Dollar General Corporation
DOLLAR GENERAL CORP (Form: 10-Q, Received: 05/26/2016 08:05:11)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

FORM 10-Q

 

QUARTERLY REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended April 29, 2016

 

Commission File Number: 001-11421

 

DOLLAR GENERAL CORPORATION

(Exact name of Registrant as specified in its charter)

 

TENNESSEE
(State or other jurisdiction of
incorporation or organization)

 

61-0502302
(I.R.S. Employer
Identification No.)

 

100 MISSION RIDGE
GOODLETTSVILLE, TN  37072
(Address of principal executive offices, zip code)

 

Registrant’s telephone number, including area code:   (615) 855-4000

 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x   No o

 

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).   Yes x   No o

 

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer x

 

Accelerated filer o

Non-accelerated filer o

 

Smaller reporting company o

 

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o   No x

 

The registrant had 283,778,285 shares of common stock outstanding on May 20, 2016.

 

 

 



 

PART I—FINANCIAL INFORMATION

 

ITEM 1.                                                 FINANCIAL STATEMENTS.

 

DOLLAR GENERAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

 

 

 

April 29,
2016

 

January 29,
2016

 

 

 

(Unaudited)

 

(see Note 1)

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

187,687

 

$

157,947

 

Merchandise inventories

 

3,072,063

 

3,074,153

 

Income taxes receivable

 

6,827

 

6,843

 

Prepaid expenses and other current assets

 

210,769

 

193,467

 

Total current assets

 

3,477,346

 

3,432,410

 

Net property and equipment

 

2,278,081

 

2,264,062

 

Goodwill

 

4,338,589

 

4,338,589

 

Other intangible assets, net

 

1,200,904

 

1,200,994

 

Other assets, net

 

21,464

 

21,830

 

Total assets

 

$

11,316,384

 

$

11,257,885

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Current portion of long-term obligations

 

$

1,526

 

$

1,379

 

Accounts payable

 

1,447,223

 

1,494,225

 

Accrued expenses and other

 

440,697

 

467,122

 

Income taxes payable

 

122,148

 

32,870

 

Total current liabilities

 

2,011,594

 

1,995,596

 

Long-term obligations

 

2,989,663

 

2,969,175

 

Deferred income taxes

 

647,626

 

639,955

 

Other liabilities

 

279,118

 

275,283

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

Preferred stock

 

 

 

Common stock

 

249,096

 

250,855

 

Additional paid-in capital

 

3,124,110

 

3,107,283

 

Retained earnings

 

2,020,784

 

2,025,545

 

Accumulated other comprehensive loss

 

(5,607

)

(5,807

)

Total shareholders’ equity

 

5,388,383

 

5,377,876

 

Total liabilities and shareholders’ equity

 

$

11,316,384

 

$

11,257,885

 

 

See notes to condensed consolidated financial statements.

 

1



 

DOLLAR GENERAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In thousands, except per share amounts)

 

 

 

For the 13 weeks ended

 

 

 

April 29,
2016

 

May 1,
2015

 

Net sales

 

$

5,265,432

 

$

4,918,672

 

Cost of goods sold

 

3,652,818

 

3,419,967

 

Gross profit

 

1,612,614

 

1,498,705

 

Selling, general and administrative expenses

 

1,131,871

 

1,070,511

 

Operating profit

 

480,743

 

428,194

 

Interest expense

 

24,081

 

21,576

 

Income before income taxes

 

456,662

 

406,618

 

Income tax expense

 

161,538

 

153,383

 

Net income

 

$

295,124

 

$

253,235

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

Basic

 

$

1.03

 

$

0.84

 

Diluted

 

$

1.03

 

$

0.84

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

Basic

 

285,886

 

301,202

 

Diluted

 

286,978

 

302,089

 

 

 

 

 

 

 

Dividends per share

 

$

0.25

 

$

0.22

 

 

See notes to condensed consolidated financial statements.

 

2



 

DOLLAR GENERAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In thousands)

 

 

 

For the 13 weeks ended

 

 

 

April 29,
2016

 

May 1,
2015

 

Net income

 

$

295,124

 

$

253,235

 

Unrealized net gain (loss) on hedged transactions, net of related income tax expense (benefit) of $130 and $481, respectively

 

200

 

758

 

Comprehensive income

 

$

295,324

 

$

253,993

 

 

See notes to condensed consolidated financial statements.

 

3



 

DOLLAR GENERAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

 

 

 

For the 13 weeks ended

 

 

 

April 29,
2016

 

May 1,
2015

 

 

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

Net income

 

$

295,124

 

$

253,235

 

Adjustments to reconcile net income to net cash from operating activities:

 

 

 

 

 

Depreciation and amortization

 

92,324

 

87,152

 

Deferred income taxes

 

7,541

 

(10,095

)

Noncash share-based compensation

 

10,253

 

10,125

 

Other noncash (gains) and losses

 

(440

)

1,407

 

Change in operating assets and liabilities:

 

 

 

 

 

Merchandise inventories

 

3,476

 

(57,103

)

Prepaid expenses and other current assets

 

(16,676

)

(12,241

)

Accounts payable

 

(55,267

)

40,123

 

Accrued expenses and other liabilities

 

(21,416

)

(17,976

)

Income taxes

 

89,294

 

75,865

 

Other

 

(260

)

(282

)

Net cash provided by (used in) operating activities

 

403,953

 

370,210

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Purchases of property and equipment

 

(98,968

)

(99,929

)

Proceeds from sales of property and equipment

 

323

 

163

 

Net cash provided by (used in) investing activities

 

(98,645

)

(99,766

)

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Repayments of long-term obligations

 

(497

)

(25,346

)

Borrowings under revolving credit facilities

 

751,000

 

13,000

 

Repayments of borrowings under revolving credit facilities

 

(731,000

)

(13,000

)

Repurchases of common stock

 

(230,961

)

(534,654

)

Payments of cash dividends

 

(71,308

)

(66,037

)

Other equity and related transactions

 

7,198

 

886

 

Net cash provided by (used in) financing activities

 

(275,568

)

(625,151

)

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

29,740

 

(354,707

)

Cash and cash equivalents, beginning of period

 

157,947

 

579,823

 

Cash and cash equivalents, end of period

 

$

187,687

 

$

225,116

 

 

 

 

 

 

 

Supplemental schedule of non-cash investing and financing activities:

 

 

 

 

 

Purchases of property and equipment awaiting processing for payment, included in Accounts payable

 

$

40,285

 

$

38,676

 

 

See notes to condensed consolidated financial statements.

 

4



 

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 29, 2016 which has been 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 29, 2016 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 2016 fiscal year is scheduled to be a 53-week accounting period ending on February 3, 2017, and the 2015 fiscal year was a 52-week accounting period that ended on January 29, 2016.

 

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 April 29, 2016 and results of operations for the 13-week accounting periods ended April 29, 2016 and May 1, 2015 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.

 

The Company uses the last-in, first-out (“LIFO”) method of valuing inventory. An actual valuation of inventory under the LIFO method is made at the end of each year based on the inventory levels and costs at that time. Accordingly, interim LIFO calculations are based on management’s estimates of expected year-end inventory levels, sales for the year and the expected rate of inflation or deflation for the year. The interim LIFO calculations are subject to adjustment in the final year-end LIFO inventory valuation. The Company recorded a LIFO provision (benefit) of $(1.4) million and $0.4 million in the respective 13-week periods ended April 29, 2016 and May 1, 2015. In addition, ongoing estimates of inventory shrinkage and initial markups and markdowns are included in the interim cost of goods sold calculation.  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.

 

5



 

In May 2014, the Financial Accounting Standards Board (“FASB”) issued comprehensive new accounting standards related to the recognition of revenue, which specified an effective date for annual reporting periods beginning after December 15, 2016, with early adoption not permitted. In August 2015, the FASB deferred the effective date to annual reporting periods beginning after December 15, 2017, with earlier adoption permitted only for annual reporting periods beginning after December 15, 2016. The new guidance allows for companies to use either a full retrospective or a modified retrospective approach in the adoption of this guidance. The Company is currently evaluating these transition approaches, as well as the potential timing of adoption and the effect of adoption on its consolidated financial statements.

 

In February 2016, the FASB issued new guidance related to lease accounting, which when effective will require a dual approach for lessee accounting under which a lessee will account for leases as finance leases or operating leases. Both finance leases and operating leases will result in the lessee recognizing a right-of-use asset and a corresponding lease liability on its balance sheet, with differing methodology for income statement recognition. This guidance is effective for public business entities for fiscal years, and interim periods within those years, beginning after December 15, 2018, and early adoption is permitted. A modified retrospective approach is required for all leases existing or entered into after the beginning of the earliest comparative period in the consolidated financial statements. The Company is currently assessing the impact that adoption of this guidance will have on its consolidated financial statements and is anticipating a material impact because the Company is party to a significant number of lease contracts.

 

In March 2016, the FASB issued amendments to existing guidance related to accounting for employee share-based payment affecting the income tax consequences of awards, classification of awards as equity or liabilities, and classification on the statement of cash flows. This guidance is effective for public business entities for fiscal years, and interim periods within those years, beginning after December 15, 2016, and early adoption is permitted. The Company adopted this guidance in the first quarter of 2016. The Company has elected to continue estimating forfeitures of share-based awards. The amendments requiring recognition of excess tax benefits and tax deficiencies in the income statement have been applied prospectively resulting in a benefit in the current period of approximately $9.0 million, or $0.03 per diluted share. The Company has elected to apply the amendments related to the presentation of excess tax benefits on the statement of cash flows using a retrospective transition method, and as a result, $26.3 million of excess tax benefits related to share-based awards which were previously classified as cash flows from financing activities in the first quarter of 2015 have been reclassified as cash flows from operating activities.

 

6



 

2.                                       Earnings per share

 

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

 

 

 

13 Weeks Ended April 29, 2016

 

13 Weeks Ended May 1, 2015

 

 

 

Net
Income

 

Weighted
Average
Shares

 

Per Share
Amount

 

Net
Income

 

Weighted
Average
Shares

 

Per Share
Amount

 

Basic earnings per share

 

$

295,124

 

285,886

 

$

1.03

 

$

253,235

 

301,202

 

$

0.84

 

Effect of dilutive share-based awards

 

 

 

1,092

 

 

 

 

 

887

 

 

 

Diluted earnings per share

 

$

295,124

 

286,978

 

$

1.03

 

$

253,235

 

302,089

 

$

0.84

 

 

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 1.6 million and 1.1 million in the 2016 and 2015 13-week periods, respectively.

 

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 2010 and earlier tax years are not open for further examination by the Internal Revenue Service (“IRS”). Due to the filing of an amended federal income tax return for the 2011 tax year, the IRS may, to a limited extent, examine the Company’s 2011 income tax filings. The IRS, at its discretion, may also choose to examine the Company’s 2012 through 2014 fiscal year income tax filings. The Company has various state income tax examinations that are currently in progress. Generally, the Company’s 2011 and later tax years remain open for examination by the various state taxing authorities.

 

7



 

As of April 29, 2016, the total reserves for uncertain tax benefits, interest expense related to income taxes and potential income tax penalties were $7.0 million, $1.0 million and $0.8 million, respectively, for a total of $8.8 million. This total amount is reflected in noncurrent Other liabilities in the condensed consolidated balance sheet.

 

The Company believes it is reasonably possible that the reserve for uncertain tax positions may be reduced by approximately $2.6 million in the coming twelve months principally as a result of the effective settlement of uncertain tax positions. As of April 29, 2016, approximately $7.0 million of the reserve for uncertain tax positions would impact the Company’s effective income tax rate if the Company were to recognize the tax benefit for these positions.

 

The effective income tax rate for the 13-week period ended April 29, 2016 was 35.4% compared to an effective income tax rate of 37.7% for the 13-week period ended May 1, 2015. The tax rate for the 2016 period was lower than for the 2015 period primarily due to the 2016 adoption of amendments to accounting guidance for share-based payment discussed in Note 1, as well as the retroactive enactment of federal jobs tax credits (principally the Work Opportunity Tax Credit or “WOTC”) for employees hired after December 31, 2014.  While the Company eventually did benefit from the WOTC associated with employees hired in the 13-week period ended May 1, 2015, the benefit could not be recognized until the federal laws authorizing the credits were retroactively reenacted in December 2015.

 

4.                                       Current and long-term obligations

 

The Company’s senior unsecured credit facilities (the “Facilities”) consist of a $425.0 million senior unsecured term loan facility (the “Term Facility”) and a $1.0 billion senior unsecured revolving credit facility (the “Revolving Facility”) which provides for the issuance of letters of credit up to $175.0 million. The Facilities are scheduled to mature on October 20, 2020.

 

As of April 29, 2016, under the Revolving Facility, the Company had outstanding borrowings of $271.0 million, outstanding standby letters of credit of $32.8 million, and borrowing availability of $696.2 million. In addition, as of April 29, 2016 the Company had outstanding commercial letters of credit of $15.9 million which were pursuant to a separate agreement.

 

5.                                       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 April 29, 2016.

 

8



 

The following table presents the Company’s assets and liabilities disclosed at fair value as of April 29, 2016, aggregated by the level in the fair value hierarchy within which those measurements are classified.

 

(in thousands)

 

Quoted Prices in
Active Markets
for Identical
Assets and
Liabilities
(Level 1)

 

Significant
Other
Observable
Inputs
(Level 2)

 

Significant
Unobservable
Inputs
(Level 3)

 

Fair Value at
April 29,
2016

 

Liabilities:

 

 

 

 

 

 

 

 

 

Long-term obligations (a)

 

$

2,362,560 

 

$

710,899 

 

$

 

$

3,073,459

 

Deferred compensation (b)

 

23,902 

 

 

 

23,902

 

 


(a)        Included in the condensed consolidated balance sheet at book value as Current portion of long-term obligations of $1,526 and Long-term obligations of $2,989,663.

