Dillard's 2015 Annual Report Download

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Table of contents

  • Page 1

  • Page 2
    ...build stores in 2015. In the fall, we opened newly constructed locations in Liberty Center in Cincinnati, Ohio; Fremaux Town Center in Slidell, Louisiana, and Fashion Place Mall in Murray, Utah, where we replaced an existing store in this vibrant center. In recent years, our goal has been to return...

  • Page 3
    ... period from to . Commission file number 1-6140 DILLARD'S, INC. (Exact name of registrant as specified in its charter) DELAWARE State or other jurisdiction of incorporation or organization 1600 CANTRELL ROAD, LITTLE ROCK, ARKANSAS (Address of principal executive offices) 71-0388071 (IRS Employer...

  • Page 4
    ... the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). No State the aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of August 1, 2015: $3,158,176,418. Indicate the number of shares outstanding of each of the...

  • Page 5
    ... Disclosures about Market Risk Financial Statements and Supplementary Data Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Controls and Procedures Other Information PART III Directors, Executive Officers and Corporate Governance Executive Compensation Security...

  • Page 6
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  • Page 7
    ... of the United States. Most of our stores are located in suburban shopping malls and open-air centers. Customers may also purchase our merchandise on-line at our website, www.dillards.com, which features on-line gift registries and a variety of other services. Our retail merchandise business is...

  • Page 8
    ... use of the private label cards by, among other things, providing incentives to sales associates to open new credit accounts, which generally can be opened while a customer is visiting one of our stores. Customers who open accounts are rewarded with discounts on future purchases. Private label card...

  • Page 9
    ... and market share. We conduct our retail merchandise business under highly competitive conditions. Competition is characterized by many factors including location, reputation, fashion, merchandise assortment, advertising, operating efficiency, price, quality, customer service and credit availability...

  • Page 10
    ... income and cash flow that the Company receives from the Wells Fargo Alliance is dependent upon a number of factors including the level of sales on Wells Fargo accounts, the level of balances carried on the Wells Fargo accounts by Wells Fargo customers, payment rates on Wells Fargo accounts, finance...

  • Page 11
    ...open air centers. Our stores benefit from the abilities that our Company, other anchor tenants and other area attractions have to generate consumer traffic. They also benefit from the continuing popularity of shopping malls as shopping destinations. Adverse changes in the development of new shopping...

  • Page 12
    ...the United States, we may be required to suspend operations in some or all of our stores, which could have a material adverse impact on our business, financial condition, and results of operations. Increases in the cost of employee benefits could impact the Company's financial results and cash flows...

  • Page 13
    ... systems in the stores, our Internet website, data centers that process transactions, communication systems and various software applications used throughout our Company to track inventory flow, process transactions and generate performance and financial reports. The Company's computer systems are...

  • Page 14
    ... for rental payments based on a percentage of net sales with a guaranteed minimum annual rent. In general, the Company pays the cost of insurance, maintenance and real estate taxes related to the leases. The following table summarizes by state of operation the number of retail stores we operate...

  • Page 15
    ... / Leased Facility Location Square Feet Distribution Centers: ...Mabelvale, AR Gilbert, AZ Valdosta, GA Olathe, KS Salisbury, NC Ft. Worth, TX Internet Fulfillment Center ...Maumelle, AR Dillard's Executive Offices ...Little Rock, AR CDI Contractors, LLC Executive Office ...Little Rock, AR CDI...

  • Page 16
    ... them and the Company's CEO and all positions and offices with the Company presently held by each person named. Each is elected to serve a one-year term. There are no other persons chosen to become executive officers. Held Present Office Since Name Age Position & Office Family Relationship to...

  • Page 17
    ... AND ISSUER PURCHASES OF EQUITY SECURITIES. Market and Dividend Information for Common Stock The Company's Class A Common Stock trades on the New York Stock Exchange under the Ticker Symbol "DDS". No public market currently exists for the Company's Class B Common Stock. The high and low sales prices...

  • Page 18
    Securities Authorized for Issuance under Equity Compensation Plans The information concerning the Company's equity compensation plans is incorporated herein by reference to Item 12 of this Annual Report on Form 10-K under the heading "Equity Compensation Plan Information". 12

  • Page 19
    ... Stock, the Standard & Poor's 500 Index and the Standard & Poor's 500 Department Stores Index as of the last day of each of the Company's last five fiscal years. 2011 2012 2013 2014 2015 Dillard's, Inc...$ S&P 500 ...S&P 500 Department Stores ... 115.23 105.33 112.90 $ 231.86 124.18 115.63...

  • Page 20
    ...-end of year ...297 297 296 302 304 _____ * Fiscal 2012 contains 53 weeks. The items below are included in the Selected Financial Data. 2015 A $12.6 million pretax gain ($8.1 million after tax or $0.21 per share) primarily related to the sale of four retail store locations. 2014 A $5.9 million...

