See
accompanying Notes to Condensed Consolidated Financial Statements.
DOLLAR
TREE, INC.
AND
SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
November
1,
|
|
|
February
2,
|
|
|
November
3,
|
|
(In
millions)
|
|
2008
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
78.6 |
|
|
$ |
40.6 |
|
|
$ |
30.0 |
|
Short-term
investments
|
|
|
- |
|
|
|
40.5 |
|
|
|
- |
|
Merchandise
inventories
|
|
|
836.5 |
|
|
|
641.2 |
|
|
|
801.0 |
|
Other
current assets
|
|
|
45.6 |
|
|
|
66.5 |
|
|
|
63.1 |
|
Total
current assets
|
|
|
960.7 |
|
|
|
788.8 |
|
|
|
894.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property,
plant and equipment, net
|
|
|
725.8 |
|
|
|
743.6 |
|
|
|
748.7 |
|
Intangibles,
net
|
|
|
144.3 |
|
|
|
147.8 |
|
|
|
149.1 |
|
Deferred
tax assets
|
|
|
22.9 |
|
|
|
38.7 |
|
|
|
15.5 |
|
Other
assets, net
|
|
|
68.0 |
|
|
|
68.8 |
|
|
|
60.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$ |
1,921.7 |
|
|
$ |
1,787.7 |
|
|
$ |
1,867.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
portion of long-term debt
|
|
$ |
17.6 |
|
|
$ |
18.5 |
|
|
$ |
18.5 |
|
Accounts
payable
|
|
|
238.4 |
|
|
|
200.4 |
|
|
|
257.6 |
|
Other
current liabilities
|
|
|
152.8 |
|
|
|
143.6 |
|
|
|
146.0 |
|
Income
taxes payable
|
|
|
3.1 |
|
|
|
43.4 |
|
|
|
12.1 |
|
Total
current liabilities
|
|
|
411.9 |
|
|
|
405.9 |
|
|
|
434.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
debt, excluding current portion
|
|
|
250.0 |
|
|
|
250.0 |
|
|
|
335.2 |
|
Income
taxes payable, long-term
|
|
|
19.6 |
|
|
|
55.0 |
|
|
|
30.0 |
|
Other
liabilities
|
|
|
100.1 |
|
|
|
88.4 |
|
|
|
83.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
781.6 |
|
|
|
799.3 |
|
|
|
883.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments
and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders'
equity
|
|
|
1,140.1 |
|
|
|
988.4 |
|
|
|
984.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND SHAREHOLDERS' EQUITY
|
|
$ |
1,921.7 |
|
|
$ |
1,787.7 |
|
|
$ |
1,867.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
shares outstanding
|
|
|
90.6 |
|
|
|
89.8 |
|
|
|
93.1 |
|
See
accompanying Notes to Condensed Consolidated Financial
Statements.
DOLLAR
TREE, INC.
AND
SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
39
Weeks Ended
|
|
|
|
November
1,
|
|
|
November
3,
|
|
(In
millions)
|
|
2008
|
|
|
2007
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
Net
income
|
|
$ |
124.3 |
|
|
$ |
106.6 |
|
Adjustments
to reconcile net income to net cash
|
|
|
|
|
|
|
|
|
provided
by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
119.8 |
|
|
|
117.9 |
|
Other
non-cash adjustments to net income
|
|
|
47.6 |
|
|
|
(5.7 |
) |
Changes
in operating assets and liabilities
|
|
|
(205.2 |
) |
|
|
(136.6 |
) |
Net
cash provided by operating activities
|
|
|
86.5 |
|
|
|
82.2 |
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
|
(104.2 |
) |
|
|
(152.8 |
) |
Purchase
of short-term investments
|
|
|
(34.7 |
) |
|
|
(875.3 |
) |
Proceeds
from sales of short-term investments
|
|
|
75.2 |
|
|
|
1,097.1 |
|
Purchase
of restricted investments
|
|
|
(16.2 |
) |
|
|
(80.0 |
) |
Proceeds
from sales of restricted investments
|
|
|
15.5 |
|
|
|
78.9 |
|
Other
|
|
|
(0.4 |
) |
|
|
(6.5 |
) |
Net
cash provided by (used in) investing activities
|
|
|
(64.8 |
) |
|
|
61.4 |
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Principal
payments under capital lease obligations
|
|
|
(1.2 |
) |
|
|
(0.5 |
) |
Borrowings
from revolving credit facility
|
|
|
- |
|
|
|
270.1 |
|
Repayments
of revolving credit facility
|
|
|
- |
|
|
|
(184.9 |
) |
Payments
for share repurchases
|
|
|
- |
|
|
|
(367.1 |
) |
Proceeds
from stock issued pursuant to stock-based
|
|
|
|
|
|
compensation
plans
|
|
|
16.0 |
|
|
|
70.3 |
|
Tax
benefit of stock options exercised
|
|
|
1.5 |
|
|
|
13.5 |
|
Net
cash provided by (used in) financing activities
|
|
|
16.3 |
|
|
|
(198.6 |
) |
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash and cash equivalents
|
|
|
38.0 |
|
|
|
(55.0 |
) |
Cash
and cash equivalents at beginning of period
|
|
|
40.6 |
|
|
|
85.0 |
|
Cash
and cash equivalents at end of period
|
|
$ |
78.6 |
|
|
$ |
30.0 |
|
Supplemental
disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
Cash
paid for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$ |
7.8 |
|
|
$ |
13.7 |
|
Income
taxes
|
|
$ |
114.8 |
|
|
$ |
80.5 |
|
See
accompanying Notes to Condensed Consolidated Financial
Statements.
DOLLAR
TREE, INC.
