Dollar General Corporation
DOLLAR GENERAL CORP (Form: 8-K, Received: 06/04/2012 16:12:07)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported):  June 1, 2012
 
Dollar General Corporation
(Exact name of registrant as specified in its charter)
 
Tennessee
001-11421
61-0502302
(State or other jurisdiction
of incorporation)
(Commission File Number)
(I.R.S. Employer
Identification No.)
 
100 Mission Ridge
Goodlettsville, Tennessee
 
37072
(Address of principal executive offices)
 
(Zip Code)
 
Registrant’s telephone number, including area code:     (615) 855-4000
 
 
(Former name or former address, if changed since last report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
o  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 
 

 
 
ITEM 2.02
RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
 
          On June 4, 2012, Dollar General Corporation (the “Company”) issued a news release regarding results of operations and financial condition for the fiscal 2012 first quarter ended May 4, 2012. The news release is attached hereto as Exhibit 99.1.
 
ITEM 5.02
DEPARTURE OF DIRECTORS OR CERTAIN OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF CERTAIN OFFICERS; COMPENSATORY ARRANGEMENTS OF CERTAIN OFFICERS.
 
Amended and Restated 2007 Stock Incentive Plan
 
On June 1, 2012, the Company’s shareholders approved the Amended and Restated 2007 Stock Incentive Plan for Key Employees of Dollar General Corporation and its Affiliates (the “Amended Stock Incentive Plan”).  The 2007 Stock Incentive Plan was initially approved by the Company’s Board of Directors in July 2007 and was subsequently amended in May 2008 and again in October 2009.  The Amended Stock Incentive Plan was approved by the Board of Directors in November 2011, subject to shareholder approval.
 
The most significant amendments include:
 
 
 
Extension of the term of such plan to June 1, 2022.
       
 
 
Prohibition on the granting of dividend equivalent rights on unearned performance shares.
       
 
 
Prohibition on the repricing of any stock option or stock appreciation granted under such plan, without the prior approval of the Company’s shareholders, other than as permitted under Section 8 or Section 9 of such plan.  For this purpose, a “repricing” includes: (i) changing the terms of any stock option or stock appreciation right to lower the applicable exercise price; (ii) any other action that is treated as a “repricing” under generally accepted accounting principles; and (iii) repurchasing for cash or canceling any stock option or stock appreciation right in exchange for another award at a time when the exercise price per share is greater than the fair market value of the underlying shares, unless the cancellation and exchange occurs in connection with an event described in Section 8 or 9 of such plan.
       
 
 
Addition of a “clawback” provision requiring the committee of the Board of Directors which administers the plan to specify that as a condition of receiving payment of an award granted under the plan on or after June 1, 2012, the participant’s rights, payments, and benefits with respect to any such award shall be subject to any reduction, cancellation, forfeiture or recoupment, in whole or in part, upon the occurrence of certain specified events, as may be required by the Securities and Exchange Commission or any applicable national exchange, law, rule or regulation.
       
    A revised change in control definition which encompasses any of the following events: (i) the sale or disposition, in one or a series of related transactions, of all or substantially all, of the assets of the Company to any person (or group of persons acting in concert) other than any of the Company or its affiliates (collectively, the “Permitted Holders”); (ii)  any person (or group of persons acting in concert), other than the Permitted Holders, is or becomes the
 
 
 

 
 
 
 
 
beneficial owner (including shares such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 50% of the total voting power of the voting stock of the Company (or any entity which controls the Company), including by way of merger, consolidation, tender or exchange offer or otherwise; (iii) a reorganization, recapitalization, merger or consolidation (a “Corporate Transaction”) involving the Company, unless securities representing 50% or more of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the Company or the entity resulting from such Corporate Transaction (or the parent of such entity) are held subsequent to such transaction by the person or persons who were the beneficial owners of the outstanding voting securities entitled to vote generally in the election of directors of the Company immediately prior to such Corporate Transaction; or (iv) during any rolling 24 month period looking back from any given date, individuals who at the beginning of such period constituted the Board (together with any new directors whose election by such Board or whose nomination for election by the shareholders of the Company was approved by a vote of a majority of the directors of the Company, then still in office, who were either directors at the beginning of such period or whose election or nomination for election was previously so approved (any such director, an “Incumbent Director”) cease for any reason to constitute a majority of the Board on the date of determination thereof; provided, that, no individual shall be an Incumbent Director who is elected or nominated as a director of the Company as a result of an actual or threatened election contest with respect to directors or as a result of any other actual or threatened solicitation of proxies by or on behalf of any Person other than the Board.  For purposes of this definition, the term “beneficial owner” is as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended.
 
          The above summary is qualified in its entirety by the full text of the Amended Stock Incentive Plan which is incorporated by reference herein (see Exhibit 99.2).
 
