(Mark One)
(X)
Quarterly report pursuant to Section 13 or 15 (d) of the Securities Exchange Act
of 1934
| For the quarterly period ended November 1, 2003 |
OR
( ) Transition report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
DOLLAR TREE STORES, INC.
(Exact name of
registrant as specified in its charter)
| Virginia | 54-1387365 | |
|---|---|---|
| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | Identification No.) | |
500 Volvo Parkway
Chesapeake, Virginia 23320
(Address of principal
executive offices)
Telephone Number (757)321-5000
(Registrant’s
telephone number, including area code)
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.
| Yes (X) | No ( ) | ||
|---|---|---|---|
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
| Yes (X) | No ( ) | ||
|---|---|---|---|
As of December 8, 2003, there were 115,239,531 shares of the Registrant’s Common Stock outstanding.
| Page | |
|---|---|
| Item 1. Financial Statements: | |
Condensed Consolidated Balance Sheets | |
| November 1, 2003, February 1, 2003 and December 31, 2002 | 3 |
Condensed Consolidated Income Statements | |
| Three months and nine months ended November 1, 2003 and | |
| October 31, 2002 | 4 |
Condensed Consolidated Statements of Cash Flows | |
| Nine months ended November 1, 2003 and October 31, 2002 | 5 |
Notes to Condensed Consolidated Financial Statements |
6 |
Item 2. Management's Discussion and Analysis of Financial | |
| Condition and Results of Operations | 10 |
Item 3. Quantitative and Qualitative Disclosures About Market Risk |
17 |
Item 4. Controls and Procedures |
18 |
PART II-OTHER INFORMATION | |
| Item 1. Legal Proceedings | 18 |
Item 6. Exhibits and Reports on Form 8-K |
19 |
Signatures |
20 |
DOLLAR TREE STORES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except
share data)
(Unaudited)
| November 1, 2003 |
February 1, 2003 |
December 31, 2002 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 67,138 | $ | 237,302 | $ | 292,192 | |||||
| Short-term investments | -- | 63,525 | 43,780 | ||||||||
| Merchandise inventories | 663,687 | 438,439 | 357,665 | ||||||||
| Deferred tax asset | 11,646 | 14,333 | 10,409 | ||||||||
| Prepaid expenses and other current assets | 14,613 | 15,783 | 12,094 | ||||||||
| Total current assets | 757,084 | 769,382 | 716,140 | ||||||||
Property and equipment, net (Note 5) | 592,606 | 477,947 | 344,322 | ||||||||
| Intangible assets, net (Note 2) | 123,168 | 41,351 | 41,418 | ||||||||
| Other assets, net (Note 3) | 20,467 | 15,559 | 14,497 | ||||||||
| TOTAL ASSETS | $ | 1,493,325 | $ | 1,304,239 | $ | 1,116,377 | |||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Revolving credit facility (Note 8) | $ | 39,700 | $ | -- | $ | -- | |||||
| Current portion of long-term debt | 25,000 | 25,000 | 25,000 | ||||||||
| Current installments of obligations under | |||||||||||
| capital leases | 5,237 | 5,811 | 5,782 | ||||||||
| Accounts payable | 167,446 | 137,668 | 59,451 | ||||||||
| Other current liabilities | 83,378 | 75,033 | 88,237 | ||||||||
| Income taxes payable | 3,616 | 23,548 | 28,041 | ||||||||
| Total current liabilities | 324,377 | 267,060 | 206,511 | ||||||||
Long-term debt, excluding current portion (Note 5) | 142,422 | 146,628 | 6,000 | ||||||||
| Obligations under capital leases, excluding | |||||||||||
| current installments | 14,533 | 17,283 | 17,647 | ||||||||
| Deferred tax liability | 26,487 | 11,685 | 9,899 | ||||||||
| Other liabilities | 15,981 | 15,764 | 20,916 | ||||||||
| Total liabilities | 523,800 | 458,420 | 260,973 | ||||||||
| Shareholders' equity: | |||||||||||
| Common stock, par value $0.01. 300,000,000 | |||||||||||
| shares authorized, 115,218,804; 114,231,314; | |||||||||||
| and 114,186,569 shares issued and outstanding | |||||||||||
| at November 1, 2003, February 1, 2003, and | |||||||||||
| December 31, 2002, respectively | 1,152 | 1,142 | 1,142 | ||||||||
| Additional paid-in capital | 243,761 | 218,106 | 217,267 | ||||||||
| Accumulated other comprehensive loss (Note 7) | (1,029 | ) | (1,277 | ) | (1,373 | ) | |||||
| Unearned compensation | (75 | ) | (112 | ) | (117 | ) | |||||
| Retained earnings | 725,716 | 627,960 | 638,485 | ||||||||
| Total shareholders' equity | 969,525 | 845,819 | 855,404 | ||||||||
Commitments | -- | -- | -- | ||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 1,493,325 | $ | 1,304,239 | $ | 1,116,377 | |||||
See accompanying Notes to Condensed Consolidated Financial Statements.
