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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 2020
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 0-25464
dollartreeicon.gif
DOLLAR TREE, INC.
(Exact name of registrant as specified in its charter)
Virginia
 
26-2018846
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
500 Volvo Parkway
 
 
Chesapeake,
Virginia
 
23320
(Address of principal executive offices)
 
(Zip Code)

(757) 321-5000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading symbol(s)
Name of each exchange on which registered
Common Stock, par value $.01 per share
DLTR
NASDAQ Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes
No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes
No

1

Table of Contents

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.        
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
 
 
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes  
No
As of November 20, 2020, there were 235,192,152 shares of the registrant’s common stock outstanding.


2



DOLLAR TREE, INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED OCTOBER 31, 2020
TABLE OF CONTENTS
 
 
Page
 
PART I - FINANCIAL INFORMATION
 
 
 
 
Item 1.
 
 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
 
 
 
 
PART II - OTHER INFORMATION
 
 
 
 
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
 

3

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

DOLLAR TREE, INC.
CONDENSED CONSOLIDATED INCOME STATEMENTS
(Unaudited)
 
 
13 Weeks Ended
 
39 Weeks Ended
 
 
October 31,
 
November 2,
 
October 31,
 
November 2,
(in millions, except per share data)
 
2020
 
2019
 
2020
 
2019
Net sales
 
$
6,177.0

 
$
5,746.2

 
$
18,741.4

 
$
17,295.5

Cost of sales
 
4,252.6

 
4,041.7

 
13,105.9

 
12,215.3

Gross profit
 
1,924.4

 
1,704.5

 
5,635.5

 
5,080.2

Selling, general and administrative expenses
 
1,458.9

 
1,346.1

 
4,429.2

 
4,067.4

Operating income
 
465.5

 
358.4

 
1,206.3

 
1,012.8

Interest expense, net
 
38.1

 
41.4

 
113.1

 
122.9

Other expense, net
 
0.1

 
0.1

 
0.8

 
0.7

Income before income taxes
 
427.3

 
316.9

 
1,092.4

 
889.2

Provision for income taxes
 
97.3

 
61.1

 
253.3

 
185.2

Net income
 
$
330.0

 
$
255.8

 
$
839.1

 
$
704.0

Basic net income per share
 
$
1.39

 
$
1.08

 
$
3.54

 
$
2.97

Diluted net income per share
 
$
1.39

 
$
1.08

 
$
3.53

 
$
2.95

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.


4

Table of Contents

DOLLAR TREE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 
 
13 Weeks Ended
 
39 Weeks Ended
 
 
October 31,
 
November 2,
 
October 31,
 
November 2,
(in millions)
 
2020
 
2019
 
2020
 
2019
Net income
 
$
330.0

 
$
255.8

 
$
839.1

 
$
704.0

 
 
 
 
 
 
 
 
 
Foreign currency translation adjustments
 
0.6

 
0.4

 
(0.8
)
 
(0.9
)
 
 
 
 
 
 
 
 
 
Total comprehensive income
 
$
330.6

 
$
256.2

 
$
838.3

 
$
703.1

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.



5

Table of Contents

DOLLAR TREE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in millions)
 
October 31, 2020
 
February 1, 2020
 
November 2, 2019
ASSETS
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
Cash and cash equivalents
 
$
1,118.3

 
$
539.2

 
$
433.7

Merchandise inventories
 
3,792.3

 
3,522.0

 
3,882.9

Other current assets
 
260.4

 
208.2

 
255.7

Total current assets
 
5,171.0

 
4,269.4

 
4,572.3

Property, plant and equipment, net of accumulated depreciation
   of $4,618.1, $4,194.1 and $4,056.6, respectively
 
4,095.6

 
3,881.8

 
3,810.7

Restricted cash
 
46.9

 
46.8

 
46.6

Operating lease right-of-use assets
 
6,185.1

 
6,225.0

 
5,864.6

Goodwill
 
1,983.1

 
1,983.3

 
2,296.5

Trade name intangible asset
 
3,100.0

 
3,100.0

 
3,100.0

Deferred tax asset
 
23.3

 
24.4

 

Other assets
 
47.2

 
43.9

 
51.4

Total assets
 
$
20,652.2

 
$
19,574.6

 
$
19,742.1

LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 

 
 

