What changed in this filing

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Item 1. Financial Statements

2020-08-27 compared with 2020-05-28 · 63 added, 40 removed, 294 unchanged (26% of the section changed)

15 unchanged sentences

Current liabilities:

Current portion of long-term obligations

Current portion of operating lease liabilities

20 unchanged sentences

For the 13 weeks ended

For the 26 weeks ended

Cost of goods sold

12 unchanged sentences

For the 13 weeks ended

For the 26 weeks ended

Unrealized net gain (loss) on hedged transactions, net of related income tax expense (benefit) of $ 86 , $ 86 , $ 173 and $ 172 , respectively

5 unchanged sentences

Comprehensive

Balances, January 31, 2020

Balances, May 1, 2020

Dividends paid, $ 0.36 per common share

3 unchanged sentences

Other equity and related transactions

Balances, July 31, 2020

Balances, May 3, 2019

Dividends paid, $ 0.32 per common share

Unrealized net gain (loss) on hedged transactions

Share-based compensation expense

Repurchases of common stock

Other equity and related transactions

Balances, August 2, 2019

Balances, January 31, 2020

Dividends paid, $ 0.72 per common share

Unrealized net gain (loss) on hedged transactions

Share-based compensation expense

Repurchases of common stock

Other equity and related transactions

Balances, July 31, 2020

Balances, February 1, 2019

3 unchanged sentences

Repurchases of common stock

Transition adjustment upon adoption of leases accounting standard

Transition adjustment upon adoption of leases accounting standard (see Note 1)

Other equity and related transactions

Balances, May 3, 2019

Balances, August 2, 2019

See notes to condensed consolidated financial statements.

49 unchanged sentences

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 1, 2020 and results of operations for the 13-week accounting periods ended May 1, 2020 and May 3, 2019 have been made.

In management’s opinion, all adjustments (which are of a normal recurring nature) necessary for a fair presentation of the consolidated financial position as of July 31, 2020 and results of operations for the 13-week and 26-week accounting periods ended July 31, 2020 and August 2, 2019 have been made.

The preparation of financial statements and related disclosures in conformity with U.S.

2 unchanged sentences

Because the Company’s business is moderately seasonal, the results for interim periods are not necessarily indicative of the results to be expected for the entire year.

In addition, consumer behavior driven by the COVID-19 pandemic in the 13-week period ended May 1, 2020 resulted in a departure from seasonal norms experienced in recent years and may continue to disrupt the historical quarterly cadence of the Company’s results of operations for an unknown period of time.

In addition, the effect of the COVID-19 pandemic on consumer behavior in the quarterly and year to date periods ended May 1, 2020 and July 31, 2020 resulted in a departure from seasonal norms experienced in recent years and may continue to disrupt the historical quarterly cadence of the Company’s results of operations for an unknown period of time.

The Company uses the last-in, first-out (“LIFO”) method of valuing inventory.

2 unchanged sentences

The interim LIFO calculations are subject to adjustment in the final year-end LIFO inventory valuation.

The Company recorded a LIFO provision of $ 1.6 million and $ 3.4 million in the respective 13-week periods ended May 1, 2020 and May 3, 2019.

The Company recorded a LIFO provision of $ 0.1 million and $ 3.2 million in the respective 13-week periods, and $ 1.7 million and $ 6.6 million in the respective 26-week periods, ended July 31, 2020 and August 2, 2019.

In addition, ongoing estimates of inventory shrinkage and initial markups and markdowns are included in the interim cost of goods sold calculation.

4 unchanged sentences

These amendments align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software, as well as hosting arrangements that include an internal use software license.

This guidance is effective for public business entities for fiscal years, and interim periods within those years, beginning after December 15, 2019, and early adoption is permitted.

This guidance is effective for public business entities for fiscal years, and interim periods within those years, beginning after December 15, 2019, and early adoption is

The Company adopted this guidance on a prospective basis and such adoption had an immaterial effect on the Company’s consolidated financial position and results of operations.

16 unchanged sentences

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

13 Weeks Ended May 1, 2020

13 Weeks Ended May 3, 2019

13 Weeks Ended July 31, 2020

13 Weeks Ended August 2, 2019

Basic earnings per share

1 unchanged sentence

Diluted earnings per share

26 Weeks Ended July 31, 2020

26 Weeks Ended August 2, 2019

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 0.7 million and 0.6 million in the respective 13-week periods ended May 1, 2020 and May 3, 2019.

