Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
May 05, 2017 | May 30, 2017 | |
Document and Entity Information | ||
Entity Registrant Name | DOLLAR GENERAL CORP | |
Entity Central Index Key | 29,534 | |
Document Type | 10-Q | |
Document Period End Date | May 5, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --02-02 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 274,225,125 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q1 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | May 05, 2017 | Feb. 03, 2017 |
Current assets: | ||
Cash and cash equivalents | $ 205,977 | $ 187,915 |
Merchandise inventories | 3,300,082 | 3,258,785 |
Income taxes receivable | 10,492 | 11,050 |
Prepaid expenses and other current assets | 232,398 | 220,021 |
Total current assets | 3,748,949 | 3,677,771 |
Net property and equipment | 2,487,292 | 2,434,456 |
Goodwill | 4,338,589 | 4,338,589 |
Other intangible assets, net | 1,200,597 | 1,200,659 |
Other assets, net | 20,928 | 20,823 |
Total assets | 11,796,355 | 11,672,298 |
Current liabilities: | ||
Current portion of long-term obligations | 401,188 | 500,950 |
Accounts payable | 1,622,776 | 1,557,596 |
Accrued expenses and other | 459,105 | 500,866 |
Income taxes payable | 208,972 | 63,393 |
Total current liabilities | 2,692,041 | 2,622,805 |
Long-term obligations | 2,632,090 | 2,710,576 |
Deferred income taxes | 662,485 | 652,841 |
Other liabilities | 280,858 | 279,782 |
Commitments and contingencies | ||
Shareholders' equity: | ||
Preferred stock | ||
Common stock | 239,947 | 240,811 |
Additional paid-in capital | 3,157,322 | 3,154,606 |
Retained earnings | 2,136,401 | 2,015,867 |
Accumulated other comprehensive loss | (4,789) | (4,990) |
Total shareholders' equity | 5,528,881 | 5,406,294 |
Total liabilities and shareholders' equity | $ 11,796,355 | $ 11,672,298 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
May 05, 2017 | Apr. 29, 2016 | |
CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||
Net sales | $ 5,609,625 | $ 5,265,432 |
Cost of goods sold | 3,910,642 | 3,652,818 |
Gross profit | 1,698,983 | 1,612,614 |
Selling, general and administrative expenses | 1,225,188 | 1,131,871 |
Operating profit | 473,795 | 480,743 |
Interest expense | 25,004 | 24,081 |
Other (income) expense | 3,502 | |
Income before income taxes | 445,289 | 456,662 |
Income tax expense | 165,800 | 161,538 |
Net income | $ 279,489 | $ 295,124 |
Earnings per share: | ||
Basic (in dollars per share) | $ 1.02 | $ 1.03 |
Diluted (in dollars per share) | $ 1.02 | $ 1.03 |
Weighted average shares outstanding: | ||
Basic (in shares) | 274,692 | 285,886 |
Diluted (in shares) | 275,215 | 286,978 |
Dividends per share (in dollars per share) | $ 0.26 | $ 0.25 |
CONDENSED CONSOLIDATED STATEME4
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands | 3 Months Ended | |
May 05, 2017 | Apr. 29, 2016 | |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||
Net income | $ 279,489 | $ 295,124 |
Unrealized net gain (loss) on hedged transactions, net of related income tax expense (benefit) of $128 and $130, respectively | 201 | 200 |
Comprehensive income | $ 279,690 | $ 295,324 |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | |
May 05, 2017 | Apr. 29, 2016 | |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||
Unrealized net gain (loss) on hedged transactions, income tax expense | $ 128 | $ 130 |
CONDENSED CONSOLIDATED STATEME6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | |
May 05, 2017 | Apr. 29, 2016 | |
Cash flows from operating activities: | ||
Net income | $ 279,489 | $ 295,124 |
Adjustments to reconcile net income to net cash from operating activities: | ||
Depreciation and amortization | 98,586 | 92,324 |
Deferred income taxes | 9,516 | 7,541 |
Loss on debt retirement, net | 3,502 | |
Noncash share-based compensation | 8,932 | 10,253 |
Other noncash (gains) and losses | 2,122 | (440) |
Change in operating assets and liabilities: | ||
Merchandise inventories | (42,456) | 3,476 |
Prepaid expenses and other current assets | (12,342) | (16,676) |
Accounts payable | 56,630 | (55,267) |
Accrued expenses and other liabilities | (39,511) | (21,416) |
Income taxes | 146,137 | 89,294 |
Other | (143) | (260) |
Net cash provided by (used in) operating activities | 510,462 | 403,953 |
Cash flows from investing activities: | ||
Purchases of property and equipment | (143,519) | (98,968) |
Proceeds from sales of property and equipment | 131 | 323 |
Net cash provided by (used in) investing activities | (143,388) | (98,645) |
Cash flows from financing activities: | ||
Issuance of long-term obligations | 599,556 | |
Repayments of long-term obligations | (750,275) | (497) |
Net increase (decrease) in commercial paper outstanding | (22,800) | |
Borrowings under revolving credit facilities | 751,000 | |
Repayments of borrowings under revolving credit facilities | (731,000) | |
Costs associated with issuance and retirement of debt | (9,460) | |
Repurchases of common stock | (88,755) | (230,961) |
Payments of cash dividends | (71,294) | (71,308) |
