Dear Shareholder,
We are writing to you in unprecedented times in our nation and the world. Foremost, we are
extremely proud of our associates, thousands of whom are shareholders with you, for being the very
best of Dillard’s as we navigate the challenges of COVID-19 together.
Normally, in our annual address to you here, we would recap our most recent fiscal year performance,
but we trust the following pages will provide you with such information. While 2019 had its challenges
for the sector and for Dillard’s, 2020 has begun with a staggering period of uncertainty. At the time of this
writing, conditions in our nation are changing rapidly, and we are responding in real-time using our best
judgment. We believe our highest efforts to provide a measure of stability are the most valuable
offerings Dillard’s can bring to our communities at this time.
Our conservative financial philosophy, practiced over 81 years of experience, has provided us with
stability in difficult times throughout our history. This thought process comes from decades of realizing
we do not always know what challenges lie just around the corner - and we need to make sound
decisions today in order to be in business tomorrow. While we could not foresee COVID-19 and the
magnitude thereof, we believe historically prudent financial decisions, evidenced by our strong balance
sheet, have us as prepared as possible for the current crisis.
We are finding encouraging evidence of preparedness in other forms, as well. We expanded our
eCommerce capabilities at dillards.com during the fall of 2019 with the implementation of ship from store.
This, in combination with buy online pick up in store and other recent eCommerce
enhancements, allows us to meet our customers’ needs in a seamless, convenient online
experience while in-store shopping visits may be limited for a time.
We are continually inspired by our team’s dedication and determination to see this through together.
While we have not experienced a storm like this, we pledge to be good stewards of our business,
to make thoughtful, intentional decisions based upon decades of experience, and to do all we
can to keep Dillard’s strong and viable in the marketplace for the many people we serve.
We thank you for your support of Dillard’s as we move forward together.
Warm regards,
William Dillard, II
Chairman of the Board &
Chief Executive Officer
Alex Dillard
President
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(Mark one)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended February 1, 2020
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition 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
71-0388071
(I.R.S. Employer
Identification No.)
1600 CANTRELL ROAD, LITTLE ROCK, ARKANSAS 72201
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code (501) 376-5200
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of each exchange on which registered
Class A Common Stock
DDS
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes
No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes
No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes
No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be
submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit such files).
Yes
No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer,"
"smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
Non-Accelerated Filer
Accelerated Filer
Smaller Reporting Company
Emerging Growth Company
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
No
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of
August 3, 2019 was $1,184,463,131.
Indicate the number of shares outstanding of each of the registrant's classes of common stock as of February 29, 2020:
CLASS A COMMON STOCK, $0.01 par value
CLASS B COMMON STOCK, $0.01 par value
19,367,269
4,010,401
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the Annual Meeting of Stockholders to be held May 16, 2020 (the "Proxy
Statement") are incorporated by reference into Part III of this Form 10-K.
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Table of Contents
Item No.
Page No.
1.
1A.
1B.
2.
3.
4.
5.
6.
7.
7A.
8.
9.
9A.
9B.
10.
11.
12.
13.
14.
15.
16.
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
PART I
PART II
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Selected Financial Data
Management's Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative 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
Directors, Executive Officers and Corporate Governance
Executive Compensation
PART III
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
Exhibits, Financial Statement Schedules
Form 10-K Summary
PART IV
1
3
10
10
11
11
14
16
18
35
35
35
35
36
37
37
37
38
38
39
41
(This page has been left blank intentionally.)
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ITEM 1. BUSINESS.
PART I
Dillard's, Inc. ("Dillard's", the "Company", "we", "us", "our" or "Registrant") ranks among the nation's largest fashion
apparel, cosmetics and home furnishing retailers. The Company, originally founded in 1938 by William T. Dillard, was
incorporated in Delaware in 1964. As of February 1, 2020, we operated 285 Dillard's stores, including 28 clearance centers, and
an Internet store offering a wide selection of merchandise including fashion apparel for women, men and children, accessories,
cosmetics, home furnishings and other consumer goods. The Company also operates a general contracting construction
company, CDI Contractors, LLC ("CDI"), a portion of whose business includes constructing and remodeling stores for the
Company.
The following table summarizes the percentage of net sales by segment and major product line:
Retail operations segment:
Cosmetics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ladies' apparel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ladies' accessories and lingerie. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Juniors' and children's apparel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Men's apparel and accessories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shoes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Home and furniture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction segment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Percentage of Net Sales
Fiscal 2019
Fiscal 2018
Fiscal 2017
14%
14%
14%
22
15
9
18
15
4
97
3
22
15
9
17
15
4
96
4
23
16
8
17
16
4
98
2
100%
100%
100%
Additional information regarding our business, results of operations and financial condition, including information
pertaining to our reporting segments, can be found in Management's Discussion and Analysis of Financial Condition and
Results of Operations in Item 7 hereof and in Note 2 in the "Notes to Consolidated Financial Statements" in Item 8 hereof.
We operate retail department stores in 29 states, primarily in the southwest, southeast and midwest regions of the United
States. Most of our stores are located in suburban shopping malls and open-air centers. Customers may also purchase our
merchandise online at our website, www.dillards.com, which features online gift registries and a variety of other services.
Our retail merchandise business is conducted under highly competitive conditions. Although we are a large regional
department store, we have numerous competitors at the national and local level that compete with our individual stores,
including specialty, off-price, discount and Internet retailers. Competition is characterized by many factors including location,
reputation, merchandise assortment, advertising, price, quality, operating efficiency, service and credit availability. We believe
that our stores are in a strong competitive position with regard to each of these factors. Other retailers may compete for
customers on some or all of these factors, or on other factors, and may be perceived by some potential customers as being
better aligned with their particular preferences.
Our merchandise selections include, but are not limited to, our lines of exclusive brand merchandise such as Antonio
Melani, Gianni Bini, GB, Roundtree & Yorke and Daniel Cremieux. Our exclusive brands/private label merchandise program
provides benefits for Dillard's and our customers. Our customers receive fashionable, higher quality product often at a savings
compared to national brands. Our private label merchandise program allows us to ensure the Company's high standards are
achieved, while minimizing costs and differentiating our merchandise offerings from other retailers.
We have made a significant investment in our trademark and license portfolio, in terms of design function, advertising,
quality control and quick response to market trends in a quality manufacturing environment. Dillard's trademark registrations
are maintained for as long as Dillard's holds the exclusive right to use the trademarks on the listed products.
Our merchandising, sales promotion and store operating support functions are conducted primarily at our corporate
headquarters. Our back office sales support functions, such as accounting, product development, store planning and information
technology, are also centralized.
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We have developed a knowledge of each of our trade areas and customer bases for our stores. This knowledge is
enhanced through regular store visits by senior management and merchandising personnel and through the use of online
merchandise information and is supported by our regional merchandising offices. We will continue to use existing technology
and research to edit merchandise assortments by store to meet the specific preference, taste and size requirements of each local
operating area.
Certain departments in our stores are licensed to independent companies in order to provide high quality service and
merchandise where specialization, focus and expertise are critical. The licensed departments vary by store to complement our
own merchandising departments. The principal licensed department is an upscale women's apparel vendor in certain stores. The
terms of the license agreements typically range between three and five years with one year renewals and require the licensee to
pay for fixtures and to provide their own employees. We regularly evaluate the performance of the licensed departments and
require compliance with established customer service guidelines.
Wells Fargo Bank, N.A. ("Wells Fargo") owns and manages Dillard's private label credit cards, including credit cards co-
branded with American Express (collectively "private label cards") under a long-term marketing and servicing alliance ("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 received from the
portfolio is determined monthly and has no recourse provisions. We participate in the marketing of the private label cards,
which includes the cost of customer reward programs. The Wells Fargo Alliance expires in fiscal 2024.
We seek to expand the number and 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 customers are sometimes
offered private shopping nights, direct mail catalogs, special discounts and advance notice of sale events. Wells Fargo
administers the loyalty program that rewards customers for private label card usage.
Our earnings depend to a significant extent on the results of operations for the last quarter of our fiscal year. Due to
holiday buying patterns, sales for that period average approximately one-third of annual sales. Additionally, working capital
requirements fluctuate during the year, increasing during the second half of the year in anticipation of the holiday season.
As of February 1, 2020, we employed approximately 38,000 full-time and part-time associates, of which approximately
40% were part-time. The number of associates varies during the year, with increases occurring during peak seasonal selling
periods.
We purchase merchandise from many sources and do not believe that we are dependent on any one supplier. We have no
long-term purchase commitments or arrangements with any of our suppliers, but we consider our relationships to be strong and
mutually beneficial.
Our fiscal year ends on the Saturday nearest January 31 of each year. Fiscal years 2019 and 2018 ended on February 1,
2020 and February 2, 2019, respectively, and contained 52 weeks each, and fiscal year 2017 ended on February 3, 2018 and
contained 53 weeks.
The information contained on our website is not incorporated by reference into this Annual Report on Form 10-K (this
"Annual Report") and should not be considered to be a part of this Annual Report. Our annual reports on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K, statements of changes in beneficial ownership of securities on Form 4 and
Form 5 and amendments to those reports filed or furnished with the SEC pursuant to Section 13(a), 15(d) or 16 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as applicable, are available free of charge (as soon as reasonably
practicable after we electronically file such material with, or furnish it to, the SEC) on the Dillard's, Inc. investor relations
website: investor.dillards.com.
We have adopted a Code of Conduct and Corporate Governance Guidelines, as required by the listing standards of the
New York Stock Exchange and the rules of the SEC. We have posted on our investor relations website our Code of Conduct,
Corporate Governance Guidelines, Social Accountability Policy, our most recent Social Accountability Report, our most recent
report on climate change mitigation efforts and committee charters for the Audit Committee of the Board of Directors and the
Stock Option and Executive Compensation Committee of the Board of Directors.
Our corporate offices are located at 1600 Cantrell Road, Little Rock, Arkansas 72201, telephone: 501-376-5200.
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ITEM 1A. RISK FACTORS.
The risks described in this Item 1A, Risk Factors, of this Annual Report could materially and adversely affect our
business, financial condition and results of operations.
The Company cautions that forward-looking statements, as such term is defined in the Private Securities Litigation
Reform Act of 1995, contained in this Annual Report on Form 10-K are based on estimates, projections, beliefs and
assumptions of 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.
The COVID-19 pandemic and its effects on public health, our supply chain, the health and well-being of our employees and
customers, and the retail industry in general could have a material adverse effect on our business, financial condition and
results of operations.
In December 2019, a strain of coronavirus, now known as COVID-19, was reported to have surfaced in Wuhan, China.
Since that time, the virus has rapidly spread to other countries around the world, including South Korea, Japan, Italy, and
recently, the United States. In response to the pandemic, national and local governments have taken various measures to
attempt to slow the spread of the virus. These measures include travel bans; prohibitions on group events and large gatherings;
extended shutdowns of schools, government offices and certain businesses; curfews and recommendations to practice “social
distancing.” At this time, it is unclear how long these measures may remain in place or what additional measures may be
imposed.
The foregoing measures, and additional measures that have been and may continue to be taken in response to the
COVID-19 pandemic, including mandatory or voluntary store closures by the Company, have substantially decreased and may
continue to decrease the number of customers that visit our stores and the shopping malls in which our stores are located. A
decrease in customers due to the COVID-19 pandemic or measures taken in response thereto has had and could continue to
have a material adverse effect on our business.
The Company sources a significant portion of its private label and exclusive brand merchandise from countries that
have experienced widespread transmission of the virus, including China. Additionally, many of the Company’s branded
merchandise vendors may also source a significant portion of their merchandise from these same countries. Manufacturing
capacity in those countries has been materially impacted by the pandemic, and has negatively impacted our supply chain. If this
continues, we cannot guarantee that we will be able to locate alternative sources of supply for our merchandise on acceptable
terms, or at all. If we are unable to adequately source our merchandise or purchase appropriate amounts of merchandise from
branded vendors, our business and results of operations may be materially and adversely affected.
In the event that the Company were to experience widespread transmission of the virus at one or more of the
Company’s stores or other facilities, the Company could suffer reputational harm or other potential liability. Further, the
Company’s business operations may be materially and adversely affected if a significant number of the Company’s employees
are impacted by the virus.
The retail merchandise business is highly competitive, and that competition could lower our revenues, margins 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. We have numerous competitors nationally, locally and on the Internet, including
conventional department stores, specialty retailers, off-price and discount stores, boutiques, mass merchants, and Internet and
mail-order retailers. Although we are a large regional department store, some of our competitors are larger than us with greater
financial resources and, as a result, may be able to devote greater resources to sourcing, promoting and selling their products.
Additionally, we compete in certain markets with a substantial number of retailers that specialize in one or more types of
merchandise that we sell. In recent years, competition has intensified as a result of reduced discretionary consumer spending,
increased promotional activity, deep price discounting, and few barriers to entry. Also, online retail shopping continues to
rapidly evolve, and we continue to expect competition in the e-commerce market to intensify in the future as the Internet
facilitates competitive entry and comparison shopping. We anticipate that intense competition will continue from both existing
competitors and new entrants. If we are unable to maintain our competitive position, we could experience downward pressure
on prices, lower demand for products, reduced margins, the inability to take advantage of new business opportunities and the
loss of market share.
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Changes in economic, financial and political conditions, and the resulting impact on consumer confidence and consumer
spending, could have an adverse effect on our business and results of operations.
The retail merchandise business is highly sensitive to changes in overall economic and political conditions that impact
consumer confidence and spending. Various economic conditions affect the level of disposable income consumers have
available to spend on the merchandise we offer, including unemployment rates, interest rates, taxation, energy costs, the
availability of consumer credit, the price of gasoline, consumer confidence in future economic conditions and general business
conditions. Due to the Company's concentration of stores in energy producing regions, volatile conditions in these regions
could adversely affect the Company's sales. Consumer purchases of discretionary items and other retail products generally
decline during recessionary periods, and also may decline at other times when changes in consumer spending patterns affect us
unfavorably. In addition, any significant decreases in shopping mall traffic could also have an adverse effect on our results of
operations.
Our business is dependent upon our ability to accurately predict rapidly changing fashion trends, customer preferences, and
other fashion-related factors.
Our sales and operating results depend in part on our ability to effectively predict and quickly respond to changes in
fashion trends and customer preferences. We continuously assess emerging styles and trends and focus on developing a
merchandise assortment to meet customer preferences at competitive prices. Even with these efforts, we cannot be certain that
we will be able to successfully meet constantly changing fashion trends and customer preferences. If we are unable to
successfully predict or respond to changing styles or preferences, we may be faced with lower sales, increased inventories,
additional markdowns or promotional sales to dispose of excess or slow-moving inventory, and lower gross margins, all of
which would have an adverse effect on our business, financial condition, and results of operations.
Our failure to protect our reputation could have an adverse effect on our business.
We offer our customers quality products at competitive prices and a high level of customer service, resulting in a well-
recognized brand and customer loyalty. As discussed in the immediately preceding risk factor, our brand and customer loyalty
depend, in part, on our ability to predict or respond to changes in fashion trends and consumer preferences in a timely manner.
Failure to respond rapidly to changing trends could diminish brand and customer loyalty and impact our reputation with
customers.
Additionally, the value of our reputation is based, in part, on subjective perceptions of the quality of our merchandise
selections. Isolated incidents involving us or our merchandise that erode trust or confidence could adversely affect our reputation
and our business, particularly if the incidents result in significant adverse publicity or governmental investigation or inquiry.
Similarly, information posted about us, including our lines of exclusive brand merchandise, on the Internet, including social media
platforms that allow individuals access to a wide audience of consumers and other interested persons, may adversely affect our
reputation, even if the information is inaccurate.
Any significant damage to our brand or reputation could negatively impact sales, diminish customer trust and generate
negative sentiment, any of which would harm our business and results of operation.
Risks associated with our private label merchandise program could adversely affect our business.
Our merchandise selections include our lines of exclusive brand merchandise, such as Antonio Melani, Gianni Bini, GB,
Roundtree & Yorke and Daniel Cremieux. We expect to grow our private label merchandise program and have invested in our
development and procurement resources and marketing efforts related to these exclusive brand offerings. The expansion of our
private label merchandise subjects us to certain additional risks. These include, among others, risks related to: our failure to
comply with government and industry safety standards; our ability to successfully protect our trademark and license portfolio
and our other proprietary rights in our exclusive brands/private label merchandise program; and risks associated with overseas
sourcing and manufacturing. In addition, damage to the reputation of our private label trade names may generate negative
customer sentiment. Our failure to adequately address some or all of these risks could have a material adverse effect on our
business, results of operations and financial condition.
Fluctuations in the price of merchandise, raw materials, fuel and labor or their reduced availability could increase our cost
of goods and negatively impact our financial results.
Fluctuations in the price and availability of fuel, labor and raw materials, combined with the inability to mitigate or to
pass cost increases on to our customers or to change our merchandise mix as a result of such cost increases, could have an
adverse impact on our profitability. Vendors and other suppliers of the Company may experience similar fluctuations, which
may subject us to the effects of their price increases. We may or may not be able to pass such costs along to our customers.
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Even when successful, attempts to pass such costs along to our customers might cause a decline in our sales volume.
Additionally, any decrease in the availability of raw materials could impair our ability and the ability of our branded vendors to
meet purchasing requirements in a timely manner. Both the increased cost and lower availability of merchandise, raw
materials, fuel and labor may also have an adverse impact on our cash and working capital needs.
Third party suppliers on whom we rely to obtain materials and provide production facilities and other third parties with whom
we do business may experience financial difficulties due to current and future economic conditions, which may subject them
to insolvency risk or may result in their inability or unwillingness to perform the obligations they owe us.
Our suppliers may experience financial difficulties due to a downturn in the industry or in other macroeconomic environments.
Our suppliers’ cash and working capital needs can be adversely impacted by the increased cost and lower availability of merchandise,
raw materials, fuel and labor. Current and future economic conditions may prevent our suppliers from obtaining financing on
favorable terms, which could impact their ability to supply us with merchandise on a timely basis.
We are also party to contractual and business relationships with various other parties, including vendors and service providers,
pursuant to which such parties owe performance, payment and other obligations to us. In some cases, we depend upon such third
parties to provide essential products, services or other benefits, such as advertising, software development and support, logistics
and other goods and services necessary to operate our business. Economic, industry and market conditions could result in increased
risks to us associated with the potential financial distress of such third parties.
If any of the third parties with which we do business become subject to insolvency, bankruptcy, receivership or similar
proceedings, our rights and benefits in relation to, contractual and business relationships with such third parties could be
terminated, modified in a manner adverse to us, or otherwise materially impaired. There can be no assurances that we would be
able to arrange for alternate or replacement contractual or business relationships on terms as favorable as our existing ones, if at
all. Any inability on our part to do so could negatively affect our cash flows, financial condition and results of operations.
We source many of our products from foreign countries, which exposes us to certain risks that include political and
economic conditions.
Political discourse has recently focused on ways to discourage corporations in the United States from outsourcing
manufacturing and production activities to foreign jurisdictions. In 2018, the United States imposed additional tariffs on certain
items sourced from foreign countries, including China. Other proposals to address this issue include the possibility of imposing
additional tariffs, border adjustments or other penalties on goods manufactured outside the United States to attempt to
discourage these practices. It has also been suggested that the United States may materially modify or withdraw from some of
its existing trade agreements. While recent tariffs have not resulted in a material impact on our cash flows, financial condition
and results of operations, any additional actions, if ultimately enacted, could negatively impact our ability and the ability of our
third-party vendors and suppliers to source products from foreign jurisdictions and could lead to an increase in the cost of
goods and adversely affect our profitability.
Moreover, our third-party suppliers in foreign jurisdictions are subject to political and economic uncertainty. As a result,
we are subject to risks and uncertainties associated with changing economic and political conditions in foreign countries where
our suppliers are located, including increased import duties, tariffs, trade restrictions and quotas, work stoppages, economic
uncertainties, human rights concerns, working conditions and other labor rights and conditions, the environmental impact in
foreign countries where merchandise is produced and raw materials or products are sourced, changing labor, environmental and
other laws in these countries, adverse foreign government regulations, wars, fears of war, terrorist attacks and organizing
activities, adverse fluctuations of foreign currencies and political unrest. We cannot predict when, or the extent to which, the
countries in which our products are manufactured will experience any of the foregoing events. Any event causing a disruption
or delay of imports from foreign locations would likely increase the cost or reduce the supply of merchandise available to us
and would adversely affect our operating results. In addition, trade restrictions, including increased tariffs or quotas,
embargoes, safeguards, and customs restrictions against apparel items, as well as United States or foreign labor strikes, work
stoppages, or boycotts, could increase the cost or reduce the supply of merchandise available to us or may require us to modify
our current business practices, any of which could adversely affect our profitability.
Failure by third party suppliers to comply with our supplier compliance programs or applicable laws could have a material
adverse effect on our business.
All of our suppliers must comply with our supplier compliance programs and applicable laws, including consumer and
product safety laws, but we do not control our vendors or their labor and business practices. The violation of labor or other laws
by one or more of our vendors could have an adverse effect on our business. Additionally, although we diversify our sourcing
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and production, the failure of any supplier to produce and deliver our goods on time, to meet our quality standards and adhere
to our product safety requirements or to meet the requirements of our supplier compliance program or applicable laws, could
impact our ability to flow merchandise to our stores or directly to consumers in the right quantities at the right time, which
could adversely affect our profitability and could result in damage to our reputation and translate into sales losses.
A decrease in cash flows from our operations and constraints to accessing other financing sources could limit our ability to
fund our operations, capital projects, interest and debt repayments, stock repurchases and dividends.
Our business depends upon our operations to generate strong cash flow and to some extent upon the availability of
financing sources to supply capital to fund our general operating activities, capital projects, interest and debt repayments, stock
repurchases and dividends. Our inability to continue to generate sufficient cash flows to support these activities or the lack of
available financing in adequate amounts and on appropriate terms when needed could adversely affect our financial
performance including our earnings per share.
Reductions in the income and cash flow from our long-term marketing and servicing alliance related to the private label
credit cards could impact operating results and cash flows.
Wells Fargo owns and manages the private label credit cards under the Wells Fargo Alliance. The Wells Fargo Alliance
provides for certain payments to be made by Wells Fargo to the Company, including the Company's share of earnings under this
alliance. The 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 charge rates and other fees on Wells Fargo accounts, the level
of credit losses for the Wells Fargo accounts, Wells Fargo's ability to extend credit to our customers as well as the cost of
customer rewards programs, all of which can vary based on changes in federal and state banking and consumer protection laws
and from a variety of economic, legal, social and other factors that we cannot control. If the income or cash flow that the
Company receives from the Wells Fargo Alliance decreases, our operating results and cash flows could be adversely affected.
Credit card operations are subject to numerous federal and state laws that impose disclosure and other requirements upon
the origination, servicing, and enforcement of credit accounts, and limitations on the amount of finance charges and fees that
may be charged by a credit card provider. Wells Fargo may be subject to regulations that may adversely impact its operation of
the private label credit card. To the extent that such limitations or regulations materially limit the availability of credit or
increase the cost of credit to the cardholders or negatively impact provisions which affect our earnings associated with the
private label credit card, our results of operations could be adversely affected. In addition, changes in credit card use, payment
patterns, or default rates could be affected by a variety of economic, legal, social, or other factors over which we have no
control and cannot predict with certainty. Such changes could also negatively impact Wells Fargo's ability to facilitate
consumer credit or increase the cost of credit to the cardholders.
We are subject to customer payment-related risks that could increase our operating costs, expose us to fraud or theft, subject
us to potential liability and potentially disrupt our business operations.
We accept payments using a variety of methods, including cash, checks, debit cards, credit cards (including the private label
credit cards) and gift cards. As a result, we are subject to rules, regulations, contractual obligations and compliance requirements,
including payment network rules and operating guidelines, data security standards and certification requirements, and rules
governing electronic funds transfers. The payment methods that we offer also subject us to potential fraud and theft by persons
who seek to obtain unauthorized access to or exploit any weaknesses that may exist in the payment systems.
The regulatory environment related to information security and privacy is increasingly rigorous, with new and constantly
changing requirements applicable to our business, and compliance with those requirements could result in additional costs or
accelerate these costs. For certain payment methods, including credit and debit cards, we pay interchange and other fees, which
could increase over time and raise our operating costs. We rely on third parties to provide payment processing services, including
the processing of credit cards, debit cards, and other forms of electronic payment. If these companies become unable to provide
these services to us, or if their systems are compromised, it could disrupt our business.
Our business is seasonal, and fluctuations in our revenues during the last quarter of our fiscal year can have a
disproportionate effect on our results of operations.
Our business, like many other retailers, is subject to seasonal influences, with a significant portion of sales and income
typically realized during the last quarter of our fiscal year due to the holiday season. Our fiscal fourth-quarter results may
fluctuate significantly, based on many factors, including holiday spending patterns and weather conditions, and any such
fluctuation could have a disproportionate effect on our results of operations for the entire fiscal year. Because of the seasonality
6
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of our business, our operating results vary considerably from quarter to quarter, and results from any quarter are not necessarily
indicative of the results that may be achieved for a full fiscal year.
A shutdown of, or disruption in, any of the Company's distribution or fulfillment centers would have an adverse effect on
the Company's business and operations.
Our business depends on the orderly operation of the process of receiving and distributing merchandise, which relies on
adherence to shipping schedules and effective management of distribution or fulfillment centers. Although we believe that our
receiving and distribution process is efficient and that we have appropriate contingency plans, unforeseen disruptions in
operations due to fire, severe weather conditions, natural disasters, or other catastrophic events, labor disagreements, or other
shipping problems may result in the loss of inventory and/or delays in the delivery of merchandise to our stores and customers.
Current store locations may become less desirable, and desirable new locations may not be available for a reasonable price,
if at all, either of which could adversely affect our results of operations.
In order to generate customer traffic and for convenience of our customers, we attempt to locate our stores in desirable
locations within shopping malls and open air centers. Our stores benefit from the abilities that our Company, other anchor
tenants and other area attractions have to generate consumer traffic. Adverse changes in the development of new shopping
malls in the United States, the availability or cost of appropriate locations within existing or new shopping malls, competition
with other retailers for prominent locations, the success of individual shopping malls and the success or failure of other anchor
tenants, the continued proper management and development of existing malls, or the continued popularity of shopping malls
may continue to impact our ability to maintain or grow our sales in our existing stores, as well as our ability to open new stores,
which could have an adverse effect on our financial condition or results of operations.
Ownership and leasing of significant amounts of real estate exposes us to possible liabilities and losses.
We own the land and building, or lease the land and/or the building, for all of our stores. Accordingly, we are subject to all
of the risks associated with owning and leasing real estate. In particular, the value of our real estate assets could decrease, and
their operating costs could increase, because of changes in the investment climate for real estate, demographic trends and
supply or demand for the use of the store, which may result from competition from similar stores in the area. Additionally, we
are subject to potential liability for environmental conditions on the property that we own or lease. If an existing owned store is
not profitable, and we decide to close it, we may be required to record an impairment charge and/or exit costs associated with
the disposal of the store. We generally cannot cancel our leases. If an existing or future store is not profitable, and we decide to
close it, we may be committed to perform certain obligations under the applicable lease including, among other things, paying
the base rent for the balance of the lease term. In addition, as each of the leases expires, we may be unable to negotiate
renewals, either on commercially acceptable terms or at all, which could cause us to close stores in desirable locations. We may
not be able to close an unprofitable owned store due to an existing operating covenant which may cause us to operate the
location at a loss and prevent us from finding a more desirable location. We have approximately 75 stores along the Gulf and
Atlantic coasts that are covered by third-party insurance but are self-insured for property and merchandise losses related to
"named storms." As a result, the repair and replacement costs will be borne by us for damage to any of these stores from
"named storms," which could have an adverse effect on our financial condition or results of operations.
A privacy breach could adversely affect our business, reputation and financial condition.
We receive and store certain personal information about our employees and our customers, including information
permitting cashless payments, both in our stores and through our online operations at www.dillards.com. In addition, our online
operations depend upon the secure transmission of confidential information over public networks.
We have a longstanding Information Security Program committed to regular risk assessment and risk mitigation practices
surrounding the protection of confidential data. This program includes network segmentation along with identity and access
controls around the computer resources that house confidential data. We continue to evaluate the security environment
surrounding the handling and control of our critical data, especially the private data we receive from our customers, and we
institute additional measures to help protect us from a privacy breach.
Despite our security measures, it is possible that unauthorized persons (through cyberattacks, which are evolving and
becoming increasingly sophisticated, physical breach or other means) might defeat our security measures, those of Wells Fargo
or of our other third-party service providers or vendors, and obtain personal information of customers, employees or others.
While we likewise have measures in place to prevent exposing the personal information of customers, employees or others, we
are at continued risk for exposure of such information.
We have purchased Cyber Risk Liability insurance to provide some financial protection should a privacy breach occur;
however, such a compromise, whether in our information security system or our third-party service providers or vendors,
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resulting in personal information being obtained by or exposed to unauthorized persons could adversely affect our operations,
results of operations, financial condition and liquidity, and could result in litigation against us or the imposition of penalties.
For example, customers have an increasingly high expectation that companies will adequately protect their personal
information from security breaches or cyberattacks and unauthorized exposure. Our reputation and our ability to attract new
customers could be materially adversely impacted if we fail, or are perceived to have failed, to properly prevent and respond to
these incidents. In addition, a security breach could require that we expend significant additional resources related to our
information security systems and could result in a disruption of our operations, particularly our online sales operations.
A security breach also could result in a violation attributable to the Company of applicable U.S. and international privacy
and other laws, and subject us to litigation by private customers, business partners, or securities litigation and regulatory
investigations and proceedings, any of which could result in our exposure to material civil or criminal liability. The regulatory
environment surrounding information security, cybersecurity, and privacy is increasingly demanding, with new and changing
requirements, such as the European Union’s General Data Protection Regulation and the California Consumer Privacy Act.
Security breaches, cyber incidents or allegations that we used personal information in violation of applicable privacy and other
laws could result in significant legal and financial exposure.
Litigation with customers, employees and others could harm our reputation and impact operating results.
In the ordinary course of business, we may be involved in lawsuits and regulatory actions. We are impacted by trends in
litigation, including, but not limited to, class-action allegations brought under various consumer protection, employment, and
privacy and information security laws. Additionally, we may be subject to employment-related claims alleging discrimination,
harassment, wrongful termination and wage issues, including those relating to overtime compensation. We are susceptible to
claims filed by customers alleging responsibility for injury suffered during a visit to a store or from product defects, and we are
also subject to lawsuits filed by patent holders alleging patent infringement. These types of claims, as well as other types of
lawsuits to which we are subject from time to time, can distract management's attention from core business operations and
impact operating results, particularly if a lawsuit results in an unfavorable outcome.
Our profitability may be adversely impacted by weather conditions.
Our merchandise assortments reflect assumptions regarding expected weather patterns and our profitability depends on
our ability to timely deliver seasonally appropriate inventory. Unexpected or unseasonable weather conditions could render a
portion of our inventory incompatible with consumer needs. For example, extended periods of unseasonably warm
temperatures during the winter season or cool weather during the summer season could render a portion of the Company's
inventory incompatible with those unseasonable conditions. Additionally, extreme weather or natural disasters, particularly in
the areas in which our stores are located, could also severely hinder our ability to timely deliver seasonally appropriate
merchandise. For example, frequent or unusually heavy snowfall, ice storms, rainstorms, hurricanes or other extreme weather
conditions over a prolonged period could make it difficult for the Company's customers to travel to its stores and thereby
reduce the Company's sales and profitability. A reduction in the demand for or supply of our seasonal merchandise or reduced
sales due to reduced customer traffic in our stores could have an adverse effect on our inventory levels, gross margins and
results of operations.
Natural disasters, war, acts of violence, acts of terrorism, other armed conflicts, and public health issues may adversely
impact our business.
The occurrence of, or threat of, a natural disaster, war, acts of violence, acts of terrorism, other armed conflicts, and
public health issues (including the recent COVID-19 pandemic) could disrupt our operations, disrupt international trade and
supply chain efficiencies, suppliers or customers, or result in political or economic instability. If commercial transportation is
curtailed or substantially delayed our business may be adversely impacted, as we may have difficulty shipping merchandise to
our distribution centers, fulfillment centers, stores, or directly to customers. As a result of the occurrence of, or threat of, a
natural disaster, acts of violence or acts of terrorism, other armed conflicts, and public health issues (including the recent
COVID-19 pandemic) in 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 employee wages and the cost of employee benefits could impact the Company’s financial results and cash flows.
The Company’s expenses relating to employee wages and health benefits are significant. Increases in employee wages,
including the minimum wage, or unfavorable changes in the cost of healthcare benefits could impact the Company’s financial
results and cash flows. Healthcare costs have risen significantly in recent years, and recent legislative and private sector initiatives
regarding healthcare reform have resulted and could continue to result in significant changes to the U.S. healthcare system. Due
to the breadth and complexity of the U.S. healthcare system, and uncertainty regarding legislative or regulatory changes, the
8
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Company is not able to fully determine the impact that future healthcare reform will have on our company sponsored medical
plans.
The Company depends on its ability to attract and retain quality employees, and failure to do so could adversely affect our
ability to execute our business strategy and our operating results.
The Company's business is dependent upon attracting and retaining quality employees. The Company has a large number
of employees, many of whom are in entry level or part-time positions with historically high rates of turnover. The Company's
ability to meet its labor needs while controlling the costs associated with hiring and training new employees is subject to
external factors such as unemployment levels, changing demographics, prevailing wage rates, and current or future minimum
wage and healthcare reform legislation. In addition, as a complex enterprise operating in a highly competitive and challenging
business environment, the Company is highly dependent upon management personnel to develop and effectively execute
successful business strategies and tactics. Any circumstances that adversely impact the Company's ability to attract, train,
develop and retain quality employees throughout the organization could adversely affect the Company's business and results of
operations.
Variations in the amount of vendor allowances received could adversely impact our operating results.
We receive vendor allowances for advertising, payroll and margin maintenance that are a strategic part of our operations.
A reduction in the amount of cooperative advertising allowances would likely cause us to consider other methods of advertising
as well as the volume and frequency of our product advertising, which could increase/decrease our expenditures and/or
revenue. Decreased payroll reimbursements would either cause payroll costs to rise, negatively impacting operating income, or
cause us to reduce the number of employees, which may cause a decline in sales. A decline in the amount of margin
maintenance allowances would either increase cost of sales, which would negatively impact gross margin and operating
income, or cause us to reduce merchandise purchases, which may cause a decline in sales.
Our operations are dependent on information technology systems, and disruptions in those systems could have an adverse
impact on our results of operations.
Our operations are dependent upon the integrity, security and consistent operation of various systems and data centers,
including the point-of-sale 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 subject to damage or interruption from
power outages, computer and telecommunications failures, computer viruses, cyberattack or other security breaches,
catastrophic events such as fires, floods, earthquakes, tornadoes, hurricanes, acts of war or terrorism, and usage errors by the
Company's employees. If the Company's computer systems are damaged or cease to function properly, the Company may have
to make a significant investment to repair or replace them, and the Company may suffer loss of critical data and interruptions or
delays in its operations in the interim. Any material interruption in the Company's computer systems could adversely affect its
business or results of operations. Additionally, to keep pace with changing technology, we must continuously provide for the
design and implementation of new information technology systems and enhancements of our existing systems. We could
encounter difficulties in developing new systems or maintaining and upgrading existing systems. Such difficulties could lead to
significant expenses or to losses due to disruption in business operations.
The cost-to-cost method of accounting that we use to recognize contract revenues for our construction segment may result
in material adjustments, which could result in a credit or a charge against our earnings.
Our construction segment recognizes contract revenues based on the cost-to-cost method. Under this method, estimated
contract revenues are measured based on the ratio of costs incurred to total estimated contract costs. Estimated contract losses
are recognized in full when determined. Total contract revenues and cost estimates are reviewed and revised at a minimum on a
quarterly basis as the work progresses and as change orders are approved. Adjustments are reflected in contract revenues in the
period when these estimates are revised. To the extent that these adjustments result in an increase, a reduction or an elimination
of previously reported contract profit, we are required to recognize a credit or a charge against current earnings, which could be
material.
9
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ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.
ITEM 2. PROPERTIES.
All of our stores are owned by us or leased from third parties. At February 1, 2020, we operated 285 stores in 29 states
totaling approximately 48.3 million square feet of which we owned approximately 43.7 million square feet. Our third-party
store leases typically provide 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 and the corresponding owned
and leased footprint at February 1, 2020:
Location
Alabama . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Arkansas. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Arizona. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
California . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Colorado. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Florida . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Georgia. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Iowa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Idaho . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Illinois . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Indiana . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Kansas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Kentucky . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Louisiana . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Missouri . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mississippi . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Montana . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
North Carolina . . . . . . . . . . . . . . . . . . . . . . . . . .
Nebraska . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
New Mexico. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nevada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ohio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Oklahoma. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
South Carolina . . . . . . . . . . . . . . . . . . . . . . . . . .
Tennessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Utah . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Virginia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wyoming . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number
of stores
Owned
Stores
Leased
Stores
Owned
Building
on Leased
Land
Partially
Owned
and
Partially
Leased
—
—
—
—
—
2
3
—
—
—
—
—
1
1
1
1
—
—
1
3
—
2
2
—
1
7
—
—
—
25
—
—
1
—
—
2
1
—
—
—
—
2
—
—
2
1
—
—
—
—
—
—
—
—
—
—
—
1
—
10
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1
5
—
—
—
6
9
8
16
3
7
42
12
4
2
3
3
5
6
15
9
6
2
13
3
6
5
12
8
7
10
57
5
6
9
8
15
3
7
38
8
4
2
3
3
3
5
14
6
4
2
13
2
3
5
10
6
7
8
45
5
5
1
285
1
244
10
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At February 1, 2020, we operated the following additional facilities:
Facility
Location
Square Feet
Distribution Centers: . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mabelvale, Arkansas
Gilbert, Arizona
Valdosta, Georgia
Olathe, Kansas
Salisbury, North Carolina
Ft. Worth, Texas
Internet Fulfillment Center . . . . . . . . . . . . . . . . . . . . . . . Maumelle, Arkansas
Dillard's Executive Offices . . . . . . . . . . . . . . . . . . . . . . . Little Rock, Arkansas
CDI Contractors, LLC Executive Office . . . . . . . . . . . . Little Rock, Arkansas
CDI Storage Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . Maumelle, Arkansas
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
400,000
295,000
370,000
500,000
355,000
700,000
850,000
333,000
25,000
66,000
3,894,000
Owned /
Leased
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Additional property information is contained in Notes 1, 12 and 13 in the "Notes to Consolidated Financial Statements,"
in Item 8 hereof.
ITEM 3. LEGAL PROCEEDINGS.
From time to time, the Company is involved in litigation relating to claims arising out of the Company's operations in the
normal course of business. This may include litigation with customers, employment related lawsuits, class action lawsuits,
purported class action lawsuits and actions brought by governmental authorities. As of March 31, 2020, neither the Company
nor any of its subsidiaries is a party to, nor is any of their property the subject of, any material legal proceedings.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
11
Table of Contents
INFORMATION ABOUT OUR EXECUTIVE OFFICERS
The following table lists the names and ages of all executive officers of the Company, the nature of any family
relationship between 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.
Name
William Dillard, II . . . . . . . .
Age
Position & Office
75 Director; Chief Executive
Officer
Held Present
Office Since
1998
Family Relationship to CEO
Not applicable
Alex Dillard . . . . . . . . . . . . .
Mike Dillard. . . . . . . . . . . . .
70 Director; President
68 Director; Executive Vice
1998
1984
Brother of William Dillard, II
Brother of William Dillard, II
President
Drue Matheny . . . . . . . . . . .
73 Director; Executive Vice
1998
Sister of William Dillard, II
Chris B. Johnson (1) . . . . . .
Phillip R. Watts (2). . . . . . . .
William Dillard, III (3). . . . .
Denise Mahaffy (4) . . . . . . .
Dean L. Worley . . . . . . . . . .
Mike McNiff . . . . . . . . . . . .
Brant Musgrave . . . . . . . . . .
Mike Litchford (5) . . . . . . . .
Tom Bolin (6). . . . . . . . . . . .
Annemarie Jazic (7) . . . . . . .
Alexandra Lucie (8) . . . . . . .
Tony Bolte (9) . . . . . . . . . . .
James D. Stockman (10) . . .
President
48 Senior Vice President; Co-
Principal Financial Officer
57 Senior Vice President; Co-
Principal Financial Officer and
Principal Accounting Officer
49 Senior Vice President
62 Senior Vice President
54 Vice President; General Counsel
67 Vice President
47 Vice President
54 Vice President
57 Vice President
36 Vice President
36 Vice President
61 Vice President
63 Vice President
2015
None
2015
None
2015
2015
2012
1995
2014
2016
2016
2017
2017
2017
2017
Son of William Dillard, II
Sister of William Dillard, II
None
None
None
None
None
Niece of William Dillard, II
Niece of William Dillard, II
None
None
_______________________________________________________________________________
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
Mr. Johnson served as Vice President of Accounting from 2006 to 2012 and served as Vice President of Real Estate
from 2012 to 2015. In 2015, he was promoted to Senior Vice President and Co-Principal Financial Officer. Since
2008, Mr. Johnson has also served as Chief Financial Officer of CDI, the Company's wholly-owned general
contracting construction subsidiary.
Mr. Watts served as Vice President of Tax from 2002 to 2015. In 2015, he was promoted to Senior Vice President, Co-
Principal Financial Officer and Principal Accounting Officer.
Mr. Dillard served as Vice President of Corporate Merchandising and Product Development from 2001 to 2015. In
2015, he was promoted to Senior Vice President.
Mrs. Mahaffy served as Corporate Vice President of Advertising from 2000 to 2015. In 2015, she was promoted to
Senior Vice President.
Mr. Litchford served as a Regional Vice President of Stores from 2005 to 2016. In 2016, he was promoted to
Corporate Vice President of Stores.
Mr. Bolin served as a Regional Vice President of Stores from 2000 to 2016. In 2016, he was promoted to Corporate
Vice President of Stores.
Mrs. Jazic served as Director of Contemporary Sportswear from 2006 to 2013 and Director of Online Experience from
2013 to 2017. In 2017, she was promoted to Vice President of Online Experience.
Mrs. Lucie served as a Divisional Merchandise Manager of Ladies', Juniors' and Children's Exclusive Brands from
2010 to 2014 and served as a General Merchandise Manager of Ladies', Juniors' and Children's Exclusive Brands from
12
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2014 to 2017. In 2017, she was promoted to Corporate Vice President of Ladies', Juniors' and Children's Exclusive
Brands.
(9)
Mr. Bolte served as Vice President of Logistics from 2007 to 2017. In 2017, he was promoted to Vice President of
Information Technology and Logistics.
(10) Mr. Stockman served as General Merchandise Manager of Exclusive Brands from 2004 to 2017. In 2017, he was
promoted to Corporate Vice President of Ladies' Apparel.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS 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.
While the Company currently expects to continue paying quarterly cash dividends during fiscal 2020, all prospective
dividends are subject to and conditional upon the review and approval of and declaration by the Board of Directors.
Stockholders
As of February 29, 2020, there were 2,459 holders of record of the Company's Class A Common Stock and 8 holders of
record of the Company's Class B Common Stock.
Repurchase of Common Stock
Issuer Purchases of Equity Securities
Period
November 3, 2019 through November 30,
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 1, 2019 through January 4,
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(a) Total
Number of
Shares
Purchased(1)
(b) Average Price
Paid per Share
(c) Total Number
of Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs
(d) Approximate
Dollar Value of
Shares that May
Yet Be
Purchased
Under the Plans
or Programs
— $
—
—
—
— $
305,417,522
—
305,417,522
January 5, 2020 through February 1, 2020
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
268,680,928
(1) The total number of shares purchased consists of shares purchased under the Board of Directors' authorized repurchase plan
described below.
268,680,928
533,557
533,557
533,557
533,557
68.85
68.85
$
$
In March 2018, the Company's Board of Directors authorized the repurchase of up to $500 million of the Company's
Class A Common Stock under an open-ended stock repurchase plan ("March 2018 Stock Plan"). This repurchase plan permits
the Company to repurchase its Class A Common Stock in the open market, pursuant to preset trading plans meeting the
requirements of Rule 10b5-1 under the Exchange Act or through privately negotiated transactions. The repurchase plan has no
expiration date. There was $268.7 million in remaining availability pursuant to the March 2018 Stock Plan as of February 1,
2020.
Reference is made to the discussion in Note 9 in the "Notes to Consolidated Financial Statements" in Item 8 of this
Annual Report, which information is incorporated by reference herein.
Securities Authorized for Issuance under Equity Compensation Plans
The information concerning the Company's equity compensation plans is incorporated herein by reference from Item 12
of this Annual Report under the heading "Equity Compensation Plan Information".
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Company Performance
The graph below compares the cumulative total returns on the Company's Class A Common Stock, the Standard & Poor's
500 Index and the Standard & Poor's 500 Department Stores Index for each of the last five fiscal years. The cumulative total
return assumes $100 invested in the Company's Class A Common Stock and each of the indices at market close on January 30,
2015 (the last trading day prior to the start of fiscal 2015) and assumes reinvestment of dividends.
The table below shows the dollar value of the respective $100 investments, with the assumptions noted above, in each of
the Company's Class A Common 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.
Dillard's, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . $
S&P 500 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
S&P 500 Department Stores . . . . . . . . . . . . . . .
62.16
$
48.45
$
56.79
$
58.82
$
99.33
72.11
120.06
58.16
147.47
71.50
147.38
75.70
54.84
179.16
53.65
2015
2016
2017
2018
2019
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ITEM 6. SELECTED FINANCIAL DATA.
The selected financial data set forth below should be read in conjunction with our "Management's Discussion and
Analysis of Financial Condition and Results of Operations", our consolidated audited financial statements and notes thereto and
the other information contained elsewhere in this report.
(Dollars in thousands, except per share data)
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,203,520
2019
2018
2017(1)
2016
2015
$ 6,356,109
$ 6,261,477
$ 6,257,137
$ 6,595,626
Percent change. . . . . . . . . . . . . . . . . . . . . .
(2)%
2%
—%
(5)%
—%
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . .
4,235,978
4,291,520
4,199,718
4,166,411
4,350,805
Percent of sales . . . . . . . . . . . . . . . . . . . . .
Interest and debt expense, net . . . . . . . . . . .
Income before income taxes and income on
and equity in earnings of joint ventures . . .
Income taxes (benefit) . . . . . . . . . . . . . . . . .
Income on and equity in earnings of joint
ventures . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income per diluted common share . . . .
Dividends per common share. . . . . . . . . . . .
Book value per common share. . . . . . . . . . .
68.3 %
46,227
67.5%
52,518
67.1%
62,580
66.6 %
63,059
66.0%
60,923
133,891
22,810
—
111,081
4.38
0.50
67.09
207,962
37,730
212,689
(7,800)
257,675
88,500
31
835
45
170,263
221,324
169,220
6.23
0.40
63.70
7.51
0.34
60.77
4.93
0.28
53.41
408,784
140,770
1,356
269,370
6.91
0.26
49.98
Average number of diluted shares
outstanding . . . . . . . . . . . . . . . . . . . . . . . . . 25,363,912
Accounts receivable . . . . . . . . . . . . . . . . . . .
46,160
Merchandise inventories . . . . . . . . . . . . . . .
Property and equipment, net . . . . . . . . . . . .
Operating lease assets . . . . . . . . . . . . . . . . .
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt. . . . . . . . . . . . . . . . . . . . . . .
Finance lease liabilities . . . . . . . . . . . . . . . .
Operating lease liabilities. . . . . . . . . . . . . . .
Other liabilities. . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . .
Subordinated debentures . . . . . . . . . . . . . . .
1,465,007
1,458,176
47,924
3,430,257
365,709
695
32,683
273,601
3,490
200,000
27,311,513
29,486,671
34,308,211
39,004,500
49,853
1,528,417
1,586,733
—
38,437
1,463,561
1,696,276
—
47,308
1,406,403
1,790,267
—
3,431,369
3,682,703
3,898,450
365,569
365,429
526,106
1,666
—
238,731
13,487
200,000
2,880
—
240,173
116,831
200,000
3,988
—
238,424
225,684
200,000
47,138
1,374,505
1,939,832
—
3,863,901
613,061
7,269
—
238,980
258,070
200,000
Total stockholders' equity . . . . . . . . . . . . . .
1,623,259
1,678,381
1,708,155
1,717,417
1,795,305
Number of stores
Opened. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Closed . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total—end of year . . . . . . . . . . . . . . . . . . .
—
6
285
—
1
291
1
2
292
—
4
293
3
3
297
___________________________________
(1)
Fiscal 2017 contains 53 weeks.
The items below are included in the Selected Financial Data.
2019
The items below amount to a net $20.3 million pretax gain ($20.9 million after tax or $0.82 per share).
•
a $20.3 million pretax gain ($15.8 million after tax or $0.62 per share) primarily related to the sale of six store
properties.
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•
$5.1 million ($0.20 per share) in tax benefits related to amended state tax return filings and the Taxpayer
Certainty and Disaster Tax Relief Act of 2019.
2018
$2.9 million ($0.11 per share) in tax benefits related to additional federal tax credits and an update of the provisional
amounts recorded for the income tax effects of the Tax Cuts and Jobs Act of 2017.
The items below amount to a net $4.1 million pretax gain ($80.1 million after tax or $2.71 per share).
•
•
•
a $4.9 million pretax gain ($3.2 million after tax or $0.11 per share) related to the disposal of assets from the
sale of a store property and insurance recovery on a previously damaged full-line store location partially offset
by a loss on the sale of equipment.
a $0.8 million pretax loss ($0.5 million after tax or $0.02 per share) related to the write-off of certain deferred
financing fees in connection with the amendment and extension of the Company's senior unsecured revolving
credit facility.
an estimated tax benefit of approximately $77.4 million ($2.62 per share) related to the Tax Cuts and Jobs Act
of 2017.
2017
2016
A $6.5 million pretax charge ($4.2 million after tax or $0.12 per share) for asset impairment related to the write-down of a
cost method investment.
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.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
Dillard's, Inc. operates 285 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 our retail operations.
In accordance with the National Retail Federation fiscal reporting calendar and our bylaws, the fiscal 2019 reporting
period presented and discussed below ended February 1, 2020 and contained 52 weeks. The fiscal 2018 reporting period
presented and discussed below ended February 2, 2019 and contained 52 weeks. The fiscal 2017 reporting period presented
below ended February 3, 2018 and contained 53 weeks. For comparability purposes, where noted, some of the information
presented below is based upon comparison of the 52 weeks ended February 2, 2019 to the 52 weeks ended February 3, 2018.
Additionally, where noted, some of the information presented below is based upon comparison of the 52 weeks ended January
27, 2018 to the 52 weeks ended January 28, 2017.
A discussion regarding results of operations and analysis of financial condition for the year ended February 2, 2019, as
compared to the year ended February 3, 2018 is included in Item 7 of Part II, “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended February 2, 2019.
EXECUTIVE OVERVIEW
Fiscal 2019
Comparable retail sales decreased 1% for fiscal 2019 compared to fiscal 2018. Gross profit from retail operations
decreased 99 basis points of sales for fiscal 2019 compared to fiscal 2018. Consolidated gross profit for fiscal 2019 decreased
76 basis points of sales compared to fiscal 2018. Consolidated selling, general and administrative ("SG&A") expenses during
fiscal 2019 increased 65 basis points of sales compared to fiscal 2018. Net income decreased to $111.1 million, or $4.38 per
share, during fiscal 2019 from $170.3 million, or $6.23 per share, in the prior year.
Included in net income for fiscal 2019 is a pretax gain of $20.3 million ($15.8 million after tax or $0.62 per share)
primarily related to the sale of six store properties. Also included is $5.1 million ($0.20 per share) in tax benefits related to
amended state tax return filings and the Taxpayer Certainty and Disaster Tax Relief Act of 2019.
Included in net income for fiscal 2018 is $2.9 million ($0.11 per share) in tax benefits related to additional federal tax
credits and an update of the provisional amounts recorded for the income tax effects of the Tax Cuts and Jobs Act of 2017.
During fiscal 2019, the Company repurchased $138.3 million, or 2.2 million shares, of Class A Common Stock under the
Company's stock repurchase plan, with $268.7 million in authorization remaining under the March 2018 Stock Plan at February
1, 2020.
As of February 1, 2020, we had working capital of $917.3 million (including cash and cash equivalents of $277.1
million) and $565.7 million of total debt outstanding, excluding finance lease liabilities and operating lease liabilities, with no
scheduled maturities in fiscal 2020. Cash flows provided by operating activities were $365.1 million in fiscal 2019.
On February 25, 2020, the Company provided estimates for certain financial statement items, including depreciation and
amortization, rentals, interest and debt expense, net and capital expenditures, for the fiscal year ending January 30, 2021 based
upon current conditions at that time, which did not include the impact of COVID-19. Due to heightened uncertainty relating to
the impacts of COVID-19 on the Company’s business operations, including the duration and impact on overall customer
demand, the Company is withdrawing its 2020 guidance.
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Key Performance Indicators
We use a number of key indicators of financial condition and operating performance to evaluate the performance of our
business, including the following:
Fiscal 2019
Net sales (in millions). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,203.5
Gross profit (in millions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,967.5
Gross profit as a percentage of net sales. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retail gross profit as a percentage of retail net sales . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses as a percentage of net sales. .
31.7 %
32.6 %
27.3 %
Cash flow from operations (in millions). . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 365.1
Total retail store count at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retail sales per square foot . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Retail stores sales trend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Comparable retail store sales trend. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retail store inventory trend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
285
127
(2)%
(1)%
(4)%
Fiscal 2018
$ 6,356.1
$ 2,064.6
Fiscal 2017
$ 6,261.5
$ 2,061.8
32.5%
33.6%
26.6%
367.3
291
127
$
$
32.9 %
33.6 %
26.9 %
$ 274.3
292
127
$
2% *
2% *
4%
(1)% **
— % **
4 %
Retail merchandise inventory turnover. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.4
2.4
2.5
* Based upon the 52 weeks ended February 2, 2019 and the 52 weeks ended February 3, 2018
** Based upon the 52 weeks ended January 27, 2018 and the 52 weeks ended January 28, 2017.
Trends and Uncertainties
Fluctuations in the following key trends and uncertainties may have a material effect on our operating results.
•
•
•
•
•
Cash flow—Cash from operating activities is a primary source of our liquidity that is adversely affected when
the retail industry faces economic challenges. Furthermore, operating cash flow can be negatively affected by
competitive factors.
Pricing—If our customers do not purchase our merchandise offerings in sufficient quantities, we respond by
taking markdowns. If we have to reduce our retail selling prices, the cost of sales on our consolidated statement
of income will correspondingly rise, thus reducing our net income and cash flow.
Success of brand—The success of our exclusive brand merchandise as well as merchandise we source from
national vendors is dependent upon customer fashion preferences and how well we can predict and anticipate
trends.
Sourcing—Our store merchandise selection is dependent upon our ability to acquire appealing products from a
number of sources. Our ability to attract and retain compelling vendors as well as in-house design talent, the
adequacy and stable availability of materials and production facilities from which we source our merchandise
and the speed at which we can respond to customer trends and preferences all have a significant impact on our
merchandise mix and, thus, our ability to sell merchandise at profitable prices.
Store growth—Our ability to open new stores is dependent upon a number of factors, such as the identification
of suitable markets and locations and the availability of shopping developments, especially in a weak economic
environment. Store growth can be further hindered by mall attrition and subsequent closure of underperforming
properties.
In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic,
which continues to spread throughout the United States and the world. As a result, we have reduced store operating hours, and
we have been ordered to temporarily close many retail locations, negatively impacting the Company's sales. While the
disruption is currently expected to be temporary, there is uncertainty around the duration. At present, while this matter has had a
significant negative impact on our business, results of operations, and financial position, the related financial impact to fiscal
2020 cannot be reasonably estimated at this time.
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Seasonality and Inflation
Our business, like many other retailers, is subject to seasonal influences, with a significant portion of sales and income
typically realized during the last quarter of our fiscal year due to the holiday season. Because of the seasonality of our business,
results from any quarter are not necessarily indicative of the results that may be achieved for a full fiscal year.
We do not believe that inflation has had a material effect on our results during the periods presented; however, our
business could be affected by such in the future.
General
Net sales. Net sales includes merchandise sales of comparable and non-comparable stores and revenue recognized on
contracts of CDI Contractors, LLC (“CDI”), the Company’s general contracting construction company. Comparable store sales
includes sales for those stores which were in operation for a full period in both the most recently completed quarter and the
corresponding quarter for the prior fiscal year, including our internet store. Comparable store sales excludes changes in the
allowance for sales returns. Non-comparable store sales includes: sales in the current fiscal year from stores opened during the
previous fiscal year before they are considered comparable stores; sales from new stores 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.
Sales occur as a result of interaction with customers across multiple points of contact, creating an interdependence between
in-store and online sales. Online orders are fulfilled from both fulfillment centers and retail stores. Additionally, online
customers have the ability to buy online and pick up in-store. Retail in-store customers have the ability to purchase items that
may be ordered and fulfilled from either a fulfillment center or another retail store location. Online customers may return
orders via mail, or customers may return orders placed online to retail store locations. Customers who earn reward points under
the private label credit card program may earn and redeem rewards through in-store or online purchases.
Service charges and other income. Service charges and other income includes income generated through the long-term
marketing and servicing alliance with Wells Fargo Bank, N.A. (“Wells Fargo Alliance”). Other income includes rental income,
shipping and handling fees, gift card breakage and lease income on leased departments.
Cost of sales. Cost of sales includes the cost of merchandise sold (net of purchase discounts, non-specific margin
maintenance allowances and merchandise margin maintenance allowances), bankcard fees, freight to the distribution centers,
employee and promotional discounts, shipping to customers and direct payroll for salon personnel. Cost of sales also includes
CDI contract costs, which comprise all direct material and labor costs, subcontract costs and those indirect costs related to
contract performance, such as indirect labor, employee benefits and insurance program costs.
Selling, general and administrative expenses. Selling, general and administrative expenses include buying, occupancy,
selling, distribution, warehousing, store and corporate expenses (including payroll and employee benefits), insurance,
employment taxes, advertising, management information systems, legal and other corporate level expenses. Buying expenses
consist of payroll, employee benefits and travel for design, buying and merchandising personnel.
Depreciation and amortization. Depreciation and amortization expenses include depreciation and amortization on
property and equipment.
Rentals. Rentals includes expenses for store leases, including contingent rent, and data processing and other equipment
rentals.
Interest and debt expense, net. Interest and debt expense includes interest, net of interest income and capitalized
interest, relating to the Company’s unsecured notes, subordinated debentures and borrowings under the Company’s credit
facility. Interest and debt expense also includes gains and losses on note repurchases, if any, amortization of financing costs
and interest on finance lease obligations.
Other expense. Other expense includes the interest cost and net actuarial loss components of net periodic benefit costs
and charges related to the write-off of deferred financing fees in connection with the amendment of the Company's senior
unsecured revolving credit facility.
(Gain) loss on disposal of assets. (Gain) loss on disposal of assets includes the net gain or loss on the sale or disposal of
property and equipment, as well as gains from any insurance proceeds in excess of the cost basis of the insured assets.
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Income on and equity in earnings of joint ventures. Income on and equity in earnings of joint ventures includes the
Company's portion of the income or loss of the Company's unconsolidated joint ventures as well as the distribution of excess
cash (excluding returns of investments) from a mall joint venture, if any.
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Critical Accounting Policies and Estimates
The Company's significant accounting policies are also described in Note 1 in the "Notes to Consolidated Financial
Statements" in Item 8 hereof. As disclosed in that note, the preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America ("GAAP") requires management to make estimates and
assumptions about future events that affect the amounts reported in the consolidated financial statements and accompanying
notes. The Company evaluates its estimates and judgments on an ongoing basis and predicates those estimates and judgments
on historical experience and on various other factors that are believed to be reasonable under the circumstances. Since future
events and their effects cannot be determined with absolute certainty, actual results could differ from those estimates.
Management of the Company believes the following critical accounting policies, among others, affect its more significant
judgments and estimates used in preparation of the Company's consolidated financial statements.
Merchandise inventory. All of the Company’s inventories are valued at the lower of cost or market using the last-in,
first-out (“LIFO”) inventory method. Approximately 97% of the Company's inventories are valued using the LIFO retail
inventory method. Under the retail inventory method, the valuation of inventories at cost and the resulting gross margins are
calculated by applying a cost to retail ratio to the retail value of inventories. The retail inventory method is an averaging
method that is widely used in the retail industry due to its practicality. Inherent in the retail inventory method calculation are
certain significant management judgments including, among others, merchandise markon, markups, and markdowns, which
significantly impact the ending inventory valuation at cost as well as the resulting gross margins. During periods of deflation,
inventory values on the first-in, first-out ("FIFO") retail inventory method may be lower than the LIFO retail inventory method.
Additionally, inventory values at LIFO cost may be in excess of net realizable value. At February 1, 2020 and February 2,
2019, merchandise inventories valued at LIFO, including adjustments as necessary to record inventory at the lower of cost or
market, approximated the cost of such inventories using the FIFO retail inventory method. The application of the LIFO retail
inventory method did not result in the recognition of any LIFO charges or credits affecting cost of sales for fiscal 2019, 2018 or
2017. A 1% change in the dollar amount of markdowns would have impacted net income by approximately $14 million for
fiscal 2019.
The Company regularly records a provision for estimated shrinkage, thereby reducing the carrying value of merchandise
inventory. Complete physical inventories of the Company's stores and warehouses are performed no less frequently than
annually, with the recorded amount of merchandise inventory being adjusted to coincide with these physical counts. The
differences between the estimated amounts of shrinkage and the actual amounts realized during the past three years have not
been material.
Revenue recognition. The Company's retail operations segment recognizes revenue upon the sale of merchandise to its
customers, net of anticipated returns of merchandise. The asset and liability for sales returns are based on historical evidence of
our return rate. We recorded an allowance for sales returns of $18.3 million and $15.1 million and return assets of $12.1 million
and $10.2 million as of February 1, 2020 and February 2, 2019, respectively. The return asset and the allowance for sales
returns are recorded in the consolidated balance sheets in other current assets and trade accounts payable and accrued expenses,
respectively. Adjustments to earnings resulting from revisions to estimates on our sales return provision were not material for
fiscal years 2019, 2018 and 2017.
The Company's share of income under the Wells Fargo Alliance and the Company's former long-term marketing and
servicing alliance with Synchrony Financial, which expired in 2014 ("Synchrony Alliance"), involving the Dillard's branded
private label credit cards is included as a component of service charges and other income. The Company received income of
approximately $91 million, $94 million and $101 million from the alliance in fiscal 2019, 2018 and 2017, respectively. The
Company participates in the marketing of the private label credit cards, which includes the cost of customer reward programs.
Through the reward programs, customers earn points that are redeemable for discounts on future purchases. The Company
defers a portion of its net sales upon the sale of merchandise to its customer reward program members that is recognized in net
sales when the reward is redeemed or expired at a future date.
Revenues from CDI construction contracts are generally measured based on the ratio of costs incurred to total estimated
contract costs (the "cost-to-cost method"). Some of our contracts with customers contain multiple performance obligations. For
these contracts, we account for individual performance obligations separately if they are distinct. The transaction price is
allocated to the separate performance obligations based on stand-alone selling prices. Construction contracts are often modified
to account for changes in contract specifications and requirements. We consider contract modifications to exist when the
modification either creates new or changes the existing enforceable rights and obligations. Most of our contract modifications
are for goods and services that are not distinct from the existing contracts; therefore, the modifications are accounted for as if
they were part of the existing contract. The effect of a contract modification on the transaction price and our measure of
progress for the performance obligation for which it relates, is recognized as an adjustment to revenue on a cumulative catch-up
basis. The length of each contract varies but is typically nine to eighteen months. The progress towards completion is
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determined by relating the actual costs of work performed to date to the current estimated total costs of the respective contracts.
Estimated contract losses are recognized in full when determined.
