What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-03-18 compared with 2021-03-19 · 64 added, 156 removed, 558 unchanged (28% of the section changed)

31 unchanged sentences

The undiscounted future claim costs for the workers’ compensation and general liability exposures are estimated using actuarial methods.

Auditing management’s assessment of the recorded self-insurance exposure reserves was complex and judgmental due to the significant assumptions required in projecting the exposure on incurred claims (including those which have not been reported to the Company).

Auditing management’s assessment of the recorded workers’ compensation and general liability self-insurance exposure reserves was complex and judgmental due to the significant assumptions required in projecting the exposure on incurred claims (including those which have not been reported to the Company).

In particular, the estimate was sensitive to significant assumptions such as loss development factors, trend factors, pure loss rates, and projected claim counts.

2 unchanged sentences

For example, we tested controls over the appropriateness of the assumptions management used in the calculation and the completeness and accuracy of the data underlying the reserves.

To test the Company’s determination of the estimated required self-insurance reserves, we performed audit procedures that included, among others, assessing the actuarial valuation methodologies utilized by management, testing the significant assumptions discussed above, testing the completeness and accuracy of the underlying data used by the Company in its evaluation, and testing the mathematical accuracy of the calculations.

To test the Company’s determination of the estimated required workers’ compensation and general liability self-insurance reserves, we performed audit procedures that included, among others, assessing the actuarial valuation methodologies utilized by management, testing the significant assumptions discussed above, testing the completeness and accuracy of the underlying data used by the Company in its evaluation, and testing the mathematical accuracy of the calculations.

We also compared the significant assumptions used by management to industry accepted actuarial assumptions, reassessed the accuracy of management’s historical estimates utilized in prior period evaluations, and utilized an actuarial valuation specialist to assist in assessing the valuation methodologies and significant assumptions used in the valuation analysis, as well as to compare the Company’s recorded reserve to an independently developed range of actuarial reserves.

46 unchanged sentences

Interest expense

Other (income) expense

Income before income taxes

21 unchanged sentences

( 1,193,155 )

( 1,200,376 )

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

Other equity and related transactions

Balances, February 1, 2019

Balances, January 31, 2020

Dividends paid, $ 1.44 per common share

4 unchanged sentences

( 2,466,434 )

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

Other equity and related transactions

28 unchanged sentences

( 1,070,460 )

( 1,027,963 )

Proceeds from sales of property and equipment

1 unchanged sentence

( 1,065,557 )

( 1,024,910 )

Cash flows from financing activities:

16 unchanged sentences

Net increase (decrease) in cash and cash equivalents

( 1,031,748 )

Cash and cash equivalents, beginning of period

10 unchanged sentences

Basis of presentation

These notes contain references to the years 2020, 2019, and 2018, which represent fiscal years ended January 29, 2021, January 31, 2020, and February 1, 2019, respectively.

These notes contain references to the years 2021, 2020, and 2019, which represent fiscal years ended January 28, 2022, January 29, 2021, and January 31, 2020, respectively.

The Company’s 2021, 2020 and 2019 accounting periods were each comprised of 52 weeks.

3 unchanged sentences

The Company sells general merchandise on a retail basis through 18,130 stores (as of January 28, 2022) in 46 states with the greatest concentration of stores in the southern, southwestern, midwestern and eastern United States.

As of January 29, 2021, the Company operated 16 distribution centers for non-refrigerated products, nine cold storage distribution centers, and one combination distribution center which has both refrigerated and non-refrigerated products.

As of January 28, 2022, the Company operated 16 distribution centers for non-refrigerated products, ten cold storage distribution centers, and two combination distribution centers which have both refrigerated and non-refrigerated products.

The Company leases 12 of these facilities and the remainder are owned.

18 unchanged sentences

Under the LIFO inventory method, the impacts of rising or falling market price changes increase or decrease cost of sales (the LIFO provision or benefit).

The Company recorded a LIFO provision (benefit) of $ 5.1 million in 2020, $ 7.0 million in 2019, and $ 25.2 million in 2018, which is included in cost of goods sold in the consolidated statements of income.

The Company recorded a LIFO provision of $ 180.4 million in 2021, $ 5.1 million in 2020, and $ 7.0 million in 2019, which is included in cost of goods sold in the consolidated statements of income.