Amended and Restated Annual Incentive Plan
 
          On June 1, 2012, the Company’s shareholders approved the Amended and Restated Dollar General Corporation Annual Incentive Plan (the “Amended Annual Incentive Plan”).  The Annual Incentive Plan was initially approved by the Company’s Board of Directors in March 2005 and adopted by the Company’s shareholders in May 2005 and was subsequently amended in October 2009.  The Amended Annual Incentive Plan was approved by the Board of Directors in November 2011, subject to shareholder approval.
 
          The most significant amendments include:
 
 
An increase in the maximum amount a participant in such plan can receive in any fiscal year from $5 million to $10 million.
     
 
Acknowledgement that performance measures upon which performance goals for awards granted under such plan may relate not just to the Company, but also to one or more of its affiliates or one or more of its or their divisions or units, or any combination of the foregoing, and may be applied on an absolute basis and/or be relative to one or more peer group companies or indices, or any combination thereof.
     
 
Addition of a “clawback” provision requiring the committee of the Board of Directors which administers the plan to specify that as a condition of receiving payment of an award granted under the plan on or after June 1, 2012, the participant’s rights, payments, and benefits with
 
 
2

 
 
    respect to any such award shall be subject to any reduction, cancellation, forfeiture or recoupment, in whole or in part, upon the occurrence of certain specified events, as may be required by the Securities and Exchange Commission or any applicable national exchange, law, rule or regulation.
 
          The above summary is qualified in its entirety by the full text of the Amended Annual Incentive Plan which is incorporated by reference herein (see Exhibit 99.3).
 
ITEM 5.07
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
 
The Annual Meeting of the Company’s Shareholders (the “Annual Meeting”) was held on June 1, 2012. The following are the final voting results on proposals considered and voted upon by shareholders, all of which are described in more detail in the Company’s definitive proxy statement for the Annual Meeting filed with the Securities and Exchange Commission on April 5, 2012 (the “Proxy Statement”).
 
The following individuals were elected to serve as directors of the Company.  Votes were cast as follows:
 
 
Name
 
Votes
For
 
Votes
Withheld
 
Broker Non-
Votes
Raj Agrawal
 
239,566,848
 
80,021,731
 
5,156,860
Warren F. Bryant
 
251,717,274
 
67,871,305
 
5,156,860
Michael M. Calbert
 
239,561,078
 
80,027,501
 
5,156,860
Richard W. Dreiling
 
279,121,434
 
40,467,145
 
5,156,860
Adrian Jones
 
239,566,037
 
80,022,542
 
5,156,860
William C. Rhodes, III
 
251,717,463
 
67,871,116
 
5,156,860
David B. Rickard
 
318,202,981
 
 1,385,598
 
5,156,860
 
The Company’s Amended Stock Incentive Plan and the material terms of the performance-based compensation under such plan for purposes of compensation deductibility under Internal Revenue Code Section 162(m) were approved. For a description of the material amendments set forth in the Amended Stock Incentive Plan, see Item 5.02 above.  Votes were cast as follows:
 
Votes
For
 
Votes
Against
 
Votes
Abstaining
 
Broker Non-
Votes
 
315,156,688
 
4,345,545
 
86,346
 
5,156,860
 
 
The Company’s Amended Annual Incentive Plan and the material terms of the performance-based compensation under such plan for purposes of compensation deductibility under Internal Revenue Code Section 162(m) were approved. For a description of the material amendments set forth in the Amended Annual Incentive Plan, see Item 5.02 above. Votes were cast as follows:
 
Votes
For
 
Votes
Against
 
Votes
Abstaining
 
Broker Non-
Votes
 
317,408,496
 
2,090,561
 
89,522
 
5,156,860
 
 
 
3

 
 
The appointment of Ernst & Young LLP to serve as the Company’s independent registered public accounting firm for fiscal year 2012 was ratified.  Votes were cast as follows:
 
Votes
For
 
Votes
Against
 
Votes
Abstaining
 
323,138,124
 
1,269,480
 
337,835
 

ITEM 7.01
REGULATION FD DISCLOSURE.
 
          The information set forth in Item 2.02 above is incorporated herein by reference. The news release also sets forth statements regarding the Company’s outlook, information regarding the Company’s planned conference call, and certain other matters.
 
ITEM 9.01
FINANCIAL STATEMENTS AND EXHIBITS.

(a)
 
Financial statements of businesses acquired. N/A
(b)
 
Pro forma financial information. N/A
(c)
 
Shell company transactions. N/A
(d)
 
Exhibits. See Exhibit Index immediately following the signature page hereto.
 
 
4

 
 
SIGNATURE
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
     
     
Date:
June 4, 2012
DOLLAR GENERAL CORPORATION
     
     
     
   
By:
 
/s/ Susan S. Lanigan
       
Susan S. Lanigan
       
Executive Vice President and General Counsel
 
 
5

 
 
EXHIBIT INDEX
 
Exhibit No.
 
