-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HPSvFYAUR6yWS6poXZvCXJOGkCrU9cejq84PXVlGj/3NHA4F+R7QVpNfPdJmGKII HXnmZ56X+jd0+WGRXOc+yQ== 0000029534-96-000029.txt : 19961216 0000029534-96-000029.hdr.sgml : 19961216 ACCESSION NUMBER: 0000029534-96-000029 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961101 FILED AS OF DATE: 19961213 SROS: NYSE 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: 001-11421 FILM NUMBER: 96680194 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 ended November 1, 1996 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 November 30, 1996 was 84,787,091. 2 Dollar General Corporation Form 10-Q For the Quarter Ended November 1, 1996 Index Part I. Financial Information Page No.
Item 1. Financial Statements (unaudited): Consolidated Balance Sheets as of November 1, 1996, January 31, 1996 and November 3, 1995 restated from October 31, 1995. See Note 1 to the consolidated financial statements 3 Consolidated Statements of Income for the three months and nine months ended November 1, 1996 and November 3, 1995 restated from October 31, 1995. See Note 1 to the consolidated financial statements 4 Consolidated Statements of Cash Flows for the nine months ended November 1, 1996 and November 3, 1995 restated from October 31, 1995. See Note 1 to the consolidated financial statements. 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 11 Signatures 12
3 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS As of November 1, 1996, January 31, 1996 and November 3, 1995* (in thousands) (unaudited) Nov. 1, Jan. 31, Nov. 3, ASSETS 1996 1996 1995* Current Assets: Cash and cash equivalents $ 8,769 $ 4,344 $ 7,355 Merchandise inventories 623,354 488,362 592,200 Deferred income taxes 11,954 11,989 12,232 Other current assets 16,447 11,548 12,310 Total current assets 660,524 516,243 624,097 Property & Equipment, at cost 285,084 242,628 234,192 Less: Accumulated depreciation 105,715 84,041 77,881 179,369 158,587 156,311 Other Assets 5,065 5,166 5,550 $ 844,958 $ 679,996 $ 785,958 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 2,060 $ 1,536 $ 1,473 Short-term borrowings 184,725 72,146 201,599 Accounts payable 144,684 103,176 126,350 Accrued expenses 67,937 62,099 60,151 Income Taxes 4,913 14,757 6,728 Total current liabilities 404,319 253,714 396,301 Long-term debt 2,748 3,278 3,418 Deferred income taxes 3,573 2,993 3,382 Shareholders' equity: Preferred stock 858 858 858 Common stock 42,389 42,762 34,149 Additional paid-in capital 326,199 303,609 302,045 Retained earnings 265,399 273,309 246,332 634,845 620,538 583,384 Less treasury stock 200,527 200,527 200,527 434,318 420,011 382,857 $ 844,958 $ 679,996 $ 785,958 *Restated as explained in Note 1. The accompanying notes are an integral part of this statement.
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DOLLAR GENERAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME For the three months and nine months ended November 1, 1996 and November 3, 1995* (in thousands except per share amounts) (unaudited) Three Months Nine Months 1996 1995* 1996 1995* Net Sales $508,977 $429,898 $1,459,222 $1,208,137 Cost of goods sold 360,343 304,000 1,053,486 864,407 Gross profit 148,634 125,898 405,736 343,730 Selling, general and administrative expense 104,178 92,129 299,444 258,537 Operating profit 44,456 33,769 106,292 85,193 Interest expense 1,485 2,549 3,791 5,456 Income before taxes on income 42,971 31,220 102,501 79,737 Provision for taxes on income 16,329 12,020 38,950 30,699 Net income $ 26,642 $ 19,200 $ 63,551 $ 49,038 Net income per common and common equivalent share $ .30 $ .22 $ .72 $ .56 Weighted average number of common shares outstanding 88,377 88,001 88,716 87,758 Cash dividends per common share as declared $ .05 $ .05 $ .15 $ .15 Adjusted to give retroactive effect to the five-for-four stock split distributed on April 26, 1996 $ .05 $ .04 $ .15 $ .12 *Restated as explained in Note 1. The accompanying notes are an integral part of this statement.