 
 

Current liabilities:
 
 

 
 

 
 

Current portion of long-term debt
 
$
300.0

 
$
250.0

 
$
750.0

Current portion of operating lease liabilities
 
1,296.5

 
1,279.3

 
1,202.6

Accounts payable
 
1,587.2

 
1,336.5

 
1,473.1

Income taxes payable
 

 
62.7

 

Other current liabilities
 
858.6

 
618.0

 
754.0

Total current liabilities
 
4,042.3

 
3,546.5

 
4,179.7

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

 
3,522.2

 
3,520.2

Operating lease liabilities, long-term
 
4,962.1

 
4,979.5

 
4,636.0

Deferred income taxes, net
 
1,043.1

 
984.7

 
1,001.5

Income taxes payable, long-term
 
31.0

 
28.9

 
29.7

Other liabilities
 
387.3

 
258.0

 
253.7

Total liabilities
 
13,691.1

 
13,319.8

 
13,620.8

Commitments and contingencies
 


 


 


Shareholders’ equity
 
6,961.1

 
6,254.8

 
6,121.3

Total liabilities and shareholders’ equity
 
$
20,652.2

 
$
19,574.6

 
$
19,742.1

 
 
 
 
 
 
 
Common shares outstanding
 
235.2

 
236.7

 
236.7

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.



6

Table of Contents

DOLLAR TREE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Unaudited)
 
 
13 Weeks Ended October 31, 2020
(in millions)
 
Common
Stock
Shares
 
Common
Stock
 
Additional
Paid-in
Capital
 
Accumulated
Other
Comprehensive
Loss
 
Retained
Earnings
 
Shareholders'
Equity
Balance at August 1, 2020
 
237.3

 
$
2.4

 
$
2,505.5

 
$
(41.2
)
 
$
4,346.9

 
$
6,813.6

Net income
 

 

 

 

 
330.0

 
330.0

Total other comprehensive income
 

 

 

 
0.6

 

 
0.6

Issuance of stock under Employee Stock
    Purchase Plan
 

 

 
2.5

 

 

 
2.5

Stock-based compensation, net
 

 

 
14.4

 

 

 
14.4

Repurchase of stock
 
(2.1
)
 

 
(200.0
)
 

 

 
(200.0
)
Balance at October 31, 2020
 
235.2

 
$
2.4

 
$
2,322.4

 
$
(40.6
)
 
$
4,676.9

 
$
6,961.1

 
 
39 Weeks Ended October 31, 2020
(in millions)
 
Common
Stock
Shares
 
Common
Stock
 
Additional
Paid-in
Capital
 
Accumulated
Other
Comprehensive
Loss
 
Retained
Earnings
 
Shareholders'
Equity
Balance at February 1, 2020
 
236.7

 
$
2.4

 
$
2,454.4

 
$
(39.8
)
 
$
3,837.8

 
$
6,254.8

Net income
 

 

 

 

 
839.1

 
839.1

Total other comprehensive loss
 

 

 

 
(0.8
)
 

 
(0.8
)
Issuance of stock under Employee Stock
    Purchase Plan
 
0.1

 

 
7.6

 

 

 
7.6

Exercise of stock options
 
0.1

 

 
6.7

 

 

 
6.7

Stock-based compensation, net
 
0.4

 

 
53.7

 

 

 
53.7

Repurchase of stock
 
(2.1
)
 

 
(200.0
)
 

 

 
(200.0
)
Balance at October 31, 2020
 
235.2

 
$
2.4

 
$
2,322.4

 
$
(40.6
)
 
$
4,676.9

 
$
6,961.1

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.


