Item 8. Financial Statements and Supplementary Data

INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS

			Page
Report of Independent Registered Public Accounting Firm (PCAOB ID: 185)			40
Consolidated Statements of Operations			42
Consolidated Statements of Comprehensive Income (Loss)			43
Consolidated Balance Sheets			44
Consolidated Statements of Shareholders’ Equity			45
Consolidated Statements of Cash Flows			46
Notes to Consolidated Financial Statements			47
Note 1 - Description of Business and Basis of Presentation			47
Note 2 - Summary of Significant Accounting Policies			47
Note 3 - Supplemental Balance Sheet Information			52
Note 4 - Income Taxes			52
Note 5 - Commitments and Contingencies			55
Note 6 - Short-Term Borrowings and Long-Term Debt			57
Note 7 - Leases			59
Note 8 - Fair Value Measurements			60
Note 9 - Shareholders’ Equity			61
Note 10 - Stock-Based Compensation Plans			62
Note 11 - Net Income (Loss) Per Share			65
Note 12 - Employee Benefit Plan			65
Note 13 - Segments and Disaggregated Revenue			65
Note 14 - Supply Chain Finance Program			67
Note 15 - Goodwill and Nonamortizing Intangible Assets			68
Note 16 - Store Portfolio Optimization Review			68

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors

Dollar Tree, Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Dollar Tree, Inc. and subsidiaries (the Company) as of February 3, 2024 and January 28, 2023, the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity, and cash flows for each of the years in the three‑year period ended February 3, 2024, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of February 3, 2024 and January 28, 2023, and the results of its operations and its cash flows for each of the years in the three‑year period ended February 3, 2024, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of February 3, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 20, 2024 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Evaluation of estimated self-insurance liability

As discussed in Note 2 to the consolidated financial statements, the Company considers actuarial assumptions to estimate its self-insurance liability. As of February 3, 2024, the Company recorded an estimated liability of $363.5 million.

We identified the evaluation of the estimated self-insurance liability as a critical audit matter. The estimation process involves auditor judgment and actuarial expertise to evaluate the actuarial methods and assumptions that are used to estimate future claim payments. Specifically, the evaluation includes the assumptions related to the loss development factors and expected loss rates which are primarily driven by historical claims paid and incurred data.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s self-insurance liability estimation process. This included controls related to (1) the selection of the actuarial methods, and the development of the loss development factors and expected loss rates used to calculate the liability, and (2) the completeness and accuracy of historical claims paid and incurred data. We assessed the Company’s estimate of the liability by testing a selection of certain data, including claims data, utilized by the Company’s actuary by comparing it to relevant documentation. We involved actuarial professionals with specialized skills and knowledge, who assisted in:

• assessing the Company’s actuarial methods by comparing them to generally accepted actuarial methodologies; and

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

Trade name intangible asset and goodwill impairment

As discussed in Notes 2 and 15 to the consolidated financial statements, the Company performs trade name intangible asset and goodwill impairment testing on an annual basis and when events and changes in circumstances indicate possible impairment of these assets. To estimate the fair value of the Family Dollar trade name intangible asset (Family Dollar trade name), the Company uses the relief-from-royalty method. To estimate the fair value of the Family Dollar reporting unit for its impairment testing of goodwill (Family Dollar goodwill), the Company uses a combination of a market multiple method and a discounted cash flow method. The impairment charges for the year ended February 3, 2024 were $950.0 million for the Family Dollar trade name and $1,069.0 million for the Family Dollar goodwill.

We identified the evaluation of the Company’s impairment testing of the Family Dollar trade name and goodwill as a critical audit matter. Subjective auditor judgment and specialized skills and knowledge were required to evaluate the key assumptions used to estimate the fair value of the Family Dollar trade name, specifically the revenue growth rates, discount rate, and company-specific royalty rate, as well as the fair value of the Family Dollar reporting unit, specifically the revenue growth rates and discount rate. Minor changes to these assumptions could have had a significant effect on the fair values determined and the resulting assessment of the carrying value of the Family Dollar trade name and goodwill.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the goodwill and intangible asset impairment process, including controls related to the determination and development of the identified assumptions. We assessed the Company’s ability to forecast by comparing the Company’s historical forecasts to actual results. We evaluated the revenue growth rates by comparing them to historical results and performing sensitivity analyses. We involved valuation professionals with specialized skills and knowledge, who assisted in:

• evaluating the revenue growth rates by comparing them to publicly available market data for comparable companies

• assessing the discount rates by comparing them to a range of discount rates developed using publicly available market data for comparable companies

• assessing the company-specific royalty rate by comparing it to publicly available market data for comparable licensing agreements.

/s/ KPMG LLP

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

Virginia Beach, Virginia

March 20, 2024

DOLLAR TREE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

						Year Ended
(in millions, except per share data)						February 3, 2024						January 28, 2023						January 29, 2022
Net sales						$	30,581.6					$	28,318.2					$	26,309.8
Other revenue						22.2						13.5						11.4
Total revenue						30,603.8						28,331.7						26,321.2
Cost of sales						21,272.0						19,396.3						18,583.9
Selling, general and administrative expenses, excluding Goodwill impairment						9,144.6						6,699.1						5,925.9
Goodwill impairment						1,069.0						—						—
Selling, general and administrative expenses						10,213.6						6,699.1						5,925.9
Operating income (loss)						(881.8)						2,236.3						1,811.4
Interest expense, net						106.8						125.3						178.9
Other expense, net						0.1						0.4						0.3
Income (loss) before income taxes						(988.7)						2,110.6						1,632.2
Provision for income taxes						9.7						495.2						304.3
Net income (loss)						$	(998.4)					$	1,615.4					$	1,327.9
Basic net income (loss) per share of common stock						$	(4.55)					$	7.24					$	5.83
Diluted net income (loss) per share of common stock						$	(4.55)					$	7.21					$	5.80
Weighted average common shares outstanding:
Basic						219.5						223.2						227.9
Diluted						219.5						224.1						229.0

See accompanying Notes to Consolidated Financial Statements

DOLLAR TREE, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

						Year Ended
(in millions)						February 3, 2024						January 28, 2023						January 29, 2022
Net income (loss)						$	(998.4)					$	1,615.4					$	1,327.9
Foreign currency translation adjustments						(2.4)						(6.0)						—
Total comprehensive income (loss)						$	(1,000.8)					$	1,609.4					$	1,327.9

See accompanying Notes to Consolidated Financial Statements

DOLLAR TREE, INC.

CONSOLIDATED BALANCE SHEETS

(in millions, except share and per share data)						February 3, 2024						January 28, 2023
ASSETS
Current assets:
Cash and cash equivalents						$	684.9					$	642.8
Merchandise inventories						5,112.8						5,449.3
Other current assets						335.0						275.0
Total current assets						6,132.7						6,367.1
Restricted cash						72.3						68.5
Property, plant and equipment, net of accumulated depreciation of $6,631.4 and $6,025.4, respectively						6,144.1						4,972.2
Operating lease right-of-use assets						6,488.3						6,458.0
Goodwill						913.8						1,983.1
Trade name intangible asset						2,150.0						3,100.0
Deferred tax asset						9.0						15.0
Other assets						113.3						58.2
Total assets						$	22,023.5					$	23,022.1
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current portion of operating lease liabilities						$	1,513.0					$	1,449.6
Accounts payable						2,063.8						1,899.8
Income taxes payable						52.7						58.1
Other current liabilities						1,067.2						817.7
Total current liabilities						4,696.7						4,225.2
Long-term debt, net						3,426.3						3,421.6
Operating lease liabilities, long-term						5,447.6						5,255.3
Deferred income taxes, net						841.1						1,105.7
Income taxes payable, long-term						22.0						17.4
Other liabilities						276.7						245.4
Total liabilities						14,710.4						14,270.6
Commitments and contingencies (Note 5)
Shareholders’ equity:
Common stock, par value $0.01; 600,000,000 shares authorized, 217,907,206 and 221,222,984 shares issued and outstanding at February 3, 2024 and January 28, 2023, respectively						2.2						2.2
Additional paid-in capital						229.9						667.5
Accumulated other comprehensive loss						(43.6)						(41.2)
Retained earnings						7,124.6						8,123.0
Total shareholders’ equity						7,313.1						8,751.5
Total liabilities and shareholders’ equity						$	22,023.5					$	23,022.1