The Company purchases its merchandise from a wide variety of suppliers.

The Company’s three largest suppliers accounted for approximately 9 %, 8 %, and 8 %, respectively, of the Company’s purchases in 2020.

The Company’s two largest suppliers accounted for approximately 9 % and 8 %, respectively, of the Company’s purchases in 2021.

Vendor rebates

15 unchanged sentences

Less accumulated depreciation and amortization

( 3,591,647 )

( 3,364,333 )

Net property and equipment

2 unchanged sentences

Interest on borrowed funds during the construction of property and equipment is capitalized where applicable.

Interest costs of less than $ 0.1 million, $ 2.7 million, and $ 3.7 million were capitalized in 2020, 2019 and 2018, respectively.

Interest costs of $ 1.2 million, less than $ 0.1 million, and $ 2.7 million were capitalized in 2021, 2020 and 2019, respectively.

Impairment of long-lived assets

25 unchanged sentences

If the carrying amount of an intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.

The Company’s goodwill balance has an indefinite life and is not expected to be deductible for tax purposes.

The Company’s goodwill balance has an indefinite life and is not expected to be deductible for income tax purposes.

Substantially all of the Company’s other intangible assets are its trade names and trademarks which have an indefinite life.

14 unchanged sentences

Pursuant to Tennessee insurance regulations, ARIC maintains certain levels of cash and cash equivalents related to its self-insured exposures.

Effective in 2019, the Company records right of use lease assets and lease liabilities on its balance sheet.

The Company records operating lease right of use assets and liabilities on its balance sheet.

Lease liabilities are recorded at a discount based upon the Company’s estimated collateralized incremental borrowing rate.

2 unchanged sentences

To determine an indicative secured rate, the Company uses the estimated credit spread improvement that would result from an upgrade of one ratings classification by tenor.

Also effective in 2019, the Company records single lease cost on a straight-line basis over the base, non-cancelable lease term commencing on the date that the Company takes physical possession of the property from the landlord, which may include a period prior to the opening of a store or other facility to make any necessary leasehold improvements and install fixtures.

The Company records single lease cost on a straight-line basis over the base, non-cancelable lease term commencing on the date that the Company takes physical possession of the property from the landlord, which may include a period prior to the opening of a store or other facility to make any necessary leasehold improvements and install fixtures.

Any tenant allowances received are recorded as a reduction of the right of use asset.

3 unchanged sentences

The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

For years prior to 2019, rent expense was recognized over the term of the lease.

The Company recorded minimum rental expense on a straight-line basis over the base, non-cancelable lease term commencing on the date that the Company took physical possession of the property from the landlord.

When a lease contained a predetermined fixed escalation of the minimum rent, the Company recognized the related rent expense on a straight-line basis and recorded the difference between the recognized rental expense and the amounts payable under the

lease as deferred rent.

Tenant allowances, to the extent received, were recorded as deferred incentive rent and were amortized as a reduction to rent expense over the term of the lease.

The difference between the calculated expense and the amounts paid result in a liability which was classified in other long-term liabilities in the consolidated balance sheet.

Other liabilities

54 unchanged sentences

Accounting standards

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 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.

Also in August 2018, the FASB 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.

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 prior 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 October 2016, the FASB issued amendments to existing guidance related to accounting for intra-entity transfers of assets other than inventory, which affected the Company’s historical accounting for intra-entity transfers of certain intangible assets.

This guidance was effective for the Company in 2018.

The amendments were 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 adopted this guidance effective February 3, 2018 which resulted in an increase in deferred income tax liabilities and a decrease in retained earnings of $ 41.3 million.

Reclassifications

Certain financial disclosures relating to prior periods have been reclassified to conform to the current year presentation where applicable.

In March 2020 and January 2021, the Financial Accounting Standards Board (“FASB”) issued accounting standards updates pertaining to reference rate reform.

This collective guidance is in response to accounting concerns regarding contract modifications and hedge accounting because of impending rate reform associated with structural risks of interbank offered rates (IBORs), and, particularly, the risk of cessation of LIBOR, related to regulators in several jurisdictions around the world having undertaken reference rate reform initiatives to identify alternative reference rates.

