-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, QUZ8hoHjPQ/rck72PS4Yj51GjaO+cA9fyjaXXilmCczJfbktJ+/9VKEvwfcucn98 0yjw0UF0nSO6Dm0CaqIrHg== 0000029534-94-000029.txt : 19941215 0000029534-94-000029.hdr.sgml : 19941215 ACCESSION NUMBER: 0000029534-94-000029 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19941031 FILED AS OF DATE: 19941214 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DOLLAR GENERAL CORP CENTRAL INDEX KEY: 0000029534 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-VARIETY STORES [5331] IRS NUMBER: 610502302 STATE OF INCORPORATION: KY FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-04769 FILM NUMBER: 94564668 BUSINESS ADDRESS: STREET 1: 104 WOODMONT BLVD STE 500 CITY: NASHVILLE STATE: TN ZIP: 37205 BUSINESS PHONE: 6157832000 FORMER COMPANY: FORMER CONFORMED NAME: TURNER CAL DATE OF NAME CHANGE: 19710401 FORMER COMPANY: FORMER CONFORMED NAME: TURNER J L & SON INC DATE OF NAME CHANGE: 19710401 10-Q 1 3RD QTR. 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period October 31, 1994 Commission file number 0-4769 DOLLAR GENERAL CORPORATION (Exact name of registrant as specified in its charter) KENTUCKY 61-0502302 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 104 Woodmont Blvd. Suite 500 Nashville, Tennessee 37205 (Address of principal executive offices, zip code) Registrant's telephone number, including area code:(615) 783-2000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)has been subject to such filing requirements for the past 90 days. Yes X No____. The number of shares of common stock outstanding at October 31, 1994 was 53,264,271. 2 Dollar General Corporation Form 10-Q For the Quarter Ended October 31, 1994 Index Part I. Financial Information Page No. Item 1. Financial Statements (unaudited): Consolidated Statements of Income for the three months and nine months ended October 31, 1994 and 1993 3 Consolidated Balance Sheets as of October 31, 1994, January 31, 1994 and October 31, 1993 4 Consolidated Statements of Cash Flows for the six months ended October 31, 1994 and October 31, 1993 5 Notes to Consolidated Financial Statements 6-7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8-10 Part II. Other Information Item 6. Exhibits and Reports on Form 8-K 11 Signatures 11 3 PART I - FINANCIAL INFORMATION ITEM 1. Financial Statements
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (unaudited) For the three months and nine months ended October 31, 1994 and 1993 (in thousands except per share amounts) Three Months Nine Months 1994 1993 1994 1993 Net Sales $359,430 $272,567 $963,839 $749,930 Cost of goods sold 253,851 192,862 690,572 534,730 Gross profit 105,579 79,705 273,267 215,200 Selling, general and administrative expense 76,620 61,951 205,560 170,973 Operating profit 28,959 17,754 67,707 44,227 Interest expense 1,177 532 2,216 1,736 Income before taxes on income 27,782 17,222 67,491 42,491 Provision for taxes on income 10,488 6,248 24,723 15,976 Net income 17,294 10,974 40,768 26,515 Net income per common share $ .31 $ .20 $ .74 $ .49 Weighted average number of common shares outstanding 55,354 54,784 55,061 54,138 Cash dividends per common share as declared $ .05 $ .05 $ .15 $ .15 Adjusted to give appro- priate retroactive effect to the five-for-four stock splits distributed on April 15, 1994 and September 17, 1993 $ .05 $ .03 $ .15 $ .10
The accompanying notes are an integral part of this statement. 4
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS As of October 31, 1994, January 31, 1994 and October 31, 1993 (amounts in thousands) ASSETS October 31, January 31, October 31, 1994 1994 1993 Current Assets: (unaudited) (unaudited) Cash and cash equivalents $ 25,582 $ 35,365 $ 22,188 Merchandise inventories 392,605 260,042 322,568 Deferred income taxes 11,221 9,664 9,591 Other current assets 12,913 8,397 11,757 Income Taxes 0 1,563 0 Total current assets 442,321 315,031 377,104 Property & equipment, at cost 165,263 124,827 116,032 Less: Accumulated depreciation 57,477 47,322 44,121 107,786 77,505 71,911 Other Assets 4,818 4,701 5,383 $554,925 $397,237 $454,398 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 1,305 $ 1,302 $ 1,301 Short-term borrowings 112,712 18,000 67,800 Accounts payable 88,836 81,038 111,978 Accrued expenses 53,572 47,906 44,243 Income taxes 5,007 0 1,271 Total current liabilities 261,432 148,246 226,593 Long-term debt 4,538 5,711 5,842 Deferred income taxes 2,563 2,563 2,606 Shareholders' equity: Preferred stock 858 0 0 Common stock 27,248 27,248 21,970 Additional paid-in capital 276,975 65,857 64,591 Retained earnings 183,981 151,165 136,502 489,062 244,270 223,063 Less treasury stock 202,670 3,553 3,706 286,392 240,717 219,357 $554,925 $397,237 $454,398
The accompanying notes are an integral part of this statement. 5
