Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jul. 31, 2015 | Aug. 21, 2015 | |
Document and Entity Information | ||
Entity Registrant Name | DOLLAR GENERAL CORP | |
Entity Central Index Key | 29,534 | |
Document Type | 10-Q | |
Document Period End Date | Jul. 31, 2015 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --01-29 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 294,659,578 | |
Document Fiscal Year Focus | 2,015 | |
Document Fiscal Period Focus | Q2 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Jul. 31, 2015 | Jan. 30, 2015 |
Current assets: | ||
Cash and cash equivalents | $ 180,525 | $ 579,823 |
Merchandise inventories | 3,029,731 | 2,782,521 |
Income taxes receivable | 14,646 | |
Prepaid expenses and other current assets | 199,945 | 170,265 |
Total current assets | 3,424,847 | 3,532,609 |
Net property and equipment | 2,195,857 | 2,116,075 |
Goodwill | 4,338,589 | 4,338,589 |
Other intangible assets, net | 1,201,241 | 1,201,870 |
Other assets, net | 34,661 | 34,961 |
Total assets | 11,195,195 | 11,224,104 |
Current liabilities: | ||
Current portion of long-term obligations | 101,335 | 101,158 |
Accounts payable | 1,536,610 | 1,388,154 |
Accrued expenses and other | 443,164 | 413,760 |
Income taxes payable | 41,348 | 59,400 |
Deferred income taxes | 32,306 | 25,268 |
Total current liabilities | 2,154,763 | 1,987,740 |
Long-term obligations | 2,761,794 | 2,639,427 |
Deferred income taxes | 578,084 | 601,590 |
Other liabilities | $ 281,620 | $ 285,309 |
Commitments and contingencies | ||
Shareholders' equity: | ||
Preferred stock | ||
Common stock | $ 257,968 | $ 265,514 |
Additional paid-in capital | 3,085,637 | 3,048,806 |
Retained earnings | 2,081,543 | 2,403,045 |
Accumulated other comprehensive loss | (6,214) | (7,327) |
Total shareholders' equity | 5,418,934 | 5,710,038 |
Total liabilities and shareholders' equity | $ 11,195,195 | $ 11,224,104 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jul. 31, 2015 | Aug. 01, 2014 | Jul. 31, 2015 | Aug. 01, 2014 | |
CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||||
Net sales | $ 5,095,904 | $ 4,724,039 | $ 10,014,576 | $ 9,246,120 |
Cost of goods sold | 3,507,749 | 3,268,465 | 6,927,716 | 6,432,800 |
Gross profit | 1,588,155 | 1,455,574 | 3,086,860 | 2,813,320 |
Selling, general and administrative expenses | 1,112,343 | 1,027,048 | 2,182,854 | 2,005,086 |
Operating profit | 475,812 | 428,526 | 904,006 | 808,234 |
Interest expense | 20,699 | 22,598 | 42,275 | 44,865 |
Income before income taxes | 455,113 | 405,928 | 861,731 | 763,369 |
Income tax expense | 172,764 | 154,668 | 326,147 | 289,711 |
Net income | $ 282,349 | $ 251,260 | $ 535,584 | $ 473,658 |
Earnings per share: | ||||
Basic (in dollars per share) | $ 0.95 | $ 0.83 | $ 1.79 | $ 1.55 |
Diluted (in dollars per share) | $ 0.95 | $ 0.83 | $ 1.79 | $ 1.54 |
Weighted average shares outstanding: | ||||
Basic (in shares) | 295,679 | 303,015 | 298,440 | 306,173 |
Diluted (in shares) | 296,528 | 303,888 | 299,308 | 307,091 |
Dividends per share (in dollars per share) | $ 0.22 | $ 0.44 |
CONDENSED CONSOLIDATED STATEME4
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jul. 31, 2015 | Aug. 01, 2014 | Jul. 31, 2015 | Aug. 01, 2014 | |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||||
Net income | $ 282,349 | $ 251,260 | $ 535,584 | $ 473,658 |
Unrealized net gain (loss) on hedged transactions, net of related income tax expense (benefit) of $238, $450, $719, and $718, respectively | 355 | 704 | 1,113 | 1,102 |
Comprehensive income | $ 282,704 | $ 251,964 | $ 536,697 | $ 474,760 |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jul. 31, 2015 | Aug. 01, 2014 | Jul. 31, 2015 | Aug. 01, 2014 | |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||||
Unrealized net gain (loss) on hedged transactions, income tax expense (benefit) | $ 238 | $ 450 | $ 719 | $ 718 |
CONDENSED CONSOLIDATED STATEME6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 6 Months Ended | |
Jul. 31, 2015 | Aug. 01, 2014 | |
Cash flows from operating activities: | ||
Net income | $ 535,584 | $ 473,658 |
Adjustments to reconcile net income to net cash from operating activities: | ||
Depreciation and amortization | 174,734 | 169,498 |
Deferred income taxes | (32,680) | (38,880) |
Tax benefit of share-based awards | (27,929) | (10,994) |
Noncash share-based compensation | 19,642 | 18,320 |
Other noncash (gains) and losses | 7,734 | 3,539 |
Change in operating assets and liabilities: | ||
Merchandise inventories | (246,793) | (235,890) |
Prepaid expenses and other current assets | (30,754) | (29,055) |
Accounts payable | 133,615 | 104,382 |
Accrued expenses and other liabilities | 29,237 | 61,977 |
Income taxes | (4,769) | (28,469) |
Other | (569) | (1,162) |
Net cash provided by (used in) operating activities | 557,052 | 486,924 |
Cash flows from investing activities: | ||
Purchases of property and equipment | (247,051) | (191,414) |
Proceeds from sales of property and equipment | 257 | 692 |
Net cash provided by (used in) investing activities | (246,794) | (190,722) |
Cash flows from financing activities: | ||
Repayments of long-term obligations | (50,605) | (26,672) |
Borrowings under revolving credit facilities | 445,100 | 972,000 |
Repayments of borrowings under revolving credit facilities | (272,100) | (782,000) |
Repurchases of common stock | (734,334) | (800,095) |
Payments of cash dividends | (131,204) | |
Other equity and related transactions | 5,658 | (3,521) |
Tax benefit of share-based awards | 27,929 | 10,994 |
Net cash provided by (used in) financing activities | (709,556) | (629,294) |
Net increase (decrease) in cash and cash equivalents | (399,298) | (333,092) |
Cash and cash equivalents, beginning of period | 579,823 | 505,566 |
Cash and cash equivalents, end of period | 180,525 | 172,474 |
Supplemental schedule of non-cash investing and financing activities: | ||
Purchases of property and equipment awaiting processing for payment, included in Accounts payable | $ 46,427 | $ 31,996 |
Basis of presentation
Basis of presentation | 6 Months Ended |
Jul. 31, 2015 | |
Basis of presentation | |
Basis of presentation | 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 January 30, 2015 which has been 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 January 30, 2015 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 2015 fiscal year is scheduled to be a 52-week accounting period ending on January 29, 2016, and the 2014 fiscal year was a 52-week accounting period that ended on January 30, 2015. 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 July 31, 2015 and results of operations for the 13-week and 26-week accounting periods ended July 31, 2015 and August 1, 2014 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. 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 $(1.0) million and $0.8 million in the respective 13-week periods, and $(0.6) million and $0.9 million in the respective 26-week periods, ended July 31, 2015 and August 1, 2014. In addition, ongoing estimates of inventory shrinkage and initial markups and markdowns are included in the interim cost of goods sold calculation. 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. 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 extended the effective date to annual reporting periods beginning after December 15, 2017. The new guidance allows for companies to use either a full retrospective or a modified retrospective approach in the adoption of this guidance, and the Company is evaluating these transition approaches. The Company expects to adopt this guidance in the first quarter of the fiscal year following its effective date and is currently in the process of evaluating the effect of adoption on its consolidated financial statements. |
Earnings per share
Earnings per share | 6 Months Ended |
Jul. 31, 2015 | |
Earnings per share | |
Earnings per share | 2. Earnings per share Earnings per share is computed as follows (in thousands, except per share data): 13 Weeks Ended July 31, 2015 13 Weeks Ended August 1, 2014 Net Income Shares Per Share Amount Net Income Shares Per Share Amount Basic earnings per share $ $ $ $ Effect of dilutive share-based awards Diluted earnings per share $ $ $ $ 26 Weeks Ended July 31, 2015 26 Weeks Ended August 1, 2014 Net Income Shares Per Share Amount Net Income Shares Per Share Amount Basic earnings per share $ $ $ $ Effect of dilutive share-based awards Diluted earnings per share $ $ $ $ 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 1.0 million and 1.7 million in the 2015 and 2014 13-week periods, respectively, and were 1.1 million and 1.6 million in the 2015 and 2014 26-week periods, respectively. |
Income taxes
Income taxes | 6 Months Ended |
Jul. 31, 2015 | |
Income taxes | |
Income taxes | 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 Internal Revenue Service (“IRS”) has previously examined the Company’s 2009 and earlier federal income tax returns. As a result, the 2009 and earlier tax years are not open for further examination by the IRS. Due to the filing of an amended federal income tax return for the 2010 tax year, the IRS may, to a limited extent, examine the Company’s 2010 income tax filings. The IRS, at its discretion, may also choose to examine the Company’s 2011 through 2014 fiscal year income tax filings. The Company has various state income tax examinations that are currently in progress. Generally, the Company’s 2010 and later tax years remain open for examination by the various state taxing authorities. As of July 31, 2015, the total reserves for uncertain tax benefits, interest expense related to income taxes and potential income tax penalties were $9.4 million, $1.1 million and $0.5 million, respectively, for a total of $11.0 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 reserve for uncertain tax positions may be reduced by approximately $3.0 million in the coming twelve months principally as a result of the effective settlement of uncertain tax positions. As of July 31, 2015, approximately $9.4 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. The effective income tax rates for the 13-week and 26-week periods ended July 31, 2015 were 38.0% and 37.8%, respectively, compared to rates of 38.1% and 38.0%, respectively, for the 13-week and 26-week periods ended August 1, 2014. Both the 13-week and 26-week effective income tax rates decreased primarily due to favorable changes in state income tax laws. |
Current and long-term obligatio
Current and long-term obligations | 6 Months Ended |
Jul. 31, 2015 | |
Current and long-term obligations | |
Current and long-term obligations | 4. Current and long-term obligations The Company’s senior unsecured credit facilities (the “Facilities”) consist of a senior unsecured term loan facility (the “Term Facility”), which had a balance of $875.0 million at July 31, 2015, and an $850.0 million senior unsecured revolving credit facility (the “Revolving Facility”), which provides for the issuance of letters of credit up to $250.0 million. The Term Facility amortizes in quarterly installments of $25.0 million. The Facilities are scheduled to mature on April 11, 2018. Under the Revolving Facility as of July 31, 2015, there were outstanding borrowings of $173.0 million, outstanding standby letters of credit totaling $30.6 million, and borrowing availability of $646.4 million. In addition, the Company had additional outstanding commercial letters of credit totaling $11.5 million outside the Revolving Facility. |
Assets and liabilities measured
Assets and liabilities measured at fair value | 6 Months Ended |
Jul. 31, 2015 | |
Assets and liabilities measured at fair value | |
Assets and liabilities measured at fair value | 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). In connection with accounting standards for fair value measurement, the Company has made an accounting policy election to measure the credit risk of any derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio. When applicable, the Company has determined that the majority of the inputs used to value derivative financial instruments using the income approach fall within Level 2 of the fair value hierarchy. However, the credit valuation adjustments associated with derivatives may utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company and its counterparties. Historically, the credit valuation adjustments have not been significant to the overall valuation of the Company’s derivative positions. The Company does not have any fair value measurements categorized within Level 3 as of July 31, 2015. (in thousands) Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Balance at July 31, 2015 Liabilities: Long-term obligations (a) $ $ $ — $ Deferred compensation (b) — — (a) Reflected at book value in the condensed consolidated balance sheet as Current portion of long-term obligations of $101,335 and Long-term obligations of $2,761,794. (b) Reflected at fair value in the condensed consolidated balance sheet as Accrued expenses and other current liabilities of $5,663 and noncurrent Other liabilities of $18,820. |
Derivatives and hedging activit
Derivatives and hedging activities | 6 Months Ended |
Jul. 31, 2015 | |
Derivative and hedging activities | |
Derivative and hedging activities | 6. Derivatives and hedging activities The Company records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Derivatives may also be designated as hedges of the foreign currency exposure of a net investment in a foreign operation. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. The Company may enter into derivative contracts that are intended to economically hedge a certain portion of its risk, even though hedge accounting does not apply or the Company elects not to apply the hedge accounting standards. Changes in the fair value of such derivatives are recorded directly in earnings. Risk management objective of using derivatives The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of its debt funding and, from time to time, the use of derivative financial instruments. Specifically, the Company may enter into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined primarily by interest rates. In addition, the Company is exposed to certain risks arising from uncertainties of future market values caused by the fluctuation in the prices of commodities. From time to time the Company may enter into derivative financial instruments to protect against future price changes related to these commodity prices. Cash flow hedges of interest rate risk The Company’s objectives when