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Income before extraordinary loss/gain on early extinguishment of debt for the 13-week period ended August 3, 2002 was $12.5 million ($.15 per fully diluted share) compared to a loss of $20.6 million ($.24 per fully diluted share) for the 13 weeks ended August 4, 2001. Net income for the 13-week period ended August 3, 2002 was $6.7 million ($.08 per fully diluted share) compared to a net loss of $18.6 million ($.22 per fully diluted share) for the 13-week period ended August 4, 2001.
Dillard's, Inc. is pleased to report the following significant accomplishments during the thirteen weeks ended August 3, 2002:
Sales
Sales for the 13 weeks ended August 3, 2002 were $1.818 billion compared to sales for the 13-week period ended August 4, 2001 of $1.828 billion. Sales decreased 1% for the period on a total basis. Sales in comparable stores were flat.
Sales for the 26 weeks ended August 3, 2002 were $3.729 billion compared to sales for the 26 weeks ended August 4, 2001 of $3.749 billion. Sales decreased 1% for the 26-week period on both a total and comparable store basis.
Income-Thirteen Weeks
Net income for the 13-week period ended August 3, 2002 was $6.7 million ($.08 per fully diluted share) compared to a net loss of $18.6 million ($.22 per fully diluted share) for the 13-week period ended August 4, 2001.
During the 13 weeks ended August 3, 2002 the Company repurchased $67.1 million of its outstanding unsecured notes prior to their maturity dates. Additionally, the Company retired the remaining $143.0 million of its 6.31% notes due August 1, 2012 prior to their maturity date. Included in net income for the 13 weeks ended August 3, 2002 is an extraordinary loss on early extinguishment of debt, net of taxes, of $5.8 million ($.07 per fully diluted share). This amount is comprised of a gain of $1.6 million on debt repurchased, offset by a call premium of $7.4 million. Included in net loss for the 13 weeks ended August 4, 2001 is an extraordinary gain on early extinguishment of debt, net of taxes, of $2.0 million ($.02 per fully diluted share).
During the 13 weeks ended August 3, 2002, the Company recorded a pre-tax net gain of $.9 million ($.6 million after-tax, or $.01 per fully diluted share) for asset impairment and store closing charges. The Company recorded $7.1 million of asset impairment and store closing charges related to six stores and received forgiveness of a lease obligation of $8.0 million in connection with the sale of a closed owned store in Memphis, Tennessee in satisfaction of that obligation. During the 13 weeks ended August 4, 2001, the Company recorded pre-tax charges of $2.0 million ($1.3 million after-tax, or $.02 per fully diluted share) for asset impairment and store closing costs.
Additionally, an investee partnership of the Company received an unusual distribution in the settlement of a receivable. As a result, the Company received a non-recurring distribution and recognized a gain of $3.1 million.
The Company adopted Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets" effective February 3, 2002. SFAS No. 142 states that goodwill and intangible assets deemed to have indefinite lives are no longer subject to amortization but are to be tested for impairment at least annually. The application of the non-amortization provisions of SFAS No. 142 resulted in an increase in net income of approximately $3.9 million ($.05 per fully diluted share) during the 13 ended August 3, 2002.
Income-Twenty-Six Weeks
Dillard's reported a net loss for the 26 weeks ended August 3, 2002 of $465.5 million ($5.45 per fully diluted share) compared to net income of $10.4 million ($.12 per fully diluted share) for the 26 weeks ended August 4, 2001.
As required by the SFAS No. 142, the Company tested its goodwill for impairment using the two-step process prescribed in SFAS No. 142. This testing resulted in a non-cash goodwill impairment charge of $530.3 million. In accordance with SFAS No. 142, this goodwill impairment was reflected by Dillard's as a cumulative effect of a change in accounting principle, retroactive to February 3, 2002.
In accordance with SFAS No. 142, the Company will restate its results for the first quarter ended May 4, 2002 to reflect the resulting $530.3 million non-cash goodwill impairment charge as a cumulative effect of a change in accounting principle.
The application of the non-amortization provisions of SFAS No. 142 resulted in an increase in net income of approximately $7.8 million ($.09 per fully diluted share) during the 26 weeks ended August 3, 2002. Application of the non-amortization provisions of this statement is expected to result in an increase in net income of approximately $15.6 million ($.18 per fully diluted share) during the 52 weeks ended February 1, 2003.
