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 OctoberJuly 31, 20202021
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 | | (I.R.S. Employer |
of incorporation or organization) | | 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 SymbolSymbol(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.
ý 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).
ý 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 | ý☐ | | Accelerated filer | ☐ý |
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 ý 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 NovemberAugust 28, 2020 17,987,6592021 16,627,015
CLASS B COMMON STOCK as of NovemberAugust 28, 2020 4,010,2332021 3,986,233
Index
DILLARD’S, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
DILLARD’S, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In Thousands)
| | | October 31, 2020 | | February 1, 2020 | | November 2, 2019 | | July 31, 2021 | | January 30, 2021 | | August 1, 2020 |
| Assets | Assets | | | | | | | Assets | | | | | | |
Current assets: | Current assets: | | | | | | | Current assets: | | | | | | |
Cash and cash equivalents | Cash and cash equivalents | | $ | 61,124 | | | $ | 277,077 | | | $ | 79,065 | | Cash and cash equivalents | | $ | 669,474 | | | $ | 360,339 | | | $ | 82,868 | |
Restricted cash | | 0 | | | 0 | | | 8,467 | | |
| Accounts receivable | Accounts receivable | | 28,406 | | | 46,160 | | | 48,241 | | Accounts receivable | | 34,445 | | | 36,693 | | | 28,631 | |
Merchandise inventories | Merchandise inventories | | 1,545,264 | | | 1,465,007 | | | 1,969,980 | | Merchandise inventories | | 1,112,815 | | | 1,087,763 | | | 1,283,141 | |
Federal and state income taxes | Federal and state income taxes | | 126,973 | | | 0 | | | 0 | | Federal and state income taxes | | 122,807 | | | 118,439 | | | 85,658 | |
Other current assets | Other current assets | | 65,631 | | | 59,838 | | | 74,231 | | Other current assets | | 66,275 | | | 58,706 | | | 65,758 | |
| Total current assets | Total current assets | | 1,827,398 | | | 1,848,082 | | | 2,179,984 | | Total current assets | | 2,005,816 | | | 1,661,940 | | | 1,546,056 | |
| Property and equipment (net of accumulated depreciation and amortization of $2,471,565, $2,336,728 and $2,358,469, respectively) | | 1,348,799 | | | 1,458,176 | | | 1,494,454 | | |
Property and equipment (net of accumulated depreciation and amortization of $2,537,137, $2,466,000 and $2,434,355, respectively) | | Property and equipment (net of accumulated depreciation and amortization of $2,537,137, $2,466,000 and $2,434,355, respectively) | | 1,237,427 | | | 1,289,302 | | | 1,394,237 | |
Operating lease assets | Operating lease assets | | 40,471 | | | 47,924 | | | 48,600 | | Operating lease assets | | 44,098 | | | 47,612 | | | 44,091 | |
Deferred income taxes | Deferred income taxes | | 14,740 | | | 0 | | | 0 | | Deferred income taxes | | 26,792 | | | 23,453 | | | 23,289 | |
Other assets | Other assets | | 74,581 | | | 76,075 | | | 77,025 | | Other assets | | 69,376 | | | 70,208 | | | 75,563 | |
| Total assets | Total assets | | $ | 3,305,989 | | | $ | 3,430,257 | | | $ | 3,800,063 | | Total assets | | $ | 3,383,509 | | | $ | 3,092,515 | | | $ | 3,083,236 | |
| Liabilities and stockholders’ equity | Liabilities and stockholders’ equity | | | | | | | Liabilities and stockholders’ equity | | | | | | |
Current liabilities: | Current liabilities: | | | | | | | Current liabilities: | | | | | | |
Trade accounts payable and accrued expenses | Trade accounts payable and accrued expenses | | $ | 1,031,806 | | | $ | 892,789 | | | $ | 1,211,446 | | Trade accounts payable and accrued expenses | | $ | 881,543 | | | $ | 758,363 | | | $ | 586,865 | |
| Current portion of finance lease liabilities | Current portion of finance lease liabilities | | 849 | | | 1,219 | | | 1,148 | | Current portion of finance lease liabilities | | 356 | | | 695 | | | 986 | |
Current portion of operating lease liabilities | Current portion of operating lease liabilities | | 12,775 | | | 14,654 | | | 15,250 | | Current portion of operating lease liabilities | | 12,113 | | | 13,819 | | | 13,758 | |
Other short-term borrowings | Other short-term borrowings | | 15,000 | | | 0 | | | 98,600 | | Other short-term borrowings | | — | | | — | | | 229,600 | |
Federal and state income taxes | | 0 | | | 22,158 | | | 4,505 | | |
| | Total current liabilities | Total current liabilities | | 1,060,430 | | | 930,820 | | | 1,330,949 | | Total current liabilities | | 894,012 | | | 772,877 | | | 831,209 | |
| Long-term debt | Long-term debt | | 365,814 | | | 365,709 | | | 365,674 | | Long-term debt | | 365,918 | | | 365,849 | | | 365,779 | |
Finance lease liabilities | Finance lease liabilities | | 180 | | | 695 | | | 1,029 | | Finance lease liabilities | | — | | | — | | | 356 | |
Operating lease liabilities | Operating lease liabilities | | 27,412 | | | 32,683 | | | 32,958 | | Operating lease liabilities | | 31,467 | | | 33,392 | | | 30,051 | |
Other liabilities | Other liabilities | | 271,324 | | | 273,601 | | | 243,258 | | Other liabilities | | 282,533 | | | 279,389 | | | 284,527 | |
Deferred income taxes | | 0 | | | 3,490 | | | 13,812 | | |
| Subordinated debentures | Subordinated debentures | | 200,000 | | | 200,000 | | | 200,000 | | Subordinated debentures | | 200,000 | | | 200,000 | | | 200,000 | |
Commitments and contingencies | Commitments and contingencies | | Commitments and contingencies | | 0 | | 0 | | 0 |
Stockholders’ equity: | Stockholders’ equity: | | | | | | | Stockholders’ equity: | | | | | | |
Common stock | Common stock | | 1,240 | | | 1,239 | | | 1,239 | | Common stock | | 1,240 | | | 1,240 | | | 1,240 | |
Additional paid-in capital | Additional paid-in capital | | 952,522 | | | 951,726 | | | 949,846 | | Additional paid-in capital | | 955,198 | | | 954,131 | | | 952,522 | |
Accumulated other comprehensive loss | Accumulated other comprehensive loss | | (29,768) | | | (31,059) | | | (12,809) | | Accumulated other comprehensive loss | | (33,878) | | | (34,935) | | | (30,198) | |
Retained earnings | Retained earnings | | 4,407,532 | | | 4,556,494 | | | 4,492,511 | | Retained earnings | | 4,808,737 | | | 4,471,269 | | | 4,378,988 | |
Less treasury stock, at cost | Less treasury stock, at cost | | (3,950,697) | | | (3,855,141) | | | (3,818,404) | | Less treasury stock, at cost | | (4,121,718) | | | (3,950,697) | | | (3,931,238) | |
| Total stockholders’ equity | Total stockholders’ equity | | 1,380,829 | | | 1,623,259 | | | 1,612,383 | | Total stockholders’ equity | | 1,609,579 | | | 1,441,008 | | | 1,371,314 | |
| Total liabilities and stockholders’ equity | Total liabilities and stockholders’ equity | | $ | 3,305,989 | | | $ | 3,430,257 | | | $ | 3,800,063 | | Total liabilities and stockholders’ equity | | $ | 3,383,509 | | | $ | 3,092,515 | | | $ | 3,083,236 | |
See notes to condensed consolidated financial statements.
DILLARD’S, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In Thousands, Except Per Share Data)
| | | | Three Months Ended | | Nine Months Ended | | | Three Months Ended | | Six Months Ended |
| | | October 31, 2020 | | November 2, 2019 | | October 31, 2020 | | November 2, 2019 | | | July 31, 2021 | | August 1, 2020 | | July 31, 2021 | | August 1, 2020 |
| Net sales | Net sales | | $ | 1,024,899 | | | $ | 1,388,310 | | | $ | 2,730,598 | | | $ | 4,280,614 | | Net sales | | $ | 1,570,378 | | | $ | 919,044 | | | $ | 2,898,921 | | | $ | 1,705,699 | |
Service charges and other income | Service charges and other income | | 27,213 | | | 35,349 | | | 88,273 | | | 99,825 | | Service charges and other income | | 31,054 | | | 26,139 | | | 60,046 | | | 61,060 | |
| | | | 1,052,112 | | | 1,423,659 | | | 2,818,871 | | | 4,380,439 | | | | 1,601,432 | | | 945,183 | | | 2,958,967 | | | 1,766,759 | |
| Cost of sales | Cost of sales | | 658,684 | | | 926,782 | | | 1,987,000 | | | 2,886,563 | | Cost of sales | | 927,210 | | | 639,847 | | | 1,701,299 | | | 1,328,316 | |
Selling, general and administrative expenses | Selling, general and administrative expenses | | 318,218 | | | 418,149 | | | 875,726 | | | 1,232,434 | | Selling, general and administrative expenses | | 365,868 | | | 267,062 | | | 702,482 | | | 557,508 | |
Depreciation and amortization | Depreciation and amortization | | 53,377 | | | 56,143 | | | 155,229 | | | 162,890 | | Depreciation and amortization | | 50,043 | | | 50,951 | | | 96,451 | | | 101,852 | |
Rentals | Rentals | | 5,115 | | | 5,927 | | | 16,304 | | | 18,254 | | Rentals | | 5,099 | | | 5,639 | | | 10,210 | | | 11,189 | |
Interest and debt expense, net | Interest and debt expense, net | | 12,162 | | | 11,536 | | | 37,305 | | | 35,021 | | Interest and debt expense, net | | 10,771 | | | 12,873 | | | 22,306 | | | 25,143 | |
Other expense | Other expense | | 2,105 | | | 1,916 | | | 6,313 | | | 5,750 | | Other expense | | 2,134 | | | 2,104 | | | 7,098 | | | 4,208 | |
Loss (gain) on disposal of assets | | 2,221 | | | 304 | | | 2,235 | | | (11,996) | | |
(Gain) loss on disposal of assets | | (Gain) loss on disposal of assets | | (9) | | | 33 | | | (24,682) | | | 14 | |
| | Income (loss) before income taxes | Income (loss) before income taxes | | 230 | | | 2,902 | | | (261,241) | | | 51,523 | | Income (loss) before income taxes | | 240,316 | | | (33,326) | | | 443,803 | | | (261,471) | |
Income taxes (benefit) | Income taxes (benefit) | | (31,620) | | | (2,560) | | | (122,550) | | | 8,130 | | Income taxes (benefit) | | 54,660 | | | (24,760) | | | 99,900 | | | (90,930) | |
| | Net income (loss) | Net income (loss) | | $ | 31,850 | | | $ | 5,462 | | | $ | (138,691) | | | $ | 43,393 | | Net income (loss) | | $ | 185,656 | | | $ | (8,566) | | | $ | 343,903 | | | $ | (170,541) | |
| Earnings (loss) per share: | Earnings (loss) per share: | | | | | | | | | Earnings (loss) per share: | | | | | | | | |
Basic and diluted | Basic and diluted | | $ | 1.43 | | | $ | 0.22 | | | $ | (6.05) | | | $ | 1.69 | | Basic and diluted | | $ | 8.81 | | | $ | (0.37) | | | $ | 16.03 | | | $ | (7.33) | |
|
See notes to condensed consolidated financial statements.
DILLARD’S, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(In Thousands)
| | | | Three Months Ended | | Nine Months Ended | | | Three Months Ended | | Six Months Ended |
| | | October 31, 2020 | | November 2, 2019 | | October 31, 2020 | | November 2, 2019 | | | July 31, 2021 | | August 1, 2020 | | July 31, 2021 | | August 1, 2020 |
Net income (loss) | Net income (loss) | | $ | 31,850 | | | $ | 5,462 | | | $ | (138,691) | | | $ | 43,393 | | Net income (loss) | | $ | 185,656 | | | $ | (8,566) | | | $ | 343,903 | | | $ | (170,541) | |
Other comprehensive income: | Other comprehensive income: | | | | | | | | | Other comprehensive income: | | | | | | | | |
Amortization of retirement plan and other retiree benefit adjustments (net of tax of $138, $0, $414, and $0, respectively) | | 430 | | | 0 | | | 1,291 | | | 0 | | |
Amortization of retirement plan and other retiree benefit adjustments (net of tax of $169, $138, $337 and $276, respectively) | | Amortization of retirement plan and other retiree benefit adjustments (net of tax of $169, $138, $337 and $276, respectively) | | 528 | | | 430 | | | 1,057 | | | 861 | |
| Comprehensive income (loss) | Comprehensive income (loss) | | $ | 32,280 | | | $ | 5,462 | | | $ | (137,400) | | | $ | 43,393 | | Comprehensive income (loss) | | $ | 186,184 | | | $ | (8,136) | | | $ | 344,960 | | | $ | (169,680) | |
See notes to condensed consolidated financial statements.
