UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934.

OR

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934.

Commission file number 000-26207

BELK, INC.

 

(Exact Name of Registrant as Specified In Its Charter)

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)

Registrant’s Telephone Number, including Area Code (704) 357-1000

N/A Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report.

     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. þ Yes   o No

     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). o Yes   o No

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes   þ No

At November 30, 2010, the registrant had issued and outstanding 45,411,168 shares of class A common stock and 932,766 shares of class B common stock.

 

 

BELK, INC.
Index to Form 10-Q

		Page
		Number
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (unaudited)			4
Condensed Consolidated Statements of Income for the Three and Nine Months Ended October 30, 2010 and October 31, 2009			4
Condensed Consolidated Balance Sheets as of October 30, 2010 and January 30, 2010			5
Condensed Consolidated Statement of Changes in Stockholders’ Equity and Comprehensive Income for the Nine Months Ended October 30, 2010			6
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended October 30, 2010 and October 31, 2009			7
Notes to Unaudited Condensed Consolidated Financial Statements			8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			13
Item 3. Quantitative and Qualitative Disclosures about Market Risk			18
Item 4. Controls and Procedures			18
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			19
Item 1A. Risk Factors			19
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			19
Item 3. Defaults upon Senior Securities			19
Item 4. Reserved			19
Item 5. Other Information			19
Item 6. Exhibits			19

This Report Contains Forward-Looking Statements

     Certain statements made in this report, and other written or oral statements made by or on behalf of the Company, may constitute “forward-looking statements” within the meaning of the federal securities laws. Statements regarding future events and developments and the Company’s future performance, as well as our expectations, beliefs, plans, estimates or projections relating to the future, are forward-looking statements within the meaning of these laws. You can identify these forward-looking statements through our use of words such as “may,” “will,” “intend,” “project,” “expect,” “anticipate,” “believe,” “estimate,” “continue” or other similar words.

     Forward-looking statements include information concerning possible or assumed future results from merchandising, marketing and advertising in our stores and through the Internet, general economic conditions, our ability to be competitive in the retail industry, our ability to execute profitability and efficiency strategies, our ability to execute growth strategies, anticipated benefits from our strategic initiative to strengthen our merchandising and planning organizations, anticipated benefits from the redesign of our belk.com website and our eCommerce fulfillment center, the expected benefit of new systems and technology, anticipated benefits from our acquisitions, the anticipated benefit under our Program Agreement with GE, and customer response to our re-branding. These forward-looking statements are subject to certain risks and uncertainties that may cause our actual results to differ significantly from the results we discuss in such forward-looking statements.

     We believe that these forward-looking statements are reasonable. However, you should not place undue reliance on such statements. Any such forward-looking statements are qualified by the following important risk factors and other risks which may be disclosed from time to time in our filings that could cause actual results to differ materially from those predicted by the forward-looking statements. Forward-looking statements relate to the date initially made, and we undertake no obligation to update them.

     Risks and uncertainties that might cause our results to differ from those we project in our forward-looking statements include, but are not limited to:

•

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 comply with debt covenants which could adversely affect our capital resources, financial condition and liquidity and our ability to re-finance existing debt as necessary on acceptable terms;

•

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;

•

Customer response to our re-branding;

•

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 identify opportunities to open new stores, or to remodel or expand existing 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;

•

Our ability to realize the planned efficiencies from our acquisitions and effectively integrate and operate the acquired stores and businesses; and

•

The effectiveness of third parties in managing our outsourced business processes.

     For a detailed description of the risks and uncertainties that might cause our results to differ from those we project in our forward-looking statements, we refer you to the section captioned “Risk Factors” in our annual report on Form 10-K for the fiscal year ended January 30, 2010 that we filed with the SEC on April 14, 2010 and to Part II, Item 1A of this report. Our other filings with the SEC may contain additional information concerning the risks and uncertainties listed above, and other factors you may wish to consider. Upon request, we will provide copies of these filings to you free of charge.

     Our forward-looking statements are based on current expectations and speak only as of the date of such statements. We undertake no obligation to publicly update or revise any forward-looking statement, even if future events or new information may impact the validity of such statements.

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

BELK, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except share and per share amounts)
(unaudited)

		Three Months Ended								Nine Months Ended
		October 30,				October 31,				October 30,				October 31,
		2010				2009				2010				2009
Revenues		$	746,556			$	727,988			$	2,338,165			$	2,249,142
Cost of goods sold (including occupancy, distribution and buying expenses)			515,807				496,473				1,584,425				1,550,933
Selling, general and administrative expenses			227,115				215,771				670,470				642,178
Gain on sale of property and equipment			2,687				639				4,480				1,552
Asset impairment and exit costs			59				(117	)			1,337				973
Pension curtailment charge			—				2,719				—				2,719
Operating income			6,262				13,781				86,413				53,891
Interest expense, net			(12,149	)			(12,931	)			(37,652	)			(38,256	)
Gain on investments			—				14				—				14
Income (loss) before income taxes			(5,887	)			864				48,761				15,649
Income tax (benefit) expense			(1,648	)			418				16,208				5,249
Net income (loss)		$	(4,239	)		$	446			$	32,553			$	10,400
Basic and diluted net income (loss) per share		$	(0.09	)		$	0.01			$	0.69			$	0.21
Weighted average shares outstanding:
Basic			46,343,934				48,285,713				47,114,522				48,505,297
Diluted			46,343,934				48,285,713				47,116,328				48,505,297

See accompanying notes to unaudited condensed consolidated financial statements.

