Dollar General 2015 Annual Report Download

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2015
ANNUAL
REPORT
AND 2016 PROXY STATEMENT

Table of contents

  • Page 1
    2015 ANNUAL REPORT AND 2016 PROXY STATEMENT

  • Page 2
    ...shoppers for over 75 years. Dollar General helps shoppers Save time. Save money. Every day!® by offering products that are frequently used and replenished, such as food, snacks, health and beauty aids, cleaning supplies, clothing for the family, housewares and seasonal items at low everyday prices...

  • Page 3
    TO OUR FELLOW SHAREHOLDERS, CUSTOMERS & EMPLOYEES This has been a strwng year at Dwllar General. Despite many changes within the retail landscape thrwughwut 2015, wur business cwntinued tw drive prwfitable sales grwwth, meet the needs wf wur custwmers and create lwng-term sharehwlder value. I am ...

  • Page 4

  • Page 5
    Proxy Statement & Meeting Notice

  • Page 6

  • Page 7
    ... have an opportunity to vote on the matters described in our accompanying Notice of Annual Meeting of Shareholders and Proxy Statement. Our 2015 Annual Report and our Annual Report on Form 10-K for the fiscal year ended January 29, 2016 also accompany this letter. Your interest in Dollar General and...

  • Page 8

  • Page 9
    ... South Main Street Goodlettsville, Tennessee 1) 2) 3) 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 2016 To transact any other business that may properly come before the annual meeting and...

  • Page 10

  • Page 11
    ... ...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 2015 ...Outstanding Equity Awards at 2015 Fiscal Year-End...

  • Page 12

  • Page 13
    ... time. Save money. Every day!↧ by offering products that are frequently used and replenished, such as food, snacks, health and beauty aids, cleaning supplies, clothing for the family, housewares and seasonal items at low everyday prices in convenient neighborhood locations. Dollar General operates...

  • Page 14
    ... they think best, including to adjourn the meeting. Who 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 17, 2016. As of that date, there were 286,669,916 shares of Dollar General common stock outstanding and...

  • 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 2016. 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
    ...and Vice President of Finance (August 1992-September 1993). Ms. Cochran has over 20 years of experience in the retail industry. Ms. Cochran has served as a director of Lowe's Companies, Inc. since January 2016. Age 70 53 57 62 54 50 69 54 Director Since 2009 2007 2012 2012 2014 2009 2010 2015 Proxy...

  • Page 18
    ... grocery delivery service, 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...

  • Page 19
    ... Executive Vice President, Division President and Chief Merchandising Officer. He was promoted to Chief Operating Officer in November 2013. Prior to joining Dollar General, Mr. Vasos served in executive positions with Longs Drug Stores Corporation for seven years, including Executive Vice President...

  • Page 20
    ...and managing companies in the retail industry, including evaluating business strategies, financial plans and structures, and management teams. His former service on the board of directors of Academy, Ltd., Pets at Home Group Plc., Shoppers Drug Mart Corporation, Toys ''R'' Us, Inc. and US Foods, Inc...

  • Page 21
    ..., Mr. Vasos's service in leadership and policy-making positions of other retail companies has provided him with the necessary leadership skills to effectively guide and oversee the direction of Dollar General and with the consensus-building skills required to lead our management team. Acting upon...

  • Page 22
    ...: • the nominee's name, age, business and residence addresses, and principal occupation or employment; the class and number of shares of Dollar General common stock beneficially owned by the nominee and by the shareholder proposing the nominee; any other information relating to the nominee that is...

  • Page 23
    ... and any audit problems or difficulties • Sets policies regarding the hiring of current and former employees of the independent auditor • Discusses the annual audited and quarterly unaudited financial statements with management and the independent auditor • Discusses types of information to be...

  • Page 24
    ... 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, prior to the filing of the proxy statement, the disclosure regarding executive compensation, including...

  • Page 25
    ... in the best interests of Dollar General and our shareholders. To further promote effective independent Board leadership, the Board has adopted a number of additional governance practices, including: • Ensuring opportunity after each regularly scheduled Board meeting for executive sessions of the...

  • Page 26
    ... an important role in our risk oversight process. Our Board regularly reviews with management our financial and business strategies, including relevant material risks as appropriate. Our General Counsel also periodically provides information to the Board regarding our insurance coverage and programs...

