FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report: October 29, 1998
Date of Earliest Event Reported: October 20, 1998
DOLLAR TREE STORES, INC.
(Exact name of registrant as specified in its charter)
COMMISSION FILE NUMBER: 0-25464
VIRGINIA 54-1387365
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
500 Volvo Parkway
Chesapeake, VA 23320
(Address of principal executive offices)
Registrant's telephone number, including area code: (757) 321-5000
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ITEM 5: OTHER EVENTS
On October 20, 1998, Dollar Tree Stores, Inc., Dollar Tree West, Inc. and Step
Ahead Investments, Inc. entered into an Amendment to the Merger Agreement among
the parties executed on July 22, 1998. The full text of the Amendment is
attached as Exhibit 2.1 hereto.
On October 21, 1998, Dollar Tree Stores, Inc. issued a press release which
contains information regarding net earnings for the quarter ended September 30,
1998. A copy of the press release is attached to this Form 8-K as Exhibit 99.1
and is incorporated herein by this reference.
ITEM 7: FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS
(c) Exhibits
Exhibit # Description
2.1 Amendment to the Merger Agreement dated October 20, 1998 by and
among Dollar Tree Stores, Inc., Dollar Tree West, Inc., and Step
Ahead Investments, Inc.
99.1 Dollar Tree Stores, Inc.'s press release regarding net earnings
for the quarter ended September 30, 1998.
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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: October 29, 1998
DOLLAR TREE STORES, INC.
By: /s/ Frederick C. Coble
----------------------------------
Frederick C. Coble
Senior Vice President, CFO
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AMENDMENT TO MERGER AGREEMENT
THIS AMENDMENT TO MERGER AGREEMENT ("Amendment") dated October
20, 1998, by and among DOLLAR TREE STORES, INC., a Virginia corporation
("Parent"), DOLLAR TREE WEST, INC., a California corporation and a wholly owned
subsidiary of Parent ("Sub"), and STEP AHEAD INVESTMENTS, INC., a California
corporation ("Company"). The capitalized terms used herein shall have the
meanings given such terms in the Merger Agreement dated July 22, 1998 by and
among the parties hereto ("Agreement").
W I T N E S S E T H:
WHEREAS, pursuant to the Agreement, if the Average Closing
Price of Parent's stock is less than $34 11/32 per share, Parent can terminate
the Agreement unless Company elects to treat the Average Closing Price as $34
11/32; and
WHEREAS, the parties desire to modify the Agreement to extend
the time between the determination of the Average Closing Price and the date of
the Company Shareholders Meeting to give the parties additional time to consider
the decisions described above; and
WHEREAS, the parties also desire to make certain other
amendments described below; and
WHEREAS, the Boards of Directors of Parent and Sub have
approved this Amendment in accordance with Section 13.3 of the Merger Agreement,
applicable law and the Articles of Incorporation and By-laws of Parent and Sub;
and
WHEREAS, the Board of Directors of the Company has (i)
approved this Amendment in accordance with the requirements of Section 13.3 of
the Merger Agreement, the
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California Code and the Articles of Incorporation and the By-laws of the
Company, (ii) directed the Agreement, as modified by the Amendment, and the
Merger to be submitted to, and recommended approval by, the Shareholders.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants and agreements set forth herein, the parties hereby amend the
Agreement and agree as follows:
1. Average Closing Price. The definition of "Average Closing Price"
shall be amended by restating the first sentence of Section 2.2(b) to read as
follows:
For the purposes of this calculation, each share of Parent Common Stock
shall be valued at the arithmetic average ("Average Closing Price") of
the closing price per share of Parent Common Stock, as reported on the
Nasdaq National Market System ("Nasdaq") for each of the five (5)
consecutive trading days ending with the sixth (6th) business day prior
to the Date of the Company Shareholders Meeting ("ACP Determination
Date"). The "Date of the Company Shareholders Meeting" shall be the
date for the Shareholders Meeting specified in the Company's definitive
Proxy Statement when first delivered to the Shareholders.
