Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Oct. 28, 2016 | Nov. 28, 2016 | |
Document and Entity Information | ||
Entity Registrant Name | DOLLAR GENERAL CORP | |
Entity Central Index Key | 29,534 | |
Document Type | 10-Q | |
Document Period End Date | Oct. 28, 2016 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --02-03 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 276,264,260 | |
Document Fiscal Year Focus | 2,016 | |
Document Fiscal Period Focus | Q3 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Oct. 28, 2016 | Jan. 29, 2016 |
Current assets: | ||
Cash and cash equivalents | $ 200,236 | $ 157,947 |
Merchandise inventories | 3,488,247 | 3,074,153 |
Income taxes receivable | 54,586 | 6,843 |
Prepaid expenses and other current assets | 225,443 | 193,467 |
Total current assets | 3,968,512 | 3,432,410 |
Net property and equipment | 2,388,463 | 2,264,062 |
Goodwill | 4,338,589 | 4,338,589 |
Other intangible assets, net | 1,200,734 | 1,200,994 |
Other assets, net | 20,778 | 21,830 |
Total assets | 11,917,076 | 11,257,885 |
Current liabilities: | ||
Current portion of long-term obligations | 501,480 | 1,379 |
Accounts payable | 1,948,111 | 1,494,225 |
Accrued expenses and other | 504,427 | 467,122 |
Income taxes payable | 5,721 | 32,870 |
Total current liabilities | 2,959,739 | 1,995,596 |
Long-term obligations | 2,673,210 | 2,969,175 |
Deferred income taxes | 637,135 | 639,955 |
Other liabilities | 285,140 | 275,283 |
Commitments and contingencies | ||
Shareholders' equity: | ||
Preferred stock | ||
Common stock | 244,457 | 250,855 |
Additional paid-in capital | 3,144,632 | 3,107,283 |
Retained earnings | 1,977,969 | 2,025,545 |
Accumulated other comprehensive loss | (5,206) | (5,807) |
Total shareholders' equity | 5,361,852 | 5,377,876 |
Total liabilities and shareholders' equity | $ 11,917,076 | $ 11,257,885 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Oct. 28, 2016 | Oct. 30, 2015 | Oct. 28, 2016 | Oct. 30, 2015 | |
CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||||
Net sales | $ 5,320,029 | $ 5,067,048 | $ 15,977,352 | $ 15,081,624 |
Cost of goods sold | 3,732,519 | 3,530,086 | 11,095,461 | 10,457,802 |
Gross profit | 1,587,510 | 1,536,962 | 4,881,891 | 4,623,822 |
Selling, general and administrative expenses | 1,194,519 | 1,113,103 | 3,499,060 | 3,295,957 |
Operating profit | 392,991 | 423,859 | 1,382,831 | 1,327,865 |
Interest expense | 23,877 | 21,394 | 72,310 | 63,669 |
Other (income) expense | 326 | 326 | ||
Income before income taxes | 369,114 | 402,139 | 1,310,521 | 1,263,870 |
Income tax expense | 133,799 | 148,818 | 473,564 | 474,965 |
Net income | $ 235,315 | $ 253,321 | $ 836,957 | $ 788,905 |
Earnings per share: | ||||
Basic (in dollars per share) | $ 0.84 | $ 0.87 | $ 2.96 | $ 2.66 |
Diluted (in dollars per share) | $ 0.84 | $ 0.86 | $ 2.95 | $ 2.65 |
Weighted average shares outstanding: | ||||
Basic (in shares) | 280,441 | 292,037 | 283,152 | 296,307 |
Diluted (in shares) | 281,283 | 292,904 | 284,126 | 297,174 |
Dividends per share (in dollars per share) | $ 0.25 | $ 0.22 | $ 0.75 | $ 0.66 |
CONDENSED CONSOLIDATED STATEME4
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Oct. 28, 2016 | Oct. 30, 2015 | Oct. 28, 2016 | Oct. 30, 2015 | |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||||
Net income | $ 235,315 | $ 253,321 | $ 836,957 | $ 788,905 |
Unrealized net gain on hedged transactions, net of related income tax expense of $129, $128, $387, and $847, respectively | 200 | 201 | 601 | 1,314 |
Comprehensive income | $ 235,515 | $ 253,522 | $ 837,558 | $ 790,219 |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Oct. 28, 2016 | Oct. 30, 2015 | Oct. 28, 2016 | Oct. 30, 2015 | |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||||
Unrealized net gain on hedged transactions, income tax expense | $ 129 | $ 128 | $ 387 | $ 847 |
CONDENSED CONSOLIDATED STATEME6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 9 Months Ended | |
Oct. 28, 2016 | Oct. 30, 2015 | |
Cash flows from operating activities: | ||
Net income | $ 836,957 | $ 788,905 |
Adjustments to reconcile net income to net cash from operating activities: | ||
Depreciation and amortization | 282,386 | 263,287 |
Deferred income taxes | (3,207) | (59,026) |
Loss on debt retirement, net | 326 | |
Noncash share-based compensation | 27,676 | 28,890 |
Other noncash (gains) and losses | 1,935 | 7,130 |
Change in operating assets and liabilities: | ||
Merchandise inventories | (405,456) | (317,273) |
Prepaid expenses and other current assets | (30,471) | (24,242) |
Accounts payable | 439,259 | 75,880 |
Accrued expenses and other liabilities | 50,683 | 58,701 |
Income taxes | (74,892) | (12,246) |
Other | (456) | (1,220) |
