UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report: March 18, 2003
Date of Earliest Event Reported: March 18, 2003
DOLLAR TREE STORES, INC.
(Exact name of registrant as specified in its charter)
COMMISSION FILE NUMBER: 0-25464
VIRGINIA 54-1387365
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
500 Volvo Parkway
Chesapeake, VA 23320
(Address of principal executive offices)
Registrant's telephone number, including area code: (757) 321-5000
Item 5. OTHER EVENTS
FISCAL YEAR 2002 RESULTS
As previously reported on Form 8-K on January 7, 2003, our Board of Directors
approved a change in our fiscal year from a calendar year to a retail fiscal
year ending on the Saturday closest to January 31. Fiscal 2002 is the period
beginning February 1, 2002 and ending February 1, 2003, and Fiscal 2003 is the
period beginning February 2, 2003 and ending January 31, 2004. Audited
information with respect to the transition period, January 1, 2003 through
February 1, 2003, will be included in our Annual Report on Form 10-K for the
year ended December 31, 2002.
Attached as Exhibit 99.1 are financial statements reflecting our results for the
quarter and fiscal year ended February 1, 2003. Financial data for the fourth
quarter of Fiscal 2002 includes results for the transition period of January 1,
2003 through February 1, 2003. Historical financial data for the first three
quarters of Fiscal 2002 was reported on Form 8-K on January 7, 2003.
SYNTHETIC LEASE FACILITY
In January 2003, the Financial Accounting Standards Board issued FASB
Interpretation No. 46, "Consolidation of Variable Interest Entities." Several of
our distribution centers are leased under the terms of a $165.0 million
synthetic lease facility, which is owned by a variable interest entity and
affected by the new standard. After evaluating the new standard, our Board of
Directors and management decided to maintain the favorable terms of the existing
facility and include the variable interest entity in our consolidated financial
statements. We adopted the requirements of the Interpretation early, effective
January 1, 2003.
As a result of our consolidation of the synthetic lease, our financial
statements were affected as follows:
o net property and equipment increased $128.8 million reflecting the
distribution center assets;
o other assets, net increased $1.0 million for the deferred financing costs
of the variable interest entity;
o long-term debt increased $140.6 million for the debt incurred by the
variable interest entity to purchase and construct the assets;
o current liabilities decreased $0.7 million for the write-off of the
current portion of the straight-lined rent liability for these
distribution centers;
o deferred tax liability decreased $3.3 million for the tax effect of the
accounting change noted below; and
o long-term liabilities decreased $1.6 million for the write-off of the
long-term portion of the straight-lined rent liability for these
distribution centers.
2
The $5.3 million cumulative effect of a change in accounting principle
represents, net of the tax effect, the catch up of depreciation related to the
distribution center assets and catch up of the amortization of the deferred
financing costs offset by the write-off of the straight-lined rent liability.
As a result of the consolidation, we expect the following changes in our annual
financial results:
o a $7.6 million increase in depreciation expense;
o a $4.5 million increase in interest expense due to amounts previously
classified as rent expense, and amortization of the deferred financing
costs; and
o a $3.5 million decrease in rent expense for the net of the monthly rent
payments now classified as interest expense and the effect of the
write-off of the straight-lined rent liability.
PRESS RELEASE
On March 18, 2003, we issued a press release regarding the consolidation of its
synthetic lease and its participation in the upcoming Merrill Lynch Retailing
Leaders Conference. The press release also includes brief comments regarding
first quarter sales estimates. A copy of the press release is attached to this
Form 8-K as Exhibit 99.2.
A WARNING ABOUT FORWARD-LOOKING STATEMENTS:
This filing contains "forward-looking statements" as that term is used in the
Private Securities Litigation Reform Act of 1995. Forward-looking statements
address future events, developments or results and typically use words such as
believe, anticipate, expect, intend, plan or estimate. For example, our
forward-looking statements include statements regarding:
o financial results affected by our implementation of FASB Interpretation
No. 46;
o future cash flow levels; and
o fiscal first quarter sales.
These forward-looking statements are subject to numerous risks and uncertainties
that may affect us including:
o the outbreak of war and other national and international events, such as
terrorism, leading to disruptions in the economy;
o adverse economic conditions, such as declining consumer confidence or
spending, or bad weather;
o possible difficulties in meeting our net sales and other expansion goals
and anticipated comparable store net sales results, which may result in
loss of leverage of operating expenses;
o increase in the cost of or disruption of the flow of our imported goods;
3
o the difficulties in managing our aggressive growth plans, including
opening stores on a timely basis;
o competition and possible increases in merchandise costs, shipping rates,
freight costs, or other operating costs such as wage levels;
o the capacity and performance of our distribution network and our ability
to expand its capacity in time to support our net sales growth; and
o changes in accounting standards.
For a discussion of the risks, uncertainties and assumptions that could affect
our future events, developments or results, you should carefully review the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business" sections in our Annual Report on Form 10-K filed
March 14, 2002. Also, carefully review "Risk Factors" in our most recent
prospectuses filed November 15, 2000 and August 3, 2000. In light of these risks
and uncertainties, the future events, developments or results described by our
forward-looking statements in this document could turn out to be materially and
adversely different from those we discuss or imply.
We are not obligated to release publicly any revisions to any forward-looking
statements contained in this filing to reflect events or circumstances occurring
after the date of this report or to reflect the occurrence of future events and
you should not expect us to do so.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
Exhibit # Description
99.1 Dollar Tree Stores, Inc.'s unaudited historical financial
data for the quarter and fiscal year ended February 1, 2003.
99.2 Dollar Tree Stores, Inc.'s press release regarding the
consolidation of its synthetic lease and its participation in
the upcoming Merrill Lynch conference.
4
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, hereunto duly authorized.
DATE: March 18, 2003
DOLLAR TREE STORES, INC.
By: /s/ Frederick C. Coble
--------------------------------
Frederick C. Coble
Chief Financial Officer
5
EXHIBIT 99.1
DOLLAR TREE STORES, INC.
AND SUBSIDIARIES
HISTORICAL FINANCIAL DATA
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
February 1,
2003
----
ASSETS
Current assets
Cash and cash equivalents.................................................. $ 237,302
Short-term investments..................................................... 63,525
Merchandise inventories.................................................... 438,439
Deferred tax asset......................................................... 14,333
Prepaid expenses and other current assets.................................. 15,783
---------
Total current assets................................................... 769,382
Property and equipment, net..................................................... 477,947
Goodwill, net................................................................... 38,358
Other assets, net............................................................... 18,552
---------
TOTAL ASSETS........................................................... $ 1,304,239
=========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt.......................................... $ 25,000
Accounts payable........................................................... 137,668
Income taxes payable....................................................... 23,548
Other current liabilities.................................................. 75,033
Current installments of obligations under
capital leases........................................................... 5,811
---------
Total current liabilities.............................................. 267,060
Long-term debt, excluding current portion....................................... 146,628
Obligations under capital leases, excluding current
installments.................................................................. 17,283
Deferred tax liability.......................................................... 11,685
Other liabilities .............................................................. 15,764
---------
Total liabilities...................................................... 458,420
---------
Shareholders' equity:
Common stock............................................................... 1,142
Additional paid-in capital................................................. 218,106
Accumulated other comprehensive loss....................................... (1,277)
Unearned compensation...................................................... (112)
Retained earnings.......................................................... 627,960
---------
Total shareholders' equity............................................. 845,819
Commitments..................................................................... --
---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,304,239
=========
1
DOLLAR TREE STORES, INC.
AND SUBSIDIARIES
HISTORICAL FINANCIAL DATA
CONDENSED CONSOLIDATED INCOME STATEMENTS
(In thousands, except per share and store data)
(Unaudited)
Three months Fiscal year
ended ended
February 1, February 1,
2003 2003
---- ----
Net sales.................................................................... $ 778,860 $ 2,357,836
Cost of sales................................................................ 497,451 1,503,612
------- ---------
Gross Profit........................................................ 281,409 854,224
Selling, general and administrative
expenses................................................................... 172,254 606,836
------- ---------
Operating income.................................................... 109,155 247,388
------- ---------
Other income (expense):
Interest income............................................................ 930 3,446
Interest expense........................................................... (1,455) (4,812)
Changes in fair value of non-hedging
interest rate swaps..................................................... 157 (1,297)
------- ----------
Total other expense................................................. (368) (2,663)
------- ---------
Income before income taxes.......................................... 108,787 244,725
Provision for income taxes................................................... 41,884 94,220
------- ---------
Income before cumulative effect of a change
in accounting principle........................................ 66,903 150,505
Cumulative effect of a change in accounting
principle, net of tax benefit of $3,309........................ 5,285 5,285
------- ---------
Net income.......................................................... $ 61,618 $ 145,220
======= =========
Basic net income per share:
Income before cumulative effect of a change in
accounting principle........................................... $ 0.59 $ 1.32
Cumulative effect of a change in accounting
principle...................................................... 0.05 0.04
------- ---------
Net income.......................................................... $ 0.54 $ 1.28
======= =========
Diluted net income per share:
Income before cumulative effect of a change in
accounting principle........................................... $ 0.58 $ 1.31
Cumulative effect of a change in accounting
principle...................................................... 0.04 0.04
------- ---------
Net income.......................................................... $ 0.54 $ 1.27
======= =========
Weighted average number of common shares
outstanding......................................................... 114,190 113,759
Weighted average number of common shares and dilutive
potential common shares outstanding................................. 114,695 114,610
Store Data:
Comparable store net sales increase................................. (1.7%) 0.8%
Number of stores open at end of period ............................. 2,272 2,272
Total selling square footage (in thousands)......................... 13,237 13,237
2
DOLLAR TREE STORES, INC.