  • 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
    ... is included in Note 10 of the annual consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended January 29, 2016, filed with the SEC on March 22, 2016 (our ''2015 Form 10-K''). As of January 29, 2016, each of the persons listed in the table above had the following...

  • Page 29
    ... and related expenses related to Dollar General business. Each non-employee director will receive payment (prorated as applicable) for a fiscal year in quarterly installments of the following cash compensation, as applicable, along with an annual award of RSUs, payable in shares of our common stock...

  • Page 30
    ... and all benefits are paid from Dollar General's general assets. Our non-employee directors are subject to share ownership guidelines, expressed as a multiple of the annual cash retainer payable for service on our Board, and holding requirements. The current ownership guideline is 5 times (increased...

  • Page 31
    ... Guidelines, which are posted on the ''Investor Information-Corporate Governance'' section of our website located at www.dollargeneral.com. The Board first considers whether any director or nominee has a relationship covered by the NYSE listing standards that would prohibit an independence finding...

  • 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 expect Mr. Brophy's total cash compensation for 2016 to...

  • Page 33
    ...total annual receipts and no related party who is an individual participates in the grant decision or receives any special compensation or benefit as a result. Transactions where the interest arises solely from share ownership in Dollar General and all of our shareholders receive the same benefit on...

  • Page 34
    ...No hedging or pledging Dollar General securities or holding Dollar General securities in margin accounts áž¡ No excise tax gross-ups and minimal income tax gross-ups No repricing or cash buyout of underwater stock options without shareholder approval Annual compensation risk assessment Independent...

  • Page 35
    ... portion of annualized target total direct compensation for our named executive officers in 2015 was performance based and exposed to fluctuations in our stock price. CEO Other NEOs (Average) Proxy Salary 12% STI 12% LTI 76% LTI 57% Salary 26% STI 17% Variable/At-Risk: 88% 29MAR201619275050...

  • Page 36
    ... appropriate balance between base salary and incentive compensation. We reward named executive officers who enhance our performance by linking cash and equity incentives to the achievement of our financial goals. We promote share ownership to align the interests of our named executive officers with...

  • Page 37
    ...and associated preparation work; assistance with risk assessment and with decision making regarding executive and director compensation matters; advising on our Board and executive pay philosophy, compensation market comparator group, incentive plan design, emerging best practices and changes in the...

  • Page 38
    ... executive officers received an unsatisfactory performance rating for either 2014 or, for those who remained employed in 2016 and therefore underwent a performance evaluation, in 2015. Use of Market Benchmarking Data. The Compensation Committee approves, periodically reviews, and utilizes a market...

  • Page 39
    ... data and each named executive officer's 2014 satisfactory performance rating, all such officers received the 2.95% base salary increase that was budgeted for our U.S. based employee population. Ms. Taylor, who was promoted to Executive Vice President in March 2015, received an additional 13.72...

  • Page 40
    ... Stock Incentive Plan. (a) 2015 Annual Equity Awards. Each year, the Compensation Committee determines a targeted equity award value for each named executive officer derived from benchmarking information and the appropriate mix of vehicles in which to deliver such targeted value (see ''Use of Market...

  • Page 41
    ... share exercise price equal to the fair market value of one share of our common stock on the grant date. The options vest 25% annually on the April 1 of each of the four fiscal years following the fiscal year in which the grant is made, subject to the named executive officer's continued employment...

  • Page 42
    ... no later than ten years from the grant date. Upon his promotion to Chief Financial Officer, Mr. Garratt received an award of non-qualified stock options having an approximate value of $124,000 to purchase 7,829 shares of our common stock. Subject to certain limited vesting acceleration events, such...

  • Page 43
    ... pay the premiums under a group long-term disability plan, which provides 60% of base salary up to a maximum of $400,000. We provide a relocation assistance program under a policy applicable to officer-level employees. We provide personal financial and estate planning and tax preparation services...

  • Page 44
    ... in our employment agreements. A change in control, by itself (''single trigger''), does not trigger any severance provision applicable to our named executive officers, except for the provisions related to outstanding long-term equity awards granted prior to 2016. The 2016 annual equity awards...

  • Page 45
    ... of the fiscal year, our CEO or one of the other named executive officers (other than our Chief Financial Officer). As a result, we may not deduct any salary, signing bonus or other annual compensation paid or imputed to such covered officers that causes non-performance-based compensation to exceed...

