UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended July 29, 2017
OR
( ) | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Commission File Number: 0-25464
DOLLAR TREE, INC.
(Exact name of registrant as specified in its charter)
Virginia | 26-2018846 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) | |
500 Volvo Parkway
Chesapeake, Virginia 23320
(Address of principal executive offices)
Telephone Number (757) 321-5000
(Registrant's 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 ( ) |
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes (X) | No ( ) |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer (X) | Accelerated filer ( ) |
Non-accelerated filer ( ) (Do not check if a smaller reporting company) | Smaller reporting company ( ) |
Emerging growth company ( ) | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ( )
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ( ) | No (X) |
As of August 21, 2017, there were 236,844,665 shares of the Registrant's Common Stock outstanding.
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DOLLAR TREE, INC.
INDEX
Page | ||
PART I - FINANCIAL INFORMATION | ||
Item 1. | Financial Statements: | |
Unaudited Condensed Consolidated Income Statements for the 13 and 26 Weeks Ended July 29, 2017 and July 30, 2016 | ||
Unaudited Condensed Consolidated Statements of Comprehensive Income for the 13 and 26 Weeks Ended July 29, 2017 and July 30, 2016 | ||
Unaudited Condensed Consolidated Balance Sheets as of July 29, 2017, January 28, 2017 and July 30, 2016 | ||
Unaudited Condensed Consolidated Statements of Cash Flows for the 26 Weeks Ended July 29, 2017 and July 30, 2016 | ||
Notes to Unaudited Condensed Consolidated Financial Statements | ||
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | |
Item 4. | Controls and Procedures | |
PART II - OTHER INFORMATION | ||
Item 1. | Legal Proceedings | |
Item 1A. | Risk Factors | |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | |
Item 3. | Defaults Upon Senior Securities | |
Item 4. | Mine Safety Disclosures | |
Item 5. | Other Information | |
Item 6. | Exhibits | |
Signatures | ||
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Part I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS.
DOLLAR TREE, INC.
CONDENSED CONSOLIDATED INCOME STATEMENTS
(Unaudited)
13 Weeks Ended | 26 Weeks Ended | |||||||||||||||
July 29, | July 30, | July 29, | July 30, | |||||||||||||
(in millions, except per share data) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Net sales | $ | 5,281.2 | $ | 4,996.3 | $ | 10,568.3 | $ | 10,082.1 | ||||||||
Cost of sales | 3,653.4 | 3,483.9 | 7,313.4 | 7,015.2 | ||||||||||||
Gross profit | 1,627.8 | 1,512.4 | 3,254.9 | 3,066.9 | ||||||||||||
Selling, general and administrative expenses, excluding Receivable impairment | 1,205.7 | 1,155.2 | 2,393.1 | 2,291.0 | ||||||||||||
Receivable impairment | 2.6 | — | 53.5 | — | ||||||||||||
Selling, general and administrative expenses | 1,208.3 | 1,155.2 | 2,446.6 | 2,291.0 | ||||||||||||
Operating income | 419.5 | 357.2 | 808.3 | 775.9 | ||||||||||||
Interest expense, net | 75.8 | 87.3 | 150.5 | 174.6 | ||||||||||||
Other (income) expense, net | 0.1 | — | 0.4 | (0.2 | ) | |||||||||||
Income before income taxes | 343.6 | 269.9 | 657.4 | 601.5 | ||||||||||||
Income tax expense | 109.8 | 99.7 | 223.1 | 198.7 | ||||||||||||
Net income | $ | 233.8 | $ | 170.2 | $ | 434.3 | $ | 402.8 | ||||||||
Basic net income per share | $ | 0.99 | $ | 0.72 | $ | 1.84 | $ | 1.71 | ||||||||
Diluted net income per share | $ | 0.98 | $ | 0.72 | $ | 1.83 | $ | 1.70 | ||||||||
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
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DOLLAR TREE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
13 Weeks Ended | 26 Weeks Ended | |||||||||||||||
July 29, | July 30, | July 29, | July 30, | |||||||||||||
(in millions) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Net income | $ | 233.8 | $ | 170.2 | $ | 434.3 | $ | 402.8 | ||||||||
Foreign currency translation adjustments | 8.0 | (2.3 | ) | 5.0 | 6.6 | |||||||||||
Total comprehensive income | $ | 241.8 | $ | 167.9 | $ | 439.3 | $ | 409.4 | ||||||||
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
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DOLLAR TREE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in millions) | July 29, 2017 | January 28, 2017 | July 30, 2016 | |||||||||
ASSETS | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | $ | 693.3 | $ | 866.4 | $ | 1,093.2 | ||||||
Short-term investments | 4.0 | 4.0 | 4.0 | |||||||||
Merchandise inventories, net | 2,928.5 | 2,865.8 | 2,975.1 | |||||||||
Other current assets | 189.4 | 201.8 | 377.1 | |||||||||
Total current assets | 3,815.2 | 3,938.0 | 4,449.4 | |||||||||
Property, plant and equipment, net of accumulated depreciation of $2,941.8, $2,694.5 and $2,437.9, respectively | 3,115.4 | 3,115.8 | 3,174.2 | |||||||||
Assets available for sale | 10.4 | 9.0 | 13.5 | |||||||||
Goodwill | 5,025.2 | 5,023.5 | 5,023.8 | |||||||||
Favorable lease rights, net of accumulated amortization of $202.8, $159.3 and $111.1, respectively | 420.4 | 468.6 | 518.8 | |||||||||
Tradename intangible asset | 3,100.0 | 3,100.0 | 3,100.0 | |||||||||
Other intangible assets, net | 4.9 | 5.1 | 5.4 | |||||||||
Other assets | 40.8 | 41.6 | 44.3 | |||||||||
Total assets | $ | 15,532.3 | $ | 15,701.6 | $ | 16,329.4 | ||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||||
Current liabilities: | ||||||||||||
Current portion of long-term debt | $ | 165.9 | $ | 152.1 | $ | 145.5 | ||||||
Accounts payable | 1,196.3 | 1,119.6 | 1,351.5 | |||||||||
Other current liabilities | 722.5 | 744.2 | 683.0 | |||||||||
Income taxes payable | — | 90.0 | — | |||||||||
Total current liabilities | 2,084.7 | 2,105.9 | 2,180.0 | |||||||||
Long-term debt, net, excluding current portion | 5,595.0 | 6,169.7 | 7,155.7 | |||||||||
Unfavorable lease rights, net of accumulated amortization of $51.2, $39.6 and $27.3, respectively | 111.5 | 124.0 | 136.6 | |||||||||
Deferred tax liabilities, net | 1,449.8 | 1,458.9 | 1,556.0 | |||||||||
Income taxes payable, long-term | 41.6 | 71.2 | 73.6 | |||||||||
Other liabilities | 389.5 | 382.4 | 370.6 | |||||||||
Total liabilities | 9,672.1 | 10,312.1 | 11,472.5 | |||||||||
Commitments and contingencies | ||||||||||||
Shareholders' equity | 5,860.2 | 5,389.5 | 4,856.9 | |||||||||
Total liabilities and shareholders' equity | $ | 15,532.3 | $ | 15,701.6 | $ | 16,329.4 | ||||||
Common shares outstanding | 236.8 | 236.1 | 235.7 | |||||||||
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
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DOLLAR TREE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
26 Weeks Ended | ||||||||
July 29, | July 30, | |||||||
(in millions) | 2017 | 2016 | ||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 434.3 | $ | 402.8 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 305.2 | 324.2 | ||||||
Provision for deferred taxes | (6.8 | ) | (31.1 | ) | ||||
Amortization of debt discount and debt-issuance costs | 8.4 | 9.5 | ||||||
Receivable impairment | 53.5 | — | ||||||
Other non-cash adjustments to net income | 49.2 | 43.1 | ||||||
Changes in operating assets and liabilities | (168.6 | ) | (68.2 | ) | ||||