DILLARD’S, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
(In Thousands, Except Share and Per Share Data)
| | | Three Months Ended October 31, 2020 | | Three Months Ended July 31, 2021 |
| | | | | | Accumulated Other Comprehensive Loss | | | | | | | | | | | | Accumulated Other Comprehensive Loss | | | | | | |
| | Common Stock | Additional Paid-in Capital | | Retained Earnings | | Treasury Stock | | | | Common Stock | Additional Paid-in Capital | | Retained Earnings | | Treasury Stock | | |
| | | | |
Balance, August 1, 2020 | $ | 1,240 | | | $ | 952,522 | | | $ | (30,198) | | | $ | 4,378,988 | | | $ | (3,931,238) | | | |
Balance, May 1, 2021 | | Balance, May 1, 2021 | $ | 1,240 | | | $ | 954,131 | | | $ | (34,406) | | | $ | 4,626,243 | | | $ | (4,009,511) | | |
Net income | Net income | — | | | — | | | — | | | 31,850 | | | — | | | 31,850 | | Net income | — | | | — | | | — | | | 185,656 | | | — | | | 185,656 | |
Other comprehensive income | Other comprehensive income | — | | | — | | | 430 | | | — | | | — | | | 430 | | Other comprehensive income | — | | | — | | | 528 | | | — | | | — | | | 528 | |
| Purchase of 645,284 shares of treasury stock | — | | | — | | | — | | | — | | | (19,459) | | | (19,459) | | |
Issuance of 9,000 shares under equity plans | | Issuance of 9,000 shares under equity plans | — | | | 1,067 | | | — | | | — | | | — | | | 1,067 | |
Purchase of 734,467 shares of treasury stock | | Purchase of 734,467 shares of treasury stock | — | | | — | | | — | | | — | | | (112,207) | | | (112,207) | |
Cash dividends declared: | Cash dividends declared: | | Cash dividends declared: | |
Common stock, $0.15 per share | Common stock, $0.15 per share | — | | | — | | | — | | | (3,306) | | | — | | | (3,306) | | Common stock, $0.15 per share | — | | | — | | | — | | | (3,162) | | | — | | | (3,162) | |
Balance, October 31, 2020 | $ | 1,240 | | | $ | 952,522 | | | $ | (29,768) | | | $ | 4,407,532 | | | $ | (3,950,697) | | | $ | 1,380,829 | | |
Balance, July 31, 2021 | | Balance, July 31, 2021 | $ | 1,240 | | | $ | 955,198 | | | $ | (33,878) | | | $ | 4,808,737 | | | $ | (4,121,718) | | | $ | 1,609,579 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended November 2, 2019 |
| | | | | Accumulated Other Comprehensive Loss | | | | | | |
| Common Stock | Additional Paid-in Capital | | Retained Earnings | | Treasury Stock | | |
| Total |
Balance, August 3, 2019 | $ | 1,239 | | | $ | 949,846 | | | $ | (12,809) | | | $ | 4,490,759 | | | $ | (3,783,191) | | | $ | 1,645,844 | |
Net income | — | | | — | | | — | | | 5,462�� | | | — | | | 5,462 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Purchase of 600,479 shares of treasury stock | — | | | — | | | — | | | — | | | (35,213) | | | (35,213) | |
Cash dividends declared: | | | | | | | | | | | |
Common stock, $0.15 per share | — | | | — | | | — | | | (3,710) | | | — | | | (3,710) | |
Balance, November 2, 2019 | $ | 1,239 | | | $ | 949,846 | | | $ | (12,809) | | | $ | 4,492,511 | | | $ | (3,818,404) | | | $ | 1,612,383 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended August 1, 2020 |
| | | | | Accumulated Other Comprehensive Loss | | | | | | |
| Common Stock | Additional Paid-in Capital | | Retained Earnings | | Treasury Stock | | |
| Total |
Balance, May 2, 2020 | $ | 1,239 | | | $ | 951,726 | | | $ | (30,628) | | | $ | 4,391,039 | | | $ | (3,916,970) | | | $ | 1,396,406 | |
Net loss | — | | | — | | | — | | | (8,566) | | | — | | | (8,566) | |
Other comprehensive income | — | | | — | | | 430 | | | — | | | — | | | 430 | |
Issuance of 32,000 shares under equity plans | 1 | | | 796 | | | — | | | — | | | — | | | 797 | |
Purchase of 586,851 shares of treasury stock | — | | | — | | | — | | | — | | | (14,268) | | | (14,268) | |
Cash dividends declared: | | | | | | | | | | | |
Common stock, $0.15 per share | — | | | — | | | — | | | (3,485) | | | — | | | (3,485) | |
Balance, August 1, 2020 | $ | 1,240 | | | $ | 952,522 | | | $ | (30,198) | | | $ | 4,378,988 | | | $ | (3,931,238) | | | $ | 1,371,314 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended October 31, 2020 |
| | | | | Accumulated Other Comprehensive Loss | | | | | | |
| Common Stock | Additional Paid-in Capital | | Retained Earnings | | Treasury Stock | | |
| Total |
Balance, February 1, 2020 | $ | 1,239 | | | $ | 951,726 | | | $ | (31,059) | | | $ | 4,556,494 | | | $ | (3,855,141) | | | $ | 1,623,259 | |
Net loss | — | | | — | | | — | | | (138,691) | | | — | | | (138,691) | |
Other comprehensive income | — | | | — | | | 1,291 | | | — | | | — | | | 1,291 | |
Issuance of 32,000 shares under equity plans | 1 | | | 796 | | | — | | | — | | | — | | | 797 | |
Purchase of 2,230,877 shares of treasury stock | — | | | — | | | — | | | — | | | (95,556) | | | (95,556) | |
Cash dividends declared: | | | | | | | | | | | |
Common stock, $0.45 per share | — | | | — | | | — | | | (10,271) | | | — | | | (10,271) | |
Balance, October 31, 2020 | $ | 1,240 | | | $ | 952,522 | | | $ | (29,768) | | | $ | 4,407,532 | | | $ | (3,950,697) | | | $ | 1,380,829 | |
| | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended July 31, 2021 |
| | | | | Accumulated Other Comprehensive Loss | | | | | | |
| Common Stock | Additional Paid-in Capital | | Retained Earnings | | Treasury 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 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended November 2, 2019 |
| | | | | Accumulated Other Comprehensive Loss | | | | | | |
| Common Stock | Additional Paid-in Capital | | Retained Earnings | | Treasury Stock | | |
| Total |
Balance, February 2, 2019 | $ | 1,239 | | | $ | 948,835 | | | $ | (12,809) | | | $ | 4,458,006 | | | $ | (3,716,890) | | | $ | 1,678,381 | |
Net income | — | | | — | | | — | | | 43,393 | | | — | | | 43,393 | |
| | | | | | | | | | | |
Issuance of 17,600 shares under equity plans | — | | | 1,011 | | | — | | | — | | | — | | | 1,011 | |
Purchase of 1,665,222 shares of treasury stock | — | | | — | | | — | | | — | | | (101,514) | | | (101,514) | |
Cash dividends declared: | | | | | | | | | | | |
Common stock, $0.35 per share | — | | | — | | | — | | | (8,888) | | | — | | | (8,888) | |
Balance, November 2, 2019 | $ | 1,239 | | | $ | 949,846 | | | $ | (12,809) | | | $ | 4,492,511 | | | $ | (3,818,404) | | | $ | 1,612,383 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended August 1, 2020 |
| | | | | Accumulated Other Comprehensive Loss | | | | | | |
| Common Stock | Additional Paid-in Capital | | Retained Earnings | | Treasury Stock | | |
| Total |
Balance, February 1, 2020 | $ | 1,239 | | | $ | 951,726 | | | $ | (31,059) | | | $ | 4,556,494 | | | $ | (3,855,141) | | | $ | 1,623,259 | |
Net loss | — | | | — | | | — | | | (170,541) | | | — | | | (170,541) | |
Other comprehensive income | — | | | — | | | 861 | | | — | | | — | | | 861 | |
Issuance of 32,000 shares under equity plans | 1 | | | 796 | | | — | | | — | | | — | | | 797 | |
Purchase of 1,585,593 shares of treasury stock | — | | | — | | | — | | | — | | | (76,097) | | | (76,097) | |
Cash dividends declared: | | | | | | | | | | | |
Common stock, $0.30 per share | — | | | — | | | — | | | (6,965) | | | — | | | (6,965) | |
Balance, August 1, 2020 | $ | 1,240 | | | $ | 952,522 | | | $ | (30,198) | | | $ | 4,378,988 | | | $ | (3,931,238) | | | $ | 1,371,314 | |
See notes to condensed consolidated financial statements.
DILLARD’S, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)
| | | | Nine Months Ended | | | Six Months Ended |
| | | October 31, 2020 | | November 2, 2019 | | | July 31, 2021 | | August 1, 2020 |
| Operating activities: | Operating activities: | | | | | Operating activities: | | | | |
Net (loss) income | | $ | (138,691) | | | $ | 43,393 | | |
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: | | | | | |
Net income (loss) | | Net income (loss) | | $ | 343,903 | | | $ | (170,541) | |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | | Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | | | | |
Depreciation and amortization of property and other deferred cost | Depreciation and amortization of property and other deferred cost | | 157,335 | | | 164,373 | | Depreciation and amortization of property and other deferred cost | | 97,695 | | | 103,140 | |
Loss (gain) on disposal of assets | | 2,235 | | | (11,996) | | |
(Gain) loss on disposal of assets | | (Gain) loss on disposal of assets | | (24,682) | | | 14 | |
Proceeds from insurance | Proceeds from insurance | | 8,659 | | | 397 | | Proceeds from insurance | | 2,254 | | | — | |
| Loss on early extinguishment of debt | | Loss on early extinguishment of debt | | 2,830 | | | — | |
| Changes in operating assets and liabilities: | Changes in operating assets and liabilities: | | | | | Changes in operating assets and liabilities: | | | | |
Decrease in accounts receivable | Decrease in accounts receivable | | 17,754 | | | 1,612 | | Decrease in accounts receivable | | 2,248 | | | 17,529 | |
Increase in merchandise inventories | | (80,257) | | | (441,563) | | |
(Increase) decrease in merchandise inventories | | (Increase) decrease in merchandise inventories | | (25,052) | | | 181,866 | |
Increase in other current assets | Increase in other current assets | | (13,680) | | | (2,015) | | Increase in other current assets | | (10,878) | | | (5,148) | |
Decrease (increase) in other assets | | 456 | | | (8,404) | | |
Increase in trade accounts payable and accrued expenses and other liabilities | | 145,745 | | | 286,322 | | |
Increase in other assets | | Increase in other assets | | (1,107) | | | (124) | |
Increase (decrease) in trade accounts payable and accrued expenses and other liabilities | | Increase (decrease) in trade accounts payable and accrued expenses and other liabilities | | 111,622 | | | (290,268) | |
Decrease in income taxes | Decrease in income taxes | | (162,494) | | | (9,135) | | Decrease in income taxes | | (6,532) | | | (130,977) | |
| Net cash (used in) provided by operating activities | | (62,938) | | | 22,984 | | |
Net cash provided by (used in) operating activities | | Net cash provided by (used in) operating activities | | 492,301 | | | (294,509) | |
| Investing activities: | Investing activities: | | | | | Investing activities: | | | | |
Purchases of property and equipment and capitalized software | | (52,100) | | | (70,915) | | |
Purchase of property and equipment and capitalized software | | Purchase of property and equipment and capitalized software | | (41,205) | | | (38,607) | |
Proceeds from disposal of assets | Proceeds from disposal of assets | | 1,533 | | | 22,031 | | Proceeds from disposal of assets | | 29,285 | | | 308 | |
| Proceeds from insurance | | Proceeds from insurance | | 2,819 | | | — | |
| Distribution from joint venture | Distribution from joint venture | | 215 | | | 1,350 | | Distribution from joint venture | | — | | | 215 | |
| | Net cash used in investing activities | Net cash used in investing activities | | (50,352) | | | (47,534) | | Net cash used in investing activities | | (9,101) | | | (38,084) | |
| Financing activities: | Financing activities: | | | | | Financing activities: | | | | |
Principal payments on long-term debt and finance lease liabilities | Principal payments on long-term debt and finance lease liabilities | | (885) | | | (703) | | Principal payments on long-term debt and finance lease liabilities | | (339) | | | (572) | |
Issuance cost of line of credit | Issuance cost of line of credit | | (3,230) | | | 0 | | Issuance cost of line of credit | | (2,972) | | | (3,001) | |
Increase in short-term borrowings | Increase in short-term borrowings | | 15,000 | | | 98,600 | | Increase in short-term borrowings | | — | | | 229,600 | |
Cash dividends paid | Cash dividends paid | | (10,669) | | | (7,810) | | Cash dividends paid | | (6,573) | | | (7,185) | |
Purchase of treasury stock | Purchase of treasury stock | | (102,879) | | | (101,514) | | Purchase of treasury stock | | (164,181) | | | (80,458) | |
| | Net cash used in financing activities | | (102,663) | | | (11,427) | | |
Net cash (used in) provided by financing activities | | Net cash (used in) provided by financing activities | | (174,065) | | | 138,384 | |
| Decrease in cash, cash equivalents and restricted cash | | (215,953) | | | (35,977) | | |
Cash, cash equivalents and restricted cash, beginning of period | | 277,077 | | | 123,509 | | |
Increase (decrease) in cash and cash equivalents | | Increase (decrease) in cash and cash equivalents | | 309,135 | | | (194,209) | |
Cash and cash equivalents, beginning of period | | Cash and cash equivalents, beginning of period | | 360,339 | | | 277,077 | |
| Cash, cash equivalents and restricted cash, end of period | | $ | 61,124 | | | $ | 87,532 | | |
Cash and cash equivalents, end of period | | Cash and cash equivalents, end of period | | $ | 669,474 | | | $ | 82,868 | |
| Non-cash transactions: | Non-cash transactions: | | | | | Non-cash transactions: | | | | |
Accrued capital expenditures | Accrued capital expenditures | | $ | 6,038 | | | $ | 9,573 | | Accrued capital expenditures | | $ | 14,496 | | | $ | 7,994 | |
| Accrued purchase of treasury stock | | Accrued purchase of treasury stock | | 6,840 | | | 2,962 | |
Stock awards | Stock awards | | 797 | | | 1,011 | | Stock awards | | 1,067 | | | 797 | |
| Lease assets obtained in exchange for new operating lease liabilities | Lease assets obtained in exchange for new operating lease liabilities | | 4,084 | | | 4,601 | | Lease assets obtained in exchange for new operating lease liabilities | | 3,815 | | | 4,084 | |
See notes to condensed consolidated financial statements.
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 ninesix months ended OctoberJuly 31, 20202021 are not necessarily indicative of the results that may be expected for the fiscal year ending January 30, 202129, 2022 due to, among other factors, the seasonal nature of the business and the ongoing effect of the COVID-19 pandemic.
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 February 1, 2020January 30, 2021 filed with the SEC on March 31, 2020.
Restricted Cash - Restricted cash consists of cash proceeds from the sale of property held in escrow for the acquisition of replacement property under like-kind exchange agreements. The escrow accounts are administered by an intermediary. Pursuant to the like-kind exchange agreements, the cash remains restricted for a maximum of 180 days from the date of the property sale pending the acquisition of replacement property.
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same such amounts shown in the condensed consolidated statements of cash flows.
| | | | | | | | | | | | | | |
(in thousands) | | October 31, 2020 | | November 2, 2019 |
Cash and cash equivalents | | $ | 61,124 | | | $ | 79,065 | |
Restricted cash | | 0 | | | 8,467 | |
Total cash, cash equivalents and restricted cash | | $ | 61,124 | | | $ | 87,532 | |
29, 2021.
COVID-19
In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic, which continues to spread throughoutimpact the United States and the world. global economies. The effects of the COVID-19 pandemic havehas had and may continue to have a significant impact on the Company's business, results of operations and financial position. 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, net sales and profitability may be further impacted if we are unable to appropriately manage our inventory levels and expenses.
The Company began closing stores on March 19, 2020 as mandated by state and local governments, and by April 9, 2020, all brick-and-mortar store locations were temporarily closed to the public. The Company began re-openingOur eCommerce capabilities allowed us to use our closed store locations (with limited staffing) to fill orders from our Internet store.
During the month ended May 30, 2020 (fiscal May), we re-opened most of our full-line stores, on May 5, 2020, and by June 2, 2020 all storesDillard's store locations had been re-opened using the Centers for Disease Control and Prevention ("CDC") guidelines to promotere-opened. Following our re-opening, a safe environment for our customers and employees. All stores are currently open and operating at reduced hours. A very small number of our locations were temporarily closed to in-store shopping due to government mandate. Other local mandates throughout the country require occupancy limits with which we are required to comply. We continue to monitor additional local government orders that may affect our operations.
As part of the Company's liquidity strategy during the COVID-19 pandemic, in March 2020, the Company borrowed $779 million under its revolving credit agreement, which was repaid concurrent with the execution of the amended credit agreement. At October 31, 2020, borrowings of $15.0 million were outstanding, and letters of credit totaling $21.1 million were issued under the amended credit agreement leaving unutilized availability under the facility of $763.9 million. See Note 7, Revolving Credit Agreement, for additional information.
We assessAll stores are currently open and are operating at reduced hours from fiscal 2019 operating hours. While the impairmentavailability of long-lived assets, primarily fixed assets and operating lease assets, whenever events or changes in circumstances indicate thatvaccinations has led to re-openings across the carrying value may not be recoverable. We evaluated the effects of the COVID-19 pandemic on our business and determined that as of October 31, 2020, the carrying values of our property and equipment and operating
lease assets were recoverable. Accordingly, no impairment charge was recorded for the nine months ended October 31, 2020. We will continue to monitor these factorscountry and the easing of restrictions, the continuing financial impact of the COVID-19 pandemic on future periods and continue to assess these assets for impairment as needed. fiscal 2021 cannot be reasonably estimated at this time.
Note 2. Accounting Standards
Recently IssuedAdopted Accounting Pronouncements
Simplifying the Accounting for Income Taxes
In December 2019, the FASB issued Accounting Standards Update ("ASU")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 does not expectadoption of this update todid not have a material impact on itsthe Company's consolidated financial statements.
Facilitation of the Effects of Reference Rate Reform
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform, which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions that reference the London Inter-Bank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. This guidance is optional for a limited period of time to ease the potential burden in accounting for, or recognizing the effects of, reference rate reform on financial reporting. More specifically, the amendments in ASU 2020-04 provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. This guidance is effective from March 12, 2020 through
December 31, 2022. Entities may elect to adopt the amendments for contract modifications as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. The adoption of this update did not have a material impact on the Company's consolidated financial statements.
