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Item 8. Financial Statements and Supplementary Data

2023-03-24 compared with 2022-03-18 · 118 added, 84 removed, 538 unchanged (27% of the section changed)

4 unchanged sentences

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Dollar General Corporation and subsidiaries (the Company) as of January 28, 2022 and January 29, 2021, the related consolidated statements of income, comprehensive income, shareholders' equity and cash flows for each of the three years in the period ended January 28, 2022, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at January 28, 2022 and January 29, 2021, and the results of its operations and its cash flows for each of the three years in the period ended January 28, 2022, in conformity with U.S.

We have audited the accompanying consolidated balance sheets of Dollar General Corporation and subsidiaries (the Company) as of February 3, 2023 and January 28, 2022, the related consolidated statements of income, comprehensive income, shareholders' equity and cash flows for each of the three years in the period ended February 3, 2023, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at February 3, 2023 and January 28, 2022, and the results of its operations and its cash flows for each of the three years in the period ended February 3, 2023, in conformity with U.S.

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of January 28, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated March 18, 2022, expressed an unqualified opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of February 3, 2023, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated March 24, 2023, expressed an unqualified opinion thereon.

Basis for Opinion

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The Company records expenses and reserves for workers’ compensation matters related to alleged work-related employee accidents and injuries, as well as general liability matters related to alleged non-employee incidents and injuries.

At January 28, 2022, the Company’s reserves for self-insurance risks were $257.4 million, which includes workers’ compensation and general liability reserves.

At February 3, 2023, the Company’s reserves for self-insurance risks were $274.8 million, which includes workers’ compensation and general liability reserves.

As discussed in Note 1 of the consolidated financial statements, the Company retains a significant portion of risk related to its workers’ compensation and general liability exposures.

2 unchanged sentences

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.

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

How We Addressed the Matter in Our Audit

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Common stock;

$ 0.875 par value, 1,000,000 shares authorized, 230,016 and 240,785 shares issued and outstanding at January 28, 2022 and January 29, 2021, respectively

$ 0.875 par value, 1,000,000 shares authorized, 219,105 and 230,016 shares issued and outstanding at February 3, 2023 and January 28, 2022, respectively

Additional paid-in capital

Retained earnings

Accumulated other comprehensive loss

Accumulated other comprehensive income (loss)

Total shareholders’ equity

9 unchanged sentences

Interest expense

Other (income) expense

Income before income taxes

8 unchanged sentences

For the Year Ended

Unrealized net gain (loss) on hedged transactions, net of related income tax expense (benefit) of $ 346 , $ 346 , and $ 345 , respectively

Unrealized net gain (loss) on hedged transactions and currency translation, net of related income tax expense (benefit) of $ 353 , $ 346 , and $ 346 , respectively

Comprehensive income

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Comprehensive

Balances, February 1, 2019

Income (Loss)

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

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Dividends paid, $ 2.20 per common share

Unrealized net gain (loss) on hedged transactions

Unrealized net gain (loss) on hedged transactions and currency translation

Share-based compensation expense

2 unchanged sentences

( 2,748,014 )

Excise tax incurred on common stock repurchases

Other equity and related transactions

Balances, January 28, 2022

Balances, February 3, 2023

The accompanying notes are an integral part of the consolidated financial statements.

11 unchanged sentences

Merchandise inventories

( 1,665,352 )

Prepaid expenses and other current assets

6 unchanged sentences

( 1,070,460 )

( 1,027,963 )

Proceeds from sales of property and equipment

2 unchanged sentences

( 1,065,557 )

( 1,024,910 )

Cash flows from financing activities:

14 unchanged sentences

( 1,714,992 )

( 1,450,680 )

Net increase (decrease) in cash and cash equivalents

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Basis of presentation

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.

These notes contain references to the years 2022, 2021, and 2020, which represent fiscal years ended February 3, 2023, January 28, 2022, and January 29, 2021, respectively.

The Company’s 2022 accounting period was comprised of 53 weeks, and the 2021 and 2020 accounting periods were each comprised of 52 weeks.

