Exhibit 99
Dollar General Announces 2006 Fourth Quarter and Fiscal Year Results;
Updates Progress on Inventory Management and Real Estate Initiatives
GOODLETTSVILLE, Tenn.--(BUSINESS WIRE)--March 26, 2007--Dollar
General Corporation (NYSE: DG) today reported net income of $137.9
million, or $0.44 per share, for the year ended February 2, 2007
("fiscal 2006") compared to net income of $350.2 million, or $1.08 per
share, for the year ended February 3, 2006 ("fiscal 2005"). For the
fourth quarter of fiscal 2006, the Company reported net income of
$50.1 million, or $0.16 per share, compared to $145.3 million, or
$0.46 per share, for the fourth quarter of fiscal 2005. As a reminder,
fiscal 2005 was a 53-week year, including 14 weeks in the fourth
quarter. Except for the calculation of same-store sales, all
comparisons are based on a 52-week year and 13-week quarter in fiscal
2006 compared to a 53-week year and 14-week quarter in fiscal 2005.
Calculations of quarterly and annual same-store sales are based on
comparable weeks and therefore exclude the extra week in fiscal 2005.
Summary of Strategic Inventory and Real Estate Initiatives
In November 2006, the Company announced significant strategic
operating initiatives intended to improve its long-term financial and
operating performance. These initiatives primarily related to changes
to its historical inventory management model which allowed for the
carryover of inventory at the end of a season to the following year,
referred to as a "packaway" strategy, and the planned closing of
approximately 400 under-performing stores, in addition to those to be
closed in the normal course of business, in fiscal 2007. During the
fourth quarter of fiscal 2006, the Company sold over half of the
targeted inventories and closed 128 of the stores identified in this
process. The Company is pleased with the results of its efforts to
date on these initiatives.
The Company's financial results were significantly impacted by
these strategic initiatives in the fiscal 2006 third and fourth
quarters. In connection with the accelerated implementation of its new
inventory management strategies and to sell through merchandise in the
closing stores, the Company incurred substantially higher markdowns on
inventory. While the Company believes these markdowns had a positive
impact on sales, particularly in the seasonal, basic clothing and home
products departments, they had a negative impact on its gross profit
as a percent of sales in fiscal 2006. In total, the gross profit rate
declined by 289 basis points to 25.8% in 2006 compared to 28.7% in
2005. Significantly impacting the gross profit rate, as a result of
the related effect on cost of goods sold, were total markdowns of
$279.1 million at cost taken during 2006, compared with total
markdowns of $106.5 million at cost taken in 2005. The 2006 markdowns
reflect $179.9 million at cost taken during the fourth quarter of 2006
compared to $39.0 million in the fourth quarter of fiscal 2005.
Markdowns which were expected to reduce inventory below cost were
considered in the lower of cost or market estimate and recorded at
such time as the utility of the underlying inventory was deemed to be
impaired. During the third quarter of fiscal 2006, the Company
recorded a lower of cost or market inventory impairment estimate
related to the initiatives discussed above, and this estimate was
revised slightly in the fourth quarter such that the impact for fiscal
2006 was $70.2 million, which reduced 2006 gross profit by a
corresponding amount. Markdowns which are not below cost impact gross
profit in the period in which such markdowns are taken. A portion of
the total markdowns taken during the fourth quarter were related to
the inventory included in the lower of cost or market estimate,
thereby reducing the reserve for such inventory as of the end of
fiscal 2006 to $49.2 million.
In addition, charges and expenses of approximately $32.7 million
relating to these real estate and inventory management initiatives are
included in Selling, general and administrative expenses ("SG&A") in
fiscal 2006, including $8.0 million recorded in the third quarter for
impairment on leasehold improvements and fixtures relating to planned
store closings. In the fiscal 2006 fourth quarter, the Company
recorded additional charges to SG&A of approximately $24.7 million,
including: (1) $8.1 million relating to strategic store closings,
consisting primarily of future lease payments on closed stores and
outside services to assist in the inventory clearance and other store
closing processes; (2) $8.7 million for store signage and radio and
television advertising for the clearance events; and (3) $7.9 million
of supplies, employee labor and outside services needed to expedite
the inventory markdown program.
Fourth Quarter Financial Results
Net sales in the fiscal 2006 fourth quarter were $2.55 billion, an
increase of 3.0 percent over the fourth quarter of fiscal 2005. The
net sales increase for the quarter was due to a 5.8 percent increase
in same-store sales, based on the comparable 13-week period, and the
opening of new stores, offset by store closings and an additional week
in 2005. As discussed above, sales in the seasonal, basic clothing and
home products departments were significantly aided in the quarter by
the Company's promotional and markdown efforts.
As a percentage of sales, gross profit for the fiscal 2006 fourth
quarter was 25.3 percent compared to 29.5 percent for the fiscal 2005
fourth quarter, a decrease of 418 basis points, primarily resulting
from markdowns in the seasonal, home and apparel categories, as
discussed above. In addition, gross margin on highly consumables
declined from the prior year, partially due to a higher mix of
nationally branded items, which generally have lower markups.
Selling, general and administrative expenses were 22.0 percent of
sales in the fourth quarter of fiscal 2006 versus 20.1 percent of
sales in the fiscal 2005 fourth quarter, an increase of 194 basis
points, including $24.7 million, or 97 basis points, relating to
strategic store closings and costs associated with the clearance of
inventories as discussed above. Other factors contributing to the
increase in SG&A from the prior year were the increased use of
advertising circulars, the approval of discretionary bonuses totaling
$9.6 million granted to approximately 7,000 employees, and increased
administrative salaries, resulting primarily from additions to the
Company's leadership and the reorganization of the merchandising and
real estate teams.
Fiscal 2006 Financial Results
Net sales in fiscal 2006 were $9.17 billion, an increase of 6.8
percent over fiscal 2005. The net sales increase for the year reflects
a 3.3 percent increase in same-store sales and the addition of 537 new
stores, offset by 237 store closings, including 128 stores closed in
the fourth quarter in connection with the Company's store
revitalization efforts, as well as the impact of an additional week in
fiscal 2005 of approximately $162.9 million.
The Company's gross profit rate to sales was 25.8 percent in 2006
compared to 28.7 percent in 2005, or a decrease of 289 basis points
primarily resulting from increased merchandise markdowns particularly
in the fourth quarter as discussed above. To a lesser extent, other
factors contributed to the gross profit rate decrease, including lower
markups, primarily attributable to purchases of highly consumable
products, including more nationally branded products, which generally
have lower average markups, higher distribution and transportation
costs in the first half of the year and an increase in the inventory
shrink rate, at retail, to 3.40 percent in fiscal 2006 from 3.22
percent in fiscal 2005.
SG&A in fiscal 2006 was 23.1 percent of sales compared to 22.2
percent in fiscal 2005, an increase of 95 basis points. As discussed
above, fiscal 2006 SG&A includes charges and expenses of approximately
$32.7 million related to strategic store closings and the clearance of
merchandise inventories. In addition, increased advertising expense
during the year, higher administrative salaries, resulting primarily
from additions to the Company's leadership and the reorganization of
the merchandising and real estate teams, the approval of $9.6 million
of discretionary bonuses, higher store rent expense and higher fees
related to increased customer usage of debit and credit cards
contributed to the increase in SG&A. These increases were partially
offset by proceeds of $13.0 million related to the settlement of
hurricane-related insurance claims from 2005.
Balance Sheet and Cash Flow
Total merchandise inventories at the end of the 2006 fiscal year
were $1.43 billion compared to $1.47 billion at the end of fiscal
2005, a decrease of $42.1 million, or 2.9 percent in total and 6.4
percent on a per store basis. The Company made substantial progress on
its initiatives to minimize seasonal and other inventory carried
forward to the following year, with more than half of the targeted
inventory sold before the fiscal year end.
Capital expenditures in 2006 totaled $261.5 million, including
approximately $66 million relating to new stores, $66 million for
distribution and transportation-related expenditures, including the
completion of the Company's ninth distribution center in Marion,
Indiana, $50 million for the EZstore project, and $38 million for
capital projects at existing stores.
During the year, the Company repurchased approximately 4.5 million
shares of its common stock for $79.9 million completing a 10 million
share repurchase authorization that was to expire on September 30,
2006. The Company has not repurchased any shares under its existing
$500 million share repurchase authorization which expires December 31,
2008.
Merger Agreement with KKR
On March 12, 2007, the Company announced that it entered into an
agreement to be acquired by affiliates of Kohlberg Kravis Roberts &
Co. L.P. ("KKR"). Under the terms of the agreement, Dollar General
shareholders would receive $22 in cash for each share of Dollar
General common stock they hold. The Board of Directors of Dollar
General unanimously approved the merger agreement. The merger is
subject to the approval of Dollar General shareholders, customary
closing conditions and regulatory approvals. The transaction is
expected to close no later than the third quarter of fiscal 2007. For
further information on this transaction, please see the Company's
March 12, 2007 press release and the Merger Agreement filed with the
SEC on Form 8-K.
About Dollar General
Dollar General is a Fortune 500(R) discount retailer with over
8,000 neighborhood stores. Dollar General stores offer convenience and
value to customers by offering consumable basic items that are
frequently used and replenished, such as food, snacks, health and
beauty aids and cleaning supplies, as well as a selection of basic
apparel, housewares and seasonal items at everyday low prices. The
Company store support center is located in Goodlettsville, Tennessee.
Dollar General's Web site can be reached at www.dollargeneral.com.
Forward-Looking Statements
This press release contains forward-looking information, such as
the information in the section entitled "Merger Agreement with KKR".
The words "believe," "anticipate," "project," "plan," "schedule,"
"expect," "estimate," "objective," "forecast," "goal," "intend," "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. The Company believes the assumptions underlying these
forward-looking statements are reasonable; however, any of the
assumptions could be inaccurate and, therefore, actual results may
differ materially from those projected by, or implied in, the
forward-looking statements. Factors that may result in actual results
differing from such forward-looking information include, but are not
limited to: (1) the occurrence of any event, change or other
circumstances that could give rise to the termination of the merger
agreement; (2) the outcome of any legal proceedings that have been or
may be instituted against Dollar General and others following
announcement of the proposal or the merger agreement; (3) the
inability to complete the merger due to the failure to obtain
shareholder approval or the failure to satisfy other conditions to the
completion of the merger, including the expiration of the waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976
and the receipt of other required regulatory approvals; (4) the
failure to obtain the necessary debt financing arrangements set forth
in commitment letters received in connection with the merger; (5)
risks that the proposed transaction disrupts current plans and
operations and the potential difficulties in employee retention as a
result of the merger; (6) the ability to recognize the benefits of the
merger; (7) the amount of the costs, fees, expenses and charges
related to the merger and the actual terms of certain financings that
will be obtained for the merger; and (8) the impact of the substantial
indebtedness incurred to finance the consummation of the merger; and
other risks that are set forth in the "Risk Factors," "Legal
Proceedings" and "Management Discussion and Analysis of Results of
Operations and Financial Condition" sections of, and elsewhere, in
Dollar General's SEC filings, which may be obtained, free of charge,
through the Investing-SEC filings section of the Company's website at
www.dollargeneral.com or through the SEC website at www.sec.gov.
Printed materials may be requested through the Investing-Information
Requests section of the Company's website, or by directing such
request to Dollar General Corporation, Investor Relations, 100 Mission
Ridge, Goodlettsville, TN 37072 or by calling (615) 855-5524. Many of
the factors that will determine the outcome of the subject matter of
this press release are beyond Dollar General's ability to control or
predict.
Forward-looking statements speak only as of the date made. The
Company undertakes no obligation to update any forward-looking
statements, including prior forward-looking statements, to reflect the
events or circumstances arising after the date as of 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.
Important Additional Information and Where to Find It
In connection with the proposed merger, Dollar General will file a
proxy statement with the Securities and Exchange Commission (the
"SEC"). INVESTORS AND SECURITY HOLDERS ARE ADVISED TO READ THE PROXY
STATEMENT WHEN IT BECOMES AVAILABLE BECAUSE IT WILL CONTAIN IMPORTANT
INFORMATION ABOUT THE MERGER AND THE PARTIES TO THE MERGER. Investors
and security holders may obtain the proxy statement (when available)
and other documents filed by Dollar General, free of charge, through
the Investing-SEC filings section of the Company's website at
www.dollargeneral.com or through the SEC website at www.sec.gov.
Printed materials may be requested through the Investing-Information
Requests section of the Company's website, or by directing such
request to Dollar General Corporation, Investor Relations, 100 Mission
Ridge, Goodlettsville, TN 37072 or by calling (615) 855-5524.
Participants in the Solicitation
Dollar General and its directors, executive officers and other
members of its management and employees may be deemed participants in
the solicitation of proxies from its shareholders in connection with
the proposed merger. Information concerning the interests of Dollar
General's participants in the solicitation, which may be different
than those of Dollar General shareholders generally, is set forth in
Dollar General's proxy statements and Annual Reports on Form 10-K,
previously filed with the SEC, and will be set forth in the proxy
statement relating to the merger when it becomes available.
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income
(Dollars in thousands, except per share amounts)
(Unaudited)
For the Years Ended
------------------------------------------
February 2, % of Net February 3, % of Net
2007 Sales 2006 Sales
-------------------- --------------------
(52 Weeks) (53 Weeks)
Net sales $9,169,822 100.00% $8,582,237 100.00%
Cost of goods sold 6,801,617 74.17 6,117,413 71.28
- ----------------------------------------------------------------------
Gross profit 2,368,205 25.83 2,464,824 28.72
Selling, general and
administrative 2,119,929 23.12 1,902,957 22.17
- ----------------------------------------------------------------------
Operating profit 248,276 2.71 561,867 6.55
Interest income (7,002) (0.08) (9,001) (0.10)
Interest expense 34,915 0.38 26,226 0.31
- ----------------------------------------------------------------------
Income before income taxes 220,363 2.40 544,642 6.35
Income taxes 82,420 0.90 194,487 2.27
- ----------------------------------------------------------------------
Net income $ 137,943 1.50% $ 350,155 4.08%
======================================================================
Diluted earnings per share $ 0.44 $ 1.08
======================================= ===========
Weighted average diluted
shares 313,510 324,133
======================================= ===========
Dividends per share $ 0.200 $ 0.175
======================================= ===========
For the Quarters Ended
------------------------------------------
February 2, % of Net February 3, % of Net
2007 Sales 2006 Sales
-------------------- --------------------
(13 Weeks) (14 Weeks)
Net sales $2,553,986 100.00% $2,480,504 100.00%
Cost of goods sold 1,908,036 74.71 1,749,575 70.53
- ----------------------------------------------------------------------
Gross profit 645,950 25.29 730,929 29.47
Selling, general and
administrative 562,875 22.04 498,665 20.10
- ----------------------------------------------------------------------
Operating profit 83,075 3.25 232,264 9.36
Interest income (2,210) (0.09) (2,559) (0.10)
Interest expense 7,891 0.31 7,593 0.31
- ----------------------------------------------------------------------
Income before income taxes 77,394 3.03 227,230 9.16
Income taxes 27,304 1.07 81,958 3.30
- ----------------------------------------------------------------------
Net income $ 50,090 1.96% $ 145,272 5.86%
======================================================================
Diluted earnings per share $ 0.16 $ 0.46
======================================= ===========
Weighted average diluted
shares 313,275 317,531
======================================= ===========
Dividends per share $ 0.050 $ 0.045
======================================= ===========
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
Selected Additional Information
(Unaudited)
Selected Balance Sheet Information (in thousands)
- ----------------------------------------------------------------------
February 2, February 3,
2007 2006
----------- -----------
Cash and cash equivalents $ 189,288 $ 200,609
Merchandise inventories 1,432,336 1,474,414
Net property and equipment 1,236,874 1,192,172
Current portion of long-term obligations 8,080 8,785
Long-term obligations 261,958 269,962
Shareholders' equity 1,745,747 1,720,795
Selected Cash Flow Information (in thousands)
- ----------------------------------------------------------------------
Year Ended
-----------------------
February 2, February 3,
2007 2006
(52 Weeks) (53 Weeks)
----------- -----------
Depreciation and amortization $ 200,608 $ 186,824
Non-cash inventory adjustments and asset
impairment 78,115 -
Purchases of property and equipment 261,515 284,112
Payment of cash dividends 62,472 56,183
Repurchases of common stock 79,947 297,602
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
Selected Additional Information
(Unaudited)
Net Sales by Category (in thousands)
- ----------------------------------------------------------------------
Year Ended
-------------------------------------
February 2, February 3,
2007 2006 %
(52 Weeks) (53 Weeks) Change
----------- ----------- -------
Highly consumable $6,022,014 $5,606,466 7.4%
Seasonal 1,509,999 1,348,769 12.0
Home products 914,357 907,826 0.7
Basic clothing 723,452 719,176 0.6
----------- ----------- -------
Total sales $9,169,822 $8,582,237 6.8%
=========== =========== =======
Quarter Ended
-------------------------------------
February 2, February 3,
2007 2006 %
(13 Weeks) (14 Weeks) Change
----------- ----------- -------
Highly consumable $1,539,327 $1,527,951 0.7%
Seasonal 539,344 486,235 10.9
Home products 275,935 269,333 2.5
Basic clothing 199,380 196,985 1.2
----------- ----------- -------
Total sales $2,553,986 $2,480,504 3.0%
=========== =========== =======
New Store Activity
- ----------------------------------------------------------------------
Year Ended
-----------------------------
February 2, February 3,
2007 2006
(52 Weeks) (53 Weeks)
----------- -----------
Beginning store count 7,929 7,320
New store openings 537 734
Store closings 237 (2) 125 (1)
Net new stores 300 609
Ending store count 8,229 7,929
Total selling square footage
(000's) 57,299 54,753
(1) Includes 41 stores closed for an extended time period due to
hurricane damage.
(2) Includes 128 stores closed as a result of certain recent strategic
initiatives.
CONTACT: Dollar General Corporation
Investor Contact:
Emma Jo Kauffman, 615-855-5525
or
Media Contact:
Tawn Earnest, 615-855-5209