Recently Issued Accounting Pronouncements
Management believes there is no other 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 2 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 1 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 1 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:
| | | | Three Months Ended | | Nine Months Ended | | | Three Months Ended | | Six Months Ended |
| | | October 31, 2020 | | November 2, 2019 | | October 31, 2020 | | November 2, 2019 | | | July 31, 2021 | | August 1, 2020 | | July 31, 2021 | | August 1, 2020 |
Retail operations segment | Retail operations segment | | | | | | | | | Retail operations segment | | | | | | | | |
Cosmetics | Cosmetics | | 14 | % | | 14 | % | | 14 | % | | 13 | % | Cosmetics | | 13 | % | | 14 | % | | 14 | % | | 14 | % |
Ladies’ apparel | Ladies’ apparel | | 20 | | | 23 | | | 21 | | | 24 | | Ladies’ apparel | | 24 | | | 21 | | | 23 | | | 21 | |
Ladies’ accessories and lingerie | Ladies’ accessories and lingerie | | 15 | | | 14 | | | 15 | | | 15 | | Ladies’ accessories and lingerie | | 15 | | | 16 | | | 15 | | | 16 | |
Juniors’ and children’s apparel | Juniors’ and children’s apparel | | 10 | | | 10 | | | 10 | | | 10 | | Juniors’ and children’s apparel | | 9 | | | 9 | | | 10 | | | 9 | |
Men’s apparel and accessories | Men’s apparel and accessories | | 18 | | | 17 | | | 18 | | | 17 | | Men’s apparel and accessories | | 20 | | | 20 | | | 19 | | | 18 | |
Shoes | Shoes | | 16 | | | 15 | | | 15 | | | 15 | | Shoes | | 14 | | | 13 | | | 14 | | | 14 | |
Home and furniture | Home and furniture | | 4 | | | 3 | | | 4 | | | 3 | | Home and furniture | | 3 | | | 4 | | | 3 | | | 4 | |
| | | 97 | | | 96 | | | 97 | | | 97 | | | | 98 | | | 97 | | | 98 | | | 96 | |
Construction segment | Construction segment | | 3 | | | 4 | | | 3 | | | 3 | | Construction segment | | 2 | | | 3 | | | 2 | | | 4 | |
Total | Total | | 100 | % | | 100 | % | | 100 | % | | 100 | % | Total | | 100 | % | | 100 | % | | 100 | % | | 100 | % |
The following tables summarize certain segment information, including the reconciliation of those items to the Company’s consolidated operations:
| (in thousands of dollars) | (in thousands of dollars) | | Retail Operations | | Construction | | Consolidated | (in thousands of dollars) | | Retail Operations | | Construction | | Consolidated |
Three Months Ended October 31, 2020 | | | | | | | |
Three Months Ended July 31, 2021 | | Three Months Ended July 31, 2021 | | | | | | |
Net sales from external customers | | Net sales from external customers | | $ | 1,539,396 | | | $ | 30,982 | | | $ | 1,570,378 | |
Gross profit | | Gross profit | | 641,240 | | | 1,928 | | | 643,168 | |
Depreciation and amortization | | Depreciation and amortization | | 49,981 | | | 62 | | | 50,043 | |
Interest and debt expense (income), net | | Interest and debt expense (income), net | | 10,782 | | | (11) | | | 10,771 | |
Income before income taxes | | Income before income taxes | | 239,790 | | | 526 | | | 240,316 | |
| Total assets | | Total assets | | 3,339,862 | | | 43,647 | | | 3,383,509 | |
| Three Months Ended August 1, 2020 | | Three Months Ended August 1, 2020 | |
Net sales from external customers | Net sales from external customers | | $ | 994,588 | | | $ | 30,311 | | | $ | 1,024,899 | | Net sales from external customers | | $ | 893,216 | | | $ | 25,828 | | | $ | 919,044 | |
Gross profit | Gross profit | | 364,232 | | | 1,983 | | | 366,215 | | Gross profit | | 277,407 | | | 1,790 | | | 279,197 | |
Depreciation and amortization | Depreciation and amortization | | 53,290 | | | 87 | | | 53,377 | | Depreciation and amortization | | 50,784 | | | 167 | | | 50,951 | |
Interest and debt expense (income), net | Interest and debt expense (income), net | | 12,167 | | | (5) | | | 12,162 | | Interest and debt expense (income), net | | 12,885 | | | (12) | | | 12,873 | |
(Loss) income before income taxes | (Loss) income before income taxes | | (232) | | | 462 | | | 230 | | (Loss) income before income taxes | | (33,699) | | | 373 | | | (33,326) | |
| Total assets | Total assets | | 3,279,241 | | | 26,748 | | | 3,305,989 | | Total assets | | 3,056,320 | | | 26,916 | | | 3,083,236 | |
| Three Months Ended November 2, 2019 | | |
Six Months Ended July 31, 2021 | | Six Months Ended July 31, 2021 | |
Net sales from external customers | Net sales from external customers | | $ | 1,334,205 | | | $ | 54,105 | | | $ | 1,388,310 | | Net sales from external customers | | $ | 2,836,132 | | | $ | 62,789 | | | $ | 2,898,921 | |
Gross profit | Gross profit | | 460,549 | | | 979 | | | 461,528 | | Gross profit | | 1,194,241 | | | 3,381 | | | 1,197,622 | |
Depreciation and amortization | Depreciation and amortization | | 55,963 | | | 180 | | | 56,143 | | Depreciation and amortization | | 96,319 | | | 132 | | | 96,451 | |
Interest and debt expense (income), net | Interest and debt expense (income), net | | 11,562 | | | (26) | | | 11,536 | | Interest and debt expense (income), net | | 22,332 | | | (26) | | | 22,306 | |
Income before income taxes | Income before income taxes | | 2,223 | | | 679 | | | 2,902 | | Income before income taxes | | 442,988 | | | 815 | | | 443,803 | |
| Total assets | Total assets | | 3,753,211 | | | 46,852 | | | 3,800,063 | | Total assets | | 3,339,862 | | | 43,647 | | | 3,383,509 | |
| Nine Months Ended October 31, 2020 | | |
Six Months Ended August 1, 2020 | | Six Months Ended August 1, 2020 | |
Net sales from external customers | Net sales from external customers | | $ | 2,638,831 | | | $ | 91,767 | | | $ | 2,730,598 | | Net sales from external customers | | $ | 1,644,243 | | | $ | 61,456 | | | $ | 1,705,699 | |
Gross profit | Gross profit | | 737,673 | | | 5,925 | | | 743,598 | | Gross profit | | 373,441 | | | 3,942 | | | 377,383 | |
Depreciation and amortization | Depreciation and amortization | | 154,806 | | | 423 | | | 155,229 | | Depreciation and amortization | | 101,516 | | | 336 | | | 101,852 | |
Interest and debt expense (income), net | Interest and debt expense (income), net | | 37,343 | | | (38) | | | 37,305 | | Interest and debt expense (income), net | | 25,176 | | | (33) | | | 25,143 | |
(Loss) income before income taxes | (Loss) income before income taxes | | (262,598) | | | 1,357 | | | (261,241) | | (Loss) income before income taxes | | (262,366) | | | 895 | | | (261,471) | |
| Total assets | Total assets | | 3,279,241 | | | 26,748 | | | 3,305,989 | | Total assets | | 3,056,320 | | | 26,916 | | | 3,083,236 | |
| Nine Months Ended November 2, 2019 | | |
Net sales from external customers | | $ | 4,132,890 | | | $ | 147,724 | | | $ | 4,280,614 | | |
Gross profit | | 1,392,057 | | | 1,994 | | | 1,394,051 | | |
Depreciation and amortization | | 162,364 | | | 526 | | | 162,890 | | |
Interest and debt expense (income), net | | 35,104 | | | (83) | | | 35,021 | | |
Income (loss) before income taxes | | 52,023 | | | (500) | | | 51,523 | | |
| Total assets | | 3,753,211 | | | 46,852 | | | 3,800,063 | | |
Intersegment construction revenues of $4.1$12.3 million and $8.2$6.9 million for the three months ended OctoberJuly 31, 20202021 and November 2, 2019,August 1, 2020, respectively, and $22.3$16.6 million and $22.8$18.3 million for the ninesix months ended OctoberJuly 31, 20202021 and November 2, 2019,August 1, 2020, 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 | Retail | | | Retail | | |
(in thousands of dollars) | (in thousands of dollars) | | October 31, 2020 | | February 1, 2020 | | November 2, 2019 | | February 2, 2019 | (in thousands of dollars) | | July 31, 2021 | | January 30, 2021 | | August 1, 2020 | | February 1, 2020 |
Contract liabilities | Contract liabilities | | $ | 54,684 | | | $ | 75,229 | | | $ | 60,742 | | | $ | 72,852 | | Contract liabilities | | $ | 59,713 | | | $ | 68,021 | | | $ | 58,186 | | | $ | 75,229 | |
During the ninesix months ended OctoberJuly 31, 20202021 and November 2, 2019,August 1, 2020, the Company recorded $39.7$28.8 million and $45.2$29.8 million, respectively, in revenue that was previously included in the retail operations contract liability balances of $68.0 million and $75.2 million at January 30, 2021 and $72.9 million, at February 1, 2020, and February 2, 2019, 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 | Construction | | | Construction | | |
(in thousands of dollars) | (in thousands of dollars) | | October 31, 2020 | | February 1, 2020 | | November 2, 2019 | | February 2, 2019 | (in thousands of dollars) | | July 31, 2021 | | January 30, 2021 | | August 1, 2020 | | February 1, 2020 |
Accounts receivable | Accounts receivable | | $ | 18,689 | | | $ | 28,522 | | | $ | 33,154 | | | $ | 31,867 | | Accounts receivable | | $ | 23,374 | | | $ | 25,094 | | | $ | 19,222 | | | $ | 28,522 | |
Costs and estimated earnings in excess of billings on uncompleted contracts | Costs and estimated earnings in excess of billings on uncompleted contracts | | 781 | | | 2,179 | | | 2,479 | | | 1,165 | | Costs and estimated earnings in excess of billings on uncompleted contracts | | 1,426 | | | 450 | | | 722 | | | 2,179 | |
Billings in excess of costs and estimated earnings on uncompleted contracts | Billings in excess of costs and estimated earnings on uncompleted contracts | | 5,808 | | | 5,737 | | | 6,800 | | | 7,414 | | Billings in excess of costs and estimated earnings on uncompleted contracts | | 5,118 | | | 4,685 | | | 7,212 | | | 5,737 | |
During the ninesix months ended OctoberJuly 31, 20202021 and November 2, 2019,August 1, 2020, the Company recorded $4.9$4.1 million and $7.1$4.7 million, respectively, in revenue that was previously included in billings in excess of costs and estimated earnings on uncompleted contracts of $4.7 million and $5.7 million at January 30, 2021 and $7.4 million at February 1, 2020, and February 2, 2019, respectively.
The remaining performance obligations related to executed construction contracts totaled $97.2$51.8 million, $156.5$76.2 million and $71.9$127.0 million at OctoberJuly 31, 2020, February2021, January 30, 2021 and August 1, 2020, and November 2, 2019, respectively.
Note 4. Earnings (Loss) Per Share Data
The following table sets forth the computation of basic and diluted earnings (loss) per share for the periods indicated (in thousands, except per share data).
| | | | Three Months Ended | | Nine Months Ended | | | Three Months Ended | | Six Months Ended |
| | | October 31, 2020 | | November 2, 2019 | | October 31, 2020 | | November 2, 2019 | | | July 31, 2021 | | August 1, 2020 | | July 31, 2021 | | August 1, 2020 |
Net income (loss) | Net income (loss) | | $ | 31,850 | | | $ | 5,462 | | | $ | (138,691) | | | $ | 43,393 | | Net income (loss) | | $ | 185,656 | | | $ | (8,566) | | | $ | 343,903 | | | $ | (170,541) | |
| Weighted average shares of common stock outstanding | Weighted average shares of common stock outstanding | | 22,264 | | | 24,913 | | | 22,930 | | | 25,604 | | Weighted average shares of common stock outstanding | | 21,079 | | | 23,174 | | | 21,458 | | | 23,264 | |
| Basic and diluted earnings (loss) per share | Basic and diluted earnings (loss) per share | | $ | 1.43 | | | $ | 0.22 | | | $ | (6.05) | | | $ | 1.69 | | Basic and diluted earnings (loss) per share | | $ | 8.81 | | | $ | (0.37) | | | $ | 16.03 | | | $ | (7.33) | |
The Company maintains a capital structure in which common stock is the only equity security issued and outstanding, and there were 0no shares of preferred stock, stock options, other dilutive securities or potentially dilutive securities issued or outstanding during the three and ninesix months ended OctoberJuly 31, 20202021 and November 2, 2019.August 1, 2020.
Note 5. Commitments and Contingencies
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, individually or in the aggregate, is not expected to have a material adverse effect on the Company’s financial position, cash flows or results of operations.
At OctoberJuly 31, 2020,2021, letters of credit totaling $21.1$20.2 million were issued under the Company’s revolving credit facility. See Note 7, Revolving Credit Agreement, for additional information.
Note 6. Benefit Plans
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. The Company determines pension expense 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 Company contributed $1.4$1.7 million and $4.2$3.2 million to the Pension Plan during the three and ninesix months ended OctoberJuly 31, 2020,2021, respectively, and expects to make additional contributions to the Pension Plan of approximately $1.5$3.2 million during the remainder of fiscal 2020.2021.
The components of net periodic benefit costs are as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | October 31, 2020 | | November 2, 2019 | | October 31, 2020 | | November 2, 2019 |
Components of net periodic benefit costs: | | | | | | | | |
Service cost | | $ | 1,090 | | | $ | 906 | | | $ | 3,270 | | | $ | 2,716 | |
Interest cost | | 1,536 | | | 1,916 | | | 4,608 | | | 5,750 | |
Net actuarial loss | | 568 | | | 0 | | | 1,705 | | | 0 | |
Net periodic benefit costs | | $ | 3,194 | | | $ | 2,822 | | | $ | 9,583 | | | $ | 8,466 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended |
| | July 31, 2021 | | August 1, 2020 | | July 31, 2021 | | August 1, 2020 |
Components of net periodic benefit costs: | | | | | | | | |
Service cost | | $ | 1,067 | | | $ | 1,090 | | | $ | 2,134 | | | $ | 2,180 | |
Interest cost | | 1,438 | | | 1,536 | | | 2,875 | | | 3,072 | |
Net actuarial loss | | 697 | | | 568 | | | 1,394 | | | 1,137 | |
Net periodic benefit costs | | $ | 3,202 | | | $ | 3,194 | | | $ | 6,403 | | | $ | 6,389 | |
The service cost component of net periodic benefit costs is included in selling, general and administrative expenses, and the interest cost and net actuarial loss components are included in other expense.
Note 7. Revolving Credit Agreement
InThe Company maintained an unsecured credit facility that provided a borrowing capacity of $800 million with a $200 million expansion option ("credit agreement") until the credit agreement was amended in April 2020 the Company(the "2020 amended its credit agreement (the "amended credit agreement"). After giving effect to the amendment, the 2020 amended credit agreement became secured by certain deposit accounts of the Company and certain inventory of certain subsidiaries. The
In April 2021, the Company further amended its secured credit agreement (the "2021 amended credit agreement provides aagreement"). The borrowing capacity ofremained at $800 million, subject to certain limitations as outlined in the 2021 amended credit agreement, with a $200 million expansion option and matures on August 9, 2022.option. The 2021 amended 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 Company pays a variable rate of interest on borrowings under the 2021 amended credit agreement and a commitment fee to the participating banks. The rate of interest on borrowings under the 2021 amended credit agreement is LIBOR plus 1.75% if average quarterly availability is less than 50% of the greater of LIBOR or 1.0% plus 1.750%total commitment, as defined in the 2021 amended credit agreement ("total commitment"), and the rate of interest on borrowings is LIBOR plus 1.50% if average quarterly availability is greater than or equal to 50% of the total commitment. The commitment fee for unused borrowings is 0.30% per annum.annum if average borrowings are less than 35% of the total commitment and 0.25% if average borrowings are greater than or equal to 35% of the total commitment. As long as availability exceeds $100$80 million and no eventcertain events of default occurshave not occurred and isare not continuing, there are no financial covenant requirements under the 2021 amended credit agreement.
Concurrent with the signing of the amended credit facility, the Company repaid the $779 million borrowed on March 25, 2020 under the previous agreement. Additionally, the Company paid $3.2 million in issuance costs related to theThe 2021 amended credit agreement which were recorded in other assetsmatures on the condensed consolidated balance sheets.April 28, 2026.
At OctoberJuly 31, 2020, $15.0 million of2021, no borrowings were outstanding, and letters of credit totaling $21.1$20.2 million were issued under the 2021 amended credit agreement leaving unutilized availability under the credit facility of $763.9$716.0 million. The weighted average interest rate under the credit agreement for the borrowings outstanding at October 31, 2020 was 2.75%.
Note 8. Stock Repurchase ProgramPrograms
In March 2018, the Company's Board of Directors authorized the Company to repurchase of up to $500 million of the Company’s Class A Common Stock pursuant tounder an open-ended stock repurchase plan (the "March("March 2018 Plan"). The March 2018 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 Securities Exchange Act of 1934 or through privately negotiated transactions and has no expiration date. As of July 31, 2021, $2.1 million of authorization remained under the March 2018 Plan.
The following is a summary of share repurchase activity under the March 2018 Plan for the periods indicated (in thousands, except per share data):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended |
| | July 31, 2021 | | August 1, 2020 | | July 31, 2021 | | August 1, 2020 |
Cost of shares repurchased | | $ | 112,207 | | | $ | 14,268 | | | $ | 171,021 | | | $ | 76,097 | |
Number of shares repurchased | | 734 | | | 587 | | | 1,359 | | | 1,586 | |
Average price per share | | $ | 152.77 | | | $ | 24.31 | | | $ | 125.81 | | | $ | 47.99 | |
All repurchases of the Company’s Class A Common Stock above were made at the market price at the trade date. All amounts paid to reacquire these shares were allocated to treasury stock.
On May 15, 2021, the Company announced that its Board of Directors approved a new stock repurchase program authorizing the Company to repurchase up to $500 million of its Class A Common Stock. This new open-ended authorization 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 Securities Exchange Act of 1934 or through privately negotiated transactions. The March 2018 Plantransactions and has no expiration date.
