FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
(Mark One)
(X) Quarterly report pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
( ) Transition report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
COMMISSION FILE NUMBER: 0-25464
DOLLAR TREE STORES, INC.
(Exact name of registrant as specified in its charter)
VIRGINIA 54-1387365
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2555 ELLSMERE AVENUE
NORFOLK COMMERCE PARK
NORFOLK, VIRGINIA 23513
(Address of principal executives office)
TELEPHONE NUMBER (757) 857-4600
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days:
Yes (X) No ( )
As of August 1, 1997, there were 39,069,207 shares of the Registrant's Common
Stock outstanding.
<PAGE>
DOLLAR TREE STORES, INC.
and subsidiaries
INDEX
PART I. FINANCIAL INFORMATION
Page No.
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
Condensed Consolidated Balance Sheets
June 30, 1997 and December 31, 1996................................. 3
Condensed Consolidated Income Statements
Three months and six months ended June 30, 1997 and 1996............ 4
Condensed Consolidated Statements of Cash Flows
Six months ended June 30, 1997 and 1996............................. 5
Notes to Condensed Consolidated Financial Statements................. 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS............................ 8
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.....................................................11
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...................12
ITEM 5. OTHER INFORMATION.....................................................12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K......................................13
SIGNATURES......................................................14
<PAGE>
DOLLAR TREE STORES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
(Unaudited)
June 30, December 31,
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash ........................................................... $ 5,265 $ 2,987
Accounts receivable................................................. 1,059 1,855
Merchandise inventories ............................................ 103,352 75,081
Deferred tax asset ................................................. 2,294 2,002
Prepaid expenses and other current assets .......................... 3,276 4,028
------- -------
Total current assets............................................ 115,246 85,953
------- -------
Property and equipment, net.............................................. 55,935 36,035
Deferred tax asset....................................................... 2,045 1,947
Goodwill, net............................................................ 45,442 46,405
Other assets, net........................................................ 951 759
------- -------
TOTAL ASSETS.................................................... $219,619 $171,099
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable ................................................... $ 34,625 $ 35,296
Accrued liabilities ................................................ 12,523 14,260
Income taxes payable................................................ 383 12,607
Current installments of obligations
under capital leases............................................. 355 302
------- -------
Total current liabilities....................................... 47,886 62,465
------- -------
Revolving credit facility................................................ 23,000 3,000
Long-term senior notes (note 4).......................................... 30,000 --
Obligations under capital leases,
excluding current installments........................................ 847 1,051
Other liabilities........................................................ 3,773 2,993
------- -------
Total liabilities............................................... 105,506 69,509
------- -------
Shareholders' equity:
Common stock, par value $0.01. Authorized 100,000,000 shares, 39,052,260
shares issued and outstanding at June 30, 1997 and 38,847,258 shares
issued and outstanding at
December 31, 1996 (note 2)...................................... 260 259
Additional paid-in capital.......................................... 34,487 31,555
Retained earnings................................................... 79,366 69,776
------- -------
Total shareholders' equity...................................... 114,113 101,590
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY...................... $219,619 $171,099
======= =======
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
3
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DOLLAR TREE STORES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED INCOME STATEMENTS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- --------------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales ............................................ $129,332 $102,689 $247,078 $187,664
Cost of sales............................................. 83,168 67,030 159,623 122,935
------- ------- ------- -------
Gross profit..................................... 46,164 35,659 87,455 64,729
------- ------- ------- -------
Selling, general, and administrative expenses:
Operating expenses..................................... 32,413 25,480 64,529 49,768
Depreciation and amortization.......................... 3,163 2,593 6,095 4,805
------- ------- ------- -------
Total selling, general
and administrative expenses................. 35,576 28,073 70,624 54,573
------- ------- ------- -------
Operating income.......................................... 10,588 7,586 16,831 10,156
Interest expense.......................................... 788 1,555 1,238 2,624
------- ------- ------- -------
Income before income taxes................................ 9,800 6,031 15,593 7,532
Provision for income taxes................................ 3,773 2,320 6,003 2,898
