##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934.
 For the quarterly period ended November 1, 2008
 OR
 o
    
    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 000-26207
 BELK, INC.
  Delaware
    
    56-2058574(State or Other Jurisdiction of Incorporation or Organization)
    
    (I.R.S. Employer Identification No.)2801 West Tyvola Road, Charlotte, NC
    
    28217-4500(Address of Principal Executive Offices)
    
    (Zip Code)
 (704) 357-1000
  
  þ o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



BELK, INC.
Index to Form 10-Q
 PageNumberPART I. FINANCIAL INFORMATIONItem 1. Condensed Consolidated Financial Statements (unaudited)Condensed Consolidated Statements of Income for the Three and Nine Months Ended
November 1, 2008 and November 3, 2007
    
    
    4Condensed Consolidated Balance Sheets as of November 1, 2008 and February 2, 2008
    
    
    5Condensed Consolidated Statement of Changes in Stockholders Equity and Comprehensive Income
for the Nine Months Ended November 1, 2008
    
    
    6Condensed Consolidated Statements of Cash Flows for the Nine Months Ended November 1, 2008 and
November 3, 2007
    
    
    7Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    8Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
    
    
    15Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    21Item 4. Controls and Procedures
    
    
    21PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    22Item 1A. Risk Factors
    
    
    22Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    22Item 3. Defaults upon Senior Securities
    
    
    22Item 4. Submission of Matters to a Vote of Security Holders
    
    
    22Item 5. Other Information
    
    
    22Item 6. Exhibits
    
    
    23EX-31.1EX-31.2EX-32.1EX-32.2




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This Report Contains Forward-Looking Statements
    
    
    General economic, political and business conditions, nationally and in our market areas,
including rates of economic growth, interest rates, inflation or deflation, consumer credit
availability, levels of consumer debt and bankruptcies, tax rates and policy, unemployment
trends, potential acts of terrorism and threats of such acts and other matters that influence
consumer confidence and spending;
    
    Our ability to anticipate the demands of our customers for a wide variety of merchandise
and services, including our predictions about the merchandise mix, quality, style, service,
convenience and credit availability of our customers;
    
    Unseasonable and extreme weather conditions in our market areas;
    
    Seasonal fluctuations in quarterly net income due to the significant portion of our
revenues generated during the holiday season in the fourth fiscal quarter and the significant
amount of inventory we carry during that time;
    
    Competition from other department and specialty stores and other retailers, including
luxury goods retailers, general merchandise stores, Internet retailers, mail order retailers
and off-price and discount stores, in the areas of price, merchandise mix, quality, style,
service, convenience, credit availability and advertising;
    
    Our ability to effectively use advertising, marketing and promotional campaigns to generate
high customer traffic in our stores;
    
    Our ability to find qualified vendors from which to source our merchandise and our ability
to access products in a timely and efficient manner from a wide variety of domestic and
international vendors;
    
    The income we receive from, and the timing of receipt of, payments from GE, the operator of
our private label credit card business, which depends upon the amount of purchases made
through the proprietary credit cards, the level of finance charge income generated from the
credit card portfolio, the number of new accounts generated, changes in customers credit card
use, and GEs ability to extend credit to our customers;
    
    Our ability to correctly anticipate the appropriate levels of inventories during the year;
    
    Our ability to manage our expense structure;
    
    Our ability to realize the planned efficiencies from our acquisitions and effectively
integrate and operate the acquired stores and businesses, including our fiscal year 2007
acquisition of Parisian stores and our fiscal year 2007 acquisition of the assets of Migerobe
and commencement of our new fine jewelry business;
    
    Our ability to continue to increase our number of stores, including the availability of
existing retail stores or store sites on acceptable terms and our ability to successfully
execute the Companys retailing concept in new markets and geographic regions;
    
    The efficient and effective operation of our distribution network and information systems
to manage sales, distribution, merchandise planning and allocation functions;
    
    Our ability to expand our eCommerce business through our updated and redesigned belk.com
website, including our ability to meet the systems challenges of expanding and operating the
website and our ability to efficiently operate our eCommerce fulfillment facility; and
    
    Our ability to comply with debt covenants which could adversely affect our capital
resources, financial condition and liquidity.