Net cash provided by (used in) operating activities | 1,124,414 | 809,112 |
Cash flows from investing activities: | ||
Purchases of property and equipment | (405,899) | (386,886) |
Proceeds from sales of property and equipment | 4,333 | 813 |
Net cash provided by (used in) investing activities | (401,566) | (386,073) |
Cash flows from financing activities: | ||
Issuance of long-term obligations | 499,220 | |
Repayments of long-term obligations | (1,302) | (502,120) |
Net increase in commercial paper outstanding | 453,000 | |
Borrowings under revolving credit facilities | 1,584,000 | 1,302,100 |
Repayments of borrowings under revolving credit facilities | (1,835,000) | (914,100) |
Debt issuance costs | (7,011) | |
Repurchases of common stock | (679,416) | (1,009,411) |
Payments of cash dividends | (212,249) | (195,169) |
Other equity and related transactions | 10,408 | 6,143 |
Net cash provided by (used in) financing activities | (680,559) | (820,348) |
Net increase (decrease) in cash and cash equivalents | 42,289 | (397,309) |
Cash and cash equivalents, beginning of period | 157,947 | 579,823 |
Cash and cash equivalents, end of period | 200,236 | 182,514 |
Supplemental schedule of non-cash investing and financing activities: | ||
Purchases of property and equipment awaiting processing for payment, included in Accounts payable | $ 46,647 | $ 37,659 |
Basis of presentation
Basis of presentation | 9 Months Ended |
Oct. 28, 2016 | |
Basis of presentation | |
Basis of presentation | 1. 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 29, 2016 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 29, 2016 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 2016 fiscal year is scheduled to be a 53-week accounting period ending on February 3, 2017, and the 2015 fiscal year was a 52-week accounting period that ended on January 29, 2016. 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 October 28, 2016 and results of operations for the 13-week and 39-week accounting periods ended October 28, 2016 and October 30, 2015 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 (benefit) of $(3.8) million and $(1.7) million in the respective 13-week periods, and $(8.1) million and $(2.3) million in the respective 39-week periods, ended October 28, 2016 and October 30, 2015. 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 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 for companies to use either a full retrospective or a modified retrospective approach in the adoption of this guidance. The Company is currently evaluating these transition approaches, as well as the potential timing of adoption and the effect of adoption on its consolidated financial statements. 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. 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. The Company is currently assessing the impact that adoption of this guidance will have on its consolidated financial statements and is anticipating a material impact because the Company is party to a significant number of lease contracts. In March 2016, the FASB issued amendments to existing guidance related to accounting for employee share-based payment affecting the income tax consequences of awards, classification of awards as equity or liabilities, and classification on the statement of cash flows. This guidance is effective for public business entities for fiscal years, and interim periods within those years, beginning after December 15, 2016, and early adoption is permitted. The Company adopted this guidance in the first quarter of 2016. The Company has elected to continue estimating forfeitures of share-based awards. The amendments requiring recognition of excess tax benefits and tax deficiencies in the income statement were applied prospectively resulting in a benefit for the 39 weeks ended October 28, 2016 of approximately $10.9 million, or $0.04 per diluted share. The Company has elected to apply the amendments related to the presentation of excess tax benefits on the statement of cash flows using a retrospective transition method, and as a result, $28.6 million of excess tax benefits related to share-based awards which were previously classified as cash flows from financing activities for the 39 weeks ended October 30, 2015 have been reclassified as cash flows from operating activities. 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 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. The amendments should be 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 currently assessing the impact that adoption of this guidance will have on its consolidated financial statements, but expects such adoption will result in an increase in deferred income tax liabilities and a decrease in retained earnings. |
Earnings per share
Earnings per share | 9 Months Ended |
Oct. 28, 2016 | |
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 October 28, 2016 13 Weeks Ended October 30, 2015 Weighted Weighted Net Average Per Share Net Average Per Share Income Shares Amount Income Shares Amount Basic earnings per share $ $ $ $ Effect of dilutive share-based awards Diluted earnings per share $ $ $ $ 39 Weeks Ended October 28, 2016 39 Weeks Ended October 30, 2015 Weighted Weighted Net Average Per Share Net Average Per Share Income Shares Amount Income Shares 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 1.9 million and 1.6 million in the 2016 and 2015 13-week periods, respectively, and were 1.6 million and 1.2 million in the 2016 and 2015 39-week periods, respectively. |
Income taxes
Income taxes | 9 Months Ended |
Oct. 28, 2016 | |
Income taxes | |
Income taxes | 3. 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 2011 and earlier tax years are not open for further examination by the Internal Revenue Service (“IRS”). Due to the filing of an amended federal income tax return for the 2012 tax year, the IRS may, to a limited extent, examine the Company’s 2012 income tax filings. The IRS, at its discretion, may choose to examine the Company’s 2013 through 2015 fiscal year income tax filings. The Company has various state income tax examinations that are currently in progress. Generally, the Company’s 2012 and later tax years remain open for examination by the various state taxing authorities. As of October 28, 2016, the total reserves for uncertain tax benefits, interest expense related to income taxes and potential income tax penalties were $6.3 million, $1.0 million and $0.9 million, respectively, for a total of $8.2 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 $5.2 million in the coming twelve months principally as a result of the effective settlement of uncertain tax positions. As of October 28, 2016, approximately $6.3 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 39-week periods ended October 28, 2016 were 36.2% and 36.1%, respectively, compared to rates of 37.0% and 37.6%, respectively, for the 13-week and 39-week periods ended October 30, 2015. The tax rate for the 2016 13-week period was lower than for the comparable 2015 period primarily due to the retroactive enactment in 2015 of federal jobs tax credits (principally the Work Opportunity Tax Credit or “WOTC”) for employees hired after December 31, 2014. The tax rate for the 2016 39-week period was lower than for the comparable 2015 period primarily due to the retroactive enactment of the WOTC as well as the 2016 adoption of amendments to accounting guidance for share-based payment discussed in Note 1. While the Company eventually did benefit from the WOTC associated with employees hired in the 13-week and 39-week periods ended October 30, 2015, the benefit could not be recognized until the federal laws authorizing the credits were retroactively reenacted in December 2015. |
Current and long-term obligatio
Current and long-term obligations | 9 Months Ended |
Oct. 28, 2016 | |
Current and long-term obligations | |
Current and long-term obligations | 4. The Company’s senior unsecured credit facilities (the “Facilities”) consist of a $425.0 million senior unsecured term loan facility (the “Term Facility”) and a $1.0 billion senior unsecured revolving credit facility (the “Revolving Facility”) which provides for the issuance of letters of credit up to $175.0 million. The Facilities are scheduled to mature on October 20, 2020. As of October 28, 2016, the entire balance of the Term Facility was outstanding, and under the Revolving Facility, the Company had no outstanding borrowings, outstanding letters of credit of $15.5 million, and borrowing availability of $984.5 million that, due to reserved borrowing availability related to the commercial paper program described below, could contribute incremental liquidity of $531.5 million. In addition, as of October 28, 2016 the Company had outstanding letters of credit of $33.6 million which were issued pursuant to separate agreements. On August 1, 2016, the Company established a commercial paper program under which the Company may issue unsecured commercial paper notes (the “CP Notes”). 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 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 has agreed 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 October 28, 2016, the Company had outstanding CP notes of $453.0 million classified as long-term obligations on the consolidated balance sheet due to its intent and ability to refinance these obligations as long-term debt. The Company also has multiple series of senior notes (collectively, the “Senior Notes”) outstanding with varying maturity dates through 2025 which had an aggregate book value of $2.3 billion at October 28, 2016 and January 29, 2016. As of October 28, 2016, the Company’s $500.0 million 4.125% Senior Notes due July 15, 2017 are classified as Current portion of long-term obligations. |
