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DOLLAR GENERAL
2014 Annual Report
2015 Proxy Statement

Table of contents

  • Page 1
    DOLLAR GENERAL 2014 Annual Report 2015 Proxy Statement

  • Page 2
    ..., such as food, snacks, health and beauty aids, cleaning supplies, basic apparel, housewares and seasonal items at low everyday prices in convenient neighborhood locations. With 11,789 stores in 40 states as of January 30, 2015, Dollar General has Learn more about Dollar General and shop online at...

  • Page 3
    ..., CUSTOMERS AND EMPLOYEES 2014 marked Dollar General's 75th anniversary of helping our customers save time and money by providing them with quality basic merchandise at great everyday low prices in convenient neighborhood stores. One thing that remains a constant in the changing landscape of retail...

  • Page 4

  • Page 5
    Proxy Statement & Meeting Notice

  • Page 6

  • Page 7
    ... you received a paper copy of the proxy materials by mail, you may vote by mail by completing and returning a proxy card. On behalf of the Board of Directors, thank you for your continued support of Dollar General. Sincerely, 29MAR201117130352 Rick Dreiling Chairman & Chief Executive Officer April...

  • Page 8

  • Page 9
    ... Street Goodlettsville, Tennessee 1) 2) 3) WHO MAY VOTE: To elect as directors the 8 nominees listed in the proxy statement To ratify the appointment of the independent registered public accounting firm for fiscal 2015 To transact any other business that may properly come before the annual meeting...

  • Page 10

  • Page 11
    ... ...Corporate Governance ...Director Compensation ...Director Independence ...Transactions with Management and Others ...Executive Compensation ...Compensation Discussion and Analysis ...Compensation Committee Report ...Summary Compensation Table ...Grants of Plan-Based Awards in Fiscal 2014...

  • Page 12

  • Page 13
    ... is Dollar General Corporation and where is it located? Dollar General operates conveniently located, small-box stores that deliver everyday low prices on products that families use every day. As of February 27, 2015, we are the largest discount retailer in the United States by number of stores with...

  • Page 14
    ...is entitled to vote at the annual meeting? You may vote if you owned shares of Dollar General common stock at the close of business on March 19, 2015. As of that date, there were 303,703,702 shares of Dollar General common stock outstanding and entitled to vote. Each share is entitled to one vote on...

  • Page 15
    ... as you direct or, if you return a signed proxy card or complete the Internet or telephone voting procedures but do not specify how you want to vote your shares: ''FOR'' all directors nominated and ''FOR'' ratification of Ernst & Young LLP as our independent auditor for 2015. Can I change my mind...

  • Page 16
    ...broker has not received voting instructions from the beneficial owner and either lacks or declines to exercise the authority to vote the shares in its ...be intentionally disclosed either within Dollar General or to third parties, except (1) as necessary to meet applicable legal requirements; (2) in a...

  • Page 17
    ... Barrel Old Country Store, Inc. since September 2011. She joined Cracker Barrel in April 2009 as Executive Vice President and Chief Financial Officer, and was named President and Chief Operating Officer in November 2010. She was previously Chief Executive Officer at book retailer Books-A-Million...

  • Page 18
    ..., Ms. Price was responsible for finance, accounting and shared services, strategic planning, real estate development, store format and construction, and information technology. Before joining Ahold, she was the Senior Vice President, Controller and Chief Accounting Officer at CVS Health Corporation...

  • Page 19
    ... Executive Vice President, Chief Financial Officer and Chief Administrative Officer of CVS Health Corporation (formerly CVS Caremark Corporation), a retail pharmacy chain and provider of healthcare services and pharmacy benefits management, from September 1999 until his retirement in December 2009...

  • Page 20
    ... business strategies, financial plans and structures, and management teams. Mr. Calbert also has a significant financial and accounting background evidenced by his prior experience as the chief financial officer of a retail company and his 10 years of practice as a certified public accountant...

  • Page 21
    ... and strategy gained from her service in senior executive and management positions at major corporations across several industries, including as Chief Financial Officer of Ahold USA before her retirement in 2014. Ms. Price's numerous years of experience as a certified public accountant, former Chief...

  • Page 22
    ..., posted on the ''Investor Information-Corporate Governance'' section of our website located at www.dollargeneral.com, for more detailed information regarding the process by which shareholders may nominate directors. No shareholder nominees have been proposed for this year's annual meeting. What if...

  • Page 23
    ... procedures for receipt, retention and treatment of complaints we receive regarding accounting or internal controls • Discusses with our general counsel legal matters having an impact on financial statements • Performs an annual self-evaluation • Furnishes the committee report required...

  • Page 24
    ...-term incentive compensation program and approves equity-based awards under such program • Oversees the share ownership guidelines and holding requirements for Board members and senior officers • Oversees the process for evaluating our senior officers • Reviews and discusses with management...

  • Page 25
    ... best interests of Dollar General and our shareholders. What is the Board of Director's role in risk oversight? Our Board of Directors and its committees have an important role in our risk oversight process. Our Board regularly reviews with management our financial and business strategies, including...

  • Page 26
    ... of Directors to coordinate with our CEO to ensure that a formalized process governs long-term management development and succession. Our Board formally reviews our management succession plan at least annually. Our comprehensive program encompasses not only our CEO and other executive officers but...