Description
     
99.1
 
News release dated June 4, 2012 regarding fiscal 2012 first quarter financial results
     
99.2
 
Amended and Restated 2007 Stock Incentive Plan for Key Employees of Dollar General Corporation and its Affiliates (effective June 1, 2012) (incorporated by reference to Appendix A to the Company’s Definitive Proxy Statement filed with the SEC on April 5, 2012 (file no. 001-11421))
     
99.3
 
Amended and Restated Dollar General Corporation Annual Incentive Plan (effective June 1, 2012) (incorporated by reference to Appendix B to the Company’s Definitive Proxy Statement filed with the SEC on April 5, 2012 (file no. 001-11421))

 
 
6

Exhibit 99.1
 
Dollar General Reports Record First Quarter Financial Results
 
 
·
Same-Store Sales Increase of 6.7%; Total Sales Improved 13.0%
 
 
·
Reported Net Income Up 36%; Adjusted Net Income Up 29%
 
 
·
Reported EPS of $0.63, Up 40%; Adjusted EPS of $0.63, Up 31%
 
 
·
Company Raises Full Year 2012 Financial Outlook
 
GOODLETTSVILLE, Tenn.--(BUSINESS WIRE)--June 4, 2012--Dollar General Corporation (NYSE: DG) today reported record sales, operating profit and net income for its fiscal 2012 first quarter (13 weeks) ended May 4, 2012.
 
“Dollar General is starting off 2012 with strong performance in the first quarter due to excellent same-store sales growth of 6.7 percent, representing the fifth consecutive quarter of accelerating improvement,” said Rick Dreiling, chairman and chief executive officer. “We are pleased to raise our full year financial outlook to now reflect adjusted EPS of $2.68 to $2.78. Our first quarter was strong, and we are pleased with our May sales performance.”
 
“I believe we are positioned well to invest in the future of our business as we continue to redefine small-box retailing and reinforce Dollar General’s role as America’s general store,” said Dreiling.
 
The Company’s net income increased by 36 percent to $213 million in the 2012 first quarter, compared to net income of $157 million in the 2011 first quarter. Adjusted net income, as defined below, increased 29 percent to $215 million in the 2012 first quarter, compared to $166 million in the 2011 first quarter. Diluted earnings per share (“EPS”) increased by 40 percent to $0.63 in the 2012 first quarter from $0.45 in the 2011 quarter. Adjusted diluted EPS increased 31 percent to $0.63 in the 2012 first quarter from $0.48 in the 2011 first quarter.
 
Adjusted net income is defined as net income excluding specifically identified expenses. For the 2012 first quarter, acceleration of equity-based compensation and other expenses relating to a secondary offering of the Company’s stock and a loss resulting from the amendment of the Company’s revolving credit facility were excluded. For the 2011 quarter, expenses related to certain litigation settlements and a net loss on the repurchase of debt were excluded. The income tax effect of adjustments is also excluded from both periods. A reconciliation of adjusted net income to net income is presented in the accompanying schedules.
 
Financial Highlights
 
Net sales increased 13.0 percent to $3.90 billion in the 2012 first quarter compared to $3.45 billion in the 2011 first quarter. Same-store sales increased 6.7 percent resulting from increases in both customer traffic and average transaction amount.
 
Gross profit, as a percentage of sales, was 31.5 percent in both the 2012 and 2011 quarters. The gross profit rate was affected by several positive factors including the favorable impact of higher markups, improved distribution and transportation efficiencies and lower inventory shrinkage, as a percentage of sales, offset by increased apparel and other markdowns and a higher mix of consumables, which generally have lower markups than non-consumables. The Company recorded a $1.6 million LIFO charge in the 2012 quarter compared to a $3.6 million charge in the 2011 quarter.
 
Selling, general and administrative expenses (“SG&A”), as a percentage of sales, were 21.6 percent in the 2012 first quarter compared to 22.2 percent in the 2011 first quarter, an improvement of 56 basis points. Excluding the acceleration of equity-based compensation and other expenses resulting from secondary offerings of the Company’s common stock of $1.0 million in the 2012 quarter and litigation settlement expenses of $13.1 million in the 2011 quarter, SG&A, as percentage of sales, improved by 20 basis points largely due to the impact of increased sales and improved utilization of retail store labor. Various other cost reduction efforts affecting store rental and other expenses also contributed to the improvement in SG&A, as a percentage of sales. Costs associated with increased debit card usage, preopening costs associated with two new distribution centers, higher workers' compensation and general liability insurance and increased advertising expenses partially offset the improvement in SG&A, as a percentage of sales.
 
 
 

 
 
Operating profit increased by 19 percent to $384 million, or 9.9 percent of sales, in the 2012 first quarter, compared to $322 million, or 9.3 percent of sales, in the 2011 first quarter. Excluding the acceleration of equity-based compensation and other secondary offering expenses from the 2012 quarter and the litigation settlement expenses from the 2011 quarter, operating profit increased by 15 percent to $385 million, or 9.9 percent of sales, compared to $335 million, or 9.7 percent of sales, in the 2011 quarter.
 
