~ Consolidated Sales of $6.21 Billion;
Enterprise Same-Store Sales Increased 2.4% ~
~ Same-Store Sales by Segment: Dollar Tree
+3.2%, Family Dollar +1.4% ~
~ Accelerates Plans for Improving Family
Dollar Performance; Takes Non-Cash Charge against Acquisition
Goodwill ~
~ Plans New Round of Testing of Multi-Price
Points at Select Dollar Tree Stores While Reiterating Brand’s Value
Commitment to Core Customer Base ~
Dollar Tree, Inc. (NASDAQ: DLTR), North America's leading
operator of discount variety stores, today reported financial
results for its fourth quarter and fiscal year ended February 2,
2019.
“Sales for the quarter were strong,” stated Gary Philbin,
President and Chief Executive Officer. “Our results demonstrate the
increasing strength of the Dollar Tree brand, and accelerated
progress on the Family Dollar turnaround, as Family Dollar
delivered its strongest quarterly same-store sales growth of the
year.”
Philbin continued, “We are confident in our progress and we have
good momentum. Our merchants at both banners have delivered a 2019
plan that we believe overcomes most of the effect of tariffs at the
25% level, and provides opportunity for margin improvements if
tariffs are not increased. We moved aggressively in the fourth
quarter to optimize Family Dollar’s performance, including closing
84 stores and announcing plans to renovate at least 1,000 stores in
2019. The renovated stores will include new $1.00 Dollar Tree
merchandise sections. Approximately 200 Family Dollar stores will
be re-bannered to Dollar Tree, and we plan to close as many as 390
Family Dollar stores this year. We also recorded an inventory
reserve in part because of the different inventory needs of this
new optimized store base. Excluding this markdown and the non-cash
goodwill impairment charge related to Family Dollar, the combined
companies performed well in the quarter.”
Fourth Quarter Results
In the fourth quarter, the Company incurred several discrete
charges, as described below:
- Based on the Company’s strategic and
operational reassessment of the Family Dollar segment, management
determined there were indicators that the goodwill of the business
may be impaired. Accordingly, a goodwill impairment test was
performed in the fourth quarter of fiscal 2018. The results of the
impairment test showed that the fair value of the Family Dollar
business was lower than the carrying value resulting in a $2.73
billion non-cash pre-tax and after-tax goodwill impairment
charge.
- $40.0 million SKU rationalization
markdown reserve related to the Family Dollar segment.
- $13.0 million non-cash impairment of
certain store assets.
- $1.5 million acceleration in non-cash
deferred financing costs associated with the prepayment of the
Company’s $782 million term loan facility.
Discrete items, or adjustments, for fiscal 2018 and 2017 are
included in the Reconciliation of Non-GAAP Financial Measures
within the tables of this earnings release.
For the fourth quarter, including the impact of each of the
items listed above, the Company reported a GAAP loss per share of
$9.66. Adjusted earnings per share for the quarter, excluding the
impact of the identified items, was $1.93, near the high end of the
Company’s guidance range.
Consolidated net sales for the thirteen-week fourth quarter 2018
were $6.21 billion, compared to $6.36 billion in the prior year’s
fourth quarter, which included fourteen weeks. Excluding $406.6
million of sales from the extra week in the prior year’s quarter,
consolidated net sales increased 4.2%. On a constant currency
basis, enterprise same-store sales increased 2.4% (or 2.3% when
adjusted to include the impact of Canadian currency fluctuations).
Same-store sales for the Dollar Tree banner increased 3.2% on a
constant currency basis (or 3.1% when adjusted to include the
impact of Canadian currency fluctuations). Same-store sales for the
Family Dollar banner increased 1.4%.
Gross profit for the quarter was $1.91 billion, compared to
$2.10 billion in the prior year’s fourteen-week quarter. As a
percentage of sales, gross margin decreased to 30.8% compared to
33.0% in the prior year. The decline was driven primarily by higher
markdowns, including a $40.0 million SKU rationalization markdown
reserve at Family Dollar, domestic freight, shrink, distribution
costs, and occupancy costs which de-levered due to cycling the
extra week in the prior year’s fourth quarter, partially offset by
lower merchandise costs.
Selling, general and administrative expenses for the quarter,
including discrete charges, were 65.4% of sales compared to 21.0%
of sales in the prior year's fourth quarter. Excluding the discrete
charges from the current year’s quarter and the receivable recovery
and workers compensation reserve from the prior year’s quarter,
selling, general and administrative expenses were flat at 21.3% of
sales for the current and prior year’s quarters.