2. Fully Diluted Company Shares. The definition of "Fully Diluted
Company Shares" shall be amended by restating the last sentence of Section
2.1(a) to read as follows:
"Fully Diluted Company Shares" shall be calculated by adding (i) the
total number of shares of Company Common Stock issued and outstanding
as of the ACP Determination Date (including Dissenting Shares) plus
(ii) the total number of shares of Company Preferred Stock issued and
outstanding as of the ACP Determination Date (including Dissenting
Shares) plus (iii) the total number of shares of Company Common or
Preferred Stock subject to Options (as defined in paragraph (e) below)
outstanding as of the ACP Determination Date (as defined in Section
2.2(b)).
3. Termination of Agreement. Section 11.1(k) shall be restated in its
entirety as follows:
(k) if the Average Closing Price is less than $34
11/32, Parent may terminate the Agreement in accordance with the
procedures set forth below:
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(i) No later than 5:00 p.m. Sacramento time
on the third calendar day following the ACP Determination Date, Parent
may send a notice to Company electing to change the Average Closing
Price to a final price of $34 11/32 or less (as determined by Parent
in its sole discretion) for all purposes of this Agreement (including
the determination of the Exchange Ratio). If this notice is not sent,
the Average Closing Price shall be determined by Section 2.2(b), this
Agreement shall not be deemed terminated pursuant to this Section
11.1(k), and the following provisions of this Section 11.1(k) shall not
apply.
(ii) If Parent sends the notice described in
Section 11.1(k)(i) above, Company shall send a reply notice to Parent
either accepting or rejecting Parent's election to change the Average
Closing Price no later than 5:00 p.m. Sacramento time on the third
business day preceding the Date of the Company Shareholders Meeting.
If Company rejects Parent's election (or a reply notice is not sent),
this Agreement shall be deemed terminated by Parent pursuant to this
Section 11.1(k). If Company accepts Parent's election, the Average
Closing Price shall be the price specified by Parent in the notice
described in Section 11.1(k)(i) above, and this Agreement shall not
be deemed terminated by Parent pursuant to this Section 11.1(k).
4. Indemnification of Directors and Officers of the Company. All
references to "Sub" in Section 6.16 shall be replaced with the phrase "Surviving
Corporation."
5. Miscellaneous. The original Agreement, as amended hereby, shall
remain in full force and effect and embody the entire agreement and
understanding of the parties hereto in respect of the subject matter contained
herein and therein in conformity with Section 13.5 of the Agreement. This
Amendment may be executed in two or more counterparts, each of which shall be
deemed an original and all of which together shall constitute one and the same
instrument, and, when signed by all of the parties hereto, shall become legally
binding on such parties effective as of the date set forth at the beginning of
this Amendment.
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IN WITNESS WHEREOF, the parties have executed or caused to be
executed this Agreement effective as of the day and year first above written.
STEP AHEAD INVESTMENTS, INC.
By: /s/ Gary Cino
---------------------------
Gary Cino
Chief Executive Officer
DOLLAR TREE STORES, INC.
By: /s/ H. Ray Compton
----------------------------
H. Ray Compton
Executive Vice President
DOLLAR TREE WEST, INC.
By: /s/ H. Ray Compton
----------------------------
H. Ray Compton
Executive Vice President
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DOLLAR TREE STORES, INC. REPORTS EARNINGS PER SHARE OF $0.18 FOR THE THIRD
QUARTER ENDING SEPTEMBER 30, 1998
CHESAPEAKE, Virginia -- October 21, 1998 -- Dollar Tree Stores, Inc. (NASDAQ:
DLTR), the nation's leading $1.00 price point retailer, reported net earnings
for the quarter ended September 30, 1998, of $11.5 million on sales of $176.1
million, compared to net earnings of $8.7 million on sales of $142.4 million in
the third quarter of 1997. Earnings per share increased to $0.18 in the third
quarter of 1998 from $0.13 in the same period last year.
As previously reported, sales increased $33.7 million over sales for the
third quarter of 1997, and sales in comparable stores increased by 2.9%. Year to
date, sales increased $111.3 million over sales for the same period last year,
and sales in comparable stores increased by 6.8%.