  • Page 27
    ... chosen to lead the executive sessions of the non-management directors and of the independent directors. This information is available in print to any shareholder who sends a written request to: Investor Relations, Dollar General Corporation, 100 Mission Ridge, Goodlettsville, TN 37072. Proxy 15

  • Page 28
    ...consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended January 30, 2015, filed with the SEC on March 20, 2015 (our ''2014 Form 10-K''). As of January 30, 2015, each of the persons listed in the table above had the following total unvested restricted stock units...

  • Page 29
    ...seminars and for travel and related expenses related to Dollar General business. For 2014, each non-employee director received payment (prorated as applicable), in quarterly installments, of the following cash compensation, as applicable 85,000 annual retainer for service as a Board member; $25,000...

  • Page 30
    ...a trust, and all benefits are paid from Dollar General's general assets. Our non-employee directors are subject to share ownership guidelines and holding requirements. The ownership guideline is 4 times the annual cash retainer payable for service on our Board as in effect on January 1, 2011 (or, if...

  • Page 31
    ... listing standards and SEC rules as well as certain Board-adopted categorical independence standards. These guidelines are contained in our Corporate Governance Guidelines, which are posted on the ''Investor Information-Corporate Governance'' section of our website located at www.dollargeneral.com...

  • Page 32
    ... were granted on terms consistent with the annual equity awards received by all Dollar General employees at the same job grade level as Mr. Brophy and on terms substantially similar to the forms of award agreements on file with the SEC. We do not expect Mr. Brophy's total cash compensation for 2015...

  • Page 33
    ... our directors, director nominees, executive officers and greater than 5% shareholders, and any of their immediate family members, and a ''transaction'' includes one in which (1) the total amount may exceed $120,000, (2) Dollar General is a participant, and (3) a related party will have a direct or...

  • Page 34
    ... returns. We strive to balance the short-term and long-term components of our executive compensation program to incent achievement of both our annual and long-term business strategies, to pay for performance and to maintain our competitive position in the market in which we compete for executive...

  • Page 35
    ... director compensation program and practices. Pay for Performance. Consistent with our pay-for-performance philosophy, a significant majority of our named executive officers' target total direct compensation for 2014 was performance based and exposed to fluctuations in the price of our common stock...

  • Page 36
    ... to Chief Operating Officer; the elimination from our employment agreements of the provisions providing for gross-up payments on any excise taxes imposed under Section 280G of the Internal Revenue Code; the modification of the Teamshare bonus program to institute a financial performance maximum...

  • Page 37
    ... the NYSE listing standards, the Committee has determined that Meridian is independent from Dollar General and that no conflicts of interest exist related to Meridian's services provided to the Committee. Management's Role. Mr. Bob Ravener, our Executive Vice President and Chief People Officer, and...

  • Page 38
    ... the amount of a named executive officer's annual base salary increase. Any named executive officer who receives a satisfactory performance rating is given a percentage base salary increase that equals the overall budgeted increase for the Company's U.S.-based employee population unless: • • the...

  • Page 39
    ... aged by 3%. In the case of Mr. Dreiling's 2014 compensation, Meridian provided current survey data from the market comparator group. Elements of Named Executive Officer Compensation We provide compensation in the form of base salary, short-term cash incentives, long-term equity incentives, benefits...

  • Page 40
    ... Restated Annual Incentive Plan. The Teamshare program provides an opportunity for each named executive officer to receive a cash bonus payment equal to a certain percentage of base salary based upon Dollar General's achievement of one or more pre-established financial performance targets based on...

  • Page 41
    ...per share (''EPS'') performance targets for fiscal years 2014 and 2015. The EPS goals were established by the Committee on the grant date based upon EPS forecasts contained in our long-term strategic plan. Half of the performance-based restricted stock vested after the end of our 2014 fiscal year as...

  • Page 42
    ... or accounting changes enacted after the beginning of the 2014 fiscal year). (b) 2014 Equity Awards. Under our long-term equity structure, each of the named executive officers receives an annual award of time-based stock options, time-based restricted stock units and performance share units. The mix...

  • Page 43
    ... earned based on 2014 financial performance vested on the last day of the one-year performance period, and the remaining two-thirds of the performance share units vest equally on the second and third anniversaries of the grant date, subject to the named executive officer's continued employment with...

  • Page 44
    ... granted under a Dollar General compensation plan) or other derivative instruments related to Dollar General stock. Benefits and Perquisites. Along with certain benefits offered to named executive officers on the same terms that are offered to all of our salaried employees (such as health benefits...

  • Page 45
    ... portable long-term disability insurance through the Retirement Date, and personal use of the Company's airplane for his and his spouse's travel between Nashville, Tennessee, and Livermore, California, while he continues to serve as Chief Executive Officer, not to exceed 100 hours total during the...

  • Page 46
    ... officers, except for the provisions related to long-term equity incentives under our Amended and Restated 2007 Stock Incentive Plan. Considerations Associated with Regulatory Requirements Section 162(m) generally disallows a tax deduction to any publicly held corporation for individual compensation...

  • Page 47
    Compensation Committee Report The Compensation Committee of our Board of Directors reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K and, based on such review and discussions, the Compensation Committee recommended to the Board ...

  • Page 48
    .... (3) The amounts reported represent the respective aggregate grant date fair value of performance share units awarded to the applicable named executive officer in fiscal 2014, fiscal 2013 and fiscal 2012, the aggregate grant date fair value of the performance-based restricted stock awarded to Mr...

