Dillard's 2012 Annual Report Download - page 38

the properties to the REIT (‘‘REIT Transaction’’). Approximately $134.4 million of the tax benefit
relates to increased basis in depreciable property while approximately $67.2 million of the benefit
relates to increased basis in land. Due to the increased tax basis of the depreciable properties
transferred to the REIT, the Company will recognize increased tax depreciation deductions in the
future which are expected to yield cash tax benefits of approximately $5.0 million annually in years one
through twenty and approximately $2.0 million annually in years twenty-one through forty beginning
with the current year. Due to the uncertainty surrounding whether the REIT will dispose of any of its
land assets in the future, the Company cannot estimate when or if the cash tax benefits related to the
increased basis in land will be received.
During fiscal 2011, income taxes included the recognition of tax benefits of approximately
$201.6 million due to the valuation allowance reversal related to the REIT Transaction, $3.7 million
related to federal tax credits, $1.0 million for the increase in the cash surrender value of life insurance
policies, $0.6 million due to net decreases in unrecognized tax benefits, interest and penalties, and
$0.6 million related to decreases in net deferred tax liabilities resulting from legislatively-enacted state
tax rate reductions. These tax benefits were partially offset by the recognition of tax expense of
approximately $2.3 million due to increases in net operating loss valuation allowances. Additionally,
during fiscal 2011, the IRS concluded its examination of the Company’s federal income tax returns for
the fiscal tax years 2008 through 2009, and no significant changes occurred in these tax years as a result
of such examination.
Fiscal 2010
During fiscal 2010, income taxes included approximately $1.4 million for an increase in deferred
liabilities due to an increase in the state effective tax rate, and included the recognition of tax benefits
of approximately $6.1 million for the net decrease in unrecognized tax benefits, interest, and penalties,
$2.9 million for the decrease in net operating loss valuation allowances, $0.7 million for the decrease in
the capital loss valuation allowance resulting from capital gain income, $1.2 million for the increase in
the cash surrender value of life insurance policies, and $2.5 million due to federal tax credits. During
fiscal 2010, the IRS completed its examination of the Company’s federal income tax returns for the
fiscal tax years 2006 and 2007, and no significant changes occurred in these tax years as a result of such
examination. During fiscal 2010, the Company reached settlements with federal and state taxing
jurisdictions which resulted in reductions in the liability for unrecognized tax benefits.
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 shareholders.
Cash flows for the three fiscal years ended were as follows:
Percent Change
(in thousands of dollars) Fiscal 2012 Fiscal 2011 Fiscal 2010 2012 - 2011 2011 - 2010
Operating Activities ................. $522,703 $ 501,140 $ 512,922 4.3% (2.3)%
Investing Activities .................. (105,709) (83,224) (89,615) (27.0) 7.1
Financing Activities ................. (517,206) (536,935) (421,709) 3.7 (27.3)
Total Cash (Used) Provided .......... $(100,212) $(119,019) $ 1,598
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