Other equity and related transactions | (5,984) | 7,198 |
Net cash provided by (used in) financing activities | (349,012) | (275,568) |
Net increase (decrease) in cash and cash equivalents | 18,062 | 29,740 |
Cash and cash equivalents, beginning of period | 187,915 | 157,947 |
Cash and cash equivalents, end of period | 205,977 | 187,687 |
Supplemental schedule of noncash investing and financing activities: | ||
Purchases of property and equipment awaiting processing for payment, included in Accounts payable | $ 47,464 | $ 40,285 |
Basis of presentation
Basis of presentation | 3 Months Ended |
May 05, 2017 | |
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 February 3, 2017 which was derived from the audited consolidated financial statements at that date. Accordingly, readers of this Quarterly Report on Form 10-Q should refer to the Company’s Annual Report on Form 10-K for the fiscal year ended February 3, 2017 for additional information. The Company’s fiscal year ends on the Friday closest to January 31. Unless the context requires otherwise, references to years contained herein pertain to the Company’s fiscal year. The Company’s 2017 fiscal year is scheduled to be a 52-week accounting period ending on February 2, 2018, and the 2016 fiscal year was a 53-week accounting period that ended on February 3, 2017. 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 May 5, 2017 and results of operations for the 13-week accounting periods ended May 5, 2017 and April 29, 2016 have been made. The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Because the Company’s business is moderately seasonal, the results for interim periods are not necessarily indicative of the results to be expected for the entire year. The Company uses the last-in, first-out (“LIFO”) method of valuing inventory. An actual valuation of inventory under the LIFO method is made at the end of each year based on the inventory levels and costs at that time. Accordingly, interim LIFO calculations are based on management’s estimates of expected year-end inventory levels, sales for the year and the expected rate of inflation or deflation for the year. The interim LIFO calculations are subject to adjustment in the final year-end LIFO inventory valuation. The Company recorded a LIFO provision (benefit) of $0.8 million and $(1.4) million in the respective 13-week periods ended May 5, 2017 and April 29, 2016. 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 companies to use either a full retrospective or a modified retrospective approach in the adoption of this guidance. The Company formed a project team to assess and implement the standard by compiling a list of the applicable revenue streams, evaluating relevant contracts and comparing the Company’s current accounting policies to the new standard. As a result of the efforts of this project team, the Company has identified customer incentives and gross versus net considerations as the areas in which it would most likely be affected by the new guidance. The Company is continuing to assess all the impacts of the new standard and the design of internal control over financial reporting, but based upon the terms of the Company’s agreements and the materiality of these transactions related to customer incentives and gross versus net considerations, the Company does not expect the effect of adoption to have a material effect on the Company’s consolidated results of operations, financial position or cash flows. The Company expects to complete this work in 2017 and to adopt this guidance on February 3, 2018. 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 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 | 3 Months Ended |
May 05, 2017 | |
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 May 5, 2017 13 Weeks Ended April 29, 2016 Weighted Weighted Net Average Per Share Net Average Per Share Income Shares Amount Income Shares Amount Basic earnings per share $ 279,489 274,692 $ 1.02 $ 295,124 285,886 $ 1.03 Effect of dilutive share-based awards 523 1,092 Diluted earnings per share $ 279,489 275,215 $ 1.02 $ 295,124 286,978 $ 1.03 Basic earnings per share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is determined based on the dilutive effect of share-based awards using the treasury stock method. Share-based awards that were outstanding at the end of the respective periods, but were not included in the computation of diluted earnings per share because the effect of exercising such awards would be antidilutive, were 2.6 million and 1.6 million in the 2017 and 2016 13-week periods, respectively. |
Income taxes
Income taxes | 3 Months Ended |
May 05, 2017 | |
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 2012 and earlier tax years are not open for further examination by the Internal Revenue Service (“IRS”). The IRS, at its discretion, may choose to examine the Company’s 2013 through 2016 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 May 5, 2017, the total reserves for uncertain tax benefits, interest expense related to income taxes and potential income tax penalties were $3.1 million, $0.9 million and $0.9 million, respectively, for a total of $4.9 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 $2.2 million in the coming twelve months principally as a result of the effective settlement of uncertain tax positions. As of May 5, 2017, approximately $3.1 million of the reserve for uncertain tax positions would impact the Company’s effective income tax rate if the Company were to recognize the tax benefit for these positions. The effective income tax rate for the 13-week periods ended May 5, 2017 was 37.2% compared to a rate of 35.4% for the 13-week period ended April 29, 2016. The tax rate for the 2017 period was higher than the 2016 period primarily due to the recognition of a tax benefit in the 2016 period associated with stock based compensation that did not reoccur in the 2017 period. |
Current and long-term obligatio
Current and long-term obligations | 3 Months Ended |
May 05, 2017 | |
Current and long-term obligations | |
Current and long-term obligations | 4. Current and long‑term obligations consist of the following: May 5, February 3, (In thousands) 2017 2017 Senior unsecured credit facilities Term Facility $ 175,000 $ 425,000 Revolving Facility — — 4.125% Senior Notes due July 15, 2017 — 500,000 1.875% Senior Notes due April 15, 2018 (net of discount of $87 and $111) 399,913 399,889 3.250% Senior Notes due April 15, 2023 (net of discount of $1,496 and $1,552) 898,504 898,448 4.150% Senior Notes due November 1, 2025 (net of discount of $683 and $700) 499,317 499,300 3.875% Senior Notes due April 15, 2027 (net of discount of $441) 599,559 — Unsecured commercial paper notes 467,700 490,500 Capital lease obligations 3,339 3,643 Tax increment financing due February 1, 2035 8,840 8,840 Debt issuance costs, net (18,894) (14,094) 3,033,278 3,211,526 Less: current portion (401,188) (500,950) Long-term portion $ 2,632,090 $ 2,710,576 On February 22, 2017, the Company entered into an unsecured amended and restated credit agreement for a $175.0 million senior unsecured term loan facility (the “Term Facility”) and a $1.25 billion senior unsecured revolving credit facility (the “Revolving Facility”) (collectively, the “Facilities”) that provides for the issuance of letters of credit up to $175.0 million. The Term Facility is scheduled to mature on October 20, 2020, and the Revolving Facility is scheduled to mature on February 22, 2022. Borrowings under the Facilities bear interest at a rate equal to an applicable interest rate margin plus, at the Company’s option, either (a) LIBOR or (b) a base rate (which is usually equal to the prime rate). The applicable interest rate margin for borrowings as of May 5, 2017 was 1.10% for LIBOR borrowings and 0.10% for base-rate borrowings. The Company is also required to pay a facility fee, payable on any used and unused commitment amounts of the Facilities, and customary fees on letters of credit issued under the Revolving Facility. As of May 5, 2017, the commitment fee rate was 0.15%. The applicable interest rate margins for borrowings, the facility fees and the letter of credit fees under the Facilities are subject to adjustment from time to time based on the Company’s long-term senior unsecured debt ratings. The weighted average all-in interest rate for borrowings under the Facilities was 2.1% as of May 5, 2017. The Facilities can be voluntarily prepaid in whole or in part at any time without penalty. There is no required principal amortization under the Facilities. The Facilities contain a number of customary affirmative and negative covenants that, among other things, restrict, subject to certain exceptions, the Company’s ability to: incur additional liens; sell all or substantially all of the Company’s assets; consummate certain fundamental changes or change in the Company’s lines of business; and incur additional subsidiary indebtedness. The Facilities also contain financial covenants which require the maintenance of a minimum fixed charge coverage ratio and a maximum leverage ratio. As of May 5, 2017, the Company was in compliance with all such covenants. The Facilities also contain customary events of default. As of May 5, 2017, 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 $13.8 million, and borrowing availability of $1.24 billion that, due to its intention to maintain borrowing availability related to the commercial paper program described below, could contribute incremental liquidity of $768.5 million. In addition, as of May 5, 2017, the Company had outstanding letters of credit of $32.3 million which were issued pursuant to separate agreements. As of May 5, 2017, the Company had outstanding unsecured commercial paper notes (the “CP Notes”) of $467.7 million classified as long-term obligations on the condensed consolidated balance sheet due to its intent and ability to refinance these obligations as long-term debt. Under this program, the Company may issue the CP Notes from time to time