What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-03-16 compared with 2020-03-20 · 400 added, 421 removed, 518 unchanged (61% of the section changed)

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Note 1 - Summary of Significant Accounting Policies

Note 2 - Balance Sheet Components

Note 2 - Supplemental Balance Sheet Information

Note 3 - Goodwill and Nonamortizing Intangible Assets

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Note 11 - Stock-Based Compensation Plans

Note 12 - Segment Reporting

Note 12 - Segments and Disaggregated Revenue

Note 13 - Quarterly Financial Information (Unaudited)

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We have audited the accompanying consolidated balance sheets of Dollar Tree, Inc.

and subsidiaries (the Company) as of February 1, 2020 and February 2, 2019, the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity, and cash flows for each of the years in the three‑year period ended February 1, 2020, and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of February 1, 2020 and February 2, 2019, and the results of its operations and its cash flows for each of the years in the three‑year period ended February 1, 2020, in conformity with U.S.

and subsidiaries (the Company) as of January 30, 2021 and February 1, 2020, the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity, and cash flows for each of the years in the three‑year period ended January 30, 2021, and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of January 30, 2021 and February 1, 2020, and the results of its operations and its cash flows for each of the years in the three‑year period ended January 30, 2021, in conformity with U.S.

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of February 1, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 20, 2020 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of January 30, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 16, 2021 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Change in Accounting Principle

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The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Assessment of the carrying value of goodwill and trade name intangible asset in the Family Dollar operating segment

Valuation of goodwill and trade name intangible asset in the Family Dollar operating segment

As discussed in Notes 1 and 3 to the consolidated financial statements, the Company performs goodwill and trade name intangible asset impairment testing on an annual basis and when events and changes in circumstances indicate possible impairment of these assets.

Total recorded goodwill as of February 1, 2020 was $2.0 billion, or 10.1% of total assets.

Of this amount, the goodwill balance for the Family Dollar reporting unit, which is also the Family Dollar operating segment, was $1.6 billion, after the effect of a $313 million current year impairment.

The Family Dollar trade name intangible asset was $3.1 billion as of February 1, 2020.

We identified the assessment of the carrying value of goodwill and trade name in the Family Dollar operating segment as a critical audit matter.

The assumptions utilized to calculate the fair value of the operating segment, which included revenue growth rates;

earnings before interest, taxes, depreciation and amortization (EBITDA) margins;

and discount rate, as well as the assumptions used to calculate the fair value of the trade name intangible asset, which included revenue growth rates, discount rate, and royalty rate (collectively “key assumptions”) involved subjective auditor judgment.

Minor changes to those key assumptions could have a significant effect on the assessment of the carrying value of the goodwill and trade name which resulted in a high degree of subjectivity in performing the associated audit procedures.

The primary procedures we performed to address this critical audit matter included the following.

We tested certain internal controls over the Company’s goodwill and trade name impairment assessment process, including controls related to the determination of the fair value of the assets, the development of the revenue growth rates, EBITDA margins, and the assumptions used to develop the discount rates and royalty rate.

We performed sensitivity analyses over certain key assumptions to assess their impact on the Company’s determination of the fair values of the Family Dollar reporting unit and the trade name intangible asset.

We compared the Company’s historical forecasts to actual results to assess the Company’s ability to accurately forecast.

Total recorded goodwill as of January 30, 2021 was $2.0 billion.

Of this amount, the goodwill balance for the Family Dollar reporting unit, which is also the Family Dollar operating segment, was $1.6 billion.

The Family Dollar trade name intangible asset was $3.1 billion as of January 30, 2021.

We identified the assessment of the valuation of goodwill and trade name intangible asset in the Family Dollar operating segment as a critical audit matter.

The assumptions utilized to calculate the fair value of the operating segment, which included revenue growth rates and discount rate, as well as the assumptions used to calculate the fair value of the trade name intangible asset, which included revenue growth rates, discount rate, and royalty rate, required subjective auditor judgment.

Minor changes to these assumptions could have a significant effect on the assessment of the carrying value of the goodwill and trade name, which resulted

in a high degree of subjectivity in performing the associated audit procedures.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s goodwill and trade name impairment assessment process, including controls related to the determination of the fair value of the assets, the development of the revenue growth rates, discount rates, and royalty rate.

We performed a sensitivity analysis over the revenue growth rate assumptions to assess their impact on the Company’s determination of the fair values of the Family Dollar reporting unit and the trade name intangible asset.

To assess the Company’s ability to accurately forecast, we compared the Company’s historical forecasts to actual results.

We evaluated the Company’s revenue growth rates reflected in the forecasted revenues for the Family Dollar operating segment by comparing the store sales growth assumptions to historical results.

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We involved valuation professionals with specialized skills and knowledge who assisted in:

evaluating the Company’s revenue growth rates and EBITDA margins based on publicly available market data for comparable entities;

• evaluating the Company’s revenue growth rates based on publicly available market data for comparable entities;

• assessing the Company’s discount rates and royalty rate by comparing the Company’s inputs to the discount and royalty rates to publicly available market data for comparable companies and assessing the resulting rates;

• evaluating (1) the Family Dollar operating segment’s fair value using the related cash flow forecast and discount rate, as well as (2) the trade name’s fair value using the related discount rate and royalty rate, and comparing the results to the Company’s fair value estimate.

Evaluation of estimated self-insurance liability

Estimated self-insurance liability

As discussed in Note 1 to the consolidated financial statements, the Company employs an actuary to estimate its self-insurance liability.

As of February 1, 2020, the Company recorded an estimated liability of $310 million.

As of January 30, 2021, the Company recorded an estimated liability of $319 million.

We identified the evaluation of the estimated self-insurance liability as a critical audit matter.

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Specifically, the evaluation includes the assumptions related to the loss development factors and expected loss rates which are primarily driven by historical claims paid and incurred data.

The primary procedures we performed to address this critical audit matter included the following.

We tested certain internal controls over the Company’s self-insurance liability estimation process, including controls related to (1) the selection of the actuarial methods and (2) the development of the key assumptions used to calculate the liability, including the historical claims paid and incurred data.

We assessed the Company’s estimate of the liability by testing the underlying data, including a selection of claims data, utilized by the Company’s actuary by comparing it to relevant underlying documentation.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s self-insurance liability estimation process.

This included controls related to (1) the selection of the actuarial methods, and the development of the loss development factors and expected loss rates used to calculate the liability, and (2) the completeness and accuracy of historical claims paid and incurred data.

We assessed the Company’s estimate of the liability by testing a selection of certain data, including claims data, utilized by the Company’s actuary by comparing it to relevant documentation.

We involved actuarial professionals with specialized skills and knowledge, who assisted in:

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• evaluating the Company’s actuarial estimates and assumptions related to the loss development factors and expected loss rates, by comparing them to generally accepted actuarial methodologies and the Company’s historical data and trends.

Adoption of Accounting Standards Codification Topic 842, Leases

As discussed in Notes 1 and 7 to the consolidated financial statements, the Company adopted ASC Topic 842, Leases , on February 3, 2019.

ASC Topic 842 requires, among other things, a lessee to recognize a right-of-use asset and lease liability for operating leases with a lease term greater than 12 months.

As part of the adoption, $6.1 billion of right-of-use assets and $6.2 billion of lease liabilities related to operating leases were recorded in the consolidated balance sheet as of the Company’s adoption date.

We identified the assessment of the Company’s adoption of ASC Topic 842 as a critical audit matter.

This is due to the subjectivity and complexity of certain assumptions inherent in the adoption and implementation, such as (1) identification of leases subject to the standard, including embedded leases, (2) future cash flows over the applicable lease term, and (3) estimation of the incremental borrowing rates used to discount the future cash flows.

The primary procedures we performed to address this critical audit matter included the following.

We tested certain internal controls over the Company’s ASC Topic 842 implementation process, including controls related to the Company’s determination of the lease term, the applicable future cash flows, and the incremental borrowing rates.

We read and analyzed a selection of contracts for potential embedded leases in order to evaluate the completeness of the population of leases subject to the provisions of ASC Topic 842.

We inspected and assessed a sample of lease contracts and compared the relevant terms to the terms used by the Company in its underlying calculations of the right-of-use assets and operating lease liabilities.

We evaluated the Company’s assessment over the adoption of ASC Topic 842 by comparing the underlying facts and circumstances in the lease contracts to the accounting treatment applied.

We involved professionals with specialized skills and knowledge who assisted in assessing the judgments made by the Company relative to the incremental borrowing rates used.

We have served as the Company’s auditor since 1987.

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CONSOLIDATED STATEMENTS OF OPERATIONS

January 30, February 1, February 2,

(in millions, except per share data) 2021 2020 2019

Net sales $ 25,509.3 $ 23,610.8 $ 22,823.3

Cost of sales 17,721.0 16,570.1 15,875.8

Gross profit 7,788.3 7,040.7 6,947.5

Selling, general and administrative expenses, excluding Goodwill

impairment and Receivable impairment

impairment 5,900.4 5,465.5 5,160.0

Goodwill impairment — 313.0 2,727.0

Receivable impairment

Selling, general and administrative expenses 5,900.4 5,778.5 7,887.0

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

January 30, February 1, February 2,

(in millions) 2021 2020 2019

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CONSOLIDATED BALANCE SHEETS

(in millions, except share and per share data)

February 1, 2020

February 2, 2019

(in millions, except share and per share data) January 30, 2021 February 1, 2020

Current assets:

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Property, plant and equipment, net of accumulated depreciation of $ 4,765.0 and $ 4,194.1 ,

4,116.3 3,881.8

Restricted cash 46.9 46.8

Operating lease right-of-use assets 6,324.1 6,225.0

Favorable lease rights, net of accumulated amortization of $287.8 at February 2, 2019

Goodwill 1,984.4 1,983.3

Trade name intangible asset 3,100.0 3,100.0

Deferred tax asset 23.2 24.4

Other assets 50.3 43.9

Total assets $ 20,696.0 $ 19,574.6

LIABILITIES AND SHAREHOLDERS’ EQUITY

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Operating lease liabilities, long-term 5,065.5 4,979.5

Unfavorable lease rights, net of accumulated amortization of $76.9 at February 2, 2019

Deferred income taxes, net 1,013.5 984.7

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600,000,000 shares authorized, 233,383,199 and

238,081,664 shares issued and outstanding at February 1, 2020 and February 2, 2019,

236,726,563 shares issued and outstanding at January 30, 2021 and February 1, 2020,

Additional paid-in capital 2,138.5 2,454.4

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CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

YEARS ENDED FEBRUARY 1, 2020 , FEBRUARY 2, 2019 , AND FEBRUARY 3, 2018

(in millions)

YEARS ENDED JANUARY 30, 2021, FEBRUARY 1, 2020, AND FEBRUARY 2, 2019

(in millions) Common

Shares Common

Stock Additional

Capital Accumulated

Comprehensive

Balance at January 28, 2017

Total other comprehensive income

Issuance of stock under Employee Stock

Purchase Plan

Exercise of stock options

Stock-based compensation, net

Loss Retained

Earnings Shareholders’

Balance at February 3, 2018 237.3 $ 2.4 $ 2,545.3 $ ( 32.3 ) $ 4,666.9 $ 7,182.3

Net loss — — — — ( 1,590.8 ) ( 1,590.8 )

Total other comprehensive loss — — — ( 6.0 ) — ( 6.0 )

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standards, net — — — — ( 65.3 ) ( 65.3 )

Net income — — — — 827.0 827.0

Total other comprehensive loss — — — ( 1.5 ) — ( 1.5 )

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Balance at February 1, 2020 236.7 2.4 2,454.4 ( 39.8 ) 3,837.8 6,254.8

Net income — — — — 1,341.9 1,341.9

Total other comprehensive income — — — 4.6 — 4.6

Issuance of stock under Employee Stock

Purchase Plan 0.2 — 10.0 — — 10.0

Exercise of stock options 0.1 — 7.0 — — 7.0

Stock-based compensation, net 0.4 — 67.0 — — 67.0

Repurchase of stock ( 4.0 ) ( 0.1 ) ( 399.9 ) — — ( 400.0 )

Balance at January 30, 2021 233.4 $ 2.3 $ 2,138.5 $ ( 35.2 ) $ 5,179.7 $ 7,285.3

See accompanying Notes to Consolidated Financial Statements

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CONSOLIDATED STATEMENTS OF CASH FLOWS

January 30, February 1, February 2,

(in millions) 2021 2020 2019

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Goodwill impairment — 313.0 2,727.0

Receivable impairment

Depreciation and amortization 686.6 645.4 621.1

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Other current assets 1.7 ( 8.4 ) ( 21.1 )

Other assets ( 7.0 ) 8.2 0.9

Accounts payable 142.6 ( 79.8 ) 242.6

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Proceeds from (payments for) fixed asset disposition 9.1 ( 1.9 ) 0.4

Proceeds from sale of unrestricted investments

Net cash used in investing activities ( 889.7 ) ( 1,020.2 ) ( 816.7 )

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Interest, net of amounts capitalized $ 152.9 $ 170.2 $ 383.4

Income taxes $ 357.7 $ 266.8 $ 277.5

Non-cash transactions:

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Description of Business

Dollar Tree, Inc.