See accompanying Notes to Consolidated Financial Statements

DOLLAR TREE, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

YEARS ENDED FEBRUARY 3, 2024, JANUARY 28, 2023, AND JANUARY 29, 2022

(in millions)						Common Stock Shares						Common Stock						Additional Paid-in Capital						Accumulated Other Comprehensive Loss						Retained Earnings						Shareholders’ Equity
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
Issuance of stock under Employee Stock Purchase Plan						0.1						—						10.4						—						—						10.4
Exercise of stock options						0.1						—						7.4						—						—						7.4
Stock-based compensation, net						0.7						—						37.5						—						—						37.5
Repurchase of stock						(9.2)						(0.1)						(949.9)						—						—						(950.0)
Balance at January 29, 2022						225.1						2.2						1,243.9						(35.2)						6,507.6						7,718.5
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
Stock-based compensation, net						0.6						—						61.8						—						—						61.8
Repurchase of stock						(4.6)						—						(647.5)						—						—						(647.5)
Balance at January 28, 2023						221.2						2.2						667.5						(41.2)						8,123.0						8,751.5
Net income (loss)						—						—						—						—						(998.4)						(998.4)
Total other comprehensive loss						—						—						—						(2.4)						—						(2.4)
Issuance of stock under Employee Stock Purchase Plan						—						—						9.9						—						—						9.9
Exercise of stock options						—						—						0.1						—						—						0.1
Stock-based compensation, net						0.6						—						56.7						—						—						56.7
Repurchase of stock						(3.9)						—						(500.0)						—						—						(500.0)
Excise tax on repurchase of stock						—						—						(4.3)						—						—						(4.3)
Balance at February 3, 2024						217.9						$	2.2					$	229.9					$	(43.6)					$	7,124.6					$	7,313.1

See accompanying Notes to Consolidated Financial Statements

DOLLAR TREE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

						Year Ended
(in millions)						February 3, 2024						January 28, 2023						January 29, 2022
Cash flows from operating activities:
Net income (loss)						$	(998.4)					$	1,615.4					$	1,327.9
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Goodwill impairment						1,069.0						—						—
Depreciation and amortization						841.0						767.9						716.0
Provision for deferred income taxes						(258.6)						123.0						(23.2)
Stock-based compensation expense						96.7						110.4						79.9
Impairments, excluding goodwill						1,461.5						40.0						4.4
Other non-cash adjustments to net income (loss)						20.7						23.7						15.7
Loss on debt extinguishment						—						—						43.8
Changes in operating assets and liabilities:
Merchandise inventories						335.6						(1,085.4)						(940.4)
Other current assets						(60.1)						(17.9)						(49.9)
Other assets						(55.7)						(6.8)						(2.6)
Accounts payable						164.4						16.8						403.8
Income taxes payable						(5.5)						(24.5)						(3.7)
Other current liabilities						193.0						(2.2)						(36.5)
Other liabilities						35.9						(14.4)						(98.2)
Operating lease right-of-use assets and liabilities, net						(155.0)						68.8						(5.5)
Net cash provided by operating activities						2,684.5						1,614.8						1,431.5
Cash flows from investing activities:
Capital expenditures						(2,101.3)						(1,248.8)						(1,021.2)
Proceeds from governmental grant						—						—						2.9
Payments for fixed asset disposition						(6.3)						(5.0)						(1.6)
Net cash used in investing activities						(2,107.6)						(1,253.8)						(1,019.9)
Cash flows from financing activities:
Proceeds from long-term debt, net of discount						—						—						1,197.4
Principal payments for long-term debt						—						—						(1,000.0)
Debt-issuance and debt extinguishment costs						—						—						(59.3)
Proceeds from revolving credit facility						—						555.0						—
Repayments of revolving credit facility						—						(555.0)						—
Proceeds from commercial paper notes						1,067.9						—						—
Repayments of commercial paper notes						(1,067.9)						—						—
Proceeds from stock issued pursuant to stock-based compensation plans						10.0						9.3						17.8
Cash paid for taxes on exercises/vesting of stock-based compensation						(40.0)						(48.6)						(42.4)
Payments for repurchase of stock						(500.0)						(647.5)						(950.0)
Net cash used in financing activities						(530.0)						(686.8)						(836.5)
Effect of exchange rate changes on cash, cash equivalents and restricted cash						(1.0)						(1.2)						(0.4)
Net increase (decrease) in cash, cash equivalents and restricted cash						45.9						(327.0)						(425.3)
Cash, cash equivalents and restricted cash at beginning of year						711.3						1,038.3						1,463.6
Cash, cash equivalents and restricted cash at end of year						$	757.2					$	711.3					$	1,038.3
Supplemental disclosure of cash flow information:
Cash paid for:
Interest, net of amounts capitalized						$	131.4					$	132.2					$	176.1
Income taxes						$	274.0					$	401.3					$	363.4
Non-cash transactions:
Right-of-use assets obtained in exchange for new operating lease liabilities						$	1,893.1					$	1,538.3					$	1,495.3
Accrued capital expenditures						$	138.8					$	86.6					$	68.3

See accompanying Notes to Consolidated Financial Statements

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DOLLAR TREE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Description of Business and Basis of Presentation

Description of Business

Unless otherwise stated, references to “we,” “us,” and “our” in this Annual Report on Form 10-K refer to Dollar Tree, Inc. and its direct and indirect subsidiaries on a consolidated basis.

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

Basis of Presentation

The accompanying consolidated financial statements include the financial statements of Dollar Tree, Inc., and its wholly-owned subsidiaries and were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). All intercompany balances and transactions have been eliminated in consolidation. All amounts stated herein are in U.S. Dollars.

Fiscal Year

Our fiscal year is a 52-week or 53-week period ending on the Saturday closest to January 31. References to “fiscal 2023” relate to the 53-week fiscal year ended February 3, 2024. References to “fiscal 2025,” “fiscal 2024,” “fiscal 2022,” and “fiscal 2021” relate to the 52-week fiscal years ended January 31, 2026, February 1, 2025, January 28, 2023, and January 29, 2022, respectively.

Note 2 - Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents at February 3, 2024 and January 28, 2023 includes $304.2 million and $317.2 million, respectively, of investments primarily in money market securities which are valued at cost, which approximates fair value. In accordance with Accounting Standards Codification (“ASC”) Topic 305 “Cash and Cash Equivalents,” we consider all highly-liquid debt instruments with original maturities of three months or less to be cash equivalents. The majority of payments due from financial institutions for the settlement of debit card and credit card transactions process within three business days, and therefore are classified as cash and cash equivalents.

Merchandise Inventories

In accordance with ASC Topic 330 “Inventory,” merchandise inventories at our distribution centers are stated at the lower of cost or net realizable value, determined on a weighted-average cost basis. Cost is assigned to store inventories using the retail inventory method on a weighted-average basis. Under the retail inventory method, the valuation of inventories at cost and the resulting gross margins are computed by applying a calculated cost-to-retail ratio to the retail value of inventories.

Costs directly associated with warehousing and distribution are capitalized as merchandise inventories. Total warehousing and distribution costs capitalized into inventory amounted to $299.8 million and $298.6 million at February 3, 2024 and January 28, 2023, respectively.

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Property, Plant and Equipment

In accordance with ASC Topic 360 “Property, Plant and Equipment,” property, plant and equipment are stated at cost and depreciated using the straight-line method over the estimated useful lives of the respective assets as follows:

Buildings			39 to 40 years
Building improvements			20 years
Furniture, fixtures and equipment, software			3 to 15 years
Leasehold improvements			Shorter of remaining lease term or related asset life

Depreciation is included in “Selling, general and administrative expenses” in the accompanying Consolidated Statements of Operations, with the exception of depreciation related to our merchandising and distribution-related assets which are included in “Cost of sales” in the accompanying Consolidated Statements of Operations.

Capitalized Interest

We capitalize interest on borrowed funds during the construction of certain property and equipment based on our weighted average borrowing rates in place while the projects are in progress. We capitalized $5.9 million, $3.8 million and $1.1 million of interest costs in the years ended February 3, 2024, January 28, 2023 and January 29, 2022, respectively.

Insurance Reserves and Restricted Cash

We utilize a combination of insurance and self-insurance programs, including a wholly-owned captive insurance entity, to provide for the potential liabilities for certain risks, including workers’ compensation, general liability and auto. Liabilities associated with the risks that are retained by us are not discounted and are estimated, in part, by considering claims experience, exposure and severity factors, historical loss development factors, and other actuarial assumptions. Our self-insurance liabilities associated with workers’ compensation, general liability and auto are recorded within “Other current liabilities” and “Other liabilities” in the accompanying Consolidated Balance Sheets and amounted to $363.5 million and $318.2 million at February 3, 2024 and January 28, 2023, respectively.

Dollar Tree Insurance, Inc., a South Carolina-based wholly-owned captive insurance subsidiary of ours, charges the operating subsidiary companies premiums to insure the retained workers’ compensation, general liability and auto exposures. Pursuant to South Carolina insurance regulations, Dollar Tree Insurance, Inc. maintains certain levels of cash and cash equivalents related to its self-insured exposures.

We also maintain certain cash balances related to our insurance programs which are held in trust and restricted as to withdrawal or use. These amounts are reflected in “Restricted cash” in the accompanying Consolidated Balance Sheets and amounted to $72.3 million and $68.5 million at February 3, 2024 and January 28, 2023, respectively.

Lease Accounting

Our lease portfolio primarily consists of leases for our retail store locations, vehicles and trailers, as well as distribution center space and equipment. In accordance with ASC Topic 842 “Leases,” we determine if an arrangement is a lease at inception by evaluating whether the arrangement conveys the right to use an identified asset and whether we obtain substantially all of the economic benefits from and have the ability to direct the use of the asset. Leases with an initial term of 12 months or less are not recorded on the Consolidated Balance Sheets. We recognize expense for these leases on a straight-line basis over the lease term. For leases with an initial term in excess of 12 months, we determine the initial classification and measurement of the right-of-use (“ROU”) assets and lease liabilities at the lease commencement date and thereafter if modified. ROU assets represent our right to control the underlying assets under lease, over the contractual term. ROU assets and lease liabilities are recognized on the Consolidated Balance Sheets based on the present value of future minimum lease payments to be made over the lease term.

As most of our leases do not provide an implicit rate, we use our incremental borrowing rate in determining the present value of future lease payments. Inputs to the calculation of our incremental borrowing rate include the valuations and yields of our outstanding senior notes and their credit spreads over comparable U.S. Treasury rates, adjusted to a collateralized basis by estimating the credit spread improvement that would result from an upgrade of one ratings classification. Most leases include one or more options to renew and the exercise of renewal options is at our sole discretion. We do not include renewal options in our determination of the lease term unless the renewals are deemed to be reasonably certain. Operating lease expense for lease payments not yet paid is recognized on a straight-line basis over the lease term. The operating lease ROU asset is reduced by lease incentives, which has the effect of lowering the operating lease expense. Operating lease ROU assets are periodically reviewed for impairment losses. We use the long-lived assets impairment guidance in ASC Subtopic 360-10 “Property, Plant, and Equipment - Overall,” to determine whether an ROU asset is impaired, and if so, the amount of the impairment loss to recognize.

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We have real estate leases that typically include payments related to non-lease components, such as common area maintenance, as well as payments for real estate taxes and insurance which are not considered components of the lease. These payments are generally variable and based on actual costs incurred by the lessor. These costs are expensed as incurred as variable lease costs and excluded for the purpose of calculating the ROU asset and lease liability. A smaller number of real estate leases contain fixed payments for common area maintenance, real estate taxes and insurance. These fixed payments are considered part of the lease payment and included in the ROU asset and lease liability. In addition, certain of our lease agreements include rental payments based on a percentage of retail sales over contractual levels and others include rental payments adjusted periodically for inflation. These payments are expensed as incurred as variable lease costs. Our lease agreements do not contain any material residual value guarantees or material restrictive financial covenants.

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

In accordance with ASC Topic 360, we review our long-lived assets and certain identifiable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by comparing the carrying amount of an asset to future net undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets based on discounted cash flows or other readily available evidence of fair value, if any. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

In fiscal 2023, fiscal 2022 and fiscal 2021, we recorded charges of $511.5 million, $39.9 million and $4.4 million, respectively, to write down certain assets, including $358.7 million, $20.1 million and $3.9 million in fiscal 2023, fiscal 2022 and fiscal 2021, respectively, to write down operating lease ROU assets. The fiscal 2023 impairment charges include $152.2 million of store asset impairment charges and $351.7 million of operating lease ROU asset impairment charges recorded in connection with the store portfolio optimization review as discussed further in Note 16. Fiscal 2022 includes $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 Statements of Operations.

Goodwill and Nonamortizing Intangible Assets

Goodwill and nonamortizing intangible assets, including the Family Dollar trade name, are not amortized, but rather tested for impairment at least annually. In addition, goodwill and nonamortizing intangible assets are 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. 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 evaluate the Family Dollar 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.

During the fourth quarter of fiscal 2023, we recorded a non-cash goodwill impairment charge of $1,069.0 million and a non-cash trade name impairment charge of $950.0 million, both related to the Family Dollar reporting unit. Refer to Note 15 for additional information on the results of the trade name and goodwill impairment tests.

Revenue Recognition

We recognize revenue in accordance with ASC Topic 606 "Revenue from Contracts with Customers." Net sales consist of the net sales of merchandise in our stores. Revenue transactions associated with the sale of merchandise comprise a single performance obligation, which consists of the sale of products to customers. Revenue is recognized when we satisfy our performance obligations by transferring control of promised products to our customers, which occurs at a point in time. Sales taxes imposed on our revenues from product sales are presented on a net basis in the accompanying Consolidated Statements of Operations. Gift cards that we issue to customers are recorded as contract liabilities until they are redeemed, at which point revenue is recognized. We record reductions to revenue for discounts and estimated customer returns. Historically, our customer returns have not been material.

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Cost of Sales

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

Vendor Allowances

We receive vendor support in the form of cash payments or allowances through a variety of reimbursements such as purchase discounts, cooperative advertising, markdowns, scandowns and volume rebates. We have agreements with vendors setting forth the specific conditions for each allowance or payment. In accordance with ASC Subtopic 705-20 “Accounting for Consideration Received from a Vendor,” we either recognize the allowance as a reduction of current costs or defer the payment over the period the related merchandise is sold. If the payment is a reimbursement for costs incurred, it is offset against those related costs; otherwise, it is treated as a reduction to the cost of merchandise.

Pre-Opening Costs

We capitalize certain internal labor costs related to new, expanded, renovated, relocated and re-bannered stores after the project becomes probable and only when the costs are directly attributable to the preparation of the store-related assets for their intended use. We expense all other pre-opening costs related to our stores and distribution centers, as incurred.

Advertising Costs

We expense advertising costs as they are incurred and they are included in “Selling, general and administrative expenses” within the accompanying Consolidated Statements of Operations. Advertising costs, net of cooperative advertising recoveries from vendors, were $109.6 million, $99.5 million and $93.9 million in fiscal 2023, fiscal 2022 and fiscal 2021, respectively.

Income Taxes

In accordance with ASC Topic 740 “Income Taxes,” income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date of such change. Deferred tax assets are reduced by valuation allowances when necessary. Assessing whether deferred tax assets are realizable requires significant judgment. We consider all available positive and negative evidence, including historical operating performance and expectations of future operating performance. The ultimate realization of deferred tax assets is often dependent upon future taxable income and therefore can be uncertain. To the extent we believe it is more likely than not that all or some portion of the asset will not be realized, valuation allowances are established against our deferred tax assets, which increase income tax expense in the period when such a determination is made. Income taxes include the largest amount of tax benefit for an uncertain tax position that is more likely than not to be sustained upon audit based on the technical merits of the tax position. Settlements with tax authorities, the expiration of statutes of limitations for particular tax positions or obtaining new information on particular tax positions may cause a change to the effective tax rate.

We have made the policy election to record any liability associated with Global Intangible Low Tax Income ("GILTI") in the period in which it is incurred.

We include interest and penalties in the provision for income tax expense and income taxes payable. We do not provide for any penalties associated with tax contingencies unless they are considered probable of assessment.

Stock-Based Compensation

We account for stock-based compensation in accordance with ASC Topic 718 “Compensation - Stock Compensation,” which requires all stock-based compensation awards granted to be measured at fair value and recognized as an expense in the financial statements over the service period. In addition, this guidance requires that excess tax benefits related to stock-based compensation awards be reflected as operating cash flows. We use the Black-Scholes option pricing model to estimate the fair market value of stock option awards and grant date fair value for restricted stock units. We use the "simplified method" to estimate the expected life of options, as permitted by accounting guidance. The "simplified method" calculates the expected life of a stock option equal to the time from grant to the midpoint between the vesting date and contractual term, taking into account all vesting tranches. The risk-free interest rate is based on the yield for the U.S. Treasury bill with a maturity equal to the expected life of the stock option. Expected volatility is based on our historical average. Compensation expense is recognized net of forfeitures on a straight-line basis over the total vesting period, which is the implied requisite service period, or a shorter period based on the retirement eligibility of the grantee. Compensation expense for performance-based awards is recorded over the implied requisite service period when achievement of the performance target is deemed probable. We issue new shares upon exercise of stock options and upon vesting of restricted stock units.

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Total stock-based compensation expense for fiscal 2023, fiscal 2022 and fiscal 2021 was $96.7 million, $110.4 million and $79.9 million, respectively. Refer to Note 10 for further details on stock-based compensation.

Net Income (Loss) Per Share

In accordance with ASC Topic 260 “Earnings Per Share,” basic net income (loss) per share has been computed by dividing net income (loss) by the weighted average number of shares outstanding. Diluted net income (loss) per share reflects the potential dilution that could occur assuming the inclusion of dilutive potential shares and has been computed by dividing net income (loss) by the weighted average number of shares and dilutive potential shares outstanding. Dilutive potential shares include all outstanding stock options and unvested restricted stock units after applying the treasury stock method.

Foreign Currency

The functional currencies of certain of our international subsidiaries are the local currencies of the countries in which the subsidiaries are located. In accordance with ASC Topic 830 “Foreign Currency Matters,” foreign currency denominated assets and liabilities are translated into U.S. dollars using the exchange rates in effect at the consolidated balance sheet date. Results of operations and cash flows are translated using the average exchange rates throughout the period. Capital accounts are translated at historical foreign currency exchange rates. The effect of exchange rate fluctuations on translation of assets and liabilities is included as a component of shareholders’ equity in accumulated other comprehensive loss. Adjustments that arise from foreign currency exchange rate changes on transactions, primarily driven by intercompany transactions, denominated in a currency other than the functional currency are included in “Other expense, net” in the accompanying Consolidated Statements of Operations. These adjustments have not historically been significant.

