What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-03-10 compared with 2022-03-15 · 110 added, 140 removed, 735 unchanged (25% of the section changed)

24 unchanged sentences

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

and subsidiaries (the Company) as of January 29, 2022 and January 30, 2021, the related consolidated income statements, and statements of comprehensive income, shareholders’ equity, and cash flows for each of the years in the three‑year period ended January 29, 2022, and the related notes (collectively, the consolidated financial statements).

and subsidiaries (the Company) as of January 28, 2023 and January 29, 2022, the related consolidated income statements, statements of comprehensive income, shareholders’ equity, and cash flows for each of the years in the three‑year period ended January 28, 2023, 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 28, 2023 and January 29, 2022, and the results of its operations and its cash flows for each of the years in the three‑year period ended January 28, 2023, in conformity with U.S.

34 unchanged sentences

CONSOLIDATED INCOME STATEMENTS

January 29, January 30, February 1,

January 28, January 29, January 30,

(in millions, except per share data) 2023 2022 2021

3 unchanged sentences

Cost of sales 19,396.3 18,583.9 17,721.0

Selling, general and administrative expenses, excluding Goodwill

impairment 5,925.9 5,900.4 5,465.5

Goodwill impairment — — 313.0

Selling, general and administrative expenses 6,699.1 5,925.9 5,900.4

10 unchanged sentences

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

January 29, January 30, February 1,

January 28, January 29, January 30,

(in millions) 2023 2022 2021

46 unchanged sentences

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

YEARS ENDED JANUARY 29, 2022, JANUARY 30, 2021, AND FEBRUARY 1, 2020

YEARS ENDED JANUARY 28, 2023, JANUARY 29, 2022, AND JANUARY 30, 2021

(in millions) Common

6 unchanged sentences

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

Cumulative effect of adopted accounting

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

Net income — — — — 1,341.9 1,341.9

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

Total other comprehensive income — — — 4.6 — 4.6

Issuance of stock under Employee Stock

3 unchanged sentences

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

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

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

Net income — — — — 1,327.9 1,327.9

Total other comprehensive income — — — 4.6 — 4.6

Issuance of stock under Employee Stock

5 unchanged sentences

Net income — — — — 1,615.4 1,615.4

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

Issuance of stock under Employee Stock

Purchase Plan 0.1 — 9.3 — — 9.3

Exercise of stock options 0.1 — 7.4 — — 7.4

Stock-based compensation, net 0.6 — 61.8 — — 61.8

4 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

January 29, January 30, February 1,

January 28, January 29, January 30,

(in millions) 2023 2022 2021

2 unchanged sentences

Adjustments to reconcile net income to net cash provided by operating activities:

Goodwill impairment — — 313.0

Depreciation and amortization 767.9 716.0 686.6

52 unchanged sentences

All significant intercompany balances and transactions have been eliminated in consolidation.

Certain prior year amounts have been reclassified to conform to the current year presentation.

Segment Information

6 unchanged sentences

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 our operations under the “Family Dollar” brand and 11 distribution centers.

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

Refer to Note 11 for additional information regarding our operating segments.

7 unchanged sentences

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

References to “2021” or “fiscal 2021,” “2020” or “fiscal 2020,” and “2019” or “fiscal 2019” relate to the 52-week fiscal years ended January 29, 2022, January 30, 2021, and February 1, 2020, respectively.

References to “2022” or “fiscal 2022,” “2021” or “fiscal 2021,” and “2020” or “fiscal 2020” relate to the 52-week fiscal years ended January 28, 2023, January 29, 2022, and January 30, 2021, respectively.

“2023” or “fiscal 2023” refers to the 53-week fiscal year ending February 3, 2024.

Use of Estimates

21 unchanged sentences

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

We capitalized $ 1.1 million, $ 3.2 million and $ 2.4 million of interest costs in the years ended January 29, 2022, January 30, 2021 and February 1, 2020, respectively.

We capitalized $ 3.8 million, $ 1.1 million and $ 3.2 million of interest costs in the years ended January 28, 2023, January 29, 2022 and January 30, 2021, respectively.