BELK, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
(unaudited)

		October 30,				January 30,
		2010				2010
Assets
Current assets:
Cash and cash equivalents		$	329,264			$	585,930
Short-term investments			—				2,500
Accounts receivable, net			34,310				22,427
Merchandise inventory			1,078,851				775,342
Prepaid income taxes, expenses and other current assets			39,573				24,902
Total current assets			1,481,998				1,411,101
Investment securities			6,850				6,850
Property and equipment, net of accumulated depreciation and amortization of $1,319,233 and $1,245,816 as of October 30, 2010 and January 30, 2010, respectively			977,590				1,009,250
Deferred income taxes			114,711				117,827
Other assets			42,477				37,547
Total assets		$	2,623,626			$	2,582,575
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable		$	439,320			$	243,995
Accrued liabilities			176,574				125,599
Accrued income taxes			—				35,775
Deferred income taxes			18,932				16,079
Current installments of long-term debt and capital lease obligations			79,235				3,419
Total current liabilities			714,061				424,867
Long-term debt and capital lease obligations, excluding current installments			535,163				685,437
Interest rate swap liability			6,454				7,403
Retirement obligations and other noncurrent liabilities			320,406				370,573
Total liabilities			1,576,084				1,488,280
Stockholders’ equity:
Preferred stock			—				—
Common stock, 400 million shares authorized and 46.3 and 48.3 million shares issued and outstanding as of October 30, 2010 and January 30, 2010, respectively			463				483
Paid-in capital			406,559				451,278
Retained earnings			792,878				798,963
Accumulated other comprehensive loss			(152,358	)			(156,429	)
Total stockholders’ equity			1,047,542				1,094,295
Total liabilities and stockholders’ equity		$	2,623,626			$	2,582,575

See accompanying notes to unaudited condensed consolidated financial statements.

BELK, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
AND COMPREHENSIVE INCOME
(in thousands)
(unaudited)

																		Accumulated
																		Other
		Common Stock								Paid-in				Retained				Comprehensive
		Shares				Amount				Capital				Earnings				Income (Loss)				Total
Balance at January 30, 2010			48,286			$	483			$	451,278			$	798,963			$	(156,429	)		$	1,094,295
Comprehensive income:
Net income			—				—				—				32,553				—				32,553
Unrealized gain on interest rate swaps, net of $354 income taxes			—				—				—				—				595				595
Defined benefit expense, net of $2,063 income taxes			—				—				—				—				3,476				3,476
Total comprehensive income																							36,624
Cash dividends			—				—				—				(38,638	)			—				(38,638	)
Issuance of stock-based compensation			—				—				(43	)			—				—				(43	)
Stock-based compensation expense			—				—				6,181				—				—				6,181
Common stock issued			36				—				539				—				—				539
Repurchase and retirement of common stock			(1,978	)			(20	)			(51,396	)			—				—				(51,416	)
Balance at October 30, 2010			46,344			$	463			$	406,559			$	792,878			$	(152,358	)		$	1,047,542

See accompanying notes to unaudited condensed consolidated financial statements.

BELK, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)

		Nine Months Ended
		October 30,				October 31,
		2010				2009
Cash flows from operating activities:
Net income		$	32,553			$	10,400
Adjustments to reconcile net income to net cash (used) provided by operating activities:
Asset impairment and exit costs			1,337				973
Deferred income tax expense			4,125				16,051
Depreciation and amortization expense			106,399				121,558
Stock-based compensation expense			6,181				139
Pension curtailment charge			—				2,719
(Gain) loss on sale of property and equipment			(2,508	)			420
Amortization of deferred gain on sale and leaseback			(1,972	)			(1,972	)
Gain on investments			—				(14	)
(Increase) decrease in:
Accounts receivable, net			(7,464	)			10,367
Merchandise inventory			(303,510	)			(187,646	)
Prepaid income taxes, expenses and other assets			(22,712	)			(22,305	)
Increase (decrease) in:
Accounts payable and accrued liabilities			237,783				233,090
Accrued income taxes			(35,775	)			(681	)
Retirement obligations and other liabilities			(41,731	)			(29,050	)
Net cash (used) provided by operating activities			(27,294	)			154,049
Cash flows from investing activities:
Purchases of property and equipment			(63,705	)			(36,587	)
Proceeds from sales of property and equipment			434				70
Proceeds from sales of short-term investments			2,500				900
Net cash used by investing activities			(60,771	)			(35,617	)
Cash flows from financing activities:
Principal payments on long-term debt and capital lease obligations			(78,504	)			(3,481	)
Repurchase and retirement of common stock			(51,416	)			(5,950	)
Dividends paid			(38,638	)			(9,752	)
Stock compensation tax benefit (expense)			41				(64	)
Cash paid for withholding taxes in lieu of stock-based compensation shares			(84	)			(51	)
Net cash used by financing activities			(168,601	)			(19,298	)
Net (decrease) increase in cash and cash equivalents			(256,666	)			99,134
Cash and cash equivalents at beginning of period			585,930				260,134
Cash and cash equivalents at end of period		$	329,264			$	359,268
Supplemental schedule of noncash investing activities:
Increase (decrease) in property and equipment through accrued purchases		$	9,089			$	(8,232	)
Increase in property and equipment through assumption of capital leases			4,045				—

See accompanying notes to unaudited condensed consolidated financial statements.

BELK, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(1) Basis of Presentation

     The accompanying unaudited condensed consolidated financial statements of Belk, Inc. and subsidiaries (the “Company”) have been prepared in accordance with the instructions to Form 10-Q promulgated by the United States Securities and Exchange Commission and should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended January 30, 2010. In the opinion of management, this information is fairly presented and all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the results for the interim periods have been included; however, certain items are included in these statements based on estimates for the entire year. Also, operating results for the three and nine months ended October 30, 2010 may not be indicative of the operating results that may be expected for the full fiscal year.

