About Dollar General Corporation
Dollar General Corporation has been delivering value to shoppers for over 75 years through its mission of Serving Others. 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 13,429 stores in 44 states as of March 3, 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.

Dollar General Corporation Reports Second Quarter 2008 Financial Results

September 03, 2008

Same Store Sales Increased 10.1%; Gross Margin Expanded 250 Basis Points to 29.1%; SG&A as a Percentage of Sales Decreased 111 Basis Points versus Year Ago Period; Achieved Net Income of $27.7 Million; Adjusted EBITDA Increased 55% versus Year Ago Period

GOODLETTSVILLE, Tenn., Sep 03, 2008 (BUSINESS WIRE) -- Dollar General Corporation today announced financial results for the second quarter and 26 weeks ended August 1, 2008.

Sales for the quarter increased 11.2 percent to $2.61 billion compared to $2.35 billion in the second quarter of fiscal 2007. Same store sales increased 10.1 percent with customer traffic and average transaction amount contributing significantly to the sales increase.

The second quarter gross profit rate increased by 250 basis points from last year, to 29.1 percent, driven by improvements in shrink, lower markdowns and improved distribution logistics efficiencies, which more than offset increased fuel costs and a LIFO charge of $16.0 million in the 2008 quarter. Selling, general and administrative expense ("SG&A"), as a percentage of sales, decreased 111 basis points from the 2007 quarter. Excluding certain expenses from each year related to strategic initiatives and the change in ownership of the Company, as listed in the accompanying table, SG&A as a percentage of sales decreased 47 basis points, driven by sales leverage and lower depreciation, advertising, workers' compensation and employee benefits expense, partially offset by higher incentive compensation expense associated with 2008 financial performance.

For the second quarter, the Company reported net income of $27.7 million compared with a net loss of $68.8 million for the combined Predecessor and Successor periods in the 2007 second quarter. EBITDA (earnings before interest, income taxes, depreciation and amortization) increased to $200.1 million in the 2008 second quarter from $5.8 million in the 2007 second quarter. Adjusted EBITDA, as defined in the Company's credit agreements and calculated in the attached schedule, was $225.7 million in the 2008 second quarter, an increase of $80.5 million, or 55 percent, from the 2007 second quarter.

For the 26-week year-to-date period, total sales increased 8.4 percent, including a 7.8 percent increase in same store sales. The gross profit rate increased 177 basis points to 28.9 percent and SG&A as a percentage of sales decreased 103 basis points to 23.9 percent. As a result, the Company reported net income of $33.6 million in the 2008 year-to-date period compared to a net loss of $35.2 million in the 2007 year-to-date combined Predecessor and Successor periods. EBITDA increased to $368.9 million in the 2008 period from $109.6 million in the 2007 period and Adjusted EBITDA, as defined in the Company's credit agreements and calculated in the attached schedule, was $408.4 million in the 2008 period, an increase of $120.3 million, or 42 percent, over the 2007 period.

"We are encouraged by Dollar General's strong financial performance during the second quarter and first half of 2008 in spite of the challenging economic environment," said Rick Dreiling, Chief Executive Officer. "We achieved solid same store sales growth and gross margin expansion and were able to further leverage our SG&A spend, all of which resulted in continued improvement in our profitability. Our sales increases in the quarter offer further evidence that customers continue to trust and rely on Dollar General for the quality products they want at value prices. While we believe that we may be benefiting somewhat from current economic conditions, we are confident that our recently implemented operating priorities are accelerating our progress."

Merchandise Inventories and Accounts Payable

As of August 1, 2008, total merchandise inventories, at cost, were $1.49 billion compared to $1.41 billion as of August 3, 2007, an increase of $84.8 million, or approximately six percent in total and four percent on an average per-store basis. Inventory levels were increased to support higher sales levels. In addition, the Company's new merchandise planograms include a net increase in the number of merchandise items, primarily highly consumables, which are expected to contribute to increased future sales. Annual inventory turns increased to 5.0 times from 4.5 times in the year ago period. Accounts payable increased by $264.5 million from the year ago period, more than offsetting the increase in inventories.

Long-Term Obligations

As of August 1, 2008, outstanding long-term obligations, including the current portion, were $4.18 billion, including $2.30 billion outstanding under a senior secured term loan facility. There were no borrowings under the Company's asset-based revolving credit facility. As of September 2, 2008, the Company had no outstanding borrowings under its asset-based revolving credit facility, with excess availability of $966.2 million, and $111.0 million of invested cash. As of August 1, 2008, the ratio of long-term obligations to Adjusted EBITDA, as calculated on the attached schedule, decreased to 5.2 times from 7.1 times since the closing of the Merger transaction in July 2007.

Cash Flow

For the 26-week period ended August 1, 2008, the Company generated $296.5 million of cash from operating activities versus $142.3 million in the corresponding 2007 combined Predecessor and Successor periods, resulting from the impact of the Company's strong operating results and working capital changes.

