UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~November~~August 3, ~~2017~~2018

Commission File Number: 001-11421

DOLLAR GENERAL CORPORATION

(Exact name of Registrant as specified in its charter)

TENNESSEE		61-0502302
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

100 MISSION RIDGE

GOODLETTSVILLE, TN 37072

(Address of principal executive offices, zip code)

Registrant’s telephone number, including area code: (615) 855-4000

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes ☒ No ☐

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 ☐
(Do not check if a 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 ☒

The registrant had ~~271,563,597~~265,534,401 shares of common stock outstanding on ~~December 1, 2017.~~August 24, 2018.

PART I—FINANCIAL INFORMATION

ITEM 1.FINANCIAL STATEMENTS.

DOLLAR GENERAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)


	November 3,		February 3,		August 3,		February 2,
	2017		2017		2018		2018
	(Unaudited)		(see Note 1)		(Unaudited)		(See Note 1)
ASSETS
Current assets:
Cash and cash equivalents	$	226,192	$	187,915	$	265,288	$	267,441
Merchandise inventories		3,597,195		3,258,785		3,896,432		3,609,025
Income taxes receivable		99,678		11,050		68,353		108,265
Prepaid expenses and other current assets		230,269		220,021		287,753		263,121
Total current assets		4,153,334		3,677,771		4,517,826		4,247,852
Net property and equipment		2,654,936		2,434,456		2,857,274		2,701,282
Goodwill		4,338,589		4,338,589		4,338,589		4,338,589
Other intangible assets, net		1,200,481		1,200,659		1,200,322		1,200,428
Other assets, net		27,416		20,823		29,938		28,760
Total assets	$	12,374,756	$	11,672,298	$	12,943,949	$	12,516,911
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term obligations	$	401,532	$	500,950	$	1,909	$	401,345
Accounts payable		1,978,032		1,557,596		2,294,996		2,009,771
Accrued expenses and other		553,596		500,866		611,389		549,658
Income taxes payable		4,646		63,393		7,250		4,104
Total current liabilities		2,937,806		2,622,805		2,915,544		2,964,878
Long-term obligations		2,719,568		2,710,576		2,776,811		2,604,613
Deferred income taxes		690,795		652,841		569,690		515,702
Other liabilities		282,432		279,782		302,962		305,944
Commitments and contingencies
Shareholders’ equity:
Preferred stock		—		—		—		—
Common stock		237,598		240,811		232,340		235,141
Additional paid-in capital		3,176,406		3,154,606		3,222,233		3,196,462
Retained earnings		2,334,534		2,015,867		2,928,064		2,698,352
Accumulated other comprehensive loss		(4,383)		(4,990)		(3,695)		(4,181)
Total shareholders’ equity		5,744,155		5,406,294		6,378,942		6,125,774
Total liabilities and shareholders' equity	$	12,374,756	$	11,672,298	$	12,943,949	$	12,516,911

See notes to condensed consolidated financial statements.

DOLLAR GENERAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In thousands, except per share amounts)


	For the 13 weeks ended				For the 39 weeks ended				For the 13 weeks ended				For the 26 weeks ended
	November 3,		October 28,		November 3,		October 28,		August 3,		August 4,		August 3,		August 4,
	2017		2016		2017		2016		2018		2017		2018		2017
Net sales	$	5,903,606	$	5,320,029	$	17,341,536	$	15,977,352	$	6,443,309	$	5,828,305	$	12,557,772	$	11,437,930
Cost of goods sold		4,137,150		3,732,519		12,085,575		11,095,461		4,468,436		4,037,783		8,720,650		7,948,425
Gross profit		1,766,456		1,587,510		5,255,961		4,881,891		1,974,873		1,790,522		3,837,122		3,489,505
Selling, general and administrative expenses		1,349,025		1,194,519		3,871,589		3,499,060		1,429,397		1,297,376		2,801,462		2,522,564
Operating profit		417,431		392,991		1,384,372		1,382,831		545,476		493,146		1,035,660		966,941
Interest expense		23,995		23,877		72,747		72,310		25,451		23,748		50,224		48,752
Other (income) expense		—		—		3,502		—		1,019		—		1,019		3,502
Income before income taxes		393,436		369,114		1,308,123		1,310,521		519,006		469,398		984,417		914,687
Income tax expense		140,903		133,799		481,318		473,564		111,769		174,615		212,328		340,415
Net income	$	252,533	$	235,315	$	826,805	$	836,957	$	407,237	$	294,783	$	772,089	$	574,272
Earnings per share:
Basic	$	0.93	$	0.84	$	3.02	$	2.96	$	1.53	$	1.08	$	2.89	$	2.09
Diluted	$	0.93	$	0.84	$	3.02	$	2.95	$	1.52	$	1.08	$	2.88	$	2.09
Weighted average shares outstanding:
Basic		272,319		280,441		273,567		283,152		266,457		273,690		267,362		274,191
Diluted		272,881		281,283		274,076		284,126		267,226		274,132		268,180		274,674

Dividends per share	$	0.26	$	0.25	$	0.78	$	0.75	$	0.29	$	0.26	$	0.58	$	0.52

See notes to condensed consolidated financial statements.

DOLLAR GENERAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In thousands)


	For the 13 weeks ended				For the 39 weeks ended				For the 13 weeks ended				For the 26 weeks ended
	November 3,		October 28,		November 3,		October 28,		August 3,		August 4,		August 3,		August 4,
	2017		2016		2017		2016		2018		2017		2018		2017
Net income	$	252,533	$	235,315	$	826,805	$	836,957	$	407,237	$	294,783	$	772,089	$	574,272
Unrealized net gain (loss) on hedged transactions, net of related income tax expense (benefit) of $128, $129, $381 and $387, respectively		201		200		607		601
Unrealized net gain (loss) on hedged transactions, net of related income tax expense (benefit) of $86, $125, $172 and $253, respectively										244		205		487		406
Comprehensive income	$	252,734	$	235,515	$	827,412	$	837,558	$	407,481	$	294,988	$	772,576	$	574,678

See notes to condensed consolidated financial statements.

DOLLAR GENERAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)


	For the 39 weeks ended				For the 26 weeks ended
	November 3,		October 28,		August 3,		August 4,
	2017		2016		2018		2017
Cash flows from operating activities:
Net income	$	826,805	$	836,957	$	772,089	$	574,272
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization		298,571		282,386		221,511		197,616
Deferred income taxes		37,573		(3,207)		12,500		6,750
Loss on debt retirement		3,502		—		1,019		3,502
Noncash share-based compensation		24,948		27,676		21,779		16,839
Other noncash (gains) and losses		12,787		1,935		12,120		11,359
Change in operating assets and liabilities:
Merchandise inventories		(340,090)		(405,456)		(292,934)		(205,385)
Prepaid expenses and other current assets		(15,198)		(30,471)		(25,727)		(43,240)
Accounts payable		384,101		439,259		270,862		292,074
Accrued expenses and other liabilities		58,901		50,683		61,096		26,751
Income taxes		(147,375)		(74,892)		43,058		(92,940)
Other		(1,645)		(456)		(84)		(1,368)
Net cash provided by (used in) operating activities		1,142,880		1,124,414		1,097,289		786,230
Cash flows from investing activities:
Purchases of property and equipment		(488,616)		(405,899)		(370,968)		(314,050)
Proceeds from sales of property and equipment		1,005		4,333		1,349		343
Net cash provided by (used in) investing activities		(487,611)		(401,566)		(369,619)		(313,707)
Cash flows from financing activities:
Issuance of long-term obligations		599,556		—		499,495		599,556
Repayments of long-term obligations		(751,927)		(1,302)		(575,664)		(750,584)
Net increase (decrease) in commercial paper outstanding		59,400		453,000		(149,400)		25,000
Borrowings under revolving credit facilities		—		1,584,000
Repayments of borrowings under revolving credit facilities		—		(1,835,000)
Costs associated with issuance and retirement of debt		(9,524)		—		(4,384)		(9,524)
Repurchases of common stock		(298,735)		(679,416)		(349,538)		(163,736)
Payments of cash dividends		(212,934)		(212,249)		(154,708)		(142,339)
Other equity and related transactions		(2,828)		10,408		4,376		(4,638)
Net cash provided by (used in) financing activities		(616,992)		(680,559)		(729,823)		(446,265)
Net increase (decrease) in cash and cash equivalents		38,277		42,289		(2,153)		26,258
Cash and cash equivalents, beginning of period		187,915		157,947		267,441		187,915
Cash and cash equivalents, end of period	$	226,192	$	200,236	$	265,288	$	214,173
Supplemental schedule of noncash investing and financing activities:
Purchases of property and equipment awaiting processing for payment, included in Accounts payable	$	75,249	$	46,647	$	77,541	$	69,912

See notes to condensed consolidated financial statements.

DOLLAR GENERAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1.Basis of presentation

The accompanying unaudited condensed consolidated financial statements of Dollar General Corporation and its subsidiaries (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and are presented in accordance with the requirements of Form 10-Q and Rule 10-01 of Regulation S-X. Such financial statements consequently do not include all of the disclosures normally required by U.S. GAAP for annual financial statements or those normally made in the Company’s Annual Report on Form 10-K, including the condensed consolidated balance sheet as of February ~~3, 2017~~2, 2018 which was derived from the audited consolidated financial statements at that date. Accordingly, readers of this Quarterly Report on Form 10-Q should refer to the Company’s Annual Report on Form 10-K for the fiscal year ended February ~~3, 2017~~2, 2018 for additional information.

The Company’s fiscal year ends on the Friday closest to January 31. Unless the context requires otherwise, references to years contained herein pertain to the Company’s fiscal year. The Company’s ~~2017~~2018 fiscal year is scheduled to be a 52-week accounting period ending on February ~~2, 2018,~~1, 2019, and the ~~2016~~2017 fiscal year was a ~~53-week~~52-week accounting period that ended on February ~~3, 2017.~~2, 2018.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the Company’s customary accounting practices. In management’s opinion, all adjustments (which are of a normal recurring nature) necessary for a fair presentation of the consolidated financial position as of ~~November~~August 3, ~~2017~~2018 and results of operations for the 13-week and ~~39-week~~26-week accounting periods ended ~~November~~August 3, ~~2017~~2018 and ~~October 28, 2016~~August 4, 2017 have been made.

The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Because the Company’s business is moderately seasonal, the results for interim periods are not necessarily indicative of the results to be expected for the entire year.

The Company uses the last-in, first-out (“LIFO”) method of valuing inventory. An actual valuation of inventory under the LIFO method is made at the end of each year based on the inventory levels and costs at that time. Accordingly, interim LIFO calculations are based on management’s estimates of expected year-end inventory levels, sales for the year and the expected rate of inflation or deflation for the year. The interim LIFO calculations are subject to adjustment in the final year-end LIFO inventory valuation. The Company recorded a LIFO provision (benefit) of ~~$0.5~~$3.4 million and ~~$(3.8)~~$(0.5) million in the respective 13-week periods, and ~~$0.8~~$5.5 million and ~~$(8.1)~~$0.3 million in the respective ~~39-week~~26-week periods, ended ~~November~~August 3, ~~2017~~2018 and ~~October 28, 2016.~~August 4, 2017. In addition, ongoing estimates of inventory shrinkage and initial markups and markdowns are included in the interim cost of goods sold calculation.

In May 2014, the Financial Accounting Standards Board (“FASB”) issued comprehensive new accounting standards related to the recognition of revenue ~~which specified an effective date for annual reporting periods beginning after December 15, 2016, with early adoption not permitted. In~~and in August 2015, the FASB deferred the effective date to annual reporting periods beginning after December 15, ~~2017, with earlier adoption permitted only for annual reporting periods beginning after December 15, 2016.~~2017. The ~~new~~Company adopted this guidance ~~allows companies to use either a full retrospective or a~~using the modified retrospective approach ~~in the~~effective February 3, 2018, and such adoption of this guidance. The Company formed a project team to assess and implement the standard by compiling a list of the applicable revenue streams, evaluating relevant contracts and comparing the Company’s current accounting policies to the new standard. As a result of the efforts of this project team, the Company has identified customer incentives and gross versus net considerations as the areas in which it would most likely be affected by the new guidance. The Company is continuing to assess all the impacts of the new standard and the design of internal control over financial reporting, but based upon the terms of the Company’s agreements and an evaluation of the materiality of these transactions related to customer incentives and gross versus net considerations, the Company does not expect the adoption to have a materialhad no effect on the Company’s consolidated results of operations,

financial position or cash flows. ~~The Company currently expects to complete this work in 2017 and to adopt this guidance on February 3, 2018 using the modified retrospective approach.~~

In February 2016, the FASB issued new guidance related to lease accounting, which when effective will require a dual approach for lessee accounting under which a lessee will account for leases as finance leases or operating leases. Both finance leases and operating leases will result in the lessee recognizing a right-of-use asset and a corresponding lease liability on its balance sheet, with differing methodology for income statement recognition. This guidance is effective for public business entities for fiscal years, and interim periods within those years, beginning after December 15, 2018, and early adoption is permitted. AAs originally issued, this guidance required a modified retrospective approach ~~is required~~ for all leases existing or entered into after the beginning of the earliest comparative period in the consolidated financial statements. In July 2018, the FASB issued additional guidance which allows companies to record the cumulative effect

of applying the new standard as an adjustment to the opening balance of retained earnings in the year of adoption as an alternative to the modified retrospective approach. The Company formed a project team to assess and implement the standard, which has completed its internal evaluation of existing contractual arrangements for embedded leases. The project team is ~~currently assessing~~also testing computations in the Company’s lease administration system, integrating interfaces between the lease administration system and the enterprise resource planning systems, identifying and implementing new processes and controls to ensure compliance, and is in the process of evaluating and documenting the Company’s accounting conclusions related to the new standard. As a result of the efforts of this project team, the Company has identified its store leases as the area in which it would most likely be affected by the new guidance. The Company’s assessment of the impact that adoption of this guidance will have on its consolidated financial ~~statements. Specifically,~~statements is ongoing, and the Company has formed a project team that is developing test plans for its lease accounting system, identifying and evaluating existing contracts for embedded leases, and discussing implementation plans with its lease accounting software vendor, among other activities. The Company anticipates a material impact ~~to its consolidated financial statements as~~because it is party to a significant number of lease ~~contracts.~~contracts for its stores.

In October 2016, the FASB issued amendments to existing guidance related to accounting for intra-entity transfers of assets other than ~~inventory. These amendments require an entity to recognize the income tax consequences of such transfers when the transfer occurs and~~inventory, which affects the Company’s historical accounting for intra-entity transfers of certain intangible assets. This guidance is effective for public business entities for fiscal years, and interim periods within those years, beginning after December 15, ~~2017, and early adoption is permitted subject to certain guidelines.~~2017. The amendments ~~should be~~are applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. The Company ~~is assessing the impact that adoption of~~adopted this guidance ~~will have on its consolidated financial statements, and currently expects such adoption would result~~effective February 3, 2018 which resulted in an increase in deferred income tax liabilities and a decrease in retained earnings of ~~approximately $32 million~~$41.3 million.

In January 2017, the FASB issued amendments to ~~$36 million under~~ existing ~~tax legislation.~~guidance related to the subsequent measurement of goodwill. These amendments modify the concept of impairment from the condition that exists when the carrying amount of goodwill exceeds its implied fair value to the condition that exists when the carrying amount of a reporting unit exceeds its fair value. Subsequent to adoption, an entity will perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. This guidance is effective for public business entities for fiscal years, and interim periods within those years, beginning after December 15, 2019, and early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The amendments should be applied on a prospective basis. An entity is required to disclose the nature of and reason for the change in accounting principle upon transition. The Company currently does not anticipate a material effect on its consolidated results of operations, financial position or cash flows to result from the adoption of this guidance.

2. Earnings per share

Earnings per share is computed as follows (in thousands, except per share data):


	13 Weeks Ended November 3, 2017					13 Weeks Ended October 28, 2016					13 Weeks Ended August 3, 2018					13 Weeks Ended August 4, 2017
			Weighted					Weighted					Weighted					Weighted
	Net		Average	Per Share		Net		Average	Per Share		Net		Average	Per Share		Net		Average	Per Share
	Income		Shares	Amount		Income		Shares	Amount		Income		Shares	Amount		Income		Shares	Amount
Basic earnings per share	$	252,533	272,319	$	0.93	$	235,315	280,441	$	0.84	$	407,237	266,457	$	1.53	$	294,783	273,690	$	1.08
Effect of dilutive share-based awards			562					842					769					442
Diluted earnings per share	$	252,533	272,881	$	0.93	$	235,315	281,283	$	0.84	$	407,237	267,226	$	1.52	$	294,783	274,132	$	1.08


	39 Weeks Ended November 3, 2017					39 Weeks Ended October 28, 2016					26 Weeks Ended August 3, 2018					26 Weeks Ended August 4, 2017
			Weighted					Weighted					Weighted					Weighted
	Net		Average	Per Share		Net		Average	Per Share		Net		Average	Per Share		Net		Average	Per Share
	Income		Shares	Amount		Income		Shares	Amount		Income		Shares	Amount		Income		Shares	Amount
Basic earnings per share	$	826,805	273,567	$	3.02	$	836,957	283,152	$	2.96	$	772,089	267,362	$	2.89	$	574,272	274,191	$	2.09
Effect of dilutive share-based awards			509					974					818					483
Diluted earnings per share	$	826,805	274,076	$	3.02	$	836,957	284,126	$	2.95	$	772,089	268,180	$	2.88	$	574,272	274,674	$	2.09

Basic earnings per share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is determined based on the dilutive effect of share-based awards using the treasury stock method.

Share-based awards that were outstanding at the end of the respective periods, but were not included in the computation of diluted earnings per share because the effect of exercising such awards would be antidilutive, were ~~2.5 million and 1.9 million in the respective 2017 and 2016 13-week periods, and 2.6 million and 1.6 million in the respective 2017 and 2016 39-week periods.~~

0.9 million and 2.6 million in the 2018 and 2017 13-week periods, and 0.9 million and 2.6 million in the 2018 and 2017 26-week periods, respectively.

3.Income taxes

Under the accounting standards for income taxes, the asset and liability method is used for computing the future income tax consequences of events that have been recognized in the Company’s consolidated financial statements or income tax returns.

Income tax reserves are determined using the methodology established by accounting standards for income taxes which require companies to assess each income tax position taken using the following two-step approach. A determination is first made as to whether it is more likely than not that the position will be sustained, based upon the technical merits, upon examination by the taxing authorities. If the tax position is expected to meet the more likely than not criteria, the benefit recorded for the tax position equals the largest amount that is greater than 50% likely to be realized upon ultimate settlement of the respective tax position.

The Company’s 2013 and earlier tax years are not open for further examination by the Internal Revenue Service (“IRS”). The IRS, at its discretion, may choose to examine the Company’s 2014 through 2016 fiscal year income tax filings. The Company has various state income tax examinations that are currently in progress. Generally, with few exceptions, the Company’s ~~2012~~2014 and later tax years remain open for examination by the various state taxing authorities.

As of ~~November~~August 3, ~~2017,~~2018, the total reserves for uncertain tax benefits, interest expense related to income taxes and potential income tax penalties were ~~$1.3~~$1.1 million, $0.8 million and ~~$0.8~~$0.9 million, respectively, for a total of ~~$2.9~~$2.8 million. This total amount is reflected in noncurrent Other liabilities in the condensed consolidated balance sheet.

The ~~Company believes it is reasonably possible that the~~Company’s reserve for uncertain tax positions ~~may~~will not be reduced ~~by approximately $0.3 million~~ in the coming twelve months ~~principally~~ as a result of ~~the effective settlement~~expiring statutes of ~~uncertain tax positions.~~limitations. As of ~~November~~August 3, ~~2017,~~2018, approximately ~~$1.3~~$1.1 million of the reserve for uncertain tax positions would impact the Company’s effective income tax rate if the Company were to recognize the tax benefit for these positions.

On December 22, 2017, the Tax Cuts and Jobs Act (“TCJA”) was enacted. The Company has not fully completed its accounting for the income tax effects of the TCJA. As discussed in SEC Staff Accounting Bulletin No. 118, the accounting for the TCJA should be completed within one year from enactment. During the 26-week period ended August 3, 2018, the Company made no adjustments to the provisional amounts recorded at February 2, 2018. Any adjustments to the provisional amounts recorded at February 2, 2018 will be reflected upon the completion of the Company’s accounting for the TCJA.

The effective income tax rates for ~~each of~~ the 13-week and ~~39-week~~26-week periods ended ~~November~~August 3, ~~2017~~2018 were ~~35.8%~~21.5% and ~~36.8%~~21.6%, respectively, compared to rates of ~~36.2%~~37.2% and ~~36.1%~~37.2%, respectively, for the 13-week and ~~39-week~~26-week periods ended ~~October 28, 2016.~~August 4, 2017. The ~~The~~ tax ~~rate~~rates for the ~~2017~~2018 13-week ~~period was~~and 26-week periods were lower than the comparable 2017 13-week ~~comparable 2016 period~~and 26-week periods primarily due to the ~~recognition of greater~~ federal ~~Work Opportunity Tax Credits~~tax law changes contained in the TCJA, including the change in the federal income tax rate to 21% in the 2018 periods compared to 35% in the 2017 period. The tax rate for the 2017 39-week period was higher than the comparable 2016 period primarily due to recognition of a tax benefit in the 2016 period associated with stock based compensation that did not reoccur, to the same extent, in the 2017 period.periods.

4.Current and long-term obligations

Current and long-term obligations consist of the following:


	November 3,		February 3,		August 3,		February 2,
(In thousands)	2017		2017		2018		2018
Senior unsecured credit facilities
Term Facility	$	175,000	$	425,000	$	—	$	175,000
Revolving Facility		—		—		—		—
4.125% Senior Notes due July 15, 2017		—		500,000
1.875% Senior Notes due April 15, 2018 (net of discount of $40 and $111)		399,960		399,889
3.250% Senior Notes due April 15, 2023 (net of discount of $1,380 and $1,552)		898,620		898,448
4.150% Senior Notes due November 1, 2025 (net of discount of $649 and $700)		499,351		499,300
3.875% Senior Notes due April 15, 2027 (net of discount of $423)		599,577		—
1.875% Senior Notes due April 15, 2018 (net of discount of $16)						—		399,984
3.250% Senior Notes due April 15, 2023 (net of discount of $1,204 and $1,322)						898,796		898,678
4.150% Senior Notes due November 1, 2025 (net of discount of $598 and $632)						499,402		499,368
3.875% Senior Notes due April 15, 2027 (net of discount of $395 and $413)						599,605		599,587
4.125% Senior Notes due May 1, 2028 (net of discount of $491)						499,509		—
Unsecured commercial paper notes		549,900		490,500		280,800		430,200
Capital lease obligations		8,261		3,643		11,659		12,321
Tax increment financing due February 1, 2035		7,765		8,840		7,335		7,335
Debt issuance costs, net		(17,334)		(14,094)		(18,386)		(16,515)
		3,121,100		3,211,526		2,778,720		3,005,958
Less: current portion		(401,532)		(500,950)		(1,909)		(401,345)
Long-term portion	$	2,719,568	$	2,710,576	$	2,776,811	$	2,604,613

~~On February 22, 2017,~~At August 3, 2018, the Company ~~entered into an unsecured amended and restated credit agreement for a $175.0 million senior unsecured term loan facility (the “Term Facility”) and~~maintained a $1.25 billion senior unsecured revolving credit facility (the “Revolving Facility”~~) (collectively, the “Facilities”~~) that provides for the issuance of letters of credit up to $175.0 ~~million. The Term Facility is scheduled to mature on October 20, 2020,~~million and ~~the Revolving Facility~~ is scheduled to mature on February 22, 2022.

Borrowings under the ~~Facilities~~Revolving Facility bear interest at a rate equal to an applicable interest rate margin plus, at the Company’s option, either (a) LIBOR or (b) a base rate (which is usually equal to the prime rate). The applicable interest rate margin for borrowings as of ~~November~~August 3, ~~2017~~2018 was 1.10% for LIBOR borrowings and 0.10% for base-rate borrowings. The Company is also required to pay a facility fee, payable on any used and unused commitment amounts of the ~~Facilities,~~Revolving Facility, and customary fees on letters of credit issued under the Revolving Facility. As of ~~November~~August 3, ~~2017,~~2018, the commitment fee rate was 0.15%. The applicable interest rate margins for borrowings, the facility fees and the letter of credit fees under the ~~Facilities~~Revolving Facility are subject to adjustment from time to time based on the Company’s long-term senior unsecured debt ratings. ~~The weighted average all-in interest rate for borrowings under the Facilities was 2.3% as of November 3, 2017.~~

The ~~Facilities can be voluntarily prepaid in whole or in part at any time without penalty. There is no required principal amortization under the Facilities. The Facilities contain~~Revolving Facility contains a number of customary affirmative and negative covenants that, among other things, restrict, subject to certain exceptions, the Company’s ability to: incur additional liens; sell all or substantially all of the Company’s assets; consummate certain fundamental changes or change in the Company’s lines of business; and incur additional subsidiary indebtedness. The ~~Facilities~~Revolving Facility also ~~contain~~contains financial covenants which require the maintenance of a minimum fixed charge coverage ratio and a maximum leverage ratio. As of ~~November~~August 3, ~~2017,~~2018, the Company was in compliance with all such covenants. The ~~Facilities~~Revolving Facility also ~~contain~~contains customary events of default.

On June 11, 2018, the Company voluntarily prepaid the entire $175.0 million outstanding balance of its senior unsecured term loan facility and recognized an associated loss of $1.0 million which is reflected in Other (gains) losses in the consolidated statement of income for the 13-week and 26-week periods ended August 3, 2018. As of ~~November~~August 3, ~~2017, the entire balance of the Term Facility was outstanding and, under the Revolving Facility,~~2018, the Company had no outstanding borrowings, outstanding letters of credit of ~~$9.5~~$9.1 million, and borrowing availability of $1.24 billion under the Revolving Facility that, due to its intention to maintain borrowing availability related to the commercial paper program described below, could contribute incremental liquidity of ~~$690.6~~$774.1 million. In addition, as of ~~November~~August 3, ~~2017,~~2018, the Company had outstanding letters of credit of ~~$40.0~~$38.9 million which were issued pursuant to separate agreements.

As of ~~November~~August 3, ~~2017,~~2018, the Company had ~~outstanding~~a commercial paper program under which the Company may issue unsecured commercial paper notes (the “CP Notes”) of $549.9 million classified as long-term obligations on the condensed consolidated balance sheet due to its intent and ability to refinance these obligations as long-term debt. Under this program, the Company may issue the CP Notes from time to time in an aggregate amount not to exceed $1.0 billion outstanding at any time. The CP Notes may have maturities of up to 364 days from the date of issue and rank equal in right of payment with all of the Company’s other unsecured and unsubordinated indebtedness. The Company intends to maintain available commitments under the Revolving Facility in an amount at least equal to the amount of CP Notes outstanding at any time. As of ~~November~~August 3, ~~2017,~~2018, the Company’s condensed consolidated balance sheet reflected

outstanding unsecured CP Notes of $280.8 million classified as long-term obligations due to its intent and ability to refinance these obligations as long-term debt. An additional $186.0 million of outstanding CP Notes were held by a wholly-owned subsidiary of the Company and are therefore not reflected on the condensed consolidated balance sheet. As of August 3, 2018, the outstanding CP Notes had a weighted average borrowing rate of ~~1.4%~~2.3%.

On April 10, 2018, the Company issued $500.0 million aggregate principal amount of 4.125% senior notes due 2028 (the “2028 Senior Notes”), net of discount of $0.5 million, which are scheduled to mature on May 1, 2028. Interest on the 2028 Senior Notes is payable in cash on May 1 and November 1 of each year, with the first payment commencing on November 1, 2018. The Company incurred $4.4 million of debt issuance costs associated with the issuance of the 2028 Senior Notes.

Effective April 15, 2018, the Company redeemed $400.0 million aggregate principal amount of outstanding 1.875% senior notes due 2018 (the “2018 Senior Notes”). There was no gain or loss associated with the redemption. The Company funded the redemption price for the 2018 Senior Notes with proceeds from the issuance of the 2028 Senior Notes.

On April 11, 2017, the Company issued $600.0 million aggregate principal amount of 3.875% senior notes due 2027 (the “2027 Senior Notes”), net of discount of $0.4 million, which are scheduled to mature on April 15, 2027. Interest on the 2027 Senior Notes is payable in cash on April 15 and October 15 of each ~~year, with the first payment commencing on October 15, 2017.~~year. The Company incurred $5.2 million of debt issuance costs associated with the issuance of the 2027 Senior Notes. ~~The net proceeds from the offering of the 2027 Senior Notes were used to repay all of the Company’s outstanding senior notes due in 2017 as discussed below and for general corporate purposes.~~

On April 27, 2017, the Company redeemed $500.0 million aggregate principal amount of outstanding 4.125% senior notes due 2017 (the “2017 Senior Notes”), resulting in a pretax loss of $3.4 million which is reflected in Other (income) expense in the condensed consolidated statement of income for the ~~39-weeks~~13-week and 26-week periods ended ~~November 3,~~August 4, 2017. The Company funded the redemption price for the 2017 Senior Notes with proceeds from the issuance of the 2027 Senior Notes.

5.Assets and liabilities measured at fair value

Fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, fair value accounting standards establish a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy). The Company does not have any fair value measurements categorized within Level 3 as of ~~November~~August 3, ~~2017.~~2018.

The following table presents the Company’s assets and liabilities disclosed at fair value as of ~~November~~August 3, ~~2017,~~2018, aggregated by the level in the fair value hierarchy within which those measurements are classified.

Quoted Prices

in Active

Markets

Significant

Markets

Significant

for Identical

Other

Significant

Total Fair

for Identical

Other

Significant

Total Fair

Assets and

Observable

Unobservable

Value at

Assets and

Observable

Unobservable

Value at

Liabilities

Inputs

November 3,

Liabilities

Inputs

August 3,

(In thousands)

(Level 1)

(Level 2)

(Level 3)

2017

(Level 1)

(Level 2)

(Level 3)

2018

Liabilities:

Long-term obligations (a)

2,480,290

740,271

—

3,220,561

2,467,011

299,793

—

2,766,804

Deferred compensation (b)

23,532

—

23,532

25,875

—

25,875

(a)

Included in the condensed consolidated balance sheet at book value as Current portion of long-term obligations of ~~$401,532~~$1,909 and Long-term obligations of ~~$2,719,568.~~$2,776,811.

(b)

Reflected at fair value in the condensed consolidated balance sheet as Accrued expenses and other current liabilities of ~~$1,441~~$2,620 and noncurrent Other liabilities of ~~$22,091.~~$23,255.

6.Commitments and contingencies

Legal proceedings

From time to time, the Company is a party to various legal matters involving claims incidental to the conduct of its business, including actions by employees, consumers, suppliers, government agencies, or others. The Company has recorded accruals with respect to these matters, where appropriate, which are reflected in the Company’s consolidated financial statements. For some matters, a liability is not probable or the amount cannot be reasonably estimated and therefore an accrual has not been made.

Except as described below, the Company believes, based upon information currently available, that such matters, both individually and in the aggregate, will be resolved without a material adverse effect on the Company’s consolidated financial statements as a whole. However, litigation and other legal matters involve an element of uncertainty. Future developments could cause these actions or claims to have a material adverse effect on the Company’s results of operations, cash flows, or financial position. In addition, certain of these matters, if decided adversely to the Company or settled by the Company, may result in liability material to the Company’s financial position or may negatively affect operating results if changes to the Company’s business operation are required.

Wage and Hour Litigation

The Company is defending the following wage and hour matters (collectively the “Wage/Hour Litigation”):

California Wage/Hour Litigation (“Key Carriers”): Plaintiffs allege, on behalf of themselves and other similarly situated current and former “key carriers,” that ~~they and a putative statewide class~~the Company failed to comply with California law, in some or all of ~~other “key carriers” were not provided with~~the following respects: failure to provide meal and rest periods, ~~and were provided inaccurate~~failure to provide accurate wage statements, and failure to provide appropriate termination ~~pay in violation of California law, including California’s Private Attorney General Act (the “PAGA”). The plaintiffs~~pay. Plaintiffs seek ~~to proceed on a statewide class basis and~~ to recover alleged unpaid wages, injunctive relief, consequential damages, pre-judgment interest, statutory penalties under the Private Attorney General Act (the “PAGA”) and attorneys’ fees and costs.

California Wage/Hour Litigation (“Non Key Carriers”): Plaintiff alleges, on behalf of herself and other current and former “hourly non-key carrier” employees, that the Company failed to comply with California law in some or all of the following respects: failure to pay for all time worked, failure to pay timely wages, failure to provide meal and rest breaks, and failure to provide accurate wage statements and appropriate termination pay. Plaintiff seeks to recover penalties under the PAGA, attorneys’ fees and costs, and pre-judgment and post-judgment interest.

Pennsylvania Wage/Hour Litigation: Plaintiff, a former distribution center employee, alleges that he and other similarly situated current and former hourly distribution center employees were subjected to unlawful policies and practices and were denied regular and overtime wages in violation of federal and Pennsylvania law. ~~The plaintiff~~Plaintiff seeks to proceed on a nationwide collective basis under federal law and a statewide class basis under Pennsylvania law and to recover alleged unpaid wages, liquidated damages, statutory damages, and attorneys’ fees and costs.

Tennessee Wage/Hour Litigation: Plaintiffs allege that they and other similarly situated current and former “key holders” were not paid for all hours worked in violation of federal, Illinois and Tennessee law. ~~The plaintiffs~~Plaintiffs seek to proceed on a nationwide collective basis under federal law and a statewide class basis under Tennessee and Illinois law and to recover alleged unpaid wages, statutory and common law damages, liquidated damages, pre- and post-judgment interest and attorneys’ fees and costs. The Company has reached a preliminary agreement with plaintiffs, which must be submitted to and approved by the Court, to resolve this matter for an amount not material to the Company’s financial statements as a whole.

The Company is vigorously defending the Wage/Hour Litigation and believes that its policies and practices comply with federal and state laws and that these actions are not appropriate for class or similar treatment. At this time, it is not possible to predict whether these matters will be permitted to proceed as a class or other similar action, or the size of any putative class or classes. Likewise, except as to the resolution of the Tennessee Wage/Hour Litigation, at this time it is not possible to estimate the value of the claims asserted, and no assurances can be given that the Company will be successful in its defense of these matters on the merits or otherwise. For these reasons, except as to the resolution of the Tennessee Wage/Hour Litigation, the Company is unable to estimate any potential loss or range of loss in these

matters; however, if the Company is not successful in its defense efforts, the resolution of these actions could have a material adverse effect on the Company’s consolidated financial statements as a whole.

Other Employment Litigation

The Company is defending the following employment-related matters (collectively the “Employment Litigation”):

California Suitable Seating Litigation: ~~The plaintiff~~Plaintiff alleges that the Company failed to provide her and other current and former California store employees with ~~suitable seats~~“suitable seats” in violation of California law. ~~The plaintiff~~Plaintiff seeks to recover penalties under the PAGA, injunctive relief, and attorneys’ fees and costs.

EEOC Litigation: The United States Equal Employment Opportunity Commission (“EEOC”) ~~filed suit against the Company alleging~~alleges that the Company’s use of post offer, pre-employment physical assessments, as applied to candidates for the general warehouse position in the Bessemer, Alabama distribution center, violates the Americans with Disabilities Act (“ADA”) and the Genetic Information Nondiscrimination ~~Act.~~Act (“GINA”). The EEOC seeks injunctive and monetary relief for a class of applicants and employees under the ADA and GINA.

The Company is vigorously defending the Employment Litigation and believes that its employment policies and practices comply with federal and state law and that these matters are not appropriate for class or similar treatment. At this time, it is not possible to predict whether these matters will be permitted to proceed as a class or in a similar fashion, or the size of any putative class or classes. Likewise, at this time, it is not possible to estimate the value of the claims asserted, and no assurances can be given that the Company will be successful in its defense of these matters on the merits or otherwise. For these reasons, the Company is unable to estimate any potential loss or range of loss in these matters; however if the Company is not successful in its defense efforts, the resolution of these matters could have a material adverse effect on the Company’s consolidated financial statements as a whole.

Consumer/Product Litigation

In December 2015 the Company was first notified of several lawsuits in which ~~the~~ plaintiffs allege violation of state law, including state consumer protection laws, relating to the labeling, marketing and sale of certain Dollar General private-label motor oil. Each of these lawsuits, as well as additional, similar lawsuits filed after December 2015, was filed in, or removed to, various federal district courts of the United States (collectively “the Motor Oil Lawsuits”).

On June 2, 2016, the United States Judicial Panel on Multidistrict Litigation (“JPML”) granted the Company’s motion to centralize the Motor Oil Lawsuits in a matter styled In re Dollar General Corp. Motor Oil Litigation, Case MDL No. 2709, before the United States District Court for the Western District of Missouri (“Motor Oil MDL”). Subsequently, ~~the~~ plaintiffs in the Motor Oil MDL filed a consolidated amended complaint, in which they seek to certify two nationwide classes and multiple statewide sub-classes and for each putative class member some or all of the following relief: compensatory damages, injunctive relief, statutory damages, punitive damages and attorneys’ fees. The ~~court recently granted in part and denied in part the~~ Company’s motion to dismiss the allegations raised in the consolidated amended ~~complaint.~~complaint was granted in part and denied in part. To the extent additional consumer lawsuits alleging violation of laws relating to the

labeling, marketing and sale of Dollar General private-label motor oil have been or will be filed, the Company expects that such lawsuits will be transferred to the Motor Oil MDL.

In May 2017, the Company received a Notice of Proposed Action from the Office of the New Mexico Attorney General (the “New Mexico AG” ~~or “Attorney General”~~) which alleges that the Company’s labeling, marketing and sale of certain Dollar General private-label motor oil violated New Mexico law (the “New Mexico Motor Oil Matter”). The State is represented in connection with this matter by counsel for ~~the~~ plaintiffs in the Motor Oil MDL.

On May 25, 2017, in response to the Notice of Proposed Action, the Company filed an action in New Mexico federal court seeking a declaratory judgment that the ~~Attorney General~~New Mexico AG is prohibited by, among other things, the United States Constitution, from pursuing the New Mexico Motor Oil Matter and an order enjoining the ~~Attorney General~~New Mexico AG from pursuing such an action. (Dollar General Corporation v. Hector H. Balderas, D.N.M., Case No. 1:17-cv-00588). Thereafter, on June 20, 2017, the New Mexico ~~Attorney General~~AG filed an action in the First Judicial District Court, County of Santa Fe, New Mexico pertaining to the New Mexico Motor Oil Matter. (Hector H. Balderas v. Dolgencorp, LLC, Case No. D-101-cv-2017-01562). The Company removed this matter to New Mexico federal court on July 26, 2017, and filed a motion to dismiss the action. The matter was transferred to the Motor Oil MDL and the ~~State~~New Mexico AG has moved to

remand it to state court. (Hector H. Balderas v. Dolgencorp, LLC, D.N.M., Case No. 1:17-cv-772). The Company’s and the New Mexico AG’s above-referenced motions are pending.

On September 1, 2017, the Mississippi Attorney General (the “Mississippi AG”), who also is represented by the counsel for ~~the~~ plaintiffs in the Motor Oil MDL, filed an action in the Chancery Court of the First Judicial District of Hinds County, Mississippi in which the Mississippi AG alleges that the Company’s labeling, marketing and sale of certain Dollar General private-label motor oil violated Mississippi law. (Jim Hood v. Dollar General Corporation, Case No. G2017-1229 T/1) (the “Mississippi Motor Oil Matter”). The Company removed this matter to Mississippi federal court on October 5, 2017, and filed a motion to dismiss the action. The matter was ~~conditionally~~ transferred to the Motor Oil MDL and the ~~State moved to vacate the JPML’s conditional transfer order. The State also~~Mississippi AG moved to remand it to state court. (Jim Hood v. Dollar General Corporation, N.D. Miss., Case No. 3:17-cv-801-LG-LRA). The Company’s and the Mississippi AG’s above-referenced motions are pending.

On January 30, 2018, the Company received a Civil Investigative Demand (“CID”) from the Office of the Louisiana Attorney General requesting information concerning the Company’s labeling, marketing and sale of certain Dollar General private-label motor oil (the “Louisiana Motor Oil Matter”). In response to the CID, the Company filed a petition for a protective order on February 20, 2018 in the 19th Judicial District Court for the Parish of East Baton Rouge, Louisiana seeking to set aside the CID. (In re Dollar General Corp. and Dolgencorp, LLC, Case No. 666499). The Company’s petition is pending.

A mediation held in the Motor Oil MDL on February 26, 2018, was unsuccessful. On August 20, 2018, plaintiffs moved to certify two nationwide classes relating to their claims of alleged unjust enrichment and breach of implied warranties. In addition, plaintiffs moved to certify 17 statewide classes relating to their claims of alleged unfair trade practices/consumer fraud statutory claims.

The Company is vigorously defending these matters and believes that the labeling, marketing and sale of its private-label motor oil comply with applicable federal and state requirements and are not misleading. The Company further believes that these matters are not appropriate for class or similar treatment. At this time, however, it is not possible to predict whether these matters will be permitted to proceed as a class or in a similar fashion, whether on a statewide or nationwide basis, or the size of any putative class or classes. Likewise, at this time, it is not possible to estimate the value of the claims asserted, and no assurances can be given that the Company will be successful in its defense of these matters on the merits or otherwise. For these reasons, the Company is unable to estimate the potential loss or range of loss in these matters; however, if the Company is not successful in its defense efforts, the resolution of the Motor Oil MDL, the New Mexico Motor Oil Matter, the Mississippi Motor Oil Matter or the ~~Mississippi~~Louisiana Motor Oil Matter could have a material adverse effect on the Company’s consolidated financial statements as a whole.

