DOLLAR GENERAL CORP 10-Q

ITEM 1. FINANCIAL STATEMENTS . ​ DOLLAR GENERAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ October 30, January 31, ​ ​ 2020 ​ 2020 ​ ​ (Unaudited) ​ (See Note 1) ​ ASSETS ​ ​ ​ ​ ​ Current assets: ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 2,199,443 ​ $ 240,320 ​ Merchandise inventories ​ 5,025,810 ​ 4,676,848 ​ Income taxes receivable ​ ​ 111,139 ​ ​ 76,537 ​ Prepaid expenses and other current assets ​ 197,040 ​ 184,163 ​ Total current assets ​ 7,533,432 ​ 5,177,868 ​ Net property and equipment ​ 3,701,782 ​ 3,278,359 ​ Operating lease assets ​ ​ 9,343,375 ​ ​ 8,796,183 ​ Goodwill ​ 4,338,589 ​ 4,338,589 ​ Other intangible assets, net ​ 1,199,900 ​ 1,200,006 ​ Other assets, net ​ 36,364 ​ 34,079 ​ Total assets ​ $ 26,153,442 ​ $ 22,825,084 ​ ​ ​ ​ ​ ​ ​ ​ ​ LIABILITIES AND SHAREHOLDERS’ EQUITY ​ ​ ​ ​ ​ ​ ​ Current liabilities: ​ ​ ​ ​ ​ ​ ​ Current portion of operating lease liabilities ​ ​ 1,044,368 ​ ​ 964,805 ​ Accounts payable ​ 3,770,528 ​ 2,860,682 ​ Accrued expenses and other ​ 1,060,602 ​ 709,156 ​ Income taxes payable ​ 10,713 ​ 8,362 ​ Total current liabilities ​ 5,886,211 ​ 4,543,005 ​ Long-term obligations ​ 4,131,573 ​ 2,911,993 ​ Long-term operating lease liabilities ​ ​ 8,285,027 ​ ​ 7,819,683 ​ Deferred income taxes ​ 686,694 ​ 675,227 ​ Other liabilities ​ 178,418 ​ 172,676 ​ Commitments and contingencies ​ ​ ​ ​ ​ ​ ​ Shareholders’ equity: ​ ​ ​ ​ ​ ​ ​ Preferred stock ​ — ​ ​ — ​ Common stock ​ 214,375 ​ 220,444 ​ Additional paid-in capital ​ 3,426,729 ​ 3,322,531 ​ Retained earnings ​ 3,346,821 ​ 3,162,660 ​ Accumulated other comprehensive loss ​ ( 2,406 ) ​ ( 3,135 ) ​ Total shareholders’ equity ​ 6,985,519 ​ 6,702,500 ​ Total liabilities and shareholders' equity ​ $ 26,153,442 ​ $ 22,825,084 ​ ​ See notes to condensed consolidated financial statements. ​ ​ 2 DOLLAR GENERAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (In thousands, except per share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the 13 weeks ended ​ For the 39 weeks ended ​ ​ October 30, November 1, October 30, November 1, ​ ​ 2020 ​ 2019 ​ 2020 ​ 2019 ​ Net sales ​ $ 8,199,625 ​ $ 6,991,393 ​ $ 25,332,315 ​ $ 20,596,331 ​ Cost of goods sold ​ 5,631,385 ​ 4,926,307 ​ 17,350,148 ​ 14,380,033 ​ Gross profit ​ 2,568,240 ​ 2,065,086 ​ 7,982,167 ​ 6,216,298 ​ Selling, general and administrative expenses ​ 1,795,110 ​ 1,573,669 ​ 5,299,626 ​ 4,634,869 ​ Operating profit ​ 773,130 ​ 491,417 ​ 2,682,541 ​ 1,581,429 ​ Interest expense ​ 40,298 ​ 24,264 ​ 110,117 ​ 75,007 ​ Income before income taxes ​ 732,832 ​ 467,153 ​ 2,572,424 ​ 1,506,422 ​ Income tax expense ​ 158,572 ​ 101,603 ​ 560,117 ​ 329,304 ​ Net income ​ $ 574,260 ​ $ 365,550 ​ $ 2,012,307 ​ $ 1,177,118 ​ Earnings per share: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ $ 2.32 ​ $ 1.43 ​ $ 8.06 ​ $ 4.57 ​ Diluted ​ $ 2.31 ​ $ 1.42 ​ $ 8.00 ​ $ 4.54 ​ Weighted average shares outstanding: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ 247,131 ​ 256,041 ​ 249,731 ​ 257,618 ​ Diluted ​ ​ 249,063 ​ ​ 257,699 ​ ​ 251,627 ​ ​ 259,022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Dividends per share ​ $ 0.36 ​ $ 0.32 ​ $ 1.08 ​ $ 0.96 ​ ​ See notes to condensed consolidated financial statements. ​ ​ 3 DOLLAR GENERAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the 13 weeks ended ​ For the 39 weeks ended ​ ​ ​ October 30, ​ November 1, ​ October 30, ​ November 1, ​ ​ 2020 2019 2020 2019 ​ Net income ​ $ 574,260 ​ $ 365,550 $ 2,012,307 ​ $ 1,177,118 ​ Unrealized net gain (loss) on hedged transactions, net of related income tax expense (benefit) of $ 87 , $ 86 , $ 260 and $ 258 , respectively ​ 243 ​ 243 729 ​ 730 ​ Comprehensive income ​ $ 574,503 ​ $ 365,793 $ 2,013,036 ​ $ 1,177,848 ​ ​ See notes to condensed consolidated financial statements. ​ ​ 4 DOLLAR GENERAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited) (In thousands, except per share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ Common ​ ​ ​ ​ Additional ​ ​ ​ ​ Other ​ ​ ​ ​ ​ ​ Stock ​ Common ​ Paid-in ​ Retained ​ Comprehensive ​ ​ ​ ​ ​ ​ Shares ​ Stock ​ Capital ​ Earnings ​ Loss ​ Total ​ Balances, July 31, 2020 249,033 ​ $ 217,906 ​ $ 3,381,819 ​ $ 3,758,995 ​ $ ( 2,649 ) ​ $ 7,356,071 ​ Net income — ​ — ​ — ​ 574,260 ​ — ​ 574,260 ​ Dividends paid, $ 0.36 per common share ​ — ​ ​ — ​ ​ — ​ ​ ( 88,362 ) ​ ​ — ​ ​ ( 88,362 ) ​ Unrealized net gain (loss) on hedged transactions — ​ — ​ — ​ — ​ 243 ​ 243 ​ Share-based compensation expense — ​ — ​ 16,889 ​ — ​ — ​ 16,889 ​ Repurchases of common stock ( 4,408 ) ​ ( 3,858 ) ​ — ​ ( 898,072 ) ​ — ​ ( 901,930 ) ​ Other equity and related transactions 375 ​ 327 ​ 28,021 ​ — ​ — ​ 28,348 ​ Balances, October 30, 2020 245,000 ​ $ 214,375 ​ $ 3,426,729 ​ $ 3,346,821 ​ $ ( 2,406 ) ​ $ 6,985,519 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balances, August 2, 2019 257,068 ​ $ 224,935 ​ $ 3,292,902 ​ $ 3,234,944 ​ $ ( 3,621 ) ​ $ 6,749,160 ​ Net income — ​ — ​ — ​ 365,550 ​ — ​ 365,550 ​ Dividends paid, $ 0.32 per common share ​ — ​ ​ — ​ ​ — ​ ​ ( 81,640 ) ​ ​ — ​ ​ ( 81,640 ) ​ Unrealized net gain (loss) on hedged transactions — ​ — ​ — ​ — ​ 243 ​ 243 ​ Share-based compensation expense — ​ — ​ 11,100 ​ — ​ — ​ 11,100 ​ Repurchases of common stock ( 2,527 ) ​ ( 2,211 ) ​ — ​ ( 398,116 ) ​ — ​ ( 400,327 ) ​ Other equity and related transactions 59 ​ 51 ​ 4,158 ​ — ​ — ​ 4,209 ​ Balances, November 1, 2019 254,600 ​ $ 222,775 ​ $ 3,308,160 ​ $ 3,120,738 ​ $ ( 3,378 ) ​ $ 6,648,295 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balances, January 31, 2020 251,936 ​ $ 220,444 ​ $ 3,322,531 ​ $ 3,162,660 ​ $ ( 3,135 ) ​ $ 6,702,500 ​ Net income — ​ — ​ — ​ 2,012,307 ​ — ​ 2,012,307 ​ Dividends paid, $ 1.08 per common share ​ — ​ ​ — ​ ​ — ​ ​ ( 268,638 ) ​ ​ — ​ ​ ( 268,638 ) ​ Unrealized net gain (loss) on hedged transactions — ​ — ​ — ​ — ​ 729 ​ 729 ​ Share-based compensation expense — ​ — ​ 51,366 ​ — ​ — ​ 51,366 ​ Repurchases of common stock ( 8,043 ) ​ ( 7,038 ) ​ — ​ ( 1,559,508 ) ​ — ​ ( 1,566,546 ) ​ Other equity and related transactions 1,107 ​ 969 ​ 52,832 ​ — ​ — ​ 53,801 ​ Balances, October 30, 2020 245,000 ​ $ 214,375 ​ $ 3,426,729 ​ $ 3,346,821 ​ $ ( 2,406 ) ​ $ 6,985,519 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balances, February 1, 2019 259,511 ​ $ 227,072 ​ $ 3,252,421 ​ $ 2,941,107 ​ $ ( 3,207 ) ​ $ 6,417,393 ​ Net income — ​ — ​ — ​ 1,177,118 ​ — ​ 1,177,118 ​ Dividends paid, $ 0.96 per common share ​ — ​ ​ — ​ ​ — ​ ​ ( 246,787 ) ​ ​ — ​ ​ ( 246,787 ) ​ Unrealized net gain (loss) on hedged transactions — ​ — ​ — ​ — ​ 730 ​ 730 ​ Share-based compensation expense — ​ — ​ 35,605 ​ — ​ — ​ 35,605 ​ Repurchases of common stock ( 5,566 ) ​ ( 4,870 ) ​ — ​ ( 780,431 ) ​ — ​ ( 785,301 ) ​ Transition adjustment upon adoption of leases accounting standard (see Note 1) ​ — ​ — ​ — ​ 28,830 ​ — ​ 28,830 ​ Other equity and related transactions 655 ​ 573 ​ 20,134 ​ 901 ​ ( 901 ) ​ 20,707 ​ Balances, November 1, 2019 254,600 ​ $ 222,775 ​ $ 3,308,160 ​ $ 3,120,738 ​ $ ( 3,378 ) ​ $ 6,648,295 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ See notes to condensed consolidated financial statements. ​ 5 DOLLAR GENERAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the 39 weeks ended ​ October 30, November 1, ​ ​ 2020 ​ 2019 Cash flows from operating activities: ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 2,012,307 ​ $ 1,177,118 ​ Adjustments to reconcile net income to net cash from operating activities: ​ ​ ​ ​ ​ ​ ​ Depreciation and amortization ​ 424,466 ​ 372,378 ​ Deferred income taxes ​ 11,207 ​ 14,308 ​ Noncash share-based compensation ​ 51,366 ​ 35,605 ​ Other noncash (gains) and losses ​ 9,266 ​ 10,531 ​ Change in operating assets and liabilities: ​ ​ ​ ​ ​ ​ ​ Merchandise inventories ​ ( 352,261 ) ​ ( 401,006 ) ​ Prepaid expenses and other current assets ​ ( 13,525 ) ​ ( 24,345 ) ​ Accounts payable ​ 919,806 ​ 425,414 ​ Accrued expenses and other liabilities ​ 357,320 ​ 108,906 ​ Income taxes ​ ( 32,251 ) ​ ( 52,076 ) ​ Other ​ ( 4,161 ) ​ ( 5,723 ) ​ Net cash provided by (used in) operating activities ​ 3,383,540 ​ 1,661,110 ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash flows from investing activities: ​ ​ ​ ​ ​ ​ ​ Purchases