  • Page 49
    ... forth in Note 10 of the annual consolidated financial statements in our 2014 Form 10-K. (4) The amounts reported represent the respective aggregate grant date fair value of stock options awarded to the applicable named executive officer in the fiscal year indicated, computed in accordance with FASB...

  • Page 50
    ...under our business travel accident insurance for which Dollar General incurs no incremental cost for participation by the named executive officers in addition to other employees. The aggregate incremental cost related to relocation included costs of transporting his automobile, home finding expenses...

  • Page 51
    ... that vest over time based upon the named executive officer's continued employment by Dollar General. The awards listed in this table were granted pursuant to our Amended and Restated 2007 Stock Incentive Plan. See ''Long-Term Equity Incentive Program'' in ''Compensation Discussion and Analysis...

  • Page 52
    Outstanding Equity Awards at 2014 Fiscal Year-End The table below sets forth information regarding awards granted under our Amended and Restated 2007 Stock Incentive Plan and held by our named executive officers as of the end of fiscal 2014. The $7.9975 exercise price set forth in the table below ...

  • Page 53
    ... multiplying the number of such units by the closing market price of one share of our common stock on January 30, 2015. (12) These options are part of a grant of time-based options which vested or are scheduled to vest 25% per year on each of the first four anniversaries of December 3, 2013, subject...

  • Page 54
    ... shown are not reported in the Summary Compensation Table because they do not represent above-market or preferential earnings. Of the amounts reported, the following were previously reported as compensation to the named executive officer for years prior to 2014 in a Summary Compensation Table: Mr...

  • Page 55
    ... named executive officer who has options outstanding that were granted prior to 2012. All such options are fully vested and generally may be exercised for a period of 1 year from service termination unless such options have expired earlier. Mr. Dreiling's 2012 Performance-Based Restricted Stock. If...

  • Page 56
    ... fiscal 2013 (''2013 PSUs'') and fiscal 2014 (''2014 PSUs'') to each named executive who was employed by us at the time of the applicable award. âœ" If such termination had occurred before January 30, 2015 for the 2014 PSUs, a pro-rated portion (based on months employed during the 1 year performance...

  • Page 57
    ... the fiscal year in which his termination occurred. Payments Upon Termination Due to Retirement Except as provided immediately below with respect to stock options, performance share units and restricted stock units awarded after 2011, retirement (as defined in the applicable governing document) is...

  • Page 58
    ... not to extend Mr. Dreiling's term of employment by providing 60 days prior written notice before the applicable extension date, then in each case the named executive officer will receive or would have received (in Mr. Dreiling's case) the following benefits generally on or beginning on the 60th...

  • Page 59
    ... under the group health plans of a subsequent employer). Mr. Dreiling will receive a prorated bonus payment based on our performance for the fiscal year in which his employment terminates, paid at the time bonuses are normally paid for that fiscal year, as well as a lump sum cash payment for any...

  • Page 60
    ... applicable employment agreement), or any person then planning to enter the discount consumable basics retail business, if the named executive officer is required to perform services for that person or entity which are substantially similar to those he provided or directed at any time while employed...

  • Page 61
    ... and CDP/SERP Plan benefits that had vested prior to the event and earned but unpaid base salary through the employment termination date. The table also excludes any amounts that are available generally to all salaried employees and do not discriminate in favor of our executive officers. The amounts...

  • Page 62
    ... of the named executive officers were eligible for retirement on January 30, 2015. Calculated as the combined Dollar General and employee cost of healthcare for the benefit option selected by Mr. Dreiling for 2015. Estimated based on information provided by our outplacement services provider. 50

  • Page 63
    ... of Dollar General or any of our subsidiaries at any time prior to 2014. Compensation Risk Considerations In March 2015, our Compensation Committee, with input from its compensation consultant and management, reviewed our compensation policies and practices for all employees, including executive...

  • Page 64
    ... Suite 3307, 45 Market Street, Camana Bay, Grand Cayman KY1-1103, Cayman Islands. All information is based solely on Amendment No. 2 to Statement on Schedule 13G filed on February 17, 2015. GIC Private Limited (''GIC'') is a fund manager with two clients-the Government of Singapore (''GoS'') and the...

  • Page 65
    ... any other person. Ms. Price was unable to purchase shares of our common stock pursuant to our share ownership guidelines for non-employee directors at the time she joined our Board because the trading window under our insider trading policy was closed. Mr. Rhodes shares voting and investment power...

  • Page 66
    ...its management. • • Based on these reviews and discussions, the Audit Committee unanimously recommended to the Board of Directors that Dollar General's audited financial statements be included in the Annual Report on Form 10-K for the fiscal year ended January 30, 2015 for filing with the SEC...

  • Page 67
    ... interests of Dollar General and our shareholders. Will representatives of Ernst & Young LLP attend the annual meeting? Representatives of Ernst & Young LLP have been requested and are expected to attend the annual meeting. These representatives will have the opportunity to make a statement if they...

  • Page 68
    ... shareholders. 2014 and 2013 fees include services relating to the employee benefit plan audit. 2014 and 2013 fees relate primarily to tax compliance services, which represented $1,547,136 and $1,398,918 in 2014 and 2013, respectively, for work related to work opportunity tax credit assistance and...

  • Page 69
    ... report 1 acquisition of performance-based stock options to purchase shares of Dollar General common stock resulting from the achievement of certain financial performance targets. Proxy SHAREHOLDER PROPOSALS FOR 2016 ANNUAL MEETING To be considered for inclusion in our proxy materials relating to...

  • Page 70

  • Page 71
    10-K

  • Page 72

  • Page 73
    ...-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.) 10-K 100 MISSION RIDGE GOODLETTSVILLE, TN 37072 (Address of principal executive offices...

  • Page 74

  • Page 75
    INTRODUCTION General This report contains references to years 2015, 2014, 2013, 2012, 2011, and 2010, which represent fiscal years ending or ended January 29, 2016, January 30, 2015, January 31, 2014, February 1, 2013, February 3, 2012, and January 28, 2011, respectively. Our fiscal year ends on the...

  • Page 76
    ... Dollar General store. We changed our name to Dollar General Corporation in 1968 and reincorporated in 1998 as a Tennessee corporation. Our common stock was publicly traded from 1968 until July 2007, when we merged with an entity controlled by investment funds affiliated with Kohlberg Kravis Roberts...

  • Page 77
    ... critical to the long-term growth and profitability of our company. These priorities are 1) drive productive sales growth; 2) enhance our gross profit rate; 3) leverage process improvements and information technology to reduce costs; and 4) strengthen and expand Dollar General's culture of serving...

  • Page 78
    ...to the culture of Dollar General for many years and we recognize the importance of this mission to our long-term success. For customers this means helping them ''Save time. Save money. Every day!'' by providing clean, well-stocked stores with quality products at low prices. For employees, this means...

  • Page 79
    ... and foot care products); pet (including pet supplies and pet food); and tobacco products. Seasonal products include decorations, toys, batteries, small electronics, greeting cards, stationery, prepaid phones and accessories, gardening supplies, hardware, automotive and home office supplies. Home...

  • Page 80
    ... opportunities available for our relocation and remodel programs. Our store growth over the past three years is summarized in the following table: 10-K Year Stores at Beginning of Year Stores Opened Stores Closed Net Store Increase Stores at End of Year 2012 ...2013 ...2014 ...Our Customers...

  • Page 81
    ..., the timing of new store openings and store closings, the amount of sales contributed by new and existing stores, as well as financial transactions such as stock repurchases. We typically purchase substantial amounts of inventory in the third quarter and incur higher shipping and payroll costs in...

  • Page 82
    ... 2013. (c) Includes expenses, net of income taxes, of $17.7 million related to the redemption of long-term obligations in the second quarter of 2012. Our Competition We operate in the basic discount consumer goods market, which is highly competitive with respect to price, store location, merchandise...

  • Page 83
    ... operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an internet site that contains reports, proxy and information statements and other information regarding issuers, such as Dollar General, that file electronically with the SEC. The address of that website...

  • Page 84
    ... costs and interest rates, lack of available credit, consumer debt levels, higher tax rates and other changes in tax laws, concerns over government mandated participation in health insurance programs and increasing healthcare costs, and decreases in government subsidies such as unemployment and food...

  • Page 85
    ... affect sales. Our ability to open, relocate and remodel profitable stores is a key component of our planned future growth. Our ability to timely open stores and to expand into additional market areas depends in part on the following factors: the availability of attractive store locations; the...

  • Page 86
    ...increase the risks we face. The sale of private brand items is an important component of our future sales growth and gross profit rate enhancement plans. We have invested in our development and procurement resources and marketing efforts relating to these private brand offerings. We believe that our...

  • Page 87
    ... plans to build new facilities to support our growth objectives. Delays in opening distribution centers could adversely affect our future financial performance by slowing store growth, which may in turn reduce revenue growth, or by increasing transportation costs. In addition, distribution-related...

  • Page 88
    ... those governing the sale of products, may result in significant added expenses or may require extensive system and operating changes that may be difficult to implement and/or could materially increase our cost of doing business. Untimely compliance or noncompliance with applicable regulations...

  • Page 89
    ... work force in a market, the temporary or long-term disruption in the supply of products from some domestic and overseas suppliers, the temporary disruption in the transport of goods from overseas, delay in the delivery of goods to our distribution centers or stores, the inability of customers...

  • Page 90
    ... Dreiling's retirement or our transition to a new chief executive, which could adversely affect our strategic planning and execution. Our cash flows from operations may be negatively affected if we are not successful in managing our inventory balances. Our inventory balance represented approximately...

  • Page 91
    ... these market changes. In addition, we self-insure a significant portion of expected losses under our workers' compensation, automobile liability, general liability and group health insurance programs. Unanticipated changes in any applicable actuarial assumptions and management estimates underlying...

  • Page 92
    .... In connection with sales, we transmit confidential credit and debit card information. We also have access to, collect or maintain certain private or confidential information regarding our customers, employees and vendors, as well as our business. We have procedures and technology in place to...

  • Page 93
    ..., therefore reducing our ability to use our cash flow to fund our operations, capital expenditures and future business opportunities, repurchase shares of our common stock, declare dividends on our common stock or otherwise manage our debt and capital levels; • making it more difficult for us...

  • Page 94
    ... COMMENTS As of February 27, 2015, we operated 11,879 retail stores located in 43 states as follows: 10-K State Number of Stores State Number of Stores Alabama ...Arizona ...Arkansas ...California ...Colorado ...Connecticut . . Delaware ...Florida ...Georgia ...Illinois ...Indiana ...Iowa...