Interest expense was $37 million in the 2012 first quarter compared to $66 million in the 2011 first quarter. The decrease was due to lower outstanding borrowings resulting from the Company’s debt repurchases and lower all-in interest rates.
 
Other expenses include pretax losses of $1.6 million resulting from the amendment of the Company’s senior secured revolving credit facility in the 2012 first quarter and $2.2 million resulting from the repurchase of $25 million aggregate principal amount of its senior notes in the 2011 first quarter.
 
The effective income tax rate in the 2012 first quarter was 38.2 percent compared to 38.1 percent in the 2011 first quarter.
 
Merchandise Inventories
 
As of May 4, 2012, total merchandise inventories, at cost, were $2.00 billion compared to $1.77 billion as of April 29, 2011, an increase of 7 percent on a per-store basis. Annual inventory turns were 5.3 times through the 2012 first quarter (based on a 53-week period).
 
Long-Term Obligations
 
As of May 4, 2012, outstanding long-term obligations, including the current portion, were $2.88 billion, a decrease of $382 million from the 2011 first quarter.
 
Capital Expenditures
 
Total additions to property and equipment in 2012 were $146 million, including: $41 million for improvements, upgrades, remodels and relocations of existing stores; $36 million for stores purchased or built by the Company; $33 million related to new leased stores; $31 million for distribution and transportation-related capital expenditures; and $4 million for information systems upgrades and technology-related projects. During the 2012 first quarter, the Company opened 128 new stores and remodeled or relocated 224 stores. In addition, a new distribution center in Alabama and a new leased distribution center in California began shipping merchandise to stores in the 2012 first quarter.
 
Share Repurchase Authorization
 
During the 2012 first quarter, the Company repurchased 6.8 million shares of its common stock from Buck Holdings, L.P. (which is controlled by affiliates of KKR and Goldman, Sachs & Co.) for $300 million. To date, the Company has repurchased 11.7 million shares, utilizing $485 million of its total $500 million authorization for repurchases of common stock.
 
 
 

 
 
Fiscal 2012 Financial Outlook
 
Based on first quarter results, the Company continues to expect total sales for the 2012 fiscal year to increase 8 to 9 percent over the 53-week 2011 fiscal year, or 10 to 11 percent on a comparable 52-week basis. Same-store sales, based on a comparable 52-week period, are expected to increase 3 to 5 percent. Operating profit for 2012 is expected to be between $1.62 billion and $1.66 billion, as compared to the Company’s previous guidance of between $1.60 billion and $1.65 billion.
 
The Company expects full year interest expense to be in the range of $145 million to $155 million. The Company intends to repurchase its outstanding Senior Subordinated Notes through a refinancing at the first scheduled call date in July 2012. If the Company does not repurchase the notes, interest expense will likely exceed the guidance, and the expected losses relating to those repurchases will not occur.
 
Diluted EPS for the 52-week fiscal year, adjusted to exclude any losses resulting from redemption of the Senior Subordinated Notes, potential charges or expenses relating to amendments to or refinancing of any notes, loans or revolving credit facilities and any expenses resulting from secondary stock offerings, is expected to be approximately $2.68 to $2.78, based on approximately 336 million weighted average diluted shares. This is an increase of $0.03 per share from the Company’s previous guidance of $2.65 to $2.75 per share, based on approximately 335 million weighted average diluted shares. The full year 2012 effective tax rate is expected to be between 38 and 39 percent. The 2012 expected tax rate exceeds the 2011 rate due principally to the expiration of federal jobs related tax credits for employees hired after December 31, 2011 as well as certain federal jobs credits that only applied to 2011.
 
The Company plans to open approximately 625 new stores, including 40 Dollar General Market stores in 2012. In addition, the Company plans to remodel or relocate a total of approximately 550 stores. Square footage is again expected to increase by approximately 7 percent. Capital expenditures are expected to be in the range of $600 million to $650 million. Approximately 65 percent of capital spending is for investment in store growth and development, including new stores, remodels, relocations and purchases of existing store locations; approximately 15 percent is for transportation, distribution and special projects; the remaining 20 percent is for maintenance capital.
 
The volatility of the macroeconomic environment continues to pressure the consumer and impact the Company’s cost of purchasing and delivering merchandise to its stores. Management continues to closely monitor customers’ responses to the economic and competitive climates.
 
Conference Call Information
 
The Company will hold a conference call on Monday afternoon, June 4, 2012 at 3:30 p.m. CT/4:30 p.m. ET, hosted by Rick Dreiling, chairman and chief executive officer, and David Tehle, chief financial officer. If you wish to participate, please call (866) 710-0179 at least 10 minutes before the conference call is scheduled to begin. The pass code for the conference call is "Dollar General." 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 Monday, June 18, 2012, and will be accessible online or by calling (334) 323-7226. The pass code for the replay is 58216843.
 