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BELK, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 (unaudited)
 (dollars in thousands, except share and per share amounts)
 Three Months Ended
    
    
    Nine Months EndedNovember 1,
    
    
    November 3,
    
    
    November 1,
    
    
    November 3,2008
    
    
    2007
    
    
    2008
    
    
    2007Revenues
    
    $
    741,403
    
    
    $
    808,338
    
    
    $
    2,388,017
    
    
    $
    2,592,427Cost of goods sold (including occupancy,
distribution and buying expenses)
    
    
    532,592
    
    
    
    571,559
    
    
    
    1,664,486
    
    
    
    1,801,976Selling, general and administrative expenses
    
    
    235,397
    
    
    
    233,661
    
    
    
    706,526
    
    
    
    724,450Gain on sale of property and equipment
    
    
    2,194
    
    
    
    2,159
    
    
    
    4,161
    
    
    
    3,644Asset impairment and exit costs
    
    
    748
    
    
    
    2,480
    
    
    
    2,659
    
    
    
    11,211Operating income (loss)
    
    
    (25,140
    )
    
    
    2,797
    
    
    
    18,507
    
    
    
    58,434Interest expense, net
    
    
    (11,912
    )
    
    
    (14,975
    )
    
    
    (38,360
    )
    
    
    (43,855
    )Gain (loss) on investments
    
    
    (239
    )
    
    
    (299
    )
    
    
    1,648
    
    
    
    (360
    )Income (loss) before income taxes
    
    
    (37,291
    )
    
    
    (12,477
    )
    
    
    (18,205
    )
    
    
    14,219Income tax expense (benefit)
    
    
    (13,803
    )
    
    
    (5,552
    )
    
    
    (8,053
    )
    
    
    4,148Net income (loss)
    
    $
    (23,488
    )
    
    $
    (6,925
    )
    
    $
    (10,152
    )
    
    $
    10,071Basic and diluted net income (loss) per share
    
    $
    (0.48
    )
    
    $
    (0.14
    )
    
    $
    (0.21
    )
    
    $
    0.20Weighted average shares outstanding:Basic
    
    
    48,752,892
    
    
    
    49,569,155
    
    
    
    49,096,381
    
    
    
    49,809,867Diluted
    
    
    48,752,892
    
    
    
    49,569,155
    
    
    
    49,096,381
    
    
    
    49,841,563
  4




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BELK, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (unaudited)
 (dollars in thousands)
 November 1,
    
    
    February 2,2008
    
    
    2008AssetsCurrent assets:Cash and cash equivalents
    
    $
    109,290
    
    
    $
    186,973Short-term investments
    
    
    10,250
    
    
    
    Accounts receivable, net
    
    
    30,988
    
    
    
    65,987Merchandise inventory
    
    
    1,160,360
    
    
    
    932,777Property held for sale
    
    
    805
    
    
    
    11,036Prepaid income taxes, expenses and other current assets
    
    
    48,730
    
    
    
    21,594Total current assets
    
    
    1,360,423
    
    
    
    1,218,367Investment securities
    
    
    2,489
    
    
    
    4,299Property and equipment, net of accumulated depreciation and amortization of $1,120,505
and $1,027,397 as of November 1, 2008 and February 2, 2008, respectively
    
    
    1,223,318
    
    
    
    1,248,030Goodwill
    
    
    326,773
    
    
    
    326,930Deferred income taxes
    
    
    
    
    
    
    5,196Other assets
    
    
    51,668
    
    
    
    48,493Total assets
    
    $
    2,964,671
    
    
    $
    2,851,315Liabilities and Stockholders EquityCurrent liabilities:Accounts payable
    
    $
    449,143
    
    
    $
    274,092Accrued liabilities
    
    
    162,003
    
    
    
