Dillard's - 10-Q quarterly report FY

PART 1. FINANCIAL INFORMATION

ITEM 1. Financial Statements

DILLARD'S, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Amounts in Thousands)

May 5, February 3, April 29,
2001 2001 2000
-------------------------------------------------
Assets (Restated)
Current Assets:
Cash and cash equivalents $ 260,105 $ 193,980 $ 246,277
Accounts receivable, net 882,616 979,241 997,403
Merchandise inventories 2,126,225 1,616,186 2,260,537
Other current assets 35,968 53,541 61,875
-------------------------------------------------
Total current assets 3,304,914 2,842,948 3,566,092
Property and Equipment, net 3,492,298 3,508,331 3,598,622
Goodwill, net 581,248 585,149 606,216
Other Assets 271,029 262,881 273,596
-------------------------------------------------
Total Assets $ 7,649,489 $ 7,199,309 $ 8,044,526
=================================================
Liabilities and Stockholders' Equity
Current Liabilities:
Trade accounts payable and accrued expenses $ 1,140,823 $ 647,843 $ 1,059,091
Federal and state income taxes 5,940 17,573 27,715
Current portion of long-term debt 208,262 208,918 108,049
Current portion of capital lease obligations 2,336 2,363 2,522
-------------------------------------------------
Total current liabilities 1,357,361 876,697 1,197,377
Long-term Debt 2,333,405 2,374,124 2,892,682
Capital Lease Obligations 21,927 22,453 24,081
Other liabilities 129,061 125,988 121,541
Deferred Income Taxes 638,604 638,648 604,223
Guaranteed Preferred Beneficial Interests in the
Company's Subordinated Debentures 531,579 531,579 531,579
Stockholders' Equity:
Common stock 1,156 1,156 1,155
Additional paid-in capital 696,412 696,879 695,507
Retained earnings 2,584,600 2,558,933 2,501,255
Less treasury stock (644,616) (627,148) (524,874)
-------------------------------------------------
Total stockholders' equity 2,637,552 2,629,820 2,673,043
-------------------------------------------------
Total Liabilities and Stockholders' Equity $ 7,649,489 $ 7,199,309 $ 8,044,526
=================================================
See notes to consolidated financial statements.

DILLARD'S, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(Unaudited)
(Amounts in Thousands, Except Per Share Data)

Three Months Ended Twelve Months Ended
------------------------------ ----------------------------
May 5, April 29, May 5, April 29,
2001 2000 2001 2000
------------- --------------- -------------- --------------
(Restated) (Restated)
Net Sales $1,920,309 $2,082,577 $8,404,292 $8,639,219
Service Charges, Interest and Other 57,276 63,171 245,330 242,829
------------- --------------- -------------- --------------
1,977,585 2,145,748 8,649,622 8,882,048
Costs and Expenses:
Cost of sales 1,253,007 1,369,195 5,685,959 5,738,908
Advertising, selling, administrative
and general expenses 541,531 536,359 2,224,990 2,204,343
Depreciation and amortization 77,195 75,976 304,417 295,660
Rentals 15,798 16,106 75,735 75,494
Interest and debt expense 48,185 58,726 213,782 232,575
Impairment charges - - 51,396 69,708
------------- --------------- -------------- --------------
1,935,716 2,056,362 8,556,279 8,616,688
------------- --------------- -------------- --------------
Income Before Income Taxes 41,869 89,386 93,343 265,360
Income Taxes 16,035 33,965 26,100 113,155
------------- --------------- -------------- --------------
Income Before Extraordinary Item
and Accounting Change 25,834 55,421 67,243 152,205
Extraordinary gain on the extinguishment
of debt, net of income taxes 3,159 - 30,470 -
Cumulative effect of accounting change, net of income taxes - (129,991) - (129,991)
------------- --------------- -------------- --------------
Net Income (loss) 28,993 (74,570) 97,713 22,214
Retained Earnings at Beginning
of the Period 2,558,933 2,579,567 2,501,254 2,495,461
------------- --------------- -------------- --------------
2,587,926 2,504,997 2,598,967 2,517,675
Cash Dividends Declared (3,326) (3,742) (14,367) (16,420)
------------- --------------- -------------- --------------
Retained Earnings at End of Period $2,584,600 $2,501,255 $ 2,584,600 $2,501,255
============= =============== ============== ==============
Basic and Diluted Earnings per share:
Income Before Extraordinary Item and Accounting Change $0.30 $ 0.58 $0.76 $1.48
Extraordinary Gain 0.04 - 0.34 -
Cumulative Effect of Accounting Change - (1.36) - (1.26)
------------- --------------- -------------- --------------
Net Income (loss) $0.34 $(0.78) $1.10 $0.22
============= =============== ============== ==============
Cash Dividends Declared Per
Common Share $0.04 $0.04 $0.16 $0.16
See notes to consolidated financial statements.