Included in net loss for the 26 weeks ended August 3, 2002 is an extraordinary loss on early extinguishment of debt, net of taxes, of $5.5 million ($.06 per fully diluted share) and the above-mentioned $530.3 million non-cash charge for goodwill impairment ($6.21 per fully diluted share). Included in net income for the 26 weeks ended August 4, 2001 is an extraordinary gain on early extinguishment of debt, net of taxes, of $5.1 million ($.06 per fully diluted share).
Income before extraordinary loss/gain on early extinguishments of debt and accounting change for the 26 weeks ended August 3, 2002 was $70.3 million ($.82 per fully diluted share) compared to $5.3 million ($.06 per fully diluted share) for the 26 weeks ended August 4, 2001.
Gross Margin/Inventory
Dillard's improved gross margin as a percentage of sales 187 basis points during the 13-week period ended August 3, 2002. Management attributes this margin improvement to the successful execution of its merchandising initiatives to improve the Company's merchandise mix and competitive position.
Penetrations of private brand merchandise as a percent of
sales for the quarter ended August 3, 2002 are as follows:
13 Weeks Ended 13 Weeks Ended
August 3, 2002 August 4, 2001
----------------- -----------------
In merchandise categories
in which private brands
are presented 18.4% 14.9%
Storewide (all categories) 15.7% 12.7%
Advertising, Selling, Administrative and General Expenses
Dillard's maintained effective control over its advertising, selling, administrative and general expenses during the 13 weeks ended August 3, 2002, decreasing these expenses $6.9 million compared to such expenses during the 13 weeks ended August 4, 2001. Dillard's achieved this reduction through the continued execution of recent cost-saving initiatives. Significant savings in payroll and services were partially offset by rising health care, worker's compensation and insurance premiums and higher credit losses related to the Company's proprietary credit card resulting from increased bankruptcy levels. Advertising, selling, administrative and general expenses were $531.0 million for the 13-week period ended August 3, 2002 and $537.9 million for the comparable period ended August 4, 2001. These expenses for the 26-week period ended August 3, 2002 decreased $28.8 million to $1,050.7 million from $1,079.5 million for the comparable period ended August 4, 2001.
Debt/Interest Expense
As a result of Dillard's continued focus on decreasing debt levels and lower short-term interest rates, interest expense for the 13 weeks ended August 3, 2002 declined to $46.9 million from $51.0 million for the 13 weeks ended August 4, 2001. Interest expense for the 26-week period ended August 3, 2002 declined to $92.2 million from $102.0 million for the same prior year period.
During the 13 weeks ended August 3, 2002 the Company repurchased $67.1 million of its outstanding unsecured notes prior to their maturity dates. Additionally, the Company retired the remaining $143.0 million of its 6.31% notes due August 1, 2012 prior to their maturity date. These transactions resulted in an extraordinary loss on early extinguishment of debt, net of taxes, of $5.8 million ($.07 per fully diluted share) for the 13-week period ended August 3, 2002.
The Company completed the documentation process and closed on a new $400.0 million revolving credit facility with Fleet Retail Finance Inc. ("Fleet") on May 9, 2002. Borrowings under the facility will be at Fleet's Base Rate or the Eurodollar Rate plus 1.75%. The line of credit agreement is secured by inventory of certain Company stores. The agreement will expire on May 9, 2005.
The Company utilizes securitizations of its credit card receivable portfolio as a financing vehicle. The Company accounted for these transactions as off balance sheet financing. In early May 2002, the Company amended its conduit financing agreement in a manner that prevented future transfers of accounts receivable to its master trust from qualifying as a sale and thus receiving off balance sheet treatment. The Company decided not to amend its agreements to allow continuing off balance sheet treatment, but to allow accounts receivable and the related financing to be brought back onto the balance sheet. As a result of this decision, the Company took a charge to its income statement in the amount of $3.2 million related to the amortization of the beneficial interests recognized up front on the off balance sheet financing. The Company anticipates that an additional charge of $2.2 million will be incurred in the third quarter of 2002. As a result, the Company put approximately $240.0 million of debt and the related asset on its balance sheet as of August 3, 2002. An additional $160.0 million will be put on its balance sheet during the third quarter of 2002.
