Dillard's 2004 Annual Report Download - page 15

Trends and uncertainties
We have identified the following key uncertainties whose fluctuations may have a material effect on our operating
results.
• Cash flow – Cash from operating activities is a primary source of liquidity that is adversely affected when the
industry faces market driven challenges and new and existing competitors seek areas of growth to expand their
businesses. If our customers do not purchase our merchandise offerings in sufficient quantities, we respond by
taking markdowns. If we have to reduce our prices, the cost of goods sold on our income statement will
correspondingly rise, thus reducing our income.
• Success of brand – The success of our exclusive brand merchandise is dependent upon customer fashion
preferences.
• Store growth – Our growth is dependent on a number of factors which could prevent the opening of new stores,
such as identifying suitable markets and locations.
• Sourcing – Store merchandise is dependent upon adequate and stable availability of materials and production
facilities from which the Company sources its merchandise.
Legal Proceedings
On July 29, 2002, a Class Action Complaint (followed on December 13, 2004 by a Second Amended Class Action
Complaint) was filed in the United States District Court for the Southern District of Ohio against the Company, the
Mercantile Stores Pension Plan (the “Plan”) and the Mercantile Stores Pension Committee (the “Committee”) on behalf
of a putative class of former Plan participants. The complaint alleges that certain actions by the Plan and the Committee
violated the Employee Retirement Income Security Act of 1974, as amended, (“ERISA”) as a result of amendments
made to the Plan that allegedly were either improper and/or ineffective and as a result of certain payments made to
certain beneficiaries of the Plan that allegedly were improperly calculated and/or discriminatory on account of age. The
Second Amended Complaint does not specify any liquidated amount of damages sought and seeks recalculation of
certain benefits paid to putative class members. No trial date has been set.
The Company is defending the litigation vigorously and has named the Plan’s actuarial firm as a cross defendant. While
it is not feasible to predict or determine the ultimate outcome of the pending litigation, management believes after
consultation with counsel, that its outcome, after consideration of the provisions recorded in the Company’s consolidated
financial statements, would not have a material adverse effect upon its consolidated cash flow or financial position.
However, it is possible that an adverse outcome could have an adverse effect on the Company’s consolidated net income
in a particular quarterly or annual period.
2005 Estimates
A summary of estimates on key financial measures for fiscal 2005, on a generally accepted accounting principles
(“GAAP”) basis, is shown below. There have been no changes in the estimates for 2005 since the Company released its
fourth quarter earnings on March 10, 2005.
(In millions of dollars) 2005 2004
Estimated Actual
Depreciation and amortization $ 310 $ 302
Rental expense 55 55
Interest and debt expense 103 139
Capital expenditures 335 285
General
Net Sales. Net sales include sales of comparable stores, non-comparable stores and lease income on leased departments.
Comparable store sales include sales for those stores which were in operation for a full period in both the current month
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