Dollar Tree 2012 Annual Report Download

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‘08 ‘09 ‘10 ‘11 ‘12
27.5%
34.8%
41.1 %
23.9%
20.5%
Return on
Shareholders’ Equity
‘08 ‘09 ‘10 ‘11 ‘12
10.7%
11.8%12.4%
9.8%
7. 9%
Operating Margin
‘08 ‘09 ‘10 ‘11 ‘12
$5.9
$6.6
$7.4
$5.2
$4.6
Net Sales
($ in Billions)
2012 Annual Report
‘08 ‘09 ‘10 ‘11 ‘12
$1.55
$2.01
$2.68
$1.19
$0.84
Earnings Per Share
For all the Right Reasons.
‘08 ‘09 ‘10 ‘11 ‘12
4,101
4,351
4,671
3,806
3,591
Number of Stores Open
(at year-end)

Table of contents

  • Page 1
    ...in Billions) $7.4 $6.6 $2.01 $1.55 $1.19 $0.84 '08 '09 '10 '11 '12 '08 '09 '10 '11 '12 $5.2 $4.6 $5.9 '08 '09 '10 '11 '12 Number of Stores Open (at year-end) 4,671 4,351 3,591 4,101 3,806 Operating Margin 11.8% 10.7% 9.8% 7.9% 12.4% '08 '09 '10 '11 '12 '08 '09 '10 '11 '12 2012 Annual Report

  • Page 2
    ... offers value merchandise at prices above $1 at its 194 Deals stores and at prices of $1.25 (CAD) at its 140 stores in Canada. Dollar Tree operates more than 4,600 stores across the 48 contiguous United States and five Canadian provinces. The stores are bright, conveniently-located and fun to shop...

  • Page 3
    ... '11 '12 Financial Highlights 2012(a) (in millions, except store and per share data) 2011 2010(b) 2009 2008 Net Sales Gross Profit Operating Income Net Income Diluted Net Income Per Working Capital Total Assets Total Debt Shareholders' Equity Number of Stores Open Total Selling Square Footage...

  • Page 4
    ... the highest new store productivity since 2001 and increased inventory turns for the Bob Sasser eighth consecutive year. To support future growth, we broke ground on our new President and Chief Executive Officer Distribution Center in Windsor, Connecticut. Dollar Tree Associates can take pride...

  • Page 5
    ... distribution. Specifically, that means Deals, Dollar Tree Canada and Dollar Tree Direct. Our Deals format extends our ability to serve more customers with more categories and increases our unit growth potential. Deals stores deliver low prices on everyday essentials, party goods, seasonal and home...

  • Page 6
    ... our social-media presence are attracting more customers and helping to drive brand awareness. â-â- Also in 2012 Dollar Tree launched The Dollar Tree Value Seekers Club. Members enjoy such things as Member Exclusive crafts, contests, recipes, product offerings and more! Membership is free, and...

  • Page 7
    ... scheduled to be operational in the third quarter this year. But that's not all. We are also expanding in the Southwest in 2013 by leasing 350,000 square feet of capacity to augment our company-owned Distribution Center in San Bernardino, California. Corporate Governance and Shareholder Value Dollar...

  • Page 8
    ...Fun, Convenient Stores - More and Better Number of Stores Open (at year-end) 4,671 4,351 4, 101 3,806 Net Sales Per Selling Square Foot $174 $182 $190 $167 $158 3,591 D 6 Dollar Tree, Inc. Dollar Tree strives to "Wow" our customers every day with great merchandise at surprising value in stores...

  • Page 9
    2012 Annual Report 7

  • Page 10
    ... value to our customers every day is supported by a solid and scalable infrastructure, including supply-chain logistics and systems. We continually upgrade our infrastructure, expanding capacity strategically to support growth ahead of need. In 2012 we broke ground on our new Distribution Center...

  • Page 11
    ... ft. Savannah, Georgia February 2001 U.S. Distribution Centers Date opened and square footage New and Expanded U.S. Distribution Centers Third-Party Canadian Distribution Centers Port of Entry (non-U.S.-sourced products) Shading indicates 2012 service area for each Distribution Center. 2012 Annual...

  • Page 12
    ...is a value. Dollar Tree Direct, our e-commerce business, broadens our customer base, drives incremental sales, expands the brand and attracts more customers into our stores. In 2012 traffic on the site grew by 18.6%. We also enhanced our mobile capability and increased our social-media presence. 10...

  • Page 13
    Investing in People D Dollar Tree invests time, effort and capital to build value for the people we impact: our customers, associates, communities, and shareholders. For Our Customers We provide quality merchandise at great values in a bright, convenient shopping environment, and help to stretch...

  • Page 14
    ... legal claims; • our growth plans, including our plans to add, expand or relocate stores, our anticipated square footage increase, and our ability to renew leases at existing store locations; • the average size of our stores to be added in 2013 and beyond; • the effect of a shift in...

  • Page 15
    ... OF OPERATIONS In Management's Discussion and Analysis, we explain the general financial condition and the results of operations for our company, including: • what factors affect our business; • what our net sales, earnings, gross margins and costs were in 2012, 2011 and 2010; • why...

