Dollar General's CEO Hosts 2013 Annual Shareholder Meeting (Transcript)

| About: Dollar General (DG)

Dollar General Corporation (NYSE:DG)

2013 Annual Shareholder Meeting

May 29, 2013 10:00 am ET


Richard W. Dreiling - Chairman and Chief Executive Officer

Christine L. Connolly - Chief Compliance Officer and Corporate Secretary

Richard W. Dreiling

Good morning and welcome to Dollar General's 2013 Annual Meeting of the Shareholders. I am Rick Dreiling, Chairman of the Board and CEO, and I am now calling the meeting to order. Also with me today is Christine Connolly, our Corporate Secretary. And as a reminder, this meeting is being recorded and webcast live.

It's my pleasure to recognize Tim Ellis, Goodlettsville's city manager. And I'd like to thank Tim and the City of Goodlettsville for hosting us today. Thank you very much, Tim. And I'd also like to introduce our Board of Directors. In the front row, I have Raj Agrawal, Warren Bryant, I have Mike Calbert and our 2 newest board members, Sandy Cochran and Pat Fili-Krushel. Next we have Adrian Jones, Bill Rhodes and David Rickard.

Our corporate officers are also here seated to the right, I have David Tehle, Executive Vice President and Chief Financial Officer; John Flanigan, our Executive Vice President in Global Supply Chain; Bob Ravener, our Executive Vice President in Chief People Officer; Greg Sparks, our Executive Vice President in Store Operations; Todd Vasos, Executive Vice President and Division President, Chief Merchandising Officer; Anita Elliott, our Senior Vice President and Controller; and Susan Lanigan, our Executive Vice President and General Counsel. Big day for Susan. Susan is retiring from Dollar General at the end of the month with almost 11 years of service at Dollar General and 5 years with me and even more importantly, it's her birthday today, so. Seated next to Susan is our new general counsel, Rhonda Taylor, who will be taking over that job on June 1.

So I'd like to thank each of our officers for their teamwork and leadership and I'd also like to take a moment to thank the Board of Directors for their guidance and support over the course of the last year. Also with us today is Jeff Smith, representing Ernst & Young, our independent auditing firm. Jeffrey. So Christine, will you please take a minute and review the required announcements?

Christine L. Connolly

Thank you, Rick. Good morning. This meeting is being held pursuant to the notice provided to shareholders. Our Inspector of Election is Sid Rodrigue of Broadridge. Sid, will you please stand. Any undelivered proxy should be given to Mr. Rodrigue at this time. The record date for this meeting is March 21, 2013. Only shareholders of record on that date or their proxies may vote today. The shareholders list is as of the record date and it's available for examination in the lobby along with copies of the meeting notice, proxy statement, 2012 Annual Report, the affidavit as to the provision of these materials to each shareholder and the meeting agenda and procedural rules. They are present today in person or by proxy, the holders of not less than a majority of the shares issued and outstanding on the record date. Accordingly, we have a quorum. The polls are now open for anyone who has not already voted by proxy or who wants to change their vote. Please raise your hand if you need a ballot and return voted ballots to Mr. Rodrigue.

The polls will closed at the end of the discussion on the last item being voted on today. Please note that no balance, proxies, revocations or changes will be accepted after that time. Mr. Dreiling will review the items of business. We will have up to 15 minutes to discuss each item. Anyone wishing to discuss an item of business should approach the microphone at the end of the aisle when Mr. Dreiling asks for discussion. Following the business portion of the meeting, Mr. Dreiling will give his Chairman's report and then we'll have a question-and-answer session. Only written questions will be taken at that time. Question cards are available in the lobby.

Rick, you may now introduce the items of business.

Richard W. Dreiling

Thank you, Christine. The first item is the election of the 9 directors named in the proxy statement to hold office until the next Annual Meeting. Is there any discussion on this particular proposal? If there's no further comments, we'll move on to the next proposal.

The second item of business is the vote regarding the amendment to the company's Amended and Restated Charter to implement a majority voting standard in uncontested elections of directors. Is there any discussion of this proposal? If there's no further comments, we'll go ahead and move on to our final proposal.

The third item of business is the ratification of the appointment of Ernst & Young LLP as our independent auditor for fiscal 2013. Is there any discussion on this proposal?

Since there was -- no other business was submitted and pursuant to our bylaws for consideration at this meeting, the polls are now closed. The Inspector of Election will now collect and tally the ballots and complete the certificate of the voting results.

Christine, before I give my report, can you please advise regarding forward-looking statements?

Christine L. Connolly

Today's comments contain forward-looking information such as statement of plans and objectives for future operations growth or initiatives. The words believe, plan, expect or intend and similar expressions generally identify forward-looking statements. A number of factors may result and actual results differing materially from the forward-looking statements including, but not limited to those described in our Form 10-K filed with the SEC on March 25, 2013. We caution against undue reliance on these forward-looking statements, which speak only as of today's date. The company disclaims any obligation to publicly update or revise these statements to reflect events or circumstances occurring after today or to reflect the occurrence of unanticipated events.

In addition, this presentation refers to sales growth based on 2011 sales excluding the effect of the 53rd week, which is not in accordance with generally accepted accounting principles or GAAP. A reconciliation of these calculation to the GAAP basis calculation is included in the meeting slides, which are also available on our website at under investor information, conference calls and investor events.

Richard W. Dreiling

Thanks again, Christine, and thanks to all of you for being here today. Serving our customers by helping them save time, save money everyday has never been more important than it is today. Our unique combination of convenience and value has never been more relevant to everyday lives to so many consumers. Today, Dollar General is serving more customers in more markets than ever before and we continue to see significant opportunities to grow. Our fiscal 2012 financial performance was once again set -- has once again set new records as we work to fulfill our mission of serving others including our shareholders, our customers and our employees.

Here are some of the highlights of 2012. Our net sales increased 8.2% to $16 billion or $216 per selling square foot. Excluding the 53rd week in 2011, net sales increased 10.4%. Same-store sales grew 4.7%, marking our 23rd consecutive year of same-store sales growth. Operating profit increased 11% to $1.66 billion or 10.3% of sales, setting a new operating profit rate record. Net income increased 24% to $953 million and earnings per diluted share increased 28% to $2.85. Operating activities generated $1.13 billion of cash flow, which we primarily used to invest in growth for the future and to return cash to our shareholders through share repurchases.

We opened 625 new stores, remodeled or relocated 592 stores and opened 2 new distribution centers in 2012. We opened our first 45 stores in California, a state with significant growth opportunities for Dollar General. We ended the fiscal year with 10,506 stores in 40 states, supported by 11 distribution centers across the United States.

As part of our ongoing share repurchase program, we repurchased 14.4 million shares of our common stock at a total cost of $671 million in 2012, bringing our total repurchases since inception of the program to 19.3 million shares or $856 million. And in March of this year, our board increased our share repurchase authorization by an additional $500 million. We also made significant progress on optimizing our capital structure by refinancing the remainder of our high interest rate debt in July of 2012. And in April of this year, we completed the restructuring of our credit facilities, resulting in much better interest rates and more flexibility. We're very pleased to now have investment grade ratings by both Moody's and S&P.

In 2012, customers responded with enthusiasm to our new merchandising initiatives and improvements in our stores. We continue to improve our merchandise in-stock levels and enhance our category management. We expanded the number of coolers for refrigerated and frozen foods in approximately 1,400 existing stores. We made further progress on our beer and wine rollout, and we implemented new merchandising initiatives throughout our stores, including successful new offerings in our home products area. We also continue to expand our private brands and consumables, and are especially pleased with the ongoing success of our proprietary Rexall brand in health care, Rexall, which has helped us position Dollar General as a destination for health care products.

We continue to improve the customer experience in our stores, reaching an all-time high and raising the bar for customer service in the Dollar Store sector. We implemented new training and development programs for our store employees and further utilized our new workforce management system to help our store managers more effectively manage their stores. As a result, our store manager retention has improved, our store productivity has increased and store labor cost, as a percentage of sales in 2012, decreased while improving our overall customer shopping experience. We're looking forward to another great year in 2013. We have a strong foundation for growth that we have built together as a team, and I am confident that we can successfully execute our 2013 plans and continue to deliver long term, sustainable growth for our shareholders.

In 2013, we remain focused on our 4 key operating priorities that have been instrumental in our success over the past 5 years. Driving productive sales growth, enhancing our gross margin, leveraging process improvements and Information Technology to reduce costs, and strengthening and expanding Dollar General's culture of serving others. Most important, we will continue to listen to our customers and strive to provide them with unparalleled convenience and value. We believe that we have the right plans and the right team to continue to deliver long term, sustainable growth for our shareholders. Thank you for your investment in the Dollar General Corporation and your continued support.Now I believe that we have time to answer your questions. David, if you'd like to come up here. I received one question from the audience and the question is, you've just built a new store in Portland, Tennessee. It's very impressive. By the way I appreciate the very impressive part. But does a small town like Portland need 2 Dollar Generals?

And the answer to that is we have a very detailed, rigorous real estate program that allows us to go in and really analyze all the communities that we operate. We take into account the demographics, the economics of the environment. And we believe that maximizing share growth to the construction of new stores ultimately will allow us to grow, not only profitably, but continue to garner more and more share. So the answer is, Portland will hold 2 stores. And by the way, at the conclusion of 2011, we will have over 11,000 stores -- excuse me, 2013, we'll have over 11,000 stores operating across the United States.

So with that, Christine, David, since there's no other questions, we'll go ahead and proceed. Christine, would you like to give us the voting count?

Question-and-Answer Session

Christine L. Connolly

Based on the preliminary report of the Inspector of Election, each of the 9 nominees named in the proxy statement has received sufficient votes to be reelected to our board. The matter pertaining to the amendment to the company's Amended and Restated Charter to implement a majority voting standard and uncontested elections of directors has received sufficient votes to be approved. And the appointment of Ernst & Young as our independent auditing firm for fiscal 2013 has received sufficient votes to be ratified. The final certified voting results will be reflected in a Form 8-K that we will file with the SEC.

Richard W. Dreiling

Thank you, Christine. This concludes our 2013 Annual Shareholders' Meeting. I must say it's always a pleasure to see people who shop with the company and invest in it. So with that, we stand adjourned.

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