(the Company) is a leading operator of discount retail stores in the United States and Canada.

Below are those accounting policies considered by the Company to be significant.

Unless otherwise stated, references to “we,” “us,” and “our” in this annual report on Form 10-K refer to Dollar Tree, Inc.

and its direct and indirect subsidiaries on a consolidated basis.

We are a leading operator of discount retail stores in the United States and Canada.

Below are those accounting policies that we consider to be significant.

Principles of Consolidation

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Segment Information

At February 1, 2020 , the Company operates more than 15,200 retail discount stores in 48 states and five Canadian provinces.

The Company’s operations are conducted in two reporting business segments:

At January 30, 2021, we operate more than 15,600 retail discount stores in 48 states and five Canadian provinces.

Our operations are conducted in two reporting business segments:

Dollar Tree and Family Dollar.

The Company defines its segments as those operations whose results its chief operating decision maker (“CODM”) regularly reviews to analyze performance and allocate resources.

The Dollar Tree segment is the leading operator of discount variety stores offering merchandise at the fixed price of $ 1.00 .

The Dollar Tree segment includes the Company’s operations under the “Dollar Tree” and “Dollar Tree Canada” brands, 13 distribution centers in the United States and two distribution centers in Canada.

We define our segments as those operations whose results our chief operating decision maker (“CODM”) regularly reviews to analyze performance and allocate resources.

The Dollar Tree segment is the leading operator of discount variety stores offering merchandise predominantly at the fixed price point of $ 1.00 .

The Dollar Tree segment includes our operations under the “Dollar Tree” and “Dollar Tree Canada” brands, 15 distribution centers in the United States and two distribution centers in Canada.

The Family Dollar segment operates a chain of general merchandise retail discount stores providing consumers with a selection of competitively-priced merchandise in convenient neighborhood stores.

The Family Dollar segment consists of the Company’s operations under the “Family Dollar” brand and 11 distribution centers.

Refer to Note 12 for additional information regarding the Company’s operating segments.

The Family Dollar segment consists of our operations under the “Family Dollar” brand and 11 distribution centers.

Refer to Note 12 for additional information regarding our operating segments.

Foreign Currency

The functional currencies of certain of the Company’s international subsidiaries are the local currencies of the countries in which the subsidiaries are located.

The functional currencies of certain of our international subsidiaries are the local currencies of the countries in which the subsidiaries are located.

Foreign currency denominated assets and liabilities are translated into U.S.

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Gains and losses from foreign currency transactions, which are included in “Other expense (income), net” have not been significant.

The Company’s fiscal year ends on the Saturday closest to January 31.

Any reference herein to “ 2019 ” or “fiscal 2019 ,” “ 2018 ” or “fiscal 2018 ,” and “ 2017 ” or “fiscal 2017 ,” relates to as of or for the year ended February 1, 2020 , February 2, 2019 , and February 3, 2018 , respectively.

Fiscal 2017 included 53 weeks, commensurate with the retail calendar.

Fiscal 2019 and fiscal 2018 each included 52 weeks.

“ 2020 ” or “fiscal 2020 “ ends on January 30, 2021 and will include 52 weeks.

Our fiscal year is a 52-week or 53-week period ending on the Saturday closest to January 31.

References to “2020” or “fiscal 2020,” “2019” or “fiscal 2019,” and “2018” or “fiscal 2018” relate to the 52-week fiscal years ended January 30, 2021, February 1, 2020, and February 2, 2019, respectively.

Use of Estimates

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Cash and Cash Equivalents

Cash and cash equivalents at February 1, 2020 and February 2, 2019 includes $ 287.6 million and $ 170.0 million , respectively, of investments primarily in money market securities which are valued at cost, which approximates fair value.

The Company considers all highly-liquid debt instruments with original maturities of three months or less to be cash equivalents.

Cash and cash equivalents at January 30, 2021 and February 1, 2020 includes $ 1,135.0 million and $ 287.6 million, respectively, of investments primarily in money market securities which are valued at cost, which approximates fair value.

We consider all highly-liquid debt instruments with original maturities of three months or less to be cash equivalents.

The majority of payments due from financial institutions for the settlement of debit card and credit card transactions process within three business days, and therefore are classified as cash and cash equivalents.

Merchandise Inventories

Merchandise inventories at the Company’s distribution centers are stated at the lower of cost or net realizable value, determined on a weighted-average cost basis.

Merchandise inventories at our distribution centers are stated at the lower of cost or net realizable value, determined on a weighted-average cost basis.

Cost is assigned to store inventories using the retail inventory method on a weighted-average basis.

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Costs directly associated with warehousing and distribution are capitalized as merchandise inventories.

Total warehousing and distribution costs capitalized into inventory amounted to $ 169.7 million and $ 161.1 million at February 1, 2020 and February 2, 2019 , respectively.

Total warehousing and distribution costs capitalized into inventory amounted to $ 172.7 million and $ 169.7 million at January 30, 2021 and February 1, 2020, respectively.

Property, Plant and Equipment

Property, plant and equipment are stated at cost and depreciated using the straight-line method over the estimated useful lives of the respective assets as follows:

39 to 40 years

Furniture, fixtures and equipment

3 to 15 years

Buildings 39 to 40 years

Furniture, fixtures and equipment 3 to 15 years

Leasehold improvements are amortized over the shorter of the estimated useful lives of the respective assets or the related lease terms.

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Capitalized Interest

The Company capitalizes interest on borrowed funds during the construction of certain property and equipment.

The Company capitalized $ 2.4 million , $ 4.2 million and $ 2.3 million of interest costs in the years ended February 1, 2020 , February 2, 2019 and February 3, 2018 , respectively.

We capitalize interest on borrowed funds during the construction of certain property and equipment.

We capitalized $ 3.2 million, $ 2.4 million and $ 4.2 million of interest costs in the years ended January 30, 2021, February 1, 2020 and February 2, 2019, respectively.

Insurance Reserves and Restricted Cash

The Company utilizes a combination of insurance and self-insurance programs, including a wholly-owned captive insurance entity, to provide for the potential liabilities for certain risks, including workers’ compensation, general liability and automobile liability.

Liabilities associated with the risks that are retained by the Company are not discounted and are estimated, in part, by considering claims experience, exposure and severity factors and other actuarial assumptions.

Dollar Tree Insurance, Inc., a South Carolina-based wholly-owned captive insurance subsidiary of the Company, charges the operating subsidiary companies premiums to insure the retained workers’ compensation, general liability and automobile liability exposures.

We utilize a combination of insurance and self-insurance programs, including a wholly-owned captive insurance entity, to provide for the potential liabilities for certain risks, including workers’ compensation, general liability and automobile liability.

Liabilities associated with the risks that are retained by us are not discounted and are estimated, in part, by considering claims experience, exposure and severity factors and other actuarial assumptions.

Dollar Tree Insurance, Inc., a South Carolina-based wholly-owned captive insurance subsidiary of ours, charges the operating subsidiary companies premiums to insure the retained workers’ compensation, general liability and automobile liability exposures.

Pursuant to South Carolina insurance regulations, Dollar Tree Insurance, Inc.

maintains certain levels of cash and cash equivalents related to its self-insured exposures.

Related to its insurance programs, the Company also maintains certain cash balances, which are held in trust and restricted as to withdrawal or use.

We also maintain certain cash balances related to our insurance programs, which are held in trust and restricted as to withdrawal or use.

Lease Accounting

The Company’s lease portfolio primarily consists of leases for its retail store locations and it also leases vehicles and trailers, as well as distribution center space and equipment.

The Company determines if an arrangement is a lease at inception by evaluating whether the arrangement conveys the right to use an identified asset and whether the Company obtains substantially all of the economic benefits from and has the ability to direct the use of the asset.

In the first quarter of fiscal 2019, we adopted Accounting Standards Update (“ASU”) No.

2016-02, “ Leases (Topic 842)” and subsequent amendments, using the optional effective date transition method provided by accounting pronouncement, ASU No.

2018-11, “Leases (Topic 842):

Targeted Improvements” and recorded a cumulative effect adjustment to beginning retained earnings.

Our reporting for the fiscal 2018 comparative period presented in the consolidated financial statements continues to be in accordance with Accounting Standards Codification (“ASC”) Topic 840, “ Leases.

” Adoption of the standard resulted in the recognition of Operating lease right-of-use assets and Operating lease liabilities of $ 6.2 billion and $ 6.1 billion, respectively, and a reduction to Retained earnings of $ 65.3 million, net of tax, as of February 3, 2019.

For fiscal 2019, the adoption of the standard did not have a material impact on our consolidated statements of operations or consolidated statements of cash flows.

Our lease portfolio primarily consists of leases for our retail store locations and we also lease vehicles and trailers, as well as distribution center space and equipment.

We determine if an arrangement is a lease at inception by evaluating whether the arrangement conveys the right to use an identified asset and whether we obtain substantially all of the economic benefits from and have the ability to direct the use of the asset.

Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheets.

the Company recognizes expense for these leases on a straight-line basis over the lease term.

For leases with an initial term in excess of 12 months, operating lease right-of-use assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the committed lease term at the lease commencement date.

As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate in determining the present value of future lease payments.

Inputs to the calculation of the Company’s incremental borrowing rate include the valuations and yields of its outstanding senior notes and their credit spread over comparable U.S.

Treasury rates, adjusted to a collateralized basis by estimating the credit spread improvement that would result from an upgrade of one ratings

classification.

Most leases include one or more options to renew and the exercise of renewal options is at the Company’s sole discretion.

The Company does not include renewal options in its determination of the lease term unless the renewals are deemed to be reasonably certain at lease commencement.

Operating lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

We recognize expense for these leases on a straight-line basis over the lease term.

For leases with an initial term in excess of 12 months, operating lease right-of-use assets and operating lease liabilities are recognized based on the present value of the future lease payments

over the committed lease term at the lease commencement date.

As most of our leases do not provide an implicit rate, we use our incremental borrowing rate in determining the present value of future lease payments.

Inputs to the calculation of our incremental borrowing rate include the valuations and yields of our outstanding senior notes and their credit spreads over comparable U.S.

Treasury rates, adjusted to a collateralized basis by estimating the credit spread improvement that would result from an upgrade of one ratings classification.

Most leases include one or more options to renew and the exercise of renewal options is at our sole discretion.

We do not include renewal options in our determination of the lease term unless the renewals are deemed to be reasonably certain.

Operating lease expense for lease payments not yet paid is recognized on a straight-line basis over the lease term.

The operating lease right-of-use asset is reduced by lease incentives, which has the effect of lowering the operating lease expense.

Operating lease right-of-use assets are periodically reviewed for impairment losses.

The Company uses the long-lived assets impairment guidance in Accounting Standards Codification (“ASC”) Subtopic 360-10, “Property, Plant, and Equipment - Overall,” to determine whether a right-of-use asset is impaired, and if so, the amount of the impairment loss to recognize.

The Company has real estate leases that typically include payments related to non-lease components, such as common area maintenance, as well as payments for real estate taxes and insurance which are not considered components of the lease.

We use the long-lived assets impairment guidance in ASC Subtopic 360-10, “Property, Plant, and Equipment - Overall,” to determine whether a right-of-use asset is impaired, and if so, the amount of the impairment loss to recognize.

We have real estate leases that typically include payments related to non-lease components, such as common area maintenance, as well as payments for real estate taxes and insurance which are not considered components of the lease.

These payments are generally variable and based on actual costs incurred by the lessor.

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These fixed payments are considered part of the lease payment and included in the right-of-use asset and lease liability.

In addition, certain of the Company’s lease agreements include rental payments based on a percentage of retail sales over contractual levels and others include rental payments adjusted periodically for inflation.

In addition, certain of our lease agreements include rental payments based on a percentage of retail sales over contractual levels and others include rental payments adjusted periodically for inflation.

These payments are expensed as incurred as variable lease costs.

The Company’s lease agreements do not contain any material residual value guarantees or material restrictive financial covenants.

Favorable and Unfavorable Lease Rights, Net

Favorable and unfavorable lease rights, net include purchased leases with terms which were either favorable or unfavorable as compared to prevailing market rates at the date of acquisition.

Purchased leases are amortized over the remaining lease terms, including, in some cases, an assumed renewal.

As discussed in this Note 1 under the captions “Lease Accounting” and “Recent Accounting Pronouncements” upon the adoption of ASC 842, “ Leases (Topic 842),” these favorable and unfavorable lease rights, net were subsumed into the Operating lease right-of-use assets, where they continue to be amortized over the remaining lease terms.

Our lease agreements do not contain any material residual value guarantees or material restrictive financial covenants.

Purchased leases with terms which were either favorable or unfavorable as compared to prevailing market rates at the date of acquisition are amortized over the remaining lease terms, including, in some cases, an assumed renewal.

Amortization expense, net of $ 48.1 million, $ 52.9 million and $ 65.4 million was recognized in “Selling, general and administrative expenses” in 2020, 2019 and 2018, respectively, related to these lease rights.

Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of

The Company reviews its long-lived assets and certain identifiable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

We review our long-lived assets and certain identifiable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Recoverability of assets to be held and used is measured by comparing the carrying amount of an asset to future net undiscounted cash flows expected to be generated by the asset.