Insurance Reserves and Restricted Cash

7 unchanged sentences

Lease Accounting

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.

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 income statements 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.

9 unchanged sentences

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.

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.

16 unchanged sentences

In fiscal 2022, 2021 and 2020, we recorded charges of $ 39.9 million, $ 4.4 million and $ 4.6 million, respectively, to write down certain assets, including $ 20.1 million, $ 3.9 million and $ 3.8 million in fiscal 2022, 2021 and 2020, respectively, to write down Operating lease right-of-use assets.

Included in 2022 is $ 14.0 million for West Memphis distribution center asset impairments.

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

2 unchanged sentences

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.

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.

For both goodwill and nonamortizing intangible assets, we have the option to initially perform a qualitative assessment to determine whether it is more likely than not that an impairment exists.

Alternatively, we may bypass the qualitative assessment in any given year and proceed directly to performing the quantitative impairment test.

We perform our annual impairment testing of goodwill and nonamortizing intangible assets during the fourth quarter of each year.

Our reporting units are determined in accordance with the provisions of ASC Topic 350, “Intangibles - Goodwill and Other.”

When a quantitative impairment test is performed for the Family Dollar trade name, we compare the 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.

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.

Our annual impairment evaluation of the Family Dollar trade name did not result in impairment charges during fiscal 2022, 2021 or 2020.

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

When a quantitative test is performed, we 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.

The annual goodwill impairment evaluations in 2022, 2021 and 2020 did not result in impairment.

The 2019 goodwill impairment evaluation indicated 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, which was recorded as a

component of “Selling, general and administrative expenses” in the accompanying consolidated income statements.

We have recorded cumulative goodwill impairment charges totaling $ 3,040.0 million, all of which relate to the Family Dollar reporting unit.

Our annual impairment evaluation of the Family Dollar trade name did no t result in impairment charges during fiscal 2021, 2020 or 2019.

Revenue Recognition

46 unchanged sentences

Total property, plant and equipment, net $ 4,972.2 $ 4,477.3

Depreciation expense was $ 672.0 million, $ 631.1 million, and $ 581.9 million for the years ended January 29, 2022, January 30, 2021, and February 1, 2020, respectively.

Depreciation expense was $ 737.4 million, $ 672.0 million, and $ 631.1 million for the years ended January 28, 2023, January 29, 2022, and January 30, 2021, respectively.

Other Current Liabilities

5 unchanged sentences

Insurance 131.1 121.5

Accrued construction costs 68.3 44.9

Accrued supplies 27.4 25.2

Other 289.0 243.2

2 unchanged sentences

The provision for income taxes consists of the following:

January 29, January 30, February 1,

January 28, January 29, January 30,

(in millions) 2023 2022 2021

12 unchanged sentences

federal income tax rate and the effective tax rate follows:

January 29, 2022 January 30, 2021 February 1, 2020

January 28, 2023 January 29, 2022 January 30, 2021

Statutory U.S.

7 unchanged sentences

Deferred tax rate change 0.7 ( 3.8 ) —

Goodwill impairment — — 6.0

Change in valuation allowance ( 0.3 ) — —

1 unchanged sentence

Effective tax rate 23.5 % 18.6 % 22.9 %

Goodwill Impairment

In the fourth quarter of 2019, we recorded a goodwill impairment charge of $ 313.0 million related to the Family Dollar goodwill, as further discussed in Note 1 under the caption “Goodwill and Nonamortizing Intangible Assets.” As the purchase of Family Dollar was a stock acquisition, carryover basis applied for tax purposes.

The impairment charge is not deductible for federal or state tax purposes and therefore there is no tax benefit related to the impairment.

Foreign Taxes

34 unchanged sentences

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

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

Our federal tax returns have been examined and all issues have been settled through the fiscal 2019 tax year, as well as the fiscal 2021 tax year.

In fiscal 2020, we participated 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 at this time.

Several states completed their examinations during fiscal 2022.

1 unchanged sentence

The statute of limitations is still open prior to fiscal 2019 for some states.