    135,974Accrued income taxes
    
    
    
    
    
    
    25,980Deferred income taxes
    
    
    28,595
    
    
    
    27,293Current installments of long-term debt and capital lease obligations
    
    
    4,557
    
    
    
    4,481Total current liabilities
    
    
    644,298
    
    
    
    467,820Deferred income taxes
    
    
    7,207
    
    
    
    Long-term debt and capital lease obligations, excluding current installments
    
    
    714,657
    
    
    
    717,660Interest rate swap liability
    
    
    4,631
    
    
    
    8,282Deferred compensation and other noncurrent liabilities
    
    
    250,402
    
    
    
    268,827Total liabilities
    
    
    1,621,195
    
    
    
    1,462,589Stockholders equity:Preferred stock
    
    
    
    
    
    
    Common stock, 400 million shares authorized and 48.8 and 49.6 million shares issued
and outstanding as of November 1, 2008 and February 2, 2008, respectively
    
    
    488
    
    
    
    496Paid-in capital
    
    
    458,559
    
    
    
    479,020Retained earnings
    
    
    947,208
    
    
    
    977,206Accumulated other comprehensive loss
    
    
    (62,779
    )
    
    
    (67,996
    )Total stockholders equity
    
    
    1,343,476
    
    
    
    1,388,726Total liabilities and stockholders equity
    
    $
    2,964,671
    
    
    $
    2,851,315
  5




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BELK, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY
 AND COMPREHENSIVE INCOME
 (unaudited)
 (in thousands)
 AccumulatedOtherCommon Stock
    
    
    Paid-in
    
    
    Retained
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    Capital
    
    
    Earnings
    
    
    Income (Loss)
    
    
    TotalBalance at February 2, 2008
    
    
    49,569
    
    
    $
    496
    
    
    $
    479,020
    
    
    $
    977,206
    
    
    $
    (67,996
    )
    
    $
    1,388,726Comprehensive income (loss):Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,152
    )
    
    
    
    
    
    
    (10,152
    )Unrealized loss on investments,
net of $213 income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (360
    )
    
    
    (360
    )Reclassification to gain (loss) on
investments,
net of $231 income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (388
    )
    
    
    (388
    )Unrealized gain on interest rate swaps,
net of $516 income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    869
    
    
    
    869Amortization of defined benefit
obligations,
net of $3,025 income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,096
    
    
    
    5,096Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,935
    )Cash dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19,846
    )
    
    
    
    
    
    
    (19,846
    )Issuance of stock-based compensation
    
    
    
    
    
    
    
    
    
    
    (444
    )
    
    
    
    
    
    
    
    
    
    
    (444
    )Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    2,015
    
    
    
    
    
    
    
    
    
    
    
    2,015Common stock issued
    
    
    57
    
    
    
    1
    
    
    
    307
    
    
    
    
    
    
    
    
    
    
    
    308Repurchase and retirement of common stock
    
    
    (873
    )
    
    
    (9
    )
    
    
    (22,339
    )
    
    
    
    
    
    
    
    
    
    
    (22,348
    )Balance at November 1, 2008
    
    
    48,753
    
    
    $
    488
    
    
    $
    458,559
    
    
    $
    947,208
    
    
    $
    (62,779
    )
    
    $
    1,343,476
  6




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BELK, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (unaudited)
 (dollars in thousands)
 Nine Months EndedNovember 1,
    
    
    November 3,2008
    
    
    2007Cash flows from operating activities:Net income (loss)
    
    $
    (10,152
    )
    
    $
    10,071Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:Asset impairment and exit costs
    
    
    2,659
    
    
    
    11,211Deferred income tax (benefit) expense
    
    
    9,564
    
    
    
    (2,161
    )Depreciation and amortization expense
    
    
    124,026
    
    
    
    119,011Stock-based compensation expense
    
    
    2,015
    
    
    
    (1,858
    )Gain on sale of property and equipment
    
    
    (2,189
    )
    
    
    (2,072
    )Amortization of deferred gain on sale and leaseback
    
    
    (1,972
    )
    