------- ------- ------- -------
Net income....................................... $ 6,027 $ 3,711 $ 9,590 $ 4,634
======= ======= ======= =======
Net income per share (notes 2 and 3)...................... $ 0.14 $ 0.09 $ 0.22 $ 0.11
======= ======= ======= =======
Weighted average number of common shares and common share equivalents
outstanding (notes 2 and 3):
Primary ......................................... 43,330 42,094 43,301 41,919
------- ------- ------- -------
Fully diluted.................................... 43,460 42,094 43,460 41,958
------- ------- ------- -------
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
4
<PAGE>
DOLLAR TREE STORES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------------
1997 1996
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income.......................................................................... $ 9,590 $ 4,634
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization.................................................... 6,095 4,805
Loss on disposal of property and equipment ...................................... 37 217
Provision for deferred income taxes.............................................. (390) (291)
Changes in assets and liabilities increasing
(decreasing) cash and cash equivalents,
(1996 shown net of effects resulting from
purchase of Dollar Bills, Inc.):
Accounts receivable........................................................... 796 (79)
Income taxes receivable..................................................... -- (439)
Merchandise inventories....................................................... (28,271) (29,819)
Prepaid expenses and other current assets..................................... 752 (629)
Other assets ................................................................. 11 422
Accounts payable.............................................................. (671) 6,358
Accrued liabilities........................................................... (1,737) (1,947)
Income taxes payable.......................................................... (10,489) (8,244)
Other liabilities............................................................. 780 45
-------- --------
Total adjustments............................................................ (33,087) (29,601)
-------- --------
Net cash used in operating activities ....................................... (23,497) (24,967)
-------- --------
Cash flows from investing activities:
Capital expenditures ............................................................... (25,069) (8,616)
Proceeds from sale of property and equipment........................................ -- 23
Payment for purchase of Dollar Bills, Inc.,
net of cash acquired............................................................... -- (52,209)
-------- --------
Net cash used in investing activities........................................ (25,069) (60,802)
-------- --------
Cash flows from financing activities:
Proceeds from development facility.................................................. -- 52,630
Repayment of development facility................................................... -- (11,030)
Proceeds from revolving credit facility............................................. 123,400 --
Repayment of revolving credit facility and facility fees............................ (103,603) --
Proceeds from long-term senior notes................................................ 30,000 --
Net change in notes payable to bank................................................. -- 14,000
Repayment of senior and junior subordinated notes................................... -- (14,000)
Principal payments under capital lease obligations.................................. (151) (124)
Proceeds from options exercised and purchase
of shares under ESPP............................................................... 1,198 2,417
Proceeds from public offering....................................................... -- 25,819
-------- --------
Net cash provided by financing activities.................................... 50,844 69,712
-------- --------
Net increase (decrease) in cash and cash equivalents................................. 2,278 (16,057)
Cash and cash equivalents at beginning of period..................................... 2,987 22,415
-------- --------
Cash and cash equivalents at end of period........................................... $ 5,265 $ 6,358
======== ========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
5
<PAGE>
DOLLAR TREE STORES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The condensed consolidated financial statements of Dollar Tree Stores, Inc.
and subsidiaries (the "Company") at June 30, 1997, and for the three- and
six-month periods then ended, are unaudited and reflect all adjustments
(consisting only of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair presentation of the financial position and
operating results for the interim periods. The condensed consolidated financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto, together with management's discussion and analysis
of financial condition and results of operations for the year ended December 31,
1996, contained in the Company's Annual Report on Form 10- K. The results of
operations for the three- and six-month periods ended June 30, 1997 are not
necessarily indicative of the results to be expected for the entire year ending
December 31, 1997.
2. STOCK SPLIT
In connection with a stock dividend authorized by the Board of Directors,
the Company issued one-half share of Common Stock for each outstanding share of
Common Stock, payable July 21, 1997 to shareholders of record as of July 14,
1997. All share and per share data in these condensed consolidated financial
statements and accompanying notes have been retroactively adjusted to reflect
this dividend, having the effect of a three-for-two stock split.
3. STOCK OPTION PLAN, STOCK INCENTIVE PLAN, EMPLOYEE STOCK PURCHASE PLAN AND
UNATTACHED WARRANTS
The Company maintains a stock option plan ("SOP") which was established on
December 16, 1993 and a stock incentive plan ("SIP") which was established on
January 1, 1995. No additional shares may be granted under the SOP. Under the
original terms of the SIP, options for no more than 405,000 shares of common
stock may be granted in any calendar year. This restriction on the number of
shares granted in any one year was removed by the Board of Directors in a
unanimous consent signed March 18, 1997. The Company's shareholders approved an
increase in the total number of shares issuable under the SIP from 1,350,000 to
3,600,000 on June 4, 1997.
At June 30, 1997 and 1996, options for the following numbers of shares were
outstanding under each plan:
Options for Shares Outstanding at Exercise
PLAN June 30, 1997 June 30, 1996 Price/Range
---- ------------- ------------- ---------------
SOP........... 348,805 550,562 $ 1.93
SIP........... 1,123,579 716,761 $ 6.67 - 31.33
The options above include options for 19,500 shares, net of lapses and
cancellations, granted during the second quarter of 1997 which are not included
in the earnings per share calculation.
On January 1, 1995, the Company also established the Dollar Tree Stores,
Inc. Employee Stock Purchase Plan (the "ESPP"). The Company reserved 337,500
shares of common stock for future issuance under the ESPP. The ESPP enables
eligible employees, as defined in the ESPP, to buy shares of common stock for
6
<PAGE>
85% of fair market value on the first day or the last day of the applicable
offering period, whichever is lower. As of June 30, 1997, 21,442 shares have
been purchased under the ESPP.
Additionally, in 1993 and 1994, the Company issued unattached warrants to
purchase a total of 3,723,262 shares of Common Stock to certain shareholders.
These warrants carry an exercise price of $1.29 and may be exercised at any
time.
The Company will adopt Statement of Financial Accounting Standards No. 128,
Earnings Per Share, for the year ended December 31, 1997. This accounting
pronouncement replaces the calculation and presentation of primary earnings per
share with basic earnings per share and of fully diluted earnings per share with
diluted earnings per share. Under SFAS No. 128, the pro forma basic earnings per
share would have been $0.15 for the three months and $0.25 for the six months
ended June 30, 1997. The Company believes that diluted earnings per share under
SFAS No. 128 will approximate the Company's fully diluted earnings per share as
reported.
4. ISSUANCE OF DEBT
On April 30, 1997, the Company issued $30.0 million of Senior Unsecured
Notes (the "Notes") due April 30, 2004. The principal amount of the Notes is
payable in five equal annual installments of $6.0 million beginning May 2000.
Interest is payable semi-annually at a fixed rate of 7.29%. The Notes contain
restrictive covenants which, among other things, require the Company to maintain
certain financial ratios. The Notes rank pari passu with all other senior
unsecured indebtedness.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
FORWARD LOOKING STATEMENTS. The Company has made in this Report, and from time
to time may otherwise make, forward looking statements regarding the Company's
operations, economic performance, and financial condition. These statements are
recognizable by the incorporation of words such as "believe," "anticipate" and
"expect." Such forward looking statements are subject to various risks and
uncertainties, as discussed throughout this Report, and as summarized in the
Company's 1996 Annual Report on Form 10-K under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations-
Forward Looking Statements."
THE THREE MONTHS ENDED JUNE 30, 1997 AND 1996
RESULTS OF OPERATIONS AND GENERAL COMMENTS
Net sales increased $26.6 million, or 25.9%, to $129.3 million for the
three months ended June 30, 1997, from $102.7 million for the three months ended
June 30, 1996. Of this increase, (i) approximately 70%, or $18.6 million, was
attributable to stores opened in 1996 and 1997 which are not included in the
Company's comparable store net sales calculation, and (ii) approximately 30%, or
$8.0 million, was attributable to comparable store net sales growth, which
represented an 8.2% increase over comparable store net sales in the
corresponding quarter of the prior period. Dollar Bills stores are included in
the comparable store net sales percentage calculation. Because substantially all
the Company's products sell for $1.00, the increase in comparable store net
sales was a direct result of increased unit volume. Comparable store net sales
were driven primarily by increased customer traffic at comparable stores during
the period and a slight increase in average purchase per customer. The Company
opened 45 new stores during the second quarter of 1997, compared to opening 29
new stores and closing three stores during the second quarter of 1996.