Store Openings/Closings
Earlier this month, the Company opened its replacement store at Lynnhaven Mall in Virginia Beach, Virginia. This new 180,000 square foot Dillard's store replaces a 117,000 unit in the same center. Also in August, Dillard's opened its new 200,000 square foot Dillard's store in Raleigh, North Carolina at Triangle Town Center.
Under the Company's existing plan to close under-performing stores as conditions permit, Dillard's completed the closure of the following stores during the thirteen weeks ended August 3, 2002:
Mall Location City
------------------------------------ --------------------------------
Ft. Worth Town Center Mall Ft. Worth, Texas
Donelson Plaza Nashville, Tennessee
North Hills Mall Raleigh, North Carolina
Pembroke Mall Virginia Beach, Virginia
The Company has announced the upcoming closures of South Square Mall in Durham, North Carolina and Six Flags Mall in Arlington, Texas. Dillard's expects to close both stores during the third quarter of 2002.
As previously discussed, the Company has recorded a net gain on asset impairment and store closings of $.9 million during the thirteen weeks ended August 3, 2002 related to the recovery of previously-expensed charges in one surrendered store offset by such charges in six stores.
At August 3, 2002, the Company operated 334 stores spanning 29 states - all operating under one name, Dillard's.
Supplemental Information
Additional information regarding sales for the quarter is provided:
Sales by Month
Sales performance by month for the second quarter occurred as follows:
Total Comparable
-------------- ------------------
May -1% -1%
June 2% 2%
July -3% -3%
Quarter -1% 0%
Sales by Category
Sales by category for the second quarter:
13 Weeks Ended
August 3, 2002
Total Comparable
--------------- ------------------
Cosmetics -2% -2%
Women's and Juniors' Clothing 3% 3%
Children's Clothing 4% 4%
Men's Clothing and Accessories -5% -4%
Shoes, Accessories and Lingerie 0% 0%
Home -7% -7%
Sales by Region
Sales performance by region for the second quarter:
13 Weeks Ended
August 3, 2002
--------------------------
East 1%
Central -2%
West 2%
Total -1%
Sales Mix
13 Weeks Ended
August 3, 2002
------------------------
Cosmetics 12.0%
Women's and Juniors' Clothing 33.9%
Children's Clothing 6.6%
Men's Clothing and Accessories 17.9%
Shoes, Accessories and Lingerie 21.2%
Home 8.4%
Estimates for 2002
The Company is updating the following estimates for certain income statement items for the fiscal year ended February 1, 2003, based upon current conditions. Actual results may differ significantly from these estimates as conditions and factors change - See "Forward Looking Information".
In Millions
-----------
2002 2001
Estimated Actual
----------- ---------
Depreciation and amortization $310 $311
Rental expense 70 72
Interest expense 180 202
Capital expenditures 225 271
Sarbanes-Oxley Act of 2002 / SEC Certification
Dillard's, Inc. announces that Chief Executive Officer, William Dillard, II and Chief Financial Officer, James I. Freeman will sign and file the certifications required by the Securities and Exchange Commission and the Sarbanes-Oxley Act of 2002 in connection with the filing of the Company's Report on Form 10-Q when due on or before September 17, 2002.
Forward-Looking Information
Certain of the information presented in this press release that addresses future results or expectations is considered "forward-looking" information within the definition of Federal securities laws. It is important to note that Dillard's, Inc.'s actual results could differ materially from those projected in such forward-looking statements. Factors that could cause actual results to differ materially from those expressed or implied in such forward-looking statements include, among others, economic and weather conditions in the regions in which the Company's stores are located and their effect on the buying patterns of the Company's customers, potential disruption from terrorist activity and the effect on ongoing consumer confidence, adequate and stable availability of materials and production facilities, potential disruption of international trade and supply chain efficiencies, customer response to the Company's merchandise, changes in consumer spending patterns and debt levels, trends in personal bankruptcies and the impact of competitive market factors. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained from time to time in the Company's filings with the Securities and Exchange Commission, including but not limited to the Company's report on Form 10K for the year ended February 2, 2002. Copies of these filings may be obtained by contacting Dillard's, Inc. or the Securities and Exchange Commission. Filings with the Securities and Exchange Commission are also available via EDGAR on the Internet at www.sec.gov.
