UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 29, 2011
or
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission File Number: 1-6140
DILLARDS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE |
|
71-0388071 |
(State or other jurisdiction |
|
(I.R.S. Employer |
of incorporation or organization) |
|
Identification No.) |
1600 CANTRELL ROAD, LITTLE ROCK, ARKANSAS 72201
(Address of principal executive offices)
(Zip Code)
(501) 376-5200
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes o No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer x |
|
Accelerated filer o |
|
|
|
Non-accelerated filer o |
|
Smaller reporting company o |
(Do not check if a smaller reporting company) |
|
|
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes x No
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date.
|
CLASS A COMMON STOCK as of November 26, 2011 |
46,217,724 |
|
|
CLASS B COMMON STOCK as of November 26, 2011 |
4,010,929 |
|
DILLARDS, INC.
DILLARDS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In Thousands)
|
|
October 29, |
|
January 29, |
|
October 30, |
| |||
|
|
2011 |
|
2011 |
|
2010 |
| |||
Assets |
|
|
|
|
|
|
| |||
Current assets: |
|
|
|
|
|
|
| |||
Cash and cash equivalents |
|
$ |
106,383 |
|
$ |
343,291 |
|
$ |
167,119 |
|
Restricted cash |
|
24,901 |
|
|
|
|
| |||
Accounts receivable |
|
20,262 |
|
25,950 |
|
51,421 |
| |||
Merchandise inventories |
|
1,756,526 |
|
1,290,147 |
|
1,708,504 |
| |||
Other current assets |
|
63,069 |
|
42,538 |
|
66,065 |
| |||
|
|
|
|
|
|
|
| |||
Total current assets |
|
1,971,141 |
|
1,701,926 |
|
1,993,109 |
| |||
|
|
|
|
|
|
|
| |||
Property and equipment, net |
|
2,476,363 |
|
2,595,514 |
|
2,649,718 |
| |||
Other assets |
|
269,626 |
|
76,726 |
|
69,264 |
| |||
|
|
|
|
|
|
|
| |||
Total assets |
|
$ |
4,717,130 |
|
$ |
4,374,166 |
|
$ |
4,712,091 |
|
|
|
|
|
|
|
|
| |||
Liabilities and stockholders equity |
|
|
|
|
|
|
| |||
Current liabilities: |
|
|
|
|
|
|
| |||
Trade accounts payable and accrued expenses |
|
$ |
1,028,555 |
|
$ |
689,281 |
|
$ |
1,049,231 |
|
Current portion of long-term debt |
|
57,219 |
|
49,166 |
|
49,145 |
| |||
Current portion of capital lease obligations |
|
2,279 |
|
2,184 |
|
2,153 |
| |||
Other short-term borrowings |
|
142,000 |
|
|
|
|
| |||
Federal and state income taxes including current deferred taxes |
|
68,996 |
|
90,581 |
|
29,791 |
| |||
|
|
|
|
|
|
|
| |||
Total current liabilities |
|
1,299,049 |
|
831,212 |
|
1,130,320 |
| |||
|
|
|
|
|
|
|
| |||
Long-term debt |
|
634,812 |
|
697,246 |
|
697,704 |
| |||
Capital lease obligations |
|
9,723 |
|
11,383 |
|
11,921 |
| |||
Other liabilities |
|
206,534 |
|
205,916 |
|
211,247 |
| |||
Deferred income taxes |
|
333,055 |
|
341,689 |
|
344,334 |
| |||
Subordinated debentures |
|
200,000 |
|
200,000 |
|
200,000 |
| |||
|
|
|
|
|
|
|
| |||
Commitments and contingencies |
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
| |||
Stockholders equity: |
|
|
|
|
|
|
| |||
Common stock |
|
1,225 |
|
1,217 |
|
1,211 |
| |||
Additional paid-in capital |
|
828,796 |
|
805,422 |
|
785,411 |
| |||
Accumulated other comprehensive loss |
|
(16,597 |
) |
(17,830 |
) |
(20,870 |
) | |||
Retained earnings |
|
2,968,076 |
|
2,653,437 |
|
2,546,338 |
| |||
Less treasury stock, at cost |
|
(1,747,543 |
) |
(1,355,526 |
) |
(1,195,525 |
) | |||
|
|
|
|
|
|
|
| |||
Total stockholders equity |
|
2,033,957 |
|
2,086,720 |
|
2,116,565 |
| |||
|
|
|
|
|
|
|
| |||
Total liabilities and stockholders equity |
|
$ |
4,717,130 |
|
$ |
4,374,166 |
|
$ |
4,712,091 |
|
See notes to condensed consolidated financial statements.
DILLARDS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(Unaudited)
(In Thousands, Except Per Share Data)
|
|
Three Months Ended |
|
Nine Months Ended |
| ||||||||
|
|
October 29, |
|
October 30, |
|
October 29, |
|
October 30, |
| ||||
|
|
2011 |
|
2010 |
|
2011 |
|
2010 |
| ||||
Net sales |
|
$ |
1,382,612 |
|
$ |
1,344,118 |
|
$ |
4,293,557 |
|
$ |
4,186,624 |
|
Service charges and other income |
|
33,926 |
|
28,919 |
|
96,790 |
|
89,864 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
|
|
1,416,538 |
|
1,373,037 |
|
4,390,347 |
|
4,276,488 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Cost of sales |
|
879,997 |
|
857,474 |
|
2,741,282 |
|
2,702,171 |
| ||||
Advertising, selling, administrative and general expenses |
|
404,766 |
|
398,494 |
|
1,190,070 |
|
1,184,190 |
| ||||
Depreciation and amortization |
|
64,734 |
|
64,953 |
|
192,862 |
|
193,124 |
| ||||
Rentals |
|
11,229 |
|
11,641 |
|
34,798 |
|
36,598 |
| ||||
Interest and debt expense, net |
|
17,750 |
|
18,043 |
|
54,447 |
|
55,361 |
| ||||
(Gain) loss on disposal of assets |
|
(1,456 |
) |
934 |
|
(3,847 |
) |
(3,292 |
) | ||||
Asset impairment and store closing charges |
|
|
|
|
|
1,200 |
|
2,208 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Income before income taxes and income on and equity in (losses) of joint ventures |
|
39,518 |
|
21,498 |
|
179,535 |
|
106,128 |
| ||||
Income taxes (benefit) |
|
(188,360 |
) |
6,035 |
|
(138,640 |
) |
33,075 |
| ||||
Income on and equity in (losses) of joint ventures |
|
293 |
|
(1,082 |
) |
4,238 |
|
(3,010 |
) | ||||
|
|
|
|
|
|
|
|
|
| ||||
Net income |
|
228,171 |
|
14,381 |
|
322,413 |
|
70,043 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Retained earnings at beginning of period |
|
2,742,624 |
|
2,534,594 |
|
2,653,437 |
|
2,484,447 |
| ||||
Cash dividends declared |
|
(2,719 |
) |
(2,637 |
) |
(7,774 |
) |
(8,152 |
) | ||||
|
|
|
|
|
|
|
|
|
| ||||
Retained earnings at end of period |
|
$ |
2,968,076 |
|
$ |
2,546,338 |
|
$ |
2,968,076 |
|
$ |
2,546,338 |
|
|
|
|
|
|
|
|
|
|
| ||||
Earnings per share: |
|
|
|
|
|
|
|
|
| ||||
Basic |
|
$ |
4.38 |
|
$ |
0.22 |
|
$ |
5.90 |
|
$ |
1.02 |
|
Diluted |
|
$ |
4.31 |
|
$ |
0.22 |
|
$ |
5.80 |
|
$ |
1.02 |
|
|
|
|
|
|
|
|
|
|
| ||||
Cash dividends declared per common share |
|
$ |
0.05 |
|
$ |
0.04 |
|
$ |
0.14 |
|
$ |
0.12 |
|
See notes to condensed consolidated financial statements.
DILLARDS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in Thousands)
|
|
Nine Months Ended |
| ||||
|
|
October 29, |
|
October 30, |
| ||
|
|
2011 |
|
2010 |
| ||
|
|
|
|
|
| ||
Operating activities: |
|
|
|
|
| ||
Net income |
|
$ |
322,413 |
|
$ |
70,043 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
| ||
Depreciation and amortization of property and deferred financing costs |
|
194,272 |
|
194,520 |
| ||
Gain on disposal of assets |
|
(3,847 |
) |
(3,292 |
) | ||
Gain on repurchase of debt |
|
(173 |
) |
(21 |
) | ||
Excess tax benefits from share-based compensation |
|
(10,171 |
) |
(353 |
) | ||
Asset impairment and store closing charges |
|
1,200 |
|
2,208 |
| ||
Changes in operating assets and liabilities: |
|
|
|
|
| ||
Decrease in accounts receivable |
|
5,688 |
|
11,801 |
| ||
Increase in merchandise inventories |
|
(466,379 |
) |
(407,824 |
) | ||
Increase in other current assets |
|
(20,531 |
) |
(22,901 |
) | ||
(Increase) decrease in other assets |
|
(205,503 |
) |
5,411 |
| ||
Increase in trade accounts payable and accrued expenses and other liabilities |
|
338,632 |
|
373,373 |
| ||
Decrease in income taxes payable |
|
(20,048 |
) |
(64,054 |
) | ||
|
|
|
|
|
| ||
Net cash provided by operating activities |
|
135,553 |
|
158,911 |
| ||
|
|
|
|
|
| ||
Investing activities: |
|
|
|
|
| ||
Purchases of property and equipment |
|
(80,304 |
) |
(73,750 |
) | ||
Proceeds from disposal of assets |
|
22,966 |
|
6,094 |
| ||
Restricted cash |
|
(24,901 |
) |
|
| ||
Distribution from joint venture |
|
2,481 |
|
|
| ||
|
|
|
|
|
| ||
Net cash used in investing activities |
|
(79,758 |
) |
(67,656 |
) | ||
|
|
|
|
|
| ||
Financing activities: |
|
|
|
|
| ||
Purchase of treasury stock |
|
(392,388 |
) |
(241,574 |
) | ||
Principal payments on long-term debt and capital lease obligations |
|
(55,773 |
) |
(16,522 |
) | ||
Cash dividends paid |
|
(7,533 |
) |
(8,472 |
) | ||
Increase in short-term borrowings |
|
142,000 |
|
|
| ||
Proceeds from stock issuance |
|
10,820 |
|
386 |
| ||
Excess tax benefits from share-based compensation |
|
10,171 |
|
353 |
| ||
|
|
|
|
|
| ||
Net cash used in financing activities |
|
(292,703 |
) |
(265,829 |
) | ||
|
|
|
|
|
| ||
Decrease in cash and cash equivalents |
|
(236,908 |
) |
(174,574 |
) | ||
Cash and cash equivalents, beginning of period |
|
343,291 |
|
341,693 |
| ||
|
|
|
|
|
| ||
Cash and cash equivalents, end of period |
|
$ |
106,383 |
|
$ |
167,119 |
|
|
|
|
|
|
| ||
Non-cash transactions: |
|
|
|
|
| ||
Accrued capital expenditures |
|
$ |
6,796 |
|
$ |
2,500 |
|
Stock awards |
|
2,762 |
|
2,292 |
| ||
Capital lease transactions |
|
|
|
3,966 |
|
See notes to condensed consolidated financial statements.
DILLARDS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Basis of Presentation
The accompanying unaudited interim condensed consolidated financial statements of Dillards, Inc. (the Company) have been prepared in accordance with the rules of the Securities and Exchange Commission (SEC). Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America (GAAP) for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement have been included. Operating results for the three and nine months ended October 29, 2011 are not necessarily indicative of the results that may be expected for the fiscal year ending January 28, 2012 due to the seasonal nature of the business.
These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Companys Annual Report on Form 10-K for the fiscal year ended January 29, 2011 filed with the SEC on March 23, 2011.
Restricted cash During the three months ended October 29, 2011, our wholly-owned captive insurance subsidiary entered into an agreement in which $24.9 million was placed into a trust for the benefit of a third party insurance provider. The purpose of the trust (and additional standby letters of credit of $24.9 million) is to collateralize a third party insurer for workers compensation and general liability obligations under casualty insurance programs for policy years through fiscal 2011. Prior to this change, all claims were secured by standby letters of credit.
Reclassifications Certain items have been reclassified from their prior year classifications to conform to the current year presentation. These reclassifications had no effect on net income or stockholders equity as previously reported.
Note 2. Business Segments
The Company operates in two reportable segments: the operation of retail department stores (retail operations) and a general contracting construction company (construction).
For the Companys retail operations, the Company determined its operating segments on a store by store basis. Each stores operating performance has been aggregated into one reportable segment. The Companys operating segments are aggregated for financial reporting purposes because they are similar in each of the following areas: economic characteristics, class of consumer, nature of products and distribution methods. Revenues from external customers are derived from merchandise sales, and the Company does not rely on any major customers as a source of revenue. Across all stores, the Company operates one store format under the Dillards name where each store offers the same general mix of merchandise with similar categories and similar customers. The Company believes that disaggregating its operating segments would not provide meaningful additional information.
The following tables summarize certain segment information, including the reconciliation of those items to the Companys consolidated operations:
(in thousands of dollars) |
|
Retail |
|
Construction |
|
Consolidated |
| |||
Three Months Ended October 29, 2011: |
|
|
|
|
|
|
| |||
Net sales from external customers |
|
$ |
1,366,362 |
|
$ |
16,250 |
|
$ |
1,382,612 |
|
Gross profit |
|
502,140 |
|
475 |
|
502,615 |
| |||
Depreciation and amortization |
|
64,689 |
|
45 |
|
64,734 |
| |||
Interest and debt expense (income), net |
|
17,791 |
|
(41 |
) |
17,750 |
| |||
Income (loss) before income taxes and income on and equity in (losses) of joint ventures |
|
40,041 |
|
(523 |
) |
39,518 |
| |||
Income on and equity in (losses) of joint ventures |
|
293 |
|
|
|
293 |
| |||
Total assets |
|
4,686,248 |
|
30,882 |
|
4,717,130 |
| |||
|
|
|
|
|
|
|
| |||
Three Months Ended October 30, 2010: |
|
|
|
|
|
|
| |||
Net sales from external customers |
|
$ |
1,320,568 |
|
$ |
23,550 |
|
$ |
1,344,118 |
|
Gross profit |
|
485,629 |
|
1,015 |
|
486,644 |
| |||
Depreciation and amortization |
|
64,906 |
|
47 |
|
64,953 |
| |||
Interest and debt expense (income), net |
|
18,118 |
|
(75 |
) |
18,043 |
| |||
Income (loss) before income taxes and income on and equity in (losses) of joint ventures |
|
21,586 |
|
(88 |
) |
21,498 |
| |||
Income on and equity in (losses) of joint ventures |
|
(1,082 |
) |
|
|
(1,082 |
) | |||
Total assets |
|
4,644,060 |
|
68,031 |
|
4,712,091 |
| |||
|
|
|
|
|
|
|
| |||
Nine Months Ended October 29, 2011: |
|
|
|
|
|
|
| |||
Net sales from external customers |
|
$ |
4,247,462 |
|
$ |
46,095 |
|
$ |
4,293,557 |
|
Gross profit |
|
1,551,936 |
|
339 |
|
1,552,275 |
| |||
Depreciation and amortization |
|
192,726 |
|
136 |
|
192,862 |
| |||
Interest and debt expense (income), net |
|
54,567 |
|
(120 |
) |
54,447 |
| |||
Income (loss) before income taxes and income on and equity in (losses) of joint ventures |
|
182,733 |
|
(3,198 |
) |
179,535 |
| |||
Income on and equity in (losses) of joint ventures |
|
4,238 |
|
|
|
4,238 |
| |||
Total assets |
|
4,686,248 |
|
30,882 |
|
4,717,130 |
| |||
|
|
|
|
|
|
|
| |||
Nine Months Ended October 30, 2010: |
|
|
|
|
|
|
| |||
Net sales from external customers |
|
$ |
4,108,112 |
|
$ |
78,512 |
|
$ |
4,186,624 |
|
Gross profit |
|
1,483,197 |
|
1,256 |
|
1,484,453 |
| |||
Depreciation and amortization |
|
192,987 |
|
137 |
|
193,124 |
| |||
Interest and debt expense (income), net |
|
55,520 |
|
(159 |
) |
55,361 |
| |||
Income (loss) before income taxes and income on and equity in (losses) of joint ventures |
|
107,908 |
|
(1,780 |
) |
106,128 |
| |||
Income on and equity in (losses) of joint ventures |
|
(3,010 |
) |
|
|
(3,010 |
) | |||
Total assets |
|
4,644,060 |
|
68,031 |
|
4,712,091 |
|
Intersegment construction revenues of $10.8 million and $25.8 million for the three and nine months ended October 29, 2011, respectively, and intersegment construction revenues of $9.5 million and $22.2 million for the three and nine months ended October 30, 2010, respectively, were eliminated during consolidation and have been excluded from net sales for the respective periods.
Note 3. Stock-Based Compensation
The Company has various stock option plans that provide for the granting of options to purchase shares of Class A Common Stock to certain key employees of the Company. Exercise and vesting terms for options granted under the plans are determined at each grant date. There were no stock options granted during the three and nine months ended October 29, 2011 and October 30, 2010.
Stock option transactions for the three months ended October 29, 2011 are summarized as follows:
|
|
|
|
Weighted Average |
| |
Stock Options |
|
Shares |
|
Exercise Price |
| |
Outstanding, beginning of period |
|
2,270,000 |
|
$ |
25.74 |
|
Granted |
|
|
|
|
| |
Exercised |
|
(25,000 |
) |
25.74 |
| |
Expired |
|
|
|
|
| |
Outstanding, end of period |
|
2,245,000 |
|
$ |
25.74 |
|
Options exercisable at period end |
|
2,245,000 |
|
$ |
25.74 |
|
During the three months ended October 29, 2011, the intrinsic value of stock options exercised was $0.6 million. At October 29, 2011, the intrinsic value of outstanding and exercisable stock options was $58.5 million.
Note 4. Asset Impairment and Store Closing Charges
There were no asset impairment and store closing costs recorded during the three months ended October 29, 2011 and October 30, 2010.
During the nine months ended October 29, 2011, the Company recorded a pretax charge of $1.2 million for asset impairment and store closing costs. The charge was for the write-down of a property currently held for sale.
During the nine months ended October 30, 2010, the Company recorded a pretax charge of $2.2 million for asset impairment and store closing costs. The charge was for the write-down of a property currently held for sale.
Following is a summary of the activity in the reserve established for store closing charges for the nine months ended October 29, 2011:
(in thousands) |
|
Balance |
|
Adjustments |
|
Cash Payments |
|
Balance |
| ||||
Rent, property taxes and utilities |
|
$ |
1,360 |
|
$ |
880 |
|
$ |
1,243 |
|
$ |
997 |
|
*included in rentals
Reserve amounts are included in trade accounts payable and accrued expenses and other liabilities.
Note 5. Earnings Per Share Data
The following table sets forth the computation of basic and diluted earnings per share for the periods indicated (in thousands, except per share data).
|
|
Three Months Ended |
|
Nine Months Ended |
| ||||||||
|
|
October 29, |
|
October 30, |
|
October 29, |
|
October 30, |
| ||||
|
|
2011 |
|
2010 |
|
2011 |
|
2010 |
| ||||
Basic: |
|
|
|
|
|
|
|
|
| ||||
Net income |
|
$ |
228,171 |
|
$ |
14,381 |
|
$ |
322,413 |
|
$ |
70,043 |
|
|
|
|
|
|
|
|
|
|
| ||||
Weighted average shares of common stock outstanding |
|
52,107 |
|
65,923 |
|
54,611 |
|
68,635 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Basic earnings per share |
|
$ |
4.38 |
|
$ |
0.22 |
|
$ |
5.90 |
|
$ |
1.02 |
|
|
|
Three Months Ended |
|
Nine Months Ended |
| ||||||||
|
|
October 29, |
|
October 30, |
|
October 29, |
|
October 30, |
| ||||
|
|
2011 |
|
2010 |
|
2011 |
|
2010 |
| ||||
Diluted: |
|
|
|
|
|
|
|
|
| ||||
Net income |
|
$ |
228,171 |
|
$ |
14,381 |
|
$ |
322,413 |
|
$ |
70,043 |
|
|
|
|
|
|
|
|
|
|
| ||||
Weighted average shares of common stock outstanding |
|
52,107 |
|
65,923 |
|
54,611 |
|
68,635 |
| ||||
Dilutive effect of stock-based compensation |
|
843 |
|
|
|
963 |
|
|
| ||||
Total weighted average equivalent shares |
|
52,950 |
|
65,923 |
|
55,574 |
|
68,635 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Diluted earnings per share |
|
$ |
4.31 |
|
$ |
0.22 |
|
$ |
5.80 |
|
$ |
1.02 |
|
Total stock options outstanding were 2,245,000 and 4,009,369 at October 29, 2011 and October 30, 2010, respectively. Of these, options to purchase 4,009,369 shares of Class A Common Stock at prices ranging from $24.73 to $26.57 were outstanding at October 30, 2010 but were not included in the computations of diluted earnings per share because the effect of their inclusion would be antidilutive. A negligible amount of dilution, included in the weighted average shares computation for the nine months ended October 30, 2010, was insignificant for presentation in the table above.
Note 6. Comprehensive Income
The following table shows the computation of comprehensive income (in thousands):
|
|
Three Months Ended |
|
Nine Months Ended |
| ||||||||
|
|
October 29, |
|
October 30, |
|
October 29, |
|
October 30, |
| ||||
|
|
2011 |
|
2010 |
|
2011 |
|
2010 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net income |
|
$ |
228,171 |
|
$ |
14,381 |
|
$ |
322,413 |
|
$ |
70,043 |
|
Other comprehensive income: |
|
|
|
|
|
|
|
|
| ||||
Amortization of retirement plan and other retiree benefit adjustments, net of taxes |
|
411 |
|
476 |
|
1,233 |
|
1,428 |
| ||||
Total comprehensive income |
|
$ |
228,582 |
|
$ |
14,857 |
|
$ |
323,646 |
|
$ |
71,471 |
|
Note 7. Commitments and Contingencies
On June 10, 2009, a lawsuit was filed in the Circuit Court of Pulaski County, Arkansas styled Billy K. Berry, Derivatively on behalf of Dillards, Inc. v. William Dillard II et al, Case Number CV-09-4227-2 (the Berry case). The lawsuit generally sought return of monies and alleged that certain officers and directors of the Company had been overcompensated and/or received improper benefits at the expense of the Company and its shareholders. On February 18, 2010, the Circuit Court entered an Order of Dismissal with Prejudice and Final Judgment dismissing the case as to all parties defendant. The Circuit Courts judgment was affirmed by the
Arkansas Court of Appeals. Plaintiff appealed the decision of the Court of Appeals to the Arkansas Supreme Court where, on September 15, 2011, that appeal was denied.
On May 27, 2009, a lawsuit was filed in the United States District Court for the Eastern District of Arkansas styled Steven Harben, Derivatively on Behalf of Nominal Defendant Dillards, Inc. v. William Dillard II et al, Case Number 4:09-IV-395. The lawsuit generally sought return of monies and alleged that certain officers and directors of the Company had been overcompensated and/or received improper benefits at the expense of the Company and its shareholders. On September 30, 2010, the District Court dismissed the lawsuit in its entirety with prejudice but granted plaintiffs request to stay final judgment pending the exhaustion of all appeals in the Berry case, discussed above. On September 23, 2011, the District Court entered Judgment dismissing the case after the Arkansas Supreme Court denied the Berry appeal. The period for any appeal to the United States Court of Appeals for the Eighth Circuit has expired.
Accordingly, each of these cases has been concluded.
Various other legal proceedings, in the form of lawsuits and claims, which occur in the normal course of business, are pending against the Company and its subsidiaries. In the opinion of management, disposition of these matters is not expected to have a material adverse effect on the Companys financial position, cash flows or results of operations.
At October 29, 2011, letters of credit totaling $55.8 million were issued under the Companys revolving credit facility.
Note 8. Benefit Plans
The Company has an unfunded, nonqualified defined benefit plan (Pension Plan) for its officers. The Pension Plan is noncontributory and provides benefits based on years of service and compensation during employment. Pension expense is determined using various actuarial cost methods to estimate the total benefits ultimately payable to officers and allocates this cost to service periods. The actuarial assumptions used to calculate pension costs are reviewed annually. The Company made contributions to the Pension Plan of $1.2 million and $3.3 million during the three and nine months ended October 29, 2011, respectively. The Company expects to make a contribution to the Pension Plan of approximately $1.1 million for the remainder of fiscal 2011.
The components of net periodic benefit costs are as follows (in thousands):
|
|
Three Months Ended |
|
Nine Months Ended |
| ||||||||
|
|
October 29, |
|
October 30, |
|
October 29, |
|
October 30, |
| ||||
|
|
2011 |
|
2010 |
|
2011 |
|
2010 |
| ||||
Components of net periodic benefit costs: |
|
|
|
|
|
|
|
|
| ||||
Service cost |
|
$ |
831 |
|
$ |
721 |
|
$ |
2,494 |
|
$ |
2,165 |
|
Interest cost |
|
1,800 |
|
1,817 |
|
5,400 |
|
5,451 |
| ||||
Net actuarial loss |
|
492 |
|
594 |
|
1,475 |
|
1,782 |
| ||||
Amortization of prior service cost |
|
157 |
|
157 |
|
470 |
|
470 |
| ||||
Net periodic benefit costs |
|
$ |
3,280 |
|
$ |
3,289 |
|
$ |
9,839 |
|
$ |
9,868 |
|
Note 9. Revolving Credit Agreement
At October 29, 2011, the Company maintained a $1.0 billion revolving credit facility (credit agreement) with JPMorgan Chase Bank (JPMorgan) as the lead agent for various banks, secured by the inventory of Dillards, Inc. operating subsidiaries. The credit agreement expires December 12, 2012.
Borrowings under the credit agreement accrue interest starting at either JPMorgans Base Rate minus 0.5% or LIBOR plus 1.0% (1.25% at October 29, 2011) subject to certain availability thresholds as defined in the credit agreement.
Limited to 85% of the inventory of certain Company subsidiaries, availability for borrowings and letter of credit obligations under the credit agreement was $1.0 billion at October 29, 2011. Borrowings of $142.0 million were outstanding and letters of credit totaling $55.8 million were issued under this credit agreement leaving unutilized availability under the facility of approximately $802 million at October 29, 2011. There are no financial covenant
requirements under the credit agreement provided availability exceeds $100 million. The Company pays an annual commitment fee to the banks of 0.25% of the committed amount less outstanding borrowings and letters of credit.