    
    (1,572
    )(Gain) loss on investments
    
    
    (1,648
    )
    
    
    360(Increase) decrease in:Accounts receivable, net
    
    
    34,749
    
    
    
    12,854Merchandise inventory
    
    
    (227,583
    )
    
    
    (310,441
    )Prepaid expenses and other assets
    
    
    (33,931
    )
    
    
    (9,594
    )Increase (decrease) in:Accounts payable and accrued liabilities
    
    
    208,019
    
    
    
    163,224Accrued income taxes
    
    
    (25,980
    )
    
    
    (20,085
    )Deferred compensation and other liabilities
    
    
    (5,047
    )
    
    
    16,912Net cash provided (used) by operating activities
    
    
    72,530
    
    
    
    (14,140
    )Cash flows from investing activities:Purchases of short-term investments
    
    
    (17,750
    )
    
    
    (453,855
    )Sales of short-term investments
    
    
    7,500
    
    
    
    453,855Purchases of property and equipment
    
    
    (112,764
    )
    
    
    (168,363
    )Proceeds from sales of property and equipment
    
    
    18,998
    
    
    
    56,603Net cash used by investing activities
    
    
    (104,016
    )
    
    
    (111,760
    )Cash flows from financing activities:Proceeds from issuance of long-term debt
    
    
    
    
    
    
    125,355Principal payments on long-term debt and capital lease obligations
    
    
    (3,559
    )
    
    
    (128,893
    )Proceeds from line of credit
    
    
    
    
    
    
    33,695Cash paid for withholding taxes in lieu of stock-based compensation shares
    
    
    (598
    )
    
    
    (5,260
    )Stock compensation tax benefit
    
    
    154
    
    
    
    2,938Dividends paid
    
    
    (19,846
    )
    
    
    (20,097
    )Repurchase and retirement of common stock
    
    
    (22,348
    )
    
    
    (24,226
    )Net cash used by financing activities
    
    
    (46,197
    )
    
    
    (16,488
    )Net decrease in cash and cash equivalents
    
    
    (77,683
    )
    
    
    (142,388
    )Cash and cash equivalents at beginning of period
    
    
    186,973
    
    
    
    171,239Cash and cash equivalents at end of period
    
    $
    109,290
    
    
    $
    28,851Supplemental schedule of noncash investing and financing activities:Increase (decrease) in property and equipment through accrued purchases
    
    $
    (8,810
    )
    
    $
    13,428Decrease in property and equipment through adjustment of Parisian goodwill
    
    
    
    
    
    
    14,969Decrease in property and equipment through adjustment of Parisian capital lease
obligation
    
    
    
    
    
    
    4,315Decrease in long term-debt through other current assets
    
    
    
    
    
    
    3,220
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BELK, INC. AND SUBSIDIARIES
 
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (1) Basis of Presentation
   (2) Comprehensive Income (Loss)
  Three Months Ended
    
    
    Nine Months EndedNovember 1,
    
    
    November 3,
    
    
    November 1,
    
    
    November 3,2008
    
    
    2007
    
    
    2008
    
    
    2007(dollars in thousands)
    
    
    (dollars in thousands)Net income (loss)
    
    $
    (23,488
    )
    
    $
    (6,925
    )
    
    $
    (10,152
    )
    
    $
    10,071Other comprehensive income (loss):Unrealized gain (loss) on investments, net of $147 and $213 income taxes for the three and
nine months ended November 1, 2008, respectively and $15 and $225 income taxes
for the three and nine months ended November 3, 2007, respectively.
    
    
    247
    
    
    
    (25
    )
    
    
    (360
    )
    
    
    (378
    )Recognized other-than-temporary impairment of investments reclassified to gain (loss) on
investments, net of $231 income taxes for the three and nine months ended
November 1, 2008.
    
