Dillard's 2003 Annual Report Download - page 41

Insurance accruals. The Company’s consolidated balance sheets include liabilities with respect to self-insured workers’
compensation and general liability claims. The Company estimates the required liability of such claims on a discounted basis, utilizing
an actuarial method, based upon various assumptions, which include, but are not limited to, our historical loss experience, projected
loss development factors, actual payroll and other data. The required liability is also subject to adjustment in the future based upon the
changes in claims experience, including changes in the number of incidents (frequency) and changes in the ultimate cost per incident
(severity).
Revenue Recognition – The Company recognizes revenue at the “point of sale.” Finance charge revenue earned on customer
accounts, serviced by the Company under its proprietary credit card program, is recognized in the period in which it is earned.
Allowance for sales returns are recorded as a component of net sales in the period in which the related sales are recorded.
Advertising – Advertising and promotional costs, which include newspaper, television, radio and other media advertising, are
expensed as incurred and were $245 million, $253 million and $245 million for fiscal years 2003, 2002 and 2001, respectively.
Income Taxes – In accordance with SFAS No. 109, “Accounting for Income Taxes,” deferred income taxes reflect the future tax
consequences of differences between the tax bases of assets and liabilities and their financial reporting amounts at year-end.
Shipping and Handling – In accordance with Emerging Issues Task Force (“EITF”) 00-10, “Accounting for Shipping and Handling
Fees and Costs,” the Company records shipping and handling reimbursements in Other Income. The Company records shipping and
handling costs in Advertising, Selling, Administrative and General Expenses.
Comprehensive Income – Comprehensive income is equivalent to the Company’s net income for fiscal year 2001.
Stock-Based Compensation – The Company periodically grants stock options to employees. Pursuant to Accounting Principles
Board Opinion No. 25, “Accounting for Stock Issued to Employees,” the Company accounts for stock-based employee compensation
arrangements using the intrinsic value method. No compensation expense has been recorded in the Consolidated Financial Statements
with respect to option grants. The Company has adopted the disclosure only provisions of Financial Accounting Standards Board
Statement No. 123, “Accounting for Stock Based Compensation,” as amended by Financial Accounting Standards Board Statement
No. 148, “Accounting for Stock Based Compensation – Transition and Disclosure, an Amendment of FASB Statement No. 123”. See
Note 11 to the Company’s Consolidated Financial Statements. 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 income before extraordinary item
and accounting change would have been:
(in thousands of dollars, except per share data) Fiscal 2003 Fiscal 2002 Fiscal 2001
Income before cumulative effect of accounting change
As reported $9,344 $131,926 $71,798
Deduct: Total stock based employee compensation expense
determined under fair value based method, net of taxes (2,732) (9,261) (5,667)
Pro forma $6,612 $122,665 $66,131
Basic earnings per share:
As reported $0.11 $1.56 $0.85
Pro forma 0.08 1.45 0.78
Diluted earnings per share:
As reported $0.11 $1.55 $0.85
Pro forma 0.08 1.44 0.79
Segment Reporting – The Company operates in a single operating segment — the operation of retail department stores. Revenues
from external customers are derived from merchandise sales and service charges and interest on the Company’s proprietary credit
card.
The Company does not rely on any major customers as a source of revenue.
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