DOLLAR TREE STORES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED INCOME STATEMENTS
(In thousands, except per share data)
(Unaudited)
| Three Months Ended |
Nine Months Ended | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| November 1, 2003 |
October 31, 2002 |
November 1, 2003 |
October 31, 2002 | |||||||||||
| Net sales | $ | 665,211 | $ | 556,864 | $ | 1,906,807 | $ | 1,578,976 | ||||||
| Cost of sales | 421,612 | 351,681 | 1,224,313 | 1,006,161 | ||||||||||
| Gross profit | 243,599 | 205,183 | 682,494 | 572,815 | ||||||||||
| Selling, general and administrative | ||||||||||||||
| expenses | 183,234 | 153,906 | 520,038 | 434,582 | ||||||||||
| Operating income | 60,365 | 51,277 | 162,456 | 138,233 | ||||||||||
| Other income (expense): | ||||||||||||||
| Interest income | 574 | 660 | 2,098 | 2,516 | ||||||||||
| Interest expense | (2,129 | ) | (1,068 | ) | (6,340 | ) | (3,357 | ) | ||||||
| Change in fair value of non- hedging interest rate swaps | ||||||||||||||
| (11 | ) | (635 | ) | 737 | (1,454 | ) | ||||||||
| Total other expense, net | (1,566 | ) | (1,043 | ) | (3,505 | ) | (2,295 | ) | ||||||
| Income before income taxes | 58,799 | 50,234 | 158,951 | 135,938 | ||||||||||
Provision for income taxes | 22,638 | 19,340 | 61,196 | 52,336 | ||||||||||
| Net income (Notes 5, 6 and 7) | $ | 36,161 | $ | 30,894 | $ | 97,755 | $ | 83,602 | ||||||
| Net income per share (Notes 4, 5 and 6) | ||||||||||||||
| Basic | $ | 0.31 | $ | 0.27 | $ | 0.85 | $ | 0.74 | ||||||
| Diluted | $ | 0.31 | $ | 0.27 | $ | 0.85 | $ | 0.73 | ||||||
See accompanying Notes to Condensed Consolidated Financial Statements.