Company Outlook

Based on current visibility and business trends, the Company remains committed to productive sales growth, expense management and gross margin expansion in 2008. In total, the Company plans to open approximately 200 new Dollar General stores and to relocate or remodel approximately 400 stores during the year. Year-to-date, the Company has opened 125 new stores, closed 11 stores and relocated or remodeled an additional 249 stores. Dollar General continues to expect capital expenditures for the year to be approximately $200 million to $220 million, primarily related to the opening of new stores as well as the remodel and relocation of existing stores and other special initiatives.

Basis of Accounting

The Company was acquired on July 6, 2007 through a merger accounted for as a reverse acquisition (the "Merger"). Although the Company continued as the same legal entity after the Merger, the accompanying financial statements are presented as Predecessor for periods preceding the Merger and as Successor for periods subsequent to the Merger. The Successor reflects the result of the Company applying purchase accounting and a new basis of accounting beginning on July 7, 2007, which affects the comparability of amounts before and after the Merger.

The attached tables include combined results, as indicated, which represent the mathematical combination of the Successor and Predecessor in each of the periods presented. For comparison purposes, the discussions of operations, cash flows, EBITDA and Adjusted EBITDA are generally based on the combined amounts. The Company believes this comparison provides a more meaningful understanding of the underlying business. The combined results have not been prepared as pro forma results and may not reflect the actual results the Company would have achieved absent the Merger and may not be indicative of future results of operations.

Non-GAAP Disclosure

Certain information provided in this press release or to be discussed during the conference call has not been derived in accordance with generally accepted accounting principles ("GAAP"), including EBITDA and Adjusted EBITDA. Reconciliations to net income of EBITDA and Adjusted EBITDA used in this press release are provided in the accompanying table.

EBITDA and Adjusted EBITDA are not measures of financial performance or condition, liquidity or profitability, and should not be considered as an alternative to net income, 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 and debt service requirements and replacement of fixed assets. EBITDA and Adjusted EBITDA have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of the Company's financial results as reported under GAAP. Because not all companies use identical calculations, these presentations may not be comparable to other similarly titled measures of other companies. The Company believes that the presentation of EBITDA and Adjusted EBITDA is appropriate to provide additional information about the calculation of a material financial ratio in the Company's credit facilities. Adjusted EBITDA is a material component of that ratio. Management from time to time uses EBITDA and Adjusted EBITDA, as well as other measures, as additional financial metrics to supplement net income and cash flow in its evaluation of the Company's financial results. For more discussion regarding the financial ratio in the Company's credit facilities, the reasons management believes these non-GAAP measures are useful to investors, and the limitations of these non-GAAP measures, please see the Company's Annual Report on Form 10-K filed with the SEC on March 28, 2008.

Conference Call Information

The Company will hold a conference call on Wednesday, September 3, 2008 at 9:00 a.m. CDT/10:00 a.m. EDT, hosted by Rick Dreiling, 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 Thursday, September 18, 2008, and will be accessible online or by calling (334) 323-7226. The pass code for the replay is 71635131.

Forward-Looking Statements

This press release contains forward-looking information, such as the information in the section entitled "Company Outlook" and the expectations regarding new merchandise items contained in the section entitled "Merchandise Inventories and Accounts Payable." The words "believe," "anticipate," "project," "plan," "schedule," "expect," "estimate," "objective," "forecast," "goal," "intend," "committed," "will likely result," or "will continue" and similar expressions generally identify forward-looking statements. These matters involve risks, uncertainties and other factors that may cause the actual performance of the Company to differ materially from that expressed or implied by these forward-looking statements. All forward-looking information should be evaluated in the context of these risks, uncertainties and other factors. Factors that may result in actual results differing from such forward-looking information include, but are not limited to, those set forth in the Company's Annual Report on Form 10-K filed with the SEC on March 28, 2008, and other factors set forth in this press release.

Forward-looking statements speak only as of the date made. The Company undertakes no obligation to update any forward-looking statements to reflect events or circumstances arising after the date on which they were made. 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 is the largest discount retailer in the United States by number of stores with more than 8,300 neighborhood stores located in 35 states. Dollar General helps shoppers Save Time. Save Money. Every Day.® by offering quality private label and national branded items that are frequently used and replenished such as food, snacks, health and beauty aids, cleaning supplies, basic apparel, house wares and seasonal items at everyday low prices in convenient neighborhood stores. Dollar General is among the largest retailers of top-quality products made by America's most trusted manufacturers such as Procter & Gamble, Kimberly Clark, Unilever, Kellogg's, General Mills, Nabisco, and Fruit of the Loom. The Company store support center is located in Goodlettsville, Tennessee. Dollar General's Web site can be reached at www.dollargeneral.com.

SOURCE: Dollar General Corporation

Dollar General Corporation
Investor Contact:
Emma Jo Kauffman
615-855-5525
or
Media Contact:
Tawn Earnest
615-855-5209

 

Copyright Business Wire 2008

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