     Certain prior period amounts have been reclassified to conform to current year presentation. Previously, the Company presented amounts due from vendors on a gross basis due to systems constraints and the lack of available information. In the current year, the Company has presented amounts due from vendors on a net basis, and revised amounts presented for the nine months ended October 31, 2009 on the cash flow statement for comparability purposes. The revision had no impact on net income, working capital, cash flows from operating activities, or stockholders’ equity for the nine months ended October 31, 2009.

(2)

Comprehensive Income (Loss)

     The following table sets forth the computation of comprehensive income (loss):

		Three Months Ended								Nine Months Ended
		October 30,				October 31,				October 30,				October 31,
		2010				2009				2010				2009
		(dollars in thousands)								(dollars in thousands)
Net income (loss)		$	(4,239	)		$	446			$	32,553			$	10,400
Other comprehensive income:
Unrealized gain on investments, net of $17 and $222 income taxes for the three and nine months ended October 31, 2009, respectively.			—				29				—				374
Unrealized gain (loss) on interest rate swaps, net of $198 and $354 income taxes for the three and nine months ended October 30, 2010, respectively and $83 and $233 income taxes for the three and nine months ended October 31, 2009, respectively.			333				(141	)			595				392
Defined benefit expense, net of $688 and $2,063 income taxes for the three and nine months ended October 30, 2010, respectively and $1,279 and $3,836 income taxes for the three and nine months ended October 31, 2009, respectively.			1,159				2,154				3,476				6,462
Pension curtailment charge, net of $1,013 income taxes for the three and nine months ended October 31, 2009.			—				1,706				—				1,706
Other comprehensive income			1,492				3,748				4,071				8,934
Total comprehensive income (loss)		$	(2,747	)		$	4,194			$	36,624			$	19,334

(3) Accumulated Other Comprehensive Loss

     The following table sets forth the components of accumulated other comprehensive loss:

		October 30, 2010				January 30, 2010
		(dollars in thousands)
Unrealized loss on interest rate swap, net of $2,435 and $2,789 income taxes as of October 30, 2010 and January 30, 2010, respectively.		$	(4,019	)		$	(4,614	)
Defined benefit plans, net of $88,658 and $90,721 income taxes as of October 30, 2010 and January 30, 2010, respectively.			(148,339	)			(151,815	)
Accumulated other comprehensive loss		$	(152,358	)		$	(156,429	)

BELK, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(4) Fair Value Measurements

     Fair value is the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants on the measurement date. The Company uses a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets for identical assets and liabilities; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

     As of October 30, 2010, the Company held an interest rate swap that is required to be measured at fair value on a recurring basis. The Company enters into interest rate swap agreements with financial institutions to manage the exposure to changes in interest rates. The fair value of interest rate swap agreements is the estimated amount that the Company would pay or receive to terminate the swap agreement, taking into account the current creditworthiness of the swap counterparties. The fair values of swap contracts are determined based on inputs that are readily available in public markets or can be derived from information available in publicly quoted markets. The Company has consistently applied these valuation techniques in all periods presented. Additionally, the change in the fair value of a swap designated as a cash flow hedge is marked to market through accumulated other comprehensive income (loss).

     The Company’s interest rate swap measured at fair value on a recurring basis was $6.5 million and $7.4 million at October 30, 2010 and January 30, 2010, respectively. The Company classifies these measurements as Level 2.

     Certain assets are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments only in certain circumstances (for example, when measuring for impairment). The fair value measurements related to long-lived assets are determined using expected future cash flow analyses. The Company classifies these measurements as Level 3.

     The following table presents the carrying amounts and estimated fair values of financial instruments not measured at fair value in the consolidated balance sheets. These included the Company’s auction rate security (“ARS”) and fixed rate long-term debt.

		October 30, 2010								January 30, 2010
		Carrying				Fair				Carrying				Fair
		Value				Value				Value				Value
						(dollars in thousands)
Financial assets
Auction rate security (a)		$	6,850			$	6,850			$	9,350			$	9,350
Financial liabilities
Long-term debt (excluding capitalized leases) (b)		$	592,780			$	602,916			$	667,780			$	647,287

     As of October 30, 2010, the par value of the ARS was $6.9 million and the estimated fair value was $6.9 million. The fair value of the ARS is estimated using Level 3 inputs as a result of the lack of frequent trading in these securities. The ARS fair value determination used an income-approach considering factors that reflect assumptions market participants would use in pricing, including: the collateralization underlying the investment; the creditworthiness of the counterparty; expected future cash flows, including the next time the security is expected to have a successful auction; and risks associated with the uncertainties in the current market. The Company has no reason to believe that the underlying issuer of the ARS is presently at risk or that the underlying credit quality of the assets backing the ARS investment has been impacted by the reduced liquidity of this investment.

     The fair value of the Company’s fixed rate long-term debt is estimated based on the current rates offered to the Company for debt of the same remaining maturities.

BELK, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(5) Asset Impairment and Exit Costs

     During the three and nine months ended October 30, 2010, the Company recorded a $3.5 million charge for real estate holding costs, offset by a $3.5 million revision to a previously estimated lease buyout reserve. In addition, during the nine months ended October 30, 2010, the Company recorded $0.9 million in impairment charges to adjust two retail locations’ net book values to fair value.

     During the three months ended October 31, 2009, the Company recorded a $0.2 million reduction to previously estimated severance costs associated with the closing of two stores, partially offset by $0.1 million in severance costs associated with the outsourcing of certain information technology and support functions. During the nine months ended October 31, 2009, the Company recorded $1.0 million in exit costs comprised primarily of severance costs associated with the outsourcing of certain information technology and support functions as well as the closing of two stores.