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Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

In fiscal 2019 , 2018 and 2017 , the Company recorded charges of $ 9.1 million , $ 13.0 million and $ 5.6 million , respectively, to write down certain assets, including $ 8.5 million in fiscal 2019 to write down Operating lease right-of-use assets.

In fiscal 2020, 2019 and 2018, we recorded charges of $ 4.6 million, $ 9.1 million and $ 13.0 million, respectively, to write down certain assets, including $ 3.8 million and $ 8.5 million in fiscal 2020 and fiscal 2019, respectively, to write down Operating lease right-of-use assets.

These charges are recorded as a component of “Selling, general and administrative expenses” in the accompanying consolidated statements of operations.

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In addition, goodwill and nonamortizing intangible assets will be tested on an interim basis if an event or circumstance indicates that it is more likely than not that an impairment loss has been incurred.

The Company performs a qualitative assessment to determine whether it is more likely than not that each reporting unit's fair value is less than its carrying value, including goodwill.

If the Company determines that it is more likely than not that the fair value of the reporting unit is less than its carrying value, the Company then estimates the fair value.

The Company uses a combination of a market multiple method and a discounted cash flow method to estimate the fair value of its reporting units and recognizes goodwill impairment for any excess of the carrying amount of a reporting unit’s goodwill over its estimated fair value.

The Company evaluates the Family Dollar trade name for impairment by comparing its fair value, based on an income approach using the relief-from-royalty method, to its carrying value.

We perform a qualitative assessment to determine whether it is more likely than not that the Family Dollar trade name is impaired.

If we determine that it is more likely than not that an impairment exists, we evaluate the Family Dollar trade name for impairment by comparing its fair value, based on an income approach using the relief-from-royalty method, to its carrying value.

If the carrying value of the asset exceeds its estimated fair value, an impairment loss is recognized in an amount equal to that excess.

The Company's reporting units are determined in accordance with the provisions of ASC 350, “Intangibles - Goodwill and Other (Topic 350).” The Company performs its annual impairment testing of goodwill and nonamortizing intangible assets during the fourth quarter of each year.

Subsequent to the evaluation of the Family Dollar trade name for impairment, we perform a goodwill impairment evaluation.

In the event that a qualitative assessment of the fair value of a reporting unit indicates it is more likely than not that the fair value is less than the carrying amount, we then estimate the fair value of the reporting unit using a combination of a market multiple method and a discounted cash flow method.

We recognize goodwill impairment for the amount by which the reporting unit’s carrying amount exceeds its estimated fair value, not to exceed the total carrying amount of goodwill allocated to the reporting unit.

Our reporting units are determined in accordance with the provisions of ASC Topic 350, “Intangibles - Goodwill and Other.” We perform our annual impairment testing of goodwill and nonamortizing intangible assets during the fourth quarter of each year.

Refer to Note 3 for additional information on the results of the impairment tests.

Other assets consist primarily of deferred compensation plan assets and receivables which are expected to be recovered over periods longer than one year.

Revenue Recognition

The Company recognizes sales revenue, net of estimated returns and sales tax, at the time the customer tenders payment for and takes control of the merchandise.

We recognize sales revenue, net of estimated returns and sales tax, at the time the customer tenders payment for and takes control of the merchandise.

Taxes Collected

The Company reports taxes assessed by a governmental authority that are directly imposed on revenue-producing transactions (i.e., sales tax) on a net (excluded from revenue) basis.

We report taxes assessed by a governmental authority that are directly imposed on revenue-producing transactions (i.e., sales tax) on a net (excluded from revenue) basis.

Cost of Sales

The Company includes the cost of merchandise, warehousing and distribution costs, and certain occupancy costs in cost of sales.

We include the cost of merchandise, warehousing and distribution costs, and certain occupancy costs in cost of sales.

Vendor Allowances

The Company receives vendor support in the form of cash payments or allowances through a variety of reimbursements such as purchase discounts, cooperative advertising, markdowns, scandowns and volume rebates.

The Company has agreements with vendors setting forth the specific conditions for each allowance or payment.

The Company either recognizes the allowance as a reduction of current costs or defers the payment over the period the related merchandise is sold.

We receive vendor support in the form of cash payments or allowances through a variety of reimbursements such as purchase discounts, cooperative advertising, markdowns, scandowns and volume rebates.

We have agreements with vendors setting forth the specific conditions for each allowance or payment.

We either recognize the allowance as a reduction of current costs or defer the payment over the period the related merchandise is sold.

If the payment is a reimbursement for costs incurred, it is offset against those related costs;

otherwise, it is treated as a reduction to the cost of merchandise.

Divestiture and Impaired Receivables

In connection with the Company’s 2015 acquisition of Family Dollar, the Company divested 330 Family Dollar stores to Dollar Express, LLC.

As part of the divestiture, 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 fiscal 2017, the Company evaluated the collectability of its divestiture-related receivable and based on information then available, the Company recorded impairment charges totaling $ 53.5 million .

In the fourth quarter of fiscal 2017, the Company settled a lawsuit with Dollar Express, 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” for the year ended February 3, 2018 in the accompanying consolidated statements of operations.

Pre-Opening Costs

The Company expenses pre-opening costs for new, expanded, relocated and re-bannered stores, as incurred.

We expense pre-opening costs for new, expanded, relocated and re-bannered stores and for distribution centers, as incurred.

Advertising Costs

The Company expenses advertising costs as they are incurred and they are included in “Selling, general and administrative expenses” within the accompanying consolidated statements of operations.

Advertising costs, net of co-op recoveries from vendors, approximated $ 102.9 million , $ 99.9 million and $ 106.3 million in fiscal 2019 , 2018 and 2017 , respectively.

We expense advertising costs as they are incurred and they are included in “Selling, general and administrative expenses” within the accompanying consolidated statements of operations.

Advertising costs, net of co-op recoveries from vendors, were $ 80.8 million, $ 102.9 million and $ 99.9 million in fiscal 2020, 2019 and 2018, respectively.

Income taxes are accounted for under the asset and liability method.

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The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date of such change.

The Company recognizes a financial statement benefit for a tax position if it determines that it is more likely than not that the position will be sustained upon examination.

The Company includes interest and penalties in the provision for income tax expense and income taxes payable.

The Company does not provide for any penalties associated with tax contingencies unless they are considered probable of assessment.

We recognize a financial statement benefit for a tax position if we determine that it is more likely than not that the position will be sustained upon examination.

We include interest and penalties in the provision for income tax expense and income taxes payable.

We do not provide for any penalties associated with tax contingencies unless they are considered probable of assessment.

Stock-Based Compensation

The Company recognizes expense for all share-based payments to employees and non-employee directors based on their fair values.

We recognize expense for all share-based payments to employees and non-employee directors based on their fair values.

Total stock-based compensation expense for 2020, 2019 and 2018 was $ 83.9 million, $ 61.4 million and $ 63.3 million, respectively.

The Company recognizes expense related to the fair value of restricted stock units (RSUs) and stock options over the requisite service period on a straight-line basis or a shorter period based on the retirement eligibility of the grantee.

The fair value of RSUs is determined using the closing price of the Company’s common stock on the date of grant.

We recognize expense related to the fair value of restricted stock units (RSUs) and stock options over the requisite service period on a straight-line basis or a shorter period based on the retirement eligibility of the grantee.

The fair value of RSUs is determined using the closing price of our common stock on the date of grant.

The fair value of stock option grants is estimated on the date of grant using the Black-Scholes option pricing model.

The Company accounts for forfeitures when they occur.

We account for forfeitures when they occur.

Net Income (Loss) Per Share

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Dilutive potential shares include all outstanding stock options and unvested RSUs after applying the treasury stock method.

Diluted net income (loss) per share for the year ended February 2, 2019 has been revised to reflect the immaterial correction of an error.

In fiscal 2018, the Company included dilutive potential shares in the calculation;

however, because of the net loss the effect was anti-dilutive.

Diluted net income (loss) per share in 2018, as corrected, was $( 6.69 ) as opposed to the previously reported diluted net income (loss) per share of $( 6.66 ) .

Financial Instruments

The Company may utilize derivative financial instruments to reduce its exposure to market risks from changes in interest rates and diesel fuel costs.

By entering into receive-variable, pay-fixed interest rate and diesel fuel swaps, the Company limits its exposure to changes in variable interest rates and diesel fuel prices.

The Company is exposed to credit-related losses in the event of non-performance by the counterparty to these instruments but minimizes this risk by entering into transactions with high quality counterparties.

Interest rate or diesel fuel cost differentials paid or received on the swaps are recognized as adjustments to interest in the period earned or incurred.

The Company formally documents all hedging relationships, if applicable, and assesses hedge effectiveness both at inception and on an ongoing basis.

The Company does not enter into derivative instruments for any purpose other than cash flow hedging and it does not hold derivative instruments for trading purposes.

There were no derivative instruments outstanding in fiscal 2019 or 2018.

Recent Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2016-02, “ Leases (Topic 842)” and subsequent amendments, which replaced existing lease accounting guidance in GAAP and requires lessees to recognize right-of-use assets and corresponding lease liabilities on the balance sheet for all in-scope leases with a term of greater than 12 months and requires disclosure of certain quantitative and qualitative information pertaining to an entity’s leasing arrangements.

The Company adopted the standard as of February 3, 2019, using the optional effective date transition method provided by accounting pronouncement, ASU No.

2018-11, “Leases (Topic 842):

Targeted Improvements” and recorded a cumulative effect adjustment to beginning retained earnings.

The Company’s reporting for the comparative prior periods presented in the consolidated financial statements continues to be in accordance with ASC 840, “ Leases (Topic 840).

” The Company elected the package of practical expedients permitted under the transition guidance within the new standard which, among other things, permitted the Company to carry forward the historical lease classification for leases that commenced before the effective date of the new standard.

The Company did not elect the hindsight practical expedient, which permits the use of hindsight when determining lease term and impairment of right-of-use assets.

Adoption of the standard resulted in the recognition of Operating lease right-of-use assets and Operating lease liabilities of $ 6.2 billion and $ 6.1 billion , respectively, and a reduction to Retained earnings of $ 65.3 million , net of tax, as of February 3, 2019.

The Operating lease right-of-use assets recorded at transition include the impact of net favorable lease rights of approximately $ 210.0 million , accrued rent, net of prepaid rent of approximately $ 108.0 million , lease incentives of approximately $ 67.0 million and the impairment of right-of-use assets recognized in retained earnings as of February 3, 2019 of approximately $ 96.0 million .

The adoption of the standard did not have a material impact on the Company’s consolidated statements of operations or consolidated statements of cash flows.

Refer to Note 7 for additional information related to the Company’s accounting for leases.

Note 2 - Balance Sheet Components

Other Current Assets

Other current assets as of February 1, 2020 and February 2, 2019 consist of the following:

(in millions)

Accounts receivable, net

Total other current assets

Note 2 - Supplemental Balance Sheet Information

Property, Plant and Equipment, Net

Property, plant and equipment, net, as of February 1, 2020 and February 2, 2019 consists of the following:

Property, plant and equipment, net, as of January 30, 2021 and February 1, 2020 consists of the following:

January 30, February 1,

(in millions) 2021 2020

Land $ 238.7 $ 233.5

Buildings 1,524.0 1,395.5

Leasehold improvements 2,631.7 2,335.1

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Total property, plant and equipment, net $ 4,116.3 $ 3,881.8

Depreciation expense was $ 581.9 million , $ 555.7 million , and $ 542.0 million for the years ended February 1, 2020 , February 2, 2019 , and February 3, 2018 , respectively.

Depreciation expense was $ 631.1 million, $ 581.9 million, and $ 555.7 million for the years ended January 30, 2021, February 1, 2020, and February 2, 2019, respectively.

Other Current Liabilities

Other current liabilities as of February 1, 2020 and February 2, 2019 consist of accrued expenses for the following:

Other current liabilities as of January 30, 2021 and February 1, 2020 consist of the following:

January 30, February 1,

(in millions) 2021 2020

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Compensation and benefits 162.8 102.8

Insurance 115.4 112.0

Accrued construction costs 44.9 51.1

Accrued utilities 27.8 22.0

Other 159.4 146.8

Total other current liabilities $ 815.3 $ 618.0

Other Liabilities

Other long-term liabilities as of February 1, 2020 and February 2, 2019 consist of the following:

(in millions)

Total other long-term liabilities

Note 3 - Goodwill and Nonamortizing Intangible Assets

Goodwill allocated to the Company’s reportable segments and changes in the net carrying amount of goodwill for the years ended February 1, 2020 and February 2, 2019 are as follows:

(in millions)

Family Dollar

Goodwill allocated to our reportable segments and changes in the net carrying amount of goodwill for the years ended January 30, 2021 and February 1, 2020 are as follows:

(in millions) Dollar Tree Family Dollar Total

Balance at February 2, 2019 $ 376.5 $ 1,920.1 $ 2,296.6

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Foreign currency translation adjustments 1.1 — 1.1

Goodwill reassignment for re-bannered stores

Goodwill impairment

Balance at February 1, 2020

Goodwill is reassigned between segments when stores are re-bannered between segments.

In 2019 and 2018 , the Company reassigned $ 47.6 million and $ 31.0 million , respectively, of goodwill from Family Dollar to Dollar Tree as a result of re-bannering.