The following is a summary of share repurchase activity for the periods indicated (in thousands, except per share data):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | October 31, 2020 | | November 2, 2019 | | October 31, 2020 | | November 2, 2019 |
Cost of shares repurchased | | $ | 19,459 | | | $ | 35,213 | | | $ | 95,556 | | | $ | 101,514 | |
Number of shares repurchased | | 645 | | | 600 | | | 2,231 | | | 1,665 | |
Average price per share | | $ | 30.16 | | | $ | 58.64 | | | $ | 42.83 | | | $ | 60.96 | |
All repurchases of the Company’s Class A Common Stock above were made at the market price at the trade date. Accordingly, all amounts paid to reacquire these shares were allocated to treasury stock. As of October 31, 2020, $173.1 million of authorization remained under the March 2018 Plan.
Note 9. Income Taxes
During the three and six months ended July 31, 2021, income tax expense differed from what would be computed using the statutory federal income tax rate primarily due to the effects of state and local income taxes.
The Company expects to bewas in a net operating loss position for the fiscal year endingended January 30, 2021. The Coronavirus Aid, Relief and Economic Security (“CARES”) Act, signed into law on March 27, 2020, allows for net operating loss carryback to years in which the statutory federal tax rate was 35% rather than the current 21%. During the three and ninesix months ended October 31,August 1, 2020, income tax benefit differed from what would be computed using the current statutory federal tax rate of 21% primarily due to the recognition of a net tax benefit of $32.4$17.4 million and $64.6$32.1 million, respectively, related to the rate differential in the carryback year including its impact on changes in estimates of temporary differences for the current and prior year. Income tax benefit for the three and ninesix months also included the effects of federal tax credits and state and local income taxes.
During the three and nine months ended November 2, 2019, income taxes differed from what would be computed using the statutory federal tax rate primarily due to the effects of federal tax credits and state and local income taxes which included tax benefits recognized of approximately$2.8 millionfor amended state income tax return filings and related decreases to accrued state income taxes.
Note 10. Reclassifications from Accumulated Other Comprehensive Loss (“AOCL”)
Reclassifications from AOCL are summarized as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Amount Reclassified from AOCL | | |
| | Three Months Ended | | Nine Months Ended | | Affected Line Item in the Statement Where Net Income Is Presented |
Details about AOCL Components | | October 31, 2020 | | November 2, 2019 | | October 31, 2020 | | November 2, 2019 | |
Defined benefit pension plan items | | | | | | | | | | |
| | | | | | | | | | |
Amortization of actuarial losses | | $ | 568 | | | $ | 0 | | | $ | 1,705 | | | $ | 0 | | | Total before tax (1) |
| | 138 | | | 0 | | | 414 | | | 0 | | | Income tax expense |
| | $ | 430 | | | $ | 0 | | | $ | 1,291 | | | $ | 0 | | | Total net of tax |
For fiscal year 2019, there was 0 amortization of the net loss in AOCL as the net loss did not exceed 10% of the projected benefit obligation. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Amount Reclassified from AOCL | | |
| | Three Months Ended | | Six Months Ended | | Affected Line Item in the Statement Where Net Income Is Presented |
Details about AOCL Components | | July 31, 2021 | | August 1, 2020 | | July 31, 2021 | | August 1, 2020 | |
Defined benefit pension plan items | | | | | | | | | | |
| | | | | | | | | | |
Amortization of actuarial losses | | $ | 697 | | | $ | 568 | | | $ | 1,394 | | | $ | 1,137 | | | Total before tax (1) |
| | 169 | | | 138 | | | 337 | | | 276 | | | Income tax expense |
| | $ | 528 | | | $ | 430 | | | $ | 1,057 | | | $ | 861 | | | Total net of tax |
(1) This item is included in the computation of net periodic pension cost. See Note 6, Benefit Plans, for additional information.
Note 11. Changes in Accumulated Other Comprehensive Loss
Changes in AOCL by component (net of tax) are summarized as follows (in thousands):
| | | | Defined Benefit Pension Plan Items | | | | Defined Benefit Pension Plan Items | |
| | | Three Months Ended | | Nine Months Ended | | | | Three Months Ended | | Six Months Ended | |
| | October 31, 2020 | | November 2, 2019 | | October 31, 2020 | | November 2, 2019 | | | July 31, 2021 | | August 1, 2020 | | July 31, 2021 | | August 1, 2020 | |
Beginning balance | Beginning balance | | $ | 30,198 | | | $ | 12,809 | | | $ | 31,059 | | | $ | 12,809 | | | Beginning balance | | $ | 34,406 | | | $ | 30,628 | | | $ | 34,935 | | | $ | 31,059 | | |
| Amounts reclassified from AOCL | Amounts reclassified from AOCL | | (430) | | | 0 | | | (1,291) | | | 0 | | | Amounts reclassified from AOCL | | (528) | | | (430) | | | (1,057) | | | (861) | | |
| Ending balance | Ending balance | | $ | 29,768 | | | $ | 12,809 | | | $ | 29,768 | | | $ | 12,809 | | | Ending balance | | $ | 33,878 | | | $ | 30,198 | | | $ | 33,878 | | | $ | 30,198 | | |
Note 12. Leases
The Company leases retail stores, office space and equipment under operating leases. As of OctoberJuly 31, 2020, February2021, January 30, 2021 and August 1, 2020, and November 2, 2019, right-of-use operating lease assets, which are recorded in operating lease assets in the condensed consolidated balance sheets, totaled $40.5$44.1 million, $47.9$47.6 million and $48.6$44.1 million, respectively, and operating lease liabilities, which are recorded in current portion of operating lease liabilities and operating lease liabilities, totaled $40.2$43.6 million, $47.3$47.2 million and $48.2$43.8 million, respectively.
In determining our operating lease assets and operating lease liabilities, we apply an incremental borrowing rate to the minimum lease payments within each lease agreement. ASU No. 2016-02GAAP 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 utilize a model consistent with the credit quality of our outstanding debt instruments.
Renewal options fromof twofive to 20or 10 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 at lease inception for renewal periods unless we are reasonably certain of renewingexercising the lease at inception.renewal options. 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) | (in thousands of dollars) | Classification - Condensed Consolidated Balance Sheets | | October 31, 2020 | | February 1, 2020 | | November 2, 2019 | (in thousands of dollars) | Classification - Condensed Consolidated Balance Sheets | | July 31, 2021 | | January 30, 2021 | | August 1, 2020 |
Assets | Assets | | | | | | | | Assets | | | | | | | |
Finance lease assets | Finance lease assets | Property and equipment, net (a) | | $ | 353 | | | $ | 670 | | | $ | 776 | | Finance lease assets | Property and equipment, net (a) | | $ | 124 | | | $ | 247 | | | $ | 459 | |
Operating lease assets | Operating lease assets | | 40,471 | | | 47,924 | | | 48,600 | | Operating lease assets | | 44,098 | | | 47,612 | | | 44,091 | |
Total leased assets | Total leased assets | | $ | 40,824 | | | $ | 48,594 | | | $ | 49,376 | | Total leased assets | | $ | 44,222 | | | $ | 47,859 | | | $ | 44,550 | |
| Liabilities | Liabilities | | Liabilities | |
Current | Current | | Current | |
Finance | Finance | Current portion of finance lease liabilities | | $ | 849 | | | $ | 1,219 | | | $ | 1,148 | | Finance | Current portion of finance lease liabilities | | $ | 356 | | | $ | 695 | | | $ | 986 | |
Operating | Operating | Current portion of operating lease liabilities | | 12,775 | | | 14,654 | | | 15,250 | | Operating | Current portion of operating lease liabilities | | 12,113 | | | 13,819 | | | 13,758 | |
Noncurrent | Noncurrent | | Noncurrent | |
Finance | Finance | Finance lease liabilities | | 180 | | | 695 | | | 1,029 | | Finance | Finance lease liabilities | | — | | | — | | | 356 | |
Operating | Operating | Operating lease liabilities | | 27,412 | | | 32,683 | | | 32,958 | | Operating | Operating lease liabilities | | 31,467 | | | 33,392 | | | 30,051 | |
Total lease liabilities | Total lease liabilities | | $ | 41,216 | | | $ | 49,251 | | | $ | 50,385 | | Total lease liabilities | | $ | 43,936 | | | $ | 47,906 | | | $ | 45,151 | |
(a) Finance lease assets are recorded net of accumulated amortization of $14.2$14.4 million, $13.9$14.3 million and $13.8$14.1 million as of OctoberJuly 31, 2020, February2021, January 30, 2021 and August 1, 2020, and November 2, 2019, respectively.
| Lease Cost | Lease Cost | | Three Months Ended | | Nine Months Ended | Lease Cost | | Three Months Ended | | Six Months Ended |
(in thousands of dollars) | (in thousands of dollars) | Classification - Condensed Consolidated Statements of Operations | | October 31, 2020 | | November 2, 2019 | | October 31, 2020 | | November 2, 2019 | (in thousands of dollars) | Classification - Condensed Consolidated Statements of Operations | | July 31, 2021 | | August 1, 2020 | | July 31, 2021 | | August 1, 2020 |
Operating lease cost (a) | Operating lease cost (a) | Rentals | | $ | 5,115 | | | $ | 5,927 | | | $ | 16,304 | | | $ | 18,254 | | Operating lease cost (a) | Rentals | | $ | 5,099 | | | $ | 5,639 | | | $ | 10,210 | | | $ | 11,189 | |
Finance lease cost | Finance lease cost | | Finance lease cost | |
Amortization of leased assets | Amortization of leased assets | Depreciation and amortization | | 106 | | | 106 | | | 317 | | | 317 | | Amortization of leased assets | Depreciation and amortization | | 62 | | | 105 | | | 124 | | | 211 | |
Interest on lease liabilities | Interest on lease liabilities | Interest and debt expense, net | | 44 | | | 109 | | | 186 | | | 367 | | Interest on lease liabilities | Interest and debt expense, net | | 10 | | | 62 | | | 24 | | | 142 | |
Net lease cost | Net lease cost | | $ | 5,265 | | | $ | 6,142 | | | $ | 16,807 | | | $ | 18,938 | | Net lease cost | | $ | 5,171 | | | $ | 5,806 | | | $ | 10,358 | | | $ | 11,542 | |
|
(a) Includes short term lease costs of $0.5 million and $0.8$0.5 million for the three months ended and $1.5$0.9 million and $2.5$1.0 million for the ninesix months ended OctoberJuly 31, 20202021 and November 2, 2019,August 1, 2020, respectively, and variable lease costs, including contingent rent, of $0.4 million and $0.3$0.4 million for the three months ended and $1.1$0.7 million and $1.0$0.7 million for the ninesix months ended OctoberJuly 31, 20202021 and November 2, 2019,August 1, 2020, respectively.
Maturities of Lease Liabilities
| | | | | | | | | | | | | | | | | |
(in thousands of dollars) Fiscal Year | Operating Leases | | Finance Leases | | Total |
2020 (excluding the nine months ended October 31, 2020) | $ | 3,550 | | | $ | 357 | | | $ | 3,907 | |
2021 | 14,154 | | | 726 | | | 14,880 | |
2022 | 7,811 | | | 0 | | | 7,811 | |
2023 | 4,496 | | | 0 | | | 4,496 | |
2024 | 3,714 | | | 0 | | | 3,714 | |
After 2024 | 15,916 | | | 0 | | | 15,916 | |
Total minimum lease payments | 49,641 | | | 1,083 | | | 50,724 | |
Less amount representing interest | (9,454) | | | (54) | | | (9,508) | |
Present value of lease liabilities | $ | 40,187 | | | $ | 1,029 | | | $ | 41,216 | |
| | | | | | | | | | | | | | | | | |
(in thousands of dollars) Fiscal Year | Operating Leases | | Finance Leases | | Total |
2021 (excluding the six months ended July 31, 2021) | $ | 7,317 | | | $ | 363 | | | $ | 7,680 | |
2022 | 13,017 | | | — | | | 13,017 | |
2023 | 9,347 | | | — | | | 9,347 | |
2024 | 4,673 | | | — | | | 4,673 | |
2025 | 4,013 | | | — | | | 4,013 | |
After 2025 | 14,138 | | | — | | | 14,138 | |
Total minimum lease payments | 52,505 | | | 363 | | | 52,868 | |
Less amount representing interest | (8,925) | | | (7) | | | (8,932) | |
Present value of lease liabilities | $ | 43,580 | | | $ | 356 | | | $ | 43,936 | |
Lease Term and Discount Rate
| | | | | | | | |
| | OctoberJuly 31, 2020 2021 |
Weighted-average remaining lease term | | |
Operating leases | | 6.35.9 years |
Finance leases | | 1.10.5 years |
Weighted-average discount rate | | |
Operating leases | | 6.66.2 | % |
Finance leases | | 10.49.5 | % |
Other Information
| | | Nine Months Ended | | Six Months Ended |
(in thousands of dollars) | (in thousands of dollars) | | October 31, 2020 | | November 2, 2019 | (in thousands of dollars) | | July 31, 2021 | | August 1, 2020 |
Cash paid for amounts included in the measurement of lease liabilities | Cash paid for amounts included in the measurement of lease liabilities | | | Cash paid for amounts included in the measurement of lease liabilities | | |
Operating cash flows from operating leases | Operating cash flows from operating leases | | $ | 14,490 | | | $ | 15,060 | | Operating cash flows from operating leases | | $ | 8,793 | | | $ | 9,387 | |
Operating cash flows from finance leases | Operating cash flows from finance leases | | 186 | | | 367 | | Operating cash flows from finance leases | | 24 | | | 142 | |
Financing cash flows from finance leases | Financing cash flows from finance leases | | 885 | | | 703 | | Financing cash flows from finance leases | | 339 | | | 572 | |
| Lease assets obtained in exchange for new operating lease liabilities | Lease assets obtained in exchange for new operating lease liabilities | | $ | 4,084 | | | $ | 4,601 | | Lease assets obtained in exchange for new operating lease liabilities | | $ | 3,815 | | | $ | 4,084 | |
Note 13. (Gain) Loss (Gain) on Disposal of Assets
During the threesix months ended OctoberJuly 31, 2020,2021, the Company recorded proceeds of $1.5 million primarily from the sale of one store property, resulting in a loss of $2.2 million that was recorded in loss (gain) on disposal of assets.
During the three months ended November 2, 2019, the Company recorded a loss of $0.3 million primarily from the sale of one store property that was recorded in loss (gain) on disposal of assets.
During the nine months ended November 2, 2019, the Company recorded proceeds of $22.0$29.3 million primarily from the sale of three store properties, resulting in a gain of $12.0$24.7 million that was recorded in (gain) loss (gain) on disposal of assets.
Note 14. Fair Value Disclosures
The estimated fair values of financial instruments 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 is categorized as Level 1 in the fair value hierarchy.
The fair value of the Company’s cash and cash equivalents and accounts receivable and short-term borrowings approximates their carrying values at OctoberJuly 31, 20202021 due to the short-term maturities of these instruments. The fair value of the Company’s long-term debt at OctoberJuly 31, 20202021 was approximately $384$438 million. The carrying value of the Company’s long-term debt at OctoberJuly 31, 20202021 was $365.8$365.9 million. The fair value of the Company’s subordinated debentures at OctoberJuly 31, 20202021 was approximately $183$212 million. The carrying value of the Company’s subordinated debentures at OctoberJuly 31, 20202021 was $200.0 million.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsOperations.
The following discussion should be read in conjunction with the condensed consolidated financial statements and the footnotes thereto included elsewhere in this report, as well as the financial and other information included in our Annual Report on Form 10-K for the year ended February 1, 2020.January 30, 2021. Due to the significant impact of COVID-19 on prior year figures, the information that follows will include certain comparisons to 2019 to provide additional context.
EXECUTIVE OVERVIEW
In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic, which continues to spread throughoutimpact the United States and the world.global economies. The COVID-19 pandemic has had and continuesmay continue to have a significant impact on the Company's business, results of operations and financial position. The Company began closing stores on March 19, 2020 as mandated by state and local governments, and by April 9, 2020, all of the Company's brick-and-mortar store locations were temporarily closed to the public. Our eCommerce capabilities allowed us to use our closed store locations (with limited staffing) to fill orders from our Internet store.
During the month ended May 30, 2020 (fiscal May), we re-opened most of our full-line stores: 45 stores, on May 5th, 80 stores on May 12th, 115 stores on May 19th and 20th and 8 stores on May 26th. All Dillard’sby June 2, 2020 all Dillard's store locations had been re-opened by June 2, 2020 re-opened.using the Centers for Disease Control and Prevention ("CDC") guidelines to promote Following our re-opening, a safe environment for our customers and employees. All stores are currently open and operating at reduced hours. A very small number of our locations were temporarily closed to in-store shopping due to government mandate. Other local mandates throughout the country require occupancy limits with which weAll stores are required to comply. We continue to monitor additional local government orders that may affect our operations.currently open and are operating at reduced hours from fiscal 2019 operating hours.
