Dillard's 2014 Annual Report Download - page 31

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26
Income Taxes
The Company's estimated federal and state effective income tax rate, inclusive of income on and equity in losses of joint
ventures, was 35.1% in fiscal 2014, 34.9% in fiscal 2013, and 30.2% in fiscal 2012. The Company expects the fiscal 2015
federal and state effective income tax rate to approximate 35%.
Fiscal 2014
During fiscal 2014, income taxes included the recognition of tax benefits of approximately $2.8 million related to federal
tax credits and $1.4 million due to net decreases in unrecognized tax benefits, interest and penalties. These tax benefits were
partially offset by tax expense of approximately $1.5 million due to net increases in valuation allowances related to state net
operating loss carryforwards. In addition, during fiscal 2014, the IRS concluded its examination of the Company's federal
income tax returns for fiscal tax years 2011 and 2012, with no material changes in these tax years as a result of such
examination.
Fiscal 2013
During fiscal 2013, income taxes included the recognition of tax benefits of approximately $5.5 million related to
decreases in valuation allowances related to state net operating loss carryforwards and $3.0 million related to federal tax
credits.
Fiscal 2012
During fiscal 2012, income taxes included the recognition of tax benefits of approximately $19.7 million due to
deductions for dividends paid to the Dillard's, Inc. Investment and Employee Stock Ownership Plan, $2.8 million related to
federal tax credits, $1.2 million for the increase in the cash surrender value of life insurance policies, $1.8 million due to net
decreases in unrecognized tax benefits, interest and penalties, $1.7 million for an amended return filed where capital gain
income was offset by a previously unrecognized capital loss carryforward available in the amended return year, and
$1.0 million related to decreases in valuation allowances related to state net operating loss carryforwards.
LIQUIDITY AND CAPITAL RESOURCES
The Company's current non-operating priorities for its use of cash are stock repurchases, strategic investments to enhance
the value of existing properties and dividend payments to stockholders.
Cash flows for the Company's most recent three fiscal years were as follows:
Percent Change
(in thousands of dollars) Fiscal 2014 Fiscal 2013 Fiscal 2012 2014 - 2013 2013 - 2012
Operating Activities. . . . . . . . . . . . . . . . . . . . . . $ 611,589 $ 501,757 $ 522,703 21.9% (4.0)%
Investing Activities . . . . . . . . . . . . . . . . . . . . . . (143,412) (76,628)(105,709)(87.2) 27.5
Financing Activities. . . . . . . . . . . . . . . . . . . . . . (301,559) (312,055)(517,206) 3.4 39.7
Total Cash Provided (Used). . . . . . . . . . . . . . . $ 166,618 $ 113,074 $ (100,212)
Operating Activities
The primary source of the Company's liquidity is cash flows from operations. Due to the seasonality of the Company's
business, we have historically realized a significant portion of the cash flows from operating activities during the second half of
the fiscal year. Retail operations sales are the key operating cash component, providing 95.7% and 96.2% of total revenues in
fiscal 2014 and 2013, respectively.
Operating cash inflows also include revenue and reimbursements from the Wells Fargo Alliance and former Synchrony
Alliance and cash distributions from joint ventures. Operating cash outflows include payments to vendors for inventory,
services and supplies, payments to employees and payments of interest and taxes.
The Wells Fargo Alliance provides for certain payments to be made by Wells Fargo to the Company, including the
Company's share of revenues under this alliance. The Company received income of approximately $112 million and $113
million from the Wells Fargo Alliance and former Synchrony Alliance in fiscal 2014 and 2013, respectively. The amount the
Company receives is dependent on the level of sales on Wells Fargo accounts, the level of balances carried on the Wells Fargo