(6) Borrowings

     As of October 30, 2010, the credit facility was comprised of an outstanding $250.0 million term loan and a $350.0 million revolving line of credit that was to mature in October 2011. This facility was refinanced on November 23, 2010. Under the new credit facility, the Company has a $350.0 million revolving line of credit and a $125.0 million term loan maturing November 2015. The refinanced credit facility allows for up to $250.0 million of outstanding letters of credit. Amounts outstanding under the credit facility bear interest at a base rate, being the higher of the prime rate or the federal funds rate plus 0.5% or LIBOR plus 1.0%, or LIBOR plus a LIBOR rate margin, at the Company’s choice. The LIBOR rate margin, currently 1.50%, is based upon the leverage ratio. The credit facility contains restrictive covenants including leverage and fixed charge coverage ratios. The Company’s calculated leverage ratio dictates the LIBOR spread that will be charged on outstanding borrowings in the subsequent quarter. The leverage ratio is calculated by dividing adjusted debt, which is the sum of the Company’s outstanding debt and rent expense multiplied by a factor of eight, by pre-tax income plus net interest expense and non-cash items, such as depreciation, amortization, and impairment expense. The maximum leverage covenant ratio decreased from 4.25 under the previous facility to 4.0 under the new facility. The Company was in compliance with all covenants at the end of third quarter fiscal year 2011 and does not anticipate non-compliance with any debt covenants during the remainder of fiscal year 2011 or fiscal year 2012.

     During the three months ended May 1, 2010, the Company made a $75.0 million discretionary payment toward the outstanding term loan under the credit facility. An additional discretionary payment of $125.0 million was made on November 23, 2010, of which cash on hand of $75.0 million was used and reclassified from long-term to short-term debt as of October 30, 2010. The remaining $50.0 million was funded by an agreement entered into by the Company on November 23, 2010 where we issued a $50.0 million, 5.70% fixed rate, 10-year note.

(7) Sale of Properties

     During the third quarter of fiscal year 2011, the Company increased the carrying value of a previously impaired store location, which resulted in an adjustment of $1.4 million.

(8) Income Taxes

     During the three months ended October 31, 2010, the effective income tax rate was 28.0% compared to 48.4% for the three months ended October 31, 2009. The decrease in the rate was due primarily to a prior year $0.1 million adjustment relating to work opportunity tax credits, which had a large impact on the effective tax rate due to the relatively small amount of pre-tax income for the period. In addition for the three months ended October 31, 2010, there was an adjustment of $0.3 million from the Company’s January 30, 2010 income tax provision to the income tax returns filed primarily due to estimates of work opportunity tax credits.

BELK, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(9) Pension and Postretirement Benefits

     The Company has a defined benefit pension plan, the Belk Pension Plan, which prior to fiscal year 2010 had been partially frozen and closed to new participants. Pension benefits were suspended for fiscal year 2010, and effective December 31, 2009, the Pension Plan was frozen for those remaining participants whose benefits were not previously frozen in fiscal year 2006.

     The Company has a non-qualified defined benefit Supplemental Executive Retirement Plan (“Old SERP”), which provides retirement and death benefits to certain qualified executives. Old SERP has been closed to new executives and has been replaced by the 2004 Supplemental Executive Retirement Plan (“2004 SERP”), a non-qualified defined contribution plan.

     The Company also provides postretirement medical and life insurance benefits to certain retired full-time employees.

     The components of net periodic benefit expense for these plans are as follows:

		Three Months Ended
		Pension Plan								Old SERP Plan								Postretirement Plan
		October 30,				October 31,				October 30,				October 31,				October 30,				October 31,
		2010				2009				2010				2009				2010				2009
		(dollars in thousands)
Service cost		$	—			$	—			$	18			$	17			$	37			$	33
Interest cost			6,517				6,649				155				86				340				406
Expected return on plan assets			(6,550	)			(5,527	)			—				—				—				—
Amortization of transition obligation			—				—				—				—				66				65
Amortization of prior service cost			—				124				—				—				—				—
Amortization of net loss			1,753				3,234				36				—				(8	)			10
Net periodic benefit expense		$	1,720			$	4,480			$	209			$	103			$	435			$	514

		Nine Months Ended
		Pension Plan								Old SERP Plan								Postretirement Plan
		October 30,				October 31,				October 30,				October 31,				October 30,				October 31,
		2010				2009				2010				2009				2010				2009
		(dollars in thousands)
Service cost		$	—			$	—			$	55			$	95			$	112			$	99
Interest cost			19,552				19,947				463				472				1,020				1,218
Expected return on plan assets			(19,651	)			(16,582	)			—				—				—				—
Amortization of transition obligation			—				—				—				—				196				196
Amortization of prior service cost			—				372				—				—				—				—
Amortization of net loss			5,257				9,701				108				—				(23	)			29
Net periodic benefit expense		$	5,158			$	13,438			$	626			$	567			$	1,305			$	1,542

     The Company made a $14.3 million discretionary contribution to its Pension Plan on April 22, 2010, June 14, 2010, and September 13, 2010, respectively, and an $8.0 million contribution on October 13, 2010. The Company expects to make an additional discretionary contribution of approximately $8.0 million to the Pension Plan before January 29, 2011. In the prior year, the Company made a $44.0 million discretionary contribution to its Pension Plan on September 15, 2009.

(10) Earnings per Share

     Basic earnings per share (“EPS”) is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding for the period. The diluted EPS calculation includes the effect of contingently issuable stock-based compensation awards with performance vesting conditions as being outstanding at the beginning of the period in which all vesting conditions are met. If all necessary conditions have not been satisfied by the end of the period, the contingently issuable shares included in diluted EPS are based on the number of dilutive shares that would be issuable if the end of the reporting period were the end of the contingency period. Contingently-issuable non-vested

BELK, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

share awards are included in the diluted EPS calculation as of the beginning of the period (or as of the date of the contingent share agreement, if later).