in an aggregate amount not to exceed $1.0 billion outstanding at any time. The CP Notes may have maturities of up to 364 days from the date of issue and rank equal in right of payment with all of the Company’s other unsecured and unsubordinated indebtedness. The Company intends to maintain available commitments under the Revolving Facility in an amount at least equal to the amount of CP Notes outstanding at any time. As of May 5, 2017, the outstanding CP Notes had a weighted average borrowing rate of 1.3%. On April 11, 2017, the Company issued $600.0 million aggregate principal amount of 3.875% senior notes due 2027 (the “2027 Senior Notes”), net of discount of $0.4 million, which are scheduled to mature on April 15, 2027. Interest on the 2027 Senior Notes is payable in cash on April 15 and October 15 of each year, commencing on October 15, 2017. The Company incurred $5.1 million of debt issuance costs associated with the issuance of the 2027 Senior Notes. The net proceeds from the offering of the 2027 Senior Notes were used to repay all of the Company’s outstanding senior notes due in 2017 as discussed below and for general corporate purposes. On April 27, 2017, the Company redeemed $500.0 million aggregate principal amount of outstanding 4.125% senior notes due 2017 (the “2017 Senior Notes”), resulting in a pretax loss of $3.4 million which is reflected in Other (income) expense in the condensed consolidated statement of income for the 13-weeks ended May 5, 2017. The Company funded the redemption price for the 2017 Senior Notes with proceeds from the issuance of the 2027 Senior Notes. Scheduled debt maturities at May 5, 2017, including capital lease obligations, for the Company’s fiscal years listed are as follows (in thousands): 2017 - $868,888; 2018 - $995; 2019 - $1,059; 2020 - $175,949; 2021 - $919; thereafter - $2,007,069. |
Assets and liabilities measured
Assets and liabilities measured at fair value | 3 Months Ended |
May 05, 2017 | |
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 May 5, 2017. The following table presents the Company’s assets and liabilities disclosed at fair value as of May 5, 2017, 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 Total Fair Assets and Observable Unobservable Value at Liabilities Inputs Inputs May 5, (In thousands) (Level 1) (Level 2) (Level 3) 2017 Liabilities: Long-term obligations (a) $ 2,433,451 $ 654,222 $ — $ 3,087,673 Deferred compensation (b) 22,052 — — 22,052 (a) Included in the condensed consolidated balance sheet at book value as Current portion of long-term obligations of $401,188 and Long-term obligations of $2,632,090. (b) Reflected at fair value in the condensed consolidated balance sheet as Accrued expenses and other current liabilities of $1,267 and noncurrent Other liabilities of $20,785. |
Commitments and contingencies
Commitments and contingencies | 3 Months Ended |
May 05, 2017 | |
Commitments and contingencies | |
Commitments and contingencies | 6. Legal proceedings From time to time, the Company is a party to various legal matters involving claims incidental to the conduct of its business, including actions by employees, consumers, suppliers, government agencies, or others. The Company has recorded accruals with respect to these matters, where appropriate, which are reflected in the Company’s consolidated financial statements. For some matters, a liability is not probable or the amount cannot be reasonably estimated and therefore an accrual has not been made. Except as described below, the Company believes, based upon information currently available, that such matters, both individually and in the aggregate, will be resolved without a material adverse effect on the Company’s consolidated financial statements as a whole. However, litigation and other legal matters involve an element of uncertainty. Future developments could cause these actions or claims to have a material adverse effect on the Company’s results of operations, cash flows, or financial position. In addition, certain of these matters, if decided adversely to the Company or settled by the Company, may result in liability material to the Company’s financial position or may negatively affect operating results if changes to the Company’s business operation are required. Employment Litigation The Company is defending litigation in California (the “California Wage/Hour Litigation”) in which the plaintiffs allege that they and a putative statewide class of other “key carriers” were not provided with meal and rest periods and were provided inaccurate wage statements and termination pay in violation of California law, including California’s Private Attorney General Act (the “PAGA”). The plaintiffs in the California Wage/Hour Litigation seek to recover alleged unpaid wages, injunctive relief, consequential damages, pre-judgment interest, statutory penalties and attorneys’ fees and costs. The Company is vigorously defending the California Wage/Hour Litigation and believes that its policies and practices comply with California law and that these actions are not appropriate for class or similar treatment. At this time, however, it is not possible to predict whether any of the actions comprising the California Wage/Hour Litigation 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 these actions and consequently is unable to estimate any potential loss or range of loss in these matters. If the Company is not successful in its defense efforts, the resolution of these actions could have a material adverse effect on the Company’s consolidated financial statements as a whole. Consumer/Product Litigation In December 2015 the Company was first 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 these lawsuits, as well as additional, similar lawsuits filed after December 2015, was filed in, or removed to, various federal district courts of the United States (collectively “the Motor Oil Lawsuits”). On June 2, 2016, the United States Judicial Panel on Multidistrict Litigation granted the Company’s motion to centralize the Motor Oil Lawsuits in a matter styled In re Dollar General Corp. Motor Oil Litigation , Case MDL No. 2709, before the United States District Court for the Western District of Missouri (“Motor Oil MDL”). Subsequently, the plaintiffs in the Motor Oil MDL filed a consolidated amended complaint, in which they seek to certify two nationwide classes and multiple statewide sub-classes and for each putative class member some or all of the following relief: compensatory damages, injunctive relief, statutory damages, punitive damages and attorneys’ fees. The Company’s motion to dismiss the allegations raised in the consolidated amended complaint remains pending. To the extent additional consumer lawsuits alleging violation of laws relating to the labeling, marketing and sale of Dollar General private-label motor oil have been or will be filed, the Company expects that such lawsuits will be transferred to the Motor Oil MDL. In May 2017, the Company received a Notice of Proposed Action from the Office of the New Mexico Attorney General which alleges that the Company’s labeling, marketing and sale of Dollar General private-label motor oil violated New Mexico law (the “New Mexico Motor Oil Matter”). The Company’s response to the Notice was submitted on May 26, 2017. The State has informed the Company that it is represented in connection with this matter by counsel for the plaintiffs in the Motor Oil MDL. On May 25, 2017, the Company filed an action in New Mexico federal court in which the Company seeks a declaratory judgment that the Attorney General of the State of New Mexico is prohibited by, among other things, the United States Constitution, from pursuing the New Mexico Motor Oil Matter and an order enjoining the Attorney General from pursuing such an action. ( Dollar General Corporation v. Hector H. Balderas , D.N.M., Case No. 1:17-cv-00588). The Company believes that the labeling, marketing and sale of its private-label motor oil comply with applicable federal and state requirements and are not misleading. The Company further believes that these matters are not appropriate for class or similar treatment. The Company intends to vigorously defend these matters; however, at this time, it is not possible to predict whether these matters will be permitted to proceed as a class or in a similar fashion, whether on a state-wide or nationwide basis, or the size of any putative class or classes. Likewise, at this time, it is not possible to estimate the value of the claims asserted, and no assurances can be given that the Company will be successful in its defense of these matters on the merits or otherwise. For these reasons, the Company is unable to estimate the potential loss or range of loss in these matters; however if the Company is not successful in its defense efforts, the resolution of the Motor Oil MDL or the New Mexico Motor Oil Matter could have a material adverse effect on the Company’s consolidated financial statements as a whole. Shareholder Litigation The Company is defending litigation filed in January and February 2017 in which the plaintiffs, on behalf of themselves and a putative class of shareholders, allege that between March 10, 2016 and December 1, 2016, the Company and certain of its officers violated federal securities laws by misrepresenting the impact to sales of changes to certain federal programs that provide supplemental nutritional assistance to individuals. ( Iron Workers Local Union No. 405 Annuity Fund v. Dollar General Corporation, et al. , M.D. Tenn. Case No. 3:17-cv-00063; Julia Askins v. Dollar General Corporation, et al ., M.D. Tenn., Case No. 3:17-cv-00276; Bruce Velan v. Dollar General Corporation, et al ., M.D. Tenn., Case No. 3:17-cv-00275)(collectively “the Shareholder Litigation”). The plaintiffs in the Shareholder Litigation seek the following relief: compensatory damages, unspecified equitable relief, pre- and post-judgment interest and attorneys’ fees and expenses. The court has consolidated the cases, appointed a lead plaintiff and entered a preliminary scheduling order. The Company believes that the statements at issue in the Shareholder Litigation complied with the federal securities laws and intends to vigorously defend this action. At this time, it is not possible to predict whether the Shareholder Litigation will be permitted to proceed as a class or the size of any putative class. Likewise, at this time, it is not possible to estimate the value of the claims asserted in this action, and no assurances can be given that the Company will be successful in its defense on the merits or otherwise. For these reasons, the Company is unable to estimate the potential loss or range of loss in this matter; however if the Company is not successful in its defense efforts, the resolution of the Shareholder Litigation could have a material adverse effect on the Company’s consolidated financial statements as a whole. On April 10, 2017, a shareholder derivative action was filed in which the plaintiff asserts, purportedly on behalf of the Company, claims against the Company’s board of directors and certain of its officers for alleged breach of fiduciary duties, unjust enrichment and violation of federal securities laws based upon factual allegations substantially similar to those in the Shareholder Litigation. ( Robert Anderson v. Todd Vasos, et al. , M.D. Tenn. Case No. 3:17-cv-00693)(“the Derivative Litigation”). The plaintiff in the Derivative Litigation seeks, purportedly on behalf of the Company, the following relief: compensatory damages, injunctive relief, disgorgement, and attorneys’ fees and expenses. The court has stayed all proceedings in the Derivative Litigation pending the resolution of the Company’s motion to dismiss, if any, in the Shareholder Litigation. Environmental Matter 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. In April 2017, the parties reached an agreement to settle this matter for an amount greater than $100,000 but not material to the Company’s consolidated financial statements as a whole, and the settlement has received final approval by the Court. |
Segment reporting
Segment reporting | 3 Months Ended |
May 05, 2017 | |
Segment reporting | |
Segment reporting | 7. The Company manages its business on the basis of one reportable operating segment. As of May 5, 2017, 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 May 5, April 29, (In thousands) 2017 2016 Classes of similar products: Consumables $ 4,315,513 $ 4,039,197 Seasonal 662,638 623,850 Home products 333,150 322,848 Apparel 298,324 279,537 Net sales $ 5,609,625 $ 5,265,432 |
Common stock transactions
Common stock transactions | 3 Months Ended |
May 05, 2017 | |
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 May 5, 2017, a cumulative total of $5.0 billion had been authorized under the program since its inception and approximately $844.6 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 including under the Facilities and issuance of CP Notes discussed in further detail in Note 4. Pursuant to its common stock repurchase program, during the 13-week periods ended May 5, 2017, and April 29, 2016, the Company repurchased in the open market approximately 1.3 million shares of its common stock at a total cost of $88.8 million and approximately 2.7 million shares at a total cost of $231.0 million, respectively. The Company paid a quarterly cash dividend of $0.26 per share on April 25, 2017 to shareholders of record as of April 11, 2017 as approved by the Company’s Board of Directors on March 15, 2017. On May 31, 2017, the Company’s Board of Directors approved a quarterly cash dividend of $0.26 per share payable on July 25, 2017 to shareholders of record as of July 11, 2017. 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) | 3 Months Ended |
May 05, 2017 | |
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 May 5, 2017 13 Weeks Ended April 29, 2016 Weighted Weighted Net Average Per Share Net Average Per Share Income Shares Amount Income Shares Amount Basic earnings per share $ 279,489 274,692 $ 1.02 $ 295,124 285,886 $ 1.03 Effect of dilutive share-based awards 523 1,092 Diluted earnings per share $ 279,489 275,215 $ 1.02 $ 295,124 286,978 $ 1.03 |
Current and long-term obligat16
Current and long-term obligations (Tables) | 3 Months Ended |
May 05, 2017 | |
Current and long-term obligations | |
Schedule of current and long-term debt obligations | May 5, February 3, (In thousands) 2017 2017 Senior unsecured credit facilities Term Facility $ 175,000 $ 425,000 Revolving Facility — — 4.125% Senior Notes due July 15, 2017 — 500,000 1.875% Senior Notes due April 15, 2018 (net of discount of $87 and $111) 399,913 399,889 3.250% Senior Notes due April 15, 2023 (net of discount of $1,496 and $1,552) 898,504 898,448 4.150% Senior Notes due November 1, 2025 (net of discount of $683 and $700) 499,317 499,300 3.875% Senior Notes due April 15, 2027 (net of discount of $441) 599,559 — Unsecured commercial paper notes 467,700 490,500 Capital lease obligations 3,339 3,643 Tax increment financing due February 1, 2035 8,840 8,840 Debt issuance costs, net (18,894) (14,094) 3,033,278 3,211,526 Less: current portion (401,188) (500,950) Long-term portion $ 2,632,090 $ 2,710,576 |