AND
SUBSIDIARIES
NOTES
TO 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 financial statements. The
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 February 2, 2008 contained in the Company’s Annual Report on Form
10-K filed April 1, 2008. The results of
operations for the 13 and 39 weeks ended November 1, 2008 are not necessarily
indicative of the results to be expected for the entire fiscal year ending
January 31, 2009.
In the
Company’s opinion, the unaudited condensed consolidated financial statements
included herein contain all adjustments (consisting of those of a normal
recurring nature) considered necessary for a fair presentation of its financial
position as of November 1, 2008 and November 3, 2007 and the results of its
operations and cash flows for the periods presented. The February 2,
2008 balance sheet information was derived from the audited consolidated
financial statements as of that date.
Certain
2007 amounts have been reclassified for comparability with the current period
presentation. The gross amount of purchases of restricted investments
and proceeds from the sale of restricted investments have been presented for
2007. These amounts were previously reported on a net
basis. Deferred tax assets have presented separately for
2007. These amounts were previously included in “Other
Assets”.
2.
LONG-TERM DEBT
On
February 20, 2008, the Company entered into a five-year $550.0 million unsecured
Credit Agreement (the Agreement). The Agreement provides for a $300.0
million revolving line of credit, including up to $150.0 million in available
letters of credit, and a $250.0 million term loan. The interest rate
on the facility will be based, at the Company’s option, on a LIBOR rate, plus a
margin, or an alternate base rate, plus a margin. The revolving line
of credit also bears a facilities fee, calculated as a percentage, as defined,
of the amount available under the line of credit, payable
quarterly. The term loan is due and payable in full at the five year
maturity date of the Agreement. The Agreement also bears an
administrative fee payable annually. The Agreement, among other
things, requires the maintenance of certain specified financial ratios,
restricts the payment of certain distributions and prohibits the incurrence of
certain new indebtedness. The Company’s March 2004, $450.0 million
unsecured revolving credit facility was terminated concurrent with entering into
the Agreement. As of November 1, 2008, only the $250.0 million term
loan was outstanding under this Agreement.
3.
INTEREST RATE SWAPS
On March
20, 2008, the Company entered into two $75.0 million interest rate swap
agreements. These interest rate swaps are used to manage the risk
associated with interest rate fluctuations on a portion of the Company’s
variable rate debt. Under these agreements, the Company pays interest
to financial institutions at a fixed rate of 2.8%. In exchange, the
financial institutions pay the Company at a variable rate, which equals the
variable rate on the debt, excluding the credit spread. These swaps
qualify for hedge accounting treatment pursuant to SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities and expire in March
2011. The fair value of these swaps as of November 1, 2008 is an
asset of $0.1 million.
4.
FAIR VALUE MEASUREMENTS
The
Company adopted SFAS No. 157, “Fair Value Measurements” (SFAS 157) on February 3, 2008.
This statement defines fair value, establishes a framework for measuring fair
value and expands disclosures about fair value measurements. Additionally, on
February 3, 2008, the Company elected the partial adoption of SFAS 157 under the
provisions of Financial Accounting Standards Board Staff Position FAS
157-2, which amends SFAS 157 to allow an entity to delay the application of this
statement until fiscal 2009 for certain non-financial assets and liabilities.
The adoption of SFAS 157 did not have a material impact on the condensed
consolidated financial statements.
SFAS 157
clarifies that fair value is an exit price, representing the amount that would
be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants. As such, fair value is a
market-based measurement that should be determined based on assumptions that
market participants would use in pricing an asset and liability. As a
basis for considering such assumptions, SFAS 157 establishes a fair value
hierarchy that prioritizes the inputs used to measure fair value. The
hierarchy gives the highest priority to unadjusted quoted prices in active
markets for identical assets or liabilities (level 1 measurement) and the lowest
priority to unobservable inputs (level 3 measurements). The three
levels of the fair value hierarchy defined by SFAS 157 are as
follows:
Level 1 -
Quoted prices in active markets for identical assets or
liabilities;
Level 2 -
Quoted prices for similar instruments in active markets; quoted prices for
identical or similar instruments in markets that are not active;
and
Level 3 -
Unobservable inputs in which there is little or no market data which require the
reporting entity to develop its own assumptions.
The
Company’s cash and cash equivalents, restricted investments and interest rate
swaps represent the financial assets and liabilities that were accounted for at
fair value on a recurring basis as of November 1, 2008. As required
by SFAS 157, financial assets and liabilities are classified 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 fair value of the Company’s cash
and cash equivalents and restricted investments was $78.6 million and $48.3
million, respectively at November 1, 2008. These fair values were
determined using Level 1 measurements in the fair value
hierarchy. The fair value of the swaps as of November 1, 2008
included an asset of $0.1 million and liabilities of $0.2
million. These fair values were estimated using Level 2 measurements
in the fair value hierarchy. These estimates used discounted cash
flow calculations based upon forward interest-rate yield curves. The
curves were obtained from independent pricing services reflecting broker market
quotes.
5.
INCOME TAXES
During
2008, the Company adjusted its balance of unrecognized tax benefits primarily as
a result of the filing of accounting method changes for certain temporary
differences. Accordingly, “income taxes payable long-term” was
reduced by $35.4 million, of which $32.3 million reduced “deferred tax assets”,
$1.3 million represented the after tax impact associated with accrued interest
on uncertain tax liabilities and $1.8 million represented the remaining
adjustment to the payable including the settlement of federal and state tax
audits, statute expirations, payments and provision to tax return
adjustments. The total amount of unrecognized tax benefits at
November 1, 2008, that, if recognized, would affect the effective tax rate was
$13.0 million (net of the federal tax benefit).
6.
