Contingencies |
3 Months Ended |
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May 04, 2024 | |
| Commitments and Contingencies Disclosure [Abstract] | |
| Contingencies | Contingencies On April 28, 2024, a tornado destroyed our Dollar Tree distribution center in Marietta, Oklahoma. Based on the significant damage sustained by the facility, the inventory contained in the facility and the facility itself are not salvageable. We incurred losses totaling $117.0 million as of May 4, 2024, consisting of $70.0 million related to damaged inventory and $47.0 million related to property and equipment. Our distribution center insurance policies include significant property and inventory coverage and we believe the aforementioned, incurred losses will be fully offset by insurance recoveries. As the insurance receivables recorded fully offset the losses incurred, there was no net impact to the accompanying unaudited Condensed Consolidated Income Statements for the 13 weeks ended May 4, 2024.
Expected insurance recoveries for business interruption and redevelopment costs greater than the losses recognized cannot be estimated at this time.
The foregoing losses and expected insurance recoveries are based on information currently available to us. We continue to assess these estimates and will recognize any changes to these estimates in the period(s) in which they are determined. The final losses, insurance recoveries and net charges could vary from these estimates.
Legal Proceedings
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.
Active Matters
DC 202-Related Matters
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, entered into a Plea Agreement (the “Plea Agreement”) resolving the U.S. Department of Justice (“DOJ”) investigation regarding rodent infestation at Family Dollar’s West Memphis, Arkansas distribution center (“DC 202”) and the related distribution of adulterated product. 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. 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 certain terms relating to its compliance program including submitting certain reports to the DOJ for a three-year term.
The company previously reported a preliminary settlement of a multi-district litigation proceeding in federal court in Tennessee covering 14 putative class actions filed against us primarily related to issues associated with DC 202 described above. The claims made settlement, which received preliminary approval from the court in October 2023, provided that one class member per household may receive a $25 Family Dollar gift certificate. The period for filing a claim, opting out of the settlement or filing an objection to the settlement ended on January 9, 2024, and on April 5, 2024, the court granted final approval on the settlement. A lawsuit brought by the Attorney General for the State of Arkansas related to the sale of products from DC 202 remains pending, and the court is expected to hold a hearing on our motion to dismiss the State's claims on July 2, 2024.
As previously disclosed, we recorded charges of $56.7 million in fiscal 2023 with respect to DC 202-related matters which included the final resolution of the DOJ investigation and the now-approved settlement of the 14 putative consumer class actions. At the present time, we are unable to estimate the amount of additional incremental loss, if any, which may result when the State of Arkansas complaint is finally resolved, but we do not believe it will have a material adverse effect on our business, financial condition, or liquidity.
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. The court disqualified 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. The dismissal has been appealed to the Second Circuit by plaintiffs.
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