Construction contracts give rise to accounts receivable, contract assets and contract liabilities. We record accounts
receivable based on amounts billed to customers. We also record costs and estimated earnings in excess of billings on
uncompleted contracts (contract assets) and billings in excess of costs and estimated earnings on uncompleted contracts
(contract liabilities) in other current assets and trade accounts payable and accrued expenses, respectively, on the consolidated
balance sheets.
Vendor allowances. The Company receives concessions from vendors through a variety of programs and
arrangements, including co-operative advertising, payroll reimbursements and margin maintenance programs.
Cooperative advertising allowances are reported as a reduction of advertising expense in the period in which the
advertising occurred. If vendor advertising allowances were substantially reduced or eliminated, the Company would likely
consider other methods of advertising as well as the volume and frequency of our product advertising, which could increase or
decrease our expenditures. We are not able to assess the impact of vendor advertising allowances on creating additional
revenues, as such allowances do not directly generate revenues for our stores.
Payroll reimbursements are reported as a reduction of payroll expense in the period in which the reimbursement occurred.
Amounts of margin maintenance allowances are recorded only when an agreement has been reached with the vendor and
the collection of the concession is deemed probable. All such merchandise margin maintenance allowances are recognized as a
reduction of cost purchases. Under the retail inventory method, a portion of these allowances reduces cost of goods sold and a
portion reduces the carrying value of merchandise inventory.
Insurance accruals. The Company's consolidated balance sheets include liabilities with respect to claims for self-
insured workers' compensation (with a self-insured retention of $4 million per claim) and general liability (with a self-insured
retention of $1 million per claim and a one-time $1 million corridor). The Company's retentions are insured through a wholly-
owned captive insurance subsidiary. The Company estimates the required liability of such claims, utilizing an actuarial method,
based upon various assumptions, which include, but are not limited to, our historical loss experience, projected loss
development factors, actual payroll and other data. The required liability is also subject to adjustment in the future based upon
the changes in claims experience, including changes in the number of incidents (frequency) and changes in the ultimate cost per
incident (severity). As of February 1, 2020 and February 2, 2019, insurance accruals of $42.9 million and $42.0 million,
respectively, were recorded in trade accounts payable and accrued expenses and other liabilities. Adjustments resulting from
changes in historical loss trends have helped control expenses during fiscal 2019 and 2018, partially due to Company programs
that have helped decrease both the number and cost of claims. Further, we do not anticipate any significant change in loss
trends, settlements or other costs that would cause a significant change in our earnings. A 10% change in our self-insurance
reserve would have affected net income by approximately $4 million for fiscal 2019.
Long-lived assets. The Company's judgment regarding the existence of impairment indicators is based on market and
operational performance. We assess the impairment of long-lived assets, primarily fixed assets and operating lease assets,
whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors we consider
important which could trigger an impairment review include the following:
•
•
•
•
Significant changes in the manner of our use of assets or the strategy for the overall business;
Significant negative industry or economic trends;
A current-period operating or cash flow loss combined with a history of operating or cash flow losses; and
Store closings.
The Company performs an analysis of the anticipated undiscounted future net cash flows of the related long-lived assets.
If the carrying value of the related asset exceeds the fair value, the carrying value is reduced to its fair value. Various factors
including future sales growth, profit margins and real estate values are included in this analysis. To the extent these future
projections, the Company's strategies, or market conditions change, the conclusion regarding impairment may differ from the
current estimates.
Income taxes. Temporary differences arising from differing treatment of income and expense items for tax and
financial reporting purposes result in deferred tax assets and liabilities that are recorded on the balance sheet. These balances,
as well as income tax expense, are determined through management's estimations, interpretation of tax law for multiple
jurisdictions and tax planning. If the Company's actual results differ from estimated results due to changes in tax laws, changes
in store locations, settlements of tax audits or tax planning, the Company's effective tax rate and tax balances could be affected.
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As such, these estimates may require adjustment in the future as additional facts become known or as circumstances change.
Changes in the Company's assumptions and judgments can materially affect amounts recognized in the consolidated balance
sheets and statements of income.
The total amount of unrecognized tax benefits as of February 1, 2020 was $5.2 million, of which $3.5 million would, if
recognized, affect the Company’s effective tax rate. The total amount of unrecognized tax benefits as of February 2, 2019 was
$2.7 million, of which $1.6 million would, if recognized, affect the Company's effective tax rate. The Company does not expect
a significant change in unrecognized tax benefits in the next twelve months. The Company classifies accrued interest expense
and penalties relating to income tax in the consolidated financial statements as income tax expense. The total amounts of
interest and penalties were not material.
The fiscal tax years that remain subject to examination for the federal tax jurisdiction and major state tax jurisdictions are
2016 and forward. At this time, the Company does not expect the results from any income tax audit to have a material impact
on the Company's consolidated financial statements.
Pension obligations. The discount rate that the Company utilizes for determining future pension obligations is based on
the FTSE 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 decreased to 2.8% as of February 1, 2020 from 4.0% as of February 2,
2019. We believe that these assumptions have been appropriate and that, based on these assumptions, the pension liability of
$223.7 million is appropriately stated as of February 1, 2020; however, actual results may differ materially from those
estimated and could have a material impact on our consolidated financial statements. A further 50 basis point change in the
discount rate would increase or decrease the pension liability by approximately $15 million. The Company expects to make a
contribution to the pension plan of approximately $5.5 million in fiscal 2020. The Company expects pension expense to be
approximately $12.8 million in fiscal 2020 with a liability of $228.7 million at January 30, 2021.
24
Table of Contents
RESULTS OF OPERATIONS
The following table sets forth the results of operations and percentage of net sales, for the periods indicated:
February 1, 2020
February 2, 2019
February 3, 2018
For the years ended
(in thousands of dollars)
Amount
% of
Net
Sales
Amount
% of
Net
Sales
Amount
% of
Net
Sales
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,203,520
Service charges and other income . . . . . . . . . . . .
139,691
100.0% $ 6,356,109
100.0% $ 6,261,477
100.0%
2.3
147,240
2.3
161,199
2.6
6,343,211
102.3
6,503,349
102.3
6,422,676
102.6
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses . . .
Depreciation and amortization. . . . . . . . . . . . . . .
4,235,978
1,691,017
222,349
Rentals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest and debt expense, net . . . . . . . . . . . . . . .
Other expense. . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Gain) loss on disposal of assets . . . . . . . . . . . . .
Income before income taxes and income on and
equity in earnings of joint ventures . . . . . . . . . .
Income taxes (benefit) . . . . . . . . . . . . . . . . . . . . .
Income on and equity in earnings of joint
ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
26,375
46,227
7,667
(20,293)
133,891
22,810
—
68.3
27.3
3.6
0.4
0.7
0.1
(0.3)
2.2
0.4
—
4,291,520
1,691,180
223,815
28,646
52,518
7,660
48
207,962
37,730
31
67.5
26.6
3.5
0.5
0.8
0.1
—
3.3
0.6
—
4,199,718
1,684,916
231,595
28,012
62,580
8,026
(4,860)
212,689
(7,800)
835
67.1
26.9
3.7
0.4
1.0
0.1
(0.1)
3.4
(0.1)
—
3.5%
111,081
1.8% $
170,263
2.7% $
221,324
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Table of Contents
Sales
(in thousands of dollars)
Net sales:
Fiscal 2019
Fiscal 2018
Fiscal 2017
Retail operations segment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Construction segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
6,012,170
191,350
6,203,520
$
$
6,120,758
235,351
6,356,109
$
$
6,108,037
153,440
6,261,477
The percent change by segment and product category in the Company's sales for the past two years is as follows:
Retail operations segment
Cosmetics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ladies' apparel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ladies' accessories and lingerie . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Juniors' and children's apparel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Men's apparel and accessories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shoes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Home and furniture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
___________________________________
(1) Based upon the 52 weeks ended February 2, 2019 and 52 weeks ended February 3, 2018
Percent Change
Fiscal
2019-2018
Fiscal
2018-2017(1)
(2.1)%
(1.8)
(4.0)
1.1
(0.4)
(2.6)
(1.7)
(18.7)
1.9%
0.2
2.1
3.3
3.4
(0.5)
4.9
53.4
2019 Compared to 2018
Net sales from the retail operations segment decreased $108.6 million during fiscal 2019 compared to fiscal 2018, a
decrease of 2% on a percentage basis. Sales in comparable stores decreased 1% for fiscal 2019 compared to fiscal 2018. During
fiscal 2019, sales of ladies' apparel, ladies' accessories and lingerie, shoes, cosmetics and home and furniture decreased
moderately, while sales of men's apparel remained essentially flat. Sales of juniors' and children's apparel increased slightly.
The number of sales transactions during fiscal 2019 decreased 2% over fiscal 2018 while the average dollars per sales
transaction remained relatively flat.
Net sales from the construction segment decreased $44.0 million or 18.7% during fiscal 2019 as compared to fiscal 2018
due to a decrease in construction activity. The remaining performance obligations related to executed construction contracts
totaled $156.5 million, increasing approximately 9% from February 2, 2019.
Exclusive Brand Merchandise
Sales penetration of exclusive brand merchandise for fiscal years 2019, 2018 and 2017 was 21.1%, 20.7% and 21.4% of
total net sales, respectively.
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Table of Contents
Service Charges and Other Income
(in millions of dollars)
Service charges and other income:
Retail operations segment
Income from Wells Fargo Alliance and
former Synchrony Alliance. . . . . . . . . . $
Leased department income. . . . . . . . . . .
Shipping and handling income. . . . . . . .
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction segment . . . . . . . . . . . . . . . . .
0.7
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 139.7
2019 Compared to 2018
Fiscal
2019
Fiscal
2018
Fiscal
2017
2019 - 2018
2018 - 2017
2019 - 2018
2018 - 2017
Dollar Change
Percent Change
91.2
$
93.6
$ 101.3
$
4.6
28.3
14.9
139.0
5.3
26.6
16.0
141.5
5.7
6.0
33.3
17.9
158.5
2.7
$ 147.2
$ 161.2
$
(2.4) $
(0.7)
1.7
(1.1)
(2.5)
(5.0)
(7.5) $
(7.7)
(0.7)
(6.7)
(1.9)
(17.0)
3.0
(14.0)
(2.6)%
(7.6)%
(13.2)
6.4
(6.9)
(1.8)
(11.7)
(20.1)
(10.6)
(10.7)
(87.7)
111.1
(5.1)%
(8.7)%
Service charges and other income is composed primarily of income from the Wells Fargo Alliance. Income from the
alliances decreased $2.4 million in fiscal 2019 compared to fiscal 2018 primarily due to a decrease in finance charges in 2019.
Gross Profit
(in thousands of dollars)
Gross profit:
Fiscal 2019
Fiscal 2018
Fiscal 2017
Retail operations segment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,960,255
7,287
Construction segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,967,542
Gross profit as a percentage of segment net sales:
$ 2,056,010
$ 2,054,969
8,579
6,790
$ 2,064,589
$ 2,061,759
Retail operations segment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total gross profit as a percentage of net sales. . . . . . . . . . . . . . . . . . . . . . .
32.6%
3.8
31.7
33.6%
3.7
32.5
33.6%
4.4
32.9
2019 Compared to 2018
Gross profit as a percentage of net sales declined 76 basis points of sales during fiscal 2019 compared to fiscal 2018.
Gross profit from retail operations declined 99 basis points of segment net sales during the same periods.
During fiscal 2019, gross margin declined moderately in men's apparel and accessories. Gross margin declined slightly in
ladies' apparel and junior's and children's apparel while remaining essentially flat in ladies' accessories and lingerie, shoes and
cosmetics. Gross margin increased moderately in home and furniture.
Gross profit from the construction segment increased 16 basis points of segment net sales.
Retail store inventory decreased 4% at February 1, 2020 compared to February 2, 2019.
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Table of Contents
Selling, General and Administrative Expenses ("SG&A")
(in thousands of dollars)
SG&A:
Fiscal 2019
Fiscal 2018
Fiscal 2017
Retail operations segment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,684,258
6,759
Construction segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total SG&A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,691,017
SG&A as a percentage of segment net sales:
$ 1,682,179
$ 1,677,850
9,001
7,066
$ 1,691,180
$ 1,684,916
Retail operations segment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total SG&A as a percentage of net sales. . . . . . . . . . . . . . . . . . . . . . . . . . .
28.0%
3.5
27.3
27.5%
3.8
26.6
27.5%
4.6
26.9
2019 Compared to 2018
SG&A increased 65 basis points of sales during fiscal 2019 compared to fiscal 2018 primarily due to deleverage of sales.
SG&A for the retail operations segment increased 53 basis points of sales during fiscal 2019 compared to fiscal 2018.
Depreciation and Amortization
(in thousands of dollars)
Depreciation and amortization:
Fiscal 2019
Fiscal 2018
Fiscal 2017
Retail operations segment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Construction segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
221,643
706
222,349
$
$
223,175
640
223,815
$
$
230,946
649
231,595
2019 Compared to 2018
Depreciation and amortization expense decreased $1.5 million during fiscal 2019 compared to fiscal 2018, primarily due
to the timing and composition of capital expenditures.
Interest and Debt Expense, Net
(in thousands of dollars)
Interest and debt expense (income), net:
Fiscal 2019
Fiscal 2018
Fiscal 2017
Retail operations segment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Construction segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total interest and debt expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
46,337
(110)
46,227
$
$
52,574
(56)
52,518
$
$
62,638
(58)
62,580
2019 Compared to 2018
Net interest and debt expense decreased $6.3 million in fiscal 2019 compared to fiscal 2018 primarily due to a note
maturity, in addition to a decrease in short term borrowings under the credit facility. Total weighted average debt outstanding
during fiscal 2019 decreased approximately $87.7 million compared to fiscal 2018, also due to the same note maturity along
with a decrease in short term borrowings under the credit facility.
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Other Expense
(in thousands of dollars)
Other expense:
Fiscal 2019
Fiscal 2018
Fiscal 2017
Retail operations segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total other expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
7,667
—
7,667
$
$
7,660
—
7,660
$
$
8,026
—
8,026
2019 Compared to 2018
During the first quarter of 2018, the Company adopted Accounting Standards Update ("ASU") No. 2017-07 and applied the
amendments retrospectively, as required. As a result of the adoption of ASU No. 2017-07, the interest cost and net actuarial loss
components of net periodic benefit costs, $7.7 million for fiscal 2019 and 2018, were included in other expense rather than
selling, general and administrative expenses in the consolidated statements of income.
(Gain) Loss on Disposal of Assets
(in thousands of dollars)
(Gain) loss on disposal of assets:
Fiscal 2019
Fiscal 2018
Fiscal 2017
Retail operations segment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Construction segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total (gain) loss on disposal of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(20,294) $
1
(20,293) $
53
(5)
48
$
$
(4,855)
(5)
(4,860)
Fiscal 2019
During fiscal 2019, the Company received proceeds of $30.6 million primarily from the sale of six store properties,
resulting in a gain of $20.3 million that was recorded in gain on disposal of assets.
Income Taxes
The Company's estimated federal and state effective income tax rate, inclusive of income on and equity in earnings of
joint ventures, was 17.0% in fiscal 2019, 18.1% in fiscal 2018, and (3.7)% in fiscal 2017. Due to uncertainty relating to the
impacts of COVID-19 on the Company’s business operations, the Company is not providing an expected fiscal 2020 federal
and state effective income tax rate.
The Tax Cuts and Jobs Act of 2017 (“the Act”) was signed into law on December 22, 2017. The Act’s primary impact to
the Company’s consolidated financial statements was its reduction of the federal corporate income tax rate from 35% to 21%,
effective January 1, 2018. The Company determined a reasonable estimate of the income tax effects of the Act and recorded
provisional amounts within its consolidated financial statements during fiscal 2017. During fiscal 2018, the Company finalized
its accounting of the income tax effects of the Act, within the one-year measurement period provided under SEC Staff
Accounting Bulletin No. 118.
Fiscal 2019
During fiscal 2019, income taxes included tax benefits of approximately $5.1 million related to federal tax credits, which
includes approximately $2.3 million in current and prior year credits provided in the Taxpayer Certainty and Disaster Tax
Relief Act of 2019. Income taxes also included the recognition of approximately $2.8 million in tax benefits for amended state
tax return filings and related decreases to accrued state income taxes.
Fiscal 2018
During fiscal 2018, income taxes included tax benefits of approximately $4.6 million related to federal tax credits, which
includes approximately $1.4 million of additional prior year credits primarily related to the employee retention credit available
to employers impacted by the 2017 hurricanes. Income taxes also included the recognition of tax benefits of approximately
$1.5 million for an update to the provisional amounts previously recorded to net deferred tax liabilities related to the Act.
29
Table of Contents
LIQUIDITY AND CAPITAL RESOURCES
The Company's current non-operating priorities for its use of cash are strategic investments to enhance the value of
existing properties, stock repurchases and dividend payments to stockholders.
Cash flows for the Company's most recent three fiscal years were as follows:
(in thousands of dollars)
Fiscal 2019
Fiscal 2018
Fiscal 2017
2019 - 2018
2018 - 2017
Operating Activities . . . . . . . . . . . . . . . . . . . . . . $
Investing Activities . . . . . . . . . . . . . . . . . . . . . .
Financing Activities . . . . . . . . . . . . . . . . . . . . . .
365,074
$
(68,092)
(143,414)
Total Cash Provided (Used). . . . . . . . . . . . . . . $
153,568
$
$
367,288
(127,749)
(303,058)
(63,519) $
274,285
(110,207)
(324,035)
(159,957)
(0.6)%
46.7
52.7
33.9%
(15.9)
6.5
Percent Change
Operating Activities
The primary source of the Company's liquidity is, and historically has been, cash flows from operations. Due to the
seasonality of the Company's business, we have historically realized a significant portion of the cash flows from operating
activities during the second half of the fiscal year. Retail operations sales are the key operating cash component, providing
94.8%, 94.1% and 95.1% of total revenues in fiscal 2019, 2018 and 2017, respectively.
Operating cash inflows also include the Company's income and reimbursements from the Wells Fargo Alliance (and
former Synchrony Alliance) and cash distributions from joint ventures (excluding returns of investments). Operating cash
outflows include payments to vendors for inventory, services and supplies, payments to employees and payments of interest
and taxes.
Wells Fargo owns and manages the 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 received from 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. The
Wells Fargo Alliance expires in fiscal 2024.
The Company received income of approximately $91 million, $94 million and $101 million from the Wells Fargo
Alliance and former Synchrony Alliance during fiscal 2019, 2018 and 2017, respectively.
Net cash flows from operations decreased $2.2 million during fiscal 2019 compared to fiscal 2018.
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 decreased $33.7 million for fiscal 2019 compared to fiscal 2018. The decrease in capital
expenditures was primarily related to a decrease in the remodeling of existing stores during fiscal 2019. During fiscal 2019, the
Company received cash proceeds of $30.6 million and recorded a $20.3 million gain, primarily related to the sale of six store
locations in Boardman, Ohio, Boynton Beach, Florida, Cary, North Carolina, Mesa, Arizona, Midland, Texas and Council
Bluffs, Iowa.
During fiscal 2019, the Company opened an expansion at Killeen Mall in Killeen, Texas, replacing a 70,000 square foot
leased facility with a 75,000 square foot owned facility at this dual-anchor location totaling 110,000 square feet. During the
first quarter of 2020, the Company plans to open an 85,000 square foot expansion at Columbia Mall in Columbia, Missouri
(dual-anchor location totaling 185,000 square feet). Also in 2020, the Company plans to replace a 100,000 square foot leased
facility at Richland Fashion Mall in Waco, Texas with a 125,000 square foot owned facility (dual-anchor location totaling
30
Table of Contents
190,000 square feet). The Company has announced plans to open a new store at Mesa Mall in Grand Junction, Colorado during
the Spring of 2021 (105,000 square feet). The Company has also announced plans to open a new store at University Place in
Orem, Utah in the Fall of 2021 (160,000 square feet). Both opportunities arose from peer closures at those centers.
During fiscal 2019, we closed our locations in Boardman, Ohio (186,000 square feet), Muskogee, Oklahoma (70,000
square feet), Enid, Oklahoma (70,000 square feet), Cary, North Carolina (145,000 square feet), Council Bluffs, Iowa (Clearance
Center - 100,000 square feet) and Mesa, Arizona (Clearance Center - 100,000 square feet). There were no material costs
associated with any of these store closures. We remain committed to closing under-performing stores where appropriate and
may incur future closing costs related to such stores when they close.
During fiscal 2018, we closed the Cincinnati West clearance center in Cincinnati, Ohio (115,000 square feet).
During fiscal 2019, the Company received life insurance proceeds of $2.4 million related to one policy, and during fiscal
2018, the Company received life insurance proceeds of $3.5 million related to two policies.
Financing Activities
Our primary source of cash inflows from financing activities is generally our $800 million senior unsecured revolving
credit facility. Financing cash outflows generally include the repayment of borrowings under the revolving credit facility, the
repayment of long-term debt, finance lease obligations, the payment of dividends and the purchase of treasury stock.
Cash used in financing activities decreased to $143.4 million in fiscal 2019 from $303.0 million in fiscal 2018. This
reduction was primarily due to a debt maturity during 2018.
Stock Repurchase. In March 2018, the Company's Board of Directors authorized the Company to repurchase up to
$500 million of the Company's Class A Common Stock under an open-ended plan ("March 2018 Stock Plan").
During fiscal 2019, the Company repurchased 2.2 million shares of Class A Common Stock for $138.3 million (including
the accrual of $7.3 million of share repurchases that had not settled as of February 1, 2020) at an average price of $62.88 per
share. As of February 1, 2020, $268.7 million of authorization remained under the March 2018 Stock Plan.
During fiscal 2018, the Company repurchased 1.8 million shares of Class A Common Stock at an average price of $71.17
per share for $127.9 million, completing the authorization under the Company's previous stock repurchase plan authorized by
the Company's Board of Directors in February 2016 and beginning share repurchases under the March 2018 Stock Plan.
Additionally, the Company paid $2.0 million for share repurchases that had not yet settled but were accrued at February 3,
2018.
The ultimate disposition of the repurchased stock has not been determined.
Revolving Credit Agreement. In August 2017, the Company amended and extended its senior unsecured revolving
credit facility (the "credit agreement") replacing the Company's previous credit agreement. The credit agreement provides
borrowing capacity of $800 million with a $200 million expansion option and matures on August 9, 2022. As part of our overall
liquidity management strategy, the credit facility is available for 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 of interest on borrowings under the credit agreement and a commitment fee to the
participating banks based on the Company's debt rating. The rate of interest on borrowings is LIBOR plus 1.375%, and the
commitment fee for unused borrowings is 0.20% per annum.
No borrowings were outstanding at February 1, 2020. Letters of credit totaling $20.6 million were issued under the credit
agreement leaving unutilized availability under the facility of $779.4 million at February 1, 2020. The Company had weighted-
average borrowings of $76.9 million, $85.9 million and $9.5 million during fiscal 2019, 2018 and 2017, respectively.
Peak borrowings under the credit facility were $247 million during fiscal 2019.
To be in compliance with the financial covenants of the credit agreement, the Company's total leverage ratio cannot
exceed 3.5 to 1.0, and the Company's coverage ratio cannot be less than 2.5 to 1.0, as defined in the credit agreement. At
February 1, 2020, the Company was in compliance with all financial covenants related to the credit agreement.
To increase our cash position during the COVID-19 pandemic and to provide additional financial flexibility, on March 25,
2020, we borrowed the unutilized availability of $779.0 million from our $800 million revolving credit agreement. The
Company still has an option to expand the facility by $200 million.
31
Table of Contents
Long-term Debt. At February 1, 2020, the Company had $365.7 million of long-term debt, comprised of unsecured
notes. The unsecured notes bear interest at rates ranging from 7.0% to 7.875% with due dates from fiscal 2022 through fiscal
2028.
Long-term debt maturities over the next five years are (in millions):
Fiscal Year
Long-Term Debt
Maturities
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
44.8
—
—
During fiscal 2019, the Company made finance lease payments of $1.0 million, and no debt matured.
During fiscal 2018, the Company decreased its net level of outstanding debt and finance leases by $161.9 million,
specifically related to the maturity of 7.13% Notes of $161.0 million and finance leases.
Subordinated Debentures. As of February 1, 2020, the Company had $200 million outstanding of its 7.5%
subordinated debentures due August 1, 2038. All of these subordinated debentures were held by Dillard's Capital Trust I, a
100% owned, unconsolidated finance subsidiary of the Company. The Company has the right to defer the payment of interest
on the subordinated debentures at any time for a period not to exceed 20 consecutive quarters; however, the Company has no
present intention of exercising this right to defer interest payments.
Fiscal 2020 Outlook
At present, the COVID-19 pandemic has had a significant negative effect on the Company's liquidity and net sales. Due
to heightened uncertainty relating to the impacts of COVID-19 on the Company’s business operations, including the duration
and impact on overall customer demand, our liquidity and net sales may be further impacted if we are unable to appropriately
manage our inventory levels and expenses.
The Company expects to finance its operations during fiscal 2020 from cash on hand, cash flows generated from
operations and utilization of the credit facility. Depending upon our actual and anticipated sources and uses of liquidity, the
Company will from time to time consider other possible financing transactions, the proceeds of which could be used to fund
working capital or for other corporate purposes.
LIBOR
The use of LIBOR is expected to be phased out by the end of 2021. At this time, there is no definitive information regarding
the future utilization of LIBOR beyond 2021 or of any particular replacement rate. Going forward, we intend to work with our
lenders to use a suitable alternative reference rate for the credit agreement, the Wells Fargo Alliance and any other applicable
agreements. We will continue to monitor, assess and plan for the phase out of LIBOR.
OFF-BALANCE-SHEET ARRANGEMENTS
The Company has not created, and is not party to, any special-purpose entities or off-balance-sheet arrangements for the
purpose of raising capital, incurring debt or operating the Company's business. The Company does not have any off-balance-
sheet arrangements or relationships that are reasonably likely to materially affect the Company's financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or the availability of capital
resources.
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Table of Contents
CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS
To facilitate an understanding of the Company's contractual obligations and commercial commitments, the following data
is provided:
PAYMENTS DUE BY PERIOD
(in thousands of dollars)
Contractual Obligations
Total
Less than
1 year
1 - 3 years
3 - 5 years
More than
5 years
193,646
366,625
Long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . $
Interest on long-term debt . . . . . . . . . . . . . . . . .
Subordinated debentures . . . . . . . . . . . . . . . . . .
Interest on subordinated debentures. . . . . . . . . .
Finance lease liabilities, including interest . . . .
Benefit plan participant payments . . . . . . . . . . .
Purchase obligations(1) . . . . . . . . . . . . . . . . . . .
Operating lease liabilities, including interest(2)
58,382
Total contractual cash obligations(3)(4) . . . . . . $ 2,624,245
1,300,393
200,000
225,442
277,603
2,154
$
— $
44,800
$
— $
321,825
27,301
—
14,959
1,428
5,900
1,300,393
16,251
54,331
—
29,918
726
14,207
—
19,641
48,022
—
30,205
—
17,758
—
6,800
63,992
200,000
202,521
—
187,577
—
15,690
$ 1,366,232
$
163,623
$
102,785
$
991,605
___________________________________
(1)
(2)
(3)
(4)
The Company's purchase obligations principally consist of purchase orders for merchandise and store construction
commitments. Amounts committed under open purchase orders for merchandise inventory represent $1,294.3 million
of the purchase obligations.
The operating leases included in the above table do not include contingent rent based upon sales volume, which
represented approximately 13% of minimum lease obligations in fiscal 2019.
The total liability for unrecognized tax benefits is $4.2 million, including tax, penalty, and interest. The Company is
not able to reasonably estimate the timing of future cash flows and has excluded these liabilities from the table above;
however, at this time, the Company 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 $27.5 million and gift card liabilities of $20.1 million and has excluded these from the
table above.
AMOUNT OF COMMITMENT EXPIRATION PER PERIOD
(in thousands of dollars)
Other Commercial Commitments
Total Amounts
Committed
Within 1 year
2 - 3 years
4 - 5 years
After
5 years
$800 million line of credit, none
outstanding(1) . . . . . . . . . . . . . . . . . . . . . . . . . . $
Standby letters of credit . . . . . . . . . . . . . . . . . . .
Import letters of credit . . . . . . . . . . . . . . . . . . . .
Total commercial commitments. . . . . . . . . . . . . $
___________________________________
— $
— $
— $
— $
20,645
—
20,645
—
—
—
—
—
20,645
$
20,645
$
— $
— $
—
—
—
—
(1)
At February 1, 2020, letters of credit totaling $20.6 million were issued under the credit agreement.
NEW ACCOUNTING PRONOUNCEMENTS
For information with respect to new accounting pronouncements and the impact of these pronouncements on our
consolidated financial statements, see Note 1 in the "Notes to Consolidated Financial Statements" in Item 8 hereof.
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FORWARD-LOOKING INFORMATION
This report contains certain forward-looking statements. The following are or may constitute forward looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995: (a) statements including words such as "may,"
"will," "could," "believe," "expect," "future," "potential," "anticipate," "intend," "plan," "seek," "estimate," "continue," or the
negative or other variations thereof; (b) statements regarding matters that are not historical facts; and (c) statements about the
Company's future occurrences, plans and objectives, including those statements included under the heading "Fiscal 2020
Outlook" included in this Management's Discussion and Analysis and other statements regarding management's expectations
and forecasts for fiscal 2020, statements concerning the opening of new stores or the closing of existing stores, statements
regarding our competitive position, statements concerning capital expenditures and sources of liquidity, statements concerning
pension contributions, statements concerning changes in loss trends, settlements and other costs related to our self-insurance
programs and statements concerning estimated taxes. 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 confidence, spending
patterns, debt levels and their ability to meet credit obligations; high levels of unemployment; changes in tax legislation;
changes in legislation, affecting such matters as the cost of employee benefits or credit card income; adequate and stable
availability of materials, production facilities and labor from which the Company sources its merchandise at acceptable pricing;
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; the elimination of LIBOR; potential disruption from terrorist activity and the effect on
ongoing consumer confidence; epidemic, pandemic (including COVID-19) or other public health issues; potential disruption of
international trade and supply chain efficiencies; any government-ordered restrictions on the movement of the general public or
the mandated or voluntary closing of retail stores in response to the COVID-19 pandemic; world conflict and the possible
impact on consumer spending patterns and other economic and demographic changes of similar or dissimilar nature, and other
risks and uncertainties, including those detailed from time to time in our periodic reports filed with the SEC, particularly those
set forth under the caption "Item 1A, Risk Factors" in this Annual Report.
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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The table below provides information about the Company's obligations that are sensitive to changes in interest rates. The
table presents maturities of the Company's long-term debt and subordinated debentures along with the related weighted-average
interest rates by expected maturity dates.
Expected Maturity Date
(fiscal year)
(in thousands of dollars)
2020
2021
2022
2023
2024
Thereafter
Total
Fair Value
Long-term debt . . . . . . . . . $
Average fixed interest rate
Subordinated debentures . . $
Average interest rate . . . . .
— $ — $44,800
$ — $ — $ 321,825
$ 366,625
$ 421,906
—%
—%
7.9%
—%
—%
7.4%
7.5%
— $ — $ — $ — $ — $ 200,000
$ 200,000
$ 211,200
—
—
—
—
—
7.5%
7.5%
The Company is exposed to market risk from changes in the interest rates under its $800 million senior unsecured
revolving credit facility. Outstanding balances under this facility bear interest at a variable rate of LIBOR plus 1.375%. The
Company had weighted average borrowings under this facility of $76.9 million during fiscal 2019. Based on the average
outstanding balance during fiscal 2019, a 100 basis point change in interest rates would result in an approximate $0.8 million
annual change to interest expense.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The consolidated financial statements of the Company and notes thereto are included in this report beginning on
page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
None.
ITEM 9A. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
The Company has established and maintains disclosure controls and procedures (as defined in Rule 13a-15(e) under the
Exchange Act). The Company's management, with the participation of our Principal Executive Officer and Co-Principal
Financial Officers, has evaluated the effectiveness of the Company's disclosure controls and procedures as of the end of the
fiscal year covered by this annual report, and based on that evaluation, the Company's Principal Executive Officer and Co-
Principal Financial Officers have concluded that these disclosure controls and procedures were effective.
Management's Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as
such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our management,
including our Principal Executive Officer and Co-Principal Financial Officers, we conducted an evaluation of the effectiveness
of our internal control over financial reporting based on the framework in 2013 Internal Control - Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in
2013 Internal Control - Integrated Framework, our management concluded that our internal control over financial reporting
was effective as of February 1, 2020.
Our independent registered public accounting firm, KPMG LLP ("KPMG"), has audited our consolidated financial
statements included in this Annual Report and has issued a report on the effectiveness of our internal control over financial
reporting as of February 1, 2020. Please refer to KPMG's "Report of Independent Registered Public Accounting Firm" on
page F-2 of this Annual Report.
Changes in Internal Controls
There were no changes in our internal control over financial reporting that occurred during the fiscal quarter ended
February 1, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial
reporting.
35
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ITEM 9B. OTHER INFORMATION.
Please see information regarding borrowings subsequent to the balance sheet date in Note 16 to the Consolidated
Financial Statements.
36
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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
A. Directors of the Company
PART III
The information called for by this item regarding directors of the Company is incorporated herein by reference from the
information under the headings "Proposal No. 1. Election of Directors", "Audit Committee Report", "Information Regarding
the Board and Its Committees" and "Delinquent Section 16(a) Reports" in the Proxy Statement.
B. Executive Officers of the Company
Information regarding executive officers of the Company is included in Part I of this report under the heading
"Information About Our Executive Officers." Reference additionally is made to the information under the heading "Delinquent
Section 16(a) Reports" in the Proxy Statement, which information is incorporated herein by reference.
The Company's Board of Directors ("Board") has adopted a Code of Conduct that applies to all Company employees,
including the Company's executive officers, and, when appropriate, the members of the Board. As stated in the Code of
Conduct, there are certain limited situations in which the Company may waive application of the Code of Conduct to
employees or members of the Board. For example, since non-employee members of the Board rarely, if ever, deal financially
with vendors and other suppliers of the Company on the Company's behalf, it may not be appropriate to seek to apply the Code
of Conduct to their dealings with these vendors and suppliers on behalf of other organizations which have no relationship to the
Company. To the extent that any such waiver applies to an executive officer or a member of the Board, the waiver requires the
express approval of the Board, and the Company intends to satisfy the disclosure requirements of Form 8-K regarding any such
waiver from, or an amendment to, any provision of the Code of Conduct, by posting such waiver or amendment on the
Company's website. The current version of the Code of Conduct is available free of charge on the Company's investor relations
website, investor.dillards.com, and is available in print to any stockholder who requests copies by contacting Julie J. Guymon,
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 called for by this item is incorporated herein by reference from the information under the headings
"2019 Director Compensation", "Compensation Discussion and Analysis", "Compensation Committee Report" and "Executive
Compensation" in the Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
Equity Compensation Plan Information
Equity compensation plans approved by
stockholders* . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
___________________________________
Number of securities to be
issued upon exercise of
outstanding options
Weighted average
exercise prices of
outstanding options
Number of securities
available for future
issuance under equity
compensation plans
— $
— $
—
—
8,748,111
8,748,111
*
Included in this category are the following equity compensation plans, which have been approved by the Company's
stockholders:
•
•
•
•
•
•
1990 Incentive and Nonqualified Stock Option Plan
1998 Incentive and Nonqualified Stock Option Plan
2000 Incentive and Nonqualified Stock Option Plan
Dillard's, Inc. Stock Bonus Plan
Dillard's, Inc. Stock Purchase Plan
Dillard's, Inc. 2005 Non-Employee Director Restricted Stock Plan
There are no non-stockholder approved plans. Balances presented in the table above are as of February 1, 2020.
37
Table of Contents
Additional information called for by this item is incorporated herein by reference from the information under the
headings "Security Ownership of Certain Beneficial Holders" and "Security Ownership of Management" in the Proxy
Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
The information called for by this item is 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 herein by reference from the information under the heading
"Independent Accountant Fees" in the Proxy Statement.
38
Table of Contents
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
(a)(1) and (2) Financial Statements
PART IV
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
The "Exhibit Index" beginning on page 40 hereof identifies exhibits incorporated herein by reference or filed with this
report.
39
Table of Contents
Exhibit Index
Number
Description
*3(a) Restated Certificate of Incorporation (Exhibit 3 to Form 10-Q for the quarter ended August 1, 1992, File No.
1-6140, as amended Exhibit 3 to Form 10-Q for the quarter ended May 3, 1997, File No. 1-6140).
*3(b) By-Laws of Dillard's, Inc., as amended (Exhibit 3 to Form 8-K dated as of August 20, 2013, File No.
1-6140).
*4(a)
Indenture between Registrant and Chemical Bank, Trustee, dated as of May 15, 1988, as supplemented
(Exhibit 4 to Registration Statement File No. 33-21671, Exhibit 4.2 to Registration Statement File No.
33-25114, Exhibit 4(c) to Form 8-K dated September 26, 1990, File No. 1-6140 and Exhibit 4-q to
Registration Statement File No. 333-59183).
4(b) Description of Securities
*+10(a)
1990 Incentive and Nonqualified Stock Option Plan (Exhibit 10(b) to Form 10-K for the fiscal year ended
January 30, 1993, File No. 1-6140).
*+10(b) Senior Management Cash Bonus Plan (Exhibit 10(d) to Form 10-K for the fiscal year ended January 28,
1995, File No. 1-6140).
*+10(c)
1998 Incentive and Nonqualified Stock Option Plan (Exhibit 10(b) to Form 10-K for the fiscal year ended
January 30, 1999, File No. 1-6140).
*+10(d)
2000 Incentive and Nonqualified Stock Option Plan (Exhibit 10(e) to Form 10-K for the fiscal year ended
February 3, 2001, File No. 1-6140).
*+10(e) Dillard's, Inc. Stock Bonus Plan, as amended (Exhibit 10(e) to Form 10-K for the fiscal year ended January
30, 2016, File No. 1-6140).
*+10(f) Dillard's, Inc. Stock Purchase Plan (Exhibit 10.2 to Form 10-Q for the quarter ended April 30, 2005, File
No. 1-6140).
*+10(g) Dillard's, Inc. 2005 Non-Employee Director Restricted Stock Plan, as amended (Exhibit 10 to Form 10-Q for
the fiscal quarter ended April 29, 2017, File No. 1-6140).
*+10(h) Amended and Restated Dillard's Corporate Officers Non-Qualified Pension Plan (Exhibit 10.1 to Form 8-K
dated as of November 21, 2007, File No. 1-6140).
*10(i) Credit Card Program Agreement by and among Dillard's, Inc., 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).
*10(j) Five-Year Credit Agreement between Dillard's, Inc., Dillard Store Services, Inc. and JPMorgan Chase Bank,
N.A. as agent for a syndicate of lenders (Exhibit 10.1 to Form 8-K filed on May 15, 2015, File No. 1-6140).
*10(k) Amendment No. 1 to Five-Year Credit Agreement between Dillard's, Inc., Dillard Store Services, Inc. and
JPMorgan Chase Bank, N.A. as agent for a syndicate of lenders (Exhibit 10.1 to Form 8-K dated as of
August 11, 2017, File No. 1-6140).
21 Subsidiaries of Registrant.
23 Consent of Independent Registered Public Accounting Firm.
31(a) Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31(b) Certification of Co-Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31(c) Certification of Co-Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32(a) Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18
U.S.C. 1350).
32(b) Certification of Co-Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(18 U.S.C. 1350).
32(c) Certification of Co-Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(18 U.S.C. 1350).
40
Table of Contents
Number
Description
101.INS XBRL Instance Document - the instance document does not appear in the Interactive Data File because its
XBRL tags are embedded within the Inline XBRL document
101.SCH Inline XBRL Taxonomy Extension Schema Document
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
___________________________________
*
+
Incorporated by reference as indicated.
A management contract or compensatory plan or arrangement.
ITEM 16. FORM 10-K SUMMARY
None.
41
Table of Contents
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Dillard's, Inc.
By:
By:
/s/ Phillip R. Watts
Phillip R. Watts
Senior Vice President, Co-Principal Financial Officer
and Principal Accounting Officer
/s/ Chris B. Johnson
Chris B. Johnson
Senior Vice President and Co-Principal Financial
Officer
Date: March 31, 2020
Pursuant to the requirements of the Securities Exchange Act of 1934, 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/ Chris B. Johnson
Chris B. Johnson
Senior Vice President and Co-Principal Financial
Officer
/s/ Alex Dillard
Alex Dillard
President and Director
/s/ Phillip R. Watts
Phillip R. Watts
Senior Vice President, Co-Principal Financial Officer
and Principal Accounting Officer
/s/ Mike Dillard
Mike Dillard
Executive Vice President and Director
/s/ Drue Matheny
Drue Matheny
Executive Vice President and Director
/s/ Robert C. Connor
Robert C. Connor
Director
/s/ H. Lee Hastings
H. Lee Hastings
Director
/s/ Reynie Rutledge
Reynie Rutledge
Director
/s/ J. C. Watts, Jr.
J. C. Watts, Jr.
Director
Date: March 31, 2020
/s/ James I. Freeman
James I. Freeman
Director
/s/ Frank R. Mori
Frank R. Mori
Director
/s/ Warren A. Stephens
Warren A. Stephens
Director
/s/ Nick White
Nick White
Director
42
Table of Contents
INDEX OF FINANCIAL STATEMENTS
DILLARD'S, INC. AND SUBSIDIARIES
Year Ended February 1, 2020
Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets—February 1, 2020 and February 2, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Income—Fiscal years ended February 1, 2020, February 2, 2019 and February 3, 2018 . .
Consolidated Statements of Comprehensive Income—Fiscal years ended February 1, 2020, February 2, 2019 and
February 3, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Stockholders' Equity—Fiscal years ended February 1, 2020, February 2, 2019 and
February 3, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows—Fiscal years ended February 1, 2020, February 2, 2019 and February 3,
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements—Fiscal years ended February 1, 2020, February 2, 2019 and February
3, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page
F-2
F-4
F-5
F-6
F-7
F-8
F-9
F-1
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors
Dillard’s, Inc.:
Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying consolidated balance sheets of Dillard’s, Inc. and subsidiaries (the Company) as of
February 1, 2020 and February 2, 2019, the related consolidated statements of income, comprehensive income, stockholders’
equity, and cash flows for each of the years in the three-year period ended February 1, 2020, and the related notes (collectively,
the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of
February 1, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of the Company as of February 1, 2020 and February 2, 2019, and the results of its operations and its cash flows for
each of the years in the three-year period ended February 1, 2020, in conformity with U.S. generally accepted accounting
principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial
reporting as of February 1, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission.