  • Page 46
    ... President, Global Supply Chain Robert D. Ravener, Executive Vice President & Chief People Officer Rhonda M. Taylor, Executive Vice President & General Counsel Gregory A. Sparks, Former Executive Vice President, Store Operations (1) Year 2015 2014 2013 Salary ($)(2) 926,605 765,342 699,549 Stock...

  • Page 47
    ...our 2015 Form 10-K. Represents amounts earned pursuant to our Teamshare bonus program for each fiscal year reported. See the discussion of the ''Short-Term Cash Incentive Plan'' and ''CEO Employment Transition Agreement'' in ''Compensation Discussion and Analysis'' above. None of the named executive...

  • Page 48
    ... paid to employees at the same job grade level under the annual bonus program for officers for the two fiscal years immediately preceding fiscal 2015, (iii) $19,234 representing two times our annual contribution for his participation in our pharmacy, medical, dental and vision benefits programs and...

  • Page 49
    ... RSUs payable in shares of common stock on a one-for-one basis that vest over time, and the awards listed under ''All Other Option Awards'' include non-qualified stock options that vest over time, in each case based upon the applicable named executive officer's continued employment by Dollar General...

  • Page 50
    Outstanding Equity Awards at 2015 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 2015. The $7.9975 exercise price in the table below reflects an ...

  • Page 51
    ... by the closing market price of one share of our common stock on January 29, 2016. Represents PSUs, to be paid in an equal number of shares of our common stock, earned as a result of our performance versus certain adjusted EBITDA and ROIC targets for fiscal 2014 and scheduled to vest 50% per year on...

  • Page 52
    ... multiplying the number of such units by the closing market price of one share of our common stock on January 29, 2016. Proxy (13) These options are part of a grant of time-based options with a vesting schedule of 25% per year on each of the first four anniversaries of December 3, 2014, subject to...

  • Page 53
    ... the highly compensated limit under Section 414(q)(1)(B) of the Internal Revenue Code. We currently match base pay deferrals at a rate of 100%, up to 5% of annual salary, with annual salary offset by the amount of match-eligible salary under the 401(k) Plan. All named executive officers are 100...

  • Page 54
    ... our named executive officers and certain plans and programs in which our named executive officers participate, in each case as in effect at the end of our 2015 fiscal year, provide for benefits or payments upon certain employment termination or change in control events. These benefits and payments...

  • Page 55
    ... 2013 (''2013 PSUs''), fiscal 2014 (''2014 PSUs'') and, except for Mr. Dreiling, fiscal 2015 (''2015 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 29, 2016 for the 2015 PSUs, a pro-rated portion (based...

  • Page 56
    ... granted in 2015) following the date of death or disability. Other Payments. In the event of death, a named executive officer's beneficiary will receive payments under our group life insurance program in an amount, up to a maximum of $3 million, equal to 2.5 times such officer's annual base salary...

  • Page 57
    ... of the named executive officer's retirement or termination other than for good reason), then in each case the named executive officer will receive the following benefits generally on or beginning on the 60th day after termination of employment but contingent upon the execution and effectiveness of...

  • Page 58
    ... and vision benefits programs. Reasonable outplacement services for one year or, if earlier, until subsequent employment. • • • Note that any amounts owed to a named executive officer in the form of salary continuation that would otherwise have been paid during the 60 day period after...

  • Page 59
    ... limited to, those entities identified in the 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 which are substantially similar to those he or she provided or directed...

  • Page 60
    ... to each named executive officer in various termination and change in control scenarios based on compensation, benefit, and equity levels in effect on, and assuming the scenario was effective as of, January 29, 2016. For stock valuations, we have used the closing price of our stock on the NYSE...

  • Page 61
    ...2,484,561 809,535 n/a n/a n/a n/a 809,535 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a Mr. Flanigan was the only named executive officer other than Mr. Dreiling who was eligible for retirement on January 29, 2016. Estimated based on information provided by our outplacement services provider. 49

  • Page 62
    ... director of Dollar General or as a member of our Compensation Committee. Compensation Risk Considerations In December 2015, our Compensation Committee, with input from its compensation consultant and management, reviewed our compensation policies and practices for all employees, including executive...

  • Page 63
    ...dispose or direct the disposition of 25,701,473 shares. The address of BlackRock, Inc. is 55 East 52nd Street, New York, New York 10055. All information is based solely on Amendment No. 1 to Statement on Schedule 13G filed on January 26, 2016. GIC Private Limited (''GIC'') is a fund manager with two...