Note 10. Stock Repurchase Program
May 2011 Stock Plan
In May 2011, the Companys Board of Directors authorized the Company to repurchase up to $250 million of the Companys Class A Common Stock under an open-ended plan (May 2011 Stock Plan). This authorization permits the Company to repurchase its Class A Common Stock in the open market, pursuant to preset trading plans meeting the requirements of Rule 10b5-1 under the Securities Exchange Act of 1934 (Exchange Act) or through privately negotiated transactions. During the three months ended October 29, 2011, the Company repurchased 2.9 million shares for $123.7 million at an average price of $42.40 per share. At October 29, 2011, $126.3 million in share repurchase authorization remained under the May 2011 Stock Plan.
February 2011 Stock Plan
In February 2011, the Companys Board of Directors authorized the Company to repurchase up to $250 million of the Companys Class A Common Stock under an open-ended plan (February 2011 Stock Plan). This authorization permitted the Company to repurchase its Class A Common Stock in the open market, pursuant to preset trading plans meeting the requirements of Rule 10b5-1 under the Exchange Act or through privately negotiated transactions. During the nine months ended October 29, 2011, the Company repurchased 6.0 million shares for $250.0 million at an average price of $41.93 per share, which completed the authorization under the February 2011 Stock Plan.
2010 Stock Plan
In August 2010, the Companys Board of Directors authorized the Company to repurchase up to $250 million of the Companys Class A Common Stock under an open-ended plan (2010 Stock Plan). During the three months ended October 30, 2010, the Company repurchased 2.9 million shares of stock under the 2010 Stock Plan for approximately $71.3 million at an average price of $24.86 per share. During the nine months ended October 29, 2011, the Company repurchased 0.4 million shares for $18.7 million at an average price of $42.19 per share, which completed the remaining authorization under the 2010 Stock Plan.
2007 Stock Plan
In November 2007, the Companys Board of Directors authorized the Company to repurchase up to $200 million of the Companys Class A Common Stock under an open-ended plan (2007 Stock Plan). During the nine months ended October 30, 2010, the Company repurchased 7.2 million shares of stock for approximately $182.6 million at an average price of $25.39 per share, which completed the remaining authorization under the 2007 Stock Plan.
Note 11. Income Taxes
The total amount of unrecognized tax benefits as of October 29, 2011 and October 30, 2010 was $8.2 million and $14.0 million, respectively, of which $5.6 million and $10.3 million, respectively, would, if recognized, affect the effective tax rate. The Company classifies accrued interest expense and penalties relating to income tax in the condensed consolidated financial statements as income tax expense. The total accrued interest and penalties in the condensed consolidated balance sheets as of October 29, 2011 and October 30, 2010 was $3.4 million and $4.6 million, respectively. The estimated range of the reasonably possible unrecognized tax benefit decrease in the next twelve months is between $0.5 million and $1.5 million. Changes in the Companys assumptions and judgments can materially affect amounts recognized in the condensed consolidated balance sheets and statements of income.
In January 2011, the Company formed a wholly-owned subsidiary intended to operate as a real estate investment trust (REIT) and transferred certain properties to this subsidiary. The Company entered into this transaction in order to enhance its financial flexibility by providing additional sources of liquidity. At the time, the Company believed that a tax election might be available to the Company that would result in a taxable gain on the transfer of these properties to the REIT. In May 2011, the Company requested that the Internal Revenue Service (IRS) review the REIT transaction and a potential tax election available to the Company, through the IRSs voluntary Pre-Filing Agreement Program (PFA). Through the PFA, in September 2011, the Company and the IRS entered into a Closing Agreement On Final Determination Covering Specific Matters under which agreement the
IRS agreed with the Company regarding the tax treatment of the transfer of the properties to the REIT and the availability of the tax election to the Company. Based on the agreement with the IRS, during the three months ended October 29, 2011 the Company determined to make the tax election in its tax return for the fiscal year ended January 29, 2011 (fiscal 2010) which was filed during the quarter. This tax election increases the tax basis of the properties transferred to the REIT to their fair values at the date of the transfer. The income tax that would otherwise be payable because of the gain recognized by this election was largely reduced by the utilization of a capital loss carryforward, that would otherwise have expired as of January 29, 2011, against a portion of the recognized gain. Because of the Companys past uncertainty regarding the incurrence of capital gain income, the deferred tax asset associated with that capital loss carryforward had been offset by a full valuation allowance since its recognition in fiscal 2005. During the three months ended October 29, 2011, income taxes included the recognition of approximately $201.6 million in tax benefit due to the reversal of the valuation allowance related to the amount of the capital loss carryforward used to offset the capital gain income recognized on the taxable transfer of the properties to the REIT. Approximately $134.4 million of the tax benefit relates to increased basis in depreciable property while approximately $67.2 million of the benefit relates to increased basis in land. Due to the increased tax basis of the depreciable properties transferred to the REIT, the Company will recognize increased tax depreciation deductions in the future which are expected to yield cash tax benefits of approximately $5 million annually in years one through twenty and approximately $2 million annually in years twenty-one through forty beginning with the year ending January 28, 2012. Due to the uncertainty surrounding whether the REIT will dispose of any of its land assets in the future, the Company cannot estimate when or if the cash tax benefits related to the increased basis in land will be received.
During the three months ended October 29, 2011, income taxes included the recognition of: a tax benefit of approximately $201.6 million due to the reversal of a valuation allowance related to a capital loss carryforward; tax benefits related to federal tax credits; and net decreases in unrecognized tax benefits, interest and penalties. During the three months ended October 30, 2010, income taxes included the recognition of tax benefits primarily due to a decrease in a capital loss valuation allowance.
During the nine months ended October 29, 2011, income taxes included the recognition of: a tax benefit of approximately $201.6 million due to the reversal of a valuation allowance related to a capital loss carryforward; tax benefits related to federal tax credits; net decreases in unrecognized tax benefits, interest and penalties; decreases in net operating loss valuation allowances; and decreases in net deferred tax liabilities resulting from legislatively-enacted state tax rate reductions. Additionally, during the nine months ended October 29, 2011, the IRS concluded its examination of the Companys federal income tax returns for the fiscal tax years 2008 through 2009, and no significant changes occurred in these tax years as a result of such examination. During the nine months ended October 30, 2010, income taxes included the recognition of tax benefits primarily due to a state administrative settlement, a decrease in a capital loss valuation allowance, and federal tax credit refund claims.
Note 12. Income on Joint Venture
During the nine months ended October 29, 2011, the Company received a distribution of excess cash from a mall joint venture of $6.7 million and recorded a related gain of $4.2 million in income on and equity in (losses) of joint ventures.
Note 13. (Gain) Loss on Disposal of Assets
During the three months ended October 29, 2011, the Company received proceeds of $10.3 million from the sale of two former retail store locations, resulting in gains totaling $1.3 million that were recorded in (gain) loss on disposal of assets.
Additionally, during the nine months ended October 29, 2011, the Company received proceeds of $11.0 million from the sale of an interest in a mall joint venture, resulting in a gain of $2.1 million that was recorded in (gain) loss on disposal of assets.
During the three months ended October 30, 2010, the Company received proceeds of $1.9 million from the sale of a former retail store location, resulting in a loss of $1.1 million that was recorded in (gain) loss on disposal of assets.
Additionally, during the nine months ended October 30, 2010, the Company received proceeds of $4.0 million from the sale of a former retail store location, resulting in a gain of $4.0 million that was recorded in (gain) loss on disposal of assets.
Note 14. Note Repurchase
During the three months ended October 29, 2011, the Company repurchased $5.7 million face amount of 6.625% notes with an original maturity on January 15, 2018. This repurchase resulted in a pretax gain of approximately $0.2 million which was recorded in net interest and debt expense during the three months ended October 29, 2011.
During the three months ended October 30, 2010, the Company repurchased $1.2 million face amount of 7.13% notes with an original maturity on August 1, 2018. This repurchase resulted in a pretax gain of approximately $21 thousand which was recorded in net interest and debt expense during the three months ended October 30, 2010.
Note 15. 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 Companys long-term debt and subordinated debentures is based on market prices or dealer quotes (for publicly traded unsecured notes) and on discounted future cash flows using current interest rates for financial instruments with similar characteristics and maturities (for bank notes and mortgage notes).
The fair value of the Companys cash and cash equivalents, restricted cash, accounts receivable and other short-term borrowings approximates their carrying values at October 29, 2011 due to the short-term maturities of these instruments. The fair value of the Companys long-term debt at October 29, 2011 was approximately $679 million. The carrying value of the Companys long-term debt at October 29, 2011 was $692 million. The fair value of the Companys subordinated debentures at October 29, 2011 was approximately $194 million. The carrying value of the Companys subordinated debentures at October 29, 2011 was $200 million.