Recently Adopted Accounting Pronouncements

In September 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2022-04 "Liabilities - Supplier Finance Programs (Subtopic 405-50)" ("ASU 2022-04") which requires entities to disclose the key terms of supplier finance programs used in connection with the purchase of goods and services along with information about their obligations under these programs, including a rollforward of those obligations. We adopted ASU 2022-04 for fiscal 2023 on a retrospective basis, except for the amendments relating to the rollforward requirement, which are required to be adopted for fiscal 2024 on a prospective basis. The adoption did not have a material impact on our consolidated financial statements. Refer to Note 14 for a discussion of our supply chain finance program.

Recently Issued Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07 “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”) which requires disclosure of incremental segment information on an annual and interim basis, including enhanced disclosures about significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within each reported measure of segment profit or loss. ASU 2023-07 also requires entities to disclose the title and position of the CODM and explain how the CODM uses the reported measures of segment profit or loss in assessing performance and allocating resources. Further, it requires that all annual disclosures about a reportable segment’s profit or loss and assets currently required by Topic 280 be provided in interim periods. ASU 2023-07 is effective on a retrospective basis for annual periods beginning in fiscal 2024 and for interim periods beginning in fiscal 2025. We are currently evaluating the impact of this standard to our consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”) which requires entities to disclose specific categories and greater disaggregation of information in the effective tax rate reconciliation, as well as disaggregated disclosure of income taxes paid, pretax income and income tax expense by jurisdiction. The standard also removes certain disclosure requirements that currently exist under Topic 740. ASU 2023-09 is effective on a prospective basis for annual periods beginning in fiscal 2025, with retrospective application permitted. We are currently evaluating the impact of this standard to our consolidated financial statements.

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Note 3 - Supplemental Balance Sheet Information

Property, Plant and Equipment, Net

Property, plant and equipment, net, as of February 3, 2024 and January 28, 2023 consists of the following:

(in millions)						February 3, 2024						January 28, 2023
Land						$	247.9					$	242.6
Buildings						1,796.7						1,631.6
Leasehold improvements						3,646.9						3,227.9
Furniture, fixtures and equipment						5,899.2						5,261.7
Construction in progress						1,184.8						633.8
Total property, plant and equipment						12,775.5						10,997.6
Less: accumulated depreciation						6,631.4						6,025.4
Total property, plant and equipment, net						$	6,144.1					$	4,972.2

Depreciation expense was $819.1 million, $737.4 million, and $672.0 million for the years ended February 3, 2024, January 28, 2023, and January 29, 2022, respectively.

Other Current Liabilities

Other current liabilities as of February 3, 2024 and January 28, 2023 consist of the following:

(in millions)						February 3, 2024						January 28, 2023
Taxes (other than income taxes)						$	292.3					$	253.7
Compensation and benefits						247.3						143.9
Insurance						143.4						131.1
Other						384.2						289.0
Total other current liabilities						$	1,067.2					$	817.7

Note 4 - Income Taxes

The provision for income taxes consists of the following:

						Year Ended
(in millions)						February 3, 2024						January 28, 2023						January 29, 2022
Current taxes:
Federal						$	222.2					$	322.0					$	271.1
State						46.1						50.2						56.3
Foreign						—						0.1						0.1
Total current taxes						268.3						372.3						327.5
Deferred taxes:
Federal						(225.3)						88.1						50.3
State						(39.2)						30.3						(76.5)
Foreign						5.9						4.5						3.0
Total deferred taxes						(258.6)						122.9						(23.2)
Provision for income taxes						$	9.7					$	495.2					$	304.3

On August 16, 2022, the Inflation Reduction Act of 2022 (“2022 Tax Act”) was enacted into law. A key provision of the 2022 Tax Act is a 15% minimum tax on adjusted financial statement income. We do not expect any impact to our effective tax rate as a result of the new 15% minimum tax under the 2022 Tax Act.

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A reconciliation of the statutory U.S. federal income tax rate and the effective tax rate follows:

						Year Ended
						February 3, 2024						January 28, 2023						January 29, 2022
Statutory U.S. federal income tax rate						21.0		%				21.0		%				21.0		%
Effect of:
Goodwill impairment						(22.7)						—						—
State and local income taxes, net of federal income tax benefit						(1.0)						3.7						3.7
Non-deductible expenses						(1.0)						0.1						0.1
Work Opportunity Tax Credit						3.0						(1.4)						(1.8)
Deferred tax rate change						—						0.7						(3.8)
Other, net						(0.3)						(0.6)						(0.6)
Effective tax rate						(1.0)		%				23.5		%				18.6		%

Goodwill Impairment

In the fourth quarter of fiscal 2023, we recorded a goodwill impairment charge of $1,069.0 million related to Family Dollar goodwill, as further discussed in Note 15. The purchase of Family Dollar was a stock acquisition, and carryover basis applied for tax purposes. The goodwill impairment charge is not deductible for federal or state tax purposes and therefore there is no tax benefit related to the impairment.

Reinvestment of Unremitted Earnings

Substantially all of our current year foreign cash earnings in excess of working capital and cash needed for strategic investments are not intended to be indefinitely reinvested offshore. Therefore, the tax effects of repatriation for applicable state taxes and foreign withholding taxes of such cash earnings have been provided for in the accompanying Consolidated Statements of Operations. We have the intent and ability to reinvest substantially all of the non-cash unremitted earnings of our non-U.S. subsidiaries indefinitely. Accordingly, no provision for state taxes or foreign withholding taxes was recorded on these unremitted earnings in the accompanying Consolidated Statements of Operations.

Deferred Income Taxes

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

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

(in millions)						February 3, 2024						January 28, 2023
Deferred tax assets:
Operating lease liabilities						$	1,800.4					$	1,703.5
Net operating losses, interest expense and credit carryforwards						72.8						69.3
Accrued expenses						35.7						31.0
Accrued compensation expense						39.3						33.9
State tax election						13.1						14.3
Other						4.7						2.5
Total deferred tax assets						1,966.0						1,854.5
Valuation allowance						(17.3)						(4.0)
Deferred tax assets, net						1,948.7						1,850.5
Deferred tax liabilities:
Operating lease ROU assets						(1,639.7)						(1,630.9)
Other intangibles						(529.1)						(760.4)
Property and equipment						(571.8)						(509.2)
Prepaids						(35.8)						(25.9)
Inventory						(4.4)						(14.8)
Total deferred tax liabilities						(2,780.8)						(2,941.2)
Deferred income taxes, net						$	(832.1)					$	(1,090.7)

At February 3, 2024, we had certain state tax credit carryforwards, net operating loss carryforwards and capital loss carryforwards totaling $72.8 million. Some of these carryforwards will expire, if not utilized, beginning in fiscal 2024 through fiscal 2043.

A valuation allowance of $17.3 million, net of federal tax benefits, has been provided principally for certain state credit carryforwards and net operating loss carryforwards. In assessing the realizability of deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred taxes will not be realized. Based upon the availability of carrybacks of future deductible amounts and our projections for future taxable income over the periods in which the deferred tax assets are deductible, we believe it is more likely than not the remaining existing deductible temporary differences will reverse during periods in which carrybacks are available or in which we generate net taxable income.

Uncertain Tax Positions

We are participating in the IRS Compliance Assurance Program (“CAP”) for fiscal 2023 and we have been accepted into the program for fiscal 2024. 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 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 fiscal 2020 tax return at this time. Several states completed their examinations during fiscal 2023. In general, fiscal 2020 and forward are within the statute of limitations for state tax purposes. The statute of limitations is still open prior to fiscal 2020 for some states.

The balance for unrecognized tax benefits at February 3, 2024 was $22.0 million. The total amount of unrecognized tax benefits at February 3, 2024 that, if recognized, would affect the effective tax rate was $17.4 million (net of the federal tax benefit).

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

(in millions)						February 3, 2024						January 28, 2023
Beginning Balance						$	17.4					$	20.9
Additions for tax positions of prior years						5.6						2.3
Additions, based on tax positions related to current year						2.3						4.0
Settlements						(0.3)						(0.1)
Lapses in statutes of limitation						(3.0)						(9.7)
Ending balance						$	22.0					$	17.4

It is possible that tax reserves will be reduced for audit settlements and statute expirations within the next 12 months. At this point it is not possible to estimate a range associated with the resolution of these audits. We do not expect any change to have a material impact to our consolidated financial statements.

As of February 3, 2024, we have recorded a liability for potential interest and penalties of $2.5 million.

Note 5 – Commitments and Contingencies

Purchase Obligations

At February 3, 2024, we have commitments totaling $190.9 million through fiscal 2025 related to ocean shipping contracts and commitments of $364.2 million through fiscal 2034 related to agreements for software licenses and support, telecommunication services and store technology assets and maintenance for our stores.

Letters of Credit

We have $425.0 million in trade letters of credit with various financial institutions, under which $133.2 million was committed to these letters of credit issued for routine purchases of imported merchandise at February 3, 2024.

