10-Q 1 dds-20220730x10q.htm 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

  

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 30, 2022

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

     

71-0388071

(State or other jurisdiction

of incorporation or organization)

(I.R.S. Employer

Identification No.)

1600 CANTRELL ROAD, LITTLE ROCK, ARKANSAS  72201

(Address of principal executive offices)

(Zip Code)

(501) 376-5200

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A Common Stock

DDS

New York Stock Exchange

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

     

Accelerated filer

Non-accelerated filer 

 

Smaller reporting company

Emerging growth company

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

CLASS A COMMON STOCK as of August 27, 2022     13,149,686

CLASS B COMMON STOCK as of August 27, 2022       3,986,233

Index

DILLARD’S, INC.

Page

Number

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements (Unaudited):

Condensed Consolidated Balance Sheets as of July 30, 2022, January 29, 2022 and July 31, 2021

3

Condensed Consolidated Statements of Income for the Three and Six Months Ended July 30, 2022 and July 31, 2021

4

Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended July 30, 2022 and July 31, 2021

5

Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended July 30, 2022 and July 31, 2021

6

Condensed Consolidated Statements of Cash Flows for the Six Months Ended July 30, 2022 and July 31, 2021

8

Notes to Condensed Consolidated Financial Statements

9

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

15

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

26

Item 4.

Controls and Procedures

26

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

27

Item 1A.

Risk Factors

27

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

28

Item 6.

Exhibits

29

SIGNATURES

30

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

DILLARD’S, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In Thousands)

    

July 30,

    

January 29,

    

July 31,

2022

2022

2021

Assets

 

  

 

  

 

  

Current assets:

 

  

 

  

 

  

Cash and cash equivalents

$

492,856

$

716,759

$

669,474

Accounts receivable

 

36,396

 

39,777

 

34,445

Short-term investments

74,006

Merchandise inventories

 

1,193,443

 

1,080,178

 

1,112,815

Federal and state income taxes

 

35,655

 

 

122,807

Other current assets

 

97,782

 

77,937

 

66,275

Total current assets

 

1,930,138

 

1,914,651

 

2,005,816

Property and equipment (net of accumulated depreciation and amortization of $2,601,424, $2,517,915 and $2,537,137, respectively)

 

1,159,740

 

1,190,151

 

1,237,427

Operating lease assets

 

37,126

 

42,941

 

44,098

Deferred income taxes

 

30,243

 

28,931

 

26,792

Other assets

 

64,356

 

68,883

 

69,376

Total assets

$

3,221,603

$

3,245,557

$

3,383,509

Liabilities and stockholders’ equity

 

  

 

  

 

  

Current liabilities:

 

  

 

  

 

  

Trade accounts payable and accrued expenses

$

890,784

$

886,233

$

881,543

Current portion of long-term debt

 

44,800

 

44,800

 

Current portion of finance lease liabilities

 

 

 

356

Current portion of operating lease liabilities

10,422

11,712

12,113

Federal and state income taxes

 

 

23,441

 

Total current liabilities

 

946,006

 

966,186

 

894,012

Long-term debt

 

321,300

 

321,247

 

365,918

Operating lease liabilities

 

26,485

 

30,969

 

31,467

Other liabilities

 

278,811

 

275,937

 

282,533

Subordinated debentures

 

200,000

 

200,000

 

200,000

Commitments and contingencies

 

  

 

  

 

  

Stockholders’ equity:

 

  

 

  

 

  

Common stock

 

1,240

 

1,240

 

1,240

Additional paid-in capital

 

958,974

 

956,653

 

955,198

Accumulated other comprehensive loss

 

(22,435)

 

(22,798)

 

(33,878)

Retained earnings

 

5,435,331

 

5,027,922

 

4,808,737

Less treasury stock, at cost

 

(4,924,109)

 

(4,511,799)

 

(4,121,718)

Total stockholders’ equity

 

1,449,001

 

1,451,218

 

1,609,579

Total liabilities and stockholders’ equity

$

3,221,603

$

3,245,557

$

3,383,509

See notes to condensed consolidated financial statements.

3

DILLARD’S, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In Thousands, Except Per Share Data)

    

Three Months Ended

    

Six Months Ended

July 30,

    

July 31,

July 30,

    

July 31,

2022

2021

2022

2021

Net sales

$

1,588,620

$

1,570,378

$

3,200,288

$

2,898,921

Service charges and other income

 

29,267

 

31,054

 

60,381

 

60,046

 

1,617,887

 

1,601,432

 

3,260,669

 

2,958,967

Cost of sales

 

941,217

 

927,210

 

1,802,654

 

1,701,299

Selling, general and administrative expenses

 

401,332

 

365,868

 

802,105

 

702,482

Depreciation and amortization

 

47,919

 

50,043

 

94,128

 

96,451

Rentals

 

5,316

 

5,099

 

10,395

 

10,210

Interest and debt expense, net

 

9,589

 

10,771

 

20,151

 

22,306

Other expense

 

1,936

 

2,134

 

3,872

 

7,098

Gain on disposal of assets

 

(1)

 

(9)

 

(7,238)

 

(24,682)

Income before income taxes

 

210,579

 

240,316

 

534,602

 

443,803

Income taxes

 

47,130

 

54,660

 

120,060

 

99,900

Net income

$

163,449

$

185,656

$

414,542

$

343,903

Earnings per share:

 

  

 

  

 

  

 

  

Basic and diluted

$

9.30

$

8.81

$

23.07

$

16.03

See notes to condensed consolidated financial statements.

4

DILLARD’S, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In Thousands)

    

Three Months Ended

Six Months Ended

July 30,

July 31,

July 30,

July 31,

2022

    

2021

    

2022

    

2021

Net income

$

163,449

$

185,656

$

414,542

$

343,903

Other comprehensive income:

 

  

 

  

 

  

 

  

Amortization of retirement plan and other retiree benefit adjustments (net of tax of $58, $169, $116 and $337, respectively)

 

182

 

528

 

363

 

1,057

Comprehensive income

$

163,631

$

186,184

$

414,905

$

344,960

See notes to condensed consolidated financial statements.

5

DILLARD’S, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(In Thousands, Except Share and Per Share Data)

Three Months Ended July 30, 2022

    

    

    

Accumulated 

    

    

    

Additional 

Other 

Common 

Paid-in 

Comprehensive

Retained 

Treasury 

Stock

Capital

 Loss

Earnings

Stock

Total

Balance, April 30, 2022

$

1,240

$

956,653

$

(22,617)

$

5,275,371

$

(4,698,314)

$

1,512,333

Net income

 

 

 

 

163,449

 

 

163,449

Other comprehensive income

 

 

 

182

 

 

 

182

Issuance of 9,000 shares under equity plans

2,321

2,321

Purchase of 874,818 shares of treasury stock

 

 

 

 

 

(225,795)

 

(225,795)

Cash dividends declared:

 

  

 

  

 

  

 

  

 

  

 

Common stock, $0.20 per share

 

 

 

 

(3,489)

 

 

(3,489)

Balance, July 30, 2022

$

1,240

$

958,974

$

(22,435)

$

5,435,331

$

(4,924,109)

$

1,449,001

Three Months Ended July 31, 2021

    

    

    

Accumulated 

    

    

    

Additional 

Other 

Common 

Paid-in 

Comprehensive

Retained 

Treasury 

Stock

Capital

 Loss

Earnings

Stock

Total

Balance, May 1, 2021

$

1,240

$

954,131

$

(34,406)

$

4,626,243

$

(4,009,511)

$

1,537,697

Net income

 

 

 

 

185,656

 

 

185,656

Other comprehensive income

 

 

 

528

 

 

 

528

Issuance of 9,000 shares under equity plans

1,067

1,067

Purchase of 734,467 shares of treasury stock

 

 

 

 

 

(112,207)

 

(112,207)

Cash dividends declared:

 

  

 

  

 

  

 

  

 

  

 

Common stock, $0.15 per share

 

 

 

 

(3,162)

 

 

(3,162)

Balance, July 31, 2021

$

1,240

$

955,198

$

(33,878)

$

4,808,737

$

(4,121,718)

$

1,609,579

Six Months Ended July 30, 2022

    

    

    

Accumulated

    

    

    

Additional

Other

Common

Paid-in

Comprehensive

Retained

Treasury

Stock

Capital

Loss

Earnings

Stock

Total

Balance, January 29, 2022

$

1,240

$

956,653

$

(22,798)

$

5,027,922

$

(4,511,799)

$

1,451,218

Net income

 

 

 

 

414,542

 

 

414,542

Other comprehensive income

 

 

 

363

 

 

 

363

Issuance of 9,000 shares under equity plans

 

 

2,321

 

 

 

 

2,321

Purchase of 1,609,935 shares of treasury stock

 

 

 

 

 

(412,310)

 

(412,310)

Cash dividends declared:

 

  

 

  

 

  

 

  

 

  

 

  

Common stock, $0.40 per share

 

 

 

 

(7,133)

 

 

(7,133)

Balance, July 30, 2022

$

1,240

$

958,974

$

(22,435)

$

5,435,331

$

(4,924,109)

$

1,449,001

6

Six Months Ended July 31, 2021

    

    

    

Accumulated 

    

    

    

Additional 

Other 

Common 

Paid-in 

Comprehensive

Retained 

Treasury 

Stock

Capital

 Loss

Earnings

Stock

Total

Balance, January 30, 2021

$

1,240

$

954,131

$

(34,935)

$

4,471,269

$

(3,950,697)

$

1,441,008

Net income

 

 

 

 

343,903

 

 

343,903

Other comprehensive income

 

 

 

1,057

 

 

 

1,057

Issuance of 9,000 shares under equity plans

 

 

1,067

 

 

 

 

1,067

Purchase of 1,359,360 shares of treasury stock

 

 

 

 

 

(171,021)

 

(171,021)

Cash dividends declared:

 

  

 

  

 

  

 

  

 

  

 

  

Common stock, $0.30 per share

 

 

 

 

(6,435)

 

 

(6,435)

Balance, July 31, 2021

$

1,240

$

955,198

$

(33,878)

$

4,808,737

$

(4,121,718)

$

1,609,579

See notes to condensed consolidated financial statements.

7

DILLARD’S, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In Thousands)

    

Six Months Ended

July 30,

    

July 31,

2022

2021

Operating activities:

 

  

 

  

Net income

$

414,542

$

343,903

Adjustments to reconcile net income to net cash provided by operating activities:

 

  

 

  

Depreciation and amortization of property and other deferred cost

 

94,922

 

97,695

Gain on disposal of assets

 

(7,238)

 

(24,682)

Proceeds from insurance

 

 

2,254

Loss on early extinguishment of debt

 

 

2,830

Accrued interest on short-term investments

(37)

Changes in operating assets and liabilities:

 

  

 

  

Decrease in accounts receivable

 

3,381

 

2,248

Increase in merchandise inventories

 

(113,265)

 

(25,052)

Increase in other current assets

 

(18,240)

 

(10,878)

Increase in other assets

 

(185)

 

(1,107)

(Decrease) increase in trade accounts payable and accrued expenses and other liabilities

 

(40,089)

 

111,622

Decrease in income taxes

 

(54,741)

 

(6,532)

Net cash provided by operating activities

 

279,050

 

492,301

Investing activities:

 

  

 

  

Purchase of property and equipment and capitalized software

 

(61,093)

 

(41,205)

Proceeds from disposal of assets

 

8,091

 

29,285

Proceeds from insurance

 

4,773

 

2,819

Purchase of short-term investments

(24,657)

Net cash used in investing activities

 

(72,886)

 

(9,101)

Financing activities:

 

  

 

  

Principal payments on long-term debt and finance lease liabilities

 

 

(339)

Issuance cost of line of credit

 

 

(2,972)

Cash dividends paid

 

(7,524)

 

(6,573)

Purchase of treasury stock

 

(422,543)

 

(164,181)

Net cash used in financing activities

 

(430,067)

 

(174,065)

(Decrease) increase in cash and cash equivalents

 

(223,903)

 

309,135

Cash and cash equivalents, beginning of period

 

716,759

 

360,339

Cash and cash equivalents, end of period

$

492,856

$

669,474

Non-cash transactions:

 

  

 

  

Accrued capital expenditures

$

9,818

$

14,496

Stock awards

 

2,321

 

1,067

Accrued purchase of treasury stock

6,000

6,840

Accrued purchase of short-term investments

49,312

Lease assets obtained in exchange for new operating lease liabilities

 

567

 

3,815

See notes to condensed consolidated financial statements.

8

DILLARD’S, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements of Dillard’s, Inc. (the “Company”) have been prepared in accordance with the rules of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended July 30, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending January 28, 2023 due to, among other factors, the seasonal nature of the business.

These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 29, 2022 filed with the SEC on March 29, 2022.

At July 30, 2022, the Company is presenting short-term investments on its condensed consolidated balance sheet. Short-term investments are securities with original maturities of greater than three months but less than twelve months and are comprised of U.S. Treasury Bills. The Company determines the classification of these securities as trading, available for sale or held to maturity at the time of purchase and re-evaluates these determinations at each balance sheet date. Our short-term investments are classified as held-to-maturity for the period presented as we have the positive intent and ability to hold these investments to maturity. Our held-to-maturity investments are stated at amortized cost, which approximated fair value, and are periodically assessed for other-than-temporary impairment.

Note 2. Accounting Standards

Recently Issued Accounting Pronouncements

Management believes there is no accounting guidance issued but not yet effective that would be relevant to the Company’s current financial statements.

Note 3. Business Segments

The Company operates in two reportable segments: the operation of retail department stores (“retail operations”) and a general contracting construction company (“construction”).

For the Company’s retail operations, 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.

9

The following table summarizes the percentage of net sales by segment and major product line:

    

Three Months Ended

    

Six Months Ended

 

July 30,

July 31,

July 30,

July 31,

2022

    

2021

2022

    

2021

 

Retail operations segment

  

  

  

  

 

Cosmetics

 

14

%  

13

%

13

%  

14

%

Ladies’ apparel

 

23

 

24

 

23

 

23

Ladies’ accessories and lingerie

 

15

 

15

 

14

 

15

Juniors’ and children’s apparel

 

8

 

9

 

10

 

10

Men’s apparel and accessories

 

21

 

20

 

20

 

19

Shoes

 

14

 

14

 

15

 

14

Home and furniture

 

3

 

3

 

3

 

3

 

98

 

98

 

98

 

98

Construction segment

 

2

 

2

 

2

 

2

Total

 

100

%  

100

%

100

%  

100

%

The following tables summarize certain segment information, including the reconciliation of those items to the Company’s consolidated operations:

    

Retail 

    

    

(in thousands of dollars)

Operations

Construction

Consolidated

Three Months Ended July 30, 2022

 

  

 

  

 

  

Net sales from external customers

$

1,552,658

$

35,962

$

1,588,620

Gross margin

 

644,921

 

2,482

 

647,403

Depreciation and amortization

 

47,863

 

56

 

47,919

Interest and debt expense (income), net

 

9,601

 

(12)

 

9,589

Income before income taxes

 

209,960

 

619

 

210,579

Total assets

 

3,174,436

 

47,167

 

3,221,603

Three Months Ended July 31, 2021

 

  

 

  

 

  

Net sales from external customers

$

1,539,396

$

30,982

$

1,570,378

Gross margin

 

641,240

 

1,928

 

643,168

Depreciation and amortization

 

49,981

 

62

 

50,043

Interest and debt expense (income), net

 

10,782

 

(11)

 

10,771

Income before income taxes

 

239,790

 

526

 

240,316

Total assets

 

3,339,862

 

43,647

 

3,383,509

Six Months Ended July 30, 2022

 

  

 

  

 

  

Net sales from external customers

$

3,133,457

$

66,831

$

3,200,288

Gross margin

 

1,393,365

 

4,269

 

1,397,634

Depreciation and amortization

 

94,014

 

114

 

94,128

Interest and debt expense (income), net

 

20,170

 

(19)

 

20,151

Income before income taxes

 

534,102

 

500

 

534,602

Total assets

 

3,174,436

 

47,167

 

3,221,603

Six Months Ended July 31, 2021

 

  

 

  

 

  

Net sales from external customers

$

2,836,132

$

62,789

$

2,898,921

Gross margin

 

1,194,241

 

3,381

 

1,197,622

Depreciation and amortization

 

96,319

 

132

 

96,451

Interest and debt expense (income), net

 

22,332

 

(26)

 

22,306

Income before income taxes

 

442,988

 

815

 

443,803

Total assets

 

3,339,862

 

43,647

 

3,383,509

10

Intersegment construction revenues of $11.6 million and $12.3 million for the three months ended July 30, 2022 and July 31, 2021, respectively, and $21.6 and $16.6 million for the six months July 30, 2022 and July 31, 2021, respectively, were eliminated during consolidation and have been excluded from net sales for the respective periods.

The retail operations segment gives rise to contract liabilities through the customer loyalty program associated with Dillard’s private label cards 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 condensed consolidated balance sheets. Our retail operations segment contract liabilities are as follows:

Retail

July 30,

January 29,

July 31,

January 30,

(in thousands of dollars)

    

2022

    

2022

    

2021

    

2021

Contract liabilities

$

68,543

$

80,421

$

59,713

$

68,021

During the six months ended July 30, 2022 and July 31, 2021, the Company recorded $37.4 million and $28.8 million, respectively, in revenue that was previously included in the retail operations contract liability balances of $80.4 million and $68.0 million at January 29, 2022 and January 30, 2021, respectively.

Construction contracts give rise to accounts receivable, contract assets and contract liabilities. We record accounts receivable based on amounts expected to be collected from 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 condensed consolidated balance sheets, respectively. The amounts included in the condensed consolidated balance sheets are as follows:

Construction

    

    

    

    

July 30,

January 29,

July 31,

January 30,

(in thousands of dollars)

2022

2022

2021

2021

Accounts receivable

$

26,229

$

25,912

$

23,374

$

25,094

Costs and estimated earnings in excess of billings on uncompleted contracts

 

4,036

 

2,847

 

1,426

 

450

Billings in excess of costs and estimated earnings on uncompleted contracts