Balance at January 30, 2021 $ 424.9 $ 1,559.5 $ 1,984.4

Goodwill is reassigned between segments when previously acquired stores are re-bannered between segments.

The goodwill related to previously acquired re-bannered stores in 2020 was no t material.

In 2019, we reassigned $ 47.6 million of goodwill from Family Dollar to Dollar Tree as a result of re-bannering.

Re-bannered stores are treated as new stores.

Goodwill and other indefinite-lived intangible assets must be evaluated for impairment annually and may also be tested on an interim basis upon the occurrence of a triggering event or a change in circumstances that would more likely than not reduce the fair value of a reporting unit below its carrying amount.

In 2018, based on the Company’s strategic and operational reassessment of the Family Dollar segment following challenges that the business experienced that impacted the Company’s ability to grow the business at the originally estimated rate when it acquired Family Dollar in 2015, management determined there were indicators that the goodwill of the business may be impaired.

Accordingly, a goodwill impairment test was performed in the fourth quarter of fiscal 2018 and an impairment test was also performed in 2019.

The results of the impairment tests showed that the fair value of the Family Dollar reporting unit was lower than its carrying value resulting in $ 313.0 million and $ 2.73 billion non-cash pre-tax and after-tax goodwill impairment charges in the fourth quarters of fiscal 2019 and 2018, respectively, which were recorded as a component of “Selling, general and administrative expenses” in the accompanying consolidated statements of operations.

The annual goodwill impairment evaluation in 2020 did not result in impairment.

The Company’s annual impairment evaluation of the Family Dollar trade name did no t result in impairment charges during fiscal 2019 , 2018 or 2017 .

The 2019 and 2018 goodwill impairment evaluations indicated that the fair value of the Family Dollar reporting unit was lower than

its carrying value resulting in $ 313.0 million and $ 2.73 billion non-cash pre-tax and after-tax goodwill impairment charges in the fourth quarters of fiscal 2019 and 2018, respectively, which were recorded as a component of “Selling, general and administrative expenses” in the accompanying consolidated statements of operations.

Our annual impairment evaluation of the Family Dollar trade name did no t result in impairment charges during fiscal 2020, 2019 or 2018.

Note 4 - Income Taxes

The provision for income taxes consists of the following:

January 30, February 1, February 2,

(in millions) 2021 2020 2019

Current taxes:

Federal $ 279.5 $ 210.1 $ 245.6

State 87.4 52.5 47.8

Foreign 0.2 0.1 0.4

Total current taxes 367.1 262.7 293.8

Deferred taxes:

Federal 32.6 39.2 0.3

State ( 3.8 ) ( 5.6 ) ( 12.3 )

Foreign 2.0 ( 24.6 ) —

Total deferred taxes 30.8 9.0 ( 12.0 )

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A reconciliation of the statutory U.S.

federal income tax (benefit) rate and the effective tax (benefit) rate follows:

February 1, 2020

February 2, 2019

February 3, 2018

federal income tax (benefit) rate and the effective tax rate follows:

January 30, 2021 February 1, 2020 February 2, 2019

Statutory U.S.

federal income tax (benefit) rate 21.0 % 21.0 % ( 21.0 ) %

Goodwill impairment

State and local income taxes, net of federal income tax benefit 3.2 3.7 3.0

Non-deductible executive compensation 0.4 — —

Incremental tax expense (benefit) of exercises/vesting of equity-based

compensation 0.2 ( 0.4 ) 0.1

State tax reserve release ( 0.5 ) — —

Work Opportunity Tax Credit ( 1.6 ) ( 2.7 ) ( 2.0 )

Goodwill impairment — 6.0 43.7

Deferred tax rate change — 0.1 —

Incremental tax expense (benefit) of exercises/vesting of

equity-based compensation

Change in valuation allowance — ( 2.2 ) 0.3

Tax Cuts and Jobs Act — — ( 1.3 )

Effective tax (benefit) rate

Tax Cuts and Jobs Act

On December 22, 2017, the Tax Cuts and Jobs Act (“TCJA”) was signed into law.

The TCJA lowered the federal corporate tax rate from 35% to 21% and made numerous other law changes, including a provision that allows the full expensing of certain qualified property and adds limitations on the deductibility of certain executive compensation.

In 2017, the Company recorded a $ 562.0 million benefit resulting from the re-measurement of the Company’s net deferred tax liabilities, primarily related to the Family Dollar trade name, to reflect the lower statutory U.S.

federal income tax rate of 21% .

An additional benefit of $ 16.2 million was recorded in 2018, related to the continued analysis of the TCJA impacts to the net deferred tax liability valuation and acceleration of depreciation.

As of February 2, 2019, the Company had completed its accounting for the tax effects of the TCJA.

Other, net 0.2 ( 0.8 ) ( 1.3 )

Effective tax rate 22.9 % 24.7 % 21.5 %

Goodwill Impairment

In the fourth quarters of 2019 and 2018, the Company recorded goodwill impairment charges of $ 313.0 million and $ 2.73 billion , respectively, related to the Family Dollar goodwill, as further discussed in Note 3 .

In the fourth quarters of 2019 and 2018, we recorded goodwill impairment charges of $ 313.0 million and $ 2.73 billion, respectively, related to the Family Dollar goodwill, as further discussed in Note 3 .

As the purchase of Family Dollar was a stock acquisition, carryover basis applied for tax purposes.

1 unchanged sentence

Foreign Taxes

United States income taxes have not been provided on accumulated but undistributed earnings of the Company’s foreign subsidiaries as the Company intends to permanently reinvest earnings.

The Company does not consider the tax on the mandatory deemed repatriation of undistributed foreign earnings and profits to be material.

United States income taxes have not been provided on accumulated but undistributed earnings of our foreign subsidiaries as we intend to permanently reinvest earnings.

We do not consider the tax on the mandatory deemed repatriation of undistributed foreign earnings and profits to be material.

Deferred Income Taxes

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

Significant components of the Company’s net deferred tax assets (liabilities) follow:

(in millions)

Significant components of our net deferred tax assets (liabilities) follow:

(in millions) January 30,

2021 February 1,

Deferred tax assets:

Deferred rent

Operating lease liabilities $ 1,658.4 $ 1,621.8

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State tax election 17.4 19.3

Other 3.2 2.4

Total deferred tax assets 1,894.6 1,803.3

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Other intangibles ( 840.4 ) ( 852.2 )

Inventory ( 4.8 ) ( 14.4 )

Prepaids ( 25.2 ) ( 24.1 )

Total deferred tax liabilities ( 2,868.1 ) ( 2,745.1 )

Deferred income taxes, net $ ( 990.3 ) $ ( 960.3 )

At February 1, 2020 , the Company had certain state tax credit carryforwards, net operating loss carryforwards and capital loss carryforwards totaling approximately $ 102.2 million .

At January 30, 2021, we had certain state tax credit carryforwards, net operating loss carryforwards and capital loss carryforwards totaling $ 95.5 million.

Some of these carryforwards will expire, if not utilized, beginning in 2021 through 2040.

A valuation allowance of $ 18.5 million , net of federal tax benefits, has been provided principally for certain state credit carryforwards, net operating loss and capital loss carryforwards.

Since February 2, 2019 , the valuation allowance has been decreased to reflect foreign net operating losses expected to be utilized over the carryforward period.

In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred taxes will not be realized.

Based upon the availability of carrybacks of future deductible amounts and the Company’s projections for future taxable income over the periods in which the deferred tax assets are deductible, the Company believes it is more likely than not the remaining existing deductible temporary differences will reverse during periods in which carrybacks are available or in which the Company generates net taxable income.

A valuation allowance of $ 16.8 million, net of federal tax benefits, has been provided principally for certain state credit carryforwards and net operating loss carryforwards.

Since February 1, 2020, the valuation allowance has been decreased to reflect capital loss carryforwards, state credits and net operating losses expected to be utilized over the carryforward period.

In assessing the realizability of deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred taxes will not be realized.

Based upon the availability of carrybacks of future deductible amounts and our projections for future taxable income over the periods in which the deferred tax assets are deductible, we believe it is more likely than not the remaining existing deductible temporary differences will reverse during periods in which carrybacks are available or in which we generate net taxable income.

Uncertain Tax Positions

The Company is participating in the IRS Compliance Assurance Program (“CAP”) for fiscal 2019 .

We are participating in the IRS Compliance Assurance Program (“CAP”) for fiscal 2020 and we have been accepted into the program for fiscal 2021.

This program accelerates the examination of key transactions with the goal of resolving any issues before the tax return is filed.

The Company’s federal tax returns have been examined and all issues have been settled through the fiscal 2018 tax year.

Our federal tax returns have been examined and all issues have been settled through the fiscal 2019 tax year.

Several states completed their examinations during fiscal 2020.

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The statute of limitations is still open prior to fiscal 2017 for some states.

The Company will participate in the CAP program for fiscal 2020 under the IRS’s new bridge year program.

As a result, the IRS will not be providing a final audit determination on the 2020 tax return.

The balance for unrecognized tax benefits at February 1, 2020 was $ 28.9 million .

The total amount of unrecognized tax benefits at February 1, 2020 that, if recognized, would affect the effective tax rate was $ 23.0 million (net of the federal tax benefit).

The following is a reconciliation of the Company’s total gross unrecognized tax benefits:

(in millions)

February 1, 2020

February 2, 2019

For fiscal 2020, we are participating in the CAP under the IRS’s bridge year program and as a result, the IRS will not be completing an audit on the 2020 tax return.

The balance for unrecognized tax benefits at January 30, 2021 was $ 22.6 million.

The total amount of unrecognized tax benefits at January 30, 2021 that, if recognized, would affect the effective tax rate was $ 17.9 million (net of the federal tax benefit).

The following is a reconciliation of our total gross unrecognized tax benefits:

(in millions) January 30, 2021 February 1, 2020

Beginning Balance $ 28.9 $ 35.4

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Ending balance $ 22.6 $ 28.9

The Company believes it is reasonably possible that $ 9.0 million to $ 11.0 million of the reserve for uncertain tax positions may be reduced during the next 12 months principally as a result of the effective settlement of outstanding issues.

We believe it is reasonably possible that $ 6.0 million to $ 7.0 million of the reserve for uncertain tax positions may be reduced during the next 12 months principally as a result of the effective settlement of outstanding issues.

It is also possible that state tax reserves will be reduced for audit settlements and statute expirations within the next 12 months.

At this point it is not possible to estimate a range associated with the resolution of these audits.

The Company does not expect any change to have a material impact to its consolidated financial statements.

As of February 1, 2020 , the Company has recorded a liability for potential interest and penalties of $ 3.3 million .

We do not expect any change to have a material impact to our consolidated financial statements.

As of January 30, 2021, we have recorded a liability for potential interest and penalties of $ 2.6 million.

Note 5 – Commitments and Contingencies

Purchase Obligations

The Company has commitments totaling approximately $ 123.2 million related to agreements for software licenses and support, telecommunication services and store technology assets and maintenance for its stores.

We have commitments totaling $ 189.8 million related to agreements for software licenses and support, telecommunication services and store technology assets and maintenance for its stores.

Letters of Credit

The Company has $ 330.0 million in Letter of Credit Reimbursement and Security Agreements with various financial institutions, under which approximately $ 134.7 million was committed to these letters of credit issued for routine purchases of imported merchandise at February 1, 2020 .

At February 1, 2020 , the Company also had approximately $ 136.9 million in standby letters of credit that serve as collateral for its large-deductible insurance programs and expire in fiscal 2020 .

The Company has issued various surety bonds that primarily serve as collateral for utility payments at the Company’s stores and self-insured insurance programs.

These bonds total approximately $ 69.3 million and are committed through various dates through fiscal 2023 .

We have $ 356.5 million in Letter of Credit Reimbursement and Security Agreements with various financial institutions, under which $ 209.6 million was committed to these letters of credit issued for routine purchases of imported merchandise at January 30, 2021.

At January 30, 2021, we also have $ 98.7 million in standby letters of credit that serve as collateral for our large-deductible insurance programs and expire in fiscal 2021.

We have issued various surety bonds that primarily serve as collateral for utility payments at our stores and self-insured insurance programs.

These bonds total $ 96.5 million and are committed through various dates through fiscal 2024.

Contingencies

The Company is a defendant in legal proceedings including a Food and Drug Administration (“FDA”) proceeding and the class, collective, representative and large cases described below as well as individual claims in arbitration.

The arbitrations include more than 2,100 wage and hour claims filed by one law firm.

The law firm has thousands of additional claims threatened to be filed in the future.

The Company will vigorously defend itself in all matters referred to in this Note 5.

The Company does not believe that any of these matters will, individually or in the aggregate, have a material effect on its business or financial condition.

The Company cannot give assurance, however, that one or more of these matters will not have a material effect on its results of operations for the quarter or year in which they are resolved.

The Company assesses its legal proceedings monthly and reserves are established if a loss is probable and the amount of such loss can be reasonably estimated.

We are defendants in legal proceedings including the class, collective, representative and large cases described below as well as individual claims in arbitration.

We will vigorously defend ourselves in these matters.

We do not believe that any of these matters will, individually or in the aggregate, have a material effect on our business or financial condition.

We cannot give assurance, however, that one or more of these matters will not have a material effect on our results of operations for the quarter or year in which they are resolved.

We assess our legal proceedings monthly and reserves are established if a loss is probable and the amount of such loss can be reasonably estimated.

For matters that have settled, we reserve the estimated settlement amount even if the settlement has not been approved by the court.

Many, if not substantially all, of our legal proceedings are subject to significant uncertainties and, therefore, determining the likelihood of a loss and the measurement of any loss can be complex and subject to judgment.

With respect to legal proceedings where the Company has determined that a loss is reasonably possible but not probable, the Company is unable to estimate the amount or range of the reasonably possible loss due to the inherent difficulty of predicting the outcome of and uncertainties regarding legal proceedings.

The Company’s assessments are based on estimates and assumptions that have been deemed reasonable by management, but that may prove to be incomplete or inaccurate, and unanticipated events and circumstances may occur that might cause the Company to change those estimates and assumptions.

Management’s assessment

of legal proceedings could change because of future determinations or the discovery of facts which are not presently known.

With respect to legal proceedings where we have determined that a loss is reasonably possible but not probable, we are unable to estimate the amount or range of the reasonably possible loss due to the inherent difficulty of predicting the outcome of and uncertainties regarding legal proceedings.

Our assessments are based on estimates and assumptions that have been deemed reasonable by management, but that may prove to be incomplete or inaccurate, and unanticipated events and circumstances may occur that might cause us to change those estimates and assumptions.

Management’s assessment of legal proceedings could change because of future determinations or the discovery of facts which are not presently known.

Accordingly, the ultimate costs of resolving these proceedings may be substantially higher or lower than currently estimated.

Dollar Tree Active Matters

The FDA has alleged that the Company improperly sold certain topically applied, over the counter (“OTC”) products manufactured by certain Chinese factories that were on an import “alert” restriction issued by the FDA.

The Company responded to the FDA by proposing enhanced procedures and processes for any OTC products it imports from China.

In April 2015, a distribution center employee filed a class action in California state court with allegations concerning wages, meal and rest breaks, recovery periods, wage statements and timely termination pay.

The Company has reached an agreement in principle to settle the matter which will be submitted to the court for approval.

In August 2018, a former employee brought suit in California state court as a class action and as a Private Attorney General Act (“PAGA”) representative suit alleging the Company failed to provide all non-exempt California store employees with compliant rest and meal breaks, accrued vacation, accurate wage statements and final pay upon termination of employment.

The Company has reached an agreement in principle to settle the matter which will be submitted to the court for approval.

In December 2018, two former employees brought a PAGA suit in California state court alleging that Dollar Tree Stores, Inc.

and Dollar Tree Distribution, Inc.

failed to provide non-exempt California store and distribution center employees with rest and meal breaks, suitable seating, overtime pay, minimum wage for all time worked, reporting time pay, accurate wage statements, timely payment of wages during and upon termination of employment, failed to reimburse business expenses, and made unlawful deductions from wage payments.

Several lawsuits have been filed against Dollar Tree, Family Dollar and their vendors alleging that personal talc powder products caused cancer.

The Company does not believe the products it sold caused the illnesses.

The Company believes these lawsuits are insured and is being indemnified by its third party vendors.

The Food and Drug Administration (“FDA”) has alleged that we improperly sold certain topically applied, over the counter

(“OTC”) products manufactured by certain Chinese factories that were on an import “alert” restriction issued by the FDA.

We responded to the FDA by proposing enhanced procedures and processes for any OTC products we import from China.

In December 2020, a former store manager brought a class action in California state court alleging we failed to reimburse employees for business expenses and in so failing, engaged in unfair competition.

Actual or threatened California state court lawsuits have been filed against Dollar Tree and Family Dollar for similar employment-related claims brought under Private Attorney General Act (“PAGA”).

These cases may allege violations such as failure to provide employees with compliant rest and meal breaks, suitable seating and overtime pay, reimburse business expenses, pay minimum wages for all time worked, provide accurate wage statements, and timely pay wages as well as other potential labor code violations.

Lawsuits have been filed against Dollar Tree, Family Dollar and our vendors alleging that personal talc powder products caused cancer.

We do not believe the products we sold caused the illnesses.

We believe these lawsuits are insured and we are being indemnified by our third party vendors.

Dollar Tree Resolved Matters

In 2015, a former store manager filed a class action in California federal court alleging, among other things, that the Company failed to make wage statements readily available to employees who did not receive paper checks.

In 2017, a jury found in favor of the Company.

In 2019, the 9th Circuit Court of Appeals affirmed the jury verdict.

In July 2019, the plaintiff filed a petition with the Supreme Court of the United States seeking a review of the decision.

The Supreme Court denied the petition and the case is now resolved.

We have reached an agreement and received final approval from the court.

In August 2018, a former employee brought suit in California state court as a class action and as a PAGA representative suit alleging we failed to provide all non-exempt California store employees with compliant rest and meal breaks, accrued vacation, accurate wage statements and final pay upon termination of employment.

We have reached an agreement to settle the matter and have received the court’s approval.

In June 2020, a current employee filed a class action in California state court on behalf of herself and other non-exempt store employees in California alleging we failed to provide an effective illness and injury prevention program in our California stores and failed to provide personal protective equipment to our store employees thereby engaging in unfair business practices and creating a public nuisance.

The court granted our request to compel arbitration which resolves the class action matter.

The consumer dismissed the January 2020 class action that was filed against us in New York relating to Almond Milk sold by us.

Family Dollar Active Matters

In January 2017, a customer filed a class action in federal court in Illinois alleging the Company violated various state consumer fraud laws as well as express and implied warranties by selling a product that purported to contain aloe when it did not.

The requested class is limited to the state of Illinois.

The Company believes that it is fully indemnified by the entities that supplied it with the product.

Beginning in 2019, a law firm has filed lawsuits around the country, including purported nationwide and state class actions, alleging the Company violated the public accommodation requirements of the Americans with Disabilities Act or its state law equivalent, by systemically blocking the aisles with merchandise.

In August 2020, a consumer class action was filed against us in New York alleging Smoked Almonds sold by us are mislabeled because the almonds do not go through a smoking process but rather acquire their smoky taste through the use of smoked flavoring.

The legal claims include New York consumer protection laws, negligent misrepresentations, breach of warranties, fraud and unjust enrichment.

In late 2019 and early 2020, personal injury and consumer class actions were filed alleging that we sold Zantac containing N- Nitrosodimethylamine, which is classified by the FDA as a probable carcinogen.

Although all the suits were dismissed in December, 2020, on February 8, 2021, an Amended Master Personal Injury Complaint was filed against us and other retailers, manufacturers, and distributors alleging unjust enrichment, physical harm, loss of consortium, and death.

In January 2021, a consumer class action was filed against us in Georgia for breach of warranty based on the allegation that the coffee we sold was mislabeled because the canister did not contain enough coffee to make the number of cups of coffee stated on the label.

Please see the description above for talc and PAGA lawsuits against Family Dollar.

Family Dollar Resolved Matters

In 2018, a former store manager and a former assistant store manager filed class actions in California state court seeking to recover for working off the clock, non-compliant rest and meal periods and related claims.

The case has been resolved.

In 2018, a former store manager filed suit in California state court asserting class and PAGA claims on behalf of himself and a class of current and former employees for alleged off the clock work, alleged failure to receive compliant rest and meal breaks and related claims.

The case has been resolved.

In 2018, a former assistant store manager filed a PAGA suit in California state court alleging the Company failed to provide rest and meal breaks, failed to pay minimum, regular and overtime wages, failed to maintain accurate records and provide accurate wage statements, failed to timely pay wages due upon termination of employment and failed to reimburse employees for business expenses.

The case was dismissed without prejudice.

The court dismissed a January 2017 lawsuit filed as a class action in federal court in Illinois alleging we violated various state consumer fraud laws as well as express and implied warranties by selling a product that purported to contain aloe when it did not.

We have reached a tentative settlement, which will have to be approved by the court, of multiple class actions that were brought under the Americans with Disabilities Act.

Note 6 - Long-Term Debt

Long-term debt at February 1, 2020 and February 2, 2019 consists of the following:

February 1, 2020

February 2, 2019

(in millions)

Unamortized Debt Discount, Premium and Issuance Costs

Long-term debt at January 30, 2021 and February 1, 2020 consists of the following:

January 30, 2021 February 1, 2020

(in millions) Principal Unamortized Debt Discount and Issuance Costs Principal Unamortized Debt Discount, Premium and Issuance Costs

5.00 % Senior Notes, due 2021

$ — $ — $ 300.0 $ ( 2.4 )

$ 1.25 billion Revolving Credit Facility, interest

payable at LIBOR, reset periodically, plus

1.25%, which was 2.91% at February 1, 2020

Senior Floating Rate Notes, due 2020, interest

payable at LIBOR, reset quarterly, plus 0.70%,

which was 2.45% at February 1, 2020

1.125 %, which was 1.24 % at January 30, 2021

Senior Floating Rate Notes, due 2020 — — 250.0 0.2

3.70 % Senior Notes, due 2023

1,000.0 4.2 1,000.0 5.9

4.00 % Senior Notes, due 2025

1,000.0 5.1 1,000.0 6.2

4.20 % Senior Notes, due 2028

1,250.0 9.2 1,250.0 10.2

Total $ 3,250.0 $ 23.8 $ 3,800.0 $ 27.8

Maturities of long-term debt are as follows (in millions):

2021 2022 2023 2024 2025 Thereafter

$ — $ — $ 1,000.0 $ — $ 1,000.0 $ 1,250.0

Senior Credit Facilities

On April 19, 2018, the Company entered into a credit agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent, providing for $ 2.03 billion in senior credit facilities (the “Senior Credit Facilities”), consisting of a $ 1.25 billion revolving credit facility (the “Revolving Credit Facility”), of which up to $ 350.0 million is available for letters of credit, and a $ 782.0 million term loan facility (the “Term Loan Facility”), which was scheduled to mature on April 19, 2020.

The loans under the Term Loan Facility bore interest at an initial interest rate of LIBOR, reset periodically, plus 1.00 % , subject to adjustment based on (i) the Company’s credit ratings and (ii) the Company’s leverage ratio.

The Company borrowed the entire $ 782.0 million Term Loan Facility on April 19, 2018 and repaid the entire amount in January 2019.

On April 19, 2018, we entered into a credit agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent, providing for $ 2.03 billion in senior credit facilities (the “Senior Credit Facilities”), consisting of a $ 1.25 billion revolving credit facility (the “Revolving Credit Facility”), of which up to $ 350.0 million is available for letters of credit, and a $ 782.0 million term loan facility (the “Term Loan Facility”), which was scheduled to mature on April 19, 2020.

The loans under the Term Loan Facility bore interest at an initial interest rate of LIBOR, reset periodically, plus 1.00 %, subject to adjustment based on (i) our credit ratings and (ii) our leverage ratio.

We borrowed the entire $ 782.0 million Term Loan Facility on April 19, 2018 and repaid the entire amount in January 2019.

The Revolving Credit Facility matures on April 19, 2023, subject to extensions permitted under the Credit Agreement.

The loans under the Revolving Credit Facility bore interest at an initial interest rate of LIBOR, reset periodically, plus 1.25 % , subject to adjustment based on (i) the Company’s credit ratings and (ii) the Company’s leverage ratio.

The loans under the Revolving Credit Facility bore interest at an initial interest rate of LIBOR, reset periodically, plus 1.25 %, subject to adjustment based on (i) our credit ratings and (ii) our leverage ratio.

Based on these factors, interest on the loans under the Revolving Credit Facility may range from LIBOR plus 1.00 % to 1.50 %.

At February 1, 2020 , the Revolving Credit Facility bore interest at LIBOR plus 1.25 % .

The Company pays certain commitment fees in connection with the Revolving Credit Facility.

At January 30, 2021, the Revolving Credit Facility bore interest at LIBOR plus 1.125 %.

We pay certain commitment fees in connection with the Revolving Credit Facility.

The Senior Credit Facilities allow voluntary repayment of outstanding loans at any time without premium or penalty, other than customary breakage costs with respect to LIBOR loans.

The Senior Credit Facilities contain a number of affirmative and negative covenants that, among other things, and subject to certain significant baskets and exceptions, restrict the Company’s ability to incur subsidiary indebtedness, incur liens, sell all or substantially all of the Company’s (including the Company’s subsidiaries’) assets and consummate certain fundamental changes.

The Senior Credit Facilities contain a number of affirmative and negative covenants that, among other things, and subject to certain significant baskets and exceptions, restrict our ability to incur subsidiary indebtedness, incur liens, sell all or substantially all of our (including our subsidiaries’) assets and consummate certain fundamental changes.

The Senior Credit Facilities also contain a maximum rent-adjusted leverage ratio covenant and a minimum fixed charge coverage ratio covenant.

The Credit Agreement provides for certain events of default which, if any of them occurs, would permit or require the loans under the Senior Credit Facilities to be declared due and payable and the commitments thereunder to be terminated.

On April 19, 2018, the Company completed the registered offering of $ 750.0 million aggregate principal amount of Senior Floating Rate Notes due 2020 (the “Floating Rate Notes”), $ 1.0 billion aggregate principal amount of 3.70 % Senior Notes due 2023 (the “2023 Notes”), $ 1.0 billion aggregate principal amount of 4.00 % Senior Notes due 2025 (the “2025 Notes”) and $ 1.25 billion aggregate principal amount of 4.20 % Senior Notes due 2028 (the “2028 Notes” and together with the 2023 Notes and the 2025 Notes, the “Fixed Rate Notes”;

In the first quarter of fiscal 2020, we preemptively drew $ 750.0 million on our Revolving Credit Facility to reduce our exposure to potential short-term liquidity risk in the banking system as a result of the COVID-19 pandemic, all of which was repaid by the end of the third quarter of fiscal 2020.

On April 19, 2018, we completed the registered offering of $ 750.0 million aggregate principal amount of Senior Floating Rate Notes due 2020 (the “Floating Rate Notes”), $ 1.0 billion aggregate principal amount of 3.70 % Senior Notes due 2023 (the “2023 Notes”), $ 1.0 billion aggregate principal amount of 4.00 % Senior Notes due 2025 (the “2025 Notes”) and $ 1.25 billion aggregate principal amount of 4.20 % Senior Notes due 2028 (the “2028 Notes” and together with the 2023 Notes and the 2025 Notes, the “Fixed Rate Notes”;

and the Fixed Rate Notes together with the Floating Rate Notes, the “Notes”).

The Notes were issued pursuant to an indenture, dated as of April 2, 2018, between the Company and U.S.

The Notes were issued pursuant to an indenture, dated as of April 2, 2018, between us and U.S.

Bank National Association, as trustee, as supplemented by the First Supplemental Indenture dated as of April 19, 2018 (the “First Supplemental Indenture”).

The Notes are unsecured, unsubordinated obligations of the Company and rank equal in right of payment to all of the Company’s existing and future debt and other obligations that are not, by their terms, expressly subordinated in right of payment to the Notes.

The Notes are unsecured, unsubordinated obligations of ours and rank equal in right of payment to all of our existing and future debt and other obligations that are not, by their terms, expressly subordinated in right of payment to the Notes.

The 2023 Notes mature on May 15, 2023 and bear interest at the rate of 3.70 % annually.

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The 2028 Notes mature on May 15, 2028 and bear interest at the rate of 4.20 % annually.

The Company is required to pay interest on the Fixed Rate Notes semiannually, in arrears, on May 15 and November 15 of each year, beginning on November 15, 2018, to holders of record on the preceding May 1 and November 1, respectively.

The Floating Rate Notes mature on April 17, 2020 and bear interest at a floating rate, reset quarterly, equal to LIBOR plus 70 basis points.

The Company is required to pay interest on the Floating Rate Notes quarterly, in arrears, on January 17, April 17, July 17 and October 17 of each year, beginning on July 17, 2018, to holders of record on the preceding January 3, April 3, July 3 and October 3, respectively.

The Company may redeem the Floating Rate Notes in whole or in part at any time beginning on April 22, 2019 at a price equal to 100 % of the principal amount of Floating Rate Notes being redeemed plus accrued but unpaid interest to, but excluding, the redemption date.

The Company may redeem the Fixed Rate Notes of each series in whole or in part, at its option, at any time and from time to time prior to (i) in the case of the 2023 Notes, April 15, 2023, (ii) in the case of the 2025 Notes, March 15, 2025 and (iii) in the case of the 2028 Notes, February 15, 2028 (each such date with respect to the applicable series, the “Applicable Par Call Date”), in each case, at a “make-whole” price described in the First Supplemental Indenture plus accrued and unpaid interest to, but excluding, the date of redemption.

In addition, on or after the Applicable Par Call Date, the Company may redeem the Fixed Rate Notes of the applicable series, at any time in whole or from time to time in part, at a redemption price equal to 100 % of the principal amount thereof.

In the event of a Change of Control Triggering Event, as defined in the indenture, with respect to any series, the holders of the Notes of such series may require the Company to purchase for cash all or a portion of their Notes of such series at a purchase price equal to 101 % of the principal amount of such Notes, plus accrued and unpaid interest, if any, to, but excluding, the date of repurchase.

The indenture limits the ability of the Company and its subsidiaries, subject to significant baskets and exceptions, to incur certain secured debt.

We are required to pay interest on the Fixed Rate Notes semiannually, in arrears, on May 15 and November 15 of each year, beginning on November 15, 2018, to holders of record on the preceding May 1 and November 1, respectively.

The Floating Rate Notes matured on April 17, 2020 and bore interest at a floating rate, reset quarterly, equal to LIBOR plus 70 basis points.

We were required to pay interest on the Floating Rate Notes quarterly, in arrears, on January 17, April 17, July 17 and October 17 of each year, beginning on July 17, 2018, to holders of record on the preceding January 3, April 3, July 3 and October 3, respectively.

We may redeem the Fixed Rate Notes of each series in whole or in part, at our option, at any time and from time to time prior to (i) in the case of the 2023 Notes, April 15, 2023, (ii) in the case of the 2025 Notes, March 15, 2025 and (iii) in the case of the 2028 Notes, February 15, 2028 (each such date with respect to the applicable series, the “Applicable Par Call Date”), in each case, at a “make-whole” price described in the First Supplemental Indenture plus accrued and unpaid interest to, but excluding, the date of redemption.

In addition, on or after the Applicable Par Call Date, we may redeem the Fixed Rate Notes of the applicable series, at any time in whole or from time to time in part, at a redemption price equal to 100 % of the principal amount thereof.

In the event of a Change of Control Triggering Event, as defined in the indenture, with respect to any series, the holders of the Notes of such series may require us to purchase for cash all or a portion of their Notes of such series at a purchase price equal to 101 % of the principal amount of such Notes, plus accrued and unpaid interest, if any, to, but excluding, the date of repurchase.

The indenture limits our ability and that of our subsidiaries, subject to significant baskets and exceptions, to incur certain secured debt.

The First Supplemental Indenture also provides for events of default which, if any of them occurs, would permit or require the principal of and accrued interest on the Notes to become or to be declared due and payable, as applicable.

Upon the acquisition of Family Dollar in 2015, the Company assumed the liability for $ 300.0 million of 5.00 % Senior Notes due February 1, 2021 .

The Company may retire the notes early at a redemption price equal to the greater of (1) 100 % of the principal amount of the notes to be redeemed and (2) the present value of the remaining scheduled payments of principal and interest at a specified treasury rate as of the redemption date plus 30 basis points, plus, in either case, accrued and unpaid interest up to the redemption date.

Upon the acquisition of Family Dollar in 2015, we assumed the liability for $ 300.0 million of 5.00 % Senior Notes that were due February 1, 2021.

Repayments of Long-term Debt

During the first quarter of 2018, the Company redeemed its $ 750.0 million acquisition notes and accelerated the amortization of debt-issuance costs associated with the notes of $ 6.1 million , which is included in “Interest expense, net” within the accompanying consolidated statements of operations for the year ended February 2, 2019.

In connection with entry into the Credit Agreement and the offering of the Notes discussed above, the Company used the proceeds of borrowings under the Senior Credit Facilities, together with the net proceeds from the offering of the Notes and cash on hand to repay the $ 2.2 billion then outstanding under its existing senior secured credit facilities and to redeem the remaining $ 2.5 billion then outstanding under its acquisition debt.

This resulted in the acceleration of the expensing of approximately $ 41.2 million of amortizable non-cash deferred financing costs and the incurrence of $ 114.3 million in prepayment penalties, which are reflected in “Interest expense, net” within the accompanying consolidated statements of operations for the year ended February 2, 2019.

In the fourth quarter of 2019, the Company prepaid $ 500.0 million of its $ 750.0 million Floating Rate Notes.

During the first quarter of 2018, we redeemed our $ 750.0 million acquisition notes and accelerated the amortization of debt-issuance costs associated with the notes of $ 6.1 million, which is included in “Interest expense, net” within the accompanying consolidated statements of operations for the year ended February 2, 2019.

In connection with entry into the Credit Agreement and the offering of the Notes discussed above, we used the proceeds of borrowings under the Senior Credit Facilities, together with the net proceeds from the offering of the Notes and cash on hand to repay the $ 2.2 billion then outstanding under our existing senior secured credit facilities and to redeem the remaining $ 2.5 billion then outstanding under our acquisition debt.

This resulted in the acceleration of the expensing of $ 41.2 million of amortizable non-cash deferred financing costs and our incurring $ 114.3 million in prepayment penalties, which are reflected in “Interest expense, net” within the accompanying consolidated statements of operations for the year ended February 2, 2019.

In the fourth quarter of 2019, we prepaid $ 500.0 million of our $ 750.0 million Floating Rate Notes and we repaid the remaining $ 250.0 million outstanding in the first quarter of 2020.

In the fourth quarter of 2020, we repaid the $ 300.0 million 5.00 % Senior Notes.

Debt Covenants

As of February 1, 2020 , the Company was in compliance with its debt covenants.

As of January 30, 2021, we were in compliance with our debt covenants.

Note 7 - Leases

The lease cost for operating leases that was recognized in the accompanying consolidated statements of operations was as follows:

(in millions)

February 1, 2020

(in millions) January 30, 2021 February 1, 2020

Operating lease cost $ 1,551.2 $ 1,520.5

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*Excludes sublease income, which is immaterial

As of February 1, 2020 , maturities of lease liabilities were as follows:

As previously disclosed in our Annual Report on Form 10-K for the year ended February 2, 2019 and in accordance with ASC 840, rental expense for the year ended February 2, 2019 was $ 1,411.3 million.

As of January 30, 2021, maturities of lease liabilities were as follows:

(in millions)

2021 $ 1,467.5

Thereafter 1,578.0

Total undiscounted lease payments 7,222.7

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Present value of lease liabilities $ 6,413.7

The future minimum lease payments above exclude $ 238.4 million of legally binding minimum lease payments for leases signed but not yet commenced as of February 1, 2020 .

Information regarding the weighted-average remaining lease term and the weighted-average discount rate for operating leases as of February 1, 2020 is as follows:

The future lease payments above exclude $ 236.8 million of legally binding minimum lease payments for leases signed but not yet commenced as of January 30, 2021.

Information regarding the weighted-average remaining lease term and the weighted-average discount rate for operating leases is as follows:

January 30, 2021 February 1, 2020

Weighted-average remaining lease term (years) 6.1 6.4

Weighted-average discount rate 3.9 % 4.3 %

The following represents supplemental information pertaining to the Company’s operating lease arrangements:

(in millions)

February 1, 2020

The following represents supplemental information pertaining to our operating lease arrangements:

(in millions) January 30, 2021 February 1, 2020

Cash paid for amounts included in the measurement of lease liabilities:

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Right-of-use assets obtained in exchange for new operating lease liabilities 1,440.2 1,286.1

As previously disclosed in the Company’s Annual Report on Form 10-K for the year ended February 2, 2019 and in accordance with ASC 840, future minimum lease payments under non-cancellable operating leases were as follows as of February 2, 2019:

(in millions)

Total minimum lease payments

The above future minimum lease payments include amounts for leases that were signed prior to February 2, 2019 for stores that were not open as of February 2, 2019 and exclude contingent rentals that may be paid under certain store leases based on a percentage of sales in excess of stipulated amounts.

As of February 2, 2019, future minimum lease payments have not been reduced by expected future minimum sublease rentals of $ 1.2 million under operating leases.

Distribution Center Lease and Related Bonds

In May 2017, the Company entered into a long-term property lease (“Missouri Lease”) which includes land and the construction of a 1.2 million square foot distribution center in Warrensburg, Missouri (“Distribution Center Project”).

The Distribution Center Project was completed in 2018 and the Company’s investment in the project of $ 102.6 million as of February 1, 2020 is reflected in “Property, plant and equipment, net.” The Missouri Lease commenced upon its execution in May 2017 and expires on December 1, 2032.

The Company has two options to extend the Missouri Lease term for up to a combined additional ten years .

Following the expiration of the lease, the property reverts back to the Company.

In addition to being a party to the Missouri Lease, the Company is also the owner of bonds which were issued in May 2017, are secured by the Missouri Lease and expire December 1, 2032 (“Missouri Bonds”).

In May 2017, we entered into a long-term property lease (“Missouri Lease”) which includes land and the construction of a 1.2 million square foot distribution center in Warrensburg, Missouri (“Distribution Center Project”).

The Distribution Center Project was completed in 2018 and our investment in the project of $ 96.9 million as of January 30, 2021 is reflected in “Property, plant and equipment, net.” The Missouri Lease commenced upon its execution in May 2017 and expires on December 1, 2032.

We have two options to extend the Missouri Lease term for up to a combined additional ten years .

Following the expiration of the lease, the property reverts back to us.

In addition to being a party to the Missouri Lease, we are also the owner of bonds which were issued in May 2017, are secured by the Missouri Lease and expire December 1, 2032 (“Missouri Bonds”).

The Missouri Bonds are debt issued by the lessor in the Missouri Lease.

Therefore, the Company holds the debt instrument pertaining to its Missouri Lease obligation.

Because a legal right of offset exists, the Company is accounting for the Missouri Bonds as a reduction of its Missouri Lease obligation in the accompanying consolidated balance sheets.

Therefore, we hold the debt instrument pertaining to our Missouri Lease obligation.

Because a legal right of offset exists, we are accounting for the Missouri Bonds as a reduction of our Missouri Lease obligation in the accompanying consolidated balance sheets.

Note 8 - Fair Value Measurements

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As required, financial assets and liabilities are classified in the fair value hierarchy 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.

Our 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.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

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that is, the assets and liabilities are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (e.g., when there is evidence of impairment).

The Company reviews certain store assets for evidence of impairment.

The fair values are determined

based on the income approach, in which the Company utilizes internal cash flow projections over the life of the underlying lease agreements discounted based on the Company’s risk-adjusted rate.

We review certain store assets for evidence of impairment.

The fair values are determined based on the income approach, in which we utilize internal cash flow projections over the life of the underlying lease agreements discounted based on our risk-adjusted rate.

These measures of fair value, and related inputs, are considered a Level 3 approach under the fair value hierarchy.

Refer to Note 1 under the caption “Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of” for information regarding the impairment charges recorded in fiscal 2020, 2019 and 2018.

The Company’s indefinite-lived intangible assets are recorded at carrying value, and, if impaired, are adjusted to fair value using Level 3 inputs.

Our indefinite-lived intangible assets are recorded at carrying value, and, if impaired, are adjusted to fair value using Level 3 inputs.

See Note 3 for further information regarding the process of determining the fair value of these assets.

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The carrying amounts of Cash and cash equivalents, Restricted cash and Accounts payable as reported in the accompanying consolidated balance sheets approximate fair value due to their short-term maturities.

The aggregate fair values and carrying values of the Company’s long-term borrowings were as follows:

February 1, 2020

February 2, 2019

(in millions)

Carrying Value

The fair values of the Company’s 5.00 % Senior Notes due 2021 and the Notes (collectively, the “Senior Notes”) were determined using Level 1 inputs as quoted prices in active markets for identical assets or liabilities are available.

The carrying value of the Company’s Revolving Credit Facility approximated its fair value because the interest rates vary with market interest rates.

The aggregate fair values and carrying values of our long-term borrowings were as follows:

January 30, 2021 February 1, 2020

(in millions) Fair Value Carrying Value Fair Value Carrying Value

Senior Notes $ 3,654.4 $ 3,231.5 $ 4,064.5 $ 3,779.9

The fair values of our Senior Notes were determined using Level 1 inputs as quoted prices in active markets for identical assets or liabilities are available.

The carrying value of our Revolving Credit Facility approximates its fair value because the interest rates vary with market interest rates.

Note 9 - Shareholders’ Equity

Preferred Stock

The Company is authorized to issue 10,000,000 shares of Preferred Stock, $ 0.01 par value per share.

No preferred shares are issued and outstanding at February 1, 2020 and February 2, 2019 .

We are authorized to issue 10,000,000 shares of Preferred Stock, $ 0.01 par value per share.

No preferred shares are issued and outstanding at January 30, 2021 and February 1, 2020.

Net Income (Loss) Per Share

The following table sets forth the calculations of basic and diluted net income (loss) per share:

January 30, February 1, February 2,

(in millions, except per share data) 2021 2020 2019

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Weighted average number of shares and dilutive potential shares

outstanding 237.3 238.3 237.9

Diluted net income (loss) per share $ 5.65 $ 3.47 $ ( 6.69 )

At February 1, 2020 and February 3, 2018 , substantially all of the stock options outstanding were included in the calculation of the weighted average number of shares and dilutive potential shares outstanding.

At January 30, 2021 and February 1, 2020, substantially all of the stock options outstanding were included in the calculation of the weighted average number of shares and dilutive potential shares outstanding.

As a result of the net loss for the year ended February 2, 2019, diluted net income (loss) per share excludes the impact of stock options and restricted stock (as determined by applying the treasury stock method) because the effect would be anti-dilutive.

Share Repurchase Programs

The Company repurchases shares on the open market and under Accelerated Share Repurchase agreements.

The Company repurchased 1,967,355 shares of common stock on the open market for approximately $ 200.0 million in fiscal 2019.

The Company did not repurchase any shares of common stock in fiscal 2018 or fiscal 2017 .

At February 1, 2020 , the Company had $ 800.0 million remaining under Board repurchase authorization.

We repurchased 3,982,478 shares of common stock on the open market for $ 400.0 million in fiscal 2020 and we repurchased 1,967,355 shares of common stock on the open market for $ 200.0 million in fiscal 2019.

We did not repurchase any shares of common stock in fiscal 2018.

At January 30, 2021, we had $ 400.0 million remaining under Board repurchase authorization.

Subsequently, on March 2, 2021, the Board increased the share repurchase authorization by $ 2.0 billion resulting in a total share repurchase authorization of $ 2.4 billion.

Note 10 – Employee Benefit Plans

Dollar Tree Retirement Savings Plan

The Company maintains a defined contribution profit sharing and 401(k) plan which is available to all full-time, United States-based employees over 21 years of age.

We maintain a defined contribution profit sharing and 401(k) plan which is available to all full-time, United States-based employees over 21 years of age.

Eligible employees may make elective salary deferrals.

The Company may make contributions, at its discretion, to eligible employees who have completed one year of service in which they have worked at least 1,000 hours.

Contributions to and reimbursements by the Company of expenses of the plan were recorded in the accompanying consolidated statements of operations as follows:

We may make contributions, at our discretion, to eligible employees who have completed one year of service in which they have worked at least 1,000 hours.

Contributions to and reimbursements by us of expenses of the plan were recorded in the accompanying consolidated statements of operations as follows:

January 30, February 1, February 2,

(in millions) 2021 2020 2019

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Selling, general and administrative expenses 19.0 17.0 32.7

Eligible employees vest in the Company’s profit sharing contributions based on the following schedule:

Total $ 26.4 $ 25.1 $ 41.4

Eligible employees vest in our profit sharing contributions based on the following schedule:

• 20 % after two years of service

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Fixed Stock-Based Compensation Plans

Under the Company’s 2011 Omnibus Incentive Plan (“Omnibus Plan”), the Company may grant to the Company’s employees, including executive officers and independent contractors, up to 4.0 million shares of its Common Stock plus any shares available under former plans which were previously approved by the shareholders.

The Omnibus Plan permits the Company to grant equity awards in the form of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock awards, restricted stock units (“RSUs”), performance bonuses, performance share units (“PSUs”), non-employee director stock options and other equity-related awards.

Under our 2011 Omnibus Incentive Plan (“Omnibus Plan”), we may grant to our employees, including executive officers and independent contractors, up to 4.0 million shares of our Common Stock plus any shares available under former plans which were previously approved by the shareholders.

The Omnibus Plan permits us to grant equity awards in the form of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock awards, restricted stock units (“RSUs”), performance bonuses, performance share units (“PSUs”), non-employee director stock options and other equity-related awards.

These awards generally vest over a three-year period with a maximum term of 10 years.

No awards may be granted under the Omnibus Plan after March 16, 2021.

Stock appreciation rights may be awarded alone or in tandem with stock options.

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The restricted stock shares or units may not be sold, transferred, pledged or disposed of until the restrictions on the shares or units have lapsed or have been removed under the provisions of the plan.

In addition, if a holder of restricted shares or units ceases to be employed by the Company, any shares or units in which the restrictions have not lapsed will be forfeited.

The 2013 Director Deferred Compensation Plan permits any of the Company’s directors who receive a retainer or other fees for Board or Board committee service to defer all or a portion of such fees until a future date, at which time they may be paid in cash or shares of the Company’s common stock, or receive all or a portion of such fees in non-statutory stock options.

In addition, if a holder of restricted shares or units ceases to be employed by us, any shares or units in which the restrictions have not lapsed will be forfeited.

The 2013 Director Deferred Compensation Plan permits any of our directors who receive a retainer or other fees for Board or Board committee service to defer all or a portion of such fees until a future date, at which time they may be paid in cash or shares of our common stock, or receive all or a portion of such fees in non-statutory stock options.

Deferred fees that are paid out in cash will earn interest at the 30-year Treasury Bond Rate.

If a director elects to be paid in common stock,

the number of shares will be determined by dividing the deferred fee amount by the closing market price of a share of the Company’s common stock on the date of deferral.

The number of options issued to a director will equal the deferred fee amount divided by 33 % of the price of a share of the Company’s common stock.

The exercise price will equal the fair market value of the Company’s common stock at the date the option is issued.

If a director elects to be paid in common stock, the number of shares will be determined by dividing the deferred fee amount by the closing market price of a share of our common stock on the date of deferral.

The number of options issued to a director will equal the deferred fee amount divided by 33 % of the price of a share of our common stock.

The exercise price will equal the fair market value of our common stock at the date the option is issued.

The options are fully vested when issued and have a term of 10 years.

In conjunction with the acquisition of Family Dollar in 2015, the Company assumed the Family Dollar Stores, Inc.

In conjunction with the acquisition of Family Dollar in 2015, we assumed the Family Dollar Stores, Inc.

2006 Incentive Plan (the “2006 Plan”).

The 2006 Plan permitted the granting of a variety of compensatory award types, including stock options and performance share rights.

The 2003 Non-Employee Director Stock Option Plan (NEDP) provided non-qualified stock options to non-employee members of the Company’s Board of Directors.

The exercise price of each stock option granted equaled the closing market price of the Company’s stock on the date of grant.

The options generally vested immediately.

This plan was terminated on June 16, 2011 and replaced with the Omnibus Plan.

Total stock-based compensation expense was recorded in the accompanying consolidated statements of operations as follows:

January 30, February 1, February 2,

(in millions) 2021 2020 2019

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Restricted Stock

The Company issues service-based RSUs to employees and officers and issues PSUs to certain officers of the Company.

The Company recognizes expense based on the estimated fair value of the RSUs or PSUs granted over the requisite service period, which is generally three years , on a straight-line basis or a shorter period based on the retirement eligibility of the grantee.

The fair value of RSUs and PSUs is determined using the Company’s closing stock price on the date of grant.

We issue service-based RSUs to employees and officers and issue PSUs to certain of our officers.

We recognize expense based on the estimated fair value of the RSUs or PSUs granted over the requisite service period, which is generally three years , on a straight-line basis or a shorter period based on the retirement eligibility of the grantee.

The fair value of RSUs and PSUs is determined using our closing stock price on the date of grant.

Service-Based RSUs

The following table summarizes the status of service-based RSUs as of February 1, 2020 and changes during the year then ended:

Number of Shares

Weighted Average Grant Date Fair Value

Nonvested at February 2, 2019

The following table summarizes the status of service-based RSUs as of January 30, 2021 and changes during the year then ended:

Number of Shares Weighted Average Grant Date Fair Value

Nonvested at February 1, 2020 1,049,081 $ 95.17

The total fair value of the service-based restricted shares vested during the years ended February 1, 2020 , February 2, 2019 and February 3, 2018 was $ 55.5 million , $ 50.2 million and $ 58.2 million , respectively.

Granted 850,132 73.24

Vested ( 533,032 ) 91.05

Forfeited ( 100,965 ) 82.78

Nonvested at January 30, 2021 1,265,216 $ 83.16

The total fair value of the service-based restricted shares vested during the years ended January 30, 2021, February 1, 2020 and February 2, 2019 was $ 48.5 million, $ 55.5 million and $ 50.2 million, respectively.

The weighted average grant date fair value of the RSUs granted in 2020, 2019 and 2018 was $ 73.24 , $ 103.55 and $ 94.30 , respectively.

As of February 1, 2020 , there was approximately $ 47.1 million of total unrecognized compensation expense related to these RSUs which is expected to be recognized over a weighted-average period of 1.2 years .

The following table summarizes the status of PSUs as of February 1, 2020 and changes during the year then ended:

Number of Shares

Weighted Average Grant Date Fair Value

Nonvested at February 2, 2019

As of January 30, 2021, there was $ 53.5 million of total unrecognized compensation expense related to these RSUs which is expected to be recognized over a weighted-average period of 1.4 years.

The following table summarizes the status of PSUs as of January 30, 2021 and changes during the year then ended:

Number of Shares Weighted Average Grant Date Fair Value

Nonvested at February 1, 2020 320,500 $ 99.29

The total fair value of the PSUs vested during the years ended February 1, 2020 , February 2, 2019 and February 3, 2018 was $ 3.3 million , $ 4.2 million and $ 2.1 million , respectively.

Granted 428,377 74.46

Vested ( 221,876 ) 88.12

Forfeited ( 103,729 ) 85.84

Nonvested at January 30, 2021 423,272 $ 82.67

The total fair value of the PSUs vested during the years ended January 30, 2021, February 1, 2020 and February 2, 2019 was $ 19.6 million, $ 3.3 million and $ 4.2 million, respectively.

The weighted average grant date fair value of the PSUs granted in 2020, 2019 and 2018 was $ 74.46 , $ 103.71 and $ 94.90 , respectively.

As of February 1, 2020 , there was approximately $ 5.9 million of total unrecognized compensation expense related to these RSUs which is expected to be recognized over a weighted-average period of 0.7 years .

As of January 30, 2021, there was $ 17.2 million of total unrecognized compensation expense related to these RSUs which is expected to be recognized over a weighted-average period of one year .

Stock Options

Stock options are valued using the Black-Scholes option-pricing model and compensation expense is recognized on a straight-line basis, net of estimated forfeitures, over the requisite service period.

Stock options are valued using the Black-Scholes option-pricing model and compensation expense is recognized on a straight-line basis over the requisite service period.

Options granted in 2020, 2019 and 2018 are immaterial.

Certain of the Company’s directors elected to defer their compensation into stock options under the 2013 Director Deferred Compensation Plan.

Certain of our directors elected to defer their compensation into stock options under the 2013 Director Deferred Compensation Plan.

These options vest immediately and are expensed on the grant date.

The following tables summarize information about options outstanding at February 1, 2020 and changes during the year then ended:

Number of Shares

Weighted Average Per Share Exercise Price

Weighted Average Remaining Term

Aggregate Intrinsic Value

The following tables summarize information about options outstanding at January 30, 2021 and changes during the year then ended:

Number of Shares Weighted Average Per Share Exercise Price Weighted Average Remaining Term (Years) Aggregate Intrinsic Value

(in millions)

Outstanding, beginning of period 205,893 $ 76.87

Granted 6,412 89.77

Exercised ( 94,890 ) 74.19

Forfeited ( 358 ) 76.97

Outstanding, end of period 117,057 $ 79.75 4.4 $ 2.6

Options vested and exercisable at February 1,

The intrinsic value of options exercised during 2019 , 2018 and 2017 was approximately $ 1.6 million , $ 12.3 million and $ 18.3 million , respectively.

Note 12 – Segment Reporting

The Company operates a chain of more than 15,200 retail discount stores in 48 states and five Canadian provinces.

The Company’s operations are conducted in two reporting business segments:

Options vested and exercisable at January 30, 2021 117,057 $ 79.75 4.4 $ 2.6

The intrinsic value of options exercised during 2020, 2019 and 2018 was $ 0.9 million, $ 1.6 million and $ 12.3 million, respectively.

Note 12 – Segments and Disaggregated Revenue

We operate a chain of more than 15,600 retail discount stores in 48 states and five Canadian provinces.

Our operations are conducted in two reporting business segments:

Dollar Tree and Family Dollar.

The Company defines its segments as those operations whose results its CODM regularly reviews to analyze performance and allocate resources.

The Company measures the results of its segments using, among other measures, each segment’s net sales, gross profit and operating income.

The CODM reviews these metrics for each of the Company’s reporting segments.

The Company may revise the measurement of each segment’s operating income, as determined by the information regularly reviewed by the CODM.

We define our segments as those operations whose results our CODM regularly reviews to analyze performance and allocate resources.

We measure the results of our segments using, among other measures, each segment’s net sales, gross profit and operating income.

The CODM reviews these metrics for each of our reporting segments.

We may revise the measurement of each segment’s operating income, as determined by the information regularly reviewed by the CODM.

If the measurement of a segment changes, prior period amounts and balances are reclassified to be comparable to the current period’s presentation.

In the current year, the Company identified Corporate and support costs, mainly store support center costs, that are considered shared services and excluded these selling, general and administrative costs from its two reporting business segments.

These costs include operating expenses for the Company’s store support centers in Chesapeake, Virginia and Matthews, North

During fiscal 2019 the Company consolidated its Matthews, North Carolina store support center with its store support center in Chesapeake, Virginia.

The Company continues to own its facility in Matthews, North Carolina.

Corporate, support and Other consists primarily of store support center costs that are considered shared services and therefore these selling, general and administrative costs are excluded from our two reporting business segments.

These costs include operating expenses for our store support centers in Chesapeake, Virginia and Matthews, North Carolina.

During fiscal 2019, we consolidated our Matthews, North Carolina store support center with our store support center in Chesapeake, Virginia.

Corporate, support and Other also includes the results of operations for our Summit Pointe property in Chesapeake, Virginia.

Amounts for the years ended February 1, 2020 and February 2, 2019 have been reclassified to be comparable to the current year presentation.

Information for the Company’s segments, as well as for Corporate and support, including the reconciliation to Income (loss) before income taxes, is as follows:

Information for our segments, as well as for Corporate, support and Other, including the reconciliation to Income (loss) before income taxes, is as follows:

January 30, February 1, February 2,

(in millions) 2021 2020 2019

Consolidated Statements of Operations Data:

Dollar Tree $ 13,265.0 $ 12,507.9 $ 11,712.1

Family Dollar 12,243.4 11,102.9 11,111.2

Corporate, support and Other 0.9 — —

Consolidated Net sales $ 25,509.3 $ 23,610.8 $ 22,823.3

Gross profit:

Dollar Tree $ 4,543.8 $ 4,342.9 $ 4,137.5

Family Dollar 3,243.6 2,697.8 2,810.0

Corporate, support and Other 0.9 — —

Consolidated Gross profit $ 7,788.3 $ 7,040.7 $ 6,947.5

Operating income (loss):

Dollar Tree $ 1,598.0 $ 1,670.2 $ 1,657.4

Family Dollar 655.6 ( 74.9 ) ( 2,312.8 )

Corporate and support

Corporate, support and Other ( 365.7 ) ( 333.1 ) ( 284.1 )

Consolidated Operating income (loss) 1,887.9 1,262.2 ( 939.5 )

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Depreciation and amortization expense:

Dollar Tree $ 302.3 $ 277.7 $ 254.0

Family Dollar 352.6 337.9 345.3

Corporate and support

Corporate, support and Other 31.8 30.1 22.1

Consolidated depreciation and amortization expense $ 686.7 $ 645.7 $ 621.4

January 30, February 1,

(in millions) 2021 2020

Consolidated Balance Sheet Data:

Dollar Tree $ 424.9 $ 423.8

Family Dollar 1,559.5 1,559.5

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Total assets:

Dollar Tree $ 8,669.3 $ 7,694.0

Family Dollar 11,562.2 11,484.9

Corporate and support

Corporate, support and Other 464.5 395.7

Consolidated Total assets $ 20,696.0 $ 19,574.6

Additions to property, plant and equipment:

Dollar Tree $ 470.4 $ 547.5

Family Dollar 362.1 425.2

Corporate and support

Corporate, support and Other 66.3 62.1

Consolidated additions to property, plant and equipment $ 898.8 $ 1,034.8

Goodwill is reassigned between segments when stores are re-bannered between segments.

In 2019 and 2018 , the Company reassigned $ 47.6 million and $ 31.0 million , respectively, of goodwill from Family Dollar to Dollar Tree as a result of re-bannering.

In addition, in the fourth quarters of 2019 and 2018, the Company recorded goodwill impairment charges of $ 313.0 million and $ 2.73 billion , respectively, to write down the Family Dollar goodwill.

Goodwill is reassigned between segments when previously acquired stores are re-bannered between segments.

The goodwill related to previously acquired re-bannered stores in 2020 was not material.

In 2019, we reassigned $ 47.6 million of goodwill from Family Dollar to Dollar Tree as a result of re-bannering.

In addition, in the fourth quarters of 2019 and 2018, we recorded goodwill impairment charges of $ 313.0 million and $ 2.73 billion, respectively, to write down the Family Dollar goodwill.

Refer to Note 3 for additional detail regarding impairment of the Family Dollar goodwill.

Disaggregated Revenue

The following table summarizes net sales by merchandise category for the Company’s segments:

The following table summarizes net sales by merchandise category for our segments:

January 30, February 1, February 2,

(in millions) 2021 2020 2019

1 unchanged sentence

merchandise category:

Consumable $ 6,407.0 48.3 % $ 6,155.3 49.2 % $ 5,703.8 48.7 %

Variety 6,194.8 46.7 % 5,732.1 45.8 % 5,457.8 46.6 %

Seasonal 663.2 5.0 % 620.5 5.0 % 550.5 4.7 %

Total Dollar Tree segment net sales $ 13,265.0 100.0 % $ 12,507.9 100.0 % $ 11,712.1 100.0 %

1 unchanged sentence

merchandise category:

Consumable $ 9,367.8 76.5 % $ 8,604.7 77.5 % $ 8,466.7 76.2 %

Home products 1,078.1 8.8 % 866.0 7.8 % 911.1 8.2 %

3 unchanged sentences

Note 13 - Quarterly Financial Information (Unaudited)

The following table sets forth certain items from the Company’s unaudited consolidated statements of operations for each quarter of fiscal year 2019 and 2018 .

The following table sets forth certain items from our unaudited consolidated statements of operations for each quarter of fiscal year 2020 and 2019.

The unaudited information has been prepared on the same basis as the audited consolidated financial statements appearing elsewhere in this report and includes all adjustments, consisting only of normal recurring adjustments, which management considers necessary for a fair presentation of the financial data shown.

The operating results for any quarter are not necessarily indicative of results for a full year or for any future period.

(dollars in millions, except diluted net income (loss) per share data)

(dollars in millions, except diluted net income per share data) First

Quarter Third

Quarter Fourth

Net sales $ 6,286.8 $ 6,277.6 $ 6,177.0 $ 6,767.9

Gross profit $ 1,794.9 $ 1,916.2 $ 1,924.4 $ 2,152.8

Operating income $ 365.9 $ 374.9 $ 465.5 $ 681.6

3 unchanged sentences

Comparable store net sales change 2

7.0 % 7.2 % 5.1 % 4.9 %

Net sales $ 5,808.7 $ 5,740.6 $ 5,746.2 $ 6,315.3

Gross profit $ 1,727.2 $ 1,648.5 $ 1,704.5 $ 1,960.5

Operating income (loss) 2,5,6,7

Net income (loss) 2,5,6,7

Diluted net income (loss) per share 2,5,6,7

Operating income 3,4

$ 385.5 $ 268.9 $ 358.4 $ 249.4

Net income 3,4,5

$ 267.9 $ 180.3 $ 255.8 $ 123.0

Diluted net income per share 3,4,5

$ 1.12 $ 0.76 $ 1.08 $ 0.52

Stores open at end of quarter 15,264 15,115 15,262 15,288

Comparable store net sales change 2

2.2 % 2.4 % 2.5 % 0.4 %

______________

1 Easter was observed on April 12, 2020 and April 21, 2019.

There were six fewer selling days between Thanksgiving and Christmas in 2019.

2 In 2018, based on the Company’s strategic and operational reassessment of the Family Dollar segment following challenges that the business experienced that impacted the Company’s ability to grow the business at the originally estimated rate when it acquired Family Dollar in 2015, management determined there were indicators that the goodwill of the business may be impaired.

Accordingly, a goodwill impairment test was performed in the fourth quarter of fiscal 2018 and an impairment test was also performed in 2019.

These goodwill impairment charges reduced diluted net income (loss) per share by $ 1.32 and $ 11.46 per share in the fourth quarters of 2019 and 2018, respectively.

3 In the fourth quarter of 2019, the Company recorded an $ 18.0 million charge to its litigation reserve.

2 The comparable store net sales change calculation includes only those stores that are open throughout both of the periods being compared, beginning after the first fifteen months of operation.

3 In 2019, the results of the annual goodwill impairment test showed that the fair value of the Family Dollar reporting unit was lower than its carrying value, resulting in a $ 313.0 million non-cash pre-tax and after-tax goodwill impairment charge in the fourth quarter of fiscal 2019.

This goodwill impairment charge reduced diluted net income per share by $ 1.32 per share in the fourth quarter of 2019.

4 In the fourth quarter of 2019, we recorded an $ 18.0 million charge to our litigation reserve.

The recognition of this liability reduced diluted net income per share in the fourth quarter of 2019 by $ 0.06 .

4 In the fourth quarter of 2019, the Company evaluated its foreign net operating loss carryforwards and determined that it expects to utilize the carryforwards for which the Company previously had provided a valuation allowance.

5 In the fourth quarter of 2019, we evaluated our foreign net operating loss carryforwards and determined that we expect to utilize the carryforwards for which we previously had provided a valuation allowance.

The reduction of the valuation allowance increased net income and diluted net income per share in the fourth quarter of 2019 by $ 24.6 million and $ 0.10 per share, respectively.

5 In the fourth quarter of 2018, the Company recorded $ 40.0 million in sku rationalization markdown expense in the Family Dollar segment, which decreased net income (loss) and diluted net income (loss) per share by $ 30.8 million and $ 0.13 per share, respectively, in the fourth quarter of 2018.

6 In the fourth quarter of 2018, the Company reviewed certain long-lived assets and identifiable intangible assets for impairment.

As a result of its impairment analysis, the Company recorded charges of $ 13.0 million to write down certain store assets, including $ 6.1 million associated with impairment of favorable lease rights.

These store impairment charges decreased net income (loss) and diluted net income (loss) per share in the fourth quarter of 2018 by $ 10.0 million and $ 0.04 per share, respectively.

7 In the first quarter of 2018, the Company refinanced its long-term debt obligations, resulting in the payment of redemption premiums totaling $ 114.3 million .

In addition, the Company accelerated the expensing of approximately $ 41.2 million of amortizable non-cash deferred financing costs and expensed approximately $ 0.4 million in transaction-related costs.

For additional information regarding these transactions, refer to Note 6 .

This refinancing of the Company’s long-term debt decreased net income (loss) and diluted net income (loss) per share in the first quarter of 2018 by $ 123.6 million and $ 0.52 per share, respectively.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data