-----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, OZ+/0Mz388dYBk6EZB/5MQM33d0MMqsvOb2F2DIoD5nONX6QJu2oK4RREJBDoY48 r3r1ulUlftDiAcwP5f3hFA== 0000914317-00-000824.txt : 20001212 0000914317-00-000824.hdr.sgml : 20001212 ACCESSION NUMBER: 0000914317-00-000824 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20001027 FILED AS OF DATE: 20001211 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: TN FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-11421 FILM NUMBER: 787043 BUSINESS ADDRESS: STREET 1: 100 MISSION RIDGE CITY: GOODLETTSVILLE STATE: TN ZIP: 37072 BUSINESS PHONE: 6158554000 MAIL ADDRESS: STREET 1: 104 WOODMONT BLVD STE 500 CITY: NASHVILLE STATE: TN ZIP: 37205 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 0001.txt FORM 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 July 28, 2000 Commission file number 1-11421 DOLLAR GENERAL CORPORATION ------------------------------------------------------ (Exact name of registrant as specified in its charter) TENNESSEE 61-0502302 ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 100 Mission Ridge Goodlettsville, Tennessee 37072 -------------------------------------------------- (Address of principal executive offices, zip code) Registrant's telephone number, including area code: (615) 855-4000 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 December 8, 2000, was 330,609,400. Dollar General Corporation Form 10-Q For the Quarter Ended October 27, 2000 Index Page No. PART I. FINANCIAL INFORMATION Item 1. Financial Statements (unaudited): Consolidated Balance Sheets as of October 27, 2000, 3 January 28, 2000 (derived from the audited financial statements) and October 29, 1999. Consolidated Statements of Income for the three months 4 ended October 27, 2000 and October 29, 1999 and the nine months ended October 27, 2000 and October 29, 1999. Consolidated Statements of Cash Flows 5 for the nine months ended October 27, 2000 and October 29, 1999. Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of 11 Financial Condition and Results of Operations Item 3. Quantitative and Qualitative Disclosures About Market Risk 15 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 16 Signatures 17 2 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS DOLLAR GENERAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands)
Oct. 27, Jan. 28, Oct. 29, 2000 2000 1999 (Unaudited) * (Unaudited - ------------------------------------------------------------------------------------------------------------------------- ASSETS Current assets: Cash and cash equivalents $ 13,080 $ 58,789 $ 23,840 Merchandise inventories 1,173,328 985,715 1,105,503 Deferred income taxes 7,743 5,995 5,373 Other current assets 62,956 45,036 79,012 - ------------------------------------------------------------------------------------------------------------------------- Total current assets 1,257,107 1,095,535 1,213,728 Property and equipment, at cost 801,837 597,537 560,219 Less: accumulated depreciation 306,894 251,064 235,360 - ------------------------------------------------------------------------------------------------------------------------- 494,943 346,473 324,859 Other assets 15,959 8,933 10,538 - ------------------------------------------------------------------------------------------------------------------------- Total assets $ 1,768,009 $ 1,450,941 $ 1,549,125 ========================================================================================================================= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 3,622 $ 1,233 $ 1,243 Short-term borrowings 61,369 - 180,099 Accounts payable 309,508 334,554 347,563 Accrued expenses 122,451 121,375 115,263 Income taxes 3,946 15,135 29,290 - ------------------------------------------------------------------------------------------------------------------------- Total current liabilities 500,896 472,297 673,458 Long-term debt 210,907 1,200 1,526 Deferred income taxes 50,817 51,523 12,079 Shareholders' equity: Preferred stock - - - Common stock 165,281 132,346 132,653 Additional paid-in capital 263,233 255,581 250,321 Retained earnings 576,875 537,994 479,088 - ------------------------------------------------------------------------------------------------------------------------- Total shareholders' equity 1,005,389 925,921 862,062 - ------------------------------------------------------------------------------------------------------------------------- Total liabilities and shareholders' equity $ 1,768,009 $ 1,450,941 $ 1,549,125 =========================================================================================================================
* Derived from the January 28, 2000 audited financial statements. 3 DOLLAR GENERAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In thousands except share and per share amounts) (Unaudited)
