What changed in this filing

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Item 1. Financial Statements

2022-11-22 compared with 2022-08-25 · 96 added, 73 removed, 321 unchanged (34% of the section changed)

3 unchanged sentences

13 Weeks Ended 39 Weeks Ended

July 30, July 31, July 30, July 31,

October 29, October 30, October 29, October 30,

(in millions, except per share data) 2022 2021 2022 2021

16 unchanged sentences

13 Weeks Ended 39 Weeks Ended

July 30, July 31, July 30, July 31,

October 29, October 30, October 29, October 30,

(in millions) 2022 2021 2022 2021

5 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions) July 30, 2022 January 29, 2022 July 31, 2021

(in millions) October 29, 2022 January 29, 2022 October 30, 2021

Current assets:

15 unchanged sentences

Current liabilities:

Current portion of long-term debt $ 350.0 $ — $ —

Current portion of operating lease liabilities 1,426.7 1,407.8 1,388.0

3 unchanged sentences

Total current liabilities 4,683.1 4,176.6 4,291.2

Long-term debt, net 3,419.3 3,417.0 3,229.5

Long-term debt, net, excluding current portion 3,420.4 3,417.0 3,231.1

Operating lease liabilities, long-term 5,155.9 5,145.5 5,151.0

10 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

13 Weeks Ended July 30, 2022

13 Weeks Ended October 29, 2022

(in millions) Common

5 unchanged sentences

Earnings Shareholders'

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

Balance at July 30, 2022 223.9 $ 2.2 $ 1,026.7 $ ( 36.3 ) $ 7,403.9 $ 8,396.5

Net income — — — — 266.9 266.9

4 unchanged sentences

Repurchase of stock ( 2.8 ) — ( 397.5 ) — — ( 397.5 )

Balance at July 30, 2022 223.9 $ 2.2 $ 1,026.7 $ ( 36.3 ) $ 7,403.9 $ 8,396.5

26 Weeks Ended July 30, 2022

Balance at October 29, 2022 221.2 $ 2.2 $ 646.9 $ ( 44.6 ) $ 7,670.8 $ 8,275.3

39 Weeks Ended October 29, 2022

(in millions) Common

12 unchanged sentences

Repurchase of stock ( 4.6 ) — ( 647.5 ) — — ( 647.5 )

Balance at July 30, 2022 223.9 $ 2.2 $ 1,026.7 $ ( 36.3 ) $ 7,403.9 $ 8,396.5

Balance at October 29, 2022 221.2 $ 2.2 $ 646.9 $ ( 44.6 ) $ 7,670.8 $ 8,275.3

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (cont.)

13 Weeks Ended July 31, 2021

13 Weeks Ended October 30, 2021

(in millions) Common

5 unchanged sentences

Earnings Shareholders'

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

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 loss — — — ( 1.8 ) — ( 1.8 )

Total other comprehensive income — — — 0.7 — 0.7

Issuance of stock under Employee Stock

Purchase Plan — — 2.4 — — 2.4

Exercise of stock options — — 0.5 — — 0.5

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

Repurchase of stock ( 7.0 ) ( 0.1 ) ( 699.9 ) — — ( 700.0 )

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

26 Weeks Ended July 31, 2021

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

(in millions) Common

13 unchanged sentences

Repurchase of stock ( 9.2 ) ( 0.1 ) ( 949.9 ) — — ( 950.0 )

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

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.

2 unchanged sentences

39 Weeks Ended

July 30, July 31,

October 29, October 30,

(in millions) 2022 2021

15 unchanged sentences

Cash flows from financing activities:

Proceeds from revolving credit facility 440.0 —

Repayments of revolving credit facility ( 90.0 ) —

Proceeds from stock issued pursuant to stock-based compensation plans 7.1 9.0

23 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 26 weeks ended July 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 July 30, 2022 and July 31, 2021 and the results of our operations and cash flows for the periods presented.

The results of operations for the 13 and 39 weeks ended October 29, 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 October 29, 2022 and October 30, 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.

11 unchanged sentences

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

Dollar Tree Active Matters

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

From time to time, the U.S.

