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Dollar General Corporation Reports Strong Second Quarter Results

Stocks in this article: DG

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 10,203 stores in 40 states as of August 3, 2012, Dollar General has more retail locations in the U.S. than any other retailer. 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)
August 3, July 29, February 3,
2012   2011   2012
ASSETS
Current assets:
Cash and cash equivalents $ 134,157 $ 113,050 $ 126,126
Merchandise inventories 2,147,837 1,973,863 2,009,206
Income taxes receivable 89,473 43,435 -
  Prepaid expenses and other current assets     142,977       142,433       139,742  
  Total current assets     2,514,444       2,272,781       2,275,074  
Net property and equipment     1,972,205       1,622,991       1,794,960  
Goodwill     4,338,589       4,338,589       4,338,589  
Other intangible assets, net     1,227,499       1,245,773       1,235,954  
Other assets, net     50,737       48,969       43,943  
Total assets   $ 10,103,474     $ 9,529,103     $ 9,688,520  
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term obligations $ 344 $ 963 $ 590
Accounts payable 1,143,857 1,122,949 1,064,087
Accrued expenses and other 366,271 366,623 397,075
Income taxes payable 665 810 44,428
  Deferred income taxes     15,546       35,606       3,722  
  Total current liabilities     1,526,683       1,526,951       1,509,902  
Long-term obligations     2,887,251       2,779,408       2,617,891  
Deferred income taxes     651,521       624,034       656,996  
Other liabilities     222,008       215,875       229,149  
Total liabilities     5,287,463       5,146,268       5,013,938  
 
Commitments and contingencies
 
Redeemable common stock     5,601       9,271       6,087  
 
Shareholders' equity:
Preferred stock - - -
Common stock 291,983 298,842 295,828
Additional paid-in capital 2,973,160 2,951,761 2,960,940
Retained earnings 1,550,438 1,133,943 1,416,918
  Accumulated other comprehensive loss     (5,171 )     (10,982 )     (5,191 )
  Total shareholders' equity     4,810,410       4,373,564       4,668,495  
Total liabilities and shareholders' equity   $ 10,103,474     $ 9,529,103     $ 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
August 3, % of Net July 29, % of Net
2012   Sales   2011   Sales
Net sales $ 3,948,655 100.00 % $ 3,575,194 100.00 %
Cost of goods sold     2,685,432   68.01       2,426,852   67.88  
Gross profit 1,263,223 31.99 1,148,342 32.12
Selling, general and administrative expenses     876,009   22.18       798,313   22.33  
Operating profit 387,214 9.81 350,029 9.79
Interest expense 35,666 0.90 60,627 1.70
Other (income) expense     26,557   0.67       58,239   1.63  
Income before income taxes 324,991 8.23 231,163 6.47
Income tax expense     110,851   2.81       85,121   2.38  
Net income   $ 214,140   5.42 %   $ 146,042   4.08 %
 
Earnings per share:
Basic $ 0.64 $ 0.43
Diluted $ 0.64 $ 0.42
Weighted average shares outstanding:
Basic 333,001 341,534
Diluted 335,521 345,625
 
 
For the 26 Weeks Ended
August 3, % of Net July 29, % of Net
2012   Sales   2011   Sales
Net sales $ 7,849,860 100.00 % $ 7,026,891 100.00 %
Cost of goods sold     5,358,381   68.26       4,791,152   68.18  
Gross profit 2,491,479 31.74 2,235,739 31.82
Selling, general and administrative expenses     1,719,941   21.91       1,564,092   22.26  
Operating profit 771,538 9.83 671,647 9.56
Interest expense 72,740 0.93 126,199 1.80
Other (income) expense     28,228   0.36       60,511   0.86  
Income before income taxes 670,570 8.54 484,937 6.90
Income tax expense     243,015   3.10       181,926   2.59  
Net income   $ 427,555   5.45 %   $ 303,011   4.31 %
 
Earnings per share:
Basic $ 1.28 $ 0.89
Diluted $ 1.27 $ 0.88
Weighted average shares outstanding:
Basic 334,541 341,528
Diluted 337,507 345,509
 

   
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
      For the 26 Weeks Ended
August 3, July 29,
2012   2011
Cash flows from operating activities:
Net income $ 427,555 $ 303,011

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

Depreciation and amortization 146,260 135,871
Deferred income taxes (844 ) 18,136
Tax benefit of stock options (59,235 ) (450 )
Loss on debt retirement, net 30,620 60,303
Non-cash share-based compensation 10,224 6,798
Other non-cash gains and losses 3,332 17,709
Change in operating assets and liabilities:
Merchandise inventories (139,998 ) (222,669 )
Prepaid expenses and other current assets (1,847 ) (37,136 )
Accounts payable 68,515 166,690
Accrued expenses and other liabilities (35,276 ) 18,399
Income taxes (74,001 ) (68,155 )
      Other     (1,813 )     (68 )
Net cash provided by (used in) operating activities     373,492       398,439  
 