Surety Bonds

We have issued various surety bonds that primarily serve as collateral for utility payments at our stores and self-insured insurance programs. These bonds total $159.1 million and are committed through various dates through fiscal 2029.

Contingencies

We are defendants in ordinary, routine litigation or proceedings incidental to our business, including employment-related matters; infringement of intellectual property rights; personal injury/wrongful death claims; real estate matters; environmental and safety issues; and product safety matters. Legal proceedings may also include class, collective, representative and large cases and arbitrations, including those described below. 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, financial condition, or liquidity. 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. 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 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. Management’s assessment of legal proceedings could change because of future determinations or the discovery of facts which are not presently known. Accordingly, the ultimate costs of resolving these proceedings may be substantially higher or lower than currently estimated.

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Active Matters

DC 202-related Matters

On February 11, 2022, the U.S. Food and Drug Administration (“FDA”) issued Form 483 observations primarily regarding rodent infestation at Family Dollar’s West Memphis, Arkansas distribution center (“DC 202”) and the related distribution of adulterated product, as well as other processes and procedures that required 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 subject inventory that was in the facility.

Beginning in February 2022, 14 putative class actions were filed against us 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, sought class action status, and allege 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 were alleged to be contaminated by virtue of rodent infestation and other unsanitary conditions at DC 202. Plaintiffs sought damages, attorney fees and costs, punitive damages and replacement 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. As a result of a mediation held in April 2023, the parties reached a claims made settlement whereby one class member per household may receive a $25 Family Dollar gift certificate. On October 27, 2023, the court granted preliminary approval of the settlement. Notice of the settlement and how to submit a claim was given beginning November 10, 2023. The period for filing a claim, opting out of the settlement or filing an objection to the settlement ended on January 9, 2024. A hearing on final approval of the settlement is scheduled for April 5, 2024.

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. In connection with this matter, we investigated the condition of FDA-regulated product shipped from DC 202 and related matters and cooperated fully with the U.S. Department of Justice (“DOJ”) investigation, including producing documents and providing additional information. As previously reported by the company on its Current Report on Form 8-K filed February 26, 2024, Family Dollar Stores, LLC (“Family Dollar”), a wholly-owned subsidiary of the company, has entered into a Plea Agreement (the “Plea Agreement”) in connection with the DOJ investigation. Subject to the terms and conditions of the Plea Agreement, Family Dollar pled guilty to a one count misdemeanor violation of the Food, Drug and Cosmetics Act for causing FDA-regulated products to become adulterated while such articles were held in DC 202. Under the Plea Agreement, Family Dollar agreed to pay $200,000 in fines and a forfeiture money judgment in the amount of $41,475,000, which relates to the value of the adulterated FDA-regulated products that were held in DC 202.

The Plea Agreement was approved by the United States District Court for the Eastern District of Arkansas at a hearing on February 26, 2024, and resolves the federal criminal investigation of Family Dollar. Subject to Family Dollar’s compliance with the terms and conditions of the Plea Agreement, the U.S. Attorney for the Eastern District of Arkansas and the DOJ have agreed not to bring further criminal charges against Family Dollar for any acts or conduct arising out of the events covered by the Plea Agreement. No criminal charges were brought against Dollar Tree in connection with this matter. As part of the Plea Agreement, Dollar Tree and Family Dollar agreed to adopt a new or to modify their existing compliance program as it relates to the warehousing and distribution to stores of food, drugs, devices and cosmetics. In addition, the company has agreed to make certain reports to the DOJ in connection with its compliance program during the three-year term.

On April 28, 2022, the Attorney General for 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 at DC 202. 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. We filed a motion to dismiss the State's claims, and it is too early to determine a likely outcome in the matter.

As previously disclosed, we recorded a charge of $30.0 million in the first quarter of fiscal 2023 with respect to DC 202-related matters which included a proposed settlement of 14 putative consumer class actions and a potential resolution of the DOJ investigation. As a result of Family Dollar entering into the Plea Agreement, we recorded an additional charge of $26.7 million in the fourth quarter of fiscal 2023 bringing the accrual to $56.7 million. At the present time, we are unable to estimate the amount of additional incremental loss, if any, which may result when the remaining matters are finally resolved. However, we do not believe the resolution of the State of Arkansas complaint or the final settlement of private civil litigation related to DC 202 will have a material adverse effect on our business, financial condition, or liquidity.

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Talc Product Matters

Multiple personal injury lawsuits are pending in state court in Illinois, New York, 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.

Acetaminophen Matters

Since August 2022, more than 50 personal injury cases have been filed in federal court 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, which originated in Alabama, California, Florida, Georgia, Louisiana, Minnesota, Missouri, North Carolina, Kentucky, Tennessee and Texas, along with other cases against many other defendants, were consolidated into multi-district court litigation in the Southern District of New York. Recently, the court disqualified all of plaintiffs’ experts and, on that basis dismissed all the cases which had been filed at the time of that decision, including all cases currently filed against us.

Note 6 - Short-Term Borrowings and Long-Term Debt

Short-term borrowings and long-term debt at February 3, 2024 and January 28, 2023 consist of the following:

(in millions)						February 3, 2024												January 28, 2023
Short-Term Borrowings:
Unsecured commercial paper notes						$	—											$	—
$1.5 billion Revolving Credit Facility						—												—
Total Short-Term Borrowings						$	—											$	—
Long-Term Debt:
4.00% Senior Notes, due 2025						$	1,000.0											$	1,000.0
4.20% Senior Notes, due 2028						1,250.0												1,250.0
2.65% Senior Notes, due 2031						800.0												800.0
3.375% Senior Notes, due 2051						400.0												400.0
Debt discount and issuance costs						(23.7)												(28.4)
Total Long-Term Debt						$	3,426.3											$	3,421.6
Less: Current portion						$	—											$	—
Non-current portion of long-term debt						$	3,426.3											$	3,421.6

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

Fiscal Year						(in millions)
2024						$	—
2025						1,000.0
2026						—
2027						—
2028						1,250.0
Thereafter						1,200.0
Total						$	3,450.0

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Commercial Paper Program

In July 2023, we established a commercial paper program to issue unsecured commercial paper notes with maturities up to 397 days from the date of issue, up to a maximum aggregate face or principal amount outstanding at any time of $1.5 billion. We expect to use the net proceeds of note issuances for general corporate purposes. Our Revolving Credit Facility will serve as a liquidity backstop for the repayment of notes outstanding under the program. The notes rank pari passu with all of our other unsecured and unsubordinated indebtedness. We issued $1,070.5 million principal amount of notes during fiscal 2023 and incurred interest expense of $2.6 million related to these notes. As of February 3, 2024, no notes were outstanding under the program.

Revolving Credit Facility

On December 8, 2021, we entered into a credit agreement (the “Credit Agreement”), with JPMorgan Chase Bank, N.A., as agent, and the financial institutions from time to time party thereto, providing for a $1.5 billion revolving credit facility (the “Revolving Credit Facility”), of which up to $350.0 million is available for letters of credit. At February 3, 2024 and January 28, 2023, we had letters of credit outstanding under the Revolving Credit Facility of $4.1 million and $4.4 million, respectively. The Revolving Credit Facility matures on December 8, 2026, subject to extensions permitted under the Credit Agreement.

Loans under the Revolving Credit Facility bear interest at the Adjusted Term SOFR Rate (as defined in the Credit Agreement) plus 1.125%, subject to adjustment based on (i) our public debt rating and (ii) our leverage ratio. At February 3, 2024, the Revolving Credit Facility bore interest at 6.55%. We pay certain commitment fees in connection with the Revolving Credit Facility. The Revolving Credit Facility allows voluntary repayment of outstanding loans at any time without premium or penalty, other than customary “breakage” costs with respect to Secured Overnight Financing Rate (“SOFR”) loans. There is no required amortization under the Revolving Credit Facility.

The Revolving Credit Facility contains a number of affirmative and negative covenants that, among other things, and subject to certain significant baskets and exceptions, restrict our ability to incur subsidiary indebtedness, incur liens, sell all or substantially all of our (including our subsidiaries’) assets and consummate certain fundamental changes. The Revolving Credit Facility also contains a maximum leverage ratio covenant and a minimum fixed charge coverage ratio covenant. The Credit Agreement provides for certain events of default which, if any of them occurs, would permit or require the loans under the Revolving Credit Facility to be declared due and payable and the commitments thereunder to be terminated.

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.

Senior Notes

Fiscal 2018 Offering

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

The Notes were issued pursuant to an indenture, dated as of April 2, 2018 (the “Indenture”), between us and U.S. Bank National Association, as trustee, as supplemented by the First Supplemental Indenture dated as of April 19, 2018 (the “First Supplemental Indenture”).

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

The 2023 Notes were scheduled to mature on May 15, 2023 and bore interest at the rate of 3.70% annually. We redeemed the 2023 Notes in the fourth quarter of 2021 as discussed in “Repayments of Long-Term Debt” below. The 2025 Notes mature on May 15, 2025 and bear interest at the rate of 4.00% annually. The 2028 Notes mature on May 15, 2028 and bear interest at the rate of 4.20% annually. We are required to pay interest on the Notes semiannually, in arrears, on May 15 and November 15 of each year to holders of record on the preceding May 1 and November 1, respectively.