The Company’s fiscal year ends on the Friday closest to January 31.

1 unchanged sentence

Intercompany transactions have been eliminated.

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 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 sells general merchandise on a retail basis through 19,104 stores (as of February 3, 2023) in 47 states with the greatest concentration of stores in the southern, southwestern, midwestern and eastern United States.

As of February 3, 2023, the Company operated 19 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 14 of these facilities and the remainder are owned.

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The carrying amounts of these items are a reasonable estimate of their fair value due to the short maturity of these investments.

Payments due from processors for electronic tender transactions classified as cash and cash equivalents totaled approximately $ 133.9 million and $ 125.3 million at January 28, 2022 and January 29, 2021, respectively.

Payments due from processors for electronic tender transactions classified as cash and cash equivalents totaled approximately $ 157.3 million and $ 133.9 million at February 3, 2023 and January 28, 2022, respectively.

Investments in debt and equity securities

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Costs directly associated with warehousing and distribution are capitalized into inventory.

The excess of current cost over LIFO cost was approximately $ 296.3 million and $ 115.9 million at January 28, 2022 and January 29, 2021, respectively.

The excess of current cost over LIFO cost was approximately $ 813.6 million and $ 296.3 million at February 3, 2023 and January 28, 2022, respectively.

Current cost is determined using the RIM on a first-in, first-out basis.

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 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 recorded a LIFO provision of $ 517.3 million in 2022,

$ 180.4 million in 2021, and $ 5.1 million in 2020, 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.

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Prepaid expenses and other current assets

Prepaid expenses and other current assets include prepaid amounts for maintenance, business licenses, advertising, and insurance, and amounts receivable for certain vendor rebates (primarily those expected to be collected in cash) and coupons.

Prepaid expenses and other current assets include amounts receivable for certain vendor rebates and other miscellaneous receivables (primarily those expected to be collected in cash), and prepaid amounts for SAAS fees, maintenance, business licenses and insurance.

Property and equipment

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

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

Interest costs of $ 4.8 million, $ 1.2 million, and less than $ 0.1 million were capitalized in 2022, 2021 and 2020, respectively.

Impairment of long-lived assets

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Generally, the Company’s policy is to review for impairment stores open more than three years for which current cash flows from operations are negative.

Impairment results when the carrying value of the assets exceeds the undiscounted future cash flows expected to be generated by the assets.

The Company’s estimate of undiscounted future cash flows is based upon historical operations of the stores and estimates of future store profitability which encompasses many factors that are subject

to variability and difficult to predict.

Impairment results when the carrying value of the assets exceeds the undiscounted future cash flows expected to be

generated by the assets.

If a long-lived asset is found to be impaired, the amount recognized for impairment is equal to the difference between the carrying value and the asset’s estimated fair value.

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

Noncurrent Other assets consist primarily of qualifying prepaid expenses for maintenance, beer and wine licenses, and utility, security and other deposits.

Noncurrent Other assets consist primarily of investments and qualifying prepaid expenses for maintenance, and utility and other deposits.

Accrued expenses and other liabilities

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Other liabilities

(In thousands)

Self-insurance reserves

Payroll tax liabilities

Other liabilities primarily consists of self-insurance which equaled $ 137.8 million in 2022 and $ 129.7 million in 2021.

Fair value accounting

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The liability for gift cards is established for the cash value at the time of purchase of the gift card.

The liability for outstanding gift cards was approximately $ 9.7 million and $ 8.2 million at January 28, 2022 and January 29, 2021, respectively, and is recorded in Accrued expenses and other liabilities.

The liability for outstanding gift cards was approximately $ 10.7 million and $ 9.7 million at February 3, 2023 and January 28, 2022, respectively, and is recorded in Accrued expenses and other liabilities.

Estimated breakage revenue, a percentage of gift cards that will never be redeemed based on historical redemption rates, is recognized over time in proportion to actual gift card redemptions.

2 unchanged sentences

Advertising costs are expensed upon performance, “first showing” or distribution, and are reflected in SG&A expenses net of earned cooperative advertising amounts provided by vendors which are specific, incremental and otherwise qualifying expenses related to the promotion or sale of vendor products for dollar amounts up to but not exceeding actual incremental costs.