DuringThe Company's results for the three months ended OctoberJuly 31, 2020, total retail sales decreased approximately 25% and comparable store sales decreased approximately 24%2021 improved significantly compared to the three months ended November 2, 2019. Retail gross margin increased 210 basis pointsAugust 1, 2020, marking a sequential record quarterly performance. The momentum of strong consumer demand that began in the first quarter continued throughout the second. This catalyst, in addition to the re-opening of stores, led to an approximately 72% increase in retail sales compared to 36.6%the second quarter of 2020. Due to the temporary closure of the Company's brick-and-mortar stores during the three months ended OctoberMay 2, 2020 as well as the interdependence between in-store and online sales, the Company reported no comparable store sales data for the three months ended July 31, 20202021 compared to 34.5%the three months ended August 1, 2020. Retail gross margin increased to 41.7% during the three months ended November 2, 2019, primarily dueJuly 31, 2021 compared to lower markdowns.31.1% during the three months ended August 1, 2020. The Company was ableattributes this improvement to reducethe strong consumer demand combined with better inventory by approximately 22%management which led to decreased markdowns compared to the prior year third quartersecond quarter. Accordingly, the Company reduced inventory by reducing purchases approximately 31%.13% compared to the prior year second quarter. Selling, general and administrative expenses decreasedincreased to $318.2$365.9 million (23.3% of sales) compared to $418.1$267.1 million from(29.1% of sales) for the prior year thirdsecond quarter primarily due to decreasesincreases in payroll expense, partially as a resultwhich was driven by the re-opening of our retail store locations. Increased retail sales during the Company's reduced operating hours.second quarter of 2021 compared to the second quarter of 2020, provided support for these increased expenses. The Company reported net income of $31.9$185.7 million ($1.438.81 per share) compared to a net incomeloss of $5.5$8.6 million ($0.220.37 per share) for the prior year thirdsecond quarter.
The Company expects to beIncluded in the net loss for the three months ended August 1, 2020 is a net operating loss position for fiscal year 2020.tax benefit of $17.4 million ($0.75 per share) related to The Coronavirus Aid, Relief and Economic Security (“CARES”Act ("CARES Act") Act,, signed into law on March 27, 2020, allowswhich allowed for net operating loss carryback to years in which the federal income tax rate was 35%. Included in net income for the quarter ended October 31, 2020 is a net tax benefit of $32.4 million ($1.46 per share) related to this provision. Also included in net income for the quarter is a pretax loss of $2.2 million ($1.4 million after tax or $0.06 per share) primarily related to the sale of a store property.
Included in net income for the quarter ended November 2, 2019 is a pretax loss on disposal of assets of $0.3 million ($0.2 million after tax or $0.01 per share) related to the sale of a store property. Also included in net income for the quarter is $2.8 million ($0.11 per share) in tax benefits related to amended state tax return filings.
During the three months ended OctoberJuly 31, 2020,2021, the Company purchased $19.5$112.2 million of its outstanding Class A Common Stock under its stock repurchase plan authorized by the Company's Board of Directors in March 2018 (the "March 2018 Plan"). As of OctoberJuly 31, 2020,2021, authorization of $173.1$2.1 million remained under the March 2018 Plan. On May 15, 2021, the Company announced that its Board of Directors approved a new stock repurchase program authorizing the Company to repurchase up to $500 million of its Class A Common Stock (the "May 2021 Plan").
As of OctoberJuly 31, 2020,2021, the Company had working capital of $767.0$1,111.8 million (including cash and cash equivalents of $61.1$669.5 million) and $580.8$565.9 million of total debt outstanding, excluding finance lease liabilities and operating lease liabilities.liabilities, with no scheduled maturities until the end of fiscal 2022. Cash flows used inprovided by operating activities were $62.9$492.3 million for the ninesix months ended OctoberJuly 31, 2020.2021.
The Company maintained 282280 Dillard's stores, including 3231 clearance centers, and an internet store at OctoberJuly 31, 2020.2021.
On February 25, 2020,We source a significant portion of our private label and exclusive brand merchandise from countries that have experienced widespread transmission of the Company provided estimates for certain financial statement items, including depreciationCOVID-19 virus. Additionally, many of our branded merchandise vendors may also source a significant portion of their merchandise from these same countries. Manufacturing capacity in those countries has been significantly impacted by the pandemic 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 thein some countries continues to negatively 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 previously withdrew its 2020 guidance.
our supply chain with shipping delays as well as increased shipping costs.
Additionally, disruptions in the global transportation network which continued into fiscal 2021 have intensified in recent weeks, particularly in certain United States receiving ports. The Company believes that Dillard'sCalifornia ports of Los Angeles and Long Beach, which together handle a significant portion of United States merchandise imports including our own imports, have experienced and are continuing to experience delays in processing imported merchandise, thereby resulting in untimely deliveries of merchandise. At present, while monitoring the situation closely, management is uniquely positioned, among U.S. department store retailers,unable to weatherquantify the COVID-19 pandemiceffects of these factors on the Company's results of operations and inventory position for the following reasons:fiscal 2021.
▪The Company owns approximately 90% of its retail store square footage and 100% of its corporate headquarters, distribution and fulfillment facilities;
▪Store rent obligations are small compared to the industry;
▪Low long-term debt position with next payment due January 2023 ($45 million);
▪Amended $800 million revolving credit facility with no financial covenants as long as availability exceeds $100 million and no event of default occurs and is continuing; and
▪Strong eCommerce platform at dillards.com which includes ship-from-store capability.
Key Performance Indicators
We use a number of key indicators of financial condition and operating performance to evaluate our business, including the following:
| | | | Three Months Ended | | | Three Months Ended |
| | | October 31, 2020 | | November 2, 2019 | | | July 31, 2021 | | August 1, 2020 |
Net sales (in millions) | Net sales (in millions) | | $ | 1,024.9 | | | $ | 1,388.3 | | Net sales (in millions) | | $ | 1,570.4 | | | $ | 919.0 | |
Retail stores sales trend | Retail stores sales trend | | (25) | % | | (1) | % | Retail stores sales trend | | 72 | % | | (35) | % |
Comparable retail stores sales trend | | (24) | % | | — | % | |
| Gross profit (in millions) | Gross profit (in millions) | | $ | 366.2 | | | $ | 461.5 | | Gross profit (in millions) | | $ | 643.2 | | | $ | 279.2 | |
Gross profit as a percentage of net sales | Gross profit as a percentage of net sales | | 35.7 | % | | 33.2 | % | Gross profit as a percentage of net sales | | 41.0 | % | | 30.4 | % |
Retail gross profit as a percentage of net sales | Retail gross profit as a percentage of net sales | | 36.6 | % | | 34.5 | % | Retail gross profit as a percentage of net sales | | 41.7 | % | | 31.1 | % |
Selling, general and administrative expenses as a percentage of net sales | Selling, general and administrative expenses as a percentage of net sales | | 31.0 | % | | 30.1 | % | Selling, general and administrative expenses as a percentage of net sales | | 23.3 | % | | 29.1 | % |
Cash flow (used in) provided by operations (in millions)* | | $ | (62.9) | | | $ | 23.0 | | |
Cash flow provided by (used in) operations (in millions)* | | Cash flow provided by (used in) operations (in millions)* | | $ | 492.3 | | | $ | (294.5) | |
Total retail store count at end of period | Total retail store count at end of period | | 282 | | | 289 | | Total retail store count at end of period | | 280 | | | 282 | |
Retail sales per square foot | Retail sales per square foot | | $ | 21 | | | $ | 28 | | Retail sales per square foot | | $ | 33 | | | $ | 19 | |
Retail store inventory trend | Retail store inventory trend | | (22) | % | | (4) | % | Retail store inventory trend | | (13) | % | | (20) | % |
Annualized retail merchandise inventory turnover | Annualized retail merchandise inventory turnover | | 1.8 | | | 2.0 | | Annualized retail merchandise inventory turnover | | 2.9 | | | 1.7 | |
*Cash flow from operations data is for the ninesix months ended OctoberJuly 31, 20202021 and November 2, 2019.August 1, 2020.
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 currentmost 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 private label cardmarketing 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, office space and data processing and other equipment rentals.rentals and office space leases.
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.agreement. Interest and debt expense also includes gains and losses on note repurchases, if any,the amortization of financing costs and interest on finance lease liabilities.obligations.
Other expense. Other expense includes the interest cost and net actuarial loss components of net periodic benefit costs related to the Company's unfunded, nonqualified defined benefit plan and charges related to the write-off of deferred financing fees, if any.
Loss (gain)(Gain) loss on disposal of assets. Loss (gain)(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 insurance proceeds in excess of the cost basis of insured assets, if any.
LIBOR
The use ofOn March 5, 2021, the U.K. Financial Conduct Authority, which regulates LIBOR, is expectedannounced that all LIBOR settings will either cease to be phased outprovided by any administrator or no longer be representative: (a) immediately after December 31, 2021, in the endcase of 2021. At this time, there is no definitive information regarding the future utilization1-week and 2-month U.S. dollar settings; and (b) immediately after June 30, 2023, in the case of LIBOR beyond 2021 or of any particular replacement rate.the remaining U.S. dollar settings. Going forward, we intend to work with our lenders to use a suitable alternative reference rate for the 2021 amended 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.
Seasonality
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.
RESULTS OF OPERATIONS
The following table sets forth the results of operations as a percentage of net sales for the periods indicated (percentages may not foot due to rounding):
| | | | Three Months Ended | | Nine Months Ended | | | Three Months Ended | | Six Months Ended |
| | | October 31, 2020 | | November 2, 2019 | | October 31, 2020 | | November 2, 2019 | | | July 31, 2021 | | August 1, 2020 | | July 31, 2021 | | August 1, 2020 |
Net sales | Net sales | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | Net sales | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % |
Service charges and other income | Service charges and other income | | 2.7 | | | 2.5 | | | 3.2 | | | 2.3 | | Service charges and other income | | 2.0 | | | 2.8 | | | 2.1 | | | 3.6 | |
| | | | 102.7 | | | 102.5 | | | 103.2 | | | 102.3 | | | | 102.0 | | | 102.8 | | | 102.1 | | | 103.6 | |
| Cost of sales | Cost of sales | | 64.3 | | | 66.8 | | | 72.8 | | | 67.4 | | Cost of sales | | 59.0 | | | 69.6 | | | 58.7 | | | 77.9 | |
Selling, general and administrative expenses | Selling, general and administrative expenses | | 31.0 | | | 30.1 | | | 32.1 | | | 28.8 | | Selling, general and administrative expenses | | 23.3 | | | 29.1 | | | 24.2 | | | 32.7 | |
Depreciation and amortization | Depreciation and amortization | | 5.2 | | | 4.0 | | | 5.7 | | | 3.8 | | Depreciation and amortization | | 3.2 | | | 5.5 | | | 3.3 | | | 6.0 | |
Rentals | Rentals | | 0.5 | | | 0.4 | | | 0.6 | | | 0.4 | | Rentals | | 0.3 | | | 0.6 | | | 0.4 | | | 0.7 | |
Interest and debt expense, net | Interest and debt expense, net | | 1.2 | | | 0.8 | | | 1.4 | | | 0.8 | | Interest and debt expense, net | | 0.7 | | | 1.4 | | | 0.8 | | | 1.5 | |
Other expense | Other expense | | 0.2 | | | 0.1 | | | 0.2 | | | 0.1 | | Other expense | | 0.1 | | | 0.2 | | | 0.2 | | | 0.2 | |
Loss (gain) on disposal of assets | | 0.2 | | | — | | | 0.1 | | | (0.3) | | |
(Gain) loss on disposal of assets | | (Gain) loss on disposal of assets | | — | | | — | | | (0.9) | | | — | |
| | Income (loss) before income taxes | Income (loss) before income taxes | | — | | | 0.2 | | | (9.6) | | | 1.2 | | Income (loss) before income taxes | | 15.3 | | | (3.6) | | | 15.3 | | | (15.3) | |
Income taxes (benefit) | Income taxes (benefit) | | (3.1) | | | (0.2) | | | (4.5) | | | 0.2 | | Income taxes (benefit) | | 3.5 | | | (2.7) | | | 3.4 | | | (5.3) | |
| | Net income (loss) | Net income (loss) | | 3.1 | % | | 0.4 | % | | (5.1) | % | | 1.0 | % | Net income (loss) | | 11.8 | % | | (0.9) | % | | 11.9 | % | | (10.0) | % |
Net Sales
| | | | Three Months Ended | | | | | Three Months Ended | | |
(in thousands of dollars) | (in thousands of dollars) | | October 31, 2020 | | November 2, 2019 | | $ Change | (in thousands of dollars) | | July 31, 2021 | | August 1, 2020 | | $ Change |
Net sales: | Net sales: | | | | | | | Net sales: | | | | | | |
Retail operations segment | Retail operations segment | | $ | 994,588 | | | $ | 1,334,205 | | | $ | (339,617) | | Retail operations segment | | $ | 1,539,396 | | | $ | 893,216 | | | $ | 646,180 | |
Construction segment | Construction segment | | 30,311 | | | 54,105 | | | (23,794) | | Construction segment | | 30,982 | | | 25,828 | | | 5,154 | |
Total net sales | Total net sales | | $ | 1,024,899 | | | $ | 1,388,310 | | | $ | (363,411) | | Total net sales | | $ | 1,570,378 | | | $ | 919,044 | | | $ | 651,334 | |
The percent change in the Company’s sales by segment and product category for the three months ended OctoberJuly 31, 20202021 compared to the three months ended November 2, 2019August 1, 2020 as well as the sales percentage by segment and product category to total net sales for the three months ended OctoberJuly 31, 20202021 are as follows:
| | | | | % Change 2020 - 2019 | | % of Net Sales | | | % Change 2021 - 2020 | | % of Net Sales |
Retail operations segment | Retail operations segment | | | | | Retail operations segment | | | | |
Cosmetics | Cosmetics | | (20.4) | % | | 14 | % | Cosmetics | | 58.5 | % | | 13 | % |
Ladies’ apparel | Ladies’ apparel | | (38.3) | | | 20 | | Ladies’ apparel | | 102.9 | | | 24 | |
Ladies’ accessories and lingerie | Ladies’ accessories and lingerie | | (15.9) | | | 15 | | Ladies’ accessories and lingerie | | 59.2 | | | 15 | |
Juniors’ and children’s apparel | Juniors’ and children’s apparel | | (24.4) | | | 10 | | Juniors’ and children’s apparel | | 61.4 | | | 9 | |
Men’s apparel and accessories | Men’s apparel and accessories | | (24.7) | | | 18 | | Men’s apparel and accessories | | 71.1 | | | 20 | |
Shoes | Shoes | | (25.2) | | | 16 | | Shoes | | 81.8 | | | 14 | |
Home and furniture | Home and furniture | | (3.5) | | | 4 | | Home and furniture | | 21.6 | | | 3 | |
| | | | | 97 | | | | | | 98 | |
Construction segment | Construction segment | | (44.0) | | | 3 | | Construction segment | | 20.0 | | | 2 | |
Total | Total | | | | 100 | % | Total | | | | 100 | % |
Net sales from the retail operations segment decreased $339.6increased $646.2 million, or approximately 72%, during the three months ended OctoberJuly 31, 20202021 compared to the three months ended November 2, 2019, decreasing approximately 25% in total and approximately 24% in comparable stores,August 1, 2020, primarily due to the impact of the COVID-19 pandemic. The Company reported no comparable store sales data for the quarter due to the temporary closure of its brick-and-mortar stores during a portion of the second quarter of 2020 as well as the interdependence between in-store and online sales. Sales in all product categories decreasedincreased significantly over the thirdsecond quarter last year withyear.
Compared to the exceptionsecond quarter of homefiscal 2019, net sales from the retail operations segment for the three months ended July 31, 2021 and furniture, which decreased moderately.August 3, 2019 were $1,539.4 million and $1,378.2 million, respectively, increasing $161.2 million or approximately 12% while sales in comparable stores increased approximately 14%.
We recorded a return asset of $7.5$10.6 million and $11.1$8.4 million and an allowance for sales returns of $12.5$19.5 million and $17.8$10.8 million as of OctoberJuly 31, 20202021 and November 2, 2019,August 1, 2020, respectively.