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 zero and 0.6 million in the respective 13-week periods, and 0.3 million and 0.6 million in the respective 26-week periods, ended July 31, 2020 and August 2, 2019.

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.

6 unchanged sentences

Generally, with few exceptions, the Company’s 2016 and later tax years remain open for examination by the various state taxing authorities.

As of May 1, 2020, the total reserves for uncertain tax benefits, interest expense related to income taxes and potential income tax penalties were $ 5.0 million, $ 0.5 million and $ 0.0 million, respectively, for a total of $ 5.5 million.

As of July 31, 2020, the total reserves for uncertain tax benefits, interest expense related to income taxes and potential income tax penalties were $ 5.1 million, $ 0.5 million and $ 0.0 million, respectively, for a total of $ 5.6 million.

This total amount is reflected in noncurrent other liabilities in the condensed consolidated balance sheet.

The Company’s reserve for uncertain tax positions is not expected to be reduced in the coming twelve months as a result of expiring statutes of limitations.

As of May 1, 2020, approximately $ 5.0 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 period ended May 1, 2020 was 22.2 %, compared to a rate of 20.8 % for the 13-week period ended May 3, 2019.

The tax rate for the 13-week period in 2020 was higher than the comparable 13-week period in 2019 primarily due to an increase in pre-tax earnings in the 2020 period compared to the 2019 period, while items impacting the effective rate, such as the benefits from stock-based compensation and federal tax credits, remained materially consistent in amount in both the 2020 and 2019 periods.

As of May 1, 2020, the Company’s primary leasing activities were real estate leases for most of its retail store locations and certain of its distribution facilities.

As of July 31, 2020, approximately $ 5.1 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 rates for the 13-week and 26-week periods ended July 31, 2020 were 21.5 % and 21.8 %, respectively, compared to rates of 22.9 % and 21.9 % for the 13-week and 26-week periods ended August 2, 2019.

The income tax rates for the 13-week and 26-week periods in 2020 were lower than the comparable 13-week and 26-week periods in 2019 primarily due to increased income tax benefits associated with share-based compensation partially offset by a lower income tax rate benefit from federal income tax credits due to higher pre-tax earnings in the 2020 periods compared to the 2019 periods.

In addition, the effective income tax rate for the 13-week period in 2020 was lower than the comparable period in 2019 due to increased income tax expense associated with prior state law changes that occurred in the 2019 period that did not reoccur in the 2020 period.

As of July 31, 2020, the Company’s primary leasing activities were real estate leases for most of its retail store locations and certain of its distribution facilities.

Substantially all of the Company’s leases are classified as operating leases and the associated assets and liabilities are presented as separate captions in the condensed consolidated balance sheets.

At May 1, 2020, the weighted-average remaining lease term for the Company’s leases is 10.0 years, and the weighted average discount rate is 4.2 %.

For the 13-week periods ended May 1, 2020 and May 3, 2019, operating lease cost of $ 336.5 million and $ 308.1 million, respectively, were reflected as selling, general and administrative expenses in the condensed consolidated statements of income.

Cash paid for amounts included in the measurement of operating lease liabilities of $ 337.1 million and $ 310.2 million, respectively, were reflected in cash flows from operating activities in the condensed consolidated statements of cash flows for the 13-week periods ended May 1, 2020 and May 3, 2019.

Finance lease assets are included in net property and equipment, and finance lease liabilities are included in long-term obligations, in the condensed consolidated balance sheet.

At July 31, 2020, the weighted-average remaining lease term for the Company’s operating leases is 10.0 years, and the weighted average discount rate for such leases is 4.1 %.

Operating lease costs are reflected as selling, general and administrative costs in the condensed consolidated statements of income.

For the 26-week periods ended July 31, 2020 and August 2, 2019, such costs were $ 678.6 million and $ 622.4 million, respectively.

Cash paid for amounts included in the measurement of operating lease liabilities of $ 680.4 million and $ 626.3 million, respectively, were reflected in cash flows from operating activities in the condensed consolidated statements of cash flows for the 26-week periods ended July 31, 2020 and August 2, 2019.