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DOLLAR TREE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (cont.)
(Unaudited)
 
 
13 Weeks Ended November 2, 2019
(in millions)
 
Common
Stock
Shares
 
Common
Stock
 
Additional
Paid-in
Capital
 
Accumulated
Other
Comprehensive
Loss
 
Retained
Earnings
 
Shareholders'
Equity
Balance at August 3, 2019
 
236.8

 
$
2.4

 
$
2,443.9

 
$
(39.6
)
 
$
3,459.0

 
$
5,865.7

Net income
 

 

 

 

 
255.8

 
255.8

Total other comprehensive income
 

 

 

 
0.4

 

 
0.4

Issuance of stock under Employee Stock
    Purchase Plan
 

 

 
2.3

 

 

 
2.3

Exercise of stock options
 

 

 
0.8

 

 

 
0.8

Stock-based compensation, net
 

 

 
7.9

 

 

 
7.9

Repurchase of stock
 
(0.1
)
 

 
(11.6
)
 

 

 
(11.6
)
Balance at November 2, 2019
 
236.7

 
$
2.4

 
$
2,443.3

 
$
(39.2
)
 
$
3,714.8

 
$
6,121.3

 
 
39 Weeks Ended November 2, 2019
(in millions)
 
Common
Stock
Shares
 
Common
Stock
 
Additional
Paid-in
Capital
 
Accumulated
Other
Comprehensive
Loss
 
Retained
Earnings
 
Shareholders'
Equity
Balance at February 2, 2019
 
238.1

 
$
2.4

 
$
2,602.7

 
$
(38.3
)
 
$
3,076.1

 
$
5,642.9

Cumulative effect of adopted accounting
    standards, net
 

 

 

 

 
(65.3
)
 
(65.3
)
Net income
 

 

 

 

 
704.0

 
704.0

Total other comprehensive loss
 

 

 

 
(0.9
)
 

 
(0.9
)
Issuance of stock under Employee Stock
    Purchase Plan
 
0.1

 

 
7.5

 

 

 
7.5

Exercise of stock options
 

 

 
4.9

 

 

 
4.9

Stock-based compensation, net
 
0.4

 

 
28.2

 

 

 
28.2

Repurchase of stock
 
(1.9
)
 

 
(200.0
)
 

 

 
(200.0
)
Balance at November 2, 2019
 
236.7

 
$
2.4

 
$
2,443.3

 
$
(39.2
)
 
$
3,714.8

 
$
6,121.3

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.


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DOLLAR TREE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
 
39 Weeks Ended
 
 
October 31,
 
November 2,
(in millions)
 
2020
 
2019
Cash flows from operating activities:
 
 
 
 
Net income
 
$
839.1

 
$
704.0

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

 
 

Depreciation and amortization
 
503.7

 
466.3

Provision for deferred income taxes
 
59.4

 
50.3

Stock-based compensation expense
 
70.5

 
52.5

Amortization of debt discount and debt-issuance costs
 
3.1

 
4.9

Other non-cash adjustments to net income
 
7.4

 
24.2

Changes in operating assets and liabilities
 
250.5

 
(287.7
)
Net cash provided by operating activities
 
1,733.7

 
1,014.5

Cash flows from investing activities:
 
 

 
 

Capital expenditures
 
(707.0
)
 
(782.3
)
Proceeds from governmental grant
 

 
16.5

Payments for fixed asset disposition
 
(0.5
)
 
(2.9
)
Net cash used in investing activities
 
(707.5
)
 
(768.7
)
Cash flows from financing activities:
 
 

 
 

Principal payments for long-term debt
 
(250.0
)
 

Proceeds from revolving credit facility
 
750.0

 

Repayments of revolving credit facility
 
(750.0
)
 

Proceeds from stock issued pursuant to stock-based compensation plans
 
14.3

 
12.3

Cash paid for taxes on exercises/vesting of stock-based compensation
 
(16.8
)
 
(24.3
)
Payments for repurchase of stock
 
(194.2
)
 
(200.0
)
Net cash used in financing activities
 
(446.7
)
 
(212.0
)
Effect of exchange rate changes on cash, cash equivalents and restricted cash
 
(0.3
)
 
(0.2
)
Net increase in cash, cash equivalents and restricted cash
 
579.2

 
33.6

Cash, cash equivalents and restricted cash at beginning of period
 
586.0

 
446.7

Cash, cash equivalents and restricted cash at end of period
 
$
1,165.2

 
$
480.3

Supplemental disclosure of cash flow information:
 
 

 
 

Cash paid for:
 
 

 
 

Interest, net of amounts capitalized
 
$
80.4

 
$
89.7

Income taxes
 
$
300.5

 
$
248.9

Non-cash transactions:
 
 
 
 
Accrued capital expenditures
 
$
41.3

 
$
73.8

 See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.


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DOLLAR TREE, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Basis of Presentation
Unless otherwise stated, references to “we,” “us,” and “our” in this quarterly report on Form 10-Q refer to Dollar Tree, Inc. and its direct and indirect subsidiaries on a consolidated basis. We have prepared the accompanying unaudited condensed consolidated financial statements in accordance with U.S. generally accepted accounting principles for interim financial information and pursuant to the requirements of Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete consolidated financial statements. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our Annual Report on Form 10-K for the year ended February 1, 2020. The results of operations for the 13 and 39 weeks ended October 31, 2020 are not necessarily indicative of the results to be expected for the entire fiscal year ending January 30, 2021.
In our opinion, the unaudited condensed consolidated financial statements included herein contain all adjustments (including those of a normal recurring nature) considered necessary for a fair presentation of our financial position as of October 31, 2020 and November 2, 2019 and the results of our operations and cash flows for the periods presented. The February 1, 2020 balance sheet information was derived from the audited consolidated financial statements as of that date.
Certain prior year amounts have been reclassified for consistency with the current year presentation.
Note 2 - Legal Proceedings
We are defendants in legal proceedings including the class, collective, representative and large cases described below as well as individual claims in arbitration. We will vigorously defend ourselves in these matters. We do not believe that any of these matters will, individually or in the aggregate, have a material effect on our business or financial condition. We cannot give assurance, however, that one or more of these matters will not have a material effect on our results of operations for the quarter or year in which they are resolved.
We assess our legal proceedings monthly and reserves are established if a loss is probable and the amount of such loss can be reasonably estimated. For matters that have settled, we reserve the estimated settlement amount even if the settlement has not been approved by the court. Many, if not substantially all, of our legal proceedings are subject to significant uncertainties and, therefore, determining the likelihood of a loss and the measurement of any loss can be complex and subject to judgment. With respect to legal proceedings where we have determined that a loss is reasonably possible but not probable, we are unable to estimate the amount or range of the reasonably possible loss due to the inherent difficulty of predicting the outcome of and uncertainties regarding legal proceedings. Our assessments are based on estimates and assumptions that have been deemed reasonable by management, but that may prove to be incomplete or inaccurate, and unanticipated events and circumstances may occur that might cause us to change those estimates and assumptions. Management’s assessment of legal proceedings could change because of future determinations or the discovery of facts which are not presently known. Accordingly, the ultimate costs of resolving these proceedings may be substantially higher or lower than currently estimated.
Dollar Tree Active Matters
The Food and Drug Administration (“FDA”) has alleged that we improperly sold certain topically applied, over the counter (“OTC”) products manufactured by certain Chinese factories that were on an import “alert” restriction issued by the FDA. We responded to the FDA by proposing enhanced procedures and processes for any OTC products we import from China.
In January 2020, a consumer class action was filed against us in New York alleging Almond Milk sold by us with “Vanilla” featured prominently on its packaging is mislabeled because it does not contain the expected amount, type, and proportion of vanilla relative to non-vanilla flavor components. The legal claims include New York consumer protection laws, negligent misrepresentations, breach of warranties, fraud and unjust enrichment.
In August 2020, a consumer class action was filed against us in New York alleging Smoked Almonds sold by us are mislabeled because the almonds do not go through a smoking process but rather acquire their smoky taste through the use of smoked flavoring. The legal claims include New York consumer protection laws, negligent misrepresentations, breach of warranties, fraud and unjust enrichment.
Actual or threatened California state court lawsuits have been filed against Dollar Tree and Family Dollar for similar employment-related claims brought under Private Attorney General Act (“PAGA”). These cases may allege violations such as failure to provide employees with compliant rest and meal breaks, suitable seating, overtime pay, reimburse business expenses, pay minimum wages for all time worked, provide accurate wage statements, and timely pay wages as well as other potential labor code violations.