    
    (388
    )
    
    
    
    
    
    
    (388
    )
    
    
    Unrealized gain (loss) on interest rate swaps, net of $352 and $516 income taxes for the three
and nine months ended November 1, 2008, respectively and $687 and $717 income
taxes for the three and nine months ended November 3, 2007, respectively.
    
    
    (593
    )
    
    
    (1,158
    )
    
    
    869
    
    
    
    (1,209
    )Interest rate swap losses reclassified into interest expense from other comprehensive
income, net of $41 income taxes for the nine months ended November 3, 2007.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    69Reclassification adjustment for interest rate swap dedesignation gain included in gain (loss)
on investments, net of $7 income taxes for the nine months ended November 3, 2007.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (51
    )Amortization of defined benefit obligations, net of $1,008 and $3,025 income taxes for the
three and nine months ended November 1, 2008, respectively and $1,194 and $3,583
income taxes for the three and nine months ended November 3, 2007, respectively.
    
    
    1,698
    
    
    
    2,012
    
    
    
    5,096
    
    
    
    6,035Other comprehensive income
    
    
    964
    
    
    
    829
    
    
    
    5,217
    
    
    
    4,466Total comprehensive income (loss)
    
    $
    (22,524
    )
    
    $
    (6,096
    )
    
    $
    (4,935
    )
    
    $
    14,537
 8




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BELK, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (3) Accumulated Other Comprehensive Loss
  November 1,
    
    
    February 2,2008
    
    
    2008(dollars in thousands)Unrealized gains on investments, net of $240 and $684
income taxes as of
November 1, 2008 and
February 2, 2008,
respectively.
    
    $
    405
    
    
    $
    1,153Unrealized loss on interest rate swap, net of $1,725
and $2,241 income taxes
as of November 1, 2008
and February 2, 2008,
respectively.
    
    
    (2,906
    )
    
    
    (3,775
    )Defined benefit obligations, net of $35,782 and $38,807
income taxes as of
November 1, 2008 and
February 2,
2008, respectively.
    
    
    (60,278
    )
    
    
    (65,374
    )Accumulated other comprehensive loss
    
    $
    (62,779
    )
    
    $
    (67,996
    )
 (4) Goodwill
   (5) Investment Securities
  9




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BELK, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
   (6) Fair Value Measurements
     10




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BELK, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  Fair Value Measurements at Reporting Date UsingQuoted Prices in
    
    
    
    
    
    
    SignificantActive Markets for
    
    
    Significant Other
    
    
    Unobservable(dollars in thousands)
    
    November 1,
    
    
    Identical Assets
    
    
    Observable Inputs
    
    
    InputsDescription
    
    2008
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Investment securities
    
    $
    2,489
    
    
    $
    2,489
    
    
    $
    
    
    
    $
    Total assets measured at fair value
    
    $
    2,489
    
    
    $
    2,489
    
    
    $
    
    
    
    $
    Interest rate swap liability
    
    $
    4,631
    
    
    $
    
    
    
    $
    4,631
    
    
    $
    Total liabilities measured at fair
value
    
    $
    4,631
    
    
    $
    
    
    
    $
    4,631
    
    
    $
    
  (7) Asset Impairment and Exit Costs
   (8) Sale of Properties
   11




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BELK, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
   (9) Borrowings
     (10) Income Taxes
    12




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BELK, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  (11) Pension and Postretirement Benefits
   Three Months EndedPension Plan
    
    
    Old SERP Plan
    
    
    Postretirement PlanNovember 1,
    
    
    November 3,
    
    
    November 1,
    
    
    November 3,
    
    
    November 1,
    
    
    November 3,2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007(dollars in thousands)Service cost
    
    $
    688
    
    
    $
    877
    
    
    $
    47
    
    
    $
    46
    
    
    $
    33
    
    
    $
    42Interest cost
    
    
    6,139
    
    
    
    5,783
    
    
    
    182
    
    
    
    177
    
    
    
    407
    
    
    
    418Expected return on plan assets
    
    
    (5,896
    )
    
    
    (5,798
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Amortization of transition
obligation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    65
    
    
    