Dillard's, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Amounts in Millions, Except Per Share Data)
Thirteen Week Period Ended
---------------------------------------------
August 3, 2002 August 4, 2001
---------------------------------------------
% of % of
Amount Net Sales Amount Net Sales
---------------------------------------------
(Unaudited) (Unaudited)
Net sales $1,818.0 -- $1,828.3 --
Total revenues 1,885.7 103.7% 1,888.6 103.3%
Cost of sales 1,197.3 65.9 1,238.4 67.7
Advertising, selling,
administrative and
general expenses 531.0 29.2 537.9 29.4
Depreciation and
amortization 76.9 4.2 76.8 4.2
Rentals 15.0 0.8 15.8 0.9
Interest and debt
expense 46.9 2.6 51.0 2.8
Asset impairment and
store closing charges (0.9) (0.1) 2.0 0.1
-------- --------
Total costs and
expenses 1,866.2 1,921.9
-------- --------
Income (loss) before
income taxes 19.5 1.1 (33.3) (1.8)
Income taxes (benefit) 7.0 (12.7)
-------- --------
Income (loss) before
extraordinary item 12.5 0.7 (20.6) (1.1)
Extraordinary gain
(loss) on early
extinguishment of debt,
net of taxes (5.8) (0.3) 2.0 0.1
-------- ------- -------- ----
Net income (loss) $6.7 0.4% $ ( 18.6) (1.0)%
======== ======= ======== ====
Basic earnings per share:
Income (loss) before
extraordinary item $ 0.15 $ (0.24)
Extraordinary gain
(loss) on early
extinguishment of debt,
net of taxes (0.07) 0.02
-------- --------
Net Income (loss) $ 0.08 $ (0.22)
======== ========
Diluted earnings per share:
Income (loss) before
extraordinary item $ 0.15 $ (0.24)
Extraordinary gain
(loss) on early
extinguishment of debt,
net of taxes (0.07) 0.02
-------- --------
Net Income (loss) $ 0.08 $ (0.22)
======== ========
Weighted average shares:
Basic 84.6 83.8
======== ========
Diluted 85.8 83.8
======== ========
The Company has reclassified $3.0 million related to its
securitizations from other revenue to interest expense for the
thirteen weeks ended August 4, 2001.
Dillard's, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Amounts in Millions, Except Per Share Data)
Twenty-Six Week Period Ended
---------------------------------------------
August 3, 2002 August 4, 2001
---------------------------------------------
% of % of
Amount Net Sales Amount Net Sales
-----------------------------------------------
(Unaudited) (Unaudited)
Net sales $3,728.9 -- $3,748.6 --
Total revenues 3,860.0 103.5% 3,869.1 103.2%
Cost of sales 2,423.7 65.0 2,491.4 66.5
Advertising, selling,
administrative and
general expenses 1,050.7 28.2 1,079.5 28.8
Depreciation and
amortization 154.3 4.1 154.0 4.1
Rentals 30.2 0.8 31.6 0.8
Interest and debt expense 92.2 2.5 102.0 2.7
Asset impairment and
store closing charges (0.9) 0.0 2.0 0.1
-------- --------
Total costs and expenses 3,750.2 3,860.5
-------- --------
Income before income taxes 109.8 2.9 8.6 0.2
Income taxes 39.5 3.3
-------- --------
Income before
extraordinary item and
accounting change 70.3 1.9 5.3 0.2
Extraordinary gain (loss)
on early extinguishment
of debt, net of taxes (5.5) (0.2) 5.1 0.1
Cumulative effect of
accounting change,
net of taxes (530.3) (14.2) -- --
-------- ------- -------- ----
Net income (loss) $(465.5) (12.5)% $10.4 0.3%
======== ======= ======== ====
Basic earnings per share:
Income before
extraordinary item and
accounting change $ 0.83 $ 0.06
Extraordinary gain
(loss) on early
extinguishment of debt,
net of taxes (0.07) 0.06
Cumulative effect of
accounting change,
net of taxes (6.28) --
-------- --------
Net Income (loss) $ (5.52) $ 0.12
======== ========
Diluted earnings per share:
Income before
extraordinary item and
accounting change $ 0.82 $ 0.06
Extraordinary gain
(loss) on early
extinguishment of debt,
net of taxes (0.06) 0.06
Cumulative effect of
accounting change,
net of taxes (6.21) --
-------- --------
Net Income (loss) $ (5.45) $ 0.12
======== ========
Weighted average shares:
Basic 84.4 84.3
======== ========
Diluted 85.4 84.9
======== ========
The Company has reclassified $1.4 million and $6.0 million related
to its securitizations from other revenue to interest expense for the
twenty-six weeks ended August 3, 2002 and August 4, 2001,
respectively.
