-----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, LdU0wyi4AS59Nk4VxZ5IFcR5ofDHkSfdmjRPIwxOXVouKJ00jOdQgXhxpTORp/wK XC0duIPV36qQNq2LLqQuiA== 0000029534-97-000021.txt : 19970929 0000029534-97-000021.hdr.sgml : 19970929 ACCESSION NUMBER: 0000029534-97-000021 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970801 FILED AS OF DATE: 19970911 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: SEC FILE NUMBER: 001-11421 FILM NUMBER: 97679016 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 1ST 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 August 1, 1997 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 August 29, 1997 was 107,329,537. 2 Dollar General Corporation Form 10-Q For the Quarter Ended August 1, 1997 Index
Part I. Financial Information Page No. Item 1. Financial Statements (unaudited): Consolidated Balance Sheets as of August 1, 1997, January 31, 1997 (audited) and August 2, 1996. 3 Consolidated Statements of Income for the three months and six months ended August 1, 1997 and August 2, 1996. 4 Consolidated Statements of Cash Flows for the six months ended August 1, 1997 and August 2, 1996. 5 Notes to Consolidated Financial Statements 6-7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. 8-11 Part II. Other Information Item 4. Submission of Matters to a Vote of Security Holders 12 Signatures 13
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DOLLAR GENERAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands) Aug. 1, Jan. 31, Aug. 2, 1997 1997 1996 (Unaudited) (Audited) (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 24,923 $ 6,563 $ 12,950 Merchandise inventories 589,660 476,103 513,665 Deferred income taxes 3,762 3,689 11,959 Other current assets 20,028 18,244 13,630 Total current assets 638,373 504,599 552,204 Property & equipment, at cost 351,773 321,917 260,716 Less: Accumulated depreciation 130,913 113,381 98,124 Net property and equipment 220,860 208,536 162,592 Other assets 5,385 5,012 5,094 Total assets $864,618 $718,147 $719,890 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 1,749 $ 2,030 $ 1,553 Short-term borrowings 57,850 38,469 74,954 Accounts payable 163,074 103,523 121,212 Accrued expenses 72,060 70,441 63,885 Income Taxes 3,480 10,002 2,991 Total current liabilities 298,213 224,465 264,595 Long-term debt 1,580 2,582 2,108 Deferred income taxes 5,326 5,571 3,573 Shareholders' equity: Preferred stock 858 858 858 Common stock 67,679 53,105 42,918 Additional paid-in capital 368,929 329,948 317,446 Retained earnings 322,560 302,145 288,919 760,026 686,056 650,141 Less: treasury stock 200,527 200,527 200,527 Total shareholders' equity 559,499 485,529 449,614 Total liabilities and shareholders'equity $864,618 $718,147 $719,890 The accompanying notes are an integral part of these consolidated financial statements.
4 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (in thousands except per share amounts) (unaudited) Three Months Ended Six Months Ended Aug. 1 Aug. 2 Aug. 1 Aug. 2 1997 1996 1997 1996 Net sales $596,820 $494,389 $1,116,834 $950,245 Cost of goods sold 436,664 360,661 814,823 693,143 Gross profit 160,156 133,728 302,011 257,102 Selling, general and administrative expense 116,699 97,321 227,034 195,266 Operating profit 43,457 36,407 74,977 61,836 Interest expense 540 1,109 1,066 2,306 Income before taxes on income 42,917 35,298 73,911 59,530 Provision for taxes on income 16,201 13,413 27,901 22,621 Net income 26,716 21,885 46,010 36,909 Net income per common and common equivalent share $ .24 $ .20 $ .42 $ .33 Weighted average number of common shares outstanding 110,781 111,368 109,919 111,108 Cash dividends per common share $ .05 $ .05 $ .10 $ .10 As adjusted to give retroactive effect to the five-for-four stock splits distributed on February 12, 1997 and September 22, 1997: Net income per common and common equivalent share $ .19 $ .16 $ .33 $ .27 Weighted average number of common shares outstanding 138,476 139,210 137,399 138,885 Cash dividends per common share $ .04 $ .03 $ .09 $ .06 The accompanying notes are an integral part of these consolidated financial statements.