Including discrete charges, operating loss for the quarter was
$2.15 billion compared with operating income of $765.6 million in
the same period last year. Excluding the discrete charges from the
current year’s quarter and the receivable recovery and workers
compensation reserve from the prior year’s quarter, operating
income for the quarter was $632.6 million compared with $743.2
million in the same period last year and adjusted operating income
margin was 10.2% in the current quarter compared to 11.7% of sales
in last year’s fourteen-week quarter.
The Company's effective tax rate for the quarter was 5.1%
compared to a benefit of 50.4% in the prior year period. The rate
in 2018 is the result of the goodwill impairment charge not being
tax deductible. The prior year benefit was the result of the Tax
Cuts and Jobs Act (“TCJA”). Among other changes to existing tax
laws, the TCJA reduced the federal corporate tax rate from 35% to
21% effective January 1, 2018. The effective tax rate for the prior
year’s quarter included a $562.0 million non-cash benefit resulting
from the re-measurement of the Company’s net deferred tax
liabilities to reflect the lower statutory rate of 21%. The total
benefit from the TCJA for the fourth quarter of fiscal 2017 was
$583.7 million.
Net loss for the quarter, including discrete charges, was $2.31
billion and GAAP diluted loss per share was $9.66 compared to
diluted earnings per share of $4.37 in the prior year’s quarter. On
an adjusted basis, diluted earnings per share increased 2.1% to
$1.93 compared to an adjusted $1.89 in the prior year’s fourteen
week-quarter. The extra week in the fourth quarter of 2017
contributed $0.21 to earnings. On a comparable 13-week basis,
adjusted diluted earnings per share increased 14.9%.
During the quarter, the Company opened 143 stores, expanded or
relocated 14 stores, and closed 84 Family Dollar stores and 10
Dollar Tree stores. Additionally, the Company opened five Dollar
Tree stores that were re-bannered from Family Dollar. Retail
selling square footage at quarter end was approximately 120.1
million square feet.
Full Year Results
Consolidated net sales for the 52-week fiscal 2018 increased
2.6% to $22.82 billion from $22.25 billion in the 53-week fiscal
2017. Excluding $406.6 million of sales from the prior year’s 53rd
week, consolidated net sales increased 4.5%. Enterprise same-store
sales increased 1.7%. Same-store sales for the Dollar Tree banner
increased 3.3%. Same-store sales for the Family Dollar banner
increased 0.1%.
Gross profit decreased by $74.4 million to $6.95 billion in
fiscal 2018 compared to $7.02 billion in the prior year’s 53-week
period. As a percentage of sales, gross margin decreased to 30.4%
from 31.6% in the prior year.
Selling, general and administrative expenses, including discrete
charges, were 34.5% of sales compared to 22.6% of sales in the
prior year. Excluding adjustments in both periods, selling, general
and administrative expenses were 22.6% of sales for fiscal 2018 and
22.4% of sales for fiscal 2017.
GAAP operating loss in fiscal 2018 was $939.5 million compared
to operating income of $2.00 billion in fiscal 2017. Excluding the
discrete charges from the current year and the net receivable
recovery and workers compensation reserve from the prior year,
adjusted operating income was $1.84 billion in fiscal 2018 compared
with $2.03 billion in fiscal 2017 and adjusted operating income
margin was 8.1% in fiscal 2018 compared to 9.1% of sales in the
53-week fiscal 2017.
Net interest expense was $370.0 million in fiscal 2018 compared
to $301.8 million in the prior year. The increase is due to the
prepayment premiums paid during the first quarter of 2018 of $107.8
million and $6.5 million related to the redemption of the 5.75%
Senior Notes due 2023 and Term Loan B-2, respectively. Also, in
connection with the debt refinancing in the first quarter of 2018,
the expensing of approximately $41.2 million of amortizable
non-cash deferred financing costs was accelerated and with the
early payment of the $782.0 million term loan facility in the
fourth quarter of 2018, the expensing of an additional $1.5 million
in deferred financing costs was accelerated in fiscal 2018. These
increases were partially offset by lower interest expense,
subsequent to the refinancing, in the second, third and fourth
quarters of fiscal 2018.
The Company's effective tax rate for the year was 21.5% compared
to a benefit of 0.6% in the prior year. The rate in 2018 is the
result of the goodwill impairment charge not being tax deductible.
The prior year benefit was the result of the TCJA.
Net loss, including discrete charges, for fiscal 2018 was $1.59
billion and GAAP diluted loss per share was $6.66 compared to
diluted earnings per share of $7.21 in the prior year. On an
adjusted basis, diluted earnings per share increased 12.1% to $5.45
compared to an adjusted $4.86 in the 53-week fiscal 2017. Please
see the Reconciliation of Non-GAAP Financial Measures for the
detail on adjustments.
