They all go together

HIBIT 1 DOLLAR TREE, INC. CONSOLIDATED INCOME STATEMENTS Year Ended (in millions, except per share data) February 3, January 28, January 30. 2018 Net sales 2017 2016 Cost of sales 22.245.5 S 20,719.2 $ 15.498.4 15,223.6 14.324.5 Gross profit 10,841.7 Selling, general and administrative expenses, 7.021.9 6.394.7 4.656.7 excluding Receivable impairment 5.004.3 4.689.9 3,607.0 Receivable impairment 18.5 Selling, general and administrative expenses 5,022.8 4,689.9 3.607.0 Operating income 1.999.1 1.704.8 1,049.7 Interest expense, net 301.8 3755 599.4 Other (income) expense, net (6.7) (0.1) 2.1 Income before income taxes 1.7040 1.329.4 448.2) Provision for income taxes (10.3) 433.2 Net income 1.714.3 $ 896.2 S 2 82.4 Basic net income per share S 7.24 $ 3.80 $ 1.27 Diluted net income per share $ 7.21 $ 3.78 $ 1.26 165.8 Summary & Trend data February 3. 2018 January 28, 2017 Year Ended January 30. 2016 January 31, 2015 February 1, 2014 $22,245.5 7,021.9 $20,719.2 6.394.7 $15.498.4 4.656.7 $8.602.2 3,034.0 Increuse $ 7.840.3 2.789.8 40.3 Inom increls 1,819.5 Increuse 5.022.8 1.999.1 1.714.3 4.689.9 1.704.8 896.2 3.607.0 1.049.7 282.4 1.993.8 1.040.2 599.2 9703 596.7 Income Statement Data: Net sales Gross profit Selling, general and administrative expenses Operating income Net income Margin Data (as a percentage of net sales): Gross profit Selling, general and administrative expenses Operating income Net income Per Share Data: Diluted net income per share Diluted net income per share increase (decrease) 31.6% 30.8% 30.1 % 35.3% 35,6 % 22.6% 9.0% 7.7% 22,6% 8.2% 4.3% 23.3% 6.8% 1.8% 23.2% 12.1% 7.0% 23.2% 12.4% 7.6% $ 7.21 $ 3.78 $ 1.26 $ 2.90 $ 2.72 90.7% 200.0% (56.67% 6.6% 1.5% EXHIBIT 2 bruary 3. 2018 As of January 28. January 30, January 31, 2017 2016 2015 February 1. 2014 Balance Sheet Data: Cash, cash equivalents and short-term investments Working capital Total assets Total debt, including capital lease obligations Shareholders' equity $ $ $ 1.097.8 1.717.2 16,332.8 5.732.7 (7.182.3) $ 870.4 1.832.1 15.701.6 6,391. 8 5.389.5) $ 740.1 1.840.5 15.901.2 7 ,465.5 4,406.9 864.1 1.133.0 3.492.7 757.0 1.785.0 267.7 692.2 2.767.7 769.8 (1.170.7 Increas Year Ended February 3, January 28. January 30, January 31. February 1, Selected Operating Data: 2018 2017 2015 2014 Number of stores open at end of period Dollar Tree 14,835 14,334 13.851 5.367 4.992 6.650 6.360 5.954 5,367 4,992 Family Dollar 8,185 7.974 7.897 Gross square footage at end of period 143.9 138.8 132.1 58.3 54.3 Dollar Tree 71.6 68.5 64.2 58.3 54.3 Family Dollar 72.3 70.3 67.9 Selling square footage at end of period 116,6 112.4 108.4 46,5 43.2 Dollar Tree 57.3 54.7 51.3 46.5 43.2 Family Dollar 59.3 57.7 57.1 Selling square footage annual growth 3.7% 3.7% 10.3% 7.4% 6.9% Net sales annual growth 7.4% 8.5% 9.7% 6.0% Comparable store net sales increase 1.9% 1.8% 2.1% 4.3% 2.4% Net sales per selling square foot $ 194 $ 188 $ 191 192 $ 187 Net sales per store $ 1.5 $ 1.5 $ 1.6 $ 1.7 % 1.6 Selected Financial Ratios: Return on assets ROA 10.7% 5.7% 11.4% 19.1% Return on equity 21.6% ROE 27.3% 18.3% 31.5% 40.5% 42.1% Inventory turns Family Dollar was only included in the determination of these items for the year ended Februar 2 016 alu included in the determination of these items for the years ended February 3, 2018 and January 29 Family Dollar was only included in the determination of these ite 2017 8.6% 4.1 PART III: PROBLEM (24 points) Using the Dollar Tree, Inc. data which follows in Exhibits 1 & 2 (excerpts from the Dollar Tree, Inc. annual report and 10-K filing for the fiscal year ended 2018), respond to the following items. You may tear out of your exam packet the two exhibits. a) Comment on the ROE trend presented in Exhibit 2 b) Comment on the ROA trend (Exhibit 2) CV comment on at least 3 of the common-size percentages shown in Exhibit 1. Give your observacom the trends or your perception of the significance of the percentages that you chose. (d) What might have caused the impairment in 2018 in Exhibit 1? et Calculate the debt-to-assets ratio (or the debt-to-equity ratio- your choice) for the 5 years. Comment on the trend and then conclude on the overall financial flexibility of the Company. (f) Is there a correlation between the Company's results for a) & b)? If so, how is ROE affected by the changes in debt levels observed in parte)? Optional: Analyze the interest coverage for the 3 most recent years. (Assume a 35% tax rate, if needed.) Ch) Comment on how Dollar Tree, Inc.'s forecast earnings for 2019 might be impacted by the newly levied import tariff on goods imported from China. 1 Increase I ROE decreuse hom 2014 to 2012 due to increase Shareholder equity ok ROG = NL wereldere 6 ROA decrease from 2014 to 2018 due to increase toked Assets Why did these categories both increase so much!? Why did these categories both What recent happened in 2011 a Net Income decreuse from 2014 to 2018 due to increase more stores bet Sales and increase the sense No, that doesn't explain the decreese. operating Income decrease from 2 to zos_due to increuse cross profit and expense. ? - Gross Profit & decreuse from 2014 to 2018 due to thonease wet sale and decrease cost of good sold. ? (We can discuss these further, if you like. The explanation doesn't make sense to me. S HIBIT 1 DOLLAR TREE, INC. CONSOLIDATED INCOME STATEMENTS Year Ended (in millions, except per share data) February 3, January 28, January 30. 2018 Net sales 2017 2016 Cost of sales 22.245.5 S 20,719.2 $ 15.498.4 15,223.6 14.324.5 Gross profit 10,841.7 Selling, general and administrative expenses, 7.021.9 6.394.7 4.656.7 excluding Receivable impairment 5.004.3 4.689.9 3,607.0 Receivable impairment 18.5 Selling, general and administrative expenses 5,022.8 4,689.9 3.607.0 Operating income 1.999.1 1.704.8 1,049.7 Interest expense, net 301.8 3755 599.4 Other (income) expense, net (6.7) (0.1) 2.1 Income before income taxes 1.7040 1.329.4 448.2) Provision for income taxes (10.3) 433.2 Net income 1.714.3 $ 896.2 S 2 82.4 Basic net income per share S 7.24 $ 3.80 $ 1.27 Diluted net income per share $ 7.21 $ 3.78 $ 1.26 165.8 Summary & Trend data February 3. 2018 January 28, 2017 Year Ended January 30. 2016 January 31, 2015 February 1, 2014 $22,245.5 7,021.9 $20,719.2 6.394.7 $15.498.4 4.656.7 $8.602.2 3,034.0 Increuse $ 7.840.3 2.789.8 40.3 Inom increls 1,819.5 Increuse 5.022.8 1.999.1 1.714.3 4.689.9 1.704.8 896.2 3.607.0 1.049.7 282.4 1.993.8 1.040.2 599.2 9703 596.7 Income Statement Data: Net sales Gross profit Selling, general and administrative expenses Operating income Net income Margin Data (as a percentage of net sales): Gross profit Selling, general and administrative expenses Operating income Net income Per Share Data: Diluted net income per share Diluted net income per share increase (decrease) 31.6% 30.8% 30.1 % 35.3% 35,6 % 22.6% 9.0% 7.7% 22,6% 8.2% 4.3% 23.3% 6.8% 1.8% 23.2% 12.1% 7.0% 23.2% 12.4% 7.6% $ 7.21 $ 3.78 $ 1.26 $ 2.90 $ 2.72 90.7% 200.0% (56.67% 6.6% 1.5% EXHIBIT 2 bruary 3. 2018 As of January 28. January 30, January 31, 2017 2016 2015 February 1. 