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DOLLAR GENERAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (unaudited) Six Months Ended Aug. 1, Aug. 2, 1997 1996 Operating activities: Net income $ 46,010 $ 36,909 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 17,752 14,929 Deferred income taxes (318) 610 Change in operating assets and liabilities: Merchandise inventories (113,557) (25,303) Accounts payable trade 59,551 18,036 Accrued expenses 1,619 1,786 Income taxes (6,522) (11,766) Other (1,261) (649) Net cash provided by operating activities 3,274 34,552 Investing activities Purchase of property and equipment (64,784) (20,296) Proceeds from sale of property and equipment 33,811 0 Net cash used by investing activities (30,973) (20,296) Financing activities: Issuance of short-term borrowings 83,558 43,178 Repayments of short-term borrowings (64,177) (40,370) Issuance of long-term debt 190 0 Repayments of long-term debt (1,473) (1,153) Payment of cash dividends (12,059) (9,207) Proceeds from exercise of stock options 23,900 9,957 Repurchase of common stock 0 (12,330) Tax effect of stock options 16,120 4,275 Net cash provided (used) by financing activities 46,059 ( 5,650) Net increase in cash and cash equivalents 18,360 8,606 Cash and cash equivalents at beginning of period 6,563 4,344 Cash and cash equivalents at end of period $ 24,923 $12,950 The accompanying notes are an integral part of these consolidated financial statements.
6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Basis of Presentation The accompanying consolidated 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, 1997 for additional information. The accompanying consolidated financial statements as of Ausust 1, 1997 and August 2, 1996, 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 six-month periods ended August 1, 1997 and August 2, 1996, have been made. Interim cost of goods sold is determined using estimates of inventory shrinkage, inflation, and markdowns which are adjusted during interim periods to reflect actual results. 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. 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 Ended Six Months Ended (In thousands) Aug 1, Aug 2, Aug 1, Aug. 2, 1997 1996 1997 1996 Actual weighted average number of common shares outstanding during the period 91,081 90,895 90,413 90,594 Common Stock Equivalents: Dilutive effect of stock options using the "Treasury Stock Method" 2,945 3,718 2,751 3,759 1,715,742 shares of Series A Convertible Preferred Stock Issued August 22, 1994 16,755 16,755 16,755 16,755 Weighted Average Shares 110,781 111,368 109,919 111,108
7 3. Changes in shareholders' equity for the six months ended August 1, 1997 and August 2, 1996 were as follows (dollars in thousands except per share amounts):
Additional Preferred Common Paid-In Retained Treasury Stock Stock Capital Earnings Stock Total Balances, January 31, 1996 $ 858 $ 42,762 $303,609 $273,309 $200,527 $420,011 Net income 36,909 36,909 Cash dividend, $.10 per common share, as declared ( 8,001) (8,001) Cash dividend, $.56 per preferred share ( 1,206) (1,206) Issuance of common stock under employee stock incentive plans 395 9,562 9,957 Tax benefit from exercise of options 4,275 4,275 Repurchase of common stock (239) (12,092) (12,331) Balances, August 2, 1996 $ 858 $ 42,918 $317,446 $288,919 $200,527 $449,614 Balances, January 31, 1997 $ 858 $ 53,105 $329,948 $302,145 $200,527 $485,529 Net Income 46,010 46,010 5-for-4 stock split, September 22, 1997 13,536 ( 13,536) Cash dividend, $.10 per common share, as declared ( 10,467) (10,467) Cash dividend, $.56 per preferred share ( 1,592) ( 1,592) Issuance of common stock under employee stock incentive plans 1,038 22,862 23,900 Tax benefit from exercise of options 16,119 16,119 Balances, August 1, 1997 $ 858 $ 67,679 $368,929 $322,560 $200,527 $559,499
4. Subsequent Event: The Company's Board of Directors authorized on August 25, 1997, a five-for-four common stock split for shareholders of record on September 8, 1997, which will be distributed on September 22, 1997. 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This discussion and analysis contains both historical and forward-looking information. The forward-looking statements are made pursuant to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. Although the Company believes the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore, 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, general transportation and distribution delays or interruptions, inventory risks due to shifts in market demand, changes in product mix, costs and delays associated with building, opening and operating a new distribution center and the risk factors listed in the Company Annual Report on Form 10-K for the year ended January 31, 1997. The Company undertakes no obligation to publicly release any revisions to any forward-looking statements contained herein to reflect events or circumstances ocurring after the date hereof or to reflect the occurrence of unanticipated