In fiscal 2020, we participated 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 28, 2023 was $ 17.4 million.

5 unchanged sentences

Additions, based on tax positions related to current year 4.0 2.7

Settlements ( 0.1 ) —

Lapses in statutes of limitation ( 9.7 ) ( 9.0 )

8 unchanged sentences

At January 28, 2023, we have commitments totaling $ 300.5 million related to ocean shipping contracts and commitments of $ 243.5 million related to agreements for software licenses and support, telecommunication services and store technology assets and maintenance for our stores.

We also have commitments totaling $ 105.4 million related to software agreements that we entered into subsequent to January 28, 2023.

Letters of Credit

We have $ 425.0 million in Letter of Credit Reimbursement and Security Agreements with various financial institutions, under which $ 257.9 million was committed to these letters of credit issued for routine purchases of imported merchandise at January 29, 2022.

At January 29, 2022, we also have $ 46.0 million in standby letters of credit that serve as collateral for our large-deductible insurance programs and expire in fiscal 2022.

We have $ 425.0 million in trade letters of credit with various financial institutions, under which $ 150.6 million was committed to these letters of credit issued for routine purchases of imported merchandise at January 28, 2023.

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

1 unchanged sentence

Contingencies

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

We are defendants in legal proceedings including the class, collective, representative and large cases 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 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 reserved or 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.

For matters that have settled, we reserve the estimated settlement amount.

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 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.

With respect to the matters noted below where we have determined that a loss is reasonably possible but not probable, we are unable to reasonably estimate the amount or range of the possible loss at this time 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.

1 unchanged sentence

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 believes we have certain additional improvements to make, 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 personal injury lawsuits are pending against us and our vendors alleging that certain talc products that were sold by the company in the past caused cancer.

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 significant, 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.

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.

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”), as well as other items 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, committed to the FDA to continue to cease the shipment of FDA-regulated products from DC 202 until FDA approval is received, and initiated corrective actions at DC 202 intended to ensure that these issues will not recur when shipment of FDA-regulated products recommences.

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

We are cooperating fully with the FDA, and intend to cooperate fully with any other applicable regulatory body.

We recorded total charges of approximately $ 34.1 million in the fourth quarter of our 2021 fiscal year in connection with the Recall, primarily attributable to inventory markdowns and related costs.

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.

We have received the following class action complaints related to issues associated with DC 202 (and anticipate additional lawsuits of a similar nature):

On February 22, 2022, a proposed class action complaint was filed in the Circuit Court of Pope County, Arkansas, alleging various causes of action on behalf of the citizens of Arkansas who purchased “contaminated products” covered by the Recall from January 1, 2021 through the date of such Recall.

Plaintiffs seek restitution, disgorgement, damages, attorney fees, costs and expenses, punitive damages and such further relief (in each case in unspecified amounts), as the Court deems just and proper.

On February 23, 2022, a proposed class action complaint was filed in the U.S.

District Court for the Southern District of Mississippi, Northern Division, alleging various causes of action related to the sale of products that may be contaminated by virtue of a rodent infestation and other unsanitary conditions in stores throughout Mississippi, Arkansas, Louisiana, Alabama, Missouri and Tennessee.

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.

On February 25, 2022, a proposed class action complaint was filed in the U.S.

District Court for the Eastern District of Virginia, on behalf of all persons who purchased products subject to the Recall (with a subclass for all persons residing in the State of Tennessee who purchased products subject to the Recall), alleging breach of the implied warranty of merchantability and unjust enrichment.

Plaintiffs seek restitution, damages, interest, punitive damages, attorney fees, costs and expenses, and such further relief (in each case in unspecified amounts), as the Court deems just and equitable.

On March 2, 2022, a proposed class action complaint was filed in the U.S.

District Court for the Western District of Louisiana, alleging various causes of action related to the sale of products that may be contaminated by virtue of rodent infestation and other unsanitary conditions in stores throughout Louisiana, Mississippi, Arkansas, Alabama, Missouri and Tennessee.