Cash flows from investing activities:
Purchases of property and equipment (303,988 ) (218,123 )
  Proceeds from sales of property and equipment     426       473  
Net cash provided by (used in) investing activities     (303,562 )     (217,650 )
 
Cash flows from financing activities:
Issuance of long-term obligations 500,000 -
Repayments of long-term obligations (477,846 ) (911,361 )
Borrowings under revolving credit facility 1,035,400 371,600
Repayments of borrowings under revolving credit facility (815,200 ) (25,600 )
Debt issue costs (15,067 ) -
Repurchases of common stock from principal shareholder (300,000 ) -
Equity transactions with employees, net of taxes paid (48,421 ) (274 )
  Tax benefit of stock options     59,235       450  
Net cash provided by (used in) financing activities     (61,899 )     (565,185 )
 
Net increase (decrease) in cash and cash equivalents 8,031 (384,396 )
Cash and cash equivalents, beginning of period     126,126       497,446  
Cash and cash equivalents, end of period   $ 134,157     $ 113,050  
 
Supplemental cash flow information:
Cash paid for:
Interest $ 70,766 $ 137,703
Income taxes $ 337,583 $ 231,807
Supplemental schedule of non-cash investing and financing activities:

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

$ 46,917 $ 32,276
 

   
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
Selected Additional Information
(Unaudited)
   
 
Sales by Category (in thousands)
 
For the Quarter (13 Weeks) Ended
August 3, 2012   July 29, 2011 % Change
Consumables $ 2,920,821 $ 2,611,070 11.9 %
Seasonal 536,738 502,569 6.8 %
Home products 255,915 235,803 8.5 %
Apparel   235,181     225,752   4.2 %
Net sales $ 3,948,655   $ 3,575,194   10.4 %
 
 
For the 26 Weeks Ended
August 3, 2012   July 29, 2011 % Change
Consumables $ 5,798,103 $ 5,140,140 12.8 %
Seasonal 1,061,231 959,626 10.6 %
Home products 514,913 470,011 9.6 %
Apparel   475,613     457,114   4.0 %
Net sales $ 7,849,860   $ 7,026,891   11.7 %
 
 
 
 
Store Activity
 
For the 26 Weeks Ended
August 3, 2012   July 29, 2011
 
Beginning store count 9,937 9,372
New store openings 295 301
Store closings   (29 )   (32 )
Net new stores   266     269  
Ending store count   10,203     9,641  
Total selling square footage (000's)   74,325     69,279  
Growth rate (square footage)   7.3 %   6.7 %
 

       
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures
Adjusted Net Income and Adjusted Diluted Earnings Per Share
Selling, General & Administrative Expenses and Operating Profit, Excluding Certain Items
(in millions, except per share amounts)
     
For the Quarter (13 Weeks) Ended
August 3, 2012 July 29, 2011 Increase
$   % of Net Sales $   % of Net Sales $   %
 
Net sales   $ 3,948.7       $ 3,575.2       $ 373.5 10.4 %
 
Selling, general and administrative ("SG&A") $ 876.0 22.18 % $ 798.3 22.33 % $ 77.7 9.7 %
Secondary offering expenses (0.4 ) -
  Acceleration of equity-based compensation     (0.5 )       -      
SG&A, excluding certain items   $ 875.1     22.16 % $ 798.3     22.33 % $ 76.8 9.6 %
 
Operating profit $ 387.2 9.81 % $ 350.0 9.79 % $ 37.2 10.6 %
Secondary offering expenses 0.4 -
  Acceleration of equity-based compensation     0.5         -      
Operating profit, excluding certain items   $ 388.1     9.83 % $ 350.0     9.79 % $ 38.1 10.9 %
 
Net income $ 214.1 5.42 % $ 146.0 4.08 % $ 68.1 46.6 %
Secondary offering expenses 0.4 -
Acceleration of equity-based compensation 0.5 -
Adjustment for settlement of interest rate swaps (2.5 ) -
  Repurchase of long-term obligations, net     29.0         58.1      
  Total adjustments, before income taxes     27.4         58.1      
  Income tax effect of adjustments     (10.6 )       (22.7 )    
  Net adjustments     16.8         35.4      
Adjusted net income   $ 230.9     5.85 % $ 181.4     5.07 % $ 49.5 27.3 %
 
Diluted earnings per share:
As reported $ 0.64 $ 0.42 $ 0.22 52.4 %
Adjusted $ 0.69 $ 0.52 $ 0.17 32.7 %
 
Weighted average diluted shares 335.5 345.6
 
For the 26 Weeks Ended
August 3, 2012 July 29, 2011 Increase
$   % of Net Sales $   % of Net Sales $   %
 