Net cash provided by operating activities | 675.2 | 680.3 | ||||||
Cash flows from investing activities: | ||||||||
Capital expenditures | (271.7 | ) | (355.9 | ) | ||||
Purchase of restricted investments | — | (36.1 | ) | |||||
Proceeds from sale of restricted investments | — | 118.1 | ||||||
Proceeds from fixed asset disposition | 2.1 | 1.5 | ||||||
Net cash used in investing activities | (269.6 | ) | (272.4 | ) | ||||
Cash flows from financing activities: | ||||||||
Principal payments for long-term debt | (569.3 | ) | (54.0 | ) | ||||
Debt-issuance costs | — | (0.7 | ) | |||||
Proceeds from stock issued pursuant to stock-based compensation plans | 14.9 | 22.7 | ||||||
Cash paid for taxes on exercises/vesting of stock-based compensation | (24.7 | ) | (19.9 | ) | ||||
Net cash used in financing activities | (579.1 | ) | (51.9 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | 0.4 | 1.1 | ||||||
Net increase (decrease) in cash and cash equivalents | (173.1 | ) | 357.1 | |||||
Cash and cash equivalents at beginning of period | 866.4 | 736.1 | ||||||
Cash and cash equivalents at end of period | $ | 693.3 | $ | 1,093.2 | ||||
Supplemental disclosure of cash flow information: | ||||||||
Cash paid for: | ||||||||
Interest, net of amounts capitalized | $ | 143.7 | $ | 175.0 | ||||
Income taxes | $ | 363.8 | $ | 319.0 | ||||
Non-cash transactions: | ||||||||
Accrued capital expenditures | $ | 37.6 | $ | 78.7 | ||||
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
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DOLLAR TREE, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of Dollar Tree, Inc. and its wholly-owned subsidiaries (the "Company") have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and are presented in accordance with the requirements of Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete consolidated financial statements. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto and Management's Discussion and Analysis of Financial Condition and Results of Operations for the year ended January 28, 2017 contained in the Company's Annual Report on Form 10-K filed March 28, 2017. The results of operations for the 13 and 26 weeks ended July 29, 2017 are not necessarily indicative of the results to be expected for the entire fiscal year ending February 3, 2018.
In the Company's opinion, the unaudited condensed consolidated financial statements included herein contain all adjustments (including those of a normal recurring nature) considered necessary for a fair presentation of its financial position as of July 29, 2017 and July 30, 2016 and the results of its operations and cash flows for the periods presented. The January 28, 2017 balance sheet information was derived from the audited consolidated financial statements as of that date.
In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers." This update will replace existing revenue recognition guidance in GAAP and requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. In July 2015, the FASB deferred the effective date of the new standard to interim and annual reporting periods beginning after December 15, 2017. Early adoption is permitted, but not before the original effective date for public business entities (interim and annual reporting periods beginning after December 15, 2016). ASU 2014-09 permits the use of either the retrospective or cumulative effect transition method. The Company is currently evaluating its preferred transition method and is continuing to evaluate the impacts this ASU and related quantitative and qualitative disclosures will have on its consolidated financial statements. The Company does not expect the adoption of this pronouncement to have a material impact on its consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02, "Leases." This update will replace existing lease guidance in GAAP and will require lessees to recognize lease assets and lease liabilities on the balance sheet for all leases and disclose key information about leasing arrangements, such as information about variable lease payments and options to renew and terminate leases. When implemented, lessees and lessors will be required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The update is effective for interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted. The Company has engaged a third party to assist in its preparation for implementation and its evaluation of the impact of the new pronouncement on its consolidated financial statements. The Company expects the adoption of this pronouncement to result in a material increase in the assets and liabilities on its consolidated balance sheets and to not have a material impact on its consolidated income statements. The Company is in the process of implementing software to assist in the quantification of the expected impact on the consolidated balance sheets and to facilitate the calculations of the related accounting entries and disclosures.
2. LONG-TERM DEBT
Acquisition Notes
The Company's $750.0 million aggregate principal amount of 5.25% senior notes due 2020 (the "2020 Notes") and $2.5 billion aggregate principal amount of 5.75% senior notes due 2023 (the "2023 Notes," and together with the 2020 Notes, the "Acquisition Notes") were issued pursuant to indentures, which contain covenants that, among other things, limit the ability of the Company to declare or pay dividends. The restriction in the indentures on the Company's ability to pay dividends is subject to certain significant exceptions, including an exception that permits the Company to pay dividends and make other distributions regardless of dollar amount so long as, after giving pro forma effect thereto, the Company would have a consolidated total net leverage ratio, as defined under the indentures, no greater than 3.50 to 1.00. As of July 29, 2017, the Company's consolidated total net leverage ratio, as defined in the indentures, was below 3.50 to 1.00. So long as the Company's consolidated total net leverage ratio remains below 3.50 to 1.00, the indentures do not restrict the ability of the Company to pay dividends.
Credit Facility and Term Loans
The Company's New Senior Secured Credit Facilities, consisting of its $1.25 billion revolving credit facility and term loan facilities, contain covenants that, among other things, limit the ability of the Company to declare or pay dividends. The restriction in the New Senior Secured Credit Facilities on the Company's ability to pay dividends is subject to certain significant exceptions,
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including an exception that permits the Company to pay dividends and make other restricted payments regardless of dollar amount so long as, after giving pro forma effect thereto, the Company would have a consolidated total net leverage ratio, as defined under the New Senior Secured Credit Facilities, no greater than 3.50 to 1.00. As of July 29, 2017, the Company's consolidated total net leverage ratio, as defined in the New Senior Secured Credit Facilities, was below 3.50 to 1.00. So long as the Company's consolidated total net leverage ratio remains below 3.50 to 1.00, the New Senior Secured Credit Facilities do not restrict the ability of the Company to pay dividends.