2014 Balance Sheet Data: Cash, cash equivalents and short-term investments Working capital Total assets Total debt, including capital lease obligations Shareholders' equity $ $ $ 1.097.8 1.717.2 16,332.8 5.732.7 (7.182.3) $ 870.4 1.832.1 15.701.6 6,391. 8 5.389.5) $ 740.1 1.840.5 15.901.2 7 ,465.5 4,406.9 864.1 1.133.0 3.492.7 757.0 1.785.0 267.7 692.2 2.767.7 769.8 (1.170.7 Increas Year Ended February 3, January 28. January 30, January 31. February 1, Selected Operating Data: 2018 2017 2015 2014 Number of stores open at end of period Dollar Tree 14,835 14,334 13.851 5.367 4.992 6.650 6.360 5.954 5,367 4,992 Family Dollar 8,185 7.974 7.897 Gross square footage at end of period 143.9 138.8 132.1 58.3 54.3 Dollar Tree 71.6 68.5 64.2 58.3 54.3 Family Dollar 72.3 70.3 67.9 Selling square footage at end of period 116,6 112.4 108.4 46,5 43.2 Dollar Tree 57.3 54.7 51.3 46.5 43.2 Family Dollar 59.3 57.7 57.1 Selling square footage annual growth 3.7% 3.7% 10.3% 7.4% 6.9% Net sales annual growth 7.4% 8.5% 9.7% 6.0% Comparable store net sales increase 1.9% 1.8% 2.1% 4.3% 2.4% Net sales per selling square foot $ 194 $ 188 $ 191 192 $ 187 Net sales per store $ 1.5 $ 1.5 $ 1.6 $ 1.7 % 1.6 Selected Financial Ratios: Return on assets ROA 10.7% 5.7% 11.4% 19.1% Return on equity 21.6% ROE 27.3% 18.3% 31.5% 40.5% 42.1% Inventory turns Family Dollar was only included in the determination of these items for the year ended Februar 2 016 alu included in the determination of these items for the years ended February 3, 2018 and January 29 Family Dollar was only included in the determination of these ite 2017 8.6% 4.1 PART III: PROBLEM (24 points) Using the Dollar Tree, Inc. data which follows in Exhibits 1 & 2 (excerpts from the Dollar Tree, Inc. annual report and 10-K filing for the fiscal year ended 2018), respond to the following items. You may tear out of your exam packet the two exhibits. a) Comment on the ROE trend presented in Exhibit 2 b) Comment on the ROA trend (Exhibit 2) CV comment on at least 3 of the common-size percentages shown in Exhibit 1. Give your observacom the trends or your perception of the significance of the percentages that you chose. (d) What might have caused the impairment in 2018 in Exhibit 1? et Calculate the debt-to-assets ratio (or the debt-to-equity ratio- your choice) for the 5 years. Comment on the trend and then conclude on the overall financial flexibility of the Company. (f) Is there a correlation between the Company's results for a) & b)? If so, how is ROE affected by the changes in debt levels observed in parte)? Optional: Analyze the interest coverage for the 3 most recent years. (Assume a 35% tax rate, if needed.) Ch) Comment on how Dollar Tree, Inc.'s forecast earnings for 2019 might be impacted by the newly levied import tariff on goods imported from China. 1 Increase I ROE decreuse hom 2014 to 2012 due to increase Shareholder equity ok ROG = NL wereldere 6 ROA decrease from 2014 to 2018 due to increase toked Assets Why did these categories both increase so much!? Why did these categories both What recent happened in 2011 a Net Income decreuse from 2014 to 2018 due to increase more stores bet Sales and increase the sense No, that doesn't explain the decreese. operating Income decrease from 2 to zos_due to increuse cross profit and expense. ? - Gross Profit & decreuse from 2014 to 2018 due to thonease wet sale and decrease cost of good sold. ? (We can discuss these further, if you like. The explanation doesn't make sense to me. S