Dillard's 2015 Annual Report Download - page 33

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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.
Synchrony owned and managed Dillard’s private label credit cards under the Synchrony Alliance that expired in November
2014. Following that scheduled expiration, Wells Fargo purchased the Dillard's private label card portfolio from Synchrony
and began managing Dillard's private label cards under the Wells Fargo Alliance. Under the Wells Fargo Alliance, Wells Fargo
establishes and owns private label card accounts for our customers, retains the benefits and risks associated with the ownership
of the accounts, provides key customer service functions, including new account openings, transaction authorization, billing
adjustments and customer inquiries, receives the finance charge income and incurs the bad debts associated with those
accounts.
Pursuant to the Wells Fargo Alliance, we receive on-going cash compensation from Wells Fargo based upon the portfolio's
earnings. The compensation earned on the portfolio is determined monthly and has no recourse provisions. The amount the
Company receives is dependent on the level of sales on Wells Fargo accounts, the level of balances carried on Wells Fargo
accounts by Wells Fargo customers, payment rates on Wells Fargo accounts, finance charge rates and other fees on Wells Fargo
accounts, the level of credit losses for the Wells Fargo accounts as well as Wells Fargo's ability to extend credit to our
customers. We participate in the marketing of the private label cards, which includes the cost of customer reward programs.
We accept payments on the private label cards in our stores as a convenience to customers who prefer to pay in person rather
than by paying online or mailing their payments to Wells Fargo. The Wells Fargo Alliance expires in fiscal 2024.
The Company received income of approximately $105 million, $112 million and $113 million from the Wells Fargo
Alliance and former Synchrony Alliance during fiscal 2015, 2014 and 2013, respectively.
Net cash flows from operations decreased $161.4 million during fiscal 2015 compared to fiscal 2014. This decrease was
primarily attributable to a decrease of $87.1 million related to changes in working capital items, primarily of decreases in trade
accounts payable and accrued expenses and income taxes payable and a decrease in gross profit.
Net cash flows from operations increased $109.8 million during fiscal 2014 compared to fiscal 2013. This improvement
was primarily attributable to an increase of $129.2 million related to changes in working capital items, primarily of increases in
trade accounts payable and accrued expenses.
Investing Activities
Cash inflows from investing activities generally include proceeds from sales of property and equipment. Investment cash
outflows generally include payments for capital expenditures such as property and equipment.
Capital expenditures increased $13.9 million for fiscal 2015 compared to fiscal 2014. The fiscal 2015 expenditures of
$165.8 million were primarily for the remodeling of existing stores and for the construction of our three new stores: Fashion
Place in Murray, Utah (200,000 square feet replacing 190,000 square feet), Fremaux Town Center in Slidell, Louisiana
(126,000 square feet) and Liberty Center in Cincinnati, Ohio (155,000 square feet), all of which opened during the third quarter
of fiscal 2015.
Capital expenditures increased $57.0 million for fiscal 2014 compared to fiscal 2013. The fiscal 2014 expenditures of
$151.9 million were primarily for the remodeling of existing stores and for the construction of our two new stores: The Shops
at Summerlin in Las Vegas, Nevada (200,000 square feet) and The Mall at University Town Center in Sarasota, Florida
(180,000 square feet), both of which opened during the third quarter of fiscal 2014.
Capital expenditures for fiscal 2016 are expected to be approximately $150 million. These expenditures are primarily for
the construction and remodeling of stores.
During fiscal 2015, we closed two clearance store locations: Madison Square Mall in Huntsville, Alabama (67,000 square
feet) and Tri County Mall in Cincinnati, Ohio (178,000 square feet). We remain committed to closing under-performing stores
where appropriate and may incur future closing costs related to these stores when they close.
During fiscal 2015, 2014 and 2013, we received proceeds from the sale of property and equipment of $25.5 million,
$14.8 million and $2.5 million, respectively, and recorded related gains of $12.6 million, $6.4 million and $0.6 million,
respectively. At January 31, 2015, $7.3 million of the fiscal 2014 proceeds were being held in escrow for the acquisition of
replacement property under like-kind exchange agreements. The escrow accounts were administered by an intermediary.
Pursuant to the like-kind exchange agreements, the cash was restricted for a maximum of 180 days from the date of the
property sale pending the acquisition of replacement property. Changes in restricted cash balances are reflected as an