During the three months ended OctoberJuly 31, 2020,2021, net sales from the construction segment decreased $23.8increased $5.2 million or 44.0%20.0% compared to the three months ended November 2, 2019August 1, 2020 due to a decreasean increase in construction activity. The remaining performance obligations related to executed construction contracts totaled $97.2$51.8 million as of OctoberJuly 31, 20202021, decreasing approximately 38%32% from FebruaryJanuary 30, 2021 and decreasing approximately 59% from August 1, 2020, and increasing approximately 35% from November 2, 2019, respectively. We expect these remaining performance obligations to be earned over the next nine to eighteen months.
| | | Nine Months Ended | | | | Six Months Ended | | |
(in thousands of dollars) | (in thousands of dollars) | | October 31, 2020 | | November 2, 2019 | | $ Change | (in thousands of dollars) | | July 31, 2021 | | August 1, 2020 | | $ Change |
Net sales: | Net sales: | | | | | | Net sales: | | | | | | |
Retail operations segment | Retail operations segment | | $ | 2,638,831 | | | $ | 4,132,890 | | | $ | (1,494,059) | | Retail operations segment | | $ | 2,836,132 | | | $ | 1,644,243 | | | $ | 1,191,889 | |
Construction segment | Construction segment | | 91,767 | | | 147,724 | | | (55,957) | | Construction segment | | 62,789 | | | 61,456 | | | 1,333 | |
Total net sales | Total net sales | | $ | 2,730,598 | | | $ | 4,280,614 | | | $ | (1,550,016) | | Total net sales | | $ | 2,898,921 | | | $ | 1,705,699 | | | $ | 1,193,222 | |
|
The percent change in the Company’sCompany's sales by segment and product category for the ninesix months ended OctoberJuly 31, 20202021 compared to the ninesix months ended November 2, 2019August 1, 2020 as well as the sales percentage by segment and product category to total net sales for the ninesix months ended OctoberJuly 31, 20202021 are as follows:
| | | | | | | | | | | | | | |
| | |
| | % Change 2020 - 2019 | | % of Net Sales |
Retail operations segment | | | | |
Cosmetics | | (30.2) | % | | 14 | % |
Ladies’ apparel | | (45.4) | | | 21 | |
Ladies’ accessories and lingerie | | (31.3) | | | 15 | |
Juniors’ and children’s apparel | | (35.7) | | | 10 | |
Men’s apparel and accessories | | (34.2) | | | 18 | |
Shoes | | (37.4) | | | 15 | |
Home and furniture | | (19.7) | | | 4 | |
| | | | 97 | |
Construction segment | | (37.9) | | | 3 | |
Total | | | | 100 | % |
| | | | | | | | | | | | | | |
| | |
| | % Change 2021 - 2020 | | % of Net Sales |
Retail operations segment | | | | |
Cosmetics | | 59.3 | % | | 14 | % |
Ladies’ apparel | | 89.4 | | | 23 | |
Ladies’ accessories and lingerie | | 68.4 | | | 15 | |
Juniors’ and children’s apparel | | 72.6 | | | 10 | |
Men’s apparel and accessories | | 75.4 | | | 19 | |
Shoes | | 72.8 | | | 14 | |
Home and furniture | | 31.9 | | | 3 | |
| | | | 98 | |
Construction segment | | 2.2 | | | 2 | |
Total | | | | 100 | % |
Net sales from the retail operations segment decreased $1.5 billion,increased $1,191.9 million, or approximately 36%72%, during the ninesix months ended OctoberJuly 31, 20202021 compared to the ninesix months ended November 2, 2019August 1, 2020 primarily due to the impact of the COVID-19 pandemic. The Company reported no comparable store sales data for the period due to the temporary closure of its brick-and-mortar stores during a portion of the first six months of 2020 as well as the interdependence between in-store and online sales. Sales in all product categories decreasedincreased significantly duringover the ninefirst six months ended October 31, 2020 compared to the nine months ended November 2, 2019.of fiscal 2020.
During the nine months ended October 31, 2020, net sales from the construction segment decreased $56.0 million or approximately 38% compared to the nine months ended November 2, 2019 due to a decrease in construction activity.
Storewide sales penetration of exclusive brand merchandise for the six months ended July 31, 2021 and August 1, 2020 was 22.8% and 20.8%, respectively.
Compared to the first six months of fiscal 2019, net sales from the retail operations segment for the six months ended July 31, 2021 and August 3, 2019 were $2,836.1 million and $2,798.7 million, respectively, increasing $37.4 million or approximately 1% while sales in comparable stores increased approximately 4%.
During the six months ended July 31, 2021, net sales from the construction segment increased $1.3 million or 2.2% compared to the six months ended August 1, 2020 due to an increase in construction activity.
Service Charges and Other Income
| | | | Three Months Ended | | Nine Months Ended | | Three Months | | Nine Months | | | Three Months Ended | | Six Months Ended | | Three Months | | Six Months |
(in thousands of dollars) | (in thousands of dollars) | | October 31, 2020 | | November 2, 2019 | | October 31, 2020 | | November 2, 2019 | | $ Change 2020-2019 | | $ Change 2020-2019 | (in thousands of dollars) | | July 31, 2021 | | August 1, 2020 | | July 31, 2021 | | August 1, 2020 | | $ Change 2021 - 2020 | | $ Change 2021-2020 |
Service charges and other income: | Service charges and other income: | | | | | | | | | | | | | Service charges and other income: | | | | | | | | | | | | |
Retail operations segment | Retail operations segment | | | | | | | | | | | | | Retail operations segment | | | | | | | | | | | | |
Income from Wells Fargo Alliance | Income from Wells Fargo Alliance | | $ | 16,472 | | | $ | 23,879 | | | $ | 51,958 | | | $ | 66,219 | | | $ | (7,407) | | | $ | (14,261) | | Income from Wells Fargo Alliance | | $ | 17,735 | | | $ | 14,685 | | | $ | 35,443 | | | $ | 35,486 | | | $ | 3,050 | | | $ | (43) | |
Shipping and handling income | Shipping and handling income | | 7,917 | | | 6,670 | | | 28,140 | | | 18,908 | | | 1,247 | | | 9,232 | | Shipping and handling income | | 10,223 | | | 8,657 | | | 18,704 | | | 20,224 | | | 1,566 | | | (1,520) | |
Leased department income | Leased department income | | 212 | | | 993 | | | 1,075 | | | 3,202 | | | (781) | | | (2,127) | | Leased department income | | 1 | | | 491 | | | 3 | | | 862 | | | (490) | | | (859) | |
Other | Other | | 2,562 | | | 2,482 | | | 6,600 | | | 8,604 | | | 80 | | | (2,004) | | Other | | 2,777 | | | 2,291 | | | 5,200 | | | 4,039 | | | 486 | | | 1,161 | |
| | | 27,163 | | | 34,024 | | | 87,773 | | | 96,933 | | | (6,861) | | | (9,160) | | | | 30,736 | | | 26,124 | | | 59,350 | | | 60,611 | | | 4,612 | | | (1,261) | |
Construction segment | Construction segment | | 50 | | | 1,325 | | | 500 | | | 2,892 | | | (1,275) | | | (2,392) | | Construction segment | | 318 | | | 15 | | | 696 | | | 449 | | | 303 | | | 247 | |
Total service charges and other income | Total service charges and other income | | $ | 27,213 | | | $ | 35,349 | | | $ | 88,273 | | | $ | 99,825 | | | $ | (8,136) | | | $ | (11,552) | | Total service charges and other income | | $ | 31,054 | | | $ | 26,139 | | | $ | 60,046 | | | $ | 61,060 | | | $ | 4,915 | | | $ | (1,014) | |
Service charges and other income is composed primarily of income from the Wells Fargo Alliance. Income from the alliance decreasedincreased $3.1 million during the three and nine months ended OctoberJuly 31, 20202021 compared to the three and nine months ended November 2, 2019August 1, 2020 primarily due to decreasesincreases in finance charges. Income from the alliance decreased slightly for the six months ended July 31, 2021 compared to the six months ended August 1, 2020.
Shipping and handling income increased during the three and nine months ended OctoberJuly 31, 20202021 compared to the three and nine months ended November 2, 2019August 1, 2020 due to an increase in online shopping. Shipping and handling income decreased during the six months ended July 31, 2021 compared to the six months ended August 1, 2020 primarily due to thean increase in online orders in the first quarter of 2020 as customer shopping patterns shifted to dillards.com as COVID-19 infection levels increased and ship-from-store capabilities.brick-and-mortar stores were temporarily closed.
Compared to the second quarter of fiscal 2019, shipping and handling income for the three months ended July 31, 2021 and August 3, 2019 was $10.2 million and $6.2 million, respectively, increasing $4.1 million or 66.0%. Shipping and handling income for the six months ended July 31, 2021 and August 3, 2019 was $18.7 million and $12.2 million, respectively, increasing $6.5 million or 52.8%.
Leased department income consisted primarily of commissions from a principal licensed department of an upscale women's apparel vendor located in certain stores. By the end of July 2020, our agreement with this principal licensed department had been terminated. We expect future leased department income to be minimal.
Gross Profit
| | (in thousands of dollars) | (in thousands of dollars) | | October 31, 2020 | | November 2, 2019 | | $ Change | | % Change | (in thousands of dollars) | | July 31, 2021 | | August 1, 2020 | | $ Change | | % Change |
Gross profit: | Gross profit: | | | | | | | | | Gross profit: | | | | | | | | |
Three months ended | Three months ended | | | | | | | | | Three months ended | | | | | | | | |
Retail operations segment | Retail operations segment | | $ | 364,232 | | | $ | 460,549 | | | $ | (96,317) | | | (20.9) | % | Retail operations segment | | $ | 641,240 | | | $ | 277,407 | | | $ | 363,833 | | | 131.2 | % |
Construction segment | Construction segment | | 1,983 | | | 979 | | | 1,004 | | | 102.6 | | Construction segment | | 1,928 | | | 1,790 | | | 138 | | | 7.7 | |
Total gross profit | Total gross profit | | $ | 366,215 | | | $ | 461,528 | | | $ | (95,313) | | | (20.7) | % | Total gross profit | | $ | 643,168 | | | $ | 279,197 | | | $ | 363,971 | | | 130.4 | % |
| Nine months ended | | | | | | | | | |
Six months ended | | Six months ended | | | | | | | | |
Retail operations segment | Retail operations segment | | $ | 737,673 | | | $ | 1,392,057 | | | $ | (654,384) | | | (47.0) | % | Retail operations segment | | $ | 1,194,241 | | | $ | 373,441 | | | $ | 820,800 | | | 219.8 | % |
Construction segment | Construction segment | | 5,925 | | | 1,994 | | | 3,931 | | | 197.1 | | Construction segment | | 3,381 | | | 3,942 | | | (561) | | | (14.2) | |
Total gross profit | Total gross profit | | $ | 743,598 | | | $ | 1,394,051 | | | $ | (650,453) | | | (46.7) | % | Total gross profit | | $ | 1,197,622 | | | $ | 377,383 | | | $ | 820,239 | | | 217.3 | % |
| | | | Three Months Ended | | Nine Months Ended | | | Three Months Ended | | Six Months Ended |
| | | October 31, 2020 | | November 2, 2019 | | October 31, 2020 | | November 2, 2019 | | | July 31, 2021 | | August 1, 2020 | | July 31, 2021 | | August 1, 2020 |
Gross profit as a percentage of segment net sales: | Gross profit as a percentage of segment net sales: | | | | | | | | | Gross profit as a percentage of segment net sales: | | | | | | | | |
Retail operations segment | Retail operations segment | | 36.6 | % | | 34.5 | % | | 28.0 | % | | 33.7 | % | Retail operations segment | | 41.7 | % | | 31.1 | % | | 42.1 | % | | 22.7 | % |
Construction segment | Construction segment | | 6.5 | | | 1.8 | | | 6.5 | | | 1.3 | | Construction segment | | 6.2 | | | 6.9 | | | 5.4 | | | 6.4 | |
Total gross profit as a percentage of net sales | Total gross profit as a percentage of net sales | | 35.7 | | | 33.2 | | | 27.2 | | | 32.6 | | Total gross profit as a percentage of net sales | | 41.0 | | | 30.4 | | | 41.3 | | | 22.1 | |
Gross profit, as a percentage of sales, increased to 35.7%41.0% from 33.2%30.4% during the three months ended OctoberJuly 31, 20202021 compared to the three months ended November 2, 2019,August 1, 2020, respectively.
Gross profit from retail operations, as a percentage of sales, increased to 36.6% from 34.5% during the three months ended October 31, 2020 compared to the three months ended November 2, 2019 primarily due to decreased markdowns. Gross margin increased significantly in ladies' accessories and lingerie and home and furniture. Gross margin increased moderately in ladies' apparel, men's apparel and accessories, junior's and children's apparel and shoes. Gross margin was essentially flat in cosmetics.
Gross profit from the construction segment increased 473 basis points of construction sales for the three months ended October 31, 2020 compared to the three months ended November 2, 2019, respectively.
Gross profit, as a percentage of sales, decreased to 27.2% from 32.6% during the nine months ended October 31, 2020 compared to the nine months ended November 2, 2019.
Gross profit from retail operations, as a percentage of sales, decreasedincreased to 28.0%41.7% from 33.7%31.1% during the ninethree months ended OctoberJuly 31, 20202021 compared to the ninethree months ended November 2, 2019August 1, 2020, respectively, primarily due to increased markdowns taken during the second quarter of fiscal 2020 as a result of the impact of the COVID-19 pandemic.pandemic as well as better inventory management and stronger customer demand leading to decreased markdowns in the second quarter of fiscal 2021. Gross margin decreased significantly in ladies'ladies’ apparel, and shoes. Gross margin decreased moderately in men'smen’s apparel and accessories, shoes, and junior'sjuniors’ and children'schildren’s apparel all improved significantly, gross margin in cosmetics improved moderately while decreasing slightlygross margin in cosmetics. Gross margin increased moderately in ladies'ladies’ accessories and lingerie while increasing significantlyremained essentially flat.
Compared to the second quarter of fiscal 2019, gross profit from retail operations, as a percentage of sales, increased 1,299 basis points of sales to 41.7% during the three months ended July 31, 2021 compared to 28.7% during the three months ended August 3, 2019 primarily due to better inventory management and customer demand leading to decreased markdowns in home and furniture.the second quarter of fiscal 2021.
Gross profit from the construction segment increased 511decreased 71 basis points of construction sales for the ninethree months ended OctoberJuly 31, 20202021 compared to the ninethree months ended November 2,August 1, 2020.
Gross profit, as a percentage of sales, increased to 41.3% from 22.1% during the six months ended July 31, 2021 compared to the six months ended August 1, 2020.
Gross profit from retail operations, as a percentage of sales, increased to 42.1% from 22.7% during the six months ended July 31, 2021 compared to the six months ended August 1, 2020, respectively, primarily due to increased markdowns taken during the first six months of fiscal 2020 as a result of the impact of the COVID-19 pandemic as well as better inventory management and customer demand leading to decreased markdowns in the first six months of fiscal 2021. Gross margin increased significantly in all product categories except cosmetics which increased moderately.
Compared to the first six months of fiscal 2019, respectively.gross profit from retail operations, as a percentage of sales, increased 883 basis points of sales to 42.1% during the six months ended July 31, 2021 compared to 33.3% during the six months ended August 3, 2019 primarily due to better inventory management and customer demand leading to decreased markdowns in the first six months of fiscal 2021.
Gross profit from the construction segment decreased 103 basis points of construction sales for the six months ended July 31, 2021 compared to the six months ended August 1, 2020.
Inventory decreased 22%13% in total as of OctoberJuly 31, 20202021 compared to November 2, 2019.August 1, 2020. A 1% change in the dollar amount of markdowns would have impacted the net lossincome by approximately $1$2 million and $5$4 million for the three and ninesix months ended OctoberJuly 31, 2020,2021, respectively.