The guidance provides optional expedients and exceptions for applying U.S.

GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

The adoption of this guidance is effective for all entities as of March 12, 2020 through December 31, 2022.

The Company does not expect the adoption of this guidance to have a material impact on its consolidated results of operations, financial position or cash flows.

Earnings per share

11 unchanged sentences

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 options would be antidilutive, were 0.2 million, 0.3 million and 0.8 million in 2020, 2019 and 2018, respectively.

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 options would be antidilutive, were less than 0.1 million, 0.2 million and 0.3 million in 2021, 2020 and 2019, respectively.

The provision (benefit) for income taxes consists of the following:

6 unchanged sentences

The effective income tax rate for 2021 was 21.7 % compared to a rate of 22.0 % for 2020 which represents a net decrease of 0.3 percentage points.

The effective income tax rate was lower in 2021 primarily due to increased income tax benefits associated with federal tax credits partially offset by a higher state effective tax rate compared to 2020.

The effective income tax rate for 2020 was 22.0 % compared to a rate of 22.2 % for 2019 which represents a net decrease of 0.2 percentage points.

The effective income tax rate was lower in 2020 primarily due to increased tax benefits associated with share-based compensation and a larger income tax rate benefit from state taxes offset by a lower income tax rate benefit from federal income tax credits due primarily to higher pre-tax earnings in 2020 compared to 2019.

The effective income tax rate for 2019 was 22.2 % compared to a rate of 21.1 % for 2018 which represents a net increase of 1.1 percentage points.

The effective income tax rate was higher in 2019 primarily due to an increase in income taxes resulting from changes in state income tax laws and federal and state income tax benefits arising from the Tax Cuts and Jobs Act in 2018 that did not reoccur in 2019.

Deferred taxes reflect the effects of temporary differences between carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

10 unchanged sentences

Tax benefit of income tax and interest reserves related to uncertain tax positions

State tax net operating loss carry forwards, net of federal tax

State and foreign tax net operating loss carry forwards, net of federal tax

State tax credit carry forwards, net of federal tax

11 unchanged sentences

The Company has state tax credit carryforwards of approximately $ 7.0 million (net of federal benefit) that will expire beginning in 2022 through 2026 and the Company has approximately $ 18.1 million of state apportioned net operating loss carryforwards, which will begin to expire in 2032 and will continue through 2041 .

The Company established a valuation allowance for the state tax credit carryforwards, in the amount of $ 4.4 million (net of federal benefit) increasing income tax expense in 2017.

In 2019, the Company updated its projections, releasing $ 0.4 million of valuation allowance (net of federal benefit).

Management continues to believe that results from operations will not generate sufficient taxable income to realize the remaining state tax credits before they expire, and therefore made no adjustment to the valuation allowance in 2020.

The Company has a valuation allowance for certain state tax credit carryforwards and foreign net operating loss carryforwards, in the amount of $ 5.2 million and $ 4.1 million (net of federal benefit) which increased income tax expense by $ 1.1 million and $ 0.0 million in 2021 and 2020, respectively.

Management believes that the results from operations will not generate sufficient taxable income to realize these deferred tax assets in the near future.

Management believes that it is more likely than not that the Company’s results of operations and its existing deferred tax liabilities will generate sufficient taxable income to realize the remaining deferred tax assets.

4 unchanged sentences

As of January 28, 2022, accruals for uncertain tax benefits, interest expense related to income taxes and potential income tax penalties were $ 6.2 million, $ 0.2 million and $ 0.0 million, respectively, for a total of $ 6.4 million.

As of January 31, 2020, accruals for uncertain tax benefits, interest expense related to income taxes and

potential income tax penalties were $ 5.1 million, $ 0.4 million and $ 0.0 million, respectively, for a total of $ 5.5 million.

As of January 29, 2021, accruals for uncertain tax benefits, interest expense related to income taxes and potential income tax penalties were $ 7.5 million, $ 0.5 million and $ 0.0 million, respectively, for a total of $ 8.0 million.

These totals are reflected in noncurrent Other liabilities in the consolidated balance sheets.

26 unchanged sentences

The depreciable life of leasehold improvements is limited by the expected lease term.