(b)        Reflected at fair value in the condensed consolidated balance sheet as Accrued expenses and other current liabilities of $7,581 and noncurrent Other liabilities of $16,321.

 

6.                                       Commitments and contingencies

 

Legal proceedings

 

In September 2011, the Chicago Regional Office of the United States Equal Employment Opportunity Commission (“EEOC” or “Commission”) notified the Company of a cause finding related to the Company’s criminal background check policy.  The cause finding alleges that the Company’s criminal background check policy, which excludes from employment individuals with certain criminal convictions for specified periods, has a disparate impact on African-American candidates and employees in violation of Title VII of the Civil Rights Act of 1964, as amended (“Title VII”).

 

The Company and the EEOC engaged in the statutorily required conciliation process, and despite the Company’s good faith efforts to resolve the matter, the Commission notified the Company on July 26, 2012 of its view that conciliation had failed.

 

On June 11, 2013, the EEOC filed a lawsuit in the United States District Court for the Northern District of Illinois entitled Equal Opportunity Commission v. Dolgencorp, LLC d/b/a Dollar General in which the Commission alleges that the Company’s criminal background check policy has a disparate impact on “Black Applicants” in violation of Title VII and seeks to recover monetary damages and injunctive relief on behalf of a class of “Black Applicants.”  The Company filed its answer to the complaint on August 9, 2013.

 

The Court has bifurcated the issues of liability and damages for purposes of discovery and trial.  Fact discovery related to liability is to be completed on or before November 16, 2016. In response to various discovery motions, the court has entered orders requiring the Company’s production of documents, information and electronic data for the period 2004 to present.

 

Currently pending is the EEOC’s Motion for Partial Summary Judgment relating to two of the Company’s defenses challenging the sufficiency of the Commission’s conciliation efforts

 

9



 

and the scope of its investigation. The Company has opposed this motion as prematurely-filed in light of the status of various discovery issues.

 

The Company believes that its criminal background check process is both lawful and necessary to a safe environment for its employees and customers and the protection of its assets and shareholders’ investments.  The Company also does not believe that this matter is amenable to class or similar treatment.  However, at this time, it is not possible to predict whether the action will ultimately be permitted to proceed as a class or in a similar fashion or the size of any putative class.  Likewise, at this time, it is not possible to estimate the value of the claims asserted, and no assurances can be given that the Company will be successful in its defense of this action on the merits or otherwise.  For these reasons, the Company cannot estimate the potential exposure or range of potential loss.  If the matter were to proceed successfully as a class or similar action or the Company is unsuccessful in its defense efforts as to the merits of the action, the resolution of this matter could have a material adverse effect on the Company’s consolidated financial statements as a whole.

 

On May 23, 2013, a lawsuit entitled Juan Varela v. Dolgen California and Does 1 through 50 (“Varela”) was filed in the Superior Court of the State of California for the County of Riverside.  In the original complaint, the Varela plaintiff alleges that he and other “key carriers” were not provided with meal and rest periods in violation of California law and seeks to recover alleged unpaid wages, injunctive relief, consequential damages, pre-judgment interest, statutory penalties and attorneys’ fees and costs and seeks to represent a putative class of California “key carriers” as to these claims.  The Varela plaintiff also asserts a claim for unfair business practices and seeks to proceed under California’s Private Attorney General Act (the “PAGA”).

 

On November 4, 2014, the Varela plaintiff filed an amended complaint to add Victoria Lee Dinger Main as a named plaintiff and to add putative class claims on behalf of “key carriers” for alleged inaccurate wage statements and failure to provide appropriate pay upon termination in violation of California law.

 

The Company filed answers to both the complaint and amended complaint.  A court-ordered mediation held in November 2015 was unsuccessful.

 

Plaintiffs’ motion for class certification is due to be filed on or before October 17, 2016.  The Company’s response is due to be filed on or before December 9, 2016.  Plaintiffs’ reply brief is due to be filed on January 20, 2017.

 

On January 15, 2015, a lawsuit entitled Kendra Pleasant v. Dollar General Corporation, Dolgen California, LLC, and Does 1 through 50 (“Pleasant”) was filed in the Superior Court of the State of California for the County of San Bernardino in which the plaintiff seeks to proceed under the PAGA for various alleged violations of California’s Labor Code.  Specifically, the plaintiff alleges that she and other similarly situated non-exempt California store-level employees were not paid for all time worked, provided meal and rest breaks, reimbursed for necessary work related expenses, and provided with accurate wage statements and seeks to recover unpaid wages, civil and statutory penalties, interest, attorneys’ fees and costs. On March 12, 2015, the Company filed a demurrer asking the court to stay all proceedings in the Pleasant

 

10



 

matter pending an issuance of a final judgment in the Varela matter.  The court granted the Company’s demurrer and stayed proceedings until resolution of the Varela matter. Subsequently, the Pleasant plaintiff moved to transfer this matter to the Superior Court of the State of California for the County of Riverside where the Varela matter is pending, which the Company opposed.  The court denied the Pleasant plaintiff’s motion to transfer.

 

On February 20, 2015, a lawsuit entitled Julie Sullivan v. Dolgen California and Does 1 through 100 (“Sullivan”) was filed in the Superior Court of the State of California for the County of Alameda in which the plaintiff alleges that she and other similarly situated Dollar General Market store managers in the State of California were improperly classified as exempt employees and were not provided with meal and rest breaks and accurate wage statements in violation of California law.  The Sullivan plaintiff also alleges that she and other California store employees were not provided with printed wage statements, purportedly in violation of California law.  The plaintiff seeks to recover unpaid wages, including overtime pay, civil and statutory penalties, interest, injunctive relief, restitution, and attorneys’ fees and costs.

 

On April 8, 2015, the Company removed this matter to the United States District Court for the Northern District of California and filed its answer on the same date.  On April 29, 2015, the Sullivan plaintiff amended her complaint to add a claim under the PAGA.  The Company’s response to the amended complaint was filed on May 14, 2015.

 

The plaintiff’s motion for class certification was filed on March 12, 2016.  Plaintiff has since conceded that her allegation that she and other Dollar General Market store managers in the State of California are improperly classified as exempt employees is not amenable to class certification.  Plaintiff continues to pursue her individual misclassification claim and class certification of her wage statement claim.

 

Also currently pending is the Company’s motion for summary judgment as to all of Plaintiff’s claims.

 

No ruling has been issued on either plaintiff’s class certification motion or the Company’s motion for summary judgment. The matter has been set for trial on October 31, 2016.  A mediation conducted in early March 2016 was unsuccessful.

 

The Company believes that its policies and practices comply with California law and that the Varela, Pleasant , and Sullivan actions are not appropriate for class or similar treatment.  The Company intends to vigorously defend these actions; however, at this time, it is not possible to predict whether the Varela, Pleasant , or Sullivan action ultimately will be permitted to proceed as a class, and no assurances can be given that the Company will be successful in its defense of these actions on the merits or otherwise. Similarly, at this time the Company cannot estimate either the size of any potential class or the value of the claims asserted in the Varela , Pleasant , or Sullivan action. For these reasons, the Company is unable to estimate any potential loss or range of loss in these matters; however, if the Company is not successful in its defense efforts, the resolution of any of these actions could have a material adverse effect on the Company’s consolidated financial statements as a whole.

 

11



 

In December 2015, the Company was notified of seven lawsuits in which the plaintiffs allege violation of state consumer protection laws relating to the labeling, marketing and sale of Dollar General private-label motor oil.  Six of these lawsuits were filed in various federal district courts of the United States: Bradford Barfoot and Leonard Karpeichik v. Dolgencorp, LLC (filed in the Southern District of Florida on December 18, 2015) (“Barfoot”); Milton M. Cooke, Jr. v. Dollar General Corporation (filed in the Southern District of Texas on December 21, 2015) (“Cooke”); William Flinn v. Dolgencorp, LLC (filed in the District Court for New Jersey on December 17, 2015) (“Flinn”); John J. McCormick, III v. Dolgencorp, LLC (filed in the District Court of Maryland on December 23, 2015) (“McCormick”); David Sanchez v. Dolgencorp, LLC (filed in the Central District of California on December 17, 2015 ) (“Sanchez”); and Will Sisemore v. Dolgencorp, LLC (filed in the Northern District of Oklahoma on December 21, 2015) (“Sisemore”).

 

The seventh matter, Chuck Hill v. Dolgencorp, LLC (“Hill”), was filed in Orleans County Superior Court in Vermont on December 22, 2015, and subsequently removed to the United States District Court for the District of Vermont on February 8, 2016.

 

In February, March and May 2016, the Company was notified of fourteen additional lawsuits alleging similar claims concerning Dollar General private-label motor oil. All of these lawsuits were filed in various federal district courts of the United States: Allen Brown v. Dollar General Corporation and DG Retail, LLC (filed in the District of Colorado on February 10, 2016) (“Brown”); Miriam Fruhling v. Dollar General Corporation and Dolgencorp, LLC (filed in the Southern District of Ohio on February 10, 2016) (“Fruhling”); John Foppe v. Dollar General Corporation and Dolgencorp, LLC (filed in the Eastern District of Kentucky on February 10, 2016) (“Foppe”); Kevin Gadson v. Dolgencorp, LLC (filed in the Southern District of New York on February 8, 2016) (“Gadson”); Bruce Gooel v. Dolgencorp, LLC (filed in the Eastern District of Michigan on February 8, 2016) (“Gooel”);  Janine Harvey v. Dollar General Corporation and Dolgencorp, LLC (filed in the District Court for Nebraska on February 10, 2016) (“Harvey”); Nicholas Meyer v. Dollar General Corporation and DG Retail, LLC (filed in the District of Kansas on February 9, 2016) (“Meyer”); Robert Oren v. Dollar General Corporation and Dolgencorp, LLC (filed in the Western District of Missouri on February 8, 2016) (“Oren”); Scott Sheehy v. Dollar General Corporation and DG Retail, LLC (filed in the District Court for Minnesota on February 9, 2016) (“Sheehy”); Gerardo Solis v. Dollar General Corporation and DG Retail, LLC (filed in the Northern District of Illinois on February 12, 2016) (“Solis”); Roberto Vega v. Dolgencorp, LLC (filed in the Central District of California on February 8, 2016) (“Vega”); Matthew Wait v. Dollar General Corporation and Dolgencorp, LLC, (filed in the Western District of Arkansas on February 16, 2016) (“Wait”); James Taschner v. Dollar General Corporation and Dolgencorp, LLC (filed in the Eastern District of Missouri on March 15, 2016) (“Taschner”); and Jason Wood and Roger Barrows v. Dollar General Corporation and Dolgencorp, LLC (filed in the Northern District of New York on May 9, 2016) (“Wood”).

 

The plaintiffs in the Taschner , Vega and Sanchez matters seek to proceed on a nationwide and statewide class basis, while the plaintiffs in the other matters seek to proceed only on a statewide class basis.  Each plaintiff seeks, for himself or herself and the putative class he or she seeks to represent, some or all of the following relief: compensatory damages, injunctive relief

 

12



 

prohibiting the sale of the products at issue and requiring the dissemination of corrective advertising, certain statutory damages (including treble damages), punitive damages and attorneys’ fees.

 

On February 1, 2016, the Sanchez plaintiff voluntarily dismissed his complaint without prejudice.

 

The Company has filed motions to dismiss and motions to strike class allegations in the following matters: Barfoot; Brown; Cooke; Flinn ; Foppe ; Fruhling ; Gooel ; Hill; McCormick ; Meyer ; Oren ; Sheehy ; Sisemore; Solis; Wait; and Vega . The Company’s responsive pleading in the Wood matter is due on July 9, 2016.

 

On March 7, 2016, the Company filed a motion with the United States Judicial Panel on Multidistrict Litigation (“JPML”) requesting that all cases be transferred to the United States District Court for the Eastern District of Michigan, or, in the alternative to the Western District of Missouri or the Southern District of Florida, for consolidated pretrial proceedings (“Motion to Transfer”).  The hearing on the Company’s Motion to Transfer is scheduled for May 26, 2016.

 

The following cases have been stayed pending the JPML’s decision on the Motion to Transfer: Barfoot ; Foppe; Fruhling; Gadsen ; Harvey ; Meyer ; and Taschner . The courts in the Sheehy and Solis matters have stayed discovery only pending a transfer decision by the JPML.

 

The Company believes that the labeling, marketing and sale of its private-label motor oil complies with applicable federal and state requirements and is not misleading.  The Company further believes that these matters are not appropriate for class or similar treatment.  The Company intends to vigorously defend these actions; however, at this time, it is not possible to predict whether any of these cases will be permitted to proceed as a class or the size of any putative class.  Likewise, at this time, it is not possible to estimate the value of the claims asserted, and no assurances can be given that the Company will be successful in its defense of these actions on the merits or otherwise.  For these reasons, the Company is unable to estimate the potential loss or range of loss in these matters; however if the Company is not successful in its defense efforts, the resolution of any of these actions could have a material adverse effect on the Company’s consolidated financial statements as a whole.

 

From time to time, the Company is a party to various other legal actions involving claims incidental to the conduct of its business, including actions by employees, consumers, suppliers, government agencies, or others through private actions, class actions, administrative proceedings, regulatory actions or other litigation, including without limitation under federal and state employment laws and wage and hour laws. The Company believes, based upon information currently available, that such other litigation and claims, 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 involves an element of uncertainty. Future developments could cause these actions or claims to have a material adverse effect on the Company’s results of operations, cash flows, or financial position. In addition, certain of these lawsuits, if decided adversely to the Company or settled by the Company, may result in liability material to the Company’s financial position or may negatively affect operating results if changes to the Company’s business operation are required.

 

13



 

7.                                       Segment reporting

 

The Company manages its business on the basis of one reportable operating segment. As of April 29, 2016, all of the Company’s operations were located within the United States with the exception of certain subsidiaries in Hong Kong and China and a liaison office in India, which collectively are not material with regard to assets, results of operations or otherwise, to the condensed consolidated financial statements. The following net sales data is presented in accordance with accounting standards related to disclosures about segments of an enterprise.

 

 

 

13 Weeks Ended

 

(in thousands)

 

April 29,
2016

 

May 1,
2015

 

Classes of similar products:

 

 

 

 

 

Consumables

 

$

4,039,197

 

$

3,753,978

 

Seasonal

 

623,850

 

586,293

 

Home products

 

322,848

 

303,024

 

Apparel

 

279,537

 

275,377

 

Net sales

 

$

5,265,432

 

$

4,918,672

 

 

8.                                       Common stock transactions

 

On August 29, 2012, the Company’s Board of Directors authorized a common stock repurchase program, which the Board has increased on several occasions. As of April 29, 2016, a cumulative total of $4.0 billion had been authorized under the program since its inception and $692.8 million remained available for repurchase. The repurchase authorization has no expiration date and allows repurchases from time to time in the open market or in privately negotiated transactions. The timing and number of shares purchased depends on a variety of factors, such as price, market conditions, compliance with the covenants and restrictions under the Company’s debt agreements and other factors. Repurchases under the program may be funded from available cash or borrowings including under the Facilities.

 

Pursuant to its common stock repurchase program, during the 13-week periods ended April 29, 2016, and May 1, 2015, the Company repurchased in the open market approximately 2.7 million shares of its common stock at a total cost of $231.0 million, and approximately 7.1 million shares of its common stock at a total cost of $534.7 million, respectively.

 

The Company paid a quarterly cash dividend of $0.25 per share on April 12, 2016 to shareholders of record as of March 29, 2016 as approved by the Company’s Board of Directors on March 8, 2016, and on May 24, 2016, the Company’s Board of Directors approved a quarterly cash dividend of $0.25 per share payable on June 29, 2016 to shareholders of record as of June 15, 2016. The declaration of future cash dividends is subject to the discretion of the Company’s Board of Directors and will depend upon, among other things, the Company’s results of operations, cash requirements, financial condition, contractual restrictions and other factors that the Board may deem relevant in its sole discretion.

 

14



 

Review Report of Independent Registered Public Accounting Firm

 

To the Board of Directors and Shareholders of

Dollar General Corporation

 

We have reviewed the condensed consolidated balance sheet of Dollar General Corporation and subsidiaries (the Company) as of April 29, 2016, and the related condensed consolidated statements of income, comprehensive income and cash flows for the thirteen week periods ended April 29, 2016 and May 1, 2015. These financial statements are the responsibility of the Company’s management.

 

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information 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 Public Company Accounting Oversight Board (United States), 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.

 

Based on our review, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above 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), the consolidated balance sheet of Dollar General Corporation and subsidiaries as of January 29, 2016 and the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for the fiscal year then ended (not presented herein) and we expressed an unqualified opinion on those consolidated financial statements in our report dated March 22, 2016. In our opinion, the accompanying condensed consolidated balance sheet of Dollar General Corporation and subsidiaries as of January 29, 2016, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

 

 

/s/ Ernst & Young LLP

 

 

May 26, 2016

 

Nashville, Tennessee

 

 

15



 

ITEM 2.                                                 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

General

 

This discussion and analysis is based on, should be read with, and is qualified in its entirety by, the accompanying unaudited condensed consolidated financial statements and related notes, as well as our consolidated financial statements and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations as contained in our Annual Report on Form 10-K for the fiscal year ended January 29, 2016. It also should be read in conjunction with the disclosure under “Cautionary Disclosure Regarding Forward-Looking Statements” in this report.

 

Executive Overview

 

We are among the largest discount retailers in the United States by number of stores, with 12,719 stores located in 43 states as of April 29, 2016, geographically concentrated in the southern, southwestern, midwestern and eastern United States. We offer a broad selection of merchandise, including consumable products such as food, paper and cleaning products, health and beauty products and pet supplies, and non-consumable products such as seasonal merchandise, home decor and domestics, and basic apparel. Our merchandise includes high-quality national brands from leading manufacturers, as well as comparable quality and value private brand selections with prices at substantial discounts to national brands. We offer our customers these national brand and private brand products at everyday low prices (typically $10 or less) in our convenient small-box locations.

 

Because the customers we serve are value-conscious, many with low or fixed incomes, we are intensely focused on helping them make the most of their spending dollars. We believe our convenient store format and broad selection of high-quality products at compelling values have driven our substantial growth and financial success over the years. Like other retailers, we have been operating for several years in an environment with ongoing macroeconomic challenges and uncertainties. Our core customers are often among the first to be affected by negative or uncertain economic conditions such as unemployment and fluctuating food, energy and medical costs, and are among the last to feel the effects of improving economic conditions. Our customer has experienced both positive and negative general economic factors during 2015 and to date in 2016, such as lower gasoline prices and unemployment rates coupled with rising rents and medical costs and lagging wage growth. The overall financial impact of these factors to our customers has been inconsistent and their duration is unknown.

 

Our operating priorities continue to evolve as we consistently strive to improve our performance while retaining our customer-centric focus. We are keenly focused on executing the following priorities: 1) driving profitable sales growth, 2) capturing growth opportunities, 3) enhancing our position as a low-cost operator, and 4) investing in our people as a competitive advantage.

 

16



 

We seek to drive profitable sales growth through initiatives such as improvement in our in-stock position, as well as an ongoing focus on enhancing our margins while maintaining both everyday low price and affordability.

 

In 2016, we expect our net sales growth to continue to be driven primarily by consumables, although we expect non-consumables sales to continue to contribute to our profitable sales growth . Same-store sales growth is key to achieving our objectives, and we are expanding our sales-driving initiatives such as cooler expansion into existing stores. An additional targeted action to drive same-store sales growth is updating our customer segmentation to gain deeper insights into the spending habits for each of our core customer segments. This helps drive our category management process, as we optimize our assortment and expand into those categories that are most likely to drive traffic to our stores.

 

Our in-stock improvement initiative is designed to ensure the right products are available on the shelf when our customers shop in our stores. To support this initiative and improve overall customer satisfaction, we have selectively invested incremental labor hours in those stores where we believe such increases will generate positive financial returns.  We have a disciplined approach to this labor investment and are able to quickly evaluate whether it delivers on our profitability expectations, reallocating resources as necessary.

 

We demonstrate our commitment to the affordability needs of our core customer by pricing more than 75% of our stock-keeping units at $5 or less at the end of the first quarter of 2016.  However, as we work to provide everyday low prices and meet our customers’ affordability needs, we also remain focused on enhancing our margins through effective category management, inventory shrink reduction initiatives, private brands penetration, efforts to improve distribution and transportation efficiencies, global sourcing, and pricing and markdown optimization. With respect to category management, the mix of sales affects profitability because the gross margin associated with sales within our consumables category generally is lower than that associated with sales within our non-consumables categories.  Even within each category, however, there are varying levels of gross margin associated with the specific items. With respect to our efforts to reduce inventory shrink, we consistently work to balance this metric with our in-stock position, and we expect additional in-store defensive merchandising and technology-based tools to further support our efforts to reduce inventory shrink.

 

Although frequently not quantifiable, we believe that the degree of success of these initiatives is often reflected in our same-store sales results, in the level of improvement in shopper frequency and number of items sold as well as average transaction amount. For the 2016 first quarter, we believe these ongoing initiatives helped to drive same-store sales growth in three out of our four product categories, reflecting increases in both customer traffic and average transaction amount for the 33 rd  consecutive quarter when compared to the prior year quarter.

 

To support our other operating priorities we also are focused on capturing growth opportunities and innovating within our channel. We continued to expand our store count, opening 249 stores during the 2016 first quarter.  We also have continued our store remodeling efforts and remodeled or relocated a total of 301 stores during the quarter. In fiscal 2016, we plan to open 900 stores and to relocate or remodel 875 stores, and we intend to accelerate square footage growth in 2017 with plans to open about 1,000 stores and to relocate or remodel about

 

17



 

900 stores. To support our new store growth and drive productivity, we are making investments in our distribution center network, recently breaking ground on our Janesville, Wisconsin distribution center with a goal to begin shipping from this facility in early 2017. We continue to innovate within our channel, and during 2016 we began the implementation of the DG16 store format. This new store format offers a total of 22 cooler doors, an increase of six cooler doors as compared to our previous new store format, and is being utilized for all new stores, relocations and remodels. The DG16 store format also offers a redesigned queueing area and other enhancements that are focused on meeting the evolving demands of our core customer while also delivering on our operating priorities. In addition, we are testing a smaller format store (less than 6,000 square feet) which we believe could allow us to capture growth opportunities in metropolitan areas as well as rural areas with a low number of households.

 

We have established a position as a low-cost operator, continuously seeking ways to reduce or control costs that do not affect our customer’s shopping experience. We have enhanced this position during the latter part of 2015 and into 2016 through our zero-based budgeting initiative, streamlining our business while also reducing expenses. Our goal is to lower the same-store sales growth required to leverage selling, general and administrative (“SG&A”) expenses. The first quarter of 2016 exhibited early success with this initiative. In addition, at the store level, we remain committed to simplifying or eliminating various tasks so that those time savings can be reinvested by our store managers in other areas such as ensuring customer service, improved in-stock levels, and improved store standards.  We will continue to seek additional opportunities to enhance our low-cost position; however certain changes to the overtime exemption regulations under the Fair Labor Standards Act, once implemented in December 2016, are likely to negatively impact these efforts by increasing labor costs and may adversely affect our operating results.

 

Our employees are a competitive advantage, and we are always searching for ways to continue investing in them. Our training programs are continually evolving, as we work to ensure that our employees have the tools necessary to be successful in their positions. We invest in our employees in an effort to create an environment that attracts and retains talented personnel, as we believe that, particularly at the store level, employees who are promoted from within generally have longer tenures and are greater contributors to improvements in our financial performance. Furthermore, we believe that reducing our store manager turnover likely results in improved store financial performance in areas such as shrink and sales. We have also implemented training programs for high-potential employees, and believe that these and other efforts will produce a more stable, engaged workforce.

 

We also plan to continue to repurchase shares of our common stock and pay quarterly cash dividends, subject to Board discretion, to further enhance shareholder return in 2016.

 

The following include highlights of our 2016 first quarter financial results compared to the comparable 2015 period. Basis points amounts referred to below are equal to 0.01% as a percentage of sales.

 

·                   Net sales increased 7.0% to $5.27 billion. Sales in same-stores increased 2.2% driven by increases in customer traffic and average transaction amount. Average sales per square foot for all stores over the 52-week period ended April 29, 2016 was $226.

 

18



 

·                   Gross profit, as a percentage of sales, was 30.6% in the 2016 period compared to 30.5% in the 2015 period, an increase of 16 basis points, due primarily to higher initial markups and lower transportation costs.

 

·                   SG&A expense, as a percentage of sales, was 21.5% in the 2016 period compared to 21.8% in the 2015 period, a decrease of 26 basis points, primarily reflecting reductions in utilities costs, administrative labor costs and incentive compensation expenses, among other factors.

 

·                   Interest expense increased by $2.5 million to $24.1 million in the 2016 period due primarily to greater average debt outstanding and higher average interest rates.

 

·                   Net income was $295.1 million, or $1.03 per diluted share, in the 2016 period compared to net income of $253.2 million, or $0.84 per diluted share, in the 2015 period. Diluted shares outstanding decreased by 15.1 million shares in the 2016 period primarily as a result of share repurchases under our share repurchase program.

 

·                   Cash generated from operating activities was $404.0 million for the 2016 period, compared to $370.2 million in the comparable 2015 period. At April 29, 2016, we had a cash balance of $187.7 million.

 

·                   Total cash dividends of $71.3 million, or $0.25 per share, were paid during the 2016 period compared to $66.0 million, or $0.22 per share, in the 2015 period.

 

·                   Inventory turnover was 4.7 times on a rolling four-quarter basis. On a per store basis, inventories at April 29, 2016 increased by 2.1% over the balances at May 1, 2015.

 

·                   During the 2016 period, we opened 249 new stores, remodeled or relocated 301 stores and closed 13 stores, resulting in a store count of 12,719 as of April 29, 2016.

 

The above discussion is a summary only. Readers should refer to the detailed discussion of our operating results below for the full analysis of our financial performance in the current year period as compared with the prior year period.

 

Results of Operations

 

Accounting Periods . We utilize a 52-53 week fiscal year convention that ends on the Friday nearest to January 31. The following text contains references to years 2016 and 2015, which represent the 53-week fiscal year ending February 3, 2017 and the 52-week fiscal year ended January 29, 2016, respectively. References to the first quarter accounting periods for 2016 and 2015 contained herein refer to the 13-week accounting periods ended April 29, 2016 and May 1, 2015, respectively.

 

Seasonality. The nature of our business is seasonal to a certain extent. Primarily because of sales of holiday-related merchandise, sales in our fourth quarter (November, December and January) have historically been higher than sales achieved in each of the first three quarters of the fiscal year. Expenses, and to a greater extent operating profit, vary by quarter. Results of a

 

19



 

period shorter than a full year may not be indicative of results expected for the entire year. Furthermore, the seasonal nature of our business may affect comparisons between periods.