~~Shareholder Litigation~~

The Company is defending litigation filed in January and February 2017 in which the plaintiffs, on behalf of themselves and a putative class of shareholders, allege that between March 10, 2016 and December 1, 2016, the Company and certain of its officers (the “Individual Defendants”) violated federal securities laws by misrepresenting the impact to sales of changes to certain federal programs that provide supplemental nutritional assistance to individuals. (~~Iron Workers Local Union No. 405 Annuity Fund v. Dollar General Corporation, et al., M.D. Tenn. Case No. 3:17-cv-00063;~~ ~~Julia Askins v. Dollar General Corporation, et al., M.D. Tenn., Case No. 3:17-cv-00276;~~ ~~Bruce Velan v. Dollar General Corporation, et al~~., M.D. Tenn., Case No. 3:17-cv-00275) (collectively “the Shareholder Litigation”). The plaintiffs in the Shareholder Litigation seek the following relief: compensatory damages, unspecified equitable relief, pre- and post-judgment interest and attorneys’ fees and expenses. The court has consolidated the cases, appointed a lead plaintiff and entered a preliminary scheduling order. A motion to dismiss filed by the Company and the Individual Defendants is pending.

The Company believes that the statements at issue in the Shareholder Litigation complied with the federal securities laws and intends to vigorously defend this matter. At this time, it is not possible to predict whether the Shareholder Litigation will be permitted to proceed as a class or the size of any putative class. Likewise, at this time, it is not possible to estimate the value of the claims asserted in this action, and no assurances can be given that the Company will be successful in its defense on the merits or otherwise. For these reasons, the Company is unable to estimate the potential loss or range of loss in this matter; however if the Company is not successful in its defense efforts, the resolution of the Shareholder Litigation could have a material adverse effect on the Company’s consolidated financial statements as a whole.

The Company is also defending shareholder derivative actions filed in April, July and August 2017, in which each plaintiff asserts, purportedly on behalf of the Company, some or all of the following claims against the Company’s board of directors and certain of its officers based upon factual allegations substantially similar to those in the Shareholder Litigation: alleged breach of fiduciary duties, unjust enrichment, violation of federal securities laws, abuse of control, and gross mismanagement. (~~Robert Anderson v. Todd Vasos, et al., M.D. Tenn. Case No. 3:17-cv-00693;~~ ~~Sharon Shaver v. Todd J. Vasos, et al., Chancery Court for the Twentieth Judicial District of Davidson County, Tennessee, Case No. 17-797-I;~~ ~~Glenn Saito v. Todd Vasos, et al~~., M.D. Tenn., Case No. 3:17-cv-01138) (collectively “the Derivative Litigation”). The plaintiffs in the Derivative Litigation seek, purportedly on behalf of the Company, some or all of the following relief: compensatory damages, injunctive relief, disgorgement, restitution and attorneys’ fees and expenses. The ~~Anderson~~ ~~and~~ ~~Saito~~ ~~cases have been consolidated and stayed pending resolution of the motion to dismiss in the Shareholder Litigation, and a similar stay has been ordered in the~~ ~~Shaver~~ ~~action.~~

7.Segment reporting

The Company manages its business on the basis of one reportable operating segment. As of ~~November~~August 3, ~~2017,~~2018, all of the Company’s operations were located within the United States with the exception of certain subsidiaries in Hong Kong and China and a liaison office in India, which collectively are not material with regard to assets, results of operations or otherwise to the condensed consolidated financial statements. The following net sales data is presented in accordance with accounting standards related to disclosures about segments of an enterprise.


	13 Weeks Ended				39 Weeks Ended				13 Weeks Ended				26 Weeks Ended
	November 3,		October 28,		November 3,		October 28,		August 3,		August 4,		August 3,		August 4,
(in thousands)	2017		2016		2017		2016		2018		2017		2018		2017
Classes of similar products:
Consumables	$	4,625,401	$	4,137,748	$	13,425,273	$	12,293,395	$	4,988,063	$	4,484,359	$	9,760,451	$	8,799,872
Seasonal		636,519		575,912		2,017,150		1,873,715		792,513		717,993		1,483,544		1,380,631
Home products		346,339		329,715		1,007,137		968,161		345,161		327,648		699,794		660,798
Apparel		295,347		276,654		891,976		842,081		317,572		298,305		613,983		596,629
Net sales	$	5,903,606	$	5,320,029	$	17,341,536	$	15,977,352	$	6,443,309	$	5,828,305	$	12,557,772	$	11,437,930

8.Common stock transactions

On August 29, 2012, the Company’s Board of Directors authorized a common stock repurchase program, which the Board has since increased on several occasions. Most recently, on ~~August 24, 2016,~~March 14, 2018, the Company’s Board of Directors authorized a $1.0 billion increase to the existing common stock repurchase program. As of ~~November~~August 3, ~~2017,~~2018, a cumulative total of ~~$5.0~~$6.0 billion had been authorized under the program since its inception and approximately ~~$634.6 million~~$1.0 billion remained available for repurchase. The repurchase authorization has no expiration date and allows repurchases from

time to time in the open market or in privately negotiated transactions. The timing and number of shares purchased depends on a variety of factors, such as price, market conditions, compliance with the covenants and restrictions under the Company’s debt agreements and other factors. Repurchases under the program may be funded from available cash or borrowings, including under the ~~Facilities~~Company’s Revolving Facility and issuance of CP Notes discussed in further detail in Note 4.

Pursuant to its common stock repurchase program, during the ~~39-week~~26-week periods ended ~~November~~August 3, ~~2017,~~2018, and ~~October 28, 2016,~~August 4, 2017, the Company repurchased in the open market approximately ~~4.0~~3.7 million shares of its common stock at a total cost of ~~$298.7~~$349.5 million and approximately ~~8.2~~2.3 million shares of its common stock at a total cost of ~~$679.4~~$163.7 million, respectively.

The Company paid a quarterly cash ~~dividends~~dividend of ~~$0.26~~$0.29 per share during each of the first ~~three~~and second quarters of ~~2017.~~2018. On ~~December 5, 2017,~~August 28, 2018, the Company’s Board of Directors ~~approved~~declared a quarterly cash dividend of ~~$0.26~~$0.29 per share, which is payable on ~~January~~or before October 23, 2018 to shareholders of record ~~at the close of business~~ on ~~January~~October 9, 2018. The amount and declaration of future cash dividends is subject to the sole discretion of the Company’s Board of Directors and will depend upon, among other things, the Company’s results of operations, cash requirements, financial condition, contractual restrictions and other factors that the Board may deem relevant in its sole discretion.

1213

~~Review~~ Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors ~~and Shareholders~~ of

Dollar General Corporation

Results of Review of Interim Financial Statements

We have reviewed the accompanying condensed consolidated balance sheet of Dollar General Corporation and subsidiaries (the Company) as of ~~November~~August 3, ~~2017, and~~2018, the related condensed consolidated statements of income and comprehensive income for the thirteen ~~week~~ and ~~thirty-nine~~twenty-six week periods ended ~~November~~August 3, ~~2017~~2018 and ~~October 28, 2016, and~~August 4, 2017, the condensed consolidated statements of cash flows for the ~~thirty-nine~~twenty-six week periods ended ~~November~~August 3, 2018 and August 4, 2017, and ~~October 28, 2016. These~~the related notes (collectively referred to as the “condensed consolidated interim financial statements”). Based on our reviews, we are not aware of any material modifications that should be made to the condensed consolidated interim financial statements ~~are the responsibility of the Company’s management.~~for them to be in conformity with U.S. generally accepted accounting principles.

We ~~conducted our review~~have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States). (PCAOB), the consolidated balance sheet of the Company as of February 2, 2018, the related consolidated statements of income, comprehensive income, shareholders' equity and cash flows for the year then ended, and the related notes (not presented herein); and in our report dated March 23, 2018, we expressed an unqualified audit opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of February 2, 2018, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

These financial statements are the responsibility of the Company's management. 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 SEC and the PCAOB. We conducted our review in accordance with the standards of the PCAOB. A review of interim financial ~~information~~statements consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the ~~Public Company Accounting Oversight Board (United States),~~PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Dollar General Corporation and subsidiaries as of February 3, 2017, and the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for the fiscal year then ended (not presented herein) and we expressed an unqualified opinion on those consolidated financial statements in our report dated March 24, 2017. In our opinion, the accompanying condensed consolidated balance sheet of Dollar General Corporation and subsidiaries as of February 3, 2017, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.


	/s/ Ernst & Young LLP

~~December 7, 2017~~August 30, 2018
Nashville, Tennessee

1314

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

General

This discussion and analysis is based on, should be read with, and is qualified in its entirety by, the accompanying unaudited condensed consolidated financial statements and related notes, as well as our consolidated financial statements and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations as contained in our Annual Report on Form 10-K for the fiscal year ended February ~~3, 2017.~~2, 2018. It also should be read in conjunction with the disclosure under “Cautionary Disclosure Regarding Forward-Looking Statements” in this report.

Executive Overview

We are among the largest discount retailers in the United States by number of stores, with ~~14,321~~15,015 stores located in 44 states as of ~~November~~August 3, ~~2017, with the~~2018. Our greatest concentration of stores is in the southern, southwestern, midwestern and eastern United States. We offer a broad selection of merchandise, including consumable products such as food, paper and cleaning products, health and beauty ~~aid~~ products and pet supplies, and non-consumable products such as seasonal merchandise, home decor and domestics, and basic apparel. Our merchandise includes national brands from leading manufacturers, as well as our own private brand ~~selections with prices at substantial discounts to national brands.~~selections. We offer our customers these national brand and private brand products at everyday low prices (typically $10 or less) in our convenient small-box locations.

~~Because the customers we serve are value-conscious, many with low or fixed incomes, we are intensely focused on helping them make the most of their spending dollars.~~ We believe our convenient store formats, locations, and broad selection of high-quality products at compelling values have driven our substantial growth and financial success over the years and through a variety of ~~macroeconomic environments. Like other retailers,~~economic cycles. We are mindful that the majority of our customers are value-conscious, and many have low or fixed incomes. As a result, we ~~have been operating for several years in an environment with ongoing macroeconomic challenges and uncertainties.~~are intensely focused on helping our customers make the most of their spending dollars. Our core customers are often among the first to be affected by negative or uncertain economic conditions, and are among the last to feel the effects of improving economic conditions particularly when ~~as in the recent past, economic~~ trends are inconsistent and ~~their duration unknown.~~of an uncertain duration. The primary macroeconomic factors that affect our core customers include the unemployment and underemployment rates, wage growth, fuel prices, ~~and~~ changes to certain government assistance programs, such as the ~~2016 changes to the~~ Supplemental Nutrition Assistance Program, ~~which has had the effect of not only reducing benefit levels but also eliminating benefit eligibility for certain individuals.~~and potential changes in U.S. trade policy. Additionally, our customers are impacted by increases in those expenses that generally comprise a large portion of their household budget, such as rent and ~~healthcare, which have increased during 2016 and the first three quarters of 2017 at a rate greater than many of our core customers’ growth in income.~~healthcare. Finally, significant unseasonable or unusual weather patterns can impact customer shopping behaviors.

Our same-store sales performance in the second and third quarters suggests that the negative effect of the above macroeconomic factors as a whole may have moderated slightly as compared to previous quarters. However, we continue to believe the overall net effect of the macroeconomic factors listed above has negatively impacted our customer traffic and, along with deflationary pressures, including both lower commodity costs and pricing actions on our products, has adversely affected same-store sales for the past several quarters. We ~~continue to monitor these factors as they continue to have the potential to negatively affect our sales results.~~

~~During 2017 we have continued to make progress on our initiatives as we continue to pursue long-term growth opportunities. At the same time, we~~ remain committed to the following long-term operating priorities as we consistently strive to improve our performance while retaining our customer-centric focus: 1) driving profitable sales growth, 2) capturing growth opportunities, 3) enhancing our position as a low-cost operator, and 4) investing in our people as a competitive advantage.

We seek to drive profitable sales growth through initiatives aimed at increasing customer traffic and average transaction amount, as well as an ongoing focus on enhancing our gross margins while maintaining both everyday low price and affordability.

For the first three quarters of 2017, consistent with historical performance, our sales of consumables, which tend to have lower gross margins, have been the key drivers of net sales and customer traffic, while sales of

non-consumables, which tend to have higher gross margins, have contributed to profitable sales growth. In addition, during the first three quarters of 2017, our mix of consumables sales has continued to shift somewhat toward lower margin consumable departments such as perishables and tobacco. We expect the trends of consumables, and lower margin consumables, comprising a larger percentage of our sales to continue throughout at least the remainder of the year and potentially into 2018. Our initiatives target these trends, although there can be no assurance we will be successful in their reversal.

Our initiatives are designed to increase customer traffic and average transaction amounts as we believe same-store sales growth is key to achieving our financial objectives. During the first three quarters of 2017, we have made significant progress on many Several of these initiatives ~~which include the continued expansion of coolers, the rollout of additional strategies across each of our merchandise departments, including a redesign of our Health~~are also designed to capture growth opportunities and ~~Beauty department to drive further product awareness and market share, a continued focus on improving our in-stock position and the addition of a queue line~~are discussed in a portion of our existing store base. We will continue to utilize our customer segmentation information and other tools, which have provided us with deeper insights into the spending habits of each of our core customer segments, to refine these initiatives and drive our category management process as we optimize our merchandise assortment and expand into those products that we believe are most likely to drive customer traffic to our stores. We also continue to enhance our advertising effectiveness by expanding our digital capabilities and further integrating our traditional and digital media mix to reach our customers where, when and how they decide to engage with us while also targeting a higher return on investment. These efforts are now being led by our Chief Digital and Customer Engagement Officer, a new position created to help drive these initiatives. Many of these initiatives support our plans to continue investing in our existing store base, with a goal to drive increased customer traffic and average transaction amount and as a result our same-store sales.

~~We demonstrate our commitment to the affordability needs of our core customer by pricing~~ more ~~than 80% of our stock-keeping units at $5 or less as of the end of the third quarter of 2017.~~detail below. Even as we work to provide everyday low prices and meet our customers’ affordability needs, we also remain focused on enhancing our margins through effective category management, inventory shrink reduction initiatives, private brands penetration, distribution and transportation efficiencies, global sourcing and pricing and markdown optimization. ~~With respect to category management, we strive to maintain an appropriate mix~~

Historically, our sales of consumables, ~~and non-consumables sales because, as noted above, the mix of sales affects profitability due~~which tend to ~~the varying~~have lower gross margins, ~~between,~~have been the key drivers of net sales and customer traffic, while sales of non-consumables, which tend to have higher gross margins, have contributed to more profitable sales growth and an increase in average transaction amount. In the first half of 2018, our sales mix continued to shift slightly toward consumables, and, within consumables, slightly toward lower margin departments such as perishables and tobacco. While we expect some sales mix challenges to persist, certain of our initiatives are intended to address these trends, although there can be no assurance we will be successful in their reversal.

We continue to make progress on certain strategic initiatives that we believe will help drive profitable sales growth and capture long-term growth opportunities. Such opportunities include leveraging existing, and developing new, digital tools and technology to provide our customers with additional shopping access points and even greater

convenience. Following an in-depth analysis, we are also testing a refreshed approach to our non-consumables product offerings. This non-consumables initiative is a merchandising strategy that offers a new, differentiated and limited assortment that will change throughout the year. Our goal for this initiative is to improve the shopping experience while delivering exceptional value within key areas of our non-consumable categories.

The imposition of proposed or future tariffs by the ~~consumables and non-consumables categories. To support~~U.S. government could have a material impact on our ~~efforts~~core customers, as well as on our business, although tariff regulations currently in effect are not expected to ~~reduce inventory shrink,~~have a material impact on our direct imports. It is more difficult, however, to assess the potential impact to products that we ~~expect to~~buy from domestic vendors with global supply chains. We continue to implement additional in-store defensive merchandising and technology-based tools, such as Electronic Article Surveillance and video-enabled exception-based reporting into 2018, as the results suggest these measures help reduce shrink and improve our in-stock position. Increasing carrier and fuel rates pressured our overall gross margin in the third quarter of 2017,monitor updates, and we ~~anticipate these negative effects continuing for at least the remainder of the year and into early 2018. However,~~are actively working to mitigate such pressures through various merchandising efforts, although there can be no assurance we ~~continue to seek to reduce our stem miles and optimize loads to improve distribution and transportation efficiencies.~~ will be successful in whole or in part.

To support our other operating priorities, we remain focused on capturing growth opportunities. In ~~2017,~~the first half of 2018, we ~~intend to open approximately 1,285 stores, which includes our originally planned 1,000~~opened 510 new stores, as well as store locations acquired in June 2017 in 35 states from a small-box multi-price point retailer. As of the end of the third quarter, we have converted 263 of the acquired store sites to the Dollar General banner. Additionally, we intend to relocate or remodel approximately 760remodeled 643 stores, ~~in 2017.~~and relocated 67 stores. For ~~the~~ 2018, ~~fiscal year,~~ we plan to open approximately 900 new stores, remodel approximately 1,000 mature store locations, and relocate approximately 100 stores for an approximate total of 2,000 real estate projects.

We continue to innovate within our channel and are able to utilize the most productive of our various store formats based on the specific market opportunity. ~~As has been the case throughout the first three quarters of 2017, we~~We expect that our traditional 7,300 square foot store format will continue to be the primary store layout for new stores, relocations and remodels in 2018. We expect approximately 400 of the ~~remainder~~planned 1,000 remodels in 2018 to include a higher cooler count for increased selection of ~~2017.~~perishable items. In addition, our smaller format store (less than 6,000 square feet) allows us to capture growth opportunities in metropolitan areas as well as in rural areas with a low number of households. We continue to incorporate ~~into our existing store base~~ lessons learned from our various store formats and layouts into our existing store base with a goal of driving increased customer traffic, average transaction amount, same-store sales and overall store productivity.

To support our new store growth and drive productivity, we continue to make investments in our distribution center network. Our ~~fifteenth~~ distribution ~~center~~centers in ~~Jackson, Georgia began shipping in October 2017. We began construction on our sixteenth distribution center in~~Longview, Texas and Amsterdam, New York, respectively, are currently under construction. We expect both of these distribution centers to begin shipping in ~~June 2017 to support our northeast growth.~~the 2019 calendar year.

We have established a position as a low-cost operator, ~~continuously~~always seeking ways to reduce or control costs that do not affect our customers’ shopping experience. We plan to continue enhancing this position over time as we aim to continually streamline our business while also employing ongoing cost discipline to reduce certain expenses as a percentage of sales. ~~We believe these actions will assist~~Nonetheless, we seek to maintain flexibility to invest in ~~maintaining~~the business as necessary to enhance our ability to leverage Selling, General & Administrative (“SG&A”) expenses at a lower same-store sales growth percentage over the long term. In addition, we remain committed to simplifying or eliminating store-level tasks and processes so that those time savings can be reinvested by our store managers and their teams in important areas such as enhanced customer service, higher in-stock levels and improved store standards. long-term profitability.

Our employees are a competitive advantage, and we are always searching for ways to continue investing in them. We invest in our employees in an effort to create an environment that attracts and retains talented personnel, as we believe that, particularly at the store level, employees who are promoted from within our company generally have longer tenures and are greater contributors to improvements in our financial performance. ~~Our store managers play a critical role in~~We believe our ~~customer experience and individual store profitability, and beginning in March 2017 we implemented certain~~ investments in compensation and training for ~~this position in the form of increased SG&A expenses that we believe~~our store managers have ~~already~~ contributed to improved customer experience scores, higher sales and improved turnover metrics.

To further enhance shareholder return, we continued to repurchase shares of our common stock during the first three quarters of 2017, although at a lower amount than in 2016, and we continued to pay quarterly cash dividends. We plan to continue both of these activities in the fourth quarter of 2017, subject to Board discretion and approval.

During the third quarter of 2017, multiple hurricanes made landfall in the southern United States. The storms resulted in extensive damage and flooding throughout the South and Southeast, especially in the coastal areas. We estimate these storms resulted in a positive impact to same-store sales for the 2017 third quarter of approximately 30-35 basis points. Conversely, the storms and accompanying flooding resulted in $24.8 million of expense, and an estimated overall net negative impact of approximately $0.05 to diluted earnings per share in the 2017 third quarter.

Both the U.S. House and Senate have passed bills related to the Tax Cuts and Jobs Act (“Act”) with both versions now headed to conference to attempt to resolve differences between the bills. As currently drafted, the bills are expected to have a favorable, material impact on the Company’s effective tax rate and net income as reported under generally accepted accounting principles both in the quarter in which the Act is passed and subsequent reporting periods to which the Act is effective. The likelihood, timing, and details of a final, reconciled bill and whether such a bill will ultimately be enacted are uncertain. There can be no assurances that a final, reconciled bill, if enacted, would have the same impact as either the current House or Senate bill.

Highlights of our ~~2017 third~~2018 second quarter results of operations compared to the ~~2016 third~~2017 second quarter and our financial condition at ~~November~~August 3, ~~2017~~2018 are set forth below. Basis points amounts referred to below are equal to 0.01% as a percentage of net sales.

Net sales increased ~~11.0%~~10.6% to ~~$5.9~~$6.44 billion. Sales in same-stores increased ~~4.3%~~3.7% due to increases in both average transaction amount and customer traffic. Average sales per square foot for all stores over the ~~53-week~~52-week period ended ~~November~~August 3, ~~2017~~2018 was ~~$230.~~$229.

Gross profit, as a percentage of net sales, was ~~29.9%~~30.6% in the 2018 period compared to 30.7% in the 2017 period, ~~compared to 29.8%~~a decrease of 7 basis points, reflecting changes in the ~~2016 period, an increase~~mix of ~~8 basis points, primarily reflecting higher initial markups on inventory purchases and an improved rate of inventory shrinkage,~~sales among other factors discussed below.

SG&A expense, as a percentage of net sales, was ~~22.9%~~22.2% in the 2018 period compared to 22.3% in the 2017 period, ~~compared to 22.5% in the 2016 period, an increase~~a decrease of 408 basis points, reflecting ~~increased retail labor, incentive compensation~~reductions in repairs and ~~occupancy~~maintenance costs ~~as well as hurricane-related costs,~~and lease termination expenses, among other factors discussed below.

Interest expense increased by ~~$0.1~~$1.7 million to ~~$24.0~~$25.5 million in the 2018 period primarily due to higher weighted average borrowing rates.

The effective income tax rate for the 2018 period was 21.5% compared to a rate of 37.2% for the 2017 ~~period.~~period primarily due to the Tax Cuts and Jobs Act.

Net income was ~~$252.5~~$407.2 million, or ~~$0.93~~$1.52 per diluted share, in the 2018 period compared to net income of $294.8 million, or $1.08 per diluted share, in the 2017 ~~period compared to net income of $235.3 million, or $0.84 per diluted share, in the 2016~~ period.

Highlights of the ~~year-to-date period~~first half of ~~2017~~2018 include:

Cash generated from operating activities was ~~$1.14~~$1.1 billion for the ~~2017~~2018 period, ~~compared to $1.12 billion~~an increase of 39.6% over $786.2 million in the comparable ~~2016~~2017 period.

Total cash dividends of ~~$212.9~~$154.7 million, or ~~$0.78~~$0.58 per share, were paid during the ~~2017~~2018 period, compared to ~~$212.2~~$142.3 million, or ~~$0.75~~$0.52 per share, in the comparable ~~2016~~2017 period.

Inventory turnover was 4.7 times on a rolling four-quarter basis. On a per store basis, inventories at ~~November~~August 3, ~~2017 decreased~~2018 increased by ~~4.9%~~3.9% over the balances at ~~October 28, 2016.~~August 4, 2017.

The above discussion is a summary only. Readers should refer to the detailed discussion of our results of operations below in the current year periods as compared with the prior year periods as well as our financial condition at ~~November~~August 3, ~~2017.~~2018.

Results of Operations

Accounting Periods. We utilize a 52-53 week fiscal year convention that ends on the Friday nearest to January 31. The following text contains references to years ~~2017~~2018 and ~~2016,~~2017, which represent the 52-week fiscal ~~year~~years ending or ended February 1, 2019 and February 2, 2018, ~~and the 53-week fiscal year ended February 3, 2017,~~ respectively. References to the ~~third~~second quarter accounting periods for ~~2017~~2018 and ~~2016~~2017 contained herein refer to the 13-week accounting periods ended ~~November~~August 3, ~~2017~~2018 and ~~October 28, 2016, respectively. References to the year-to-date accounting periods for~~August 4, 2017, ~~and 2016 contained herein refer to the 39-week accounting periods ended November 3, 2017 and October 28, 2016,~~ respectively.

Seasonality. The nature of our business is ~~seasonal to a certain extent.~~somewhat seasonal. Primarily because of sales of Christmas-related merchandise, ~~sales~~operating profit in our fourth quarter (November, December and January) ~~have~~has historically been higher than ~~sales~~operating profit achieved in each of the first three quarters of the fiscal year. Expenses, and to a greater extent operating profit, vary by quarter. Results of a period shorter than a full year may not be indicative of results expected for the entire year. Furthermore, the seasonal nature of our business may affect comparisons between periods.

The following table contains results of operations data for the ~~third~~second 13-week periods and ~~first 39-week~~the 26-week periods of ~~2017~~2018 and ~~2016,~~2017, and the dollar and percentage variances among those periods:


	13 Weeks Ended						2017 vs. 2016				39 Weeks Ended						2017 vs. 2016				13 Weeks Ended						2018 vs. 2017				26 Weeks Ended						2018 vs. 2017
(amounts in millions, except	November 3,			October 28,			Amount		%		November 3,			October 28,			Amount		%		August 3,			August 4,			Amount		%		August 3,			August 4,			Amount		%
per share amounts)	2017			2016			Change		Change		2017			2016			Change		Change		2018			2017			Change		Change		2018			2017			Change		Change
Net sales by category:
Consumables	$	4,625.4		$	4,137.7		$	487.7	11.8	%	$	13,425.3		$	12,293.4		$	1,131.9	9.2	%	$	4,988.1		$	4,484.4		$	503.7	11.2	%	$	9,760.5		$	8,799.9		$	960.6	10.9	%
% of net sales		78.35	%		77.78	%						77.42	%		76.94	%						77.41	%		76.94	%						77.72	%		76.94	%
Seasonal		636.5			575.9			60.6	10.5			2,017.2			1,873.7			143.4	7.7			792.5			718.0			74.5	10.4			1,483.5			1,380.6			102.9	7.5
% of net sales		10.78	%		10.83	%						11.63	%		11.73	%						12.30	%		12.32	%						11.81	%		12.07	%
Home products		346.3			329.7			16.6	5.0			1,007.1			968.2			39.0	4.0			345.2			327.6			17.5	5.3			699.8			660.8			39.0	5.9
% of net sales		5.87	%		6.20	%						5.81	%		6.06	%						5.36	%		5.62	%						5.57	%		5.78	%
Apparel		295.3			276.7			18.7	6.8			892.0			842.1			49.9	5.9			317.6			298.3			19.3	6.5			614.0			596.6			17.4	2.9
% of net sales		5.00	%		5.20	%						5.14	%		5.27	%						4.93	%		5.12	%						4.89	%		5.22	%
Net sales	$	5,903.6		$	5,320.0		$	583.6	11.0	%	$	17,341.5		$	15,977.4		$	1,364.2	8.5	%	$	6,443.3		$	5,828.3		$	615.0	10.6	%	$	12,557.8		$	11,437.9		$	1,119.8	9.8	%
Cost of goods sold		4,137.2			3,732.5			404.6	10.8			12,085.6			11,095.5			990.1	8.9			4,468.4			4,037.8			430.7	10.7			8,720.7			7,948.4			772.2	9.7
% of net sales		70.08	%		70.16	%						69.69	%		69.44	%						69.35	%		69.28	%						69.44	%		69.49	%
Gross profit		1,766.5			1,587.5			178.9	11.3			5,256.0			4,881.9			374.1	7.7			1,974.9			1,790.5			184.4	10.3			3,837.1			3,489.5			347.6	10.0
% of net sales		29.92	%		29.84	%						30.31	%		30.56	%						30.65	%		30.72	%						30.56	%		30.51	%
Selling, general and administrative expenses		1,349.0			1,194.5			154.5	12.9			3,871.6			3,499.1			372.5	10.6			1,429.4			1,297.4			132.0	10.2			2,801.5			2,522.6			278.9	11.1
% of net sales		22.85	%		22.45	%						22.33	%		21.90	%						22.18	%		22.26	%						22.31	%		22.05	%
Operating profit		417.4			393.0			24.4	6.2			1,384.4			1,382.8			1.5	0.1			545.5			493.1			52.3	10.6			1,035.7			966.9			68.7	7.1
% of net sales		7.07	%		7.39	%						7.98	%		8.65	%						8.47	%		8.46	%						8.25	%		8.45	%
Interest expense		24.0			23.9			0.1	0.5			72.7			72.3			0.4	0.6			25.5			23.7			1.7	7.2			50.2			48.8			1.5	3.0
% of net sales		0.41	%		0.45	%						0.42	%		0.45	%						0.39	%		0.41	%						0.40	%		0.43	%
Other (income) expense		—			—			—	—			3.5			—			3.5	—			1.0			—			1.0	—			1.0			3.5			(2.5)	—
% of net sales		0.00	%		0.00	%						0.02	%		0.00	%						0.02	%		0.00	%						0.01	%		0.03	%
Income before income taxes		393.4			369.1			24.3	6.6			1,308.1			1,310.5			(2.4)	(0.2)			519.0			469.4			49.6	10.6			984.4			914.7			69.7	7.6
% of net sales		6.66	%		6.94	%						7.54	%		8.20	%						8.05	%		8.05	%						7.84	%		8.00	%
Income tax expense		140.9			133.8			7.1	5.3			481.3			473.6			7.8	1.6			111.8			174.6			(62.8)	(36.0)			212.3			340.4			(128.1)	(37.6)
% of net sales		2.39	%		2.52	%						2.78	%		2.96	%						1.73	%		3.00	%						1.69	%		2.98	%
Net income	$	252.5		$	235.3		$	17.2	7.3	%	$	826.8		$	837.0		$	(10.2)	(1.2)	%	$	407.2		$	294.8		$	112.5	38.1	%	$	772.1		$	574.3		$	197.8	34.4	%
% of net sales		4.28	%		4.42	%						4.77	%		5.24	%						6.32	%		5.06	%						6.15	%		5.02	%
Diluted earnings per share	$	0.93		$	0.84		$	0.09	10.7	%	$	3.02		$	2.95		$	0.07	2.4	%	$	1.52		$	1.08		$	0.44	40.7	%	$	2.88		$	2.09		$	0.79	37.8	%

13 WEEKS ENDED ~~NOVEMBER~~AUGUST 3, ~~2017~~2018 AND ~~OCTOBER 28, 2016~~AUGUST 4, 2017

Net Sales. The net sales increase in the ~~2017~~2018 period reflects a same-store sales increase of ~~4.3%~~3.7% compared to the ~~2016~~2017 period. Same-stores include stores that have been open for at least 13 months and remain open at the end of the reporting period. For the ~~2017~~2018 period, there were ~~12,971~~13,568 same-stores which accounted for sales of ~~$5.5~~$6.0 billion. The increase in same-store sales reflects increases in average transaction amount and customer ~~traffic as discussed above~~traffic. The increase in ~~the Executive Overview, as well as hurricane-related impacts.~~average transaction amount was driven by both higher average units sold and higher average retail prices per transaction. Same-store sales increased in the consumables, seasonal and apparel categories and declined in the home ~~products~~product category. ~~Same-store sales results in the three non-consumables categories, when aggregated, were positive.~~ The net sales increase was also positively affected by sales from new stores, modestly offset by sales from closed stores.

Gross Profit.For the ~~2017~~2018 period, gross profit increased by ~~11.3%~~10.3%, and as a percentage of net sales decreased by 7 basis points to 30.6% compared to the 2017 period. A greater proportion of sales of consumables, which generally have a lower gross profit rate than our other product categories, the sales of lower margin products comprising a higher proportion of consumables sales, higher markdowns, and increased transportation costs contributed to the decline in the gross profit rate. These factors were partially offset by an improved rate of inventory shrinkage and higher initial markups on inventory purchases. We believe our improved rate of inventory shrinkage reflects our continued implementation of in-store defensive merchandising and technology-based tools, including a significant increase in the number of stores utilizing Electronic Article Surveillance (“EAS”). We believe that the results from those stores in which EAS has been implemented suggests that EAS improves our inventory shrinkage which in turn helps to improve our in-stock position. As a result of increasing carrier and fuel rates, our transportation costs have continued to increase and pressured our overall gross margin in the second quarter. To mitigate these ongoing pressures, we continue to pursue

opportunities such as stem mile reduction, shipment load optimization and private fleet expansion to improve our distribution and transportation efficiencies.

Selling, General & Administrative Expenses (“SG&A”). SG&A was 22.2% as a percentage of net sales in the 2018 period compared to 22.3% in the comparable 2017 period, a decrease of 8 basis points. The 2018 period results reflect lower repairs and maintenance expenses, a reduction in lease termination expenses primarily due to acquired stores in the 2017 period, lower fixed asset impairment costs, and a reduction in retail labor expenses as a percentage of sales, partially offset by an increase in professional fees, higher incentive compensation expenses, and increased costs to support certain loss prevention initiatives.

Interest Expense. Interest expense increased by $1.7 million to $25.5 million in the 2018 period primarily due to higher weighted average borrowing rates. See Liquidity and Capital Resources.

Income Taxes. The effective income tax rate for the 2018 period was 21.5% compared to a rate of 37.2% for the 2017 period which represents a net decrease of 15.7 percentage points. The tax rate for the 2018 period was lower than the comparable 2017 period primarily due to the federal tax law changes contained in the Tax Cuts and Jobs Act, including the change in the federal income tax rate to 21% in the 2018 period compared to 35% in the 2017 period.

26 WEEKS ENDED AUGUST 3, 2018 AND AUGUST 4, 2017

Net Sales. The net sales increase in the 2018 period reflects a same-store sales increase of 2.9% compared to the 2017 period. For the 2018 period, there were 13,568 same-stores which accounted for sales of $11.6 billion. The increase in same-store sales reflects an increase in average transaction amount, partially offset by a decline in customer traffic. The increase in average transaction amount was driven by both higher average units sold and higher average retail prices per transaction. Same-store sales increased in the consumables and seasonal categories and declined in the apparel and home products categories. The net sales increase was also positively affected by sales from new stores, modestly offset by sales from closed stores.

Gross Profit. For the 2018 period, gross profit increased by 10.0%, and as a percentage of net sales increased by 85 basis points to ~~29.9%~~30.6% compared to the ~~2016~~2017 period. Higher initial markups on inventory purchases and an improved rate of inventory shrinkage contributed to the increase in the gross profit rate. These factors were partially offset by a greater proportion of sales of consumables, which generally have a lower gross profit rate than our other product categories, the sales of lower margin products comprising a higher proportion of consumables sales, and increased transportation costs.

Selling, General & Administrative Expenses.SG&A ~~Expense.~~ ~~SG&A expense~~ was ~~22.9%~~22.3% as a percentage of net sales in the ~~2017~~2018 period compared to ~~22.5%~~22.1% in the comparable ~~2016~~2017 period, an increase of 4026 basis points. The ~~2017~~2018 period results reflect increased ~~retail labor expenses, primarily due to our investment in store manager compensation,~~occupancy costs, utilities and ~~increases in incentive compensation and occupancy costs,~~professional fees, each of which increased at a rate greater than the increase in net ~~sales. Partially offsetting these increased~~sales, partially offset by reductions, as a percentage of sales, in repairs and maintenance expenses ~~were lower utilities costs~~ and ~~a reduction in advertising costs. The 2017 period results include~~

approximately $24.8 million of hurricane-related costs, the majority of which were store inventory and property losses. In the 2016 period, we incurred charges of $13.0 million associated with the acquisition of former Walmart Express store locations and related closure of existing stores plus an incremental $7.7 million oflease termination expenses primarily ~~related~~due to ~~natural disasters.~~

~~Income Taxes.~~ ~~The effective income tax rate for~~acquired stores in the 2017 ~~period was 35.8% compared~~period.

Interest Expense. Interest expense increased by $1.5 million to ~~a rate of 36.2% for~~$50.2 million in the ~~2016 period which represents a net decrease of 0.4 percentage points.~~ ~~The tax rate for the 2017 period was lower than the comparable 2016~~2018 period primarily due to ~~the recognition of greater federal Work Opportunity Tax Credits in the 2017 period.~~

~~39 WEEKS ENDED NOVEMBER 3, 2017 AND OCTOBER 28, 2016~~

~~Net Sales~~. The net sales increase in the 2017 period reflects a same-store sales increase of 2.6% compared to the 2016 period. In the 2017 period, our 12,971 same-stores accounted for sales of $16.2 billion. The increase in same-store sales was primarily due to increases inhigher weighted average transaction amount and customer traffic relative to the comparable 2016 period, as same-store sales increased in the consumables, seasonal and apparel categories, and declined in the home products category. Same-store sales results in the three non-consumables categories, when aggregated, were positive. The net sales increase was positively affected by new stores, modestly offset by sales from closed stores.

~~Gross Profit.~~ For the 2017 period, gross profit increased by 7.7%, and as a percentage of net sales decreased by 25 basis points to 30.3% compared to the 2016 period. Higher markdowns, which were primarily for promotional activities, a greater proportion of sales of consumables, which generally have a lower gross profit rate than our other product categories, and sales of lower margin products comprising a higher proportion of consumables sales, each reduced the gross profit rate. These factors were partially offset by higher initial markups on inventory purchases and an improved rate of inventory shrinkage.

~~SG&A Expense.~~ SG&A expense was 22.3% as a percentage of net sales in the 2017 period compared to 21.9% in the 2016 period, an increase of 43 basis points. The 2017 period results reflect increased retail labor expenses, primarily as a result of our investment in store manager compensation, and increased occupancy costs, each of which increased at a rate greater than the increase in net sales. Partially offsetting these increased expenses were reduced advertising costs as well as lower utilities and lower waste management costs primarily resulting from our recycling efforts. We incurred charges associated with hurricanes and other natural disasters as well as costs associated with the acquisition of store locations in both the 2017 and 2016 periods. See the Executive Overview and the 13-week period discussion above for more information regarding the hurricanes, other natural disasters and acquisitions of store locations.

~~Other (income) expense. Other (income) expense in the 2017 period reflects expenses associated with the issuance and refinancing of long-term debt during the first quarter of 2017.~~borrowing rates.

Income Taxes. The effective income tax rate for the ~~2017~~2018 period was ~~36.8%~~21.6% compared to ~~36.1%~~a rate of 37.2% for the ~~2016~~2017 period which represents a net ~~increase~~decrease of ~~0.7~~15.6 percentage points. The tax rate for the ~~2017~~2018 period was ~~higher~~lower than ~~for~~ the ~~2016~~comparable 2017 period primarily due to the ~~recognition of a~~federal tax ~~benefit of approximately $10.9 million~~law changes contained in the ~~2016~~Tax Cuts and Jobs Act, including the change in the federal income tax rate to 21% in the 2018 period ~~associated with stock based compensation that did not reoccur~~compared to ~~the same extent~~35% in the 2017 ~~period~~period..

Accounting Standards

In May 2014, the Financial Accounting Standards Board (“FASB”) issued comprehensive new accounting standards related to the recognition of revenue, which specified an effective date for annual reporting periods beginning after December 15, 2016, with early adoption not permitted. In August 2015, the FASB deferred the effective date to annual reporting periods beginning after December 15, 2017, with earlier adoption permitted only for annual reporting periods beginning after December 15, 2016. The new guidance allows companies to use either a full retrospective or a modified retrospective approach in the adoption of this guidance. We have formed a project team to assess and implement the standard by compiling a list of the applicable revenue streams, evaluating relevant contracts and comparing our current accounting policies to the new standard. As a result of the efforts of this project team, we have identified customer incentives and gross versus net considerations as the areas in which we would most likely be affected by the new guidance. We are continuing to assess all the impacts of the new standard and the design of internal control over financial reporting, but based upon the terms of our agreements and an evaluation of the materiality of the

transactions related to customer incentives and gross versus net considerations, we do not expect the adoption to have a material effect on our consolidated results of operations, financial position or cash flows. We currently expect to complete this work in 2017 and to adopt this guidance on February 3, 2018 using the modified retrospective approach.

for all leases existing or entered into after the beginning of the earliest comparative period in the consolidated financial statements. In July 2018, the FASB issued additional guidance which allows companies to record the cumulative effect of applying the new standard as an adjustment to the opening balance of retained earnings in the year of adoption as an alternative to the modified retrospective approach. We ~~are currently assessing~~formed a project team to assess and implement the standard, which has completed its internal evaluation of existing contractual arrangements for embedded leases. The project team is also testing computations in our lease administration system, integrating interfaces between the lease administration system and the enterprise resource planning systems, identifying and implementing new processes and controls to ensure compliance, and is in the process of evaluating and documenting our accounting conclusions related to the new standard. As a result of the efforts of this project team, we have identified store leases as the area in which we would most likely be affected by the new guidance. Our assessment of the impact that adoption of this guidance will have on our consolidated financial ~~statements. Specifically, we have formed a project team that~~statements is ~~developing test plans for our lease accounting system,~~ongoing and we are ~~identifying and evaluating existing contracts for embedded leases, and discussing implementation plans with our lease accounting software vendor, among other activities. We anticipate~~anticipating a material impact because we are party to ~~our consolidated financial statements due to our~~a significant number of lease ~~contracts.~~contracts for our stores.

In ~~October 2016,~~January 2017, the FASB issued amendments to existing guidance related to ~~accounting for intra-entity transfers~~the subsequent measurement of ~~assets other than inventory.~~goodwill. These amendments ~~require~~modify the concept of impairment from the condition that exists when the carrying amount of goodwill exceeds its implied fair value to the condition that exists when the carrying amount of a reporting unit exceeds its fair value. Subsequent to adoption, an entity towill perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the ~~income tax consequences of such transfers when~~amount by which the ~~transfer occurs and affects our historical accounting for intra-entity transfers of certain intangible assets.~~carrying amount exceeds the reporting unit’s fair value. This guidance is effective for public business entities for fiscal years, and interim periods within those years, beginning after December 15, ~~2017,~~2019, and early adoption is permitted ~~subject to certain guidelines.~~for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The amendments should be applied on a ~~modified retrospective basis through~~prospective basis. An entity is required to disclose the nature of and reason for the change in accounting principle upon transition. We currently do not anticipate a ~~cumulative-effect adjustment directly~~material effect on our consolidated results of operations, financial position or cash flows to ~~retained earnings as of~~result from the ~~beginning of the period of adoption. We are assessing the impact that~~ adoption of this guidance will have on our consolidated financial statements, and currently expect such adoption would result in an increase in deferred income tax liabilities and a decrease in retained earnings of approximately $32 million to $36 million under existing tax legislation.guidance.

