Dollar Tree 2009 Annual Report Download

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2009 Annual Report

Table of contents

  • Page 1
    2009 Annual Report

  • Page 2
    ..., Inc. is the World's leading operator of $1 price-point variety stores. The Company also offers value merchandise at prices above $1 at its 157 Deal$ stores. Since our first store opened in 1986, Dollar Tree has focused on providing surprising, unexpected value on an ever-changing assortment of...

  • Page 3
    ... years reported in the table contain 52 weeks. (b) Comparable store net sales compare net sales for stores open throughout each of the two periods being compared. Net sales per store are calculated for stores open throughout the entire period presented. ฀฀฀DOLLAR฀TREE,฀INC.฀•฀2009...

  • Page 4
    ...add new product. We have evolved from small, mall-based locations and now open฀10,000฀-฀12,000฀sq.฀ft.฀stores฀in฀strip฀centers฀and฀free-standing฀locations.฀We฀believe฀this฀to฀be฀our฀optimum฀size฀ 2฀฀฀DOLLAR฀TREE,฀INC.฀•฀2009฀Annual฀Report

  • Page 5
    ... our volume increases; in fact, every new store that we open makes our network more efficient. In฀ the฀ fourth฀ quarter฀ 2009,฀ we฀ purchased฀ a฀ new฀ distribution฀ center฀ in฀ San฀ Bernardino, CA, to replace a leased facility in Salt Lake City. The new DC became฀ fully...

  • Page 6
    ...launched฀our฀e-commerce฀platform,฀"Dollar Tree Direct," as another way to offer Dollar Tree values to more customers, including organizations, small businesses and individual customers planning events. Dollar฀Tree฀Direct฀is฀off฀to฀a฀great฀start฀and฀2009฀was฀only฀the...

  • Page 7
    ... our store base, enhancing our supply chain with a new distribution center and developing new retail concepts, including Deal$ and Dollar Tree Direct. These investments bring greater opportunities for our associates to grow and develop their skills, while expanding overall employment opportunities...

  • Page 8
    6฀฀฀DOLLAR฀TREE,฀INC.฀•฀2009฀Annual฀Report

  • Page 9
    ...seasonal merchandise and party supplies like helium balloons, gift bags and gift wrap. Dollar Tree is the one name that offers these and other items to customers coast-to-coast with each item priced at $1 - or less - every day! ฀฀฀DOLLAR฀TREE,฀INC.฀•฀2009฀Annual฀Report฀฀฀7

  • Page 10
    ... grows. Our inventory management and supply chain systems are enabling us to streamline our supply chain, improve merchandise ï¬,ow and reduce per-store inventory levels, resulting in more efficient distribution and store operations. 8฀฀฀DOLLAR฀TREE,฀INC.฀•฀2009฀Annual฀Report D

  • Page 11
    ....) Inventory Per Sq. Foot $25.07 $23.00 $22.58 $22.30 Port of Entry (for non-U.S.-sourced products) $21.05 Distribution Centers Date opened (square footage) Shading indicates service area for each distribution center. '05 '06 '07 '08 '09 ฀฀฀DOLLAR฀TREE,฀INC.฀•฀2009฀Annual...

  • Page 12
    ... EBT, Visa and Discover Credit cards are accepted at all of our stores, and we accept Food Stamps - or SNAP - at 75% of our stores. Through our 157 Deal$ stores, we offer great value merchandise at prices above $1. At Deal$, not everything is $1, but everything is a value. In฀2009,฀Dollar฀Tree...

  • Page 13
    ... Types Widely Accepted Debit Card EBT Cash & Checks 1999 Cash & Checks 2009* * SNAP/Food Stamps are accepted at 75% of our ฀ stores฀at฀fiscal฀2009฀year-end.฀All฀other฀listed฀ tender-types are accepted at 100% of our stores. ฀฀฀DOLLAR฀TREE,฀INC.฀•฀2009฀Annual...

  • Page 14
    ...associate's contributions are valued, employment opportunities expand and where professional development is encouraged. Each new store represents an investment in a community. Our stores are bright, clean and beautiful. They average approximately $1.4 million in annual sales, and help drive customer...

  • Page 15
    ..., shipping rates, domestic and import freight costs, fuel costs and฀wage฀and฀benefit฀costs; •฀฀ our฀gross฀profit฀margin,฀earnings,฀inventory฀levels฀ and ability to leverage selling, general and administrative฀and฀other฀fixed฀costs; •฀฀ our฀seasonal฀sales...

