DOLLAR TREE, INC. CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED FEBRUARY 1, 2020 AND FEBRUARY 2, 2019 Year Ended February 1, February 2, 2020 2019 $ 23,610.8 $ 22,823.3 16,570.1 15,875.8 7,040.7 6,947.5 February 3, 2018 S 22,245.5 15,223.6 7,021.9 5,004.3 5,465.5 313.0 5,160.0 2,727.0 18.5 (in millions, except per share data) Net sales Cost of sales Gross profit Selling, general and administrative expenses, excluding Goodwill impairment and Receivable impairment Goodwill impairment Receivable impairment Selling, general and administrative expenses Operating income (loss) Interest expense, net Other expense (income), net Income (loss) before income taxes Provision for income taxes Net income (loss) Basic net income (loss) per share Diluted net income (loss) per share 5,778.5 1,262.2 162.1 5,022.8 1,999.1 301.8 1.4 1,098.7 271.7 827.0 7,887.0 (939.5) 370.0 (0.5) (1,309.0) 281.8 (1,590.8) $ (6.69) $ 16.691 (6.7) 1,704.0 (10.3) 1,714.3 7.24 $ $ $ 3.49 $ 3.47 124 See accompanying Notes to Consolidated Financial Statements 2019 422.1 DOLLAR TREE + CONSOLIDATED BALANCE SHEETS AS OF FEBRUARY 1, 2020 AND FEBRUARY 2, 2019 2020 (in millions, except share and per share data) ASSETS Current assets: Cash and cash equivalents $ 539.2 $ Merchandise inventories 3,522.0 Other current assets 208.2 Total current assets 4,269.4 Property, plant and equipment, net of accumulated depreciation of $4,194.1 and $3,690.6, respectively 3,881.8 Restricted cash 46.8 Operating lease right-of-use assets 6,225.0 Goodwill 1,983.3 Favorable lease rights, net of accumulated amortization of $287.8 at February 2, 2019 Trade name intangible asset 3,100.0 Deferred tax asset 24.4 3,536.0 335.2 4,293.3 3,445.3 24.6 2,296.6 288.7 3,100.0 43.9 $ 19,574.6 $ 52.7 13,501.2 $ 250.0 $ 1,279.3 1,336.5 62.7 1,416.4 60.0 618.0 619.3 3,546.5 3,522.2 4,979.5 2,095.7 4,265.3 Other assets Total assets LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term debt Current portion of operating lease liabilities Accounts payable Income taxes payable Other current liabilities Total current liabilities Long-term debt, net, excluding current portion Operating lease liabilities, long-term Unfavorable lease rights, net of accumulated amortization of $76.9 at February 2, 2019 Deferred income taxes, net Income taxes payable, long-term Other liabilities Total liabilities Commitments and contingencies Shareholders' equity: Common stock, par value $0.01; 600,000,000 shares authorized, 236,726,563 and 238,081,664 shares issued and outstanding at February 1, 2020 and February 2, 2019, respectively Additional paid-in capital Accumulated other comprehensive loss Retained earnings Total shareholders' equity Total liabilities and shareholders' equity 984.7 78.8 973.2 35.4 28.9 258.0 409.9 7,858.3 13,319.8 2.4 2.4 2,454.4 2,602.7 (39.8) (38.3) 3,837.8 3,076.1 6,254.8 5,642.9 $ 19,574.6 $ 13,501.2 TARGET CORPORATION Consolidated Statements of Financial Position As of February 1, 2020 and February 2, 2019 + (millions, except footnotes) 2020 2019 Assets Cash and cash equivalents $ 2,577 $ 1,556 Inventory 8,992 9,497 Other current assets 1,333 1,466 Total current assets 12,902 12,519 Property and equipment Land 6,036 6,064 Buildings and improvements 30,603 29,240 Fixtures and equipment 6,083 5,912 Computer hardware and software 2,692 2,544 Construction-in-progress 533 460 Accumulated depreciation (19,664) (18,687) Property and equipment, net 26,283 25,533 Operating lease assets 2,236 1,965 Other noncurrent assets 1,358 1,273 Total assets $ 42,779 $ 41,290 Liabilities and shareholders' investment Accounts payable $ 9,920 $ 9,761 Accrued and other current liabilities 4,406 4,201 Current portion of long-term debt and other borrowings 161 1,052 Total current liabilities 14,487 15,014 Long-term debt and other borrowings 11,338 10,223 Noncurrent operating lease liabilities 2,275 2,004 Deferred income taxes 1,122 972 Other noncurrent liabilities 1,724 1,780 Total noncurrent liabilities 16,459 14,979 Shareholders' investment Common stock 42 43 Additional paid-in capital 6,226 6,042 Retained earnings 6,433 6,017 Accumulated other comprehensive loss (868) (805) Total shareholders' investment 11,833 11,297 Total liabilities and shareholders' investment $ 42,779 $ 41,290 Common Stock Authorized 6,000,000,000 shares, $0.0833 par value; 504,198,962 shares issued and outstandingas of February 1, 2020; 517,761,600 shares issued and outstanding as of February 2, 2019. Preferred Stock Authorized 5,000,000 shares, $0.01 par value; no shares were issued or outstanding during anyperiod presented. See accompanying Notes to Consolidated Financial Statements. TARGET CORPORATION Consolidated Statements of Operations For the years ended February 1, 2020, 2019, 2018 (millions, except per share data) Sales 2019 $ 77,130 $ 982 78,112 54,864 16,233 2018 74,433 $ 923 75,356 53,299 15,723 2017 71,786 928 72,714 51,125 15,140 2,357 4,658 477 (9) 4,190 921 3,269 12 3,281 $ 2,224 4,110 461 (27) 3,676 746 2,930 2,225 4,224 653 (59) 3,630 722 2,908 6 2,914 7 2,937 $ $ Other revenue Total revenue Cost of sales Selling, general and administrative expenses Depreciation and amortization (exclusive of depreciation included in cost of sales) Operating income Net interest expense Net other (income) / expense Earnings from continuing operations before income taxes Provision for income taxes Net earnings from continuing operations Discontinued operations, net of tax Net earnings Basic earnings per share Continuing operations Discontinued operations Net earnings per share Diluted earnings per share Continuing operations Discontinued operations Net earnings per share Weighted average common shares outstanding Basic Diluted Antidilutive shares Note: Per share amounts may not foot due to rounding. $ 6.39 $ 0.02 6.42 $ 5.54 $ 0.01 5.55 $ 5.32 0.01 5.32 $ $ 6.34 $ 0.02 6.36 $ 5.50 $ 0.01 5.51 $ 5.29 0.01 5.29 $ 510.9 515.6 528.6 533.2 546.8 550.3 4.1 See accompanying Notes to Consolidated Financial Statements. REQUIREMENTS: 1. . Role and Ratios (18 points) Decide whether you are analyzing these companies as a potential investor or potential creditor. and select EIGHT of the ratios presented in this chapter that you believe would be of interest to an individual in this role. Compute these (SAME) ratios for each of the companies). Additionally - As mentioned above, neither company has A/R so you cannot select the A/T turnover or average collection period ratios. You must use at least one ratio from each of the five categories identified in the text book: Liquidity Asset Management Debt Management Profitability Market Performance Do not count the Inventory Turnover and the Average Sale Period as two separate ratios as they measure the same thing (the first in times per year and the second in number of days). A summary of the ratio categories and ratio formulas is presented on pages 678-679 of the text. Be aware that computations of some ratios might vary slightly from source to source (ie, if you were to Google a specific ratio the formula might be slightly different). For this assignment, ALL ratios will be graded using the formulas in the text (regardless of alternate computations you might find elsewhere). You must show your formula for reach ratio computed. . Grading - 1 point per ratio, per company (for the most recent year only), with formula shown, using formulas as presented in the textbook. (16 points) 2. o O o Analysis (4 points) Write a paragraph (no longer than page) explaining which company you prefer. Your paragraph should include: Whether you are evaluating as a potential investor or creditor. A brief summary of why you chose the specific ratios you did (i.e. why did you believe these were the most important ratios to evaluate based on the role you have selected). A brief summary of how you arrived at your preference. Do not do a ratio by ratio comparison stating which company performs better on each ratio, but an overall summary, discussing important points that influenced your decision. When doing this assignment, your selection of role and ratios and your analysis should be completely your own. While there will logically be some overlap among students with regard to ratios selected, this section is open-ended enough that there should be no notable similarities in writing. DO NOT COPY OR PARAPHRASE from the text or from anyone else or the assignment will receive a zero. O o For this assignment you will choose to take the role of either a potential investor or creditor and perform a limited ratio analysis of two retail stores: Target and Dollar Tree. Additional details related to requirements are discussed on page two. Other relevant information that will assist you in computing ratios: 1. Since neither company has accounts receivable, you will not be able to compute A/R turnover or average collection period ratios (i.e. all sales must have been for cash). 2. If one of your selected ratios is earnings per share, do not compute the ratio. Instead, use the amounts given for Basic Earnings per Share on each company's Income Statement. 3. If computing Book Value per Share: for Target, use the weighted average number of shares outstanding reported on its income statement for Basic earnings per share. For Dollar Tree, use 237 (this is presented in millions to be consistent with the other financial statement numbers). 4. If computing the price earnings or dividend payout ratios: For Target, use a market price of $206.10 per share For Dollar Tree, use a market price of $115.56 5. . If computing the dividend payout and/or dividend yield ratios: For Target, annual dividends are $2.72 Dollar Tree does not pay a dividend. This does not mean you cannot compare the companies on this measure. Some investors prefer dividend paying stocks and some prefer stocks that do not pay a dividend - you can address this in your written comments. 6. For Target, do not be confused by their dates. The balance sheet year 2019 and the income statement year 2020 are BOTH related to the date February 1, 2020. Use the most recent numbers (leftmost column) for all computations, for both companies