Dillard’s, Inc. Reports Record Fourth Quarter and Fiscal Year Results

  Dillard’s, Inc. Reports Record Fourth Quarter and Fiscal Year Results

Business Wire

LITTLE ROCK, Ark. -- February 25, 2013

Dillard's, Inc. (DDS-NYSE) (the "Company" or "Dillard's") announced operating
results for the 14 and 53 weeks ended February 2, 2013. The Company follows
the retail 4-5-4 reporting calendar, which included an extra week in the
fourth quarter of fiscal 2012. This release contains certain forward-looking
statements. Please refer to the Company's cautionary statements regarding
forward-looking information included below under "Forward-Looking
Information".

Highlights of the Company’s performance included:

  *A 30% increase in fourth quarter earnings per share compared to the prior
    year (excluding certain items described below)
  *A 3% increase in comparable store sales for the fourth quarter based upon
    comparable weeks, marking the Company’s 10^th consecutive quarterly
    comparable sales increase
  *Fourth quarter merchandise gross margin improvement of 40 basis points of
    sales
  *Cash flow from operations for the fiscal year of $522.7 million compared
    to $501.1 million for the prior year which made possible these actions for
    shareholders during the fourth quarter:

       *Payment of a special dividend of $5.00 per share on December 21, 2012
       *Repurchase of $23.4 million of Class A Common Stock

Fourth Quarter Results

Dillard’s reported net income for the 14 weeks ended February 2, 2013 of
$161.4 million, or $3.36 per share. Included in net income is a net after-tax
credit totaling $23.9 million ($0.50 per share) comprised of the following
items:

  *a $6.8 million after-tax gain ($0.14 per share) related to the sale of a
    former retail store location
  *after-tax asset impairment and store closing charges of $1.1 million
    ($0.02 per share)
  *approximately $18.1 million ($0.38 per share) in tax benefit due to a
    one-time deduction related to dividends paid to the Dillard’s, Inc.
    Investment and Employee Stock Ownership Plan

Excluding these items, Dillard’s would have reported $137.6 million ($2.87 per
share) for the 14 weeks ended February 2, 2013, marking a record-setting
fourth quarter earnings per share performance and a 30% improvement over the
prior year adjusted fourth quarter earnings per share.

Dillard’s reported net income for the prior year fourth quarter, the 13 weeks
ended January 28, 2012, of $141.5 million, or $2.77 per share. Included in net
income for the prior year fourth quarter is a net after-tax credit totaling
$28.7 million ($0.56 per share) related to the settlement of a lawsuit.
Excluding this credit, the Company would have recorded net income of $112.8
million ($2.21 per share) for the prior year fourth quarter.

Dillard’s Chief Executive Officer, William T. Dillard, II, stated, “We are
pleased to report a strong finish to a very successful year at Dillard’s. Our
positive sales performance and gross margin expansion combined with expense
control drove strong cash flow throughout the year. As a result, we were
pleased to return cash to shareholders in the form of a $5.00 special dividend
during the fourth quarter. Additionally, we purchased $185.5 million of Class
A Common Stock during the year. As we mark our 75^th year at Dillard’s this
month, we are proud of our progress and excited about the future.”

Fiscal Year Results

Dillard’s reported net income for the 53 weeks ended February 2, 2013 of
$336.0 million, or $6.87 per share. Included in net income is a net after-tax
credit totaling $26.7 million ($0.55 per share) comprised of the following
items:

  *after-tax gains of $7.4 million ($0.15 per share) related to the sale of
    three former retail store locations
  *after-tax asset impairment and store closing charges of $1.0 million
    ($0.02 per share)
  *approximately $1.7 million ($0.03 per share) in tax benefit due to the
    reversal of a valuation allowance related to a deferred tax asset
    consisting of a capital loss carryforward
  *approximately $18.6 million ($0.38 per share) in tax benefit due to a
    one-time deduction related to dividends paid to the Dillard’s, Inc.
    Investment and Employee Stock Ownership Plan

Excluding these items, Dillard’s would have reported $309.3 million ($6.32 per
share) for the 53 weeks ended February 2, 2013, marking a record-setting
fiscal year earnings per share performance and a 50% improvement over prior
year adjusted earnings per share.

