Dollar General's fiscal Q3 earnings rise 14% year-over-year to US$237M as net sales increase 10.5% to US$4.38B, same-store sales grow 4.4%; consumables sales growth continues to outpace non-consumables, led by tobacco products, perishables, candy, snacks
Cindy Allen
GOODLETSVILLE, Tennessee
,
December 5, 2013
(press release)
–
“Dollar General once again delivered strong results in the third quarter, even in the face of an ongoing challenging consumer environment,” said Rick Dreiling, Dollar General’s chairman and chief executive officer. “Our merchandising initiatives have continued to be successful in driving traffic and sales. We had solid financial performance across key metrics, including better than anticipated gross margin performance and solid SG&A leverage. As a result, we are now forecasting full year adjusted earnings per share of $3.18 to $3.22. “Looking ahead, while we are cautious on the current macroeconomic trends, we remain excited about the long-term growth prospects for our business. Dollar General is committed to delivering everyday low prices and convenience for our customers, which has proven to be a winning formula given our long track record of success. Further, today’s announcement of an additional $1 billion share repurchase authorization reflects our commitment to return cash to our shareholders and the confidence that we have in our business.” Third Quarter Highlights The Company’s net income increased by 14 percent to $237 million in the 2013 third quarter compared to net income of $208 million in the 2012 third quarter, and earnings per diluted share (“EPS”) of $0.74 in the 2013 third quarter increased 19 percent over EPS of $0.62 in the 2012 third quarter. Adjusted net income, as defined under “Non-GAAP Disclosure” below, increased 10 percent to $231 million in the 2013 third quarter compared to $210 million in the 2012 third quarter and adjusted EPS increased 14 percent to $0.72 per diluted share in the 2013 third quarter from $0.63 per diluted share in the 2012 third quarter. Net income in the 2013 third quarter includes a benefit of $6 million, or approximately $0.02 per diluted share, resulting from the reversal of income tax reserves that were established in 2009. Net sales increased 10.5 percent to $4.38 billion in the 2013 third quarter compared to $3.96 billion in the 2012 third quarter. Same-store sales increased 4.4 percent, with increases in both customer traffic and average transaction value. Consumables sales continued to increase at a higher rate than non-consumables in the 2013 third quarter, with the most significant growth due to strong sales of tobacco products, perishables and candy and snacks. Same-store sales growth was solid in seasonal and home products, while apparel sales were affected by a planned merchandising initiative that reduced apparel inventories in more than 4,000 stores during the 2013 third quarter. Gross profit increased by 8.3 percent and, as a percentage of sales, decreased by 61 basis points to 30.3 percent in the 2013 third quarter compared to the third quarter of 2012. The majority of the gross profit rate decrease in the 2013 third quarter as compared to the 2012 third quarter was due to an increase in the mix of consumables and increased sales of lower margin consumables, including tobacco products and expanded perishables offerings, all of which contributed to lower initial inventory markups. In addition, the Company’s inventory shrinkage rate increased and markdowns were higher than in the 2012 period. These factors were partially offset by transportation efficiencies, including the impact of lower average fuel costs. The Company recorded a LIFO benefit of $3.7 million in the 2013 quarter compared to a LIFO provision of $0.1 million in the 2012 quarter. Selling, general and administrative (“SG&A”) expenses were 21.4 percent of sales in the 2013 third quarter compared to 21.8 percent in the 2012 third quarter, an improvement of 40 basis points. Retail labor expense increased at a rate lower than the increase in sales. In addition, decreases in incentive compensation, health benefits costs and workers’ compensation and general liability expenses contributed to the overall improvement in SG&A as a percentage of sales. These factors were partially offset by costs that increased at a higher rate than the increase in sales including depreciation and amortization and fees associated with the increased use of debit cards. Interest expense was $22 million in the 2013 third quarter, a decrease of $6 million from the 2012 third quarter, due to lower average interest rates, primarily resulting from the completion of the Company’s refinancing earlier in the 2013 fiscal year. The effective income tax rate for the 2013 third quarter was 35.6 percent compared to a rate of 37.4 percent for the 2012 quarter. The third quarter 2013 effective income tax rate decreased primarily due to the recording of a benefit resulting from the reversal of income tax reserves that were established in 2009. 39-Week Period Results For the 39-week period ended November 1, 2013, net sales increased 10.1 percent over the comparable 2012 period, to $13.01 billion. Same-store sales increased 4.0 percent. Gross profit increased by 7.6 percent and, as a percentage of sales, decreased by 72 basis points to 30.8 percent in the 2013 39-week period compared to the 2012 39-week period. The majority of the gross profit rate decrease in the 2013 period as compared to the 2012 period was due to an increase in the mix of consumables and increased sales of lower margin consumables, including tobacco products and expanded perishables offerings, all of which contributed to lower initial inventory markups. In addition, the Company’s inventory shrinkage rate increased and markdowns were higher than in the comparable 2012 period. These factors were partially offset by transportation efficiencies. The Company recorded a LIFO benefit of $6.6 million in the 2013 period compared to a LIFO provision of $1.2 million in the 2012 period. SG&A expenses were 21.5 percent of sales in the 2013 39-week period compared to 21.9 percent in the 2012 period, an improvement of 34 basis points. Excluding a legal settlement of $8.5 million in the 2013 period and expenses relating to secondary offerings of the Company’s common stock in both periods, SG&A as a percentage of sales improved by 38 basis points from the 2012 period. Retail labor expense increased at a rate lower than the increase in sales for the period. In addition, decreases in incentive compensation and workers’ compensation and general liability expenses contributed to the overall improvement in SG&A as a percentage of sales. Costs that increased at a higher rate than the increase in sales include depreciation and amortization and fees related to the increased use of debit cards. Interest expense was $67 million in the 2013 39-week period, a decrease of $34 million from the 2012 period, due to lower average interest rates, primarily resulting from the completion of the Company’s refinancing earlier in the 2013 fiscal year. As previously reported, Other (income) expenses in the 2013 39-week period included pre-tax losses of $18.9 million resulting from the restructuring of the Company’s credit facilities in the 2013 first quarter. Other (income) expense in the 2012 period included pretax losses totaling $29.0 million resulting from the Company’s redemption of its senior subordinated notes, a $2.5 million pretax gain resulting from the settlement of interest rate swaps, $1.7 million of debt amendment fees and a pretax loss of $1.6 million resulting from the amendment of the senior secured revolving credit facility. The effective income tax rate for the 2013 39-week period was 36.8 percent compared to a rate of 36.6 percent for the 2012 period. As discussed above, the effective income tax rate for the 2013 period reflects the recording of a benefit resulting from the reversal of income tax reserves that were established in 2009. In addition, the 2013 period reflects income tax benefits associated with federal jobs credits. The federal law authorizing these credits was not in effect during the 2012 third quarter for employees hired after December 31, 2011, but was enacted with retroactive effect later in 2012. Income tax expense in the 2012 period was reduced by $14.5 million associated with the adjustment of accruals due to the favorable resolution of income tax examinations that did not reoccur, to the same extent, in the 2013 period. For the 2013 39-week period, the Company reported net income of $703 million, or $2.16 per diluted share, compared to net income of $635 million, or $1.89 per diluted share, for the 2012 39-week period. Adjusted net income, as defined under “Non-GAAP Disclosure” below, for the 2013 39-week period was $714 million, or $2.20 per diluted share, compared to adjusted net income in the 2012 period of $656 million, or $1.95 per diluted share. Reported and adjusted net income in the 2012 period included a benefit of $14.5 million, or approximately $0.04 per diluted share, relating to an adjustment of accruals resulting from the favorable resolution of income tax audits. Merchandise Inventories As of November 1, 2013, total merchandise inventories, at cost, were $2.59 billion compared to $2.33 billion as of November 2, 2012, an increase of 11 percent in total, or 4 percent on a per-store basis. Inventory turns for the 52 weeks ended November 1, 2013 were 4.8 times. Capital Expenditures Total expenditures for property and equipment in the 39-week 2013 period were $444 million, including: $167 million for improvements, upgrades, remodels and relocations of existing stores; $103 million related to new leased stores, primarily for leasehold improvements, fixtures and equipment; $86 million for distribution and transportation-related capital expenditures; $65 million for stores purchased or built by the Company; and $17 million for information systems upgrades and technology-related projects. During the 39-week period, the Company opened 577 new stores and remodeled or relocated 534 stores. Share Repurchases In the 2013 third quarter, the Company repurchased 3.5 million shares of its outstanding common stock for $200 million, increasing total purchases for the 2013 39-week period to $420 million, or 7.8 million shares. Since the inception of the share repurchase