     The reconciliation of basic and diluted shares for the three and nine months ended October 30, 2010 and October 31, 2009, are as follows:

		Three Months Ended								Nine Months Ended
		October 30,				October 31,				October 30,				October 31,
		2010				2009				2010				2009
Basic Shares			46,343,934				48,285,713				47,114,522				48,505,297
Dilutive contingently-issuable non-vested share awards			—				—				1,806				—
Diluted Shares			46,343,934				48,285,713				47,116,328				48,505,297

     For the three months ended October 30, 2010, the Company had a net loss from operations; therefore, the inclusion of contingently-issuable non-vested share awards would have an anti-dilutive effect on the Company’s calculation of diluted loss per share. Accordingly, the diluted loss per share equals basic loss per share for this period.

(11) Repurchase of Common Stock

     On April 1, 2010, the Company’s Board of Directors approved a self-tender offer to purchase up to 2,880,000 shares of common stock at a price of $26.00 per share. The tender offer was initiated on April 21, 2010, and on May 19, 2010, the Company accepted for purchase 1,482,822 shares of Class A and 494,719 shares of Class B common stock for $51.4 million.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

     Belk, Inc., together with its subsidiaries (collectively, the “Company” or “Belk”), is the largest privately owned mainline department store business in the United States. As of October 30, 2010, the Company had 305 stores in 16 states, located primarily in the southern United States. The Company generated revenues of $3.3 billion for the fiscal year ended January 30, 2010, and together with its predecessors, has been successfully operating department stores since 1888 by seeking to provide superior service and merchandise that meets customers’ needs for fashion, value and quality.

     The following discussion, which presents the results of the Company, should be read in conjunction with the Company’s consolidated financial statements as of January 30, 2010, and for the year then ended, and related Notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations, all contained in the Company’s Annual Report on Form 10-K for the year ended January 30, 2010.

     The Company’s fiscal year ends on the Saturday closest to each January 31. All references to “fiscal year 2011” refer to the fiscal year that will end January 29, 2011 and all references to “fiscal year 2010” refer to the fiscal year ended January 30, 2010.

     The Company’s revenues increased 2.6% in the third quarter of fiscal year 2011 to $746.6 million due primarily to an increase in overall consumer spending and enhanced merchandising and marketing programs. Comparable store revenues increased 2.5%. Comparable store revenue includes stores that have reached the one-year anniversary of their opening as of the beginning of the fiscal year and eCommerce revenues, but excludes closed stores. Operating income decreased to $6.3 million in the third quarter of fiscal year 2011 compared to $13.8 million during the same period in fiscal year 2010. Net income decreased to a net loss of $4.2 million or $0.09 per basic and diluted share in the third quarter of fiscal year 2011 compared to $0.4 million or $0.01 per basic and diluted share during the same period in fiscal year 2010. The decrease in net income was due primarily to higher costs of goods sold and selling, general, and administrative (“SG&A”) expenses. For the three and nine months ended October 30, 2010, the Company spent approximately $10 million on re-branding and other corporate strategic initiatives, including merchandising, information technology and e-commerce.

     The Company’s revenues increased 4.0% in the first nine months of fiscal year 2011 to $2,338.2 million. Comparable store sales increased 4.4%. Operating income increased to $86.4 million in the first nine months of fiscal year 2011 compared to $53.9 million during the same period in fiscal year 2010. Net income increased to $32.6 million or $0.69 per basic and diluted share compared to $10.4 million or $0.21 per basic and diluted share during the same period in fiscal year 2010. The increase in net income was due primarily to continued positive results from initiatives focused on sales and margin performance.

     Belk stores seek to provide customers the convenience of one-stop shopping, with an appealing merchandise mix and extensive offerings of brands, styles, assortments and sizes. Belk stores sell top national brands of fashion apparel, shoes and accessories for women, men and children, as well as cosmetics, home furnishings, housewares, fine jewelry, gifts and other types of quality merchandise. The Company also sells exclusive private label brands, which offer customers differentiated merchandise selections. Larger Belk stores may include hair salons, spas, restaurants, optical centers and other amenities.

     The Company seeks to be the leading department store in its markets by selling merchandise to customers that meets their needs for fashion, selection, value, quality and service. To achieve this goal, Belk’s business strategy focuses on quality merchandise assortments, effective marketing and sales promotional strategies, attracting and retaining talented, well-qualified associates to deliver superior customer service, and operating efficiently with investments in information technology and process improvement.

     The Company operates department stores in the highly competitive retail industry. Management believes that the principal competitive factors for retail department store operations include merchandise selection, quality, value, customer service and convenience. The Company believes its stores are strong competitors in all of these areas. The Company’s primary competitors are traditional department stores, mass merchandisers, national apparel chains,

individual specialty apparel stores and direct merchant firms, including J.C. Penney Company, Inc., Dillard’s, Inc., Kohl’s Corporation, Macy’s, Inc., Sears Holding Corporation, Target Corporation and Wal-Mart Stores, Inc.

     In recent years, the Company has taken advantage of prudent opportunities to expand its store base by opening and expanding stores in new and existing markets in order to increase sales, market share and customer loyalty. In response to recent economic conditions and the significant decline in the number of new retail centers being developed, the Company has scaled back its store growth plans but will continue to explore strategic opportunities to open and expand stores where the Belk name and reputation are well known and in contiguous markets where Belk can distinguish its stores from the competition. The Company will also consider closing stores in markets where more attractive locations become available or where the Company does not believe there is potential for long term growth and success. In addition, the Company periodically reviews and adjusts its space requirements to create greater operating efficiencies and convenience for the customer.

     In October 2010, the Company launched a branding campaign which included a change in logo and extensive advertising and promotional activity in connection with the new brand and tagline. The Company is investing approximately $70 million over the next 18 months in advertising, supplies and capital, and is in the process of changing exterior and interior signing on all stores.