Dillard’s reported net income for the prior year 52-week period ended January
28, 2012, of $463.9 million, or $8.52 per share. Included in net income for
the prior year 52-week period is a net after-tax credit totaling $234.5
million ($4.31 per share) comprised of the following items:

  *approximately $201.6 million ($3.70 per share) in tax benefit due to the
    reversal of a valuation allowance related to a deferred tax asset
    consisting of a capital loss carryforward
  *a $28.7 million after-tax gain ($0.53 per share) related to the settlement
    of a lawsuit
  *a $0.9 million after-tax gain ($0.02 per share) related to the sale of two
    former retail store locations
  *a $2.7 million after-tax gain ($0.05 per share) related to a distribution
    from a mall joint venture
  *a $1.4 million after-tax gain ($0.03 per share) relating to the sale of an
    interest in a mall joint venture
  *asset impairment and store closing charges of $0.8 million after-tax
    ($0.01 per share)

Excluding this net after-tax credit, the Company would have recorded net
income of $229.4 million ($4.21 per share) for the prior year 52-week period.

Net Sales – Fourth Quarter

Net sales for the 14 weeks ended February 2, 2013 were $2.106 billion and
$1.970 billion for the 13 weeks ended January 28, 2012. Net sales include the
operations of the Company’s construction business, CDI Contractors, LLC
(“CDI”).

Total merchandise sales (which exclude CDI) for the 14-week period ended
February 2, 2013 were $2.087 billion and $1.946 billion for the 13-week period
ended January 28, 2012. Total merchandise sales increased 7% for the 14-week
period compared to the 13-week period. Based upon comparable weeks, total
sales increased 2% and sales in comparable stores increased 3% for the fourth
quarter.

Sales trends were strongest in ladies accessories and lingerie and men’s
apparel and accessories. Sales were weakest in the home and furniture
category. Sales trends were strongest in the Central region, followed by the
Eastern and Western regions, respectively.

Net Sales – Fiscal Year

Net sales for the 53 weeks ended February 2, 2013 were $6.593 billion and
6.264 billion for the 52 weeks ended January 28, 2012.

Total merchandise sales for the 53-week period ended February 2, 2013 were
$6.489 billion and $6.194 billion for the 52-week period ended January 28,
2012. Total merchandise sales increased 5% for the 53-week period compared to
the 52-week period. Based upon comparable weeks, total sales increased 3% and
sales in comparable stores increased 4% for the fiscal year.

Gross Margin/Inventory

Gross margin from retail operations (which excludes CDI) improved 40 basis
points of sales to 34.6% for the 14 weeks ended February 2, 2013 compared to
34.2% for the prior year fourth quarter. Consolidated gross margin for the 14
weeks ended February 2, 2013 improved 50 basis points of sales to 34.4% from
33.9% during the prior year fourth quarter.

Gross margin from retail operations improved 30 basis points of sales to 36.1%
for the 53 weeks ended February 2, 2013 compared to 35.8% for the prior year
52-week period ended January 28, 2012. Consolidated gross margin for the 53
weeks ended February 2, 2013 was 35.6% compared to 35.4% during the prior
fiscal year.

Inventory in comparable stores decreased 1% at February 2, 2013 compared to
January 28, 2012.

Dillard’s credits its consistent success in both sales and gross margin
performance to effective execution of its merchandise strategy which the
Company believes sets Dillard’s apart from its peer group. Key initiatives
within the strategy include:

  *Presenting limited distribution, high profile brands not typically found
    in department stores along with well known, highly regarded national
    brands
  *Developing and offering fashionable, nationally recognized exclusive
    brands which are revered by customers for their styling as well as their
    quality
  *Equipping sales associates, beauty advisors and merchandise specialists
    with comprehensive product knowledge and customer service tools to exceed
    the expectations of the Dillard’s customer
  *Presenting merchandise in edited, limited assortments and in engaging
    formats which encourage interaction with sales associates and expedite the
    sale
  *Flowing merchandise receipts to stores in shorter and more frequent
    intervals and pinpointing replenishment based upon immediate feedback from
    improvements in data analysis and logistical response

Advertising, Selling, Administrative and General Expenses

Advertising, selling, administrative and general expenses (“operating
expenses”) were $474.9 million (22.5% of sales) and $440.8 million (22.4%),
respectively, during the 14 weeks ended February 2, 2013 and the 13 weeks
ended January 28, 2012. The increase in expenses is primarily due to the
additional week of operations during the 2012 reporting period. On a
normalized basis for the 13-week periods, increases in selling payroll and
related payroll taxes were partially offset by savings in advertising and
services purchased.