On July 27, 2017, the Company prepaid $500.0 million of the $2.2 billion remaining outstanding under its Term Loan A-1. The prepayment resulted in an acceleration of the amortization of debt-issuance costs associated with the Term Loan A-1 of $1.2 million.
Debt Covenants
As of July 29, 2017, the Company was in compliance with its debt covenants.
3. INCOME TAXES
The Company's effective tax rate was 32.0% for the 13 weeks ended July 29, 2017 compared with 36.9% for the 13 weeks ended July 30, 2016 and 33.9% for the 26 weeks ended July 29, 2017 compared with 33.0% for the 26 weeks ended July 30, 2016. The tax rate for the 13 and 26 weeks ended July 29, 2017, respectively, includes the effect of a reduction in the statutory rate for North Carolina which resulted in a decrease in the deferred tax liability related to the trade name intangible asset and a $9.9 million decrease in tax expense. The rate for the 13 and 26 weeks ended July 29, 2017 also includes the effect of a reduction of $5.6 million in the reserve for uncertain tax positions resulting from statute expirations and the reduction of interest accrued on method changes effected in the 13 weeks ended July 29, 2017. The 2016 tax rate includes a one-time benefit for an election allowing the Family Dollar acquisition to be treated as an asset purchase for certain state tax purposes in the quarter ended April 30, 2016.
4. LEGAL PROCEEDINGS
The Company is a defendant in legal proceedings including those described below and will vigorously defend itself in these matters. The Company does not believe that any of these matters will, individually or in the aggregate, have a material effect on its business or financial condition. The Company cannot give assurance, however, that one or more of these matters will not have a material effect on its results of operations for the quarter or year in which they are resolved.
The Company assesses its legal proceedings and reserves are established if a loss is probable and the amount of such loss can be reasonably estimated. Many if not substantially all of the contingencies described below are subject to significant uncertainties and, therefore, determining the likelihood of a loss and the measurement of any loss can be complex and subject to judgment. With respect to legal proceedings where the Company has determined that a loss is reasonably possible but not probable, the Company is unable to estimate the amount or range of the reasonably possible loss due to the inherent difficulty of predicting the outcome of and uncertainties regarding legal proceedings. The Company’s assessments are based on estimates and assumptions that have been deemed reasonable by management, but that may prove to be incomplete or inaccurate, and unanticipated events and circumstances may occur that might cause the Company to change those estimates and assumptions. Management’s assessment of legal proceedings could change because of future determinations or the discovery of facts which are not presently known. Accordingly, the ultimate costs of resolving these proceedings may be substantially higher or lower than currently estimated.
Dollar Tree Active Matters
In April 2015, a distribution center employee filed a class action in California state court with allegations concerning wages, meal and rest breaks, recovery periods, wage statements and timely termination pay. The employee filed an amended complaint in which he abandoned his attempt to certify a nation-wide class of non-exempt distribution center employees for alleged improper calculation of overtime compensation. The Company removed this lawsuit to federal court. The court is now considering the employee’s motion to certify the case as a state-wide class action.
In April 2015, a former store manager filed a class action in California federal court alleging, among other things, that the Company failed to make wage statements readily available to employees who did not receive paper checks. The wage statement class is certified and scheduled for trial in October 2017.
In April 2016, the Company was served with a putative class action in Florida state court brought by a former store employee asserting the Company violated the Fair Credit Reporting Act in the way it handled background checks. Specifically, the former employee alleged the Company used disclosure forms that did not meet the statute’s requirements and failed to provide notices accompanied by background reports prior to taking adverse actions against prospective and existing employees based on information in the background reports. The plaintiff is seeking statutory damages of $100 to $1,000 per violation.
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In June 2017, the Company (Dollar Tree and Family Dollar) filed suit in chancery court in Delaware against Sycamore Partners and Dollar Express LLC alleging, among other things, fraud, fraudulent transfer, breach of contract, and unjust enrichment. The Company is seeking in excess of $52 million for the failure of Dollar Express to pay the Company for goods and services the Company provided to Sycamore’s Dollar Express stores. These stores were divested by Dollar Tree as a condition of its merger with Family Dollar. The Company is also seeking substantial damages for the unauthorized use of its marks. Sycamore and Dollar Express responded in part by denying liability and filing a counterclaim against the Company alleging the Company had successfully engaged in a scheme to put Dollar Express out of business, seeking more than $500 million in damages.
In July 2017, two former employees filed suit in federal court in California, seeking to represent a class of current and former non-exempt employees alleging that the Company’s dress code required them to purchase such distinctive clothing that it constituted a uniform and the Company’s failure to reimburse them for the clothing violated California law. The former employees seek restitution, damages, penalties and injunctive relief.
In August 2017, 43 current and former employees filed suit against the Company in state court in California alleging improper classification as exempt employees which they allege resulted in, among other things, their failure to receive overtime compensation, rest and meal periods, accurate wage statements, and final pay upon termination of employment.
Dollar Tree Resolved Matters
In April 2016, a former store manager filed a lawsuit in California state court alleging individual claims of pregnancy and disability discrimination in addition to asserting Private Attorney General Act ("PAGA") claims on behalf of herself and other store managers alleging they were improperly classified as exempt and therefore, among other things, did not receive overtime compensation and meal and rest periods. The parties have reached a settlement as to all claims.
In July 2016, a former non-exempt sales associate filed in federal court in Arkansas a putative nationwide collective action alleging the Company forced sales associates and assistant store managers to work off the clock while clocked out for meal breaks and, as a result, underpaid regular and overtime pay. In September 2016, the court granted the Company’s motion to compel arbitration. To date, the former associate has not initiated any arbitration proceedings.
In March 2017, a former store manager filed suit in a state court in Florida, seeking to represent a collective, alleging failure to pay non-exempt employees minimum wage for all time worked and overtime in violation of the Fair Labor Standards Act, and, individually, alleging race discrimination and retaliation in violation of federal and state civil rights laws. Pursuant to Court order, the case has been sent to arbitration.
Family Dollar Active Matters
In 2008, a complaint was filed alleging discriminatory practices with respect to the pay of Family Dollar's female store managers. Among other things, the plaintiffs seek recovery of back pay, monetary and punitive remedies, interest, attorneys' fees, and equitable relief. In June 2016, the United States District Court in North Carolina ordered that the case be continued for merits discovery. The court also certified the case as a class action of approximately 30,000 current and former female store managers employed as far back as July 2002. A preliminary settlement has been reached in this case and has been properly recorded by the Company. Other aspects of the settlement agreement are still being finalized.