using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate changes. To accomplish this objective, the Company has from time to time used interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. The Company also previously entered into treasury locks that were designated as cash flow hedges of interest rate risk prior to its April 2013 issuance of long-term debt. The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in Accumulated other comprehensive income (loss) (also referred to as “OCI”) and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During the 13-week and 26-week periods ended July 31, 2015 and August 1, 2014, such interest rate swaps were used to hedge the variable cash flows associated with existing variable-rate debt. The ineffective portion of the change in fair value of the interest rate swaps, if any, is recognized directly in earnings. The Company had interest rate swaps with a combined notional value of $875.0 million designated as cash flow hedges of interest rate risk that expired on May 31, 2015. Amounts reported in Accumulated other comprehensive income (loss) related to derivatives were reclassified to interest expense as interest payments were made on the Company’s variable-rate debt. In 2013, the Company recorded a loss on the settlement of treasury locks associated with the issuance of long-term debt which was deferred to OCI and is being amortized as an increase to interest expense over the period of the debt’s maturity. All of the amounts reflected in Accumulated other comprehensive income (loss) in the condensed consolidated balance sheets for the periods presented are related to cash flow hedges. During the 52-week period following July 31, 2015, the Company estimates that approximately $1.3 million will be reclassified as an increase to interest expense related to its previous cash flow hedges. The table below presents the fair value of the Company’s derivative financial instruments as well as their classification in the condensed consolidated balance sheets as of July 31, 2015 and January 30, 2015: (in thousands) July 31, 2015 January 30, 2015 Derivatives Designated as Hedging Instruments Interest rate swaps classified as Accrued expenses and other $ — $ The table below presents the pre-tax effect of the Company’s derivative financial instruments as reflected in the condensed consolidated statements of comprehensive income for the 13-week and 26-week periods ended July 31, 2015 and August 1, 2014: 13 Weeks Ended 26 Weeks Ended (in thousands) July 31, 2015 August 1, 2014 July 31, 2015 August 1, 2014 Derivatives in Cash Flow Hedging Relationships Loss related to effective portion of derivatives recognized in OCI $ $ $ $ Loss related to effective portion of derivatives reclassified from Accumulated OCI to Interest expense $ $ $ $ |
Commitments and contingencies
Commitments and contingencies | 6 Months Ended |
Jul. 31, 2015 | |
Commitments and contingencies | |
Commitments and contingencies | 7. Commitments and contingencies Legal proceedings On October 31, 2014, a lawsuit entitled Ronda Hood v. Dollar General Corporation was filed in the United States District Court for the Eastern District of Louisiana (Case No. 2:14-cv-02512-JTM-DEK) (“Hood”). In the Complaint, the Hood plaintiff seeks to proceed on a nationwide collective basis under the Fair Labor Standards Act (“FLSA”) on behalf of herself and other similarly situated store managers who allegedly were improperly classified as exempt executive employees under the FLSA and seeks to recover overtime pay, liquidated damages, and attorneys’ fees and costs. The Hood plaintiff also asserts individual causes of action for alleged violations of the Americans with Disabilities Act, the Louisiana Human Rights Act, the Family Medical Leave Act, and negligent infliction of emotional distress and seeks damages for those claims including back wages, compensatory damages, liquidated and/or punitive damages, reinstatement and/or front pay, interest, and attorneys’ fees and costs. The Company filed its answer to the complaint on January 16, 2015. The Hood plaintiff did not seek certification of her FLSA claims. Based on the current status of this matter, the Company does not believe that the outcome of this litigation is likely to have a material adverse effect on its consolidated financial statements as a whole. In September 2011, the Chicago Regional Office of the United States Equal Employment Opportunity Commission (“EEOC” or “Commission”) notified the Company of a cause finding related to the Company’s criminal background check policy. The cause finding alleges that the Company’s criminal background check policy, which excludes from employment individuals with certain criminal convictions for specified periods, has a disparate impact on African-American candidates and employees in violation of Title VII of the Civil Rights Act of 1964, as amended (“Title VII”). The Company and the EEOC engaged in the statutorily required conciliation process, and despite the Company’s good faith efforts to resolve the matter, the Commission notified the Company on July 26, 2012 of its view that conciliation had failed. On June 11, 2013, the EEOC filed a lawsuit in the United States District Court for the Northern District of Illinois entitled Equal Opportunity Commission v. Dolgencorp, LLC d/b/a Dollar General (Case No. 1:13-cv-04307) in which the Commission alleges that the Company’s criminal background check policy has a disparate impact on “Black Applicants” in violation of Title VII and seeks to recover monetary damages and injunctive relief on behalf of a class of “Black Applicants.” The Company filed its answer to the complaint on August 9, 2013. The Court has bifurcated the issues of liability and damages for purposes of discovery and trial. Fact discovery related to liability is to be completed on or before February 16, 2016. On July 29, 2014 and May 5, 2015, the court entered orders requiring the Company to produce certain documents, information, and electronic data for the period 2004 to present. The Company believes that its criminal background check process is both lawful and necessary to a safe environment for its employees and customers and the protection of its assets and shareholders’ investments. The Company also does not believe that this matter is amenable to class or similar treatment. However, at this time, it is not possible to predict whether the action will ultimately be permitted to proceed as a class or in a similar fashion or the size of any putative class. Likewise, at this time, it is not possible to estimate the value of the claims asserted, and, therefore, the Company cannot estimate the potential exposure or range of potential loss. If the matter were to proceed successfully as a class or similar action or the Company is unsuccessful in its defense efforts as to the merits of the action, the resolution of this matter could have a material adverse effect on the Company’s consolidated financial statements as a whole. On May 23, 2013, a lawsuit entitled Juan Varela v. Dolgen California and Does 1 through 50 (Case No. RIC 1306158) (“Varela”) was filed in the Superior Court of the State of California for the County of Riverside. In the original complaint, the Varela plaintiff alleges that he and other “key carriers” were not provided with meal and rest periods in violation of California law and seeks to recover alleged unpaid wages, injunctive relief, consequential damages, pre-judgment interest, statutory penalties and attorneys’ fees and costs and seeks to represent a putative class of California “key carriers” as to these claims. The Varela plaintiff also asserts a claim for unfair business practices and seeks to proceed under California’s Private Attorney General Act (the “PAGA”). The Company filed its answer to the complaint on July 1, 2013. On November 4, 2014, the Varela plaintiff filed an amended complaint to add Victoria Lee Dinger Main as a named plaintiff and to add putative class claims on behalf of “key carriers” for alleged inaccurate wage statements and failure to provide appropriate pay upon termination in violation of California law. The Company filed its answer to the amended complaint on December 23, 2014. The parties have been ordered to engage in informal discovery and mediation. On January 15, 2015, a lawsuit entitled Kendra Pleasant v. Dollar General Corporation, Dolgen California, LLC, and Does 1 through 50 (Case No. CIVDS1500651) (“Pleasant”) was filed in the Superior Court of the State of California for the County of San Bernardino in which the plaintiff seeks to proceed under the PAGA for various alleged violations of California’s Labor Code. Specifically, the plaintiff alleges that she and other similarly situated non-exempt California store-level employees were not paid for all time worked, provided meal and rest breaks, reimbursed for necessary work related expenses, and provided with accurate wage statements and seeks to recover unpaid wages, civil and statutory penalties, interest, attorneys’ fees and costs. On March 12, 2015, the Company filed a demurrer asking the court to stay all proceedings in the Pleasant matter pending an issuance of a final judgment in the Varela matter. The court granted the Company’s demurrer and stayed proceedings until resolution of the Varela matter. Subsequently, the Pleasant plaintiff moved to transfer this matter to the Superior Court of the State of California for the County of Riverside where the Varela matter is pending, which the Company opposed. The court denied the Pleasant plaintiff’s motion to transfer. On February 20, 2015, a lawsuit entitled Julie Sullivan v. Dolgen California and Does 1 through 100 (Case No. RG 15759417) (“Sullivan”) was