Dollar General Corporation
May 26, 2016

Dollar General Reports First Quarter 2016 Financial Results

GOODLETTSVILLE, Tenn.--(BUSINESS WIRE)-- Dollar General Corporation (NYSE: DG) today reported financial results for its 2016 first quarter (13 weeks) ended April 29, 2016.

"Dollar General had a strong start to the year with our first quarter 2016 results. Compared to the first quarter of 2015, same-store sales improved 2.2%. We remained keenly focused on ensuring the effectiveness and efficiency of every aspect of our business as we delivered both gross margin expansion and selling, general and administrative expense leverage. This balanced performance contributed to operating profit improvement of 12% and diluted earnings per share growth of 23%. We are confident in our opportunities for growth and remain committed to creating sustainable long-term shareholder value," said Todd Vasos, Dollar General's chief executive officer.

First Quarter 2016 Financial Highlights
Net sales increased 7.0 percent to $5.27 billion in the 2016 first quarter compared to $4.92 billion in the 2015 first quarter. Same-store sales in the 2016 first quarter increased 2.2 percent over the 2015 first quarter resulting from increases in both customer traffic and average transaction amount. Same-store sales increases were driven by positive results in both the consumables category and certain of the non-consumables categories, with sales of consumable merchandise outpacing sales of non-consumable merchandise. Within the non-consumables categories, growth in same-store sales was due to seasonal and home products. The net sales increase also was positively affected by sales from new stores, partially offset by sales from closed stores.

Gross profit, as a percentage of sales, was 30.6 percent in the 2016 first quarter compared to 30.5 percent in the 2015 first quarter, an increase of 16 basis points. The majority of the gross profit rate increase was due to higher initial inventory markups and lower transportation costs partially attributable to lower fuel rates, offset in part by a greater proportion of sales of consumables merchandise, which have a lower gross profit rate than non-consumables merchandise, increased inventory shrinkage, and higher markdowns.

Selling, general and administrative expense ("SG&A") as a percentage of sales was 21.5 percent in the 2016 first quarter compared to 21.8 percent in the 2015 first quarter, a decrease of 26 basis points. The majority of the SG&A decrease was due to lower utilities costs, administrative payroll, incentive compensation, travel expenses, workers' compensation costs and advertising costs, as well as a higher volume of convenience fees associated with customer cash-back transactions. Partially offsetting these items were retail labor and occupancy costs, each of which increased at a rate greater than the increase in sales.

The Company's net income was $295 million, or $1.03 per diluted share, in the 2016 first quarter, compared to net income of $253 million, or $0.84 per diluted share, in the 2015 first quarter.

The effective income tax rate in the 2016 first quarter was 35.4 percent compared to 37.7 percent in the 2015 first quarter. The effective income tax rate was lower in the 2016 first quarter due primarily to the Company's early adoption of an amended accounting standard for employee share-based payments and the recognition of additional amounts of the Work Opportunity Tax Credit ("WOTC") in the 2016 first quarter. The December 2015 reenactment of the WOTC allowed the Company to receive credits for eligible employees hired during the first quarter of 2016. In 2015, only eligible employees hired on or before December 31, 2014, were credit eligible.

The share-based payment accounting amendments are effective for fiscal years beginning after December 15, 2016 with early adoption permitted. The Company adopted this guidance in the 2016 first quarter. The income tax benefit in the 2016 first quarter of this accounting standard adoption was approximately $9.0 million or $0.03 cents per diluted share. Due to the majority of the Company's share-based awards typically vesting in the first quarter, this amended accounting standard is anticipated to have the most significant impact in the first quarter. It is not expected to reoccur to this degree over the balance of the year.

Merchandise Inventories
As of April 29, 2016, total merchandise inventories, at cost, were $3.07 billion compared to $2.84 billion as of May 1, 2015, an increase of two percent on a per-store basis.

Capital Expenditures
Total additions to property and equipment in the 2016 first quarter were $99 million, including: $33 million for distribution and transportation-related capital expenditures; $31 million for improvements, upgrades, remodels and relocations of existing stores; $24 million related to new leased stores, primarily for leasehold improvements, fixtures and equipment; and $6 million for information systems upgrades and technology-related projects.

During the 2016 first quarter, the Company opened 249 new stores and remodeled or relocated 301 stores. For 2016, the Company plans to open 900 new stores and remodel or relocate 875 stores. For 2017, the Company intends to accelerate its square footage growth with plans to open about 1,000 stores and remodel or relocate about 900 stores.

Share Repurchases
In the 2016 first quarter, the Company repurchased 2.7 million shares of its common stock under its share repurchase program at an average price of $84.81 per share. From December 2011 through the end of the 2016 first quarter, the Company repurchased 64.7 million shares of its common stock under the share repurchase program at a total cost of $3.8 billion, at an average price of $58.82 per share. The total remaining authorization for future repurchases was approximately $693 million at the end of the 2016 first quarter. The authorization has no expiration date.