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS for the nine months ended October 31, 1994 and 1993 (amounts in thousands) (unaudited) October 31, October 31, 1994 1993 Cash flows from operating activities: Net income $ 40,768 $ 26,515 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 12,217 8,254 Deferred income taxes ( 1,557) ( 1,956) Change in operating assets and liabilities: Merchandise inventories (132,563) (105,725) Accounts payable 7,800 47,953 Accrued expenses 5,666 6,573 Income taxes 6,570 ( 2,744) Other ( 4,216) ( 5,255) Net cash used by operating activities ( 65,315) ( 26,385) Cash flows used in investing activities: Purchase of property & equipment ( 42,916) ( 25,180) Cash flows provided by financing activities: Issuance of short-term borrowings 96,212 58,920 Repayments of short-term borrowings ( 1,501) ( 1,128) Repayments of long-term debt ( 1,170) ( 1,162) Payments of cash dividends ( 7,952) ( 5,444) Proceeds from exercise of stock options 6,584 3,826 Tax benefits from exercise of stock options 5,585 5,253 Other 690 ( 558) Net cash provided by financing activities 98,448 59,707 Net increase (decrease) in cash and equivalents ( 9,783) 8,142 Cash and cash equivalents at beginning of year 35,365 25,046 Cash and cash equivalents at end of period $ 25,582 $ 33,188
The accompanying notes are an integral part of this statement. 6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Basis of Presentation The accompanying financial statements are presented in accordance with the requirements of Form 10-Q and consequently do not include all of the disclosures normally required by generally accepted accounting principles or those normally made in the Company's Annual Report on Form 10-K. Accordingly, the reader of the quarterly report on Form 10-Q should refer to the Company's Annual Report on Form 10-K for the year ended January 31, 1994 for additional information. The accompanying financial statements have been prepared in accordance with the Company's customary accounting practices and have not been audited. All subsidiaries are included. In management's opinion, all adjustments (which are of a normal recurring nature) necessary for a fair presentation of the results of operations for the three month and nine month periods ended October 31, 1994 and 1993, respectively have been made. Interim cost of goods sold is determined using estimates of inventory shrinkage, inflation, and markdowns which are adjusted to reflect actual results at year end. Because of the seasonal nature of the Company's business, the results for interim periods are not necessarily indicative of the results to be expected for the year. 2. Net Income Per Common Share Net income per common share is based upon the actual weighted average number of common shares outstanding during each period plus the assumed exercise of dilutive stock options as follows:
Three Months Nine Months Ended October 31 Ended October 31 (in thousands) 1994 1993 1994 1993 Actual weighted average number of common shares outstanding during the period 53,165 1,874 52,947 52,683 Equivalent number of common shares representing the dilutive effect of stock options using the "treasury stock method" 2,189 2,910 2,114 1,455 Weighted Average Number of Common Shares 55,354 54,784 55,061 54,138
7 3. Changes in shareholder's equity for the nine months ended October 31, 1994 and 1993 were as follows (dollars in thousands except per share amounts):
Additional Retained Treasury Preferred Common Stock Paid-In Capital Earnings Stock Stock Balances, January 31, 1993 $17,821 $57,246 $119,580 $ 4,881 $ 0 Net Income 26,515 Cash dividend, $.15 per common share, as declared ( 5,444) Five for four stock split 4,149 ( 4,149) Reissuance of treasury stock under stock incentive plans 2,092 ( 1,175) Tax benefit from exercise of options 5,253 ______ ______ ______ ______ _______ Balances, October 31, 1993 $21,970 $64,591 $136,502 $ 3,706 $ 0 Balances, January 31, 1994 $27,248 $ 65,857 $151,165 $ 3,553 $ 0 Net Income 40,768 Cash dividend, $.15 per common share, as declared ( 7,952) Reissuance of treasury stock under stock incentive plans 5,217 ( 1,367) Tax benefit from exercise of options 5,585 Transfer to employee pension plan (25,314 shs.) 647 43 Issuance of Preferred Stock and exchange for Company Common Stock (1) 199,669 200,527 858 _______ _______ _______ ________ ______ Balances, October 31, 1994 $27,248 $276,975 $183,981 $202,670 $ 858
(1) On August 22, 1994, Dollar General Corporation announced the issuance of 1,715,742 shares of a previously authorized but unissued series of convertible preferred stock, as approved by the Board of Directors. The shares of the Series A Convertible Junior Preferred Stock ("Preferred Stock") were issued in exchange for 8,578,710 shares of Dollar General Common Stock, $.50 par value per share, owned by C.T.S., Inc., a personal holding company of the Turner family (founders of Dollar General). 