Dillard's 2009 Annual Report Download - page 67

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. Income Taxes (Continued)
judgments can materially affect amounts recognized in the consolidated balance sheets and statements
of operations.
Income taxes paid during fiscal 2009, 2008 and 2007 were approximately $6.4 million, $0.5 million
and $69.8 million, respectively.
9. Subordinated Debentures
At January 30, 2010, the Company had $200 million outstanding of its 7.5% subordinated
debentures due August 1, 2038. All of these subordinated debentures were held by Dillard’s Capital
Trust I (‘‘Trust’’), a 100% owned unconsolidated finance subsidiary of the Company. The subordinated
debentures are the sole asset of the Trust. The Company has the right to defer the payment of interest
on the subordinated debentures at any time for a period not to exceed 20 consecutive quarters.
However, the Company has no intention of exercising this right to defer interest payments.
At January 30, 2010, the Trust has outstanding $200 million liquidation amount of 7.5% Capital
Securities, due August 1, 2038 (the ‘‘Capital Securities’’). 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 Capital Securities are subject to mandatory redemption upon
repayment of the Company’s subordinated debentures. The Company’s obligations under the
subordinated debentures and related agreements, taken together, provide a full and unconditional
guarantee of payments due on the Capital Securities.
The Trust is a variable interest entity and is not consolidated into the Company’s financial
statements, since the Company is not the primary beneficiary of the Trust.
10. 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 the lesser of $16,500 ($22,000 if
at least 50 years of age) or 75% of eligible pay. Eligible employees with one year of service, who elect
to participate in the plan, receive a Company matching contribution. Company matching contributions
are calculated on the eligible employee’s first 6% of elective deferrals with the first 1% being matched
100% and the next 5% being matched 50%. The Company matching contributions are used to purchase
Class A Common Stock of the Company for the benefit of the employee. The terms of the plan
provide a two-year vesting schedule for the Company matching contribution portion of the plan. The
Company incurred benefit plan expense of $13 million, $15 million and $14 million for fiscal 2009, 2008
and 2007, respectively.
The Company has an unfunded, nonqualified defined benefit plan (‘‘Pension Plan’’) for its officers.
The Pension 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 to officers and allocates this cost to service periods. The actuarial
assumptions used to calculate pension costs are reviewed annually.
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