  • Page 64
    ... and Ravener (5,223); Ms. Taylor (2,086); and all current directors and executive officers as a group (38,651). Also includes the following number of shares subject to options either currently exercisable or exercisable within 60 days of March 17, 2016 over which the person will not have voting or...

  • Page 65
    ... General and 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 29, 2016 for filing...

  • Page 66
    ... the best 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...

  • Page 67
    ...for each year relate to the employee benefit plan audit. 2015 and 2014 fees relate primarily to tax compliance services, which represented $1,805,042 and $1,547,136 in 2015 and 2014, respectively, for work related to work opportunity tax credit assistance and foreign sourcing offices' tax compliance...

  • Page 68
    ... a timely basis, the reports required by Section 16(a) of the Exchange Act, except that (1) Ms. Price filed 1 late Form 4 to report 1 open market purchase of shares of Dollar General common stock; and (2) as a result of an administrative oversight, Mr. Vasos filed 1 late Form 4 to correct the number...

  • Page 69
    ... of Companies from Aon Hewitt Total Compensation MeasurementTM (TCM) Database Used for Certain Officers Proxy Academy Sports & Outdoors, Ltd. ANN INC. Belk, Inc. Best Buy Co., Inc. BJ's Wholesale Club, Inc. The Bon-Ton Stores Brinker International Inc. CDW Corporation The Children's Place Retail...

  • Page 70

  • Page 71
    10-K

  • Page 72

  • Page 73
    UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended January 29, 2016 Commission file number: 001-11421 DOLLAR GENERAL CORPORATION (Exact name of registrant ...

  • Page 74

  • Page 75
    ...30, 2015, January 31, 2014, February 1, 2013, and February 3, 2012, respectively. Our fiscal year ends on the Friday closest to January 31. 2016 will consist and 2011 consisted of 53 weeks, while each of the remaining years listed were 52-week years. All of the discussion and analysis in this report...

  • Page 76
    ... and grocery retailers. Our slogan ''Save time. Save money. Every day!'' summarizes our appeal to customers. We believe our ability to effectively deliver both value and convenience allows us to succeed in small markets with limited shopping alternatives, as well as to profitably coexist alongside...

  • Page 77
    ... even the largest discount retailers. Our ability to offer everyday low prices on quality merchandise is supported by our low-cost operating structure and our strategy to maintain a limited number of items per merchandise category, which we believe helps us maintain strong purchasing power. We offer...

  • Page 78
    ... home products categories typically account for the highest gross profit margins, and the consumables category typically accounts for the lowest gross profit margin. 10-K The Dollar General Store The typical Dollar General store is operated by a store manager, one or more assistant store managers...

  • Page 79
    ... statements for additional information. Our Competition We operate in the basic discount consumer goods market, which is highly competitive with respect to price, store location, merchandise quality, assortment and presentation, in-stock consistency, and customer service. We compete with discount...

  • Page 80
    ... to the Rexall brand through March 5, 2020. Available Information Our Internet website address is www.dollargeneral.com. We file with or furnish to the Securities and Exchange Commission (the ''SEC'') annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and...

  • Page 81
    ... which could result in lower net sales, decreases in inventory turnover, greater markdowns on inventory, a change in the mix of products we sell, and a reduction in profitability due to lower margins. Factors that could reduce our customers' disposable income and over which we exercise no influence...

  • Page 82
    ...our targeted gross profit margins. If we cannot open, relocate or remodel stores profitably and on schedule, our planned future growth will be impeded, which would adversely affect sales. Our ability to open, relocate and remodel profitable stores is a key component of our planned future growth. Our...

  • Page 83
    ... distribution centers or to the timely receipt of inventory could adversely impact sales or increase our transportation costs, which would decrease our profits. We rely on our distribution and transportation network to provide goods to our stores in a timely and cost-effective manner. Using various...

  • Page 84
    ... increase our costs or otherwise negatively affect our business. We maintain a network of distribution facilities and are moving forward with plans to build new facilities to support our growth objectives. Delays in opening distribution centers could adversely affect our future financial performance...

  • Page 85
    ... the sale of products or employee wages, 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 86
    ...have transportation to our stores directly affected by such events, the temporary reduction in the availability of products in our stores and disruption of our utility services or to our information systems. These events also can have indirect consequences such as increases in the costs of insurance...