Assets and liabilities measured
Assets and liabilities measured at fair value | 9 Months Ended |
Oct. 28, 2016 | |
Assets and liabilities measured at fair value | |
Assets and liabilities measured at fair value | 5. 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 October 28, 2016. The following table presents the Company’s assets and liabilities disclosed at fair value as of October 28, 2016, aggregated by the level in the fair value hierarchy within which those measurements are classified. Quoted Prices in Active Markets Significant for Identical Other Significant Assets and Observable Unobservable Balance at Liabilities Inputs Inputs October 28, (in thousands) (Level 1) (Level 2) (Level 3) 2016 Liabilities: Long-term obligations (a) $ $ $ — $ Deferred compensation (b) — — (a) Included in the condensed consolidated balance sheet at book value as Current portion of long-term obligations of $501,480 and Long-term obligations of $2,673,210. (b) Reflected at fair value in the condensed consolidated balance sheet as Accrued expenses and other current liabilities of $5,210 and noncurrent Other liabilities of $17,490. |
Commitments and contingencies
Commitments and contingencies | 9 Months Ended |
Oct. 28, 2016 | |
Commitments and contingencies | |
Commitments and contingencies | 6. Legal proceedings 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 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 April 17, 2017. In response to various discovery motions, the court has entered orders requiring the Company’s production of documents, information and electronic data for the period 2004 to present. Currently pending is the EEOC’s Motion for Partial Summary Judgment relating to two of the Company’s defenses challenging the sufficiency of the Commission’s conciliation efforts and the scope of its investigation. 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 no assurances can be given that the Company will be successful in its defense of this action on the merits or otherwise. For these reasons, 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 (“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”). 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 answers to both the complaint and amended complaint. The court recently vacated the deadlines for the filing of motions related to class certification in light of other discovery matters pending before the court. No new deadlines have been set. On January 15, 2015, a lawsuit entitled Kendra Pleasant v. Dollar General Corporation, Dolgen California, LLC, and Does 1 through 50 (“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. The court has stayed proceedings in this matter until resolution of the Varela matter. On February 20, 2015, a lawsuit entitled Julie Sullivan v. Dolgen California and Does 1 through 100 (“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 and filed its answer on the same date. On April 29, 2015, the Sullivan plaintiff amended her complaint to add a claim under the PAGA. The Company’s response to the amended complaint was filed on May 14, 2015. The plaintiff’s motion for class certification was filed in March 2016. Plaintiff subsequently conceded that her exemption claim is not amenable to class certification but continued to pursue her individual misclassification claim and class certification of her wage statement claim. On June 14, 2016, the parties reached a preliminary agreement to resolve this matter for an amount not material to the Company’s consolidated financial statements as a whole, which has been submitted to, and received preliminary approval from, the court. The final fairness hearing is scheduled for February 23, 2017. At this time, although probable, it is not certain that the court will grant final approval to the settlement. If the court does not approve the settlement and the case proceeds, it is not possible to predict whether Sullivan ultimately will be permitted to proceed as a class action with respect to the wage statement claim, and no assurances can be given that the Company will be successful in its defense on the merits or otherwise. On July 8, 2016, a lawsuit entitled Eric Farley and Dane Rinaldi v. Dolgen California, LLC (“Farley”) was filed in the Superior Court of the State of California for the County of San Joaquin. The Farley plaintiffs allege they and other similarly situated “key carriers” in California were not provided with meal and rest periods, accurate wage statements, and appropriate pay upon termination in violation of California law. The Farley plaintiffs also assert a claim for unfair business practices and seek to recover alleged unpaid wages, injunctive relief, consequential damages, pre-judgment interest, statutory penalties and attorneys’ fees and costs. On September 15, 2016, the Farley plaintiffs filed an amended complaint seeking to recover penalties under the PAGA. On October 19, 2016, the Company removed the matter to the United States District Court for the Eastern District of California. Currently pending is the Company’s motion to dismiss and to compel arbitration. The Company believes that its policies and practices comply with California law and that the Varela , Pleasant , Sullivan , and Farley 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 , Sullivan or Farley 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 , Sullivan or Farley 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. On August 2, 2016, a lawsuit entitled Matthew Debinder v. Dolgencorp, LLC (“Debinder”) was filed in the Circuit Court of the Seventeenth Judicial Circuit in and for Broward County, Florida. The Debinder plaintiff alleges on behalf of himself and a putative class of “applicants” that certain of the Company’s background check procedures violate the Fair Credit Reporting Act (“FCRA”). The parties reached an agreement in October 2016 to resolve this matter for an amount that is not material to the Company’s consolidated financial statements as a whole. In December 2015 and February, March, May and June 2016, the Company was notified of several lawsuits in which the plaintiffs allege violation of state consumer protection laws relating to the labeling, marketing and sale of Dollar General private-label motor oil. Each of the lawsuits 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”). As a result of the JPML’s order, the following cases have been transferred to, and are currently part of, the Motor Oil MDL: Bradford Barfoot and Leonard Karpeichik v. Dolgencorp, LLC (filed in the Southern District of Florida on December 18, 2015) (“Barfoot”); William Flinn v. Dolgencorp, LLC (filed in the District Court for New Jersey on December 17, 2015) (“Flinn”); John Foppe v. Dollar General Corporation and Dolgencorp, LLC (filed in the Eastern District of Kentucky on February 10, 2016) (“Foppe”); Miriam Fruhling v. Dollar General Corporation and Dolgencorp, LLC (filed in the Southern District of Ohio on February 10, 2016) (“Fruhling”); Kevin Gadson v. Dolgencorp, LLC (filed in the Southern District of New York on February 8, 2016) (“Gadson”); Bruce Gooel v. Dolgencorp, LLC (filed in the Eastern District of Michigan on February 8, 2016) (“Gooel”); Janine Harvey v. Dollar General Corporation and Dolgencorp, LLC (filed in the District Court for Nebraska on February 10, 2016) (“Harvey”); Chuck Hill v. Dolgencorp, LLC (filed in the United States District Court for the District of Vermont on February 8, 2016) (“Hill”); John J. McCormick, III v. Dolgencorp, LLC (filed in the District Court of Maryland on December 23, 2015) (“McCormick”); Nicholas Meyer v. Dollar General Corporation and DG Retail, LLC (filed in the District of Kansas on February 9, 2016) (“Meyer”); Robert Oren v. Dollar General Corporation and Dolgencorp, LLC (filed in the Western District of Missouri on February 8, 2016) (“Oren”); Brandon Raab v. Dolgencorp, LLC and Dollar General Corporation (filed in the Western District of North Carolina on July 15, 2016); Scott Sheehy v. Dollar General Corporation and DG Retail, LLC (filed in the District Court for Minnesota on February 9, 2016) (“Sheehy”); Will Sisemore v. Dolgencorp, LLC (filed in the Northern District of Oklahoma on December 21, 2015) (“Sisemore”); Gerardo Solis v. Dollar General Corporation and DG Retail, LLC (filed in the Northern District of Illinois on February 12, 2016) (“Solis”); James Taschner v. Dollar General Corporation and Dolgencorp, LLC (filed in the Eastern District of Missouri on March 15, 2016) (“Taschner”); Roberto Vega v. Dolgencorp, LLC (filed in the Central District of California on February 8, 2016) (“Vega”); Matthew Wait v. Dollar General Corporation and Dolgencorp, LLC (filed in the Western District of Arkansas on February 16, 2016) (“Wait”); and Jason Wood and Roger Barrows v. Dollar General Corporation and Dolgencorp, LLC (filed in the Northern District of New York on May 9, 2016) (“Wood”). On August 29, 2016, as directed by the court, the plaintiffs in the Motor Oil MDL filed a consolidated amended complaint, in which they seek to certify two nationwide classes and 16 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 Company’s responsive pleading to the consolidated amended complaint is due to be filed on or before December 5, 2016. The Company believes that the labeling, marketing and sale of its private-label motor oil complies with applicable federal and state requirements and is not misleading. The Company further believes that these matters 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 any of these cases 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, and no assurances can be given that the Company will be successful in its defense of these actions 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 any of these actions could have a material adverse effect on the Company’s consolidated financial statements as a whole. In February 2014, certain California District Attorneys’ Offices (“California DAs”), representing California’s county environmental authorities, informed the Company that they were investigating the Company’s hazardous waste handling and disposal practices in certain of its California stores and its California distribution center. On September 22, 2016, the California DAs provided a settlement demand to the Company that included a proposed civil penalty and certain injunctive relief. The Company does not believe that the resolution of this matter is likely to have a material adverse effect on the Company's consolidated financial statements as a whole. Nonetheless, SEC regulations require disclosures of certain environmental matters when a governmental authority is a party to the proceeding unless the Company reasonably believes the proceeding will result in no monetary sanctions or in monetary sanctions, exclusive of interest and costs, of less than $100,000. As noted above, it now appears that this matter is likely to result in monetary sanctions, which the Company expects to exceed $100,000. 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 | 9 Months Ended |
Oct. 28, 2016 | |
Segment reporting | |
Segment reporting | 7. The Company manages its business on the basis of one reportable operating segment. As of October 28, 2016, 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 October 28, October 30, October 28, October 30, (in thousands) 2016 2015 2016 2015 Classes of similar products: Consumables $ $ $ $ Seasonal Home products Apparel Net sales $ $ $ $ |
Common stock transactions
Common stock transactions | 9 Months Ended |
Oct. 28, 2016 | |
Common stock transactions | |
Common stock transactions | 8. 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, the Company’s Board of Directors authorized a $1.0 billion increase to the existing common stock repurchase program. As of October 28, 2016, a cumulative total of $5.0 billion had been authorized under the program since its inception and approximately $1.2 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 and issuance of CP Notes. Pursuant to its common stock repurchase program, during the 39-week periods ended October 28, 2016, and October 30, 2015, the Company repurchased in the open market approximately 8.2 million shares of its common stock at a total cost of $679.4 million and approximately 13.4 million shares at a total cost of $1.0 billion, respectively. The Company paid quarterly cash dividends of $0.25 per share during each of the first three quarters of 2016. On November 30, 2016, the Company’s Board of Directors approved a quarterly cash dividend of $0.25 per share payable on January 4, 2017 to shareholders of record as of December 21, 2016. 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. |
Acquisition of facilities
Acquisition of facilities | 9 Months Ended |
Oct. 28, 2016 | |
Acquisition of facilities | |
Acquisition of facilities | 9. Acquisition of facilities In July and August of 2016, the Company acquired 42 former Walmart Express store locations. Most of these stores are located in rural markets where the Company had existing stores. During the 13-week period ended October 28, 2016, the Company closed 40 of its existing store locations after their operations were relocated into these new store locations. The Company incurred pretax selling, general, and administrative expenses of $11.0 million during the third quarter of 2016, primarily for lease termination costs related to the existing stores that were closed upon relocation of their operations. |
Earnings per share (Tables)
Earnings per share (Tables) | 9 Months Ended |
Oct. 28, 2016 | |