Net sales   $ 7,849.9       $ 7,026.9       $ 823.0 11.7 %
 
Selling, general and administrative ("SG&A") $ 1,719.9 21.91 % $ 1,564.1 22.26 % $ 155.8 10.0 %
Litigation settlements - (13.1 )
Secondary offering expenses (0.8 ) -
  Acceleration of equity-based compensation     (1.1 )       -      
SG&A, excluding certain items   $ 1,718.0     21.89 % $ 1,551.0     22.07 % $ 167.0 10.8 %
 
Operating profit $ 771.5 9.83 % $ 671.6 9.56 % $ 99.9 14.9 %
Litigation settlements - 13.1
Secondary offering expenses 0.8 -
  Acceleration of equity-based compensation     1.1         -      
Operating profit, excluding certain items   $ 773.4     9.85 % $ 684.7     9.74 % $ 88.7 13.0 %
 
Net income $ 427.6 5.45 % $ 303.0 4.31 % $ 124.5 41.1 %
Litigation settlements - 13.1
Secondary offering expenses 0.8 -
Acceleration of equity-based compensation 1.1 -
Adjustment for settlement of interest rate swaps (2.5 ) -
Write-off of capitalized debt costs 1.6 -
  Repurchase of long-term obligations, net     29.0         60.3      
  Total adjustments before income taxes     30.0         73.4      
  Income tax effect of adjustments     (11.4 )       (28.7 )    
  Net adjustments     18.6         44.7      
Adjusted net income   $ 446.2     5.68 % $ 347.7     4.95 % $ 98.5 28.3 %
 
Diluted earnings per share:
As reported $ 1.27 $ 0.88 $ 0.39 44.3 %
Adjusted $ 1.32 $ 1.01 $ 0.31 30.7 %
 
Weighted average diluted shares outstanding 337.5 345.5
 

 
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures (Continued)
             
RECONCILIATION OF NET INCOME TO EBITDA AND ADJUSTED EBITDA
 
 
For the Quarter For the For the
(13 Weeks) Ended 26 Weeks Ended Four Quarters Ended
August 3, July 29, August 3, July 29, August 3, July 29,
(In millions) 2012   2011 2012   2011 2012   2011
(53 Weeks)   (52 Weeks)
 
Net income $ 214.1 $ 146.0 $ 427.5 $ 303.0 $ 891.2 $ 653.7
Add (subtract):
Interest expense 35.7 60.7 72.8 126.3 151.4 258.9
Depreciation and amortization 71.8 65.4 141.7 129.7 276.1 252.1
Income taxes   110.9       85.1   243.1       181.9   519.8       372.7
EBITDA   432.5       357.2   885.1       740.9   1,838.5       1,537.4
 
Adjustments:
Loss on debt retirement, net 29.0 58.1 30.6 60.3 30.6 68.5
(Gain) loss on hedging instruments (2.4 ) 0.1 (2.4 ) 0.2 (2.2 ) 0.4
Non-cash expense for share-based awards 5.5 3.3 10.3 6.8 18.8 13.3
Litigation settlement and related costs, net - - - 13.1 - 13.1
Indirect costs related to merger and stock offering 0.4 - 0.8 - 1.7 0.5
Other non-cash charges (including LIFO) 2.0 12.1 5.2 17.6 40.9 23.9
Other   0.2       -   0.8       -   0.8       -
Total Adjustments   34.7       73.6   45.3       98.0   90.6       119.7
Adjusted EBITDA $ 467.2     $ 430.8 $ 930.4     $ 838.9 $ 1,929.1     $ 1,657.1
 

 
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures
(Continued)
(Dollars in millions)
     
 
Senior Secured Incurrence Test
 
August 3, July 29,
2012 2011
Senior secured debt $ 2,387.6 $ 2,329.7
Less: cash   134.2   113.1
Senior secured debt, net of cash $ 2,253.4 $ 2,216.6
Adjusted EBITDA $ 1,929.1 $ 1,657.1

Ratio of senior secured debt, net of cash, to Adjusted EBITDA

1.2x

1.3x
 
 
 
Calculation of Ratio of Long-Term Obligations to Adjusted EBITDA
 
August 3, July 29,
2012 2011
Total long-term obligations $ 2,887.6 $ 2,780.4
Adjusted EBITDA $ 1,929.1 $ 1,657.1
Ratio of long-term obligations to Adjusted EBITDA 1.5x 1.7x
 
 
 
Calculation of Ratio of Long-Term Obligations, net of Cash, to Adjusted EBITDA
 
August 3, July 29,
2012 2011
Total long-term obligations $ 2,887.6 $ 2,780.4
Less: cash   134.2   113.1
Total long-term obligations, net of cash $ 2,753.4 $ 2,667.3
Adjusted EBITDA $ 1,929.1 $ 1,657.1

Ratio of long-term obligations, net of cash, to Adjusted EBITDA

1.4x 1.6x




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