XML 24 R10.htm IDEA: XBRL DOCUMENT
v3.8.0.1

ACQUISITION (Notes) | 12 Months Ended
--- | ---
Feb. 03, 2018
Business Combinations [Abstract] |
Acquisition | ACQUISITION On July 27, 2014, the Company executed an Agreement and Plan of Merger to acquire Family Dollar in a cash and stock transaction. On July 6, 2015, the Company completed the Acquisition and Family Dollar became a direct, wholly-owned subsidiary of the Company. Under the Acquisition, the Family Dollar shareholders received $59.60 in cash and 0.2484 shares of the Company's common stock for each share of Family Dollar common stock they owned, plus cash in lieu of fractional shares (the "Merger Consideration"). As of the Acquisition Date, each outstanding performance share right of Family Dollar common stock was canceled in exchange for the right of the holder to receive the Merger Consideration (the "PSR Payment"). The aggregate amount paid by the Company for the Merger Consideration and PSR Payment was $6.8 billion in cash and the Company issued 28.5 million shares of the Company's common stock, valued at $2.3 billion based on the closing price of the Company's common stock on July 2, 2015. Additionally, outstanding Family Dollar stock options and restricted stock units were converted into mirror awards exercisable or to be earned in the Company's common stock. The value of these awards was apportioned between total Merger Consideration and unearned compensation to be recognized over the remaining original vesting periods of the awards. The Company's common stock continues to trade on the Nasdaq Exchange under the symbol "DLTR." Following the Acquisition Date, Family Dollar's common stock ceased trading on, and was delisted from, the New York Stock Exchange. Family Dollar's results from the Acquisition Date are included in the consolidated income statements. The following table summarizes the final allocation of the fair values of the identifiable assets acquired and liabilities assumed as of the Acquisition Date. Within the measurement period, which closed during the second quarter of 2016, the Company made certain purchase accounting adjustments due to continued refinement of management's original appraisals and estimates. None of these measurement period adjustments had a material impact on the purchase price allocation.
|  | (in millions)
Cash |  | $ | 305.3 |
Short-term investments |  | 4.0 |
Accounts receivable |  | 71.1 |
Inventory |  | 1,765.5 |
Taxes receivable |  | 32.9 |
Other current assets |  | 100.1 |
Property, plant and equipment |  | 1,893.3 |
Assets available for sale |  | 10.1 |
Goodwill |  | 4,859.9 |
Intangible assets, net |  | 3,570.4 |
Other assets |  | 78.1 |
Long-term debt, including current portion |  | (497.0 | )
Accounts payable |  | (635.2 | )
Other current liabilities |  | (563.4 | )
Deferred tax liabilities, net |  | (1,618.4 | )
Other liabilities |  | (253.6 | )
Total purchase price |  | $ | 9,123.1 |
Less: Cash acquired |  | (305.3 | )
Total purchase price, net of cash acquired |  | 8,817.8 |
Acquisition cost paid in common stock |  | (2,272.4 | )
Acquisition cost paid in equity compensation |  | (17.7 | )
Acquisition cost paid in cash, net of cash acquired |  | $ | 6,527.7 |
On November 1, 2015, the Company completed the transaction pursuant to which it divested 330 Family Dollar stores, 325 of which were already open, to Dollar Express LLC, a portfolio company of Sycamore Partners. The divestiture satisfied a condition as required by the Federal Trade Commission in connection with the Acquisition. The divested stores represented approximately $45.5 million of annual operating income. The table above reflects the effect of the divestiture as required by purchase accounting, as the divestiture was a condition of the Acquisition. As part of the divestiture, the Company was required to guarantee payments under 316 store leases and the fair value of the guarantee is immaterial. In addition, the Company was required to partially support the divested stores through a transition services agreement, under which the Company provided merchandise and services and the buyer was required to reimburse the Company. In the first quarter of fiscal 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 second quarter of 2017. In the fourth quarter of 2017, the Company settled a lawsuit with Dollar Express related to the divestiture, which resulted in Dollar Express paying the Company $35.0 million. The settlement of the litigation resulted in a partial reversal of the receivable impairment in the fourth quarter of 2017. The remaining impairment charges of $18.5 million are included in "Receivable impairment" in the accompanying consolidated income statement. Goodwill is calculated as the excess of the purchase price over the net assets acquired. The goodwill recognized is attributable to growth opportunities and expected synergies of at least $300 million annually (unaudited), which is expected to be achieved by July 2018. Expected sources of synergies include the following:
• | Savings from sourcing and procurement of merchandise and non-merchandise goods and services driven by leveraging the combined volume of the Dollar Tree and Family Dollar banners, among other things;
• | Rebannering to optimize store formats;
• | A reduction in overhead and corporate selling, general and administrative expenses by eliminating redundant positions and optimizing processes; and
• | Savings resulting from the optimization of distribution and logistics networks.
Intangible assets, net consist of three separately identified assets and one liability. First, the Company identified the Family Dollar trade name as an indefinite-lived intangible asset with a fair value of $3.1 billion. The trade name is not subject to amortization but is evaluated annually for impairment. No related impairment losses were recognized in 2017, 2016 or 2015. Second, the Company recognized an intangible asset of $629.2 million for favorable Family Dollar leases and a liability of $164.3 million for unfavorable Family Dollar leases (as compared to prevailing market rates) which are being amortized over the remaining lease terms, including, in some cases, an assumed renewal. Amortization expense of $69.2 million, $75.7 million and $45.3 million was recognized in 2017, 2016 and 2015, respectively, related to these lease rights. Lastly, the Company recognized an intangible asset of $5.5 million for a customer list. The Company assumed Family Dollar's $185.2 million of private placement unsecured senior notes which were due September 27, 2015 and Family Dollar's unsecured revolving credit facilities. Following the Acquisition, the Company repaid the amount outstanding under the unsecured senior notes and terminated the unsecured revolving credit facilities. The Company also assumed Family Dollar's $300.0 million of 5% unsecured senior notes due February 1, 2021, which became secured upon closing of the Acquisition and which had an estimated fair value of $311.8 million on the Acquisition Date. The results of operations of Family Dollar are included in the Company's results of operations beginning on July 6, 2015. From July 6, 2015 through January 30, 2016, Family Dollar generated net sales of $6,162.0 million and an operating loss of $30.8 million. These results included: $73.0 million of inventory markdowns due to sku rationalization and planned liquidations; $156.8 million of expenses related to purchase accounting, primarily amortization of the step-up of the inventory value, amortization of intangible assets and higher depreciation expense; and $13.4 million of severance and integration costs. The following unaudited consolidated pro forma summary has been prepared by adjusting the Company's historical data to give effect to the Acquisition as if it had occurred on February 2, 2014:
|  | Pro Forma - Unaudited
|  | Year Ended
(in millions, except per share data) |  | January 30, 2016
Net sales |  | $ | 19,782.3 |
Net income |  | $ | 565.7 |
Basic net income per share |  | $ | 2.41 |
Diluted net income per share |  | $ | 2.40 |
The unaudited consolidated pro forma financial information was prepared in accordance with existing standards and is not necessarily indicative of the results of operations that would have occurred if the Acquisition had been completed on the date indicated, nor is it indicative of the future operating results of the Company. The unaudited pro forma results do not reflect events that either have occurred or may occur after the Acquisition, including, but not limited to, the anticipated realization of ongoing savings from operating synergies in subsequent periods. They also do not give effect to certain charges that the Company incurred in connection with the Acquisition, including, but not limited to, additional professional fees, employee integration, retention and severance costs, potential asset impairments, or product rationalization charges. The unaudited pro forma results reflect the divestiture of 330 Family Dollar stores which results in the exclusion of net income of $20.9 million or $0.09 per basic and diluted share. Material non-recurring adjustments excluded from the pro forma financial information above consist of the effects of the divested stores and the step-up of Family Dollar inventory to its fair value. Acquisition expenses totaled $39.2 million in 2015, excluding acquisition-related interest expense. For additional discussion of the Acquisition, please see the "Acquisition and Divestiture" section included in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" beginning on page 26 of this Form 10-K.

X
- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
Name: | us-gaap_BusinessCombinationDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration

X
- References No definition available. + Details
Name: | us-gaap_BusinessCombinationsAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration