Dollar General Corporation
DOLLAR GENERAL CORP (Form: 8-K, Received: 06/01/2017 07:02:27)


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):  May 31, 2017


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:

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  


ITEM 2.02       RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

On June 1, 2017, Dollar General Corporation (the “Company”) issued a news release regarding results of operations and financial condition for the fiscal 2017 first quarter (13 weeks) ended May 5, 2017. The news release is furnished as Exhibit 99 hereto.

The information contained within this Item 2.02, including the information in Exhibit 99, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and shall not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended.

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 May 31, 2017. The following are the final voting results on proposals considered and voted upon by shareholders, each of which is described in more detail in the Company’s definitive proxy statement for the Annual Meeting filed with the Securities and Exchange Commission on April 12, 2017.

The following individuals were elected to serve as directors of the Company, each of whom will hold office until the Annual Meeting of the Company’s Shareholders to be held in 2018 and until his or her successor is duly elected and qualified.  Votes were cast as follows:


Name
  Votes
For
  Votes
Against
 

Votes
Abstaining

 

Broker
Non-Votes

Warren F. Bryant 226,780,695 7,449,246 85,992 13,729,582
Michael M. Calbert 232,631,974 1,597,974 85,985 13,729,582
Sandra B. Cochran 211,940,685 21,846,790 528,458 13,729,582
Patricia D. Fili-Krushel 227,797,451 6,434,853 83,629 13,729,582
Paula A. Price 231,788,633 2,443,173 84,127 13,729,582
William C. Rhodes, III 227,080,580 7,149,772 85,581 13,729,582
David B. Rickard 231,050,822 3,177,795 87,316 13,729,582
Todd J. Vasos 233,689,605 540,175 86,153 13,729,582

The material terms of the performance goals under the Company’s Amended and Restated 2007 Stock Incentive Plan for purposes of compensation deductibility under Internal Revenue Code Section 162(m) and the limit on non-employee director compensation set forth in such Plan were approved.  Votes were cast as follows:

Votes
For
  Votes
Against
  Votes
Abstaining
 

Broker
Non-Votes

227,314,281 6,876,352 125,300 13,729,582


The material terms of the performance goals under the Company’s Amended and Restated Annual Incentive Plan for purposes of compensation deductibility under Internal Revenue Code Section 162(m) were approved.  Votes cast were as follows:

Votes
For

 

Votes
Against

 

Votes
Abstaining

 

Broker
Non-Votes

230,700,313 3,484,388 131,232 13,729,582

The compensation of the Company’s named executive officers was approved on an advisory (non-binding) basis.  Votes were cast as follows:

Votes
For
  Votes
Against
  Votes
Abstaining
 

Broker
Non-Votes

221,309,430 12,398,430 608,073 13,729,582

The Company’s shareholders selected, on an advisory (non-binding) basis, 1 year as the frequency at which future advisory votes shall be held on the compensation of the Company’s named executive officers.  Votes were cast as follows:


1 Year

 


2 Years

 


3 Years

 

Votes
Abstaining

 

Broker
Non-Votes

192,308,757 144,857 41,716,953 145,366 13,729,582

In light of this recommendation from the Company’s shareholders, the Company has determined that it will include an advisory (non-binding) shareholder vote on the compensation of the Company’s named executive officers in the Company’s proxy materials every year until the next required advisory vote on the frequency of future advisory votes on named executive officer compensation, which will occur no later than the Company’s Annual Meeting of Shareholders in 2023.

The appointment of Ernst & Young LLP to serve as the Company’s independent registered public accounting firm for fiscal year 2017 was ratified.  Votes were cast as follows:

Votes
For
  Votes
Against
  Votes
Abstaining
241,473,292 6,444,944 127,279

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, among other things, the Company’s outlook, as well as the Company’s planned conference call to discuss the reported financial results, the Company’s outlook, and certain other matters, and announces that on May 31, 2017, the Company’s Board of Directors declared a quarterly cash dividend of $0.26 per share on the Company’s outstanding common stock.  The dividend will be payable on or before July 25, 2017 to shareholders of record at the close of business on July 11, 2017.  The payment of future cash dividends is subject to the Board’s discretion and will depend upon, among other things, the Company’s results of operations, cash requirements, financial condition, contractual restrictions and other factors that the Board may deem relevant in its sole discretion.

2

The information contained within this Item 7.01, including the information in Exhibit 99, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and shall not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended.  

  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.

3

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 1, 2017

DOLLAR GENERAL CORPORATION

 
 
 

By:

 

/s/ Rhonda M. Taylor

 

Rhonda M. Taylor

Executive Vice President and General Counsel

4

EXHIBIT INDEX

Exhibit No.

 

Description

 

99

News release issued June 1, 2017

5

Exhibit 99

Dollar General Corporation Reports First Quarter 2017 Financial Results

GOODLETTSVILLE, Tenn.--(BUSINESS WIRE)--June 1, 2017--Dollar General Corporation (NYSE: DG) today reported financial results for its 2017 first quarter (13 weeks) ended May 5, 2017.

“For the first quarter of 2017, I am pleased with our earnings results which reflect solid management of the business in a difficult retail environment as we overcame our most challenging comparisons from the prior year. Our same-store sales improved as we moved past the delay in income tax refunds and the timing shift of the later Easter holiday. We continue to execute on our focused strategy and implement our operating initiatives which we believe will improve customer traffic and transactions,” said Todd Vasos, Dollar General’s chief executive officer.

First Quarter 2017 Financial Highlights

Net sales increased 6.5 percent to $5.61 billion in the 2017 first quarter compared to $5.27 billion in the 2016 first quarter. Same-store sales in the 2017 first quarter increased 0.7 percent over the 2016 first quarter primarily due to an increase in average transaction amount, partially offset by a decline in traffic. Same-store sales were driven by positive results in the consumables and apparel categories, partially offset by negative results in the home and seasonal categories. The net sales increase was also positively affected by sales from new stores, partially offset by sales from closed stores.

Gross profit, as a percentage of net sales, was 30.3 percent in the 2017 first quarter compared to 30.6 percent in the 2016 first quarter, a decrease of 34 basis points. The gross profit rate decrease was primarily attributable to higher markdowns, primarily for inventory clearance and promotional activities, a greater proportion of sales of consumables, which tend to have a lower gross profit rate as compared to non-consumables, and the mix within consumables. Partially offsetting these items were higher initial inventory markups.


Selling, general and administrative expense (“SG&A”), as a percentage of net sales was 21.8 percent in the 2017 first quarter compared to 21.5 percent in the 2016 first quarter, an increase of 34 basis points as a percentage of net sales. The SG&A increase was primarily attributable to increased labor costs, primarily as a result of the Company’s investment in store manager compensation, and occupancy costs, which increased at a rate greater than the increase in net sales. Partially offsetting these costs were a reduction in advertising costs and lower waste management costs resulting from the Company’s recycling efforts.

The Company’s net income and diluted earnings per share (“EPS”) for the 2017 first quarter were $279 million and $1.02, respectively, compared to net income and diluted EPS of $295 million and $1.03, respectively, in the 2016 first quarter. Diluted EPS for the 2017 first quarter includes a charge of approximately $0.01 related to the early retirement of long-term obligations.

The effective income tax rate in the 2017 first quarter was 37.2 percent compared to 35.4 percent in the 2016 first quarter. The effective income tax rate was higher in the 2017 first quarter due primarily to the recognition of a tax benefit of approximately $9.0 million or $0.03 per diluted share in the 2016 quarter associated with stock-based compensation that did not reoccur in the 2017 quarter.

Merchandise Inventories

As of May 5, 2017, total merchandise inventories, at cost, were $3.30 billion compared to $3.07 billion as of April 29, 2016, an increase of 0.5 percent on a per-store basis.

Capital Expenditures

Total additions to property and equipment in the 2017 first quarter were $144 million, including: $54 million for distribution and transportation-related capital expenditures; $50 million for improvements, upgrades, remodels and relocations of existing stores; and $35 million related to new leased stores, primarily for leasehold improvements, fixtures and equipment.

During the 2017 first quarter, the Company opened 293 new stores and remodeled or relocated 301 stores.

Share Repurchases

The Company repurchased $89 million, or 1.3 million shares, under its share repurchase program in the first quarter of 2017, at an average price of $70.86 per share. Since December 2011 through the end of the first quarter of 2017, the Company has repurchased 75.6 million shares of its common stock at a total cost of $4.7 billion, at an average price of $61.57 per share. The total remaining authorization for future repurchases was approximately $845 million at the end of the 2017 first quarter. The authorization has no expiration date.


Dividend

On May 31, 2017, the Board of Directors declared a regular quarterly cash dividend of $0.26 per share on the Company’s common stock. The second quarter dividend will be payable on July 25, 2017 to shareholders of record at the close of business on July 11, 2017.

Acquisition

In April 2017, the Federal Trade Commission approved the Company’s proposed purchase of 322 store locations in 36 states from a small-box multi-price point retailer. The transaction is expected to close during June 2017, subject to customary closing conditions. The store sites are anticipated to be converted to the Dollar General banner by the end of November 2017. The acquisition of these sites is expected to be incremental to the Company’s 2017 new store growth by approximately 290 new stores over the prior guidance of 1,000 new stores for fiscal 2017.

The Company anticipates sales from the acquired sites to impact fiscal 2017 (as defined below in “Financial Outlook”) net sales by approximately 100 basis points. The Company anticipates the acquisition will be modestly accretive to EPS for the fiscal year. An estimated $0.02 per diluted share charge is forecasted in the second quarter primarily related to lease termination costs for a small number of overlapping store locations, as well as ancillary costs related to the pending store locations.

No assurances can be given that the transaction will be closed or will be closed within the expected timeframe or that the store sites will be converted to the Dollar General banner within the timeframe anticipated. Any failure to close the transaction or a delay in such closing or in the conversion of the store sites to the Dollar General banner would impact the financial estimates and store count outlined above.

Financial Outlook

For the 52-week fiscal year ending February 2, 2018 (“fiscal 2017”), and including the anticipated closing of the transaction discussed above under “Acquisition,” GAAP diluted EPS is forecasted to remain consistent with the prior guidance range of $4.25 to $4.50. Assuming such transaction is consummated as planned and the store sites are converted to the Dollar General banner on the expected timeframe, as detailed above, the Company’s net sales are forecasted to increase by approximately five to seven percent as compared with the prior guidance range of four to six percent and capital expenditures for fiscal 2017 are expected to be in the range of $715 million to $765 million as compared with the prior guidance range of $650 million to $700 million. The Company’s same-store sales growth is unchanged from the prior guidance range of slightly positive to an increase of two percent.

Share repurchases for fiscal 2017 continue to be forecasted to be approximately $450 million.

For fiscal 2017, assuming the closing of the acquisition as discussed above, the Company plans to open approximately 1,290 new stores in addition to remodeling or relocating 760 stores and to reduce the Company’s total projects for remodels and relocations by 140 to allow for organizational capacity to execute the incremental new store growth anticipated to result from the pending acquisition.


Conference Call Information

The Company will hold a conference call on Thursday, June 1, 2017 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 14434844. 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 15, 2017, and will be accessible online or by calling (855) 859-2056. The conference ID for the replay is 14434844.

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 sections entitled “Acquisition” and “Financial Outlook”. A reader can identify forward-looking statements because they are not limited to historical fact or they use words such as “outlook,” “may,” “will,” “should,” “could,” “would,” “believe,” “anticipate,” “plan,” “expect,” “estimate,” “forecast,” “confident,” “opportunities,” “goal,” “prospect,” “positioned,” “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, and specifically disclaims any duty, 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 13,601 stores in 44 states as of May 5, 2017, 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 brands 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 5 April 29 February 3
2017     2016     2017
ASSETS
Current assets:
Cash and cash equivalents $ 205,977 $ 187,687 $ 187,915
Merchandise inventories 3,300,082 3,072,063 3,258,785
Income taxes receivable 10,492 6,827 11,050
Prepaid expenses and other current assets       232,398         210,769         220,021  
Total current assets       3,748,949         3,477,346         3,677,771  
Net property and equipment       2,487,292         2,278,081         2,434,456  
Goodwill       4,338,589         4,338,589         4,338,589  
Other intangible assets, net       1,200,597         1,200,904         1,200,659  
Other assets, net       20,928         21,464         20,823  
Total assets     $ 11,796,355       $ 11,316,384       $ 11,672,298  
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term obligations $ 401,188 $ 1,526 $ 500,950
Accounts payable 1,622,776 1,447,223 1,557,596
Accrued expenses and other 459,105 440,697 500,866
Income taxes payable       208,972         122,148         63,393  
Total current liabilities       2,692,041         2,011,594         2,622,805  
Long-term obligations       2,632,090         2,989,663         2,710,576  
Deferred income taxes       662,485         647,626         652,841  
Other liabilities       280,858         279,118         279,782  
Total liabilities       6,267,474         5,928,001         6,266,004  
 