Three Months Ended Nine Months Ended Oct. 27, Oct. 29, Oct. 27, Oct. 29, 2000 1999 2000 1999 - ----------------------------------------------------------------------------------------------------------- Net sales $1,094,360 $ 950,419 $3,108,857 $2,710,222 Cost of goods sold 772,996 672,562 2,232,811 1,956,836 ---------------------------------------------------------------- Gross profit 321,364 277,857 876,046 753,386 Selling, general and administrative expense 236,524 195,753 654,387 546,211 ---------------------------------------------------------------- Operating profit 84,840 82,104 221,659 207,175 Interest expense 4,855 2,326 10,459 5,102 ---------------------------------------------------------------- Income before taxes on income 79,985 79,778 211,200 202,073 Provision for taxes on income 28,995 28,919 76,560 73,251 ---------------------------------------------------------------- Net income $ 50,990 $ 50,859 $ 134,640 $ 128,822 ================================================================ Diluted earnings per share $ 0.15 $ 0.15 $ 0.40 $ 0.38 ================================================================ Weighted average diluted shares 333,556 337,989 333,652 337,140 ================================================================ Basic earnings per share $ 0.15 $ 0.15 $ 0.41 $ 0.43 ================================================================
The accompanying notes are an integral part of these consolidated financial statements. 4 DOLLAR GENERAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
Nine Months Ended Oct. 27, Oct. 29, 2000 1999 - ---------------------------------------------------------------------------------------------------------- Operating activities: Net income $ 134,640 $ 128,822 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 58,571 46,759 Deferred income taxes (2,454) (20,874) Tax benefit of stock options exercised 14,715 27,862 Change in operating assets and liabilities: Merchandise inventories (187,613) (293,781) Other current assets (17,920) (36,634) Accounts payable (25,046) 89,804 Accrued expenses 1,076 (57,562) Income taxes (11,189) 5,465 Other (4,824) (30) - ---------------------------------------------------------------------------------------------------------- Net cash used in operating activities (40,044) (110,169) - ---------------------------------------------------------------------------------------------------------- Investing activities: Purchase of property and equipment (209,414) (112,441) Proceeds from sale of property and equipment 171 63,182 - ---------------------------------------------------------------------------------------------------------- Net cash used in investing activities (209,243) (49,259) - ---------------------------------------------------------------------------------------------------------- Financing activities: Issuance of short-term borrowings 315,000 237,914 Repayments of short-term borrowings (253,631) (57,815) Issuance of long-term debt 214,947 3,104 Repayments of long-term debt (2,851) (1,846) Payment of cash dividends (31,664) (25,619) Proceeds from exercise of stock options 27,325 32,235 Repurchase of common stock (65,548) (26,999) - ---------------------------------------------------------------------------------------------------------- Net cash provided by financing activities 203,578 160,974 - ---------------------------------------------------------------------------------------------------------- Net (decrease) increase in cash and cash equivalents (45,709) 1,546 Cash and cash equivalents, beginning of period 58,789 22,294 - ---------------------------------------------------------------------------------------------------------- Cash and cash equivalents, end of period $ 13,080 $ 23,840 ==========================================================================================================
The accompanying notes are an integral part of these consolidated financial statements 5 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands except share and per share amounts) (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 28, 2000, for additional information. The accompanying consolidated financial statements have been prepared in accordance with the Company's customary accounting practices and have not been audited. In management's opinion, all adjustments (which are of a normal recurring nature) necessary for a fair presentation of the consolidated results of operations for the three-month and nine-month periods ended October 27, 2000, and October 29, 1999, have been made. Interim cost of goods sold is determined using ongoing estimates of inventory shrinkage, inflation, and markdowns. 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. Certain reclassifications have been made to the 1999 financial statements to conform to the 2000 presentation. 2. Shareholders' Equity Changes in shareholders' equity for the nine months ended October 27, 2000 and October 29, 1999, were as follows.