  • Page 95
    As of February 27, 2015, we operated twelve distribution centers, as described in the following table: Location Year Opened Approximate Square Footage Number of Stores Served Scottsville, KY . . Ardmore, OK ...South Boston, VA Indianola, MS ...Fulton, MO ...Alachua, FL ...Zanesville, OH . . ...

  • Page 96
    ... operation of three distribution centers. He also previously served in leadership positions at Phar-Mor Food and Drug Inc. and Eckerd Corporation. Mr. Tehle joined Dollar General in June 2004 as Executive Vice President and Chief Financial Officer. As previously announced, Mr. Tehle plans to retire...

  • Page 97
    ... Supply Chain in May 2008. He was promoted to Executive Vice President in March 2010. He has almost 30 years of management experience in retail logistics. Prior to joining Dollar General, he was Group Vice President of Logistics and Distribution for Longs Drug Stores Corporation, an operator of...

  • Page 98
    ... 2005. Prior to joining Dollar General, she served as Vice President and Controller of Big Lots, Inc., a closeout retailer, from May 2001 to August 2005. Overseeing a staff of 140 employees at Big Lots, she was responsible for accounting operations, financial reporting and internal audit. Prior...

  • Page 99
    ...'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is traded on the New York Stock Exchange under the symbol ''DG.'' The high and low sales prices during each quarter in fiscal 2014 and 2013 were as follows: 2014 First Quarter...

  • Page 100
    ... financial information of Dollar General Corporation as of the dates and for the periods indicated. The selected historical statement of operations data and statement of cash flows data for the fiscal years ended January 30, 2015, January 31, 2014, and February 1, 2013 and balance sheet data as...

  • Page 101
    ..., excluding per share data, number of stores, selling square feet, and net sales per square foot) January 30, 2015 January 31, 2014 Year Ended February 1, 2013 February 3, 2012(1) January 28, 2011 Statement of Operations Data: Net sales ...Cost of goods sold ...Gross profit ...Selling, general and...

  • Page 102
    ... same-store sales calculation. When applicable, we exclude the sales in the non-comparable week of a 53-week year from the same-store sales calculation. (3) Net sales per square foot was calculated based on total sales for the preceding 12 months as of the ending date of the reporting period divided...

  • Page 103
    ..., which are: 1) drive productive sales growth, 2) enhance our gross profit margins, 3) leverage process improvements and information technology to reduce costs, and 4) strengthen and expand Dollar General's culture of serving others. Our first priority is driving productive sales growth, which...

  • Page 104
    ... Our fourth priority is to strengthen and expand Dollar General's culture of serving others. For customers this means helping them ''Save time. Save money. Every day!'' by providing clean, well-stocked stores with quality products at low prices. For employees, this means creating an environment that...

  • Page 105
    ...store basis over 2013. • During 2014 we opened 700 new stores, remodeled or relocated 915 stores, and closed 43 stores. Also in 2014, we repurchased approximately 14.1 million shares of our outstanding common stock for $800.1 million. In 2015, we plan to continue to focus on our four key operating...

  • Page 106
    ... of Operations Accounting Periods. The following text contains references to years 2014, 2013, and 2012, which represent fiscal years ended January 30, 2015, January 31, 2014, and February 1, 2013, respectively. Our fiscal year ends on the Friday closest to January 31. All fiscal years were 52-week...

  • Page 107
    ...Amount Change % Change 2014 2013 2012 Net sales by category: Consumables ...% of net sales ...Seasonal ...% of net sales ...Home products ...% of net sales ...Apparel ...% of net sales ...Net sales ...Cost of goods sold . . % of net sales ...Gross profit ...% of net sales ...Selling, general and...

  • Page 108
    ...higher retail prices. These factors were partially offset by a reduction in net purchase costs on certain products. The Company recorded a LIFO benefit of $11.0 million in 2013 compared to a LIFO provision of $1.4 million in 2012. SG&A Expense. SG&A expense was 21.3% as a percentage of sales in 2014...

  • Page 109
    ... increased by a lesser amount in 2014 compared to 2013. As in prior years, we receive a significant income tax benefit related to wages paid to certain newly hired employees that qualify for federal jobs credits (principally the Work Opportunity Tax Credit or ''WOTC''). The federal law authorizing...

  • Page 110
    ... 2015. We believe our cash flow from operations and existing cash balances, combined with availability under the Facilities, and access to the debt markets will provide sufficient liquidity to fund our current obligations, projected working capital requirements, capital spending and planned dividend...

  • Page 111
    ... on review for downgrade due to the proposed business combination with Family Dollar. Our current credit ratings, as well as future rating agency actions, could (i) impact our ability to finance our operations on satisfactory terms; (ii) affect our financing costs; and (iii) affect our insurance...

  • Page 112
    ... our own credit spread are based on implied spreads from our publicly-traded debt. For counterparties with publicly available credit information, the credit spreads over LIBOR used in the calculations represent implied credit default swap spreads obtained from a third party credit data provider. In...

  • Page 113
    ...-term debt and capital lease obligations, and includes projected interest on variable rate long-term debt, using 2014 year end rates. Variable rate long-term debt includes the balance of the senior revolving credit facility (which had a balance of zero as of January 30, 2015), the balance of our tax...

  • Page 114
    ... 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 increased by 9% during 2014, compared to a 7% increase in 2013. Inventory levels in the...