Management anticipates that the primary source of future sales growth will
be new store openings and, to a lesser degree, sales increases from expanded and
relocated stores and comparable store net sales increases. Although the Company
has experienced significant increases in comparable store net sales
historically, management expects that any increases in comparable store net
sales in the future will be smaller than those experienced historically.
Gross profit, which consists of net sales less cost of sales (including
distribution and certain occupancy costs), increased $10.5 million, or 29.5%, to
$46.2 million in the second quarter of 1997 from $35.7 million in the second
quarter of 1996. As a percentage of net sales, gross profit increased to 35.7%
from 34.7%, primarily due to improved merchandise costs (including freight),
offset by a slight increase in inventory shrinkage as a percentage of net sales.
Merchandise costs as a percentage of net sales improved primarily as a result of
higher sales of foreign-sourced merchandise, which carries a higher gross margin
than domestic goods, in the current period compared to last year. This is due in
part to the change in merchandise mix, year over year, in the Dollar Bills
stores, which were still operating with a heavier domestic and consumable
product emphasis in the second quarter of 1996. Throughout 1996, the merchandise
mix at Dollar Bills stores was changed to more closely resemble the mix at
Dollar Tree stores.
Selling, general and administrative expenses ("SGA"), which include
operating expenses and depreciation and amortization, increased $7.5 million,
8
<PAGE>
or 26.7%, to $35.6 million in the second quarter of 1997 from $28.1 million in
the second quarter of 1996, and increased slightly as a percentage of net sales
to 27.5% from 27.3% during the same period. This increase in SGA expense is
primarily due to the $0.50 per hour increase in the federally mandated minimum
wage which took effect on October 1, 1996. The increase would have been higher
but for the mitigating effect of payroll cost saving measures implemented by the
Company in early 1996. Management anticipates that the additional $0.40 per hour
increase in the minimum wage scheduled to take effect on September 1, 1997, will
increase payroll costs by $650,000 to $750,000 above otherwise expected levels
during the four month period ending December 31, 1997.
Operating income increased $3.0 million, or 39.6%, to $10.6 million for the
second quarter of 1997 from $7.6 million for the comparable period in 1996, and
increased as a percentage of net sales to 8.2% from 7.4% during the same period
for the reasons noted above.
INTEREST EXPENSE
Interest expense decreased $0.8 million in the second quarter of 1997
compared to the second quarter of 1996 to $0.8 million from $1.6 million during
the same period. This decrease is primarily a result of lower levels of debt in
the current year compared to the same period in 1996, when the Company had
increased borrowings related to the purchase of Dollar Bills, Inc.
THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
RESULTS OF OPERATIONS AND GENERAL COMMENTS
Net sales increased $59.4 million, or 31.7%, to $247.1 million for the six
months ended June 30, 1997, from $187.7 million for the six months ended June
30, 1996. Of this increase, (i) approximately 58%, or $34.7 million, was
attributable to stores opened in 1996 and 1997 which are not included in the
Company's comparable store net sales calculation, and (ii) approximately 42%, or
$24.7 million, was attributable to comparable store net sales growth, which
represented a 9.7% increase over comparable store net sales in the corresponding
prior year period. Dollar Bills stores are included in the comparable store net
sales percentage calculation for the full six month period, beginning January 1,
of each respective year. Because substantially all the Company's products sell
for $1.00, the increase in comparable store net sales was a direct result of
increased unit volume. The Company opened 75 new stores during the first six
months of 1997 compared to opening 53 new stores and closing three stores during
the first six months of 1996.
Gross profit, which consists of net sales less cost of sales (including
distribution and certain occupancy costs), increased $22.7 million, or 35.1%, to
$87.5 million in the first six months of 1997 from $64.7 million in the first
six months of 1996. As a percentage of net sales, gross profit increased to
35.4% from 34.5%, primarily due to improved merchandise costs (including
freight), offset by a slight increase in inventory shrinkage as a percentage of
net sales. Merchandise costs as a percentage of net sales improved primarily as
a result of higher sales of foreign-sourced merchandise, which carries a higher
gross margin than domestic goods, in the current period compared to last year.