Additional Preferred Common Paid-In Retained Treasury Stock Stock Capital Earnings Stock Total - ------------------------------------------------------------------------------------------------------------------------ Balances, January 29, 1999 $ 858 $ 105,121 $ 418,039 $ 402,270 $ (200,527) $ 725,761 Net income 128,822 128,822 5-for-4 stock split, May 24, 1999 26,573 (26,573) - Cash dividend, $.06 per common share, as declared (24,441) (24,441) Cash dividend, $1.37 per preferred share (1,178) (1,178) Issuance of common stock under employee stock incentive plans 1,573 30,662 32,235 Conversion of preferred stock - to common stock (858) (199,669) 200,527 Tax benefit of stock options exercised 27,862 27,862 Stock repurchase (614) (26,385) (26,999) - ------------------------------------------------------------------------------------------------------------------------ Balances, October 29, 1999 $ - $ 132,653 $ 250,321 $ 479,088 $ - $ 862,062 ========================================================================================================================
6
Additional Preferred Common Paid-In Retained Treasury Stock Stock Capital Earnings Stock Total - ----------------------------------------------------------------------------------------------------------------------- $ - $ 132,346 $ 255,581 $ 537,994 $ - $ 925,921 Net income 134,640 134,640 5-for-4 stock split, May 22, 2000 32,857 (32,857) - Cash dividend, $.06 per common share, as declared (31,664) (31,664) Issuance of common stock under employee stock incentive plans 1,531 25,794 27,325 Tax benefit of stock options exercised 14,715 14,715 Stock repurchase (3,633,625 shares) (1,453) (64,095) (65,548) - ----------------------------------------------------------------------------------------------------------------------- $ - $ 165,281 $ 263,233 $ 576,875 $ - $ 1,005,389 =======================================================================================================================
3. Earnings Per Share Shares have been adjusted for all stock splits including the five-for-four common stock split distributed on May 22, 2000. Nine months ended October 27, 2000 Per-Share Income Shares Amount ----------------------------------- Net income $134,640 - ------------------------------------------------------------------------------- Basic earnings per share: Income available to common shareholders $134,640 329,372 $ 0.41 ======= Stock options outstanding 4,280 Diluted earnings per share: Income available to common shareholders plus assumed conversions $134,640 333,652 $ 0.40 =============================================================================== Nine months ended October 29, 1999 Per-Share Income Shares Amount ---------------------------------- Net income $ 128,822 Less: preferred stock dividends 1,178 - ------------------------------------------------------------------------------- Basic earnings per share: Income available to common shareholders $ 127,644 296,575 $ 0.43 ====== Stock options outstanding 6,477 Convertible preferred stock 1,178 34,088 - ------------------------------------------------------------------------------- Diluted earnings per share: Income available to common shareholders plus assumed conversions $ 128,822 337,140 $ 0.38 =============================================================================== 7 Three months ended October 27, 2000 Per-Share Income Shares Amount --------------------------------- Net income $ 50,990 - ------------------------------------------------------------------------------- Basic earnings per share: Income available to common shareholders $ 50,990 330,099 $ 0.15 ====== Stock options outstanding 3,457 - ------------------------------------------------------------------------------- Diluted earnings per share: Income available to common shareholders plus assumed conversions $ 50,990 333,556 $ 0.15 =============================================================================== 7 Three months ended October 27, 2000 Per-Share Income Shares Amount ---------------------------------- Net income $ 50,990 - -------------------------------------------------------------------------------- Basic earnings per share: Income available to common shareholders $ 50,990 330,099 $ 0.15 ====== Stock options outstanding 3,457 - -------------------------------------------------------------------------------- Diluted earnings per share: Income available to common shareholders plus assumed conversions $ 50,990 333,556 $ 0.15 ================================================================================ Three months ended October 29, 1999 Per-Share Income Shares Amount ---------------------------------- Net income $ 50,859 - ------------------------------------------------------------------------------- Basic earnings per share: Income available to common shareholders $ 50,859 331,833 $ 0.15 ====== Stock options outstanding 6,156 - ------------------------------------------------------------------------------- Diluted earnings per share: Income available to common shareholders plus assumed conversions $ 50,859 337,989 $ 0.15 =============================================================================== 8 4. Segment Reporting The Company manages its business on the basis of one reportable segment. As of October 27, 2000 and October 29, 1999, all of the Company's operations were located within the United States. The following data is presented in accordance with Statement of Financial Accounting Standards No. 131 "Disclosures about Segments of an Enterprise and Related Information." Three Months Ended Nine Months Ended Oct. 27, Oct. 29, Oct. 27, Oct. 29, 