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Table of Contents

Lawsuits have been filed against Dollar Tree, Family Dollar and our vendors alleging that personal talc powder products caused cancer. We do not believe the products we sold caused the illnesses. We believe these lawsuits are insured and we are being indemnified by our third party vendors.
Dollar Tree Resolved Matters
In April 2015, a distribution center employee filed a class action in California state court with allegations concerning wages, meal and rest breaks, recovery periods, wage statements and timely termination pay. We have reached an agreement and received final approval from the court.
In August 2018, a former employee brought suit in California state court as a class action and as a PAGA representative suit alleging we failed to provide all non-exempt California store employees with compliant rest and meal breaks, accrued vacation, accurate wage statements and final pay upon termination of employment. We have reached an agreement to settle the matter and have received the court’s approval.
In June 2020, a current employee filed a class action in California state court on behalf of herself and other non-exempt store employees in California alleging we failed to provide an effective illness and injury prevention program in our California stores and failed to provide personal protective equipment to our store employees thereby engaging in unfair business practices and creating a public nuisance. The court granted our request to compel arbitration which resolves the class action matter.
Family Dollar Active Matters
Beginning in 2019, a law firm has filed lawsuits around the country, including purported nationwide and state class actions, alleging we violated the public accommodation requirements of the Americans with Disabilities Act or its state law equivalent, by systemically blocking the aisles with merchandise.
In October 2019, a state and federal class action was filed in New York alleging that we sold Zantac containing N-Nitrosodimethylamine, which is classified by the FDA as a probable carcinogen. The suit alleges breach of warranty, fraud, unjust enrichment, and violation of New York’s General Business Law. We believe we are fully indemnified by our supplier.
Please see the description above for talc and PAGA lawsuits against Family Dollar.
Family Dollar Resolved Matters
In January 2017, a customer filed a class action in federal court in Illinois alleging we violated various state consumer fraud laws as well as express and implied warranties by selling a product that purported to contain aloe when it did not. The requested class is limited to the state of Illinois. The court has dismissed the lawsuit.
Note 3 - Long-Term Debt
In the first quarter of fiscal 2020, we paid the remaining $250.0 million outstanding under our Senior Floating Rate Notes due 2020.
Additionally, in the first quarter of fiscal 2020, we preemptively drew $750.0 million on our Revolving Credit Facility to reduce our exposure to potential short-term liquidity risk in the banking system as a result of the COVID-19 pandemic, all of which was repaid as of October 31, 2020.
As of October 31, 2020, we were in compliance with our debt covenants.
Note 4 - Fair Value Measurements
As required, financial assets and liabilities are classified in the fair value hierarchy in their entirety based on the lowest level of input that is significant to the fair value measurement. 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 did not record any significant impairment charges during the 13 or 39 weeks ended October 31, 2020 and November 2, 2019.

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Table of Contents

Fair Value of Financial Instruments
The carrying amounts of Cash and cash equivalents, Restricted cash and Accounts payable as reported in the accompanying unaudited condensed consolidated balance sheets approximate fair value due to their short-term maturities.
The aggregate fair values and carrying values of our long-term borrowings were as follows:
 
 
October 31, 2020
 
February 1, 2020
 
November 2, 2019
(in millions)
 
Fair Value
 
Carrying Value
 
Fair Value
 
Carrying Value
 
Fair Value
 
Carrying Value
Level 1
 
 
 
 
 
 
 
 
 
 
 
 
Senior Notes
 
$
3,966.3

 
$
3,531.2

 
$
4,064.5

 
$
3,779.9

 
$
4,530.3

 
$
4,278.6


The fair values of our Senior Notes were determined using Level 1 inputs as quoted prices in active markets for identical assets or liabilities are available. The carrying value of our Revolving Credit Facility approximates its fair value because the interest rates vary with market interest rates.
Note 5 - Net Income Per Share
The following table sets forth the calculations of basic and diluted net income per share:
 
 
13 Weeks Ended
 
39 Weeks Ended
 
 
October 31,
 
November 2,
 
October 31,
 
November 2,
(in millions, except per share data)
 
2020
 
2019
 
2020
 
2019
Basic net income per share:
 
 
 
 
 
 
 
 
Net income
 
$
330.0

 
$
255.8

 
$
839.1

 
$
704.0

Weighted average number of shares outstanding
 
236.8

 
236.7

 
237.0

 
237.4

Basic net income per share
 
$
1.39

 
$
1.08

 
$
3.54

 
$
2.97

Diluted net income per share:
 