  • Page 21
    ... sale of three former retail store locations. a $1.6 million pretax charge ($1.0 million after tax or $0.02 per share) for asset impairment and store closing charges related to the write-down of a property held for sale and of an operating property. a $1.7 million income tax benefit ($0.03 per share...

  • Page 22
    ... OF OPERATIONS. Dillard's, Inc. operates 297 retail department stores spanning 29 states and an Internet store. The Company also operates a general contractor, CDI, a portion of whose business includes constructing and remodeling stores for the Company, which is a reportable segment separate from...

  • Page 23
    ... of net sales. . Cash flow from operations (in millions)...Total retail store count at end of period ...Retail sales per square foot ...Retail stores sales trend ...Comparable retail store sales trend...Comparable retail store inventory trend ...Retail merchandise inventory turnover... $ 6,595...

  • Page 24
    ...opened during the current fiscal year; sales in the previous fiscal year for stores closed during the current or previous fiscal year that are no longer considered comparable stores; sales in clearance centers; and changes in the allowance for sales returns. Service charges and other income. Service...

  • Page 25
    ... on our sales return provision were not material for fiscal years 2015, 2014 or 2013. The Company's share of income earned under the Wells Fargo Alliance and former Synchrony Alliance involving the Dillard's branded private label credit cards is included as a component of service charges and...

  • Page 26
    ... Company utilizes for determining future pension obligations is based on the Citigroup Above Median Pension Index Curve on its annual measurement date and is matched to the future expected cash flows of the benefit plans by annual periods. The discount rate increased to 4.2% as of January 30, 2016...

  • Page 27
    ...: For the years ended January 30, 2016 % of Net Sales January 31, 2015 % of Net Sales February 1, 2014 % of Net Sales (in thousands of dollars) Amount Amount Amount Net sales ...$ 6,595,626 Service charges and other income ...158,919 6,754,545 Cost of sales ...4,350,805 Selling, general and...

  • Page 28
    ...the Company's sales for the past two years is as follows: Percent Change Fiscal 2015 - 2014 Fiscal 2014 - 2013 Retail operations segment Cosmetics...Ladies' apparel ...Ladies' accessories and lingerie ...Juniors' and children's apparel ...Men's apparel and accessories ...Shoes ...Home and furniture...

  • Page 29
    ... in juniors' and children's apparel and in men's apparel and accessories. Gross margin declined moderately in ladies' accessories and lingerie and home and furniture. Gross margin was essentially flat in cosmetics, ladies' apparel and shoes. Gross profit from the construction segment increased...

  • Page 30
    ... compared to fiscal 2013. Gross profit from retail operations improved 35 basis points of segment net sales during the same periods primarily due to increased initial markups. During fiscal 2014, gross margin improved slightly in juniors' and children's apparel and ladies' apparel. Gross margin was...

  • Page 31
    ...in Acumen Brands ("Acumen"), an eCommerce company based in Fayetteville, Arkansas. The sale resulted in a gain of $11.7 million that was recorded in gain on disposal of assets. During fiscal 2013, the Company also received proceeds of $1.7 million from the sale of two former retail stores located in...

  • Page 32
    ..., and 34.9% in fiscal 2013. The Company expects the fiscal 2016 federal and state effective income tax rate to approximate 35%. Fiscal 2015 During fiscal 2015, income taxes included the recognition of tax benefits of approximately $2.0 million related to federal tax credits and $1.5 million due to...

  • Page 33
    ... 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...

  • Page 34
    ... credit facility, the repayment of mortgage notes or long-term debt, capital lease obligations, the payment of dividends and the purchase of treasury stock. Cash used in financing activities increased to $518.2 million in fiscal 2015 from $301.6 million in fiscal 2014. This increase in cash used...

  • Page 35
    .... These conditions could impact our net sales which may result in reduced cash flows if we are unable to appropriately manage our inventory levels and expenses. Depending upon our actual and anticipated sources and uses of liquidity, the Company will from time to time consider possible financing...

  • Page 36
    ... does not expect a significant change in unrecognized tax benefits in the next twelve months. The Company is unable to reasonably estimate the timing of future cash flows of workers' compensation and general liability insurance reserves of $26.9 million and gift card liabilities of $18.7 million...

  • Page 37
    ... structures and related benefits; system failures or data security breaches; possible future acquisitions of store properties from other department store operators; the continued availability of financing in amounts and at the terms necessary to support the Company's future business; fluctuations in...

  • Page 38
    ... financial statements included in this Annual Report and has issued a report on the effectiveness of our internal control over financial reporting as of January 30, 2016. Please refer to KPMG's "Report of Independent Registered Public Accounting Firm" on page F-2 of this Annual Report. Changes in...

  • Page 39
    ...'s website, www.dillards.com, and is available in print to any stockholder who requests copies by contacting Julie J. Bull, Director of Investor Relations, at the Company's corporate executive offices at 1600 Cantrell Rd, Little Rock, AR 72201. ITEM 11. EXECUTIVE COMPENSATION. The information...

  • Page 40
    ...incorporated herein by reference from the information under the headings "Certain Relationships and Transactions" and "Information Regarding the Board and its Committees" in the Proxy Statement. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES. The information called for by this item is incorporated...

  • Page 41
    PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES. Financial Statements (a)(1) and (2) An "Index of Financial Statements" has been filed as a part of this report beginning on page F-1 hereof. (a)(3) Exhibits and Management Compensatory Plans An "Exhibit Index" has been filed as a part of ...

  • Page 42
    ... this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated. /s/ WILLIAM DILLARD, II William Dillard, II Chairman of the Board and Chief Executive Officer (Principal Executive Officer) /s/ ALEX DILLARD Alex Dillard President...

  • Page 43
    ...DILLARD'S, INC. AND SUBSIDIARIES Year Ended January 30, 2016 Page Report of Independent Registered Public Accounting Firm ...Report of Independent Registered Public Accounting Firm ...Consolidated Balance Sheets-January 30, 2016 and January 31, 2015 ...Consolidated Statements of Income-Fiscal years...

  • Page 44
    ... of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Dillard's, Inc. and subsidiaries as of January 30, 2016 and January 31, 2015, and the related consolidated statements of income, comprehensive income, stockholders' equity, and cash flows for each...

  • Page 45
    ... with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of January 30, 2016, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations...

  • Page 46
    ..., 2016 January 31, 2015 Assets Current assets: Cash and cash equivalents ...$ Restricted cash ...Accounts receivable ...Merchandise inventories ...Other current assets ...Total current assets ...Property and equipment: Land and land improvements ...Buildings and leasehold improvements ...Furniture...

  • Page 47
    Consolidated Statements of Income Dollars in Thousands, Except Share Data Years Ended January 30, 2016 January 31, 2015 February 1, 2014 Net sales ...$ Service charges and other income...Cost of sales ...Selling, general and administrative expenses ...Depreciation and amortization ...Rentals......

  • Page 48
    Consolidated Statements of Comprehensive Income Dollars in Thousands Years Ended January 30, 2016 January 31, 2015 February 1, 2014 Net income ...$ Other comprehensive income (loss): Amortization of retirement plan and other retiree benefit adjustments (net of tax of $8,574, $(4,235) and $4,452) ...

  • Page 49
    ... Per Share Data Additional Paid-in Capital Accumulated Other Comprehensive Loss Common Stock Class A Class B Retained Earnings Treasury Stock Total Balance, February 2, 2013 . $ 1,197 Net income ...- Other comprehensive income ...- Issuance of 30,452 shares under stock bonus plans . - Purchase...

  • Page 50
    ... payments on long-term debt and capital lease obligations Cash dividends paid ...Purchase of treasury stock ...Issuance cost of line of credit ...Net cash used in financing activities...(Decrease) increase in cash and cash equivalents ...Cash and cash equivalents, beginning of year ...Cash and cash...

  • Page 51
    ...Policies Description of Business-Dillard's, Inc. ("Dillard's" or the "Company") operates retail department stores, located primarily in the southeastern, southwestern and midwestern areas of the United States, and a general contracting construction company based in Little Rock, Arkansas. The Company...

  • Page 52
    ... capitalized during fiscal 2015 and 2014 was $2.1 million and $1.7 million, respectively, and was immaterial during fiscal 2013. For financial reporting purposes, depreciation is computed by the straight-line method over estimated useful lives: Buildings and leasehold improvements ...Furniture...

  • Page 53
    ... expiration, Wells Fargo Bank, N.A. ("Wells Fargo") purchased the Dillard's private label credit card portfolio from Synchrony and began managing Dillard's private label cards under a new 10-year agreement ("Wells Fargo Alliance"). The Company's share of income earned under the Wells Fargo Alliance...

  • Page 54
    ... to the current year presentation. These reclassifications had no effect on net income or stockholders' equity as previously reported. New Accounting Pronouncements Revenue from Contracts with Customers In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update...

  • Page 55
    ... fiscal years beginning after December 15, 2018, and early adoption is permitted. The Company is currently assessing the impact of this update on its consolidated financial statements. 2. Business Segments The Company operates in two reportable segments: the operation of retail department stores and...

  • Page 56
    ... of net sales by segment and major product line: Percentage of Net Sales Fiscal 2015 Fiscal 2014 Fiscal 2013 Retail operations segment: Cosmetics ...Ladies' apparel ...Ladies' accessories and lingerie ...Juniors' and children's apparel ...Men's apparel and accessories ...Shoes...Home and furniture...

  • Page 57
    ... working capital needs and general corporate purposes including, among other uses, working capital financing, the issuance of letters of credit, capital expenditures and, subject to certain restrictions, the repayment of existing indebtedness and share repurchases. The Company pays a variable rate...

  • Page 58
    ... of dollars) January 30, 2016 January 31, 2015 Trade accounts payable...$ Accrued expenses: Taxes, other than income ...Salaries, wages and employee benefits ...Liability to customers...Interest ...Rent ...Other...$ 6. Income Taxes The provision for federal and state income taxes is summarized as...

  • Page 59
    ... and income taxes using the federal statutory income tax rate is presented below: (in thousands of dollars) Fiscal 2015 Fiscal 2014 Fiscal 2013 Income tax at the statutory federal rate (inclusive of income on and equity in losses of joint ventures)...$ State income taxes, net of federal benefit...

  • Page 60
    ... ending amount of unrecognized tax benefits is as follows: (in thousands of dollars) Fiscal 2015 Fiscal 2014 Fiscal 2013 Unrecognized tax benefits at beginning of period ...$ Gross increases-tax positions in prior period...Gross decreases-tax positions in prior period ...Gross increases-current...

  • Page 61
    ... approximately $18 million for each of fiscal 2015, 2014 and 2013. 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...

  • Page 62
    ...the end of each fiscal year and is matched to the future expected cash flows of the benefit plans by annual periods. The discount rate increased to 4.2% as of January 30, 2016 from 3.5% as of January 31, 2015. Weighted average assumptions are as follows: Fiscal 2015 Fiscal 2014 Fiscal 2013 Discount...

  • Page 63
    ... 2015 Fiscal 2014 Fiscal 2013 Components of net periodic benefit costs: Service cost...Interest cost...Net actuarial loss...Amortization of prior service cost ...Plan curtailment gain ...Net periodic benefit costs ...Other changes in benefit obligations recognized in other comprehensive (income...

  • Page 64
    ... under open-ended stock repurchase plans. The following is a summary of share repurchase activity for the periods indicated (in thousands, except per share data): Fiscal 2015 Fiscal 2014 Fiscal 2013 Cost of shares repurchased ...Number of shares repurchased ...Average price per share... $ $ 500...

  • Page 65
    ... share data) Basic Diluted Basic Fiscal 2014 Diluted Basic Fiscal 2013 Diluted Net earnings available for pershare calculation ...$ Average shares of common stock outstanding ...Dilutive effect of stock-based compensation ...Total average equivalent shares Per share of common stock: ...Net income...

  • Page 66
    ... assets on the balance sheet. 15. Quarterly Results of Operations (unaudited) Fiscal 2015, Three Months Ended (in thousands of dollars, except per share data) May 2 August 1 October 31 January 30 Net sales ...$ Gross profit ...Net income ...Diluted earnings per share: Net income ...$ 1,573,493 613...

  • Page 67
    Quarterly information for fiscal 2015 and fiscal 2014 includes the following items: Fourth Quarter 2015 • Third Quarter 2015 • 2014 • a $5.9 million pretax gain ($3.8 million after tax or $0.09 per share) related to the sale of a retail store location. a $9.4 million pretax gain ($6.0 million ...

  • Page 68
    ... Wells Fargo Bank, N.A. and for the limited purposes stated therein, Dillard Investment Co., Inc. (Exhibit 10 to Form 10-Q for the quarter ended May 3, 2014, File No. 1-6140). Five-Year Credit Agreement between Dillard's, Inc., Dillard Store Services, Inc. and JPMorgan Chase Bank, N.A. as agent for...

  • Page 69
    ... 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF 101.LAB 101.PRE XBRL Taxonomy Extension Definition Linkbase Document XBRL Taxonomy Extension Label Linkbase Document XBRL Taxonomy Extension Presentation Linkbase Document _____ * + Incorporated by reference as indicated...

  • Page 70
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  • Page 71
    ... Holding Corp. - Little Rock, Arkansas J.C. Watts, Jr. - Former Member of Congress, Chairman of J.C. Watts Companies, Washington, D.C. Nick White - Chief Executive Officer & President, White & Associates - Rogers, Arkansas CORPORATE ORGANIZATION William Dillard, II - Chief Executive Officer Alex...

  • Page 72
    ... by exceptional customer care. Dillard's stores offer a broad selection of merchandise and feature products from both national and exclusive brand sources. The Company operates 273 Dillard's locations and 24 clearance centers spanning 29 states, plus an Internet store at www.dillards.com. ON THE...