NET INCOME PER SHARE
The
following table sets forth the calculation of basic and diluted net income per
share:
|
|
13
Weeks Ended
|
|
|
39
Weeks Ended
|
|
|
|
November
1,
|
|
|
November
3,
|
|
|
November
1,
|
|
|
November
3,
|
|
(In millions, except per share
data)
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
Basic
net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$ |
43.1 |
|
|
$ |
35.9 |
|
|
$ |
124.3 |
|
|
$ |
106.6 |
|
Weighted
average number of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
shares
outstanding
|
|
|
90.5 |
|
|
|
95.2 |
|
|
|
90.2 |
|
|
|
97.5 |
|
Basic
net income per share
|
|
$ |
0.48 |
|
|
$ |
0.38 |
|
|
$ |
1.38 |
|
|
$ |
1.09 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$ |
43.1 |
|
|
$ |
35.9 |
|
|
$ |
124.3 |
|
|
$ |
106.6 |
|
Weighted
average number of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
shares
outstanding
|
|
|
90.5 |
|
|
|
95.2 |
|
|
|
90.2 |
|
|
|
97.5 |
|
Dilutive
effect of stock options and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
restricted
stock units (as determined
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
by
applying the treasury stock method)
|
|
|
0.5 |
|
|
|
0.5 |
|
|
|
0.4 |
|
|
|
0.6 |
|
Weighted
average number of shares and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
dilutive
potential shares outstanding
|
|
|
91.0 |
|
|
|
95.7 |
|
|
|
90.6 |
|
|
|
98.1 |
|
Diluted
net income per share
|
|
$ |
0.47 |
|
|
$ |
0.38 |
|
|
$ |
1.37 |
|
|
$ |
1.09 |
|
For the
13 and 39 weeks ended November 1, 2008, approximately 0.4 million and 0.6
million stock options, respectively, were not included in the calculation of the
weighted average number of shares and dilutive potential shares outstanding
because their effect would be anti-dilutive. For the 13 weeks ended
November 3, 2007, substantially all of the stock options outstanding were
included in the calculation of the weighted average number of
shares. For the 39 weeks ended November 3, 2007, approximately 0.1
million stock options were not included in the calculation of the weighted
average number of shares and dilutive potential shares outstanding because their
effect would be anti-dilutive.
7.
STOCK-BASED COMPENSATION
The
Company’s stock-based compensation expense includes the fair value of granted
stock options and restricted stock units (RSUs) and employees’ purchase rights
under the Company’s Employee Stock Purchase Plan. Stock-based
compensation expense was $4.0 million and $12.6 million, respectively, during
the 13 and 39 weeks ended November 1, 2008. Total stock-based
compensation expense was $2.7 million and $8.5 million, respectively, during the
13 and 39 weeks ended November 3, 2007.
Stock
Options
In the 39
weeks ended November 1, 2008, the Company granted a total of 0.5 million stock
options from the Equity Incentive Plan (EIP), Executive Officer Equity Plan
(EOEP) and the Directors Deferred Compensation Plan (DDCP). The fair
value of the 2008 options was estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted average
assumptions:
Expected
term in years
|
|
6.0
|
Expected
volatility
|
|
45.7%
|
Annual
dividend yield
|
|
-
|
Risk
free interest rate
|
|
2.8%
|
The
estimated fair value of these stock options granted approximated $6.2 million,
net of expected forfeitures, and is being recognized over their three-year
vesting period, or a shorter period based on the retirement eligibility of
certain grantees. During the 13 and 39 weeks ended November 1, 2008,
the Company recognized $0.6 million and $2.0 million of expense, respectively,
related to these options. During the 13 and 39 weeks ended November
1, 2008, the Company recognized $0.6 million and $1.8 million, respectively, of
expense related to options granted prior to 2008. During the 13 and
39 weeks ended November 3, 2007, the Company recognized $0.6 million and $2.0
million, respectively, of expense for stock options. The expected
term of the awards granted was calculated using the “simplified method” in
accordance with Staff Accounting Bulletin No. 107. Expected
volatility is derived from an analysis of the historical and implied volatility
of the Company’s publicly traded stock. The risk free rate is based
on the U.S. Treasury rates on the grant date with maturity dates approximating
the expected life of the option on the grant date.
During
the 13 and 39 weeks ended November 1, 2008, approximately 0.2 million and 0.5
million stock options were exercised yielding $6.4 million and $13.3 million of
cash proceeds and $1.1 million and $1.5 million of tax benefits recognized as
additional paid in capital, respectively. During the 13 and 39 weeks ended
November 3, 2007, approximately 0.2 million and 2.7 million stock options were
exercised yielding $4.2 million and $67.7 million of cash proceeds and $1.1
million and $13.5 million of tax benefits recognized as additional paid in
capital, respectively. The intrinsic value of options exercised
during the 13 and 39 weeks ended November 1, 2008 was approximately $3.3 million
and $4.7 million, respectively. The intrinsic value of options
exercised during the 13 and 39 weeks ended November 3, 2007 was approximately
$2.3 million and $32.7 million, respectively.
Restricted
Stock Units (RSUs)
The
Company granted approximately 0.5 million RSUs in the 39 weeks ended November 1,
2008 from the EIP and the EOEP to employees and officers. The
estimated $11.9 million fair value of these RSUs is being expensed ratably over
the three-year vesting periods, or a shorter period 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 $1.1 million and $3.1 million, respectively, of expense related to
these RSUs for the 13 and 39 weeks ended November 1, 2008. The
Company recognized $1.5 million and $5.0 million of expense related to RSUs
granted prior to 2008 in each of the 13 and 39 weeks ended November 1,
2008. For the 13 and 39 weeks ended November 3, 2007, the Company
recognized $1.9 million and $5.7 million of expense related to
RSUs.
