Dillard's 2005 Annual Report Download - page 57

Deferred tax assets and liabilities are presented as follows in the accompanying consolidated balance sheets:
(in thousands of dollars) January 28, 2006 January 29, 2005
Net deferred tax liabilities-noncurrent ....................... $479,123 $509,589
Net deferred tax liabilities-current .......................... 34,130 37,224
Net deferred tax liabilities ............................ $513,253 $546,813
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 estimates 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.
Income taxes paid during fiscal 2005, 2004 and 2003 were approximately $98.7 million, $36.2 million and
$0 million, respectively.
8. Guaranteed Preferred Beneficial Interests in the Company’s Subordinated Debentures
Guaranteed Preferred Beneficial Interests in the Company’s Subordinated Debentures are comprised of
$200 million liquidation amount of 7.5% Capital Securities, due August 1, 2038 (the “Capital Securities”)
representing beneficial ownership interest in the assets of Dillard’s Capital Trust I, a consolidated entity of the
Company.
Holders of the Capital Securities are entitled to receive cumulative cash distributions, payable quarterly, at
the annual rate of 7.5% of the liquidation amount of $25 per Capital Security. The subordinated debentures are
the sole assets of the Trust, and the Capital Securities are subject to mandatory redemption upon repayment of
the subordinated debentures. The Company’s obligations under the debentures and related agreements, taken
together, provides a full and unconditional guarantee of payments due on the Capital Securities.
9. Benefit Plans
The Company has a retirement plan with a 401(k)-salary deferral feature for eligible employees. Under the
terms of the plan, eligible employees may contribute up to 20% of eligible pay. Eligible employees with one year
of service may elect to make a contribution of up to 5% of eligible pay which will be matched 100% only if
invested in the Company’s common stock. The Company contributions are used to purchase Class A Common
Stock of the Company for the account of the employee. The terms of the plan provide a six-year graduated-
vesting schedule for the Company contribution portion of the plan. The Company incurred expense of $13
million, $11 million and $12 million for fiscal 2005, 2004 and 2003, respectively, for the plan.
The Company has a nonqualified defined benefit plan for certain officers. The plan is noncontributory and
provides benefits based on years of service and compensation during employment. Pension expense is
determined using various actuarial cost methods to estimate the total benefits ultimately payable and allocates
this cost to service periods. The pension plan is unfunded. The actuarial assumptions used to calculate pension
costs are reviewed annually. The Company expects to make a contribution to the pension plan of approximately
$5.0 million in fiscal 2006. The Company uses January 31 as the measurement date for determining pension plan
obligations.
F-17