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DOLLAR GENERAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS for the nine months ended November 1, 1996 and November 3, 1995* (in thousands) (unaudited) Nov. 1, Nov. 3, 1996 1995* Cash flows from operating activities: Net income $ 63,551 $ 49,038 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 23,027 18,494 Deferred income taxes 615 (447) Change in operating assets and liabilities: Merchandise inventories (134,992) (236,089) Accounts payable 41,508 14,675 Accrued expenses 5,838 (886) Income taxes (9,844) 1,518 Other (1,710) (1,265) Net cash used in operating activities (12,007) (154,962) Cash flows used in investing activities: Purchase of property & equipment (46,897) (51,473) Cash flows provided by financing activities: Issuance of short-term borrowings 149,390 201,631 Repayments of short-term borrowings (36,811) (29,632) Issuance of long-term debt 1,487 0 Repayments of long-term debt (1,493) (1,317) Payments of cash dividends (12,673) (10,142) Proceeds from exercise of stock options 15,257 12,879 Repurchase of common stock (59,788) 0 Tax benefits from exercise of stock options 7,436 6,997 Other 524 329 Net cash provided by financing activities 63,329 180,745 Net increase (decrease) in cash and cash equivalents 4,425 (25,690) Cash and cash equivalents at beginning of year 4,344 33,045 Cash and cash equivalents at end of period $ 8,769 $ 7,355 *Restated as explained in Note 1. The accompanying notes are an integral part of this statement.
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, 1996 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 November 1, 1996 and November 3, 1995, 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 entire year. The comparative financial statements presented for the period ended November 3, 1995, have been restated from the 10-Q report for the period ended October 31, 1995 to reflect the adoption of a retail 52/53 week reporting calendar effective February 1, 1996. For the nine-month and three-month periods ended October 31, 1995, the Company reported net income of $49,275,000 and $20,008,000, respectively, or $0.56 and $0.23, respectively per common and common equivalent share, as restated for the April 26, 1996 stock split. 2. Net Income Per Common Share Net income per common and common equivalent share is based upon the actual weighted average number of common shares outstanding during each period (including the presumed conversion of the Series A Convertible Preferred Stock) plus the assumed exercise of dilutive stock options as follows:
Three Months Nine Months Ended Ended (Shares in thousands) 1996 1995 1996 1995 Actual weighted average number of common shares outstanding during the period 72,148 71,946 72,465 71,351 Common Stock Equivalents: Dilutive effect of stock options using the "Treasury Stock Method" 2,825 2,651 2,847 3,003 1,715,742 shares of Series A Convertible Preferred Stock Issued August 22, 1994 13,404 13,404 13,404 13,404 Weighted Average Shares 88,377 88,001 88,716 87,758
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3. Changes in shareholder's equity for the nine months ended November 1, 1996 and November 3, 1995 were as follows (dollars in thousands except per share amounts): Additional Preferred Common Paid-In Retained Treasury Stock Stock Capital Earnings Stock Balances, January 31, 1995 $ 858 $ 33,971 $283,323 $207,436 $201,832 Net income 49,038 Cash dividend, $.15 per common share, as declared (8,696) Cash dividend, $.84 per preferred share (1,446) Reissuance of treasury stock under employee stock incentive plans 7,549 (1,305) Issuance of common stock under employee stock incentive plans 172 3,853 Tax benefit from exercise of options 6,997 Transfer to employee pension plan (12,783 shares) 6 323 Balances, November 3, 1995 $ 858 $ 34,149 $302,045 $246,332 $200,527 Balances, January 31, 1996 $ 858 $ 42,762 $303,609 $273,309 $200,527 Net Income 63,551 Cash dividend, $.15 per common share, as declared (10,863) Cash dividend, $.84 per preferred share (1,810) Issuance of common stock under employee stock incentive plans 614 14,643 Tax benefit from exercise of options 7,436 Transfer to employee pension plan (26,347 shares) 13 511 Repurchase of common stock (1,000) (58,788) Balances, November 1, 1996 $ 858 $ 42,389 $326,199 $265,399 $200,527