  • Page 16
    ...14 Dollar Tree, Inc. • On November 2, 2009, we purchased a new distribution center in San Bernardino, California. This new distribution center replaced our Salt Lake City, Utah leased facility whose lease ended in April 2010. Overview Our net sales are derived from the sale of merchandise. Two...

  • Page 17
    Management's Discussion & Analysis of Financial Condition and Results of Operations of transactions and a 0.6% increase in average ticket. We believe comparable store net sales continued to be positively affected by a number of our initiatives, as debit and credit card penetration continued to ...

  • Page 18
    ... 25 stores were opened in January 2013. Of the 2.9 million selling square foot increase in 2012 approximately 0.3 million was added by expanding existing stores. Gross profit margin was 35.9% in 2012 and 2011. Improvement in initial mark-up in many categories and occupancy and distribution cost...

  • Page 19
    Management's Discussion & Analysis of Financial Condition and Results of Operations Fiscal year ended January 28, 2012 compared to fiscal year ended January 29, 2011 Net Sales. Net sales increased 12.7%, or $748.0 million, in 2011 compared to 2010, resulting from sales in our new stores and a ...

  • Page 20
    ... $49.4 million to acquire Dollar Giant. These increased sources of cash were partially offset by a $71.4 million increase in capital expenditures in 2011 due to funds for new store projects and the expansion of our distribution center in Savannah, Georgia. In 2012, net cash used in financing...

  • Page 21
    ...under the line of credit, payable quarterly. The Agreement also bears an administrative fee payable annually. The Agreement, among other things, requires the maintenance of certain specified financial ratios, restricts the payment of certain distributions and prohibits the incurrence of certain new...

  • Page 22
    ...opening costs. Our estimated capital expenditures for fiscal 2013 are between $320.0 and $330.0 million, including planned expenditures for our new and expanded stores, the addition of freezers and coolers to approximately 475 stores and approximately $61.2 million to expand our distribution center...

  • Page 23
    ...available under the line of credit, payable quarterly. The Agreement, among other things, requires the maintenance of certain specified financial ratios, restricts the payment of certain distributions and prohibits the incurrence of certain new indebtedness. As of February 2, 2013, $250.0 million...

  • Page 24
    ... Note 1 to the Consolidated Financial Statements, inventories at the distribution centers are stated at the lower of cost or market with cost determined on a weighted-average basis. Cost is assigned to store inventories using the retail inventory method on a weighted-average basis. Under the retail...

  • Page 25
    ... the timing of new store openings; • the net sales contributed by new stores; • changes in our merchandise mix; and • competition. Our highest sales periods are the Christmas and Easter seasons. Easter was observed on April 24, 2011, April 8, 2012, and will be observed on March 31, 2013. We...

  • Page 26
    ... for trading purposes. Diesel Fuel Cost Risk In order to manage fluctuations in cash flows resulting from changes in diesel fuel costs, we entered into fuel derivative contracts with third parties. We hedged 4.8 million, 3.5 million and 5.0 million gallons of diesel fuel in 2012, 2011 and 2010...

  • Page 27
    Management's Discussion & Analysis of Financial Condition and Results of Operations Interest Rate Risk We use variable-rate debt to finance certain of our operations and capital improvements. These obligations expose us to variability in interest payments due to changes in interest rates. If ...

  • Page 28
    ... Registered Public Accounting Firm The Board of Directors and Shareholders Dollar Tree, Inc.: We have audited the accompanying consolidated balance sheets of Dollar Tree, Inc. (the Company) as of February 2, 2013 and January 28, 2012, and the related consolidated statements of operations...

  • Page 29
    ...profit Operating income Interest expense, net Other income, net Income before income taxes Provision for income taxes Net income Basic net income per share Diluted net income per share See accompanying Notes to Consolidated Financial Statements. February 2, 2013 $ 7,394.5 4,741.8 January 29, 2011...

  • Page 30
    ... adjustments Fai r value adjustment - derivative cash flow hedging instrument, net of tax Total comprehensive income See accompanying Notes to Consolidated Financial Statements. February 2, 2013 $ 619.3 (0.9) January 29, 2011 397.3 (0.2) 2.2 399.3 - $ 618.4 28 Dollar Tree, Inc.

  • Page 31
    ...Income taxes payable, long-term Other liabilities Total liabilities Commitments and contingencies Shareholders' equity: Co mmon stock, par value $0.01. 400,000,000 shares authorized, 224,584,393 and 231,164,300 shares issued and outstanding at February 2, 2013 and January 28, 2012, respectively...

  • Page 32
    ...Issuance of stock under Employee Stock Purchase Plan Exercise of stock options, including income tax benefit of $3.0 Repurchase and retirement of shares Stock-based compensation, net, including tax benefit of $10.8 Balance at January 28, 2012 Net income Total other comprehensive loss Transfer from...

