Dillard's 2004 Annual Report Download - page 45

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”. 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 accounting change would have been:
(in thousands of dollars, except per share data) Fiscal 2004 Fiscal 2003 Fiscal 2002
Income before cumulative effect of accounting change
As reported $117,666 $ 9,344 $131,926
Deduct: Total stock-based employee
compensation expense determined under fair value
based method, net of taxes
(1,825) (2,732)
(9,261)
Pro forma $115,841 $ 6,612 $122,665
Basic earnings per share:
As reported $1.41 $0.11 $1.56
Pro forma 1.39 0.08 1.45
Diluted earnings per share:
As reported $1.41 $0.11 $1.55
Pro forma 1.38 0.08 1.44
Segment Reporting – The Company operates in a single operating segment — the operation of retail department stores.
Revenues from customers are derived from merchandise sales and service charges and interest on the Company’s
proprietary credit card prior to November 1, 2004.
The Company does not rely on any major customers as a source of revenue.
New Accounting Pronouncements
In November 2004, the FASB issued SFAS No. 151, “Inventory Costs, an Amendment of ARB No. 43, Chapter 4”
(“SFAS No. 151”). SFAS No. 151 amends the guidance in ARB No. 43, Chapter 4, “Inventory Pricing,” to clarify the
accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). SFAS
No. 151 is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The adoption of the
of SFAS No. 151 is not expected to have a material effect on the Company’s financial position, results of operations or
cash flows.
In December 2004, the FASB issued SFAS No. 153, “Exchanges of Nonmonetary Assets – An Amendment of APB
Opinion No. 29, Accounting for Nonmonetary Transactions” (“SFAS No. 153”). SFAS No. 153 eliminates from fair
value measurement for nonmonetary exchanges of similar productive assets in paragraph 21 (b) of APB Opinion No. 29,
and replaces it with an exception for exchanges that do not have commercial substance. SFAS No. 153 is effective for
fiscal periods beginning after June 15, 2005. The Company does not expect SFAS No. 153 to have a material impact on
our consolidated financial position, results of operations or cash flows.
In December 2004, the FASB issued Statement No. 123 (revised 2004), “Share-Based Payment” (“SFAS No. 123-R”).
SFAS No. 123-R requires all forms of share-based payments to employees, including employee stock options, be treated
as compensation and recognized in the income statement based on their estimated fair values. This statement will be
effective for fiscal periods beginning after June 15, 2005 which will be the Company’s third quarter of fiscal 2005.
The Company currently accounts for stock options under APB No. 25 using the intrinsic value method in accounting for
its employee stock options. No stock-based compensation costs were reflected in net income, as no options under those
plans had an exercise price less than the market value of the underlying common stock on the date of grant.
Under the adoption of SFAS No. 123-R, the Company will be required to expense stock options over the vesting period
in its statement of operations. In addition, the Company will need to recognize expense over the remaining vesting
period associated with unvested options outstanding as of June 15, 2005.
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