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
The FASBs accounting guidance utilizes a fair value hierarchy that prioritizes the inputs to the valuation techniques used to measure fair value into three broad levels:
· Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities
· Level 2: Inputs, other than quoted prices, that are observable for the asset or liability, either directly or indirectly; these include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active
· Level 3: Unobservable inputs that reflect the reporting entitys own assumptions
|
|
|
|
Basis of Fair Value Measurements |
| ||||||||
|
|
|
|
Quoted Prices |
|
Significant |
|
|
| ||||
|
|
|
|
In Active |
|
Other |
|
Significant |
| ||||
|
|
Fair Value |
|
Markets for |
|
Observable |
|
Unobservable |
| ||||
|
|
of Assets |
|
Identical Items |
|
Inputs |
|
Inputs |
| ||||
(in thousands) |
|
(Liabilities) |
|
(Level 1) |
|
(Level 2) |
|
(Level 3) |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Long-lived assets held for sale |
|
|
|
|
|
|
|
|
| ||||
As of October 29, 2011 |
|
$ |
17,348 |
|
$ |
|
|
$ |
|
|
$ |
17,348 |
|
As of January 29, 2011 |
|
27,548 |
|
|
|
|
|
27,548 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
As of October 30, 2010 |
|
$ |
28,748 |
|
$ |
|
|
$ |
|
|
$ |
28,748 |
|
As of January 30, 2010 |
|
33,956 |
|
|
|
|
|
33,956 |
|
During the nine months ended October 29, 2011, long-lived assets held for sale with a carrying value of $27.5 million were written down to their fair value of $26.3 million, resulting in an impairment charge of $1.2 million, which was included in earnings for the period. During the nine months ended October 29, 2011, the Company sold two former retail store locations with carrying values totaling $9.0 million.
During the nine months ended October 30, 2010, long-lived assets held for sale with a carrying value of $34.0 million were written down to their fair value of $31.7 million, resulting in an impairment charge of $2.2 million, which was included in earnings for the period. The inputs used to calculate the fair value of these long-lived assets in both periods included selling prices from commercial real estate transactions for similar assets in similar markets that we estimated would be used by a market participant in valuing these assets. During the nine months ended October 30, 2010, the Company also sold a former retail store location with a carrying value of $3.0 million.
Note 16. Recently Issued Accounting Standards
In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-04, Fair Value Measurement (Topic 820)Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. The amendments in this update change the wording used to describe the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements to ensure consistency between U.S. GAAP and IFRS. This update is effective for interim and annual periods beginning after December 15, 2011 and is to be applied prospectively. The Company does not expect the adoption of ASU No. 2011-04 to have a material impact on the Companys financial statements.
In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220)Presentation of Comprehensive Income, to make the presentation of items within other comprehensive income (OCI) more prominent. The new standard will require companies to present items of net income, items of OCI and total comprehensive income in one continuous statement or two separate consecutive statements, and companies will no longer be allowed to present items of OCI in the statement of stockholders equity. This new update is effective for interim and annual periods beginning after December 15, 2011 and is to be applied retrospectively. The adoption of this new standard may change the order in which certain financial statements are presented and will provide additional detail in those financial statements when applicable, but will not have any other impact on the Companys financial statements.
Note 17. Subsequent Event
The Company reached an agreement effective November 30, 2011 with i2 Technologies, Inc. (i2), a subsidiary of JDA Software Group, Inc. (JDA), to settle a lawsuit filed by Dillards against i2 over software sold to Dillards by i2 in 2000, prior to JDAs acquisition of i2 in 2010. Pursuant to the agreement, i2 paid Dillards $57.0 million during the three months ending January 28, 2012. After providing for income taxes and settlement related expenses, the Company expects to record approximately $28.5 million of net income from this settlement during the three months ending January 28, 2012.
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with the condensed consolidated financial statements and the footnotes thereto included elsewhere in this report, as well as the financial and other information included in our Annual Report on Form 10-K for the year ended January 29, 2011.
EXECUTIVE OVERVIEW
Improved sales headlined our third quarter operating performance of fiscal 2011, contributing to record-setting earnings per share. Extending the sales momentum from our first two quarters, comparable store sales for the quarter ended October 29, 2011 increased 5% over the comparable prior year quarter as gross margin rates were held and operating expenses were leveraged. Net income for the quarter increased to $228.2 million, or $4.31 per shareour highest historical third quarter earnings per sharecompared to $14.4 million, or $0.22 per share, in the comparable prior year quarter.
Included in net income for the quarter ended October 29, 2011 are:
· a $201.6 million tax benefit ($3.81 per share) due to a reversal of a valuation allowance related to the amount of the capital loss carryforward used to offset the capital gain income recognized on the taxable transfer of properties to our REIT and
· 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.
Included in net income for the quarter ended October 30, 2010 is a $1.1 million pretax loss ($0.7 million after tax or $0.02 per share) related to the sale of a closed store and a $1.2 million income tax benefit ($0.02 per share) for a decrease in a capital loss valuation allowance.
Highlights of the quarter ended October 29, 2011 included:
· record earnings per share for a third quarter of $4.31 per share compared to $0.22 per share for the prior year third quarter. Net income was $228.2 million for the quarter ended October 29, 2011 compared to net income of $14.4 million for the quarter ended October 30, 2010.
· a comparable store sales increase of 5% while maintaining gross margin from retail operations at 36.8% of sales and
· continued operating expense control, decreasing 30 basis points of sales.
· the repurchase of approximately $123.7 million (2.9 million shares) of Class A Common Stock.
As of October 29, 2011, we had working capital of $672.1 million, cash and cash equivalents of $106.4 million and $1,034.0 million of total debt outstanding, excluding capital lease obligations. Cash flows from operating activities were $135.6 million for the nine months ended October 29, 2011. We operated 304 total stores, including 16 clearance centers, and one internet store as of October 29, 2011, a decrease of 6 stores from the same period last year.
Key Performance Indicators
We use a number of key indicators of financial condition and operating performance to evaluate our business, including the following:
|
|
Three Months Ended* |
| ||||
|
|
October 29, |
|
October 30, |
| ||
Net sales (in millions) |
|
$ |
1,382.6 |
|
$ |
1,344.1 |
|
Net sales trend |
|
3 |
% |
(1 |
)% | ||
Gross profit (in millions) |
|
$ |
502.6 |
|
$ |
486.6 |
|
Gross profit as a percentage of net sales |
|
36.4 |
% |
36.2 |
% | ||
Cash flow from operations (in millions) |
|
$ |
135.6 |
|
$ |
158.9 |
|
Total retail store count at end of period |
|
304 |
|
310 |
| ||
Retail sales per square foot |
|
$ |
26 |
|
$ |
25 |
|
Retail store sales trend |
|
4 |
% |
0 |
% | ||
Comparable retail store sales trend |
|
5 |
% |
1 |
% | ||
Comparable retail store inventory trend |
|
4 |
% |
(2 |
)% | ||
Retail merchandise inventory turnover |
|
2.4 |
|
2.4 |
|
*Cash flow from operations data is for the nine months ended October 29, 2011 and October 30, 2010.
General
Net sales. Net sales include merchandise sales of comparable and non-comparable stores and revenue recognized on contracts of CDI Contractors, LLC (CDI), the Companys general contracting construction company. Comparable store sales include sales for those stores which were in operation for a full period in both the current month and the corresponding month for the prior year. Non-comparable store sales include: sales in the current fiscal year from stores opened during the previous fiscal year before they are considered comparable stores; sales from new stores opened during the current fiscal year; sales in the previous fiscal year for stores closed during the current or previous fiscal year that are no longer considered comparable stores; and sales in clearance centers.
Service charges and other income. Service charges include income generated through the long-term marketing and servicing alliance (Alliance) with GE Consumer Finance (GE), which owns and manages the Dillards branded proprietary credit cards. Other income includes rental income, shipping and handling fees and lease income on leased departments.
Cost of sales. Cost of sales includes the cost of merchandise sold (net of purchase discounts), bankcard fees, freight to the distribution centers, employee and promotional discounts, non-specific margin maintenance allowances and direct payroll for salon personnel. Cost of sales also includes CDI contract costs, which comprise all direct material and labor costs, subcontract costs and those indirect costs related to contract performance, such as indirect labor, employee benefits and insurance program costs.
Advertising, selling, administrative and general expenses. Advertising, selling, administrative and general expenses include buying, occupancy, selling, distribution, warehousing, store and corporate expenses (including payroll and employee benefits), insurance, employment taxes, advertising, management information systems, legal and other corporate level expenses. Buying expenses consist of payroll, employee benefits and travel for design, buying and merchandising personnel.
Depreciation and amortization. Depreciation and amortization expenses include depreciation and amortization on property and equipment.
Rentals. Rentals include expenses for store leases and data processing and other equipment rentals.
Interest and debt expense, net. Interest and debt expense includes interest, net of interest income, relating to the Companys unsecured notes, mortgage notes, term note and subordinated debentures, amortization of financing costs and interest on capital lease obligations.
(Gain) loss on disposal of assets. (Gain) loss on disposal of assets includes the net gain or loss on the sale or disposal of property and equipment and the gain on the sale of an interest in a mall joint venture.
Asset impairment and store closing charges. Asset impairment and store closing charges consist of write-downs to fair value of under-performing or available-for-sale properties and exit costs associated with the closure of certain stores. Exit costs include future rent, taxes and common area maintenance expenses from the time the stores are closed.
Income on and equity in (losses) of joint ventures. Income on and equity in (losses) of joint ventures includes the Companys portion of the income or loss of the Companys unconsolidated joint ventures as well as a distribution of excess cash from one of the Companys mall joint ventures.