DILLARD'S, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in Thousands)

Three Months Ended
--------------------------------
May 5, April 29,
2001 2000
-------------- ---------------
(Restated)
Operating Activities:
Net income (loss) $ 28,993 $ (74,570)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 77,891 76,701
Extraordinary gain on extinguishment of debt, net of taxes (3,159) -
Cumulative effect of accounting change - 129,991
Changes in operating assets and liabilities:
Decrease in trade accounts receivable, net 96,625 107,522
Increase in merchandise inventories and other current assets (492,466) (405,444)
Increase in other assets (8,845) (9,213)
Increase in trade accounts payable and accrued expenses,
other liabilities and income taxes 482,134 361,738
-------------- ---------------
Net cash provided by operating activities 181,173 186,725
Investing Activities:
Purchases of property and equipment (57,260) (51,443)
-------------- ---------------
Net cash used in investing activities (57,260) (51,443)
Financing Activities:
Principal payments on long-term debt and capital lease obligations (36,994) (2,504)
Cash dividends paid (3,326) (3,743)
Purchase of treasury stock (17,468) (81,479)
-------------- ---------------
Net cash used in financing activities (57,788) (87,726)
Increase in Cash and Cash Equivalents 66,125 47,556
Cash and Cash Equivalents, Beginning of Period 193,980 198,721
-------------- ---------------
Cash and Cash Equivalents, End of Period $ 260,105 $ 246,277
============== ===============
See notes to consolidated financial statements.

DILLARD'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
May 5, 2001

Note 1. Basis of Presentation

The accompanying unaudited consolidated financial statements of Dillard's, Inc. (the "Company") have been
prepared in accordance with accounting principles generally accepted in the United States for interim
financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required by accounting principles
generally accepted in the United States for complete financial statements. In accordance with Emerging
Issues Task Force ("EITF") Issue 00-10, "Accounting for Shipping and Handling Fees and Costs," the
Company has reclassified shipping and handling reimbursements to Other Income for all periods. Certain
prior period balances have been reclassified to conform with current period presentation. 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 twelve month periods ended May 5,
2001 are not necessarily indicative of the results that may be expected for the fiscal year ending
February 2, 2002 due to the seasonal nature of the business. For further information, refer to the
consolidated financial statements and footnotes thereto included in the Company's annual report on Form
10-K for the fiscal year ended February 3, 2001.

Note 2. Earnings Per Share Data

The following table sets forth the computation of basic and diluted earnings per share ("EPS") for the
periods indicated (in thousands, except per share data).

Three Months Ended Twelve Months Ended
May 5, April 29, May 5, April 29,
2001 2000 2001 2000
------------------------ ------------------------

Basic:

Earnings before extraordinary item and accounting change $25,834 $ 55,421 $67,243 $152,205
Extraordinary gain 3,159 - 30,470 -
Cumulative effect of accounting change - (129,991) - (129,991)
------------------------ ------------------------
Net Income (loss) 28,993 (74,570) 97,713 22,214
======================== ========================
Net earnings (loss) available for
per-share calculations $28,993 $ (74,570) $97,713 $ 22,214
======================== ========================
Average shares of common stock outstanding 84,834 95,648 88,468 102,646
======================== ========================
Per Share of Common Stock
Earnings before extraordinary item and accounting change $ .30 $ .58 $ .76 $ 1.48
Extraordinary gain .04 - .34 -
Cumulative effect of accounting change - (1.36) - (1.26)
------------------------ ------------------------
Net Income (loss) $ .34 $ (.78) $ 1.10 $ .22
======================== ========================
Three Months Ended Twelve Months Ended
May 5, April 29, May 5, April 29,
2001 2000 2001 2000
----------------------- ------------------------

Diluted:

Earnings before extraordinary item and accounting change $25,834 $ 55,421 $67,243 $ 152,205
Extraordinary gain 3,159 - 30,470 -
Cumulative effect of accounting change - (129,991) - (129,991)
----------------------- ------------------------
Net Income (loss) 28,993 (74,570) 97,713 22,214
======================= ========================
Net earnings (loss) available for
per-share calculations $28,993 $(74,570) $97,713 $22,214
======================= ========================
Average shares of common stock outstanding 85,444 95,648 88,648 102,788
======================= ========================
Per Share of Common Stock
Earnings before extraordinary item and accounting change $ .30 $ .58 $ .76 $ 1.48
Extraordinary gain .04 - .34 -
Cumulative effect of accounting change - (1.36) - (1.26)
----------------------- ------------------------
Net Income (loss) $ .34 $ ( .78) $ 1.10 $ .22
======================= ========================

Options to purchase 6,961,233 and 10,052,189 shares of Class A common stock at prices ranging from $18.13
to $40.22 per share were outstanding at May 5, 2001and April 29, 2000, respectively, but were not
included in the computation of diluted earnings per share because they would be antidilutive.

Note 3. Common Stock and Note Repurchase

During the quarter ended May 5, 2001, the Company repurchased approximately $17.5 million of Class A
Common Stock, representing approximately 1,040,000 shares at an average price of $16.78 per share.
During the quarter ended May 5, 2001, the Company repurchased $30.9 million of its outstanding unsecured
notes prior to their related maturity dates. Interest rates on the repurchased securities ranged from
6.4% to 8.2%. Maturity dates ranged from 2003 to 2023. In connection with these transactions, the
Company recorded after tax extraordinary gains during the quarter ended May 5, 2001 of $3.2 million (net
of income taxes of $1.7 million).

Note 4. Derivative Instruments

During the first quarter of fiscal 2001, the Company adopted Statements of Financial Accounting Standards
No. 133 and 138, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133 and SFAS 138).
SFAS 133 established accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities requiring all companies to
recognize derivatives as either assets or liabilities in the statement of financial position and measure
those instruments at fair value. SFAS 138 is an amendment to SFAS 133, which modified certain issues
discussed in SFAS 133. Implementation of SFAS 133 and SFAS 138 did not have a material impact on the
Company's statement of financial position, results of operations or cash flows.

Note 5. Accounting Change

Effective the beginning of fiscal 2000, the Company changed its method of accounting for inventories under the
retail inventory method. The change principally relates to the Company's accounting for allowances received from
vendors, from recording such allowances directly as a reduction to cost of sales to recording such allowances as a
reduction to inventoriable product cost. The cumulative effect of this accounting change reduced net income by
$130 million after taxes (of $73.1 million) or $1.36 per share for the quarter ended April 29, 2000. Financial
statements for the quarter ended April 29, 2000 have been restated to reflect this change in accordance with
Statement of Financial Accounting Standards No. 3 "Reporting Accounting Changes in Interim Financial Statements".

ITEM 2. Management's Discussion And Analysis Of Financial
Condition And Results Of Operations

Results of Operations

The following table sets forth the results of operations, expressed as a percentage of net sales, for the periods
indicated:
Three Months Ended Twelve Months Ended
May 5, April 29, May 5, April 29,
2001 2000 2001 2000
----------- ------------ ----------- -----------
Net sales 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales 65.2 65.7 67.7 66.4
----------- ------------ ----------- -----------
Gross profit 34.8 34.3 32.3 33.6
Advertising, selling, administrative
and general expenses 28.2 25.8 26.5 25.5
Depreciation and amortization 4.0 3.6 3.6 3.4
Rentals 0.9 0.8 0.9 0.9
Interest and debt expense 2.5 2.8 2.5 2.7
Impairment charges - - 0.6 0.8
----------- ------------ ----------- -----------
Total operating expenses 35.6 33.0 34.1 33.3
Service charges, interest and other 3.0 3.0 2.9 2.8
----------- ------------ ----------- -----------
Income before income taxes 2.2 4.3 1.1 3.1
Income taxes 0.9 1.6 0.3 1.3
----------- ------------ ----------- -----------
Income before extraordinary item
and accounting change 2.7 0.8 1.8
1.3
Extraordinary gain 0.2 - 0.4 -
Cumulative effect of accounting change - (6.3) - (1.5)
----------- ------------ ----------- -----------
Net income (loss) 1.5 % (3.6) % 1.2 % 0.3 %
=========== ============ =========== ===========

Net Sales

Net sales decreased 8% on both a total and comparable store basis for the three month period ended May 5, 2001,
compared to the three month period ended April 29, 2000. Sales declined in all merchandising categories with the
weakest performing categories being children's clothing, men's clothing and home sales which all declined 11%.
Net sales decreased 3% for the twelve month period ended May 5, 2001 compared to the same period in 2000. These
decreases were primarily due to decreases in comparable store sales.