2000 1999 2000 1999 - ----------------------------------------------------------------------------- Sales by Category: Highly Consumable $ 638,372 $513,139 $1,767,009 $1,430,504 Hardware and Seasonal 148,415 138,007 429,230 416,149 Basic Clothing 133,818 121,908 375,048 330,111 Home Products 173,755 177,365 537,570 533,458 - ----------------------------------------------------------------------------- $1,094,360 $950,419 $3,108,857 $2,710,222 ============================================================================= 5. Long-Term Debt and Guarantor Subsidiaries On June 21, 2000, the Company sold $200 million of 8 5/8% Notes due June 15, 2010 (the "Old Notes"), in a private offering under Rule 144A of the Securities Act of 1933. The proceeds were used to repay outstanding short-term debt and for general corporate purposes. Subsequent to the offering, the Company and its guarantor subsidiaries filed a registration statement on Form S-4 which enabled the Company to exchange its 8 5/8% Exchange Notes due June 15, 2010 (the "New Notes" and, together with the Old Notes, the "Notes"), for all outstanding Old Notes. All of the Company's subsidiaries (the "Guarantors") have fully and unconditionally guaranteed on a joint and several basis the Company's obligations under the Notes. Each of the Guarantors is a wholly-owned subsidiary of the Company. The Guarantors comprise all of the direct and indirect subsidiaries of the Company. The Company has not presented separate financial statements and other disclosures concerning each Guarantor because management has determined that they are not material to investors. 9 Summarized combined financial information (in accordance with Rule 1-02(bb) of Regulation S-X) for the Guarantors is set forth below: October 27, Jan. 28, October 29, 2000 2000 1999 --------------------------------------------------- Current assets $1,156,026 $1,085,925 $1,028,843 Current liabilities 366,430 443,496 315,362 Noncurrent assets 427,683 320,142 295,252 Noncurrent liabilities 57,385 52,619 19,463
Three Months Ended Nine Months Ended October 27, October 29, October 27, October 29, 2000 1999 2000 1999 -------------------------------------------------------------------- Net sales $1,017,418 $ 915,210 $2,014,497 $1,759,803 Gross profit 281,973 249,582 554,682 475,529 Net income 79,054 106,342 158,152 190,707
10 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 Dollar General Corporation (the "Company") believes the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could be inaccurate, and therefore, there can be no assurance that the forward-looking statements will prove to be accurate. Forward-looking statements may be significantly impacted by certain risks and uncertainties, including, but not limited to: general transportation and distribution delays or interruptions; interruptions in suppliers' operations; inventory risks due to shifts in market demand; changes in product mix; costs and delays associated with building, opening and operating new distribution centers; and other risk factors referenced in the Annual Report on Form 10-K for the year ended January 28, 2000 and the Company's other periodic reports and filings with the Securities and Exchange Commission. The Company undertakes no obligation to publicly release any revisions to any forward-looking statements to reflect events or circumstances occurring after the date of this report. The following text contains references to years 2000, 1999, 1998, and 1997 which represent fiscal years ending or ended February 2, 2001, January 28, 2000, January 29, 1999, and January 30, 1998, respectively. This discussion and analysis should be read in conjunction with, and is qualified in its entirety by, the consolidated financial statements and their 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 with a period other than the same period of the previous year may reflect the seasonal nature of the Company's business. The Company defines same stores as those opened before the beginning of the previous fiscal year which have remained open throughout the current period. NINE MONTHS ENDED OCTOBER 27, 2000, AND OCTOBER 29, 1999 NET SALES. Net sales for the first nine months of 2000 increased $398.7 million, or 14.7%, to $3.1 billion from $2.7 billion for the comparable period in 1999. Same-store sales increased 0.7% for the first nine months of 2000. In the second quarter the Company undertook a major relay of its stores while adding 600 new items to and deleting 800 items from the merchandise assortment. The new prototype features wider aisles, additional selling space for seasonal merchandise, and better customer flow through high traffic departments. The Company also continued its installation of new technology and ordering processes in all stores. In conjunction with implementing this new ordering process, the Company experienced softer than expected sales in some core categories as a result of low in-stocks. While this aggressive implementation was disruptive to year-to-date results, management believes these efforts position the stores for increased productivity and profitability in the future. GROSS PROFIT. Gross profit for the first nine months of 2000 was $876.0 million, or 28.2% of net sales, compared with $753.4 million, or 27.8% of net sales, in the same period last year. This increase was driven by higher purchase markup and lower shrink, which offsets higher distribution expenses in the period. Year-to-date, transportation expense is slightly lower as a percentage of sales, despite higher fuel costs. This improvement is a result of better fleet utilization, continued benefits from our transportation management system, and lower average stem miles. 