In January 2017, a customer filed a class action in federal court in Illinois alleging the Company violated various state consumer fraud laws as well as express and implied warranties by selling a product that purported to contain aloe when it did not. The requested class is limited to the state of Illinois. The Company believes that it is fully indemnified by the entities that supplied it with the product.
In June 2017, a former store employee filed suit in California state court asserting PAGA claims on behalf of herself and other allegedly aggrieved employees alleging the Company willfully caused their work time to go under reported so they failed to receive pay for time worked, rest and meal breaks, minimum wage and overtime compensation, final pay in a timely manner, and accurate wage statements.
Family Dollar Resolved Matters
In 2014, a putative class action was filed in a California Federal Court by a former employee alleging that the Company had a policy of requiring employee bag checks while the employees were not clocked in for work. As a result of those actions, the employee alleged the Company violated California law by failing to provide meal periods and rest breaks, failing to pay regular and overtime wages for work performed off the clock, failing to provide accurate wage statements, failing to timely pay all final wages and by engaging in unfair competition. He also alleged PAGA claims. In July 2017, the Court granted the Company’s motion for summary judgment as to all claims and dismissed the lawsuit with prejudice.
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In 2015, former employees filed a nationwide class action in federal court in Connecticut alleging the Company had violated ERISA by overcharging employees who purchased supplemental life insurance through a Company sponsored plan. In March 2016, the district court dismissed the lawsuit. The Second Circuit Court of Appeals has now affirmed the dismissal of the lawsuit.
5. RECEIVABLE IMPAIRMENT
In connection with its acquisition of Family Dollar, the Company was required to divest 330 stores and partially support these stores through a transition services agreement. Under the transition services agreement, the Company provided merchandise and services and the buyer was required to reimburse the Company.
In the 13 weeks ended April 29, 2017, the Company evaluated the collectability of its divestiture-related receivable. Based on information available, the Company determined that the outstanding balance of $50.9 million was not recoverable and recorded an impairment charge to write down the receivable to zero. An additional $2.6 million was recorded as a receivable and impaired in the 13 weeks ended July 29, 2017. The impairment charges are included in “Receivable impairment” in the accompanying condensed consolidated income statements.
6. FAIR VALUE MEASUREMENTS
As required, financial assets and liabilities are classified in the fair value hierarchy in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company's assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels.
The following table sets forth the Company's financial assets and liabilities that are disclosed at fair value on a recurring basis:
(in millions) | July 29, 2017 | January 28, 2017 | July 30, 2016 | |||||||||
Level 1 | ||||||||||||
Short-term investments | $ | 4.0 | $ | 4.0 | $ | 4.0 | ||||||
Long-term debt - Secured Senior Notes and Acquisition Notes | 3,745.7 | 3,740.3 | 3,804.8 | |||||||||
Level 2 | ||||||||||||
Long-term debt - term loans | 2,275.5 | 2,828.2 | 3,862.0 | |||||||||
The Company's cash and cash equivalents are valued at cost, which approximates fair value, due to the short-term maturities of these instruments.
The fair values of the Company's Secured Senior Notes and Acquisition Notes were determined using Level 1 inputs as quoted prices in active markets for identical assets or liabilities are available. The fair values of the Company's term loans were determined using Level 2 inputs as quoted prices are readily available from pricing services, but the prices are not published. The carrying values of the Company's Tranche A Revolving Credit Facility at July 29, 2017 and January 28, 2017 and the Company's Revolving Credit Facility at July 30, 2016, approximated their fair values because the interest rates vary with market interest rates.
Certain assets and liabilities are measured at fair value on a nonrecurring basis; that is, the assets and liabilities are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (e.g., when there is evidence of impairment). As described in Note 5, the Company recorded receivable impairments in the 13 and 26 weeks ended July 29, 2017.
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7. NET INCOME PER SHARE
The following table sets forth the calculations of basic and diluted net income per share:
13 Weeks Ended | 26 Weeks Ended | |||||||||||||||
July 29, | July 30, | July 29, | July 30, | |||||||||||||
(in millions, except per share data) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Basic net income per share: | ||||||||||||||||
Net income | $ | 233.8 | $ | 170.2 | $ | 434.3 | $ | 402.8 | ||||||||
Weighted average number of shares outstanding | 236.7 | 235.6 | 236.5 | 235.5 | ||||||||||||
Basic net income per share | $ | 0.99 | $ | 0.72 | $ | 1.84 | $ | 1.71 | ||||||||
Diluted net income per share: | ||||||||||||||||
Net income | $ | 233.8 | $ | 170.2 | $ | 434.3 | $ | 402.8 | ||||||||
Weighted average number of shares outstanding | 236.7 | 235.6 | 236.5 | 235.5 | ||||||||||||
Dilutive effect of stock options and restricted stock (as determined by applying the treasury stock method) | 0.7 | 1.1 | 0.9 | 1.1 | ||||||||||||
Weighted average number of shares and dilutive potential shares outstanding | 237.4 | 236.7 | 237.4 | 236.6 | ||||||||||||
Diluted net income per share | $ | 0.98 | $ | 0.72 | $ | 1.83 | $ | 1.70 | ||||||||
For the 13 and 26 weeks ended July 29, 2017 and July 30, 2016, substantially all of the stock options outstanding were included in the calculation of the weighted average number of shares and dilutive potential shares outstanding.
8. STOCK-BASED COMPENSATION
The Company's stock-based compensation expense primarily includes the fair value of restricted stock units (RSUs) and employees' purchase rights under the Company's Employee Stock Purchase Plan. Stock-based compensation expense was $12.5 million and $40.1 million during the 13 and 26 weeks ended July 29, 2017, respectively. Stock-based compensation expense was $12.5 million and $37.3 million during the 13 and 26 weeks ended July 30, 2016, respectively.
The Company granted approximately 0.5 million service-based RSUs from the Omnibus Incentive Plan (Omnibus Plan) to employees and officers in the 26 weeks ended July 29, 2017. The estimated $42.5 million fair value of these RSUs is being expensed ratably over the three-year vesting periods, or shorter periods based on the retirement eligibility of certain grantees. The fair value was determined using the Company's closing stock price on the date of grant. The Company recognized $3.7 million and $9.4 million of expense related to these RSUs during the 13 and 26 weeks ended July 29, 2017, respectively.
In the 26 weeks ended July 29, 2017, the Company granted 0.2 million RSUs with a fair value of $18.4 million from the Omnibus Plan to certain officers of the Company, contingent on the Company meeting certain performance targets in fiscal 2017. If the Company meets these performance targets in fiscal 2017, the RSUs will vest ratably over three years. The estimated fair value of these RSUs is being expensed ratably over the three-year vesting periods, or shorter periods based on the retirement eligibility of certain grantees. The Company recognized $0.7 million and $11.4 million of expense related to these RSUs in the 13 and 26 weeks ended July 29, 2017, respectively.