  • Page 87
    .... We do not currently maintain key person life insurance policies with respect to our executive officers or key personnel. Our cash flows from operations may be negatively affected if we are not successful in managing our inventory balances. Our inventory balance represented approximately 54% of...

  • Page 88
    ... store support center and distribution centers, we are effectively self-insured for other property losses. If we experience a greater number of these losses than we anticipate, our financial performance could be adversely affected. Any failure to maintain the security of information we hold relating...

  • Page 89
    ... our operations, growth strategy, and return of cash to our shareholders through share repurchases and dividends. Changes in the credit and capital markets, including market disruptions, limited liquidity and interest rate fluctuations, may increase the cost of financing or restrict our access to...

  • Page 90
    .... The implementation of new accounting standards will require extensive systems, internal process and other changes that could increase our operating costs, and also will result in changes to our financial statements. In particular, the implementation of accounting standards related to leases, as...

  • Page 91
    ...of our new stores are subject to build-to-suit arrangements. As of February 26, 2016, we operated thirteen 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...

  • Page 92
    ... plans to retire from Dollar General effective April 29, 2016. 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 a chain of retail drug...

  • Page 93
    ..., Specialized Distribution Management Inc., and Crum & Crum Logistics. Mr. Owen returned to Dollar General in June 2015 as Executive Vice President of Store Operations, with over 21 years of previous employment experience with the Company. Prior to his departure from Dollar General in July 2014, he...

  • Page 94
    ... purchases of our common stock made during the quarter ended January 29, 2016 by or on behalf of Dollar General or any ''affiliated purchaser,'' as defined by Rule 10b-18(a)(3) of the Securities Exchange Act of 1934: Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs...

  • Page 95
    ... 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 29, 2016, January 30, 2015, and January 31, 2014 and balance sheet data...

  • Page 96
    ... per share data, number of stores, selling square feet, and net sales per square foot) January 29, 2016 January 30, 2015 Year Ended January 31, 2014 February 1, 2013 February 3, 2012(1) Statement of Income Data: Net sales ...Cost of goods sold ...Gross profit ...Selling, general and administrative...

  • Page 97
    ... open at the end of the reporting period. We include stores that have been remodeled, expanded or relocated in our 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...

  • Page 98
    ... 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, with selling space averaging approximately 7,400 square feet per store. Because the customers we...

  • Page 99
    ... 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. Our employees are a competitive advantage...

  • Page 100
    ... business, repurchase our common stock, and pay quarterly cash dividends. • Inventory turnover was 4.7 times on a rolling four-quarter basis. Inventories increased 4.3% on a per store basis over 2014. • During 2015 we opened 730 new stores, remodeled or relocated 881 stores, and closed 36 stores...

  • Page 101
    ... results of operations data for fiscal years 2015, 2014 and 2013, and the dollar and percentage variances among those years. 2015 vs. 2014 Amount % Change Change 2014 vs. 2013 Amount % Change Change 10-K (amounts in millions, except per share amounts) 2015 2014 2013 Net sales by category...

  • Page 102
    ...in 2014 was attributable to new stores, partially offset by sales from closed stores. The increase in sales reflects increased customer traffic and average transaction amounts resulting from the refinement of the Company's merchandise offerings, including a full year's sales of tobacco products, the...

  • Page 103
    ... state reserve releases in 2014 that did not reoccur, to the same extent, in 2015. 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''). In...

  • Page 104
    ...(which is usually equal to the prime rate). The applicable interest rate margin for borrowings as of January 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...

  • Page 105
    ...to positive. 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 premiums and collateral requirements necessary for our self-insured programs...

  • Page 106
    ... a significant portion of the risk for our workers' compensation, employee health insurance, general liability, property loss and automobile insurance. As these obligations do not have scheduled maturities, these amounts represent undiscounted estimates based upon actuarial assumptions. Reserves for...

  • Page 107
    ... increased sales and operating profit in 2015 as described in more detail above under ''Results of Operations.'' Changes in merchandise inventories resulted in a net use of working capital, increasing by a greater amount in 2015 compared to 2014 as described in greater detail below. Accounts payable...

  • Page 108
    ...2013. The increase in accounts payable during 2014 was due primarily to the volume and timing of domestic merchandise receipts. 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...

  • Page 109
    ... our supply chain initiatives including new and existing distribution center facilities; technology initiatives; as well as routine and ongoing capital requirements. Cash flows from financing activities. In 2015, we repurchased 17.6 million outstanding shares of our common stock at a total cost of...