  • Page 115
    ...cash payments for income taxes, and changes in Accounts payable, which are affected by the timing and mix of merchandise purchases, the most significant category of which were domestic purchases. In addition, our merchandise inventories increased by 7% during 2013, compared to a 19% increase in 2012...

  • Page 116
    ...; the construction of new stores; costs to support and enhance our supply chain initiatives including the distribution center under construction in Texas; technology initiatives; as well as routine and ongoing capital requirements. Cash flows from financing activities. In 2014, we repurchased 14...

  • Page 117
    ... the inventory balance include: • applying the RIM to a group of products that is not fairly uniform in terms of its cost and selling price relationship and turnover; • applying the RIM to transactions over a period of time that include different rates of gross profit, such as those relating to...

  • Page 118
    assumptions. Future cash flow projections are based on management's projections and represent best estimates taking into account recent financial performance, market trends, strategic plans and other available information, which in recent years have been materially accurate. Although not currently ...

  • Page 119
    ... closed form option pricing model. We believe that this model fairly estimates the value of our share-based awards. The application of this valuation model involves assumptions that are judgmental and highly sensitive in the valuation of stock options, which affects compensation expense related...

  • Page 120
    ... values of these assets and liabilities. The application of these models involves assumptions such as discounted cash flow analysis and interest rate curves that are judgmental and highly sensitive in the fair value computations. In recent years, these methodologies have produced materially accurate...

  • Page 121
    ... pre-tax earnings and cash flows; whereas a change in interest rates on fixed rate debt impacts the economic fair value of debt but not our pre-tax earnings and cash flows. Our interest rate swaps qualify for hedge accounting as cash flow hedges. Therefore, changes in market fluctuations related to...

  • Page 122
    ...DATA Report of Independent Registered Public Accounting Firm The Board of Directors and Shareholders of Dollar General Corporation We have audited the accompanying consolidated balance sheets of Dollar General Corporation and subsidiaries as of January 30, 2015 and January 31, 2014, and the related...

  • Page 123
    DOLLAR GENERAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except per share amounts) January 30, 2015 January 31, 2014 ASSETS Current assets: Cash and cash equivalents ...Merchandise inventories ...Prepaid expenses and other current assets ...Total current assets ...Net ...

  • Page 124
    DOLLAR GENERAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts) For the Year Ended January 31, February 1, 2014 2013 January 30, 2015 Net sales ...Cost of goods sold ...Gross profit ...Selling, general and administrative expenses ... $18,909,...

  • Page 125
    DOLLAR GENERAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands) For the Year Ended January 30, January 31, February 1, 2015 2014 2013 Net income ...Unrealized net gain (loss) on hedged transactions, net of related income tax expense (benefit) of $1,671, ...

  • Page 126
    DOLLAR GENERAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (In thousands except per share amounts) Accumulated Other Comprehensive Loss Common Stock Shares Common Stock Additional Paid-in Capital Retained Earnings Total Balances, February 3, 2012 ...Net income ...

  • Page 127
    ...2014 2013 January 30, 2015 Cash flows from operating activities: Net income ...Adjustments to reconcile net income to net cash activities: Depreciation and amortization ...Deferred income taxes ...Tax benefit of share-based awards ...Loss on debt retirement, net ...Noncash share-based compensation...

  • Page 128
    DOLLAR GENERAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of presentation and accounting policies Basis of presentation These notes contain references to the years 2014, 2013, and 2012, which represent fiscal years ended January 30, 2015, January 31, 2014, and ...

  • Page 129
    ... market price changes increase or decrease cost of sales (the LIFO provision or benefit). The Company recorded a LIFO provision (benefit) of $4.2 million in 2014, $(11.0) million in 2013, and $1.4 million in 2012, which is included in cost of goods sold in the consolidated statements of income...

  • Page 130
    ...based primarily upon estimated future cash flows over the asset's remaining useful life (discounted at the Company's credit adjusted risk-free rate) or other reasonable estimates of fair market value. Assets to be disposed of are adjusted to the fair value less the cost to sell if less than the book...

  • Page 131
    ...-step process that requires management to make judgments in determining what assumptions to use in the calculation. The first step of the process consists of estimating the fair value of the Company's reporting unit based on valuation techniques (including a discounted cash flow model using revenue...

  • Page 132
    ... future claim costs for the workers' compensation, general liability, and health claim risks are derived using actuarial methods and are recorded as self-insurance reserves pursuant to Company policy. To the extent that subsequent claim costs vary from those estimates, future results of operations...

  • Page 133
    ... expenses and other in the consolidated balance sheets. Other liabilities Noncurrent Other liabilities consist of the following: 10-K (In thousands) January 30, 2015 January 31, 2014 Compensation and benefits ...Insurance ...Income tax related reserves ...Deferred gain on sale leaseback . Other...

  • Page 134
    ... cash payments (or receipts) and the discounted expected variable cash receipts (or payments). The variable cash receipts (or payments) are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. 10-K The Company incorporates credit...

  • Page 135
    ...and the credit ratings of its counterparties and does not anticipate nonperformance by the counterparties. Revenue and gain recognition The Company recognizes retail sales in its stores at the time the customer takes possession of merchandise. All sales are net of discounts and estimated returns and...

  • Page 136
    ... costs related to new store openings and the related construction periods are expensed as incurred. 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...

  • Page 137
    ... a material effect on the Company's condensed consolidated financial statements. In May 2014, the Financial Accounting Standards Board issued comprehensive new accounting standards related to the recognition of revenue. This guidance is effective for annual reporting periods beginning after December...

  • Page 138
    DOLLAR GENERAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2. Goodwill and other intangible assets (Continued) The Company recorded amortization expense related to amortizable intangible assets for 2014, 2013 and 2012 of $5.8 million, $11.9 million and $16.9 ...

  • Page 139
    ...Company receives a significant income tax benefit related to salaries paid to certain newly hired employees that qualify for federal jobs credits (principally the Work Opportunity Tax Credit or ''WOTC''). The federal law authorizing the WOTC credit expired for employees hired after December 31, 2014...

  • Page 140
    ... 30, 2015 January 31, 2014 Deferred tax assets: Deferred compensation expense ...Accrued expenses and other ...Accrued rent ...Accrued insurance ...Accrued incentive compensation ...Share based compensation ...Interest rate hedges ...Tax benefit of income tax and interest reserves related to...

  • Page 141
    DOLLAR GENERAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 4. Income taxes (Continued) The Company has state net operating loss carry forwards as of January 30, 2015 that total approximately $1.3 million which will expire in 2028. The Company also has state ...

  • Page 142
    DOLLAR GENERAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 4. Income taxes (Continued) A reconciliation of the uncertain income tax positions from February 3, 2012 through January 30, 2015 is as follows: (In thousands) 2014 2013 2012 10-K Beginning balance ...

  • Page 143
    DOLLAR GENERAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 5. Current and long-term obligations (Continued) Borrowings under the Facilities bear interest at a rate equal to an applicable margin plus, at the Company's option, either (a) LIBOR or (b) a base ...

  • Page 144
    ... statement of income for the year ended February 1, 2013. The Company funded the redemption price for the senior subordinated notes due 2017 with proceeds from the issuance of the 2017 Senior Notes. Scheduled debt maturities, including capital lease obligations, for the Company's fiscal years listed...

  • Page 145
    ... of future market values caused by the fluctuation in the prices of commodities. From time to time the Company may enter into derivative financial instruments to protect against future price changes related to these commodity prices. Cash flow hedges of interest rate risk The Company's objectives...

  • Page 146
    ... present the pre-tax effect of the Company's derivative financial instruments as reflected in the consolidated statements of comprehensive income and shareholders' equity, as applicable: (in thousands) 2014 2013 2012 Derivatives in Cash Flow Hedging Relationships Loss related to effective portion...

  • Page 147
    DOLLAR GENERAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 8. Commitments and contingencies Leases As of January 30, 2015, the Company was committed under operating lease agreements for most of its retail stores. Many of the Company's stores are subject to ...

  • Page 148
    ... of current and former store managers. The Company opposed the plaintiff's motion. On March 23, 2007, the court conditionally certified a nationwide class. On December 2, 2009, notice was mailed to over 28,000 current or former Dollar General store managers. Approximately 3,950 individuals opted...

  • Page 149
    ... the Company's background check procedures violate the Fair Credit Reporting Act (''FCRA''). Plaintiff Marcum also alleges defamation. According to the complaint and subsequently filed first and second amended complaints, the plaintiffs seek to represent a putative class of applicants in connection...

  • Page 150
    ... the Company's consolidated financial statements as a whole. 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...

  • Page 151
    ...fees and costs. The Varela plaintiff 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 (''PAGA''). The Company removed the...

  • Page 152
    ... 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. Plaintiff seeks to recover unpaid wages, civil and statutory penalties, interest, attorneys' fees and costs...

  • Page 153
    ... 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...

  • Page 154
    ... all similarly situated non-exempt store employees who allegedly were not paid for all hours worked. The Harsey plaintiff seeks back wages (including overtime), liquidated damages, pre- and post-judgment interest, injunctive relief, and attorneys' fees and costs. The Company filed its answer on May...

  • Page 155
    ... for the Southern District of Florida (Case No. 9:11-cv-80601-DMM) (''Winn-Dixie'') in which the plaintiffs allege that the sale of food and other items in approximately 55 of the Company's stores, each of which allegedly is or was at some time co-located in a shopping center with one of plaintiffs...

  • Page 156
    ...'') and compensation deferral plan (''CDP''), known as the Dollar General Corporation CDP/SERP Plan, for a select group of management and other key employees. The Company incurred compensation expense for these plans of approximately $0.8 million, $1.2 million and $1.4 million in 2014, 2013 and 2012...

  • Page 157
    ... and other stock-based awards or dividend equivalent rights to key employees, directors, consultants or other persons having a service relationship with the Company, its subsidiaries and certain of its affiliates. The number of shares of Company common stock authorized for grant under the Plan is 31...

  • Page 158
    DOLLAR GENERAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 10. Share-based payments (Continued) The weighted average for key assumptions used in determining the fair value of all stock options granted in the years ended January 30, 2015, January 31, 2014, and...

  • Page 159
    DOLLAR GENERAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 10. Share-based payments (Continued) The number of performance share unit awards earned is based upon the Company's annual financial performance in the year of grant as specified in the award ...

  • Page 160
    ... for 2014 was met and the applicable shares vested. At January 30, 2015, the total unrecognized compensation cost related to nonvested stock-based awards was $55.2 million with an expected weighted average expense recognition period of 1.4 years. The fair value method of accounting for share-based...