Seasonality and Inflation
Our business, like many other retailers, is subject to seasonal influences, with a significant portion of sales and income typically realized during the last quarter of our fiscal year due to the holiday season. Because of the seasonality of our business, results from any quarter are not necessarily indicative of the results that may be achieved for a full fiscal year.
We do not believe that inflation has had a material effect on our results during the periods presented; however, there can be no assurance that our business will not be affected by such in the future. In response to recent economic volatility in Asia and to increasing fabric prices (including cotton) and overseas wages, we have sought solutions to help minimize the effects of these events on our operations during fiscal 2011 by (1) negotiating efficiencies through our longstanding relationships with our current suppliers, (2) considering alternative manufacturing sources, (3) redesigning our garments and incorporating other types of fibers where appropriate and (4) adjusting price points as necessary. Consequently, we believe the effects of these currently known trends on our gross margins in fiscal 2011 will be minimal.
RESULTS OF OPERATIONS
The following table sets forth the results of operations and percentage of net sales for the periods indicated.
|
|
Three Months Ended |
|
Nine Months Ended |
| ||||
|
|
October 29, |
|
October 30, |
|
October 29, |
|
October 30, |
|
|
|
2011 |
|
2010 |
|
2011 |
|
2010 |
|
Net sales |
|
100.0 |
% |
100.0 |
% |
100.0 |
% |
100.0 |
% |
Service charges and other income |
|
2.5 |
|
2.1 |
|
2.2 |
|
2.1 |
|
|
|
102.5 |
|
102.1 |
|
102.2 |
|
102.1 |
|
Cost of sales |
|
63.6 |
|
63.8 |
|
63.8 |
|
64.5 |
|
Advertising, selling, administrative and general expenses |
|
29.3 |
|
29.6 |
|
27.7 |
|
28.3 |
|
Depreciation and amortization |
|
4.7 |
|
4.8 |
|
4.5 |
|
4.6 |
|
Rentals |
|
0.8 |
|
0.9 |
|
0.8 |
|
0.9 |
|
Interest and debt expense, net |
|
1.3 |
|
1.3 |
|
1.3 |
|
1.3 |
|
(Gain) loss on disposal of assets |
|
(0.1 |
) |
0.1 |
|
(0.1 |
) |
(0.1 |
) |
Asset impairment and store closing charges |
|
0.0 |
|
0.0 |
|
0.0 |
|
0.1 |
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes and income on and equity in (losses) of joint ventures |
|
2.9 |
|
1.6 |
|
4.2 |
|
2.5 |
|
Income taxes (benefit) |
|
(13.6 |
) |
0.4 |
|
(3.2 |
) |
0.8 |
|
Income on and equity in (losses) of joint ventures |
|
0.0 |
|
(0.1 |
) |
0.1 |
|
0.0 |
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
16.5 |
% |
1.1 |
% |
7.5 |
% |
1.7 |
% |
Net Sales
|
|
Three Months Ended |
|
|
| |||||
|
|
October 29, |
|
October 30, |
|
|
| |||
(in thousands of dollars) |
|
2011 |
|
2010 |
|
$ Change |
| |||
Net sales: |
|
|
|
|
|
|
| |||
Retail operations segment |
|
$ |
1,366,362 |
|
$ |
1,320,568 |
|
$ |
45,794 |
|
Construction segment |
|
16,250 |
|
23,550 |
|
(7,300 |
) | |||
Total net sales |
|
$ |
1,382,612 |
|
$ |
1,344,118 |
|
$ |
38,494 |
|
The percent change by category in the Companys retail operations segment sales for the three months ended October 29, 2011 compared to the three months ended October 30, 2010 as well as the percentage by segment and category to total net sales for the three months ended October 29, 2011 is as follows:
|
|
Three Months |
| ||
|
|
% Change |
|
% of |
|
Retail operations segment |
|
|
|
|
|
Cosmetics |
|
4.4 |
% |
16 |
% |
Ladies apparel and accessories |
|
3.0 |
|
36 |
|
Juniors and childrens apparel |
|
4.8 |
|
9 |
|
Mens apparel and accessories |
|
3.0 |
|
16 |
|
Shoes |
|
4.8 |
|
17 |
|
Home and furniture |
|
(1.3 |
) |
5 |
|
|
|
|
|
99 |
|
Construction segment |
|
|
|
1 |
|
Total |
|
|
|
100 |
% |
Net sales from the retail operations segment increased 4%, exclusive of adjustments to the sales reserve, during the three months ended October 29, 2011 compared to the three months ended October 30, 2010 while sales in comparable stores increased 5% between the same periods. Sales of shoes and juniors and childrens apparel increased significantly during the period. Sales of cosmetics, ladies apparel and accessories and mens apparel and accessories increased moderately during the period while sales in the home and furniture category declined slightly during the period.
The number of sales transactions decreased 3% for the three months ended October 29, 2011 over the comparable prior year period while the average dollars per sales transaction increased significantly. We recorded an allowance for sales returns of $7.7 million and $7.2 million as of October 29, 2011 and October 30, 2010, respectively.
We believe that we may continue to see some sales growth in the retail operations segment during the coming months; however, there is no guarantee of improved sales performance.
Net sales from the construction segment decreased $7.3 million or 31% during the three months ended October 29, 2011 compared to the three months ended October 30, 2010. We believe this decrease is primarily attributable to the negative impact that the weak United States economy has had in previous quarters and continues to have on demand for construction projects in private industry. During the first nine months of 2011, we have been awarded approximately $136 million in new contracts.
|
|
Nine Months Ended |
|
|
| |||||
|
|
October 29, |
|
October 30, |
|
|
| |||
(in thousands of dollars) |
|
2011 |
|
2010 |
|
$ Change |
| |||
Net sales: |
|
|
|
|
|
|
| |||
Retail operations segment |
|
$ |
4,247,462 |
|
$ |
4,108,112 |
|
$ |
139,350 |
|
Construction segment |
|
46,095 |
|
78,512 |
|
(32,417 |
) | |||
Total net sales |
|
$ |
4,293,557 |
|
$ |
4,186,624 |
|
$ |
106,933 |
|
The percent change by category in the Companys retail operations segment sales for the nine months ended October 29, 2011 compared to the nine months ended October 30, 2010 as well as the percentage by segment and category to total net sales for the nine months ended October 29, 2011 is as follows:
|
|
Nine Months |
| ||
|
|
% Change |
|
% of |
|
Retail operations segment |
|
|
|
|
|
Cosmetics |
|
4.1 |
% |
15 |
% |
Ladies apparel and accessories |
|
2.8 |
|
38 |
|
Juniors and childrens apparel |
|
4.0 |
|
9 |
|
Mens apparel and accessories |
|
4.4 |
|
17 |
|
Shoes |
|
5.3 |
|
15 |
|
Home and furniture |
|
(3.4 |
) |
5 |
|
|
|
|
|
99 |
|
Construction segment |
|
|
|
1 |
|
Total |
|
|
|
100 |
% |
Net sales from the retail operations segment increased 3% during the nine months ended October 29, 2011 compared to the nine months ended October 30, 2010 while sales in comparable stores increased 4% between the same periods. Moderate sales increases were noted in most merchandise categories during the period, with the exception of shoes which experienced a significant sales increase and home and furniture which experienced a moderate sales decline.
The number of sales transactions decreased 2% for the nine months ended October 29, 2011 compared to the nine months ended October 30, 2010 while the average dollars per sales transaction increased significantly.
Net sales from the construction segment decreased $32.4 million or 41% during the nine months ended October 29, 2011 compared to the nine months ended October 30, 2010.
Service Charges and Other Income
|
|
Three Months Ended |
|
Nine Months Ended |
|
Three |
|
Nine |
| ||||||||||
(in thousands of dollars) |
|
October 29, |
|
October 30, |
|
October 29, |
|
October 30, |
|
$ Change |
|
$ Change |
| ||||||
Service charges and other income: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Retail operations segment |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Leased department income |
|
$ |
2,372 |
|
$ |
2,311 |
|
$ |
7,106 |
|
$ |
6,844 |
|
$ |
61 |
|
$ |
262 |
|
Income from GE marketing and servicing alliance |
|
25,297 |
|
20,926 |
|
70,515 |
|
64,133 |
|
4,371 |
|
6,382 |
| ||||||
Shipping and handling income |
|
4,012 |
|
3,659 |
|
12,538 |
|
11,547 |
|
353 |
|
991 |
| ||||||
Other |
|
2,115 |
|
2,000 |
|
6,475 |
|
6,896 |
|
115 |
|
(421 |
) | ||||||
|
|
33,796 |
|
28,896 |
|
96,634 |
|
89,420 |
|
4,900 |
|
7,214 |
| ||||||
Construction segment |
|
130 |
|
23 |
|
156 |
|
444 |
|
107 |
|
(288 |
) | ||||||
Total |
|
$ |
33,926 |
|
$ |
28,919 |
|
$ |
96,790 |
|
$ |
89,864 |
|
$ |
5,007 |
|
$ |
6,926 |
|
Service charges and other income is composed primarily of income from the Alliance with GE. Income from the Alliance increased $4.4 million during the three months ended October 29, 2011 compared to the three months ended October 30, 2010 primarily due to decreased credit losses and increased late charge fee income. Income from the
Alliance increased $6.4 million during the nine months ended October 29, 2011 compared to the nine months ended October 30, 2010 primarily due to decreased credit losses partially offset by reduced finance charge and late charge fee income.