 
 
 
 
 
 
 
Net income
 
$
330.0

 
$
255.8

 
$
839.1

 
$
704.0

Weighted average number of shares outstanding
 
236.8

 
236.7

 
237.0

 
237.4

Dilutive effect of stock options and restricted stock (as
determined by applying the treasury stock method)
 
1.1

 
0.8

 
0.8

 
0.9

Weighted average number of shares and dilutive potential
shares outstanding
 
237.9

 
237.5

 
237.8

 
238.3

Diluted net income per share
 
$
1.39

 
$
1.08

 
$
3.53

 
$
2.95


For the 13 and 39 weeks ended October 31, 2020 and November 2, 2019, substantially all of the stock options outstanding were included in the calculation of the weighted average number of shares and dilutive potential shares outstanding.
Note 6 - Stock-Based Compensation
For a discussion of our stock-based compensation plans, refer to “Note 11 - Stock-Based Compensation Plans” of our Annual Report on Form 10-K for the year ended February 1, 2020. Stock-based compensation expense was $70.5 million and $52.5 million during the 39 weeks ended October 31, 2020 and November 2, 2019, respectively.
Restricted Stock
We issue service-based RSUs to employees and officers and issue PSUs to certain officers. We recognize expense based on the estimated fair value of the RSUs or PSUs granted over the requisite service period, which is generally three years, on a straight-line basis or a shorter period based on the retirement eligibility of the grantee. The fair value of RSUs and PSUs is determined using our closing stock price on the date of grant.

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Table of Contents

Service-Based RSUs
The following table summarizes the status of service-based RSUs as of October 31, 2020 and changes during the 39 weeks then ended:
 
 
Number of Shares
 
Weighted Average
Grant Date
Fair Value
Nonvested at February 1, 2020
 
1,049,081

 
$
95.17

Granted
 
845,394

 
73.08

Vested
 
(528,710
)
 
91.06

Forfeited
 
(80,457
)
 
83.36

Nonvested at October 31, 2020
 
1,285,308

 
$
83.07


PSUs
The following table summarizes the status of PSUs as of October 31, 2020 and changes during the 39 weeks then ended:
 
 
Number of Shares
 
Weighted Average
Grant Date
Fair Value
Nonvested at February 1, 2020
 
320,500

 
$
99.29

Granted
 
428,377

 
74.46

Vested
 
(221,876
)
 
88.12

Forfeited
 
(89,390
)
 
89.44

Nonvested at October 31, 2020
 
437,611

 
$
82.66


Note 7 - Leases
Our lease portfolio primarily consists of leases for our retail store locations and we also lease vehicles and trailers, as well as distribution center space and equipment.
The lease cost for operating leases that was recognized in the accompanying unaudited condensed consolidated income statements for the 13 and 39 weeks ended October 31, 2020 and November 2, 2019 was as follows:
 
 
13 Weeks Ended
 
39 Weeks Ended
(in millions)
 
October 31, 2020
 
November 2, 2019
 
October 31, 2020
 
November 2, 2019
Operating lease cost
 
$
389.7

 
$
378.2

 
$
1,158.5

 
$
1,139.8

Variable lease cost
 
95.3

 
94.7

 
288.0

 
272.2

Total lease cost*
 
$
485.0

 
$
472.9

 
$
1,446.5

 
$
1,412.0

 
 
 
 
 
 
 
 
 
*Excludes short-term lease cost and sublease income, which are immaterial


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Table of Contents

As of October 31, 2020, maturities of lease liabilities were as follows:
 
 
(in millions)
Remainder of 2020
 
$
305.2

2021
 
1,474.8

2022
 
1,286.2

2023
 
1,072.4

2024
 
857.6

Thereafter
 
2,116.8

Total undiscounted lease payments
 
7,113.0

Less interest
 
854.4

Present value of lease liabilities
 
$
6,258.6


The future minimum lease payments above exclude $243.7 million of legally binding minimum lease payments for leases signed but not yet commenced as of October 31, 2020.
Information regarding the weighted-average remaining lease term and the weighted-average discount rate for operating leases as of October 31, 2020 and November 2, 2019 is as follows:
 
 
October 31, 2020
 
November 2, 2019
Weighted-average remaining lease term (years)
 