Change in Accounting Principles
As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for leases
as of February 3, 2019 due to the adoption of Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842). As
discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for the income
tax consequences of intra-entity transfers as of February 4, 2018 due to the adoption of Accounting Standards Update (ASU)
No. 2016-16, Intra-Entity Transfers of Assets Other Than Inventory.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included
in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an
opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial
reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement,
whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material
respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement
of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated
financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal
control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the
risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based
on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
F-2
Table of Contents
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial
statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or
disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or
complex judgment. The communication of a critical audit matter does not alter in any way our opinion on the consolidated
financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate
opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Evaluation of self-insurance liabilities
As discussed in Note 1 to the consolidated financial statements, the Company estimates the liability associated with self-
insured workers’ compensation and general liability claims using actuarial methods that require consideration of historical
loss experience, projected loss development factors, and other actuarial assumptions. At February 1, 2020, the estimated
self-insurance liability was $42.9 million.
We identified the evaluation of self-insurance liabilities as a critical audit matter. There was complexity involved in
estimating the ultimate costs to settle the liabilities, which requires the use of actuarial specialists to assess the various
assumptions and methods used. The process of projecting future loss development involves the application of multiple
actuarial methods to the historical pattern of claims incurred and losses paid in order to estimate the self-insurance liability.
The primary procedures we performed to address this critical audit matter included the following. We tested certain
internal controls over the Company’s process of estimating self-insurance liabilities. This included testing controls over
processing and payment of claims, reconciliation of claims data provided to the actuary, and the Company’s review of the
actuarial report. We selected a sample of claims and tested key attributes, including amounts and dates of losses and
payments. Furthermore, we involved actuarial professionals with specialized skills to assist in evaluating the actuarial
methods used in the Company’s analysis, assessing the qualifications of the Company’s actuaries, and developing an
independent range of estimates of the self-insurance liabilities compared to the amounts recorded by the Company.
/s/ KPMG LLP
We have served as the Company’s auditor since 2011.
Dallas, Texas
March 31, 2020
F-3
Table of Contents
Assets
Current assets:
Consolidated Balance Sheets
Dollars in Thousands
February 1, 2020
February 2, 2019
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Merchandise inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
277,077
$
46,160
1,465,007
59,838
1,848,082
Property and equipment:
Land and land improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings and leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Furniture, fixtures and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings under construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings and equipment under finance leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less accumulated depreciation and amortization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Liabilities and stockholders' equity
Current liabilities:
Trade accounts payable and accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Current portion of finance lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of operating lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Federal and state income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance lease liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subordinated debentures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments and contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stockholders' equity:
123,509
49,853
1,528,417
68,753
1,770,532
64,003
3,125,629
603,698
6,707
14,556
(2,227,860)
1,586,733
—
74,104
54,067
3,092,405
615,491
18,385
14,556
(2,336,728)
1,458,176
47,924
76,075
3,430,257
$
3,431,369
892,789
$
921,205
1,219
14,654
22,158
930,820
365,709
695
32,683
273,601
3,490
200,000
1,214
—
11,116
933,535
365,569
1,666
—
238,731
13,487
200,000
Common stock, Class A— 119,946,571 and 119,899,553 shares issued; 20,186,368
and 22,338,129 shares outstanding. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock, Class B (convertible)—4,010,401 and 4,010,401 shares issued and
outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less treasury stock, at cost, Class A—99,760,203 and 97,561,424 shares . . . . . . . . . . .
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities and stockholders' equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,199
40
951,726
(31,059)
4,556,494
(3,855,141)
1,623,259
1,199
40
948,835
(12,809)
4,458,006
(3,716,890)
1,678,381
3,430,257
$
3,431,369
See notes to consolidated financial statements.
F-4
Table of Contents
Consolidated Statements of Income
Dollars in Thousands, Except Per Share Data
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Service charges and other income. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rentals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest and debt expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Gain) loss on disposal of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income taxes and income on and equity in earnings
of joint ventures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes (benefit). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income on and equity in earnings of joint ventures . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Earnings per common share:
Years Ended
February 1, 2020
February 2, 2019
February 3, 2018
6,203,520
$
6,356,109
$
6,261,477
139,691
6,343,211
4,235,978
1,691,017
222,349
26,375
46,227
7,667
(20,293)
133,891
22,810
—
111,081
147,240
6,503,349
4,291,520
1,691,180
223,815
28,646
52,518
7,660
48
207,962
37,730
31
170,263
6.23
6.23
$
$
161,199
6,422,676
4,199,718
1,684,916
231,595
28,012
62,580
8,026
(4,860)
212,689
(7,800)
835
221,324
7.51
7.51
$
$
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.38
4.38
See notes to consolidated financial statements.
F-5
Table of Contents
Consolidated Statements of Comprehensive Income
Dollars in Thousands
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other comprehensive (loss) income:
Amortization of retirement plan and other retiree benefit
adjustments (net of tax of ($5,887), $1,646, and ($1,395)) . . . . .
Comprehensive income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Years Ended
February 1, 2020
February 2, 2019
February 3, 2018
111,081
$
170,263
$
221,324
(18,250)
92,831
$
5,177
175,440
$
(4,307)
217,017
See notes to consolidated financial statements.
F-6
Table of Contents
Consolidated Statements of Stockholders' Equity
Dollars in Thousands, Except Share and Per Share Data
Common Stock
Class A
Balance, January 28, 2017 . $ 1,198
—
Net income . . . . . . . . . . . .
$
Other comprehensive loss
Issuance of 46,042 shares
under stock plans . . . . . .
Purchase of 4,096,972
shares of treasury stock .
Cash dividends declared: .
Common stock, $0.34
per share . . . . . . . . . . .
—
1
—
—
Balance, February 3, 2018 .
Net income . . . . . . . . . . . .
1,199
—
Cumulative effect
adjustment related to ASU
2016-16 and 2018-02 . . . .
Other comprehensive
income . . . . . . . . . . . . . . .
Issuance of 38,809 shares
under stock plans . . . . . .
Purchase of 1,796,908
shares of treasury stock .
Cash dividends declared: .
Common stock, $0.40
per share. . . . . . . . . . .
Balance, February 2, 2019 .
Net income . . . . . . . . . . . .
Other comprehensive loss
Issuance of 47,018 shares
under stock plans . . . . . .
Purchase of 2,198,779
shares of treasury stock .
Cash dividends declared: .
Common stock, $0.50
per share. . . . . . . . . . .
—
—
—
—
—
1,199
—
—
—
—
—
Class B
40
—
—
—
—
—
40
—
—
—
—
—
—
40
—
—
—
—
—
Additional
Paid-in
Capital
943,467
$
—
—
2,680
—
—
946,147
—
—
—
2,688
—
—
948,835
—
—
2,891
—
—
Accumulated
Other
Comprehensive
Loss
Retained
Earnings
Treasury
Stock
Total
$
(11,137) $ 4,153,844
221,324
—
(4,307)
$ (3,369,995) $ 1,717,417
221,324
(4,307)
—
—
—
2,681
(219,011)
(219,011)
—
—
—
(9,949)
—
(9,949)
(15,444)
—
4,365,219
170,263
(3,589,006)
—
1,708,155
170,263
(2,542)
(66,574)
—
—
—
(69,116)
5,177
2,688
(127,884)
(127,884)
—
—
—
—
—
—
(10,902)
—
(10,902)
4,458,006
111,081
(3,716,890)
—
1,678,381
111,081
(18,250)
2,891
—
—
(138,251)
(138,251)
(12,593)
—
(12,593)
—
—
—
5,177
—
—
—
(12,809)
—
(18,250)
—
—
—
Balance, February 1, 2020 . $ 1,199
$
40
$
951,726
$
(31,059) $ 4,556,494
$ (3,855,141) $ 1,623,259
See notes to consolidated financial statements.
F-7
Table of Contents
Consolidated Statements of Cash Flows
Dollars in Thousands
February 1, 2020
February 2, 2019
February 3, 2018
Years Ended
Operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization of property and other deferred cost .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Gain) loss on disposal of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain from insurance proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on early extinguishment of debt . . . . . . . . . . . . . . . . . . . . . . . .
Changes in operating assets and liabilities: . . . . . . . . . . . . . . . . . . . . .
Decrease (increase) in accounts receivable . . . . . . . . . . . . . . . . . . . .
Decrease (increase) in merchandise inventories . . . . . . . . . . . . . . . .
Decrease (increase) in other current assets . . . . . . . . . . . . . . . . . . . .
(Increase) decrease in other assets . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Decrease) increase in trade accounts payable and accrued
expenses and other liabilities
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in income taxes payable . . . . . . . . . . . . . . . . . . .
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . .
Investing activities:
Purchase of property and equipment and capitalized software . . . . .
Proceeds from disposal of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distribution from joint venture . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . .
Financing activities:
Principal payments on long-term debt and finance lease liabilities. .
Cash dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issuance cost of line of credit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in financing activities . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in cash and cash equivalents. . . . . . . . . . . . . . . . .
Cash and cash equivalents, beginning of year . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents, end of year . . . . . . . . . . . . . . . . . . . . . . . . $
Non-cash transactions:
Accrued capital expenditures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Stock awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued purchases of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . .
Lease assets obtained in exchange for new operating lease
liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
111,081
$
170,263
$
221,324
224,309
(5,415)
(20,293)
397
—
—
3,693
63,410
9,554
(1,220)
(25,597)
5,155
365,074
(103,383)
30,580
2,416
2,295
(68,092)
(966)
(11,520)
(130,928)
—
(143,414)
153,568
123,509
277,077
9,295
2,891
7,323
7,974
$
$
225,849
334
48
—
—
—
(11,416)
(64,856)
(17,416)
(10,419)
104,060
(29,159)
367,288
(137,064)
2,003
3,477
3,835
(127,749)
(162,066)
(11,108)
(129,884)
—
(303,058)
(63,519)
187,028
123,509
2,597
2,688
—
—
$
$
233,683
(102,065)
1,000
—
(5,861)
797
8,871
(57,158)
(1,902)
2,196
(20,395)
(6,205)
274,285
(130,464)
11,683
5,114
3,460
(110,207)
(90,483)
(9,424)
(223,013)
(1,115)
(324,035)
(159,957)
346,985
187,028
23,084
2,680
2,000
—
See notes to consolidated financial statements.
F-8
Table of Contents
1. Description of Business and Summary of Significant Accounting Policies
Notes to Consolidated Financial Statements
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's fiscal year ends on the Saturday nearest January 31 of each year.
Fiscal years 2019 and 2018 ended on February 1, 2020 and February 2, 2019, respectively, and contained 52 weeks each, and
fiscal year 2017 ended on February 3, 2018 and included 53 weeks.
Consolidation—The accompanying consolidated financial statements include the accounts of Dillard's, Inc. and its
wholly owned subsidiaries. Intercompany accounts and transactions are eliminated in consolidation. Investments in and
advances to joint ventures are accounted for by the equity method where the Company does not have control.
Use of Estimates—The preparation of financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Significant estimates include inventories, sales return, self-
insured accruals, future cash flows and real estate values for impairment analysis, pension discount rate and taxes. Actual
results could differ from those estimates.
Seasonality—The Company's business is highly seasonal, and historically the Company has realized a significant portion
of its sales, net income and cash flow in the second half of the fiscal year, attributable to the impact of the back-to-school
selling season in the third quarter and the holiday selling season in the fourth quarter. Additionally, working capital
requirements fluctuate during the year, increasing in the third quarter in anticipation of the holiday season.
Cash Equivalents—The Company considers all highly liquid investments with an original maturity of 3 months or less
when purchased or certificates of deposit with no early withdrawal penalty to be cash equivalents. The Company considers
receivables from charge card companies as cash equivalents because they settle the balances within 2 to 3 days.
Accounts Receivable—Accounts receivable primarily consists of construction receivables of the Company's general
contracting construction company, CDI Contractors, LLC ("CDI"), and the monthly settlement with Wells Fargo for Dillard's
share of earnings from the long-term marketing and servicing alliance. Construction receivables are based on amounts billed to
customers. The Company provides any allowance for doubtful accounts considered necessary based upon a review of
outstanding receivables, historical collection information and existing economic conditions. Accounts receivable are ordinarily
due 30 days after the issuance of the invoice. Contract retentions are due 30 days after completion of the project and acceptance
by the owner. Accounts that are past due more than 120 days are considered delinquent. Delinquent receivables are written off
based on individual credit evaluation and specific circumstances of the customer.
Merchandise Inventories—All of the Company’s inventories are valued at the lower of cost or market using the last-in,
first-out (“LIFO”) inventory method. Approximately 97% of the Company's inventories are valued using the LIFO retail
inventory method. Under the retail inventory method, the valuation of inventories at cost and the resulting gross margins are
calculated by applying a cost to retail ratio to the retail value of inventories. The retail inventory method is an averaging
method that is widely used in the retail industry due to its practicality. Inherent in the retail inventory method calculation are
certain significant management judgments including, among others, merchandise markon, markups, and markdowns, which
significantly impact the ending inventory valuation at cost as well as the resulting gross margins. During periods of deflation,
inventory values on the first-in, first-out ("FIFO") retail inventory method may be lower than the LIFO retail inventory method.
Additionally, inventory values at LIFO cost may be in excess of net realizable value. At February 1, 2020 and February 2, 2019,
merchandise inventories valued at LIFO, including adjustments as necessary to record inventory at the lower of cost or market,
approximated the cost of such inventories using the FIFO retail inventory method. The application of the LIFO retail inventory
method did not result in the recognition of any LIFO charges or credits affecting cost of sales for fiscal 2019, 2018 or 2017.
The Company regularly records a provision for estimated shrinkage, thereby reducing the carrying value of merchandise
inventory. Complete physical inventories of all of the Company's stores and warehouses are performed no less frequently than
annually, with the recorded amount of merchandise inventory being adjusted to coincide with these physical counts.
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Property and Equipment—Property and equipment owned by the Company is stated at cost, which includes related
interest costs incurred during periods of construction, less accumulated depreciation and amortization. Interest capitalized
during fiscal 2019, 2018 and 2017 was $0.4 million, $0.2 million and $0.7 million, respectively. For financial reporting
purposes, depreciation is computed by the straight-line method over estimated useful lives:
Buildings and leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Furniture, fixtures and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
20 - 40 years
3 - 10 years
Properties leased by the Company under lease agreements which are determined to be finance leases are stated at an
amount equal to the present value of the minimum lease payments during the lease term, less accumulated amortization. The
assets under finance leases and leasehold improvements under operating leases are amortized on the straight-line method over
the shorter of their useful lives or the related lease terms. The provision for amortization of assets under finance leases is
included in depreciation and amortization expense.
Included in property and equipment as of February 1, 2020 are assets held for sale in the amount of $8.6 million. During
fiscal 2019, the Company received cash proceeds of $30.6 million and realized a gain of $20.3 million primarily related to the
sale of six store properties. During fiscal 2018, the Company received cash proceeds of $1.9 million from the sale of a location
classified as an asset held for sale. During fiscal 2017, the Company realized a gain of $4.9 million on disposal of assets
primarily related to the sale of two store properties, insurance recovery on a previously damaged full-line store location and
sale of equipment.
Depreciation expense on property and equipment was approximately $222 million, $224 million and $232 million for
fiscal 2019, 2018 and 2017, respectively.
Long-Lived Assets—Impairment losses are required to be recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the
assets' carrying amount. In the evaluation of the fair value and future benefits of long-lived assets, the Company performs an
analysis of the anticipated undiscounted future net cash flows of the related long-lived assets. This analysis is performed at the
store unit level. If the carrying value of the related asset exceeds the fair value, the carrying value is reduced to its fair value.
Various factors including future sales growth, profit margins and real estate values are included in this analysis. Management
believes at this time that the carrying values and useful lives continue to be appropriate.
During fiscal 2019, 2018 and 2017, no asset impairment and store closing charges were recorded.
Other Assets—Other assets include investments accounted for by the equity and cost methods, capitalized software and
cash surrender value of life insurance policies.
Vendor Allowances—The Company receives concessions from its vendors through a variety of programs and
arrangements, including cooperative advertising and margin maintenance programs. The Company has agreements in place
with each vendor setting forth the specific conditions for each allowance or payment. These agreements range in periods from a
few days to up to a year. If the payment is a reimbursement for costs incurred, it is offset against those related costs; otherwise,
it is treated as a reduction to the cost of the merchandise. Amounts of vendor concessions are recorded only when an agreement
has been reached with the vendor and the collection of the concession is deemed probable.
For cooperative advertising programs, the Company generally offsets the allowances against the related advertising
expense when incurred. Many of these programs require proof-of-advertising to be provided to the vendor to support the
reimbursement of the incurred cost. Programs that do not require proof-of-advertising are monitored to ensure that the
allowance provided by each vendor is a reimbursement of costs incurred to advertise for that particular vendor. If the allowance
exceeds the advertising costs incurred on a vendor-specific basis, then the excess allowance from the vendor is recorded as a
reduction of merchandise cost for that vendor.
Margin maintenance allowances are credited directly to cost of purchased merchandise in the period earned according to
the agreement with the vendor. Under the retail method of accounting for inventory, a portion of these allowances reduces cost
of goods sold and a portion reduces the carrying value of merchandise inventory.
Insurance Accruals—The Company's consolidated balance sheets include liabilities with respect to self-insured workers'
compensation and general liability claims. The Company's self-insured retention is insured through a wholly-owned captive
insurance subsidiary. The Company estimates the required liability of such claims, utilizing an actuarial method, based upon
various assumptions, which include, but are not limited to, the Company's historical loss experience, projected loss
development factors, actual payroll and other data. The required liability is also subject to adjustment in the future based upon
the changes in claims experience, including changes in the number of incidents (frequency) and changes in the ultimate cost per
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incident (severity). As of February 1, 2020 and February 2, 2019, insurance accruals of $42.9 million and $42.0 million,
respectively, were recorded in trade accounts payable and accrued expenses and other liabilities on the consolidated balance
sheets.
Operating Leases—The Company leases retail stores, office space and equipment under operating leases. The Company
records right-of-use assets and operating lease liabilities for operating leases with lease terms exceeding twelve months. The
right-of-use assets are adjusted for lease incentives, including construction allowances, and prepaid rent. The Company
recognizes minimum rent expense on a straight-line basis over the lease term. Many leases contain contingent rent provisions.
Contingent rent is expensed as incurred.
The lease term used for lease evaluation includes renewal option periods only in instances in which the exercise of the
option period is reasonably certain.
Revenue Recognition—The Company's retail operations segment recognizes merchandise revenue at the "point of sale."
Allowance for sales returns and a return asset are recorded as components of net sales in the period in which the related sales
are recorded. Sales taxes collected from customers are excluded from revenue and are recorded in trade accounts payable and
accrued expenses until remitted to the taxing authorities.
Wells Fargo Bank, N.A. ("Wells Fargo") owns and manages Dillard's private label cards under a 10-year agreement
("Wells Fargo Alliance"). Pursuant to the Wells Fargo Alliance, we receive on-going cash compensation from Wells Fargo
based upon the portfolio's earnings. The compensation received from 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. The Company's share of income under the Wells Fargo Alliance is included as a component of
service charges and other income. The Company received income of approximately $91 million, $94 million and $101 million
from the Wells Fargo and former Synchrony alliances in fiscal 2019, 2018 and 2017, respectively. The Company participates in
the marketing of the private label credit cards, which includes the cost of customer reward programs. Through the reward
programs, customers earn points that are redeemable for discounts on future purchases. The Company defers a portion of its net
sales upon the sale of merchandise to its customer reward program members that is recognized in net sales when the reward is
redeemed or expired at a future date.
Revenue from CDI construction contracts is generally measured based on the ratio of costs incurred to total estimated
contract costs (the "cost-to-cost method"). The length of each contract varies but is typically nine to eighteen months. The
progress towards completion is determined by relating the actual costs of work performed to date to the current estimated total
costs of the respective contracts. When the estimate on a contract indicates a loss, the entire loss is recorded in the current
period.
Gift Card Revenue Recognition—The Company establishes a liability upon the sale of a gift card. The liability is
relieved and revenue is recognized when gift cards are redeemed for merchandise. Gift card breakage income is determined
based upon historical redemption patterns. The Company uses a homogeneous pool to recognize gift card breakage and will
recognize income over the period in proportion to the pattern of rights exercised by the customer when the Company
determines that it does not have a legal obligation to remit the value of unredeemed gift cards to the relevant jurisdiction as
abandoned property. At that time, the Company will recognize breakage income over the performance period for those gift
cards (i.e. 60 months) and will record it in service charges and other income. As of February 1, 2020 and February 2, 2019, gift
card liabilities of $59.0 million and $58.2 million, respectively, were included in trade accounts payable and accrued expenses
and other liabilities.
Advertising—Advertising and promotional costs, which include newspaper, magazine, Internet, broadcast and other
media advertising, are expensed as incurred and were approximately $39.2 million, $40.4 million and $42.5 million, net of
cooperative advertising reimbursements of $13.9 million, $15.1 million and $19.9 million for fiscal years 2019, 2018 and 2017,
respectively. The Company records net advertising expenses in selling, general and administrative expenses.
Income Taxes—Income taxes are recognized for the amount of taxes payable for the current year and deferred tax assets
and liabilities for the future tax consequence of events that have been recognized differently in the financial statements than for
tax purposes. Deferred tax assets and liabilities are established using statutory tax rates and are adjusted for tax rate changes.
Tax positions are analyzed to determine whether it is "more likely than not" that a tax position will be sustained upon
examination by the appropriate taxing authorities before any part of the benefit can be recorded in the financial statements. For
those tax positions where it is not "more likely than not" that a tax benefit will be sustained, no tax benefit is recognized. The
Company classifies accrued interest expense and penalties relating to income tax in the consolidated financial statements as
income tax expense.