In the 26 weeks ended July 29, 2017, the Company granted RSUs with a fair value of $4.1 million from the Omnibus Plan to certain officers of the Company, contingent on the Company meeting certain performance targets for the period beginning on January 29, 2017 and ending on February 1, 2020. Provided the vesting conditions are satisfied, the awards will vest at the end of the performance period. The estimated fair value of these RSUs is being expensed ratably over the three-year vesting period, or shorter periods based on the retirement eligibility of certain grantees. The Company recognized $0.2 million and $1.9 million of expense related to these RSUs in the 13 and 26 weeks ended July 29, 2017, respectively.
The Company recognized $6.3 million and $14.6 million of expense related to RSUs granted prior to fiscal 2017 in the 13 and 26 weeks ended July 29, 2017, respectively. For the 13 and 26 weeks ended July 30, 2016, the Company recognized $12.1 million and $36.5 million, respectively, of expense related to RSUs granted in fiscal 2016 and prior.
The Company recognized $0.6 million and $0.6 million of expense related to options granted prior to fiscal 2017 in the 13 and 26 weeks ended July 29, 2017, respectively.
12
In the 26 weeks ended July 29, 2017, approximately 0.8 million RSUs vested and approximately 0.5 million shares, net of taxes, were issued. During the 26 weeks ended July 30, 2016, approximately 0.6 million RSUs vested and approximately 0.4 million shares, net of taxes, were issued. In the 13 weeks ended July 29, 2017, 0.2 million RSUs vested and approximately 0.1 million shares, net of taxes, were issued. Less than 0.1 million RSUs vested in the 13 weeks ended July 30, 2016.
In connection with the Family Dollar acquisition, the Company converted approximately 1.5 million Family Dollar vested and unvested options into equivalent options to purchase Dollar Tree Common Stock at the date of the acquisition and recognized $0.3 million and $0.7 million of expense related to these options during the 13 and 26 weeks ended July 29, 2017, respectively. The Company recognized $0.3 million and $1.0 million of expense related to these options during the 13 and 26 weeks ended July 30, 2016, respectively. Stock options are valued using the Black-Scholes option-pricing model and compensation cost is recognized on a straight-line basis over the requisite service period.
9. SEGMENTS
The Company operates a chain of more than 14,500 retail discount stores in 48 states and five Canadian provinces. The Company's operations are conducted in two reporting business segments: Dollar Tree and Family Dollar. The Company defines its segments as those operations whose results its chief operating decision maker ("CODM") regularly reviews to analyze performance and allocate resources.
The Dollar Tree segment is the leading operator of discount variety stores offering merchandise at the fixed price of $1.00. The Dollar Tree segment includes the Company's operations under the "Dollar Tree" and "Dollar Tree Canada" brands, 11 distribution centers in the United States, two distribution centers in Canada and a Store Support Center in Chesapeake, Virginia.
The Family Dollar segment operates a chain of general merchandise retail discount stores providing consumers with a selection of competitively-priced merchandise in convenient neighborhood stores. The Family Dollar segment consists of the Company's operations under the "Family Dollar" brand, 11 distribution centers and a Store Support Center in Matthews, North Carolina.
The Company measures the results of its segments using, among other measures, each segment's net sales, gross profit and operating income. The Company may revise the measurement of each segment's operating income, including the allocation of distribution center and Store Support Center costs, as determined by the information regularly reviewed by the CODM. When the measurement of a segment changes, previous period amounts and balances are reclassified to be comparable to the current period's presentation.
Net sales by segment are as follows:
13 Weeks Ended | 26 Weeks Ended | |||||||||||||||
July 29, | July 30, | July 29, | July 30, | |||||||||||||
(in millions) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Net sales: | ||||||||||||||||
Dollar Tree | $ | 2,586.9 | $ | 2,387.5 | $ | 5,158.6 | $ | 4,772.0 | ||||||||
Family Dollar | 2,694.3 | 2,608.8 | 5,409.7 | 5,310.1 | ||||||||||||
Total net sales | $ | 5,281.2 | $ | 4,996.3 | $ | 10,568.3 | $ | 10,082.1 | ||||||||
Gross profit by segment is as follows:
13 Weeks Ended | 26 Weeks Ended | |||||||||||||||
July 29, | July 30, | July 29, | July 30, | |||||||||||||
(in millions) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Gross profit: | ||||||||||||||||
Dollar Tree | $ | 895.8 | $ | 818.1 | $ | 1,792.5 | $ | 1,638.8 | ||||||||
Family Dollar | 732.0 | 694.3 | 1,462.4 | 1,428.1 | ||||||||||||
Total gross profit | $ | 1,627.8 | $ | 1,512.4 | $ | 3,254.9 | $ | 3,066.9 | ||||||||
13
Depreciation and amortization expense by segment is as follows:
13 Weeks Ended | 26 Weeks Ended | |||||||||||||||
July 29, | July 30, | July 29, | July 30, | |||||||||||||
(in millions) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Depreciation and amortization expense: | ||||||||||||||||
Dollar Tree | $ | 62.7 | $ | 59.3 | $ | 124.2 | $ | 116.7 | ||||||||
Family Dollar | 88.7 | 102.7 | 181.1 | 207.7 | ||||||||||||
Total depreciation and amortization expense | $ | 151.4 | $ | 162.0 | $ | 305.3 | $ | 324.4 | ||||||||
Operating income by segment is as follows:
13 Weeks Ended | 26 Weeks Ended | |||||||||||||||
July 29, | July 30, | July 29, | July 30, | |||||||||||||
(in millions) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Operating income: | ||||||||||||||||
Dollar Tree | $ | 289.1 | $ | 262.5 | $ | 604.5 | $ | 543.1 | ||||||||
Family Dollar | 130.4 | 94.7 | 203.8 | 232.8 | ||||||||||||
Total operating income | $ | 419.5 | $ | 357.2 | $ | 808.3 | $ | 775.9 | ||||||||
Total assets by segment are as follows:
As of | ||||||||||||
July 29, | January 28, | July 30, | ||||||||||
(in millions) | 2017 | 2017 | 2016 | |||||||||
Total assets: | ||||||||||||
Dollar Tree | $ | 3,555.9 | $ | 3,705.5 | $ | 3,787.4 | ||||||
Family Dollar | 11,976.4 | 11,996.1 | 12,542.0 | |||||||||
Total assets | $ | 15,532.3 | $ | 15,701.6 | $ | 16,329.4 | ||||||
Total goodwill by segment is as follows:
As of | ||||||||||||
July 29, | January 28, | July 30, | ||||||||||
(in millions) | 2017 | 2017 | 2016 | |||||||||
Total goodwill: | ||||||||||||
Dollar Tree | $ | 347.1 | $ | 345.4 | $ | 315.9 | ||||||
Family Dollar | 4,678.1 | 4,678.1 | 4,707.9 | |||||||||
Total goodwill | $ | 5,025.2 | $ | 5,023.5 | $ | 5,023.8 | ||||||
Goodwill is reassigned between segments when stores are rebannered between segments. There were no stores rebannered between segments in the 26 weeks ended July 29, 2017. In the 26 weeks ended July 30, 2016, the Company reassigned $30.2 million of goodwill from Family Dollar to Dollar Tree as a result of rebannering.