We may redeem the Notes of each series in whole or in part, at our option, at any time and from time to time prior to March 15, 2025 in the case of the 2025 Notes and February 15, 2028 in the case of the 2028 Notes (the date with respect to each such series, the “Applicable Par Call Date”), in each case, at a “make-whole” price described in the First Supplemental Indenture plus accrued and unpaid interest to, but excluding, the date of redemption. In addition, on or after the Applicable Par Call Date, we may redeem the Notes of the applicable series, at any time in whole or from time to time in part, at a redemption price equal to 100% of the principal amount thereof.

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In the event of a Change of Control Triggering Event, as defined in the Indenture, with respect to any series, the holders of the Notes of such series may require us to purchase for cash all or a portion of their Notes of such series at a purchase price equal to 101% of the principal amount of such Notes, plus accrued and unpaid interest, if any, to, but excluding, the date of repurchase. The Indenture limits our ability and that of our subsidiaries, subject to significant baskets and exceptions, to incur certain secured debt. The First Supplemental Indenture also provides for events of default which, if any of them occurs, would permit or require the principal of and accrued interest on the Notes to become or to be declared due and payable, as applicable.

Fiscal 2021 Offering

On December 1, 2021, we completed the registered offering of $800.0 million aggregate principal amount of 2.65% Senior Notes due 2031 (the “2031 Notes”) and $400.0 million aggregate principal amount of 3.375% Senior Notes due 2051 (the “2051 Notes” and, together with the 2031 Notes, the “New Notes”).

The New Notes were issued pursuant to the Indenture, as supplemented by the Second Supplemental Indenture dated as of December 1, 2021 (the “Second Supplemental Indenture”).

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

The 2031 Notes mature on December 1, 2031 and bear interest at the rate of 2.650% per annum. 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 semiannually, 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. In addition, on or after the Applicable Par Call Date, we may redeem the New Notes of the applicable series, at any time in whole or from time to time in part, at a redemption price equal to 100% of the principal amount thereof.

In the event of a Change of Control Triggering Event (as defined in the Second Supplemental Indenture) with respect to any series, the holders of the New Notes of such series may require us to purchase for cash all or a portion of their New Notes of such series at a purchase price equal to 101% of the principal amount of such New Notes, plus accrued and unpaid interest, if any, to, but excluding, the date of repurchase. The Indenture limits our ability and that of our subsidiaries, subject to significant baskets and exceptions, to incur certain secured debt. The Indenture also provides for events of default which, if any of them occurs, would permit or require the principal of and accrued interest on the New Notes to become or to be declared due and payable, as applicable.

Repayments of Long-term Debt

In the fourth quarter of fiscal 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 Statements of Operations for the year ended January 29, 2022.

Debt Covenants

As of February 3, 2024, we were in compliance with the debt covenants for both our short-term borrowings and long-term debt.

Note 7 - Leases

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

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The lease cost for operating leases that was recognized in the accompanying Consolidated Statements of Operations was as follows:

						Year Ended
(in millions)						February 3, 2024						January 28, 2023						January 29, 2022
Operating lease cost						$	1,713.0					$	1,652.8					$	1,602.8
Variable lease cost						450.3						428.8						417.8
Short-term lease cost						20.0						10.8						5.6
Total lease cost*						$	2,183.3					$	2,092.4					$	2,026.2
*Excludes sublease income, which is immaterial

There are no residual value guarantees that exist, and there are no restrictions or covenants imposed by leases.

As of February 3, 2024, maturities of lease liabilities were as follows:

Fiscal Year						(in millions)
2024						$	1,622.3
2025						1,572.2
2026						1,336.3
2027						1,074.3
2028						786.4
Thereafter						1,499.5
Total undiscounted lease payments						7,891.0
Less interest						930.4
Present value of lease liabilities						$	6,960.6

The future lease payments above exclude $415.7 million of legally binding minimum lease payments for leases signed but not yet commenced as of February 3, 2024.

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

						February 3, 2024						January 28, 2023						January 29, 2022
Weighted-average remaining lease term (years)						5.7						5.7						5.9
Weighted-average discount rate						4.1		%				3.6		%				3.4		%

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

						Year Ended
(in millions)						February 3, 2024						January 28, 2023						January 29, 2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases						$	1,852.1					$	1,559.7					$	1,579.8

Note 8 - Fair Value Measurements

Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, a fair value hierarchy has been established that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy are as follows:

Level 1 - Quoted prices in active markets for identical assets or liabilities;

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Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and

Level 3 - Unobservable inputs in which there is little or no market data which require the reporting entity to develop its own assumptions.

Financial assets and liabilities are classified in the fair value hierarchy in their entirety based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Certain assets and liabilities are measured at fair value on a nonrecurring basis; 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 review certain store assets for evidence of impairment. The fair values are determined based on the income approach, in which we utilize internal cash flow projections over the life of the underlying lease agreements discounted based on our risk-adjusted rate. These measures of fair value, and related inputs, are considered a Level 3 approach under the fair value hierarchy. Refer to Note 2 under the caption “Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of” and Note 16 for further information regarding the impairment charges recorded in fiscal 2023, fiscal 2022 and fiscal 2021.

Our indefinite-lived intangible assets are recorded at carrying value, and, if impaired, are adjusted to fair value using Level 3 inputs. Refer to Note 2 under the caption “Goodwill and Nonamortizing Intangible Assets” and Note 15 for further information regarding the process of determining the fair value of these assets and the impairment charges recorded in fiscal 2023, fiscal 2022 and fiscal 2021.

Fair Value of Financial Instruments

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 values of our Revolving Credit Facility and borrowings under our commercial paper program approximate their fair values.

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

						February 3, 2024												January 28, 2023
(in millions)						Fair Value						Carrying Value						Fair Value						Carrying Value
Level 1
Senior Notes						$	3,140.0					$	3,430.1					$	3,162.8					$	3,426.7

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.

Note 9 - Shareholders’ Equity

Preferred Stock

We are authorized to issue 10,000,000 shares of Preferred Stock, $0.01 par value per share. No preferred shares are issued and outstanding at February 3, 2024 and January 28, 2023.

Share Repurchase Programs

We periodically repurchase shares of our common stock under share repurchase programs authorized by our Board of Directors. Under the existing Board repurchase authorization, we may repurchase up to $2.5 billion of our common stock in open market or privately negotiated transactions with financial institutions. The repurchase authorization does not have an expiration date.

We repurchased 3,905,599, 4,613,696 and 9,156,898 shares of common stock on the open market in fiscal 2023, fiscal 2022 and fiscal 2021, respectively, for $504.3 million, $647.5 million and $950.0 million, respectively. At February 3, 2024, we had $1.35 billion remaining under our existing $2.5 billion Board repurchase authorization.

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Note 10 - Stock-Based Compensation Plans

Fixed Stock-Based Compensation Plans

The 2011 Omnibus Incentive Plan permitted us to grant to our employees, consultants and directors up to 4.0 million shares of our common stock plus any shares available under former plans which were previously approved by the shareholders. The plan permitted us to grant equity awards in the form of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock awards, service-based restricted stock units (“RSUs”), performance bonuses, performance-based restricted stock units (“PSUs”), non-employee director stock options and other equity-related awards. As of March 17, 2021, the plan was no longer available for new grants of awards, but all outstanding awards that were granted under the plan prior to March 17, 2021 continue to be governed by the terms and conditions of the plan and applicable award agreements. Effective June 10, 2021, the 2011 Omnibus Incentive Plan was replaced and superseded by the 2021 Omnibus Incentive Plan (“Omnibus Plan”). The Omnibus Plan permits us to grant up to 6.5 million shares of our common stock to our employees, consultants and directors. The form of equity awards authorized for grant under the Omnibus Plan are substantially the same as those permitted by the predecessor plan.

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 Omnibus 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.

Prior to July 1, 2023, the 2013 Director Deferred Compensation Plan permitted our directors to defer all or a portion of fees for Board or Board committee service until a future date, at which time they may be paid in cash or shares of our common stock, or receive all or a portion of such fees in non-statutory stock options. Deferred fees that are paid out in cash will earn interest at the 30-year Treasury Bond Rate. Deferred amounts to be paid in common stock are determined by dividing the deferred fee amount by the closing market price of a share of our common stock on the date of deferral. The number of options issued to a director will equal the deferred fee amount divided by 33% of the price of a share of our common stock. The exercise price will equal the fair market value of our common stock at the date the option is issued. The options are fully vested when issued and have a term of 10 years. The 2013 plan expired on June 30, 2023. All amounts deferred by directors pursuant to the terms of the 2013 plan on or before June 30, 2023 will continue to be administered in accordance with the terms of the 2013 plan and applicable deferral elections.