 

The following table contains results of operations data for the most recent 13-week periods of 2016 and 2015, and the dollar and percentage variances among those periods:

 

 

 

13 Weeks Ended

 

2016 vs. 2015

 

(dollars in millions, except per share amounts)

 

April 29,
2016

 

May 1,
2015

 

Amount
change

 

%
change

 

Net sales by category:

 

 

 

 

 

 

 

 

 

Consumables

 

$

4,039.2

 

$

3,754.0

 

$

285.2

 

7.6

%

% of net sales

 

76.71

%

76.32

%

 

 

 

 

Seasonal

 

623.9

 

586.3

 

37.6

 

6.4

 

% of net sales

 

11.85

%

11.92

%

 

 

 

 

Home products

 

322.8

 

303.0

 

19.8

 

6.5

 

% of net sales

 

6.13

%

6.16

%

 

 

 

 

Apparel

 

279.5

 

275.4

 

4.2

 

1.5

 

% of net sales

 

5.31

%

5.60

%

 

 

 

 

Net sales

 

$

5,265.4

 

$

4,918.7

 

$

346.8

 

7.0

%

Cost of goods sold

 

3,652.8

 

3,420.0

 

232.9

 

6.8

 

% of net sales

 

69.37

%

69.53

%

 

 

 

 

Gross profit

 

1,612.6

 

1,498.7

 

113.9

 

7.6

 

% of net sales

 

30.63

%

30.47

%

 

 

 

 

Selling, general and administrative expenses

 

1,131.9

 

1,070.5

 

61.4

 

5.7

 

% of net sales

 

21.50

%

21.76

%

 

 

 

 

Operating profit

 

480.7

 

428.2

 

52.5

 

12.3

 

% of net sales

 

9.13

%

8.71

%

 

 

 

 

Interest expense

 

24.1

 

21.6

 

2.5

 

11.6

 

% of net sales

 

0.46

%

0.44

%

 

 

 

 

Income before income taxes

 

456.7

 

406.6

 

50.0

 

12.3

 

% of net sales

 

8.67

%

8.27

%

 

 

 

 

Income tax expense

 

161.5

 

153.4

 

8.2

 

5.3

 

% of net sales

 

3.07

%

3.12

%

 

 

 

 

Net income

 

$

295.1

 

$

253.2

 

$

41.9

 

16.5

%

% of net sales

 

5.60

%

5.15

%

 

 

 

 

Diluted earnings per share

 

$

1.03

 

$

0.84

 

$

0.19 

 

22.6

%

 

13 WEEKS ENDED APRIL 29, 2016 AND MAY 1, 2015

 

Net Sales . The net sales increase in the 2016 quarter reflects a same-store sales increase of 2.2% compared to the 2015 quarter. Same-stores include stores that have been open for at least 13 months and remain open at the end of the reporting period. For the 2016 quarter, there were 11,831 same-stores which accounted for sales of $5.0 billion. The increase in same-store sales reflects increases in both customer traffic and average transaction amount, with sales growth of the consumables category outpacing sales growth of the non-consumables categories. Within the non-consumables categories, growth in same-store sales was due to the seasonal and home products categories. The net sales increase also was positively affected by sales from new stores, partially offset by sales from closed stores.

 

Gross Profit. Gross profit increased by 7.6%, and as a percentage of sales increased by 16 basis points to 30.6%, in the 2016 quarter as compared to the comparable 2015 period. Higher initial markups on inventory purchases and lower transportation costs partially attributable to

 

20



 

lower fuel rates were the primary factors in the improved performance, partially offset by a greater proportion of sales of consumables, which have a lower gross profit rate than our other product categories, an increased rate of inventory shrinkage, and higher markdowns.

 

SG&A Expense. SG&A expense was 21.5% as a percentage of sales in the 2016 quarter compared to 21.8% in the comparable 2015 period, a decrease of 26 basis points. The 2016 quarter results reflect reductions in utilities costs, administrative payroll costs, incentive compensation expenses, travel expenses, workers’ compensation costs, and advertising costs, as well as a higher volume of convenience fees associated with customer cash-back transactions. Partially offsetting these items were retail labor and occupancy costs, each of which increased at a rate greater than the increase in net sales.

 

Interest Expense . Interest expense increased by $2.5 million to $24.1 million in the 2016 period due primarily to an increase in average debt outstanding and higher average interest rates primarily due to the issuance of long-term debt, net of prepayments under our credit facility in October 2015. See Liquidity and Capital Resources. Total outstanding debt (including the current portion of long-term obligations) as of April 29, 2016 was $2.99 billion.

 

Income Taxes. The effective income tax rate for the 2016 period was 35.4% compared to 37.7% for the 2015 period which represents a net decrease of 2.3 percentage points. The tax rate for the 2016 period was lower than for the 2015 period primarily due to the 2016 early adoption of amendments to accounting guidance for share-based payment as well as the retroactive enactment of federal jobs tax credits (principally the Work Opportunity Tax Credit or “WOTC”) for employees hired after December 31, 2014.  While the Company eventually did benefit from the WOTC associated with employees hired in the 13-week period ended May 1, 2015, the benefit could not be recognized until the federal laws authorizing the credits were retroactively reenacted in December 2015. WOTC benefits have been enacted through 2019.

 

Due to the fact that the majority of the Company’s share-based awards typically vest in the first quarter, adoption of the amended accounting guidance is anticipated to have the most significant impact in the first quarter of 2016. It is not expected to reoccur to this degree over the balance of the year.

 

Liquidity and Capital Resources

 

We have a five-year $1.425 billion unsecured credit agreement (the “Facilities”), and we have outstanding $2.3 billion aggregate principal amount of senior notes. At April 29, 2016, we had total outstanding debt (including the current portion of long-term obligations) of $2.99 billion, which includes balances under the Facilities, and senior notes, all of which are described in greater detail below.

 

We believe our cash flow from operations and existing cash balances, combined with availability under the Facilities discussed below and access to the debt markets will provide sufficient liquidity to fund our current obligations, projected working capital requirements, capital spending and anticipated dividend payments for a period that includes the next twelve months as well as the next several years.  However, our ability to maintain sufficient liquidity may be affected by numerous factors, many of which are outside of our control.  Depending on

 

21



 

our liquidity levels, conditions in the capital markets and other factors, we may from time to time consider the issuance of debt, equity or other securities, the proceeds of which could provide additional liquidity for our operations.

 

Facilities

 

Our senior unsecured credit facilities (the “Facilities”) consist of a $425.0 million senior unsecured term loan facility (the “Term Facility”) and a $1.0 billion senior unsecured revolving credit facility (the “Revolving Facility”) which provides for the issuance of letters of credit up to $175.0 million. The Facilities are scheduled to mature on October 20, 2020.

 

Borrowings under the Facilities bear interest at a rate equal to an applicable interest rate margin plus, at our 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 April 29, 2016 was 1.10% for LIBOR borrowings and 0.10% for base-rate borrowings . We must also pay a facility fee, payable on any used and unused commitment amounts of the Facilities, and customary fees on letters of credit issued under the Revolving Facility.  The applicable interest rate margins for borrowings, the facility fees and the letter of credit fees under the Facilities are subject to adjustment from time to time based on our long-term senior unsecured debt ratings. The weighted average all-in interest rate for borrowings under the Facilities was 1.66% as of April 29, 2016.

 

The Facilities can be voluntarily prepaid in whole or in part at any time without penalty. There is no required amortization under the Facilities. The Facilities contain a number of customary affirmative and negative covenants that, among other things, restrict, subject to certain exceptions, the Company’s and its subsidiaries’ ability to: incur additional liens; sell all or substantially all of our assets; consummate certain fundamental changes or change in the Company’s lines of business; and incur additional subsidiary indebtedness. The Facilities also contain financial covenants that require the maintenance of a minimum fixed charge coverage ratio and a maximum leverage ratio.  As of April 29, 2016, we were in compliance with all such covenants.  The Facilities also contain customary events of default.

 

As of April 29, 2016, under the Revolving Facility, we had outstanding borrowings of $271.0 million, outstanding standby letters of credit of $32.8 million, and borrowing availability of $696.2 million. In addition, as of April 29, 2016 we had outstanding commercial letters of credit of $15.9 million which were pursuant to a separate agreement.

 

For the remainder of fiscal 2016, we anticipate potential borrowings under the Revolving Facility up to a maximum of approximately $600 million outstanding at any one time, including any anticipated borrowings to fund repurchases of common stock.

 

Senior Notes

 

We have $500.0 million aggregate principal amount of 4.125% senior notes due 2017 (the “2017 Senior Notes”) which are scheduled to mature on July 15, 2017; $400.0 million aggregate principal amount of 1.875% senior notes due 2018 (the “2018 Senior Notes”), net of discount of $0.2 million, which are scheduled to mature on April 15, 2018; $900.0 million

 

22



 

aggregate principal amount of 3.25% senior notes due 2023 (the “2023 Senior Notes”), net of discount of $1.7 million, which are scheduled to mature on April 15, 2023; and $500.0 million aggregate principal amount of 4.150% senior notes due 2025 (the “2025 Senior Notes”), net of discount of $0.7 million, which are scheduled to mature on November 1, 2025. Collectively, the 2017 Senior Notes, the 2018 Senior Notes, the 2023 Senior Notes and the 2025 Senior Notes 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”).  Interest on the 2017 Senior Notes is payable in cash on January 15 and July 15 of each year. Interest on the 2018 Senior Notes and the 2023 Senior Notes is payable in cash on April 15 and October 15 of each year. Interest on the 2025 Senior Notes is payable in cash on May 1 and November 1 of each year.

 

We may redeem some or all of the Senior Notes at any time at redemption prices set forth in the Senior Indenture. Upon the occurrence of a change of control triggering event, which is defined in the Senior Indenture, each holder of our Senior Notes has the right to require us to repurchase some or all of such holder’s Senior Notes at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but excluding, the repurchase date.

 

The Senior Indenture contains covenants limiting, among other things, our ability (subject to certain exceptions) to consolidate, merge, or sell or otherwise dispose of all or substantially all of our assets; and our ability and the ability of our subsidiaries to incur or guarantee indebtedness secured by liens on any shares of voting stock of significant subsidiaries.

 

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 our Senior Notes to become or to be declared due and payable, as applicable.

 

Current Financial Condition / Recent Developments

 

Our inventory balance represented approximately 53% of our total assets exclusive of goodwill and other intangible assets as of April 29, 2016. Our ability to effectively manage our inventory balances can have a significant impact on our cash flows from operations during a given fiscal year. Inventory purchases are often somewhat seasonal in nature, such as the purchase of warm-weather or Christmas-related merchandise. Efficient management of our inventory has been and continues to be an area of focus for us.

 

As described in Note 6 to the unaudited condensed consolidated financial statements, we are involved in a number of legal actions and claims, some of which could potentially result in material cash payments. Adverse developments in those actions could materially and adversely affect our liquidity. We also have certain income tax-related contingencies as disclosed in Note 3 to the unaudited condensed consolidated financial statements. Future negative developments could have a material adverse effect on our liquidity.

 

Our current Standard & Poor’s senior unsecured debt rating and corporate debt rating are BBB, both with a stable outlook, and our Moody’s senior unsecured debt rating is Baa3 with a positive outlook. Our current credit ratings, as well as future rating agency actions, could (i)

 

23



 

impact our ability to finance our operations on satisfactory terms; (ii) affect our financing costs; and (iii) affect our insurance premiums and collateral requirements necessary for our self-insured programs. There can be no assurance that we will maintain or improve our current credit ratings.

 

Unless otherwise noted, all references to the “2016 period” and the “2015 period” in the discussion of “Cash flows from operating activities,” “Cash flows from investing activities,” and “Cash flows from financing activities” below refer to the 13-week periods ended April 29, 2016 and May 1, 2015, respectively.

 

Cash flows from operating activities.  Cash flows from operating activities were $404.0 million in the 2016 period, which was $33.7 million greater than the 2015 period. Changes in merchandise inventories were minimal in the 2016 period as compared to a $57.1 million decrease in the 2015 period. Changes in accounts payable resulted in a $55.3 million decrease in the 2016 period compared to a $40.1 million increase in the 2015 period, due primarily to the timing of receipts and payments. The increase in net income was due primarily to greater net sales and operating profit in the 2016 period as described in more detail above under “Results of Operations.”

 

On an ongoing basis, we closely monitor and manage our inventory balances, and they may fluctuate from period to period based on new store openings, the timing of purchases, and other factors. Merchandise inventories were essentially unchanged in the 2016 period compared to a 2% increase in the 2015 period.  In the 2016 period compared to the 2015 period, changes in inventory balances in our four inventory categories were as follows: the consumables category increased by 4% compared to 5%; the seasonal category decreased by 4% compared to a 1% increase; the home products category decreased by 3% compared to a 3% increase; and apparel decreased by 12% compared to a 14% decrease. Factors impacting the changes in inventory include our efforts to improve our in-stock position, shrink levels, the timing of receipts, and sales performance.

 

Cash flows from investing activities .  Significant components of property and equipment purchases in the 2016 period included the following approximate amounts: $33 million for distribution and transportation-related capital expenditures; $31 million for improvements, upgrades, remodels and relocations of existing stores; $24 million related to new leased stores, primarily for leasehold improvements, fixtures and equipment; and $6 million for information systems upgrades and technology-related projects. The timing of new, remodeled and relocated store openings along with other factors may affect the relationship between such openings and the related property and equipment purchases in any given period. During the 2016 period, we opened 249 new stores and remodeled or relocated 301 stores.

 

Significant components of property and equipment purchases in the 2015 period included the following approximate amounts: $30 million for improvements, upgrades, remodels and relocations of existing stores; $27 million related to new leased stores, primarily for leasehold improvements, fixtures and equipment; $24 million for distribution and transportation-related capital expenditures; $10 million for stores built by us; and $8 million for information systems upgrades and technology-related projects. During the 2015 period, we opened 219 new stores and remodeled or relocated 291 stores.

 

24



 

We anticipate funding 2016 capital requirements with existing cash balances, cash flows from operations, and availability under our Revolving Facility. We plan to continue to invest in store growth and development of new stores and stores to be remodeled or relocated. Capital expenditures in 2016 are anticipated to support our store growth as well as our remodel and relocation initiatives, including capital outlays for leasehold improvements, fixtures and equipment; the construction of new stores; costs to support and enhance our supply chain initiatives including construction of new and investments in existing distribution center facilities; technology initiatives; as well as routine and ongoing capital requirements.