Dividend
On May 24, 2016, the Board of Directors declared its regular quarterly cash dividend of $0.25 per share on the Company's common stock. The second quarter dividend will be payable on June 29, 2016 to shareholders of record at the close of business on June 15, 2016.

Conference Call Information
The Company will hold a conference call on Thursday, May 26, 2016 at 9:00 a.m. CT/10:00 a.m. ET, hosted by Todd Vasos, chief executive officer and John Garratt, chief financial officer. If you wish to participate, please call (855) 576-2641 at least 10 minutes before the conference call is scheduled to begin. The conference ID is 94270343. The call will also be broadcast live online at www.dollargeneral.com under "Investor Information, Conference Calls and Investor Events." A replay of the conference call will be available through Thursday, June 9, 2016, and will be accessible online or by calling (855) 859-2056. The conference ID for the replay is 94270343.

Forward-Looking Statements
This press release contains forward-looking information, including statements regarding the Company's outlook, plans and intentions, including, but not limited to, statements made within the quotations of Mr. Vasos and in the section entitled "Capital Expenditures". A reader can identify forward-looking statements because they are not limited to historical fact or they use words such as "outlook," "may," "should," "could," "believe," "anticipate," "plan," "expect," "estimate," "forecast," "confident," "opportunities," "goal," "prospect," "positioned," "accelerate," "intend," "committed," "continue," "looking ahead," "going forward," "focused on," or "will likely result," and similar expressions that concern the Company's strategy, plans, intentions or beliefs about future occurrences or results. These matters involve risks, uncertainties and other factors that may cause the actual performance of the Company to differ materially from that which the Company expected. Many of these statements are derived from the Company's operating budgets and forecasts as of the date of this release, which are based on many detailed assumptions that the Company believes are reasonable. However, it is very difficult to predict the effect of known factors on the Company's future results, and the Company cannot anticipate all factors that could affect future results that may be important to an investor. All forward-looking information should be evaluated in the context of these risks, uncertainties and other factors. Important factors that could cause actual results to differ materially from the expectations expressed in or implied by such forward-looking statements include, but are not limited to:

All forward-looking statements are qualified in their entirety by these and other cautionary statements that the Company makes from time to time in its SEC filings and public communications. The Company cannot assure the reader that it will realize the results or developments the Company anticipates or, even if substantially realized, that they will result in the consequences or affect the Company or its operations in the way the Company expects. Forward-looking statements speak only as of the date made. The Company undertakes no obligation to update or revise any forward-looking statements to reflect events or circumstances arising after the date on which they were made, except as otherwise required by law. As a result of these risks and uncertainties, readers are cautioned not to place undue reliance on any forward-looking statements included herein or that may be made elsewhere from time to time by, or on behalf of, the Company.

About Dollar General Corporation
Dollar General Corporation has been delivering value to 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, basic apparel, housewares and seasonal items at low everyday prices in convenient neighborhood locations. With 12,719 stores in 43 states as of April 29, 2016, Dollar General is among the largest discount retailers in the United States. In addition to high quality private brands, Dollar General sells products from America's most-trusted manufacturers such as Procter & Gamble, Kimberly-Clark, Unilever, Kellogg's, General Mills, Nabisco, Hanes, PepsiCo and Coca-Cola. Learn more about Dollar General at www.dollargeneral.com.

 
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
                         
  (Unaudited)  
April 29 May 1 January 29
  2016         2015           2016  
ASSETS
Current assets:
Cash and cash equivalents $ 187,687 $ 225,116 $ 157,947
Merchandise inventories 3,072,063 2,839,198 3,074,153
Income taxes receivable 6,827 - 6,843
  Prepaid expenses and other current assets           210,769             180,586               193,467    
  Total current assets           3,477,346             3,244,900               3,432,410    
  Net property and equipment           2,278,081             2,135,436               2,264,062    
  Goodwill           4,338,589             4,338,589               4,338,589    
  Other intangible assets, net           1,200,904             1,201,428               1,200,994    
  Other assets, net           21,464             21,702               21,830    
  Total assets         $ 11,316,384           $ 10,942,055             $ 11,257,885    
 

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Current portion of long-term obligations $ 1,526 $ 101,309 $ 1,379
Accounts payable 1,447,223 1,435,367 1,494,225
Accrued expenses and other 440,697 393,507 467,122
  Income taxes payable           122,148             108,948               32,870    
  Total current liabilities           2,011,594             2,039,131               1,995,596    
  Long-term obligations           2,989,663             2,599,510               2,969,175    
  Deferred income taxes           647,626             632,056               639,955    
  Other liabilities           279,118             285,500               275,283    
  Total liabilities           5,928,001             5,556,197               5,880,009    
 