Family Dollar Update
Philbin added, “Since the merger, we have prepaid $4.3 billion
dollars of debt, captured significant synergies in both brands, and
fully integrated most systems, functions and departments across
banners. By July, we will complete the most important phase:
unifying our headquarters under one roof in Virginia. With these
improvements behind us coupled with an investment grade debt rating
and expected operating cash flow, before capital expenditures, of
approximately $2.0 billion in 2019, we are in an ideal spot to
accelerate our initiatives to position the Family Dollar and Dollar
Tree banners for success.”
2019 Store Optimization Program
- After continued development,
experimentation and testing, the Company is very pleased to roll
out a new model for both new and renovated Family Dollar stores
internally known as H2. This new H2 model has significantly
improved merchandise offerings, including Dollar Tree $1.00
merchandise, throughout the store. H2 has produced increased
traffic and provided an average comparable store sales lift in
excess of 10% over control stores. H2 performs well in a variety of
locations, and especially in locations where Family Dollar has in
the past been the most challenged. The Company plans to renovate at
least 1,000 of these stores this year and will pursue an
accelerated renovation schedule in future years.
- The Company closed 84 under-performing
stores in the fourth quarter – closing 37 more than originally
planned for the year. In fiscal 2019, the Company is seeking to
obtain material rent concessions from landlords on under-performing
stores. Without such concessions, the Company expects to accelerate
its pace of store closings to as many as 390 stores in fiscal 2019
(compared to the banner’s normal annual closing cadence of
approximately 75 stores).
- The Company plans to re-banner
approximately 200 Family Dollar stores to the Dollar Tree banner in
2019.
- Additionally, the Company plans to
install adult beverages in approximately 1,000 stores and expand
freezers and coolers in approximately 400 stores.
The actions taken in 2019 under the Store Optimization Program
alone are expected to provide a comparable store sales lift of up
to 1.5% once they have been implemented by the end of fiscal
2019.
Integration Update
Nearly all systems, functions and departments at Family Dollar
and Dollar Tree have been substantially integrated with the primary
exceptions of merchandising, store operations, and loss prevention.
Real estate, supply chain, strategic planning, global sourcing,
information technology, store development, finance, human
resources, inventory management, and legal have been integrated to
a significant degree. These integrations have resulted in annual
savings exceeding $50 million, with another $15 million in expected
annual savings upon completion of campus consolidation.
The acquisition of Family Dollar has contributed significantly
to the Dollar Tree banner’s increasing profitability. The
re-bannered Family Dollar stores have improved Dollar Tree’s
profitability by more than $55 million per year, which we expect to
increase as more Family Dollar stores are re-bannered. The Dollar
Tree banner has benefitted from combining its purchasing power with
Family Dollar. Annual savings for the Dollar Tree banner are
estimated to be more than $60 million in indirect procurement
(including capital expenditures), and more than $70 million in
initial merchandise cost. The Company expects to benefit from
future savings as well as from other ongoing initiatives and
business improvements. These savings have helped to offset
investments in the business, such as improved merchandise values
and increased store labor, and cost increases such as wage rates,
fuel costs, and freight charges due to the driver shortage, which
also impact Family Dollar and the retail sector more broadly.
As part of Dollar Tree, the Family Dollar banner has benefited
from more than $145 million in estimated annual savings for
indirect procurement (including capital expenditures) and more than
$100 million in initial merchandise cost. As a percentage of sales,
Family Dollar has decreased its initial merchandise cost by
approximately 1.53% from fiscal 2015 to fiscal 2018. The Company
has reinvested much of these savings into the business through
price reductions at stores, increased merchandise value, and
increased staffing. The savings have also been offset by higher
costs of items included in the gross margin calculation, such as
distribution, shrink, freight and fuel. The Company expects the
merger to result in continued savings in the future.
Dollar Tree Price Test
The Company continues to believe that the Dollar Tree banner has
one of the most unique, differentiated and defensible brand
concepts in all of value retail. The one-dollar fixed-price point
has been a critical element of Dollar Tree’s success, generating
deep customer loyalty and strong historical performance. While the
Company will not undermine this important value proposition for
customers, testing new initiatives is an essential component of the
Company’s ability to evolve and provide the best customer
experience, including multi-price point testing, which has been
done on prior occasions.
The ability to test multi-price points is enhanced by Family
Dollar. The merchandise team at Family Dollar has the expertise and
purchasing power to purchase high value multi-price merchandise for
these test stores.
Company Outlook
In fiscal 2019, the Company will be accelerating its store
optimization program, and currently expects to renovate at least
1,000 Family Dollar stores. The Company plans to open 350 new
Dollar Tree and 200 new Family Dollar stores, as well as
re-bannering an additional 200 Family Dollar stores to Dollar Tree
stores. The Company also expects to accelerate its pace of Family
Dollar store closings by closing as many as 390 additional
under-performing stores. The total number of stores closed may
change depending on the Company’s ability to achieve material rent
concessions from landlords.