  • Page 16
    ...฀inventory฀cost฀under฀the฀ retail฀method.฀On฀January,฀31,฀2010,฀the฀first฀day฀of฀ fiscal฀2010,฀we฀will฀use฀approximately฀30฀inventory฀ pools in our retail inventory calculation. As a result 14฀฀฀DOLLAR฀TREE,฀INC.฀•฀2009฀Annual฀Report

  • Page 17
    ...the฀building฀starts฀receiving฀ merchandise. This new distribution center will replace our Salt Lake City, Utah leased facility when฀its฀lease฀ends฀in฀April฀2010 On฀February฀20,฀2008,฀we฀entered฀into฀a฀five-year฀ $550.0฀million฀unsecured฀Credit฀Agreement...

  • Page 18
    ... Operating income Interest฀income Interest฀expense ฀ Income฀before฀income฀taxes Net income Provision for income taxes Selling, general and administrative expenses 100.0% 64.5% 35.5% 25.7% 9.8% 0.0% (0.1%) 9.7% (3.6%) 6.1% 16฀฀฀DOLLAR฀TREE,฀INC.฀•฀2009฀Annual฀Report

  • Page 19
    ... New stores Acquired leases Expanded or relocated stores Closed stores 227 4 86 (51) Of the 1.9 million selling square foot increase in฀2008฀approximately฀0.3฀million฀was฀added฀by฀ expanding existing stores. ฀฀฀DOLLAR฀TREE,฀INC.฀•฀2009฀Annual฀Report฀฀฀17

  • Page 20
    ...These฀benefits฀to฀the฀tax฀ rate were partially offset by a reduction in tax-exempt interest฀income฀in฀2008. Liquidity and Capital Resources Our business requires capital to build and open new stores, expand our distribution network and operate existing stores. Our working capital...

  • Page 21
    ... Briar Creek distribution center and corporate headquarters. In฀2009,฀net฀cash฀used฀in฀financing฀activities฀was฀ $161.3฀million฀as฀a฀result฀of฀share฀repurchases฀of฀$190.7฀ million partially offset by stock option exercises and employee฀stock฀plan฀purchases...

  • Page 22
    ....฀ Funding Requirements Overview We฀expect฀our฀cash฀needs฀for฀opening฀new฀stores฀ and฀expanding฀existing฀stores฀in฀fiscal฀2010฀to฀total฀ approximately฀$136.0฀million,฀which฀includes฀capital฀ expenditures, initial inventory and pre-opening costs. Our...

  • Page 23
    ...30,฀2010฀for฀ stores฀that฀were฀not฀yet฀open฀on฀January฀30,฀2010. Capital Lease Obligations. Our capital lease obligations are primarily for distribution center equipment and computer equipment at the store support center. Credit Agreement.฀On฀February฀20,฀2008,฀we...

  • Page 24
    ...,฀ including estimates of future merchandise markdowns and฀shrink,฀which฀significantly฀affect฀the฀ending฀ inventory valuation at cost as well as the resulting gross margins. The averaging required in applying the retail 22฀฀฀DOLLAR฀TREE,฀INC.฀•฀2009฀Annual฀Report

  • Page 25
    ... Our management believes that our application of the retail inventory method results in an inventory valuation that reasonably approximates cost and results in carrying inventory at the lower of cost or market each year on a consistent basis. Accrued Expenses workers'฀compensation฀and฀general...

  • Page 26
    ...฀through฀the฀first฀half฀of฀2010;฀however,฀ we believe that we can partially offset the increase in payroll costs through increased productivity and continued฀efficiencies฀in฀product฀flow฀to฀our฀stores. 24฀฀฀DOLLAR฀TREE,฀INC.฀•฀2009฀Annual฀Report

  • Page 27
    ...75.0฀million฀interest฀ rate฀swap฀agreements฀in฀March฀2008฀to฀manage฀the฀ risk associated with the interest rate ï¬,uctuations on a portion฀of฀our฀$250.0฀million฀variable฀rate฀term฀loan. ฀฀฀DOLLAR฀TREE,฀INC.฀•฀2009฀Annual฀Report฀฀฀25

