Dollar General Reports Record Fourth Quarter and Full Year 2015 Financial Results; Board of Directors Increases Regular Quarterly Cash Dividend by 14%
Thu, 10 Mar 2016
- Full Year Net Sales Increased 7.7%; Full Year Same-Store Sales Increased 2.8%
- Fourth Quarter Net Sales Increased 7.0%; Fourth Quarter Same-Store Sales Increased 2.2%
-
13% EPS Growth for Fiscal 2015; Fiscal 2015 EPS of
$3.95 and Adjusted Fiscal 2015 EPS of$3.96 - Company Outlines Long-Term Financial Growth Model
-
Company Plans Share Repurchases of Approximately
$1.0 Billion in Fiscal 2016
“2015 was another great year for
“Looking ahead,
Vasos continued, “The Company remains well-positioned to serve our customers with value and convenience. We continue to take the appropriate strategic steps to ensure that we are investing in the Company for sustainable and consistent growth.”
Fourth Quarter 2015 Highlights
The Company’s net income for the 2015 fourth quarter was
Net sales increased 7.0 percent to
The Company’s gross profit, as a percentage of sales, was 31.8 percent in the 2015 fourth quarter compared to 31.7 percent in the 2014 fourth quarter, an increase of 12 basis points. Lower transportation costs and an improved rate of inventory shrinkage were the primary factors of the improved performance, while increased markdowns were an offset.
Selling, general and administrative expenses (“SG&A”) were
The effective income tax rate in the 2015 fourth quarter was 36.1 percent compared to 34.8 percent in the 2014 fourth quarter. Both years benefitted from the retroactive reenactment of the Work Opportunity Tax Credit (“WOTC”). The effective tax rate for the 2015 fourth quarter was higher than the 2014 quarter due to state income tax benefits recorded in the 2014 period as well as a benefit in the 2014 quarter associated with a change in the deductibility of expenses incurred in prior quarters of that year associated with an acquisition that was not completed.
As noted above, the 2015 fourth quarter effective tax rate benefitted
from the retroactive (for employees hired on or after
Full Year 2015 Financial Results
Full year 2015 net sales increased 7.7 percent to
The Company’s gross profit rate was 31.0 percent of sales in 2015
compared to 30.7 percent in 2014, an increase of 27 basis points. The
majority of the gross profit rate increase in 2015 as compared to 2014
was due to lower transportation costs and an improved rate of inventory
shrinkage, partially offset by increased markdowns. The Company recorded
a LIFO benefit of
Full year SG&A was 21.4 percent of sales in 2015 compared to 21.3
percent in 2014, an increase of 10 basis points. The 2015 SG&A results
reflect increases in incentive compensation expenses, repairs and
maintenance expenses, occupancy costs, and fees associated with an
increase in debit card transactions. Partially offsetting these items
was a higher volume of cash back transactions resulting in increased
convenience fees collected from customers. The 2014 SG&A results reflect
expenses of
The effective income tax rate for 2015 was 37.1 percent compared to 36.6
percent for 2014. The effective income tax rate was lower in 2014 due
principally to federal and state reserve releases in 2014 that did not
reoccur, to the same extent, in 2015. As in prior years, we received a
significant income tax benefit related to wages paid to certain newly
hired employees that qualify for federal jobs credits (principally the
Work Opportunity Tax Credit). In
The Company reported net income of
Merchandise Inventories
As of
Capital Expenditures
Significant components of property and equipment purchases in 2015
included approximately:
Share Repurchases
The Company repurchased
Dividend
On
Financial Growth Outlook
The Company has established a financial growth model that is focused on long-term shareholder value creation. Key components of the model include:
|
|
Annual Target |
||||||
|
|
+7 to 10% | ||||||
|
- Square Footage |
+6 to 8% | ||||||
|
- Same-Store Sales |
+2 to 4% | ||||||
| Operating Profit | +7 to 11% | ||||||
| Diluted Earnings per Share | +10 to 15% | ||||||
| Cash from Operations | 7 to 8% of Sales | ||||||
| Capital Expenditures | 2 to 3% of Sales | ||||||
|
Annual Shareholder Return |
+11 to 17% | ||||||
For the 53-week fiscal year ending
Including the impact of the 53rd week, the Company expects its fiscal 2016 net sales and diluted EPS results to be at the high end of the ranges outlined in the growth model above. Same-store sales growth for fiscal 2016 is forecasted to be near the middle of the range as outlined in the growth model above.
The Company plans to open approximately 900 new stores and relocate or
remodel 875 stores in fiscal 2016. Capital expenditures for fiscal 2016
are expected to be in the range of
The Company intends to update its diluted EPS guidance only if the Company no longer reasonably expects diluted EPS to fall within the 10 percent to 15 percent range outlined in the growth model above. The Company does not intend, and specifically disclaims any duty, to update its expectations regarding where in the range of guidance fiscal 2016 net sales, same-store sales or diluted EPS may fall, or to update any component of the growth model outlined above, other than diluted EPS as specified herein. The Company also does not intend, and specifically disclaims any duty, to update its dollar range for expected fiscal 2016 capital expenditures unless otherwise required by applicable securities laws.
The Company intends to use the financial growth model in discussions of its business beginning in 2016 and in future years, and by doing so the Company does not undertake to update any portion of the growth model except as specified herein.
Conference Call Information
The Company will hold a conference call on
Non-GAAP Disclosure
Certain financial information relating to the fiscal 2015 and 2014
periods provided in this press release and the accompanying tables has
not been derived in accordance with
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 as these measures provide an additional relevant
comparison of the Company’s operating performance across periods.
Adjustments to net income and EPS in the 2015 fiscal year include
expenses of
Adjustments to net income and EPS in the 2014 fiscal year include
expenses of
Reconciliations of these non-GAAP measures to the most directly comparable measures calculated in accordance with GAAP are provided in the accompanying schedules.
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, EPS or any other measure derived in accordance with GAAP. 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. Because not all companies use identical calculations these presentations may not be comparable to other similarly titled measures of other companies.
Forward-Looking Statements
This press release contains forward-looking information, such as the
information in the section entitled “Financial Growth Outlook” as well
as other statements regarding the Company’s outlook, plans and
intentions, including, but not limited to, statements made within the
quotations of
- economic conditions, including their effect on employment levels, consumer demand, disposable income, credit availability and spending patterns, inflation, commodity prices, fuel prices, interest rates, exchange rate fluctuations and the cost of goods;
- failure to successfully execute the Company’s strategies and initiatives, including those relating to merchandising, sourcing, shrink, private brand, distribution and transportation, store operations, store formats, budgeting and expense reduction, and real estate;
- failure to open, relocate and remodel stores profitably and on schedule, as well as failure of the Company’s new store base to achieve sales and operating levels consistent with the Company’s expectations;
- levels of inventory shrinkage;
- effective response to competitive pressures and changes in the competitive environment and the markets where the Company operates, including consolidation;
- the Company’s level of success in gaining and maintaining broad market acceptance of its private brands;
- disruptions, unanticipated or unusual expenses or operational failures in the Company’s supply chain including, without limitation, a decrease in transportation capacity for overseas shipments, increases in transportation costs (including increased fuel costs and carrier rates or driver wages), work stoppages or other labor disruptions that could impede the receipt of merchandise, or delays in constructing or opening new distribution centers;
- risks and challenges associated with sourcing merchandise from suppliers, including, but not limited to, those related to international trade;
- unfavorable publicity or consumer perception of the Company’s products, including, but not limited to, related product liability and food safety claims;
- the impact of changes in or noncompliance with governmental laws and regulations (including, but not limited to, environmental compliance, product safety, food safety, information security and privacy, and labor and employment laws, as well as tax laws, the interpretation of existing tax laws, or our failure to sustain our reporting positions negatively affecting the Company’s tax rate) and developments in or outcomes of private actions, class actions, administrative proceedings, regulatory actions or other litigation;
- natural disasters, unusual weather conditions, pandemic outbreaks, terrorist acts and geo-political events;
- damage or interruption to the Company’s information systems or failure of technology initiatives to deliver desired or timely results;
- ability to attract and retain qualified employees, while controlling labor costs (including anticipated regulatory changes related to overtime exemption under Fair Labor Standards Act) and other labor issues;
- the Company’s loss of key personnel, inability to hire additional qualified personnel or disruption of executive management as a result of retirements or transitions;
- failure to successfully manage inventory balances;
- seasonality of the Company’s business;
- incurrence of material uninsured losses, excessive insurance costs or accident costs;
- failure to maintain the security of information that the Company holds, whether as a result of a data security breach or otherwise;
- deterioration in market conditions, including market disruptions, limited liquidity and interest rate fluctuations, or a lowering of the Company’s credit ratings;
- new accounting guidance, or changes in the interpretation or application of existing guidance, such as changes to lease accounting guidance;
- the factors disclosed under “Risk Factors” in the Company’s most recent Annual Report on Form 10-K; 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
About
| DOLLAR GENERAL CORPORATION AND SUBSIDIARIES | ||||||||
| Consolidated Balance Sheets | ||||||||
| (In thousands) | ||||||||
| (Unaudited) | ||||||||
|
|
|
|||||||
| 2016 | 2015 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 157,947 | $ | 579,823 | ||||
| Merchandise inventories | 3,074,153 | 2,782,521 | ||||||
| Income taxes receivable | 6,843 | - | ||||||
| Prepaid expenses and other current assets | 193,467 | 170,265 | ||||||
| Total current assets | 3,432,410 | 3,532,609 | ||||||
| Net property and equipment | 2,264,062 | 2,116,075 | ||||||
|
|
4,338,589 | 4,338,589 | ||||||
| Other intangible assets, net | 1,200,994 | 1,201,870 | ||||||
| Other assets, net | 21,830 | 19,499 | ||||||
| Total assets | $ | 11,257,885 | $ | 11,208,642 | ||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Current portion of long-term obligations | $ | 1,379 | $ | 101,158 | ||||
| Accounts payable | 1,494,225 | 1,388,154 | ||||||
| Accrued expenses and other | 467,122 | 413,760 | ||||||
| Income taxes payable | 32,870 | 59,400 | ||||||
| Total current liabilities | 1,995,596 | 1,962,472 | ||||||
| Long-term obligations | 2,969,175 | 2,623,965 | ||||||
| Deferred income taxes | 639,955 | 626,858 | ||||||
| Other liabilities | 275,283 | 285,309 | ||||||
| Total liabilities | 5,880,009 | 5,498,604 | ||||||
|
Commitments and contingencies |
||||||||
|
Shareholders' equity: |
||||||||
|
Preferred stock |
- |
- |
||||||
|
Common stock |
250,855 |
265,514 |
||||||
| Additional paid-in capital | 3,107,283 | 3,048,806 | ||||||
| Retained earnings | 2,025,545 | 2,403,045 | ||||||
| Accumulated other comprehensive loss | (5,807 | ) | (7,327 | ) | ||||
| Total shareholders' equity | 5,377,876 | 5,710,038 | ||||||