    65Amortization of prior service cost
    
    
    124
    
    
    
    124
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Amortization of net loss
    
    
    2,459
    
    
    
    2,927
    
    
    
    54
    
    
    
    49
    
    
    
    4
    
    
    
    41Net periodic benefit expense
    
    $
    3,514
    
    
    $
    3,913
    
    
    $
    283
    
    
    $
    272
    
    
    $
    509
    
    
    $
    566
 Nine Months EndedPension Plan
    
    
    Old SERP Plan
    
    
    Postretirement PlanNovember 1,
    
    
    November 3,
    
    
    November 1,
    
    
    November 3,
    
    
    November 1,
    
    
    November 3,2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007(dollars in thousands)Service cost
    
    $
    2,407
    
    
    $
    2,631
    
    
    $
    142
    
    
    $
    138
    
    
    $
    100
    
    
    $
    126Interest cost
    
    
    18,438
    
    
    
    17,349
    
    
    
    546
    
    
    
    531
    
    
    
    1,222
    
    
    
    1,254Expected return on plan assets
    
    
    (17,688
    )
    
    
    (17,394
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Amortization of transition
obligation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    196
    
    
    
    195Amortization of prior service cost
    
    
    371
    
    
    
    372
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Amortization of net loss
    
    
    7,379
    
    
    
    8,781
    
    
    
    163
    
    
    
    147
    
    
    
    12
    
    
    
    123Net periodic benefit expense
    
    $
    10,907
    
    
    $
    11,739
    
    
    $
    851
    
    
    $
    816
    
    
    $
    1,530
    
    
    $
    1,698
  (12) Stock-Based Compensation
  (13) Earnings per Share
  13




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##### Table of Contents



BELK, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  Nine Months EndedNovember 3,2007Basic Shares
    

    49,809,867Dilutive contingently-issuable non-vested share awards
    

    31,696Diluted Shares
    

    49,841,563
 (14) Repurchase of Common Stock
  14




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Overview
         15




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##### Table of Contents



Results of Operations
  Three Months Ended
    
    Nine Months EndedNovember 1,
    
    November 3,
    
    November 1,
    
    November 3,2008
    
    2007
    
    2008
    
    2007SELECTED FINANCIAL DATARevenues
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100
    %
    
    
    100
    %Cost of goods sold (including occupancy,
distribution and buying expenses)
    
    
    71.8
    
    
    
    70.7
    
    
    
    69.7
    
    
    
    69.5Selling, general and administrative expenses
    
    
    31.8
    
    
    
    28.9
    
    
    
    29.6
    
    
    
    27.9Gain on sale of property and equipment
    
    
    0.3
    
    
    
    0.3
    
    
    
    0.2
    
    
    
    0.1Asset impairment and exit costs
    
    
    0.1
    
    
    
    0.3
    
    
    
    0.1
    
    
    
    0.4Operating income (loss)
    
    
    (3.4
    )
    
    
    0.3
    
    
    
    0.8
    
    
    
    2.3Interest expense, net
    
    
    1.6
    
    
    
    1.9
    
    
    
    1.6
    
    
    
    1.7Gain (loss) on investments
    
    
    
    
    
    
    
    
    
    
    0.1
    
    
    
    Income (loss) before income taxes
    
    
    (5.0
    )
    
    
    (1.5
    )
    
    
    (0.8
    )
    
    
    0.5Income tax expense (benefit)
    
    
    (1.9
    )
    
    
    (0.7
    )
    
    
    (0.3
    )
    
    
    0.2Net income (loss)
    
    
    (3.2
    )
    
    
    (0.9
    )
    
    
    (0.4
    )
    
    
    0.4Comparable store revenue increase (decrease)
    
    
    (9.8
    )
    
    
    (4.4
    )
    
    
    (7.5
    )
    