Advertising costs were $ 117.2 million, $ 107.4 million and $ 91.0 million in 2021, 2020 and 2019, respectively.

Advertising costs were $ 126.0 million, $ 117.2 million and $ 107.4 million in

2022, 2021 and 2020, respectively.

These costs primarily include promotional circulars, targeted circulars supporting new stores, television and radio advertising, and in-store signage.

23 unchanged sentences

Management estimates

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods.

consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods.

Actual results could differ from those estimates.

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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.

In September 2022, the FASB issued new required disclosures for supplier finance programs.

This is intended to enhance the transparency about the use of supplier finance programs for investors.

The amendments are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, with the exception of the disclosure of rollforward information, which is effective for fiscal years beginning after December 15, 2023.

Early adoption is permitted.

The amendments should be applied retrospectively to each period in which a balance sheet is presented, except for disclosure of rollforward information, which should be applied prospectively.

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

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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 less than 0.1 million, 0.2 million and 0.3 million in 2021, 2020 and 2019, 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 approximately 0.1 million, 0.1 million and 0.2 million in 2022, 2021 and 2020, respectively.

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

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Jobs credits, net of federal income taxes

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 2022 was 22.5 % compared to a rate of 21.7 % for 2021 which represents a net increase of 0.8 percentage points.

The effective income tax rate was higher in 2022 primarily due to decreased income tax benefits associated with stock-based compensation compared to 2021.

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 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.

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.

23 unchanged sentences

Net deferred tax liabilities

( 1,060,906 )

The Company has state tax credit carryforwards of approximately $ 7.8 million (net of federal benefit) that will expire beginning in 2023 through 2027 and the Company has approximately $ 13.5 million of state apportioned net operating loss carryforwards, which will begin to expire in 2029 and will continue through 2041 .

The Company has a valuation allowance for certain state tax credit carryforwards and foreign net operating loss carryforwards, in the amount of $ 9.0 million and $ 5.2 million (net of federal benefit) which increased income tax expense by $ 3.8 million and $ 1.1 million in 2022 and 2021, 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 the results from operations will not generate sufficient taxable income to realize these deferred tax assets before they expire.

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.

3 unchanged sentences

Generally, with few exceptions, the Company’s 2019 and later tax years remain open for examination by the various state taxing authorities.

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 February 3, 2023, accruals for uncertain tax benefits, interest expense related to income taxes and potential income tax penalties were $ 8.0 million, $ 0.3 million and $ 0.0 million, respectively, for a total of $ 8.3 million.

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

The Company’s reserve for uncertain tax positions is expected to be reduced by $ 1.7 million in the coming twelve months as a result of expiring statutes of limitations.

As of January 28, 2022 and January 29, 2021, approximately $ 6.2 million and $ 7.5 million, respectively, of the 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 Company’s reserve for uncertain tax positions is expected to be reduced by $ 2.4 million in the coming twelve months as a result of expiring statutes of limitations or settlements.

As of February 3, 2023 and January 28, 2022, approximately $ 8.0 million and $ 6.2 million, respectively, of the 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 amounts associated with uncertain tax positions included in income tax expense consists of the following:

3 unchanged sentences

Income tax related penalty expense (benefit)

A reconciliation of the uncertain income tax positions from February 2, 2019 through January 28, 2022 is as follows:

A reconciliation of the uncertain income tax positions from January 31, 2020 through February 3, 2023 is as follows:

(In thousands)

5 unchanged sentences

Ending balance

As of January 28, 2022, 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 February 3, 2023, the Company’s primary leasing activities were real estate leases for most of its retail store locations and certain of its distribution facilities.

Many of the Company’s store locations are subject to build-to-suit arrangements with landlords which typically carry a primary lease term of up to 15 years .

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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 %.

At February 3, 2023, the weighted-average remaining lease term for the Company’s leases was 9.6 years, and the weighted average discount rate was 3.9 %.