Commitments and contingencies
 

Shareholders' equity:

Preferred stock - - -
Common stock 249,096 260,111 250,855
Additional paid-in capital 3,124,110 3,070,518 3,107,283
Retained earnings 2,020,784 2,061,798 2,025,545
  Accumulated other comprehensive loss           (5,607 )           (6,569 )             (5,807 )  
 

Total shareholders' equity

          5,388,383             5,385,858               5,377,876    
 

Total liabilities and shareholders' equity

        $ 11,316,384           $ 10,942,055             $ 11,257,885    
 

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

 

 
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited)
                                 
  For the Quarter (13 Weeks) Ended  
April 29 % of Net May 1 % of Net
  2016         Sales         2015         Sales  
Net sales $ 5,265,432 100.00 % $ 4,918,672 100.00 %
  Cost of goods sold           3,652,818         69.37             3,419,967         69.53    
Gross profit 1,612,614 30.63 1,498,705 30.47
  Selling, general and administrative expenses           1,131,871         21.50             1,070,511         21.76    
Operating profit 480,743 9.13 428,194 8.71
  Interest expense           24,081         0.46             21,576         0.44    
Income before income taxes 456,662 8.67 406,618 8.27
  Income tax expense           161,538         3.07             153,383         3.12    
  Net income         $ 295,124         5.60 %         $ 253,235         5.15 %  
 
Earnings per share:
Basic $ 1.03 $ 0.84
Diluted $ 1.03 $ 0.84
Weighted average shares outstanding:
Basic 285,886 301,202
Diluted 286,978 302,089
 

 
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
               
  For the 13 Weeks Ended  
April 29 May 1
  2016         2015  
Cash flows from operating activities:
Net income $ 295,124 $ 253,235

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

Depreciation and amortization 92,324 87,152
Deferred income taxes 7,541 (10,095 )
Noncash share-based compensation 10,253 10,125
Other noncash (gains) and losses (440 ) 1,407
Change in operating assets and liabilities:
Merchandise inventories 3,476 (57,103 )
Prepaid expenses and other current assets (16,676 ) (12,241 )
Accounts payable (55,267 ) 40,123
Accrued expenses and other liabilities (21,416 ) (17,976 )
Income taxes 89,294 75,865
  Other           (260 )           (282 )  
  Net cash provided by (used in) operating activities           403,953             370,210    
 
Cash flows from investing activities:
Purchases of property and equipment (98,968 ) (99,929 )
  Proceeds from sales of property and equipment           323             163    
  Net cash provided by (used in) investing activities           (98,645 )           (99,766 )  
 
Cash flows from financing activities:
Repayments of long-term obligations (497 ) (25,346 )
Borrowings under revolving credit facilities 751,000 13,000
Repayments of borrowings under revolving credit facilities (731,000 ) (13,000 )
Repurchases of common stock (230,961 ) (534,654 )
Payments of cash dividends (71,308 ) (66,037 )
  Other equity and related transactions           7,198             886    
  Net cash provided by (used in) financing activities           (275,568 )           (625,151 )  
 
Net increase (decrease) in cash and cash equivalents 29,740 (354,707 )
  Cash and cash equivalents, beginning of period           157,947             579,823    
  Cash and cash equivalents, end of period         $ 187,687           $ 225,116    
 
Supplemental cash flow information:
Cash paid for:
Interest $ 21,477 $ 24,215
Income taxes $ 64,520 $ 87,449
Supplemental schedule of non-cash investing and financing activities:

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

$ 40,285 $ 38,676
 

 
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
Selected Additional Information
(Unaudited)
                         
Sales by Category (in thousands)
 
  For the Quarter (13 Weeks) Ended  
April 29 May 1
  2016         2015     % Change  
Consumables $ 4,039,197 $ 3,753,978 7.6 %
Seasonal 623,850 586,293 6.4 %
Home products 322,848 303,024 6.5 %
Apparel     279,537           275,377       1.5 %  
Net sales   $ 5,265,432         $ 4,918,672       7.0 %  
 
 
 
Store Activity
 
  For the 13 Weeks Ended  
April 29 May 1
  2016         2015  
 
Beginning store count 12,483 11,789
New store openings 249 219
Store closings     (13 )         (9 )  
Net new stores     236           210    
Ending store count     12,719           11,999    

Total selling square footage (000's)

    94,262           88,789    
Growth rate (square footage)     6.2 %         6.2 %  

Dollar General Corporation
Investor Contacts:
Mary Winn Pilkington, 615-855-5536
Matt Hancock, 615-855-4811
or
Media Contacts:
Dan MacDonald, 615-855-5209
Crystal Ghassemi, 615-855-5210

Source: Dollar General Corporation

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