Gross Profit
(in thousands of dollars) |
|
October 29, |
|
October 30, |
|
$ Change |
|
% Change |
| |||
Gross profit: |
|
|
|
|
|
|
|
|
| |||
Three months ended |
|
|
|
|
|
|
|
|
| |||
Retail operations segment |
|
$ |
502,140 |
|
$ |
485,629 |
|
$ |
16,511 |
|
3.4 |
% |
Construction segment |
|
475 |
|
1,015 |
|
(540 |
) |
(53.2 |
) | |||
Total gross profit |
|
$ |
502,615 |
|
$ |
486,644 |
|
$ |
15,971 |
|
3.3 |
% |
|
|
|
|
|
|
|
|
|
| |||
Nine months ended |
|
|
|
|
|
|
|
|
| |||
Retail operations segment |
|
$ |
1,551,936 |
|
$ |
1,483,197 |
|
$ |
68,739 |
|
4.6 |
% |
Construction segment |
|
339 |
|
1,256 |
|
(917 |
) |
(73.0 |
) | |||
Total gross profit |
|
$ |
1,552,275 |
|
$ |
1,484,453 |
|
$ |
67,822 |
|
4.6 |
% |
|
|
Three Months Ended |
|
Nine Months Ended |
| ||||
|
|
October 29, |
|
October 30, |
|
October 29, |
|
October 30, |
|
Gross profit as a percentage of segment net sales: |
|
|
|
|
|
|
|
|
|
Retail operations segment |
|
36.8 |
% |
36.8 |
% |
36.5 |
% |
36.1 |
% |
Construction segment |
|
2.9 |
|
4.3 |
|
0.7 |
|
1.6 |
|
Total gross profit as a percentage of net sales |
|
36.4 |
|
36.2 |
|
36.2 |
|
35.5 |
|
Gross profit improved 20 basis points of sales and 70 basis points of sales during the three and nine months ended October 29, 2011 compared to the three and nine months ended October 30, 2010, respectively.
Gross profit as a percentage of sales from retail operations remained flat during the three months ended October 29, 2011 compared to the three months ended October 30, 2010 as a result of increased markdowns partially offset by increased markups. Gross profit as a percentage of sales from retail operations improved 40 basis points during the nine months ended October 29, 2011 compared to the nine months ended October 30, 2010 as a result of increased markups and decreased markdowns.
During the three months ended October 29, 2011 as compared to the three months ended October 30, 2010, gross margin was flat in most merchandise categories, with the exception of a slight gross margin decline in ladies apparel and accessories and a significant gross margin improvement in home and furniture.
During the nine months ended October 29, 2011 as compared to the nine months ended October 30, 2010, gross margin improved moderately in home and furniture and improved slightly in shoes and juniors and childrens apparel. Gross margin was flat in cosmetics and ladies apparel and accessories while mens apparel and accessories experienced a slight gross margin decline.
Inventory increased 4% in comparable stores as of October 29, 2011 compared to October 30, 2010 as management has planned more aggressively in light of improved sales trends. A 1% change in the dollar amount of markdowns would have impacted net income by approximately $2 million and $6 million for the three and nine months ended October 29, 2011, respectively.
Gross profit from the construction segment declined 140 basis points of sales and 90 basis points of sales during the three and nine months ended October 29, 2011 compared to the three and nine months ended October 30, 2010, respectively. The three-month gross margin decline from the prior year was the result of fewer projects caused by the reduction in demand for construction services combined with pricing pressures in an already competitive marketplace. The nine-month gross margin decline was also attributable to a $1.2 million loss recorded during the nine months ended October 29, 2011 on an electrical contract partially offset by a $2.2 million loss recorded in the
prior year comparable period on certain electrical contracts stemming from job delays due to bad weather and job underperformance.
Advertising, Selling, Administrative and General Expenses (SG&A)
(in thousands of dollars) |
|
October 29, |
|
October 30, |
|
$ Change |
|
% Change |
| |||
SG&A: |
|
|
|
|
|
|
|
|
| |||
Three months ended |
|
|
|
|
|
|
|
|
| |||
Retail operations segment |
|
$ |
403,658 |
|
$ |
397,355 |
|
$ |
6,303 |
|
1.6 |
% |
Construction segment |
|
1,108 |
|
1,139 |
|
(31 |
) |
(2.7 |
) | |||
Total SG&A |
|
$ |
404,766 |
|
$ |
398,494 |
|
$ |
6,272 |
|
1.6 |
% |
|
|
|
|
|
|
|
|
|
| |||
Nine months ended |
|
|
|
|
|
|
|
|
| |||
Retail operations segment |
|
$ |
1,186,492 |
|
$ |
1,180,737 |
|
$ |
5,755 |
|
0.5 |
% |
Construction segment |
|
3,578 |
|
3,453 |
|
125 |
|
3.6 |
| |||
Total SG&A |
|
$ |
1,190,070 |
|
$ |
1,184,190 |
|
$ |
5,880 |
|
0.5 |
% |
|
|
Three Months Ended |
|
Nine Months Ended |
| ||||
|
|
October 29, |
|
October 30, |
|
October 29, |
|
October 30, |
|
SG&A as a percentage of segment net sales: |
|
|
|
|
|
|
|
|
|
Retail operations segment |
|
29.5 |
% |
30.1 |
% |
27.9 |
% |
28.7 |
% |
Construction segment |
|
6.8 |
|
4.8 |
|
7.8 |
|
4.4 |
|
Total SG&A as a percentage of net sales |
|
29.3 |
|
29.6 |
|
27.7 |
|
28.3 |
|
SG&A improved 30 basis points of sales during the three months ended October 29, 2011 compared to the three months ended October 30, 2010 while total SG&A dollars increased $6.3 million. The dollar increase was most noted in payroll and payroll related taxes ($4.9 million), primarily of selling payroll, and supplies ($3.3 million) partially offset by decreased net advertising expenditures ($2.8 million) and utilities ($2.3 million).
SG&A improved 60 basis points of sales during the nine months ended October 29, 2011 compared to the nine months ended October 30, 2010 while total SG&A dollars increased $5.9 million. The dollar increase was most noted in payroll and payroll related taxes ($10.4 million), primarily of selling payroll, and supplies ($6.7 million) partially offset by decreased net advertising expenditures ($8.7 million).
Rentals
(in thousands of dollars) |
|
October 29, |
|
October 30, |
|
$ Change |
|
% Change |
| |||
Rentals: |
|
|
|
|
|
|
|
|
| |||
Three months ended |
|
|
|
|
|
|
|
|
| |||
Retail operations segment |
|
$ |
11,213 |
|
$ |
11,626 |
|
$ |
(413 |
) |
(3.6 |
)% |
Construction segment |
|
16 |
|
15 |
|
1 |
|
6.7 |
| |||
Total rentals |
|
$ |
11,229 |
|
$ |
11,641 |
|
$ |
(412 |
) |
(3.5 |
)% |
|
|
|
|
|
|
|
|
|
| |||
Nine months ended |
|
|
|
|
|
|
|
|
| |||
Retail operations segment |
|
$ |
34,763 |
|
$ |
36,537 |
|
$ |
(1,774 |
) |
(4.9 |
)% |
Construction segment |
|
35 |
|
61 |
|
(26 |
) |
(42.6 |
) | |||
Total rentals |
|
$ |
34,798 |
|
$ |
36,598 |
|
$ |
(1,800 |
) |
(4.9 |
)% |
The decrease in rental expense for the three and nine months ended October 29, 2011 compared to the three and nine months ended October 30, 2010, respectively, was primarily due to a decrease in the amount of equipment leased by the Company.
Interest and Debt Expense, Net
(in thousands of dollars) |
|
October 29, |
|
October 30, |
|
$ Change |
|
% Change |
| |||
Interest and debt expense (income), net: |
|
|
|
|
|
|
|
|
| |||
Three months ended |
|
|
|
|
|
|
|
|
| |||
Retail operations segment |
|
$ |
17,791 |
|
$ |
18,118 |
|
$ |
(327 |
) |
(1.8 |
)% |
Construction segment |
|
(41 |
) |
(75 |
) |
34 |
|
45.3 |
| |||
Total interest and debt expense, net |
|
$ |
17,750 |
|
$ |
18,043 |
|
$ |
(293 |
) |
(1.6 |
)% |
|
|
|
|
|
|
|
|
|
| |||
Nine months ended |
|
|
|
|
|
|
|
|
| |||
Retail operations segment |
|
$ |
54,567 |
|
$ |
55,520 |
|
$ |
(953 |
) |
(1.7 |
)% |
Construction segment |
|
(120 |
) |
(159 |
) |
39 |
|
24.5 |
| |||
Total interest and debt expense, net |
|
$ |
54,447 |
|
$ |
55,361 |
|
$ |
(914 |
) |
(1.7 |
)% |
The decrease in net interest and debt expense for the nine months ended October 29, 2011 is primarily attributable to note maturities and repurchases during the period partially offset by an increase in credit facility interest. Total weighted average debt outstanding during the nine months ended October 29, 2011 increased approximately $35.9 million compared to the nine months ended October 30, 2010.
