Dillard's 2005 Annual Report Download - page 24

The Company’s income tax returns are periodically audited by various state and local jurisdictions.
Additionally, the Internal Revenue Service audits the Company’s federal income tax return annually. The
Company reserves for tax contingencies when it is probable that a liability has been incurred and the contingent
amount is reasonably estimable. These reserves are based upon the Company’s best estimation of the potential
exposures associated with the timing and amount of deductions as well as various tax filing positions. Due to the
complexity of these examination issues, for which reserves have been recorded, it may be several years before
the final resolution is achieved.
Discount rate. The discount rate that the Company utilizes for determining future pension obligations is
based on the Citigroup High Grade Corporate Yield Curve on its annual measurement date and is matched to the
future expected cash flows of the benefit plans by annual periods. The discount rate had increased to 5.60% as of
January 28, 2006 from 5.50% as of January 29, 2005. A further 50 basis point change in the discount rate would
generate an experience gain or loss of approximately $9 million.
Results of Operations
The following table sets forth the results of operations and percentage of net sales, for the periods indicated:
For the years ended
January 28, 2006 January 29, 2005 January 31, 2004
(in millions of dollars) Amount
%of
Net Sales Amount
%of
Net Sales Amount
%of
Net Sales
Net sales ................................. $7,560.2 100.0% $7,528.6 100.0% $7,598.9 100.0%
Cost of sales .............................. 5,014.0 66.3 5,017.8 66.6 5,170.2 68.0
Gross profit ............................... 2,546.2 33.7 2,510.8 33.4 2,428.7 32.0
Advertising, selling, administrative and general
expenses ............................... 2,041.5 27.0 2,098.8 27.9 2,097.9 27.6
Depreciation and amortization ................ 301.9 4.0 301.9 4.0 290.7 3.8
Rentals ................................... 47.5 0.6 54.8 0.7 64.1 0.8
Interest and debt expense .................... 105.6 1.4 139.1 1.8 181.1 2.4
Asset impairment and store closing charges ...... 61.7 0.8 19.4 0.3 43.7 0.6
Total expenses ......................... 2,558.2 33.8 2,614.0 34.7 2,677.5 35.2
Service charges, interest and other income ....... 147.8 1.9 287.7 3.8 264.8 3.4
Income before income taxes .................. 135.8 1.8 184.5 2.5 16.0 0.2
Income taxes .............................. 14.3 0.2 66.9 0.9 6.7 0.1
Net income ............................... $ 121.5 1.6% $ 117.6 1.6% $ 9.3 0.1%
Sales
The percent change by category in the Company’s sales for the past two years is as follows:
Percent Change
Fiscal
2005-2004
Fiscal
2004-2003
Cosmetics .............................................. 1.6 1.3
Ready to Wear ........................................... (3.5) (1.3)
Lingerie and Accessories ................................... 6.6 7.6
Juniors ................................................. 1.4 (8.7)
Children’s Clothing ....................................... (5.1) (2.7)
Men’s Clothing and Accessories ............................. 1.0 (3.2)
Shoes .................................................. 7.5 0.8
Decorator Home ......................................... (2.5) (2.0)
Furniture ............................................... (11.3) (15.1)
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