 

Cash flows from financing activities .  Net borrowings under the Revolving Facility during the 2016 period were $20.0 million, compared to net borrowings of zero during the 2015 period. During the 2016 and 2015 periods, we repurchased 2.7 million and 7.1 million outstanding shares of our common stock at a total cost of $231.0 million and $534.7 million, respectively. Also during the 2016 and 2015 periods, we paid cash dividends of $71.3 million and $66.0 million, respectively.

 

Share Repurchase Program

 

At April 29, 2016, our common stock repurchase program had a total remaining authorization of approximately $692.8 million. Under the authorization, purchases may be made in the open market or in privately negotiated transactions from time to time subject to market and other conditions, and the authorization has no expiration date and may be increased or terminated from time to time in the discretion of our Board of Directors. For more information about our share repurchase program, see Note 8 to the condensed consolidated financial statements.

 

ITEM 3.                                                 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

There have been no material changes to the disclosures relating to this item from those set forth in our Annual Report on Form 10-K for the fiscal year ended January 29, 2016.

 

ITEM 4.                                                 CONTROLS AND PROCEDURES.

 

(a)                                  Disclosure Controls and Procedures .  Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

 

(b)                                  Changes in Internal Control Over Financial Reporting .  There have been no changes in our internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) during the quarter ended April 29, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

25



 

PART II—OTHER INFORMATION

 

ITEM 1.                                                 LEGAL PROCEEDINGS.

 

The information contained in Note 6 to the unaudited condensed consolidated financial statements under the heading “Legal proceedings” contained in Part I, Item 1 of this report is incorporated herein by this reference.

 

ITEM 1A.                                        RISK FACTORS.

 

There have been no material changes to the disclosures relating to this item from those set forth in our Annual Report on Form 10-K for the fiscal year ended January 29, 2016.

 

ITEM 2.                                                 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

 

The following table contains information regarding purchases of our common stock made during the quarter ended April 29, 2016 by or on behalf of Dollar General or any “affiliated purchaser,” as defined by Rule 10b-18(a)(3) of the Exchange Act:

 

Issuer Purchases of Equity Securities

 

Period

 

Total Number
of Shares
Purchased

 

Average
Price Paid
per Share

 

Total Number
of Shares Purchased
as Part of Publicly
Announced Plans or
Programs(a)

 

Approximate
Dollar Value
of Shares that May
Yet Be Purchased
Under the Plans
or Programs(a)

 

01/30/16-02/29/16

 

 

$

 

 

$

923,803,000

 

03/01/16-03/31/16

 

2,275,815

 

$

84.87

 

2,275,815

 

$

730,657,000

 

04/01/16-04/29/16

 

447,348

 

$

84.53

 

447,348

 

$

692,843,000

 

Total

 

2,723,163

 

$

84.81

 

2,723,163

 

$

692,843,000

 

 


(a) A $500 million share repurchase program was publicly announced on September 5, 2012, and increases in the authorization under such program were announced on March 25, 2013 ($500 million increase), December 5, 2013 ($1.0 billion increase), March 12, 2015 ($1.0 billion increase) and December 3, 2015 ($1.0 billion increase).  Under the authorization, purchases may be made in the open market or in privately negotiated transactions from time to time subject to market and other conditions. This repurchase authorization has no expiration date.

 

ITEM 6.                                                 EXHIBITS.

 

See the Exhibit Index immediately following the signature page hereto, which Exhibit Index is incorporated by reference as if fully set forth herein.

 

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CAUTIONARY DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

 

We include “forward-looking statements” within the meaning of the federal securities laws throughout this report, particularly under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Part I, Item 2, and “Note 6. Commitments and Contingencies” included in Part I, Item 1, among others. You can identify these statements because they are not limited to historical fact or they use words such as “may,” “will,” “should,” “expect,” “ believe,” “anticipate,” “project,” “plan,” “estimate,” “objective,” “goal,” “opportunity,” “intend,” “could,” “can,” “would,” “committed,” “are likely to,” “are scheduled to,” “predict,” “seek,” “ensure,” “subject to,” or “continue,” and similar expressions that concern our strategy, plans, initiatives, intentions or beliefs about future occurrences or results. For example, statements relating to estimated and projected expenditures, cash flows, results of operations, financial condition and liquidity; plans and objectives for, and expectations regarding, future operations, growth or initiatives, including the number of planned store openings, remodels and relocations and store square footage growth, progress of labor investment initiatives, progress of merchandising initiatives including customer segmentation and shrink management, trends in sales of consumable and non-consumable products, results of the investment in our personnel and the levels of future costs and expenses; potential future stock repurchases and cash dividends; anticipated borrowing under certain of our credit facilities; the potential impact of regulatory changes; and the expected outcome or effect of pending or threatened litigation or audits are forward-looking statements.

 

Forward-looking statements are subject to risks and uncertainties that may change at any time, so our actual results may differ materially from those that we expected. We derive many of these statements from our operating budgets and forecasts, which are based on many detailed assumptions that we believe are reasonable. However, it is very difficult to predict the effect of known factors, and we cannot anticipate all factors that could affect our actual results. Important factors that could cause actual results to differ materially from the expectations expressed in our forward-looking statements include, without limitation:

 

·                   economic conditions, including their effect on employment levels, consumer demand, disposable income, credit availability and spending patterns, inflation, commodity prices, fuel prices, interest rates, exchange rate fluctuations and the cost of goods;

·                   failure to successfully execute our strategies and initiatives, including those relating to merchandising, sourcing, customer segmentation, shrink, private brand, distribution and transportation, store operations, store formats, budgeting and expense reduction, and real estate;

·                   failure to open, relocate and remodel stores profitably and on schedule, as well as failure of our new store base to achieve sales and operating levels consistent with our expectations;

·                   levels of inventory shrinkage;

·                   effective response to competitive pressures and changes in the competitive environment and the markets where we operate, including consolidation;

·                   our level of success in gaining and maintaining broad market acceptance of our private brands;

 

27



 

·                   disruptions, unanticipated or unusual expenses or operational failures in our supply chain including, without limitation, a decrease in transportation capacity for overseas shipments, increases in transportation costs (including increased fuel costs and carrier rates or driver wages), work stoppages or other labor disruptions that could impede the receipt of merchandise, or delays in constructing or opening new distribution centers;

·                   risks and challenges associated with sourcing merchandise from suppliers, including, but not limited to, those related to international trade;

·                   unfavorable publicity or consumer perception of our products, including, but not limited to, related product liability and food safety claims;

·                   the impact of changes in or noncompliance with governmental laws and regulations (including, but not limited to, environmental compliance, product safety, food safety, information security and privacy, and labor and employment laws, as well as tax laws, the interpretation of existing tax laws, or our failure to sustain our reporting positions negatively affecting our tax rate) and developments in or outcomes of private actions, class actions, administrative proceedings, regulatory actions or other litigation;

·                   natural disasters, unusual weather conditions, pandemic outbreaks, terrorist acts and geo-political events;

·                   damage or interruption to our information systems or failure of technology initiatives to deliver desired or timely results;

·                   ability to attract and retain qualified employees, while controlling labor costs (including potential effects of regulatory changes related to overtime exemption under the Fair Labor Standards Act once implemented) and other labor issues;

·                   our loss of key personnel, inability to hire additional qualified personnel or disruption of executive management as a result of retirements or transitions;

·                   failure to successfully manage inventory balances;

·                   seasonality of our business;

·                   incurrence of material uninsured losses, excessive insurance costs or accident costs;

·                   failure to maintain the security of information that we hold, whether as a result of a data security breach or otherwise;

·                   deterioration in market conditions, including market disruptions, limited liquidity and interest rate fluctuations, or a lowering of our credit ratings;

·                   new accounting guidance, or changes in the interpretation or application of existing guidance, such as changes to lease accounting guidance;

·                   factors disclosed under “Risk Factors” in Part I, Item 1A of our Form 10-K for the fiscal year ended January 29, 2016; and

·                   factors disclosed elsewhere in this document (including, without limitation, in conjunction with the forward-looking statements themselves) and other factors.

 

All forward-looking statements are qualified in their entirety by these and other cautionary statements that we make from time to time in our other Securities and Exchange

 

28



 

Commission filings and public communications. You should evaluate forward-looking statements in the context of these risks and uncertainties and are cautioned to not place undue reliance on such forward-looking statements. These factors may not contain all of the material factors that are important to you. We cannot assure you that we will realize the results or developments we anticipate or, even if substantially realized, that they will result in the consequences or affect us or our operations in the way we expect. The forward-looking statements in this report are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

 

29



 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized, both on behalf of the Registrant and in his capacity as principal financial officer of the Registrant.

 

 

DOLLAR GENERAL CORPORATION

 

 

 

 

Date:

May 26, 2016

 

By:

/s/ John W. Garratt

 

 

John W. Garratt

 

 

Executive Vice President & Chief Financial Officer

 

30



 

EXHIBIT INDEX

 

10.1

 

Dollar General 2016 Teamshare Bonus Program for Named Executive Officers

 

 

 

10.2

 

Form of Restricted Stock Unit Award Agreement (approved May 24, 2016) for awards beginning May 2016 to non-employee directors of Dollar General Corporation pursuant to the Amended and Restated 2007 Stock Incentive Plan

 

 

 

10.3

 

Form of Stock Option Award Agreement (approved May 24, 2016) for awards beginning May 2016 to certain newly hired and promoted employees of Dollar General Corporation pursuant to the Amended and Restated 2007 Stock Incentive Plan

 

 

 

10.4

 

Form of Stock Option Award Agreement (approved March 16, 2016) for awards beginning March 2016 to certain employees of Dollar General Corporation pursuant to the Amended and Restated 2007 Stock Incentive Plan (incorporated by reference to Exhibit 10.5 to Dollar General Corporation’s Annual Report on Form 10-K for the fiscal year ended January 29, 2016, filed with the SEC on March 22, 2016 (file no. 001-11421))

 

 

 

10.5

 

Form of Performance Share Unit Award Agreement (approved March 16, 2016) for awards beginning March 2016 to certain employees of Dollar General Corporation pursuant to the Amended and Restated 2007 Stock Incentive Plan (incorporated by reference to Exhibit 10.10 to Dollar General Corporation’s Annual Report on Form 10-K for the fiscal year ended January 29, 2016, filed with the SEC on March 22, 2016 (file no. 001-11421))

 

 

 

10.6

 

Form of Restricted Stock Unit Award Agreement (approved March 16, 2016) for awards beginning March 2016 to certain employees of Dollar General Corporation pursuant to the Amended and Restated 2007 Stock Incentive Plan (incorporated by reference to Exhibit 10.13 to Dollar General Corporation’s Annual Report on Form 10-K for the fiscal year ended January 29, 2016, filed with the SEC on March 22, 2016 (file no. 001-11421))

 

 

 

10.7

 

Form of Restricted Stock Unit Award Agreement (approved January 26, 2016) for awards beginning February 1, 2016 to non-executive Chairmen of the Board of Directors of Dollar General Corporation pursuant to the Amended and Restated 2007 Stock Incentive Plan (incorporated by reference to Exhibit 10.20 to Dollar General Corporation’s Annual Report on Form 10-K for the fiscal year ended January 29, 2016, filed with the SEC on March 22, 2016 (file no. 001-11421))

 

 

 

10.8

 

Form of Stock Option Award Agreement between Dollar General Corporation and Todd J. Vasos (approved March 16, 2016) (incorporated by reference to Exhibit 10.38 to Dollar General Corporation’s Annual Report on Form 10-K for the fiscal year ended January 29, 2016, filed with the SEC on March 22, 2016 (file no. 001-11421))

 

31



 

15

 

Letter re unaudited interim financial information

 

 

 

31

 

Certifications of CEO and CFO under Exchange Act Rule 13a-14(a)

 

 

 

32

 

Certifications of CEO and CFO under 18 U.S.C. 1350

 

 

 

101.INS

 

XBRL Instance Document

 

 

 

101.SCH

 

XBRL Taxonomy Extension Schema Document

 

 

 

101.CAL

 

XBRL Taxonomy Extension Calculation Linkbase Document

 

 

 

101.LAB

 

XBRL Taxonomy Extension Labels Linkbase Document

 

 

 

101.PRE

 

XBRL Taxonomy Extension Presentation Linkbase Document

 

 

 

101.DEF

 

XBRL Taxonomy Extension Definition Linkbase Document

 

32


Exhibit 10.1

 

GRAPHIC

 

2016 Teamshare Incentive Program

 

I.                               Definitions

 

As used in this document:

 

“AIP” shall mean the Amended and Restated Dollar General Corporation Annual Incentive Plan, as amended from time to time.

 

“Applicable Base Pay” shall mean the eligible employee’s annual salary (or hours, where applicable) plus shift differential, subject to adjustment based on all other eligibility requirements and administrative rules.

 

“Committee” shall mean the Compensation Committee of the Board of Directors (or any successor committee with oversight of executive compensation) or any subcommittee thereof which meets the requirements of Section 162(m).

 

Covered Employees ” shall mean those officers who could, in respect of the Company’s 2016 fiscal year, be “covered employees” under Section 162(m).

 

Dollar General” or the “Company ” means Dollar General Corporation.

 

Eligible Employee ” shall mean those employees meeting all of the criteria set forth in (a) through (c) of Section IV below.

 

“Executive Officers” refers to employees designated as such by the Board of Directors.

 

“Merit Effective Date” shall mean April 1 of the applicable performance period or, if later, the applicable date of the annual merit increase (e.g., for the 2016 Teamshare program, the Merit Effective Date for salaried employees is April 1, 2016).

 

“Performance Period” refers to the 2016 fiscal year from January 30, 2016 to February 3, 2017.

 

Section 162(m) ” refers to Section 162(m)(4)(C) of the Internal Revenue Code of 1986, as amended, and the regulations and guidance issued thereunder from time to time.

 

Senior Officers ” shall include all officers at or above the level of Senior Vice President.

 

“Teamshare” shall mean the 2016 Teamshare Incentive Program as authorized by the Committee.

 

 

March 16, 2016

Teamshare

Page 1 of 5

 



 

II.                          Teamshare Overview

 

The Committee has established the terms of Teamshare, which provides each Eligible Employee an opportunity to receive a cash bonus payment equal to a certain percentage of his or her Applicable Base Pay based upon Dollar General’s achievement of one or more pre-established financial performance measures for a specified Performance Period.  When more than one financial performance measure is selected, the Committee determines the applicable weight to be assigned to each of the selected measures.

 

Threshold, target and maximum performance levels are established by the Committee for the selected performance measure. No Teamshare payout may be made unless the threshold performance level is achieved. The amount payable to each Eligible Employee if the Company reaches the target performance level(s) is equal to a specified percentage of the Eligible Employee’s Applicable Base Pay, subject to adjustment for performance as discussed under Section IV below.  Teamshare payments for financial performance below or above the applicable target levels are prorated on a graduated scale, subject to the threshold and the maximum limits.

 

III.                     2016 Teamshare Program

 

For the 2016 Teamshare program, the Committee selected earnings before interest and taxes, as adjusted for certain items (“Adjusted EBIT”), as the financial performance measure.  In determining the level of performance the Company has achieved for this performance measure at year end, certain categories of items previously identified by the Committee may be excluded from the calculation.  Threshold and maximum performance results for Adjusted EBIT coincide with potential Teamshare payout levels equal to 50% and 300% of individual payout targets, respectively (as a percentage of the Eligible Employee’s Applicable Base Pay).

 

For purposes of the 2016 Teamshare program, the Adjusted EBIT performance target shall be the Company’s Operating Profit as calculated in accordance with United States general accepted accounting principles, but shall exclude:

 

(a)                          the impact of (i) any costs, fees and expenses directly related to the consideration, negotiation, preparation, or consummation of any asset sale, merger or other transaction that results in a Change in Control (within the meaning of the Amended and Restated 2007 Dollar General Corporation Stock Incentive Plan) of the Company or any offering of Company common stock or other security; (ii) any gain or loss recognized as a result of derivative instrument transactions or other hedging activities; (iii) any gains or losses associated with the early retirement of debt obligations; (iv) charges resulting from significant natural disasters; and (v) any significant gains or losses associated with the Company’s LIFO computation; and

 

(b)                            unless the Committee disallows any such item, (i) non-cash asset impairments; (ii) any significant loss as a result of an individual litigation, judgment or lawsuit settlement (including a collective or class action lawsuit and security holder lawsuit, among others); (iii) charges for business restructurings; (iv) losses due to new or

 

 

March 16, 2016

Teamshare

Page 2 of 5

 



 

modified tax or other legislation or accounting changes enacted after the beginning of the 2016 fiscal year; (v) significant tax settlements; and (vi) any significant unplanned items of a non-recurring nature.

 

IV. Determination of Bonuses

 

(a)      Eligibility to Participate in Teamshare:

 

i.

Active regular, full-time or part-time store support center (SSC), Dollar General Global Sourcing (DGGS) or distribution center (DC) employee during the Performance Period.

 

 

ii.

Hired by January 15 of 2017.

 

 

iii.

Employed with the Company through February 3, 2017 and, unless otherwise required by law, on the date on which the Teamshare payment is made.

 

 

iv.

Bonuses for the estates of Eligible Employees will be eligible to receive the Teamshare payment if the employee’s death occurs on or after February 3, 2017.

 

(b)      Eligibility to Receive Bonus Payout:

 

If the Company achieves at least the threshold financial performance level, each employee who participates in Teamshare will become eligible to receive a bonus payout; provided, however, that any employee who fails to comply with the Code of Business Conduct and Ethics during the fiscal year may not be deemed eligible to receive a bonus payout regardless of his or her performance rating.

 

(c)       Adjustments to Bonus Payouts to Eligible Employees:

 

If an employee is determined to be eligible to receive a bonus payout in accordance with the eligibility rules outlined immediately above, adjustments to the bonus payout may be made only as follows:

 

i.

Bonuses for eligible hourly employees shall be calculated based on Company financial performance but shall be adjusted downward to a level from 0%-80%, as determined by management, if rated “Below Expectations”.

ii.

Bonuses for Executive Officers (i.e. Section 16 filers) shall be calculated based on Company financial performance but may be adjusted downward in the sole discretion of the Committee to a level from 80%-100% if rated “Meets Expectations” or to a level from 0-80% if rated “Below Expectations”.

iii.

Bonuses for all other Eligible Employees shall be calculated based on Company financial performance, but shall be adjusted upward or downward to a level from 100%-120% if rated “Exceeds Expectations,” to a level from 80%-100% if rated “Meets Expectations” and to a level from 0%-80% if rated “Below Expectations” (see below for a limitation on this authority for Covered Employees). Such upward or downward adjustment must be approved by the Committee in the case of any Senior Officer or certain others identified in the

 

 

March 16, 2016

Teamshare

Page 3 of 5

 



 

 

resolution adopting Teamshare; otherwise, such adjustment shall be approved by management.

iv.

Payouts to Covered Employees shall follow the rules set forth above depending upon whether the Covered Employee is an Executive Officer or is not an Executive Officer; provided, however, that in no event may any bonus paid to a Covered Employee be adjusted upward nor may any individual payout to a Covered Employee exceed $10.0 million.

v.

In no event may the aggregate amount paid under Teamshare, taking into account all allowable adjustments, exceed the earned bonus pool.

 

(d)      CEO Discretion to Distribute Unallocated Funds:

 

Bonuses that are not allocated out of the earned bonus pool are subject to distribution at the discretion of the Chief Executive Officer of the Company, except that no such unallocated bonus amounts may be allocated to any Covered Employee, Senior Officer or certain others identified in the resolution adopting Teamshare.

 

V.                       Administrative Rules

 

(a)

Each Eligible Employee’s Teamshare payout is computed as a percentage of the Applicable Base Pay plus any shift differential.

 

 

(b)

Teamshare payouts will be prorated for changes to an Eligible Employee’s position, pay, individual target, shift differential or status that occur during the Performance Period based on the number of days the applicable element applies. The Applicable Base Pay used for Teamshare from the beginning of the Performance Period to the Merit Effective Date will be the Eligible Employee’s base pay as of the Merit Effective Date.

 

 

(c)

Teamshare payouts are prorated to exclude leaves of absence during the Performance Period (unless otherwise required by law).

 

 

(d)

Teamshare payouts will be made no later than April 15 of the year following the fiscal year in which financial performance is measured (e.g., the 2016 Teamshare program payouts, if any, will be made no later than April 15, 2017).

 

 

(e)

Teamshare information is proprietary and confidential. Employees are reminded that they may not disclose Teamshare information relating to the Company’s financial goals or performance. Such disclosure may result in disciplinary action, up to and including termination. The Company reserves the right to adjust, amend or suspend Teamshare at any time for any reason, including, but not limited to, unforeseen events.

 

 

(f)

Notwithstanding anything in this Teamshare document to the contrary, the determination of the Adjusted EBIT performance measure and all other relevant provisions and actions applicable to the determination of bonus payout amounts to Covered Employees under Teamshare shall be pursuant to and subject to the terms

 

 

March 16, 2016

Teamshare

Page 4 of 5

 



 

 

of the AIP and in the event of any conflict between the provisions of Teamshare and the AIP, the terms of the AIP shall govern.

 

VI.                  Tax and Other Withholding Information

 

The Internal Revenue Service (the “IRS”) considers incentive payments as supplemental wages.  In accordance with IRS guidelines, Dollar General will withhold federal income taxes at the supplemental rate (currently established at 25%).  In addition, this payment will be subject to applicable social security, Medicare, state and local taxes. Voluntary deductions (e.g. health insurance, 401k, etc.) will not be deducted from this amount.  Where required by law, specific garnishments (e.g., child support) may be deducted, as appropriate, from this amount.  Certain state laws require incentive payments be held for up to 30 days after the check date pending review of applicable child support garnishments.  After the Company receives notification from the state child support agencies regarding whether part or all of the impacted employee’s incentive payment should be paid toward child support, the Company will pay any remaining incentive funds with the next regular payroll.

 

 

March 16, 2016

Teamshare

Page 5 of 5

 


Exhibit 10.2

 

DOLLAR GENERAL CORPORATION

RESTRICTED STOCK UNIT AWARD AGREEMENT

 

THIS AGREEMENT (the “Agreement”) is made effective as of [Date] (the “ Grant Date ”), between Dollar General Corporation, a Tennessee corporation (hereinafter called the “ Company ”), and [Name] (hereinafter referred to as the “ Grantee ”). Capitalized terms not otherwise defined herein shall have the same meanings as in the Amended and Restated 2007 Stock Incentive Plan for Key Employees of Dollar General Corporation and its Affiliates, as amended from time to time (the “ Plan ”), the terms of which are hereby incorporated by reference and made a part of this Agreement.

 

WHEREAS, the Company desires to grant the Grantee a restricted stock unit award as provided for hereunder, ultimately payable in shares of Common Stock of the Company, par value $0.875 per Share (the “ Restricted Stock Unit Award ”), pursuant to the terms and conditions of this Agreement and the Plan; and

 

WHEREAS, the committee of the Company’s Board appointed to administer the Plan (the “ Committee ”) has determined that it would be to the advantage and in the best interest of the Company and its shareholders to grant the Restricted Stock Unit Award provided for herein to the Grantee;

 

NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto do hereby agree as follows:

 

1.   Grant of the Restricted Stock Unit .  Subject to the terms and conditions of the Plan and the additional terms and conditions set forth in this Agreement, the Company hereby grants to the Grantee [xxxx] Restricted Stock Units.  A “ Restricted Stock Unit ” represents the right to receive one share of Common Stock upon satisfaction of the vesting and other conditions set forth in this Agreement.  The Restricted Stock Units shall vest and become nonforfeitable in accordance with Section 2 hereof.

 

2.   Vesting .

 

(a)                                 The Restricted Stock Units shall become vested and nonforfeitable on the first anniversary of the Grant Date (the “ Vesting Date ”), so long as the Grantee continues to be a member of the Board through the Vesting Date.

 

(b)                                 Notwithstanding the foregoing, to the extent the Restricted Stock Units have not previously terminated or become vested and nonforfeitable (i) if the Grantee ceases to be a member of the Board due to the Grantee’s death, Disability (as defined below) or voluntary departure from the Board, then 100% of the Restricted Stock Units that would have become vested and nonforfeitable on the Vesting Date if the Grantee had remained a member of the Board through such date will become vested and nonforfeitable upon such death, Disability or voluntary departure from the Board; and (ii) the Restricted Stock Units shall become immediately vested and nonforfeitable as to 100% of the shares of Common Stock subject to such Restricted Stock Units immediately prior to a Change in Control so long as the Grantee is a member of the Board through the date of the Change in Control.

 

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(c)                                  For the purposes of this Agreement, Disability shall have the meaning as provided under Section 409A(a)(2)(C)(i) of the Code.

 

(d)                                 For purposes of this Agreement, a Change in Control (as defined in the Plan) will be deemed to have occurred with respect to the Grantee only if an event relating to the Change in Control constitutes a change in ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company within the meaning of Treas. Reg. Section 1.409A-3(i)(5).

 

3.   Entitlement to Receive Common Stock .

 

(a)                                 Shares corresponding to the number of Restricted Stock Units granted herein (“ RSU Shares ”) are to be paid to the Grantee on the Vesting Date or, if earlier, upon the Grantee’s death or Disability, upon a Change in Control, or upon termination of Board service (but only to the extent the RSU Shares are vested at the time of termination pursuant to Section 2).   However, if the Grantee has made a timely and valid irrevocable election to defer receipt of all or any portion of the vested RSU Shares in accordance with the provisions of the RSU Award Deferral Election Form provided to the Grantee and returned it to the Company [ for a Grantee receiving an Award under the Plan for the first time: prior to the Grant Date] [ for a Grantee receiving an annual Award: prior to December 31 of the calendar year preceding the Grant Date] (such shares, the “ Deferred Shares ”), any such Deferred Shares shall instead be paid on the date so elected by the Grantee pursuant to such RSU Award Deferral Election Form, or, if earlier, upon the Grantee’s death or Disability or upon a Change in Control.

 

(b)                                 On any date on which any RSU Shares are to be paid to the Grantee in accordance with Section 3(a) above, the Company shall deliver to the Grantee or the Grantee’s legal representative or, if the Grantee is deceased, the  Grantee’s designated  beneficiary, or, if none, his personal representative, a share certificate or evidence of electronic delivery of such RSU Shares in the amount of the RSU Shares so delivered to the Grantee, and such RSU Shares shall be registered in the name of the Grantee.

 

(c)                                  The shares of Common Stock deliverable upon the payment of a vested Restricted Stock Unit may be either previously authorized but unissued Shares or issued Shares, which have then been reacquired by the Company. Such Shares shall be fully paid and nonassessable.

 

(d)                                 Only whole shares of Common Stock shall be delivered in payment of a vested Restricted Stock Unit. To the extent a vested Restricted Stock Unit (including any additional Restricted Stock Units or Deferred Shares credited from dividends pursuant to Section 4 below) includes a fractional share, on the date the RSU Shares or Deferred Shares are to be paid to the Grantee, such fractional share shall be paid to the Grantee or the Grantee’s legal representative or, if the Grantee is deceased, the Grantee’s designated beneficiary, or if none, his personal representative, in cash, in an amount that equals the Fair Market Value of such fractional share on such payment date.

 

4.   Dividend Equivalents .  In the event that the Company pays any ordinary dividend (whether in cash, shares of Common Stock or other property) on its Shares, on the date such dividend is paid to shareholders the Grantee shall be credited, based on the number of unvested Restricted Stock Units held by the Grantee and the number of Deferred Shares (if any) that the Grantee is

 

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entitled to receive, in each case as of the record date of such dividend, with additional Restricted Stock Units or Deferred Shares, as applicable, that reflect the amount of such dividend (or if such dividend is paid in shares of Common Stock or other property, the fair value of the dividend, as determined in good faith by the Board). Any such additional Restricted Stock Units and Deferred Shares, as applicable, shall be subject to all terms and conditions of this Agreement.

