December 05, 2011

• Third Quarter Same-Store Sales Increased 6.3%; Total Sales Improved 11.5%
• Operating Profit Increased 13% to $311 Million, or 8.6% of Sales
• Adjusted Net Income Increased 29% to $172 Million, or $0.50 per Diluted Share
• Net Income Increased 34% to $171 Million, or $0.50 per Diluted Share
• Company Raises Fiscal 2011 Financial Outlook

GOODLETTSVILLE, Tenn. (BUSINESS WIRE), December 05, 2011 - Dollar General Corporation (NYSE: DG) today reported financial results for its fiscal 2011 third quarter (13 weeks) ended October 28, 2011. Net income was $171 million, or diluted earnings per share (“EPS”) of $0.50, compared to net income of $128 million, or diluted EPS of $0.37, in the third quarter (13 weeks) of fiscal 2010. Excluding expenses in the 2011 third quarter of $0.9 million ($0.7 million, net of income taxes) relating to a secondary offering of the Company’s common stock by certain selling shareholders and excluding losses in the 2010 third quarter of $8 million ($5 million, net of income taxes) relating to the early repayment of long-term obligations, net income increased 29 percent.

“Dollar General delivered another great quarter, and we expect to continue to build upon our strong track record of delivering excellent results for our shareholders,” said Rick Dreiling, chairman and chief executive officer. “Our same-store sales increased 6.3 percent in the third quarter, representing our third consecutive quarter of accelerating same-store sales growth and demonstrating our ability to balance the challenges of pricing and rising input costs. Based on these results, we are raising our full year adjusted earnings per share guidance to the range of $2.29 to $2.32.

“I am also pleased to announce that, given this continued strong financial performance, our Board of Directors has approved a new program authorizing the Company to repurchase up to $500 million of our common stock. We expect that any share repurchases would be carried out in a manner that will enable us to continue to invest prudently in our stores and infrastructure to support sustainable growth for the long term.

“For the holiday season and into 2012, we expect our customers to remain very interested in value and in ways to make their dollars go further. November sales were strong. Our Thanksgiving week and Black Friday sales suggest that we are well positioned to meet our customers’ expectations."

Third Quarter 2011 Financial Results

Sales increased 11.5 percent to $3.60 billion in the 2011 third quarter compared to $3.22 billion in the 2010 third quarter. Same-store sales increased 6.3 percent in the 2011 quarter and 4.2 percent in the 2010 quarter, with increases in customer traffic and average transaction amount contributing to the growth in both periods. Consumables sales continued to increase at a higher rate than non-consumables in the 2011 quarter, with the most significant growth in candy and snacks, perishables, packaged foods, health care and pet supplies. Sales in the Company’s seasonal and home categories reflected favorable trends in several departments, including hardware, stationery, sundries and domestics, while apparel sales decreased, in part, due to continued weakness in discretionary spending by consumers.

Gross profit, as a percentage of sales, was 31.0 percent in the 2011 third quarter compared to 31.4 percent in the 2010 third quarter, a decrease of 31 basis points. Cost of goods sold included a charge in the 2011 third quarter of $11 million to increase the Company’s LIFO reserve. In addition, consumables, which generally have lower markups than non-consumables, continued to increase as a percentage of sales, and transportation costs were impacted by higher rates for fuel. These factors were partially offset by decreased inventory shrinkage, selective price increases and lower distribution center costs, as a percentage of sales.

Selling, general and administrative expenses (“SG&A”), as a percentage of sales, were 22.4 percent in the 2011 third quarter compared to 22.8 percent in the 2010 third quarter, a decrease of 45 basis points. The decline in SG&A, as a percentage of sales, was largely due to the impact of increased sales and improved utilization of retail store labor, resulting primarily from the Company’s new workforce management initiatives. A decrease in incentive compensation, as well as other cost reduction and productivity initiatives, including the impact of energy management and recycling, favorably impacted SG&A, as a percentage of sales, in the 2011 quarter. These improvements were partially offset by increased depreciation and amortization costs, store data communications costs and charges resulting from an increase in customers’ usage of debit cards.

Operating profit increased by 13 percent to $311 million, or 8.6 percent of sales, in the 2011 third quarter, compared to $274 million, or 8.5 percent of sales, in the 2010 third quarter.

Interest expense was $39 million in the 2011 third quarter, compared to $67 million in the 2010 third quarter. The decrease in the 2011 period from the 2010 period was due to lower outstanding borrowings, resulting from the Company’s repurchases of indebtedness in 2011 and 2010 and lower all-in interest rates on its term loan primarily due to reduced notional amounts on interest rate swaps.

The effective income tax rate increased to 37.1 percent for the 2011 period compared to 35.6 percent for the 2010 period. The 2010 period included the elimination of selected income tax reserves upon the effective resolution of previously uncertain tax positions that did not reoccur in the 2011 period.

39-Week Period Results

For the 39-week period ended October 28, 2011, total sales increased 11.2 percent over the comparable 2010 period, to $10.62 billion, including an increase in same-store sales of 5.9 percent.

Gross profit, as a percentage of sales, was 31.6 percent in the 2011 39-week period compared to 31.9 percent in the 2010 period, a decrease of 35 basis points. The Company recorded increases to its LIFO reserve of $25.4 million in the 2011 period compared to $0.7 million in the 2010 period. Other factors contributing to the decrease in the Company’s gross profit rate included a higher mix of sales of consumables; increased commodity costs, which resulted in higher merchandise purchase costs; higher markdowns to sell through certain home and apparel products; and increased transportation costs, which were impacted by higher fuel rates. These factors were partially offset by selective price increases, lower inventory shrinkage and lower distribution center costs, as a percentage of sales.

SG&A expense was 22.3 percent of sales in the 2011 39-week period compared to 22.8 percent in the 2010 period, a decrease of 54 basis points. SG&A, as a percentage of sales, was favorably impacted by the increase in sales, as well as a decrease in incentive compensation and various cost reduction and productivity initiatives, partially offset by increased depreciation expense. Retail salaries increased at a rate lower than the increase in sales reflecting the rollout of a new workforce management system in the period. SG&A in the 2011 period included expenses totaling $13.1 million, or 12 basis points, for payments and accruals related to the settlement and expected settlement of two legal matters, and expenses of $0.9 million incurred in connection with a secondary offering of the Company’s common stock in the 2011 third quarter. SG&A in the 2010 period included expenses totaling $15.0 million, or 16 basis points, primarily relating to share-based compensation incurred in connection with a secondary offering of the Company’s common stock.

For the 39-week 2011 period, the Company’s operating profit rate was 9.3 percent of sales compared to an operating profit rate in the 2010 period of 9.1 percent of sales. Excluding expenses in both periods relating to secondary offerings of the Company’s common stock by certain selling shareholders and the settlement and expected settlement of certain legal matters in the 2011 period, the Company’s operating profit increased 13 percent to $997 million, or 9.4 percent of sales, in the 2011 39-week period compared to 9.2 percent of sales in the 2010 39-week period.

Interest expense was $165 million in the 2011 39-week period, a decrease of $44 million from the 2010 period. The decrease was due to lower average outstanding borrowings resulting from the Company’s repurchases of indebtedness in 2011 and 2010 and lower all-in interest rates on its term loan primarily due to reduced notional amounts on interest rate swaps. Total long-term obligations as of October 28, 2011 were $2.72 billion, a net decrease of $566 million from the end of the 2010 third quarter.

Other expense includes pretax losses totaling $60.3 million in the 2011 period and $14.7 million in the 2010 period resulting from the repurchase of the Company’s 10.625 percent senior notes.

The effective income tax rate increased to 37.4 percent for the 2011 period compared to 36.9 percent for the 2010 period.

The Company reported net income of $474 million, or diluted EPS of $1.37, for the 2011 39-week period, compared to net income of $405 million, or diluted EPS of $1.18 for the 2010 period. Excluding expenses as discussed above relating to secondary offerings and the net losses on debt repurchases in each of the 39-week periods and the litigation settlements in the 2011 period, net income for the 2011 39-week period increased by 23 percent to $520 million, or $1.50 per diluted share, compared to adjusted net income of $424 million, or $1.23 per diluted share, in the 2010 39-week period.

Merchandise Inventories

As of October 28, 2011, total merchandise inventories, at cost, were $2.09 billion compared to $1.89 billion as of October 29, 2010, an increase of five percent on a per-store basis. This increase resulted from commodity costs increases, net of LIFO charges, and the addition of new items to the Company’s merchandise offerings. Inventory turns, based on the most recent four quarters, were 5.1 times as of October 28, 2011.

Capital Expenditures

Total additions to property and equipment in the 2011 year-to-date period were $363 million, including $79 million for new leased stores, $73 million for distribution centers, including a new distribution center under construction in Alabama, $68 million for improvements and upgrades to existing stores, $59 million for stores purchased or built by the Company, $59 million for remodels and relocations of existing stores, and $20 million for systems-related capital projects. During the 2011 39-week period, the Company opened 482 new stores, including five new Dollar General Market stores, and remodeled or relocated 544 stores. The Company opened its first stores in Connecticut, New Hampshire and Nevada during the 2011 third quarter.

Share Repurchase Authorization

The Company's Board of Directors has authorized the Company to purchase up to $500 million of its common stock. The Company intends to fund any such repurchases through cash from operations or borrowings on its revolving credit facility. Such repurchases may be effected from time to time through open market repurchases and/or privately negotiated transactions. The timing and amount of repurchase transactions under this program will depend upon price, market conditions, and other factors. At this time, $185 million of the $500 million authorization is expected to be purchased in the 2011 fourth quarter from the Company’s controlling shareholder, Buck Holdings, L.P.(which is controlled by affiliates of KKR and Goldman, Sachs & Co.).The Company expects to repurchase the remainder of the $500 million authorization within a year. However, there can be no assurance as to the number of shares the Company will purchase, if any.

Fiscal 2011 Financial Outlook

The volatility of the macroeconomic environment continues to pressure the consumer and impact the Company’s cost of purchasing and delivering merchandise to its stores. Management continues to closely monitor customers’ responses to the economic and competitive climates.

The following guidance for full year 2011 adjusted operating profit and adjusted diluted earnings per share excludes the same reconciling items as used to reconcile adjusted operating profit, adjusted net income and adjusted diluted earnings per share to the corresponding GAAP measures for the 39-week periods ended October 28, 2011 and October 29, 2010 as detailed in the accompanying table.

For the 53-week fiscal year ending February 3, 2012, the Company is raising its expectation for full year earnings. The Company currently expects to report adjusted diluted earnings per share in the range of $2.29 to $2.32 based on 345 million weighted average diluted shares, assuming $185 million of share repurchases in the fourth quarter. The full year 2011 tax rate is expected to be approximately 38 percent. The Company expects total sales for the 53-week 2011 fiscal year to increase approximately 13 percent. Same-store sales, based on the comparable 52-week periods ended January 27, 2012 and January 28, 2011, are now expected to increase in a range of approximately 5.6 to 5.8 percent. Same-store sales in the 2011 fourth quarter, based on comparable 13-week periods, are expected to increase approximately five percent. Adjusted operating profit for the 53-week 2011 period is expected to increase approximately 15 percent over fiscal 2010, driven by increased sales and prudent expense management. The Company expects a decrease in its gross profit rate comparable to the decrease experienced in the 39-week period as the result of purchase cost increases, higher fuel costs and weakness in discretionary spending. This guidance now includes an estimated full year LIFO charge of approximately $35 million. 2011 interest expense is now expected to be in the range of $205 million to $210 million.

In fiscal year 2011, the Company plans to open approximately 625 new stores, including 12 Dollar General Market stores, and to remodel or relocate a total of approximately 575 stores, including 482 new stores opened and 544 stores remodeled or relocated through the third quarter. Capital expenditures for the fiscal year are currently expected to be in the range of $550 million to $600 million.

Fiscal 2012 Financial Outlook

In fiscal year 2012, the Company plans to open approximately 625 new stores, including approximately 40 Dollar General Market stores. In addition, the Company plans to remodel or relocate a total of approximately 550 stores. Square footage is again expected to increase by approximately seven percent. Approximately 80 stores are expected to be opened in new markets, including California, Nevada, Connecticut, Massachusetts and New Hampshire. The Company plans to lease a distribution center in California to support its stores in the western states and expects to complete the construction of its new Alabama distribution center in early 2012.

The Company plans to share its expectations for full year 2012 financial results when it reports fourth quarter and full year 2011 results.

Conference Call Information

The Company will hold a conference call on Monday, December 5, 2011, at 9:00 a.m. CT/10:00 a.m. ET, hosted by Rick Dreiling, chairman and 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 Monday, December 19, 2011, and will be accessible online or by calling (334) 323-7226. The pass code for the replay is 63033334.

Non-GAAP Disclosure

Certain financial information provided in this press release and the accompanying tables has not been derived in accordance with generally accepted accounting principles (“GAAP”), including adjusted operating profit, adjusted net income, adjusted diluted EPS, EBITDA, and adjusted EBITDA. In addition to historical results, full year earnings and operating profit guidance for fiscal 2011 are based on adjusted net income and adjusted operating profit. Reconciliations of all of these non-GAAP measures to the most directly comparable measures calculated in accordance with GAAP are provided in the accompanying schedules. The Company believes that providing comparisons to operating profit, net income, and diluted earnings per share, adjusted for the items shown in the accompanying reconciliations, provides useful information to the reader in assessing the Company’s operating performance.

The Company believes that the presentation of EBITDA and adjusted EBITDA is appropriate to provide additional information about the calculation of the senior secured incurrence test, a material financial ratio in the Company’s credit agreements. Adjusted EBITDA is a material component of that ratio.

The non-GAAP measures discussed above are not measures of financial performance or condition, liquidity or profitability in accordance with GAAP, and should not be considered as alternatives 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, debt service requirements and replacement of fixed assets. These non-GAAP measures have limitations as analytical tools and should not be considered in isolation or as substitutes for analysis of the Company’s financial results as reported under GAAP.

Forward-Looking Statements

This press release contains forward-looking information, such as the information in the sections entitled “Fiscal 2011 Financial Outlook” and “Fiscal 2012 Financial Outlook” as well as other statements regarding our outlook, plans and intentions. A reader can identify forward-looking statements because they are not limited to historical fact or they use words such as “may,” “should,” “could,” “believe,” “anticipate,” “project,” “plan,” “schedule,” “on track,” “expect,” “estimate,” “objective,” “forecast,” “goal,” “focus,” “intend,” “committed,” “continue,” or “will likely result,” and similar expressions that concern our 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 we expected. We derive many of these statements from our operating budgets and forecasts, which are based on many detailed assumptions that we believe are reasonable. However, it is very difficult to predict the effect of known factors, and we cannot anticipate all factors that could affect our 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:

• failure to successfully execute the Company’s growth strategy, including delays in store growth, difficulties executing sales and operating profit margin initiatives and inventory shrinkage reduction;
• the failure of the Company’s new store base to achieve sales and operating levels consistent with the Company’s expectations;
• risks and challenges in connection with sourcing merchandise from domestic and foreign vendors, as well as trade restrictions;
• the Company’s level of success in gaining and maintaining broad market acceptance of its private brands and in achieving its other initiatives;
• unfavorable publicity or consumer perception of the Company’s products;
• the Company’s debt levels and restrictions in its debt agreements;
• economic conditions, including their effect on the financial and capital markets, the Company’s suppliers and business partners, employment levels, consumer demand, disposable income, credit availability and spending patterns, inflation and the cost of goods;
• increases in commodity prices (including, without limitation, cotton, wheat, corn, sugar, oil, paper and resin);
• levels of inventory shrinkage;
• seasonality of the Company’s business;
• increases in costs of fuel or other energy, transportation or utilities costs and in the costs of labor, employment and healthcare;
• the impact of changes in or noncompliance with governmental laws and regulations (including, but not limited to, product safety, healthcare and unionization) and developments in and outcomes of legal proceedings, investigations or audits;
• disruptions, unanticipated expenses or operational failures in the Company’s supply chain including, without limitation, a decrease in transportation capacity for overseas shipments or work stoppages or other labor disruptions that could impede the receipt of merchandise;
• delays or unanticipated expenses in constructing new distribution centers;
• damage or interruption to the Company’s information systems;
• changes in the competitive environment in the Company’s industry and the markets where the Company operates;
• natural disasters, unusual weather conditions, pandemic outbreaks, boycotts, war and geo-political events;
• the incurrence of material uninsured losses, excessive insurance costs or accident costs;
• the Company’s failure to protect its brand name;
• the Company’s loss of key personnel or the Company’s inability to hire additional qualified personnel;
• interest rate and currency exchange fluctuations;
• a data security breach;
• the Company’s failure to maintain effective internal controls;
• changes to income tax expense due to changes in or interpretation of tax laws, or as a result of federal or state income tax examinations;
• changes to or new accounting guidance, such as changes to lease accounting guidance or a requirement to convert to international financial reporting standards;
• the factors disclosed under “Risk Factors” in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 22, 2011 and any subsequent quarterly filings on Form 10-Q; and
• such other factors as may be discussed or identified in this press release.

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 other 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 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 9,813 stores in 38 states as of October 28, 2011, 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)
				October 28,					October 29,					January 28,
				2011					2010					2011
ASSETS
Current assets:
	Cash and cash equivalents			$	118,580				$	237,906				$	497,446
	Merchandise inventories				2,089,722					1,885,753					1,765,433
	Income taxes receivable				48,807					27,677					-
	Prepaid expenses and other current assets				135,746					121,422					104,946
	Total current assets				2,392,855					2,272,758					2,367,825
Net property and equipment					1,716,797					1,414,700					1,524,575
Goodwill					4,338,589					4,338,589					4,338,589
Intangible assets, net					1,240,733					1,262,834					1,256,922
Other assets, net					46,908					60,693					58,311
Total assets				$	9,735,882				$	9,349,574				$	9,546,222
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
	Current portion of long-term obligations			$	763				$	1,358				$	1,157
	Accounts payable				1,132,544					971,538					953,641
	Accrued expenses and other				414,977					378,750					347,741
	Income taxes payable				1,111					14,068					25,980
	Deferred income taxes				22,826					44,601					36,854
	Total current liabilities				1,572,221					1,410,315					1,365,373
Long-term obligations					2,721,061					3,286,907					3,287,070
Deferred income taxes					647,329					565,510					598,565
Other liabilities					233,950					254,669					231,582
Total liabilities					5,174,561					5,517,401					5,482,590
Commitments and contingencies
Redeemable common stock					7,309					14,783					9,153
Shareholders' equity:
	Preferred stock				-					-					-
	Common stock				299,514					298,459					298,819
	Additional paid-in capital				2,957,267					2,937,300					2,945,024
	Retained earnings				1,305,107					608,386					830,932
	Accumulated other comprehensive loss				(7,876	)				(26,755	)				(20,296	)
	Total shareholders' equity				4,554,012					3,817,390					4,054,479
Total liabilities and shareholders' equity				$	9,735,882				$	9,349,574				$	9,546,222

 

DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited)
				For the Quarter (13 Weeks) Ended
				October 28,				% of Net				October 29,				% of Net
				2011				Sales				2010				Sales
Net sales				$	3,595,224			100.00	%			$	3,223,427			100.00	%
Cost of goods sold					2,479,422			68.96					2,212,759			68.65
Gross profit					1,115,802			31.04					1,010,668			31.35
Selling, general and administrative expenses					804,885			22.39					736,334			22.84
Operating profit					310,917			8.65					274,334			8.51
Interest income					(10	)		(0.00	)				(90	)		(0.00	)
Interest expense					38,642			1.07					67,235			2.09
Other (income) expense					53			0.00					8,312			0.26
Income before income taxes					272,232			7.57					198,877			6.17
Income tax expense					101,068			2.81					70,757			2.20
Net income				$	171,164			4.76	%			$	128,120			3.97	%
Earnings per share:
	Basic			$	0.50							$	0.38
	Diluted			$	0.50							$	0.37
Weighted average shares outstanding:
	Basic				341,955								341,062
	Diluted				345,777								344,739
				For the 39 Weeks Ended
				October 28,				% of Net				October 29,				% of Net
				2011				Sales				2010				Sales
Net sales				$	10,622,115			100.00	%			$	9,548,896			100.00	%
Cost of goods sold					7,270,574			68.45					6,502,493			68.10
Gross profit					3,351,541			31.55					3,046,403			31.90
Selling, general and administrative expenses					2,368,977			22.30					2,180,589			22.84
Operating profit					982,564			9.25					865,814			9.07
Interest income					(55	)		(0.00	)				(128	)		(0.00	)
Interest expense					164,886			1.55					208,583			2.18
Other (income) expense					60,564			0.57					14,983			0.16
Income before income taxes					757,169			7.13					642,376			6.73
Income tax expense					282,994			2.66					237,065			2.48
Net income				$	474,175			4.46	%			$	405,311			4.24	%
Earnings per share:
	Basic			$	1.39							$	1.19
	Diluted			$	1.37							$	1.18
Weighted average shares outstanding:
	Basic				341,670								340,961
	Diluted				345,598								344,628

 

DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
						For the 39 Weeks Ended
						October 28,					October 29,
						2011					2010
Cash flows from operating activities:
	Net income					$	474,175				$	405,311
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization					204,771					189,739
		Deferred income taxes					23,977					31,620
		Tax benefit of stock options					(16,101	)				(6,413	)
		Loss on debt retirement, net					60,303					14,576
		Non-cash share-based compensation					10,969					11,620
		Other non-cash gains and losses					31,656					7,920
		Change in operating assets and liabilities:
			Merchandise inventories				(350,932	)				(366,903	)
			Prepaid expenses and other current assets				(30,899	)				(26,412	)
			Accounts payable				164,336					146,933
			Accrued expenses and other				89,993					1,091
			Income taxes				(57,575	)				(4,178	)
			Other				(174	)				(1,108	)
Net cash provided by operating activities							604,499					403,796
Cash flows from investing activities:
	Purchases of property and equipment						(363,099	)				(259,243	)
	Proceeds from sale of property and equipment						729					868
Net cash used in investing activities							(362,370	)				(258,375	)
Cash flows from financing activities:
	Issuance of common stock						177					599
	Repayments of long-term obligations						(911,708	)				(130,654	)
	Borrowings under revolving credit agreement						1,485,000					-
	Repayments of borrowings under revolving credit agreement						(1,197,200	)				-
	Repurchases of common stock and settlement of equity awards, net of employee taxes paid						(13,365	)				(5,949	)
	Tax benefit of stock options						16,101					6,413
Net cash used in financing activities							(620,995	)				(129,591	)
Net increase (decrease) in cash and cash equivalents							(378,866	)				15,830
Cash and cash equivalents, beginning of period							497,446					222,076
Cash and cash equivalents, end of period						$	118,580				$	237,906
Supplemental cash flow information:
Supplemental schedule of non-cash investing and financing activities:
	Purchases of property and equipment awaiting processing for payment, included in Accounts payable					$	44,225				$	24,046
Cash paid for:
	Interest					$	151,123				$	161,385
	Income taxes					$	301,643				$	246,198

 

DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures
Adjusted Selling, General & Administrative Expenses, Adjusted Operating Profit,
Adjusted Net Income and Adjusted Diluted Earnings Per Share
(in millions, except per share amounts)
				For the 13 Weeks Ended
				October 28, 2011								October 29, 2010								Increase
					$			% of Net Sales					$			% of Net Sales					$		%
Net sales				$	3,595.2							$	3,223.4							$	371.8		11.5	%
Selling, general and administrative				$	804.9			22.39	%			$	736.3			22.84	%			$	68.6		9.3	%
	Secondary offering expenses				(0.4	)							-
	Acceleration of equity-based compensation				(0.5	)							-
	Adjusted SG&A			$	804.0			22.36	%			$	736.3			22.84	%			$	67.7		9.2	%
Operating profit				$	310.9			8.65	%			$	274.3			8.51	%			$	36.6		13.3	%
	Secondary offering expenses				0.4								-
	Acceleration of equity-based compensation				0.5								-
	Adjusted operating profit			$	311.8			8.67	%			$	274.3			8.51	%			$	37.5		13.7	%
Net income				$	171.2			4.76	%			$	128.1			3.97	%			$	43.0		33.6	%
	Secondary offering expenses				0.4								-
	Acceleration of equity-based compensation				0.5								-
	Repurchase of long-term obligations				-								8.2
	Total adjustments				0.9								8.2
	Income tax effect of adjustments				(0.2	)							(3.2	)
	Net adjustments				0.7								5.0
	Adjusted net income			$	171.9			4.78	%			$	133.1			4.13	%			$	38.8		29.2	%
Diluted earnings per share:
	As reported			$	0.50							$	0.37
	Adjusted			$	0.50							$	0.39
Weighted average diluted shares outstanding					345.8								344.7
				For the 39 Weeks Ended
				October 28, 2011								October 29, 2010								Increase
					$			% of Net Sales					$			% of Net Sales					$		%
Net sales				$	10,622.1							$	9,548.9							$	1,073.2		11.2	%
Selling, general and administrative				$	2,369.0			22.30	%			$	2,180.6			22.84	%			$	188.4		8.6	%
	Litigation settlements				(13.1	)							-
	Secondary offering expenses				(0.4	)							(0.7	)
	Acceleration of equity-based compensation				(0.5	)							(14.3	)
	Adjusted SG&A			$	2,355.0			22.17	%			$	2,165.6			22.68	%			$	189.4		8.7	%
Operating profit				$	982.6			9.25	%			$	865.8			9.07	%			$	116.8		13.5	%
	Litigation settlements				13.1								-
	Secondary offering expenses				0.4								0.7
	Acceleration of equity-based compensation				0.5								14.3
	Adjusted operating profit			$	996.6			9.38	%			$	880.8			9.22	%			$	115.8		13.1	%
Net income				$	474.2			4.46	%			$	405.3			4.24	%			$	68.9		17.0	%
	Litigation settlements				13.1								-
	Secondary offering expenses				0.4								0.7
	Acceleration of equity-based compensation				0.5								14.3
	Repurchase of long-term obligations				60.3								14.6
	Total adjustments				74.3								29.6
	Income tax effect of adjustments				(28.9	)							(11.3	)
	Net adjustments				45.4								18.3
	Adjusted net income			$	519.6			4.89	%			$	423.6			4.44	%			$	96.0		22.7	%
Diluted earnings per share:
	As reported			$	1.37							$	1.18
	Adjusted			$	1.50							$	1.23
Weighted average diluted shares outstanding					345.6								344.6

 

	DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
Selected Additional Information
(Unaudited)
Sales by Category (in thousands)
			For the Quarter (13 Weeks) Ended
			October 28, 2011				October 29, 2010					% Change
Consumables			$	2,705,765			$	2,378,667				13.8	%
Seasonal				433,931				401,544				8.1	%
Home products				236,951				223,026				6.2	%
Apparel				218,577				220,190				-0.7	%
	Net sales		$	3,595,224			$	3,223,427				11.5	%
			For the 39 Weeks Ended
			October 28, 2011				October 29, 2010					% Change
Consumables			$	7,845,905			$	6,907,541				13.6	%
Seasonal				1,393,557				1,302,780				7.0	%
Home products				706,962				670,352				5.5	%
Apparel				675,691				668,223				1.1	%
	Net sales		$	10,622,115			$	9,548,896				11.2	%
Store Activity
							For the 39 Weeks Ended
							October 28, 2011					October 29, 2010
Beginning store count								9,372				8,828
New store openings								482				491
Store closings								(41	)			(46	)
Net new stores								441				445
Ending store count								9,813				9,273
Total selling square footage (000's)								70,737				66,270
	Growth rate (square footage)							6.7	%			7.6	%

 

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 Four Quarters
				(13 Weeks) Ended										39 Weeks Ended										(52 Weeks) Ended
				October 28,					October 29,					October 28,					October 29,					October 28,				October 29,
(In millions)				2011					2010					2011					2010					2011					2010
Net income				$	171.2				$	128.1				$	474.2				$	405.3				$	696.8			$	492.5
Add (subtract):
	Interest income				(0.0	)				(0.1	)				(0.0	)				(0.1	)				(0.1	)			(0.1	)
	Interest expense				38.6					67.2					164.9					208.5					230.5				287.4
	Depreciation and amortization				66.3					60.4					196.0					180.3					258.0				239.6
	Income taxes				101.1					70.8					283.0					237.1					403.0				294.1
EBITDA					377.2					326.4					1,118.1					1,031.1					1,588.2				1,313.5
Adjustments:
	Loss on debt retirement, net				-					8.2					60.3					14.6					60.3				69.9
	Loss on hedging instruments				0.1					0.1					0.3					0.3					0.4				1.8
	Impact of markdowns related to inventory clearance activities, net of purchase accounting adjustments				-					-					-					-					-				(0.7	)
	Advisory and consulting fees to affiliates				-					-					-					0.1					-				59.2
	Non-cash expense for share-based awards				4.2					3.3					11.0					12.8					14.2				22.1
	Litigation settlement and related costs, net				-					-					13.1					-					13.1				-
	Indirect costs related to merger and stock offering				0.4					0.2					0.4					1.0					0.7				5.9
	Other non-cash charges (including LIFO)				13.1					1.4					30.7					6.6					35.6				4.4
Total Adjustments					17.8					13.2					115.8					35.4					124.3				162.6
Adjusted EBITDA				$	395.0				$	339.6				$	1,233.9				$	1,066.5				$	1,712.5			$	1,476.1

 

DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures
(Continued)
(Dollars in millions)
Senior Secured Incurrence Test
				October 28,				October 29,
				2011				2010
Senior secured debt				$	2,271.1			$	1,984.9
Less: cash					118.6				237.9
Senior secured debt, net of cash				$	2,152.5			$	1,747.0
Adjusted EBITDA				$	1,712.5			$	1,476.1
	Ratio of senior secured debt, net of cash, to Adjusted EBITDA			1.3x				1.2x
Calculation of Ratio of Long-Term Obligations to Adjusted EBITDA
				October 28,				October 29,
				2011				2010
Total long-term obligations				$	2,721.8			$	3,288.3
Adjusted EBITDA				$	1,712.5			$	1,476.1
Ratio of long-term obligations to Adjusted EBITDA				1.6x				2.2x
Calculation of Ratio of Long-Term Obligations, net of Cash, to Adjusted EBITDA
				October 28,				October 29,
				2011				2010
Total long-term obligations				$	2,721.8			$	3,288.3
Less: cash					118.6				237.9
Total long-term obligations, net of cash				$	2,603.2			$	3,050.4
Adjusted EBITDA				$	1,712.5			$	1,476.1
	Ratio of long-term obligations, net of cash, to Adjusted EBITDA			1.5x				2.1x