  • Page 28
    ... for hedge accounting and therefore all changes in fair value for this derivative will be included directly in earnings. The fair value of these฀contracts฀at฀January฀30,฀2010฀was฀a฀liability฀of฀ $0.2฀million. 26฀฀฀DOLLAR฀TREE,฀INC.฀•฀2009฀Annual฀Report

  • Page 29
    ...our฀report฀dated฀March฀19,฀2010฀expressed฀an฀unqualified฀opinion฀on฀the฀ effectiveness฀of฀the฀Company's฀internal฀control฀over฀financial฀reporting. Norfolk, Virginia March฀19,฀2010 ฀฀฀DOLLAR฀TREE,฀INC.฀•฀2009฀Annual฀Report฀฀฀27

  • Page 30
    ... Year฀Ended฀ ฀February฀2,฀ 2008 $ 4,242.6฀ 2,781.5฀ 1,461.1฀ 1,130.8฀ 330.3฀ 6.7฀ (17.2) 319.8฀ 118.5฀ $ $ $ 201.3฀ 2.10฀ 2.09฀ Selling,฀general฀and฀administrative฀expenses฀(Notes฀4,฀8฀and฀9) 28฀฀฀DOLLAR฀TREE,฀INC.฀•฀2009฀Annual...

  • Page 31
    ..., 2010 (in millions, except share and per share data) ASSETS January฀31,฀ 2009 Current assets: Cash and cash equivalents Short-term investments Merchandise inventories ฀ Deferred฀tax฀assets฀(Note฀3)฀ Prepaid expenses and other current assets Total current assets Property,฀plant...

  • Page 32
    ...฀of฀stock฀under฀Employee฀Stock฀ Purchase Plan (Note 9) Exercise of stock options, including income฀tax฀benefit฀of฀$2.3฀ (Notes 3 and 9) Stock-based compensation, net (Notes 1 and 9) Balance฀at฀January฀31,฀2009 Net income for the year ended January฀30,฀2010 Other...

  • Page 33
    ...credit facility Payments for share repurchases Proceeds from stock issued pursuant to stock-based compensation plans Tax฀benefit฀of฀exercises/vesting฀of฀equity฀based฀compensation Net฀cash฀provided฀by฀(used฀in)฀financing฀activities Net increase (decrease) in cash and cash...

  • Page 34
    ... centers in Mississippi,฀Illinois,฀California,฀Pennsylvania,฀Georgia,฀ Oklahoma,฀Utah฀and฀Washington.฀The฀Company's฀stores฀ are฀located฀in฀all฀48฀contiguous฀states฀and฀the฀District฀ of฀Columbia.฀The฀Company's฀merchandise฀includes฀ food...

  • Page 35
    ... statements of operations. Costs incurred related to software developed for internal฀use฀are฀capitalized฀and฀amortized฀generally฀over฀ three years. Goodwill value฀less฀costs฀to฀sell.฀In฀fiscal฀2009,฀2008฀and฀2007,฀the฀ Company฀recorded฀charges฀of...

  • Page 36
    ... on revenueproducing transactions (i.e., sales tax) on a net (excluded from revenues) basis. Cost of Sales The Company includes the cost of merchandise, warehousing and distribution costs, and certain occupancy costs in cost of sales. 34฀฀฀DOLLAR฀TREE,฀INC.฀•฀2009฀Annual฀Report

  • Page 37
    ...฀Company's฀common฀stock฀on฀ the date of grant. Depreciation฀expense฀was฀$157.8฀million,฀$161.1฀ million฀and฀$158.5฀million฀for฀the฀years฀ended฀ January฀30,฀2010,฀January฀31,฀2009,฀and฀February฀2,฀ 2008,฀respectively. ฀฀฀DOLLAR฀TREE...

  • Page 38
    ....6฀ $ 118.5฀ Included฀in฀current฀tax฀expense฀for฀the฀years฀ended฀January฀30,฀2010฀and฀January฀31,฀2009,฀are฀amounts฀related฀ to uncertain tax positions associated with temporary differences. 36฀฀฀DOLLAR฀TREE,฀INC.฀•฀2009฀Annual฀Report

  • Page 39
    ...effective rate follows: Year Ended January 30, 2010 Statutory tax rate Effect of State฀and฀local฀income฀taxes,฀net฀of฀federal฀income฀tax฀benefit฀ Other, net Effective tax rate 35.0% 3.3 (1.4) 36.9% Year฀Ended Year฀Ended January฀31, February฀2, ฀2009฀ ฀2008 35...