of property and equipment ​ ( 697,598 ) ​ ( 518,051 ) ​ Proceeds from sales of property and equipment ​ 1,587 ​ 1,910 ​ Net cash provided by (used in) investing activities ​ ( 696,011 ) ​ ( 516,141 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash flows from financing activities: ​ ​ ​ ​ ​ ​ ​ Issuance of long-term obligations ​ 1,494,315 ​ — ​ Repayments of long-term obligations ​ ( 2,564 ) ​ ( 525 ) ​ Net increase (decrease) in commercial paper outstanding ​ ​ ( 425,200 ) ​ ​ ( 90,800 ) ​ Borrowings under revolving credit facilities ​ 300,000 ​ — ​ Repayments of borrowings under revolving credit facilities ​ ( 300,000 ) ​ — ​ Costs associated with issuance of debt ​ ( 13,574 ) ​ ( 1,675 ) ​ Repurchases of common stock ​ ( 1,566,546 ) ​ ( 785,301 ) ​ Payments of cash dividends ​ ​ ( 268,630 ) ​ ​ ( 246,776 ) ​ Other equity and related transactions ​ 53,793 ​ 20,697 ​ Net cash provided by (used in) financing activities ​ ( 728,406 ) ​ ( 1,104,380 ) ​ Net increase (decrease) in cash and cash equivalents ​ 1,959,123 ​ 40,589 ​ Cash and cash equivalents, beginning of period ​ 240,320 ​ 235,487 ​ Cash and cash equivalents, end of period ​ $ 2,199,443 ​ $ 276,076 ​ ​ ​ ​ ​ ​ ​ ​ ​ Supplemental noncash investing and financing activities: ​ ​ ​ ​ ​ ​ ​ Right of use assets obtained in exchange for new operating lease liabilities ​ $ 1,319,711 ​ $ 1,311,734 ​ Purchases of property and equipment awaiting processing for payment, included in Accounts payable ​ $ 100,288 ​ $ 96,950 ​ ​ See notes to condensed consolidated financial statements. ​ ​ 6 DOLLAR GENERAL CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) ​ 1. Basis of presentation ​ The accompanying unaudited condensed consolidated financial statements of Dollar General Corporation and its subsidiaries (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and are presented in accordance with the requirements of Form 10-Q and Rule 10-01 of Regulation S-X. Such financial statements consequently do not include all of the disclosures normally required by U.S. GAAP for annual financial statements or those normally made in the Company’s Annual Report on Form 10-K, including the condensed consolidated balance sheet as of January 31, 2020 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 January 31, 2020 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 2020 fiscal year is scheduled to be a 52 -week accounting period ending on January 29, 2021, and the 2019 fiscal year was a 52 -week accounting period that ended on January 31, 2020. ​ 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 30, 2020 and results of operations for the 13-week and 39-week accounting periods ended October 30, 2020 and November 1, 2019 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. In addition, the effect of the COVID-19 pandemic on consumer behavior in the quarterly and year to date periods ended May 1, 2020, July 31, 2020, and October 30, 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. 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 of $ 1.6 million and $ 3.2 million in the respective 13-week periods, and $ 3.3 million and $ 9.7 million in the respective 39-week periods, ended October 30, 2020 and November 1, 2019. In addition, ongoing estimates of inventory shrinkage and initial markups and markdowns are included in the interim cost of goods sold calculation. ​ The Company adopted new accounting guidance related to leases as of February 2, 2019. The cumulative effect of applying the standard resulted in an adjustment to retained earnings of $ 28.8 million at February 2, 2019, primarily for the elimination of deferred gain on a 2013 sale-leaseback transaction. Because the standard was adopted under the modified retrospective approach, it did not impact the Company’s historical consolidated net income or cash flows. ​ In August 2018, the Financial Accounting Standards Board (“FASB”) issued guidance related to the accounting for implementation costs incurred in a cloud computing arrangement that is a service contract. 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 7 permitted. 