Operating expenses declined 60 basis points of sales during the 53 weeks ended
February 2, 2013 compared to the 52 weeks ended January 28, 2012. Operating
expenses were $1,671.5 million (25.4% of sales) and $1,630.9 million (26.0%),
respectively, for the 2012 and 2011 fiscal years.

Share Repurchase

During the 13 weeks ended February 2, 2013, Dillard’s repurchased
approximately $23.4 million of Class A Common Stock (294,000 shares) at an
average price of $79.69. During the fiscal year, the Company repurchased
approximately $185.5 million (2.8 million shares) at an average price of
$65.82. At February 2, 2013, $92.0 million of authorization remained under the
Company’s share repurchase program.

Total shares outstanding (Class A and Class B Common Stock) at February 2,
2013 and January 28, 2012 were 47.8 million and 49.4 million, respectively.

Debt Maturities

During the year ended February 2, 2013, the Company made principal payments on
long-term debt of $76.8 million consisting of the scheduled maturities of
$55.4 million unsecured note (7.85%), a $20.4 million term loan (5.93%) and a
$1.0 million mortgage note (9.25%). The Company has no note maturities until
January of 2018.

Revolving Line of Credit

The Company maintains a $1.0 billion revolving credit facility (“credit
agreement”) secured by the inventory of certain subsidiaries. No borrowings
were outstanding under the credit agreement at February 2, 2013. Availability
under the credit agreement at February 2, 2013 was $871.5 million. Letters of
credit totaling $52.5 million were issued under the credit agreement at
February 2, 2013 leaving unutilized availability of approximately $819
million.

Stock Options

During the fiscal year ended February 2, 2013, all stock options previously
outstanding under the Company’s stock option plans were exercised. There are
no outstanding stock options at February 2, 2013.

Store Information

During the fourth quarter of 2012, the Company announced the upcoming closure
of its Cache Valley Mall location in Logan, Utah (94,000 square feet). The
store is expected to close during the first quarter of 2013.

At February 2, 2013, the Company operated 284 Dillard's locations and 18
clearance centers spanning 29 states and an Internet store at
www.dillards.com. Total square footage at February 2, 2013 was 52.3 million.

Dillard’s, Inc. and Subsidiaries

Condensed Consolidated Statements of Income (Unaudited)

(In Millions, Except Per Share Data)
                               14 Weeks Ended         13 Weeks Ended
                                February 2, 2013       January 28, 2012
                                                                  
                                            % of                      % of
                                                                      Net
                                Amount      Net Sales     Amount
                                                                      Sales
                                                                             
Net sales                       $ 2,106.3   100.0.    %   $ 1,970.0   100.0. %
Service charges and other        47.8      2.3            41.7      2.1
income
                                  2,154.1   102.3           2,011.7   102.1
                                                                             
Cost of sales                     1,382.8   65.6            1,302.6   66.1
Advertising, selling,
administrative and general        474.9     22.5            440.8     22.4
expenses
Depreciation and amortization     65.6      3.1             64.8      3.3
Rentals                           10.3      0.5             13.3      0.7
Interest and debt expense,        17.5      0.8             17.6      0.9
net
Gain on litigation settlement     -         -               44.5      2.3
Gain on disposal of assets        10.2      0.5             0.1       0.0
Asset impairment and store        1.5       0.1             -         -
closing charges
Income before income taxes
and income
on and equity in losses of        211.7     10.1            217.2     11.0
joint ventures
Income taxes                      50.5                      76.1
Income on and equity in          0.2       0.0            0.4       0.0
losses of joint ventures
Net income                      $ 161.4     7.7       %   $ 141.5     7.2    %
                                                                             