Assets and liabilities measur17
Assets and liabilities measured at fair value (Tables) | 3 Months Ended |
May 05, 2017 | |
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 Total Fair Assets and Observable Unobservable Value at Liabilities Inputs Inputs May 5, (In thousands) (Level 1) (Level 2) (Level 3) 2017 Liabilities: Long-term obligations (a) $ 2,433,451 $ 654,222 $ — $ 3,087,673 Deferred compensation (b) 22,052 — — 22,052 (a) Included in the condensed consolidated balance sheet at book value as Current portion of long-term obligations of $401,188 and Long-term obligations of $2,632,090. (b) Reflected at fair value in the condensed consolidated balance sheet as Accrued expenses and other current liabilities of $1,267 and noncurrent Other liabilities of $20,785. |
Segment reporting (Tables)
Segment reporting (Tables) | 3 Months Ended |
May 05, 2017 | |
Segment reporting | |
Schedule of net sales grouped by classes of similar products | 13 Weeks Ended May 5, April 29, (In thousands) 2017 2016 Classes of similar products: Consumables $ 4,315,513 $ 4,039,197 Seasonal 662,638 623,850 Home products 333,150 322,848 Apparel 298,324 279,537 Net sales $ 5,609,625 $ 5,265,432 |
Basis of presentation (Details)
Basis of presentation (Details) $ in Millions | 3 Months Ended | 12 Months Ended | ||
May 05, 2017USD ($) | Apr. 29, 2016USD ($) | Feb. 02, 2018period | Feb. 03, 2017period | |
Basis of presentation | ||||
Fiscal year, number of weeks | period | 52 | 53 | ||
Merchandise inventories | ||||
LIFO provision (benefit) | $ | $ 0.8 | $ (1.4) |
Earnings per share (Detail)
Earnings per share (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | |
May 05, 2017 | Apr. 29, 2016 | |
Net Income | ||
Basic Earnings | $ 279,489 | $ 295,124 |
Diluted Earnings | $ 279,489 | $ 295,124 |
Shares | ||
Shares outstanding, basic | 274,692 | 285,886 |
Effect of dilutive share-based awards | 523 | 1,092 |
Shares outstanding, diluted | 275,215 | 286,978 |
Per Share Amount | ||
Basic earnings per share (in dollars per share) | $ 1.02 | $ 1.03 |
Diluted earnings per share (in dollars per share) | $ 1.02 | $ 1.03 |
Share-based awards outstanding excluded from computation of diluted earnings per share | 2,600 | 1,600 |
Income taxes (Detail)
Income taxes (Detail) - USD ($) $ in Millions | 3 Months Ended | |
May 05, 2017 | Apr. 29, 2016 | |
Income taxes | ||
Effective income tax rates (as a percent) | 37.20% | 35.40% |
Reserves for uncertain tax benefits | $ 3.1 | |
Interest accrued related to uncertain tax benefits | 0.9 | |
Potential penalties accrued related to uncertain tax benefits | 0.9 | |
Reserves for uncertain tax benefits included in noncurrent Other liabilities | 4.9 | |
Reserve for uncertain tax positions for which a reduction is reasonably possible in the next twelve months | 2.2 | |
Reserve for uncertain tax positions that would impact effective tax rate if recognized | $ 3.1 |
Current and long-term obligat22
Current and long-term obligations (Details) - USD ($) $ in Thousands | Apr. 27, 2017 | May 05, 2017 | Apr. 11, 2017 | Feb. 22, 2017 | Feb. 03, 2017 |
Current and long-term obligations | |||||
Debt issuance costs, net | $ (18,894) | $ (14,094) | |||
Current and long-term obligations | 3,033,278 | 3,211,526 | |||
Less: current portion | (401,188) | (500,950) | |||
Long-term obligations | 2,632,090 | 2,710,576 | |||
Loss on debt retirement, net | 3,502 | ||||
Scheduled debt maturities including capital lease obligations | |||||
2,017 | 868,888 | ||||
2,018 | 995 | ||||
2,019 | 1,059 | ||||
2,020 | 175,949 | ||||
2,021 | 919 | ||||
Thereafter | $ 2,007,069 | ||||
Senior unsecured credit facility | |||||
Current and long-term obligations | |||||
Commitment fee rate | 0.15% | ||||
Weighted average interest rate (as a percent) | 2.10% | ||||
Senior unsecured credit facility | LIBOR loans | |||||
Current and long-term obligations | |||||
Variable rate basis | LIBOR | ||||
Spread on variable rate (as a percent) | 1.10% | ||||
Senior unsecured credit facility | Base-rate loans | |||||
Current and long-term obligations | |||||
Variable rate basis | base rate | ||||
Spread on variable rate (as a percent) | 0.10% | ||||
Senior unsecured credit facility, Term Facility | |||||
Current and long-term obligations | |||||
Current and long-term obligations | $ 175,000 | 425,000 | |||
Amount borrowed | $ 175,000 | ||||
Senior unsecured credit facility, Revolving Facility | |||||
Current and long-term obligations | |||||
Current and long-term obligations | 0 | ||||
Maximum financing under credit agreements | 1,250,000 | 1,250,000 | |||
Borrowing availability under credit facility | 1,240,000 | ||||
Borrowing availability except for amount reserved for commercial paper program | 768,500 | ||||
Senior unsecured credit facility, Revolving Facility | Letters of credit | |||||
Current and long-term obligations | |||||