  • Page 40
    ... payments under noncancelable stores and distribution center operating leases are as follows: 2010 2011 2012 2013 2014 Thereafter Total minimum lease payments (in millions 372.8 326.9 269.3 202.7 ฀฀ ฀ 140.2 ฀฀ ฀ 206.8 ฀ ฀$฀1,518.7฀ During฀fiscal฀2009,฀the฀Company...

  • Page 41
    ...rentals Contingent rentals Year฀Ended Year฀Ended January฀31, February฀2, ฀2009฀ ฀2008 323.9 295.4 0.3 1.2฀ Non-Operating Facilities Letters of Credit The Company is responsible for payments under leases for certain closed stores. A facility is considered abandoned on the date...

  • Page 42
    ... debt, excluding current portion $ 250.0 January฀31, 2009 250.0฀ 17.6฀ 267.6฀ 17.6฀ 250.0฀ Maturities฀of฀long-term฀debt฀are฀as฀follows:฀2010฀-฀$17.5฀million฀and฀2013฀-฀$250.0฀million. 40฀฀฀DOLLAR฀TREE,฀INC.฀•฀2009฀Annual฀Report

  • Page 43
    ... and therefore all changes in fair value for these derivatives will be included directly into earnings. The฀fair฀value฀of฀these฀contracts฀at฀January฀30,฀2010฀was฀ a฀liability฀of฀$0.2฀million. ฀฀฀DOLLAR฀TREE,฀INC.฀•฀2009฀Annual฀Report฀฀฀41

  • Page 44
    ...number฀of฀shares฀ was determined based on the weighted average market price฀of฀the฀Company's฀common฀stock฀during฀the฀four฀ months after the initial execution date. The calculated weighted฀average฀market฀price฀through฀July฀30,฀2007,฀ 42฀฀฀DOLLAR฀TREE...

  • Page 45
    ... high-end of the price range of the collar. The number of shares received under the agreement was determined based on the weighted average market price of the Company's฀common฀stock,฀net฀of฀a฀predetermined฀ discount, during the time after the initial execution date through a period of...

  • Page 46
    ...฀exercise฀price฀will฀ equal฀the฀fair฀market฀value฀of฀the฀Company's฀common฀ stock at the date the option is issued. The options are fully฀vested฀when฀issued฀and฀have฀a฀term฀of฀10฀years.฀ 44฀฀฀DOLLAR฀TREE,฀INC.฀•฀2009฀Annual฀Report

  • Page 47
    ...Company's฀ publicly traded stock. The risk free rate is based on the U.S. Treasury rates on the grant date with maturity dates approximating the expected life of the option on the grant date. The weighted average assumptions used in the Black-Scholes option pricing model for grants in 2009,฀2008...

  • Page 48
    ... RSUs was determined using the Company's฀closing฀stock฀price฀on฀the฀grant฀date. In฀2008,฀the฀Company฀granted฀0.1฀million฀RSUs฀ from฀the฀EIP฀and฀the฀EOEP฀to฀certain฀officers฀of฀the฀ 46฀฀฀DOLLAR฀TREE,฀INC.฀•฀2009฀Annual฀Report

  • Page 49
    ...year฀then฀ ended: Weighted Average Grant Date Fair Value purchase฀price฀of฀the฀stock฀is฀85%฀of฀the฀lower฀of฀the฀ price at the beginning or the end of the quarterly offering period. Under the ESPP, the Company has sold 1,333,000฀shares฀as฀of฀January฀30,฀2010...

  • Page 50
    ...share Stores open at end of quarter Comparable store net sales change Fiscal฀2008: Net sales Gross฀profit Operating income Net income Diluted฀net฀income฀per฀share Stores open at end of quarter Comparable store net sales change (1) Easter was observed on April 12, 2009 and March 23, 2008...

  • Page 51
    ...Company's฀common฀stock฀has฀been฀traded฀฀ on NASDAQ under the symbol "DLTR " since our initial public offering฀on฀March฀6,฀1995. The following table gives the high and low sales prices of our common฀stock฀for฀the฀fiscal฀years฀2009฀and฀2008. Stock Price HIGH 2009...

  • Page 52
    500 Volvo Parkway • Chesapeake, Virginia 23320 • Phone (757) 321-5000 www.DollarTree.com