filed in the Superior Court of the State of California for the County of Alameda in which the plaintiff alleges that she and other similarly situated Dollar General Market store managers in the State of California were improperly classified as exempt employees and were not provided with meal and rest breaks and accurate wage statements in violation of California law. The Sullivan plaintiff also alleges that she and other California store employees were not provided with printed wage statements, purportedly in violation of California law. The plaintiff seeks to recover unpaid wages, including overtime pay, civil and statutory penalties, interest, injunctive relief, restitution, and attorneys’ fees and costs. On April 8, 2015, the Company removed this matter to the United States District Court for the Northern District of California (Case No. 3:15-cv-01617-JD) and filed its answer on the same date. On April 29, 2015, the Sullivan plaintiff amended her complaint to add a claim under PAGA. The Company’s response to the amended complaint was filed on May 14, 2015. The Company believes that its policies and practices comply with California law and that the Varela, Pleasant , and Sullivan actions are not appropriate for class or similar treatment. The Company intends to vigorously defend these actions; however, at this time, it is not possible to predict whether the Varela, Pleasant , or Sullivan action ultimately will be permitted to proceed as a class, and no assurances can be given that the Company will be successful in its defense of these actions on the merits or otherwise. Similarly, at this time the Company cannot estimate either the size of any potential class or the value of the claims asserted in the Varela , Pleasant , or Sullivan action. 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 any of these actions could have a material adverse effect on the Company’s consolidated financial statements as a whole. From time to time, the Company is a party to various other legal actions involving claims incidental to the conduct of its business, including actions by employees, consumers, suppliers, government agencies, or others through private actions, class actions, administrative proceedings, regulatory actions or other litigation, including without limitation under federal and state employment laws and wage and hour laws. The Company believes, based upon information currently available, that such other litigation and claims, 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 involves 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 lawsuits, 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. |
Segment reporting
Segment reporting | 6 Months Ended |
Jul. 31, 2015 | |
Segment reporting | |
Segment reporting | 8. Segment reporting The Company manages its business on the basis of one reportable operating segment. As of July 31, 2015, all of the Company’s operations were located within the United States with the exception of a Hong Kong subsidiary and a liaison office in India, which collectively are not material 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 26 Weeks Ended (in thousands) July 31, 2015 August 1, 2014 July 31, 2015 August 1, 2014 Classes of similar products: Consumables $ $ $ $ Seasonal Home products Apparel Net sales $ $ $ $ |
Common stock transactions
Common stock transactions | 6 Months Ended |
Jul. 31, 2015 | |
Common stock transactions | |
Common stock transactions | 9. Common stock transactions On August 29, 2012, the Company’s Board of Directors authorized a common stock repurchase program, which has been increased on several occasions, most recently on March 10, 2015. As of July 31, 2015, a cumulative total of $3.0 billion had been authorized under the program and $489.1 million 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 under the Facilities discussed in further detail in Note 4. Pursuant to its common stock repurchase program, during the 26-week periods ended July 31, 2015, and August 1, 2014, the Company repurchased in the open market approximately 9.7 million shares of its common stock at a total cost of $734.3 million and approximately 14.1 million shares at a total cost of $800.1 million, respectively. The Company paid quarterly cash dividends of $0.22 per share during each of the first and second quarters of 2015. On August 26, 2015, the Company’s Board of Directors approved a quarterly cash dividend of $0.22 per share, which is payable on September 30, 2015 to shareholders of record as of September 16, 2015. The declaration of future cash dividends is subject to the 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. |
Earnings per share (Tables)
Earnings per share (Tables) | 6 Months Ended |
Jul. 31, 2015 | |
Earnings per share | |
Schedule of computation of earnings per share | Earnings per share is computed as follows (in thousands, except per share data): 13 Weeks Ended July 31, 2015 13 Weeks Ended August 1, 2014 Net Income Shares Per Share Amount Net Income Shares Per Share Amount Basic earnings per share $ $ $ $ Effect of dilutive share-based awards Diluted earnings per share $ $ $ $ 26 Weeks Ended July 31, 2015 26 Weeks Ended August 1, 2014 Net Income Shares Per Share Amount Net Income Shares Per Share Amount Basic earnings per share $ $ $ $ Effect of dilutive share-based awards Diluted earnings per share $ $ $ $ |
Assets and liabilities measur17
Assets and liabilities measured at fair value (Tables) | 6 Months Ended |
Jul. 31, 2015 | |
Assets and liabilities measured at fair value | |
Schedule of assets and liabilities measured at fair value | (in thousands) Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Balance at July 31, 2015 Liabilities: Long-term obligations (a) $ $ $ — $ Deferred compensation (b) — — (a) Reflected at book value in the condensed consolidated balance sheet as Current portion of long-term obligations of $101,335 and Long-term obligations of $2,761,794. (b) Reflected at fair value in the condensed consolidated balance sheet as Accrued expenses and other current liabilities of $5,663 and noncurrent Other liabilities of $18,820. |
Derivatives and hedging activ18
Derivatives and hedging activities (Tables) | 6 Months Ended |
Jul. 31, 2015 | |
Derivative and hedging activities | |
Schedule of fair value of derivative financial instruments as well as their classification on the condensed consolidated balance sheets | (in thousands) July 31, 2015 January 30, 2015 Derivatives Designated as Hedging Instruments Interest rate swaps classified as Accrued expenses and other $ — $ |
Schedule of the pre-tax effect of derivative financial instruments in the condensed consolidated statements of comprehensive income | 13 Weeks Ended 26 Weeks Ended (in thousands) July 31, 2015 August 1, 2014 July 31, 2015 August 1, 2014 Derivatives in Cash Flow Hedging Relationships Loss related to effective portion of derivatives recognized in OCI $ $ $ $ Loss related to effective portion of derivatives reclassified from Accumulated OCI to Interest expense $ $ $ $ |
Segment reporting (Tables)
Segment reporting (Tables) | 6 Months Ended |
Jul. 31, 2015 | |
Segment reporting | |
Schedule of net sales grouped by classes of similar products | 13 Weeks Ended 26 Weeks Ended (in thousands) July 31, 2015 August 1, 2014 July 31, 2015 August 1, 2014 Classes of similar products: Consumables $ $ $ $ Seasonal Home products Apparel Net sales $ $ $ $ |
Basis of presentation and accou
Basis of presentation and accounting policies (Details) $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | |||
Jul. 31, 2015USD ($) | Aug. 01, 2014USD ($) | Jul. 31, 2015USD ($) | Aug. 01, 2014USD ($) | Jan. 29, 2016period | Jan. 30, 2015period | |
Basis of presentation | ||||||
Fiscal year, number of weeks | 52 | 52 | ||||
Merchandise inventories | ||||||
LIFO provision (benefit) | $ | $ (1) | $ 0.8 | $ (0.6) | $ 0.9 |
Earnings per share (Details)
Earnings per share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jul. 31, 2015 | Aug. 01, 2014 | Jul. 31, 2015 | Aug. 01, 2014 | |
Net Income | ||||
Basic Earnings | $ 282,349 | $ 251,260 | $ 535,584 | $ 473,658 |
Diluted Earnings | $ 282,349 | $ 251,260 | $ 535,584 | $ 473,658 |
Shares | ||||
Shares outstanding, basic | 295,679 | 303,015 | 298,440 | 306,173 |
Effect of dilutive share-based awards | 849 | 873 | 868 | 918 |
Shares outstanding, diluted | 296,528 | 303,888 | 299,308 | 307,091 |
Per Share Amount | ||||
Basic earnings per share (in dollars per share) | $ 0.95 | $ 0.83 | $ 1.79 | $ 1.55 |
Diluted earnings per share (in dollars per share) | $ 0.95 | $ 0.83 | $ 1.79 | $ 1.54 |
Share-based awards outstanding excluded from computation of diluted earnings per share | 1,000 | 1,700 | 1,100 | 1,600 |
Income taxes (Details)
Income taxes (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jul. 31, 2015 | Aug. 01, 2014 | Jul. 31, 2015 | Aug. 01, 2014 | |
Income taxes | ||||
Reserves for uncertain tax benefits | $ 9.4 | $ 9.4 | ||
Interest accrued related to uncertain tax benefits | 1.1 | 1.1 | ||
Potential penalties accrued related to uncertain tax benefits | 0.5 | 0.5 | ||
Aggregate reserve for uncertain tax positions including interest and penalties | 11 | 11 | ||
Reserves for uncertain tax benefits included in noncurrent Other liabilities | 11 | 11 | ||
Reserve for uncertain tax positions for which a reduction is reasonably possible in the next twelve months | 3 | 3 | ||
Reserve for uncertain tax positions that would impact effective tax rate if recognized | $ 9.4 | $ 9.4 | ||
Effective income tax rates (as a percent) | 38.00% | 38.10% | 37.80% | 38.00% |
Current and long-term obligat23
Current and long-term obligations (Details) - Jul. 31, 2015 - USD ($) $ in Millions | Total |
Senior unsecured credit facility, maturity April 11, 2018, Term Facility | |
Current and long-term obligations | |
Amount of quarterly installment | $ 25 |
Current and long-term obligations | 875 |
Senior unsecured credit facility, maturity April 11, 2018, Revolving Facility | |
Current and long-term obligations | |
Maximum financing under credit agreements | 850 |
Borrowing availability under credit facility | 646.4 |
Amount of outstanding borrowings | 173 |
Senior unsecured credit facility, maturity April 11, 2018, Revolving Facility | Letters of credit | |
Current and long-term obligations | |
Maximum financing under credit agreements | 250 |
Letters of credit outstanding | 30.6 |
Letter of Credit Outside of Revolving Facility | Letters of credit | |
Current and long-term obligations | |
Letters of credit outstanding | $ 11.5 |
Assets and liabilities measur24
Assets and liabilities measured at fair value (Details) - USD ($) $ in Thousands | Jul. 31, 2015 | Jan. 30, 2015 |
Accrued expenses and other current liabilities | ||
Liabilities: | ||
Derivative financial instruments | $ 1,173 | |
Reported amount | Current portion of long-term debt obligations | ||
Liabilities: | ||
Long-term obligations | $ 101,335 | |
Reported amount | Long-term obligations | ||
Liabilities: | ||
Long-term obligations | 2,761,794 | |
Reported amount | Accrued expenses and other current liabilities | ||
Liabilities: | ||
Deferred compensation | 5,663 | |
Reported amount | Noncurrent Other liabilities | ||
Liabilities: | ||
Deferred compensation | 18,820 | |
Fair value measurements on recurring basis | Balance at the end of the period | ||
Liabilities: | ||
Long-term obligations | 2,836,075 | |
Deferred compensation | 24,483 | |
Fair value measurements on recurring basis | Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1) | ||
Liabilities: | ||
Long-term obligations | 1,775,824 | |
Deferred compensation | 24,483 | |
Fair value measurements on recurring basis | Significant Other Observable Inputs (Level 2) | ||
Liabilities: | ||
Long-term obligations | $ 1,060,251 |
Derivatives and hedging activ25
Derivatives and hedging activities (Details) - USD ($) $ in Millions | Jul. 31, 2015 | May. 31, 2015 |
Cash flow hedges of interest rate risk | ||
Estimated amount to be reclassified during the next 52 week period | $ 1.3 | |
Interest rate swaps | Cash flow hedge | ||
Cash flow hedges of interest rate risk | ||
Combined notional value | $ 875 |
Derivatives and hedging activ26
Derivatives and hedging activities (Details 2) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jul. 31, 2015 | Aug. 01, 2014 | Jul. 31, 2015 | Aug. 01, 2014 | Jan. 30, 2015 | |
Pre-tax effect of derivative financial instruments on the condensed consolidated statements of comprehensive income | |||||
Loss related to effective portion of derivatives recognized in OCI | $ 1 | $ 139 | $ 3 | $ 755 | |
Loss related to effective portion of derivatives reclassified from Accumulated OCI to Interest expense | $ 593 | $ 1,294 | $ 1,834 | $ 2,576 | |
Accrued expenses and other current liabilities | |||||
Derivatives designated as hedging instruments | |||||
Derivative financial instruments | $ 1,173 |
Segment reporting (Details)
Segment reporting (Details) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jul. 31, 2015USD ($)segment | Aug. 01, 2014USD ($)segment | Jul. 31, 2015USD ($)segment | Aug. 01, 2014USD ($)segment | |
Segment reporting | ||||
Number of reportable segments | segment | 1 | 1 | 1 | 1 |
Net sales data for classes of similar products | ||||
Net sales | $ 5,095,904 | $ 4,724,039 | $ 10,014,576 | $ 9,246,120 |
Consumables | ||||
Net sales data for classes of similar products | ||||
Net sales | 3,867,635 | 3,576,189 | 7,621,613 | 7,021,654 |
Seasonal | ||||
Net sales data for classes of similar products | ||||
Net sales | 642,525 | 593,596 | 1,228,818 | 1,135,028 |
Home products | ||||
Net sales data for classes of similar products | ||||
Net sales | 304,305 | 285,428 | 607,329 | 569,025 |
Apparel | ||||
Net sales data for classes of similar products | ||||
Net sales | $ 281,439 | $ 268,826 | $ 556,816 | $ 520,413 |
Common stock transactions (Deta
Common stock transactions (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | Aug. 26, 2015 | Jul. 31, 2015 | May. 01, 2015 | Jul. 31, 2015 | Aug. 01, 2014 |
Common stock transactions | |||||
Cash dividend paid (in dollars per share) | $ 0.22 | $ 0.22 | $ 0.44 | ||
Cash dividend declared (in dollars per share) | $ 0.22 | ||||
Common Stock | Pursuant to Authorized Repurchase Program | |||||
Common stock transactions | |||||
Common stock repurchase authorization | $ 3,000 | $ 3,000 | |||
Remaining authorization available under the common stock repurchase program | $ 489.1 | $ 489.1 | |||
Shares acquired under share repurchase program | 9.7 | 14.1 | |||
Aggregate purchase price | $ 734.3 | $ 800.1 |