.69 - - (12,500) 31.25 Forfeited (436,985) 37.91 (79,965) 37.69 (55,685) 40.95 Outstanding, end of year 7,058,685 $33.85 6,448,006 $33.08 4,537,521 $35.63 Options exercisable at year-end 3,079,350 $35.57 3,946,866 $35.52 3,984,866 $35.56 Weighted-average fair value of options granted during the year $12.19 $ 9.26 $ 7.96
The following table summarizes information about stock options outstanding at February 1, 1997: Options Outstanding Options Exercisable Weighted-Average Weighted- Weighted- Range of Number Remaining Average Number Average Exercise Outstanding Contractual Exercise Exercisable Exercise Prices at February 1, 1997 Life (Yrs) Price at February 1, 1997 Price $27.25-$31.25 3,566,315 3.6 $29.05 1,453,350 $30.87 $37.38-$45.13 3,492,370 3.2 38.76 1,626,000 39.77 7,058,685 3.4 $33.85 3,079,350 $35.57
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 1996, 1995 and 1994, respectively: risk-free interest rate 6.27%, 6.32% and 6.23%; expected life 4.3 years, 4.3 years and 2.8 years; expected volatility of 29.4%, 29.9% and 29.3%; dividend yield .38%, .44% and .32%. 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. 9. Capital Leases Future minimum payments under capital leases as of February 1, 1997 are as follows (in thousands of dollars): Fiscal Year Amount 1997 $ 2,987 1998 2,987 1999 2,710 2000 2,627 2001 2,371 After 2001 13,463 Total minimum lease payments 27,145 Less amount representing interest (11,926) Present value of net minimum lease payments (of which $1,529 is currently payable) $ 15,219 10. Operating Leases And Commitments Rental expense consists of the following (in thousands of dollars): Fiscal 1996 Fiscal 1995 Fiscal 1994 Operating leases: Buildings: Minimum rentals $28,842 $30,034 $33,290 Contingent rentals 12,482 13,625 13,456 Equipment 13,100 14,015 16,910 54,424 57,674 63,656 Contingent rentals on capital leases 1,342 1,161 1,260 $55,766 $58,835 $64,916 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 February 1, 1997 for all noncancelable operating leases for buildings and equipment are as follows (in thousands): Fiscal Year Amount 1997 $ 29,444 1998 26,241 1999 24,746 2000 24,093 2001 22,857 After 2001 138,904 $266,285 Renewal options from three to 25 years exist on the majority of leased properties. At February 1, 1997, the Company is committed to incur costs of approximately $309 million to acquire, complete and furnish certain stores. 11. Fair Value Disclosures The estimated fair values of financial instruments which are presented herein have been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is required in interpreting market data to develop estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of amounts the Company could realize in a current market exchange. The fair value of the Company's cash and cash equivalents, trade accounts receivable and commercial paper borrowings approximates their carrying values at February 1, 1997 and February 3, 1996 due to the short-term maturities of these instruments. The fair value of the Company's long-term debt 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 long-term debt at February 1, 1997 and February 3, 1996 was $1,435 million and $1,431 million, respectively. The carrying value of the Company's long-term debt at February 1, 1997 and February 3, 1996 was $1,355 million and $1,289 million, respectively. 12. Quarterly Results Of Operations (Unaudited) The following is a tabulation of the unaudited quarterly results of operations for the years ended February 1, 1997 and February 3, 1996 (in thousands, except per share data): Fiscal 1996 Three Months Ended May 4 August 3 November 2 February 1 Net sales $1,453,302 $1,340,326 $1,496,578 $1,937,379 Gross profit 497,505 468,522 491,455 645,338 Net income 56,401 39,526 31,618 111,076 Income per common share .50 .34 .28 .97 Fiscal 1995 Three Months Ended April 29 July 29 October 28 February 3 Net sales $1,326,754 $1,265,066 $1,405,626 $1,920,592 Gross profit 444,826 440,120 490,101 649,205 Net income 48,379 38,633 51,025 29,146(a) Income per common share .43 .34 .45 .26 (a) Includes a $78.5 million charge for the early adoption of Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." See Note 2. Annual Meeting And General Information Annual Meeting Saturday, May 17, 1997, 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 Boatmen's Trust Company, Post Office Box 14737, St. Louis, Missouri 63178 Listing New York Stock Exchange, Ticker Symbol "DDS" Stock Prices and Dividends by Quarter Sales Prices - Common Shares 1996 1995 Dividends Per Share Quarter High Low High Low 1996 1995 First $41.38 $29.75 $29.00 $24.00 $0.03 $0.03 Second 40.38 31.38 32.13 24.63 0.03 0.03 Third 34.88 30.88 33.88 27.13 0.04 0.03 Fourth 32.63 29.13 30.63 27.13 0.04 0.03 EX-21 6 EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT. STATE OF NAME UNDER WHICH NAME INCORPORATION SUBSIDIARY IS DOING BUSINESS Dillard Investment Co., Inc. Delaware Dillard Investment Company Construction Developers, Incorporated Arkansas Dillard's The Higbee Company Delaware Dillard's J. B. Ivey & Company North Carolina Dillard's Dillard National Bank National Banking Dillard National Bank Association Dillard Travel, Inc. Arkansas Dillard Travel, Inc. Pulaski Realty Company Arkansas Pulaski Realty Company Dillard USA, Inc. Nevada Dillard's Dillard's Utah, Inc. Utah Dillard's Utah, Inc. Dillard International, Inc. Nevada Dillard International, Inc. Dillard Distribution, Inc. Arkansas Dillard Distribution, Inc. Dillard's Wyoming, Inc. Wyoming Dillard's Dillard Ticketing Systems, Inc. Arizona Dillard Ticketing Systems, Inc. EX-23 7 INDEPENDENT AUDITOR'S CONSENT We consent to the incorporation by reference in Registration Statement Number 33-42500 on Form S-8, in Registration Number 33-42553 on Form S-8, in Registration Statement Number 33-42499 on Form S-8, and in Registration Statement Number 33-64355 on Form S-3, of our reports (which express an unqualified opinion and include an explanatory paragraph relating to a change in accounting for the impairment of long-lived assets and for long-lived assets to be disposed of) dated February 25, 1997, appearing in and incorporated by reference in this Annual Report on Form 10-K of Dillard Department Stores, Inc. and subsidiaries for the year ended February 1, 1997. DELOITTE & TOUCHE LLP New York, New York April 25, 1997 EX-27 8
5 1000 YEAR FEB-1-1997 FEB-1-1997 64,094 0 1,130,504 24,169 1,556,958 2,760,636 3,513,155 1,321,222 5,059,726 894,746 1,186,708 0 440 1,136 2,715,602 5,059,726 6,227,585 6,412,060 4,124,765 4,124,765 0 66,629 120,599 378,761 140,140 238,621 0 0 0 238,621 2.09 2.09
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