12 SELLING, GENERAL AND ADMINISTRATIVE (SG&A) EXPENSE. SG&A expense for the first nine months of 2000 totaled $654.4 million, or 21.0% of net sales, compared with $546.2 million, or 20.2% of net sales during the comparable period last year. Although expenses were below plan for the period, lower than expected sales eliminated SG&A expense leverage. [repeat some of explanation in 3 month section?] INTEREST EXPENSE. Interest expense increased to $10.5 million, or 0.34% of sales, compared with $5.1 million, or 0.19%, in the comparable nine-month period last year. This increase is primarily a result of higher average borrowings and an increase in weighted average interest rates compared with the same nine-month period last year. Average borrowings were higher than last year due to capital expenditures for new stores and distribution centers, inventory for new stores and the timing of share repurchases. PROVISIONS FOR TAXES ON INCOME. The effective income tax rate was 36.25% for the nine-month periods ended October 27, 2000, and October 29,1999. THREE MONTHS ENDED OCTOBER 27, 2000, AND OCTOBER 29, 1999 NET SALES. Net sales for the quarter increased $143.9 million, or 15.1%, to $1,094.4 million from $950.4 million for the comparable period in 1999. Same store sales for the third quarter increased 0.8%. Sales in the third quarter were driven by a 24.4% increase in sales of highly consumable merchandise, a 9.8% increase in sales of basic clothing merchandise, and a 7.5% increase in sales of hardware and seasonal merchandise. Although the Company experienced softer than expected sales in some core categories as a result of low in-stocks, the Company had better than expected sales in other departments including food, toys, Halloween, and summer seasonal merchandise. GROSS PROFIT. Gross profit for the quarter was $321.4 million, or 29.4% of net sales, compared with $277.9 million, or 29.2% of net sales, in the same period last year. This increase was primarily the result of higher purchase markup, lower shrink, and lower transportation expense as a percentage of sales. However, these improvements were slightly offset by higher markdowns in the period. SELLING, GENERAL AND ADMINISTRATIVE (SG&A) EXPENSE. SG&A expense for the quarter totaled $236.5 million, or 21.6% of net sales, compared with $195.8 million, or 20.6% of net sales during the comparable period last year. SG&A expense as a percentage of sales increased primarily as a result of higher health insurance expense, rent expense, and payroll expense. INTEREST EXPENSE. Interest expense increased to $4.9 million, or 0.44% of sales, from $2.3 million, or 0.24% of sales, in the comparable period last year. This increase was a result of higher average borrowings and an increase in weighted average interest rates compared to the same three-month period last year. Average borrowings were higher than last year due to capital expenditures for new stores and distribution centers, inventory for new stores and the timing of share repurchases. LIQUIDITY AND CAPITAL RESOURCES Cash flows used in operating activities - Net cash used in operating activities totaled $40.0 million during the first nine months of 2000, compared with $110.2 million cash used in operating activities in the comparable period last year. This decrease in the use of cash was primarily driven by a decrease in cash used to purchase merchandise inventories compared to the first nine months last year. Inventory management is improving due to contributions from technology and distribution investments. Cash flows used in investing activities - Net cash used in investing activities totaled $209.2 million during the first nine months of 2000, compared with $49.3 million in the comparable period last year. The increase in cash used in investing activities was primarily the result of investments in distribution 12 center projects and investments in 643 new store openings this year compared with 501 new store openings in the first nine months of last year. In addition, cash used in investing activities was offset in the first nine months of last year by $63.2 million of proceeds recognized in 1999 primarily from the sale/leasebacks of the South Boston, Virginia distribution center expansion and the Ardmore, Oklahoma distribution center. Cash flows from financing activities - Total debt (including current maturities and short-term borrowings) at October 27, 2000 was $275.9 million compared with $182.9 million at October 29, 1999. Because of the significant impact of seasonal buying (e.g., Spring and December 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 $175.0 million revolving credit/term loan facility and short-term bank lines of credit totaling $140.0 million at October 27, 2000. The Company had short-term borrowings of $61.4 million outstanding as of October 27, 2000 and $180.1 million as of October 29, 1999. Management believes seasonal working capital expenditure requirements will continue to be met through cash flow provided by operations supplemented by the revolving credit/term loan facility and short-term bank lines of credit. [explain total debt increase?] On June 21, 2000, the Company placed $200 million (principal amount) of 8 5/8% unsecured notes due June 15, 2010, through a private debt placement with registration rights. The notes pay interest semi-annually on June 15 and December 15 of each year. The holders of the notes may elect to have their notes repaid on June 15, 2005, at 100% of the principal amount plus accrued and unpaid interest. Proceeds