Liquidity and Capital Resources

~~We have an~~At August 3, 2018, we had a $1.25 billion unsecured credit agreement ~~that provides for total loans and commitments equal to $1.425 billion~~ (the ~~“Facilities”~~“Revolving Facility”), ~~and we have outstanding $2.4~~$2.5 billion aggregate principal amount of senior ~~notes. We have~~notes outstanding, and a commercial paper program that may provide borrowing availability of up to $1.0 billion. At ~~November~~August 3, ~~2017,~~2018, we had total outstanding debt (including the current portion of long-term obligations) of ~~approximately $3.1~~$2.8 billion, which includes ~~balances under the Facilities,~~ commercial paper and senior notes balances, all of which are described in greater detail below. Our borrowing availability under the Revolving Facility may be effectively limited by borrowings under the commercial paper program as further described below.

We believe our cash flow from operations and existing cash balances, combined with availability under the ~~Facilities,~~Revolving Facility, the commercial paper program and access to the debt markets will provide sufficient liquidity to fund our current obligations, projected working capital requirements, capital spending and anticipated dividend payments for a period that includes the next twelve months as well as the next several years. However, our ability to maintain sufficient liquidity may be affected by numerous factors, many of which are outside of our control. Depending on our liquidity levels, conditions in the capital markets and other factors, we may from time to time consider the issuance of debt, equity or other securities, the proceeds of which could provide additional liquidity for our operations.

For the remainder of fiscal ~~2017,~~2018, we anticipate potential combined borrowings under the Revolving Facility ~~(defined below)~~ and our commercial paper program to be a maximum of approximately ~~$600~~$800 million outstanding at any one time, including any anticipated borrowings to fund repurchases of common stock.

Revolving Credit ~~Facilities~~Facility

On February 22, 2017, we entered into the Facilities, which consist of a $175.0 million senior unsecured term loan facility (the “Term Facility”) and a $1.25 billion senior unsecured revolving credit facility (the “Revolving Facility”)Revolving Facility of which up to $175.0 million is available for the issuance of letters of ~~credit. The Term Facility is scheduled to mature on October 20, 2020,~~credit and ~~the Revolving Facility~~which is scheduled to mature on February 22, 2022.

Borrowings under the ~~Facilities~~Revolving Facility bear interest at a rate equal to an applicable interest rate margin plus, at our option, either (a) LIBOR or (b) a base rate (which is usually equal to the prime rate). The applicable interest rate margin for borrowings as of ~~November~~August 3, ~~2017~~2018 was 1.10% for LIBOR borrowings and 0.10% for base-rate borrowings. We must also pay a facility fee, payable on any used and unused commitment amounts of the ~~Facilities,~~Revolving Facility, and customary fees on letters of credit issued under the Revolving Facility. As of ~~November~~August 3, ~~2017,~~2018, the commitment fee rate

was 0.15%. The applicable interest rate margins for borrowings, the facility fees and the letter of credit fees under the ~~Facilities~~Revolving Facility are subject to adjustment from time to time based on our long-term senior unsecured debt ratings. ~~The weighted average all-in interest rate for borrowings under the Facilities was 2.3% as of November 3, 2017.~~

The ~~Facilities can be voluntarily prepaid in whole or in part at any time without penalty. There is no required principal amortization under the Facilities. The Facilities contain~~Revolving Facility contains a number of customary affirmative and negative covenants that, among other things, restrict, subject to certain exceptions, our (including our subsidiaries’) ability to: incur additional liens; sell all or substantially all of our assets; consummate certain fundamental changes or change in our lines of business; and incur additional subsidiary indebtedness. The ~~Facilities~~Revolving Facility also ~~contain~~contains financial covenants that require the maintenance of a minimum fixed charge coverage ratio and a maximum leverage ratio. As of ~~November~~August 3, ~~2017,~~2018, we were in compliance with all such covenants. The ~~Facilities~~Revolving Facility also ~~contain~~contains customary events of default.

As of ~~November~~August 3, ~~2017, the entire balance of the Term Facility was outstanding, and~~2018, under the Revolving Facility, we had no outstanding borrowings, outstanding letters of credit of ~~$9.5~~$9.1 million, and borrowing availability of $1.24 billion that, due to our intention to maintain borrowing availability related to the commercial paper program described below, could contribute incremental liquidity of ~~$690.6~~$774.1 million at ~~November~~August 3, ~~2017.~~2018. In addition, as of ~~November~~August 3, ~~2017~~2018 we had outstanding letters of credit of ~~$40.0~~$38.9 million which were issued pursuant to separate agreements.

Commercial Paper

As of ~~November~~August 3, ~~2017, we had~~2018, our condensed consolidated balance sheet reflected outstanding unsecured ~~commercial paper notes (the “CP Notes”)~~CP Notes of ~~$549.9~~$280.8 million classified as long-term obligations ~~on the condensed consolidated balance sheet~~ due to our intent and ability to refinance these obligations as long-term debt. An additional $186.0 million of outstanding CP Notes were held by a wholly-owned subsidiary and are therefore not reflected on the condensed consolidated balance sheet. Under this program, we may issue the CP Notes from time to time in an aggregate amount not to exceed $1.0 billion outstanding at any time. The CP Notes may have maturities of up to 364 days from the date of issue and rank equal in right of payment with all of our other unsecured and unsubordinated indebtedness. We intend to maintain available commitments under the Revolving Facility in an amount at least equal to the amount of CP Notes outstanding at any time. As of ~~November~~August 3, ~~2017,~~2018, the outstanding CP Notes had a weighted average borrowing rate of ~~1.4%~~2.3%.

Senior Notes

OnIn April ~~11,~~2013 we issued $900.0 million aggregate principal amount of 3.25% senior notes due 2023 (the “2023 Senior Notes”) at a discount of $2.4 million, which are scheduled to mature on April 15, 2023. In October 2015 we issued $500.0 million aggregate principal amount of 4.150% senior notes due 2025 (the “2025 Senior Notes”) at a discount of $0.8 million, which are scheduled to mature on November 1, 2025. In April 2017 we issued $600.0 million aggregate principal amount of 3.875% senior notes due 2027 (the “2027 Senior Notes”)~~, net of~~ at a discount of $0.4 million, which are scheduled to mature on April 15, 2027. ~~The net proceeds from the offering of the 2027 Senior Notes were used to repay all~~In April 2018 we issued $500.0 ~~million of our outstanding 4.125% senior notes due 2017 and for general corporate purposes. In addition, we have $400.0~~ million aggregate principal amount of ~~1.875%~~4.125% senior notes due ~~2018~~2028 (the ~~“2018~~“2028 Senior Notes”)~~, net of~~ at a discount of ~~less than $0.1~~$0.5 million, which are scheduled to mature on April 15, 2018; $900.0 million aggregate principal amount of 3.25% senior notes due 2023 (the “2023 Senior Notes”), net of discount of $1.4 million, which are scheduled to mature on April 15, 2023; and $500.0 million aggregate principal amount of 4.150% senior notes due 2025 (the “2025 Senior Notes”), net of discount of $0.6 million, which are scheduled to mature on NovemberMay 1, ~~2025.~~2028. Collectively, ~~the 2018 Senior Notes,~~ the 2023 Senior Notes, 2025 Senior Notes, 2027 Senior Notes and ~~2027~~2028 Senior Notes comprise the “Senior Notes”, each of which were issued pursuant to an indenture as supplemented and amended by supplemental indentures relating to each series of Senior Notes (as so supplemented and amended, the “Senior Indenture”). Interest on the ~~2018 Senior Notes, the~~ 2023 Senior Notes and the 2027 Senior Notes is payable in cash on April 15 and October 15 of each year. Interest on the 2025 and 2028 Senior Notes is payable in cash on May 1 and November 1 of each ~~year. We expect to refinance~~year, with interest on the ~~2018~~2028 Senior Notes commencing on ~~or prior to their maturity utilizing proceeds from the issuance of additional senior notes, revolver borrowings or the issuance of commercial paper.~~November 1, 2018.

We may redeem some or all of the Senior Notes at any time at redemption prices set forth in the Senior Indenture. Upon the occurrence of a change of control triggering event, which is defined in the Senior Indenture, each holder of our Senior Notes has the right to require us to repurchase some or all of such holder’s Senior Notes at a

purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but excluding, the repurchase date.

The Senior Indenture contains covenants limiting, among other things, our ability (subject to certain exceptions) to consolidate, merge, or sell or otherwise dispose of all or substantially all of our assets; and our ability and the ability of our subsidiaries to incur or guarantee indebtedness secured by liens on any shares of voting stock of significant subsidiaries.

The Senior Indenture also provides for events of default which, if any of them occurs, would permit or require the principal of and accrued interest on our Senior Notes to become or to be declared due and payable, as applicable.

Current Financial Condition / Recent Developments

Our inventory balance represented approximately 53% of our total assets exclusive of goodwill and other intangible assets as of ~~November~~August 3, ~~2017.~~2018. Our ability to effectively manage our inventory balances can have a significant impact on our cash flows from operations during a given fiscal year. Inventory purchases are often somewhat seasonal in nature, such as the purchase of warm-weather or Christmas-related merchandise. Efficient management of our inventory has been and continues to be an area of focus for us.

As described in Note 6 to the unaudited condensed consolidated financial statements, we are involved in a number of legal actions and claims, some of which could potentially result in material cash payments. Adverse developments in those actions could materially and adversely affect our liquidity. We also have certain income tax-related contingencies as disclosed in Note 3 to the unaudited condensed consolidated financial statements. Future negative developments could have a material adverse effect on our liquidity.

Our senior unsecured debt is rated “Baa2,” by Moody’s with a stable outlook and “BBB” by Standard & Poor’s with a stable outlook, and our commercial paper program is rated “P-2” by Moody’s and “A-2” by Standard and Poor’s. Our current credit ratings, as well as future rating agency actions, could (i) impact our ability to finance our operations on satisfactory terms; (ii) affect our financing costs; and (iii) affect our insurance premiums and collateral requirements necessary for our self-insured programs. There can be no assurance that we will maintain or improve our current credit ratings.

Unless otherwise noted, all references to the ~~“2017~~“2018 period” and the ~~“2016~~“2017 period” in the discussion of “Cash flows from operating activities,” “Cash flows from investing activities,” and “Cash flows from financing activities” below refer to the ~~39-week~~26-week periods ended ~~November~~August 3, ~~2017~~2018 and ~~October 28, 2016,~~August 4, 2017, respectively.

Cash flows from operating activities. Cash flows from operating activities were ~~$1.14~~$1.1 billion in the ~~2017~~2018 period, which represents ~~an $18.5~~a $311.1 million increase compared to the ~~2016~~2017 period. Net income increased by $197.8 million in the 2018 period over the 2017 period. Changes in merchandise inventories resulted in a ~~$340.1~~$292.9 million decrease in the ~~2017~~2018 period as compared to a decrease of ~~$405.5~~$205.4 million in the ~~2016~~2017 period. Changes in accounts payable resulted in a ~~$384.1~~$270.9 million increase in the ~~2017~~2018 period compared to a ~~$439.3~~$292.1 million increase in the ~~2016~~2017 period, due primarily to the timing of receipts and ~~payments which was partially impacted by certain changes in payment terms.~~payments. Changes in income taxes in the ~~2017~~2018 period compared to the ~~2016~~2017 period ~~primarily~~ reflect ~~increased cash~~lower income tax payments primarily resulting from ~~higher fourth quarter income (including the 53rd week) in the 2016 fiscal year, a reduced cash benefit for stock based compensation and~~ the timing of income ~~recognition for~~taxes paid and the reduction in the federal income tax ~~purposes.~~rate to 21% from 35% under the Tax Cuts and Jobs Act.

On an ongoing basis, we closely monitor and manage our inventory balances, and they may fluctuate from period to period based on new store openings, the timing of purchases, and other factors. Merchandise inventories increased ~~10%~~8% in the 2018 period and increased 6% in the 2017 ~~period and 13% in the 2016~~ period. In the ~~2017~~2018 period compared to the ~~2016~~2017 period, changes in inventory balances in our four inventory categories were as follows: the consumables category increased by ~~18%~~11% in both periods; the seasonal category increased 5% compared to a ~~16% increase; the seasonal category was essentially unchanged compared to a 10% increase;~~minimal decrease; the home products category increased by 3%5% compared to a ~~23%~~3% increase; and apparel decreased by 8%3% compared to a 5%4% decrease.

Cash flows from investing activities. Significant components of property and equipment purchases in the ~~2017~~2018 period included the following approximate amounts: ~~$178~~$147 million for improvements, upgrades, remodels and relocations of existing stores; ~~$150~~$113 million for distribution and transportation-related capital expenditures; $81 million related to new leased stores, primarily for leasehold improvements, fixtures and equipment; ~~$134~~and $24 million for ~~distribution and transportation-related capital expenditures; and $21 million for~~ information

systems upgrades and technology-related projects. The timing of new, remodeled and relocated store openings along with other factors may affect the relationship between such openings and the related property and equipment purchases in any given period. During the ~~2017~~2018 period, we opened ~~1,044~~510 new stores and remodeled or relocated ~~719~~710 stores.

Significant components of property and equipment purchases in the ~~2016~~2017 period included the following approximate amounts: ~~$136 million for distribution and transportation-related capital expenditures; $116~~$126 million for improvements, upgrades, remodels and relocations of existing stores; ~~$92~~$90 million for distribution and transportation-related capital expenditures; $81 million related to new leased stores, primarily for leasehold improvements, fixtures and equipment; ~~$38 million for stores purchased or built by us~~ and ~~$18~~$13 million for information systems upgrades and technology-related projects. During the ~~2016~~2017 period, we opened ~~768~~574 new stores and remodeled or relocated ~~861~~555 stores.