Department of Labor’s Occupational Safety and Health Administration (“OSHA”) has found violations of OSHA regulations at Dollar Tree stores and Family Dollar stores and assessed penalties relating to the violations.

For those periods in which this occurs, pending resolution of the matters, we record the associated estimated liabilities in the financial statements.

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.

Five personal injury lawsuits are pending against Dollar Tree and two 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

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.

Active Matters

On February 11, 2022, the FDA issued Form 483 observations primarily regarding rodent infestation at Family Dollar’s 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”), temporarily 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, permanently 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 14 putative class action complaints primarily related to issues associated with DC 202 described above.

The lawsuits are proceeding in federal court in Tennessee using the federal court’s multidistrict litigation process.

A consolidated complaint seeking class action status was filed August 12, 2022 alleging violations of the Mississippi, Arkansas, Louisiana, Tennessee, Alabama and Missouri consumer protection laws, breach of warranty, negligence, misrepresentation, deception 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.

In June 2022, we stopped shipping to stores from DC 202 and are decommissioning the facility.

On November 9, 2022 we received an FDA Warning Letter (“Warning Letter”) in connection with the DC 202 inspection.

The conditions and issues detailed in the Warning Letter are generally the same as those described in the Form 483 observations or were otherwise observed during the inspection.

The Warning Letter acknowledged certain remedial actions we have taken in response to the Form 483 observations, including conducting the voluntary recall and decommissioning the facility.

We are taking this matter extremely seriously and continue to cooperate with the FDA.

Since February 22, 2022, Family Dollar has received 14 putative class action complaints primarily related to issues associated with DC 202 described above.

The lawsuits are proceeding in federal court in Tennessee using the federal court’s multi-district litigation process.

An amended consolidated complaint seeking class action status was filed October 17, 2022 alleging violations of the Mississippi, Arkansas, Louisiana, Tennessee, Alabama and Missouri consumer protection laws, breach of warranty, negligence, misrepresentation, deception and unjust enrichment related to the sale of products that may be contaminated by virtue of rodent infestation and other unsanitary conditions.

unspecified amounts), including equitable and injunctive relief.

We have filed a motion to dismiss the amended consolidated complaint and a ruling on the motion by the court is expected in early 2023.

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.

3 unchanged sentences

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 Dollar Tree Active Matters section above for descriptions of OSHA proceedings, PAGA lawsuits and two talc lawsuits against Family Dollar.

Family Dollar Resolved Matters

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.

The Food and Drug Administration (“FDA”) has alleged that Dollar Tree improperly sold certain topically applied, over the counter products manufactured by certain Chinese factories that were on an import “alert” restriction issued by the FDA.

We believe we have made significant improvements in our processes in our supply chain and continue to monitor these for compliance.

From time to time, various federal and state regulators such as the U.S.

Department of Labor’s Occupational Safety and Health Administration and the state equivalents along with state-level hazardous waste and product regulators have found violations of applicable regulations at Dollar Tree stores and Family Dollar stores and assessed penalties relating to the violations.

For those periods in which this occurs, pending resolution of the matters, we record the associated estimated liabilities in the financial statements.

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 allege that we failed to provide non-exempt associates with compliant rest and meal breaks, suitable seating, overtime pay, minimum wages, reimbursement of business expenses, and properly calculated sick leave pay, as well as other potential labor code violations.

The plaintiffs generally seek civil penalties and attorneys’ fees and costs.

Five personal injury lawsuits are pending in state court in Illinois, New York, Massachusetts, Texas, and New Jersey against Dollar Tree, Family Dollar or both alleging that certain talc products that were sold in the past caused cancer.

The plaintiffs seek compensatory, punitive and exemplary damages, damages for loss of consortium, and attorneys’ fees and costs.

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.

Since August 2022, four personal injury cases have been filed in federal court in California and Minnesota against Dollar Tree, Family Dollar, or both, on behalf of minors alleging that their mothers took acetaminophen while pregnant, that the acetaminophen interfered with fetal development such that plaintiffs were born with autism and/or ADHD, and that we knew or should have known of the danger, had a duty to warn and failed to include appropriate warnings on the product labels.

