Dillard’s Co. 10K Report 1. General Information A. The company’s corporate office is headquartered in Little Rock, Arkansas. I found this information on Dillard’s website in the non-selling location directory. (F-3) B. The fiscal year for Dillard’s ends on the last Saturday of January. This information was found in the 2010 annual report. (F3) C. The types of products and services that it sells are retail clothing and merchandise. I found this information on the company website. D. The next annual stockholder’s meeting is on the 3rd Saturday of May. So may 19th, 2012 at the corporate headquarters in Little Rock, Arkansas.

This information was found on allbusiness. com 2. Report of Independent External Auditor A. The corporation’s independent auditor is Price Waterhouse Coopers LLP. They are located in Dallas, Texas. (37) B. The auditor believes that the financial statements were presented fairly as a result of them issuing a report on the effectives of their internal control over financial reporting as of January 29, 2011. (F2) 3. It provides complete balance sheets for two years, cash flow statements for 3 years, and 3 years of income statements. 4. Income statement(23) A. Its revenues over the last year have increased.

The percentage increased was . 42%. (6120961-609498)/609498X100=. 42 B. The company’s revenue recognition policy is the revenue “point of sale”. This information was found in Dillard’s 10k. C. The costs of goods sold have decreased over the last year by -3. 10%. (3976063-4102892)/4102892X100=-3. 10 Some ways to decrease cost of goods sold are to redesign products and making them simpler so less money is put into the cost of production. An example of this could be using the same material throughout the shirt instead of adding two types of shirt materials together.

D. The percentage change in revenue to the change in cost of goods sold is that they are not similar due to the fact that the percent change in revenue is only . 42% while the percent of change in cost of goods sold is down by -3. 10%. The management talks about the revenue and net income increasing from $179. 6 million compared to the $68. 5 million in 2009. Costs of sales have also gone down from $4102892 thousands in 2009 to $3976063 thousands in 2010. (16 &23) E. Dillard’s net income increased from $68531 thousand in 2010 to $179,620 thousand in 2011.

The percentage change was 162%. To find the percent change you subtract 68531 from 179620 and divide it by 68531= 1. 62 (23) F. The method of depreciation that the company uses is the straight-line method over estimated useful lives. I found this information in the section of “notes to Consolidated Financial Statements”-“Description of business and summary of significant Accounting Policies. ” A reason as to why this company uses this method could be that it splits the cost equally over its useful life in set amounts. (F9) G.

The amount reported for depreciation expense for the fiscal year 2010 was $262 million. I found this in the Notes to Consolidated Financial Statement. (F9) 5. Balance Sheet(F13) A. The total assets decreased for the current year when compared to the past year. The percent change was -4. 25 (4332262-4524694)/4524694X100=-4. 25. The largest asset was the company’s consolidated operations. B. The balance sheet accounts that were most significant in explaining the changes in total assets for the corporation were that buildings under construction increased by about $50,000.

Accounts receivable has also increased by about $37,000. Furthermore, buildings and equipment under capital leases had also increased by almost double. A reason as to why account receivable increased could be that more people are spending and buying more. I found this information in the company’s consolidated balance sheet on page F-4. 6. Cash Flow Statement(F7) A. The company has a cash outflow from operating activities. I used the company’s consolidated statements of cash flow. The item that I used for the operating activities was net income and the net cash provided by operating activities.

The company also had a cash inflow as a result of it being stated in the consolidated statements of cash flow. It states that they received money from reimbursements and revenue. (31) B. The company has a cash inflow as well as cash outflow for its investing activities. Cash inflow is from the sales of property and equipment while the cash outflow is from payment from capital from property and equipment. The largest item in investing activities was the purchase of property and equipment which resulted in a total of $98. 2 million. (F-7) C.

The company has cash inflow from its financing activities. Its main source for cash inflow is their credit facility which brings in $1 billion. The company also has cash outflow from its financing activities due to its repayment on things such as mortgage, long term notes, paying out dividends, and also stock purchases. (32) 7. Profitability ratios A. The asset turnover ratio for Dillard’s is 1. 40. This is because you take their total sales revenue which is equal to $6120961billion divided by their total assets which equal out to $4374166billion.

The asset turnover ratio is a way to determine or see how well they use the assets that they have. The asset turnover ratio for Dillard’s is strength since the number is in the positives. (F5) B. The 2010 net profit margin for Dillard’s was 0. 029. This can be found by dividing net income from sales revenue. So for Dillard’s fiscal year, you take their net income of $179600 thousand divided by their sales revenue of $6120961 thousand. The 2009 net profit margin for Dillard’s was 0. 011.

This number can be found by taking their net income for 2009 by $68531 thousand divided by the sales revenue of $6094948 thousand. The 2008 net profit margin was 0. 035. This can be found by taking their net income of $241065 thousand divided by $6830543 thousand. There is not a steady trend for Dillard’s net profit margin due to the fact that the economy is not predictable as of now. One year they can have a great year as they did in 2008 but then the next year it can be bad as seen in 2009. This is a weakness due to the fact that there is no certainty and also that the economy is always changing. 13) C. The company’s gross profit percentage for 2010 is 35%. This number can be found by taking the net sales – the cost of sales divided by net sales times 100. For 2010 you would take their net sales of $6120961 thousand minus by $3976063 thousand divided by $6120961 thousand which gives you . 35 which is then timed by 100. The company’s gross profit percentage for 2009 was 32%. This was computed by taking $6094948 thousand – $4102892 thousand divided by $6094948 thousand timed by 100. The Company gross profit percentage for 2008 was 29%.

This was computed by taking $6830543 thousand – $4827769 thousand divided by $6830543 thousand timed by 100. There is a trend which is an increase in their gross profit percentage that can be seen due to the increase from 29% to 32% to 35% from 2008 to 2010. This is a strength since the higher the number, the better profit they are making which allows for them to pay for expenses. (13) D. The return on equity for 2010 was 279%. This was found by taking their net income for 2010 of $6120961 thousand and dividing it by the average stockholders’ equity.

The average stock holder’s equity can be computed by taking the stock holders equity for 2010 and 2009 and dividing it by 2. So for 2010 it was $6120961 thousand divided by ($2086720 thousand+ 2304103thousand) divided by 2 which equals $2195411. 5 thousand. $6120961 thousand divided by $2195411. 5 thousand equals 2. 79 or 279%. The return on equity for 2009 was 268%. This percentage for ROE was found by taking the net sales for 2009 of $6094948 thousand and dividing that by the AVG stockholders equity. The Average stockholders equity was $2277609 thousand.

This was found by taking the stockholders equity for the 2009 and 2008 and dividing it by 2 so ($2304103+2251115)/2. The return on equity for 2008 was 287%. This can be found by taking the net income for 2008 of $6830543 thousand and dividing it by the average stockholders equity. The stockholders equity was (2251115+2514111)/2=$2382613. $6830543/2382613= 2. 87 or 287%. There is no trend indicated due to the fact that the percentage are not steadily increasing or decreasing. This is a weakness due to the fact that the trend cannot be determined. (13) E.

Compared to the previous year, the corporation has improved its ability to generate a profit since it has increased its gross profit percentage in 2009 of 29% to a gross profit percentage increase of 35% in 2010. In two years they have increased their gross profit percentage by 6%. The net profit margin for 2010 has also increased from its net profit margin in 2009 which is another source of evidence indicating that the corporation has improved its ability to generate profit. (13) F. The basic earnings per share for continuing operations in 2010 were $. 9 thousand. This was found by taking the net income for the year and dividing it by the average number of common shares outstanding. $6120961 thousand divided by 67174163 thousand= $. 09. The basic earnings per share for continuing operations in 2010 were $. 08 thousand. This was found by taking the net income for the year and dividing it by the average number of common shares outstanding. $6094948 thousand divided by 73783960 thousand= $ . 08. The change in EPS was a result of changes to both the numerator and the denominator.

The net income increased but the average number of common shares outstanding decreased. (13) 8. Liquidity G. The company’s current ratio for 2011 is 2. 05. This is found by taking the total current assets and dividing it by the total current liabilities. For 2011 the current ratio was 1701926/831212=2. 05 The company’s current ratio for 2010 was 2. 28. The 2010 current ratio was 1749529/769022=2. 28. The current ratio is adequate seeing that the 10K was written in March and all the numbers were for the year in the report.

The current ratio is used to evaluate the liquidity for the year in the company. (F4) H. The company’s receivable turnover I. Dillard’s end of the year inventory is $1290147 thousand which is a decrease from its previous year amount of $1300680 thousand. (F4) J. K. The inventory costing method that the company uses is the Last in, First out method for assessing its merchandise inventory. I found this information on page 20 under “Description of Business and Summary of Significant Accounting Policies” under “Notes to Consolidated Financial Statements”. 20) 9. Solvency Ratios L. The debt-to-asset ratio for the year 2011 was . 52. This was found using the debt-to-asset ratio formula of total liabilities divided by total assets. For the total liabilities from Dillard’s 10k, you must subtract stockholders equity from total liabilities to be used in the formula. $4374166 thousand minus 2086720=$2287446. With that number you now put that into the formula to be divided by total assets so 2287446/4374166=. 52. For the debt-to-ratio for the year 2010, it was . 50.

Again you must subtract stockholders equity from total liabilities to be used in the formula so 4606327-2304103=2302224. You use that number in the formula to find the ratio. 2302224/4606327=. 50(F4) The ratio simply tells you the percentage that of assets that is financed by debt and that the greater the ratio is in number, the bigger the amount of financial risk. The debt position over the last year has increased by 2%. The dept position went from 50% in 2010 to 52% in 2011. This is due to the fact that liabilities are increasing while assets are decreasing at a faster rate when compared to liabilities.

Potential lenders would prefer the debt-to-asset ratio to be smaller due to the fact that it means that the percentage of assets financed by debt is less which gives them a better sense of security as to where they are investing/lending their money. The smaller the ratio number, the less financial risk the company has in regards to debt, that means it would appeal to potential lenders since it would not have a big financial risk when trying to repay back the debts they have. (13) M. 10. I would only invest some money into the company based on the fact that its gross profits are going up little by little seeing how it went up by 6%.

I would not invest more than $200 in Dillard’s stocks due to the fact that it has a big debt-to-asset ratio which means that a lot of its finances are financed by debt. The financial debt is not decreasing but rather increasing so that worries me. There seems to be a greater chance of losing out by buying stocks then making a profit in the long run since the debt amount is increasing. Furthermore, the economic trend cannot be used due to the fact that it did well in 2010 but in 2009 it did not do good and furthermore 2010 did not do as good as the company had done in 2008. 1. I would not lend Dillard’s any of my money due to the fact that it is steadily increasing its debt which makes me not want to hand over my hard earned money to get lost in the big pile of debt that they already have. In addition to, I would not invest in Dillard’s due to the fact that they are not doing too well in the past few years. Instead of opening more stores, they are downsizing the number of stores that are open which also does not forecast a great future ahead for them.