  • Page 110
    ... other 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. Changes in these...

  • Page 111
    ... value or impairment. Insurance Liabilities. We retain a significant portion of the risk for our workers' compensation, employee health, property loss, automobile and general liability. These represent significant costs primarily due to our large employee base and number of stores. Provisions are...

  • Page 112
    ... related to these options. These assumptions include the term that the options are expected to be outstanding, the historical volatility of our stock price, applicable interest rates and the dividend yield of our stock. Other factors involving judgments that affect the expensing of share-based...

  • Page 113
    ... financial instruments are generally offset by reciprocal changes in the value of the underlying economic exposure. Interest Rate Risk 10-K We manage our interest rate risk through the strategic use of fixed and variable interest rate debt and, from time to time, derivative financial instruments...

  • Page 114
    ... the accompanying consolidated balance sheets of Dollar General Corporation and subsidiaries as of January 29, 2016 and January 30, 2015, and the related consolidated statements of income, comprehensive income, shareholders' equity and cash flows for each of the three years in the period ended...

  • Page 115
    DOLLAR GENERAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except per share amounts) January 29, 2016 January 30, 2015 (see Note 1) ASSETS Current assets: Cash and cash equivalents ...Merchandise inventories ...Income tax receivable ...Prepaid expenses and other current ...

  • Page 116
    DOLLAR GENERAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts) For the Year Ended January 30, January 31, 2015 2014 January 29, 2016 Net sales ...Cost of goods sold ...Gross profit ...Selling, general and administrative expenses ... $20,368,...

  • Page 117
    DOLLAR GENERAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands) For the Year Ended January 30, January 31, 2015 2014 January 29, 2016 Net income ...Unrealized net gain (loss) on hedged transactions, net of related income tax expense (benefit) of $971, $1,...

  • Page 118
    ... 1, 2013 . . Net income ...Unrealized net gain (loss) on hedged transactions ...Share-based compensation expense ...Repurchases of common stock Tax benefit from stock option exercises ...Other equity and related transactions ...Balances, January 31, 2014 . . Net income ...Unrealized net gain (loss...

  • Page 119
    ......Deferred income taxes ...Tax benefit of share-based awards ...Loss on debt retirement, net ...Noncash share-based compensation ...Other noncash (gains) and losses ...Change in operating assets and liabilities: Merchandise inventories ...Prepaid expenses and other current assets . Accounts payable...

  • Page 120
    ... the years 2015, 2014, and 2013, which represent fiscal years ended January 29, 2016, January 30, 2015, and January 31, 2014, respectively, each of which were 52-week accounting periods. The Company's fiscal year ends on the Friday closest to January 31. The consolidated financial statements include...

  • Page 121
    ... 29, 2016 and January 30, 2015, respectively. Current cost is determined using the RIM on a first-in, first-out basis. Under the LIFO inventory method, the impacts of rising or falling market price changes increase or decrease cost of sales (the LIFO provision or benefit). The Company recorded...

  • Page 122
    ... 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 value. The...

  • Page 123
    ... require 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 an entity's reporting units based on valuation techniques (including a discounted cash flow model using revenue and profit forecasts...

  • Page 124
    DOLLAR GENERAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 1. Basis of presentation and accounting policies (Continued) Insurance liabilities The Company retains a significant portion of risk for its workers' compensation, employee health, general liability, ...

  • Page 125
    ... to maturity, and uses observable market-based inputs, including interest rate curves. The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash payments (or receipts) and the discounted expected variable cash receipts (or...

  • Page 126
    ...promotion or sale of vendor products for dollar amounts up to but not exceeding actual incremental costs. Advertising costs were $89.3 million, $77.3 million and $70.5 million in 2015, 2014 and 2013, respectively. These costs primarily include promotional circulars, targeted circulars supporting new...

  • Page 127
    ... GENERAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 1. Basis of presentation and accounting policies (Continued) Share-based payments The Company recognizes compensation expense for share-based compensation based on the fair value of the awards on the grant...

  • Page 128
    ... 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...

  • Page 129
    ...201,870 The Company recorded amortization expense related to amortizable intangible assets for 2015, 2014 and 2013 of $0.9 million, $5.8 million and $11.9 million, respectively, all of which is included in rent expense. Expected future cash flows associated with the Company's intangible assets are...