6.2

 
6.5

Weighted-average discount rate
 
4.0
%
 
4.4
%

The following represents supplemental information pertaining to our operating lease arrangements for the 13 and 39 weeks ended October 31, 2020 and November 2, 2019:
 
 
13 Weeks Ended
 
39 Weeks Ended
(in millions)
 
October 31, 2020
 
November 2, 2019
 
October 31, 2020
 
November 2, 2019
Cash paid for amounts included in the measurement
of lease liabilities:
 
 
 
 
 
 
 
 
Operating cash flows from operating leases
 
$
383.3

 
$
367.5

 
$
1,132.7

 
$
1,099.1

Right-of-use assets obtained in exchange for new
operating lease liabilities
 
314.0

 
163.9

 
959.6

 
593.2


Note 8 - Shareholders’ Equity
We repurchased 2,154,304 shares of common stock on the open market for approximately $200.0 million during the 13 and 39 weeks ended October 31, 2020. Approximately $5.8 million in share repurchases had not settled as of October 31, 2020. This amount was accrued and is reflected in “Other current liabilities” within the accompanying unaudited condensed consolidated balance sheet as of October 31, 2020. We repurchased 125,048 and 1,967,355 shares of common stock on the open market for approximately $11.6 million and $200.0 million during the 13 and 39 weeks ended November 2, 2019, respectively. As of October 31, 2020, we have $600.0 million remaining under Board repurchase authorization.
Note 9 - Income Taxes
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law. The CARES Act retroactively changed the recovery period for Qualified Improvement Property to 15 years for eligible property placed in service subsequent to December 31, 2017. In the first quarter of 2020, we reclassified $67.0 million to the “Deferred income taxes, net” liability from “Income taxes payable” to reflect the additional currently deductible depreciation associated with the change in recovery period for Qualified Improvement Property.

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Table of Contents

Note 10 - Segments
We operate a chain of more than 15,600 retail discount stores in 48 states and five Canadian provinces. Our operations are conducted in two reporting business segments: Dollar Tree and Family Dollar. We define our segments as those operations whose results our chief operating decision maker (“CODM”) regularly reviews to analyze performance and allocate resources.
The Dollar Tree segment is the leading operator of discount variety stores offering merchandise at the fixed price of $1.00. The Dollar Tree segment includes our operations under the “Dollar Tree” and “Dollar Tree Canada” brands, 15 distribution centers in the United States and two distribution centers in Canada.
The Family Dollar segment operates a chain of general merchandise retail discount stores providing consumers with a selection of competitively-priced merchandise in convenient neighborhood stores. The Family Dollar segment consists of our operations under the “Family Dollar” brand and 11 distribution centers.
We measure the results of our segments using, among other measures, each segment’s net sales, gross profit and operating income. The CODM reviews these metrics for each of our reporting segments. We may revise the measurement of each segment’s operating income, as determined by the information regularly reviewed by the CODM. If the measurement of a segment changes, prior period amounts and balances are reclassified to be comparable to the current period’s presentation. Corporate, support and Other consists primarily of store support center costs that are considered shared services and therefore these selling, general and administrative costs are excluded from our two reporting business segments. These costs include operating expenses for our store support centers in Chesapeake, Virginia and Matthews, North Carolina. During fiscal 2019, we consolidated our Matthews, North Carolina store support center with our store support center in Chesapeake, Virginia. Corporate, support and Other also includes the results of operations for our Summit Pointe property in Chesapeake, Virginia.
Information for our segments, as well as for Corporate, support and Other, including the reconciliation to Income before income taxes, is as follows:
 
 
13 Weeks Ended
 
39 Weeks Ended
 
 
October 31,
 
November 2,
 
October 31,
 
November 2,
(in millions)
 
2020
 
2019
 
2020
 
2019
Condensed Consolidated Income Statement Data:
 
 
 
 
 
 
 
 
Net sales:
 
 
 
 
 
 
 
 
Dollar Tree
 
$
3,303.2

 
$
3,074.3

 
$
9,557.6

 
$
8,991.4

Family Dollar
 
2,873.5

 
2,671.9

 
9,183.5

 
8,304.1

Corporate, support and Other
 
0.3

 

