~ Sales increased to $3.01 billion and
Same-Store Sales increased 2.7% ~
~ Reaffirms estimate of $300 million in
run-rate synergies by end of third year ~
~ Company is progressing on Family Dollar
integration plan ~
Dollar Tree, Inc. (NASDAQ: DLTR), North America's leading
operator of discount variety stores, today reported results for its
second fiscal quarter ended August 1, 2015.
Bob Sasser, Chief Executive Officer of Dollar Tree, stated, “I
am extremely proud of Dollar Tree’s accomplishments in the second
quarter. We delivered our 30th consecutive quarter of positive
same-store sales, broke ground on our southeast distribution center
in South Carolina, successfully completed our acquisition of Family
Dollar, and quickly initiated our integration plan.”
Merger Integration
On July 6, 2015, Dollar Tree completed its acquisition of Family
Dollar Stores, Inc. Since that date, the Company has been executing
its integration plan.
Sasser added, “We are very pleased to have successfully
completed the acquisition. We are now an organization with annual
sales exceeding $19 billion, more than 13,800 stores across North
America and a network of more than 145,000 associates. We remain
confident in our ability to deliver $300 million in annual run-rate
synergies by the end of the third year post-acquisition. This
combination provides us with the unique opportunity to leverage our
multiple banners to better serve a broader range of customers,
while enhancing our ability to deliver long-term profitable growth
for our shareholders.”
Second Quarter Results
Net sales increased 48.3% to $3.01 billion from $2.03 billion in
the prior year’s second quarter. The increase was the result of
$811.6 million in sales from the Family Dollar segment since
closing on the acquisition, and a same-store sales increase of 2.7%
on a constant currency basis for the Dollar Tree segment.
Same-store sales increased 4.5% in the prior-year period for the
Dollar Tree segment. Adjusted for the impact of Canadian currency
fluctuations, the same-store sales increase was 2.4%. The positive
same-store sales were driven by increases in customer count and
average ticket.
Gross profit increased by $161.1 million, or 23.2%, to $855.2
million in the second quarter compared to $694.1 million in the
prior year’s second quarter. The dollar increase was primarily
driven by $105.9 million of gross profit for Family Dollar as well
as higher sales at Dollar Tree. As a percent of sales, gross margin
decreased to 28.4% compared to 34.2% in the prior year. The primary
contributors to the decrease were $60 million of markdown expense
for Family Dollar related to SKU rationalization and planned
liquidations, $11.1 million for Family Dollar related to the
amortization of the stepped up inventory basis and the impact of
the overall lower-margin product mix for the Family Dollar
business.
Selling, general and administrative expenses were 24.3% of sales
compared to 24.1% of sales in the prior year's second quarter.
Acquisition-related costs were $17.7 million in the second quarter
of 2015 and $7.5 million in the second quarter of 2014. Excluding
acquisition-related costs, selling, general and administrative
expenses were flat at 23.7% of sales for both years.
Net income, including acquisition-related costs, decreased
$219.5 million compared to the prior year’s second quarter,
resulting in a net loss of $0.46 per diluted share. Excluding
acquisition-related adjustments, net income decreased $72.6 million
to $53.5 million and diluted earnings per share decreased 59% to
$0.25.
The Dollar Tree segment, excluding all acquisition-related costs
and share changes, produced adjusted net income of $138.9 million,
or $0.67 per adjusted diluted share, as detailed in the attached
Reconciliation of Consolidated Pre-Tax Loss to Dollar Tree Segment
Adjusted Earnings Per Share Excluding Acquisition Related Costs
table. This adjusted net income per adjusted diluted share is
relevant and useful because it shows what the Dollar Tree segment
would have earned excluding all acquisition-related costs and share
changes. This compares to adjusted earnings per diluted share for
the Dollar Tree segment of $0.61 in the prior year’s second
quarter.
During the quarter, the Company acquired 8,284 Family Dollar
stores, opened 141 stores, expanded or relocated 40 stores, and
closed 1 store. Additionally, as part of its re-banner initiative,
the Company closed 18 Family Dollar stores, of which four have
re-opened as Dollar Tree stores and the other 14 re-opened as
Dollar Tree stores following quarter-end. Retail selling square
footage at the end of the quarter was approximately 108.2 million
square feet.
First Six Months Results
Consolidated net sales increased 28.7% to $5.19 billion from
$4.03 billion in the first six months of 2014. Family Dollar sales
represented $811.6 million of the increase. Same-store sales, for
the Dollar Tree segment, increased 3.0% on a constant currency
basis, compared to a 3.2% increase in the prior-year period.