On March 4, 2022, a proposed class action complaint was filed in the U.S.

District Court for the Western District of Tennessee, alleging various causes of action related to the sale of products that may be contaminated by virtue of rodent infestation and other unsanitary conditions in stores throughout Tennessee, Louisiana, Mississippi, Arkansas, Alabama, and Missouri.

On March 7, 2022, a proposed class action complaint was filed in the U.S.

District Court for the Southern District of Alabama, alleging various causes of action related to the sale of products that may be contaminated by virtue of rodent infestation and other unsanitary conditions in stores throughout Alabama, Louisiana, Mississippi, Arkansas, Tennessee, and Missouri.

On March 8, 2022, a proposed class action complaint was filed in the U.S.

District Court for the Western District of Missouri, alleging various causes of action related to the sale of products that may be contaminated by virtue of rodent infestation and other unsanitary conditions in stores throughout Missouri, Arkansas, Louisiana, Mississippi, Alabama and Tennessee.

On March 10, 2022, a proposed class action complaint was filed in the U.S.

District Court for the Eastern District of Arkansas, Delta Division, alleging various causes of action related to the sale of products that may be contaminated by virtue of rodent infestation and other unsanitary conditions in stores throughout Arkansas, Louisiana, Mississippi, Alabama, Tennessee and Missouri.

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 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, ceased the direct shipment of FDA-regulated products from DC 202, and initiated corrective actions.

In June 2022, we stopped shipping to stores from DC 202 and have since disposed of all of the inventory that was in 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 recall and decommissioning the facility.

We continue to cooperate with the FDA.

Since February 22, 2022, Family Dollar has been named in 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.

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.

On March 10, 2022, a proposed class action complaint was filed in the U.S.

District Court for the Western District of Tennessee, Memphis Division, on behalf of all persons who purchased products subject to the Recall (with a subclass for all persons residing in the State of Tennessee who purchased products subject to the Recall), alleging breach of the implied warranty of merchantability, violation of the Tennessee Consumer Protection Act, and unjust enrichment.

Plaintiffs seek refunds of unjust benefits, damages, interest, punitive damages, attorney fees, costs and expenses, and such further relief (in each case in unspecified amounts), as the Court deems just and equitable.

We have filed a motion to dismiss the amended consolidated complaint.

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 and compliance with law regarding certain of our procedures and products.

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.

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.

The legal claims include 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, 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 talc and PAGA lawsuits 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.

After the lawsuits were dismissed in June 2021, plaintiffs filed an appeal.

In connection with this matter, we have been investigating the condition of FDA-regulated product shipped from DC 202.

We are cooperating fully with the U.S.

Department of Justice investigation, including having produced documents and provided additional information.

As part of this cooperation, we may engage in discussions with the government in an effort to reach a negotiated resolution.

Due to the inherent uncertainties associated with this matter, no assurance can be given as to the timing or outcome of this matter, which could include penalties and company undertakings.

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.

Seven 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 we sold caused cancer.

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

Although we have been able to resolve previous talc lawsuits against us without material loss, 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 fulfill their obligations to us.

Since August 2022, six personal injury cases have been filed in federal court in California, Missouri, North Carolina 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.

Resolved Matters

All personal injury cases that were 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, have been dismissed.

Note 5 - Long-Term Debt

5 unchanged sentences

$ — $ 5.1 $ — $ 6.4

$ 1.25 billion Revolving Credit Facility

4.00 % Senior Notes, due 2025

6 unchanged sentences

400.0 5.0 400.0 5.0

3.375 % Senior Notes, due 2051

400.0 5.0 — —

Total $ 3,450.0 $ 28.4 $ 3,450.0 $ 33.0

14 unchanged sentences

In connection with entry into the Credit Agreement, we terminated all commitments and fulfilled all obligations under our existing credit agreement dated April 19, 2018.

Under the previous credit agreement, in the first quarter of fiscal 2020, we preemptively drew $ 750.0 million on our $ 1.25 billion 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.

