What changed in this filing

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Item 1. Financial Statements

2022-05-26 compared with 2021-11-23 · 97 added, 102 removed, 253 unchanged (44% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED INCOME STATEMENTS

13 Weeks Ended 39 Weeks Ended

October 30, October 31, October 30, October 31,

13 Weeks Ended

April 30, May 1,

(in millions, except per share data) 2022 2021

6 unchanged sentences

Interest expense, net 34.0 33.0

Other expense, net 0.2 0.1 0.2 0.8

Income before income taxes 697.5 486.9

6 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

13 Weeks Ended 39 Weeks Ended

October 30, October 31, October 30, October 31,

13 Weeks Ended

April 30, May 1,

(in millions) 2022 2021

5 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions) October 30, 2021 January 30, 2021 October 31, 2020

(in millions) April 30, 2022 January 29, 2022 May 1, 2021

Current assets:

15 unchanged sentences

Current liabilities:

Current portion of long-term debt $ — $ — $ 300.0

Current portion of operating lease liabilities $ 1,406.7 $ 1,407.8 $ 1,355.6

3 unchanged sentences

Total current liabilities 4,289.9 4,176.6 3,902.2

Long-term debt, net, excluding current portion 3,231.1 3,226.2 3,225.3

Long-term debt, net 3,418.1 3,417.0 3,227.8

Operating lease liabilities, long-term 5,087.9 5,145.5 5,099.2

10 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

13 Weeks Ended October 30, 2021

(in millions) Common

Shares Common

Stock Additional

Capital Accumulated

Comprehensive

Loss Retained

Earnings Shareholders'

Balance at July 31, 2021 224.9 $ 2.2 $ 1,204.9 $ ( 32.0 ) $ 5,836.6 $ 7,011.7

Net income — — — — 216.8 216.8

Total other comprehensive income — — — 0.7 — 0.7

Issuance of stock under Employee Stock

Purchase Plan — — 2.4 — — 2.4

Stock-based compensation, net — — 12.8 — — 12.8

Balance at October 30, 2021 224.9 $ 2.2 $ 1,220.1 $ ( 31.3 ) $ 6,053.4 $ 7,244.4

39 Weeks Ended October 30, 2021

13 Weeks Ended April 30, 2022

(in millions) Common

7 unchanged sentences

Net income — — — — 536.4 536.4

Total other comprehensive income — — — 3.9 — 3.9

Total other comprehensive loss — — — ( 0.1 ) — ( 0.1 )

Issuance of stock under Employee Stock

Purchase Plan — — 2.9 — — 2.9

Exercise of stock options — — 0.7 — — 0.7

Stock-based compensation, net 0.5 — ( 2.0 ) — — ( 2.0 )

Repurchase of stock ( 0.1 ) — ( 14.2 ) — — ( 14.2 )

Balance at October 30, 2021 224.9 $ 2.2 $ 1,220.1 $ ( 31.3 ) $ 6,053.4 $ 7,244.4

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

DOLLAR TREE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (cont.)

13 Weeks Ended October 31, 2020

Balance at April 30, 2022 225.5 $ 2.2 $ 1,230.6 $ ( 35.3 ) $ 7,044.0 $ 8,241.5

13 Weeks Ended May 1, 2021

(in millions) Common

5 unchanged sentences

Earnings Shareholders'

Balance at August 1, 2020 237.3 $ 2.4 $ 2,505.5 $ ( 41.2 ) $ 4,346.9 $ 6,813.6

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

Net income — — — — 374.5 374.5

2 unchanged sentences

Purchase Plan 0.1 — 3.8 — — 3.8

Stock-based compensation, net — — 14.4 — — 14.4

Repurchase of stock ( 2.1 ) — ( 200.0 ) — — ( 200.0 )

Balance at October 31, 2020 235.2 $ 2.4 $ 2,322.4 $ ( 40.6 ) $ 4,676.9 $ 6,961.1

39 Weeks Ended October 31, 2020

(in millions) Common

Shares Common

Stock Additional

Capital Accumulated

Comprehensive

Loss Retained

Earnings Shareholders'

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

Net income — — — — 839.1 839.1

Total other comprehensive loss — — — ( 0.8 ) — ( 0.8 )

Issuance of stock under Employee Stock

Purchase Plan 0.1 — 7.6 — — 7.6

Exercise of stock options — — 0.2 — — 0.2

1 unchanged sentence

Repurchase of stock ( 2.2 ) — ( 250.0 ) — — ( 250.0 )

Balance at October 31, 2020 235.2 $ 2.4 $ 2,322.4 $ ( 40.6 ) $ 4,676.9 $ 6,961.1

Balance at May 1, 2021 231.8 $ 2.3 $ 1,885.0 $ ( 30.2 ) $ 5,554.2 $ 7,411.3

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

2 unchanged sentences

13 Weeks Ended

October 30, October 31,

April 30, May 1,

(in millions) 2022 2021

12 unchanged sentences

Proceeds from governmental grant — 2.3

Proceeds from (payments for) fixed asset disposition 0.4 ( 0.5 )

Payments for fixed asset disposition ( 2.9 ) ( 0.2 )

Net cash used in investing activities ( 256.3 ) ( 222.8 )

Cash flows from financing activities:

Principal payments for long-term debt — ( 250.0 )

Proceeds from revolving credit facility — 750.0

Repayments of revolving credit facility — ( 750.0 )

Proceeds from stock issued pursuant to stock-based compensation plans 2.9 4.0

3 unchanged sentences

Effect of exchange rate changes on cash, cash equivalents and restricted cash 0.5 0.4

Net increase (decrease) in cash, cash equivalents and restricted cash ( 708.8 ) 579.2

Net increase in cash, cash equivalents and restricted cash 233.6 57.2

Cash, cash equivalents and restricted cash at beginning of period 1,038.3 1,463.6

17 unchanged sentences

The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our Annual Report on Form 10-K for the year ended January 29, 2022.

The results of operations for the 13 and 39 weeks ended October 30, 2021 are not necessarily indicative of the results to be expected for the entire fiscal year ending January 29, 2022.

In our opinion, the unaudited condensed consolidated financial statements included herein contain all adjustments (including those of a normal recurring nature) considered necessary for a fair presentation of our financial position as of October 30, 2021 and October 31, 2020 and the results of our operations and cash flows for the periods presented.

The results of operations for the 13 weeks ended April 30, 2022 are not necessarily indicative of the results to be expected for the entire fiscal year ending January 28, 2023.

In our opinion, the unaudited condensed consolidated financial statements included herein contain all adjustments (including those of a normal recurring nature) considered necessary for a fair presentation of our financial position as of April 30, 2022 and May 1, 2021 and the results of our operations and cash flows for the periods presented.

The January 29, 2022 balance sheet information was derived from the audited consolidated financial statements as of that date.

Certain prior year amounts have been reclassified for consistency with the current year presentation.

Note 2 - Commitments and Contingencies

Purchase Obligations

At October 30, 2021, we have commitments totaling $ 253.8 million related to agreements for ocean shipping contracts.

Contingencies

Note 2 - Contingencies

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

11 unchanged sentences

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 and implementing enhanced procedures and processes for any OTC products we import from China.

We believe we have made significant improvements in our processes, and the FDA has asked us to make certain additional improvements, which we are addressing.

Actual or threatened California state court lawsuits have been filed against Dollar Tree and Family Dollar for similar employment-related claims brought under the 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 off-the-clock and potential labor code violations.

Three lawsuits are pending against us and our vendors alleging that personal talc powder products caused cancer.

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

Our past talc lawsuits have been resolved without material loss to the company but

no assurance can be given as to the outcome of pending or future cases.

Although we have indemnification rights against our vendors, it is uncertain whether the vendors will have the financial ability to carry out their obligations.

It is also uncertain whether our insurers will deny coverage under our various policies.

Dollar Tree Resolved Matters

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.

The case has been resolved.

Three personal injury lawsuits are pending against Dollar Tree and one against Family Dollar alleging that certain talc products that were sold in the past caused cancer, one of which is set for trial this year.

Although we have been able to resolve previous talc lawsuits against us without material loss to the company, given the inherent uncertainties of litigation there can be no assurances regarding the outcome of pending or future cases.

Future costs to litigate these cases are not known but may be material, and it is uncertain whether our costs will be covered by insurance.

In addition, although we have indemnification rights against our vendors in several of these cases, it is uncertain whether the vendors will have the financial ability to carry out their obligations.

Family Dollar Active Matters

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 January, April, and September 2021, state-wide consumer class actions were filed against us by the same law firm in Georgia and Alabama, respectively, for breach of warranty based on the allegation that the coffee we sold was mislabeled because the canisters 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.

On February 11, 2022, the FDA issued Form 483 observations primarily regarding rodent infestation at our West Memphis, Arkansas distribution center (“DC 202”) and the related sale and distribution of adulterated product, as well as other processes and procedures that require remediation.

In connection therewith, we initiated a voluntary retail-level product recall of FDA and U.S.

Department of Agriculture-regulated products stored and shipped from DC 202 from January 1, 2021 through February 18, 2022 (the “Recall”), closed DC 202 for extensive cleaning, temporarily closed the affected stores to permit the removal and destruction of inventory subject to the Recall, ceased sales of relevant inventory subject to the Recall, ceased the shipment of FDA-regulated products from DC 202, and initiated corrective actions.

We are taking this matter extremely seriously and are responding to all observations made in the Form 483.

The circumstances leading to the Recall (and/or the Recall itself) may have other negative impacts, which could include reputational damage, lost sales, further or additional governmental investigations and/or enforcement actions, and/or private litigation (see below), which could have a material adverse effect, individually or collectively, on our business, results of operations and/or financial condition.

Since February 22, 2022, we have received 13 class action complaints primarily related to issues associated with DC 202 described above.

The lawsuits are in federal court in Mississippi, Virginia, Arkansas, Louisiana, Tennessee, Alabama, and Missouri and allege violations of the Mississippi, Arkansas, Louisiana, Tennessee, Alabama and Missouri consumer protection laws, breach of warranty, and unjust enrichment related to the sale of products that may be contaminated by virtue of rodent infestation and other unsanitary conditions.

Plaintiffs seek damages, attorney fees and costs, punitive damages and the replacement of, or refund of, money paid to purchase the relevant products, and any other legal relief available for their claims (in each case in unspecified amounts), including equitable and injunctive relief.

A hearing is scheduled in late May to determine whether these cases should proceed using the federal court’s multidistrict litigation process.

On March 1, 2022, a federal grand jury subpoena was issued to us by the Eastern District of Arkansas requesting the production of information, documents and records pertaining to pests, sanitation, compliance with law, and the issues described above.

We intend to cooperate fully with the subpoena and any related investigation, however, no assurance can be given as to the timing or outcome of this matter.

On April 28, 2022, the State of Arkansas filed a complaint in state court alleging violations of the Arkansas Deceptive Trade Practices Act, gross negligence and negligence, strict liability in tort, unjust enrichment and civil conspiracy related to the sale of products that may have been contaminated by virtue of rodent infestation and other unsanitary conditions.

The State of Arkansas is seeking injunctive relief, restitution, disgorgement, damages, civil penalties, punitive damages and suspension or revocation of our authorization to do business in Arkansas.

In January, April, and September 2021, state-wide consumer class actions were filed against us by the same law firm in Georgia, Alabama and Florida, respectively, for breach of warranty based on the allegation that the coffee we sold was mislabeled because the canisters did not contain enough coffee to make the number of cups of coffee stated on the label.

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

Family Dollar Resolved Matters

In late 2019 and early 2020, personal injury and consumer class actions were filed alleging that we sold Zantac containing a probable carcinogen.

The lawsuits were dismissed in June 2021.

The time for appealing the dismissal has not run.

In August 2020 and July 2021, consumer class actions were filed against us in New York and Illinois, respectively, 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.

Both actions alleged violation of consumer protection laws, negligent misrepresentation, breach of warranties, fraud and unjust enrichment.

Both have been dismissed with prejudice.

Note 3 - Fair Value Measurements

4 unchanged sentences

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).

We did not record any significant impairment charges during the 13 or 39 weeks ended October 30, 2021 and October 31, 2020.

We did not record any material impairment charges during the 13 weeks ended April 30, 2022 or May 1, 2021.

Fair Value of Financial Instruments

1 unchanged sentence

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

October 30, 2021 January 30, 2021 October 31, 2020

April 30, 2022 January 29, 2022 May 1, 2021

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

4 unchanged sentences

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

13 Weeks Ended 39 Weeks Ended

October 30, October 31, October 30, October 31,

13 Weeks Ended

April 30, May 1,

(in millions, except per share data) 2022 2021

11 unchanged sentences

Diluted net income per share $ 2.37 $ 1.60

For the 13 and 39 weeks ended October 30, 2021 and October 31, 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.

Stock options and other stock-based awards of 2.9 million shares and 0.7 million shares were excluded from the calculation of diluted net income per share for the 13 weeks ended April 30, 2022 and May 1, 2021, respectively, because their inclusion would be anti-dilutive.

Note 5 - Stock-Based Compensation

For a discussion of our stock-based compensation plans, refer to “Note 10 - Stock-Based Compensation Plans” of our Annual Report on Form 10-K for the year ended January 29, 2022.

Stock-based compensation expense was $ 63.1 million and $ 70.5 million during the 39 weeks ended October 30, 2021 and October 31, 2020, respectively.

Stock-based compensation expense was $ 35.8 million and $ 31.8 million during the 13 weeks ended April 30, 2022 and May 1, 2021, respectively.

Restricted Stock

1 unchanged sentence

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.

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

Service-Based RSUs

The following table summarizes the status of service-based RSUs as of October 30, 2021 and changes during the 39 weeks then ended:

The following table summarizes the status of service-based RSUs as of April 30, 2022 and changes during the 13 weeks then ended:

Number of Shares Weighted Average

Nonvested at January 29, 2022

1,096,066 $ 94.16

Granted 416,729 159.34

1 unchanged sentence

Forfeited ( 40,005 ) 111.77

Nonvested at October 30, 2021 1,177,297 $ 93.86

The following table summarizes the status of PSUs as of October 30, 2021 and changes during the 39 weeks then ended:

Nonvested at April 30, 2022

962,748 $ 122.32

The following table summarizes the status of PSUs as of April 30, 2022 and changes during the 13 weeks then ended:

Number of Shares Weighted Average

Nonvested at January 29, 2022

584,972 $ 91.86

Granted 198,718 158.47

1 unchanged sentence

Forfeited ( 100,229 ) 114.41

Nonvested at October 30, 2021 584,972 $ 91.86

Nonvested at April 30, 2022

410,007 $ 119.50

Stock Options

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.

On March 19, 2022, we granted a one-time award of options to purchase 2,252,587 shares of our common stock with a fair value of $ 135.6 million to the Executive Chairman of the Board.

The grant of options was subject to the terms and conditions of a five-year Executive Agreement with the Executive Chairman.

The option award has a ten-year term and is scheduled to vest in equal installments on each of the first five anniversaries of the grant date, subject to the Executive Chairman’s continued employment with the company through each vesting date.

The assumptions used in the Black-Scholes option pricing model for this award are as follows:

Expected term (in years) 6.5

Expected stock price volatility 34.1 %

Dividend yield — %

Risk-free interest rate 2.15 %

The simplified method was used to estimate the expected term of the options due to our lack of historical option exercise experience and the “plain vanilla” characteristics of the option award.

The simplified method results in an expected term equal to the average of the weighted average time-to-vesting and the contractual life of the options.

The expected stock price volatility is based on the historical volatility of our common stock over a period matching the expected term of the options granted.

The dividend yield reflects that we have never paid cash dividends.

The risk-free interest rate represents the yield curve in effect at the time of grant for U.S.

Treasury zero-coupon securities with maturities that approximate the expected term of the options.

The following table summarizes information about options outstanding at April 30, 2022 and changes during the 13 weeks then ended:

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

(in millions)

Outstanding at January 29, 2022

24,541 $ 90.38

Granted 2,252,587 157.17

Exercised ( 370 ) 76.97

Outstanding at April 30, 2022

2,276,758 $ 156.46 9.8 $ 13.6

Exercisable at April 30, 2022

24,171 $ 90.59 4.5 $ 1.7

Note 6 - Shareholders’ Equity

We did not repurchase any shares of common stock on the open market during the 13 weeks ended October 30, 2021.

During the 39 weeks ended October 30, 2021, we repurchased 9,156,898 shares of common stock on the open market for approximately $ 950.0 million.

We repurchased 2,154,304 shares of common stock on the open market for approximately $ 200.0 million during the 13 and 39 weeks ended October 31, 2020.

Approximately $ 5.8 million in share repurchases had not settled as of October 31, 2020.

This amount was accrued and is reflected in “Other current liabilities” within the accompanying unaudited condensed consolidated balance sheet as of October 31, 2020.

During the 13 weeks ended October 30, 2021, the Board increased our share repurchase authorization by $ 1.05 billion to an aggregate amount of $ 2.5 billion, including $ 1.45 billion available for repurchases under the Board’s previous repurchase authorization approved on March 2, 2021.

We repurchased 89,779 shares of common stock on the open market for $ 14.2 million during the 13 weeks ended April 30, 2022.

We repurchased 2,150,572 shares of common stock on the open market for $ 250.0 million during the 13 weeks ended May 1, 2021.

Of the shares repurchased during the 13 weeks ended May 1, 2021, approximately $ 8.7 million had not settled as of May 1, 2021.

This amount was accrued and is reflected in “Other current liabilities” within the accompanying unaudited condensed consolidated balance sheet as of May 1, 2021.

At April 30, 2022, we had $ 2.5 billion remaining under Board repurchase authorization.

Note 7 - Segments and Disaggregated Revenue

15 unchanged sentences

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

13 Weeks Ended 39 Weeks Ended

October 30, October 31, October 30, October 31,

13 Weeks Ended

April 30, May 1,

(in millions) 2022 2021

3 unchanged sentences

Consolidated Net sales $ 6,900.1 $ 6,476.8

13 Weeks Ended

April 30, May 1,

(in millions) 2022 2021

Condensed Consolidated Income Statement Data:

Gross profit:

8 unchanged sentences

Interest expense, net 34.0 33.0

Other expense, net 0.2 0.1 0.2 0.8

Income before income taxes $ 697.5 $ 486.9

October 30, January 30, October 31,

April 30, January 29, May 1,

(in millions) 2022 2022 2021

10 unchanged sentences

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

13 Weeks Ended 39 Weeks Ended

October 30, October 31, October 30, October 31,

13 Weeks Ended

April 30, May 1,

(in millions) 2022 2021

13 unchanged sentences

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-Q

Item 1. Financial Statements