events. The following text contains references to years 1998, 1997, and 1996, which represent fiscal years ending or ended January 30, 1998, and January 31, 1997 and 1996, respectively. This discussion and analysis should be read in conjunction with, and is qualified in its entirety by, the consolidated financial statements, including the notes thereto. RESULTS OF OPERATIONS 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 1998 of approximately $8.0 million and resulted in an increase during fiscal 1997 of approximately $2.1 to $2.3 million above otherwise expected levels. The Company believes that increased sales and employee productivity will partially offset the financial impact of the minimum wage increase to operations for fiscal 1998. SIX MONTHS ENDED AUGUST 1, 1997 AND AUGUST 2, 1996 NET SALES. Net sales for the first six months of fiscal 1998 increased 17.5%, to $1,116.8 million from $950.2 million for the comparable period of fiscal 1997. The increase resulted from 418 net additional stores being in operation as of August 1, 1997 as compared with August 2, 1996 and an increase of 4.1% in same-store sales. Same store sales growth was an 8.6% increase for 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 were negatively impacted by the elimination of an advertising circular and by the conversion of more than 2,400 stores to the Company's new 9 prototype. The new store prototype and related product mix reflects a 65%/35% hardlines to softlines space allocation versus the previous 50%/50% allocation. The new prototype allocates more space to faster-turning consumable merchandise. For the last six months of fiscal 1998, management expects continued improvement in net sales and same store sales increases. GROSS PROFIT. Gross profit for the first six months was $302.0 million, or 27.0% of net sales, compared to $257.1 million, or 27.1% of net sales, in the same period last year. Driving the decrease in gross profit as a percent to sales was higher freight costs associated with adding 700 new items to the merchandise mix and increased use of two outside distribution centers. These higher costs were partially offset by lower shrinkage reserves and higher margin on beginning inventory. Management currently anticipates a slight decline in gross profit as a percent of net sales, for the last six months of fiscal 1998. SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and administrative expense for the six months, ending August 1, 1997, totaled $227.0 million, or 20.3% of net sales, compared with $195.3 million, or 20.5% of net sales in the comparable period last year. As a percentage of sales, increases in employee compensation were offset by decreases in (i) employee incentive compensation costs and (ii) advertising expense. Total operating expense increased 16.3% primarily due to 418 net additional stores being in operation compared to the comparable period last year. Management currently anticipates a slight decline in selling general and administrative expense as a percent of net sales for the last six months of fiscal 1998. INTEREST EXPENSE. For the first six months of fiscal 1998 interest expense decreased 53.8% to $1.1 million (0.1% of sales) compared with $2.3 million (0.2% of sales) in the comparable period last year primarily as a result of lower average short-term borrowings due to faster-moving consumable merchandise and improved accounts payable leverage. Management currently anticipates interest expense to be flat, as a percentage of sales, in the third quarter to support the normal seasonal inventory increase. For fiscal 1998, management expects interest expense to be lower than last year. PROVISION FOR TAXES ON INCOME. The effective income tax rate was 37.8% for both the three and six month periods compared with 38.0% in the comparable periods last year, respectively. THREE MONTHS ENDED AUGUST 1, 1997 AND AUGUST 2, 1996 NET SALES. Net sales for the quarter increased 20.7%, to $596.8 million from $494.4 million for the comparable period of fiscal 1997. The increase resulted from an increase of 6.4% in same-store sales as compared with a 9.8% increase in the same period last year and the operation of 418 additional stores as of August 1, 1997. GROSS PROFIT. Gross profit for the quarter was $160.2 million, or 26.8% of net sales, compared with $133.7 million, or 27.0% of net sales, in the same period last year. Driving the decrease in gross profit as a percent of sales was higher freight costs which were partially offset by lower shrinkage reserves and higher margin on current purchases. SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and administrative expense for the quarter totaled $116.7 million, or 19.6% of net sales, compared with $97.3 million, or 19.7% of net sales in the comparable period last year. As a percentage of sales, higher 10 payroll and store maintenance expense associated with the store conversions were offset by lower advertising due to the elimination of the Spring circular. Total operating expense