DOLLAR TREE STORES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| Nine Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|
| November 1, 2003 |
October 31, 2002 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | 97,755 | $ | 83,602 | ||||
| Adjustments to reconcile net income to net cash provided by | ||||||||
| (used in) operating activities: | ||||||||
| Depreciation and amortization | 74,093 | 53,168 | ||||||
| Loss on disposal of property and equipment | 2,944 | 1,661 | ||||||
| Change in fair value of non-hedging interest rate swaps | (737 | ) | 1,454 | |||||
| Provision (benefit) for deferred income taxes | 17,933 | (3,164 | ) | |||||
| Tax benefit of stock option exercises | 5,057 | 9,627 | ||||||
| Other non-cash adjustments to net income | 396 | 291 | ||||||
| Changes in assets and liabilities increasing | ||||||||
| (decreasing) cash and cash equivalents: | ||||||||
| Merchandise inventories | (199,210 | ) | (182,630 | ) | ||||
| Prepaid expenses and other current assets | 1,485 | 10,216 | ||||||
| Other assets | (1,106 | ) | (927 | ) | ||||
| Accounts payable and other current liabilities | 24,749 | 14,747 | ||||||
| Income taxes payable | (16,509 | ) | (19,939 | ) | ||||
| Other liabilities | (1,142 | ) | 2,778 | |||||
| Net cash provided by (used in) operating activities | 5,708 | (29,116 | ) | |||||
| Cash flows from investing activities: | ||||||||
| Capital expenditures | (178,578 | ) | (107,871 | ) | ||||
| Purchase of Greenbacks, Inc., net of cash acquired of $1,248 | (99,560 | ) | -- | |||||
| Purchase of short-term investments | (30,360 | ) | (16,500 | ) | ||||
| Investment in Ollie's, Inc | (4,000 | ) | -- | |||||
| Proceeds from sales of short-term investments | 93,885 | 15,000 | ||||||
| Acquisition of favorable lease rights | (105 | ) | (813 | ) | ||||
| Proceeds from sale of property and equipment | 32 | -- | ||||||
| Settlement of merger-related contingencies | 1,021 | 75 | ||||||
| Net cash used in investing activities | (217,665 | ) | (110,109 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from revolving credit facilities | 39,700 | -- | ||||||
| Repayment of long-term debt and facility fees | (11,813 | ) | (6,025 | ) | ||||
| Principal payments under capital lease obligations | (5,681 | ) | (2,870 | ) | ||||
| Proceeds from stock issued pursuant to | ||||||||
| stock-based compensation plans | 19,587 | 29,073 | ||||||
| Net cash provided by financing activities | 41,793 | 20,178 | ||||||
| Net decrease in cash and cash equivalents | (170,164 | ) | (119,047 | ) | ||||
| Cash and cash equivalents at beginning of period | 237,302 | 218,077 | ||||||
| Cash and cash equivalents at end of period | $ | 67,138 | $ | 99,030 | ||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for: | ||||||||
| Interest | $ | 5,598 | $ | 3,063 | ||||
| Income taxes | 57,432 | 65,967 | ||||||
See accompanying Notes to Condensed Consolidated Financial Statements.
The condensed consolidated financial statements at November 1, 2003 and for the three- and nine-month periods ended November 1, 2003 and October 31, 2002 are unaudited and reflect all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial position at November 1, 2003 and operating results for the interim periods. The February 1, 2003 and December 31, 2002 balance sheet information was derived from the audited consolidated financial statements as of those dates.
The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto, together with management’s discussion and analysis of financial condition and results of operations for the year ended December 31, 2002 contained in the Company’s Annual Report on Form 10-K filed March 28, 2003. The results of operations for the three- and nine-month periods ended November 1, 2003 are not necessarily indicative of the results to be expected for the entire fiscal year ending January 31, 2004.
Certain 2002 amounts have been reclassified for comparability with the 2003 financial statement presentation.
On June 29, 2003, the Company acquired 100% of the outstanding capital stock of Greenbacks, Inc. (Greenbacks). The results of Greenbacks’ operations are included in the condensed consolidated financial statements since that date. Greenbacks was a privately-held company operating 100 stores in 10 western states and one expandable 252,000 square foot distribution center in Salt Lake City. As a result of this acquisition, the Company has extended its geographical reach to include 47 states compared with 41 states prior to the acquisition. In addition, this acquisition has provided the Company with an expandable distribution infrastructure in the Rocky Mountain area of the country. The aggregate purchase price was approximately $100 million and was paid in cash. In addition, the Company incurred approximately $0.8 million in direct costs associated with the acquisition.
The following table summarizes the fair value of the assets acquired and liabilities assumed at the date of acquisition.
| (In thousands) | |||||
|---|---|---|---|---|---|
| Current assets | $ | 28,192 | |||
| Property and equipment | 7,856 | ||||
| Intangible assets | 3,031 | ||||
| Goodwill | 80,050 | ||||
| Other assets | 33 | ||||
| Total assets acquired | 119,162 | ||||
| Current liabilities | 11,033 | ||||
| Long-term debt | 4,838 | ||||
| Other liabilities | 2,481 | ||||
| Total liabilities assumed | 18,352 | ||||
| Net assets acquired | $ | 100,810 | |||
In accordance with SFAS No. 142, goodwill will not be amortized, but rather tested annually for impairment.