 
 

 
 
Non-GAAP Disclosure
 
Certain financial information provided in this press release and the accompanying tables has not been derived in accordance with generally accepted accounting principles (“GAAP”), including adjusted net income and adjusted diluted EPS. The Company has also provided calculations of EBITDA and Adjusted EDITDA, which are non-GAAP measures.
 
Reconciliations of all of these non-GAAP measures to the most directly comparable measures calculated in accordance with GAAP are provided in the accompanying schedules. In addition, for reference, the schedules also include calculations of SG&A and operating profit, as adjusted to exclude certain expenses. In addition to historical results, guidance for fiscal 2012 is based on comparable adjustments.
 
The Company believes that providing comparisons to net income and diluted earnings per share, adjusted for the items shown in the accompanying reconciliations, provides useful information to the reader in assessing the Company’s operating performance. The Company believes that the presentation of EBITDA and adjusted EBITDA is appropriate to provide additional information about the calculation of the senior secured incurrence test, a material financial ratio in the Company’s credit agreements. Adjusted EBITDA is a material component of that ratio.
 
The non-GAAP measures discussed above are not measures of financial performance or condition, liquidity or profitability in accordance with GAAP, and should not be considered as alternatives to net income, diluted earnings per share, operating income, cash flows from operations or any other performance measures determined in accordance with GAAP. Additionally, EBITDA and adjusted EBITDA are not intended to be measures of free cash flow for management’s discretionary use, as they do not consider certain cash requirements such as interest payments, tax payments, debt service requirements and replacement of fixed assets. These non-GAAP measures have limitations as analytical tools and should not be considered in isolation or as substitutes for analysis of the Company’s financial results as reported under GAAP.
 
Forward-Looking Statements
 
This press release contains forward-looking information, such as the information in the sections entitled “Fiscal 2012 Financial Outlook” as well as other statements regarding our outlook, plans and intentions. A reader can identify forward-looking statements because they are not limited to historical fact or they use words such as “may,” “should,” “could,” “believe,” “anticipate,” “project,” “plan,” “schedule,” “on track,” “expect,” “estimate,” “objective,” “forecast,” “goal,” “focus,” “intend,” “committed,” “continue,” or “will likely result” and similar expressions that concern our 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 was expected. The Company derives many of these statements from its operating budgets and forecasts, 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, and the Company cannot anticipate all factors that could affect its actual 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:
 
 
 

 
 
 
·
failure to successfully execute the Company’s growth strategy, including delays in store growth and difficulties executing sales and operating profit margin initiatives;
 
 
·
the failure of the Company’s new store base to achieve sales and operating levels consistent with the Company’s expectations;
 
 
·
risks and challenges in connection with sourcing merchandise from domestic and foreign vendors, as well as trade restrictions;
 
 
·
the Company’s level of success in gaining and maintaining broad market acceptance of its private brands and in achieving its other initiatives;
 
 
·
unfavorable publicity or consumer perception of the Company’s products;
 
 
·
the Company’s debt levels and restrictions in its debt agreements;
 
 
·
economic conditions, including their effect on the financial and capital markets, the Company’s suppliers and business partners, employment levels, consumer demand, disposable income, credit availability and spending patterns, inflation and the cost of goods;
 
 
·
increases in commodity prices (including, without limitation, cotton, wheat, corn, sugar, oil, paper, nuts and resin);
 
 
·
levels of inventory shrinkage;
 
 
·
seasonality of the Company’s business;
 
 
·
increases in costs of fuel or other energy, transportation or utilities costs and in the costs of labor, employment and healthcare;
 
 
·
the impact of changes in or noncompliance with governmental laws and regulations (including, but not limited to, product safety, healthcare and unionization) and developments in and outcomes of legal proceedings, investigations or audits;
 
 
·
disruptions, unanticipated expenses or operational failures in the Company’s supply chain including, without limitation, a decrease in transportation capacity for overseas shipments or work stoppages or other labor disruptions that could impede the receipt of merchandise;
 
 
·
delays or unanticipated expenses in constructing new distribution centers;
 
 
·
damage or interruption to the Company’s information systems;
 
 
·
changes in the competitive environment in the Company’s industry and the markets where the Company operates;
 
 
·
natural disasters, unusual weather conditions, pandemic outbreaks, boycotts, war and geo-political events;
 
 
·
the incurrence of material uninsured losses, excessive insurance costs or accident costs;
 
 
·
the Company’s failure to protect its brand name;
 
 
·
the Company’s loss of key personnel or the Company’s inability to hire additional qualified personnel;
 
 
·
interest rate and currency exchange fluctuations;
 
 
·
a data security breach;
 
 
·
the Company’s failure to maintain effective internal controls;
 
 
·
changes to income tax expense due to changes in or interpretation of tax laws, or as a result of federal or state income tax examinations;
 
 
·
changes to or new accounting guidance, such as changes to lease accounting guidance or a requirement to convert to international financial reporting standards;
 
 
·
the factors disclosed under “Risk Factors” in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on March 22, 2012 or any subsequent quarterly filings on Form 10-Q; and
 
 
·
such other factors as may be discussed or identified in this press release.
 