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Shipping and Handling—The Company records shipping and handling reimbursements in service charges and other
income. The Company records shipping and handling costs in cost of sales.
Defined Benefit Retirement Plans—The Company's defined benefit retirement plan costs are accounted for using
actuarial valuations. The Company recognizes the funded status of its defined benefit pension plans on the balance sheet and
recognizes changes in the funded status that arise during the period but that are not recognized as components of net periodic
benefit cost, within other comprehensive income, net of income taxes.
Income on and Equity in Earnings of Joint Ventures—Income on and equity in earnings of joint ventures includes the
Company's portion of the income or loss of the Company's unconsolidated joint ventures as well as distributions (excluding
returns of investments) of excess cash from an open air center joint venture.
Comprehensive Income—Comprehensive income is defined as the change in equity (net assets) of a business enterprise
during a period from transactions and other events and circumstances from non-owner sources. It consists of the net income or
loss and other gains and losses affecting stockholders' equity that, under GAAP, are excluded from net income or loss. One
such exclusion is the amortization of retirement plan and other retiree benefit adjustments, which is the only item impacting our
accumulated other comprehensive loss.
Supply Concentration—The Company purchases merchandise from many sources and does not believe that the
Company was dependent on any one supplier during fiscal 2019.
Reclassifications—Certain items have been reclassified from their prior year classifications to conform to the current
year presentation. These reclassifications had no effect on net income or stockholders' equity as previously reported.
Recently Adopted Accounting Pronouncements
Leases: Amendments to the FASB Accounting Standards Codification
In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No.
2016-02, Leases (Topic 842): Amendments to the FASB Accounting Standards Codification, to increase transparency and
comparability among organizations by recognizing lease assets and liabilities on the balance sheet and disclosing key
information about leasing arrangements. Under these amendments, lessees are required to recognize lease assets and lease
liabilities for leases classified as operating leases under Accounting Standards Codification 840, Leases ("ASC 840").
Subsequent to the issuance of ASU No. 2016-02, the FASB issued additional amendments related to ASU No. 2016-02: (1)
ASU No. 2018-01, Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842; (2) ASU No. 2018-10:
Codification Improvements to Topic 842, Leases; and (3) ASU No. 2018-11, Leases (Topic 842): Targeted Improvements. We
refer to this ASU and related amendments as the "new standard" or "ASU No. 2016-02." We adopted the requirements of the
new standard as of February 3, 2019. See Note 13, Leases.
Defined Benefit Plans: Changes to the Disclosure Requirements for Defined Benefit Plans
In August 2018, the FASB issued ASU No. 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans -
General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans, to
improve the effectiveness of disclosures in the notes to financial statements for employers that sponsor defined benefit pension
plans. ASU No. 2018-14 is effective for financial statements issued for fiscal years ending after December 15, 2020, and early
adoption is permitted. The Company adopted ASU No. 2018-14 during the fourth quarter of 2019. The impact of this update on
its notes to financial statements is not material. See Note 8, Benefit Plans.
Intra-Entity Transfers of Assets Other Than Inventory
In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than
Inventory, as part of its initiative to reduce complexity in accounting standards. Under these amendments, an entity is required to
recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The
amendments within ASU No. 2016-16 were effective for the Company beginning in the first quarter of fiscal 2018.
At February 3, 2018, other assets included a deferred charge related to the income tax effects of the intra-entity transfer
pursuant to the previously disclosed REIT Transaction. During the fourth quarter of 2017, the Company terminated REIT
status of its subsidiary, which did not have a material impact to the Company’s fiscal 2017 consolidated financial statements.
Prior to the adoption of ASU No. 2016-16, income tax consequences of the intra-entity transfer remained recorded as a deferred
charge, which was not subject to remeasurement for the lower tax rates enacted through tax reform.
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The Company adopted the standard at the beginning of the first quarter of fiscal 2018, at which time the deferred charge was
removed through a cumulative-effect adjustment directly to retained earnings, resulting in a decrease to other assets of
approximately $173.7 million. A deferred tax asset of approximately $104.6 million was recorded through a cumulative-effect
adjustment directly to retained earnings to reflect future income tax benefits of the intra-entity transfer at newly-enacted tax
rates, resulting in a reduction to net deferred tax liabilities. These adjustments resulted in a net decrease to retained earnings of
approximately $69.1 million.
Recently Issued Accounting Pronouncements
Simplifying the Accounting for Income Taxes
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income
Taxes, as part of its initiative to reduce complexity in accounting standards. The amendments in this update simplify the
accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also
improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing
guidance. The amendments within ASU No. 2019-12 are effective for financial statements issued for fiscal years, and interim
periods within those fiscal years, beginning after December 15, 2020, 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 a general contracting
construction company.
For the Company's retail operations reportable segment, the Company determined its operating segments on a store by
store basis. Each store's operating performance has been aggregated into one reportable segment. The Company's operating
segments are aggregated for financial reporting purposes because they are similar in each of the following areas: economic
characteristics, class of consumer, nature of products and distribution methods. Revenues from external customers are derived
from merchandise sales, and the Company does not rely on any major customers as a source of revenue. Across all stores, the
Company operates one store format under the Dillard's name where each store offers the same general mix of merchandise with
similar categories and similar customers. The Company believes that disaggregating its operating segments would not provide
meaningful additional information.
The following table summarizes the percentage of net sales by segment and major product line:
Retail operations segment:
Cosmetics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ladies' apparel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ladies' accessories and lingerie . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Juniors' and children's apparel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Men's apparel and accessories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shoes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Home and furniture. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Percentage of Net Sales
Fiscal 2019
Fiscal 2018
Fiscal 2017
14%
14%
14%
22
15
9
18
15
4
97
3
22
15
9
17
15
4
96
4
23
16
8
17
16
4
98
2
100%
100%
100%
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Table of Contents
The following tables summarize certain segment information, including the reconciliation of those items to the
Company's consolidated operations.
(in thousands of dollars)
Net sales from external customers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest and debt expense (income), net . . . . . . . . . . . . . . . . . . . . . . . .
Income before income taxes and income on and equity in earnings of
joint ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income on and equity in earnings of joint ventures . . . . . . . . . . . . . . .
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,960,255
221,643
46,337
133,398
—
3,387,404
Retail Operations
Fiscal 2019
Construction
Consolidated
6,012,170
$
191,350
$
7,287
706
(110)
493
—
6,203,520
1,967,542
222,349
46,227
133,891
—
(in thousands of dollars)
Net sales from external customers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retail Operations
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest and debt expense (income), net . . . . . . . . . . . . . . . . . . . . . . . .
Income before income taxes and income on and equity in earnings of
joint ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income on and equity in earnings of joint ventures . . . . . . . . . . . . . . .
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
42,853
3,430,257
Fiscal 2018
Construction
Consolidated
6,120,758
$
235,351
$
2,056,010
223,175
52,574
203,330
31
3,384,277
8,579
640
(56)
4,632
—
47,092
6,356,109
2,064,589
223,815
52,518
207,962
31
3,431,369
(in thousands of dollars)
Net sales from external customers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest and debt expense (income), net . . . . . . . . . . . . . . . . . . . . . . . .
Income before income taxes and income on and equity in earnings of
joint ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income on and equity in earnings of joint ventures . . . . . . . . . . . . . . .
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retail Operations
Fiscal 2017
Construction
Consolidated
6,108,037
$
153,440
$
2,054,969
230,946
62,638
210,969
835
3,650,393
6,790
649
(58)
1,720
—
32,310
6,261,477
2,061,759
231,595
62,580
212,689
835
3,682,703
Intersegment construction revenues of $33.6 million, $30.2 million and $47.4 million were eliminated during
consolidation and have been excluded from net sales for fiscal years 2019, 2018 and 2017, respectively.
The retail operations segment gives rise to contract liabilities through the loyalty program and through the issuances of
gift cards. The loyalty program liability and a portion of the gift card liability is included in trade accounts payable and accrued
expenses, and a portion of the gift card liability is included in other liabilities on the consolidated balance sheets. Our retail
operations segment contract liabilities are as follows:
Retail
(in thousands of dollars)
Contract liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
February 1,
2020
February 2,
2019
February 3,
2018
$
75,229
72,852
73,059
During fiscal 2019 and fiscal 2018, the Company recorded $53.4 million and $55.3 million, respectively, in revenue that
was previously included in the retail operations contract liability balances of $72.9 million and $73.1 million, at February 2,
2019 and February 3, 2018, respectively.
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Construction contracts give rise to accounts receivable, contract assets and contract liabilities. We record accounts
receivable based on amounts billed to customers. We also record costs and estimated earnings in excess of billings on
uncompleted contracts (contract assets) and billings in excess of costs and estimated earnings on uncompleted contracts
(contract liabilities) in other current assets and trade accounts payable and accrued expenses in the consolidated balance sheets,
respectively. The amounts included in the consolidated balance sheets are as follows:
Construction
(in thousands of dollars)
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Costs and estimated earnings in excess of billings on
uncompleted contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Billings in excess of costs and estimated earnings on
uncompleted contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
February 1,
2020
February 2,
2019
February 3,
2018
$
28,522
$
31,867
$
20,136
2,179
5,737
1,165
7,414
1,213
5,503
During fiscal 2019 and fiscal 2018, the Company recorded $7.2 million and $5.2 million, respectively, in revenue that was
previously included in billings in excess of costs and estimated earnings on uncompleted contracts of $7.4 million and $5.5
million at February 2, 2019 and February 3, 2018, respectively.
The remaining performance obligations related to executed construction contracts totaled $156.5 million and $143.9 million
at February 1, 2020 and February 2, 2019, respectively.
3. Revolving Credit Agreement
In August 2017, the Company amended and extended its senior unsecured revolving credit facility (the "credit
agreement"), replacing the Company's previous credit agreement. The credit agreement is available to the Company for 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 credit agreement
provides borrowing capacity of $800 million with a $200 million expansion option and matures on August 9, 2022.
The Company pays a variable rate of interest on borrowings under the credit agreement and a commitment fee to the
participating banks based on the Company's debt rating. The rate of interest on borrowings is LIBOR plus 1.375%, and the
commitment fee for unused borrowings is 0.20% per annum.
No borrowings were outstanding at February 1, 2020. Letters of credit totaling $20.6 million were issued under this credit
agreement leaving unutilized availability under the facility of $779.4 million at February 1, 2020. The Company had weighted-
average borrowings of $76.9 million, $85.9 million and $9.5 million during fiscal 2019, 2018 and 2017 respectively.
To be in compliance with the financial covenants of the credit agreement, the Company's total leverage ratio cannot
exceed 3.5 to 1.0, and the coverage ratio cannot be less than 2.5 to 1.0, as defined in the credit agreement. At February 1, 2020,
the Company was in compliance with all financial covenants related to the credit agreement.
In connection with the amendment and extension of the Company's senior unsecured revolving credit facility, we
recorded charges totaling $0.8 million due to the the write-off of certain deferred financing fees during fiscal 2017.
Peak borrowings under the credit facility were $247 million during fiscal 2019.
4. Long-Term Debt
Long-term debt, including the current portion, of $365.7 million and $365.6 million was outstanding at February 1, 2020
and February 2, 2019, respectively. The debt outstanding at February 1, 2020 consisted of unsecured notes, bearing interest
rates ranging from 7.000% to 7.875% and maturing during fiscal 2022 through fiscal 2028. There are no financial covenants
under any of the debt agreements.
F-15
Table of Contents
Long-term debt maturities over the next five years are (in millions):
Fiscal Year
Long-Term Debt
Maturities
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
44.8
—
—
Net interest and debt expense consists of the following:
(in thousands of dollars)
Interest on long-term debt and subordinated debentures . . . . . . . . . . . . . . . . $
Revolving credit facility expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of debt expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest on finance lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal 2019
Fiscal 2018
Fiscal 2017
41,876
$
47,742
$
59,579
4,199
945
462
(1,259)
4
4,504
977
321
(1,030)
4
2,096
1,326
418
(842)
3
$
46,227
$
52,518
$
62,580
Interest paid during fiscal 2019, 2018 and 2017 was approximately $42.8 million, $52.9 million and $71.6 million,
respectively.
F-16
Table of Contents
5. Trade Accounts Payable and Accrued Expenses
Trade accounts payable and accrued expenses consist of the following:
(in thousands of dollars)
Trade accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Accrued expenses:
Taxes, other than income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Salaries, wages and employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liability to customers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
February 1, 2020
February 2, 2019
713,463
$
743,330
46,688
58,551
55,088
7,572
2,185
9,242
47,646
64,370
52,677
3,961
2,419
6,802
$
892,789
$
921,205
6. Income Taxes
The provision for federal and state income taxes is summarized as follows:
(in thousands of dollars)
Current:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Fiscal 2019
Fiscal 2018
Fiscal 2017
27,684
$
34,960
$
541
28,225
(5,293)
(122)
(5,415)
22,810
2,436
37,396
2,353
(2,019)
334
$
37,730
$
91,799
2,466
94,265
(100,954)
(1,111)
(102,065)
(7,800)
The Tax Cuts and Jobs Act (“the Act”) was signed into law on December 22, 2017. The Act’s primary impact to the
Company’s consolidated financial statements was its reduction of the federal corporate income tax rate from 35% to 21%,
effective January 1, 2018. The resulting blended federal statutory income tax rate in effect for the Company’s fiscal 2017 was
33.72%. The Company determined a reasonable estimate of the income tax effects of the Act and recorded provisional amounts
within its consolidated financial statements during 2017. During fiscal 2018, the Company finalized its accounting of the
income tax effects of the Act, within the one-year measurement period provided under SEC Staff Accounting Bulletin No. 118.
The rate reconciliation presented below reconciles the Company’s income tax provision to income taxes using the federal
statutory income tax rate. As noted above, the federal statutory rates are 21% for fiscal 2019 and 2018 and 33.72% for fiscal
2017. Included in fiscal 2019 state income taxes below is $2.8 million in tax benefits for amended state tax return filings and
related decreases to accrued state income taxes.
F-17
Table of Contents
(in thousands of dollars)
Fiscal 2019
Fiscal 2018
Fiscal 2017
Income tax at the statutory federal rate (inclusive of income on and equity
in earnings of joint ventures). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
State income taxes, net of federal benefit (inclusive of income on and
equity in earnings of joint ventures) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net changes in unrecognized tax benefits, interest and penalties /reserves . .
Tax benefit of federal credits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in cash surrender value of life insurance policies. . . . . . . . . . . . . . .
Changes in valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax benefit of dividends paid to ESOP. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Estimated adjustments to net deferred tax liabilities for enacted changes in
tax laws and rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
28,117
$
43,679
$
72,000
(2,782)
1,017
(5,094)
(404)
2,017
(684)
—
623
2,538
(421)
(4,563)
(410)
(2,039)
(621)
(1,521)
1,088
$
22,810
$
37,730
$
(22)
(448)
(4,440)
(441)
222
(810)
(74,216)
355
(7,800)
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the
Company's deferred tax assets and liabilities as of February 1, 2020 and February 2, 2019 are as follows:
(in thousands of dollars)
Property and equipment bases and depreciation differences . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Joint venture bases differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Differences between book and tax bases of inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accruals not currently deductible. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net operating loss carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
February 1,
2020
February 2,
2019
14,985
$
47,181
6,512
22,705
11,323
3,301
106,007
(79,575)
(11,184)
(64,270)
(749)
(3,715)
(159,493)
55,671
(103,822)
2,185
$
22,942
45,101
6,889
18,770
—
2,953
96,655
(66,325)
—
(67,512)
(236)
(2,267)
(136,340)
53,172
(83,168)
13,487
For fiscal 2019 and 2018, deferred tax assets and liabilities were measured using the federal statutory income tax rate of
21% and the appropriate state statutory income tax rates.
At February 1, 2020, the Company had a deferred tax asset related to state net operating loss carryforwards of
approximately $64.3 million that could be utilized to reduce the tax liabilities of future years. These carryforwards will expire
between fiscal 2020 and 2040. State deferred tax assets were reduced by a valuation allowance of approximately $55.7 million
primarily for the net operating loss carryforwards of various members of the affiliated group in states for which the Company
determined that it is "more likely than not" that the benefit of the net operating losses will not be realized.
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Table of Contents
Deferred tax assets and liabilities are presented as follows in the accompanying consolidated balance sheets:
(in thousands of dollars)
Net deferred tax assets—other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Net deferred tax liabilities—deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
February 1,
2020
February 2,
2019
(1,305) $
3,490
2,185
$
—
13,487
13,487
The total amount of unrecognized tax benefits as of February 1, 2020 was $5.2 million, of which $3.5 million would, if
recognized, affect the Company’s effective tax rate. The total amount of unrecognized tax benefits as of February 2, 2019 was
$2.7 million, of which $1.6 million would, if recognized, affect the Company's effective tax rate. The Company does not expect
a significant change in unrecognized tax benefits in the next twelve months. Where applicable, associated interest and penalties
are also recorded. The total amounts of interest and penalties were not material.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
(in thousands of dollars)
Fiscal 2019
Fiscal 2018
Fiscal 2017
Unrecognized tax benefits at beginning of period . . . . . . . . . . . . . . . . . . . . . $
Gross increases—tax positions in prior period. . . . . . . . . . . . . . . . . . . . . . .
Gross decreases—tax positions in prior period . . . . . . . . . . . . . . . . . . . . . .
Gross increases—current period tax positions . . . . . . . . . . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lapse of statutes of limitation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrecognized tax benefits at end of period. . . . . . . . . . . . . . . . . . . . . . . . . . . $
2,688
$
3,189
$
1,865
(538)
1,453
—
(277)
5,191
$
37
(606)
483
—
(415)
2,688
$
4,013
2
(710)
417
(81)
(452)
3,189
The fiscal tax years that remain subject to examination for the federal tax jurisdiction and major state tax jurisdictions are
2016 and forward. At this time, the Company does not expect the results from any income tax audit to have a material impact
on the Company's consolidated financial statements.
Income taxes paid, net of income tax refunds received, during fiscal 2019, 2018 and 2017 were approximately $15.7
million, $68.4 million and $93.9 million, respectively.
7. Subordinated Debentures
At February 1, 2020, the Company had $200 million outstanding of its 7.5% subordinated debentures due August 1,
2038. All of these subordinated debentures were held by Dillard's Capital Trust I ("Trust"), a 100% owned unconsolidated
finance subsidiary of the Company. The subordinated debentures are the sole asset of the Trust. The Company has the right to
defer the payment of interest on the subordinated debentures at any time for a period not to exceed 20 consecutive quarters.
At February 1, 2020, the Trust had outstanding $200 million liquidation amount of 7.5% Capital Securities, due August 1,
2038 (the "Capital Securities"). Holders of the Capital Securities are entitled to receive cumulative cash distributions, payable
quarterly, at the annual rate of 7.5% of the liquidation amount of $25 per Capital Security. The Capital Securities are subject to
mandatory redemption upon repayment of the Company's subordinated debentures. The Company's obligations under the
subordinated debentures and related agreements, taken together, provide a full and unconditional guarantee of payments due on
the Capital Securities.
The Trust is a variable interest entity and is not consolidated into the Company's financial statements, since the Company
is not the primary beneficiary of the Trust.
F-19
Table of Contents
8. Benefit Plans
The Company has a retirement plan with a 401(k)-salary deferral feature for eligible employees. Under the terms of the
plan, eligible employees could contribute up to the lesser of $19,000 ($25,000 if at least 50 years of age) or 75% of eligible pay.
Eligible employees with 1 year of service, who elect to participate in the plan or are auto-enrolled, receive a Company
matching contribution. Company matching contributions are calculated on the eligible employee's first 6% of elective deferrals
with the first 1% being matched 100% and the next 5% being matched 50%. The Company matching contributions are used to
purchase Class A Common Stock of the Company for the benefit of the employee. This stock may be immediately diversified
into any of the other funds within the plan at the election of the employee. The terms of the plan provide a two-year vesting
schedule for the Company matching contribution portion of the plan.
The Company incurred benefit plan expense of approximately $19 million for each of fiscal years 2019 and 2018 and $18
million for fiscal 2017. Benefit plan expenses are included in selling, general and administrative expenses.
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 is
determined using an actuarial cost method to estimate the total benefits ultimately payable to officers and allocates this cost to
service periods. The actuarial assumptions used to calculate pension costs are reviewed annually. The service cost component of
net periodic benefit costs is included in selling, general and administrative expenses, and the interest costs and net actuarial loss
components are included in other expense in the consolidated statements of income.
F-20
Table of Contents
The accumulated benefit obligations, change in projected benefit obligation, change in Pension Plan assets, funded status,
and reconciliation to amounts recognized in the consolidated balance sheets are as follows:
(in thousands of dollars)
Change in benefit obligation:
February 1,
2020
February 2,
2019
Benefit obligation at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actuarial loss (gain) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefit obligation at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
193,865
$
194,733
3,621
7,667
24,137
(5,554)
223,736
$
3,687
7,131
(6,294)
(5,392)
193,865
Change in Pension Plan assets:
Fair value of Pension Plan assets at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Employer contribution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of Pension Plan assets at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Funded status (Pension Plan assets less benefit obligation) . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Amounts recognized in the balance sheets:
— $
—
5,554
(5,554)
— $
(223,736) $
5,392
(5,392)
—
(193,865)
Accrued benefit liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Net amount recognized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(223,736) $
(223,736) $
(193,865)
(193,865)
Pretax amounts recognized in accumulated other comprehensive loss:
Net actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Prior service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net amount recognized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
41,017
—
41,017
$
$
16,880
—
16,880
Accumulated benefit obligation at end of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(218,277) $
(192,982)
The accrued benefit liability is included in other liabilities. At February 1, 2020 and February 2, 2019, the current portion
of the accrued benefit liability of $5.5 million and $5.3 million, respectively, is included in trade accounts payable and accrued
expenses.