| Total liabilities and shareholders' equity | $ | 11,257,885 | $ | 11,208,642 | ||||
| DOLLAR GENERAL CORPORATION AND SUBSIDIARIES | ||||||||||||
| Consolidated Statements of Income | ||||||||||||
| (In thousands, except per share amounts) | ||||||||||||
| (Unaudited) | ||||||||||||
| For the Quarter (13 Weeks) Ended | ||||||||||||
|
|
% of Net |
|
% of Net | |||||||||
| 2016 | Sales | 2015 | Sales | |||||||||
| Net sales | $ | 5,286,938 | 100.00 | % | $ | 4,939,059 | 100.00 | % | ||||
| Cost of goods sold | 3,604,669 | 68.18 | 3,373,620 | 68.30 | ||||||||
| Gross profit | 1,682,269 | 31.82 | 1,565,439 | 31.70 | ||||||||
| Selling, general and administrative expenses | 1,069,840 | 20.24 | 998,723 | 20.22 | ||||||||
| Operating profit | 612,429 | 11.58 | 566,716 | 11.47 | ||||||||
| Interest expense | 23,275 | 0.44 | 21,532 | 0.44 | ||||||||
| Income before income taxes | 589,154 | 11.14 | 545,184 | 11.04 | ||||||||
| Income tax expense | 212,979 | 4.03 | 189,813 | 3.84 | ||||||||
| Net income | $ | 376,175 | 7.12 | % | $ | 355,371 | 7.20 | % | ||||
| Earnings per share: | ||||||||||||
| Basic | $ | 1.30 | $ | 1.17 | ||||||||
| Diluted | $ | 1.30 | $ | 1.17 | ||||||||
| Weighted average shares outstanding: | ||||||||||||
| Basic | 288,401 | 303,108 | ||||||||||
| Diluted | 289,322 | 304,435 | ||||||||||
| For the 52 Weeks Ended | ||||||||||||
|
|
% of Net |
|
% of Net | |||||||||
| 2016 | Sales | 2015 | Sales | |||||||||
| Net sales | $ | 20,368,562 | 100.00 | % | $ | 18,909,588 | 100.00 | % | ||||
| Cost of goods sold |
14,062,471 |
69.04 | 13,107,081 | 69.31 | ||||||||
|
Gross profit |
6,306,091 |
30.96 |
5,802,507 |
30.69 |
||||||||
|
Selling, general and administrative expenses |
4,365,797 |
21.43 |
4,033,414 |
21.33 |
||||||||
|
Operating profit |
1,940,294 |
9.53 |
1,769,093 |
9.36 |
||||||||
|
Interest expense |
86,944 |
0.43 |
88,232 |
0.47 |
||||||||
|
Other (income) expense |
326 |
0.00 |
- |
0.00 |
||||||||
| Income before income taxes | 1,853,024 | 9.10 | 1,680,861 | 8.89 | ||||||||
| Income tax expense | 687,944 | 3.38 | 615,516 | 3.26 | ||||||||
| Net income | $ | 1,165,080 | 5.72 | % | $ | 1,065,345 | 5.63 | % | ||||
| Earnings per share: |
|
|||||||||||
| Basic | $ | 3.96 | $ | 3.50 | ||||||||
| Diluted | $ | 3.95 | $ | 3.49 | ||||||||
| Weighted average shares outstanding: | ||||||||||||
| Basic | 294,330 | 304,633 | ||||||||||
| Diluted | 295,211 | 305,681 | ||||||||||
| DOLLAR GENERAL CORPORATION AND SUBSIDIARIES | ||||||||||
| Consolidated Statements of Cash Flows | ||||||||||
| (In thousands) | ||||||||||
| (Unaudited) | ||||||||||
| For the 52 Weeks Ended | ||||||||||
|
|
|
|||||||||
| 2016 | 2015 | |||||||||
| Cash flows from operating activities: | ||||||||||
| Net income | $ | 1,165,080 | $ | 1,065,345 | ||||||
|
Adjustments to reconcile net income to net cash from operating activities: |
||||||||||
| Depreciation and amortization | 352,431 | 342,353 | ||||||||
| Deferred income taxes | 12,126 | (17,734 | ) | |||||||
| Tax benefit of share-based awards | (13,698 | ) | (12,147 | ) | ||||||
| Loss on debt retirement, net | 326 | - | ||||||||
| Noncash share-based compensation | 38,547 | 37,338 | ||||||||
| Other noncash (gains) and losses | 7,797 | 8,551 | ||||||||
| Change in operating assets and liabilities: | ||||||||||
| Merchandise inventories | (290,001 | ) | (233,559 | ) | ||||||
| Prepaid expenses and other current assets | (24,626 | ) | (25,048 | ) | ||||||
| Accounts payable | 105,637 | 97,166 | ||||||||
| Accrued expenses and other liabilities | 44,949 | 41,635 | ||||||||
| Income taxes | (19,675 | ) | 12,399 | |||||||
| Other | (905 | ) | (1,555 | ) | ||||||
| Net cash provided by (used in) operating activities | 1,377,988 | 1,314,744 | ||||||||
| Cash flows from investing activities: | ||||||||||
| Purchases of property and equipment | (504,806 | ) | (373,967 | ) | ||||||
| Proceeds from sales of property and equipment | 1,423 | 2,268 | ||||||||
| Net cash provided by (used in) investing activities | (503,383 | ) | (371,699 | ) | ||||||
|
Cash flows from financing activities: |
||||||||||
|
Issuance of long-term obligations |
499,220 |
- |
||||||||
|
Repayments of long-term obligations |
(502,401 |
) |
(78,467 |
) |
||||||
|
Borrowings under revolving credit facilities |
2,034,100 |
1,023,000 |
||||||||
|
Repayments of borrowings under revolving credit facilities |
(1,783,100 |
) |
(1,023,000 |
) |
||||||
| Debt issuance costs | (6,991 | ) | - | |||||||
| Repurchases of common stock | (1,299,613 | ) | (800,095 | ) | ||||||
| Payments of cash dividends | (258,328 | ) | - | |||||||
|
Other equity and related transactions |
6,934 |
(2,373 |
) | |||||||
| Tax benefit of share-based awards | 13,698 | 12,147 | ||||||||
| Net cash provided by (used in) financing activities | (1,296,481 | ) | (868,788 | ) | ||||||
| Net increase (decrease) in cash and cash equivalents | (421,876 | ) | 74,257 | |||||||
| Cash and cash equivalents, beginning of period | 579,823 | 505,566 | ||||||||
| Cash and cash equivalents, end of period | $ | 157,947 | $ | 579,823 | ||||||
| Supplemental cash flow information: | ||||||||||
| Cash paid for: | ||||||||||
| Interest | $ | 76,354 | $ | 82,447 | ||||||
| Income taxes | $ | 697,357 | $ | 631,483 | ||||||
| Supplemental schedule of non-cash investing and financing activities: | ||||||||||
|
Purchases of property and equipment awaiting processing for payment, included in Accounts payable |
$ | 32,020 | $ | 31,586 | ||||||
| DOLLAR GENERAL CORPORATION AND SUBSIDIARIES | ||||||||||
| Selected Additional Information | ||||||||||
| (Unaudited) | ||||||||||
| Sales by Category (in thousands) | ||||||||||
| For the Quarter (13 Weeks) Ended | ||||||||||
|
|
|
|||||||||
| 2016 | 2015 | % Change | ||||||||
| Consumables | $ | 3,914,335 | $ | 3,654,405 | 7.1 | % | ||||
| Seasonal | 738,021 | 685,342 | 7.7 | % | ||||||
| Home products | 364,131 | 337,470 | 7.9 | % | ||||||
| Apparel | 270,451 | 261,842 | 3.3 | % | ||||||
| Net sales | $ | 5,286,938 | $ | 4,939,059 | 7.0 | % | ||||
| For the 52 Weeks Ended | ||||||||||
|
|
|
|||||||||
| 2016 | 2015 | % Change | ||||||||
| Consumables | $ | 15,457,611 | $ | 14,321,080 | 7.9 | % | ||||
| Seasonal | 2,522,701 | 2,344,993 | 7.6 | % | ||||||
| Home products | 1,289,423 | 1,205,373 | 7.0 | % | ||||||
| Apparel | 1,098,827 | 1,038,142 | 5.8 | % | ||||||
| Net sales | $ | 20,368,562 | $ | 18,909,588 | 7.7 | % | ||||
| Store Activity | ||||||||||
| For the 52 Weeks Ended | ||||||||||
|
|
|
|||||||||
|
2016 |
2015 |
|||||||||
|
Beginning store count |
11,789 |
11,132 |
||||||||
|
New store openings |
730 |
700 |
||||||||
| Store closings | (36 | ) | (43 | ) | ||||||
| Net new stores | 694 | 657 | ||||||||
| Ending store count | 12,483 | 11,789 | ||||||||
| Total selling square footage (000's) | 92,477 | 87,205 | ||||||||
| Growth rate (square footage) |
6.0 |
% |
6.3 | % | ||||||
| DOLLAR GENERAL CORPORATION AND SUBSIDIARIES | ||||||||
| Reconciliation of Non-GAAP Financial Measures | ||||||||
|
Adjusted Net Income and |
||||||||
| Adjusted Diluted Earnings Per Share | ||||||||
| (Unaudited) | ||||||||
| (in millions, except per share amounts) | ||||||||
| For the 52 Weeks Ended | ||||||||
|
|
|
|||||||
| 2016 | 2015 | |||||||
| Net income | $ | 1,165.1 | $ | 1,065.3 | ||||
| Expenses related to acquisition not completed | - | 14.3 | ||||||
| Restructuring expenses | 6.1 | - | ||||||
| Debt refinancing costs | 0.3 | - | ||||||
| Income tax effect of adjustments | (2.5 | ) | (5.6 | ) | ||||
| Reversal of tax reserves created in 2009 | - | (4.7 | ) | |||||
| Net adjustments | 3.9 | 4.0 | ||||||
| Adjusted net income | $ | 1,169.0 | $ | 1,069.3 | ||||
| Diluted earnings per share: | ||||||||
| As reported | $ | 3.95 | $ | 3.49 | ||||
| Adjusted | $ | 3.96 | $ | 3.50 | ||||
| Weighted average diluted shares outstanding: | 295.2 | 305.7 | ||||||
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