Results of Operations

     The following table sets forth, for the periods indicated, the percentage relationship to revenues of certain items in the Company’s unaudited condensed consolidated statements of income, as well as a period comparison of changes in comparable store net revenue.

		Three Months Ended								Nine Months Ended
		October 30,				October 31,				October 30,				October 31,
		2010				2009				2010				2009
SELECTED FINANCIAL DATA
Revenues			100.0	%			100.0	%			100.0	%			100.0	%
Cost of goods sold (including occupancy, distribution and buying expenses)			69.1				68.2				67.8				69.0
Selling, general and administrative expenses			30.4				29.6				28.7				28.6
Gain on sale of property and equipment			0.4				0.1				0.2				0.1
Asset impairment and exit costs			—				—				0.1				—
Pension Curtailment Charge			—				0.4				—				0.1
Operating income			0.8				1.9				3.7				2.4
Interest expense, net			1.6				1.8				1.6				1.7
Income (loss) before income taxes			(0.8	)			0.1				2.1				0.7
Income tax (benefit) expense			(0.2	)			0.1				0.7				0.2
Net income (loss)			(0.6	)			0.1				1.4				0.5
Comparable store net revenue increase (decrease)			2.5				(2.1	)			4.4				(6.5	)

Revenues

     The following table gives information regarding the percentage of revenues contributed by each merchandise area for each of the respective periods. There were no material changes for the periods as reflected in the table below.

		Three Months Ended								Nine Months Ended
		October 30,				October 31,				October 30,				October 31,
Merchandise Areas		2010				2009				2010				2009
Women’s			36	%			37	%			38	%			39	%
Cosmetics, Shoes and Accessories			34				33				32				32
Men’s			15				15				15				15
Home			8				8				8				8
Children’s			7				7				7				6
Total			100	%			100	%			100	%			100	%

Comparison of the Three and Nine Months Ended October 30, 2010 and October 31, 2009

     Revenues. The Company’s revenues for the three months ended October 30, 2010 increased 2.6%, or $18.6 million, to $746.6 million from $728.0 million during the same period in fiscal year 2010. The increase is primarily attributable to a 2.5% increase in revenues from comparable stores and a $0.9 million increase in revenues from new stores, partially offset by a decrease in revenues from closed stores of $1.0 million.

     The Company’s revenues for the nine months ended October 30, 2010 increased 4.0%, or $89.0 million, to $2,338.2 million from $2,249.1 million during the same period in fiscal year 2010. The increase is primarily attributable to a 4.4% increase in revenues from comparable stores and a $4.0 million increase in revenues from new stores, partially offset by a decrease in revenues from closed stores of $9.9 million.

     Cost of goods sold. Cost of goods sold was $515.8 million, or 69.1% of revenues, for the three months ended October 30, 2010 compared to $496.5 million, or 68.2% of revenues, for the same period in fiscal year 2010. The increase in cost of goods sold as a percentage of revenues was primarily attributable to increased buying expenses related to the Company’s merchandising initiatives, partially offset by reduced markdown activity for the three months ended October 30, 2010.

     Cost of goods sold was $1,584.4 million, or 67.8% of revenues, for the nine months ended October 30, 2010 compared to $1,550.9 million, or 69.0% of revenues, for the same period in fiscal year 2010. The decrease in cost of goods sold as a percentage of revenues was primarily attributable to reduced markdown activity, partially offset by the increase in buying expenses related to the company’s merchandising initiatives for the nine months ended October 30, 2010.

     Selling, general and administrative expenses. Selling, general and administrative expenses were $227.1 million, or 30.4% of revenues for the three months ended October 30, 2010, compared to $215.8 million, or 29.6% of revenues for the same period in fiscal year 2010. The increase in SG&A expenses was primarily due to an increase in re-branding and other corporate strategic initiatives of approximately $10 million, advertising, and performance based compensation, partially offset by reductions in depreciation and pension expense for the three months ended October 30, 2010. The increase in the SG&A expense rate is primarily the result of re-branding and other corporate strategic initiatives and an increase in advertising expense as a percentage of revenues, partially offset by a decrease in depreciation expense.

     SG&A expenses were $670.5 million, or 28.7% of revenues for the nine months ended October 30, 2010, compared to $642.2 million, or 28.6% of revenues for the same period in fiscal year 2010. The increase in SG&A expenses was primarily due to an increase in re-branding and other corporate strategic initiatives of approximately $10 million, advertising, and performance based compensation, partially offset by reductions in depreciation and pension expense for the nine months ended October 30, 2010. The increase in the SG&A expense rate is primarily the result of re-branding and other corporate strategic initiatives and an increase in advertising expense as a percentage of revenues, partially offset by a decrease in depreciation expense.

     Gain on sale of property and equipment. Gain on sale of property and equipment was $2.7 million for the three months ended October 30, 2010, compared to $0.6 million for the same period in fiscal year 2010. The increase was primarily due to an increase in the carrying value of a previously impaired store location, which resulted in an adjustment of $1.4 million.

     Gain on sale of property and equipment was $4.5 million for the nine months ended October 30, 2010, compared to $1.6 million for the same period in fiscal year 2010. The increase was primarily due to an increase in the carrying value of a previously impaired store location, which resulted in an adjustment of $1.4 million. In addition, the Company recognized $1.1 million in insurance claims recoveries.

     Asset impairment and exit costs. During the three and nine months ended October 30, 2010, the Company recorded a $3.5 million charge for real estate holding costs, offset by a $3.5 million revision to a previously estimated lease buyout reserve. In addition, during the nine months ended October 30, 2010, the Company recorded $0.9 million in impairment charges to adjust two retail locations’ net book values to fair value.