This is due in part to the change in merchandise mix, year over year, in the
Dollar Bills stores, which were operating with a heavier consumable product
emphasis in the first half of 1996. Throughout 1996, the merchandise mix at
Dollar Bills stores was changed to more closely resemble the mix at Dollar Tree
stores.
9
<PAGE>
SG&A increased $16.1 million, or 29.4%, to $70.6 million in the first six
months of 1997 from $54.6 million in the first six months of 1996, and decreased
as a percentage of net sales to 28.6% from 29.1% during the same period. This
decrease is primarily attributable to approximately $2.0 million in
non-recurring expenses incurred in 1996 as a result of the Dollar Bills
acquisition. Excluding these non-recurring costs, SGA increased as a percentage
of net sales to 28.6% in the first six months of 1997 from 28.0% in the first
six months of 1996, primarily due to increased hourly payroll costs resulting
from the minimum wage increase, as discussed above.
Operating income increased $6.7 million, or 65.7%, to $16.8 million for the
first six months of 1997 from $10.2 million for the comparable period in 1996,
and increased as a percentage of net sales to 6.8% from 5.4% during the same
period for the reasons noted above.
INTEREST EXPENSE
Interest expense decreased $1.4 million in the first six months of 1997
compared to the first six months of 1996 to $1.2 million from $2.6 million
during the same period. This decrease is primarily a result of lower levels of
debt in the current year compared to the same period in 1996, when the Company
had increased borrowings related to the purchase of Dollar Bills, Inc.
LIQUIDITY AND CAPITAL RESOURCES
The Company's capital requirements result primarily from capital
expenditures related to new store openings and working capital requirements
related to new and existing stores. The Company's working capital requirements
for existing stores are seasonal in nature and typically reach their peak near
the end of the third and the beginning of the fourth quarter of the year.
Historically, the Company has met its seasonal working capital requirements for
its existing stores and funded its store expansion program from internally
generated funds and borrowings under its credit facilities.
During the first six months of 1997 and 1996, net cash used in operations
was $23.5 million and $25.0 million, respectively, primarily used to build
inventory levels. During the first six months of 1997 and 1996, net cash used in
investing activities was $25.1 million and $60.8 million, respectively, the
decrease primarily due to payment for the acquisition of Dollar Bills in 1996.
In 1997, net cash used in investing activities was related to capital
expenditures, including $13.1 million related to the construction of the new
Store Support Center. This Store Support Center project is proceeding as
planned, within the expected timetable and within budget. Net cash provided by
financing activities was $50.8 million and $69.7 million during the first six
months of 1997 and 1996, respectively, the decrease primarily attributable to
borrowings incurred to fund the acquisition of Dollar Bills in January 1996 and
to capital raised during a public offering completed in June, 1996. In 1997, net
cash provided by financing activities was primarily used for the construction of
the new Store Support Center and to fund seasonal working capital needs.
On April 30, 1997, the Company issued $30.0 million of Senior Unsecured
Notes (the "Notes") due April 30, 2004. The proceeds were used to repay existing
indebtedness and for general corporate purposes, including capital expenditures.
The principal amount of the Notes is payable in five equal annual installments
of $6.0 million beginning May 2000. Interest is payable semi-annually at a fixed
rate of 7.29%. The Notes contain restrictive covenants which, among other
things, require the Company to maintain certain financial ratios. The Notes rank
pari passu with all other senior unsecured
10
<PAGE>
indebtedness.
The Company's borrowings under its bank facilities and senior notes were
$53.0 million at June 30, 1997, and $62.5 million at June 30, 1996. Borrowings
at December 31, 1996, amounted to $3.0 million. Under the Company's bank
facilities, an additional $112.0 million is available at June 30, 1997,
approximately $20.9 million of which is committed to certain letters of credit
issued in relation to the routine purchase of foreign merchandise.
NEW ACCOUNTING PRONOUNCEMENTS
With the period ending December 31, 1997, the Company will implement SFAS
No. 128, Earnings Per Share (see note 3 of the Notes to Condensed Consolidated
Financial Statements).
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company has previously reported in its 1996 Annual Report on Form 10-K
litigation in the state and federal courts of Illinois involving Michael and
Pamela Alper and a corporation they control. There have been no material
developments regarding this matter in 1997.
Additionally, the Company is a party to ordinary routine litigation and
proceedings incidental to its business, including certain matters which may
occasionally be asserted by the U.S. Consumer Product Safety Commission, none of
which is individually or in the aggregate material to the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's Annual Meeting of Shareholders held on June 4, 1997, the
following individuals were elected to the Board of Directors:
Votes For Votes Withheld
---------- --------------
J. Douglas Perry 24,231,371 249,040
Thomas A. Saunders, III 24,230,871 249,540
Frank Doczi 24,235,123 245,288
As Class II directors, Messrs. Perry, Saunders and Doczi will serve until the
Annual Meeting of Shareholders in 2000, or such time as successors are elected
and qualified.
John F. Megrue, Macon F. Brock, Jr., H. Ray Compton, Allan W. Karp and Alan
L. Wurtzel continue as directors after the meeting and no elections were held
with respect to their offices.
In addition, the following proposal was approved at the Company's Annual
Meeting:
Amendment to the Company's Stock Incentive Plan to increase the number of shares
issuable under the Plan from 1,350,000 to 3,600,000.
Affirmative Votes Negative Votes Abstentions/Broker Non-Votes
----------------- -------------- ----------------------------
22,771,357 270,979 1,438,075
11
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ITEM 5. OTHER INFORMATION
Grant of Options to Directors
On June 4, 1997, options to purchase 18,000 shares of Common Stock each
were granted to Frank Doczi and Alan Wurtzel as continuing directors, under the
terms of the SIP. These options are immediately exercisable and have an exercise
price of $31.33 per share.
Registered Public Offering
On June 23, 1997, certain shareholders of the Company sold 6,900,000 shares
(split-effected) of Common Stock pursuant to an effective registration
statement. No shares were sold by the Company during this offering.
Stock Dividend
On July 2, 1997, the Company's Board of Directors announced a 50% stock
dividend having the effect of a three-for-two stock split for shareholders of
record of common stock as of July 14, 1997. Cash payments were made in lieu of
fractional shares. As of the record date, there were 26,037,225 shares of Common
Stock outstanding, resulting in a dividend of 13,018,500 shares of Common Stock.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
The following documents, filed as exhibits 10.4, 10.5 and 10.6 to the
Company's Form 10-Q for the quarter ended March 31, 1997, are incorporated
herein by reference:
10.1 $30 million, 7.29% Senior Guaranteed Notes, due April 30, 2004 (the
"Notes").
10.2 Composite Conformed Copy of Note Agreements by Dollar Tree Distribution
Inc. and the Company, regarding the Notes.
10.3 Guaranty Agreement by Dollar Tree Management, Inc. regarding the Notes.
The following documents, filed as exhibits 10.1 and 10.2 to the Company's
Form S-3 filed on June 6, 1997, are incorporated herein:
10.4 Second Amendment to Dollar Tree Stores, Inc. Stock Incentive Plan
10.5 Standard Form of Agreement between Owner (Dollar Tree Stores, Inc.) and
Contractor (Clancy & Theys Construction Company)
The following document is filed herewith:
10.6 Second Amendment to the Amended and Restated Revolving Credit Agreement.
(b) Reports on Form 8-K.
The Company filed a Form 8-K on June 4, 1997, announcing its intention to
file a registration statement with the Securities and Exchange Commission with
respect to a proposed offering of shares by certain shareholders. This offering
was completed June 23, 1997 (see Item 5, above).
12
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
DATE: August 11, 1997
DOLLAR TREE STORES, INC.
By: /s/ Macon F. Brock, Jr.
---------------------------
Macon F. Brock, Jr.
President and
Chief Executive Officer
13
SECOND AMENDMENT TO AMENDED AND
RESTATED REVOLVING CREDIT AGREEMENT
This Second Amendment to Amended and Restated Revolving Credit
Agreement is made as of the 8th day of May, 1997 by and among
Dollar Tree Distribution, Inc. (the "Borrower"), a Virginia corporation
having its chief executive office at 2555 Ellsmere Avenue, Norfolk,
Virginia 23513;
Dollar Tree Stores, Inc. ("DTS"), a Virginia corporation having its
chief executive office at 2555 Ellsmere Avenue, Norfolk, Virginia;
Dollar Tree Management, Inc. ("DTM"), a Virginia corporation having its
chief executive office at 2555 Ellsmere, Avenue, Norfolk, Virginia;
BankBoston, N.A. (f/k/a The First National Bank of Boston),Nationsbank,
N.A., Signet Bank, Crestar Bank, First Union National Bank of Virginia,
Amsouth Bank of Alabama, Union Bank of California, N.A. and all other
financial institutions which are now or may hereafter become parties to
such Amended and Restated Revolving Credit Agreement (individually, a
"Lender: and collectively, the "Lenders"); and
BankBoston, N.A. (f/k/a The First National Bank of Boston), a
national banking association having its head office at 100 Federal
Street, Boston, Massachusetts, as Agent for the Lenders (in such
capacity, the "Agent").
In consideration of the mutual covenants herein contained and benefits to be
derived herefrom,
WITNESSETH:
WHEREAS, the Borrower, DTS, DTM, the Agent and the Lenders entered into
an Amended and Restated Revolving Credit Agreement dated as of September 27,
1996 (as Amended by First Amendment to Amended and Restated Revolving Credit
Agreement dated January 25, 1997, collectively, the "Agreement"); and
WHEREAS, the Agent, the Lenders, the Borrower, DTS and DTM desire to
modify and amend the Agreement as provided herein.
NOW, THEREFORE, it is hereby agreed as follows:
1. Definitions . All capitalized terms used herein and not otherwise
defined shall have the same meaning herein as in the Agreement.
2. Amendments to Section 9.
(a) The provisions of Section 9.1 of the Agreement are hereby
amended by deleting the words "seventy-five percent (75%)" appearing in clause
(B) thereof and substituting the words "sixty-five percent (65%)" in its stead.
1
<PAGE>
(b) The provisions of Section 9.3 of the Agreement are hereby
amended by deleting the chart setting forth the minimum ratios in its entirety
and substituting the following in its stead:
Quarterly Periods Ending Minimum Ratio
---------------------------------------- ---------------
Each of the first three Fiscal
Quarters of Fiscal Year 1996 1.50:1.00
Fiscal Year End 1996 and Fiscal
Quarter ending March 31, 1997 2.00:1.00
Fiscal Quarters ending June 30, 1997,
September 30, 1997 and December 31,
1997. 1.90:1.00
Fiscal Quarter ending March 31, 1998
and each Fiscal Quarter thereafter 1.85:1.00
(c) The provisions of Section 9.4 of the Agreement are hereby
amended by deleting the maximum amount of capital expenditures for Fiscal Year
1997 only (which presently appears in the agreement as $25,000,000) and
substituting the number $27,500,000 in its stead.
(d) The provisions of Section 9.5 of the Agreement are hereby
deleted in their entirety.
(e) The provisions of Section 9.6 of the Agreement are hereby
amended by deleting the covenants appearing in the Agreement for December 31,
1997 and each Fiscal Quarter End thereafter and substituting the following in
their stead:
Quarterly Periods Ending Minimum Ratio
------------------------------------------- -------------
December 31, 1997 and March 31, 1998 1.45:1.00
June 30, 1998 and each Fiscal Quarter End
thereafter 1.50:1.00
3. Conditions to Effectiveness. This Second Amendment to Amended and
Restated Revolving Credit Term and Loan Agreement shall not be effective until
each of the following conditions precedent have been fulfilled to the
satisfaction of the Agent and the Lenders:
(a) This Second Amendment to Amended and Restated Revolving Credit
and Term Loan Agreement shall have been duly executed and delivered by the
respective parties hereto and, shall be in full force and effect and shall be in
form and substance satisfactory to each of the Lenders.
(b) Each of the Lenders and the Agent shall have received a
favorable opinion addressed to the Lenders and the Agent in form and substance
satisfactory to the Lenders and the Agent from Messrs. Hofheimer, Nusbaum,
McPhaul & Samuels.
(c) All action on the part of the Obligors necessary for the valid
execution, delivery and performance by the Obligors of this Agreement shall have
been duly and effectively taken and evidence thereof satisfactory to the Lenders
shall have been provided to each of the Lenders. Each of the Lenders shall have
received from each Obligor true copies of the resolutions adopted by its board
of directors authorizing the transactions described herein, each certified by
such Obligor's secretary to be true and complete.