Basic earnings per share        $ 3.38                    $ 2.82
Diluted earnings per share      $ 3.36                    $ 2.77
Basic weighted average shares    47.7                     50.2
Diluted weighted average         48.0                     51.1
shares
                                                                             

Dillard’s, Inc. and Subsidiaries

Condensed Consolidated Statements of Income (Unaudited)

(In Millions, Except Per Share Data)
                          
                            53 Weeks Ended          52 Weeks Ended
                            February 2, 2013       January 28, 2012
                                                                
                                        % of                        % of
                                                                    Net
                            Amount      Net Sales     Amount
                                                                    Sales
                                                                           
Net sales                   $ 6,593.2   100.0.    %   $ 6,263.6     100.0.   %
Service charges and other    158.4     2.4            141.9      2.3
income
                              6,751.6   102.4           6,405.5     102.3
                                                                             
Cost of sales                 4,247.1   64.4            4,047.3     64.6
Advertising, selling,
administrative and            1,671.5   25.4            1,630.9     26.0
general expenses
Depreciation and              259.6     3.9             257.7       4.1
amortization
Rentals                       34.8      0.5             48.1        0.8
Interest and debt             69.6      1.1             72.1        1.2
expense, net
Gain on litigation            -         -               44.5        0.7
settlement
Gain on disposal of           12.4      0.2             4.0         0.0
assets
Asset impairment and         1.6       0.0            1.2        0.0
store closing charges
Income before income
taxes and income
on and equity in losses       479.8     7.3             396.7       6.3
of joint ventures
Income taxes (benefit)        145.1                     (62.5   )
Income on and equity in      1.3       0.0            4.7        0.1
losses of joint ventures
Net income                  $ 336.0     5.1       %   $ 463.9      7.4      %
                                                                             
Basic earnings per share    $ 6.98                    $ 8.67    
Diluted earnings per        $ 6.87                    $ 8.52    
share
Basic weighted average       48.1                     53.5    
shares
Diluted weighted average     48.9                     54.4    
shares
                                                                             

Dillard’s, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)
(In Millions)
                                                                
                                                     February 2,   January 28,
                                                     2013          2012
Assets
Current Assets:
Cash and cash equivalents                            $  124.1      $  224.3
Accounts receivable                                     31.5          28.7
Merchandise inventories                                 1,294.6       1,304.1
Other current assets                                   41.8         34.6
Total current assets                                    1,492.0       1,591.7
                                                                   
Property and equipment, net                             2,287.0       2,440.3
Other assets                                           269.7        274.1
                                                                   
Total Assets                                         $  4,048.7    $  4,306.1
                                                                   
Liabilities and Stockholders' Equity
Current Liabilities:
Trade accounts payable and accrued expenses          $  653.8      $  655.7
Current portion of long-term debt and capital                         79.1
leases1.7
Federal and state income taxes including current
deferred taxes                                         111.6        135.6
Total current liabilities                               767.1         870.4
                                                                   
Long-term debt and capital leases                       622.3         623.9
Other liabilities                                       233.4         245.2
Deferred income taxes                                   255.7         314.6
Subordinated debentures                                 200.0         200.0
Stockholders' equity                                   1,970.2      2,052.0
                                                                   
Total Liabilities and Stockholders' Equity           $  4,048.7    $  4,306.1
                                                                      

Dillard’s, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In Millions)
                                                     53 Weeks      52 Weeks

                                                     Ended         Ended
                                                               
                                                     February 2,   January 28,

                                                     2013          2012
Operating activities:                                           
Net income                                           $  336.0      $  463.9
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization of property and
deferred                                                261.5         259.6