8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS This discussion and analysis contain both historical and forward-looking information. The Company undertakes no obligation to publicly release any revisions to any forward-looking statements contained herein to reflect events or circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. The forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected in the forward-looking statements. Forward-looking statements may be significantly impacted by certain risks and uncertainties, including, but not limited to, the holiday shopping season results, cost of merchandise, mix of hardline and softline merchandise, number of store openings and distribution costs as described in this Management's Discussion and Analysis. The nature of the Company's business is seasonal. Historically, sales in the fourth quarter have been significantly 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 by quarter. Results of a period shorter than a full year may not be indicative of results expected for the entire year. Furthermore, comparing any period to other than the same period of the previous year will not reflect the seasonal nature of the Company's business. In August 1996, the federal minimum wage law was changed to increase minimum wage from $4.25 per hour to $4.75 per hour effective October 1, 1996 and from $4.75 per hour to $5.15 per hour effective September 1, 1997. The Company estimates that this change will result in an increase in wage expense during fiscal 1997 of approximately $2.1 to $2.3 million above otherwise expected levels. The Company believes the financial impact of the minimum wage increase to operations for fiscal 1997 will be partially offset by increased sales and employee productivity. NINE MONTHS ENDED NOVEMBER 1, 1996 AND NOVEMBER 3, 1995 NET SALES. Net sales for the first nine months of fiscal 1997 increased $251.1 million, or 20.8%, to $1,459.2 million from $1,208.1 million for the comparable period of fiscal 1996. The increase resulted from 301 net additional stores being in operation as of November 1, 1996 as compared with November 3, 1995, and an increase of 7.9% in same-store sales as compared with the 6.6% increase in the same period last year. The Company regards same stores as those 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 gains are a reflection of better in-stock positions compared to the prior year and improved focus on its strategy as a distributor of consumable basics. The Company's sales mix shifted in favor of hardlines which accounted for 74% of sales, compared to softlines' 26% of sales in the first nine months of fiscal 1997 as compared with 69% and 31%, respectively in the comparable 1996 period. In the third quarter of fiscal 1997, the Company opened 105 stores, closed 0 stores and ended the quarter with a total of 2,691 stores. GROSS PROFIT. Gross profit for the first nine months of fiscal 1997 was $405.7 million, or 27.8% of net sales, compared to $343.7 million, or 28.5% of net sales, for the comparable period in the prior fiscal year. This decrease was driven by lower margin on sales of current purchases, as a result of the shift of sales towards hardlines and lower beginning inventory margins. These effects were partially offset by no LIFO charge in the current year as compared with 0.2% last year (based on current price trend indications). Cost of goods 9 sold is determined in the first, second and third quarters utilizing estimates of inventory, shrinkage, markdowns and inflation. Adjustments of these estimates based upon actual results are included in cost of goods sold in the fourth quarter. SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and administrative expense for the period equaled $299.4 million, or 20.5% of sales, compared with $258.5 million, or 21.4% of sales in the same period last year. This decrease (as a percentage of sales) was the result of better labor expense control, both retail and administrative, and lower advertising costs resulting from the elimination of the August circular. Increased incentive compensation accruals partially offset these gains. INTEREST EXPENSE. Interest expense decreased 30.5% to $3.8 million for the first nine months of fiscal 1997 from $5.5 million for the comparable prior-year period. The decrease resulted from both lower average short-term borrowings as well as lower average interest rates. Average short-term borrowings were $90.5 million and $108.7 million for the respective nine month periods of fiscal 1997 and 1996. THREE MONTHS ENDED NOVEMBER 1, 1996 AND NOVEMBER 3, 1995 NET SALES. Net sales in the third quarter of fiscal 1997 increased $79.1 million or 18.4%, to $509.0 million from $429.9 million for the same period in fiscal 1996. The increase resulted from an increase of 6.5% in same store sales and the operation of 301 net additional stores at the end of the quarter. GROSS