In the 39
weeks ended November 1, 2008, approximately 0.3 million RSUs vested and
approximately 0.2 million shares, net of taxes were issued. During
the 13 weeks ended November 1, 2008, less than 0.1 million RSUs vested and were
issued. In the 39 weeks ended November 3, 2007, approximately 0.1
million RSUs vested and approximately 0.1 million shares net of taxes were
issued. No RSUs vested during the 13 weeks ended November 3,
2007.
8.
SHAREHOLDERS’ EQUITY
Comprehensive
Income
The
Company's comprehensive income reflects the effect of recording the derivative
financial instrument entered into in March 2008, pursuant to SFAS No. 133,
“Accounting for Derivative
Instruments and Hedging Activities.” The following table
provides a reconciliation of net income to total comprehensive
income:
|
|
13
Weeks Ended
|
|
|
39
Weeks Ended
|
|
|
|
November
1,
|
|
|
November
3,
|
|
|
November
1,
|
|
|
November
3,
|
|
(In millions)
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$ |
43.1 |
|
|
$ |
35.9 |
|
|
$ |
124.3 |
|
|
$ |
106.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
value adjustment-derivative
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
cash
flow hedging instrument
|
|
|
(2.5 |
) |
|
|
- |
|
|
|
0.1 |
|
|
|
- |
|
Income
tax expense
|
|
|
1.0 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Fair
value adjustment, net of tax
|
|
|
(1.5 |
) |
|
|
- |
|
|
|
0.1 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
comprehensive income
|
|
$ |
41.6 |
|
|
$ |
35.9 |
|
|
$ |
124.4 |
|
|
$ |
106.6 |
|
The
amount of income tax expense related to the fair value adjustment for the
derivative cash flow hedging instrument for the 39 weeks ended November 1, 2008
was less than $0.1 million.
Share
Repurchase Program
The
Company had no share repurchases during the 13 and 39 weeks ended November 1,
2008. As of November 1, 2008, the Company had approximately $453.7
million remaining under Board approved repurchase authorizations.
9.
LITIGATION MATTERS
In 2003,
the Company was served with a lawsuit in a California state court by a former
employee who alleged that employees did not properly receive sufficient meal
breaks and paid rest periods, along with other alleged wage and hour
violations. The suit requested that the Court certify the case as a
class action. The parties engaged in mediation and reached an
agreement which upon presentation to the Court received preliminary approval and
the certification of a settlement class. Notices were mailed to the
class members and the final fairness hearing occurred on May 22,
2008. The settlement amount was accrued in the accompanying condensed
consolidated balance sheet as of February 2, 2008 and was paid to class members
during the second quarter of 2008. While the Court has continuing
jurisdiction to enforce the settlement, the case is resolved.
In 2004,
the Company was notified by the Environmental Protection Agency (EPA) that one
of its products contained an ozone depleting substance banned by the
Environmental Protection Act. In cooperation with the EPA, the
Company removed all of the offending product from its stores and inventory and
provided for its destruction, in accordance with the EPAs
regulations. The EPA and the Company agreed upon a penalty of
$120,000 which is accrued in the accompanying condensed consolidated balance
sheets as of November 1, 2008, February 2, 2008 and November 3,
2007. The Company notified the vendor of the product of the violation
and the vendor has agreed to reimburse the Company for the costs incurred for
the destruction of the product and the penalty paid to the EPA.
In 2005,
the Company was served with a lawsuit by former employees in Oregon who allege
that they did not properly receive sufficient meal breaks and paid rest periods,
and that terminated employees were not paid in a timely manner. The
trial court certified three classes, two for alleged violations of that state’s
labor laws concerning rest breaks and one related to untimely payments upon
termination. Thereafter, following a ruling by the Oregon Supreme
Court in a similar rest break class action case, the trial court dismissed one
of the classes. The parties agreed to mediate which resulted in a
settlement of all remaining issues. The agreement received the Court’s
preliminary approval and a final fairness hearing has been scheduled for
December 17, 2008. The entire settlement amount is accrued in the
accompanying condensed consolidated balance sheet as of November 1,
2008.
In 2006,
the Company was served with a lawsuit by a former employee in a California state
court alleging that she was paid for wages with a check drawn on a bank which
did not have any branches in the state, an alleged violation of the state's
labor code; that she was paid less for her work than other similar employees
with the same job title based on her gender; and that she was not paid her final
wages in a timely manner, also an alleged violation of the labor
code. The plaintiff requested the court to certify the case and those
claims as a class action. The parties reached a settlement and
executed an Agreement by which the named plaintiff individually settled her
Equal Pay Act and late payment claims. The Court accepted the
proposed settlement and certified a class for the check
claim. Notices were mailed to class members and a hearing for final
approval of the settlement occurred on April 22, 2008. The settlement
amount was accrued in the accompanying condensed consolidated balance sheet as
of February 2, 2008 and was paid to class members during the second quarter of
2008. While the Court has continuing jurisdiction to enforce
settlement, the case is resolved.
In 2006,
the Company was served with a lawsuit filed in federal court in the state of
Alabama by a former store manager. She claims that she should have
been classified as a non-exempt employee under the Fair Labor Standards Act and,
therefore, should have received overtime compensation and other
benefits. She filed the case as a collective action on behalf of
herself and all other employees (store managers) similarly
situated. Plaintiff sought and received from the Court an Order
allowing nationwide (except for the state of California) notice to be sent to
all store managers employed by the Company now or within the past three
years. Such notice was mailed and less than fifteen percent of those
eligible to opt-in as a plaintiff did so. The Company will challenge
the anticipated effort by the opt-in plaintiffs to be certified as a class
following discovery which is on-going. A second suit was recently
filed in the same court by the same plaintiffs’ attorneys by named plaintiffs
who sue on behalf of themselves and others similarly situated. The
named plaintiffs in the second suit failed to opt-in to the original suit in a
timely manner. The allegations in the second suit are essentially the
same as the first. The Court has consolidated the two
cases.