financing cost
Deferred income taxes                                   (61.7  )      (9.5   )
Gain on disposal of assets                              (12.4  )      (4.0   )
Asset impairment and store closing charges              1.6           1.2
Excess tax benefits from share-based compensation       (49.9  )      (10.2  )
Gain on repurchase of debt                              -             (0.2   )
Changes in operating assets and liabilities:
Increase in accounts receivable                         (2.8   )      (2.8   )
Decrease (increase) in merchandise inventories          9.5           (14.0  )
(Increase) decrease in other current assets             (7.2   )      7.9
Decrease (increase) in other assets                     7.9           (210.4 )
Increase (decrease) in trade accounts payable and       11.5          (18.0  )
accrued expenses and other liabilities
Increase in income taxes payable                      28.7       37.6   
Net cash provided by operating activities             522.7      501.1  
Investing activities:
Purchase of property and equipment                      (136.6 )      (115.6 )
Proceeds from disposal of assets                        30.9          29.9
Distribution from joint venture                       -          2.5    
Net cash used in investing activities                 (105.7 )    (83.2  )
Financing activities:
Principal payments on long-term debt and capital        (79.0  )      (56.8  )
lease obligations
Cash dividends paid                                     (252.3 )      (10.0  )
Purchase of treasury stock                              (185.5 )      (491.1 )
Excess tax benefits from share-based compensation       49.9          10.2
Proceeds from stock issuance                            6.3           10.8
Issuance cost of line of credit                         (5.4   )      -
Repurchase and retirement of common stock             (51.2  )    -      
Net cash used in financing activities                 (517.2 )    (536.9 )
Decrease in cash and cash equivalents                   (100.2 )      (119.0 )
Cash and cash equivalents, beginning of period        224.3      343.3  
Cash and cash equivalents, end of period            $  124.1    $  224.3  
Non-cash transactions:
Accrued capital expenditures                         $  -          $  7.1
Stock awards                                            4.8           2.8
                                                                   

Estimates for 2013

The Company is providing the following estimates for certain financial
statement items for the fiscal year ending February 1, 2014 based upon current
conditions. Actual results may differ significantly from these estimates as
conditions and factors change – See “Forward-Looking Information”.

                                In millions
                                 2013            2012
                                             
                                 Estimated       Actual
Depreciation and amortization    $   261      $  260
Rentals                              27             35
Interest and debt expense, net       65             70
Capital expenditures                 175            137
                                                 

Forward-Looking Information

The foregoing contains certain “forward-looking statements” within the
definition of federal securities laws. The following are or may constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995: statements including (a) words such as “may,”
“will,” “could,” “believe,” “expect,” “future,” “potential,” “anticipate,”
“intend,” “plan,” “estimate,” “continue,” or the negative or other variations
thereof, and (b) statements regarding matters that are not historical facts.
The Company cautions that forward-looking statements contained in this report
are based on estimates, projections, beliefs and assumptions of management and
information available to management at the time of such statements and are not
guarantees of future performance. The Company disclaims any obligation to
update or revise any forward-looking statements based on the occurrence of
future events, the receipt of new information, or otherwise. Forward-looking
statements of the Company involve risks and uncertainties and are subject to
change based on various important factors. Actual future performance, outcomes
and results may differ materially from those expressed in forward-looking
statements made by the Company and its management as a result of a number of
risks, uncertainties and assumptions. Representative examples of those factors
include (without limitation) general retail industry conditions and
macro-economic conditions; economic and weather conditions for regions in
which the Company’s stores are located and the effect of these factors on the
buying patterns of the Company’s customers, including the effect of changes in
prices and availability of oil and natural gas; the availability of consumer
credit; the impact of competitive pressures in the department store industry
and other retail channels including specialty, off-price, discount and
Internet retailers; changes in consumer spending patterns, debt levels and
their ability to meet credit obligations; changes in legislation, affecting
such matters as the cost of employee benefits or credit card income; adequate
and stable availability and pricing of materials, production facilities and
labor from which the Company sources its merchandise; changes in operating
expenses, including employee wages, commission 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 LIBOR and other base
borrowing rates; potential disruption from terrorist activity and the effect
on ongoing consumer confidence; epidemic, pandemic or other public health
issues; potential disruption of international trade and supply chain
efficiencies; world conflict and the possible impact on consumer spending
patterns and other economic and demographic changes of similar or dissimilar
nature. The Company’s filings with the Securities and Exchange Commission,
including its Annual Report on Form 10-K for the fiscal year ended January 28,
2012, contain other information on factors that may affect financial results
or cause actual results to differ materially from forward-looking statements.

Contact:

Dillard's, Inc.
Julie Johnson Bull, 501-376-5965
 
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