     During the three months ended October 31, 2009, the Company recorded a $0.2 million reduction to previously estimated severance costs associated with the closing of two stores, partially offset by $0.1 million in severance costs associated with the outsourcing of certain information technology and support functions. During the nine months ended October 31, 2009, the Company recorded $1.0 million in exit costs comprised primarily of severance costs associated with the outsourcing of certain information technology and support functions, as well as the closing of two stores.

     Pension curtailment charge. A one-time pension curtailment charge of $2.7 million for the three and nine months ended October 31, 2009 resulted from the decision to freeze the Company’s defined benefit plan, effective December 31, 2009, for those remaining participants whose benefits were not previously frozen in fiscal year 2006.

     Income tax expense (benefit). Income tax benefit for the three months ended October 30, 2010 was $1.6 million compared to an income tax expense of $0.4 million for the same period in fiscal year 2010. The effective income tax rate for the three months ended October 30, 2010 was 28.0% compared to 48.4% for the same period in fiscal year 2010. The decrease in the rate was due primarily to a prior year $0.1 million adjustment relating to work opportunity tax credits, which had a large impact on the effective tax rate due to the relatively small amount of pre-tax income for the period. In addition for the three months ended October 31, 2010, there was an adjustment of $0.3 million from the Company’s January 30, 2010 income tax provision to the income tax returns filed primarily due to estimates of work opportunity tax credits.

Seasonality and Quarterly Fluctuations

     The Company has historically experienced and expects to continue to experience seasonal fluctuations in its revenues, operating income and net income due to the seasonal nature of the retail business. The highest revenue period for the Company is the fourth quarter, which includes the holiday selling season. A disproportionate amount of the Company’s revenues and a substantial amount of the Company’s operating and net income are realized during the fourth quarter. If for any reason the Company’s revenues were below seasonal norms during the fourth quarter, the Company’s annual results of operations could be adversely affected. The Company’s inventory levels generally reach their highest levels in anticipation of increased revenues during these months. The Company’s quarterly results of operations could also fluctuate significantly as a result of a variety of factors, including the timing of new store openings.

Liquidity and Capital Resources

     The Company’s primary sources of liquidity are cash on hand, cash flows from operations, and borrowings under debt facilities, which, as of October 30, 2010, consisted of a $600.0 million credit facility that was to mature in October 2011 and $325.0 million in senior notes. As of October 30, 2010, the credit facility was comprised of an outstanding $250.0 million term loan and a $350.0 million revolving line of credit.

     The credit facility allowed for up to $200.0 million of outstanding letters of credit. The credit facility charges interest based upon certain Company financial ratios, and the interest spread was calculated at October 30, 2010 using LIBOR plus 150 basis points. The credit facility contains restrictive financial covenants including leverage and fixed charge coverage ratios. The Company’s calculated leverage ratio dictates the LIBOR spread that will be charged on outstanding borrowings in the subsequent quarter. The leverage ratio is calculated by dividing adjusted debt, which is the sum of the Company’s outstanding debt and rent expense multiplied by a factor of eight, by pre-tax income plus net interest expense and non-cash charges, such as depreciation, amortization, and impairment charges. At October 30, 2010, the maximum leverage allowed under the credit facility was 4.25, and the calculated leverage ratio was 2.73. As of October 30, 2010, the Company had $35.4 million of standby letters of credit outstanding under the credit facility, and availability under the credit facility was $314.6 million.

     This facility was refinanced on November 23, 2010. Under the new credit facility, the Company has a $350.0 million revolving line of credit and a $125.0 million term loan maturing November 2015. The refinanced credit facility

allows for up to $250.0 million of outstanding letters of credit. Amounts outstanding under the credit facility bear interest at a base rate, being the higher of the prime rate or the federal funds rate plus 0.5% or LIBOR plus 1.0%, or LIBOR plus a LIBOR rate margin, at the Company’s choice. The LIBOR rate margin, currently 1.50%, is based upon the leverage ratio. The credit facility contains restrictive covenants including leverage and fixed charge coverage ratios. The Company’s calculated leverage ratio dictates the LIBOR spread that will be charged on outstanding borrowings in the subsequent quarter. The leverage ratio is calculated by dividing adjusted debt, which is the sum of the Company’s outstanding debt and rent expense multiplied by a factor of eight, by pre-tax income plus net interest expense and non-cash items, such as depreciation, amortization, and impairment expense. The maximum leverage covenant ratio decreased from 4.25 under the previous facility to 4.0 under the new facility. The Company was in compliance with all covenants as of October 30, 2010 and expects to remain in compliance with all debt covenants for the next twelve months.

     During the three months ended May 1, 2010, the Company made a $75.0 million discretionary payment toward the outstanding term loan under the credit facility. An additional discretionary payment of $125.0 million was made on November 23, 2010, of which cash on hand of $75.0 million was used and reclassified from long-term to short-term debt as of October 30, 2010. The remaining $50.0 million was funded by an agreement entered into by the Company on November 23, 2010 where we issued a $50.0 million, 5.70% fixed rate, 10-year note.

     The senior notes are comprised of an $80.0 million floating rate senior note that has a stated variable interest rate based on three-month LIBOR plus 80.0 basis points, or 1.08% at October 30, 2010, that matures in July 2012. This $80.0 million notional amount has an associated interest rate swap with a fixed interest rate of 5.2%. Additionally, a $20.0 million fixed rate senior note that bears interest of 5.05% matures in July 2012, a $100.0 million fixed rate senior note that bears interest of 5.31% matures in July 2015, and a $125.0 million fixed rate senior note that bears interest of 6.2% matures in August 2017. The senior notes have restrictive covenants that are similar to the Company’s credit facility. Additionally, the Company has a $17.8 million, 20-year variable rate, 0.28% at October 30, 2010, state bond facility which matures in October 2025.