10. CONDENSED CONSOLIDATING FINANCIAL INFORMATION
At July 29, 2017, the Company had outstanding $750.0 million principal amount of 5.25% Acquisition Notes due March 1, 2020 and $2,500.0 million principal amount of 5.75% Acquisition Notes due March 1, 2023, which are unsecured obligations of the Company and are also fully, unconditionally, jointly and severally guaranteed on an unsecured, unsubordinated basis, subject to certain exceptions, by certain of the Company's direct or indirect wholly-owned U.S. subsidiaries, including Family Dollar and certain of its subsidiaries. All of the subsidiaries, guarantor and non-guarantor, are 100% owned by the parent. Supplemental
14
condensed consolidated financial information of the Company, including such information for the Guarantors, is presented below. The information is presented in accordance with the requirements of Rule 3-10 under Regulation S-X of the Securities and Exchange Commission (the "SEC"). The financial information may not necessarily be indicative of results of operations, cash flows or financial position had the guarantor or the non-guarantor subsidiaries operated as independent entities. Investments in subsidiaries are presented using the equity method of accounting. The principal elimination entries eliminate investments in subsidiaries and intercompany balances and transactions. Separate financial statements of the Guarantors are not provided as the condensed consolidating financial information contained herein provides a more meaningful disclosure to allow investors to determine the nature of the assets held by, and the operations of, the combined groups. The Company completed the exchange of the Acquisition Notes for registered notes with substantially identical terms on August 1, 2016.
Condensed Consolidating Statements of Comprehensive Income
13 Weeks Ended July 29, 2017 | ||||||||||||||||||||
Guarantor | Non-Guarantor | Consolidation | Consolidated | |||||||||||||||||
(in millions) | Parent | Subsidiaries | Subsidiaries | Adjustments | Company | |||||||||||||||
Net sales | $ | — | $ | 5,237.0 | $ | 73.6 | $ | (29.4 | ) | $ | 5,281.2 | |||||||||
Cost of sales | — | 3,623.7 | 41.0 | (11.3 | ) | 3,653.4 | ||||||||||||||
Gross profit | — | 1,613.3 | 32.6 | (18.1 | ) | 1,627.8 | ||||||||||||||
Selling, general and administrative expenses | 2.1 | 1,203.2 | 21.2 | (18.2 | ) | 1,208.3 | ||||||||||||||
Operating income (loss) | (2.1 | ) | 410.1 | 11.4 | 0.1 | 419.5 | ||||||||||||||
Interest expense (income), net | 58.8 | 18.9 | (1.9 | ) | — | 75.8 | ||||||||||||||
Other (income) expense, net | (0.1 | ) | 0.1 | 0.2 | (0.1 | ) | 0.1 | |||||||||||||
Income (loss) before income taxes | (60.8 | ) | 391.1 | 13.1 | 0.2 | 343.6 | ||||||||||||||
Income tax expense (benefit) | (21.5 | ) | 126.5 | 4.8 | — | 109.8 | ||||||||||||||
Equity in earnings of subsidiaries | (273.0 | ) | (8.6 | ) | — | 281.6 | — | |||||||||||||
Net income | 233.7 | 273.2 | 8.3 | (281.4 | ) | 233.8 | ||||||||||||||
Other comprehensive income | 8.0 | 2.4 | 8.0 | (10.4 | ) | 8.0 | ||||||||||||||
Comprehensive income | $ | 241.7 | $ | 275.6 | $ | 16.3 | $ | (291.8 | ) | $ | 241.8 | |||||||||
13 Weeks Ended July 30, 2016 | ||||||||||||||||||||
Guarantor | Non-Guarantor | Consolidation | Consolidated | |||||||||||||||||
(in millions) | Parent | Subsidiaries | Subsidiaries | Adjustments | Company | |||||||||||||||
Net sales | $ | — | $ | 4,951.8 | $ | 230.3 | $ | (185.8 | ) | $ | 4,996.3 | |||||||||
Cost of sales | — | 3,468.8 | 210.2 | (195.1 | ) | 3,483.9 | ||||||||||||||
Gross profit | — | 1,483.0 | 20.1 | 9.3 | 1,512.4 | |||||||||||||||
Selling, general and administrative expenses | 1.9 | 1,125.1 | 16.2 | 12.0 | 1,155.2 | |||||||||||||||
Operating income (loss) | (1.9 | ) | 357.9 | 3.9 | (2.7 | ) | 357.2 | |||||||||||||
Interest expense (income), net | 72.7 | 16.5 | (1.9 | ) | — | 87.3 | ||||||||||||||
Other expense, net | 2.7 | — | 0.4 | (3.1 | ) | — | ||||||||||||||
Income (loss) before income taxes | (77.3 | ) | 341.4 | 5.4 | 0.4 | 269.9 | ||||||||||||||
Income tax expense (benefit) | (30.4 | ) | 129.7 | 0.3 | 0.1 | 99.7 | ||||||||||||||
Equity in earnings of subsidiaries | (216.6 | ) | (1.9 | ) | — | 218.5 | — | |||||||||||||
Net income | 169.7 | 213.6 | 5.1 | (218.2 | ) | 170.2 | ||||||||||||||
Other comprehensive loss | (2.4 | ) | (0.6 | ) | (2.4 | ) | 3.1 | (2.3 | ) | |||||||||||
Comprehensive income | $ | 167.3 | $ | 213.0 | $ | 2.7 | $ | (215.1 | ) | $ | 167.9 | |||||||||
15
Condensed Consolidating Statements of Comprehensive Income (Continued)
26 Weeks Ended July 29, 2017 | ||||||||||||||||||||
Guarantor | Non-Guarantor | Consolidation | Consolidated | |||||||||||||||||
(in millions) | Parent | Subsidiaries | Subsidiaries | Adjustments | Company | |||||||||||||||
Net sales | $ | — | $ | 10,484.4 | $ | 142.3 | $ | (58.4 | ) | $ | 10,568.3 | |||||||||