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 October 28, 2016 13 Weeks Ended October 30, 2015 Weighted Weighted Net Average Per Share Net Average Per Share Income Shares Amount Income Shares Amount Basic earnings per share $ $ $ $ Effect of dilutive share-based awards Diluted earnings per share $ $ $ $ 39 Weeks Ended October 28, 2016 39 Weeks Ended October 30, 2015 Weighted Weighted Net Average Per Share Net Average Per Share Income Shares Amount Income Shares 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) | 9 Months Ended |
Oct. 28, 2016 | |
Assets and liabilities measured at fair value | |
Schedule of assets and liabilities measured at fair value | Quoted Prices in Active Markets Significant for Identical Other Significant Assets and Observable Unobservable Balance at Liabilities Inputs Inputs October 28, (in thousands) (Level 1) (Level 2) (Level 3) 2016 Liabilities: Long-term obligations (a) $ $ $ — $ Deferred compensation (b) — — (a) Included in the condensed consolidated balance sheet at book value as Current portion of long-term obligations of $501,480 and Long-term obligations of $2,673,210. (b) Reflected at fair value in the condensed consolidated balance sheet as Accrued expenses and other current liabilities of $5,210 and noncurrent Other liabilities of $17,490. |
Segment reporting (Tables)
Segment reporting (Tables) | 9 Months Ended |
Oct. 28, 2016 | |
Segment reporting | |
Schedule of net sales grouped by classes of similar products | 13 Weeks Ended 39 Weeks Ended October 28, October 30, October 28, October 30, (in thousands) 2016 2015 2016 2015 Classes of similar products: Consumables $ $ $ $ Seasonal Home products Apparel Net sales $ $ $ $ |
Basis of presentation (Details)
Basis of presentation (Details) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Oct. 28, 2016USD ($)$ / shares | Oct. 30, 2015USD ($)$ / shares | Oct. 28, 2016USD ($)$ / shares | Oct. 30, 2015USD ($)$ / shares | Feb. 03, 2017period | Jan. 29, 2016period | |
Fiscal year, number of weeks | period | 53 | 52 | ||||
Income tax benefit | $ (133,799) | $ (148,818) | $ (473,564) | $ (474,965) | ||
Earnings Per Share, Diluted | $ / shares | $ 0.84 | $ 0.86 | $ 2.95 | $ 2.65 | ||
Merchandise inventories | ||||||
LIFO (benefit) | $ (3,800) | $ (1,700) | $ (8,100) | $ (2,300) | ||
New accounting guidance effect | ||||||
Income tax benefit | $ 10,900 | |||||
Earnings Per Share, Diluted | $ / shares | $ 0.04 | |||||
Tax benefit of share-based awards | $ 28,600 |
Earnings per share (Details)
Earnings per share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Oct. 28, 2016 | Oct. 30, 2015 | Oct. 28, 2016 | Oct. 30, 2015 | |
Net Income | ||||
Basic Earnings | $ 235,315 | $ 253,321 | $ 836,957 | $ 788,905 |
Diluted Earnings | $ 235,315 | $ 253,321 | $ 836,957 | $ 788,905 |
Shares | ||||
Shares outstanding, basic | 280,441 | 292,037 | 283,152 | 296,307 |
Effect of dilutive share-based awards | 842 | 867 | 974 | 867 |
Shares outstanding, diluted | 281,283 | 292,904 | 284,126 | 297,174 |
Per Share Amount | ||||
Basic earnings per share (in dollars per share) | $ 0.84 | $ 0.87 | $ 2.96 | $ 2.66 |
Diluted earnings per share (in dollars per share) | $ 0.84 | $ 0.86 | $ 2.95 | $ 2.65 |
Share-based awards outstanding excluded from computation of diluted earnings per share | 1,900 | 1,600 | 1,600 | 1,200 |
Income taxes (Details)
Income taxes (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Oct. 28, 2016 | Oct. 30, 2015 | Oct. 28, 2016 | Oct. 30, 2015 | |
Income taxes | ||||
Reserves for uncertain tax benefits | $ 6.3 | $ 6.3 | ||
Interest accrued related to uncertain tax benefits | 1 | 1 | ||
Potential penalties accrued related to uncertain tax benefits | 0.9 | 0.9 | ||
Reserves for uncertain tax benefits included in noncurrent Other liabilities | 8.2 | 8.2 | ||
Reserve for uncertain tax positions for which a reduction is reasonably possible in the next twelve months | 5.2 | 5.2 | ||
Reserve for uncertain tax positions that would impact effective tax rate if recognized | $ 6.3 | $ 6.3 | ||
Effective income tax rates (as a percent) | 36.20% | 37.00% | 36.10% | 37.60% |
Current and long-term obligat22
Current and long-term obligations (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Oct. 28, 2016 | Jan. 29, 2016 | |
Current and long-term obligations | ||
Current portion of long-term obligations | $ 501,480 | $ 1,379 |
Long-term obligations | 2,673,210 | 2,969,175 |
Senior unsecured credit facility, maturity October 20, 2020, Term Facility | ||
Current and long-term obligations | ||
Current and long-term obligations | 425,000 | |
Senior unsecured credit facility, maturity October 20, 2020, Revolving Facility | ||
Current and long-term obligations | ||
Current and long-term obligations | 0 | |
Maximum financing under credit agreements | 1,000,000 | |
Borrowing availability under credit facility | 984,500 | |