Commitments and contingencies
 
Shareholders' equity:
Preferred stock - - -
Common stock 239,947 249,096 240,811
Additional paid-in capital 3,157,322 3,124,110 3,154,606
Retained earnings 2,136,401 2,020,784 2,015,867
Accumulated other comprehensive loss       (4,789 )       (5,607 )       (4,990 )
Total shareholders' equity       5,528,881         5,388,383         5,406,294  
Total liabilities and shareholders' equity     $ 11,796,355       $ 11,316,384       $ 11,672,298  

           
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited)
   
For the Quarter Ended
May 5 % of Net April 29 % of Net
2017     Sales     2016     Sales
Net sales $ 5,609,625 100.00 % $ 5,265,432 100.00 %
Cost of goods sold       3,910,642     69.71         3,652,818     69.37  
Gross profit 1,698,983 30.29 1,612,614 30.63
Selling, general and administrative expenses       1,225,188     21.84         1,131,871     21.50  
Operating profit 473,795 8.45 480,743 9.13
Interest expense 25,004 0.45 24,081 0.46
Other (income) expense       3,502     0.06         -     0.00  
Income before income taxes 445,289 7.94 456,662 8.67
Income tax expense       165,800     2.96         161,538     3.07  
Net income     $ 279,489     4.98 %     $ 295,124     5.60 %
 
Earnings per share:
Basic $ 1.02 $ 1.03
Diluted $ 1.02 $ 1.03
Weighted average shares outstanding:
Basic 274,692 285,886
Diluted 275,215 286,978

       
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 
For the 13 Weeks Ended
May 5 April 29
2017     2016
Cash flows from operating activities:
Net income $ 279,489 $ 295,124

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

Depreciation and amortization 98,586 92,324
Deferred income taxes 9,516 7,541
Loss on debt retirement, net 3,502 -
Noncash share-based compensation 8,932 10,253
Other noncash (gains) and losses 2,122 (440 )
Change in operating assets and liabilities:
Merchandise inventories (42,456 ) 3,476
Prepaid expenses and other current assets (12,342 ) (16,676 )
Accounts payable 56,630 (55,267 )
Accrued expenses and other liabilities (39,511 ) (21,416 )
Income taxes 146,137 89,294
Other       (143 )       (260 )
Net cash provided by (used in) operating activities       510,462         403,953  
 
Cash flows from investing activities:
Purchases of property and equipment (143,519 ) (98,968 )
Proceeds from sales of property and equipment       131         323  
Net cash provided by (used in) investing activities       (143,388 )       (98,645 )
 
Cash flows from financing activities:
Issuance of long-term obligations 599,556 -
Repayments of long-term obligations (750,275 ) (497 )
Net increase (decrease) in commercial paper outstanding (22,800 ) -
Borrowings under revolving credit facilities - 751,000
Repayments of borrowings under revolving credit facilities - (731,000 )
Costs associated with issuance and retirement of debt (9,460 ) -
Repurchases of common stock (88,755 ) (230,961 )
Payments of cash dividends (71,294 ) (71,308 )
Other equity and related transactions       (5,984 )       7,198  
Net cash provided by (used in) financing activities       (349,012 )       (275,568 )
 
Net increase (decrease) in cash and cash equivalents 18,062 29,740
Cash and cash equivalents, beginning of period       187,915         157,947  
Cash and cash equivalents, end of period     $ 205,977       $ 187,687  
 
Supplemental cash flow information:
Cash paid for:
Interest $ 37,917 $ 21,477
Income taxes $ 8,837 $ 64,520
Supplemental schedule of non-cash investing and financing activities:

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

$ 47,464 $ 40,285

       
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
Selected Additional Information
(Unaudited)
 
 
Sales by Category (in thousands)
 
For the Quarter Ended
May 5 April 29
2017   2016     % Change  
Consumables $ 4,315,513 $ 4,039,197 6.8 %
Seasonal 662,638 623,850 6.2 %
Home products 333,150 322,848 3.2 %
Apparel   298,324       279,537       6.7 %
Net sales $ 5,609,625     $ 5,265,432       6.5 %
 
 
 
 
 
Store Activity
 
For the Quarter Ended
May 5 April 29
2017     2016
 
Beginning store count 13,320 12,483
New store openings 293 249
Store closings   (12 )     (13 )
Net new stores   281       236  
Ending store count   13,601       12,719  
Total selling square footage (000's)   101,065       94,262  
Growth rate (square footage)   7.2 %     6.2 %

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