Selling, General and Administrative Expenses (“SG&A”)
| | (in thousands of dollars) | (in thousands of dollars) | | October 31, 2020 | | November 2, 2019 | | $ Change | | % Change | (in thousands of dollars) | | July 31, 2021 | | August 1, 2020 | | $ Change | | % Change |
SG&A: | SG&A: | | | | | | | | | SG&A: | | | | | | | | |
Three months ended | Three months ended | | | | | | | | | Three months ended | | | | | | | | |
Retail operations segment | Retail operations segment | | $ | 316,738 | | | $ | 416,707 | | | $ | (99,969) | | | (24.0) | % | Retail operations segment | | $ | 364,212 | | | $ | 265,801 | | | $ | 98,411 | | | 37.0 | % |
Construction segment | Construction segment | | 1,480 | | | 1,442 | | | 38 | | | 2.6 | | Construction segment | | 1,656 | | | 1,261 | | | 395 | | | 31.3 | |
Total SG&A | Total SG&A | | $ | 318,218 | | | $ | 418,149 | | | $ | (99,931) | | | (23.9) | % | Total SG&A | | $ | 365,868 | | | $ | 267,062 | | | $ | 98,806 | | | 37.0 | % |
| Nine months ended | | | | | | | | | |
Six months ended | | Six months ended | | | | | | | | |
Retail operations segment | Retail operations segment | | $ | 871,096 | | | $ | 1,227,588 | | | $ | (356,492) | | | (29.0) | % | Retail operations segment | | $ | 699,355 | | | $ | 554,358 | | | $ | 144,997 | | | 26.2 | % |
Construction segment | Construction segment | | 4,630 | | | 4,846 | | | (216) | | | (4.5) | | Construction segment | | 3,127 | | | 3,150 | | | (23) | | | (0.7) | |
Total SG&A | Total SG&A | | $ | 875,726 | | | $ | 1,232,434 | | | $ | (356,708) | | | (28.9) | % | Total SG&A | | $ | 702,482 | | | $ | 557,508 | | | $ | 144,974 | | | 26.0 | % |
| | | | Three Months Ended | | Nine Months Ended | | | Three Months Ended | | Six Months Ended |
| | | October 31, 2020 | | November 2, 2019 | | October 31, 2020 | | November 2, 2019 | | | July 31, 2021 | | August 1, 2020 | | July 31, 2021 | | August 1, 2020 |
SG&A as a percentage of segment net sales: | SG&A as a percentage of segment net sales: | | | | | | | | | SG&A as a percentage of segment net sales: | | | | | | | | |
Retail operations segment | Retail operations segment | | 31.8 | % | | 31.2 | % | | 33.0 | % | | 29.7 | % | Retail operations segment | | 23.7 | % | | 29.8 | % | | 24.7 | % | | 33.7 | % |
Construction segment | Construction segment | | 4.9 | | | 2.7 | | | 5.0 | | | 3.3 | | Construction segment | | 5.3 | | | 4.9 | | | 5.0 | | | 5.1 | |
Total SG&A as a percentage of net sales | Total SG&A as a percentage of net sales | | 31.0 | | | 30.1 | | | 32.1 | | | 28.8 | | Total SG&A as a percentage of net sales | | 23.3 | | | 29.1 | | | 24.2 | | | 32.7 | |
SG&A decreased by $99.9 million and increased 93 basis pointsto 23.3% of net sales during the three months ended OctoberJuly 31, 20202021 compared to 29.1% of sales during the three months ended November 2, 2019.August 1, 2020, while increasing $98.8 million. SG&A from retail operations decreased by $100.0 million and increased 62 basis pointsto 23.7% of net sales during the three months ended October 31, 2020 compared to the three months ended November 2, 2019. The decrease in SG&A dollars was realized across all SG&A categories; however, it was primarily due to decreases in payroll expense. Payroll expense and related payroll taxes for the three months ended OctoberJuly 31, 2020 was $207.5 million2021 compared to $288.6 million29.8% of sales for the three months ended November 2, 2019, a decline of 28.1%, whichAugust 1, 2020, while increasing $98.4 million. The increase in SG&A dollars was driven by retail store locations operating at reduced hours, which required fewer sales associates.
primarily due to increases in payroll expense and related payroll taxes.
SG&A decreased by $356.7 million and increased 328 basis pointsto 24.2% of net sales during the ninesix months ended OctoberJuly 31, 20202021 compared to 32.7% of sales during the ninesix months ended November 2, 2019.August 1, 2020, while increasing $145.0 million. SG&A from retail operations decreased by $356.5 million and increased 331 basis pointsto 24.7% of net sales duringfor the ninesix months ended OctoberJuly 31, 20202021 compared to 33.7% of sales for the ninesix months ended November 2, 2019.August 1, 2020, while increasing $145.0 million. The decreaseincrease in SG&A dollars was realized across all SG&A categories; however, the decrease was primarily due to decreasesincreases in payroll expense.expense and related payroll taxes.
Payroll expense and related payroll taxes for the ninethree months ended OctoberJuly 31, 20202021 was $560.1$246.7 million compared to $854.0$168.7 million for the ninethree months ended November 2, 2019, a declineAugust 1, 2020, increasing $78.0 million. Payroll expense and related payroll taxes for the six months ended July 31, 2021 was $472.1 million compared to $352.6 million for the six months ended August 1, 2020, increasing $119.5 million. During the first six months of 34.4%. Thefiscal 2020, the Company (a) furloughed store associates as stores temporarily closed due to the COVID-19 pandemic and furlough actions were also implementedfurloughed associates in certain corporate and support facility functions. Stores then re-opened atfunctions and (b) reduced operating hours, requiring fewer sales associates. During the nine months ended October 31, 2020, the Company was also able to reduce payroll expense and related payroll taxes and benefits by $6.1 million through the employee retention credit available under the CARES Act.
Compared to the second quarter of fiscal 2019, SG&A from retail operations for the three months ended July 31, 2021 and August 3, 2019 were $364.2 million (23.7% of sales) and $407.6 million (29.6% of sales), decreasing $43.4 million. SG&A from retail operations for the six months ended July 31, 2021 was $699.4 million (24.7% of sales) compared to $810.9 million (29.0% of sales), decreasing $111.5 million primarily due to decreases in payroll expense and related payroll taxes. During the
first six months of fiscal 2021, stores were operating at reduced operating hours from the first six months of fiscal 2019, requiring fewer sales associates.
Depreciation and Amortization
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
(in thousands of dollars) | | October 31, 2020 | | November 2, 2019 | | $ Change | | % Change |
Depreciation and amortization: | | | | | | | | |
Three months ended | | | | | | | | |
Retail operations segment | | $ | 53,290 | | | $ | 55,963 | | | $ | (2,673) | | | (4.8) | % |
Construction segment | | 87 | | | 180 | | | (93) | | | (51.7) | |
Total depreciation and amortization | | $ | 53,377 | | | $ | 56,143 | | | $ | (2,766) | | | (4.9) | % |
| | | | | | | | |
Nine months ended | | | | | | | | |
Retail operations segment | | $ | 154,806 | | | $ | 162,364 | | | $ | (7,558) | | | (4.7) | % |
Construction segment | | 423 | | | 526 | | | (103) | | | (19.6) | |
Total depreciation and amortization | | $ | 155,229 | | | $ | 162,890 | | | $ | (7,661) | | | (4.7) | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
(in thousands of dollars) | | July 31, 2021 | | August 1, 2020 | | $ Change | | % Change |
Depreciation and amortization: | | | | | | | | |
Three months ended | | | | | | | | |
Retail operations segment | | $ | 49,981 | | | $ | 50,784 | | | $ | (803) | | | (1.6) | % |
Construction segment | | 62 | | | 167 | | | (105) | | | (62.9) | |
Total depreciation and amortization | | $ | 50,043 | | | $ | 50,951 | | | $ | (908) | | | (1.8) | % |
| | | | | | | | |
Six months ended | | | | | | | | |
Retail operations segment | | $ | 96,319 | | | $ | 101,516 | | | $ | (5,197) | | | (5.1) | % |
Construction segment | | 132 | | | 336 | | | (204) | | | (60.7) | |
Total depreciation and amortization | | $ | 96,451 | | | $ | 101,852 | | | $ | (5,401) | | | (5.3) | % |
Depreciation and amortization expense decreased $2.8$0.9 million and $7.7$5.4 million during the three and ninesix months ended OctoberJuly 31, 20202021 compared to the three and ninesix months ended November 2, 2019,August 1, 2020 primarily due to the timing and composition of capital expenditures.
Interest and Debt Expense, Net
| | (in thousands of dollars) | (in thousands of dollars) | | October 31, 2020 | | November 2, 2019 | | $ Change | | % Change | (in thousands of dollars) | | July 31, 2021 | | August 1, 2020 | | $ Change | | % Change |
Interest and debt expense (income), net: | Interest and debt expense (income), net: | | | | | | | | | Interest and debt expense (income), net: | | | | | | | | |
Three months ended | Three months ended | | | | | | | | | Three months ended | | | | | | | | |
Retail operations segment | Retail operations segment | | $ | 12,167 | | | $ | 11,562 | | | $ | 605 | | | 5.2 | % | Retail operations segment | | $ | 10,782 | | | $ | 12,885 | | | $ | (2,103) | | | (16.3) | % |
Construction segment | Construction segment | | (5) | | | (26) | | | 21 | | | 80.8 | | Construction segment | | (11) | | | (12) | | | 1 | | | 8.3 | |
Total interest and debt expense, net | Total interest and debt expense, net | | $ | 12,162 | | | $ | 11,536 | | | $ | 626 | | | 5.4 | % | Total interest and debt expense, net | | $ | 10,771 | | | $ | 12,873 | | | $ | (2,102) | | | (16.3) | % |
| Nine months ended | | | | | | | | | |
Six months ended | | Six months ended | | | | | | | | |
Retail operations segment | Retail operations segment | | $ | 37,343 | | | $ | 35,104 | | | $ | 2,239 | | | 6.4 | % | Retail operations segment | | $ | 22,332 | | | $ | 25,176 | | | $ | (2,844) | | | (11.3) | % |
Construction segment | Construction segment | | (38) | | | (83) | | | 45 | | | 54.2 | | Construction segment | | (26) | | | (33) | | | 7 | | | 21.2 | |
Total interest and debt expense, net | Total interest and debt expense, net | | $ | 37,305 | | | $ | 35,021 | | | $ | 2,284 | | | 6.5 | % | Total interest and debt expense, net | | $ | 22,306 | | | $ | 25,143 | | | $ | (2,837) | | | (11.3) | % |
Net interest and debt expense increased $0.6decreased $2.1 million and $2.8 million during the three and six months ended OctoberJuly 31, 20202021 compared to the three and six months ended November 2, 2019 August 1, 2020, respectively, primarily due to an increase in fees associated with the amendmenta decrease of the credit facility. Net interest and debt expense increased $2.3 million during the nine ended October 31, 2020 compared to the nine months ended November 2, 2019 primarily due to an increase in short termshort-term borrowings under the credit facility. Total weighted average debt increaseddecreased by $10.3$217.2 million and $111.8$241.3 million during the three and ninesix months ended OctoberJuly 31, 2020, respectively,2021 compared to the three and ninesix months ended November 2, 2019August 1, 2020, respectively, primarily due to a decrease of short-term borrowings under the increase of short term borrowings.credit facility.
Other Expense
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
| | | | | | |
(in thousands of dollars) | | July 31, 2021 | | August 1, 2020 | | $ Change | | % Change |
Other expense: | | | | | | | | |
Three months ended | | | | | | | | |
Retail operations segment | | $ | 2,134 | | | $ | 2,104 | | | $ | 30 | | | 1.4 | % |
Construction segment | | — | | | — | | | — | | | — | |
Total other expense | | $ | 2,134 | | | $ | 2,104 | | | $ | 30 | | | 1.4 | % |
| | | | | | | | |
Six months ended | | | | | | | | |
Retail operations segment | | $ | 7,098 | | | $ | 4,208 | | | $ | 2,890 | | | 68.7 | % |
Construction segment | | — | | | — | | | — | | | — | |
Total other expense | | $ | 7,098 | | | $ | 4,208 | | | $ | 2,890 | | | 68.7 | % |
Other expense increased $2.9 million during the six months ended July 31, 2021 compared to the six months ended August 1, 2020 primarily due to the write-off of certain deferred financing fees in connection with the amendment and extension of the Company's secured revolving credit facility.
(Gain) Loss (Gain) on Disposal of Assets
| | (in thousands of dollars) | (in thousands of dollars) | | October 31, 2020 | | November 2, 2019 | | $ Change | | (in thousands of dollars) | | July 31, 2021 | | August 1, 2020 | | $ Change | |
Loss (gain) on disposal of assets: | | | | | | | | |
(Gain) loss on disposal of assets: | | (Gain) loss on disposal of assets: | | | | | | | |
Three months ended | Three months ended | | | | | | | | Three months ended | | | | | | | |
Retail operations segment | Retail operations segment | | $ | 2,234 | | | $ | 303 | | | $ | 1,931 | | | Retail operations segment | | $ | (6) | | | $ | 45 | | | $ | (51) | | |
Construction segment | Construction segment | | (13) | | | 1 | | | (14) | | | Construction segment | | (3) | | | (12) | | | 9 | | |
Total loss (gain) on disposal of assets | | $ | 2,221 | | | $ | 304 | | | $ | 1,917 | | | |
Total (gain) loss on disposal of assets | | Total (gain) loss on disposal of assets | | $ | (9) | | | $ | 33 | | | $ | (42) | | |
| Nine months ended | | | | | | | | |
Six months ended | | Six months ended | | | | | | | |
Retail operations segment | Retail operations segment | | $ | 2,261 | | | $ | (11,997) | | | $ | 14,258 | | | Retail operations segment | | $ | (24,679) | | | $ | 27 | | | $ | (24,706) | | |
Construction segment | Construction segment | | (26) | | | 1 | | | (27) | | | Construction segment | | (3) | | | (13) | | | 10 | | |
Total loss (gain) on disposal of assets | | $ | 2,235 | | | $ | (11,996) | | | $ | 14,231 | | | |
Total (gain) loss on disposal of assets | | Total (gain) loss on disposal of assets | | $ | (24,682) | | | $ | 14 | | | $ | (24,696) | | |
During the three and ninesix months ended OctoberJuly 31, 2020,2021, the Company recorded proceeds of $1.5 million primarily from the sale of one store property, resulting in a loss of $2.2 million that was recorded in loss (gain) on disposal of assets.
During the three months ended November 2, 2019, the Company recorded a loss of $0.3 million primarily from the sale of one store property. that was recorded in loss (gain) on disposal of assets.
During the nine months ended November 2, 2019, the Company recorded proceeds of $22.0$29.3 million primarily from the sale of three store properties, resulting in a gain of $12.0$24.7 million that was recorded in (gain) loss (gain) on disposal of assets.
Income Taxes
The Company’s estimated federal and state effective income tax rate was approximately 22.8% and 22.5% for the three and six months ended July 31, 2021, respectively. During the three and six months ended July 31, 2021, income tax expense differed from what would be computed using the statutory federal income tax rate primarily due to the effects of state and local income taxes.
The Company expects to bewas in a net operating loss position for the fiscal year.year ended January 30, 2021. The CARESCoronavirus Aid, Relief and Economic Security (“CARES”) Act, signed into law on March 27, 2020, allows for net operating loss carryback to years in which the statutory federal income tax rate was 35% rather than the current 21%. The Company’sCompany's estimated federal and state effective income tax rate was approximately 46.9%74.3% and 34.8% for the ninethree and six months ended October 31, 2020.August 1, 2020, respectively. During the three and ninesix months ended October 31,August 1, 2020, income tax benefit differed from what would be computed using the current statutory federal income tax rate of 21% primarily due to the recognition of a net tax benefit of $32.4$17.4 million and $64.6$32.1 million, respectively, related to the rate differential in the carryback year including its impact on changes in estimates of temporary differences for the current and prior year. Income tax benefit for the three and ninesix months also included the effects of federal tax credits and state and local income taxes.
The Company’s estimatedCompany expects the fiscal 2021 federal and state effective income tax rate was approximately -88.2%to approximate 22% to 23%. This rate may change if results of operations for fiscal 2021 differ from management’s current expectations. Changes in the Company’s assumptions and 15.8% forjudgments can materially affect amounts recognized in the three and nine months ended November 2, 2019, respectively. During the three and nine months ended November 2, 2019, income taxes differed from what would be computed using the statutory federal tax rate primarily due to the effects of federal tax credits and state and local income taxes which included tax benefits recognized of approximately $2.8 million for amended state income tax return filings and related decreases to accrued state income taxes.condensed consolidated financial statements.
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.
FINANCIAL CONDITION
A summary of net cash flows for the ninesix months ended OctoberJuly 31, 20202021 and November 2, 2019August 1, 2020 follows:
| | | | Nine Months Ended | | | | | Six Months Ended | | |
(in thousands of dollars) | (in thousands of dollars) | | October 31, 2020 | | November 2, 2019 | | $ Change | (in thousands of dollars) | | July 31, 2021 | | August 1, 2020 | | $ Change |
Operating Activities | Operating Activities | | $ | (62,938) | | | $ | 22,984 | | | $ | (85,922) | | Operating Activities | | $ | 492,301 | | | $ | (294,509) | | | $ | 786,810 | |
Investing Activities | Investing Activities | | (50,352) | | | (47,534) | | | (2,818) | | Investing Activities | | (9,101) | | | (38,084) | | | 28,983 | |
Financing Activities | Financing Activities | | (102,663) | | | (11,427) | | | (91,236) | | Financing Activities | | (174,065) | | | 138,384 | | | (312,449) | |
Total Decrease in Cash, Cash Equivalents and Restricted Cash | | $ | (215,953) | | | $ | (35,977) | | | $ | (179,976) | | |
Total Increase (Decrease) in Cash and Cash Equivalents | | Total Increase (Decrease) in Cash and Cash Equivalents | | $ | 309,135 | | | $ | (194,209) | | | $ | 503,344 | |
Net cash flows from operations decreased $85.9increased $786.8 million during the ninesix months ended OctoberJuly 31, 20202021 compared to the ninesix months ended November 2, 2019August 1, 2020 due to significant decreasesincreases in net income, primarily due to decreasesincreases in sales,gross profit and changes in working capital.