  • Page 161
    ...funded from available cash or borrowings under the Company's credit facilities discussed in further detail in Note 5. During the years ended January 30, 2015, January 31, 2014, and February 1, 2013, the Company repurchased approximately 14.1 million shares of its common stock at a total cost of $800...

  • Page 162
    ... 13-week accounting period. The sum of the four quarters for any given year may not equal annual totals due to rounding. (In thousands) First Quarter Second Quarter Third Quarter Fourth Quarter 2014: Net sales ...Gross profit ...Operating profit ...Net income ...Basic earnings per share . . Diluted...

  • Page 163
    ...as amended (the ''Exchange Act''). 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) Management's Annual Report on Internal Control...

  • Page 164
    ... of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Dollar General Corporation and subsidiaries as of January 30, 2015 and January 31, 2014, and the related consolidated statements of income, comprehensive income, shareholders' equity, and cash flows...

  • Page 165
    ...changes during the quarter ended January 30, 2015 in our internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B. None. OTHER INFORMATION...

  • Page 166
    ... request to Dollar General Corporation, c/o Investor Relations Department, 100 Mission Ridge, Goodlettsville, TN 37072. We intend to provide any required disclosure of an amendment to or waiver from the Code of Business Conduct and Ethics that applies to our principal executive officer, principal...

  • Page 167
    ...2007 Stock Incentive Plan, whether in the form of stock, restricted stock, share units, or other share-based awards or upon the exercise of an option or right. (b) Other Information. The information required by this Item 12 regarding security ownership of certain beneficial owners and our management...

  • Page 168
    ... AND FINANCIAL STATEMENT SCHEDULES (a) Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets Consolidated Statements of Income Consolidated Statements of Comprehensive Income Consolidated Statements of Shareholders' Equity Consolidated Statements of Cash Flows Notes...

  • Page 169
    ...has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. DOLLAR GENERAL CORPORATION Date: March 20, 2015 By: /s/ RICHARD W. DREILING Richard W. Dreiling, Chairman and Chief Executive Officer We, the undersigned directors and officers of the registrant...

  • Page 170
    Name Title Date /s/ PAULA A. PRICE PAULA A. PRICE Director March 20, 2015 /s/ WILLIAM C. RHODES, III WILLIAM C. RHODES, III Director March 20, 2015 /s/ DAVID B. RICKARD DAVID B. RICKARD Director March 20, 2015 10-K 96

  • Page 171
    ... 4.3 to Dollar General Corporation's Current Report on Form 8-K dated April 8, 2013 and filed with the SEC on April 11, 2013 (file no. 001-11421)) Amended and Restated 2007 Stock Incentive Plan for Key Employees of Dollar General Corporation and its Affiliates (effective June 1, 2012) (incorporated...

  • Page 172
    ... the SEC on March 26, 2012 (file no. 001-11421))* Form of Performance Share Unit Award Agreement (approved March 18, 2014) for annual awards beginning March 2014 and prior to March 2015 to certain employees of Dollar General Corporation pursuant to the Amended and Restated 2007 Stock Incentive Plan...

  • Page 173
    ... February 2015 to non-employee directors of Dollar General Corporation pursuant to the Amended and Restated 2007 Stock Incentive Plan (incorporated by reference to Exhibit 10.4 to Dollar General Corporation's Quarterly Report on Form 10-Q for the fiscal quarter ended May 2, 2014, filed with the SEC...

  • Page 174
    ... the SEC on June 3, 2014 (file no. 001-11421))* Summary of Dollar General Corporation Life Insurance Program as Applicable to Executive Officers (incorporated by reference to Exhibit 10.19 to Dollar General Corporation's Annual Report on Form 10-K for the fiscal year ended February 2, 2007, filed...

  • Page 175
    ... for the fiscal quarter ended August 1, 2014, filed with the SEC on August 28, 2014 (file no. 001-11421))* Summary of Non-Employee Director Compensation effective January 31, 2015 (incorporated by reference to Exhibit 10.1 to Dollar General Corporation's Quarterly Report on Form 10-Q for the fiscal...

  • Page 176
    ... Exhibit 10.38 to Dollar General Corporation's Annual Report on Form 10-K for the fiscal year ended January 28, 2011, filed with the SEC on March 22, 2011 (file no. 001-11421))* Employment Agreement, effective March 24, 2013, between Dollar General Corporation and Robert D. Ravener (incorporated by...

  • Page 177
    ... 24, 2010, between Dollar General Corporation and Robert D. Ravener (incorporated by reference to Exhibit 10.42 to Dollar General Corporation's Annual Report on Form 10-K for the fiscal year ended January 28, 2011, filed with the SEC on March 22, 2011 (file no. 001-11421))* Management Stockholder...

  • Page 178
    ... contact: Dollar General Corporation, Investor Relations 100 Mission Ridge, Goodlettsville, Tennessee 37072 (615) 855-4000 Direct Stock Purchase Plan Wells Fargo Shareowner Services sponsors and administers a direct purchase plan for the shares of Dollar General Corporation. Information on the plan...

  • Page 179
    ..., Goodlettsville, TN 37072 Shareholders of record as of March 19, 2015 are entitled to vote at the meeting. 2010 2011 2012 2013 2014 NYSE: DG SAME-STORE SALES GROWTH The common stock of Dollar General Corporation is traded on the New York Stock Exchange under the trading symbol "DG." The number of...

  • Page 180
    100 Mission Ridge Goodlettsville, Tennessee 37072 (615) 855-4000 www.dollargeneral.com