For 2022, 2021 and 2020, operating lease cost of $ 1.61 billion, $ 1.49 billion and $ 1.38 billion, respectively, and variable lease cost of $ 0.31 billion, $ 0.28 billion and $ 0.26 billion, respectively, were reflected as selling, general and administrative expenses in the consolidated statements of income.

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Present value of lease liabilities

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

a) Excludes approximately $ 481.0 million of legally binding minimum lease payments for leases signed which have not yet commenced .

Current and long-term obligations

2 unchanged sentences

Revolving Facility

364-Day Revolving Facility

3.250 % Senior Notes due April 15, 2023 (net of discount of $ 0 and $ 319 )

4.250 % Senior Notes due September 20, 2024 (net of discount of $ 563 and $ 0 )

4.150 % Senior Notes due November 1, 2025 (net of discount of $ 249 and $ 332 )

3.875 % Senior Notes due April 15, 2027 (net of discount of $ 207 and $ 251 )

4.625 % Senior Notes due November 1, 2027 (net of discount of $ 495 and $ 0 )

4.125 % Senior Notes due May 1, 2028 (net of discount of $ 287 and $ 336 )

3.500 % Senior Notes due April 3, 2030 (net of discount of $ 504 and $ 564 )

5.000 % Senior Notes due November 1, 2032 (net of discount of $ 2,346 and $ 0 )

4.125 % Senior Notes due April 3, 2050 (net of discount of $ 4,766 and $ 4,857 )

5.500 % Senior Notes due November 1, 2052 (net of discount of $ 292 and $ 0 )

Unsecured commercial paper notes

Debt issuance costs, net

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.

Long-term obligations

At February 3, 2023, the existing senior unsecured revolving credit facility (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) Adjusted Term SOFR (which is Term SOFR (as published by CME Group Benchmark Administration Limited) plus a credit spread adjustment of 0.10 % or (b) a base rate (which is usually equal to the prime rate).

The applicable interest rate margin for borrowings as of February 3, 2023 was 1.015 % for Adjusted Term SOFR 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 January 28, 2022, the facility fee rate was 0.11 %.

As of February 3, 2023, 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:

The Company entered into a 364-day $ 750 million unsecured revolving credit facility (the “364-Day Revolving Facility”) on January 31, 2023, which will expire on January 30, 2024.

At February 3, 2023, the 364-Day Revolving Facility had no outstanding borrowing.

Borrowings under the 364-Day Revolving Facility bear interest at a rate equal to an applicable interest rate margin plus, at the Company’s option, either (a) Adjusted Term SOFR (which is Term SOFR (as published by CME Group Benchmark Administration Limited) plus a credit spread adjustment of 0.10 % ) or (b) a base rate (which is usually equal to the prime rate).

The Company is also required to pay a facility fee to the lenders under the 364-Day Revolving Facility for any used and unused commitments.

As of February 3, 2023, the applicable interest rate margin for Adjusted Term SOFR loans was 1.035 % and the facility fee rate was 0.09 %.

The applicable interest rate margins for borrowings and the facility fees under the 364-Day Revolving Facility are subject to adjustment from time to time based on the Company’s long-term senior unsecured debt ratings.

The Revolving Facility and the 364-Day Revolving Facility contain a number of customary affirmative and negative covenants that, among other things, restrict, subject to certain exceptions, the Company’s (and its subsidiaries’) ability to:

incur additional liens;

2 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.

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

The Revolving Facility also contains customary events of default.

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.

The Revolving Facility and the 364-Day Revolving Facility also contain financial covenants which require the maintenance of a minimum fixed charge coverage ratio and a maximum leverage ratio.

As of February 3, 2023, the Company was in compliance with all such covenants.

Both facilities also contain customary events of default.

As of February 3, 2023, the Company had no outstanding borrowings, no outstanding letters of credit, 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 liquidity of $ 0.3 billion.

As of February 3, 2023, under the 364-Day Revolving Facility, the Company had no outstanding borrowings and borrowing availability of $ 750 million.

At February 3, 2023, the Company had combined availability under the credit facilities of $ 1.0 billion.

In addition, the Company had outstanding letters of credit of $ 39.7 million which were issued pursuant to separate agreements.

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.

As of February 3, 2023, 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 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 28, 2022, the Company’s consolidated balance sheet reflected outstanding CP Notes of $ 54.3 million.

As of February 3, 2023, the Company’s consolidated balance sheet reflected outstanding CP Notes of $ 1.5 billion.

CP Notes totaling $ 230.8 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.

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.

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

On September 20, 2022, the Company issued $ 750.0 million aggregate principal amount of 4.25 % senior notes due 2024 (the “2024 Senior Notes”), net of discount of $ 0.7 million, $ 550.0 million aggregate principal amount of 4.625 % senior notes due 2027 (the “November 2027 Senior Notes”), net of discount of $ 0.5 million, $ 700.0 million aggregate principal amount of 5.0 % senior notes due 2032 (the “2032 Senior Notes”), net of discount of $ 2.4 million, and $ 300.0 million aggregate principal amount of 5.50 % senior notes due 2052 (the “2052 Senior Notes”), net of discount of $ 0.3 million.

The 2024 Senior Notes are scheduled to mature on September 20, 2024, the November 2027 Senior Notes are scheduled to mature on November 1, 2027, the 2032 Senior Notes are scheduled to mature on November 1, 2032 and the 2052 Senior Notes are scheduled to mature on November 1, 2052.

Interest on the 2024 Senior Notes is payable in cash on March 20 and September 20 of each year, commencing on March 20, 2023.

Interest on the November 2027 Senior Notes, the 2032 Senior Notes and the 2052 Senior Notes is payable in cash on May 1 and November 1 of each year, commencing on May 1, 2023.

The Company incurred $ 16.5 million of debt issuance costs associated with the issuance of the 2024 Senior Notes, November 2027 Senior Notes, 2032 Senior Notes and 2052 Senior Notes.

Collectively, the Company’s Senior Notes due 2024, 2025, April 2027, November 2027, 2028, 2030, 2032, 2050 and 2052 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”).

The Company may redeem some or all of its Senior Notes at any time at redemption prices set forth in the Senior Indenture.

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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):

Scheduled debt maturities at February 3, 2023 for the Company’s fiscal years listed below are as follows (in thousands):

2023 - $ 1,516,478 ;

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Assets and liabilities measured at fair value

The following table presents the Company’s assets and liabilities required to be measured at fair value as of January 28, 2022, aggregated by the level in the fair value hierarchy within which those measurements are classified.

The following table presents the Company’s assets and liabilities required to be measured at fair value as of February 3, 2023, aggregated by the level in the fair value hierarchy within which those measurements are classified.

Quoted Prices

6 unchanged sentences

The carrying amounts reflected in the consolidated balance sheets for cash, cash equivalents, short-term investments, receivables and payables approximate their respective fair values.

The Company does not have any recurring fair value measurements using significant unobservable inputs (Level 3) as of January 28, 2022.

The Company does not have any recurring fair value measurements using significant unobservable inputs (Level 3) as of February 3, 2023.

Commitments and contingencies

3 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, 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.

On January 20, 2023, a lawsuit entitled Brent Conforti, et al.

Owen, et al .

was filed in the United States District Court for the Middle District of Tennessee (Case No.

3:23-CV-00059) (“ Conforti ”) in which the plaintiff shareholder, purportedly on behalf and for the benefit of the Company, alleges that each of the Company’s directors violated their fiduciary duties by failing to implement and maintain a system of controls regarding the Company’s workplace safety practices.

The plaintiff also alleges corporate waste and, as to the Company’s former CEO, Mr.

Vasos, unjust enrichment.

On February 13, 2023, the plaintiff amended the complaint to add breach of fiduciary duty allegations against certain officers of the Company, including Messrs.

Owen, Vasos, Garratt, Sunderland and Wenkoff and Mss.

Taylor and Elliott, and to expand the unjust enrichment claim to include all individual director and officer defendants (the “Individual Defendants”).

The plaintiff seeks both non-monetary and monetary relief for the benefit of the Company.

The Company and the Individual Defendants intend to seek dismissal of the Conforti action.