Adjusted for the impact of Canadian currency fluctuations, the
same-store sales increase was 2.8%.
Gross profit increased $213.4 million, or 15.3%, to $1.60
billion from $1.39 billion in the first six months of 2014. As a
percent of sales, gross margin decreased by 360 basis points to
30.9%. The primary contributors to the decrease were $60 million of
markdown expense for Family Dollar related to SKU rationalization
and planned liquidations, $11.1 million for Family Dollar related
to the amortization of the stepped up inventory basis and the
impact of the overall lower-margin product mix for the Family
Dollar business.
Selling, general and administrative expenses were 24.1% of sales
compared to 23.7% of sales in the first six months of 2014.
Acquisition-related costs were $28.1 million in the first six
months of 2015 and $7.5 million in the first six months of 2014.
Excluding acquisition-related costs, selling, general and
administrative expenses were 23.5% of sales, flat compared to the
first six months of the prior year.
Net income, including acquisition-related costs, decreased
$288.2 million compared to the prior year's first six months,
resulting in a net loss of $0.14 per diluted share. Excluding
acquisition-related adjustments, net income decreased $63.5 million
to $200.8 million and diluted earnings per share decreased 25.8% to
$0.95.
Company Outlook
The Company estimates consolidated net sales for the third
quarter of 2015 to range from $4.78 billion to $4.87 billion, based
on a low single-digit increase in same-store sales. For the full
year, the Company estimates consolidated net sales to range from
$15.30 billion to $15.52 billion, based on a low single-digit
increase in same-store sales.
As a result of the recently-completed acquisition, the
significant integration initiatives and the divestiture process,
the Company is not providing earnings per share guidance for the
third quarter or full year at this time.
Conference Call
Information
On Tuesday, September 1, 2015, 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 888-737-3713. A
recorded version of the call will be available until midnight
Monday, September 7, 2015 and may be accessed by dialing
888-203-1112.The access code is 9293899. A webcast of the call is
accessible through Dollar Tree's website, and will remain online
until Monday, September 7.
Dollar Tree, a Fortune 500 Company, operated 13,864 stores
across 48 states and five Canadian provinces as of August 1, 2015.
Stores operate under the brands of Dollar Tree, Family Dollar,
Dollar Tree Canada, and Deals. 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 address future events, developments or results and
typically use words such as believe, anticipate, expect, intend,
plan, forecast, or estimate. For example, our forward-looking
statements include statements regarding third quarter 2015 and full
year 2015 net sales and same-store sales, acquisition-related
synergies and expenses, the benefits, results, and effects of the
merger, future financial and operating results, the combined
company's plans, objectives, expectations (financial or otherwise)
and intentions. 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," “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” sections in our Annual Report
on Form 10-K filed March 13, 2015, the “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” and
other sections in our Quarterly Report on Form 10-Q filed May 21,
2015 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 August
1, 2015 August 2, 2014 (Unaudited)
(Unaudited)
As
Reported
Adjustments
(a)
As
Adjusted
As
Reported
Adjustments
(a)
As
Adjusted
Net sales $ 3,011.2 $ - $ 3,011.2 $ 2,031.1 $ - $ 2,031.1
Cost of sales 2,156.0 - 2,156.0 1,337.0 - 1,337.0
Gross profit 855.2 - 855.2 694.1 - 694.1 28.4 % 28.4 % 34.2 % 34.2
% Selling, general & administrative expenses 731.8 (17.7
) 714.1 489.1 (7.5 ) 481.6 24.3 % (0.6 %) 23.7 % 24.1 % (0.4 %)
23.7 % Operating income 123.4 17.7 141.1 205.0 7.5 212.5 4.1
% 0.6 % 4.7 % 10.1 % 0.4 % 10.5 % Interest expense, net
263.9 (227.6 ) 36.3 8.4 - 8.4 Other expense, net 1.7 - 1.7 - - -
Income (loss) before income taxes (142.2 ) 245.3 103.1 196.6
7.5 204.1 (4.7 %) 8.1 % 3.4 % 9.7 % 0.4 % 10.0 % Income tax
expense (benefit) (44.2 ) 93.8 49.6 75.1 2.9 78.0 Income tax rate
31.1 % 38.3 % 48.1 % 38.2 % 38.3 % 38.2 % Net income (loss)
$ (98.0 ) $ 151.5 $ 53.5 $ 121.5 $ 4.6 $ 126.1 (3.3 %) 5.0 % 1.8 %
6.0 % 0.2 % 6.2 % Net earnings (loss) per share: Basic $
(0.46 ) $ 0.71 $ 0.25 $ 0.59 $ 0.02 $ 0.61 Weighted average number
of shares 214.3 214.3 214.3 205.8 205.8 205.8 Diluted $
(0.46 ) $ 0.70 $ 0.25 $ 0.59 $ 0.02 $ 0.61 Weighted average number
of shares 214.3 215.3 215.3 206.6 206.6 206.6 (a) The
adjustments to Selling, general and administrative expenses and
Interest expense, net are related to the acquisition of Family
Dollar Stores, Inc. The adjustments to Interest expense, net
represent the incremental costs incurred to the July 6, 2015
acquisition date and in conjunction with the repayment of
pre-existing debt. NOTE: These condensed consolidated income
statements have been prepared on a basis consistent with our
previously prepared income statements filed with the Securities and
Exchange Commission for our prior quarter and annual periods, with
the exception of the footnotes required by GAAP for completed
financial statements and inclusion of certain non-GAAP adjustments
and measures as described in footnote (a) above. Management
believes the reporting of comparable results is important in
assessing the overall performance of the business and is therefore
useful for investors and prospective investors.