2
<PAGE>
(d) The Borrower shall have paid to the Agent and Lenders all fees
and expenses then due and owing pursuant to Section 15 of the Agreement.
(e) No Default or Event of Default shall have occurred and be
continuing.
(f) The Obligors shall have provided such additional instruments
and documents to the Agent and the Lenders as the Agent and the Agent's counsel
may have reasonably requested.
4. Ratification of Loan Documents. Except as provided herein, all terms
and conditions of the Agreement and the other Loan Documents remain in full
force and effect. The Obligors each hereby ratify, confirm, and reaffirm all
representations, warranties, and covenants contained therein and acknowledge and
agree that none of them have any offsets, defenses, or counterclaims against the
Agent or any Lender thereunder, and to the extent that any such offsets,
defenses, or counterclaims may exist, each of the Obligors hereby waive and
release the Agent and Lenders therefrom.
5. Miscellaneous.
(a) This Second Amendment and Restated Revolving Credit and Term
Loan Agreement may be executed in several counterparts and by each
party on a separate counterpart, each of which when so executed and
delivered shall be an original, and all of which together shall
constitute one instrument.
(b) This Second Agreement to Amended and Restated Revolving Credit
and Term Loan Agreement expresses the entire understanding of the
parties with respect to the transactions contemplated hereby. No prior
negotiations or discussions shall limit, modify, or otherwise affect
the provisions hereof.
3
<PAGE>
IN WITNESS WHEREOF, the undersigned have hereunto executed this
Agreement as a sealed instrument as of the date first above written.
DOLLAR TREE DISTRIBUTION, INC.
By: /s/ Frederick C. Coble
Name: Frederick C. Coble
Title: Sr. Vice President, Finance
DOLLAR TREE STORES, INC.
By:/s/ Frederick C. Coble
Name: Frederick C. Coble
Title: Sr. Vice President, Finance
DOLLAR TREE MANAGEMENT, INC.
By:/s/ Frederick C. Coble
Name: Frederick C. Coble
Title: Sr. Vice President, Finance
BANKBOSTON,N.A. (f/k/a THE FIRST
NATIONAL BANK OF BOSTON),
individually and as Agent
By:/s/ Judith C.E. Kelly
Name: Judith C.E. Kelly
Title: Vice President
NATIONSBANK, N.A.
By: /s/ John L. Daniels
Name: John L. Daniels
Title: Senior Vice President
4
<PAGE>
SIGNET BANK
By: /S/ John P. Matson
Name: John P. Matson
Title: Executive Vice President
CRESTAR BANK
By:/s/ Bruce W. Nave
Name: Bruce W. Nave
Title: Vice President
FIRST UNION NATIONAL BANK OF VIRGINIA
By:/s/ R.H. Grattan
Name: R.H. Grattan
Title: Senior Vice President
AMSOUTH BANK OF ALABAMA
By: /s/ John J. Hooker
Name: John J. Hooker
Title: Commercial Banking Officer
UNION BANK OF CALIFORNIA, N.A.
By: /s/ Dana C. Fenwick
Name: Dana C. Fenwick
Title: Vice President
5
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM THE COMPANY'S
FORM 10-k FOR THE PERIOD ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 5,265
<SECURITIES> 0
<RECEIVABLES> 1,300
<ALLOWANCES> 0
<INVENTORY> 103,352
<CURRENT-ASSETS> 115,487
<PP&E> 85,152
<DEPRECIATION> 29,217
<TOTAL-ASSETS> 219,860
<CURRENT-LIABILITIES> 48,127
<BONDS> 0
0
0
<COMMON> 260
<OTHER-SE> 113,853
<TOTAL-LIABILITY-AND-EQUITY> 219,860
<SALES> 247,078
<TOTAL-REVENUES> 247,078
<CGS> 159,623
<TOTAL-COSTS> 159,623
<OTHER-EXPENSES> 70,624
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,238
<INCOME-PRETAX> 15,593
<INCOME-TAX> 6,003
<INCOME-CONTINUING> 9,590
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,590
<EPS-PRIMARY> 0.22
<EPS-DILUTED> 0.22
</TABLE>