 
0.3

 

Consolidated Net sales
 
$
6,177.0

 
$
5,746.2

 
$
18,741.4

 
$
17,295.5

 
 
 
 
 
 
 
 
 
Gross profit:
 
 
 
 
 
 
 
 
Dollar Tree
 
$
1,154.2

 
$
1,050.5

 
$
3,206.8

 
$
3,070.8

Family Dollar
 
769.9

 
654.0

 
2,428.4

 
2,009.4

Corporate, support and Other
 
0.3

 

 
0.3

 

Consolidated Gross profit
 
$
1,924.4

 
$
1,704.5

 
$
5,635.5

 
$
5,080.2

 
 
 
 
 
 
 
 
 
Operating income (loss):
 
 
 
 
 
 
 
 
Dollar Tree
 
$
417.9

 
$
374.6

 
$
1,006.5

 
$
1,105.9

Family Dollar
 
131.4

 
55.2

 
472.0

 
163.9

Corporate, support and Other
 
(83.8
)
 
(71.4
)
 
(272.2
)
 
(257.0
)
Consolidated Operating income
 
465.5

 
358.4

 
1,206.3

 
1,012.8

Interest expense, net
 
38.1

 
41.4

 
113.1

 
122.9

Other expense, net
 
0.1

 
0.1

 
0.8

 
0.7

Income before income taxes
 
$
427.3

 
$
316.9

 
$
1,092.4

 
$
889.2


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Table of Contents

 
 
As of
 
 
October 31,
 
February 1,
 
November 2,
(in millions)
 
2020
 
2020
 
2019
Condensed Consolidated Balance Sheet Data:
 
 
 
 
 
 
Goodwill:
 
 
 
 
 
 
Dollar Tree
 
$
423.6

 
$
423.8

 
$
421.6

Family Dollar
 
1,559.5

 
1,559.5

 
1,874.9

Consolidated Goodwill
 
$
1,983.1

 
$
1,983.3

 
$
2,296.5

 
 
 
 
 
 
 
Total assets:
 
 
 
 
 
 
Dollar Tree
 
$
8,467.4

 
$
7,694.0

 
$
7,531.0

Family Dollar
 
11,703.0

 
11,484.9

 
11,858.3

Corporate, support and Other
 
481.8

 
395.7

 
352.8

Consolidated Total assets
 
$
20,652.2

 
$
19,574.6

 
$
19,742.1

 
 
 
 
 
 
 

*Goodwill is reassigned between segments when previously acquired stores are re-bannered between segments. The goodwill related to previously acquired re-bannered stores in the 39 weeks ended October 31, 2020 was not material. In the 39 weeks ended November 2, 2019, we reassigned $45.2 million of goodwill from Family Dollar to Dollar Tree as a result of re-bannering.
Disaggregated Revenue
The following table summarizes net sales by merchandise category for our segments:
 
 
13 Weeks Ended
 
39 Weeks Ended
 
 
October 31,
 
November 2,
 
October 31,
 
November 2,
(in millions)
 
2020
 
2019
 
2020
 
2019
Dollar Tree segment net sales by
    merchandise category:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consumable
 
$
1,564.1

 
47.4
%
 
$
1,555.8

 
50.6
%
 
$
4,778.8

 
50.0
%
 
$
4,567.6

 
50.8
%
Variety
 
1,520.9

 
46.0
%
 
1,328.3

 
43.2
%
 
4,473.0

 
46.8
%
 
4,127.1

 
45.9
%
Seasonal
 
218.2

 
6.6
%
 
190.2

 
6.2
%
 
305.8

 
3.2
%
 
296.7

 
3.3
%
Total Dollar Tree segment net sales
 
$
3,303.2

 
100.0
%
 
$
3,074.3

 
100.0
%
 
$
9,557.6

 
100.0
%
 
$
8,991.4

 
100.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Family Dollar segment net sales by
    merchandise category:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consumable
 
$
2,255.7

 
78.5
%
 
$
2,133.9

 
79.9
%
 
$
7,077.5

 
77.1
%
 
$
6,481.1

 
78.0
%
Home products
 
240.1

 
8.3
%
 
196.3

 
7.3
%
 
802.7

 
8.7
%