Capital expenditures for ~~2017~~2018 are currently projected to be in the range of ~~$700~~$725 million to ~~$750~~$800 million. We anticipate funding ~~2017~~2018 capital requirements with a combination of some or all of the following: existing cash balances, cash flows from operations, availability under our Revolving Facility ~~and~~and/or the issuance of additional CP Notes. We

plan to continue to invest in store growth through the development of new stores and the remodel or relocation of existing stores. Capital expenditures in ~~2017~~2018 are anticipated to support our store growth ~~(including store locations acquired)~~ as well as our remodel and relocation initiatives, ~~which include~~including capital outlays for leasehold improvements, fixtures and equipment; the construction of new stores; costs to support and enhance our supply chain initiatives including ~~construction of~~ new and ~~investments in~~ existing distribution center ~~facilities;~~facilities and our private fleet; technology and other strategic initiatives; as well as routine and ongoing capital requirements.

Cash flows from financing activities. ~~As discussed above,~~Net proceeds from the issuance of the 2028 Senior Notes in the 2018 period were $499.5 million and net proceeds from the issuance of the 2027 Senior Notes in the 2017 period were $599.6 million. In the 2018 period, we redeemed all outstanding 1.875% senior notes due 2018 for $400.0 million and made a principal payment on the Term Facility of $175.0 million. In the 2017 period, we redeemed ~~the~~all outstanding 4.125% senior notes due 2017 ~~Senior Notes~~ for $500.0 million and made a principal payment on the Term Facility of $250.0 million. ~~We had~~Commercial paper borrowings were a net decrease in the 2018 period of $149.4 million and a net increase ~~in commercial paper borrowings~~of $25.0 million in the 2017 ~~period of $59.4 million and~~period. There were no borrowings or repayments under the Revolving ~~Facility. Net repayments under the Revolving~~ Facility during the ~~2016 period were $251.0 million. During~~2018 or 2017 periods. Also during the ~~2017~~2018 and ~~2016~~2017 periods, we repurchased ~~4.0~~3.7 million and ~~8.2~~2.3 million shares of our common stock at a total cost of ~~$298.7~~$349.5 million and ~~$679.4~~$163.7 million, respectively, and paid cash dividends of ~~$212.9~~$154.7 million and ~~$212.2~~$142.3 million, respectively.

Share Repurchase Program

At ~~November~~August 3, ~~2017,~~2018, our common stock repurchase program had a total remaining authorization of approximately ~~$634.6 million.~~$1.0 billion, which included the increase of $1.0 billion to the authorization available under this common stock repurchase program approved by our Board of Directors on March 14, 2018. Under the authorization, purchases may be made in the open market or in privately negotiated transactions from time to time subject to market and other conditions. The authorization has no expiration date and may be ~~increased~~modified or terminated from time to time at the discretion of our Board of Directors. For more information about our share repurchase program, see Note 8 to the condensed consolidated financial statements contained in Part I, Item 1 of this report and Part II, Item 2 of this report.

ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

There have been no material changes to the disclosures relating to this item from those set forth in our Annual Report on Form 10-K for the fiscal year ended February ~~3, 2017.~~2, 2018.

ITEM 4.CONTROLS AND PROCEDURES.

(a) Disclosure Controls and Procedures. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) or Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

(b) Changes in Internal Control Over Financial Reporting. There have been no changes in our internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) or Rule 15d-15(f)) during the quarter ended ~~November~~August 3, ~~2017~~2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

2324

PART II—OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS.

The information contained in Note 6 to the unaudited condensed consolidated financial statements under the heading “Legal proceedings” contained in Part I, Item 1 of this report is incorporated herein by this reference.

ITEM ~~1A.RISK~~1A.RISK FACTORS.

There have been no material changes to the disclosures relating to this item from those set forth in our Annual Report on Form 10-K for the fiscal year ended February ~~3, 2017.~~2, 2018.

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

The following table contains information regarding purchases of our common stock made during the quarter ended ~~November~~August 3, ~~2017~~2018 by or on behalf of Dollar General or any “affiliated purchaser,” as defined by Rule 10b-18(a)(3) of the Exchange Act:

Issuer Purchases of Equity Securities

Total Number

Approximate

of Shares

Dollar Value

Purchased

of Shares that May

Total Number

Average

as Part of Publicly

Yet Be Purchased

of Shares

Price Paid

Announced Plans or

Under the Plans

Period

Purchased

per Share

Programs(a)

or Programs(a)

08/05/17-08/31/17

—

$
—

—

$
769,593,000

09/01/17-09/30/17

1,582,189

$
76.48

1,582,189

$
648,593,000

10/01/17-11/03/17

171,710

$
81.53

171,710

$
634,594,000

Total

1,753,899

$
76.97

1,753,899

$
634,594,000


				Total Number	Approximate
				of Shares	Dollar Value
				Purchased	of Shares that May
	Total Number	Average		as Part of Publicly	Yet Be Purchased
	of Shares	Price Paid		Announced Plans or	Under the Plans
Period	Purchased	per Share		Programs(a)	or Programs(a)
05/05/18-05/31/18	—	$	—	—	$	1,203,616,000
06/01/18-06/30/18	1,752,603	$	94.50	1,752,603	$	1,037,998,000
07/01/18-08/03/18	344,045	$	98.59	344,045	$	1,004,079,000
Total	2,096,648	$	95.17	2,096,648	$	1,004,079,000

(a)

~~A $500 million share repurchase program was publicly announced on~~On September 5, 2012, ~~and increases in~~ the ~~authorization under such~~Company announced a program ~~were announced~~permitting the Company to repurchase a portion of its outstanding shares not to exceed a dollar maximum established by the Company’s Board of Directors. The program was most recently amended on March ~~25, 2013 ($500 million increase), December 5, 2013 ($1.0~~14, 2018 to increase the repurchase authorization by $1.0 billion, ~~increase), March 12, 2015 ($1.0 billion increase), December 3, 2015 ($1.0 billion increase) and August 25, 2016 ($1.0 billion increase).~~bringing the total value of authorized share repurchases under the program to $6.0 billion. Under the authorization, purchases may be made in the open market or in privately negotiated transactions from time to time subject to market and other conditions. This repurchase authorization has no expiration ~~date.~~date.

ITEM 6.EXHIBITS.

See the Exhibit Index to this report immediately before the signature page hereto, which Exhibit Index is incorporated by reference as if fully set forth herein.

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CAUTIONARY DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

We include “forward-looking statements” within the meaning of the federal securities laws throughout this report, particularly under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Part I, Item 2, and “Note 6. Commitments and Contingencies” included in Part I, Item 1, among others. You can identify these statements because they are not limited to historical fact or they use words such as “may,” “will,” “should,” “expect,” “believe,” “anticipate,” “project,” “plan,” “estimate,” ~~“objective,”~~ “aim,” “goal,” “opportunity,” “intend,” “could,” “can,” “would,” “committed,” “likely, ~~to,~~” “scheduled to,” “predict,” “seek,” “potential,” “strive,” “subject to,” “focused on,” “continue,” or “will result in,” and similar expressions that concern our strategy, plans, initiatives, intentions or beliefs about future occurrences or results. For example, statements relating to estimated and projected expenditures, cash flows, results of operations, financial condition and liquidity; plans and objectives for, and expectations regarding, future operations, economic and competitive market conditions, growth or initiatives, including the number of planned store openings, remodels and relocations, store format plans, progress of merchandising ~~initiatives including customer segmentation~~ and ~~in-stock and shrink management,~~margin enhancing initiatives, trends in sales of consumable and non-consumable products, results of the investment in and training of our ~~personnel and the levels of future costs and expenses;~~personnel; potential future stock repurchases and cash dividends; anticipated borrowing under ~~certain of~~the Revolving Facility and our ~~credit facilities;~~commercial paper program; the potential impact of legal or regulatory changes and our responses thereto, including the potential impact of ~~pending tax reform legislation, and our responses thereto;~~tariffs by the U.S. government; efforts to improve distribution and transportation ~~efficiencies; the~~efficiencies, including anticipated ~~completion date~~timing of ~~conversion of the recently acquired store sites to the Dollar General banner along with timing, financial and store count expectations;~~distribution center openings; and the expected outcome or effect of pending or threatened litigation or audits are forward-looking statements.

Forward-looking statements are subject to risks and uncertainties that may change at any time, so our actual results may differ materially from those that we expected. We derive many of these statements from our operating budgets and forecasts, which are based on many detailed assumptions that we believe are reasonable. However, it is very difficult to predict the effect of known factors, and we cannot anticipate all factors that could affect our actual results. Important factors that could cause actual results to differ materially from the expectations expressed in our forward-looking statements include, without limitation:

economic conditions and other economic factors, including ~~their effect on~~but not limited to employment levels, ~~consumer demand, customer traffic, customer disposable income,~~ credit availability and spending patterns, inflation, commodity prices, fuel prices, interest rates, ~~exchange rate fluctuations~~measures that create barriers to or increase the costs associated with international trade (including increased import duties or tariffs), and ~~the cost~~healthcare and housing costs, and their effect on, as applicable, consumer demand, customer traffic, customer disposable income, our ability to execute our strategic initiatives, our costs of ~~goods;~~goods sold, our SG&A expenses and real estate costs;

failure to successfully execute our strategies and initiatives, including those relating to merchandising, marketing, real estate and new store development, digital, sourcing, shrink, private brand, inventory management, distribution and transportation, store operations, store formats, budgeting and expense reduction, and technology;

failure to open, relocate and remodel stores profitably and on schedule, as well as failure of our new store base to achieve sales and operating levels consistent with our expectations;

effective response to competitive pressures and changes in the competitive environment and the geographic and product markets where we operate, including, but not limited to, pricing, ~~consolidation~~the creation of a more convenient customer online and ~~omnichannel shopping;~~in-store shopping experience, and consolidation;

levels of inventory shrinkage;

failure to successfully manage inventory balances;

failure to maintain the security of information that we hold, whether as a result of cybersecurity attacks or otherwise;

disruptions, unanticipated or unusual expenses or operational failures in our supply chain including, ~~but not limited to,~~without limitation, a decrease in transportation capacity for overseas shipments, increases in transportation costs (including increased fuel costs and carrier rates or driver wages), work stoppages or other labor

disruptions that could impede the receipt of or delivery of merchandise, or delays in constructing or opening new distribution centers;

risks and challenges associated with sourcing merchandise from suppliers, including, but not limited to, those related to international trade;

unfavorable publicity or consumer perception of our products, including, but not limited to, related product liability;

risks and challenges associated with our private brands, including, but not limited to, our level of success in ~~gaining and maintaining broad market acceptance of~~improving our ~~private brands;~~

~~unfavorable publicity or consumer perception of our products, including, but not limited to, related product liability;~~gross profit rate;

the impact of changes in or noncompliance with governmental laws and regulations (including, but not limited to, environmental compliance, product safety or labeling, food safety, information security and privacy, and labor and employment laws, as well as tax laws, ~~(including the current pending U.S. tax reform legislation),~~ the interpretation of existing tax laws, or our failure to sustain our reporting positions negatively affecting our tax rate) and developments in or outcomes of private actions, class actions, administrative proceedings, regulatory actions or other litigation;

incurrence of material uninsured losses, excessive insurance costs or accident costs;

natural disasters, unusual weather conditions (whether or not caused by climate change), pandemic outbreaks, terrorist acts and geo-political events;

~~failure to maintain the security of information that we hold, whether as a result of cybersecurity attacks or otherwise;~~

damage or interruption to our information systems or failure of technology initiatives to deliver desired or timely results;

ability to attract, train and retain qualified employees, while controlling labor costs ~~(including effects of potential federal or state regulatory changes related to overtime exemptions, if implemented)~~ and other labor issues;

~~our~~ loss of key personnel, inability to hire additional qualified personnel or disruption of executive management as a result of retirements or transitions;

seasonality of our business;

deterioration in market conditions, including market disruptions, limited liquidity and interest rate fluctuations, or a lowering of our credit ratings;

new accounting guidance, or changes in the interpretation or application of existing guidance, such as changes to guidance related to ~~leases, revenue recognition and intra-company transfers;~~leases;

factors disclosed under “Risk Factors” in Part I, Item 1A of our Form 10-K for the fiscal year ended February ~~3, 2017;~~2, 2018; and

factors disclosed elsewhere in this document (including, without limitation, in conjunction with the forward-looking statements themselves) and other factors.

All forward-looking statements are qualified in their entirety by these and other cautionary statements that we make from time to time in our other Securities and Exchange Commission filings and public communications. You should evaluate forward-looking statements in the context of these risks and uncertainties and are cautioned to not place undue reliance on such forward-looking statements. These factors may not contain all of the material factors that are important to you. We cannot assure you that we will realize the results or developments we anticipate or, even if substantially realized, that they will result in the consequences or affect us or our operations in the way we expect. The forward-looking statements in this report are made only as of the date hereof. We undertake no obligation, and specifically disclaim any duty, to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

2627

EXHIBIT INDEX


10.1		~~Summary of Non-Employee Director Compensation (effective February~~Employment Agreement, effective June 3, ~~2018)~~

~~10.2~~		~~Form of Stock Option Award Agreement (approved December 5, 2017) for awards beginning December 2017 to certain newly hired and promoted employees of~~2018, between Dollar General Corporation ~~pursuant~~and Todd J. Vasos (incorporated by reference to ~~the~~Exhibit 99 to Dollar General ~~Corporation Amended and Restated 2007 Stock Incentive Plan~~Corporation’s Current Report on Form 8-K dated May 31, 2018, filed with the SEC on May 31, 2018 (file no. 001-11421))

15		Letter re unaudited interim financial information

31		Certifications of CEO and CFO under Exchange Act Rule 13a-14(a)

32		Certifications of CEO and CFO under 18 U.S.C. 1350

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB		XBRL Taxonomy Extension Labels Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized, both on behalf of the Registrant and in his capacity as principal financial officer of the Registrant.


		DOLLAR GENERAL CORPORATION


Date:	~~December 7, 2017~~August 30, 2018	By:	/s/ John W. Garratt
			John W. Garratt
			Executive Vice President & Chief Financial Officer

2829