Current and long-term obligations

10 unchanged sentences

Debt issuance costs, net

current portion

Long-term portion

On September 10, 2019, the Company entered into an amended and restated credit agreement, providing for a $ 1.25 billion unsecured five-year revolving credit facility (the “Revolving Facility”) of which up to $ 175.0 million is available for letters of credit.

Borrowings under the Revolving Facility bear interest at a rate equal to an applicable interest rate margin plus, at the Company’s option, either (a) LIBOR or (b) a base rate (which is usually equal to the prime rate).

The applicable interest rate margin for borrowings as of May 1, 2020 was 1.015 % for LIBOR borrowings and 0.015 % for base-rate borrowings.

The applicable interest rate margin for borrowings as of July 31, 2020 was 1.015 % for LIBOR borrowings and 0.015 % for base-rate borrowings.

The Company is also required to pay a facility fee, payable on any used and unused commitment amounts of the Revolving Facility, and customary fees on letters of credit issued under the Revolving Facility.

As of May 1, 2020, the facility fee rate was 0.11 %.

As of July 31, 2020, the facility fee rate was 0.11 %.

The applicable interest rate margins for borrowings, the facility fees and the letter of credit fees under the Revolving Facility are subject to adjustment from time to time based on the Company’s long-term senior unsecured debt ratings.

5 unchanged sentences

The Revolving Facility also contains financial covenants which require the maintenance of a minimum fixed charge coverage ratio and a maximum leverage ratio.

As of May 1, 2020, the Company was in compliance with all such covenants.

As of July 31, 2020, the Company was in compliance with all such covenants.

The Revolving Facility also contains customary events of default.

As of May 1, 2020, the Company had no outstanding borrowings, outstanding letters of credit of $ 4.8 million, and borrowing availability of approximately $ 1.25 billion under the Revolving Facility that, due to its intention to maintain borrowing availability related to the commercial paper program described below, could contribute incremental liquidity of $ 1.06 billion.

In addition, as of May 1, 2020, the Company had outstanding letters of credit of $ 44.1 million which were issued pursuant to separate agreements.

As of May 1, 2020, the Company had a commercial paper program under which the Company may issue unsecured commercial paper notes (the “CP Notes”) from time to time in an aggregate amount not to exceed $ 1.0 billion outstanding at any time.

As of July 31, 2020, the Company had no outstanding borrowings, outstanding letters of credit of $ 4.8 million, and borrowing availability of approximately $ 1.25 billion under the Revolving Facility that, due to its intention to maintain borrowing availability related to the commercial paper program described below, could contribute incremental liquidity of $ 1.06 billion.

In addition, as of July 31, 2020, the Company had outstanding letters of credit of $ 53.9 million which were issued pursuant to separate agreements.

As of July 31, 2020, the Company had a commercial paper program under which the Company may issue unsecured commercial paper notes (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 1, 2020, the Company’s condensed consolidated balance sheet reflected no outstanding unsecured CP Notes.

As of July 31, 2020, the Company’s condensed consolidated balance sheet reflected no outstanding unsecured CP Notes.

CP Notes totaling $ 181.0 million were held by a wholly-owned subsidiary of the Company and are therefore not reflected on the condensed consolidated balance sheet.

1 unchanged sentence

The 2030 Senior Notes are scheduled to mature on April 3, 2030 and the 2050 Senior Notes are scheduled to mature on April 3, 2050.

Interest on the 2030 Senior Notes and the 2050 Senior Notes is payable in cash on April 3 and October 3 of each year, commencing on October 3, 2020.

Interest on the 2030

Senior Notes and the 2050 Senior Notes is payable in cash on April 3 and October 3 of each year, commencing on October 3, 2020.

The Company incurred $ 13.6 million of debt issuance costs associated with the issuance of the 2030 Senior Notes and the 2050 Senior Notes.

3 unchanged sentences

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 1, 2020.

The following table presents the Company’s liabilities required to be measured at fair value as of May 1, 2020, aggregated by the level in the fair value hierarchy within which those measurements are classified.

The Company does not have any fair value measurements categorized within Level 3 as of July 31, 2020.

The following table presents the Company’s liabilities required to be measured at fair value as of July 31, 2020, aggregated by the level in the fair value hierarchy within which those measurements are classified.

Quoted Prices

3 unchanged sentences

Deferred compensation (b)

(a) Included in the condensed consolidated balance sheet at book value as Current portion of long-term obligations of $ 580 and Long-term obligations of $ 3,967,221 .

(a) Included in the condensed consolidated balance sheet at book value as Long-term obligations of $ 4,089,001 .

(b) Reflected at fair value in the condensed consolidated balance sheet as Accrued expenses and other current liabilities of $ 2,098 and noncurrent Other liabilities of $ 28,977 .

56 unchanged sentences

The Company manages its business on the basis of one reportable operating segment.

As of May 1, 2020, all of the Company’s operations were located within the United States with the exception of certain product sourcing operations in Hong Kong and China, which collectively are not material with regard to assets, results of operations or otherwise to the condensed consolidated financial statements.

As of July 31, 2020, all of the Company’s operations were located within the United States with the exception of certain product sourcing operations in Hong Kong and China, 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

26 Weeks Ended

(in thousands)

3 unchanged sentences

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 December 3, 2019, the Company’s Board of Directors authorized a $ 1.0 billion increase to the existing common stock repurchase program and as of that date, a cumulative total of $ 8.0 billion had been authorized under the program since its inception.

Most recently, on August 26, 2020, the Company’s Board of Directors authorized a $ 2.0 billion increase to the existing common stock repurchase program and as of that date, a cumulative total of $ 10.0 billion had been authorized under the program since its inception.

The repurchase authorization has no expiration date and allows repurchases from time to time in the open market or in privately negotiated transactions.

1 unchanged sentence

Repurchases under the program may be funded from available cash or borrowings, including under the Company’s Revolving Facility and issuance of CP Notes discussed in further detail in Note 5.

Pursuant to its common stock repurchase program, during the 13-week periods ended May 1, 2020 and May 3, 2019, the Company repurchased in the open market approximately 0.5 million shares of its common stock at a total cost of $ 63.1 million and approximately 1.7 million shares of its common stock at a total cost of $ 200.0 million, respectively.

The Company paid a cash dividend of $ 0.36 per share during the first quarter of 2020.

On May 27, 2020, the Company’s Board of Directors declared a quarterly cash dividend of $ 0.36 per share, which is payable on or before July 21, 2020 to shareholders of record on July 7, 2020.

Pursuant to its common stock repurchase program, during the 26-week periods ended July 31, 2020 and August 2, 2019, the Company repurchased in the open market approximately 3.6 million shares of its common stock at a total cost of $ 664.6 million and approximately 3.0 million shares of its common stock at a total cost of $ 385.0 million, respectively.

The Company paid a cash dividend of $ 0.36 per share during each of the first two quarters of 2020.

On August 25, 2020, the Company’s Board of Directors declared a quarterly cash dividend of $ 0.36 per share, which is payable on or before October 20, 2020 to shareholders of record on October 6, 2020.

The amount and declaration of future cash dividends is subject to the sole discretion of the Company’s Board of Directors and will depend upon, among other things, the Company’s results of operations, cash requirements, financial condition, contractual restrictions and other factors that the Board may deem relevant in its sole discretion.

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of

Dollar General Corporation

To the Shareholders and Board of Directors of Dollar General Corporation

Results of Review of Interim Financial Statements

We have reviewed the accompanying condensed consolidated balance sheet of Dollar General Corporation and subsidiaries (the Company) as of May 1, 2020, the related condensed consolidated statements of income, comprehensive income, and shareholders’ equity for the thirteen week periods ended May 1, 2020 and May 3, 2019, the condensed consolidated statements of cash flows for the thirteen week periods ended May 1, 2020 and May 3, 2019, and the related notes (collectively referred to as the “condensed consolidated interim financial statements”).

We have reviewed the accompanying condensed consolidated balance sheet of Dollar General Corporation and subsidiaries (the Company) as of July 31, 2020, the related condensed consolidated statements of income, comprehensive income, and shareholders’ equity for the thirteen and twenty-six week periods ended July 31, 2020 and August 2, 2019, the condensed consolidated statements of cash flows for the twenty-six week periods ended July 31, 2020 and August 2, 2019, and the related notes (collectively referred to as the “condensed consolidated interim financial statements”).

Based on our reviews, we are not aware of any material modifications that should be made to the condensed consolidated interim financial statements for them to be in conformity with U.S.

12 unchanged sentences

/s/ Ernst & Young LLP

August 27, 2020

Nashville, Tennessee

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements