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TheStreet Open House

Dollar General Corporation Reports Record Third Quarter 2012 Sales And Earnings

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 10,371 stores in 40 states as of November 2, 2012, Dollar General has more locations than any other discount 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)
November 2, October 28, February 3,
2012   2011   2012
ASSETS
Current assets:
Cash and cash equivalents $ 142,580 $ 118,580 $ 126,126
Merchandise inventories 2,330,436 2,089,722 2,009,206
Income taxes receivable 13,554 48,807 -
  Prepaid expenses and other current assets     131,622       135,746       139,742  
  Total current assets     2,618,192       2,392,855       2,275,074  
Net property and equipment     2,047,434       1,716,797       1,794,960  
Goodwill     4,338,589       4,338,589       4,338,589  
Other intangible assets, net     1,223,407       1,240,733       1,235,954  
Other assets, net     46,055       46,908       43,943  
Total assets   $ 10,273,677     $ 9,735,882     $ 9,688,520  
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term obligations $ 891 $ 763 $ 590
Accounts payable 1,199,727 1,132,544 1,064,087
Accrued expenses and other 392,439 414,977 397,075
Income taxes payable 997 1,111 44,428
  Deferred income taxes     39,785       22,826       3,722  
  Total current liabilities     1,633,839       1,572,221       1,509,902  
Long-term obligations     3,023,367       2,721,061       2,617,891  
Deferred income taxes     655,910       647,329       656,996  
Other liabilities     225,699       233,950       229,149  
Total liabilities     5,538,815       5,174,561       5,013,938  
 
Commitments and contingencies
 
Shareholders' equity:
Preferred stock - - -
Common stock 287,613 299,514 295,828
Additional paid-in capital 2,983,323 2,964,576 2,967,027
Retained earnings 1,468,534 1,305,107 1,416,918
  Accumulated other comprehensive loss     (4,608 )     (7,876 )     (5,191 )
  Total shareholders' equity     4,734,862       4,561,321       4,674,582  
Total liabilities and shareholders' equity   $ 10,273,677     $ 9,735,882     $ 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
November 2, % of Net October 28, % of Net
2012   Sales   2011   Sales
Net sales $ 3,964,647 100.00 % $ 3,595,224 100.00 %
Cost of goods sold     2,738,524   69.07       2,479,422   68.96  
Gross profit 1,226,123 30.93 1,115,802 31.04
Selling, general and administrative expenses     864,734   21.81       804,885   22.39  
Operating profit 361,389 9.12 310,917 8.65
Interest expense 27,726 0.70 38,632 1.07
Other (income) expense     1,728   0.04       53   0.00  
Income before income taxes 331,935 8.37 272,232 7.57
Income tax expense     124,250   3.13       101,068   2.81  
Net income   $ 207,685   5.24 %   $ 171,164   4.76 %
 
Earnings per share:
Basic $ 0.62 $ 0.50
Diluted $ 0.62 $ 0.50
Weighted average shares outstanding:
Basic 332,337 341,955
Diluted 334,004 345,777
 
 
 
For the 39 Weeks Ended
November 2, % of Net October 28, % of Net
2012   Sales   2011   Sales
Net sales $ 11,814,507 100.00 % $ 10,622,115 100.00 %
Cost of goods sold     8,096,905   68.53       7,270,574   68.45  
Gross profit 3,717,602 31.47 3,351,541 31.55
Selling, general and administrative expenses     2,584,675   21.88       2,368,977   22.30  
Operating profit 1,132,927 9.59 982,564 9.25
Interest expense 100,466 0.85 164,831 1.55
Other (income) expense     29,956   0.25       60,564   0.57  
Income before income taxes 1,002,505 8.49 757,169 7.13
Income tax expense     367,265   3.11       282,994   2.66  
Net income   $ 635,240   5.38 %   $ 474,175   4.46 %
 
Earnings per share:
Basic $ 1.90 $ 1.39
Diluted $ 1.89 $ 1.37
Weighted average shares outstanding:
Basic 333,806 341,670
Diluted 336,339 345,598

 
 
 
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 
        For the 39 Weeks Ended
November 2,   October 28,
2012   2011
Cash flows from operating activities:
Net income $ 635,240 $ 474,175

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

Depreciation and amortization 222,398 204,771
Deferred income taxes 24,221 23,977
Tax benefit of stock options (85,335 ) (16,101 )
Loss on debt retirement, net 30,620 60,303
Non-cash share-based compensation 15,357 10,969
Other non-cash gains and losses 9,548 31,656
Change in operating assets and liabilities:
Merchandise inventories (326,076 ) (350,932 )
Prepaid expenses and other current assets 12,399 (30,899 )
Accounts payable 130,733 164,336
Accrued expenses and other liabilities (4,334 ) 89,993
Income taxes 28,350 (57,575 )
      Other     (2,235 )     (174 )
Net cash provided by (used in) operating activities     690,886       604,499  
 
Cash flows from investing activities:
Purchases of property and equipment (453,626 ) (363,099 )
  Proceeds from sales of property and equipment     1,144       729  
Net cash provided by (used in) investing activities     (452,482 )     (362,370 )
 
Cash flows from financing activities:
Issuance of long-term obligations 500,000 -
Repayments of long-term obligations (478,026 ) (911,708 )
Borrowings under revolving credit facility 1,703,400 649,100
Repayments of borrowings under revolving credit facility (1,349,800 ) (361,300 )
Debt issue costs (15,278 ) -
Repurchases of common stock (596,442 ) -
Equity transactions with employees, net of taxes paid (71,139 ) (13,188 )
  Tax benefit of stock options     85,335       16,101  
Net cash provided by (used in) financing activities     (221,950 )     (620,995 )
 
Net increase (decrease) in cash and cash equivalents 16,454 (378,866 )
Cash and cash equivalents, beginning of period     126,126       497,446  
Cash and cash equivalents, end of period   $ 142,580     $ 118,580  
 
Supplemental cash flow information:
Cash paid for:
Interest $ 90,992 $ 151,123
Income taxes $ 328,196 $ 301,643
Supplemental schedule of non-cash investing and financing activities:

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

$ 40,569 $ 44,225
Purchases of property and equipment under capital lease obligations $ 3,440 $ -

 
 
 
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
Selected Additional Information
(Unaudited)
       
 
Sales by Category (in thousands)
 
For the Quarter (13 Weeks) Ended
November 2, 2012   October 28, 2011 % Change
Consumables $ 3,004,247 $ 2,705,765 11.0 %
Seasonal 471,541 433,931 8.7 %
Home products 257,918 236,951 8.8 %
Apparel   230,941     218,577   5.7 %
Net sales $ 3,964,647   $ 3,595,224   10.3 %
 
 
For the 39 Weeks Ended
November 2, 2012   October 28, 2011 % Change
Consumables $ 8,802,350 $ 7,845,905 12.2 %
Seasonal 1,532,772 1,393,557 10.0 %
Home products 772,831 706,962 9.3 %
Apparel   706,554     675,691   4.6 %
Net sales $ 11,814,507   $ 10,622,115   11.2 %
 
 
 
 
Store Activity
 
For the 39 Weeks Ended
November 2, 2012   October 28, 2011
 
Beginning store count 9,937 9,372
New store openings 479 482
Store closings   (45 )   (41 )
Net new stores   434     441  
Ending store count   10,371     9,813  
Total selling square footage (000's)   75,692     70,737  
Growth rate (square footage)   7.0 %   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
November 2, 2012 October 28, 2011 Increase
$   % of Net Sales   $   % of Net Sales $   %
 
Net sales   $ 3,964.6         $ 3,595.2       $ 369.4 10.3 %
 
Selling, general and administrative ("SG&A") $ 864.7 21.81 % $ 804.9 22.39 % $ 59.8 7.4 %
Secondary offering expenses (0.5 ) (0.4 )
  Acceleration of equity-based compensation     (0.4 )         (0.5 )    
SG&A, excluding certain items   $ 863.8     21.79 %   $ 804.0     22.36 % $ 59.8 7.4 %
 
Operating profit $ 361.4 9.12 % $ 310.9 8.65 % $ 50.5 16.2 %
Secondary offering expenses 0.5 0.4
  Acceleration of equity-based compensation     0.4           0.5      
Operating profit, excluding certain items   $ 362.3     9.14 %   $ 311.8     8.67 % $ 50.5 16.2 %
 
Net income $ 207.7 5.24 % $ 171.2 4.76 % $ 36.5 21.3 %
Secondary offering expenses 0.5 0.4
Acceleration of equity-based compensation 0.4 0.5
 

Debt amendment fees

    1.7           -      
  Total adjustments, before income taxes     2.6           0.9      
  Income tax effect of adjustments     (0.8 )         (0.2 )    
  Net adjustments     1.8           0.7      
Adjusted net income   $ 209.5     5.28 %   $ 171.9     4.78 % $ 37.6 21.9 %
 
Diluted earnings per share:
As reported $ 0.62 $ 0.50 $ 0.12 24.0 %
Adjusted $ 0.63 $ 0.50 $ 0.13 26.0 %
 
Weighted average diluted shares 334.0 345.8
 
 
 
For the 39 Weeks Ended
November 2, 2012 October 28, 2011 Increase
$   % of Net Sales $   % of Net Sales $   %
 
