UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 28, 2006
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Dollar General Corporation
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(Exact name of registrant as specified in its charter)
Tennessee 001-11421 61-0502302
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(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
100 Mission Ridge
Goodlettsville, Tennessee 37072
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (615) 855-4000
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(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[_] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[_] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[_] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[_] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On November 29, 2006, Dollar General Corporation (the "Company") issued
a press release disclosing certain charges and expenses that will be reflected
in the Company's results of operations for the fiscal 2006 third quarter ended
November 3, 2006 in connection with the implementation of certain strategic
changes. The press release is attached hereto as Exhibit 99.1 and is
incorporated by reference as if fully set forth herein. For further information
regarding these charges and expenses, please see Items 2.05 and 2.06 below.
ITEM 2.05 COSTS ASSOCIATED WITH EXIT OR DISPOSAL ACTIVITIES.
On November 28, 2006, the Board of Directors of the Company approved
management's recommendation to close approximately 400 stores by the end of
fiscal 2007 in addition to those closed in the normal course of business. The
disclosure herein includes estimates of pre-tax costs and charges expected to be
incurred in connection with this store closing plan. These estimates, as well as
the anticipated timing of the store closings, are subject to change as the
activities are finalized. Some of these costs and charges will be recognized in
the third quarter of fiscal 2006, though a greater amount of the charges will be
recognized in future periods when the related expenses are incurred.
This decision is part of the Company's plans to focus on upgrading its
existing store base and enhancing the store experience for customers by closing
a number of stores that do not meet the Company's real estate criteria,
decelerating its new store growth rate through fiscal 2008, remodeling or
relocating a number of stores to improve productivity, and by eliminating its
"packaway" inventory management model by the end of fiscal 2007. This initiative
is part of the Company's ongoing efforts to enhance its customers' shopping
experience by making stores more appealing, fresh and easy to shop.
In its second quarter earnings release on August 31, 2006, the Company
announced it was considering accelerating its recently enhanced real estate
strategy. The Board's decision to close approximately 400 stores reflects a plan
that is based upon a comprehensive analysis of the performance of each of the
Company's stores, including but not limited to, recent store sales, rental
costs, profit and cash flow trends, potential growth and proximity to other
Dollar General(R) stores. The Company will continue to evaluate its store base
for additional closing candidates as part of its revitalization efforts.
The Company currently estimates the pre-tax exit costs and charges
related to this real estate plan to be $74 million. An estimated $16 million of
these costs and charges will be recorded in the third quarter of fiscal 2006,
primarily related to asset impairments (including $8 million of below-cost
inventory adjustments and $8 million of fixed assets) in the stores to be
closed. The remaining $58 million of these costs and charges are expected to be
recorded primarily in fiscal 2007. The estimated amount and timing of these
costs and charges are preliminary and may vary materially depending on various
factors, including timing in the execution of the plan, the outcome of
negotiations with landlords and/or potential sublease tenants, the accuracy of
assumptions used by management in developing these estimates and final inventory
levels.
The table below summarizes the types of expenses and identifies the
estimated non-cash and cash components associated with the store closing plan:
Pre-Tax Costs ($ millions) Non-Cash Future Cash Total
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Lease contract termination costs $ -- $ 38 $ 38
One-time employee termination benefits -- 1 1
Other associated store closing costs -- 9 9
Inventory markdowns below cost
& liquidation fees 12 5 17
Asset impairment & accelerated depreciation 9 -- 9
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Total $ 21 $ 53 $ 74
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In the table above, "Future Cash" primarily relates to the settlement
of lease obligations over their scheduled lease terms."Inventory markdowns
below cost" represents the estimate of below cost markdowns needed to dispose of
the closing stores' inventory. "Asset impairment & accelerated depreciation"
includes assets used in the normal operations of retail stores and includes the
remaining unrecoverable net book values of leasehold improvements, fixtures,
racking, equipment, etc. due to the store closures that cannot or will not be
relocated and used in other of the Company's operations. "Other associated store
closing costs" primarily includes the removal of any usable assets as well as
real estate consulting and other services. The table does not include the cash
impact of the tax benefit associated with these expenses, which generally will
be realized when the lease obligation is paid, or the asset is disposed of or
sold.
The Company's November 29, 2006, press release announcing the store
closing plan is attached as Exhibit 99.1 and incorporated herein by reference.
ITEM 2.06 MATERIAL IMPAIRMENTS.
On November 28, 2006, the Company's Board of Directors was advised of
management's assessment that certain material impairment charges should be
recorded in the third quarter of fiscal 2006 due to the Board's approval of an
accelerated schedule of inventory markdowns, as further described below, and due
to the Board's approval of the store closing plan discussed in Item 2.05 above.
The discussion set forth in Item 2.05 above is incorporated herein by reference.
In its second quarter earnings release on August 31, 2006, the Company
announced it was considering modifying its historical inventory management
model. Based on a comprehensive analysis of the impact of the Company's
"packaway" inventory model on its ability to effectively serve its customers,
and to better meet its customers' needs and to ensure an appealing, fresh
merchandise selection, the Company will discontinue that packaway management
model by the end of fiscal 2007. With few exceptions, the Company plans to
eliminate, through in-season and other markdowns, existing seasonal, home and
apparel packaway merchandise by the close of fiscal 2007. In addition, beginning
in fiscal 2007, the Company plans to clear virtually all current-year
non-replenishable merchandise by taking end-of-season markdowns, allowing for
increased levels of newer, current-season merchandise. The Company believes this
strategy change will enhance the appearance of its stores and will positively
impact customer satisfaction as well as the store employees' ability to manage
stores, ultimately resulting in higher sales, increased gross margin, lower
employee turnover, and decreased inventory shrink and damages. The Company also
expects this improved SKU management will result in more appropriate per store
inventory levels.
The Company anticipates recording an estimated below-cost inventory
adjustment of approximately $64 million (in addition to $8 million relating to
inventory in stores to be closed as discussed in Item 2.05 above) in the third
quarter of fiscal 2006 to reflect the impact of this revised strategy. The
estimated amount of the below-cost inventory adjustment is based on management's
assumptions regarding the timing and adequacy of markdowns and the final
adjustment may vary materially from the estimate depending on various factors,
including timing in the execution of the plan and the accuracy of assumptions
used by management in developing these estimates. These impairment charges will
not require current or future cash outflows but will decrease the amount of
future cash inflows.
The Company's November 29, 2006, press release announcing this
decision is attached as Exhibit 99.1 and incorporated herein by reference.
ITEM 7.01 REGULATION FD DISCLOSURE.
On November 29, 2006, the Company issued the news releases attached
hereto as Exhibit 99.1 and Exhibit 99.2, each of which is incorporated by
reference as if fully set forth herein. Exhibit 99.1 discloses the matters
discussed in Items 2.02, 2.05 and 2.06 above, a share repurchase authorization,
the appointment of a President and Chief Operating Officer, and other matters.
Exhibit 99.2 discloses a dividend declaration.
FORWARD-LOOKING STATEMENT DISCLAIMER
This Form 8-K and the attached press release contain forward-looking
information, including but not limited to, certain planned real estate and
merchandising strategic and operational changes and the related timing, cost and
charge estimates and anticipated results and benefits. The words "believe,"
"anticipate," "project," "plan," "schedule," "expect," "estimate," "objective,"
"target," "potential," "forecast," "goal," "intend," "should," "will likely
result," or "will continue" and similar expressions generally identify
forward-looking statements. Forward-looking statements involve risks,
uncertainties and other factors that may cause actual results to differ
materially from those 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. These risks, uncertainties and other
factors are discussed by the Company in its filings with the United States
Securities and Exchange Commission (the "SEC"), including its most recent Form
10-K and Form 10-Q, its other filings made from time to time with the SEC,
including this Form 8-K, and the press release attached as Exhibit 99.1. The
Company strongly encourages readers to review all such filings and the press
release for a more detailed discussion of these risks, uncertainties and other
factors. Readers are cautioned not to place undue reliance on these
forward-looking statements, since the statements speak only as of the date of
this document. Unless otherwise required by law, the Company has no obligation,
and does not intend, to publicly update or revise forward-looking statements to
reflect events or circumstances occurring after the date of this document or to
reflect the occurrence of unanticipated events. Readers are advised, however, to
consult any further disclosures the Company may make on related subjects in its
documents filed with or furnished to the SEC or in its other public disclosures.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of businesses acquired. N/A
(b) Pro forma financial information. N/A
(c) Shell company transactions. N/A
(d) Exhibits. See Exhibit Index immediately following the signature
page hereto.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: November 29, 2006 DOLLAR GENERAL CORPORATION
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By: /s/ Susan S. Lanigan
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Susan S. Lanigan
Executive Vice President and General Counsel
EXHIBIT INDEX
Exhibit No. Description
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99.1 News release dated November 29, 2006 regarding various
strategic changes and other matters.
99.2 News release dated November 29, 2006 regarding a
dividend declaration.