(Gain) Loss on Disposal of Assets
(in thousands of dollars) |
|
October 29, |
|
October 30, |
|
$ Change |
| |||
(Gain) loss on disposal of assets: |
|
|
|
|
|
|
| |||
Three months ended |
|
|
|
|
|
|
| |||
Retail operations segment |
|
$ |
(1,456 |
) |
$ |
934 |
|
$ |
2,390 |
|
Construction segment |
|
|
|
|
|
|
| |||
Total (gain) loss on disposal of assets |
|
$ |
(1,456 |
) |
$ |
934 |
|
$ |
2,390 |
|
|
|
|
|
|
|
|
| |||
Nine months ended |
|
|
|
|
|
|
| |||
Retail operations segment |
|
$ |
(3,911 |
) |
$ |
(3,280 |
) |
$ |
631 |
|
Construction segment |
|
64 |
|
(12 |
) |
(76 |
) | |||
Total (gain) loss on disposal of assets |
|
$ |
(3,847 |
) |
$ |
(3,292 |
) |
$ |
555 |
|
During the three months ended October 29, 2011, the Company received proceeds of $10.3 million from the sale of two former retail store locations, resulting in gains totaling $1.3 million that were recorded in (gain) loss on disposal of assets.
Additionally, during the nine months ended October 29, 2011, the Company received proceeds of $11.0 million from the sale of an interest in a mall joint venture, resulting in a gain of $2.1 million that was recorded in (gain) loss on disposal of assets.
During the three months ended October 30, 2010, the Company received proceeds of $1.9 million from the sale of a former retail store location, resulting in a loss of $1.1 million that was recorded in (gain) loss on disposal of assets.
Additionally, during the nine months ended October 30, 2010, the Company received proceeds of $4.0 million from the sale of a former retail store location, resulting in a gain of $4.0 million that was recorded in (gain) loss on disposal of assets.
Asset Impairment and Store Closing Charges
(in thousands of dollars) |
|
October 29, |
|
October 30, |
|
$ Change |
| |||
Asset impairment and store closing charges: |
|
|
|
|
|
|
| |||
Nine months ended |
|
|
|
|
|
|
| |||
Retail operations segment |
|
$ |
1,200 |
|
$ |
2,208 |
|
$ |
(1,008 |
) |
Construction segment |
|
|
|
|
|
|
| |||
Total asset impairment and store closing charges |
|
$ |
1,200 |
|
$ |
2,208 |
|
$ |
(1,008 |
) |
There were no asset impairment and store closing costs recorded during the three months ended October 29, 2011 and October 30, 2010.
During the nine months ended October 29, 2011, the Company recorded a pretax charge of $1.2 million for asset impairment and store closing costs. The charge was for the write-down of a property currently held for sale.
During the nine months ended October 30, 2010, the Company recorded a pretax charge of $2.2 million for asset impairment and store closing costs. The charge was for the write-down of a property currently held for sale.
Income Taxes
The total amount of unrecognized tax benefits as of October 29, 2011 and October 30, 2010 was $8.2 million and $14.0 million, respectively, of which $5.6 million and $10.3 million, respectively, would, if recognized, affect the effective tax rate. The Company classifies accrued interest expense and penalties relating to income tax in the condensed consolidated financial statements as income tax expense. The total accrued interest and penalties in the condensed consolidated balance sheets as of October 29, 2011 and October 30, 2010 was $3.4 million and $4.6 million, respectively. The estimated range of the reasonably possible unrecognized tax benefit decrease in the next twelve months is between $0.5 million and $1.5 million. Changes in the Companys assumptions and judgments can materially affect amounts recognized in the condensed consolidated balance sheets and statements of income.
In January 2011, the Company formed a wholly-owned subsidiary intended to operate as a real estate investment trust (REIT) and transferred certain properties to this subsidiary. The Company entered into this transaction in order to enhance its financial flexibility by providing additional sources of liquidity. At the time, the Company believed that a tax election might be available to the Company that would result in a taxable gain on the transfer of these properties to the REIT. In May 2011, the Company requested that the Internal Revenue Service (IRS) review the REIT transaction and a potential tax election available to the Company, through the IRSs voluntary Pre-Filing Agreement Program (PFA). Through the PFA, in September 2011, the Company and the IRS entered into a Closing Agreement On Final Determination Covering Specific Matters under which agreement the IRS agreed with the Company regarding the tax treatment of the transfer of the properties to the REIT and the availability of the tax election to the Company. Based on the agreement with the IRS, during the three months ended October 29, 2011 the Company determined to make the tax election in its tax return for the fiscal year ended January 29, 2011 (fiscal 2010) which was filed during the quarter. This tax election increases the tax basis of the properties transferred to the REIT to their fair values at the date of the transfer. The income tax that would otherwise be payable because of the gain recognized by this election was largely reduced by the utilization of a capital loss carryforward, that would otherwise have expired as of January 29, 2011, against a portion of the recognized gain. Because of the Companys past uncertainty regarding the incurrence of capital gain income, the deferred tax asset associated with that capital loss carryforward had been offset by a full valuation allowance since its recognition in fiscal 2005. During the three months ended October 29, 2011, income taxes included the recognition of approximately $201.6 million in tax benefit due to the reversal of the valuation allowance related to the amount of the capital loss carryforward used to offset the capital gain income recognized on the taxable transfer of the properties to the REIT. Approximately $134.4 million of the tax benefit relates to increased basis in depreciable property while approximately $67.2 million of the benefit relates to increased basis in land. Due to the increased tax basis of the depreciable properties transferred to the REIT, the Company will recognize increased tax depreciation deductions in the future which are expected to yield cash tax benefits of approximately $5 million annually in years one through twenty and approximately $2 million annually in years twenty-one through forty beginning with the year ending January 28, 2012. Due to the uncertainty surrounding whether the REIT will dispose of any of its land assets in the future, the Company cannot estimate when or if the cash tax benefits related to the increased basis in land will be received.
The Companys estimated federal and state income tax rate, inclusive of income on and equity in losses of joint ventures, was approximately (473.1)% and 29.6% for the three months ended October 29, 2011 and October 30, 2010, respectively. During the three months ended October 29, 2011, income taxes included the recognition of: a tax benefit of approximately $201.6 million due to the reversal of a valuation allowance related to a capital loss carryforward; tax benefits related to federal tax credits; and net decreases in unrecognized tax benefits, interest and penalties. During the three months ended October 30, 2010, income taxes included the recognition of tax benefits primarily due to a decrease in a capital loss valuation allowance.
The Companys estimated federal and state income tax rate, inclusive of income on and equity in losses of joint ventures, was approximately (75.4)% and 32.1% for the nine months ended October 29, 2011 and October 30, 2010, respectively. During the nine months ended October 29, 2011, income taxes included the recognition of: a tax benefit of approximately $201.6 million due to the reversal of a valuation allowance related to a capital loss carryforward; tax benefits related to federal tax credits; net decreases in unrecognized tax benefits, interest and penalties; decreases in net operating loss valuation allowances; and decreases in net deferred tax liabilities resulting from legislatively-enacted state tax rate reductions. Additionally, during the nine months ended October 29, 2011, the IRS concluded its examination of the Companys federal income tax returns for the fiscal tax years 2008 through 2009, and no significant changes occurred in these tax years as a result of such examination. During the nine months ended October 30, 2010, income taxes included the recognition of tax benefits primarily due to a state administrative settlement, a decrease in a capital loss valuation allowance, and federal tax credit refund claims.
The Companys income tax rate for the remainder of fiscal 2011 is dependent upon results of operations and may change if the results for fiscal 2011 are different from current expectations. The Companys effective tax rate for the remainder of fiscal 2011 is estimated to approximate 36%.
FINANCIAL CONDITION
Financial Position Summary
(in thousands of dollars) |
|
October 29, |
|
January 29, |
|
$ Change |
|
% Change |
| |||
Cash and cash equivalents |
|
$ |
106,383 |
|
$ |
343,291 |
|
$ |
(236,908 |
) |
(69.0 |
)% |
Restricted cash |
|
24,901 |
|
|
|
24,901 |
|
* |
| |||
Other short-term borrowings |
|
142,000 |
|
|
|
142,000 |
|
* |
| |||
Long-term debt, including current portion |
|
692,031 |
|
746,412 |
|
(54,381 |
) |
(7.3 |
) | |||
Subordinated debentures |
|
200,000 |
|
200,000 |
|
|
|
|
| |||
Stockholders equity |
|
1,832,367 |
|
2,086,720 |
|
(254,353 |
) |
(12.2 |
) | |||
|
|
|
|
|
|
|
|
|
| |||
Current ratio |
|
1.52 |
|
2.05 |
|
|
|
|
| |||
Debt to capitalization |
|
36.1 |
% |
31.2 |
% |
|
|
|
| |||
(in thousands of dollars) |
|
October 29, |
|
October 30, |
|
$ Change |