The plaintiffs seek compensatory, punitive and/or exemplary damages, restitution and disgorgement, economic damages, and attorneys’ fees and costs.

These cases, along with other cases against many other defendants, have been consolidated in multi-district court litigation in the Southern District of New York.

Since September 2022, five personal injury cases have been filed in state court in Pennsylvania against both Dollar Tree and Family Dollar alleging that both sold Zantac and generic ranitidine products containing N-Nitrosodimethylamine, which is classified by the FDA as a probable carcinogen.

The plaintiffs seek compensatory, exemplary and punitive damages and costs.

The five cases along with similar cases against other companies filed in the Philadelphia Court of Common Pleas have been consolidated.

Under the court’s rules, one long form master complaint was filed in a process that is similar to multi-district litigation in federal court.

Dollar Tree and Family Dollar have not been named as defendants in the long form master complaint but could still be named in short form complaints that may be filed.

In addition, in February 2021, as part of a multi-district litigation in the Southern District of Florida, master personal injury and consumer protection class complaints were filed against Zantac manufacturers and retailers, including Dollar Tree and Family Dollar.

While Dollar Tree and Family Dollar have been dismissed from both master complaints, those dismissals are currently being appealed.

We believe we will be indemnified by our suppliers with respect to these proceedings.

Since January 2021, four state-wide consumer class actions have been filed against Family Dollar in Georgia, Alabama, Florida, and Tennessee 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.

The plaintiffs seek compensatory damages.

Resolved Matters

In August 2020 and July 2021, consumer class actions were filed against Family Dollar 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.

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

The New York and Illinois cases were dismissed with prejudice on March 21, 2022 and April 28, 2022, respectively.

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 material impairment charges during the 13 or 26 weeks ended July 30, 2022 or July 31, 2021.

We did not record any material impairment charges during the 13 or 39 weeks ended October 29, 2022 or October 30, 2021.

Fair Value of Financial Instruments

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

The carrying value of our Revolving Credit Facility approximates its fair value.

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

July 30, 2022 January 29, 2022 July 31, 2021

October 29, 2022 January 29, 2022 October 30, 2021

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

1 unchanged sentence

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 4 - Net Income Per Share

1 unchanged sentence

13 Weeks Ended 39 Weeks Ended

July 30, July 31, July 30, July 31,

October 29, October 30, October 29, October 30,

(in millions, except per share data) 2022 2021 2022 2021

11 unchanged sentences

Diluted net income per share $ 1.20 $ 0.96 $ 5.17 $ 3.80

Stock options and other stock-based awards of 2.3 million shares and 2.8 million shares were excluded from the calculation of diluted net income per share for the 13 and 26 weeks ended July 30, 2022, respectively, because their inclusion would be anti-dilutive.

Stock options and other stock-based awards of less than 0.1 million shares and 0.8 million shares were excluded from the calculation of diluted net income per share for the 13 and 26 weeks ended July 31, 2021, respectively, because their inclusion would be anti-dilutive.

Stock options and other stock-based awards of 2.3 million shares and 3.0 million shares were excluded from the calculation of diluted net income per share for the 13 and 39 weeks ended October 29, 2022, respectively, because their inclusion would be anti-dilutive.

Stock options and other stock-based awards of 0.1 million shares and 1.1 million shares were excluded from the calculation of diluted net income per share for the 13 and 39 weeks ended October 30, 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 $ 66.1 million and $ 49.6 million during the 26 weeks ended July 30, 2022 and July 31, 2021, respectively.

Stock-based compensation expense was $ 90.8 million and $ 63.1 million during the 39 weeks ended October 29, 2022 and October 30, 2021, respectively.

Restricted Stock

3 unchanged sentences

Service-Based RSUs

The following table summarizes the status of service-based RSUs as of July 30, 2022 and changes during the 26 weeks then ended:

The following table summarizes the status of service-based RSUs as of October 29, 2022 and changes during the 39 weeks then ended:

Number of Shares Weighted Average

4 unchanged sentences

Forfeited ( 119,350 ) 119.22

Nonvested at July 30, 2022

Nonvested at October 29, 2022

883,452 $ 123.04

The following table summarizes the status of PSUs as of July 30, 2022 and changes during the 26 weeks then ended:

The following table summarizes the status of PSUs as of October 29, 2022 and changes during the 39 weeks then ended:

Number of Shares Weighted Average

4 unchanged sentences

Forfeited ( 189,340 ) 116.40

Nonvested at July 30, 2022

Nonvested at October 29, 2022

288,358 $ 123.66

15 unchanged sentences

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

The following table summarizes information about options outstanding at July 30, 2022 and changes during the 26 weeks then ended:

The following table summarizes information about options outstanding at October 29, 2022 and changes during the 39 weeks then ended:

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

4 unchanged sentences

Exercised ( 370 ) 76.97

Outstanding at July 30, 2022

Outstanding at October 29, 2022

2,277,150 $ 156.45 9.3 $ 4.8

Exercisable at July 30, 2022

Exercisable at October 29, 2022

24,563 $ 90.80 4.1 $ 1.7

Note 6 - Shareholders’ Equity

We repurchased 1,664,717 and 1,754,496 shares of common stock on the open market for $ 235.8 million and $ 250.0 million during the 13 and 26 weeks ended July 30, 2022, respectively.

We repurchased 7,006,326 and 9,156,898 shares of common stock on the open market for $ 700.0 million and $ 950.0 million during the 13 and 26 weeks ended July 31, 2021, respectively.

Of the shares repurchased during the 26 weeks ended July 31, 2021, approximately $ 2.5 million had not settled as of July 31, 2021.

This amount was accrued and is reflected in Other current liabilities within the accompanying unaudited condensed consolidated balance sheet as of July 31, 2021.

At July 30, 2022, we had $ 2.25 billion remaining under Board repurchase authorization.

We repurchased 2,859,200 and 4,613,696 shares of common stock on the open market for $ 397.5 million and $ 647.5 million during the 13 and 39 weeks ended October 29, 2022, respectively.

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

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

At October 29, 2022, we had $ 1.85 billion remaining under our Board repurchase authorization.

Note 7 - Segments and Disaggregated Revenue

16 unchanged sentences

13 Weeks Ended 39 Weeks Ended

July 30, July 31, July 30, July 31,

October 29, October 30, October 29, October 30,

(in millions) 2022 2021 2022 2021

3 unchanged sentences

Consolidated Net sales $ 6,936.6 $ 6,415.4 $ 20,602.0 $ 19,232.4

13 Weeks Ended 26 Weeks Ended

July 30, July 31, July 30, July 31,

(in millions) 2022 2021 2022 2021

Condensed Consolidated Income Statement Data:

Gross profit:

10 unchanged sentences

Income before income taxes $ 348.4 $ 276.9 $ 1,520.6 $ 1,133.0

July 30, January 29, July 31,

October 29, January 29, October 30,

(in millions) 2022 2022 2021

11 unchanged sentences

13 Weeks Ended 39 Weeks Ended

July 30, July 31, July 30, July 31,

October 29, October 30, October 29, October 30,

(in millions) 2022 2021 2022 2021

12 unchanged sentences

Total Family Dollar segment net sales $ 3,180.5 100.0 % $ 2,998.0 100.0 % $ 9,493.0 100.0 % $ 9,229.4 100.0 %

Note 8 - Long-Term Debt

Revolving Credit Facility

The following table summarizes information pertaining to our revolving credit facilities:

(in millions) October 29, 2022 January 29, 2022 October 30, 2021

Revolving Credit Facility Capacity $ 1,500.0 $ 1,500.0 $ 1,250.0

Loans Outstanding 350.0 — —

Standby Letters of Credit Outstanding 44.3 46.0 69.8

Available Capacity 1,105.7 1,454.0 1,180.2

The weighted-average interest rate for the $ 350.0 million of loans outstanding at October 29, 2022 was 4.69 %.

Debt Covenants

As of October 29, 2022, we were in compliance with our debt covenants.

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