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.

25 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 28, 2022, January 29, 2021, and January 31, 2020, 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 February 3, 2023, January 28, 2022, and January 29, 2021, and a summary of the methodology applied to develop each assumption, are as follows:

Expected dividend yield

11 unchanged sentences

An increase in the expected term will increase compensation expense.

A summary of the Company’s stock option activity during the year ended January 28, 2022 is as follows:

A summary of the Company’s stock option activity during the year ended February 3, 2023 is as follows:

(Intrinsic value amounts reflected in thousands)

1 unchanged sentence

Balance, January 28, 2022

( 1,042,403 )

Canceled or expired

Balance, January 28, 2022

Exercisable at January 28, 2022

Balance, February 3, 2023

Exercisable at February 3, 2023

The weighted average grant date fair value per share of options granted was $ 52.06 , $ 42.89 and $ 34.60 during 2022, 2021 and 2020, respectively.

1 unchanged sentence

The number of performance share unit awards earned is based upon the Company’s financial performance as specified in the award agreement.

A summary of performance share unit award activity during the year ended January 28, 2022 is as follows:

A summary of performance share unit award activity during the year ended February 3, 2023 is as follows:

(Intrinsic value amounts reflected in thousands)

1 unchanged sentence

Converted to common stock

Balance, January 28, 2022

All performance share unit awards at January 28, 2022 are unvested, and the number of such awards which will ultimately vest will be based in part on the Company’s financial performance in future years.

Balance, February 3, 2023

All performance share unit awards at February 3, 2023 are unvested, and the number of such awards which will ultimately vest will be based in part on the Company’s financial performance in future years.

The weighted average grant date fair value per share of performance share units granted was $ 214.25 , $ 193.55 and $ 154.53 during 2022, 2021 and 2020, respectively.

A summary of restricted stock unit award activity during the year ended January 28, 2022 is as follows:

A summary of restricted stock unit award activity during the year ended February 3, 2023 is as follows:

(Intrinsic value amounts reflected in thousands)

1 unchanged sentence

Converted to common stock

Balance, January 28, 2022

Balance, February 3, 2023

The weighted average grant date fair value per share of restricted stock units granted was $ 223.51 , $ 193.76 and $ 155.73 during 2022, 2021 and 2020, respectively.

At January 28, 2022, the total unrecognized compensation cost related to unvested stock-based awards was $ 87.4 million with an expected weighted average expense recognition period of 1.8 years.

At February 3, 2023, the total unrecognized compensation cost related to unvested stock-based awards was $ 119.6 million with an expected weighted average expense recognition period of 2.1 years.

The fair value method of accounting for share-based awards resulted in share-based compensation expense (a component of SG&A expenses) and a corresponding reduction in income before and net of income taxes as follows:

(In thousands)

Year ended January 28, 2022

Year ended February 3, 2023

Year ended January 28, 2022

3 unchanged sentences

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

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

As of February 3, 2023, 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.

5 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.

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.

On August 24, 2022, 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 $ 16.0 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.

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 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.

Repurchases under the program may be funded from available cash or borrowings including under the Company’s Revolving Facility, 364-Day Revolving Facility and issuance of CP Notes discussed in further detail in Note 5.

During the years ended February 3, 2023, January 28, 2022, and January 29, 2021, the Company repurchased approximately 11.6 million shares of its common stock at a total cost of $ 2.7 billion, approximately 12.1 million shares of its common stock at a total cost of $ 2.5 billion, and approximately 12.3 million shares of its common stock at a total cost of $ 2.5 billion, respectively, pursuant to its common stock repurchase program.

The Company paid quarterly cash dividends of $ 0.55 per share in 2022.

On March 16, 2022, the Company’s Board of Directors declared a quarterly cash dividend of $ 0.55 per share, which is payable on or before April 19, 2022 to shareholders of record on April 5, 2022.

In March 2023, the Company’s Board of Directors declared a quarterly cash dividend of $ 0.59 per share, which is payable on or before April 25, 2023 to shareholders of record on April 11, 2023.

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.

2 unchanged sentences

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