DOLLAR TREE, INC. Condensed Consolidated Statements of
Operations (In millions, except per share data)
26 Weeks Ended August 1, 2015
August 2, 2014 (Unaudited) (Unaudited)
As
Reported
Adjustments
(a)
As
Adjusted
As
Reported
Adjustments
(a)
As
Adjusted
Net sales $ 5,187.8 $ - $ 5,187.8 $ 4,031.4 $ - $ 4,031.4
Cost of sales 3,583.7 - 3,583.7 2,640.7 - 2,640.7
Gross profit 1,604.1 - 1,604.1 1,390.7 - 1,390.7 30.9 % 30.9 % 34.5
% 34.5 % Selling, general & administrative expenses
1,247.8 (28.1 ) 1,219.7 953.8 (7.5 ) 946.3 24.1 % (0.5 %) 23.5 %
23.7 % (0.2 %) 23.5 % Operating income 356.3 28.1 384.4
436.9 7.5 444.4 6.9 % 0.5 %
7.4
% 10.8 % 0.2 % 11.0 % Interest expense, net 386.2 (343.2 )
43.0 16.6 - 16.6 Other income, net (0.9 ) - (0.9 ) - - -
Income (loss) before income taxes (29.0 ) 371.3 342.3 420.3 7.5
427.8 (0.6 %) 7.2 % 6.6 % 10.4 % 0.2 % 10.6 % Income tax
expense (benefit) (0.5 ) 142.0 141.5 160.6 2.9 163.5 Income tax
rate 1.7 % 38.3 % 41.3 % 38.2 % 38.2 % 38.2 % Net income
(loss) $ (28.5 ) $ 229.3 $ 200.8 $ 259.7 $ 4.6 $ 264.3 (0.5 %) 4.4
% 3.9 % 6.4 % 0.1 % 6.6 % Net earnings (loss) per share:
Basic $ (0.14 ) $ 1.08 $ 0.95 $ 1.26 $ 0.02 $ 1.28 Weighted average
number of shares 210.3 210.3 210.3 206.3 206.3 206.3 Diluted
$ (0.14 ) $ 1.09 $ 0.95 $ 1.25 $ 0.02 $ 1.28 Weighted average
number of shares 210.3 211.2 211.2 207.2 207.2 207.2
(a) The adjustments to Selling, general and administrative expenses
and Interest expense, net are related to the acquisition of Family
Dollar Stores, Inc. The adjustments to Interest expense, net
represent the incremental costs incurred to the July 6, 2015
acquisition date and in conjunction with the repayment of
pre-existing debt. NOTE: These condensed consolidated income
statements have been prepared on a basis consistent with our
previously prepared income statements filed with the Securities and
Exchange Commission for our prior quarter and annual periods, with
the exception of the footnotes required by GAAP for completed
financial statements and inclusion of certain non-GAAP adjustments
and measures as described in footnote (a) above. Management
believes the reporting of comparable results is important in
assessing the overall performance of the business and is therefore
useful for investors and prospective investors.