In 2007,
the Company was served with a lawsuit filed in federal court in the state of
California by one present and one former store manager. They claim
they should have been classified as non-exempt employees under both the
California Labor Code and the Fair Labor Standards Act. They filed
the case as a class action on behalf of California-based store
managers. The Company responded with a motion to dismiss which the
Court granted with respect to allegations of fraud. The plaintiff
then filed an amended complaint which has been answered by the
Company. The Company was thereafter served with a second suit in a
California state court which alleges essentially the same claims as those
contained in the federal action and which likewise seeks class certification of
all California store managers. The Company has removed the case to
the same federal court as the first suit, answered it and the two cases have
been consolidated. The Company will defend the plaintiffs’
anticipated effort to seek class certification.
In 2007,
the Company was served with a lawsuit filed in federal court in California by
two former employees who allege they were not paid all wages due and owing for
time worked, that they were not paid in a timely manner upon termination of
their employment and that they did not receive accurate itemized wage
statements. They filed the suit as a class action and seek to include
in the class all of the Company’s former employees in the state of
California. The Company responded with a motion to dismiss which the
Court denied. The Company thereafter answered and opposed plaintiffs’
motion for class certification. The Court denied certification on the
grounds their counsel failed to demonstrate he would adequately represent the
class as required by the applicable federal rule. Plaintiffs have now
engaged other counsel. The Company will defend the plaintiffs’
anticipated effort to seek class certification.
In 2008,
the Company was served with a lawsuit filed in federal court in the state of
Alabama by one present and one former store manager, both females, alleging that
they and other female store managers similarly situated were paid less than male
store managers for performing jobs of equal skill and effort. They
seek monetary damages, back pay, injunctive and other relief. The
Company has filed in response to the Complaint, its answer denying the
plaintiffs’ allegations and a motion to transfer the venue of the case from the
Alabama court to the U.S, District Court for the Eastern District of Virginia,
which motion was denied.
The
Company will vigorously defend itself in these lawsuits. The Company
does not believe that any of these matters will, individually or in the
aggregate, have a material adverse effect on its business or financial
condition. The Company cannot give assurance, however, that one or
more of these lawsuits will not have a material adverse effect on its results of
operations for the period in which they are resolved.
Item
2.
|
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
|
INTRODUCTORY
NOTE: Unless otherwise stated, references to "we," "our" and
"us" generally refer to Dollar Tree, Inc. and its direct and indirect
subsidiaries on a consolidated basis.
A WARNING ABOUT FORWARD-LOOKING
STATEMENTS: This document contains "forward-looking
statements" as that term is used in the Private Securities Litigation Reform Act
of 1995. Forward-looking statements address future events,
developments or results and typically use words such as "believe," "anticipate,"
"expect," "intend," "plan," “view,” “target” or "estimate." For
example, our forward-looking statements include statements
regarding:
·
|
our
anticipated sales, including comparable store net sales, net sales growth,
earnings growth and new store
growth;
|
·
|
the
average size of our stores to be added for the remainder of 2008 and 2009
and their performance compared with other store
sizes;
|
·
|
the
effect of a shift in merchandise mix to consumables and the continued
roll-out of frozen and refrigerated merchandise on gross profit margin and
sales;
|
·
|
the
effect of expanding forms of tender type accepted, including VISA, on
sales;
|
·
|
the
possible effect of inflation and other economic changes on our future
costs and profitability, including future changes in minimum wage rates,
shipping rates and diesel fuel
costs;
|
·
|
our
cash needs, including our ability to fund our future capital expenditures
and working capital requirements;
|
·
|
the
future reliability of, and cost associated with, our sources of supply,
particularly imported goods such as those sourced from China and Hong
Kong;
|
·
|
costs
of pending and possible future legal and tax
claims.
|
For a
discussion of the risks, uncertainties and assumptions that could affect our
future events, developments or results, you should carefully review the risk
factors summarized below and the more detailed discussions in the "Risk Factors”
and “Business” sections in our Annual Report on Form 10-K filed April 1,
2008. Also see section 1A. “Risk Factors” in Part II of this
Quarterly Report on Form 10-Q.
·
|
Our
profitability is especially vulnerable to cost increases, such as diesel
costs or cost increases resulting from legislative
changes.
|
·
|
Our
profitability is affected by the mix of products we
sell.
|
·
|
A
downturn in economic conditions could adversely affect our
sales.
|
·
|
We
could encounter disruptions or additional costs in receiving and
distributing merchandise.
|
·
|
Sales
below our expectations during peak seasons may cause our operating results
to suffer materially.
|
·
|
Our
sales and profits rely on directly and indirectly imported merchandise
which may increase in cost, become unavailable, or not meet U.S. product
safety standards.
|
·
|
We
may be unable to expand our square footage as timely and profitably as
planned.
|
·
|
Pressure
from competitors, including competition for merchandise, may reduce our
sales and profits.
|
·
|
The
resolution of certain legal and tax matters could have a material adverse
effect on our results of operations, accrued liabilities and
cash.
|
·
|
Certain
provisions in our articles of incorporation and bylaws could delay or
discourage a takeover attempt that may be in shareholders’ best
interests.
|
Our
forward-looking statements could be wrong in light of these and other risks,
uncertainties and assumptions. The future events, developments or
results described in this report could turn out to be materially
different. We have no obligation to publicly update or revise our
forward-looking statements after the date of this quarterly report and you
should not expect us to do so.
Investors
should also be aware that while we do, from time to time, communicate with
securities analysts and others, it is against our policy to selectively disclose
to them any material nonpublic information or other confidential commercial
information. Accordingly, shareholders should not assume that we
agree with any statement or report issued by any analyst regardless of the
content of the statement or report, as we have a policy against confirming
information issued by others. Thus, to the extent that reports issued
by securities analysts contain any financial projections, forecasts or opinions,
such reports are not our responsibility.
Overview
Our net
sales are derived from the sale of merchandise. Two major factors
tend to affect our net sales trends. First is our success at opening
new stores or adding new stores through mergers or
acquisitions. Second is the performance of stores once they are
open. Sales vary at our existing stores from one year to the
next. We refer to this change as a change in comparable store net
sales, because we include only those stores that are open throughout both of the
periods being compared, beginning after the first fifteen months of
operation. We include sales from stores expanded during the period in
the calculation of comparable store net sales, which has the effect of
increasing our comparable store net sales. The term “expanded” also
includes stores that are relocated.
At
November 1, 2008 we operated 3,572 stores in 48 states, with 30.1 million
selling square feet compared to 3,401 stores with 28.2 million selling square
feet at November 3, 2007. During the 39 weeks ended November 1, 2008,
we opened 201 stores, expanded 79 stores and closed 40 stores, compared to 213
stores opened, 93 stores expanded and 31 stores closed during the 39 weeks ended
November 3, 2007. In the 13 and 39 weeks ended November 1, 2008, we
added approximately 0.8 million and 2.3 million selling square feet,
respectively, of which approximately 0.3 million and 0.6 million, respectively,
was added through expanding existing stores. The average size of
stores opened during the 39 weeks ended November 1, 2008 was approximately 8,400
selling square feet (or about 10,700 gross square feet). For the
remainder of 2008 and 2009, we continue to plan to open stores that are
approximately 8,500 - 9,000 selling square feet (or about 10,000 – 12,000 gross
square feet). We believe that this size store is our optimal size
operationally and that this size also gives the customer an improved shopping
environment that invites them to shop longer and buy more.
For the
13 and 39 weeks ended November 1, 2008, comparable store net sales increased
6.2% and 4.9%, respectively. The comparable store net sales increase
was the result of increases of 5.3% in the number of transactions and 0.9% in
transaction size for the 13 weeks ended November 1, 2008, compared to the 13
weeks ended November 3, 2007. The number of transactions and the
transaction size increased 3.6% and 1.3%, respectively, in the 39 weeks ended
November 1, 2008, as compared to the same period last year. We
believe comparable store net sales continue to be positively affected by a
number of our initiatives, including expansion of forms of payment accepted by
our stores and the continued roll-out of frozen and refrigerated merchandise to
more of our stores. At November 1, 2008, we had frozen and
refrigerated merchandise in approximately 1,220 stores compared to approximately
1,000 stores at November 3, 2007. We believe that this has and will
continue to enable us to increase sales and earnings by increasing the number of
shopping trips made by our customers and increasing the average transaction
size. In addition, we now accept food stamps in approximately 2,160
qualified stores compared to approximately 1,000 stores at November 3,
2007. Beginning October 31, 2007, all of our stores accept Visa
credit which has had a positive impact on sales during the quarter and we expect
it to have a positive impact on sales for the remainder of the
year.
With the
pressures of the current economic environment, we have seen greater increases in
the demand for basic, consumable products in 2008. As a result, we
have shifted the mix of inventory carried in our stores to more consumer product
merchandise which we believe increases the traffic in our stores and has helped
to increase our sales even during the current economic environment; however,
this merchandise has lower margins. This shift negatively impacted
our third quarter 2008 margins and we believe that this increase in basic,
consumer product merchandise will negatively impact our margins for the
remainder of 2008.
On May
25, 2007, the President signed legislation that increased the Federal Minimum
Wage from $5.15 an hour to $7.25 an hour by July 2009. We do not
expect this legislation to have a material effect on our operations for the
remainder of fiscal 2008.
Results
of Operations
13
Weeks Ended November 1, 2008 Compared to the 13 Weeks Ended November 3,
2007
Net
sales. Net sales
increased 11.6%, or $116.2 million, over last year’s third quarter resulting
from a 6.2% increase in comparable store net sales and sales in our new stores.
Comparable store net sales are positively affected by our expanded and relocated
stores, which we include in the calculation, and, to a lesser extent, are
negatively affected when we open new stores or expand stores near existing
stores.
Gross
Profit. For the 13 weeks
ended November 1, 2008, our gross profit margin was 34.1% compared to our gross
profit margin of 34.5% for the 13 weeks ended November 3, 2007. This
decrease can be attributed to the following:
·
|
Merchandise
costs, including inbound freight, increased 60 basis points due primarily
to an increase in the sales mix of higher cost consumer product
merchandise. In addition we had increased freight costs due to
the higher cost of fuel in the current year
quarter.
|
·
|
Outbound
freight also increased 20 basis points in the current year quarter due
primarily to increased fuel costs.
|
·
|
Shrink
expense decreased 20 basis points in the quarter due to favorable
adjustments to shrink estimates in the current quarter based on actual
inventory results.
|
·
|
Occupancy
and distribution costs decreased 20 basis points in the quarter resulting
from the leveraging of the comparable store sales
increase.
|
Selling, General
and Administrative Expenses. Selling,
general, and administrative expenses for the current quarter decreased to 27.8%,
as a percentage of net sales, compared to 28.4% for the same period last
year. This decrease was primarily due to the following:
·
|
Depreciation
decreased 50 basis points primarily due to the leveraging associated with
the increase in comparable store net sales in the current
quarter.
|
·
|
Payroll-related
expenses decreased 10 basis points resulting
from:
|
o
|
lower
field payroll costs as a percentage of sales, due to the leveraging of the
comparable store sales increase; partially offset
by,
|
o
|
increased
bonuses due to favorable sales and earnings results in relation to their
targets in the current quarter.
|
Operating
Income. Operating income for the
current quarter was 6.2% as a percentage of sales compared to 6.0% for the same
period last year as a result of decreased selling, general and administrative
expenses being partially offset by decreased gross profit.