The increase in the benefit obligation from February 2, 2019 to February 1, 2020 was primarily related to the decrease in
the discount rate of 2.8% as of February 1, 2020 from 4.0% as of February 2, 2019, which is included in the actuarial loss of
$24.1 million.
The discount rate that the Company utilizes for determining future pension obligations is based on the FTSE Above
Median Pension Index Curve on its annual measurement date as of 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 decreased to 2.8% as of February 1, 2020 from
4.0% as of February 2, 2019. Weighted average assumptions are as follows:
Discount rate—net periodic pension cost . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Discount rate—benefit obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rate of compensation increases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.0%
2.8%
2.0%
3.7%
4.0%
2.0%
4.0%
3.7%
2.0%
Fiscal 2019
Fiscal 2018
Fiscal 2017
F-21
Table of Contents
The components of net periodic benefit costs are as follows:
(in thousands of dollars)
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
loss (income):
Fiscal 2019
Fiscal 2018
Fiscal 2017
3,621
$
3,687
$
7,667
—
—
—
7,131
529
—
—
3,494
7,229
—
—
—
11,288
$
11,347
$
10,723
Net actuarial loss (gain) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Amortization of prior service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total recognized in other comprehensive loss (income) . . . . . . . . . . . . . . $
Total recognized in net periodic benefit costs and other comprehensive
income or loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
24,137
—
24,137
35,425
$
$
$
(6,823) $
—
(6,823) $
5,701
—
5,701
4,524
$
16,424
The estimated future benefits payments for the nonqualified benefit plan are as follows:
(in thousands of dollars)
Fiscal Year
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025- 2029. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total payments for next ten fiscal years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
5,545 *
5,826
7,803
8,486
8,779
80,664
117,103
___________________________________
* The estimated benefit payment for fiscal 2020 also represents the amount the Company expects to contribute to the Pension
Plan for fiscal 2020.
9. Stockholders' Equity
Capital stock is comprised of the following:
Type
Preferred (5% cumulative) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Additional preferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Class A, common . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Class B, common . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Par
Value
Shares
Authorized
100.00
5,000
0.01
0.01
0.01
10,000,000
289,000,000
11,000,000
Holders of Class A are empowered as a class to elect one-third of the members of the Board of Directors, and the holders
of Class B are empowered as a class to elect two-thirds of the members of the Board of Directors. Shares of Class B are
convertible at the option of any holder thereof into shares of Class A at the rate of one share of Class B for one share of
Class A.
F-22
Table of Contents
Stock Repurchase Programs
All repurchases of the Company's Class A Common Stock were made at the market price at the trade date and all amounts
paid to reacquire these shares were allocated to Treasury Stock.
The Company’s Board of Directors has authorized the Company to repurchase the Company’s Class A Common Stock
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):
Cost of shares repurchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number of shares repurchased . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average price per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
138,251
2,199
62.88
$
$
127,884
1,797
71.17
$
$
219,011
4,097
53.46
Fiscal 2019
Fiscal 2018
Fiscal 2017
On March 1, 2018, the Company announced that the Company's Board of Directors approved a new stock repurchase
program authorizing the Company to repurchase up to $500 million of its Class A Common Stock ("March 2018 Stock Plan").
During fiscal 2018, the Company completed the authorization under the Company's previous stock repurchase plan authorized
by the Company's Board of Directors in February 2016 and began share repurchases under the March 2018 Stock Plan. As of
February 1, 2020, $268.7 million authorization remained under this stock repurchase plan.
10. Accumulated Other Comprehensive Loss ("AOCL")
Reclassifications from AOCL
Reclassifications from AOCL are summarized as follows (in thousands):
Details about AOCL Components
Defined benefit pension plan items
Amortization of prior service cost . . . . . . . . . . . . . . . . . . . . . . .
Amortization of actuarial losses. . . . . . . . . . . . . . . . . . . . . . . . .
Amount
Reclassified
from AOCL
Fiscal 2019
Fiscal 2018
Affected Line Item in the
Statement Where Net
Income Is Presented
$
$
— $
—
—
—
— (1)
529
(1)
529 Total before tax
128
Income tax expense
— $
401 Total net of tax
_____________________________
(1) These items are included in the computation of net periodic benefit costs. See Note 8 for additional information.
Changes in AOCL
Changes in AOCL by component (net of tax) are summarized as follows (in thousands):
Defined Benefit
Pension Plan Items
Fiscal 2019
Fiscal 2018
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
12,809 $
15,444
Other comprehensive loss (income) before reclassifications . . . . . . . . . . . . . . . . . . . .
Amounts reclassified from AOCL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reclassification due to the adoption of ASU No. 2018-02 . . . . . . . . . . . . . . . . . . . . .
Net other comprehensive loss (income) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18,250
—
—
18,250
(4,776)
(401)
2,542
(2,635)
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
31,059 $
12,809
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Table of Contents
11. Earnings per Share
Basic earnings per share has been computed based upon the weighted average of Class A and Class B common shares
outstanding. As no stock options or other dilutive securities were outstanding during any of the respective periods, the
calculation of basic and dilutive earnings per share are the same.
Earnings per common share has been computed as follows:
(in thousands, except per share data)
Net earnings available for per-
share calculation . . . . . . . . . . . $
Average shares of common
stock outstanding . . . . . . . . . .
Dilutive effect of stock-based
compensation . . . . . . . . . . . . .
Total average equivalent shares
Per share of common stock:
Net income . . . . . . . . . . . . . . . $
Fiscal 2019
Fiscal 2018
Fiscal 2017
Basic
Diluted
Basic
Diluted
Basic
Diluted
111,081
$
111,081
$
170,263
$
170,263
$
221,324
$
221,324
25,364
25,364
27,312
27,312
29,487
29,487
—
25,364
—
25,364
—
27,312
—
27,312
—
29,487
—
29,487
4.38
$
4.38
$
6.23
$
6.23
$
7.51
$
7.51
12. Commitments and Contingencies
At February 1, 2020, the Company is committed to incur costs of approximately $2.1 million to acquire, complete and
furnish certain stores and equipment.
At February 1, 2020, letters of credit totaling $20.6 million were issued under the Company's $800 million revolving
credit facility.
Various legal proceedings, in the form of lawsuits and claims, which occur in the normal course of business, are pending
against the Company and its subsidiaries. In the opinion of management, disposition of these matters is not expected to
materially affect the Company's financial position, cash flows or results of operations.
13. Leases
We adopted the requirements of ASU No. 2016-02 as of February 3, 2019, utilizing the optional effective date transition
method allowing the application of the new standard at the adoption date with comparative periods presented in accordance with
ASC 840, Leases. At adoption, we made the following practical expedient policy elections:
• We applied the new standard using the package of practical expedients permitted under the transition guidance, which
allowed us to not reassess:
Whether any expired or existing contracts are or contain leases;
Lease classification for any expired or existing leases, which allowed us to carry forward the historical lease
classifications; and
Indirect costs for any existing leases.
• We elected the practical expedient that allowed us to use hindsight in determining the lease term.
• We elected the practical expedient related to land easements, allowing us to carry forward our accounting treatment for
land easements on existing agreements.
• We elected the accounting policy to not recognize a right-of-use asset and operating lease liability for leases with an
initial term of twelve months or less. The Company records lease expense for short term leases on a straight-line basis
over the lease term in rentals on the consolidated statements of income.
• We elected the accounting policy to account for lease components (e.g. fixed rent payments) separately from non-lease
components (e.g. common area maintenance costs).
F-24
Table of Contents
The Company leases retail stores, office space and equipment under operating leases. The majority of these operating leases
were impacted by the adoption of the new standard. At adoption, we recorded right-of-use operating lease assets and operating
lease liabilities totaling $57.0 million and $56.2 million, respectively. As of February 1, 2020, right-of-use operating lease assets,
which are recorded in operating lease assets in the consolidated balance sheets, totaled $47.9 million, and operating lease liabilities,
which are recorded in current portion of operating lease liabilities and operating lease liabilities, totaled $47.3 million. The impact
of the adoption of the new standard was immaterial to our consolidated statements of income, consolidated statements of cash
flows and consolidated statements of stockholders' equity.
In determining our operating lease assets and operating lease liabilities, we applied an incremental borrowing rate to the
minimum lease payments within each lease agreement. ASU No. 2016-02 requires the use of the rate implicit in the lease whenever
that rate is readily determinable; furthermore, if the implicit rate is not readily determinable, a lessee may use its incremental
borrowing rate. The incremental borrowing rate is the rate of interest that a lessee would have to pay to borrow on a collateralized
basis over a similar term an amount equal to the lease payments in a similar economic environment. To estimate our specific
incremental borrowing rates that align with applicable lease terms, we utilized a model consistent with the credit quality of our
outstanding debt instruments.
Renewal options from two to 20 years exist on the majority of leased properties. The Company has sole discretion in
exercising the lease renewal options. We do not recognize operating lease assets or operating lease liabilities for renewal
periods unless it has been determined that we are reasonably certain of renewing the lease at inception. The depreciable life of
operating lease assets and related leasehold improvements is limited by the expected lease term.
Contingent rentals on certain leases are based on a percentage of annual sales in excess of specified amounts. Other
contingent rentals are based entirely on a percentage of sales. The Company's operating lease agreements do not contain any
material residual value guarantees or material restrictive covenants.
The following table summarizes the Company's operating and finance leases:
(in thousands of dollars)
Classification - Consolidated Balance Sheets
February 1,
2020
February 2,
2019(a)
Assets
Finance lease assets. . . . . . Property and equipment, net (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease assets . . . . Operating lease assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total leased assets
$
$
670
47,924
48,594
$
$
1,093
—
1,093
Liabilities
Current
Finance . . . . . . . . . . . . . Current portion of finance lease liabilities. . . . . . . . . . . . . . . . . . . . .
Operating . . . . . . . . . . . Current portion of operating lease liabilities . . . . . . . . . . . . . . . . . . .
Noncurrent
Finance . . . . . . . . . . . . . Finance lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating . . . . . . . . . . . Operating lease liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total lease liabilities
$
1,219
$
14,654
695
32,683
49,251
$
$
1,214
—
1,666
—
2,880
(a) The Company adopted and applied ASU No. 2016-02, Leases (Topic 842): Amendments to the FASB Accounting Standards
Codification and related amendments on February 3, 2019. The prior period is presented under ASC 840, Leases.
(b) Finance lease assets are recorded net of accumulated amortization of $13.9 million, and $13.5 million as of February 1, 2020
and February 2, 2019, respectively.
F-25
Table of Contents
Lease Cost
Classification - Consolidated Statements of Income
(in thousands of dollars)
Operating lease cost (a) . . . . . . . . . Rentals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance lease cost
Amortization of leased assets . Depreciation and amortization . . . . . . . . . . . . . . . .
Interest on lease liabilities. . . . Interest and debt expense, net . . . . . . . . . . . . . . . . .
Net lease cost
Fiscal 2019
Fiscal 2018
Fiscal 2017
$
26,375
$
28,646
$
28,012
423
462
481
320
3,512
418
$
27,260
$
29,447
$
31,942
(a) Includes short term lease costs of $3.2 million and variable lease costs, including contingent rent, of $3.7 million for fiscal
2019. Includes contingent rentals of $3.0 million for fiscal 2019 and $3.4 million for each of fiscal years 2018 and 2017.
Maturities of Lease Liabilities
(in thousands of dollars)
Fiscal Year
Operating
Leases
Finance
Leases
Total
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
After 2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total minimum lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less amount representing interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Present value of lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
16,251
$
1,428
$
12,991
6,650
3,778
3,022
15,690
58,382
(11,045)
47,337
726
—
—
—
—
2,154
(240)
1,914
$
$
17,679
13,717
6,650
3,778
3,022
15,690
60,536
(11,285)
49,251
Lease Term and Discount Rate
Weighted-average remaining lease term
Operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted-average discount rate
Operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Information
(in thousands of dollars)
February 1, 2020
6.2 years
1.7 years
6.6%
15.4%
February 1, 2020
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating cash flows from finance leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financing cash flows from finance leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
20,032
462
966
Lease assets obtained in exchange for new operating lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
7,974
F-26
Table of Contents
14. Fair Value Disclosures
The estimated fair values of financial instruments which are presented herein have been determined by the Company
using available market information and appropriate valuation methodologies. However, considerable judgment is required in
interpreting market data to develop estimates of fair value. Accordingly, the estimates presented herein are not necessarily
indicative of amounts the Company could realize in a current market exchange.
The fair value of the Company's long-term debt and subordinated debentures is based on market prices and are
categorized as Level 1 in the fair value hierarchy.
The fair value of the Company's cash and cash equivalents and trade accounts receivable approximates their carrying
values at February 1, 2020 and February 2, 2019 due to the short-term maturities of these instruments. The fair values of the
Company's long-term debt at February 1, 2020 and February 2, 2019 were approximately $422 million and $384 million,
respectively. The carrying value of the Company's long-term debt at February 1, 2020 and February 2, 2019 was approximately
$366 million. The fair value of the subordinated debentures at February 1, 2020 and February 2, 2019 was approximately $211
million and $215 million, respectively. The carrying value of the subordinated debentures at February 1, 2020 and February 2,
2019 was $200 million.
15. Quarterly Results of Operations (unaudited)
(in thousands of dollars, except per share data)
May 4
August 3
November 2
February 1
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted earnings per share:
1,465,441
$
1,426,863
$
1,388,310
$
1,922,906
537,674
78,602
394,849
(40,671)
461,528
5,462
573,491
67,688
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2.99
$
(1.59) $
0.22
$
2.75
Fiscal 2019, Three Months Ended
(in thousands of dollars, except per share data)
May 5
August 4
November 3
February 2
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted earnings per share:
1,458,262
$
1,468,023
$
1,419,213
$
2,010,611
554,521
80,548
450,846
(2,868)
464,276
7,425
594,946
85,158
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2.89
$
(0.10) $
0.27
$
3.22
Fiscal 2018, Three Months Ended
Total of quarterly earnings per common share may not equal the annual amount because net income per common share is
calculated independently for each quarter.
Quarterly information for fiscal 2019 and fiscal 2018 includes the following items:
Fourth Quarter
2019
•
•
an $8.3 million pretax gain ($6.5 million after tax or $0.26 per share) primarily related to the sale of two store
properties
$2.3 million ($0.09 per share) in tax benefits provided in the Taxpayer Certainty and Disaster Tax Relief Act of
2019
Third Quarter
2019
•
a $0.3 million pretax loss ($0.2 million after tax or $0.01 per share) primarily related to the sale of a store
property
F-27
Table of Contents
2018
•
•
$2.8 million ($0.11 per share) in tax benefits related to amended state tax return filings
$2.9 million ($0.11 per share) in tax benefits related to additional federal tax credits and an update of the
provisional amounts recorded for the income tax effects of the Tax Cuts and Jobs Act of 2017
Second Quarter
2019
•
a $4.9 million pretax gain ($3.8 million after tax or $0.15 per share) primarily related to the sale of a store
property
First Quarter
2019
•
a $7.4 million pretax gain ($5.8 million after tax or $0.22 per share) primarily related to the sale of two store
properties
16. Subsequent Event
In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic,
which continues to spread throughout the United States and the world. While our internet store remains open, governmental
directives relative to this outbreak have caused us to temporarily close approximately 200 of our retail store locations as of
March 27, 2020, and we may have to close additional stores. These actions in addition to reduced consumer demand have had
and may continue to have a negative impact on our sales.
Although the disruption from COVID-19 is currently expected to be temporary, there is significant uncertainty around the
duration and the overall impact on customer demand. Due to this heightened uncertainty, we cannot reasonably estimate the
impact of COVID-19 on our business operations; however, we anticipate this disruption may have a material adverse effect on
our results of operations, financial position and cash flows for fiscal 2020.
To increase our cash position during this crisis and to provide additional financial flexibility, on March 25, 2020, we
borrowed the unutilized availability of $779.0 million from our $800 million revolving credit agreement, subject to the terms
and covenants as described in Note 3. The Company still has an option to expand the facility by $200 million.
F-28
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A N N U A L R E P O R T 2 0 1 9
BOARD OF DIRECTORS
CORPORATE ORGANIZATION
Robert C. Connor
Investments - Dallas, Texas
Alex Dillard
President of Dillard’s, Inc.
Mike Dillard
Executive Vice President of Dillard’s, Inc.
William Dillard, II
Chairman of the Board & Chief Executive
Officer of Dillard’s, Inc.
James I. Freeman
Retired Senior Vice President & Chief
Financial Officer of Dillard’s, Inc.
H. Lee Hastings, III
President & Chief Operating Officer
of Hastings Holdings, Inc.
Little Rock, Arkansas
Drue Matheny
Executive Vice President of Dillard’s, Inc.
Frank R. Mori
Co-Chief Executive Officer & President,
TTM Associates, Inc. - New York, New York
Reynie Rutledge
Chairman of First Security Bancorp
Searcy, Arkansas
Warren A. Stephens
Chairman, CEO & President of
Stephens, Inc.
Co-Chairman of SF Holding Corp.
Little Rock, Arkansas
J.C. Watts, Jr.
Former Member of Congress,
Chairman of The J.C. Watts Companies
Norman, Oklahoma
Nick White
Chief Executive Officer & President of
White & Associates - Rogers, Arkansas
William Dillard, II - Chief Executive Officer
Alex Dillard - President
Mike Dillard - Executive Vice President
Drue Matheny - Executive Vice President
Chris B. Johnson - Senior Vice President
Phillip R. Watts - Senior Vice President
William Dillard, III - Senior Vice President
Denise Mahaffy - Senior Vice President
Dean L. Worley - Vice President & General Counsel
VICE PRESIDENTS
Tom Bolin
Tony Bolte
Amy Carrasquillo
Michael I. Draper
Mike Litchford
Jim Mitchell
Brant Musgrave
Michael E. Price
Christine Rowell
CORPORATE MERCHANDISING
PRODUCT DEVELOPMENT
VICE PRESIDENTS, MERCHANDISING
Scott Bartels
Laura Beever
Gary Borofsky
Gianni Duarte
Christine A. Ferrari
Pete Gigliotti
Brett Gunn
Annemarie Jazic
Alexandra Lucie
Mike McNiff
James P. Northup
Mike Shields
Terry Smith
James D. Stockman
Kay White
REGIONAL MERCHANDISING
PRESIDENTS
GENERAL MERCHANDISE MANAGERS
Mike Dillard
Drue Matheny
Robin Sanderford
Julie A. Taylor
Leslie Argo
Gary A. Platt
Lisa M. Roby
Bob Thompson
REGIONAL VICE PRESIDENTS - STORES
Bradford Baker
Robby David
Mark Galvan
Armando Gonzalez
Gene D. Heil
Michael J. Hubbell
Donna T. Moye
Zeina T. Nassar
Jill Nicholson
Gregory E. Ostberg
Raymond Stockley
A N N U A L R E P O R T 2 0 1 9
Dillard’s, Inc. ranks among the nation’s largest fashion retailers with annual sales exceeding $6.2 billion.
The company focuses on delivering style, service and value to its shoppers by offering compelling apparel, cosmetics and
home selections complemented 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 257 Dillard’s locations
and 28 clearance centers spanning 29 states and an internet store at www.dillards.com.
ANNUAL MEETING
Saturday, May 16, 2020 - 9 AM
Dillard’s Corporate Office
1600 Cantrell Road
Little Rock, Arkansas 72201
FINANCIAL & OTHER INFORMATION
Copies of financial documents and other Company
information, such as Dillard’s, Inc. reports on
Form 10-K and 10-Q and other reports filed with
the Securities and Exchange Commission
are available by contacting:
Dillard’s, Inc.
Investor Relations
1600 Cantrell Road, Little Rock, Arkansas 72201
Phone: 501.376.5989
Email: investor.relations@dillards.com
Financial reports, press releases and other
Company information are available on the
Dillard’s, Inc. website: www.dillards.com.
For questions regarding Dillard’s, Inc.,
please contact:
Julie Johnson Guymon, C.P.A.
Director of Investor Relations
1600 Cantrell Road, Little Rock, Arkansas 72201
Phone: 501.376.5965
Email: julie.guymon@dillards.com
SHAREHOLDER INFORMATION
Registered shareholders should direct
communications regarding address changes, lost
certificates and other administrative matters to the
Company’s Transfer Agent and Registrar:
Computershare
Post Office Box 505000, Louisville, Kentucky 40233
Phone: 1.800.368.5948
For online shareholder inquiries:
www.computershare.com/investor
Shareholders in the Dillard's, Inc. Investment &
Employee Stock Ownership Plan should direct inquiries to:
Wells Fargo Institutional Retirement and Trust
1525 West W.T. Harris Blvd.
Charlotte, North Carolina 28262-8522
Phone: 1.800.728.3123
For online shareholder inquiries:
www.wellsfargo.com/retirement-plan
CORPORATE HEADQUARTERS
1600 Cantrell Road
Little Rock, Arkansas 72201
MAILING ADDRESS
Post Office Box 486, Little Rock, Arkansas 72203
Phone: 501.376.5200
Fax: 501.376.5917
LISTING
New York Stock Exchange, Ticker Symbol “DDS”
ON THE COVER:
From our Antonio Melani collection, effortlessly adding a modern touch to timeless silhouettes.
Available exclusively at Dillard’s.