Gross margin for the quarter increased to 38.7% of sales compared to 37.8%
for the same quarter last year. This increase is due primarily to improved
merchandise costs (including freight) and a reduction in shrink and markdown
costs. The improvement in merchandise costs is primarily due to favorable
pricing and the earlier receipt of import merchandise.
Operating expenses increased to 27.3% of net sales for the third quarter of
1998, compared to 27.2% for the third quarter of 1997. This increase resulted
from increased payroll, primarily due to the minimum wage increase in 1997, and
depreciation, offset by a general reduction in operating expenses resulting from
cost controls.
Year to date, net sales, earnings, and earnings per share in 1998 were
$500.8 million, $29.1 million and $0.45 per share, respectively, compared to net
sales, earnings, and earnings per share through the third quarter of 1997 of
$389.5 million, $18.3 million, and $0.28 per share, respectively.
Dollar Tree Stores, Inc. is a leading discount variety store chain offering
a wide assortment of quality everyday general merchandise, in many traditional
variety store categories, at the $1.00 price point. Dollar Tree Stores operates
1,054 stores in 29 states as of September 30, 1998, having added 75 new stores
and closed one store in the quarter, for a total of 171 new stores and four
closed stores in 1998.
CONTACT: Dollar Tree Stores, Inc.
Eric Coble or Erica Robb, 757/321-5000
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DOLLAR TREE STORES, INC.
Condensed Consolidated Income Statements
For the Period Ended
September 30,
(Amounts in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Third Quarter Year-To-Date
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Net sales $176,071 $142,386 $500,769 $389,464
Cost of sales 107,915 88,550 312,927 248,173
Gross profit 68,156 53,836 187,842 141,291
38.7% 37.8% 37.5% 36.3%
SGA expenses 43,384 35,444 124,615 99,973
24.6% 24.9% 24.9% 25.7%
Depreciation/amortization 4,736 3,327 13,207 9,422
2.7% 2.3% 2.6% 2.4%
Interest expense 1,313 971 2,634 2,209
0.7% 0.7% 0.5% 0.6%
Earnings before
income taxes $ 18,723 $ 14,094 $ 47,386 $ 29,687
10.6% 9.9% 9.5% 7.6%
Income tax expense 7,208 5,425 18,243 11,428
Net earnings $ 11,515 $ 8,669 $ 29,143 $ 18,259
6.5% 6.1% 5.8% 4.7%
Earnings per share -
Basic $ 0.19 $ 0.15 $ 0.49 $ 0.31
Weighted average number
of shares 59,132 58,616 58,968 58,492
Earnings per share -
Diluted $ 0.18 $ 0.13 $ 0.45 $ 0.28
Weighted average number
of shares 65,391 64,831 65,213 64,569
</TABLE>
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DOLLAR TREE STORES, INC.
Condensed Consolidated Balance Sheets
(Amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Sept. 30, Dec. 31, Sept. 30,
1998 1997 1997
<S> <C> <C> <C>
Cash and cash equivalents $ 5,325 $ 43,695 $ 4,638
Merchandise inventories 184,511 89,066 133,150
Other current assets 13,782 10,261 7,815
Total current assets 203,618 143,022 145,603
Net property and equipment 108,364 82,071 70,581
Goodwill, net 43,033 44,478 44,960
Other assets, net 3,443 3,005 3,255
Total assets $ 358,458 $ 272,576 $ 264,399
Current portion of
long-term debt $ 32,100 $ 0 $ 12,500
Accounts payable and
accrued expenses 69,598 63,584 61,104
Income taxes payable 0 18,908 1,742
Current installments of
obligations under capital
leases 392 317 309
Total current liabilities 102,090 82,809 75,655
Long-term debt 57,900 30,000 60,000
Obligations under capital
leases, excluding current
installments 2,188 804 817
Other liabilities 4,072 4,037 3,798
Total liabilities 166,250 117,650 140,270
Shareholders' equity 192,208 154,926 124,129
Total liabilities and
shareholders' equity $ 358,458 $ 272,576 $ 264,399
</TABLE>