 
 

 
 
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 other 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 statement 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 more than 70 years. Dollar General helps shoppers Save time. Save money. Every day!(R) by offering products that are frequently used and replenished, such as food, snacks, health and beauty aids, cleaning supplies, basic apparel, house wares and seasonal items at low everyday prices in convenient neighborhood locations. With 10,052 stores in 40 states as of May 4, 2012, Dollar General has more retail locations than any retailer in America. 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)
   
       
May 4,
 
April 29,
 
February 3,
       
2012
 
2011
 
2012
ASSETS
             
Current assets:
             
 
Cash and cash equivalents
   
$
132,530
   
$
602,463
   
$
126,126
 
 
Merchandise inventories
     
2,000,864
     
1,767,121
     
2,009,206
 
 
Income taxes receivable
     
5,210
     
-
     
-
 
 
Prepaid expenses and other current assets
     
135,131
     
137,313
     
139,742
 
 
Total current assets
     
2,273,735
     
2,506,897
     
2,275,074
 
Net property and equipment
     
1,878,172
     
1,562,596
     
1,794,960
 
Goodwill
     
4,338,589
     
4,338,589
     
4,338,589
 
Other intangible assets, net
     
1,231,866
     
1,251,289
     
1,235,954
 
Other assets, net
     
47,846
     
55,493
     
43,943
 
Total assets
   
$
9,770,208
   
$
9,714,864
   
$
9,688,520
 
                 
LIABILITIES AND SHAREHOLDERS' EQUITY
             
Current liabilities:
             
 
Current portion of long-term obligations
   
$
459
   
$
1,039
   
$
590
 
 
Accounts payable
     
985,924
     
933,710
     
1,064,087
 
 
Accrued expenses and other
     
360,349
     
380,422
     
397,075
 
 
Income taxes payable
     
50,355
     
32,217
     
44,428
 
 
Deferred income taxes
     
14,166
     
39,842
     
3,722
 
 
Total current liabilities
     
1,411,253
     
1,387,230
     
1,509,902
 
Long-term obligations
     
2,880,920
     
3,262,597
     
2,617,891
 
Deferred income taxes
     
649,532
     
606,071
     
656,996
 
Other liabilities
     
231,427
     
230,043
     
229,149
 
Total liabilities
     
5,173,132
     
5,485,941
     
5,013,938
 
                 
Commitments and contingencies
             
                 
Redeemable common stock
     
5,644
     
9,267
     
6,087
 
                 
Shareholders' equity:
             
 
Preferred stock
     
-
     
-
     
-
 
 
Common stock
     
290,782
     
298,844
     
295,828
 
 
Additional paid-in capital
     
2,967,014
     
2,948,506
     
2,960,940
 
 
Retained earnings
     
1,336,298
     
987,901
     
1,416,918
 
 
Accumulated other comprehensive loss
     
(2,662
)
   
(15,595
)
   
(5,191
)
 
Total shareholders' equity
     
4,591,432
     
4,219,656
     
4,668,495
 
Total liabilities and shareholders' equity
   
$
9,770,208
   
$
9,714,864
   
$
9,688,520
 
                 
                 
                 
 
 
 

 
 
             
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited)
                     
       
For the Quarter (13 Weeks) Ended
       
May 4,
 
% of Net
 
April 29,
 
% of Net
       
2012
 
Sales
 
2011
 
Sales
Net sales
   
$
3,901,205
 
100.00
%
 
$
3,451,697
 
100.00
%
Cost of goods sold
     
2,672,949
 
68.52
%
   
2,364,300
 
68.50
%
Gross profit
     
1,228,256
 
31.48
%
   
1,087,397
 
31.50
%
Selling, general and administrative expenses
     
843,932
 
21.63
%
   
765,779
 
22.19
%
Operating profit
     
384,324
 
9.85
%
   
321,618
 
9.32
%
Interest expense
     
37,074
 
0.95
%
   
65,572
 
1.90
%
Other (income) expense
     
1,671
 
0.04
%
   
2,272
 
0.07
%
Income before income taxes
     
345,579
 
8.86
%
   
253,774
 
7.35
%
Income tax expense
     
132,164
 
3.39
%
   
96,805
 
2.80
%
Net income
   
$
213,415
 
5.47
%
 
$
156,969
 
4.55
%
                     
Earnings per share:
                 
 
Basic
   
$
0.64
     
$
0.46
   
 
Diluted
   
$
0.63
     
$
0.45
   
Weighted average shares:
                 
 
Basic
     
336,080
       
341,522
   
 
Diluted
     
339,490
       
345,393
   
             
 
 
 

 
 
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
           
For the Quarter (13 Weeks) Ended
           
May 4,
   
April 29,
           
2012
   
2011
Cash flows from operating activities:
           
 
Net income
   
$
213,415
     
$
156,969
 
 
Adjustments to reconcile net income to net cash provided by operating activities:
           