Cost of sales | — | 7,255.4 | 80.3 | (22.3 | ) | 7,313.4 | ||||||||||||||
Gross profit | — | 3,229.0 | 62.0 | (36.1 | ) | 3,254.9 | ||||||||||||||
Selling, general and administrative expenses | 3.4 | 2,425.2 | 54.1 | (36.1 | ) | 2,446.6 | ||||||||||||||
Operating income (loss) | (3.4 | ) | 803.8 | 7.9 | — | 808.3 | ||||||||||||||
Interest expense (income), net | 116.3 | 38.0 | (3.8 | ) | — | 150.5 | ||||||||||||||
Other (income) expense, net | (0.1 | ) | 0.1 | 0.5 | (0.1 | ) | 0.4 | |||||||||||||
Income (loss) before income taxes | (119.6 | ) | 765.7 | 11.2 | 0.1 | 657.4 | ||||||||||||||
Income tax expense (benefit) | (48.9 | ) | 266.7 | 5.3 | — | 223.1 | ||||||||||||||
Equity in earnings of subsidiaries | (505.0 | ) | (8.5 | ) | — | 513.5 | — | |||||||||||||
Net income | 434.3 | 507.5 | 5.9 | (513.4 | ) | 434.3 | ||||||||||||||
Other comprehensive income | 5.0 | 1.5 | 5.0 | (6.5 | ) | 5.0 | ||||||||||||||
Comprehensive income | $ | 439.3 | $ | 509.0 | $ | 10.9 | $ | (519.9 | ) | $ | 439.3 | |||||||||
26 Weeks Ended July 30, 2016 | ||||||||||||||||||||
Guarantor | Non-Guarantor | Consolidation | Consolidated | |||||||||||||||||
(in millions) | Parent | Subsidiaries | Subsidiaries | Adjustments | Company | |||||||||||||||
Net sales | $ | — | $ | 9,985.2 | $ | 415.1 | $ | (318.2 | ) | $ | 10,082.1 | |||||||||
Cost of sales | — | 6,958.6 | 370.8 | (314.2 | ) | 7,015.2 | ||||||||||||||
Gross profit | — | 3,026.6 | 44.3 | (4.0 | ) | 3,066.9 | ||||||||||||||
Selling, general and administrative expenses | 3.9 | 2,263.1 | 30.8 | (6.8 | ) | 2,291.0 | ||||||||||||||
Operating income (loss) | (3.9 | ) | 763.5 | 13.5 | 2.8 | 775.9 | ||||||||||||||
Interest expense (income), net | 145.6 | 32.8 | (3.8 | ) | — | 174.6 | ||||||||||||||
Other (income) expense, net | (3.0 | ) | (0.3 | ) | 0.3 | 2.8 | (0.2 | ) | ||||||||||||
Income (loss) before income taxes | (146.5 | ) | 731.0 | 17.0 | — | 601.5 | ||||||||||||||
Income tax expense (benefit) | (64.1 | ) | 259.0 | 3.8 | — | 198.7 | ||||||||||||||
Equity in earnings of subsidiaries | (485.1 | ) | (8.8 | ) | — | 493.9 | — | |||||||||||||
Net income | 402.7 | 480.8 | 13.2 | (493.9 | ) | 402.8 | ||||||||||||||
Other comprehensive income | 6.6 | 2.0 | 6.6 | (8.6 | ) | 6.6 | ||||||||||||||
Comprehensive income | $ | 409.3 | $ | 482.8 | $ | 19.8 | $ | (502.5 | ) | $ | 409.4 | |||||||||
16
Condensed Consolidating Balance Sheets
July 29, 2017 | ||||||||||||||||||||
Guarantor | Non-Guarantor | Consolidating | Consolidated | |||||||||||||||||
(in millions) | Parent | Subsidiaries | Subsidiaries | Adjustments | Company | |||||||||||||||
ASSETS | ||||||||||||||||||||
Current assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | 389.1 | $ | 128.2 | $ | 176.0 | $ | — | $ | 693.3 | ||||||||||
Short-term investments | — | — | 4.0 | — | 4.0 | |||||||||||||||
Merchandise inventories, net | — | 2,882.1 | 48.1 | (1.7 | ) | 2,928.5 | ||||||||||||||
Current deferred tax assets, net | — | (6.7 | ) | 6.7 | — | — | ||||||||||||||
Due from intercompany, net | 109.1 | 1,118.7 | 6.5 | (1,234.3 | ) | — | ||||||||||||||
Other current assets | 0.8 | 186.6 | 1.7 | 0.3 | 189.4 | |||||||||||||||
Total current assets | 499.0 | 4,308.9 | 243.0 | (1,235.7 | ) | 3,815.2 | ||||||||||||||
Property, plant and equipment, net | — | 3,087.4 | 28.0 | — | 3,115.4 | |||||||||||||||
Assets available for sale | — | 10.4 | — | — | 10.4 | |||||||||||||||
Goodwill | — | 4,993.1 | 32.1 | — | 5,025.2 | |||||||||||||||
Favorable lease rights, net | — | 420.4 | — | — | 420.4 | |||||||||||||||
Tradename intangible asset | — | 3,100.0 | — | — | 3,100.0 | |||||||||||||||
Other intangible assets, net | — | 4.9 | — | — | 4.9 | |||||||||||||||
Investment in subsidiaries | 8,583.5 | 116.5 | — | (8,700.0 | ) | — | ||||||||||||||
Intercompany note receivable | 1,801.4 | — | 188.8 | (1,990.2 | ) | — | ||||||||||||||
Due from intercompany, net | 1,245.7 | — | — | (1,245.7 | ) | — | ||||||||||||||
Other assets | — | 40.5 | 3.1 | (2.8 | ) | 40.8 | ||||||||||||||
Total assets | $ | 12,129.6 | $ | 16,082.1 | $ | 495.0 | $ | (13,174.4 | ) | $ | 15,532.3 | |||||||||
LIABILITIES AND EQUITY | ||||||||||||||||||||
Current liabilities: | ||||||||||||||||||||
Current portion of long-term debt | $ | 165.9 | $ | — | $ | — | $ | — | $ | 165.9 | ||||||||||
Accounts payable | — | 1,182.0 | 15.4 | (1.1 | ) | 1,196.3 | ||||||||||||||
Due to intercompany, net | 917.4 | 299.6 | 17.3 | (1,234.3 | ) | — | ||||||||||||||
Other current liabilities | 50.2 | 467.3 | 205.0 | — | 722.5 | |||||||||||||||
Income taxes payable | (146.4 | ) | 143.0 | 3.4 | — | — | ||||||||||||||
Total current liabilities | 987.1 | 2,091.9 | 241.1 | (1,235.4 | ) | 2,084.7 | ||||||||||||||
Long-term debt, net, excluding current portion | 5,280.3 | 314.7 | — | — | 5,595.0 | |||||||||||||||
Unfavorable lease rights, net | — | 111.5 | — | — | 111.5 | |||||||||||||||
Deferred tax liabilities, net | 2.0 | 1,447.8 | — | — | 1,449.8 | |||||||||||||||