The Company estimates consolidated net sales for the first
quarter of 2019 to range from $5.74 billion to $5.85 billion, based
on a low single-digit increase in same-store sales for the combined
enterprise. Diluted earnings per share are estimated to be in the
range of $1.05 to $1.15.
For fiscal 2019, our guidance is based on the expectation that
Section 301 tariffs would move to 25% in March 2019. If these
tariffs do not move to 25%, we expect to see margin benefit in the
second half of fiscal 2019.
The Company estimates consolidated net sales will range from
$23.45 billion to $23.87 billion. This estimate is based on a low
single-digit increase in same-store sales and approximately 1.0%
square footage growth. Diluted earnings per share are expected to
range from $4.85 to $5.25, and includes discrete costs of
approximately $95 million, or $0.31 per share. Diluted earnings per
share in fiscal 2019 are also burdened by approximately $0.18 due
to the expected tax rate being 22.6% as compared to 19.9%,
excluding the goodwill impairment charge, in fiscal 2018.
The $95 million in discrete costs are related to the following
initiatives:
- $37 million of Store Support Center
consolidation costs,
- $30 million of incremental initiative
costs based on project count and velocity, and
- $28 million of store closure
costs.
These initiative-related costs are expected to be incurred
disproportionately, as approximately 75% will be incurred in the
first half and 25% in second half of fiscal 2019, as the Company
targets completing the majority of the initiatives by the end of
August 2019.
Due to the costs associated with these initiatives,
year-over-year operating income is expected to be lower in the
first half of fiscal 2019, but is expected to show material
improvement in the second half, as the initiatives gain traction.
Additionally, we believe that these initiatives will drive business
and provide the platform for an accelerated improvement in earnings
in fiscal 2020, when the Company’s earnings per share are expected
to grow 14% to 18% over reported fiscal 2019 earnings per
share.
Philbin concluded, “Our Dollar Tree business has continued to
perform extremely well. It’s a concept our customers love, as
validated by our streak of 44 consecutive quarters of comp sales
growth. We are confident we are taking the appropriate steps to
reposition our Family Dollar brand for increasing profitability as
business initiatives gain traction in the back half of fiscal 2019.
Improving the consistency of execution and optimizing our real
estate portfolio will contribute to a meaningful improvement in our
shoppers’ in-store experience and store traffic. We believe we are
well-positioned to capture the significant opportunity ahead of us
as we focus on creating and driving value for our
shareholders.”
Conference Call
Information
On Wednesday, March 6, 2019, the Company will host a conference
call to discuss its earnings results at 9:00 a.m. Eastern Time. The
telephone number for the call is 800-667-5617. A recorded version
of the call will be available until midnight Tuesday, March 12,
2019, and may be accessed by dialing 888-203-1112. The access code
is 9281767. A webcast of the call is accessible through Dollar
Tree's website and will remain online through Tuesday, March 12,
2019.
Dollar Tree, a Fortune 200 Company, operated 15,237 stores
across 48 states and five Canadian provinces as of February 2,
2019. Stores operate under the brands of Dollar Tree, Family
Dollar, and Dollar Tree Canada. To learn more about the Company,
visit www.DollarTree.com.
A WARNING ABOUT FORWARD-LOOKING STATEMENTS: Our press release
contains "forward-looking statements" as that term is used in the
Private Securities Litigation Reform Act of 1995. Forward-looking
statements can be identified by the fact that they address future
events, developments or results and do not relate strictly to
historical facts. Any statements contained in this press release
that are not statements of historical facts may be deemed to be
forward-looking statements. Forward-looking statements include,
without limitation, statements preceded by, followed by or
including words such as “believe,” “anticipate,” “expect,”
“intend,” “plan,” “view,” “target” or “estimate,” “may,” “will,”
“should,” “predict,” “possible,” “potential,” “continue,”
“strategy,” and similar expressions. For example, our
forward-looking statements include statements regarding 2020
earnings per share growth, first quarter 2019 and full-year 2019
results of operations, including consolidated net sales, expenses,
same-store sales, operating income, diluted earnings per share,
operating cash flow and tax rate; our square footage growth; our
expectations regarding tariff increases and plans to address the
effects of tariffs on our business; the impacts of increases in
wage rates, fuel costs and freight costs on our business; the
timing of and expected annual cost savings from the completion of
our headquarters consolidation; the benefits, results and effects
of the ongoing integration with Family Dollar, including our
estimates of future annual cost savings resulting from the
acquisition and our efforts to make both Company-wide improvements
as well as those targeted at Family Dollar; our plans and
expectations relating to our store optimization program, including
the opening of new stores, renovation of Family Dollar stores,
re-bannering Family Dollar stores to Dollar Tree stores and closing
Family Dollar stores, and the impact of the optimization program on
comparable store sales and profitability; our plans regarding the
testing of multi-price points at certain Dollar Tree stores; and
our other plans, objectives, expectations (financial and otherwise)
and intentions. These statements are subject to risks and
uncertainties. For a discussion of the risks, uncertainties and
assumptions that could affect our future events, developments or
results, you should carefully review the "Risk Factors," "Business"
and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" sections in our Annual Report on Form
10-K/A filed March 26, 2018, and other filings with the Securities
and Exchange Commission. We are not obligated to release publicly
any revisions to any forward-looking statements contained in this
press release to reflect events or circumstances occurring after
the date of this report and you should not expect us to do so.
DOLLAR
TREE, INC. Condensed Consolidated Statements of
Operations (In millions, except per share data)
13 Weeks
Ended
14 Weeks
Ended
52 Weeks
Ended
53 Weeks
Ended
February 2,
2019
February 3,
2018
February 2,
2019
February 3,
2018
(Unaudited) (Unaudited) (Unaudited) Net
sales $ 6,205.2 $ 6,360.6 $ 22,823.3 $ 22,245.5 Cost of
sales 4,293.1 4,259.6 15,875.8 15,223.6 Gross profit 1,912.1
2,101.0 6,947.5 7,021.9 30.8% 33.0% 30.4% 31.6%
Selling, general & administrative
expenses, excluding Goodwill impairment and Receivable
impairment
1,332.5 1,370.4 5,160.0 5,004.3 21.5% 21.5% 22.6% 22.5%
Goodwill impairment 2,727.0 - 2,727.0 - 43.9% 0.0% 11.9% 0.0%
Receivable impairment - (35.0) - 18.5 0.0% (0.5%) 0.0% 0.1%
Selling, general & administrative expenses 4,059.5
1,335.4 7,887.0 5,022.8 65.4% 21.0% 34.5% 22.6% Operating
income (loss) (2,147.4) 765.6 (939.5) 1,999.1 (34.6%) 12.0% (4.1%)
9.0% Interest expense, net 46.3 81.6 370.0 301.8 Other
expense (income), net 0.4 (7.5) (0.5) (6.7) Income (loss)
before income taxes (2,194.1) 691.5 (1,309.0) 1,704.0 (35.4%) 10.9%
(5.7%) 7.7% Provision for income taxes 112.9 (348.6) 281.8
(10.3) Income tax rate 5.1% (50.4%) 21.5% (0.6%) Net income
(loss) $ (2,307.0) $ 1,040.1 $ (1,590.8) $ 1,714.3 (37.2%) 16.4%
(7.0%) 7.7% Net earnings (loss) per share: Basic $ (9.69) $
4.38 $ (6.69) $ 7.24 Weighted average number of shares 238.0 237.2
237.9 236.8 Diluted $ (9.66) $ 4.37 $ (6.66) $ 7.21 Weighted
average number of shares 238.9 238.2 238.7 237.7
The 53 weeks ended February 3, 2018
information was derived from the audited consolidated financial
statements as of that date.
DOLLAR TREE, INC.Reconciliation of
Non-GAAP Financial Measures(In millions, except per share
data)(Unaudited)
From time-to-time, the Company's financial results include
certain financial measures not derived in accordance with generally
accepted accounting principles ("GAAP"). Non-GAAP financial
measures should not be used as a substitute for GAAP financial
measures, or considered in isolation, for the purposes of analyzing
operating performance, financial position or cash flows. However,
the Company believes providing additional transparency in the form
of non-GAAP measures that exclude the unusual, non-recurring
expenses and benefits outlined below is beneficial to the users of
its financial statements in evaluating the Company's current
operating results in relation to past periods. The Company has
included a reconciliation of this information to the most
comparable GAAP measures in the following tables.
Fiscal 2018:
In the fourth quarter of 2018, the Company recorded $40.0
million in sku rationalization markdown expense in the Family
Dollar segment.
Based on the Company’s strategic reassessment of the Family
Dollar segment, management determined there were indicators that
the goodwill of the business may be impaired. Accordingly, a
goodwill impairment test was performed in the fourth quarter of
2018. The results of the impairment test showed that the fair value
of the Family Dollar business was lower than the carrying value,
resulting in a $2.73 billion non-cash pre-tax and after-tax
goodwill impairment charge.
In the fourth quarter of 2018, the Company reviewed certain
long-lived assets and identifiable intangible assets for
impairment. As a result of its impairment analysis, the Company
recorded charges of $13.0 million to write down certain store
assets, including $6.1 million associated with impairment of
favorable lease rights.
In the first quarter of 2018, the Company entered into a credit
agreement that provided a $1.25 billion revolving credit facility
and a $782.0 million term loan facility. The Company also announced
the registered offering of $750.0 million aggregate principal
amount of Senior Floating Rate Notes due 2020, $1.0 billion of
3.70% Senior Notes due 2023, $1.0 billion of 4.00% Senior Notes due
2025 and $1.25 billion of 4.20% Senior Notes due 2028. In
connection with entry into the credit agreement, the Company
terminated the then-existing senior secured credit facilities and
paid a redemption premium of $6.5 million for the early payment of
the Term Loan B-2. In connection with the offering of the Senior
Notes, the Company redeemed the 5.75% Senior Notes due 2023 and
paid a redemption premium of $107.8 million. In connection with the
termination of the existing senior secured credit facilities and
the payment of the Term Loan B-2 and the 5.75% Senior Notes due
2023, the Company accelerated the expensing of approximately $41.2
million of amortizable non-cash deferred financing costs and
expensed approximately $0.4 million in non-capitalizable
transaction costs. Interest on the new debt was approximately $7.9
million in the first quarter and the interest foregone on the
redemption of the Term Loan A-1 and Term Loan B-2 was approximately
$3.3 million. In the fourth quarter of 2018, the Company prepaid
the $782.0 million term loan facility and accelerated the expensing
of $1.5 million of amortizable non-cash deferred financing
costs.
Fiscal 2017:
In the first half of 2017, the Company evaluated the
collectability of its divestiture-related receivable from Dollar
Express, which acquired the stores that the Federal Trade
Commission required the Company to divest. Based on a number of
factors, the Company determined the outstanding balance of $53.5
million was not recoverable and recorded impairment charges to
write down the receivable to zero. In the fourth quarter of 2017, a
settlement was reached, under which Sycamore Partners and Dollar
Express paid the Company $35.0 million which resulted in a partial
reversal of the impairment in the fourth quarter of 2017.
In the fourth quarter of 2017, the Company reevaluated its
workers' compensation insurance reserves. As a result of the effect
of re-bannered Family Dollar stores, among other factors, the
Company determined that the Dollar Tree workers' compensation loss
reserves were not as predictable as they were previously.
Therefore, the Company concluded that it was no longer appropriate
to discount these reserves and recorded a $12.6 million adjustment
to record the reserves on an undiscounted basis.
On January 30, 2018, the Company provided an irrevocable notice
to the holders of the 2020 Notes to call the 2020 Notes on March 1,
2018 and recorded a redemption premium of $9.8 million which was
payable on the call date of March 1, 2018.
On December 22, 2017, the Tax Cuts and Jobs Act (TCJA) was
signed into law. The TCJA lowered the federal corporate tax rate
from 35% to 21% and made numerous other law changes effective as of
January 1, 2018. The total benefit from the TCJA to the fourth
quarter 2017 was $583.7 million.
Reconciliation of Adjusted Net Income and Adjusted Diluted
Earnings per Share (EPS) 13 Weeks Ended 14 Weeks
Ended 52 Weeks Ended 53 Weeks Ended February
2, 2019 February 3, 2018 February 2, 2019
February 3, 2018 Net income (loss) (GAAP) $ (2,307.0 ) $
1,040.1 $ (1,590.8 ) $ 1,714.3 Gross profit adjustment: Markdowns
40.0 - 40.0 - SG&A adjustments: Goodwill impairment 2,727.0 -
2,727.0 - Store impairments 13.0 - 13.0 - Receivable impairment
(settlement) - (35.0 ) - 18.5 Workers' compensation reserve - 12.6
- 12.6 Interest expense adjustments:
Redemption premiums, deferred financing
costs acceleration, non-capitalizable transactions costs and
interest changes related to refinancing
1.5 9.8 162.0 9.8
Total adjustments 2,781.5 (12.6 )
2,942.0 40.9 Provision for income taxes
on adjustments1 (12.5 ) (578.3 ) (49.5 )
(598.6 ) Adjusted Net income (Non-GAAP) $ 462.0 $
449.2 $ 1,301.7 $ 1,156.6 Diluted
earnings (loss) per share (GAAP) $ (9.66 ) $ 4.37 $ (6.66 ) $ 7.21
Adjustments, net of tax 11.59 (2.48 )
12.11 (2.35 ) Adjusted Diluted EPS (Non-GAAP) $ 1.93
$ 1.89 $ 5.45 $ 4.86 1 For the
14 and 53 weeks ended February 3, 2018, the adjustment to the
Provision for income taxes includes the impact of the TCJA, which
resulted in a benefit of $583.7 million or $2.45 per share.