    
    0.2
 16




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##### Table of Contents



Revenues
  Three Months Ended
    
    Nine Months EndedNovember 1,
    
    November 3,
    
    November 1,
    
    November 3,Merchandise Areas
    
    2008
    
    2007
    
    2008
    
    2007Womens
    
    
    38
    %
    
    
    38
    %
    
    
    40
    %
    
    
    39
    %Cosmetics, Shoes and Accessories
    
    
    31
    
    
    
    31
    
    
    
    31
    
    
    
    30Mens
    
    
    15
    
    
    
    15
    
    
    
    15
    
    
    
    15Home
    
    
    9
    
    
    
    9
    
    
    
    8
    
    
    
    9Childrens
    
    
    7
    
    
    
    7
    
    
    
    6
    
    
    
    7Total
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
 Comparison of the Three and Nine Months Ended November 1, 2008 and November 3, 2007
 Revenues.
  Cost of goods sold.
  Selling, general and administrative expenses
 
    
    Depreciation expense increased as a percentage of revenues by 0.61% primarily due to new
store openings and expansions in the past year combined with the
decline in revenue.
    
    Performance based compensation increased
as a percentage of revenues by 0.77% due to larger
reductions for performance based compensation expense in the prior
year.
    
    Other non-selling related expenses increased as a percentage of revenues by 1.20%
primarily due to the 8.3% decline in revenue.
 17




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##### Table of Contents



Asset impairment and exit costs.
  Interest expense, net.
 Gain (loss) on investments.
 Income tax expense(benefit).
  Seasonality and Quarterly Fluctuations
  18




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##### Table of Contents



Liquidity and Capital Resources
       19




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##### Table of Contents



Contractual Obligations and Commercial Commitments
  Payments Due by PeriodUpdated Contractual Obligations
    
    Total
    
    Less than 1 Year
    
    1-3 years
    
    3 - 5 Years
    
    More than 5 Years(dollars in thousands)Long-Term Debt
    
    $
    692,780
    
    
    $
    
    
    
    $
    367,780
    
    
    $
    100,000
    
    
    $
    225,000Estimated Interest Payments on Debt (a)
    
    
    178,440
    
    
    
    36,844
    
    
    
    72,084
    
    
    
    30,511
    
    
    
    39,001
 
 (a)
    
    Interest rates used to compute estimated interest payments utilize the stated rate for fixed rate debt and projected interest
rates for variable rate debt. Projected rates range from 3.5% to 6.5% over the term of the variable rate debt agreements.  Off-Balance Sheet Arrangements
  20




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4. Controls and Procedures
   21




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  General Economic, Political and Business Conditions
  Debt Covenants
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  22




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##### Table of Contents



Item 6. Exhibits
  3.1
    
    Form of Amended and Restated Certificate of Incorporation of the Company
(incorporated by reference to pages B-24 to B-33 of the Companys Registration Statement
on Form S-4/A, filed on March 5, 1998 (File No. 333-42935)).3.2
    
    Form of Second Amended and Restated Bylaws of the Company (incorporated by reference
to Exhibit 3.2 of the Companys Annual Report on Form 10-K for the fiscal year ended
January 31, 2004).4.1
    
    Articles Fourth, Fifth and Seventh of the Amended and Restated Certificate of
Incorporation of the Company (incorporated by reference to pages B-24 to B-33 of the
Companys Registration Statement on Form S-4/A, filed on March 5, 1998 (File No.
333-42935)).4.2
    
    Articles I and IV of the Second Amended and Restated Bylaws of the Company
(incorporated by reference to Exhibit 3.2 of the Companys Annual Report on Form 10-K for
the fiscal year ended January 31, 2004).31.1
    
    Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) or Rule
15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted under Section
302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) or Rule
15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted under Section
302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 23




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##### Table of Contents



SIGNATURES
  BELK, INC.Dated:  December 11, 2008
    By:
    /s/ Ralph A. PittsRalph A. PittsExecutive Vice President, General Counsel and
Corporate Secretary

(Authorized Officer of the Registrant)By:
    /s/ Brian T. MarleyBrian T. MarleyExecutive Vice President and Chief Financial Officer

(Principal Financial Officer) 24