Net sales   $ 11,814.5         $ 10,622.1       $ 1,192.4 11.2 %
 
Selling, general and administrative ("SG&A") $ 2,584.7 21.88 % $ 2,369.0 22.30 % $ 215.7 9.1 %
Litigation settlements - (13.1 )
Secondary offering expenses (1.4 ) (0.4 )
  Acceleration of equity-based compensation     (1.5 )       (0.5 )    
SG&A, excluding certain items   $ 2,581.8     21.85 % $ 2,355.0     22.17 % $ 226.8 9.6 %
 
Operating profit $ 1,132.9 9.59 % $ 982.6 9.25 % $ 150.4 15.3 %
Litigation settlements - 13.1
Secondary offering expenses 1.4 0.4
  Acceleration of equity-based compensation     1.5         0.5      
Operating profit, excluding certain items   $ 1,135.8     9.61 % $ 996.6     9.38 % $ 139.2 14.0 %
 
Net income $ 635.2 5.38 % $ 474.2 4.46 % $ 161.1 34.0 %
Litigation settlements - 13.1
Secondary offering expenses 1.4 0.4
Acceleration of equity-based compensation 1.5 0.5
Adjustment for settlement of interest rate swaps (2.5 ) -
Write-off of capitalized debt costs 1.6 -

Debt amendment fees

1.7 -
  Repurchase of long-term obligations, net     29.0         60.3      
  Total adjustments before income taxes     32.7         74.3      
  Income tax effect of adjustments     (12.3 )       (28.9 )    
  Net adjustments     20.4         45.4      
Adjusted net income   $ 655.6     5.55 % $ 519.6     4.89 % $ 136.1 26.2 %
 
Diluted earnings per share:
As reported $ 1.89 $ 1.37 $ 0.52 38.0 %
Adjusted $ 1.95 $ 1.50 $ 0.45 30.0 %
 
Weighted average diluted shares outstanding 336.3 345.6

 
 
 
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 39 Weeks Ended Four Quarters Ended
Nov. 2, Oct. 28, Nov. 2, Oct. 28, Nov. 2, Oct. 28,
(In millions) 2012   2011 2012   2011 2012   2011
(53 Weeks)   (52 Weeks)
 
Net income $ 207.7 $ 171.2 $ 635.2 $ 474.2 $ 927.7 $ 696.8
Add (subtract):
Interest expense 27.7 38.6 100.5 164.9 140.5 230.4
Depreciation and amortization 73.7 66.3 215.4 196.0 283.5 258.0
Income taxes   124.2     101.1   367.3       283.0   542.9       403.0
EBITDA   433.3     377.2   1,318.4       1,118.1   1,894.6       1,588.2
 
Adjustments:
Loss on debt retirement, net - - 30.6 60.3 30.6 60.3
Loss (gain)on hedging instruments - 0.1 (2.4 ) 0.3 (2.3 ) 0.4
Non-cash expense for share-based awards 5.1 4.2 15.4 11.0 19.7 14.2
Litigation settlement and related costs, net - - - 13.1 - 13.1
Indirect costs related to merger and stock offering 0.5 0.4 1.3 0.4 1.8 0.7
Other non-cash charges (including LIFO) 5.5 13.1 10.7 30.7 33.3 35.6
Other   1.7     -   2.5       -   2.5       -
Total Adjustments   12.8     17.8   58.1       115.8   85.6       124.3
Adjusted EBITDA $ 446.1   $ 395.0 $ 1,376.5     $ 1,233.9 $ 1,980.2     $ 1,712.5

 
 
 
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures
(Continued)
(Dollars in millions)
     
 
Senior Secured Incurrence Test
 
November 2, October 28,
2012 2011
Senior secured debt $ 2,524.3 $ 2,271.1
Less: cash   142.6   118.6
Senior secured debt, net of cash $ 2,381.7 $ 2,152.5
Adjusted EBITDA $ 1,980.2 $ 1,712.5

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
 
November 2, October 28,
2012 2011
Total long-term obligations $ 3,024.3 $ 2,721.8
Adjusted EBITDA $ 1,980.2 $ 1,712.5
Ratio of long-term obligations to Adjusted EBITDA 1.5x 1.6x
 
 
 
Calculation of Ratio of Long-Term Obligations, net of Cash, to Adjusted EBITDA
 
November 2, October 28,
2012 2011
Total long-term obligations $ 3,024.3 $ 2,721.8
Less: cash   142.6   118.6
Total long-term obligations, net of cash $ 2,881.7 $ 2,603.2
Adjusted EBITDA $ 1,980.2 $ 1,712.5

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

1.5x 1.5x
 
 




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