Reconciliation of Adjusted Operating Income 13 Weeks
Ended 14 Weeks Ended 52 Weeks Ended 53 Weeks
Ended February 2, 2019 February 3, 2018
February 2, 2019 February 3, 2018 Operating income
(loss) (GAAP) $ (2,147.4 ) $ 765.6 $ (939.5 ) $ 1,999.1 Gross
profit adjustment: Markdowns 40.0 - 40.0 - SG&A adjustments:
Goodwill impairment 2,727.0 - 2,727.0 - Store impairments 13.0 -
13.0 - Receivable impairment (settlement) - (35.0 ) - 18.5 Workers'
compensation reserve - 12.6 -
12.6 Total adjustments 2,780.0
(22.4 ) 2,780.0 31.1 Adjusted
Operating income (Non-GAAP) $ 632.6 $ 743.2 $ 1,840.5
$ 2,030.2
Reconciliation of Adjusted
Operating Income - Dollar Tree Segment 13 Weeks Ended
14 Weeks Ended 52 Weeks Ended 53 Weeks Ended
February 2, 2019 February 3, 2018 February 2,
2019 February 3, 2018 Operating income (GAAP) $ 542.7 $
560.0 $ 1,502.5 $ 1,481.9 SG&A adjustments: Store impairments
2.2 - 2.2 - Workers' compensation reserve -
12.6 - 12.6 Total adjustments
2.2 12.6 2.2 12.6
Adjusted Operating income (Non-GAAP) $ 544.9 $ 572.6
$ 1,504.7 $ 1,494.5
Reconciliation
of Adjusted Operating Income - Family Dollar Segment 13
Weeks Ended 14 Weeks Ended 52 Weeks Ended 53
Weeks Ended February 2, 2019 February 3, 2018
February 2, 2019 February 3, 2018 Operating income
(loss) (GAAP) $ (2,690.1 ) $ 205.6 $ (2,442.0 ) $ 517.2 Gross
profit adjustment: Markdowns 40.0 - 40.0 - SG&A adjustments:
Goodwill impairment 2,727.0 - 2,727.0 - Store impairments 10.8 -
10.8 - Receivable impairment (settlement) -
(35.0 ) - 18.5 Total adjustments
2,777.8 (35.0 ) 2,777.8 18.5
Adjusted Operating income (Non-GAAP) $ 87.7 $ 170.6
$ 335.8 $ 535.7
DOLLAR TREE, INC. Segment
Information (In millions, except store count)
13 Weeks Ended 14 Weeks Ended
52 Weeks Ended 53 Weeks Ended February 2, 2019
February 3, 2018 February 2, 2019 February 3, 2018
(a) (Unaudited) (Unaudited) (Unaudited)
Net sales: Dollar Tree $ 3,305.1 $ 3,320.9 $ 11,712.1
$ 11,164.4 Family Dollar
2,900.1
3,039.7 11,111.2
11,081.1 Total net sales
$
6,205.2 $ 6,360.6
$ 22,823.3 $
22,245.5 Gross profit: Dollar
Tree $ 1,227.7 37.1 % $ 1,263.4 38.0 % $ 4,137.5 35.3 % $ 3,998.5
35.8 % Family Dollar
684.4
23.6 % 837.6
27.6 % 2,810.0
25.3 % 3,023.4
27.3 % Total gross profit
$
1,912.1 30.8 %
$ 2,101.0 33.0
% $ 6,947.5
30.4 % $
7,021.9 31.6 %
Operating income (loss): Dollar Tree $ 542.7 16.4 % $ 560.0
16.9 % $ 1,502.5 12.8 % $ 1,481.9 13.3 % Family Dollar
(2,690.1 ) (92.8
%) 205.6 6.8
% (2,442.0 )
(22.0 %) 517.2
4.7 % Total operating income (loss)
$ (2,147.4 )
(34.6 %) $
765.6 12.0 %
$ (939.5 ) (4.1
%) $ 1,999.1
9.0 %
13 Weeks Ended 14 Weeks Ended 52 Weeks
Ended 53 Weeks Ended February 2, 2019 February
3, 2018 February 2, 2019 February 3, 2018
Dollar
Tree
Family
Dollar
Total
Dollar
Tree
Family
Dollar
Total
Dollar
Tree
Family
Dollar
Total
Dollar
Tree
Family
Dollar
Total Store Count: Beginning 6,923 8,264
15,187 6,604 8,140 14,744 6,650 8,185 14,835 6,360 7,974 14,334 New
83 60 143 51 86 137 320 226 546 315 288 603 Re-banner (b) 5 (4 ) 1
- - - 52 (53 ) (1 ) - - - Closings
(10 )
(84 ) (94
) (5 )
(41 ) (46 )
(21 ) (122
) (143 ) (25
) (77 )
(102 ) Ending
7,001
8,236 15,237
6,650 8,185
14,835 7,001
8,236 15,237
6,650 8,185
14,835 Selling Square Footage (in millions)
60.3 59.8
120.1 57.3
59.3 116.6
60.3 59.8
120.1 57.3
59.3 116.6 Growth Rate
(Square Footage)
5.2 %
0.8 % 3.0 %
4.8 % 2.8
% 3.7 % 5.2
% 0.8 %
3.0 % 4.8 %
2.8 % 3.7
%
(a) The 53 weeks ended February 3, 2018 information was
derived from the audited consolidated financial statements as of
that date. (b) Stores are included as re-banners when they close or
open, respectively.
