Analysis of Debt
Total Debt (Carrying Amount)
Dollar Tree Inc., balance sheet: debt
US$ in thousands
Based on: 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03), 10-K (reporting date: 2017-01-28).
- Current Portion of Long-Term Debt
- The current portion of long-term debt showed a significant increase from approximately 152.1 million in early 2017 to 915.9 million by early 2018. However, the data for early 2019 is not available. In early 2020, this item decreased substantially to 250 million. No data is available for 2021 and 2022, indicating potential reporting limitations or a change in classification.
- Long-Term Debt, Net, Excluding Current Portion
- There is a clear downward trend in the net long-term debt excluding the current portion over the six-year period. Beginning at approximately 6.17 billion in 2017, the balance decreased steadily each year to about 3.23 billion by early 2021, with a slight uptick to approximately 3.42 billion in early 2022. This suggests ongoing repayment or refinancing activities leading to a reduction in long-term liabilities, albeit with a modest increase in the final reported year.
- Total Long-Term Debt (Carrying Amount)
- Total long-term debt, which includes both the current portion and the net long-term debt, also exhibited a declining trend. The balance diminished from about 6.32 billion in 2017 to 3.23 billion in 2021. Notably, there was a slight increase to approximately 3.42 billion in 2022, mirroring the net long-term debt trend. The overall decrease over the period reflects a significant reduction in total long-term debt obligations, suggesting active debt management and possible deleveraging efforts.
Total Debt (Fair Value)
| Jan 29, 2022 | |
|---|---|
| Selected Financial Data (US$ in thousands) | |
| Senior Notes | 3,558,500) |
| Revolving Credit Facility | 6,400) |
| Term Loans | —) |
| Forgivable Promissory Note | —) |
| Total long-term debt (fair value) | 3,564,900) |
| Financial Ratio | |
| Debt, fair value to carrying amount ratio | 1.04 |
Based on: 10-K (reporting date: 2022-01-29).
Weighted-average Interest Rate on Debt
Weighted-average interest rate on long-term debt: 3.68%
| Interest rate | Debt amount1 | Interest rate × Debt amount | Weighted-average interest rate2 |
|---|---|---|---|
| 1.28% | 6,400) | 82) | |
| 4.00% | 1,004,000) | 40,160) | |
| 4.20% | 1,258,100) | 52,840) | |
| 2.65% | 809,500) | 21,452) | |
| 3.38% | 405,000) | 13,669) | |
| Total | 3,483,000) | 128,203) | |
| 3.68% | |||
Based on: 10-K (reporting date: 2022-01-29).
1 US$ in thousands
2 Weighted-average interest rate = 100 × 128,203 ÷ 3,483,000 = 3.68%
Interest Costs Incurred
Dollar Tree Inc., interest costs incurred
US$ in thousands
Based on: 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03), 10-K (reporting date: 2017-01-28).
The analysis of annual interest costs incurred reveals notable fluctuations over the six-year period. The primary components examined include net interest expense, capitalized interest, and total interest costs incurred.
- Interest expense, net
- This expense demonstrates a variable trend. Starting at 375,500 thousand USD in early 2017, there is a decline to 301,800 thousand USD in early 2018. The amount rises again to 370,000 thousand USD in early 2019, followed by a significant decrease to 162,100 thousand USD in early 2020. From 2020 onwards, the expense continues to decrease slightly to 147,300 thousand USD in early 2021 but then increases moderately to 178,900 thousand USD by early 2022.
- Capitalized interest
- This component exhibits smaller absolute values with more volatility. Beginning at 2,400 thousand USD in early 2017, it slightly decreases to 2,300 thousand USD in early 2018 before almost doubling to 4,200 thousand USD in early 2019. It then falls to 2,400 thousand USD in early 2020 and rises again to 3,200 thousand USD in early 2021, ultimately decreasing to 1,100 thousand USD by early 2022.
- Interest costs incurred
- The total interest costs incurred closely mirror the trend of net interest expense, as expected, with values starting at 377,900 thousand USD in early 2017. There is a notable reduction to 304,100 thousand USD in early 2018, followed by an increase to 374,200 thousand USD in early 2019. A sharp decline occurs in early 2020 to 164,500 thousand USD, and it then continues to decrease to 150,500 thousand USD in early 2021 before rising again to 180,000 thousand USD in early 2022.
Overall, the data points to a general reduction in interest costs after the peak observed around early 2019, with the most drastic drop happening between early 2019 and early 2020. The subsequent years show relatively lower and more stable interest costs, with a slight upward adjustment in the latest period. Capitalized interest, being a minor part of total interest costs, displays inconsistent changes without a clear directional trend.
Adjusted Interest Coverage Ratio
Based on: 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03), 10-K (reporting date: 2017-01-28).
2022 Calculations
1 Interest coverage ratio (without capitalized interest) = EBIT ÷ Interest expense, net
= 1,811,100 ÷ 178,900 = 10.12
2 Adjusted interest coverage ratio (with capitalized interest) = EBIT ÷ Interest costs incurred
= 1,811,100 ÷ 180,000 = 10.06
- Interest Coverage Ratio (without capitalized interest)
- The interest coverage ratio displays significant variability over the analyzed periods. Initially, the ratio increased from 4.54 in early 2017 to 6.65 in early 2018, indicating an improved ability to cover interest expenses from operating earnings. However, there was a sharp decline to -2.54 in early 2019, reflecting an operating loss or earnings insufficient to meet interest obligations during that period. Following this negative trough, the ratio rebounded strongly to 7.78 in early 2020 and continued to improve substantially, reaching a peak of 12.81 in early 2021. By early 2022, the ratio declined slightly but remained robust at 10.12, suggesting continued strong coverage ability despite a modest reduction compared to the prior year.
- Adjusted Interest Coverage Ratio (with capitalized interest)
- The adjusted interest coverage ratio, which includes capitalized interest, closely follows the same pattern as the unadjusted ratio but at marginally lower levels. It rose from 4.51 in early 2017 to 6.6 in early 2018, dropped dramatically to -2.51 in early 2019, and then increased substantially to 7.66 in early 2020. The highest recorded ratio occurs in early 2021 at 12.54, followed by a slight decrease to 10.06 in early 2022. This parallel trend indicates that the capitalization of interest has a minor dilutive effect on coverage ratios, but the overall financial performance and ability to service interest expenses exhibit consistent improvements after the downturn in 2019.
- Overall Analysis
- The financial data reveals a challenging period in early 2019 marked by negative interest coverage, indicative of profitability issues or extraordinary expenses impacting earnings relative to interest payments. Since that time, the company has demonstrated significant improvement in operational earnings or expense management, substantially enhancing its capacity to cover interest costs. The relatively high ratios observed in 2020 and 2021 suggest healthy operational cash flows and reduced financial risk. Slight moderation in early 2022 ratios does not detract from the overall positive trend post-2019, underscoring sustained financial strength with respect to interest obligations.