  • Page 130
    ... by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share was determined based on the dilutive effect of share-based awards using the treasury stock method. Options to purchase shares of common stock that were outstanding...

  • Page 131
    DOLLAR GENERAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 4. Income taxes The provision (benefit) for income taxes consists of the following: (In thousands) 2015 2014 2013 Current: Federal ...Foreign ...State ...Deferred: Federal ...State ... $590,120 1,678...

  • Page 132
    ... expenses ...Accrued rent ...Accrued insurance ...Accrued incentive compensation ...Share based compensation ...Interest rate hedges ...Tax benefit of income tax and interest reserves related positions ...Deferred gain on sale-leaseback ...Other ...State tax credit carry forwards, net of federal...

  • Page 133
    DOLLAR GENERAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 4. Income taxes (Continued) 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 ...

  • Page 134
    ... (which is usually equal to the prime rate). The applicable interest rate margin for borrowings as of January 29, 2016 was 1.10% for LIBOR borrowings and 0.10% for base-rate borrowings. The Company must also pay a facility fee, payable on any used and unused commitment amounts of the Facilities, and...

  • Page 135
    ... Notes''), net of discount of $0.8 million, which are scheduled to mature on November 1, 2025. Interest on the 2025 Senior Notes is payable in cash on May 1 and November 1 of each year, commencing on May 1, 2016. The Company incurred $4.4 million of debt issuance costs associated with the issuance...

  • Page 136
    ... of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of its debt funding and, from time to time, through the use of...

  • Page 137
    ... other comprehensive income (loss) in the consolidated balance sheets for the periods presented are related to cash flow hedges. Non-designated hedges of commodity risk Derivatives not designated as hedges are not speculative and are used to manage the Company's exposure to commodity price risk but...

  • Page 138
    ...'s derivative financial instruments as reflected in the consolidated statements of comprehensive income and shareholders' equity, as applicable: (in thousands) 2015 2014 2013 10-K Derivatives in Cash Flow Hedging Relationships Loss related to effective portion of derivative recognized in OCI...

  • Page 139
    ... for the years ended January 29, 2016, January 30, 2015, and January 31, 2014, respectively. 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...

  • Page 140
    DOLLAR GENERAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 8. Commitments and contingencies (Continued) which the Commission alleges that the Company's criminal background check policy has a disparate impact on ''Black Applicants'' in violation of Title VII ...

  • Page 141
    ... financial statements as a whole. 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...

  • Page 142
    ... 2016, the Company was notified of thirteen 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...

  • Page 143
    ...'') 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 $1.1 million, $0.8 million and $1.2 million in 2015, 2014 and 2013...

  • Page 144
    ...number of shares of Company common stock authorized for grant under the Plan is 31,142,858. As of January 29, 2016, 18,556,241 of such shares are available for future grants. Since May 2011, most of the share-based awards issued by the Company have been in the form of stock options, restricted stock...

  • Page 145
    ... awards have been based on the historical volatility of the Company's publicly traded common stock. An increase in the expected volatility will increase compensation expense. Weighted average risk-free interest rate-This is the U.S. Treasury rate for the week of the grant having a term approximating...

  • Page 146
    ... during 2015, 2014 and 2013 was $4.9 million, $4.9 million and $39.1 million, respectively. In March 2012, the Company issued a performance-based award of 326,037 shares of restricted stock to its former Chairman and Chief Executive Officer. The restricted stock award had a fair value on the grant...

  • Page 147
    ... results of operations or otherwise, to the consolidated financial statements. The following net sales data is presented in accordance with accounting standards related to disclosures about segments of an enterprise. (In thousands) 2015 2014 2013 Classes of similar products: Consumables ...Seasonal...

  • Page 148
    ... at a total cost of $0.6 billion, respectively, pursuant to its common stock repurchase programs. The Company paid quarterly cash dividends of $0.22 per share during each of the four quarters of 2015. On March 8, 2016, the Company's Board of Directors approved a quarterly cash dividend of $0.25 per...

  • Page 149
    DOLLAR GENERAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 14. Quarterly financial data (unaudited) (Continued) (In thousands) First Quarter Second Quarter Third Quarter Fourth Quarter 2014: Net sales ...Gross profit ...Operating profit ...Net income ......

  • Page 150
    ...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 151
    ... balance sheets of Dollar General Corporation and subsidiaries as of January 29, 2016 and January 30, 2015, and the related consolidated statements of income, comprehensive income, shareholders' equity, and cash flows for each of the three years in the period ended January 29, 2016 of Dollar General...

  • Page 152
    ... W. Flanigan, Executive Vice President, Global Supply Chain, advised the Company of his intent to retire effective April 29, 2016. On March 16, 2016, the Company's Compensation Committee (the ''Committee'') awarded 119,599 non-qualified stock options (''Options'') and 27,367 performance share units...

  • Page 153
    ...on the Investor Information section of our Internet website at www.dollargeneral.com. If we choose to no longer post such Code, we will provide a free copy to any person upon written request to Dollar General Corporation, c/o Investor Relations Department, 100 Mission Ridge, Goodlettsville, TN 37072...

  • Page 154
    ...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 155
    ... Balance Sheets Consolidated Statements of Income Consolidated Statements of Comprehensive Income Consolidated Statements of Shareholders' Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements All schedules for which provision is made in the applicable accounting...

  • Page 156
    ... Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. DOLLAR GENERAL CORPORATION Date: March 22, 2016 By: /s/ TODD J. VASOS Todd J. Vasos, Chief Executive Officer We, the undersigned directors and officers...

  • Page 157
    ... Date /s/ PATRICIA D. FILI-KRUSHEL PATRICIA D. FILI-KRUSHEL Director March 22, 2016 /s/ PAULA A. PRICE PAULA A. PRICE Director March 22, 2016 /s/ WILLIAM C. RHODES, III WILLIAM C. RHODES, III Director March 22, 2016 10-K /s/ DAVID B. RICKARD DAVID B. RICKARD Director March 22, 2016 83

  • Page 158
    ...as of July 12, 2012, between Dollar General Corporation, as issuer, and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.1 to Dollar General Corporation's Current Report on Form 8-K dated July 12, 2012, filed with the SEC on July 17, 2012 (file no. 001-11421)) First...

  • Page 159
    ...Corporation's Current Report on Form 8-K dated March 20, 2012, filed with the SEC on March 26, 2012 (file no. 001-11421))* Form of Stock Option Award Agreement (approved August 26, 2014) for annual awards beginning March 2015 and prior to March 2016 to certain employees of Dollar General Corporation...

  • Page 160
    ... to March 2015 to certain employees of Dollar General Corporation pursuant to the Amended and Restated 2007 Stock Incentive Plan (incorporated by reference to Exhibit 10.3 to Dollar General Corporation's Current Report on Form 8-K dated March 20, 2012, filed with the SEC on March 26, 2012 (file no...

  • Page 161
    ... quarter ended May 1, 2015, filed with the SEC on June 2, 2015 (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...

  • Page 162
    ...))* Summary of Non-Employee Director Compensation effective January 30, 2016 Employment Transition Agreement, effective March 10, 2015, between Dollar General Corporation and Richard W. Dreiling (incorporated by reference to Exhibit 99 to Dollar General Corporation's Current Report on Form 8-K dated...

  • Page 163
    ... Dollar General Corporation's Current Report on Form 8-K dated December 2, 2015, filed with the SEC on December 3, 2015 (file no. 001-11421))* Omnibus Limited Waiver by Dollar General Corporation to the Employment Agreement and Employment Transition Agreement with certain employees of Dollar General...

  • Page 164
    ...List of Subsidiaries of Dollar General Corporation Consent of Independent Registered Public Accounting Firm Powers of Attorney (included as part of the signature pages hereto) Certifications of CEO and CFO under Exchange... 10-K 101.LAB 101.PRE 101.DEF * Management Contract or Compensatory Plan 90

  • Page 165
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  • Page 166
    ...shares of Dollar General Corporation. Information on the plan, a copy of the prospectus and enrollment forms are located at www.shareowneronline.com, or you may contact our transfer agent by calling (866) 927-3314 or at our transfer agent's mailing address above. Dollar General Corporation Investor...

  • Page 167
    ... of March 17, 2016 are entitled 2011 2012 2013 2014 2015 to vote at the meeting. NYSE: DG ENDHNG STORE COUNT 12,483 11,789 11,132 10,506 9,937 The common stock of Dollar General Corporation is traded on the New York Stock Exchange under the trading symbol "DG." The number of shareholders of...

  • Page 168
    100 Mission Ridge Goodlettsville, Tennessee 87072 (615) 855-4000 www.dollargeneral.com