   
Depreciation and amortization
     
72,271
       
67,486
 
   
Deferred income taxes
     
(1,119
)
     
7,393
 
   
Tax benefit of stock options
     
(18,589
)
     
(434
)
   
Loss on debt retirement, net
     
1,629
       
2,167
 
   
Non-cash share-based compensation
     
4,759
       
3,519
 
   
Other non-cash gains and losses
     
2,828
       
4,574
 
   
Change in operating assets and liabilities:
           
     
Merchandise inventories
     
6,499
       
(5,275
)
     
Prepaid expenses and other current assets
     
5,370
       
(32,369
)
     
Accounts payable
     
(82,227
)
     
(25,922
)
     
Accrued expenses and other liabilities
     
(30,218
)
     
38,810
 
     
Income taxes
     
19,306
       
6,671
 
     
Other
     
(1,285
)
     
(17
)
Net cash provided by operating activities
     
192,639
       
223,572
 
                   
Cash flows from investing activities:
           
 
Purchases of property and equipment
     
(145,857
)
     
(91,958
)
 
Proceeds from sales of property and equipment
     
119
       
367
 
Net cash used in investing activities
     
(145,738
)
     
(91,591
)
                   
Cash flows from financing activities:
           
 
Repayments of long-term obligations
     
(202
)
     
(27,151
)
 
Borrowings under revolving credit facility
     
584,900
       
-
 
 
Repayments of borrowings under revolving credit facility
     
(321,800
)
     
-
 
 
Debt issue costs
     
(7,663
)
     
-
 
 
Repurchases of common stock from principal shareholder
     
(300,000
)
     
-
 
 
Equity transactions with employees, net of taxes paid
     
(14,321
)
     
(247
)
 
Tax benefit of stock options
     
18,589
       
434
 
Net cash used in financing activities
     
(40,497
)
     
(26,964
)
                   
Net increase in cash and cash equivalents
     
6,404
       
105,017
 
Cash and cash equivalents, beginning of period
     
126,126
       
497,446
 
Cash and cash equivalents, end of period
   
$
132,530
     
$
602,463
 
                   
Supplemental cash flow information:
           
Cash paid for:
           
 
Interest
   
$
21,737
     
$
41,386
 
 
Income taxes
   
$
117,361
     
$
82,664
 
Supplemental schedule of non-cash investing and financing activities:
           
 
Purchases of property and equipment awaiting processing for payment, included in Accounts payable
   
$
39,726
     
$
35,649
 
             
 
 
 

 
 
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
Selected Additional Information
(Unaudited)
             
             
Sales by Category (in thousands)
             
   
For the Quarter (13 Weeks) Ended
   
   
May 4, 2012
 
April 29, 2011
 
% Change
 
Consumables
$
2,877,282
 
$
2,529,070
   
13.8
%
Seasonal
 
524,493
   
457,057
   
14.8
%
Home products
 
258,998
   
234,208
   
10.6
%
Apparel
 
240,432
   
231,362
   
3.9
%
 
Net sales
$
3,901,205
 
$
3,451,697
   
13.0
%
             
             
             
             
Store Activity
             
       
For the Quarter (13 Weeks) Ended
       
May 4, 2012
 
April 29, 2011
             
Beginning store count
     
9,937
   
9,372
 
New store openings
     
128
   
139
 
Store closings
     
(13
)
 
(15
)
Net new stores
     
115
   
124
 
Ending store count
     
10,052
   
9,496
 
Total selling square footage (000's)
     
72,928
   
68,131
 
 
Growth rate
     
7
%
 
7
%
 
 
 
 

 
 
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures
Adjusted Net Income and Adjusted Diluted Earnings Per Share
And Calculation of SG&A and Operating Profit, Excluding Certain Items
(in millions, except per share amounts)
                           
   
For the Quarter (13 Weeks) Ended
         
   
May 4, 2012
 
April 29, 2011
   
Increase
     
$
   
% of Net Sales
   
$
   
% of Net Sales
     
$
 
%
 
                           
Net sales
$
3,901.2
       
$
3,451.7
         
$
449.5
 
13.0
%
                           
SG&A
$
843.9
   
21.63
%
 
$
765.8
   
22.19
%
   
$
78.2
 
10.2
%
 
Litigation settlements
 
-
         
(13.1
)
             
 
Secondary offering expenses
 
(0.4
)
       
-
               
 
Acceleration of equity-based compensation
 
(0.6
)
       
-
               
SG&A, excluding certain items
$
842.9
   
21.61
%
 
$
752.7
   
21.81
%
   
$
90.2
 
12.0
%
                           
Operating profit
$
384.3
   
9.85
%
 
$
321.6
   
9.32
%
   
$
62.7
 
19.5
%
 
Litigation settlements
 
-
         
13.1
               
 
Secondary offering expenses
 
0.4
         
-
               
 
Acceleration of equity-based compensation
 
0.6
         
-
               
Operating profit, excluding certain items
$
385.3
   
9.88
%
 
$
334.7
   
9.70
%
   
$
50.6
 
15.1
%
                           
Net income
$
213.4
   
5.47
%
 
$
157.0
   
4.55
%
   
$
56.4
 
36.0
%
 
Litigation settlements
 
-
         
13.1
               
 
Secondary offering expenses
 
0.4
         
-
               
 
Acceleration of equity-based compensation
 
0.6
         
-
               
 
Write-off of capitalized debt costs
 
1.6
         
-
               
 
Repurchase of long-term obligations
 
-
         
2.2
               
 
Total adjustments
 
2.6
         
15.3
               
 
Income tax effect of adjustments
 
(0.9
)
       
(6.0
)
             
 
Net adjustments
 
1.7
         
9.3
               
Adjusted net income
$
215.1
   
5.51
%
 
$
166.3
   
4.82
%
   
$
48.8
 
29.3
%
                           
Diluted earnings per share:
                       
 
As reported
$
0.63
       
$
0.45
               
 
Adjusted
$
0.63
       
$
0.48
               
                           
Weighted average diluted shares
 
339.5
         
345.4
               
               
 
 
 

 
 
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures
RECONCILIATION OF NET INCOME TO EBITDA AND ADJUSTED EBITDA
(In millions)
                       
       
Quarter (13 Weeks) Ended
 
Four Quarters Ended
       
May 4,
 
April 29,
   
May 4,
 
April 29,
       
2012
 
2011
   
2012
 
2011
                 
(53 Weeks)
 
(52 Weeks)
                     
Net income
   
$
213.4
 
$
157.0
   
$
823.1
   
$
648.9
 
Add (subtract):
                   
 
Interest income
     
-
   
-
     
(0.1
)
   
(0.2
)
 
Interest expense
     
37.1
   
65.6
     
176.5
     
267.7
 
 
Depreciation and amortization
     
69.9
   
64.3
     
269.7
     
246.5
 
 
Income taxes
     
132.2
   
96.8
     
494.0
     
371.3
 
EBITDA
     
452.6
   
383.7
     
1,763.2
     
1,534.2
 
                       
Adjustments:
                   
 
Loss on debt retirements
     
1.6
   
2.2
     
59.7
     
16.8
 
 
Loss on hedging instruments
     
-
   
0.1
     
0.3
     
0.4
 
 
Non-cash expense for share-based awards
     
4.8
   
3.5
     
16.6
     
13.4
 
 
Litigation settlement and related costs, net
     
-
   
13.1
     
-
     
13.1
 
 
Indirect costs related to merger and stock offerings
     
0.4
   
-
     
1.3
     
0.5
 
 
Other non-cash charges (including LIFO)
     
3.2
   
5.5
     
51.0
     
15.2
 
 
Other
     
0.6
   
-
     
0.6
     
-
 
Total Adjustments
     
10.6
   
24.4
     
129.5
     
59.4
 
Adjusted EBITDA
   
$
463.2
 
$
408.1
   
$
1,892.7
   
$
1,593.6
 
           
 
 
 

 
 
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures
(Dollars in millions)
           
           
Senior Secured Incurrence Test
           
     
May 4,
 
April 29,
     
2012
 
2011
Senior secured debt
   
$
2,430.7
 
$
1,984.0
Less: cash
     
132.5
   
602.5
Senior secured debt, net of cash
   
$
2,298.2
 
$
1,381.5
Adjusted EBITDA
   
$
1,892.7
 
$
1,593.6
Ratio of senior secured debt, net of cash, to Adjusted EBITDA
   
1.2x
 
0.9x
           
           
           
Calculation of Ratio of Long-Term Obligations to Adjusted EBITDA
           
     
May 4,
 
April 29,
     
2012
 
2011
Total long-term obligations
   
$
2,881.4
 
$
3,263.6
Adjusted EBITDA
   
$
1,892.7
 
$
1,593.6
Ratio of long-term obligations to Adjusted EBITDA
   
1.5x
 
2.0x
           
           
           
Calculation of Ratio of Long-Term Obligations, net of Cash, to Adjusted EBITDA
           
     
May 4,
 
April 29,
     
2012
 
2011
Total long-term obligations
   
$
2,881.4
 
$
3,263.6
Less: cash
     
132.5
   
602.5
Total long-term obligations, net of cash
   
$
2,748.8
 
$
2,661.1
Adjusted EBITDA
   
$
1,892.7
 
$
1,593.6
Ratio of long-term obligations, net of cash, to Adjusted EBITDA
   
1.5x
 
1.7x
 
CONTACT:
Dollar General Corporation
Investor Contacts:
Mary Winn Gordon, 615-855-5536
or
Emma Jo Kauffman, 615-855-5525
or
Media Contact:
Tawn Earnest, 615-855-5209