Borrowing availability except for amount reserved for commercial paper program | 531,500 | |
Senior unsecured credit facility, maturity October 20, 2020, Revolving Facility | Letters of credit | ||
Current and long-term obligations | ||
Maximum financing under credit agreements | 175,000 | |
Letters of credit outstanding | 15,500 | |
Senior notes | ||
Current and long-term obligations | ||
Current and long-term obligations | 2,300,000 | $ 2,300,000 |
4.125% Senior Notes due July 15, 2017 | ||
Current and long-term obligations | ||
Current portion of long-term obligations | $ 500,000 | |
Stated interest rate (as a percent) | 4.125% | |
Letter of Credit Outside of Revolving Facility | ||
Current and long-term obligations | ||
Letters of credit outstanding | $ 33,600 | |
Commercial Paper | ||
Current and long-term obligations | ||
Long-term obligations | 453,000 | |
Maximum aggregate borrowing amount | $ 1,000,000 | |
Maximum maturity | 364 days |
Assets and liabilities measur23
Assets and liabilities measured at fair value (Details) $ in Thousands | Oct. 28, 2016USD ($) |
Reported amount | Current portion of long-term debt obligations | |
Liabilities: | |
Long-term obligations | $ 501,480 |
Reported amount | Long-term obligations | |
Liabilities: | |
Long-term obligations | 2,673,210 |
Reported amount | Accrued expenses and other current liabilities | |
Liabilities: | |
Deferred compensation | 5,210 |
Reported amount | Noncurrent Other liabilities | |
Liabilities: | |
Deferred compensation | 17,490 |
Fair value measurements on recurring basis | Balance at the end of the period | |
Liabilities: | |
Long-term obligations | 3,262,934 |
Deferred compensation | 22,700 |
Fair value measurements on recurring basis | Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1) | |
Liabilities: | |
Long-term obligations | 2,369,552 |
Deferred compensation | 22,700 |
Fair value measurements on recurring basis | Significant Other Observable Inputs (Level 2) | |
Liabilities: | |
Long-term obligations | $ 893,382 |
Commitments and contingencies -
Commitments and contingencies - Legal proceedings (Detail) | Oct. 28, 2016USD ($)item | Aug. 29, 2016item |
Commission cause finding related to the criminal background check policy | Pending litigation | ||
Legal proceedings | ||
Number Of Defenses | 2 | |
Motor Oil MDL | Pending litigation | ||
Legal proceedings | ||
Number of nationwide classes | 2 | |
Number of statewide sub-classes | 16 | |
California County Environmental Authorities | Minimum | ||
Legal proceedings | ||
Expected possible loss | $ | $ 100,000 |
Segment reporting (Details)
Segment reporting (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Oct. 28, 2016USD ($)segment | Oct. 30, 2015USD ($)segment | Oct. 28, 2016USD ($)segment | Oct. 30, 2015USD ($)segment | |
Net sales data for classes of similar products | ||||
Net sales | $ 5,320,029 | $ 5,067,048 | $ 15,977,352 | $ 15,081,624 |
Number of reportable segments | ||||
Number of reportable operating segments | segment | 1 | 1 | 1 | 1 |
Consumables | ||||
Net sales data for classes of similar products | ||||
Net sales | $ 4,137,748 | $ 3,921,663 | $ 12,293,395 | $ 11,543,276 |
Seasonal | ||||
Net sales data for classes of similar products | ||||
Net sales | 575,912 | 555,862 | 1,873,715 | 1,784,680 |
Home products | ||||
Net sales data for classes of similar products | ||||
Net sales | 329,715 | 317,963 | 968,161 | 925,292 |
Apparel | ||||
Net sales data for classes of similar products | ||||
Net sales | $ 276,654 | $ 271,560 | $ 842,081 | $ 828,376 |
Common stock transactions (Deta
Common stock transactions (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | Nov. 30, 2016 | Aug. 24, 2016 | Oct. 28, 2016 | Jul. 29, 2016 | Apr. 29, 2016 | Oct. 30, 2015 | Oct. 28, 2016 | Oct. 30, 2015 |
Common stock transactions | ||||||||
Cash dividend paid (in dollars per share) | $ 0.25 | $ 0.25 | $ 0.25 | $ 0.22 | $ 0.75 | $ 0.66 | ||
Cash dividend declared (in dollars per share) | $ 0.25 | |||||||
Common Stock | Pursuant to Authorized Repurchase Program | ||||||||
Common stock transactions | ||||||||
Common stock repurchase program, increase in the authorized amount | $ 1,000 | |||||||
Common stock repurchase authorization | $ 5,000 | $ 5,000 | ||||||
Remaining authorization available under the common stock repurchase program | $ 1,200 | $ 1,200 | ||||||
Shares acquired under share repurchase program | 8.2 | 13.4 | ||||||
Aggregate purchase price | $ 679.4 | $ 1,000 |
Acquisition of facilities (Deta
Acquisition of facilities (Details) $ in Millions | 3 Months Ended |
Oct. 28, 2016USD ($)store | |
Acquisition of facilities | |
Number of stores acquired | 42 |
Number of stores closing | 40 |
Selling, general and administrative expenses | $ | $ 11 |