Dillard's, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Amounts in Millions, Except Per Share Data)
52 Week Period Ended 53 Week Period Ended
-----------------------------------------------
August 3, 2002 August 4, 2001
-----------------------------------------------
% of % of
Amount Net Sales Amount Net Sales
-----------------------------------------------
(Unaudited) (Unaudited)
Net sales $ 8,135.2 -- $ 8,389.2 --
Total revenues 8,390.6 103.1% 8,649.8 103.1%
Cost of sales 5,440.1 66.9 5,696.5 67.9
Advertising, selling,
administrative and
general expenses 2,162.6 26.6 2,240.3 26.7
Depreciation and
amortization 311.0 3.8 305.6 3.6
Rentals 71.4 0.9 75.4 0.9
Interest and debt
expense 191.8 2.3 220.8 2.6
Asset impairment and
store closing charges 0.9 0.0 53.4 0.7
-------- --------
Total costs and
expenses 8,177.8 8,592.0
-------- --------
Income before income
taxes 212.8 2.6 57.8 0.7
Income taxes 82.1 12.5
-------- --------
Income before
extraordinary item
and accounting change 130.7 1.6 45.3 0.6
Extraordinary gain
(loss) on early
extinguishment of debt,
net of taxes (4.6) (0.1) 28.0 0.3
Cumulative effect of
accounting change,
net of taxes (530.3) (6.5) -- --
-------- ------- -------- ----
Net income (loss) $ (404.2) (5.0)% $ 73.3 0.9%
======== ======= ======== ====
Basic earnings per share:
Income before
extraordinary item and
accounting change $ 1.56 $ 0.52
Extraordinary gain
(loss) on early
extinguishment of debt,
net of taxes (0.06) 0.33
Cumulative effect of
accounting change,
net of taxes (6.31) --
-------- --------
Net Income (loss) $ (4.81) $ 0.85
======== ========
Diluted earnings per share:
Income before
extraordinary item and
accounting change $ 1.54 $ 0.52
Extraordinary gain
(loss) on early
extinguishment of debt,
net of taxes (0.05) 0.33
Cumulative effect of
accounting change,
net of taxes (6.26) --
-------- --------
Net Income (loss) $ (4.77) $ 0.85
======== ========
Weighted average shares:
Basic 84.0 86.2
======== ========
Diluted 84.8 86.5
======== ========
The Company has reclassified $6.8 million and $16.7 million
related to its securitizations from other revenue to interest expense
for the fifty-two weeks ended August 3, 2002 and August 4, 2001,
respectively.
Dillard's, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Amounts in Millions)
August 3, August 4,
2002 2001
------------- -------------
Assets (Unaudited)
Current Assets:
Cash and cash equivalents $ 118.5 $ 53.2
Trade accounts receivable 1,111.7 860.3
Merchandise inventories 1,696.0 1,832.8
Other current assets 18.8 43.0
------------- -------------
Total current assets 2,945.0 2,789.3
Property and equipment 3,376.4 3,502.2
Goodwill 39.2 577.3
Other assets 227.2 261.8
------------- -------------
Total Assets $6,587.8 $7,130.6
============= =============
Liabilities and Stockholders' Equity
Current Liabilities:
Trade accounts payable and
accrued expenses $752.6 $ 801.4
Current portion of long-term
debt and capital leases 91.7 210.6
Federal and state income taxes 20.5 3.5
------------- -------------
Total current liabilities 864.8 1,015.5
Long-term debt and capital leases 2,212.7 2,221.5
Other liabilities 116.3 126.2
Deferred income taxes 660.4 624.8
Guaranteed preferred beneficial
interests in the Company's
subordinated debentures 531.6 531.6
Stockholders' equity 2,202.0 2,611.0
------------- -------------
Total Liabilities and
Stockholders' Equity $ 6,587.8 $ 7,130.6
============= =============
Other Financial Information
(Amounts in Millions)
(Unaudited)
August 3, August 4,
2002 2001
------------ -----------
Square footage 56.6 57.2
============ ===========
Capital expenditures:
13 weeks ended $ 57.4 $ 82.8
26 weeks ended 107.5 140.1
Year ended 238.0 263.3
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