 

5.   Transferability .  Neither the Restricted Stock Units prior to becoming vested pursuant to Section 2 nor any interest or right therein or part thereof shall be liable for the debts, contracts or engagements of the Grantee or his or her successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect; provided, however, that this Section 5 shall not prevent transfers by will or by the applicable laws of descent and distribution.

 

6.    Grantee’s Continued Service on the Board . Nothing contained in this Agreement or in any other agreement entered into by the Company and the Grantee guarantees that the Grantee will continue to serve as a member of the Board for any specified period of time.

 

7.   Change in Capitalization .  If any event described in Section 9 of the Plan occurs, this Agreement and the Restricted Stock Units (and any Deferred Shares due to be delivered hereunder) shall be adjusted to the extent required or permitted, as applicable, pursuant to Section 9 of the Plan.

 

8.   Taxes . The Grantee shall have full responsibility, and the Company shall have no responsibility, for satisfying any liability for any federal, state or local income or other taxes required by law to be paid with respect to such Restricted Stock Units, including upon the vesting of the Restricted Stock Units and the delivery of any RSU Shares. The Grantee is hereby advised to seek his or her own tax counsel regarding the taxation of the grant and vesting of the Restricted Stock Units hereunder (and the tax consequences of any deferral election made in respect of the delivery of any RSU Shares).

 

9.   Limitation on Obligations . This Restricted Stock Unit Award shall not be secured by any specific assets of the Company or any of its Subsidiaries, nor shall any assets of the Company or any of its Subsidiaries be designated as attributable or allocated to the satisfaction of the Company’s obligations under this Agreement.  In addition, the Company shall not be liable to the Grantee for damages relating to any delays in issuing the share certificates or electronic delivery thereof to him (or his designated entities), any loss of the certificates, or any mistakes or errors in the issuance or registration of the certificates or in the certificates themselves.

 

10.                               Securities Laws . The Company may require the Grantee to make or enter into such written representations, warranties and agreements as the Committee may reasonably request in order to comply with applicable securities laws.  The granting of the Restricted Stock Units hereunder shall be subject to all applicable laws, rules and regulations and to such approvals of any governmental agencies as may be required.

 

11.                               Notices . Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of its Secretary or his or her designee, and any

 

3



 

notice to be given to the Grantee shall be addressed to him at the address given beneath his signature hereto.  By a notice given pursuant to this Section 11, either party may hereafter designate a different address for notices to be given to him. Any notice that is required to be given to the Grantee shall, if the Grantee is then deceased, be given to the Grantee’s personal representative if such representative has previously informed the Company of his status and address by written notice under this Section 11.  Any notice shall have been deemed duly given when delivered by hand or courier or when enclosed in a properly sealed envelope or wrapper addressed as aforesaid, deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service.

 

12.                               Governing Law . The laws of the State of Delaware shall govern the interpretation, validity and performance of the terms of this Agreement regardless of the law that might be applied under principles of conflicts of laws.

 

13.                               Section 409A of the Code .  The provisions of Section 10(c) of the Plan are hereby incorporated by reference.

 

14.                               Restricted Stock Units Subject to Plan . The Restricted Stock Unit Award and the Shares issued to the Grantee upon payment of the Restricted Stock Units shall be subject to all terms and provisions of the Plan, to the extent applicable to the Restricted Stock Units and such Shares. In the event of any conflict between this Agreement and the Plan, the terms of the Plan shall control.

 

15.                               Amendment and Termination .  This Agreement may be modified in any manner consistent with Section 10 of the Plan.

 

16.                               Administration .  The Committee shall have the power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret or revoke any such rules.  All actions taken and all interpretations and determinations made by the Committee shall be final and binding upon the Grantee, the Company and all other interested persons. No member of the Committee shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or the Restricted Stock Unit Award.  In its absolute discretion, the Board may at any time and from time to time exercise any and all rights and duties of the Committee under the Plan and this Agreement.

 

17.                               Rights as Shareholder .  Except as may be otherwise provided in Section 7 of this Agreement, the holder of a Restricted Stock Unit Award shall not be, nor have any of the rights or privileges of, a shareholder of the Company in respect of any Shares issuable upon the payment of a vested Restricted Stock Unit unless and until a certificate or certificates representing such Shares shall have been issued by the Company to such holder or, if the Common Stock is listed on a national securities exchange, a book entry representing such Shares has been made by the registrar of the Company.

 

18.                               Signature in Counterparts . This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

 

[Signatures on next page.]

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

 

 

DOLLAR GENERAL CORPORATION

 

 

 

 

 

By:

 

 

 

 

 

Name:

 

 

 

 

 

Title:

 

 

 

 

 

GRANTEE

 

 

 

 

 

 

[Name]

 

 

[Address]

 

 

5


Exhibit 10.3

 

DOLLAR GENERAL CORPORATION

STOCK OPTION AWARD AGREEMENT

 

THIS AGREEMENT (the “ Agreement ”), dated as of the date indicated on Schedule A hereto (the “ Grant Date ”), is made by and between Dollar General Corporation, a Tennessee corporation (hereinafter referred to as the “ Company ”), and the individual whose name is set forth on the signature page hereof, who is an employee of the Company or a Subsidiary or Affiliate of the Company (hereinafter referred to as the “ Optionee ”).  Any capitalized terms herein not otherwise defined in this Agreement shall have the meaning set forth in the Amended and Restated 2007 Stock Incentive Plan for Key Employees of Dollar General Corporation and its Affiliates, as such Plan may be amended from time to time (the “ Plan ”).

 

WHEREAS, the Company wishes to carry out the Plan, the terms of which are hereby incorporated by reference and made a part of this Agreement; and

 

WHEREAS, the Compensation Committee (or a duly authorized subcommittee thereof) of the Board of the Company appointed to administer the Plan (the “ Committee ”) has determined that it would be to the advantage and best interest of the Company and its shareholders to grant the Option provided for herein to the Optionee, and has advised the Company thereof and instructed the undersigned officer to issue said Option.

 

NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby agree as follows:

 

ARTICLE I

DEFINITIONS

 

Whenever the following terms are used in this Agreement, they shall have the meaning specified below unless the context clearly indicates to the contrary.

 

Section 1.1.   Cause

 

“Cause” shall mean (A) “Cause” as such term may be defined in any employment agreement between the Optionee and the Company or any of its Subsidiaries or Affiliates that is in effect at the time of termination of employment; or (B) if there is no such employment agreement in effect, “Cause” as such term may be defined in any change-in-control agreement between the Optionee and the Company or any of its Subsidiaries or Affiliates that is in effect at the time of termination of employment; or (C) if there is no such employment or change-in-control agreement, with respect to an Optionee: (i) any act of the Optionee involving fraud or dishonesty, or any willful failure to perform reasonable duties assigned to the Optionee which failure is not cured within 10 business days after receipt from the Company of written notice of such failure; (ii) any material breach by the Optionee of any securities or other law or regulation or any Company policy governing trading or dealing with stock, securities, investments or the like, or any inappropriate disclosure or “tipping” relating to any stock, securities, investments or the like; (iii) other than as required by law, the carrying out by the Optionee of any activity, or the Optionee making any public statement, which prejudices or ridicules the good name and standing of the Company or its Affiliates or would bring such persons into public contempt or ridicule; (iv) attendance by the Optionee at work in a state of intoxication or the Optionee otherwise being found in possession at the Optionee’s place of work of

 

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any prohibited drug or substance, possession of which would amount to a criminal offense; (v) any assault or other act of violence by the Optionee; or (vi) the Optionee being indicted for any crime constituting (x) any felony whatsoever or (y) any misdemeanor that would preclude employment under the Company’s hiring policy.

 

Section 1.2.   Disability

 

“Disability” shall mean (A) “Disability” as such term may be defined in any employment agreement between the Optionee and the Company or any of its Subsidiaries or Affiliates that is in effect at the time of termination of employment; or (B) if there is no such employment agreement in effect, “Disability” as such term may be defined in any change-in-control agreement between the Optionee and the Company or any of its Subsidiaries or Affiliates that is in effect at the time of termination of employment; or (C) if there is no such employment or change-in-control agreement, “Disability” as defined in the Company’s long-term disability plan.

 

Section 1.3.  Good Reason

 

“Good Reason” shall mean (A) a material diminution in the Optionee’s base salary unless such action is in connection with across-the-board base salary reductions affecting 100 percent of employees at the same grade level; or (B) a material diminution in the Optionee’s authority, duties or responsibilities.  To qualify as a termination due to Good Reason under this Agreement, the Optionee must have provided written notice to the Company of the existence of the circumstances providing grounds for termination for Good Reason within thirty (30) days of the initial existence of such grounds and must have given the Company at least thirty (30) days from receipt of such notice to cure the condition constituting Good Reason.  Such termination of employment must have become effective no later than one year after the initial existence of the condition constituting Good Reason.

 

Section 1.4.   Option

 

“Option” shall mean the right and option to purchase, on the terms and conditions set forth herein, all or any part of an aggregate of the number of Shares of Common Stock set forth on Schedule A hereto.

 

Section 1.5.  Qualifying Termination

 

“Qualifying Termination” shall mean the Optionee’s employment with the Company and all Service Recipients is involuntarily terminated by the Company other than with Cause or terminated by the Optionee for Good Reason other than when Cause to terminate exists, in each case within two years following a Change in Control. In no event shall a Qualifying Termination include the Retirement, death, Disability or any other termination of the Optionee not specifically covered by the preceding sentence.

 

Section 1.6.  Retirement

 

“Retirement” shall mean the voluntary termination of the Optionee’s employment with the Company or any of its Subsidiaries or Affiliates on or after (A) reaching the minimum age of sixty-two (62) and (B) achieving five (5) consecutive years of service; provided, however, that the sum of the Optionee’s age plus years of service (counting whole years only) must equal at least seventy (70)

 

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and provided further that there is no basis for the Company to terminate the Optionee with Cause at the time of Optionee’s voluntary termination.

 

Section 1.7.   Secretary

 

“Secretary” shall mean the Secretary of the Company.

 

ARTICLE II

GRANT OF OPTION

 

Section 2.1.    Grant of Option

 

For good and valuable consideration, on and as of the Grant Date the Company irrevocably grants to the Optionee the Option on the terms and conditions set forth in this Agreement.

 

Section 2.2.    Exercise Price

 

Subject to Section 2.4, the exercise price of the Shares of Common Stock covered by the Option (the “ Exercise Price ”) shall be as set forth on Schedule A hereto, which shall be the Fair Market Value on the Grant Date.

 

Section 2.3.   No Guarantee of Employment

 

Nothing in this Agreement or in the Plan shall confer upon the Optionee any right to continue in the employ of the Company or any Subsidiary or Affiliate or shall interfere with or restrict in any way the rights of the Company and its Subsidiaries or Affiliates, which are hereby expressly reserved, to terminate the employment of the Optionee at any time for any reason whatsoever, with or without cause, subject to the applicable provisions of, if any, the Optionee’s employment agreement with the Company or offer letter provided by the Company to the Optionee.

 

Section 2.4.    Adjustments to Option

 

The Option shall be subject to the adjustment provisions of Sections 8 and 9 of the Plan, provided , however , that in the event of the payment of an extraordinary dividend by the Company to its shareholders: the Exercise Price of the Option shall be reduced by the amount of the dividend paid, but only to the extent the Committee determines it to be permitted under applicable tax laws and to not have adverse tax consequences to the Optionee under Section 409A of the Code; and, if such reduction cannot be fully effected due to such tax laws and it will not have adverse tax consequences to the Optionee, then the Company shall pay to the Optionee a cash payment, on a per Share basis, equal to the balance of the amount of the dividend not permitted to be applied to reduce the Exercise Price of the applicable Option as follows: (a) for each Share subject to a vested Option, immediately upon the date of such dividend payment; and (b) for each Share subject to an unvested Option, on the date on which such Option becomes vested and exercisable with respect to such Share.

 

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ARTICLE III

PERIOD OF EXERCISABILITY

 

Section 3.1.   Commencement of Exercisability

 

(a)                                  Except as otherwise provided in Section 3.1(b), (c) or (d) below, so long as the Optionee continues to be employed by the Company or any other Service Recipient, the Option shall become vested and exercisable with respect to 25% of the Shares subject to such Option on each of the first four (4) anniversaries of the Grant Date (each such date, a “Vesting Date”).  To the extent this vesting schedule results in the vesting of fractional shares, the fractional shares shall be combined and be exercisable on the earliest Vesting Date.

 

(b)                                  Notwithstanding Section 3.1(a) above, upon the earliest occurrence of (i) the Optionee’s death, or (ii) a termination of the Optionee’s employment by reason of the Optionee’s Disability, the Option shall become immediately vested and exercisable with respect to 100% of the Shares subject to such unvested Option immediately prior to such event (but only to the extent such Option has not otherwise terminated, been forfeited or become exercisable).

 

(c)                                   Notwithstanding Section 3.1(a) above, in the event the Optionee experiences a Qualifying Termination, the Option shall become immediately vested and exercisable on the date of such Qualifying Termination with respect to 100% of the Shares subject to such unvested Option (but only to the extent such Option has not otherwise terminated, been forfeited or become exercisable).

 

(d)                                  Notwithstanding Section 3.1(a) above, in the event of the Optionee’s Retirement, that portion of the Option that would have become vested and exercisable within the one (1) year period following the Optionee’s Retirement date if the Optionee had remained employed with the Company or the applicable Service Recipient shall remain outstanding for a period of one (1) year following the Optionee’s Retirement date and shall become vested and exercisable on the anniversary of the Grant Date that falls within the one (1) year period following the Optionee’s Retirement date (but only to the extent such portion of the Option has not otherwise terminated, been forfeited or become exercisable); provided, however, that if during such one (1) year period the Optionee dies or incurs a Disability, such portion of the Option shall instead become immediately vested and exercisable (but only to the extent such portion of the Option has not otherwise terminated or been forfeited) upon such death or Disability.