Income taxes payable, long-term | — | 41.6 | — | — | 41.6 | |||||||||||||||
Due to intercompany, net | — | 1,245.7 | — | (1,245.7 | ) | — | ||||||||||||||
Intercompany note payable | — | 1,990.2 | — | (1,990.2 | ) | — | ||||||||||||||
Other liabilities | — | 383.9 | 8.5 | (2.9 | ) | 389.5 | ||||||||||||||
Total liabilities | 6,269.4 | 7,627.3 | 249.6 | (4,474.2 | ) | 9,672.1 | ||||||||||||||
Shareholders' equity | 5,860.2 | 8,454.8 | 245.4 | (8,700.2 | ) | 5,860.2 | ||||||||||||||
Total liabilities and equity | $ | 12,129.6 | $ | 16,082.1 | $ | 495.0 | $ | (13,174.4 | ) | $ | 15,532.3 | |||||||||
17
Condensed Consolidating Balance Sheets (Continued)
January 28, 2017 | ||||||||||||||||||||
Guarantor | Non-Guarantor | Consolidating | Consolidated | |||||||||||||||||
(in millions) | Parent | Subsidiaries | Subsidiaries | Adjustments | Company | |||||||||||||||
ASSETS | ||||||||||||||||||||
Current assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | 562.4 | $ | 139.2 | $ | 164.8 | $ | — | $ | 866.4 | ||||||||||
Short-term investments | — | — | 4.0 | — | 4.0 | |||||||||||||||
Merchandise inventories, net | — | 2,826.3 | 41.2 | (1.7 | ) | 2,865.8 | ||||||||||||||
Current deferred tax assets, net | — | (9.3 | ) | 9.3 | — | — | ||||||||||||||
Due from intercompany, net | 58.7 | 1,041.5 | 42.8 | (1,143.0 | ) | — | ||||||||||||||
Other current assets | 0.5 | 198.7 | 2.3 | 0.3 | 201.8 | |||||||||||||||
Total current assets | 621.6 | 4,196.4 | 264.4 | (1,144.4 | ) | 3,938.0 | ||||||||||||||
Property, plant and equipment, net | — | 3,085.3 | 30.5 | — | 3,115.8 | |||||||||||||||
Assets available for sale | — | 9.0 | — | — | 9.0 | |||||||||||||||
Goodwill | — | 4,993.1 | 30.4 | — | 5,023.5 | |||||||||||||||
Favorable lease rights, net | — | 468.6 | — | — | 468.6 | |||||||||||||||
Tradename intangible asset | — | 3,100.0 | — | — | 3,100.0 | |||||||||||||||
Other intangible assets, net | — | 5.1 | — | — | 5.1 | |||||||||||||||
Investment in subsidiaries | 8,640.1 | 106.6 | — | (8,746.7 | ) | — | ||||||||||||||
Intercompany note receivable | 1,926.4 | — | 188.8 | (2,115.2 | ) | — | ||||||||||||||
Due from intercompany, net | 1,243.8 | — | — | (1,243.8 | ) | — | ||||||||||||||
Other assets | — | 41.3 | 3.3 | (3.0 | ) | 41.6 | ||||||||||||||
Total assets | $ | 12,431.9 | $ | 16,005.4 | $ | 517.4 | $ | (13,253.1 | ) | $ | 15,701.6 | |||||||||
LIABILITIES AND EQUITY | ||||||||||||||||||||
Current liabilities: | ||||||||||||||||||||
Current portion of long-term debt | $ | 152.1 | $ | — | $ | — | $ | — | $ | 152.1 | ||||||||||
Accounts payable | — | 1,105.9 | 14.7 | (1.0 | ) | 1,119.6 | ||||||||||||||
Due to intercompany, net | 969.6 | 121.5 | 51.9 | (1,143.0 | ) | — | ||||||||||||||
Other current liabilities | 66.4 | 470.5 | 207.3 | — | 744.2 | |||||||||||||||
Income taxes payable | (1.9 | ) | 91.0 | 0.9 | — | 90.0 | ||||||||||||||
Total current liabilities | 1,186.2 | 1,788.9 | 274.8 | (1,144.0 | ) | 2,105.9 | ||||||||||||||
Long-term debt, net, excluding current portion | 5,853.9 | 315.8 | — | — | 6,169.7 | |||||||||||||||
Unfavorable lease rights, net | — | 124.0 | — | — | 124.0 | |||||||||||||||
Deferred tax liabilities, net | 2.0 | 1,456.9 | — | — | 1,458.9 | |||||||||||||||
Income taxes payable, long-term | — | 71.2 | — | — | 71.2 | |||||||||||||||
Due to intercompany, net | — | 1,243.8 | — | (1,243.8 | ) | — | ||||||||||||||
Intercompany note payable | — | 2,115.2 | — | (2,115.2 | ) | — | ||||||||||||||
Other liabilities | — | 377.5 | 8.1 | (3.2 | ) | 382.4 | ||||||||||||||
Total liabilities | 7,042.1 | 7,493.3 | 282.9 | (4,506.2 | ) | 10,312.1 | ||||||||||||||
Shareholders' equity | 5,389.8 | 8,512.1 | 234.5 | (8,746.9 | ) | 5,389.5 | ||||||||||||||
Total liabilities and equity | $ | 12,431.9 | $ | 16,005.4 | $ | 517.4 | $ | (13,253.1 | ) | $ | 15,701.6 | |||||||||
18
Condensed Consolidating Balance Sheets (Continued)
July 30, 2016 | ||||||||||||||||||||
Guarantor | Non-Guarantor | Consolidating | Consolidated | |||||||||||||||||
(in millions) | Parent | Subsidiaries | Subsidiaries | Adjustments | Company | |||||||||||||||
ASSETS | ||||||||||||||||||||
Current assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | — | $ | 1,044.8 | $ | 155.4 | $ | (107.0 | ) | $ | 1,093.2 | |||||||||
Short-term investments | — | — | 4.0 | — | 4.0 | |||||||||||||||
Merchandise inventories, net | — | 2,910.6 | 61.2 | 3.3 | 2,975.1 | |||||||||||||||
Due from intercompany, net | 40.5 | 350.1 | 125.6 | (516.2 | ) | — | ||||||||||||||
Other current assets | 3.0 | 380.8 | (7.0 | ) | 0.3 | 377.1 | ||||||||||||||
Total current assets | 43.5 | 4,686.3 | 339.2 | (619.6 | ) | 4,449.4 | ||||||||||||||
Property, plant and equipment, net | — | 3,139.1 | 35.1 | — | 3,174.2 | |||||||||||||||
Assets available for sale | — | 13.5 | — | — | 13.5 | |||||||||||||||
Goodwill | — | 4,993.2 | 30.6 | — | ||||||||||||||||