Dillard's 2005 Annual Report Download - page 35

Litigation Reform Act of 1995, contained in this report are based on estimates, projections, beliefs and
assumptions of management at the time of such statements and are not guarantees of future performance. The
Company disclaims any obligation to update or revise any forward-looking statements based on the occurrence of
future events, the receipt of new information, or otherwise. Forward-looking statements of the Company involve
risks and uncertainties and are subject to change based on various important factors. Actual future performance,
outcomes and results may differ materially from those expressed in forward-looking statements made by the
Company and its management as a result of a number of risks, uncertainties and assumptions including the
matters described under the caption “Risk Factors” above. Representative examples of those factors (without
limitation) include general retail industry conditions and macro-economic conditions; economic and weather
conditions for regions in which the Company’s stores are located and the effect of these factors on the buying
patterns of the Company’s customers; the impact of competitive pressures in the department store industry and
other retail channels including specialty, off-price, discount, internet, and mail-order retailers; changes in
consumer spending patterns and debt levels; adequate and stable availability of materials and production facilities
from which the Company sources its merchandise; changes in operating expenses, including employee wages,
commission structures and related benefits; possible future acquisitions of store properties from other department
store operators and the continued availability of financing in amounts and at the terms necessary to support the
Company’s future business; fluctuations in LIBOR and other base borrowing rates; potential disruption from
terrorist activity and the effect on ongoing consumer confidence; potential disruption of international trade and
supply chain efficiencies; world conflict and the possible impact on consumer spending patterns and other
economic and demographic changes of similar or dissimilar nature.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The table below provides information about the Company’s obligations that are sensitive to changes in
interest rates. The table presents maturities of the Company’s long-term debt and Guaranteed Beneficial Interests
in the Company’s Subordinated Debentures along with the related weighted-average interest rates by expected
maturity dates.
(in thousands of dollars)
Expected Maturity Date (fiscal year) 2006 2007 2008 2009 2010 Thereafter Total Fair Value
Long-term debt (including receivables
financing facilities) .................. $198,479 $100,635 $198,146 $24,653 $836 $734,675 $1,257,424 $1,231,947
Average interest rate ................... 7.3% 6.7% 6.5% 9.5% 9.3% 7.5% 7.2%
Guaranteed Beneficial Interests in the
Company’s Subordinated Debentures . . . $ — $ — $ — $ — $— $200,000 $ 200,000 $ 196,000
Average interest rate ................... — % — % — % — % — % 7.5% 7.5%
During the year ended January 28, 2006, the Company repurchased $15.4 million of its outstanding
unsecured notes prior to their related maturity dates. Interest rates on the repurchased securities ranged from
7.8% to 7.9%. Maturity dates ranged from 2023 to 2027. A pre-tax loss of $0.5 million recorded within interest
expense resulted from the repurchase of the unsecured notes during 2005.
During the year ended January 28, 2006, the Company paid off $50.0 million in mortgage notes due August
2011. These notes bore interest at 7.25% and were collateralized by certain corporate buildings, land and land
improvements.
The Company is exposed to market risk from changes in the interest rates under its $1.2 billion revolving
credit facility. Outstanding balances under this facility bear interest at a variable rate based on JPMorgan’s Base
Rate or LIBOR plus 1.25%. The Company had average borrowings of $8.2 million during fiscal 2005. Based on
the average amount outstanding during fiscal 2005, a 100 basis point change in interest rates would result in an
approximate $82,000 annual change to interest expense.
The Company had average short-term investments of $210 million during fiscal 2005. Based on the average
amount outstanding during fiscal 2005, a 100 basis point change in interest rates would result in an approximate
$2.1 million annual change to investment income.
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