increased 19.9% primarily due to 418 net additional stores being in operationcompared to last year. INTEREST EXPENSE. Interest expense decreased 51.3% to $540,000 (0.1% of sales) compared with $1.1 million (0.2% of sales) in the comparable period last year. This decrease was primarily a result of the same factors listed above for the six-month period. LIQUIDITY AND CAPITAL RESOURCES Cash flows from operating activities - Net cash provided by operating activities decreased to $3.3 million during the first six months of fiscal 1998 compared with $34.6 million in the comparable period last year. This decrease is primarily the result of increased inventories being only partially offset by increased accounts payable. Inventories increased primarily as a result of opening an additional distribution center and opening new stores. Cash flows from investing activities - Net cash used by investing activities increased to $31.0 million during the first six months compared with $20.3 million in the comparable period last year. Driving this increase was increased capital expenditures primarily related to the Scottsville, Kentucky distribution center expansion, the implementation of point-of sale technology in stores and the conversion of stores to the Company's new prototype. Partially offsetting the capital expenditures was $33.8 million received from the sale (and subsequent leaseback) of the South Boston, Virginia distribution center. Cash flows from financing activities - The Company's short-term borrowings during the first six months of fiscal 1998 increased by $19.4 million compared with an increase of $2.8 million in fiscal 1997. The increase in short-term borrowings was the result of increased inventories and capital expenditures and was partially offset by increased accounts payable to inventory ratio and the proceeds from the sale/leaseback of the South Boston, Virginia distribution center. Because of the significant impact of seasonal buying (e.g., Spring and Holiday purchases), the Company's working capital requirements vary significantly during the year. These working capital requirements were financed by short-term borrowings under the Company's $170 million revolving credit/term loan facility and short-term bank lines of credit totaling $170 million at August 1, 1997. The Company had short-term bank lines of credit borrowings of $57.9 million as of August 1, 1997 and $75.0 million as of August 2, 1996. As of September 4, 1997, the Company increased its revolving credit/term loan facility to $175 million from $170 million and also negotiated an additional $100 million leveraged lease facility. The revolving credit/term loan facility will be used to fund working capital needs, open market stock repurchases and general corporate needs. The leveraged lease facility will be used to meet capital requirements related to construction of new stores, a new distribution center in Indianola, Mississippi and a new corporate headquarters complex in Goodlettsville, Tennessee. These two credit facilities will expire August 29, 2002 and they contain financial covenants similar to existing credit facilities. 11 The Company's liquidity position is set forth in the following table (dollars in thousands):
August 1, January 31, August 2, 1997 1997 1996 Current ratio 2.1x 2.2x 2.1x Total borrowings/equity 10.9% 8.9% 17.5% Long-term debt/equity 0.3% 0.5% 0.5% Working Capital $340,160 $280,134 $287,609 Average daily use of debt: (fiscal year-to-date) Short-term $ 47,185 $ 87,952 $ 81,332 Long-term 3,686 2,930 3,998 Total $ 50,871 $ 90,882 $ 85,330 Maximum outstanding short-term debt (fiscal year-to-date) $ 60,883 $184,725 $104,733
12 PART II - OTHER INFORMATION Item 1. Not applicable. Item 2. Not applicable. Item 3. Not applicable. Item 4. Submission of Matters to a vote of Security Holders At the Annual Meeting of Stockholders of the Corporation held June 2, 1997, the Stockholders voted upon one proposal. The result of the Stockholders' vote is as follows: Proposal No. 1: Election of Directors The following nominees were elected to serve as Directors of the Corporation until the next Annual Stockholders' Meeting:
Nominee Votes For Votes Withheld/Against Cal Turner 89,008,248 56,085 Cal Turner, Jr. 89,007,255 57,078 James L. Clayton 89,008,236 56,097 Reginald D. Dickson 89,010,834 53,499 John B. Holland 89,002,269 62,064 Barbara M. Knuckles 89,009,907 54,426 Wallace N. Rasmussen 89,005,093 59,240 David M. Wilds 89,006,212 58,121 William S. Wire, II 89,008,570 55,763
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 August 1, 1997. 13 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) September 11, 1997 By: SS/ Phil Richards Phil Richards, Vice President and 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. 6-MOS JAN-31-1998 19,425 AUG-01-1997 24,923 0 0 0 589,660 638,373 351,773 130,913 864,618 298,213 0 67,679 0 858 490,962 864,618 1,116,834 1,116,834 814,823 227,034 0 0 1,066 73,911 27,901 46,010 0 0 0 46,010 .33 .33
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