Dillard's 2010 Annual Report Download - page 37

Limited to 85% of the inventory of certain Company subsidiaries, availability for borrowings and
letter of credit obligations under the credit agreement was $817.7 million at January 29, 2011. No
borrowings were outstanding at January 29, 2011. Letters of credit totaling $90.8 million were issued
under this credit agreement leaving unutilized availability under the facility of approximately
$727 million at January 29, 2011. There are no financial covenant requirements under the credit
agreement provided that availability for borrowings and letters of credit exceeds $100 million. The
Company pays an annual commitment fee to the banks of 0.25% of the committed amount less
outstanding borrowings and letters of credit. The Company had weighted-average borrowings of
$8.7 million and $57.2 million during fiscal 2010 and 2009, respectively.
Under the credit agreement, the Company unilaterally reduced the previous $1.2 billion credit
facility by $200 million to $1.0 billion, effective September 1, 2010, in order to reduce the amount of
commitment fees. Planned inventory levels would not allow for utilization of the full $1.2 billion. All
other aspects of the credit agreement remain unchanged.
The Company’s credit agreement expires December 12, 2012. The Company will assess the timing
and amount of a new facility later this year. Market conditions and lender capacity continue to
improve.
Long-term Debt. At January 29, 2011, the Company had $746.4 million of long-term debt,
comprised of unsecured notes, a term note and a mortgage note outstanding. The unsecured notes bear
interest at rates ranging from 6.63% to 9.13% with due dates from 2011 through 2028, and the
mortgage note bears interest at 9.25% with a due date of 2013. The term note, with an outstanding
balance of $21.3 million as of January 29, 2011, was issued during fiscal 2008 towards the purchase of a
corporate aircraft and bears interest at 5.93% with a due date of 2012.
We reduced our net level of outstanding debt and capital leases during fiscal 2010 by $17.5 million
compared to a reduction of $33.9 million in fiscal 2009. In addition to regularly scheduled payments on
its term note and mortgage principal during fiscal 2010, the Company (1) paid off $13 million in capital
lease obligations for two corporate aircraft during fiscal 2010 and (2) repurchased $1.2 million face
amount of 7.13% notes with an original maturity on August 1, 2018.
The debt decline in fiscal 2009 was primarily due to regular maturities of outstanding notes and
scheduled payments of mortgage principal. During fiscal 2009, the Company also repurchased
$8.4 million face amount of 9.125% notes with an original maturity on August 1, 2011. This repurchase
resulted in a pretax gain of approximately $1.7 million which was recorded in net interest and debt
expense. No notes were repurchased during fiscal 2008.
As of January 29, 2011, maturities of long-term debt over the next five years (starting with year
one) are $49 million, $77 million, $0, $0 and $0.
Subordinated Debentures. 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, a 100% owned, unconsolidated finance subsidiary of the Company.
Fiscal 2011
During fiscal 2011, the Company expects to finance its capital expenditures and its working capital
requirements, including required debt repayments and stock repurchases, from cash on hand, cash flows
generated from operations and utilization of the credit facility. Peak borrowings under the credit
facilities were approximately $126 million during fiscal 2010. Net borrowings (borrowings less cash and
cash equivalents) remained below $0 during fiscal 2010, and borrowings are expected to be minimal
during fiscal 2011. Depending on conditions in the capital markets and other factors, the Company will
from time to time consider possible financing transactions, the proceeds of which could be used to
refinance current indebtedness or for other corporate purposes.
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