DOLLAR TREE, INC. Condensed Consolidated
Balance Sheets (In millions) February 2,
February 3, 2019 2018 (Unaudited)
Cash and cash equivalents $ 422.1 $ 1,097.8 Merchandise
inventories, net 3,536.0 3,169.3 Other current assets 335.2
309.2 Total current assets 4,293.3 4,576.3 Property,
plant and equipment, net 3,445.3 3,200.7 Restricted cash 24.6 -
Goodwill 2,296.6 5,025.2 Favorable lease rights, net 288.7 375.3
Trade name intangible asset 3,100.0 3,100.0 Other assets
52.7 55.3 Total assets $ 13,501.2 $ 16,332.8
Current portion of long-term debt $ - $ 915.9 Accounts
payable 1,416.4 1,174.8 Income taxes payable 60.0 31.5 Other
current liabilities 619.3 736.9 Total current
liabilities 2,095.7 2,859.1 Long-term debt, net, excluding
current portion 4,265.3 4,762.1 Unfavorable lease rights, net 78.8
100.0 Deferred income taxes, net 973.2 985.2 Income taxes payable,
long-term 35.4 43.8 Other liabilities 409.9 400.3
Total liabilities 7,858.3 9,150.5
Shareholders' equity 5,642.9 7,182.3 Total
liabilities and shareholders' equity $ 13,501.2 $ 16,332.8
The February 3, 2018 information was derived from the
audited consolidated financial statements as of that date.
DOLLAR TREE, INC. Condensed
Consolidated Statements of Cash Flows (In millions)
52 Weeks Ended 53 Weeks Ended February
2, February 3, 2019 2018
(Unaudited) Cash flows from operating activities: Net
income (loss) $ (1,590.8 ) $ 1,714.3
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Goodwill impairment 2,727.0 - Receivable impairment - 18.5
Depreciation and amortization 621.1 611.2 Provision for deferred
income taxes (12.1 ) (473.5 ) Amortization of debt discount and
debt-issuance costs 57.2 15.4 Other non-cash adjustments to net
income (loss) 70.9 76.6 Loss on debt extinguishment 114.7 - Changes
in operating assets and liabilities (222.0 ) (452.3 )
Total adjustments 3,356.8 (204.1 ) Net cash
provided by operating activities 1,766.0
1,510.2 Cash flows from investing activities: Capital
expenditures (817.1 ) (632.2 ) Proceeds from sale of restricted and
unrestricted investments - 4.0 Proceeds from fixed asset
disposition 0.4 0.3 Net cash used in
investing activities (816.7 ) (627.9 ) Cash
flows from financing activities: Proceeds from long-term debt, net
of discount 4,775.8 - Principal payments for long-term debt
(6,214.7 ) (659.1 ) Debt-issuance and debt extinguishment costs
(155.3 ) - Proceeds from revolving credit facility 50.0 -
Repayments of revolving credit facility (50.0 ) - Proceeds from
stock issued pursuant to stock-based compensation plans 17.5 35.0
Cash paid for taxes on exercises/vesting of stock-based
compensation (23.2 ) (27.4 ) Net cash used in
financing activities (1,599.9 ) (651.5 ) Effect of
exchange rate changes on cash, cash equivalents and restricted cash
(0.5 ) 0.6 Net increase (decrease) in cash,
cash equivalents and restricted cash (651.1 ) 231.4 Cash, cash
equivalents and restricted cash at beginning of period
1,097.8 866.4 Cash, cash equivalents and
restricted cash at end of period $ 446.7 $ 1,097.8
The 53 weeks ended February 3, 2018 information was
derived from the audited consolidated financial statements as of
that date.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190306005387/en/
Dollar Tree, Inc.Randy Guiler, 757-321-5284Vice President,
Investor Relationswww.DollarTree.comDLTR-E
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