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS RESULTS OF OPERATIONS The nature of the Company's business is highly seasonal. Historically, sales in the fourth quarter have been substantially higher than sales achieved in each of the first three quarters of the fiscal year. Thus expenses, and to a greater extent operating income, vary greatly by quarter. Caution, therefore, is advised when evaluating results for a period shorter than a full year or when comparing any period to other than the same period of the previous year. Nine months ended October 31, 1994 and 1993. NET SALES. Net sales for the first nine months of fiscal 1995 increased $213.9 million, or 28.5%, to $963.8 million from $749.9 million for the comparable period of fiscal 1994. The increase resulted primarily from 245 net additional stores being in operation as of October 31, 1994 as compared to the same prior year period (1,997 stores at October 31, 1994 compared to 1,752 at October 31, 1993) and an increase of 14.7% in same-store sales. The Company defines same-stores as those stores opened prior to the beginning of the previous fiscal year which have remained open throughout the previous fiscal year and the period reported. Management believes that the same-store sales increase was primarily the result of better ordering that caused more complete in-stock levels of the appropriate items in the stores, improved merchandising, and continued aggressive every day low pricing. The mix of merchandise sales for the period was 65.1% hardlines and 34.9% softlines, which is a slightly greater percentage of hardlines than during the same period a year ago. GROSS PROFIT. Gross profit for the first nine months of fiscal 1995 was $273.3 million, or 28.4% of net sales, compared to $215.2 million, or 28.7% of net sales, for the comparable period in the prior fiscal year. This decrease in gross profit percentage was primarily the result of the effect of markdowns taken in prior periods decreasing the margin on beginning-of-the-year inventory. SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and administrative expense as a percentage of net sales decreased to 21.3% for the first nine months of fiscal 1995 from 22.8% for the comparable period of fiscal 1994 primarily because of higher sales volume and lower advertising, supply, and health benefit costs. Selling, general and administrative expense of $205.6 million for the first nine months of fiscal 1995 represents an increase of 20.2% from $171.0 million for the comparable prior year period. This increase resulted from operating 245 net additional stores as of October 31, 1994 compared to the same prior year period and an 11.2% increase in same-store expenses. INTEREST EXPENSE. Interest expense decreased 27.6% to $2.2 million for the first nine months of fiscal 1995 from $1.7 million for the comparable prior year period. The increase resulted from higher average borrowings and higher average interest rates. Three months ended October 31, 1994 and 1993. NET SALES. Net sales in the third quarter of fiscal 1995 increased $86.8 million, or 31.8%, to $359.4 million from $272.6 million for the same period in fiscal 1994. The increase resulted from a same-store sales increase of 17.2% and the operation of 104 net additional stores 1,997 stores at October 31, 1994 compared to 1,893 a year ago. 9 GROSS PROFIT. Gross profit as a percentage of sales was 29.4% in the third quarter of fiscal 1995 as compared to 29.2% for the comparable period in fiscal 1994. This increase was primarily the result of higher margins on current purchases, higher initial mark- up, and a lower LIFO charge. SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and administrative expense as a percentage of sales decreased to 21.3% for the third quarter of fiscal 1995 from 22.7% for the same period in the previous year. This decrease was principally the result of lower supply, property self-insurance reserve, electricity, and salary costs. Selling, general and administrative expense increased $14.7 million or 23.7% in the third quarter of fiscal 1995 as compared to the third quarter of fiscal 1994 due to the addition of 104 net new stores and the 10.4% increase in same- store expenses. INTEREST EXPENSE. Interest expense for the third quarter of fiscal 1995 increased 121.2%, to $1.2 million from $0.5 million, from the comparable period in fiscal 1994 due to higher average borrowings and higher average interest rates. LIQUIDITY AND CAPITAL RESOURCES Cash flows from operating activities. Cash flow used in operating activities totaled $65.3 million during the first nine months of fiscal 1995 compared to $26.4 million in the same period last year. This increased use of cash was primarily the result of the following factors: First, inventories increased by $132.6 million this year, $26.8 million more than a year ago. Trade payables increased by $7.8 million versus a $48.0 million increase last year. These factors more than offset the increases in net income and depreciation and amortization, $14.3 million and $4.0 million, respectively. This smaller increase in trade payables was due partly to a greater proportion of merchandise purchases being imported and financed by letters of credit rather than by trade credit. Also the receipt of merchandise purchases occurred earlier this year to support anticipated Fall and Christmas sales and to minimize distribution capacity constraints while the Company's third distribution center is being constructed. Cash flows from investing activities. Cash used for capital expenditures during the first nine months of fiscal 1995 was $42.9 million compared to $25.2 million during the same period of fiscal 1994. This increase was principally the result of investment in stores, including new, relocated and remodeled stores, of $23.3 million for the nine months of fiscal 1995 versus $20.1 million in the prior year period and $13.5 million related to the construction of the Ardmore, Oklahoma distribution center which had no counterpart in the prior period. Cash flows from financing activities. The Company's net borrowings during the first nine months of fiscal 1995 increased $93.5 million compared to an increase of $56.6 million during the same period in the prior fiscal year. This higher level of borrowings relates to increased merchandise inventory purchases necessary to support higher sales and increased merchandise imports that are financed by letters of credit, rather than by trade credit. The increase in borrowings was also the result of a shifting of purchases to earlier in the year to support anticipated Fall and Christmas sales and to minimize distribution capacity constraints while the Company's third distribution center is being constructed. Because the Company emphasizes seasonal events, such as Christmas and back-to-school, its working capital requirements vary significantly during the year. Bank credit facilities equaled $150 million at October 31, 1994 ($65 million revolving credit/term loan facility plus $85.0 million seasonal lines of credit). The Company's seasonal line of credit borrowings as of October 31, 1994 were $50.7 million versus $4.8 million at October 31, 1993. Seasonal working capital and capital expenditure requirements will continue to be met through cash flow provided by operating activities supplemented by the revolving credit/term loan facility and seasonal credit lines. 10 The Company's liquidity position is set forth in the following table (dollar amounts in thousands):
October 31, January 31, October 31, 1994 1994 1993 Current ratio 1.7x 2.1x 1.7x Total debt/equity 41.4% 10.4% 34.2% Long-term debt/equity 1.6% 2.4% 3.3% Working capital (000) $180,889 $166,785 $150,511 Average daily use of debt: (fiscal year-to-date) Short-term (000) 52,240 34,102 34,713 Long-term (000) 6,128 7,335 7,430 Total (000) 58,368 41,437 42,143 Maximum outstanding short-term debt (fiscal year-to-date) $112,712 $ 70,909 $ 67,800
On August 22, 1994, Dollar General Corporation announced the issuance of 1,715,742 shares of a previously authorized but unissued series of convertible preferred stock, as approved by the Board of Directors. The shares of the Series A Convertible Junior Preferred Stock ("Preferred Stock") were issued in exchange for 8,578,710 shares of Dollar General Common Stock, $.50 par value per share, owned by C.T.S., Inc., a personal holding company of the Turner family (founders of Dollar General). The holders of the Preferred Stock retain the same voting rights as those held prior to the exchange and will receive dividends, as declared by the Board of Directors, in an amount equal to ninety percent (90%) of the dividend paid per share of Common Stock times the number of shares of Common Stock that the holder of the Preferred would be entitled to receive upon conversion after five years. The conversion ratio for the Preferred Stock into Common Stock, subject to adjustment for stock dividends or splits, is as follows: (1) Issuance date through year three: 4.5 to 1 (however, the holders of the Preferred Stock have no voluntary right to convert such shares to Common Stock during the first two years following the exchange); (2) during year four: 4.625 to 1; (3) during year five: 4.75 to 1; (4) after year five: 5 to 1. The terms and conditions of the exchange, the rights and preferences of the Preferred Stock and the certain limited registration rights for the underlying Common Stock for the benefit of the estate of the 1980 Turner Children Trust (a holder of the Preferred Stock) are more fully described in the Exchange Agreement, the Articles of Amendment to the Restated Articles of Incorporation and the Registration Rights Agreement, respectively, copies of which were filed with the Current Report on Form 8-K dated August 22, 1994. 11 PART II - OTHER INFORMATION Item 1. Not applicable. Item 2. Not applicable. Item 3. Not applicable. Item 4. Not applicable. Item 5. Not applicable. Item 6. Exhibits and reports on Form 8-K (b) A current report on Form 8-K dated August 22, 1994 was filed on August 23, 1994. The report addressed Item 5. "Other Events" and addressed the issuance of the Series A Convertible Junior Preferred Stock. No financial statements were included. SIGNATURES 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 thereunto duly authorized. DOLLAR GENERAL CORPORATION (Registrant) Date: December 14, 1994 By: SS/:C. Kent Garner C. Kent Garner, Vice President, Treasurer and Chief Financial Officer EX-27 2 FINANCIAL DATA SCHEDULE
5 The accompanying notes are an integral part of this schedule. 0000029534 SALLEE WISE 9-MOS JAN-31-1995 OCT-31-1994 25,582 0 0 0 392,605 442,321 165,263 57,477 554,925 261,432 0 27,248 0 858 258,286 554,925 963,839 963,839 690,572 205,560 0 0 2,216 65,491 24,723 40,768 0 0 0 40,768 .74 .74
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