program in December 2011, the Company has repurchased 27.1 million shares totaling $1.3 billion. On December 4, 2013, the Company’s Board of Directors authorized an additional $1.0 billion for share repurchases, increasing the total authorization for future repurchases to $1.2 billion. The authorization has no expiration date. Pending Sale Leaseback Transaction In November 2013, the Company signed an agreement to sell and subsequently lease back approximately 233 currently owned stores. The transaction is expected to close in January 2014 and result in proceeds to the Company, after taxes and applicable fees, in excess of $200 million. The Company currently anticipates that some or all of these proceeds will be utilized for repurchases of its common stock. The closing of the transaction is contingent upon satisfactory completion of customary due diligence and other conditions. The closing of the transaction or the timing thereof cannot be assured. Fiscal 2013 Financial Outlook The Company has updated its financial outlook to reflect the results of the third quarter and expectations for the remainder of the year. The following guidance for operating profit, excluding certain items, and adjusted EPS excludes the same reconciling items as used to reconcile these metrics to the corresponding GAAP measures for the 39-week period ended November 1, 2013 as detailed in the accompanying table. The Company now expects adjusted EPS to be approximately $3.18 to $3.22, reflecting an increase to the low end of the Company’s previous adjusted EPS guidance of $3.15 to $3.22. The current estimate is based on approximately 324 million weighted average diluted shares outstanding. The Company now expects total net sales for the 2013 fiscal year to increase by 10.0 to 10.5 percent over the 2012 fiscal year, including an expected increase in same-store sales of 4.0 to 4.5 percent. Previous guidance reflected an increase in total net sales of 10.0 to 11.0 percent and an increase in same-store sales of 4.0 to 5.0 percent. Operating profit, excluding certain items, is expected to be in the range of $1.745 billion to $1.770 billion for the 2013 fiscal year. Full year interest expense is expected to be approximately $90 million. The full year 2013 effective tax rate, excluding the $6 million benefit recorded in the third quarter, is expected to be in the range of 37.5 to 38.0 percent. Capital expenditures are now expected to be in the range of $550 million to $600 million in 2013, a reduction of $25 million from previous guidance. The Company plans to open approximately 650 new stores and remodel or relocate a total of approximately 550 stores for the full year. The Company expects its new Pennsylvania distribution center to be fully operational in the first quarter of fiscal 2014. Fiscal 2014 Outlook The Company plans to open approximately 700 new stores in fiscal 2014 and remodel or relocate approximately 525 stores, expanding store selling square footage by 6 to 7 percent. Conference Call Information The Company will hold a conference call, hosted by Rick Dreiling, chairman and chief executive officer, and David Tehle, chief financial officer, on December 5, 2013, at 9:00 a.m. CT/10:00 a.m. ET. 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 11806504. 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, December 19, 2013, and will be accessible online or by calling (855) 859-2056. The conference ID for the replay is 11806504. Non-GAAP Disclosure Certain financial information provided in this press release and the accompanying tables has not been derived in accordance with U.S. generally accepted accounting principles (“GAAP”), including adjusted net income and adjusted EPS. The Company also has provided calculations of EBITDA, adjusted EBITDA, adjusted EBITDAR (adjusted EBITDA plus total rent expense), adjusted debt, and the ratio of adjusted debt to adjusted EBITDAR, which are non-GAAP measures. EBITDA is defined as income (loss) from continuing operations before cumulative effect of changes in accounting principles plus interest and other financing costs, net, provision for income taxes, and depreciation and amortization. Adjusted EBITDA is defined as EBITDA, further adjusted to give effect to adjustments noted in the accompanying non-GAAP reconciliation table. Adjusted debt is defined as total long-term obligations, including the current portion, plus total rent expense multiplied by eight, which is an estimate of the hypothetical capitalization of operating leases, consistent with practices used by the Company’s rating agencies. Adjusted net income is defined as net income excluding specifically identified expenses. The Company believes that providing comparisons to net income and EPS, adjusted for the items shown in the accompanying reconciliations, provides useful information to the reader in assessing the Company’s operating performance. The adjustment to net income and EPS in the 2013 third quarter relates to an income tax benefit of $6 million, or approximately $0.02 per share, resulting from the reversal of income tax reserves that were established in 2009. For the 2013 39-week period, additional adjustments include $8.5 million resulting from a legal settlement, $1.0 million relating to the acceleration of equity-based compensation and expenses relating to secondary offerings of the Company’s common stock and $18.9 million of debt refinancing costs. Adjustments to net income in the 2012 third quarter include $0.9 million relating to the acceleration of equity-based compensation and expenses relating to secondary offerings of the Company’s common stock and $1.7 million of debt amendment fees. For the 2012 39-week period, additional adjustments include an incremental $2.0 million relating to the acceleration of equity-based compensation and expenses relating to secondary offerings of the Company’s common stock, a $2.5 million gain relating to interest rate swap settlements, $29.0 million relating to the repurchase of long-term obligations and a $1.6 million write-off of capitalized debt costs. In each case, adjusted net income reflects the related income tax effect of the adjustment. EBITDA, adjusted EBITDA and adjusted EBITDAR are not presentations made in accordance with GAAP, are not measures of financial performance or condition, liquidity or profitability, and should not be considered as alternatives to (1) net income, operating income or any other performance measures determined in accordance with GAAP or (2) operating cash flows determined in accordance with GAAP. Additionally, EBITDA, adjusted EBITDA and adjusted EBITDAR 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 replacements of fixed assets. Adjusted debt should not be considered a substitute for long-term obligations as included in the GAAP-basis balance sheet or any other calculation of outstanding obligations. The Company’s presentations of EBITDA, adjusted EBITDA and adjusted EBITDAR have limitations as analytical tools, and should not be considered in isolation or as a substitute for analysis of results as reported under GAAP. Because not all companies use identical calculations, these presentations of EBITDA, adjusted EBITDA and adjusted EBITDAR may not be comparable to other similarly titled measures of other companies. Company management uses adjusted EBITDA as a supplemental performance measure. The Company believes that the presentation of EBITDA, adjusted EBITDA, adjusted EBITDAR, adjusted debt and the ratio of adjusted debt to adjusted EBITDAR is useful to investors because these or similar measures are frequently used by securities analysts, investors and other interested parties in the evaluation of the operating performance and financial leverage of companies in industries similar to Dollar General’s. Reconciliations 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, excluding certain items. In addition to historical results, guidance for fiscal 2013 is based on comparable adjustments. Forward-Looking Statements This press release contains forward-looking information, such as the information in the sections entitled “Fiscal 2013 Financial Outlook,” “Fiscal 2014 Outlook,” and “Pending Sale Leaseback Transaction,” as well as other statements regarding the Company’s outlook, plans and intentions, including statements made within the quotations of Mr. Dreiling. A reader can identify forward-looking statements because they are not limited to historical fact or they use words such as “outlook,” “may,” “should,” “could,” “believe,” “anticipate,” “plan,” “expect,” “estimate,” “forecast,” “goal,” “intend,” “committed,” “continue,” or “will likely result,” and similar expressions that concern the Company’ 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, 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 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: All forward-looking statements are qualified in their entirety by these and other cautionary statements that the Company makes from time to time in its SEC filings and public communications. The Company cannot assure the reader that it will realize the results or developments the Company anticipates or, even if substantially realized, that they will result in the consequences or affect the Company or its operations in the way the Company expects. Forward-looking statements speak only as of the date made. The Company undertakes no obligation to update or revise any forward-looking 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 nearly 75 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, housewares and seasonal items at low everyday prices in convenient neighborhood locations. With 11,061 stores in 40 states as of November 1, 2013, Dollar General has more retail locations in the U.S. than any other discount 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. Adjustments to reconcile net income to net cash from operating activities: Purchases of property and equipment awaiting processing for payment, included in Accounts payable (1) Income tax effect of adjustments (1) Income tax effect of adjustments (1) Includes a benefit of $6.0 million in the 2013 period resulting from the reversal of a tax reserve that was established in 2009.
Dollar General Corporation (
DG) today reported record sales, operating profit and net income for its fiscal 2013 third quarter (13 weeks) ended November 1, 2013.
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
November 1,
November 2,
February 1,
2013
2012
2013
ASSETS
Current assets:
Cash and cash equivalents
$
165,717
$
142,580
$
140,809
Merchandise inventories
2,591,552
2,330,436
2,397,175
Income taxes receivable
9,786
13,554
-
Prepaid expenses and other current assets
137,247
131,622
139,129
Total current assets
2,904,302
2,618,192
2,677,113
Net property and equipment
2,287,410
2,047,434
2,088,665
Goodwill
4,338,589
4,338,589
4,338,589
Other intangible assets, net
1,210,077
1,223,407
1,219,543
Other assets, net
35,596
46,055
43,772
Total assets
$
10,775,974
$
10,273,677
$
10,367,682
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term obligations
$
50,945
$
891
$
892
Accounts payable
1,251,394
1,199,727
1,261,607
Accrued expenses and other
414,881
392,439
357,438
Income taxes payable
639
997
95,387
Deferred income taxes
35,190
39,785
23,223
Total current liabilities
1,753,049
1,633,839
1,738,547
Long-term obligations
2,873,967
3,023,367
2,771,336
Deferred income taxes
643,206
655,910
647,070
Other liabilities
230,798
225,699
225,399
Total liabilities
5,501,020
5,538,815
5,382,352
Commitments and contingencies
Shareholders' equity:
Preferred stock
-
-
-
Common stock
280,215
287,613
286,185
Additional paid-in capital
3,004,582
2,983,323
2,991,351
Retained earnings
2,000,488
1,468,534
1,710,732
Accumulated other comprehensive loss
(10,331
)
(4,608
)
(2,938
)
Total shareholders' equity
5,274,954
4,734,862
4,985,330
Total liabilities and shareholders' equity
$
10,775,974
$
10,273,677
$
10,367,682
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited)
For the Quarter (13 Weeks) Ended
November 1,
% of Net
November 2,
% of Net
2013
Sales
2012
Sales
Net sales
$
4,381,838
100.00
%
$
3,964,647
100.00
%
Cost of goods sold
3,053,345
69.68
2,738,524
69.07
Gross profit
1,328,493
30.32
1,226,123
30.93
Selling, general and administrative expenses
938,252
21.41
864,734
21.81
Operating profit
390,241
8.91
361,389
9.12
Interest expense
21,524
0.49
27,726
0.70
Other (income) expense
-
-
1,728
0.04
Income before income taxes
368,717
8.41
331,935
8.37
Income tax expense
131,332
3.00
124,250
3.13
Net income
$
237,385
5.42
%
$
207,685
5.24
%
Earnings per share:
Basic
$
0.74
$
0.62
Diluted
$
0.74
$
0.62
Weighted average shares outstanding:
Basic
321,711
332,337
Diluted
322,543
334,004
For the 39 Weeks Ended
November 1,
% of Net
November 2,
% of Net
2013
Sales
2012
Sales
Net sales
$
13,010,222
100.00
%
$
11,814,507
100.00
%
Cost of goods sold
9,009,291
69.25
8,096,905
68.53
Gross profit
4,000,931
30.75
3,717,602
31.47
Selling, general and administrative expenses
2,802,868
21.54
2,584,675
21.88
Operating profit
1,198,063
9.21
1,132,927
9.59
Interest expense
66,671
0.51
100,466
0.85
Other (income) expense
18,871
0.15
29,956
0.25
Income before income taxes
1,112,521
8.55
1,002,505
8.49
Income tax expense
409,578
3.15
367,265
3.11
Net income
$
702,943
5.40
%
$
635,240
5.38
%
Earnings per share:
Basic
$
2.17
$
1.90
Diluted
$
2.16
$
1.89
Weighted average shares outstanding:
Basic
324,485
333,806
Diluted
325,438
336,339
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
For the 39 Weeks Ended
November 1,
November 2,
2013
2012
Cash flows from operating activities:
Net income
$
702,943
$
635,240
Depreciation and amortization
247,672
222,398
Deferred income taxes
6,483
24,221
Tax benefit of share-based awards
(28,163
)
(85,335
)
Loss on debt retirement, net
18,871
30,620
Non-cash share-based compensation
16,372
15,357
Other non-cash gains and losses
(3,552
)
9,548
Change in operating assets and liabilities:
Merchandise inventories
(187,490
)
(326,076
)
Prepaid expenses and other current assets
5,269
12,399
Accounts payable
(3,106
)
130,733
Accrued expenses and other liabilities
63,547
(4,334
)
Income taxes
(76,371
)
28,350
Other
(1,900
)
(2,235
)
Net cash provided by (used in) operating activities
760,575
690,886
Cash flows from investing activities:
Purchases of property and equipment
(443,978
)
(453,626
)
Proceeds from sales of property and equipment
950
1,144
Net cash provided by (used in) investing activities
(443,028
)
(452,482
)
Cash flows from financing activities:
Issuance of long-term obligations
2,297,177
500,000
Repayments of long-term obligations
(2,119,760
)
(478,026
)
Borrowings under revolving credit facilities
1,170,900
1,703,400
Repayments of borrowings under revolving credit facilities
(1,195,800
)
(1,349,800
)
Debt issuance costs
(15,996
)
(15,278
)
Payments for cash flow hedge related to debt issuance
(13,217
)
-
Repurchases of common stock
(419,974
)
(596,442
)
Other equity transactions, net of employee taxes paid
(24,132
)
(71,139
)
Tax benefit of share-based awards
28,163
85,335
Net cash provided by (used in) financing activities
(292,639
)
(221,950
)
Net increase (decrease) in cash and cash equivalents
24,908
16,454
Cash and cash equivalents, beginning of period
140,809
126,126
Cash and cash equivalents, end of period
$
165,717
$
142,580
Supplemental cash flow information:
Cash paid for:
Interest
$
55,668
$
90,992
Income taxes
$
480,353
$
328,196
Supplemental schedule of non-cash investing and financing activities:
$
32,040
$
40,569
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 1, 2013
November 2, 2012
% Change
Consumables
$
3,362,796
$
3,004,247
11.9
%
Seasonal
505,793
471,541
7.3
%
Home products
276,770
257,918
7.3
%
Apparel
236,479
230,941
2.4
%
Net sales
$
4,381,838
$
3,964,647
10.5
%
For the 39 Weeks Ended
November 1, 2013
November 2, 2012
% Change
Consumables
$
9,859,528
$
8,802,350
12.0
%
Seasonal
1,610,965
1,532,772
5.1
%
Home products
807,986
772,831
4.5
%
Apparel
731,743
706,554
3.6
%
Net sales
$
13,010,222
$
11,814,507
10.1
%
Store Activity
For the 39 Weeks Ended
November 1, 2013
November 2, 2012
Beginning store count
10,506
9,937
New store openings
577
479
Store closings
(22
)
(45
)
Net new stores
555
434
Ending store count
11,061
10,371
Total selling square footage (000's)
81,368
75,692
Growth rate (square footage)
7.5
%
7.0
%
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 1, 2013
November 2, 2012
Increase
$
% of Net Sales
$
% of Net Sales
$
%
Net sales
$
4,381.8
$
3,964.6
$
417.2
10.5
%
Selling, general and administrative ("SG&A")
$
938.3
21.41
%
$
864.7
21.81
%
$
73.5
8.5
%
Secondary offering expenses
-
(0.5
)
Acceleration of equity-based compensation
-
(0.4
)
SG&A, excluding certain items
$
938.3
21.41
%
$
863.8
21.79
%
$
74.5
8.6
%
Operating profit
$
390.2
8.91
%
$
361.4
9.12
%
$
28.9
8.0
%
Secondary offering expenses
-
0.5
Acceleration of equity-based compensation
-
0.4
Operating profit, excluding certain items
$
390.2
8.91
%
$
362.3
9.14
%
$
27.9
7.7
%
Net income
$
237.4
5.42
%
$
207.7
5.24
%
$
29.7
14.3
%
Secondary offering expenses
-
0.5
Acceleration of equity-based compensation
-
0.4
Debt amendment fees
-
1.7
Total adjustments, before income taxes
-
2.6
(6.0
)
(0.8
)
Net adjustments
(6.0
)
1.8
Adjusted net income
$
231.4
5.28
%
$
209.5
5.28
%
$
21.9
10.5
%
Diluted earnings per share:
As reported
$
0.74
$
0.62
$
0.12
19.4
%
Adjusted
$
0.72
$
0.63
$
0.09
14.3
%
Weighted average diluted shares
322.5
334.0
For the 39 Weeks Ended
November 1, 2013
November 2, 2012
Increase
$
% of Net Sales
$
% of Net Sales
$
%
Net sales
$
13,010.2
$
11,814.5
$
1,195.7
10.1
%
Selling, general and administrative ("SG&A")
$
2,802.9
21.54
%
$
2,584.7
21.88
%
$
218.2
8.4
%
Litigation settlement
(8.5
)
-
Secondary offering expenses
(0.5
)
(1.4
)
Acceleration of equity-based compensation
(0.5
)
(1.5
)
SG&A, excluding certain items
$
2,793.4
21.47
%
$
2,581.8
21.85
%
$
211.6
8.2
%
Operating profit
$
1,198.1
9.21
%
$
1,132.9
9.59
%
$
65.1
5.7
%
Litigation settlement
8.5
-
Secondary offering expenses
0.5
1.4
Acceleration of equity-based compensation
0.5
1.5
Operating profit, excluding certain items
$
1,207.6
9.28
%
$
1,135.8
9.61
%
$
71.8
6.3
%
Net income
$
702.9
5.40
%
$
635.2
5.38
%
$
67.7
10.7
%
Litigation settlement
8.5
-
Secondary offering expenses
0.5
1.4
Acceleration of equity-based compensation
0.5
1.5
Debt refinancing costs
18.9
-
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
Total adjustments before income taxes
28.4
32.7
(16.9
)
(12.3
)
Net adjustments
11.5
20.4
Adjusted net income
$
714.4
5.49
%
$
655.6
5.55
%
$
58.8
9.0
%
Diluted earnings per share:
As reported
$
2.16
$
1.89
$
0.27
14.3
%
Adjusted
$
2.20
$
1.95
$
0.25
12.8
%
Weighted average diluted shares outstanding
325.4
336.3
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures (Continued)
RECONCILIATION OF NET INCOME TO EBITDA, ADJUSTED EBITDA AND ADJUSTED EBITDAR
For the Quarter
For the
For the
(13 Weeks) Ended
39 Weeks Ended
Four Quarters Ended
Nov. 1,
Nov. 2,
Nov. 1,
Nov. 2,
Nov. 1,
Nov. 2,
(In millions)
2013
2012
2013
2012
2013
2012
(52 Weeks)
(53 Weeks)
Net income
$
237.4
$
207.7
$
702.9
$
635.2
$
1,020.5
$
927.7
Add:
Interest expense
21.5
27.7
66.6
100.5
94.0
140.5
Depreciation and amortization
83.1
73.7
242.9
215.4
321.0
283.5
Income taxes
131.3
124.2
409.6
367.3
586.9
542.9
EBITDA
473.3
433.3
1,422.0
1,318.4
2,022.4
1,894.6
Adjustments:
Loss on debt retirements
-
-
18.9
30.6
18.9
30.6
Gain on hedging instruments
-
-
-
(2.4
)
-
(2.3
)
Non-cash expense for share-based awards
5.5
5.1
16.3
15.4
22.6
19.7
Indirect costs related to stock offerings
0.2
0.5
0.7
1.3
0.8
1.8
Litigation settlement and related costs, net
-
-
8.5
-
8.5
-
Other non-cash charges (including LIFO)
(2.3
)
5.5
(1.1
)
10.7
(1.4
)
33.3
Other
-
1.7
0.1
2.5
0.1
2.5
Total adjustments
3.4
12.8
43.4
58.1
49.5
85.6
Adjusted EBITDA
476.7
446.1
1,465.4
1,376.5
2,071.9
1,980.2
Rent expense
175.3
156.7
508.1
455.4
667.0
598.1
Adjusted EBITDAR
$
652.0
$
602.8
$
1,973.5
$
1,831.9
$
2,738.9
$
2,578.3
CALCULATION OF ADJUSTED DEBT TO ADJUSTED EBITDAR
Nov. 1,
Nov. 2,
(In millions)
2013
2012
Total long-term obligations
$
2,924.9
$
3,024.3
Add: Rent x 8
5,336.0
4,784.8
Adjusted Debt
$
8,260.9
$
7,809.1
Adjusted EBITDAR
$
2,738.9
$
2,578.3
Ratio of Adjusted Debt to Adjusted EBITDAR
3.0x
3.0x
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