Dollar Tree 2006 Annual Report Download - page 22

The $79.9 million decrease in cash used in
investing activities in 2005 compared to 2004 was
the result of a $34.2 million decrease in net purchases
of investments resulting from more cash used to
repurchase stock in 2005. The net purchases of
investments in 2005 include $29.9 million of invest-
ments that are in a restricted account to collateralize
certain long-term insurance obligations. These invest-
ments replaced higher cost stand-by letters of credit
and surety bonds. Capital expenditures also
decreased $42.5 million in 2005 after two distribu-
tion center projects and point-of-sale installations
were completed in 2004.
The $231.5 million change in cash used in financ-
ing activities in 2005 compared to 2004 primarily
resulted from $180.4 million in stock repurchases in
2005 compared to $48.6 million in 2004. Also in
2004, we entered into a five-year $450.0 million
Revolving Credit Facility, under which we received
net proceeds of $248.9 million. We used a portion
of these proceeds to repay $142.6 million of variable
rate debt for our distribution centers and invested the
balance in short-term tax exempt municipal bonds.
At February 3, 2007, our long-term borrowings
were $268.8 million and our capital lease commit-
ments were $0.7 million. We also have $125.0 million
and $50.0 million Letter of Credit Reimbursement
and Security Agreements, under which approximately
$84.8 million were committed to letters of credit
issued for routine purchases of imported merchandise
at February 3, 2007.
In March 2005, our Board of Directors author-
ized the repurchase of up to $300.0 million of our
common stock through March 2008. During fiscal
2006, we repurchased 5,650,871 shares for approxi-
mately $148.2 million under the March 2005
authorization.
In November 2006, our Board of Directors
authorized the repurchase of up to $500.0 million
of our common stock. This amount was in addition
to the $27.0 million remaining on the March 2005
authorization. In December 2006, we entered into
two agreements with a third party to repurchase
approximately $100.0 million of the Company’s
common shares under an Accelerated Share
Repurchase Agreement (ASR).
MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The first $50.0 million was executed in an
“uncollared” agreement. In this transaction, we ini-
tially received 1,656,178 shares based on the market
price of our stock of $30.19 as of the trade date
(December 8, 2006). A weighted average price was
calculated using stock prices from December 16, 2006
– March 8, 2007. This represents the calculation peri-
od and based on the weighted average price during
this period, a settlement took place in March 2007
resulting in additional funding of $3.3 million.
The remaining $50.0 million relates to a “col-
lared” agreement in which we initially received
1,500,703 shares representing the minimum number
of shares under the agreement. The maximum num-
ber of shares that can be repurchased under the agree-
ment is 1,693,101. The number of shares was deter-
mined based on the weighted average market price of
our common stock during the same calculation period
as defined in the “uncollared” agreement. The
weighted average market price as of February 3, 2007
as defined in the “collared” agreement was $30.80.
Therefore, as of February 3, 2007, we would receive
an additional 122,742 shares under the “collared”
agreement. Based on the applicable accounting litera-
ture, these additional shares were not included in the
weighted average diluted earnings per share calcula-
tion because their effect would be antidilutive. The
weighted average stock price of our common stock as
defined in the “collared” agreement as of March 8,
2007 (termination date) was $31.97. We received an
additional 63,325 shares on March 8, 2007 under
this agreement.
On March 29, 2007, we entered into an agree-
ment with a third party to repurchase approximately
$150.0 million of our common shares under another
ASR. The entire $150.0 million was executed under
a “collared” agreement. Within two weeks of the
March 29, 2007 execution date, we will receive the
minimum number of shares. Up to four months after
the initial execution date, we will receive additional
shares from the third party depending on the volume
weighted average price of our common shares during
that period, subject to the maximum share delivery
provisions of the agreement.
20 DOLLAR TREE STORES, INC. • 2006 ANNUAL REPORT