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 consolidated balance sheet.

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

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 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 consolidated balance sheets.

At January 28, 2022, the weighted-average remaining lease term for the Company’s leases was 9.7 years, and the weighted average discount rate was 3.7 %.

For 2020 and 2019, operating lease cost of $ 1.38 billion and $ 1.27 billion, respectively, were reflected as selling, general and administrative expenses in the consolidated statements of income.

Cash paid for amounts included in the measurement of operating lease liabilities of $ 1.39 billion and $ 1.28 billion, respectively, were reflected in cash flows from operating activities in the consolidated statement of cash flows for 2020 and 2019.

For 2021, 2020 and 2019, operating lease cost of $ 1.49 billion, $ 1.38 billion and $ 1.27 billion, respectively, and variable lease cost of $ 0.28 billion, $ 0.26 billion and $ 0.23 billion, respectively, were reflected as selling, general and administrative expenses in the consolidated statements of income.

Cash paid for amounts included in the measurement of operating lease liabilities of $ 1.50 billion, $ 1.39 billion and $ 1.28 billion, respectively, were reflected in cash flows from operating activities in the consolidated statements of cash flows for 2021, 2020 and 2019.

The scheduled maturity of the Company’s operating lease liabilities is as follows:

5 unchanged sentences

a) Excludes approximately $ 0.7 billion of legally binding minimum lease payments for leases signed which have not yet commenced .

Rent expense under all operating leases in 2018, prior to the adoption of current lease accounting guidance, included minimum rentals of $ 1.15 billion and contingent rentals of $ 4.7 million.

Current and long-term obligations

6 unchanged sentences

4.125 % Senior Notes due May 1, 2028 (net of discount of $ 336 and $ 383 )

3.500 % Senior Notes due April 3, 2030 (net of discount of $ 623 )

4.125 % Senior Notes due April 3, 2050 (net of discount of $ 4,945 )

3.500 % Senior Notes due April 3, 2030 (net of discount of $ 564 and $ 623 )

4.125 % Senior Notes due April 3, 2050 (net of discount of $ 4,857 and $ 4,945 )

Unsecured commercial paper notes

Debt issuance costs, net

At January 29, 2021, the Company maintained a $ 1.25 billion senior unsecured revolving credit facility (the “Revolving Facility”) that provides for the issuance of letters of credit up to $ 175.0 million and is scheduled to mature on September 10, 2024.

The Company amended and extended its existing senior unsecured revolving credit facility (the “Revolving Facility”) on December 2, 2021.

At January 28, 2022, the Revolving Facility had a commitment of $ 2.0 billion that provides for the issuance of letters of credit up to $ 100.0 million and is scheduled to mature on December 2, 2026.

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 Revolving Facility includes customary LIBOR replacement provisions.

The applicable interest rate margin for borrowings as of January 28, 2022 was 1.015 % for LIBOR borrowings and 0.015 % for base-rate borrowings.

7 unchanged sentences

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.

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 January 28, 2022, the Company was in compliance with all such covenants.

The Revolving Facility also contains customary events of default.

On June 11, 2018, the Company voluntarily prepaid the entire $ 175.0 million outstanding balance of its senior unsecured term loan facility and recognized an associated loss of $ 1.0 million which is reflected in Other (income) expense in the consolidated statement of income for the year ended February 1, 2019.

As of January 28, 2022, the Company had no outstanding borrowings, outstanding letters of credit of $ 1.9 million, and borrowing availability of $ 2.0 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 $ 1.76 billion.

1 unchanged sentence

As of January 28, 2022, 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 $ 2.0 billion outstanding at any time.

The CP Notes have maturities of up to 364 days from the date of issue and rank equal in right of payment with all of the Company’s other unsecured and unsubordinated indebtedness.

The 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 January 29, 2021, the Company’s consolidated balance sheet reflected no outstanding 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 consolidated balance sheet.

As of January 28, 2022, the Company’s consolidated balance sheet reflected outstanding CP Notes of $ 54.3 million.

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

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.

2 unchanged sentences

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

On April 10, 2018, the Company issued $ 500.0 million aggregate principal amount of 4.125 % senior notes due 2028 (the “2028 Senior Notes”), net of discount of $ 0.5 million, which are scheduled to mature on May 1, 2028.

Interest on the 2028 Senior Notes is payable in cash on May 1 and November 1 of each year.

The Company incurred $ 4.4 million of debt issuance costs associated with the issuance of the 2028 Senior Notes.

Effective April 15, 2018, the Company redeemed $ 400.0 million aggregate principal amount of outstanding 1.875 % senior notes due 2018 (the “2018 Senior Notes”).

There was no gain or loss associated with the redemption.

The Company funded the redemption price for the 2018 Senior Notes with proceeds from the issuance of the 2028 Senior Notes.

Collectively, the Company’s Senior Notes due 2023, 2025, 2027, 2028, 2030 and 2050 comprise the “Senior Notes”, each of which were issued pursuant to an indenture as supplemented and amended by supplemental indentures relating to each series of Senior Notes (as so supplemented and amended, the “Senior Indenture”).

5 unchanged sentences

The Senior Indenture also provides for events of default which, if any of them occurs, would permit or require the principal of and accrued interest on the Senior Notes to become or to be declared due and payable, as applicable.

During the second quarter of 2021, the Company entered into interest rate swaps on a portion of the 2030 Senior Notes.

These interest rate swaps are being accounted for as fair value hedges, with the derivative asset or liability offset by a corresponding adjustment to the carrying value of the 2030 Senior Notes.

Such arrangements are not material to the Company’s consolidated financial statements.

Scheduled debt maturities at January 28, 2022 for the Company’s fiscal years listed below are as follows (in thousands):

21 unchanged sentences

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.

In 2019, the Company recorded an accrual of $ 31.0 million, an amount that is immaterial to the Company’s consolidated financial statements, for probable and reasonably estimable losses relating to certain significant legal matters, including certified class action and associated matters.

The majority of the legal matters related to the 2019 accrual have been resolved, and the Company does not believe that any remaining related matters will result in liability that is material to the Company’s annual consolidated financial statements.

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”).

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.

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.

On August 20, 2018, plaintiffs in the Motor Oil 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, which was submitted to the court for preliminary approval on February 5, 2021, to resolve the Motor Oil MDL for an amount that is immaterial to the Company’s consolidated financial statements as a whole.

The final fairness hearing is scheduled for June 22, 2021.

At this time, although probable, it is not certain that the court will grant final approval to the settlement.

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.

Dolgencorp, LLC , Case No.

D-101-cv-2017-01562).

The parties have reached an agreement in principle to resolve the New Mexico Motor Oil Matter for an amount that is immaterial to the Company’s consolidated financial statements as a whole.

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.

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.

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 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.

Adverse decisions and settlements, including any required changes to the Company’s business, or other developments in such matters could affect the consolidated operating results in future periods or result in liability or other amounts material to the Company’s annual consolidated financial statements.

Benefit plans

12 unchanged sentences

Forfeitures are estimated at the time of valuation and reduce expense ratably over the vesting period.

On July 6, 2007, the Company’s Board of Directors adopted the 2007 Stock Incentive Plan, which was subsequently amended and restated on several occasions (as so amended and restated, the “Plan”).

The Plan allows the granting of stock options, stock appreciation rights, and other stock-based awards or dividend equivalent rights to key employees, directors, consultants or other persons having a service relationship with the Company, its subsidiaries and certain of its affiliates.

On May 26, 2021, the Company’s shareholders approved the Dollar General Corporation 2021 Stock Incentive Plan (“2021 Plan”), which replaced the Company’s 2007 Stock Incentive Plan (“2007 Plan”).

The Plans allow the granting of stock options, stock appreciation rights, and other stock-based awards or dividend equivalent rights to key employees, directors, consultants or other persons having a service relationship with the Company, its subsidiaries and certain of its affiliates.

Upon the effective date of the 2021 Plan, no new awards may be granted under the 2007 Plan.

Awards previously granted under the 2007 Plan remain outstanding in accordance with their terms.

The number of shares of Company common stock authorized for grant under the 2021 Plan is 11,838,143 .

4 unchanged sentences

With limited exceptions, the performance share unit and restricted stock unit awards are payable in shares of common stock on the vesting date.

The weighted average for key assumptions used in determining the fair value of all stock options granted in the years ended January 29, 2021, January 31, 2020, and February 1, 2019, and a summary of the methodology applied to develop each assumption, are as follows:

The weighted average for key assumptions used in determining the fair value of all stock options granted in the years ended January 28, 2022, January 29, 2021, and January 31, 2020, and a summary of the methodology applied to develop each assumption, are as follows:

Expected dividend yield

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An increase in the dividend yield will decrease compensation expense.

Expected stock price volatility - This is a measure of the amount by which the price of the Company’s common stock has fluctuated or is expected to fluctuate.

Expected stock price volatility - This is a measure of the amount by which the price of the Company’s common stock has fluctuated or is expected to fluctuate, calculated based upon historical volatility.

An increase in the expected volatility will increase compensation expense.

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Balance, January 29, 2021

( 1,042,403 )

Canceled or expired

Balance, January 28, 2022

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Year ended January 29, 2021

Year ended February 1, 2019

Year ended January 31, 2020

Segment reporting

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See Note 1 for a brief description of the Company’s business.

As of January 29, 2021, 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 consolidated financial statements.

As of January 28, 2022, all of the Company’s retail store operations were located within the United States.

Certain product sourcing and other operations are located outside the United States, which collectively are not material with regard to assets, results of operations or otherwise to the consolidated financial statements.

The following net sales data is presented in accordance with accounting standards related to disclosures about segments of an enterprise.

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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.

On March 17, 2021, the Company’s Board of Directors authorized a $ 2.0 billion increase to the existing common stock repurchase program, bringing the cumulative total authorized under the program since its inception to $ 12.0 billion.

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.

On December 1, 2021, the Company’s Board of Directors authorized a $ 2.0 billion increase to the existing common stock repurchase program, bringing the cumulative total authorized under the program since its inception to $ 14.0 billion.

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.

During the years ended January 29, 2021, January 31, 2020, and February 1, 2019, the Company repurchased approximately 12.3 million shares of its common stock at a total cost of $ 2.5 billion, approximately 8.3 million shares of its common stock at a total cost of $ 1.2 billion, and approximately 9.9 million shares of its common stock at a total cost of $ 1.0 billion, respectively, pursuant to its common stock repurchase program.

During the years ended January 28, 2022, January 29, 2021, and January 31, 2020, the Company repurchased approximately 12.1 million shares of its common stock at a total cost of $ 2.5 billion, approximately 12.3 million shares of its common stock at a total cost of $ 2.5 billion, and approximately 8.3 million shares of its common stock at a total cost of $ 1.2 billion, respectively, pursuant to its common stock repurchase program.

The Company paid quarterly cash dividends of $ 0.42 per share in 2021.

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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.

Quarterly financial data (unaudited)

The following is selected unaudited quarterly financial data for the fiscal years ended January 29, 2021 and January 31, 2020.

Each quarterly period listed below was a 13 -week accounting period.

The sum of the four quarters for any given year may not equal annual totals due to rounding.

(In thousands)

Operating profit

Basic earnings per share

Diluted earnings per share

(In thousands)

Operating profit

Basic earnings per share

Diluted earnings per share

Approximately midway into the first quarter of 2020, the Company began seeing heightened demand from customers, particularly for consumable products, which continued in varying degrees throughout the balance of the year.

As the first quarter of 2020 progressed, the Company experienced a significant increase in demand in many non-consumable products.

This increased overall customer demand significantly benefited the Company’s results of operations, and in particular, net sales, gross profit, operating income and net income for each quarter of fiscal 2020.

Although the Company incurred additional payroll related expenses, increased distribution and transportation costs, as well as other costs throughout fiscal 2020 to meet the significant customer demand and to protect the health and safety of employees and customers, these costs were more than offset by the incremental sales.

In the second quarter of 2019, the Company incurred expenses for losses the Company believes are both probable and reasonably estimable relating to certified class actions and associated legal matters totaling $ 31.0 million ($ 24.1 million net of tax, or $ 0.09 per diluted share), which was recognized in Selling, general and administrative expense in the second quarter of 2019.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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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-K

Item 8. Financial Statements and Supplementary Data