Beginning July 1, 2023, our non-employee directors are permitted to defer all or a part of fees earned for his or her service as a director pursuant to our Non-Employee Director Deferred Compensation Program, which operates in conjunction with, and under the authority of, the Omnibus Plan. Pursuant to this program, cash fees may be deferred into either a cash account or a phantom stock account, and annual equity awards for service as a director may be deferred into the director’s phantom stock account. Deferred fees that are paid out in cash will earn interest at the 30-year Treasury Bond Rate. Deferred amounts to be paid in common stock are determined by dividing the deferred fee amount by the closing market price of a share of our common stock on the date of deferral.

Total stock-based compensation expense was recorded in the accompanying Consolidated Statements of Operations as follows:

						Year Ended
(in millions)						February 3, 2024						January 28, 2023						January 29, 2022
Cost of sales						$	22.4					$	19.7					$	18.3
Selling, general and administrative expenses						74.3						90.7						61.6
Total stock-based compensation expense						$	96.7					$	110.4					$	79.9
Excess tax benefit on stock-based compensation recognized in the provision for income taxes						$	3.9					$	9.8					$	8.5

Restricted Stock

We issue RSUs to employees and officers and issue PSUs to certain of our officers. We recognize expense based on the estimated fair value of the RSUs or PSUs granted over the requisite service period, which is generally three years, on a straight-line basis or a shorter period based on the retirement eligibility of the grantee. For PSUs, the compensation expense recorded is re-evaluated at each reporting period and adjusted, as necessary, based on the probability of achieving the performance criteria.

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RSUs

The fair value of RSUs is determined based on our closing stock price on the grant date. The following table summarizes the status of RSUs as of February 3, 2024 and changes during the year then ended:

						Number of RSUs						Weighted Average Grant Date Fair Value
Nonvested at January 28, 2023						868,720						$	123.99
Granted						550,132						141.70
Vested						(486,439)						110.56
Forfeited						(93,227)						141.20
Nonvested at February 3, 2024						839,186						$	141.45

The total fair value of the RSUs vested during the years ended February 3, 2024, January 28, 2023 and January 29, 2022 was $53.8 million, $51.5 million and $56.8 million, respectively. The weighted average grant date fair value of the RSUs granted in fiscal 2023, fiscal 2022 and fiscal 2021 was $141.70, $158.05 and $109.01, respectively. As of February 3, 2024, there was $65.9 million of total unrecognized compensation expense related to the outstanding RSUs which is expected to be recognized over a weighted-average period of 1.4 years.

PSUs

Historically, we have granted PSUs that have a service and performance condition. The fair value of these awards is determined based on our closing stock price on the grant date. In fiscal 2023, we granted PSUs that cliff vest at the end of three years and that contain a market condition modifier, in addition to having a service and performance condition. The market condition modifier can adjust the number of shares that vest under the award based on a comparison of our total shareholder return to that of a designated peer group over the performance period. The fair value of these awards incorporating the market condition was estimated on the grant date using a Monte Carlo simulation model with the following weighted average assumptions:

						Fiscal 2023
Expected term (in years)						2.8
Expected stock price volatility						34.5		%
Dividend yield						—		%
Risk-free interest rate						3.82		%

The expected stock price volatility is based on the historical and implied volatility of our common stock over a period matching the expected term of the awards 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 awards.

The following table summarizes the status of PSUs as of February 3, 2024 and changes during the year then ended:

						Number of PSUs						Weighted Average Grant Date Fair Value
Nonvested at January 28, 2023						154,823						$	125.84
Granted						122,419						129.24
Vested						(96,508)						89.81
Forfeited						(30,584)						129.29
Nonvested at February 3, 2024						150,150						$	147.29

The total fair value of the PSUs vested during the years ended February 3, 2024, January 28, 2023 and January 29, 2022 was $8.7 million, $44.5 million and $17.3 million, respectively. The weighted average grant date fair value of the PSUs granted in fiscal 2023, fiscal 2022 and fiscal 2021 was $129.24, $159.57 and $95.04, respectively. As of February 3, 2024, there was $3.7 million of total unrecognized compensation expense related to these PSUs which is expected to be recognized over a weighted-average period of 1.1 years. We assess the probability of the achievement of the remaining performance targets at the end of each reporting period and based on that assessment, cumulative adjustments may be recorded in future periods.

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Stock Options

Historically, we have not used stock options broadly as part of our compensation strategy. In fiscal 2023, we began to issue stock options to certain key executives. These awards generally have a ten-year term and vest in equal installments on each of the first three anniversaries of the grant date, subject to the employees’ continued employment with the company through each vesting date. Stock options granted in fiscal 2023 had a fair value of $4.9 million.

In addition, in fiscal 2022, we granted a one-time award of options to purchase 2,252,587 shares of our common stock at 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.

Options granted in fiscal 2021 were immaterial.

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.

The weighted average assumptions used in the Black-Scholes option pricing model for the executive stock options granted in fiscal 2023 and the assumptions used for the fiscal 2022 award granted to the Executive Chairmain are as follows:

						Fiscal 2023						Fiscal 2022
Expected term (in years)						6.0						6.5
Expected stock price volatility						36.3		%				34.1		%
Dividend yield						—		%				—		%
Risk-free interest rate						3.81		%				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 awards. 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.

Prior to July 1, 2023, certain of our directors elected to defer their compensation into stock options under the 2013 Director Deferred Compensation Plan. These options vested immediately and were expensed on the grant date.

The following tables summarize information about options outstanding at February 3, 2024 and changes during the year then ended:

						Number of Shares						Weighted Average Per Share Exercise Price						Weighted Average Remaining Term (Years)						Aggregate Intrinsic Value (in millions)
Outstanding at January 28, 2023						2,276,937						$	156.46
Granted						85,447						137.93
Exercised						(1,207)						77.59
Forfeited						(1,075)						143.55
Outstanding at February 3, 2024						2,360,102						$	155.84					8.1						$	1.5
Exercisable at February 3, 2024						475,810						$	153.92					7.9						$	1.1

The intrinsic value of options exercised during fiscal 2023, fiscal 2022 and fiscal 2021 was $0.1 million, less than $0.1 million and $5.6 million, respectively. As of February 3, 2024, there was $87.5 million of total unrecognized compensation expense related to these options which is expected to be recognized over a weighted-average period of 3.1 years.

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Note 11 – Net Income (Loss) Per Share

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

						Year Ended
(in millions, except per share data)						February 3, 2024						January 28, 2023						January 29, 2022
Basic net income (loss) per share:
Net income (loss)						$	(998.4)					$	1,615.4					$	1,327.9
Weighted average number of shares outstanding						219.5						223.2						227.9
Basic net income (loss) per share						$	(4.55)					$	7.24					$	5.83
Diluted net income (loss) per share:
Net income (loss)						$	(998.4)					$	1,615.4					$	1,327.9
Weighted average number of shares outstanding						219.5						223.2						227.9
Dilutive impact of share-based awards (as determined by applying the treasury stock method)						—						0.9						1.1
Weighted average number of shares and dilutive potential shares outstanding						219.5						224.1						229.0
Diluted net income (loss) per share						$	(4.55)					$	7.21					$	5.80

For the years ended February 3, 2024 and January 28, 2023, share-based awards of 2.9 million shares and 3.0 million shares, respectively, were excluded from the calculation of diluted net income (loss) per share because their inclusion would be anti-dilutive. For the year ended January 29, 2022, substantially all of the outstanding share-based awards were included in the calculation of the weighted average number of shares and dilutive potential shares outstanding.

Note 12 – Employee Benefit Plan

Dollar Tree Retirement Savings Plan

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. We make contributions in the form of a dollar-for-dollar match on the first five percent of employee contributions to eligible employees who have completed one year of service in which they have worked at least 1,000 hours.

Contributions to and reimbursements by us of expenses of the plan were recorded in the accompanying Consolidated Statements of Operations as follows:

						Year Ended
(in millions)						February 3, 2024						January 28, 2023						January 29, 2022
Cost of sales						$	9.9					$	8.6					$	8.2
Selling, general and administrative expenses						26.0						23.1						20.6
Total						$	35.9					$	31.7					$	28.8

All eligible employees are immediately vested in any company match contributions under the 401(k) plan.

Note 13 – Segments and Disaggregated Revenue

We operate more than 16,700 retail discount stores in 48 states and five Canadian provinces. Our operations are conducted in two reporting business segments: Dollar Tree and Family Dollar. We define our segments as those operations whose results our CODM regularly reviews to analyze performance and allocate resources.

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We measure the results of our segments using, among other measures, each segment’s net sales, gross profit and operating income (loss). The CODM reviews these metrics for each of our reporting segments. We may revise the measurement of each segment’s operating income (loss), as determined by the information regularly reviewed by the CODM. If the measurement of a segment changes, prior period amounts and balances are reclassified to be comparable to the current period’s presentation. Corporate, support and other consists primarily of store support center costs and the results of operations for our Summit Pointe property in Chesapeake, Virginia that are considered shared services and therefore these selling, general and administrative costs are excluded from our two reporting business segments. The Family Dollar segment operating income (loss) includes advertising revenue, which is a component of “Other revenue” in the accompanying Consolidated Statements of Operations.

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

						Year Ended
(in millions)						February 3, 2024						January 28, 2023						January 29, 2022
Consolidated Statements of Operations Data:
Net sales:
Dollar Tree						$	16,770.3					$	15,405.7					$	13,922.1
Family Dollar						13,811.3						12,912.5						12,387.7
Consolidated net sales						$	30,581.6					$	28,318.2					$	26,309.8
Gross profit:
Dollar Tree						$	6,008.9					$	5,775.5					$	4,603.6
Family Dollar						3,300.7						3,146.4						3,122.3
Consolidated gross profit						$	9,309.6					$	8,921.9					$	7,725.9
Operating income (loss):
Dollar Tree						$	2,278.8					$	2,536.0					$	1,607.0
Family Dollar						(2,663.5)						127.5						543.1
Corporate, support and other						(497.1)						(427.2)						(338.7)
Consolidated operating income (loss)						(881.8)						2,236.3						1,811.4
Interest expense, net						106.8						125.3						178.9
Other expense, net						0.1						0.4						0.3
Income (loss) before income taxes						$	(988.7)					$	2,110.6					$	1,632.2
Depreciation and amortization expense:
Dollar Tree						$	370.5					$	338.8					$	316.0
Family Dollar						440.4						402.4						369.8
Corporate, support and other						30.4						26.8						30.2
Consolidated depreciation and amortization expense						$	841.3					$	768.0					$	716.0

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						As of
(in millions)						February 3, 2024						January 28, 2023
Consolidated Balance Sheet Data:
Goodwill:
Dollar Tree						$	423.3					$	423.6
Family Dollar						490.5						1,559.5
Consolidated goodwill						$	913.8					$	1,983.1
Total assets:
Dollar Tree						$	10,315.9					$	9,914.6
Family Dollar						11,037.0						12,562.2
Corporate, support and other						670.6						545.3
Consolidated total assets						$	22,023.5					$	23,022.1
Additions to property, plant and equipment:
Dollar Tree						$	993.5					$	548.7
Family Dollar						995.2						605.2
Corporate, support and other						112.6						94.9
Consolidated additions to property, plant and equipment						$	2,101.3					$	1,248.8

Disaggregated Revenue

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

						Year Ended
(in millions)						February 3, 2024												January 28, 2023												January 29, 2022
Dollar Tree segment net sales by merchandise category:
Consumable						$	7,915.6					47.2		%				$	6,978.8					45.3		%				$	6,334.5					45.5		%
Variety						7,781.4						46.4		%				7,456.3						48.4		%				6,794.0						48.8		%
Seasonal						1,073.3						6.4		%				970.6						6.3		%				793.6						5.7		%
Total Dollar Tree segment net sales						$	16,770.3					100.0		%				$	15,405.7					100.0		%				$	13,922.1					100.0		%
Family Dollar segment net sales by merchandise category:
Consumable						$	11,086.1					80.3		%				$	10,036.2					77.7		%				$	9,446.5					76.3		%
Home products						930.0						6.7		%				982.5						7.6		%				1,033.9						8.3		%
Apparel and accessories						673.4						4.9		%				732.2						5.7		%				781.5						6.3		%
Seasonal and electronics						1,121.8						8.1		%				1,161.6						9.0		%				1,125.8						9.1		%
Total Family Dollar segment net sales						$	13,811.3					100.0		%				$	12,912.5					100.0		%				$	12,387.7					100.0		%

Note 14 – Supply Chain Finance Program

During the third quarter of fiscal 2023, we implemented a supply chain finance program, administered through a financial institution, which provides participating suppliers with the opportunity to finance payments due from us. Participating suppliers may, at their sole discretion, elect to finance one or more invoices of ours prior to their scheduled due dates at a discounted price with the financial institution.

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Our obligations to our suppliers, including amounts due and scheduled payment dates, are not impacted by the supplier’s decision to finance amounts under these arrangements. As such, the outstanding payment obligations under our supply chain financing program are included within “Accounts payable” in the accompanying Consolidated Balance Sheets and within “Cash flows from operating activities” in the accompanying Consolidated Statements of Cash Flows.

As of February 3, 2024, our outstanding payment obligations under this program were $11.8 million.

Note 15 – Goodwill and Nonamortizing Intangible Assets

Impairments

In connection with our annual impairment testing of goodwill and nonamortizing intangible assets during the fourth quarter, and as a result of the anticipated store closures described in Note 16, we determined it was more likely than not that an impairment loss had been incurred with respect to the Family Dollar goodwill and trade name, and proceeded to perform a quantitative impairment test of both assets. We estimated, with the assistance of a third party specialist, the fair value of the Family Dollar trade name based on an income approach using the relief-from-royalty method. The significant estimates used in the relief-from-royalty method, which are level 3 inputs, include a company-specific royalty rate, our weighted average cost of capital adjusted by a company-specific risk premium and trade name premium. The valuation date for the Family Dollar trade name was November 25, 2023. The results of the impairment test showed that the carrying value of the Family Dollar trade name exceeded its estimated fair value resulting in the recognition of a $950.0 million impairment charge in the fourth quarter of fiscal 2023, which is recorded as a component of “Selling, general and administrative expenses” in the accompanying Consolidated Statements of Operations.

Subsequent to the Family Dollar trade name and long-lived asset impairment tests, we estimated, with the assistance of a third party specialist, the fair value of the Family Dollar reporting unit using a combination of a market multiple method and a discounted cash flow method. The significant estimates used in the discounted cash flow method, which are level 3 inputs, include our weighted average cost of capital adjusted by a company-specific risk premium, long-term rates of growth and profitability for the Family Dollar reporting unit, working capital effects, and changes in market conditions, consumer trends and strategy. The market multiple method utilized comparable public company revenue and profitability multiples to estimate the fair value of the Family Dollar reporting unit. The valuation date for the Family Dollar reporting unit was November 25, 2023. The annual goodwill impairment evaluation in 2023 showed that the fair value of the Family Dollar reporting unit was lower than its carrying value resulting in the recognition of a $1,069.0 million impairment charge in the fourth quarter of fiscal 2023.

The annual goodwill and nonamortizing intangible asset impairment evaluations in fiscal 2022 and fiscal 2021 did not result in impairment.

We have recorded cumulative goodwill impairment charges totaling $4,109.0 million, all of which relate to the Family Dollar reporting unit and recorded during the fourth quarters of fiscal 2023 ($1,069.0 million), fiscal 2019 ($313.0 million), and fiscal 2018 ($2,727.0 million).

Goodwill

Goodwill allocated to our reportable segments and changes in the net carrying amount of goodwill for the years ended February 3, 2024 and January 28, 2023 are as follows:

(in millions)						Dollar Tree						Family Dollar						Total
Balance at January 29, 2022						$	424.9					$	1,559.5					$	1,984.4
Foreign currency translation adjustments						(1.3)						—						(1.3)
Balance at January 28, 2023						423.6						1,559.5						1,983.1
Foreign currency translation adjustments						(0.3)						—						(0.3)
Goodwill impairment						—						(1,069.0)						(1,069.0)
Balance at February 3, 2024						$	423.3					$	490.5					$	913.8

Note 16 – Store Portfolio Optimization Review

During the fourth quarter of fiscal 2023, we announced that we had initiated a comprehensive store portfolio optimization review which involved identifying stores for closure, relocation or re-bannering based on an evaluation of current market conditions and individual store performance, among other factors. As a result of this portfolio optimization review, we plan to close approximately 970 underperforming Family Dollar stores, including approximately 600 stores to be closed in the first half of fiscal 2024, and approximately 370 stores to be closed at the end of each store's current lease term. Additionally, we identified approximately 30 underperforming Dollar Tree stores for closure and plan to close each store at the end of the store's current lease term.

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We performed an undiscounted cash flow analysis on each individual store’s asset group, and determined that certain store asset groups had net carrying values that exceeded their estimated undiscounted future cash flows. Accordingly, we estimated the fair values of the asset groups based on a discounted cash flow method. For stores that are closing in the first half of fiscal 2024, we estimated the remaining fair value of the asset groups taking into account our ability to generate sublease income or lease termination benefits prior to the end of the lease term. The significant estimates used in the discounted cash flow methodology, which are based on level 3 inputs, include our expectations for future operations and projected cash flows. The valuation date for estimating the fair value of the long-lived assets for these stores was November 25, 2023.

As a result of the impairment test for the long-lived assets, we incurred $503.9 million of non-cash impairment charges which are included in “Selling, general and administrative expenses” within the accompanying Consolidated Statements of Operations, comprised of $152.2 million of property, plant and equipment impairment charges and $351.7 million of operating lease ROU asset impairment charges. The operating lease ROU asset impairment does not relieve us of our monthly cash payment obligations under the lease. We will pursue lease terminations or subleases where practicable. In addition, we recorded $80.6 million of inventory markdowns and $5.6 million of capitalized distribution cost impairment within “Cost of sales” in the accompanying Consolidated Statements of Operations for the stores expected to close in the first half of fiscal 2024. We also incurred $4.3 million in third party consulting fees related to the portfolio optimization review which are included in “Selling, general and administrative expenses” within the accompanying Consolidated Statements of Operations.

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