Cost of Sales

Cost of sales, as a percent of net sales, was 65.2%% and 67.7% for the three and twelve month periods ended May 5,
2001 compared to 65.7% and 66.4% for the three and twelve month periods ended April 29, 2000. The reduction of 50
basis points in cost of sales for the three months ended May 5, 2001, is attributable to recent inventory
reduction measures and the ongoing execution of key merchandising initiatives including greater emphasis on
private brand merchandise.
Comparable store inventories decreased 6% over last year's first quarter levels.

Advertising, Selling, Administrative and General Expenses

Advertising, selling, administrative and general expenses ("SG&A expenses"), as a percentage of net sales, were
28.2% and 26.5% for the three and twelve month periods ended May 5, 2001 compared to 25.8% and 25.5% for the
comparable 2000 periods.
The increase in SG&A expenses, as a percent of net sales, is attributable to higher advertising and insurance
costs as well as lower than planned sales that negatively impacted the Company's leverage of fixed SGamp;A expenses.

Depreciation and Amortization Expense

Depreciation and amortization expense increased $1.2 million and $8.7 million for the three and twelve month
periods ended May 5, 2001 compared to similar periods in 2000, due primarily to new asset additions.

Rentals

Rental expense, as a percent of net sales, remained relatively flat for the three and twelve month periods ended
May 5, 2001 at .9% and .9%, respectively, compared to .8% and .9%, respectively, for the three and twelve month
periods ended April 29, 2000.

Interest and Debt Expense

Interest and debt expense for the three months ended May 5, 2001 decreased to $48.2 million or 2.5% of net sales
compared to $58.7 million or 2.8% of net sales for the three months ended April 29, 2000. This reduction is due
primarily to a decrease of approximately $440 million in the average amount of outstanding debt in the first
quarter of 2001 compared to the first quarter of 2000 and to a reduction in short term interest rates from last
year's first quarter.
Interest and debt expense, as a percent of net sales, was 2.5% in the twelve month period ended May 5, 2001,
compared to 2.7% in the similar period in 2000.

Service Charges, Interest and Other Income

Service charges, interest and other income for the three months ended May 5, 2001decreased to $57.3 million or
3.0% of net sales compared to $63.2 million or 3.0% of net sales for the three months ended April 29, 2000. This
decrease is due to a $120 million decrease in the average amount of outstanding accounts receivable in the first
quarter of 2001 compared to the first quarter of 2000.

Income Taxes

The actual federal and state income tax rates for the three month period ended May 5, 2001 and April 29, 2000 was
36% and 37%, exclusive of the nondeductible goodwill amortization. The Company's actual federal and state income
tax rate (exclusive of the effect of nondeductible goodwill amortization) was reduced from 37% in fiscal 1999 to
36% in fiscal 2000. The effect of these reduced rates on the Company's deferred income taxes was to reduce the
income tax provision by $16 million for the twelve month period ended May 5, 2001.

Accounting Change

Effective the beginning of fiscal 2000, the Company changed its method of accounting for inventories under the
retail inventory method. The change principally relates to the Company's accounting for allowances received from
vendors, from recording such allowances directly as a reduction to cost of sales to recording such allowances as a
reduction to inventoriable product cost. The cumulative effect of this accounting change reduced net income by
$130 million after taxes (of $73.1 million) or $1.36 per share for the quarter ended April 29, 2000. Financial
statements for the quarter ended April 29, 2000 have been restated to reflect this change in accordance with
Statement of Financial Accounting Standards No. 3 "Reporting Accounting Changes in Interim Financial Statements".