AND SUBSIDIARIES
HISTORICAL FINANCIAL DATA
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Fiscal year
ended
February 1,
2003
----
Cash flows from operating activities:
Net income............................................................... $ 145,220
-------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization........................................ 73,892
Loss on disposal of property and equipment........................... 1,853
Cumulative effect of change in accounting
principle......................................................... 5,285
Change in fair value of non-hedging interest
rate swaps........................................................ 1,297
Provision for deferred income taxes.................................. 17,830
Tax benefit of stock option exercises................................ 9,797
Other non-cash adjustments to net income............................. 454
Changes in assets and liabilities increasing
(decreasing) cash and cash equivalents:
Merchandise inventories........................................... (74,696)
Prepaid expenses and other current assets......................... 3,529
Other assets...................................................... (1,628)
Accounts payable.................................................. 20,686
Income taxes payable.............................................. (14,268)
Other current liabilities......................................... 13,477
Other liabilities................................................. (2,145)
-------
Net cash provided by operating activities................... 200,583
-------
Cash flows from investing activities
Capital expenditures..................................................... (137,570)
Purchase of short-term investments....................................... (84,060)
Proceeds from maturities of short-term investments....................... 20,535
Settlement of merger-related contingencies............................... 75
Acquisition of favorable lease rights.................................... (813)
Proceeds from sale of property and equipment............................. 216
-------
Net cash used in investing activities....................... (201,617)
-------
Cash flows from financing activities:
Repayment of long-term debt and facility fees............................ (6,025)
Principal payments under capital lease obligations....................... (3,996)
Proceeds from stock issued pursuant to stock-based
compensation plans..................................................... 30,280
-------
Net cash provided by financing activities................... 20,259
-------
Net increase in cash and cash equivalents....................................... 19,225
Cash and cash equivalents at beginning of period................................ 218,077
-------
Cash and cash equivalents at end of period...................................... $ 237,302
=======
Supplemental disclosure of cash flow information:
Cash paid for:
Interest............................................................... $ 4,003
=======
Income taxes........................................................... $ 82,503
=======
3
EXHIBIT 99.2
DOLLAR TREE TO PRESENT AT MERRILL LYNCH CONFERENCE,
COMPANY ALSO CONSOLIDATES SYNTHETIC LEASE
CHESAPEAKE, Va - March 18, 2003 - Dollar Tree Stores, Inc. (Nasdaq: DLTR) has
consolidated its synthetic lease facility on its financial statements. The lease
comprises approximately $140 million of distribution center assets, including
the Company's new Marietta, Oklahoma facility. The financial details of this
decision, as well as the Company's fiscal fourth quarter results, are presented
in an 8-K, filed today with the SEC. The effect of the consolidation will be to
increase non-cash expenses, primarily depreciation, by approximately $8.6
million ($5.3 million, net of tax) annually.
"This decision enhances the transparency of our financial reporting while
enabling us to retain very favorable borrowing rates," Chief Financial Officer
Eric Coble said. "Our cash flow will be unaffected by this transaction, and will
remain at industry-leading levels. Dollar Tree continues to be one of the most
profitable retailers, generating more than enough cash to fund all our expansion
needs."
In other news, Dollar Tree will participate in the Merrill Lynch Retailing
Leaders Conference being held on March 19-20, 2003 at the Pierre Hotel in New
York City. Dollar Tree's presentation is scheduled for Thursday, March 20, 2003,
at approximately 1:20 pm ET. Management will discuss Dollar Tree's business and
growth plans. The Company believes it is on-track to achieve fiscal first
quarter sales in the low-to-middle portion of its $590-$610 million forecast.
A live audio-only web cast of the Company's presentation at the Merrill Lynch
conference will be available on Dollar Tree's web site, www.DollarTree.com. A
replay will be available within 24 hours of the presentation and can be accessed
at the same location. This replay will be available until midnight Tuesday,
March 25, 2003.
Additionally, on February 2, 2003, Dollar Tree's Marietta, Oklahoma distribution
center began serving stores in the central and southwestern portions of the
United States. This 603,000 square foot, fully automated distribution center is
the seventh in Dollar Tree's nationwide network, and was completed on-time and
under-budget.
Dollar Tree Stores, Inc. is the nation's leading $1.00 discount variety store
chain. As of February 1, 2003, Dollar Tree operates 2,272 stores in 40 states.
A WARNING ABOUT FORWARD-LOOKING STATEMENTS: This press release contains
"forward-looking statements" as that term is used in the Private Securities
Litigation Reform Act of 1995. Forward-looking statements address future events,
developments or results and typically use words such as believe, anticipate,
expect, intend, plan or estimate. For example, our forward-looking statements
include statements regarding the financial effects of consolidating our
synthetic lease facility, future levels of cash flow, and fiscal first-quarter
sales.
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 filed March 14, 2002 and in our Quarterly Report on Form 10-Q filed
November 14, 2002. Also, carefully review "Risk Factors" in our most recent
prospectuses filed November 15, 2000 and August 3, 2000. In light of these risks
and uncertainties, the future events, developments or results described by our
forward-looking statements in this document could turn out to be materially and
adversely different from those we discuss or imply.
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.
CONTACT: Dollar Tree Stores, Inc., Chesapeake
Erica Robb or Adam Bergman, 757/321-5000
www.DollarTree.com