from the notes are being used to repay outstanding short-term debt and for general corporate purposes. FORWARD-LOOKING EXPECTATIONS Please refer to the first paragraph under "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" for information concerning forward-looking statements. Revenues - For the fourth quarter and full year, management expects revenues to increase 16-19% and 15-16%, respectively. Same Store Sales - Management expects same store sales to increase 2-5% in the fourth quarter and 1-2% for the full year. Gross Profit - For the full year, management expects gross profit as a percentage of net sales to be 20-25 basis points higher than last year, reflecting lower transportation expense as a percentage of sales and higher purchase markup. Despite a difficult shrink comparison, management expects gross profit as a percentage of net sales to be comparable with the fourth quarter last year. Last year, the fourth quarter benefited 100 basis points because of better than expected annual inventory shrink results. For the fourth quarter, management expects a higher markup and higher sales of seasonal merchandise to offset higher shrink as a percentage of sales. Selling, General and Administrative (SG&A) Expense - Management expects SG&A expense as a percentage of net sales to increase 90-110 basis points for the full year and increase 120-170 basis points for the fourth quarter, reflecting both the impact of lower same store sales and the potential increase of two unique, one-time expenses. First, during the transition to a new health insurance provider this year, management discovered that certain health insurance billings and reimbursements were not current. Bringing those billings and reimbursements current will likely result in a significant increase in health insurance costs this year. Second, the Company is experiencing an increase in workers' compensation expense associated with prior year claims. Reflecting higher annual costs, these two unresolved issues could add 40-50 basis points to SG&A expense as a percentage of sales in the fourth quarter. 13 Interest Expense - Management expects interest expense as a percentage of net sales for the fourth quarter and full year to be 10-15 basis points higher, reflecting both higher borrowing balances and higher interest rates. Provision for Taxes on Income - Management expects the tax rate to be approximately 36.25% for the fourth quarter and the full year. ACCOUNTING PRONOUNCEMENTS The Company does not expect a material impact from the adoption of Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities" as amended by SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of Effective Date of FASB Statement No. 133" and SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities - an amendment of FASB Statement No. 133." Adoption of this Statement, as amended, is required for the Company's fiscal year ending February 1, 2002. The Company will adopt SEC Staff Accounting Bulleting No. 101, "Revenue Recognition in Financial Statements," during the quarter ended February 2, 2001. Management does not expect this Bulletin to have a material impact on the Company's financial statements. 14 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK For reasons other than trading purposes, the Company has entered into commitments under certain instruments which expose the Company to market risk for changes in interest rates primarily related to the Company's revolving and seasonal lines of credit and certain lease obligations. Under these obligations, the Company has cash flow exposure as a result of its variable interest rates. The Company seeks to manage this interest rate risk through the use of interest rate swaps. In 1999, the Company entered into interest rate swap agreements totaling $200 million which are scheduled to be in place until February 2001 at which time the counterparties have the option to extend the agreements through 2002. These swap agreements exchange the Company's floating interest rate exposure for a fixed interest rate. The Company will pay a weighted average fixed rate of 5.14% on the $200 million notional amount. The fair value of the interest rate swap agreements was $1.3 million at October 27, 2000. These swap agreements replaced four interest rate swap agreements totaling $200 million and exchanging floating rate exposure to a fixed interest rate. At October 29, 1999, the fair value of these interest rate swap agreements was $2.0 million. 15 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. There were no items submitted to a vote of security holders during the quarter ended October 27, 2000. Item 5. Not applicable. 10.1 Item 6. A. Exhibits: 27 Financial Data Schedule (for SEC use only) B. Reports on Form 8-K: On October 18, 2000, The Company filed a Current Report on Form 8-K pursuant to Item 9 thereof regarding certain forward-looking expectations. 16 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 11, 2000 By: /s/ Brian M. Burr ----------------- Brian M. Burr Executive Vice President and Chief Financial Officer EX-27 2 0002.txt FDS FOR DOLLAR GENERAL
5 1,000 9-MOS 9-MOS JAN-02-2001 JAN-28-2000 OCT-27-2000 OCT-29-1999 13,080 23,840 0 0 0 0 0 0 1,173,328 1,105,503 1,257,107 1,213,728 801,837 560,219 306,894 235,360 1,768,009 1,549,125 500,896 673,458 0 0 165,281 132,653 0 0 0 0 840,108 729,409 1,768,009 1,549,125 3,108,857 2,710,222 3,108,857 2,710,222 2,232,811 1,956,836 654,387 546,211 0 0 0 0 10,459 5,102 211,200 202,073 76,560 73,251 134,640 128,822 0 0 0 0 0 0 134,640 128,822 0.41 0.43 0.40 0.38
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