  • Page 33
    ... at end of year Supplemental disclosure of cash flow information: Cash paid for: Interest Income taxes See accompanying Notes to Consolidated Financial Statements. 2012 Annual Report 31 February 2, January 28, January 29, 2013 2012 2011 $ 619.3 $ 488.3 $ 397.3 175.3 (60.8) (7.7) 35...

  • Page 34
    Notes to Consolidated Financial Statements NOTE 1-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Description of Business Segment Information Dollar Tree, Inc. (the Company) is the leading operator of discount variety retail stores offering merchandise at the fixed price of $1.00 or less with 4,671 ...

  • Page 35
    ... to Consolidated Financial Statements Merchandise Inventories Goodwill Merchandise inventories at the Company's distribution centers are stated at the lower of cost or market, determined on a weighted-average cost basis. Cost is assigned to store inventories using the retail inventory method on...

  • Page 36
    ... 2012 to reduce certain store assets to their estimated fair value. The fair values were determined based on the income approach, in which the Company utilized internal cash flow projections over the life of the underlying lease agreements discounted based on a risk-free rate of return. These...

  • Page 37
    ... 2, 2013, January 28, 2012, and January 29, 2011, respectively. Income Taxes The Company recognizes all share-based payments to employees, including grants of employee stock options, in the financial statements based on their fair values. Total stock-based compensation expense for 2012, 2011 and...

  • Page 38
    ... 2, 2013, January 28, 2012, and January 29, 2011, respectively. Other Current Liabilities Other current liabilities as of February 2, 2013 and January 28, 2012 consist of accrued expenses for the following: (in millions) Compensation and benefits Taxes (other than income taxes) Insurance Other...

  • Page 39
    ... 2, 2013, January 28, 2012 and January 29, 2011, are amounts related to uncertain tax positions associated with temporary differences. A reconciliation of the statutory federal income tax rate and the effective rate follows: Year Ended Statutory tax rate Effect of: State and local income taxes...

  • Page 40
    ... Internal Revenue Service ("IRS") Compliance Assurance Program ("CAP") for the 2012 fiscal year and has applied to participate for fiscal year 2013. This program accelerates the examination of key transactions with the goal of resolving any issues before the tax return is filed. Our federal tax...

  • Page 41
    ... expense for store and distribution center operating leases (including payments to related parties) included in the accompanying consolidated statements of operations are as follows: Year Ended (in millions) Minimum rentals Contingent rentals February 2, 2013 January 28, 2012 January 29, 2011 $ 455...

  • Page 42
    ... been set for trial. In April 2011, a former assistant store manager, on behalf of himself and those similarly situated, instituted a class action in a California state court primarily alleging a failure by the Company to provide meal breaks, to compensate for all hours worked, and to pay overtime...

  • Page 43
    ... to Consolidated Financial Statements In the summer and fall of 2011, five collective action lawsuits were filed against the Company in federal courts in Georgia, Colorado, Florida, Michigan and Illinois by different assistant store managers, each alleging he or she was forced to work off the...

  • Page 44
    .... 42 Dollar Tree, Inc. In order to manage fluctuations in cash flows resulting from changes in diesel fuel costs, the Company entered into fuel derivative contracts with third parties. The Company hedged 4.8 million, 3.5 million and 5.0 million gallons of diesel fuel in 2012, 2011 and 2010...

  • Page 45
    ... this ASR. The number of shares is determined based on the weighted average market price of the Company's common stock, less a discount, during a specified period of time. On August 24, 2011, the Company entered into an agreement to repurchase $200.0 million of the Company's common shares under...

  • Page 46
    ... this ASR. The number of shares is determined based on the weighted average market price of the Company's common stock, less a discount, during a specified period of time. NOTE 8-EMPLOYEE BENEFIT PLANS Profit Sharing and 401(k) Retirement Plan Deferred Compensation Plan The Company has a deferred...

  • Page 47
    ... the service period or a shorter period based on the retirement eligibility of the grantee. The Company recognized $5.7 million of expense related to these RSUs in 2012. The fair value of these RSUs was determined using the Company's closing stock price on the grant date. In 2011, the Company...

  • Page 48
    Notes to Consolidated Financial Statements the retirement eligibility of the grantee. The Company recognized $0.9 million and $5.4 million of expense related to these RSUs in 2012 and 2011, respectively. The fair value of these RSUs was determined using the Company's closing stock price on the ...

  • Page 49
    ...with a proven management team and distribution network as well as additional potential store growth in a new market. The Company paid approximately $51.3 million including the assumption of certain liabilities. The results of Dollar Giant store operations are included in the 2012 Annual Report 47

  • Page 50
    ... Company's operating results in 2012, 2011 or 2010. This acquisition is immaterial to the Company's operations as a whole and therefore no proforma disclosure of financial information has been presented. The following table summarizes the final allocation of the purchase price to the fair value...

  • Page 51
    ..., Deals Stores James A. Gorry, III, General Counsel and Corporate Secretary David A. Jacobs, Chief Strategy Officer James A. Paisley, Chief Information Officer Robert H. Rudman, Chief Merchandising Officer Kevin S. Wampler, Chief Financial Officer Stephen W. White, Chief Logistics Officer Annual...

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