     The debt facilities place certain restrictions on mergers, consolidations, acquisitions, sales of assets, indebtedness, transactions with affiliates, leases, liens, investments, dividends and distributions, exchange and issuance of capital stock and guarantees, and require maintenance of minimum financial ratios, which include a leverage ratio, consolidated debt to consolidated capitalization ratio and a fixed charge coverage ratio. These ratios are calculated exclusive of non-cash charges, such as fixed asset, goodwill and other intangible asset impairments.

     The Company utilizes a derivative financial instrument (interest rate swap agreement) to manage the interest rate risk associated with its borrowings. The Company has not historically traded, and does not anticipate prospectively trading, in derivatives. The swap agreement is used to reduce the potential impact of increases in interest rates on variable rate debt. The difference between the fixed rate leg and the variable rate leg of the swap, to be paid or received, is accrued and recognized as an adjustment to interest expense. Additionally, the change in the fair value of a swap designated as a cash flow hedge is marked to market through accumulated other comprehensive income (loss).

     The Company’s exposure to derivative instruments was limited to one interest rate swap as of October 30, 2010, an $80.0 million notional amount swap, which has a fixed interest rate of 5.2% and expires in fiscal year 2013. It has been designated as a cash flow hedge against variability in future interest rate payments on the $80.0 million floating rate senior note.

     Management believes that cash flows from operations and existing credit facilities will be sufficient to cover working capital needs, stock repurchases, dividends, capital expenditures, pension funding and debt service requirements for the next twelve months and foreseeable future.

     Net cash used by operating activities was $27.3 million for the nine months ended October 30, 2010 compared to net cash provided of $154.0 million for the same period in fiscal year 2010. The decrease in cash flows from operating activities for the nine months ended October 30, 2010 was principally due to the increase in inventory to support current sales trends, a $40.3 million increase in income taxes paid in fiscal year 2011, and $51.0 million discretionary defined benefit plan contributions in fiscal year 2011, partially offset by a $22.2 million increase in net income for the current year period.

     Net cash used by investing activities was $60.8 million for the nine months ended October 30, 2010 compared to $35.6 million for the same period in fiscal year 2010. The increase in cash used by investing activities primarily resulted from increased purchases of property and equipment of $27.1 million, partially offset from the $2.5 million partial redemption of a short-term investment in the first quarter of fiscal year 2011.

     Net cash used by financing activities was $168.6 million for the nine months ended October 30, 2010 compared to $19.3 million for the same period in fiscal year 2010. The increase in cash used by financing activities was primarily due to the $75.0 million discretionary payment on the credit facility term loan, a $45.5 million increase in the repurchase and retirement of common stock, and a $28.9 million increase in dividends paid for fiscal year 2011 compared to the same period in fiscal year 2010.

Contractual Obligations and Commercial Commitments

     A table representing the scheduled maturities of the Company’s contractual obligations and commercial commitments as of January 30, 2010 was included under the heading “Contractual Obligations and Commercial Commitments” of the Company’s Annual Report on Form 10-K for the fiscal year ended January 30, 2010. The credit facility was refinanced on November 23, 2010. Under the new credit facility, the Company has a $350.0 million revolving line of credit and a $125.0 million term loan maturing November 2015. During the three months ended May 1, 2010, the Company made a $75.0 million discretionary payment toward the outstanding term loan under the credit facility. An additional discretionary payment of $125.0 million was made on November 23, 2010, of which cash on hand of $75.0 million was used and reclassified from long-term to short-term debt as of October 30, 2010. The remaining $50.0 million was funded by an agreement entered into by the Company on November 23, 2010 where we issued a $50.0 million, 5.70% fixed rate, 10-year note.

Off-Balance Sheet Arrangements

     The Company has not created, and is not party to, any special-purpose or off-balance sheet entities for the purpose of raising capital, incurring debt or operating the Company’s business. The Company does not have any arrangements or relationships with entities that are not consolidated into the financial statements that are reasonably likely to materially affect the Company’s liquidity or the availability of capital resources.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

     There have been no material changes to the Company’s quantitative and qualitative market risk disclosures during the three and nine months ended October 30, 2010 from the disclosures contained in the Company’s Annual Report on Form 10-K for the fiscal year ended January 30, 2010.

Item 4. Controls and Procedures

     The Company’s management conducted an evaluation pursuant to Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, under the supervision and with the participation of its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the period covered by this report. The Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective.

     During the period covered by this report, there were no changes in the Company’s internal control over financial reporting that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

     In the ordinary course of business, the Company is subject to various legal proceedings and claims. The Company believes that the ultimate outcome of these matters will not have a material adverse effect on its consolidated financial position or results of operations.

Item 1A. Risk Factors

     There have been no material changes from the risk factors disclosed in the Company’s Annual Report on Form 10-K filed on April 14, 2010 other than the updated risk factor below.

Belk Re-Branding

     In October 2010, we launched a branding campaign which included a change in our logo and extensive advertising and promotional activity in connection with our new brand and tagline. We are investing approximately $70 million over the next 18 months in advertising, supplies and capital, and we are in the process of changing exterior and interior signing on all of our stores. If customers do not accept our new brand, our sales, performance and customer relationships could be adversely affected.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

     Not applicable.

Item 3. Defaults Upon Senior Securities

     Not applicable.

Item 4. Reserved

Item 5. Other Information

     Not applicable.

Item 6. Exhibits

(a) 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).

	10.1		Form of Third Amended and Restated Credit Agreement, dated November 23, 2010, by and among Wells Fargo Bank, National Association, Bank of America, N.A. and the other lenders referred to therein.
	10.2		Note Purchase Agreement, dated as of November 23, 2010, by and among Belk, Inc. and certain subsidiaries of Belk, Inc., as obligors, and the purchasers referred to therein.
	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.

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.