Fiscal 2018 Offering

5 unchanged sentences

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 to holders of record on the preceding January 3, April 3, July 3 and October 3, respectively.

The 2023 Notes were scheduled to mature on May 15, 2023 and bore interest at the rate of 3.70 % annually.

13 unchanged sentences

The 2051 Notes mature on December 1, 2051 and bear interest at the rate of 3.375 % per annum.

We are required to pay interest on the New Notes semi-annually, in arrears, on June 1 and December 1 of each year, beginning on June 1, 2022, to holders of record on the preceding May 15 and November 15, respectively.

We are required to pay interest on the New Notes semi-annually, in arrears, on June 1 and December 1 of each year to holders of record on the preceding May 15 and November 15, respectively.

We may redeem the New Notes of each series in whole or in part at any time and from time to time prior to (i) in the case of the 2031 Notes, September 1, 2031, and (ii) in the case of the 2051 Notes, June 1, 2051 (the date with respect to each such series, the “Applicable Par Call Date”), in each case, at a “make-whole” price described in the Second Supplemental Indenture plus accrued and unpaid interest to, but excluding, the date of redemption.

4 unchanged sentences

Repayments of Long-term Debt

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 first quarter of 2020, we repaid the remaining $ 250.0 million outstanding under our $ 750.0 million Floating Rate Notes.

In the fourth quarter of 2020, we repaid the $ 300.0 million 5.00 % Senior Notes that we assumed upon the acquisition of Family Dollar in 2015.

In the fourth quarter of 2021, we used the proceeds from the offering of the New Notes discussed above to redeem the $ 1.0 billion 2023 Notes.

We incurred a redemption premium of $ 43.8 million in connection with the early redemption of the 2023 Notes and accelerated the expensing of $ 2.7 million of amortizable non-cash deferred financing and original issue discount costs, which are reflected in “Interest expense, net” within the accompanying consolidated income statements for the year ended January 29, 2022.

We incurred a redemption premium of $ 43.8 million in connection with the early redemption of the 2023 Notes and

accelerated the expensing of $ 2.7 million of amortizable non-cash deferred financing and original issue discount costs, which are reflected in “Interest expense, net” within the accompanying consolidated income statements for the year ended January 29, 2022.

Debt Covenants

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

(in millions) January 29, 2022 January 30, 2021 February 1, 2020

(in millions) January 28, 2023 January 29, 2022 January 30, 2021

Operating lease cost $ 1,652.8 $ 1,602.8 $ 1,551.2

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

January 29, 2022 January 30, 2021 February 1, 2020

January 28, 2023 January 29, 2022 January 30, 2021

Weighted-average remaining lease term (years) 5.7 5.9 6.1

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

(in millions) January 29, 2022 January 30, 2021 February 1, 2020

(in millions) January 28, 2023 January 29, 2022 January 30, 2021

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

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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 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:

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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 8 - Shareholders’ Equity

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

January 29, January 30, February 1,

January 28, January 29, January 30,

(in millions, except per share data) 2023 2022 2021

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Diluted net income per share $ 7.21 $ 5.80 $ 5.65

At January 29, 2022, 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.

For the year ended January 28, 2023, stock options and other stock-based awards of 3.0 million shares were excluded from the calculation of diluted net income per share because their inclusion would be anti-dilutive.

For the years ended January 29, 2022 and January 30, 2021, substantially all of the stock options outstanding were included in the calculation of the weighted average number of shares and dilutive potential shares outstanding.

Share Repurchase Programs

We repurchased 4,613,696 , 9,156,898 and 3,982,478 shares of common stock on the open market in fiscal 2022, fiscal 2021 and fiscal 2020, respectively, for $ 647.5 million, $ 950.0 million and $ 400.0 million, respectively.

At January 29, 2022, we had $ 2.5 billion remaining under Board repurchase authorization.

At January 28, 2023, we had $ 1.85 billion remaining under our Board repurchase authorization.

Note 9 – Employee Benefit Plans

Dollar Tree Retirement Savings Plan

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

We maintain a 401(k) plan which is available to all full-time, United States-based employees who are at least 18 years of age.

Eligible employees may make elective salary deferrals.

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

January 29, January 30, February 1,

January 28, January 29, January 30,

(in millions) 2023 2022 2021

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The form of equity awards authorized for grant under the Omnibus Plan are substantially the same as those permitted by the predecessor plan.

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

When the stock appreciation rights are exercisable, the holder may surrender all or a portion of the unexercised stock appreciation right and receive in exchange an amount equal to the excess of the fair market value at the date of exercise over the fair market value at the date of the grant.

No stock appreciation rights have been granted to date.

Any restricted stock, RSUs or PSUs awarded are subject to certain general restrictions.

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 us, any shares or units in which the restrictions have not lapsed will be forfeited.

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

January 29, January 30, February 1,

January 28, January 29, January 30,

(in millions) 2023 2022 2021

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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

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868,720 $ 123.99

The total fair value of the service-based restricted shares vested during the years ended January 29, 2022, January 30, 2021 and February 1, 2020 was $ 56.8 million, $ 48.5 million and $ 55.5 million, respectively.

The total fair value of the service-based restricted shares vested during the years ended January 28, 2023, January 29, 2022 and January 30, 2021 was $ 51.5 million , $ 56.8 million and $ 48.5 million, respectively.

The weighted average grant date fair value of the RSUs granted in 2022, 2021 and 2020 was $ 158.05 , $ 109.01 and $ 73.24 , respectively.

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154,823 $ 125.84

The total fair value of the PSUs vested during the years ended January 29, 2022, January 30, 2021 and February 1, 2020 was $ 17.3 million, $ 19.6 million and $ 3.3 million, respectively.

The total fair value of the PSUs vested during the years ended January 28, 2023, January 29, 2022 and January 30, 2021 was $ 44.5 million, $ 17.3 million and $ 19.6 million, respectively.

The weighted average grant date fair value of the PSUs granted in 2022, 2021 and 2020 was $ 159.57 , $ 95.04 and $ 74.46 , respectively.

As of January 29, 2022, there was $ 20.7 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 28, 2023, there was $ 9.9 million of total unrecognized compensation expense related to these PSUs which is expected to be recognized over a weighted-average period of 0.9 years.

Stock Options

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Options granted in 2021 and 2020 are immaterial.

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, who was also appointed Chief Executive Officer of the company effective January 29, 2023.

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

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.

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

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(in millions)

Outstanding, beginning of period 117,057 $ 79.75

Outstanding at January 29, 2022

24,541 $ 90.38

Granted 2,252,979 157.17

Exercised ( 583 ) 76.95

Outstanding, end of period 24,541 $ 90.38 4.8 $ 0.9

Options vested and exercisable at January 29, 2022

Outstanding at January 28, 2023

2,276,937 $ 156.46 9.1 $ 1.4

The intrinsic value of options exercised during 2021, 2020 and 2019 was $ 5.6 million, $ 0.9 million and $ 1.6 million, respectively.

Exercisable at January 28, 2023

24,350 $ 90.92 3.8 $ 1.4

The intrinsic value of options exercised during 2022, 2021 and 2020 was less than $ 0.1 million, $ 5.6 million and $ 0.9 million, respectively.

As of January 28, 2023, there was $ 112.1 million of total unrecognized compensation expense related to these options which is expected to be recognized over a weighted-average period of 4.1 years.

Note 11 – Segments and Disaggregated Revenue

We operate a chain of more than 16,000 retail discount stores in 48 states and five Canadian provinces.

We operate more than 16,300 retail discount stores in 48 states and five Canadian provinces.

Our operations are conducted in two reporting business segments:

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

January 29, January 30, February 1,

January 28, January 29, January 30,

(in millions) 2023 2022 2021

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Consolidated Gross profit $ 8,921.9 $ 7,725.9 $ 7,787.4

January 29, January 30, February 1,

(in millions) 2022 2021 2020

Operating income (loss):

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

January 29, January 30, February 1,

January 28, January 29, January 30,

(in millions) 2023 2022 2021

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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