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. ​ In August 2018, the FASB also issued guidance related to the disclosure requirements for fair value measurement. This guidance added, modified, and removed certain disclosure requirements related to assets and liabilities recorded at fair value. The majority of this guidance pertains to assets and liabilities classified in Level 3 of the fair value hierarchy, and the Company has no such assets or liabilities. 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. The adoption of this guidance did not affect the Company’s consolidated results of operations, financial position or cash flows. ​ In January 2017, the FASB issued amendments to existing guidance related to the subsequent measurement of goodwill. Subsequent to adoption, the Company will perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. This guidance is effective for public business entities for fiscal years, and interim periods within those years, beginning after December 15, 2019, and early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The amendments are being applied on a prospective basis. The adoption of this guidance did not affect the Company’s consolidated results of operations, financial position or cash flows. ​ In June 2016, the FASB issued guidance related to measurement requirements for credit losses on financial instruments. These amendments require a financial asset or a group of financial assets measured at amortized cost basis to be presented at the net amount expected to be collected. The guidance requires measurement of expected credit losses based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts. 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. The adoption of this guidance did not affect the Company’s consolidated results of operations, financial position or cash flows. ​ 2. Earnings per share ​ Earnings per share is computed as follows (in thousands, except per share data): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 13 Weeks Ended October 30, 2020 ​ ​ 13 Weeks Ended November 1, 2019 ​ ​ ​ Weighted ​ ​ Weighted ​ ​ ​ Net ​ Average ​ Per Share ​ ​ Net ​ Average ​ Per Share ​ ​ ​ Income ​ Shares ​ Amount ​ ​ Income ​ Shares ​ Amount ​ Basic earnings per share ​ $ 574,260 247,131 ​ $ 2.32 ​ ​ $ 365,550 256,041 ​ $ 1.43 ​ Effect of dilutive share-based awards ​ ​ ​ 1,932 ​ ​ ​ ​ ​ ​ ​ 1,658 ​ ​ ​ ​ Diluted earnings per share ​ $ 574,260 249,063 ​ $ 2.31 ​ ​ $ 365,550 257,699 ​ $ 1.42 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 39 Weeks Ended October 30, 2020 ​ ​ 39 Weeks Ended November 1, 2019 ​ ​ ​ Weighted ​ ​ Weighted ​ ​ ​ Net ​ Average ​ Per Share ​ ​ Net ​ Average ​ Per Share ​ ​ ​ Income ​ Shares ​ Amount ​ ​ Income ​ Shares ​ Amount ​ Basic earnings per share ​ $ 2,012,307 249,731 ​ $ 8.06 ​ ​ $ 1,177,118 257,618 ​ $ 4.57 ​ Effect of dilutive share-based awards ​ ​ ​ 1,896 ​ ​ ​ ​ ​ ​ ​ 1,404 ​ ​ ​ ​ Diluted earnings per share ​ $ 2,012,307 251,627 ​ $ 8.00 ​ ​ $ 1,177,118 259,022 ​ $ 4.54 ​ ​ 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 less than 0.1 million and 0.1 million in the respective 13-week periods, and 0.2 million and 0.4 million in the respective 39-week periods, ended October 30, 2020 and November 1, 2019. ​ 8 3. Income taxes ​ Under the accounting standards for income taxes, the asset and liability method is used for computing the future income tax consequences of events that have been recognized in the Company’s consolidated financial statements or income tax returns. ​ Income tax reserves are determined using the methodology established by accounting standards for income taxes which require companies to assess each income tax position taken using the following two-step approach. A determination is first made as to whether it is more likely than not that the position will be sustained, based upon the technical merits, upon examination by the taxing authorities. If the tax position is expected to meet the more likely than not criteria, the benefit recorded for the tax position equals the largest amount that is greater than 50% likely to be realized upon ultimate settlement of the