Dollar General buys back $44.1 million of bonds, remains focused on investing in business

By Jennifer Lanning Drey

Portland, Ore., March 24 - Dollar General Corp. repurchased $44.1 million of its outstanding senior subordinated notes in the fourth quarter to end 2008 with total outstanding debt of $4.1 billion, David Tehle, the company's chief financial officer, reported Tuesday.

Although its long-term objective is to continue to deleverage the business, Dollar General's first priority is to invest in the business, which it believes will provide the best return on its investment, Tehle said during the company's fourth-quarter earnings call.

At the same time, Dollar General will consider continuing to buy back debt as appropriate. The company has some restrictions on repurchasing debt but doesn't believe they will be a major impairment to buying back bonds in 2009, he said.

In 2008, Dollar General generated $575.2 million of cash from operating activities, resulting from a strong operating performance, Tehle said. The company ended fiscal 2008 with cash and cash equivalents of $378 million at Jan. 30, according to its earnings release.

Dollar General had no borrowings outstanding under its asset-based revolving credit facility at fiscal year-end.

In 2009, the company has increased projected capital expenditures to between $250 million to $275 million, primarily related to improvements in existing stores, the planned opening of 450 new stores and the remodel or relocation of 400 stores.

Capital expenditures totaled $205.5 million in 2008.

Q4 sales up 11.2%

Dollar General posted an 11.2% increase in fourth-quarter sales, which were $2.85 billion, compared to $2.56 billion in the same period of 2007. Same-store sales increased 9.4% for the period with higher customer traffic and average transactions both contributing to the increase.

For the full year, sales increased 10.1%, including a 9.0% increase in same-store sales.

"Not only has the company performed extremely well in an environment that is challenging for consumers and retailers this year, but we also continue to strengthen our financial foundation," Tehle said.

In addition to focusing on new store openings in 2009, Dollar General will focus on improving the non-consumables side of the business.

"Our operating priorities are focused on increasing the financial productivity of our stores, he said.

Dollar General is a Goodlettsville, Tenn.-based discount retailer.

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