The Company took a number Compared to the first six months of actions to enhance liquidity duringfiscal 2019, net cash flows provided by operations for the ninesix months ended OctoberJuly 31, 2020 as2021 were $492.3 million compared to cash flows used in operations for the COVID-19 pandemic progressed, including the following:
▪Extended vendor payment terms during the first quarter but restored most vendors to standard payment terms bysix months ended August 1, 2020
▪Canceled, suspended and significantly delayed merchandise shipments
▪Reduced merchandise purchases during the first, second and third quarters by 33%, 62% and 31%, respectively
▪Reviewed and reduced discretionary operating and capital expenditures
▪Reduced payroll expense
▪Executed aggressive promotional markdowns to clear inventory3, 2019 of $18.6 million, increasing $510.9 million.
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-goingongoing 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 $52.0$35.4 million and $66.2$35.5 million from the Wells Fargo Alliance during the ninesix months ended OctoberJuly 31, 20202021 and November 2, 2019,August 1, 2020, respectively. The Company is unable to quantifycannot reasonably predict whether there will be any ongoing impact or the magnitude of any such impact of the COVID-19 pandemic on the portfolio's future earnings and the on-goingongoing cash compensation from the Wells Fargo Alliance.
During the ninesix months ended OctoberJuly 31, 2020,2021, the Company received proceeds from insurance of $8.7$2.3 million for claims filed for merchandise losses related to storm damage incurred at two stores.
Capital expenditures were $52.1$41.2 million and $70.9$38.6 million for the ninesix months ended OctoberJuly 31, 20202021 and November 2, 2019,August 1, 2020, respectively. The capital expenditures were primarily related to equipment purchases and the remodelingcontinued construction of existingtwo new stores during the current year. The Company has announced plans to open a new store at Mesa Mall in Grand Junction, Colorado during the Fall of 2021 (100,000 square feet). The Company has also announced plans to open a new store at University Place in Orem, Utah in the Spring of 2022 (160,000 square feet). Both opportunities arose from peer closures at those centers.
During the ninesix months ended OctoberJuly 31, 2020,2021, the Company received cash proceeds of $1.5 million and recorded a related loss of $2.2 million, primarily for the sale of one store property in Slidell, Louisiana.
During the nine months ended November 2, 2019, the Company received cash proceeds of $22.0$29.3 million and recorded a related gain of $12.0$24.7 million, forprimarily from the sale of three store locations in Boardman, Ohio, Boynton Beach, Florida and Cary, North Carolina. The proceeds from the Cary, North Carolina store sale were being held in escrow for the acquisition of replacement property underproperties: (1) a like-kind exchange agreement. The escrow account was administered by an intermediary. Pursuant to the like-
kind exchange agreement, the cash was restricted for a maximum of 180 days from the date of the property sale pending the acquisition of replacement property. As of November 2, 2019, the acquisitions of a replacement property had not yet occurred; therefore, the proceeds were classified as restricted cash on the condensed consolidated balance sheet. The proceeds from the Boardman, Ohio store sale were previously held in escrow prior to the acquisition of the replacement property120,000 square foot location at ColumbiaCortana Mall in Columbia, MissouriBaton Rouge, Louisiana, which was permanently closed and sold; (2) a 200,000 square foot location at Paradise Valley Mall in Phoenix, Arizona, which was sold during our first fiscal quarter and closed during our second fiscal quarter and (3) a non-operating store property in Knoxville, Tennessee. The Company also plans to close its clearance center at Valle Vista Mall in Harlingen, Texas (100,000 square feet) during the third quarterquarter. There were no material costs associated or expected with any of fiscal 2019.
During the nine months ended October 31, 2020, the Company opened an 85,000 square foot expansion at Columbia Mall in Columbia, Missouri (dual-anchor location totaling 185,000 square feet). Additionally, the Company replaced 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 190,000 square feet).
During the nine months ended October 31, 2020, we permanently closed the locations at Central Mall in Lawton, Oklahoma (100,000 square feet); Crossroads Center in Waterloo, Iowa (150,000 square feet); and North Plains Mall in Clovis, New Mexico (62,000 square feet). We announced the upcoming closure of the Paradise Valley Mall location in Phoenix, Arizona (200,000 square feet).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 the six months ended July 31, 2021, the Company received proceeds from insurance of $2.8 million for claims filed for building losses related to storm damage incurred at two stores.
The Company had cash on hand of $61.1$669.5 million as of OctoberJuly 31, 2020. As2021. During the first quarter of fiscal 2020 and as part of our overall liquidity management strategy and for peak working capital requirements, the Company maintained an unsecured credit facility that provided a borrowing capacity of $800 million with a $200 million expansion option ("credit agreement") until the credit agreement was amended in April 2020 (the "amended credit agreement"). After giving effect to the amendment, the amended credit agreement became secured by certain deposit accounts of the Company and certain inventory of certain subsidiaries. The amended 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 rate of interest on borrowings under the amended credit agreement is the greater of LIBOR or 1.0% plus 1.750%, and the commitment fee for unused borrowings is 0.30% per annum. So long as availability exceeds $100 million and no event of default occurs and is continuing, there are no financial covenant requirements under the amended credit agreement. The Company paid $3.2 million in issuance costs related to the amended credit agreement, which were recorded in other assets on the condensed consolidated balance sheet.
As part of the Company's liquidity strategy during the COVID-19 pandemic, in March 2020, the Company borrowed $779 million under the credit agreement.
The credit agreement which was amended in April 2020 and became secured by certain deposit accounts of the Company and certain inventory of certain subsidiaries (the "2020 amended credit agreement"). The borrowings of $779 million were repaid concurrent with the execution of the 2020 amended credit agreement. During the six months ended August 1, 2020, the Company paid $3.0 million in issuance costs related to the 2020 amended credit agreement, which were recorded in other assets on the condensed consolidated balance sheet.
In April 2021, the Company further amended its secured credit agreement (the “2021 amended credit agreement”). See Note 7, Revolving Credit Agreement, in the "Notes to Condensed Consolidated Financial Statements," in Part I, Item I hereof for additional information. During the six months ended July 31, 2021, the Company paid $3.0 million in issuance costs related to the 2021 amended credit agreement, which were recorded in other assets on the condensed consolidated balance sheet, and the Company recognized a loss on the early extinguishment of debt of $2.8 million for the write-off of certain remaining deferred financing fees related to the 2020 amended credit agreement. This charge was recorded in other expense on the condensed consolidated statement of operations.
At OctoberJuly 31, 2020,2021, no borrowings of $15.0 million were outstanding, and letters of credit totaling $21.1$20.2 million were issued under the 2021 amended credit agreement leaving unutilized availability under the credit facility of $763.9$716.0 million. The weighted average interest rate under the credit agreement for the borrowings outstanding at October 31, 2020 was 2.75%.
During the ninesix months ended OctoberJuly 31, 2020,2021, the Company repurchased 2.21.4 million shares of Class A Common Stock at an average price of $42.83$125.81 per share for $95.6$171.0 million (including the accrual of $6.8 million of share repurchases that had not settled as of July 31, 2021) under the Company's March 2018 Plan. During the six months ended August 1, 2020, the Company repurchased 1.6 million shares of Class A Common Stock at an average price of $47.99 per share for $76.1 million (including the accrual of $3.0 million of share repurchases that had not settled as of August 1, 2020) under the Company's March 2018 Plan. Additionally, the Company paid $7.3 million for share repurchases that had not yet settled but were accrued at February 1, 2020. During the nine months ended November 2, 2019, the Company repurchased 1.7 million shares of Class A Common Stock at an average price of $60.96 per share for $101.5 million under the Company's March 2018 Plan. At OctoberJuly 31, 2020, $173.12021, $2.1 million of authorization remained under the March 2018 Plan and $500.0 million of authorization remained under the May 2021 Plan. The ultimate disposition of the repurchased stock has not been determined. See Note 8, Stock Repurchase Programs, in the "Notes to Condensed Consolidated Financial Statements," in Part I, Item I hereof for additional information.
The COVID-19 pandemic has had and may continue to have a significant negative effectimpact on the Company's liquiditybusiness, results of operations and net sales. Due to heightenedfinancial position. Because there is still significant uncertainty relating toaround the impactseffects of the COVID-19 pandemic on the Company’sCompany's business operations, including the durationour profitability and impact on overall customer demand, our liquidity net sales and profitability may be further impacted if we are unable to appropriately manage our inventory levels and expenses.expenses relative to any change in consumer demand.
The Company expects to finance its operations during fiscal 20202021 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.
There have been no material changes in the information set forth under caption “Contractual Obligations and Commercial“Commercial Commitments” in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in the Company’s Annual Report on Form 10-K for the fiscal year ended February 1, 2020.January 30, 2021.
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.
NEW ACCOUNTING STANDARDS
For information with respect to new accounting pronouncements and the impact of these pronouncements on our consolidated financial statements, see Note 2, Accounting Standards, in the "Notes to Condensed Consolidated Financial Statements," in Part I, Item I hereof.
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,” “should,” “believe,” “expect,” “future,” “potential,” “anticipate,” “intend,” “plan,” “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 statements regarding management’s expectations and forecasts for the remainder of fiscal 20202021 and beyond, statements concerning the opening of new stores or the closing of existing stores, statements concerning capital expenditures and sources of liquidity, statements regarding the expected impact of the COVID-19 pandemic and related government responses, including the CARES Act and other subsequently-enacted COVID-19 stimulus packages, statements concerning share repurchases, statements concerning pension contributions, statements regarding the expected phase out of LIBOR 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) 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; other general retail industry conditions and macro-economic conditions;conditions including inflation and changes in traffic at malls and shopping centers; economic and weather conditions for regions in which the Company’s stores are located and the effect of these factors on the buying patterns of the Company’s customers, including the effect of changes in prices and availability of oil and natural gas; the availability of consumer credit; the impact of competitive pressures in the department store industry and other retail channels including specialty, off-price, discount and Internet retailers; changes in consumer spending patterns, debt levels and their ability to meet credit obligations; changes in tax legislation; changes in legislation, affecting such matters as the cost of employee benefits or credit card income; adequate and stable availability and pricing of materials, production facilities and labor from which the Company sources its merchandise; changes in operating expenses, including employee wages, commission structures and related benefits; system failures or data security breaches; possible future acquisitions of store properties from other department store operators; the continued availability of financing in amounts and at the terms necessary to support the Company’s future business; fluctuations in LIBOR and other base borrowing rates; the elimination of LIBOR; potential disruption from terrorist activity and the effect on ongoing consumer confidence; other epidemic, pandemic or 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.The Company's filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended February 1, 2020,January 30, 2021, contain other information on factors that may affect financial results or cause actual results to differ materially from forward-looking statements.
Item 3. Quantitative and Qualitative Disclosures About Market RiskRisk.
There have been no material changes in the information set forth under caption “Item 7A-Quantitative and Qualitative Disclosures About Market Risk” in the Company’s Annual Report on Form 10-K for the fiscal year ended February 1, 2020.January 30, 2021.
Item 4. Controls and ProceduresProcedures.
The Company has established and maintains disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). 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 quarter covered by this quarterly 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.
There were no changes in our internal control over financial reporting that occurred during the fiscal quarter ended OctoberJuly 31, 20202021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal ProceedingsProceedings.
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 December 4, 2020,September 3, 2021, the Company is not a party to any legal proceedings that, individually or in the aggregate, are reasonably expected to have a material adverse effect on the Company’s business, results of operations, financial condition or cash flows.
Item 1A. Risk FactorsFactors.
"Item 1A, Risk Factors"There have been no material changes in ourthe information set forth under caption “Item 1A-Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended February 1, 2020, as filed with the Securities Exchange Commission on March 31, 2020 includes a discussion of our risk factors. The information presented below updates, and should be read in conjunction with, the risk factors disclosed in our Annual Report on Form 10-K. The effects of the events and circumstances described in the following risk factor may have the additional effect of heightening many of the risks noted in our Annual Report on Form 10-K. Otherwise, except as presented below, there have been no material changes to the risk factors disclosed in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended February 1, 2020, as filed with the Securities Exchange Commission on March 31, 2020.
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, has had, and could continue to 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 the United States. In response to the pandemic, national and local governments, including those in the regions in which we operate, have taken various measures to attempt to slow the spread of the virus, including 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.” Accordingly, the Company began closing its stores on March 19, 2020, and all brick-and-mortar store locations were temporarily closed to the public by April 9, 2020.
The Company had reopened all stores as of June 2, 2020. Stores are operating at reduced hours and implementing certain safety measures to ensure the safety of our customers and associates, which may have the effect of discouraging shopping or limiting the occupancy of our stores. These measures, and any additional measures that have been and may continue to be taken in response to the COVID-19 pandemic, 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, which has had, and will likely continue to have a material adverse effect on our business, financial condition and results of operations. All stores are currently open and operating at reduced hours. A very small number of our locations were temporarily closed to in-store shopping due to government mandate. Other local mandates throughout the country require occupancy limits with which we are required to comply. At this time, it is unclear how long these measures may remain in place, what additional measures may be imposed, or when our operations will be restored to the levels that existed prior to the COVID-19 pandemic. A recent surge in reported cases and hospitalizations in the U.S. could result in additional mandated business closures.
In addition, our business depends on consumer discretionary spending, and as such, our results are particularly sensitive to economic conditions and consumer confidence. COVID-19 has significantly impacted economic conditions, resulting in, among other things, unprecedented increases in the number of people seeking jobless benefits and a significant decline in global financial markets. As a result, even when all of our store locations are fully operational, there can be no guarantee that our revenue will return to its pre-COVID-19 levels.
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, which 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.January 30, 2021.
Additionally, 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.
Item 2. Unregistered Sales of Equity Securities and Use of ProceedsProceeds.
(a) Unregistered Sales of Equity Securities
On February 11, 2021, the Company issued 12,000 shares of Class A Common Stock in exchange for 12,000 shares of Class B Common Stock tendered for conversion pursuant to the Certificate of Incorporation. The transaction was exempt from registration under Section 3(a)(9) of the Securities Act of 1933.
(c) Purchases of Equity Securities
| Issuer Purchases of Equity Securities | Issuer Purchases of Equity Securities | Issuer Purchases of Equity Securities |
Period | Period | | (a) Total Number of Shares Purchased | | (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 | Period | | (a) Total Number of Shares Purchased | | (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 |
| August 2, 2020 through August 29, 2020 | | 265,985 | | | $ | 26.94 | | | 265,985 | | | $ | 185,419,113 | | |
August 30, 2020 through October 3, 2020 | | 379,299 | | | 32.41 | | | 379,299 | | | 173,124,594 | | |
October 4, 2020 through October 31, 2020 | | — | | | — | | | — | | | 173,124,594 | | |
May 2, 2021 through May 29, 2021 | | May 2, 2021 through May 29, 2021 | | 256,927 | | | $ | 112.86 | | | 256,927 | | | $ | 585,313,262 | |
May 30, 2021 through July 3, 2021 | | May 30, 2021 through July 3, 2021 | | 65,111 | | | 148.34 | | | 65,111 | | | 575,654,805 | |
July 4, 2021 through July 31, 2021 | | July 4, 2021 through July 31, 2021 | | 412,429 | | | 178.34 | | | 412,429 | | | 502,103,905 | |
Total | Total | | 645,284 | | | $ | 30.16 | | | 645,284 | | | $ | 173,124,594 | | Total | | 734,467 | | | $ | 152.77 | | | 734,467 | | | $ | 502,103,905 | |
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 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 Securities Exchange Act of 1934 or through privately negotiated transactions. The March 2018 PlanThis repurchase plan has no expiration date.
During the three months ended OctoberJuly 31, 2020,2021, the Company repurchased 0.60.7 million shares totaling $19.5$112.2 million. As of OctoberJuly 31, 2020, $173.12021, $2.1 million of authorization remained under the March 2018 Plan.
On May 15, 2021, the Company announced that its Board of Directors approved a new open-ended stock repurchase program authorizing the Company to repurchase up to $500 million of its Class A Common Stock. The Company intends to exhaust the remaining authorization under the March 2018 Plan before repurchasing any shares under the new repurchase program. Reference is made to the discussion in Note 8, Stock Repurchase ProgramPrograms, in the “Notes to Condensed Consolidated Financial Statements” in Part I of this Quarterly Report on Form 10-Q, which information is incorporated by reference herein.
Item 6. ExhibitsExhibits.
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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 |
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101.SCH | | Inline XBRL Taxonomy Extension Schema Document |
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101.CAL | | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
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101.DEF | | Inline XBRL Taxonomy Extension Definition Linkbase Document |
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101.LAB | | Inline XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE | | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
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104 | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrantregistrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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| | | DILLARD’S, INC. |
| | | (Registrant) |
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Date: | December 4, 2020September 3, 2021 | | /s/ Phillip R. Watts |
| | | Phillip R. Watts |
| | | Senior Vice President, Co-Principal Financial Officer and Principal Accounting Officer |
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| | | /s/ Chris B. Johnson |
| | | Chris B. Johnson |
| | | Senior Vice President and Co-Principal Financial Officer |