Income
Taxes. The income tax
rate for the 13 weeks ended November 1, 2008 was 35.7% compared to 36.5% for the
13 weeks ended November 3, 2007. The lower rate in the current year
reflects the reconciliation of the 2007 tax provision to the tax return filed
during the quarter, partially offset by a reduction of tax-exempt interest
income in the current quarter.
39
Weeks Ended November 1, 2008 Compared to the 39 Weeks Ended November 3,
2007
Net
sales. Net sales increased 10.7%, or $314.4 million, over the
same time period last year resulting from sales in our new stores and a 4.9%
increase in comparable store net sales in the current
year. Comparable store net sales are positively affected by our
expanded and relocated stores, which we include in the calculation, and, to a
lesser extent, are negatively affected when we open new stores or expand stores
near existing stores.
Gross
Profit. For the 39 weeks ended November 1, 2008, our gross
profit margin was 33.7% compared to the gross profit margin of 33.8% for the
first nine months of 2007. This decrease can be attributed to the
following:
·
|
Merchandise
costs, including inbound freight, increased 30 basis points due primarily
to an increase in the sales mix of higher cost consumer product
merchandise and higher diesel fuel costs compared with 2007. In
addition, freight from the distribution centers to the stores increased 10
basis points due to the higher cost of fuel in the current
year.
|
·
|
Shrink
expense decreased 30 basis points in the current year due to favorable
adjustments to shrink estimates based on actual inventory
results.
|
Selling, General
and Administrative Expenses. Selling,
general, and administrative expenses for the 39 weeks ended November 1, 2008,
decreased to 27.6%, as a percentage of net sales, compared to 27.9% for the same
period last year. This decrease was primarily due to the
following:
·
|
Depreciation
decreased 30 basis points primarily due to the leveraging associated with
the increase in comparable store net
sales.
|
·
|
Payroll-related
expenses decreased 10 basis points as a result of lower payroll costs as a
percentage of sales, due to the leveraging from the comparable store sales
increase.
|
·
|
Partially
offsetting these decreases was a 10 basis point increase in operating and
corporate expenses due to increased debit and credit fees in the current
year resulting from increased debit card penetration and the acceptance of
VISA credit beginning in the fourth quarter of
2007.
|
Operating
Income. Operating income for the
39 weeks ended November 1, 2008, was 6.2% as a percentage of sales compared to
6.0% for the same period last year as a result of decreased selling, general and
administrative expenses being partially offset by decreased gross
profit.
Income
Taxes. The income tax
rate for the 39 weeks ended November 1, 2008 was 36.2% compared to 36.9% for the
39 weeks ended November 3, 2007. The lower rate in the current year
reflects the recognition of certain tax benefits in accordance with Financial
Accounting Standards Board Interpretation No. 48, “Accounting for Uncertainty in Income
Taxes”, and a lower blended state tax rate. These benefits to
the tax rate were partially offset by a reduction in tax-exempt interest
income.
Liquidity
and Capital Resources
Our
business requires capital to open new stores, expand our distribution network
and operate our existing business. Our working capital requirements
for our existing business are seasonal in nature and typically reach their peak
in the months of September and October. Historically, we have
satisfied our seasonal working capital requirements, funded our store opening
and expansion programs and repurchased shares from internally generated funds
and borrowings under our credit facilities.
The
following table compares cash flow information for the 39 weeks ended November
1, 2008 and November 3, 2007:
|
|
39
Weeks ended
|
|
|
|
November
1,
|
|
|
November
3,
|
|
(In millions)
|
|
2008
|
|
|
2007
|
|
Net
cash provided by (used in):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
activities
|
|
$ |
86.5 |
|
|
$ |
82.2 |
|
|
|
|
|
|
|
|
|
|
Investing
activities
|
|
|
(64.8 |
) |
|
|
61.4 |
|
|
|
|
|
|
|
|
|
|
Financing
activities
|
|
|
16.3 |
|
|
|
(198.6 |
) |
Net cash
provided by operating activities increased $4.3 million due to increased
earnings before income taxes and depreciation and amortization in the current
year, partially offset by increased requirements for operating assets and
liabilities in the current year.
In the
current year, net cash used in investing activities was $64.8 million, while in
the prior year investing activities provided cash of $61.4
million. Net proceeds from the sale of short-term investments were
higher in the prior year in order to fund increased share
repurchases. Overall, short-term investment activity has decreased in
the current year resulting from the liquidation of our short-term investments
early in the current year due to market conditions. These amounts
were put into cash equivalent money market accounts. Partially
offsetting the decrease in net proceeds from the sales of short-term investments
were higher capital expenditures in the prior year due to the expansion of the
Briar Creek distribution center and fewer new and relocated stores in the
current year.
In the
current year, financing activities provided cash of $16.3 million as a result of
stock option exercises and employee stock plan purchases. In the
prior year, net cash used in financing activities was $198.6
million. This was the result of share repurchases of $367.1 million
in the first 9 periods of 2007, partially offset by stock option exercises
resulting from the Company’s higher stock price last year and increased
borrowings on the revolving credit facility to fund share
repurchases.