Maximum financing under credit agreements | 175,000 | $ 175,000 | |||
Letters of credit outstanding | $ 13,800 | ||||
4.125% Senior Notes due July 15, 2017 | |||||
Current and long-term obligations | |||||
Current and long-term obligations | $ 500,000 | ||||
Stated interest rate (as a percent) | 4.125% | 4.125% | |||
Loss on debt retirement, net | $ 3,400 | ||||
Principal amount of notes redeemed | $ 500,000 | ||||
1.875% Senior Notes due April 15, 2018 | |||||
Current and long-term obligations | |||||
Current and long-term obligations | 399,913 | $ 399,889 | |||
Discount on debt issuance | $ 87 | $ 111 | |||
Stated interest rate (as a percent) | 1.875% | 1.875% | |||
3.25% Senior Notes due April 15, 2023 | |||||
Current and long-term obligations | |||||
Current and long-term obligations | $ 898,504 | $ 898,448 | |||
Discount on debt issuance | $ 1,496 | $ 1,552 | |||
Stated interest rate (as a percent) | 3.25% | 3.25% | |||
4.150% Senior Notes due Nov 1, 2025 | |||||
Current and long-term obligations | |||||
Current and long-term obligations | $ 499,317 | $ 499,300 | |||
Discount on debt issuance | $ 683 | $ 700 | |||
Stated interest rate (as a percent) | 4.15% | 4.15% | |||
3.875% Senior Notes due April 15. 2027 | |||||
Current and long-term obligations | |||||
Current and long-term obligations | $ 599,559 | ||||
Discount on debt issuance | $ 441 | $ 400 | |||
Debt issue costs | 5,100 | ||||
Amount borrowed | $ 600,000 | ||||
Stated interest rate (as a percent) | 3.875% | 3.875% | |||
Unsecured commercial paper notes | |||||
Current and long-term obligations | |||||
Long-term obligations | $ 467,700 | $ 490,500 | |||
Maximum maturity | 364 days | ||||
Maximum aggregate borrowing amount | $ 1,000,000 | ||||
Weighted average interest rate (as a percent) | 1.30% | ||||
Capital lease obligations | |||||
Current and long-term obligations | |||||
Current and long-term obligations | $ 3,339 | 3,643 | |||
Tax increment financing due February 1, 2035 | |||||
Current and long-term obligations | |||||
Current and long-term obligations | 8,840 | $ 8,840 | |||
Letter Of Credit Outside Of Revolving Facility | |||||
Current and long-term obligations | |||||
Letters of credit outstanding | $ 32,300 |
Assets and liabilities measur23
Assets and liabilities measured at fair value (Detail) $ in Thousands | May 05, 2017USD ($) |
Reported amount | Current portion of long-term debt obligations | |
Liabilities: | |
Long-term obligations | $ 401,188 |
Reported amount | Long-term obligations | |
Liabilities: | |
Long-term obligations | 2,632,090 |
Reported amount | Accrued expenses and other current liabilities | |
Liabilities: | |
Deferred compensation | 1,267 |
Reported amount | Noncurrent Other liabilities | |
Liabilities: | |
Deferred compensation | 20,785 |
Fair value measurements on recurring basis | Balance at the end of the period | |
Liabilities: | |
Long-term obligations | 3,087,673 |
Deferred compensation | 22,052 |
Fair value measurements on recurring basis | Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1) | |
Liabilities: | |
Long-term obligations | 2,433,451 |
Deferred compensation | 22,052 |
Fair value measurements on recurring basis | Significant Other Observable Inputs (Level 2) | |
Liabilities: | |
Long-term obligations | $ 654,222 |
Commitments and contingencies -
Commitments and contingencies - Legal proceedings (Detail) | 1 Months Ended |
May 05, 2017USD ($)item | |
Motor Oil MDL | Pending litigation | |
Legal proceedings | |
Number of nationwide classes | item | 2 |
California County Environmental Authorities | Minimum | |
Legal proceedings | |
Settlement amount | $ | $ 100,000 |
Segment reporting (Details)
Segment reporting (Details) $ in Thousands | 3 Months Ended | |
May 05, 2017USD ($)segment | Apr. 29, 2016USD ($)segment | |
Net sales data for classes of similar products | ||
Net sales | $ 5,609,625 | $ 5,265,432 |
Number of reportable segments | ||
Number of reportable operating segments | segment | 1 | 1 |
Consumables | ||
Net sales data for classes of similar products | ||
Net sales | $ 4,315,513 | $ 4,039,197 |
Seasonal | ||
Net sales data for classes of similar products | ||
Net sales | 662,638 | 623,850 |
Home products | ||
Net sales data for classes of similar products | ||
Net sales | 333,150 | 322,848 |
Apparel | ||
Net sales data for classes of similar products | ||
Net sales | $ 298,324 | $ 279,537 |
Common stock transactions (Deta
Common stock transactions (Detail) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | May 31, 2017 | Apr. 25, 2017 | Aug. 24, 2016 | May 05, 2017 | Apr. 29, 2016 |
Common stock transactions | |||||
Cash dividend paid (in dollars per share) | $ 0.26 | $ 0.26 | $ 0.25 | ||
Cash dividend declared (in dollars per share) | $ 0.26 | ||||
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 | ||||
Remaining authorization available under the common stock repurchase program | $ 844.6 | ||||
Shares acquired under share repurchase program | 1.3 | 2.7 | |||
Aggregate purchase price | $ 88.8 | $ 231 |