respective tax position. ​ The Company’s 2016 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 2017 through 2019 fiscal year income tax filings. The Company has various state income tax examinations that are currently in progress. Generally, with few exceptions, the Company’s 2017 and later tax years remain open for examination by the various state taxing authorities. ​ As of October 30, 2020, the total reserves for uncertain tax benefits, interest expense related to income taxes and potential income tax penalties were $ 5.6 million, $ 0.3 million and $ 0.0 million, respectively, for a total of $ 5.9 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 October 30, 2020, approximately $ 5.6 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 30, 2020 were 21.6 % and 21.8 % respectively, compared to rates of 21.7 % and 21.9 % for the 13-week and 39-week periods ended November 1, 2019. The income tax rates for the 13-week and 39-week periods in 2020 were lower than the comparable 13-week and 39-week periods in 2019 primarily due to increased income tax benefits associated with share-based compensation and a greater income tax rate benefit from state taxes, 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. ​ 4. Leases ​ As of October 30, 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. 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 October 30, 2020, the weighted-average remaining lease term for the Company’s operating leases is 9.9 years, and the weighted average discount rate for such leases is 4.0 %. Operating lease costs are reflected as selling, general and administrative costs in the condensed consolidated statements of income. For the 39-week periods ended October 30, 2020 and November 1, 2019, such costs were $ 1.03 billion and $ 0.94 billion, respectively. Cash paid for amounts included in the measurement of operating lease liabilities of $ 1.03 billion and $ 0.95 billion, respectively, were reflected in cash flows from operating activities in the condensed consolidated statements of cash flows for the 39-week periods ended October 30, 2020 and November 1, 2019. ​ 9 5. Current and long-term obligations ​ Current and long-term obligations consist of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ October 30, January 31, (In thousands) ​ 2020 ​ 2020 Revolving Facility ​ $ — ​ $ — ​ 3.250 % Senior Notes due April 15, 2023 (net of discount of $ 647 and $ 837 ) ​ 899,353 ​ 899,163 ​ 4.150 % Senior Notes due November 1, 2025 (net of discount of $ 431 and $ 489 ) ​ ​ 499,569 ​ ​ 499,511 ​ 3.875 % Senior Notes due April 15, 2027 (net of discount of $ 305 and $ 336 ) ​ ​ 599,695 ​ ​ 599,664 ​ 4.125 % Senior Notes due May 1, 2028 (net of discount of $ 394 and $ 428 ) ​ ​ 499,606 ​ ​ 499,572 ​ 3.500 % Senior Notes due April 3, 2030 (net of discount of $ 637 ) ​ ​ 999,363 ​ ​ — ​ 4.125 % Senior Notes due April 3, 2050 (net of discount of $ 4,966 ) ​ ​ 495,034 ​ ​ — ​ Unsecured commercial paper notes ​ ​ — ​ ​ 425,200 ​ Other ​ ​ 165,996 ​ ​ 4,895 ​ Debt issuance costs, net ​ ( 27,043 ) ​ ( 16,012 ) ​ ​ ​ $ 4,131,573 ​ $ 2,911,993 ​ ​ 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 October 30, 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 October 30, 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. ​ The Revolving Facility contains a number of customary affirmative and negative covenants that, among other things, restrict, subject to certain exceptions, the Company’s ability to: incur additional liens; sell all or substantially all of the Company’s assets; consummate certain fundamental changes or change in the Company’s lines of business; and incur additional subsidiary indebtedness. The Revolving Facility also contains financial covenants which require the maintenance of a minimum fixed charge coverage ratio and a maximum leverage ratio. As of October 30, 2020, the Company was in compliance with all such covenants. The Revolving Facility also contains customary events of default. ​ As of October 30, 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 October 30, 2020, the Company had outstanding letters of credit of $ 75.5 million which were issued pursuant to separate agreements. ​ As of October 30, 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 October 30, 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. ​ On April 3, 2020, the Company issued $ 1.0 billion aggregate principal amount of 3.5 % senior notes due 2030 (the “2030 Senior Notes”), net of discount of $ 0.7 million, and $ 500.0 million aggregate principal amount of 4.125 % senior notes due 2050 (the “2050 Senior Notes”), net of discount of $ 5.0 million. 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 10 Senior Notes and the 2050 Senior Notes is payable in cash on April 3 and October 3 of each year, and commenced 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. ​ 6. Assets and liabilities measured at fair value ​ Fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, fair value accounting standards establish a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy). The Company does not have any fair value measurements categorized within Level 3 as of October 30, 2020. ​ The following table presents the Company’s liabilities required to be measured at fair value as of October 30, 2020, 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 ​ October 30, ​ (In thousands) ​ (Level 1) ​ (Level 2) ​ (Level 3) ​ 2020 ​ Liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Long-term obligations (a) ​ $ 4,525,226 ​ $ 165,996 ​ $ — ​ $ 4,691,222 ​ Deferred compensation (b) ​ 31,248 ​ — ​ — ​ 31,248 ​ (a) Included in the condensed consolidated balance sheet at book value as Long-term obligations of $ 4,131,573 . (b) Reflected at fair value in the condensed consolidated balance sheet as Accrued expenses and other current liabilities of $ 1,776 and noncurrent Other liabilities of $ 29,472 . ​ 7. Commitments and contingencies Legal proceedings From time to time, the Company is a party to various legal matters in the ordinary course 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. In 2019, the Company recorded an accrual of $ 31.0 million for losses the Company believes are both probable and reasonably estimable relating to certified class actions and associated matters including the matters discussed below under Consumer/Product Litigation. Except as described below and based on information currently available, the Company believes that its pending legal 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. Adverse decisions and settlements, including any required changes to the Company’s business, or other developments in such matters could affect our consolidated operating results in future periods or result in liability or other amounts material to the Company’s annual consolidated financial statements. Consumer/Product Litigation In December 2015 the Company was first notified of several lawsuits in which plaintiffs allege violation of state law, including state consumer protection laws, relating to the labeling, marketing and sale of certain Dollar General private-label motor oil. Each of these lawsuits, as well as additional, similar lawsuits filed after December 2015, was filed in, or removed to, various federal district courts of the United States (collectively “Motor Oil Lawsuits”). 11 On June 2, 2016, the Motor Oil Lawsuits were centralized 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”). In their consolidated amended complaint, the plaintiffs in the Motor Oil MDL sought 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 was granted in part and denied in part on August 3, 2017. To the extent additional consumer lawsuits alleging violation of laws relating to the labeling, marketing and sale of Dollar General private-label motor oil have been or will be filed, the Company expects that such lawsuits will be transferred to the Motor Oil MDL. In May 2017, the Company received a Notice of Proposed Action from the Office of the New Mexico Attorney General (the “New Mexico AG”) which alleges that the Company’s labeling, marketing and sale of certain Dollar General private-label motor oil violated New Mexico law (the “New Mexico Motor Oil Matter”). The State is represented in connection with this matter by counsel for plaintiffs in the Motor Oil MDL. On June 20, 2017, the New Mexico AG filed an action in the First Judicial District Court, County of Santa Fe, New Mexico pertaining to the New Mexico Motor Oil Matter. ( Hector H. Balderas v. Dolgencorp, LLC , Case No. D-101-cv-2017-01562). On May 4, 2020, the Company’s motion to dismiss the action was denied. Trial is scheduled for March 8, 2021. On September 1, 2017, the Mississippi Attorney General (the “Mississippi AG”), who also is represented by the counsel for plaintiffs in the Motor Oil MDL, filed an action in the Chancery Court of the First Judicial District of Hinds County, Mississippi alleging that the Company’s labeling, marketing and sale of certain Dollar General private-label motor oil violated Mississippi law. ( Jim Hood v. Dollar General Corporation , Case No. G2017-1229 T/1) (the “Mississippi Motor Oil Matter”). The Company removed this matter to Mississippi federal court on October 5, 2017, and filed a motion to dismiss the action. The matter was transferred to the Motor Oil MDL and the Mississippi AG moved to remand it to state court. ( Jim Hood v. Dollar General Corporation , N.D. Miss., Case No. 3:17-cv-801-LG-LRA). On May 7, 2019, the Mississippi AG renewed its motion to remand. The Company’s and the Mississippi AG’s above-referenced motions are pending. On January 30, 2018, the Company received a Civil Investigative Demand (“CID”) from the Office of the Louisiana Attorney General (the “Louisiana AG”) requesting information concerning the Company’s labeling, marketing and sale of certain Dollar General private-label motor oil (the “Louisiana Motor Oil Matter”). In response to the CID, the Company filed a petition for a protective order on February 20, 2018 in the 19 th Judicial District Court for the Parish of East Baton Rouge, Louisiana seeking to set aside the CID. ( In re Dollar General Corp. and Dolgencorp, LLC , Case No. 666499). On February 7, 2020, the Company reached an agreement with the Louisiana AG to resolve this matter for an amount that is immaterial to the Company’s consolidated financial statements as a whole. On August 20, 2018, plaintiffs in the MDL moved to certify two nationwide classes relating to their claims of alleged unjust enrichment and breach of implied warranties. In addition, plaintiffs moved to certify a multi-state class relating to their claims of breach of implied warranties and multiple statewide classes relating to alleged unfair trade practices/consumer fraud, unjust enrichment and breach of implied warranty claims. The Company opposed the plaintiffs’ certification motion. On March 21, 2019, the court granted the plaintiffs’ certification motion as to 16 statewide classes regarding claims of unjust enrichment and 16 statewide classes regarding state consumer protection laws. Subsequently, the court certified an additional class, bringing the total to 17 statewide classes. The court denied plaintiffs’ certification motion in all other respects. On June 25, 2019, the United States Court of Appeals for the Eighth Circuit granted the Company’s Petition to Appeal the lower court’s certification rulings. The Company’s appeal remains pending. The parties have reached an agreement in principle to resolve the Motor Oil MDL for an amount that is immaterial to the Company’s consolidated financial statements as a whole. The parties’ agreement must be formalized and submitted to the court for consideration and approval. The Company is vigorously defending these matters and believes that the labeling, marketing and sale of its private-label motor oil comply with applicable federal and state requirements and are not misleading. The Company further believes that these matters are not appropriate for class or similar treatment. At this time, however, except as to the Louisiana Motor Oil Matter, it is not possible to predict whether these matters ultimately will be permitted to proceed as a class or in a similar fashion or the size of any putative class or classes. Likewise, except as to the Louisiana Motor Oil Matter, no assurances can be given that the Company will be successful in its defense of these matters on the merits 12 or otherwise. Based on its belief that a loss in these matters is both probable and reasonably estimable, as noted above, during 2019, the Company recorded an accrual for an amount that is immaterial to the Company’s consolidated financial statements as a whole. ​ 8. Segment reporting ​ The Company manages its business on the basis of one reportable operating segment. As of October 30, 2020, all of the Company’s operations were located within the United States with the exception of certain product sourcing operations, 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 30, ​ November 1, ​ October 30, ​ November 1, ​ (in thousands) 2020 2019 2020 2019 Classes of similar products: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Consumables ​ $ 6,385,315 ​ $ 5,523,157 ​ $ 19,585,114 ​ $ 16,164,317 ​ Seasonal ​ 906,623 ​ 750,843 ​ 2,986,146 ​ 2,341,914 ​ Home products ​ 517,147 ​ 400,934 ​ 1,601,450 ​ 1,151,715 ​ Apparel ​ 390,540 ​ 316,459 ​ 1,159,605 ​ 938,385 ​ Net sales ​ $ 8,199,625 ​ $ 6,991,393 ​ $ 25,332,315 ​ $ 20,596,331 ​ ​ ​ 9. Common stock transactions ​ On August 29, 2012, the Company’s Board of Directors authorized a common stock repurchase program, which the Board has since increased on several occasions. Most recently, on August 26, 2020, the Company’s Board of Directors authorized a $ 2.0 billion increase to the existing common stock repurchase program, bringing the cumulative total to $ 10.0 billion authorized under the program since its inception. The repurchase authorization has no expiration date and allows repurchases from time to time in open market transactions, including pursuant to trading plans adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended, or in privately negotiated transactions. The timing, manner and number of shares repurchased will depend on a variety of factors, including 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 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 39-week periods ended October 30, 2020 and November 1, 2019, the Company repurchased in the open market approximately 8.0 million shares of its common stock at a total cost of $ 1.57 billion and approximately 5.6 million shares of its common stock at a total cost of $ 0.79 billion, respectively. ​ The Company paid a cash dividend of $ 0.36 per share during each of the first three quarters of 2020. On December 2, 2020, the Company’s Board of Directors declared a quarterly cash dividend of $ 0.36 per share, which is payable on or before January 19, 2021 to shareholders of record on January 5, 2021. 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. ​ ​ 13 Report of Independent Registered Public Accounting Firm ​ 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 October 30, 2020, the related condensed consolidated statements of income, comprehensive income, and shareholders’ equity for the thirteen and thirty-nine week periods ended October 30, 2020 and November 1, 2019, the condensed consolidated statements of cash flows for the thirty-nine week periods ended October 30, 2020 and November 1, 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. generally accepted accounting principles. ​ We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of January 31, 2020, the related consolidated statements of income, comprehensive income, shareholders' equity and cash flows for the year then ended, and the related notes (not presented herein); and in our report dated March 19, 2020, we expressed an unqualified audit opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of January 31, 2020, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. ​ Basis for Review Results ​ These financial statements are the responsibility of the Company's management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the SEC and the PCAOB. We conducted our review in accordance with the standards of the PCAOB. A review of interim financial statements consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. ​ ​ ​ /s/ Ernst & Young LLP ​ ​ December 3, 2020 ​ Nashville, Tennessee ​ ​ ​ ​ 14