Financial Condition

Cash provided by operating activities totaled $181.2 million and $186.7 million for the three months ended May 5,
2001 and April 29, 2000, respectively.
The Company invested $57.3 million in capital expenditures for the three months ended May 5, 2001 compared to
$51.4 million for the three months ended April 29, 2000.
During the three months ended May 5 2001, the Company opened two new stores, the Valley Hills Mall in Hickory,
North Carolina and the Westfield Shopping Town Independence in Wilmington, North Carolina. The Company
anticipates opening an additional five new stores in 2001, resulting in an addition of approximately 1.08 million
square feet of retail space. In addition, the Company is embarking on major expansions at three additional stores
totaling 202,000 square feet. During the quarter ended May 5, 2001, the Company purchased four ZCMI stores
totaling 349,000 square feet and acquired eight former Montgomery Ward store locations.
Cash used in financing activities for the three months ended May 5, 2001 totaled $57.8 million compared to $87.7
million for the three months ended April 29, 2000. During the three months ended May 5, 2001 and April 29, 2000,
the Company reduced its level of outstanding debt by $41.4 million and $2.5 million, respectively.
During the three months ended May 5, 2001, the Company has repurchased approximately 1.0 million Class A Common
Shares for approximately $17.5 million under its existing $200 million share repurchase authorization.
Management of the Company believes that cash generated from operations will be sufficient to cover its reasonably
foreseeable working capital, capital expenditure, stock repurchase and debt service requirements. Depending on
conditions in the capital markets and other factors, the Company will from time to time consider the issuance of
debt or other securities, or other possible capital market transactions, the proceeds of which could be used to
refinance current indebtedness or for other corporate purposes.

New Accounting Standards

In June 1998, Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and
Hedging Activities" ("SFAS 133") was issued. In June 2000, Statement of Financial Accounting Standards No. 138,
"Accounting for Certain Derivative Instruments and Hedging Activities, an Amendment of FASB Statement No. 133"
("SFAS 138") was issued. SFAS 133 and SFAS 138 address the accounting for derivative instruments, including
certain derivative instruments embedded in other contracts, and hedging activities. The Company adopted SFAS 133
and SFAS 138 in the first quarter of 2001. The adoption of SFAS 133 and SFAS 138 did not have a material effect
on the financial position or results of operations.

Forward-Looking Information

Statements in the Management's Discussion and Analysis of Financial Condition and Results of Operations include
certain "forward-looking statements", including (without limitation) statements with respect to anticipated future
operating and financial performance, growth and acquisition opportunities and other similar forecasts and
statements of expectation. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks,"
"estimates," and "should" and variations of these words and similar expressions, are intended to identify these
forward-looking statements. The Company cautions that forward-looking statements, as such term is defined in the
Private Securities Litigation Reform Act of 1995, contained in this quarterly report on Form 10-Q or made by
management 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. Representative examples of those factors (without limitation) include
general industry and 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; changes in
consumer spending patterns and debt levels; trends in personal bankruptcies; the impact of competitive market
factors and other economic and demographic changes of similar or dissimilar nature; changes in operating expenses,
including employee wages, commissions structures and related benefits; the continued availability of financing in
amounts and at the terms necessary to support the Company's future business.

Item 3. Quantitative and Qualitative Disclosure About Market Risk.

During the three months ended May 5, 2001, the Company repurchased $30.9 million of its outstanding unsecured
notes prior to their related maturity dates. Interest rates on the repurchased securities ranged from 6.4% to
8.2%. Maturity dates ranged from 2003 to 2023.

PART II OTHER INFORMATION

Item 1. Legal Proceedings

Item 2. Changes in Securities and Use of Proceeds

Item 3. Defaults Upon Senior Securities

Item 4. Submission of Matters to a Vote of Security Holders

Item 5. Other Information

Ratio of Earnings to Fixed Charges:
The Company has calculated the ratio of earnings to fixed charges pursuant to Item 503 of Regulation S-K of the
Securities and Exchange Act as follows:
Three Months Ended Fiscal Year Ended
- ---------------------------- ----------------------------------------------------------------------------
May 5, April 29, February 3, January 29, January 30, January 31, February 1,
2001 2000 2001* 2000 1999 1998 1997
- -------------- ------------ ------------- -------------- --------------- -------------- --------------
1.75 2.35 1.54 2.04 1.97 3.69 3.61
============== ============ ============= ============== =============== ============== ==============
* 53 week year.

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibit (12): Statement re: Computation of Earnings to Fixed Charges
(b) Reports of Form 8-K filed during the first quarter: Restatement of quarterly results for the year ended
February 3, 2001, dated March 21, 2001.

SIGNATURES

Pursuant to the requirements 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.
DILLARD'S Inc.
(Registrant)
Date: June 19, 2001 /s/ James I. Freeman
James I. Freeman
Senior Vice-President & Chief Financial Officer
(Principal Financial and Accounting Officer)