 

(e)                                   No Option shall become vested or exercisable as to any additional Shares following the Optionee’s termination of employment for any reason, and any Option which is unexercisable as of the Optionee’s termination of employment shall immediately terminate and be forfeited without payment therefor, in each case except as otherwise provided in Section 3.1(b), (c) or (d) above.

 

Section 3.2.   Expiration of Option

 

The Optionee may not exercise the Option to any extent after the first to occur of the following events:

 

(a)                                  The tenth anniversary of the Grant Date;

 

(b)                                  The fifth anniversary of the date of the Optionee’s termination of employment with the Company and all Service Recipients by reason of Retirement;

 

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(c)                                   The first anniversary of the date of the Optionee’s termination of employment with the Company and all Service Recipients by reason of death or Disability;

 

(d)                                  The third anniversary of the date of the Optionee’s Qualifying Termination;

 

(e)                                   Ninety (90) days after the date of the Optionee’s involuntary termination of employment by the Company and all Service Recipients without Cause that is not a Qualifying Termination;

 

(f)                                    Ninety (90) days after the date of the Optionee’s voluntary termination of employment with the Company and all Service Recipients by the Optionee that is not a Qualifying Termination or Disability or Retirement;

 

(g)                                   Immediately upon the date of the Optionee’s termination of employment by the Company and all Service Recipients with Cause;

 

(h)                                  At the discretion of the Company, if the Committee so determines pursuant to Section 9 of the Plan.

 

ARTICLE IV

EXERCISE OF OPTION

 

Section 4.1.   Person Eligible to Exercise

 

During the lifetime of the Optionee, only the Optionee (or his or her duly authorized legal representative) may exercise the Option or any portion thereof.  After the death of the Optionee, any exercisable portion of the Option may, prior to the time when the Option becomes unexercisable under Section 3.2, be exercised by the Optionee’s personal representative or by any person empowered to do so under the Optionee’s will or under the then applicable laws of descent and distribution.

 

Section 4.2.   Partial Exercise

 

Any exercisable portion of the Option or the entire Option, if then wholly exercisable, may be exercised in whole or in part at any time prior to the time when the Option or portion thereof becomes unexercisable under Section 3.2; provided , however , that any partial exercise shall be for whole Shares of Common Stock only.

 

Section 4.3.   Manner of Exercise

 

The Option, or any exercisable portion thereof, may be exercised solely by delivering to the Secretary or his or her designee all of the following prior to the time when the Option or such portion becomes unexercisable under Section 3.2:

 

(a)                                  Notice in writing signed by the Optionee or the other person then entitled to exercise the Option or portion thereof, stating that the Option or portion thereof is thereby exercised, such notice complying with all applicable rules established by the Committee;

 

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(b)                                  (i) Full payment (in cash or by check or by a combination thereof) for the Shares with respect to which such Option or portion thereof is exercised (provided, however, that full payment is deemed made if the Company receives cash in respect of the exercise price no later than the date on which the Company or its agent delivers or releases Shares to the Optionee or his or her agent, which date shall not be later than three (3) business days following the date on which the Option is exercised, in the event of a cashless exercise via a third party in a manner that is compliant with applicable law) or (ii) notice in writing that the Optionee elects to have the number of Shares that would otherwise be issued to the Optionee reduced by a number of Shares having an equivalent Fair Market Value to the payment that would otherwise be made by the Optionee to the Company pursuant to clause (i) of this subsection (b);

 

(c)                                   (i) Full payment (in cash or by check or by a combination thereof) to satisfy the minimum withholding tax obligation with respect to which such Option or portion thereof is exercised (provided, however, that full payment is deemed made if the Company receives such payment no later than the date on which the Company must remit such withholding to the Internal Revenue Service in the event of a cashless exercise via a third party in a manner that is compliant with applicable law); or (ii) notice in writing that the Optionee elects to have the number of Shares that would otherwise be issued to the Optionee reduced by a number of Shares having an equivalent Fair Market Value to the payment that would otherwise be made by the Optionee to the Company pursuant to clause (i) of this subsection (c);

 

(d)                            A bona fide written representation and agreement, in a form satisfactory to the Committee, signed by the Optionee or other person then entitled to exercise such Option or portion thereof, stating that the Shares of Common Stock are being acquired for his or her own account, for investment and without any present intention of distributing or reselling said Shares or any of them except as may be permitted under the Securities Act of 1933, as amended (the “ Act ”), and then applicable rules and regulations thereunder, and that the Optionee or other person then entitled to exercise such Option or portion thereof will indemnify the Company against and hold it free and harmless from any loss, damage, expense or liability resulting to the Company if any sale or distribution of the Shares by such person is contrary to the representation and agreement referred to above; provided , however , that the Committee may, in its reasonable discretion, take whatever additional actions it deems reasonably necessary to ensure the observance and performance of such representation and agreement and to effect compliance with the Act and any other federal or state securities laws or regulations; and

 

(e)           In the event the Option or portion thereof shall be exercised pursuant to Section 4.1 by any person or persons other than the Optionee, appropriate proof of the right of such person or persons to exercise the Option.

 

Without limiting the generality of the foregoing, the Committee may require an opinion of counsel acceptable to it to the effect that any subsequent transfer of Shares acquired on exercise of the Option does not violate the Act, and may issue stop-transfer orders covering such Shares.  Share certificates evidencing stock issued on exercise of the Option may bear an appropriate legend referring to the provisions of subsection (d) above and the agreements herein. The written representation and agreement referred to in subsection (d) above shall, however, not be required if the Shares to be issued pursuant to such exercise have been registered under the Act, and such registration is then effective in respect of such Shares.

 

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Section 4.4.   Conditions to Issuance of Stock Certificates

 

The Shares deliverable upon the exercise of the Option, or any portion thereof, may be either previously authorized but unissued Shares or issued Shares, which have then been reacquired by the Company.  Such Shares shall be fully paid and nonassessable.  The Company shall not be required to issue or deliver any certificate or certificates for Shares purchased (if certificated, or if not certificated, register the issuance of such Shares on its books and records) upon the exercise of the Option or portion thereof prior to fulfillment of all of the following conditions:

 

(a)           The obtaining of approval or other clearance from any state or federal governmental agency which the Committee shall, in its reasonable and good faith discretion, determine to be necessary or advisable; and

 

(b)           The lapse of such reasonable period of time following the exercise of the Option as the Committee may from time to time establish for reasons of administrative convenience or as may otherwise be required by applicable law.

 

Section 4.5.   Rights as Shareholder

 

Except as otherwise provided in Section 2.4 of this Agreement, the holder of an Option shall not be, nor have any of the rights or privileges of, a shareholder of the Company in respect of any Shares purchasable upon the exercise of the Option or any portion thereof unless and until certificates representing such Shares shall have been issued by the Company to such holder or the Shares have otherwise been recorded in the records of the Company as owned by such holder.

 

ARTICLE V

MISCELLANEOUS

 

Section 5.1.   Administration

 

The Committee shall have the power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret or revoke any such rules.  All actions taken and all interpretations and determinations made by the Committee shall be final and binding upon the Optionee, the Company and all other interested persons.  No member of the Committee shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or the Option.  In its absolute discretion, the Board may at any time and from time to time exercise any and all rights and duties of the Committee under the Plan and this Agreement.

 

Section 5.2.   Option Not Transferable

 

Neither the Option nor any interest or right therein or part thereof shall be liable for the debts, contracts or engagements of the Optionee or his or her successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect; provided, however, that this

 

7



 

Section 5.2 shall not prevent transfers by will or by the applicable laws of descent and distribution or other transfers authorized in limited circumstances by the Committee (or its designee).

 

Section 5.3.   Notices

 

Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of its Secretary or his or her designee, and any notice to be given to the Optionee shall be addressed to him or her at the address given beneath his or her signature hereto.  By a notice given pursuant to this Section 5.3, either party may hereafter designate a different address for notices to be given to him or her.  Any notice, which is required to be given to the Optionee, shall, if the Optionee is then deceased, be given to the Optionee’s personal representative if such representative has previously informed the Company of his status and address by written notice under this Section 5.3. Any notice shall have been deemed duly given when (i) delivered in person; or, except for notice under Section 4.3 which must be received to be duly given, (ii) enclosed in a properly sealed envelope or wrapper addressed as aforesaid, deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service, or (iii) enclosed in a properly sealed envelope or wrapper addressed as aforesaid, deposited (with fees prepaid) in an office regularly maintained by FedEx, UPS, or comparable non-public mail carrier.

 

Section 5.4.   Titles; Pronouns

 

Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.  The masculine pronoun shall include the feminine and neuter, and the singular the plural, where the context so indicates.

 

Section 5.5.   [ Applicability of Plan and Management Stockholder’s Agreement

 

The Option and the Shares of Common Stock issued to the Optionee upon exercise of the Option shall be subject to all of the terms and provisions of the Plan to the extent applicable to an Option and Shares.   In the event of any conflict between this Agreement and the Plan, the terms of the Plan shall control.  The Option and the Shares of Common Stock issued to the Optionee upon exercise of the Option shall not be subject to, and hereby are expressly exempted from, all of the terms and provisions of any Management Stockholder’s Agreement between the Optionee and the Company in existence on the Grant Date.]

 

Section 5.6.   Amendment

 

This Agreement may only be amended pursuant to Section 10 of the Plan.

 

Section 5.7.   Governing Law

 

The laws of the State of Delaware shall govern the interpretation, validity and performance of the terms of this Agreement regardless of the law that might be applied under principles of conflicts of laws.

 

8



 

Section 5.8.   Arbitration

 

In the event of any controversy among the parties hereto arising out of, or relating to, this Agreement which cannot be settled amicably by the parties, such controversy shall be finally, exclusively and conclusively settled by mandatory arbitration conducted expeditiously in accordance with the American Arbitration Association rules, by a single independent arbitrator.  Such arbitration process shall take place within the Nashville, Tennessee metropolitan area.  The decision of the arbitrator shall be final and binding upon all parties hereto and shall be rendered pursuant to a written decision, which contains a detailed recital of the arbitrator’s reasoning.  Judgment upon the award rendered may be entered in any court having jurisdiction thereof.  Each party shall bear its own legal fees and expenses, unless otherwise determined by the arbitrator.

 

Section 5.9.   Clawback

 

As a condition of receiving the Option, the Optionee acknowledges and agrees that the Optionee’s rights, payments, and benefits with respect to the Option shall be subject to any reduction, cancellation, forfeiture or recoupment, in whole or in part, upon the occurrence of certain specified events, as may be required by any rule or regulation of the Securities and Exchange Commission or by any applicable national exchange, or by any other applicable law, rule or regulation.

 

Section 5.10  Signature in Counterparts

 

This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

 

[ Signatures on next pages ]

 

9



 

IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto.

 

 

DOLLAR GENERAL CORPORATION

 

 

 

 

 

 

 

By:

 

 

 

 

 

Name:

 

 

 

 

 

Title:

 

 

 

 

 

 

 

ADDRESS:

 

 

 

Dollar General Corporation

 

100 Mission Ridge

 

Goodlettsville, TN 37072

 

[Signature Page of Stock Option Award Agreement]

 

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OPTIONEE:

 

 

 

 

 

Signature:

 

Print Name:

 

Employee ID:

 

 

 

 

 

ADDRESS:

 

 

 

 

 

[Signature Page of Stock Option Award Agreement]

 

11



 

Schedule A to Stock Option Award Agreement

 

Grant Date :

 

[     ]

 

 

 

 

 

Exercise Price (per Share) :

 

$[     ]

 

 

 

 

 

Option Grant :

 

 

 

Aggregate number of Shares of Common Stock for which the Option granted hereunder is exercisable:

 

[     ]

 

 

12


Exhibit 15

 

May 26, 2016

The Board of Directors and Shareholders

Dollar General Corporation

 

We are aware of the incorporation by reference in the Registration Statements (Nos. 333-151047, 333-151049, 333-151655, and 333-163200 on Form S-8) of Dollar General Corporation of our report dated May 26, 2016 relating to the unaudited condensed consolidated interim financial statements of Dollar General Corporation that are included in its Form 10-Q for the quarter ended April 29, 2016.

 

 

/s/ Ernst & Young LLP

 

Nashville, Tennessee

 


Exhibit 31

 

CERTIFICATIONS

 

I, Todd J. Vasos, certify that:

 

1.                    I have reviewed this quarterly report on Form 10-Q of Dollar General Corporation;

 

2.                    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.                    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.                    The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a)          Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b)          Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c)           Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d)          Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.                    The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of  the registrant’s board of directors (or persons performing the equivalent functions):

 

(a)          All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b)          Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

 

Date: May 26, 2016

 

/s/ Todd J. Vasos

 

 

Todd J. Vasos

 

 

Chief Executive Officer

 



 

I, John W. Garratt, certify that:

 

1.                    I have reviewed this quarterly report on Form 10-Q of Dollar General Corporation;

 

2.                    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.                    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.                    The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a)          Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b)          Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c)           Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d)          Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.                    The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a)          All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b)          Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

 

Date: May 26, 2016

 

/s/ John W. Garratt

 

 

John W. Garratt

 

 

Chief Financial Officer

 


Exhibit 32

 

CERTIFICATIONS

Pursuant to 18 U.S.C. Section 1350

 

Each of the undersigned hereby certifies that to his knowledge the Quarterly Report on Form 10-Q for the fiscal quarter ended April 29, 2016 of Dollar General Corporation (the “Company”) filed with the Securities and Exchange Commission on the date hereof fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

 

/s/ Todd J. Vasos

 

Name:

Todd J. Vasos

 

Title:

Chief Executive Officer

 

Date:

May 26, 2016

 

 

/s/ John W. Garratt

 

Name:

John W. Garratt

 

Title:

Chief Financial Officer

 

Date:

May 26, 2016