PROFIT. Gross profit as a percentage of sales was 29.2% in the third quarter of fiscal 1997, as compared with 29.3% for the comparable period in fiscal 1996. This decrease was driven primarily by lower beginning inventory margins. SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and administrative expense increased $12.0, million or 13.1%, in the third quarter of fiscal 1997 as compared with fiscal 1996. As a percentage of sales, selling, general and administrative expense decreased to 20.5% for the third quarter of fiscal 1997 from 21.4% for the same period in the previous year. Operating expense as a percentage of sales decreased primarily as a result of better labor expense control, both retail and administrative, lower advertising due to the elimination of the August circular, and reduced self-insurance expense due to better claims management. These improvements offset increases in incentive compensation accruals. INTEREST EXPENSE. Interest expense for the third quarter of fiscal 1997 decreased 41.7% to $1.5 million from $2.5 million from the comparable period in fiscal 1996 due to lower average interest rates and average borrowings. LIQUIDITY AND CAPITAL RESOURCES Cash flows from operating activities - Cash flows used in operating activities totaled $12.0 million during the first nine months of fiscal 1997 compared with $155.0 last year. This decrease in use of cash is primarily the result of a smaller increase in inventories during the 1997 period as compared to 1996 plus an increase in accounts payable and net income. Cash flows from investing activities - Cash used for capital expenditures during the first nine months decreased $4.6 million to $46.9 million as compared with $51.5 million in the comparable period in 1996. The current period expenditures resulted principally from opening 306 new stores, remodeling 61 stores, relocating 72 stores, and construction of the South Boston, VA distribution center. The decrease is driven by reduced investment in new stores, a reduction of $4.8 million, and lower trailer purchases, down $4.8 million. On July 18, 1996 the Company's Board of Directors authorized a buy-back of up to 2.0 10 million shares of the Company's outstanding common stock. Cash flows from financing activities - The Company's short-term borrowings during the first nine months of fiscal 1997 increased from January 31, 1996 by a net of $112.6 million to $184.7 million, compared with an increase of $172.0 million to $201.6 million in fiscal 1996. The lower level of short-term borrowings in fiscal 1997 resulted from the greater cash flow from operating activities and lower capital expenditures discussed above. As of November 1, 1996 the Company had completed the entire purchase at an aggregate cost of $59.8 million, or an average cost of $29.89 per share. 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 $340.0 million at November 1, 1996 ($170.0 million revolving credit/term loan facility plus $170.0 million seasonal lines of credit). The Company successfully negotiated an increase in its revolving credit/term loan facility from $65.0 million to $170.0 million during June 1995. The Company had seasonal lines of credit borrowings of $24.7 million as of November 1, 1996 and $35.1 million as of November 3, 1995. 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. The Company's liquidity position is set forth in the following table (dollars in thousands):
Nov. 1, Jan. 31, Nov. 3, 1996 1996 1995 Current ratio 1.6x 2.0x 1.6x Total borrowings/equity 43.6% 18.3% 53.9% Long-term debt/equity 0.6% 0.8% 0.9% Working Capital (000) $256,205 $262,529 $227,796 Average daily use of debt: (fiscal year-to-date) Short-term (000) $ 90,548 $ 99,564 $108,659 Long-term (000) 3,843 4,718 4,812 Total (000) $ 94,391 $104,282 $113,471 Maximum outstanding short-term debt (fiscal year-to-date) $184,725 $227,397 $211,227
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 (a) No reports on Form 8-K were filed during the quarter ended November 1, 1996. 12 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) December 13, 1996 By: Phil Richards, Vice President, Chief Financial Officer EX-27 2 FINANCIAL DATA SCHEDULE WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 The accompanying notes are an integral part of this statement. 1,000 9-MOS JAN-31-1997 NOV-01-1996 8,769 0 0 0 623,354 660,524 285,084 105,715 844,958 404,319 0 42,389 0 858 391,071 844,958 1,459,222 1,459,222 1,053,486 299,444 0 0 3,791 102,501 38,950 63,551 0 0 0 63,551 .72 .72 The accompanying notes are an integral part of this statement.
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