DOLLAR TREE, INC. Segment Information (In
millions, except store count)
13 Weeks Ended 26 Weeks Ended August
1, 2015 August 2, 2014 August 1,
2015 August 2, 2014 (Unaudited)
(Unaudited) (Unaudited) (Unaudited)
As
Reported
Adj
(a)
As
Adjusted
As
Reported
Adj
(a)
As
Adjusted
As
Reported
Adj
(a)
As
Adjusted
As
Reported
Adj
(a)
As
Adjusted
Net sales: Dollar Tree $ 2,199.6 $ - $ 2,199.6 $
2,031.1 $ - $ 2,031.1 $ 4,376.2 $ - $ 4,376.2 $ 4,031.4 $ - $
4,031.4 Family Dollar
811.6
- 811.6
- -
- 811.6
- 811.6
- -
- Total net sales
$
3,011.2 $ -
$ 3,011.2 $
2,031.1 $ -
$ 2,031.1 $
5,187.8 $ -
$ 5,187.8 $
4,031.4 $ -
$ 4,031.4 Gross
profit: Dollar Tree $ 749.3 $ - $ 749.3 $ 694.1 $ - $ 694.1 $
1,498.2 $ - $ 1,498.2 $ 1,390.7 $ - $ 1,390.7 Family Dollar
105.9 -
105.9 -
- -
105.9 -
105.9 -
- - Total gross
profit
$ 855.2 $
- $ 855.2
$ 694.1 $
- $ 694.1
$ 1,604.1 $
- $ 1,604.1
$ 1,390.7 $
- $ 1,390.7
Operating income (loss): Dollar Tree $ 218.4 $ 16.5 $
234.9 $ 205.0 $ 7.5 $ 212.5 $ 451.3 $ 26.9 $ 478.2 $ 436.9 $ 7.5 $
444.4 Family Dollar
(95.0 )
1.2 (93.8 )
- -
- (95.0 )
1.2 (93.8
) - -
- Total operating income
$ 123.4 $
17.7 $ 141.1
$ 205.0 $
7.5 $ 212.5
$ 356.3 $
28.1 $ 384.4
$ 436.9 $
7.5 $ 444.4
13 Weeks Ended 26 Weeks
Ended August 1, August 2, August 1,
August 2, 2015 2014 2015 2014
Dollar
Tree
Family
Dollar
Total
Dollar
Tree
Family
Dollar
Total
Dollar
Tree
Family
Dollar
Total
Dollar
Tree
Family
Dollar
Total Store Count: Beginning 5,454 8,284
13,738 5,080 - 5,080 5,367 8,284 13,651 4,992 - 4,992 New 126 15
141 90 - 90 219 15 234 184 - 184 Rebanner (b) 4 (18 ) (14 ) - - - 4
(18 ) (14 ) - - - Closings
(1 )
- (1 )
(4 ) -
(4 ) (7
) - (7
) (10 )
- (10 ) Ending
5,583 8,281
13,864 5,166
- 5,166
5,583 8,281
13,864 5,166
- 5,166
Selling Square Footage (in millions)
48.3
59.9 108.2
44.8 -
44.8 48.3
59.9 108.2
44.8 -
44.8 Growth Rate (Square Footage)
7.8 % 100.0
% 141.5 %
6.8 % 0.0
% 6.8 %
7.8 % 100.0
% 141.5 %
6.8 % 0.0
% 6.8 %
(a) The adjustments to Selling, general and administrative
expenses are related to the acquisition of Family Dollar Stores,
Inc. (b) Rebanner represent stores being converted from the
Family Dollar segment to the Dollar Tree segment. The Family Dollar
segment shows the store as a reduction in store count when it
ceases operations and the Dollar Tree segment shows it as an
increase in store count upon reopening. NOTE: These
condensed consolidated income statements have been prepared on a
basis consistent with our previously prepared income statements
filed with the Securities and Exchange Commission for our prior
quarter and annual periods, with the exception of the footnotes
required by GAAP for completed financial statements and inclusion
of certain non-GAAP adjustments and measures as described in
footnote (a) above. Management believes the reporting of comparable
results is important in assessing the overall performance of the
business and is therefore useful for investors and prospective
investors. The results of Family Dollar's operations are included
from the July 6, 2015 acquisition date.
