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Dillard's profits fall in fourth quarter, financials restated on CDI charges Friday, Mar 21, 2008 By Jason Wiest Arkansas News Bureau LITTLE ROCK - The most recent earnings statement from Dillard's Inc. notes falling profits, store closures and a financial restatement related to its partnership with CDI Contractors LLC, whose chief financial officer went missing in January. Dillard's recorded a fourth-quarter profit of $47.3 million, a 69 percent drop since earnings of $155 million in the same quarter last year, the company reported late Wednesday night. Included in the quarter was a $64 million net income tax benefit. Without it and other one-time gains, Dillard's would have reported its second consecutive quarterly loss. For the year, Dillard's earnings were $53.8 million, down 78.1 percent from earnings of $245.6 million in 2006. Quarterly sales fell 5 percent in both total and comparable stores, Dillard's said. "We simply did not achieve the level of sales necessary to produce more acceptable results," CEO William Dillard II said in a prepared statement. "Moving forward, we will execute further improvements to our merchandise mix while working to effectively respond to potentially changing macro-economic conditions." On Wednesday, Dillard's announced it would close a store in Lexington, Ky., and a distribution center in Louisville, Ky. Earlier this year, Dillard's announced it was closing two other stores, one in Colorado and one in Virginia. Dillard's closed nine underperforming stores in 2007 and opened nine new stores. The company also said it would restate its opening retained earnings dating back to 2005 after uncovering an accounting discrepancy in its business relationship with CDI Contractors. Dillard's owns a 50 percent interest in CDI, which does construction work for Dillard's and third parties. Dillard's was reviewing CDI's internal financial records because of the potential transfer of the other 50 percent shareholder's interest. "During this review process, the company discovered that CDI had recorded profit on the company's construction projects in excess of what CDI had previously reported to the company, and which, therefore, were not properly eliminated," Dillard's said. The company said the cumulative effect of the error would be material to operating results for 2007, so it decided to restate its opening retained earnings as of Jan. 29, 2005, to eliminate the cumulative effect of the profit from its financial statements for all periods prior to the fiscal year ended Jan. 28, 2006. "Opening retained earnings was reduced by $7.1 million; the deferred income tax balances were reduced by $4.1 million and the carrying amount of property, plant & equipment was reduced by $11.2 million," Dillard's said. "The effects of this error on the company's consolidated statements of operations for the fiscal years ended Jan. 28, 2006, and Feb. 3, 2007, respectively, were not material and were recorded in 2007." Previously, Dillard's said that neither it nor CDI believed that CDI chief financial officer John Glasgow had misappropriated any money. Glasgow went missing Jan. 28 during the time Dillard's was going over CDI's books. Shares of Dillard's (NYSE: DDS) closed Thursday at $18.36, up $1.31 for a 7.7 percent gain. |