On
February 20, 2008, we entered into a five-year $550.0 million unsecured Credit
Agreement (the Agreement). The Agreement provides for a $300.0
million revolving line of credit, including up to $150.0 million in available
letters of credit, and a $250.0 million term loan. The interest rate
on the facility will be based, at our option, on a LIBOR rate, plus a margin, or
an alternate base rate, plus a margin. The revolving line of credit
also bears a facilities fee, calculated as a percentage, as defined, of the
amount available under the line of credit, payable quarterly. The
term loan is due and payable in full at the five year maturity date of the
Agreement. The Agreement also bears an administrative fee payable
annually. The Agreement, among other things, requires the maintenance
of certain specified financial ratios, restricts the payment of certain
distributions and prohibits the incurrence of certain new
indebtedness. Our March 2004 $450.0 million unsecured revolving
credit facility was terminated concurrent with entering into the
Agreement.
At
November 1, 2008, our long-term borrowings were $267.6 million, our capital
lease commitments were $0.6 million and we had $300.0 million available on the
revolving credit portion of the Agreement. We also have $125.0
million and $50.0 million Letter of Credit Reimbursement and Security
Agreements, under which approximately $96.2 million was committed to letters of
credit issued for routine purchases of imported merchandise as of November 1,
2008.
We had no
share repurchases during the 13 and 39 weeks ended November 1,
2008. As of November 1, 2008, we had approximately $453.7 million
remaining under Board approved repurchase authorizations.
Item 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK.
We are
exposed to various types of market risk in the normal course of our business,
including the impact of interest rate changes and foreign currency rate
fluctuations. We may enter into interest rate swaps to manage our
exposure to interest rate changes, and we may employ other risk management
strategies, including the use of foreign currency forward
contracts. We do not enter into derivative instruments for any
purpose other than cash flow hedging purposes.
On March
20, 2008, we entered into two $75.0 million interest rate swap
agreements. These interest rate swaps are used to manage the risk
associated with interest rate fluctuations on a portion of our variable rate
debt. Under these agreements, we pay interest to financial
institutions at a fixed rate of 2.8%. In exchange, the financial
institutions pay us at a variable rate, which equals the variable rate on the
debt, excluding the credit spread. These swaps qualify for hedge
accounting treatment pursuant to SFAS No. 133, “Accounting for Derivative
Instruments and Hedging Activities” and expire in March
2011. The fair value of these swaps as of November 1, 2008 is an
asset of $0.1 million.
Our other
remaining interest rate swap does not qualify for hedge accounting treatment
under SFAS No. 133, as amended by SFAS No. 138, because it contains provisions
that "knockout" the swap when the variable interest rate exceeds a predetermined
rate. As of November 1, 2008, the fair value of this interest rate
swap is a liability of $0.2 million. The fair value of this swap as
of November 3, 2007 was not material to our financial position.
Item
4. CONTROLS AND PROCEDURES.
As of the
end of the period covered by this report, we carried out an evaluation, under
the supervision and with the participation of our management, including our
Chief Executive Officer and Principal Financial Officer, of the effectiveness of
the design and operation of our disclosure controls and procedures (as defined
in Rule 13a-15(e) of the Exchange Act). Based on this evaluation, the
Chief Executive Officer and Principal Financial Officer concluded that our
disclosure controls and procedures are effective.
There
have been no changes in our internal control over financial reporting during the
quarter ended November 1, 2008 that have materially affected, or are reasonably
likely to materially affect, our internal control over financial
reporting.
PART
II. OTHER INFORMATION
Item
1. LEGAL PROCEEDINGS.
From time
to time, we are defendants in ordinary, routine litigation or proceedings
incidental to our business, including allegations regarding:
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employment-related
matters;
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·
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Infringement
of intellectual property rights;
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·
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product
safety matters, which may include product recalls in cooperation with the
Consumer Products Safety Commission or other
jurisdictions;
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personal
injury/wrongful death claims; and
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real
estate matters related to store
leases.
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For a
discussion of our current lawsuits, please refer to “Note 9. Litigation
Matters”, included in “Part I. Financial Information, Item 1. Financial
Statements” of this Form 10-Q.
We will
vigorously defend ourselves in these lawsuits. We do not believe that
any of these matters will, individually or in the aggregate, have a material
adverse effect on our business or financial condition. We cannot give
assurance, however, that one or more of these lawsuits will not have a material
adverse effect on our results of operations for the period in which they are
resolved.
Item
1A. RISK FACTORS
There
have been no material changes to the risk factors described in Item 1A. “Risk
Factors” in the Company’s Annual Report on Form 10-K, filed with the SEC on
April 1, 2008.
Item 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
We had no
share repurchases during the 13 weeks ended November 1, 2008. As of
November 1, 2008, we had approximately $453.7 million remaining under Board
approved repurchase authorizations.
Item 3.
DEFAULTS UPON SENIOR SECURITIES.
None.
Item 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
Item 5.
OTHER INFORMATION.
None.
Item 6.
EXHIBITS.
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31.
Certifications required under Section 302 of the Sarbanes-Oxley
Act
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31.1
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Certification
required under Section 302 of the Sarbanes-Oxley Act of Chief Executive
Officer
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31.2
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Certification
required under Section 302 of the Sarbanes-Oxley Act of Principal
Financial Officer
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32.
Certifications required under Section 906 of the Sarbanes-Oxley Act
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32.1
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Certification
required under Section 906 of the Sarbanes-Oxley Act of Chief Executive
Officer
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32.2
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Certification
required under Section 906 of the Sarbanes-Oxley Act of Principal
Financial Officer
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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.
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DOLLAR
TREE, INC.
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Date:
December 5, 2008
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By:
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/s/ Kathleen E.
Mallas
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Kathleen
E. Mallas
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Vice
President - Controller
(Principal
Financial
Officer)
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