DOLLAR TREE, INC. Condensed
Consolidated Balance Sheets (Dollars in millions)
(Unaudited) August 1, January
31, August 2, 2015 2015 2014
Cash and cash equivalents $ 1,302.5 $ 864.1 $ 467.7
Restricted cash 4.0 - - Merchandise inventories, net 2,825.1
1,035.7 1,084.0 Current deferred tax assets, net 85.5 28.3 17.1
Other current assets 307.6 66.5 94.4 Total
current assets 4,524.7 1,994.6 1,663.2 Property and
equipment, net 3,151.9 1,210.5 1,153.4 Goodwill 4,982.8 164.6 169.8
Deferred tax assets, net - 30.6 42.2 Favorable lease rights, net
620.8 0.9 1.7 Other intangible assets, net 3,106.3 1.2 2.1 Other
assets, net 178.6 90.3 97.5 Total
assets $ 16,565.1 $ 3,492.7 $ 3,129.9 Current portion
of long-term debt $ 83.0 $ - $ - Accounts payable 1,152.5 433.6
524.2 Other current liabilities 837.8 385.3 256.1 Income taxes
payable - 42.7 2.7 Total current liabilities
2,073.3 861.6 783.0 Long-term debt 8,265.5 682.7 740.2
Unfavorable lease rights, net 162.4 - - Deferred tax liabilities,
net 1,655.1 - - Other liabilities 361.8 163.4
158.6 Total liabilities 12,518.1 1,707.7
1,681.8 Shareholders' equity 4,047.0
1,785.0 1,448.1 Total liabilities and shareholders'
equity $ 16,565.1 $ 3,492.7 $ 3,129.9 The January 31,
2015 information was derived from the audited consolidated
financial statements as of that date.
DOLLAR TREE, INC. Condensed Consolidated
Statements of Cash Flows (In millions)
(Unaudited) 26 Weeks Ended August
1, August 2, 2015 2014 Cash
flows from operating activities: Net income (loss) $ (28.5 ) $
259.7
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating activities:
Depreciation and amortization 142.3 100.6 Provision for deferred
taxes (17.6 ) (16.2 ) Other non-cash adjustments to net income
(loss) 57.5 25.7 Changes in operating assets and liabilities
(199.4 ) (4.5 ) Total adjustments (17.2 )
105.6
Net cash provided by (used in) operating
activities
(45.7 ) 365.3 Cash flows from investing
activities: Capital expenditures (167.0 ) (160.2 ) Purchase of
restricted investments (12.0 ) - Acquisition of Family Dollar, net
of cash and common stock acquired (6,525.6 ) - Proceeds from sale
of fixed assets (0.3 ) 0.3 Net cash used in
investing activities (6,704.9 ) (159.9 ) Cash
flows from financing activities: Principal payments for long-term
debt (935.2 ) (12.8 ) Proceeds from long-term debt 8,200.0 - Debt
issuance costs (88.9 ) -
Proceeds from stock issued pursuant to
stock-based compensation plans
3.9 3.3 Tax benefit of exercises/vesting of stock-based
compensation 10.0 3.6 Net cash provided
by (used in) financing activities 7,189.8 (5.9
) Effect of exchange rate changes on cash and cash equivalents
(0.8 ) 0.5 Net increase in cash and cash
equivalents 438.4 200.0 Cash and cash equivalents at beginning of
period 864.1 267.7 Cash and cash
equivalents at end of period $ 1,302.5 $ 467.7
DOLLAR TREE, INC. Reconciliation of Consolidated
Pre-Tax Loss to Dollar Tree Segment Adjusted Earnings Per Share
Excluding Acquisition Related Costs (In millions, except per
share data)
13 Weeks Ended
August 1, 2015
Reported Consolidated Company Pre-Tax Income (Loss) $ (142.2 )
Less: Family Dollar Segment Operating Income (Loss) (95.0 ) Plus:
Dollar Tree Segment Acquisition Fees 16.5 Plus: Consolidated
Company Interest Expense, net 263.9 Less: 13 Weeks Ended May 2,
2015 As Adjusted Interest Expense, net 8.2 Adjusted
Dollar Tree Segment Pre-Tax Income 225.0 Income Taxes
(38.25%) 86.1 Adjusted Dollar Tree Segment Net Income
$ 138.9 Dollar Tree Segment Adjusted Basic EPS $ 0.67 Dollar
Tree Segment Adjusted Dilutive EPS $ 0.67 Share Count
Information: Reported Consolidated Company Weighted Average Basic
Shares Outstanding 214.3 Less: Shares related to Family Dollar
acquisition 8.1 Dollar Tree Segment Weighted Average
Basic Shares Outstanding 206.2 Reported
Consolidated Company Weighted Average Dilutive Shares Outstanding
215.3 Less: Shares related to Family Dollar acquisition 8.3
Dollar Tree Segment Weighted Average Dilutive Shares
Outstanding 207.0
View source
version on businesswire.com: http://www.businesswire.com/news/home/20150901005831/en/
Dollar Tree, Inc.Randy Guiler, 757-321-5284Vice President,
Investor Relationswww.DollarTree.com
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