SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Tennessee 001-11421 61-0502302
--------------------------------------------------------------------------------
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
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ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On August 26, 2004, Dollar General Corporation (the "Company") issued a news release regarding results of operations and financial condition for the second quarter ended July 30, 2004, and the conference call to be held to discuss such results. The news release is attached hereto as Exhibit 99 and incorporated by reference as if fully set forth herein.
ITEM 7.01. REGULATION FD DISCLOSURE
The information set forth in Item 2.02 above is incorporated by reference as if fully set forth herein.
ITEM 9.01. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements. None.
(b) Pro Forma Financial Information. None.
(c) Exhibits. See Exhibit Index immediately following the signature
page hereto.
SIGNATURE
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.
Date: August 26, 2004 DOLLAR GENERAL CORPORATION
---------------
By: /s/ Susan S. Lanigan
--------------------------------------
Susan S. Lanigan
Senior Vice President, General Counsel
and Corporate Secretary
|
EXHIBIT INDEX
Exhibit No. Description ----------- ----------- 99 News release dated August 26, 2004. |
EXHIBIT 99
Dollar General Reports Increase in Second Quarter Net Income
GOODLETTSVILLE, Tenn.--(BUSINESS WIRE)--Aug. 26, 2004--Dollar
General Corporation (NYSE:DG) today reported diluted earnings per
share of $0.22 for the second quarter of fiscal 2004 compared to $0.18
per diluted share in the second quarter of fiscal 2003. Net income for
the quarter increased 19 percent to $71.3 million in 2004 compared to
$59.9 million in 2003. During the quarter, the Company recorded a net
reduction in certain income tax-related liabilities and related
interest accruals which increased net income by $7.4 million.
Excluding these adjustments, net income for the second quarter of 2004
would have been $63.9 million, or $0.19 per share.
Net sales during the second quarter increased 11.2 percent to
$1.84 billion compared to $1.65 billion in the second quarter of 2003.
The sales increase was driven by new store growth and a same-store
sales increase of 3.2 percent.
Gross profit during the quarter was $537.0 million, or 29.2
percent of sales, versus $472.8 million, or 28.6 percent of sales, in
the prior year quarter. The improvement in gross margin is primarily
the result of a higher average markup on beginning inventories and a
decrease in lower of cost or market inventory adjustments.
Selling, general and administrative expenses ("SG&A") for the
quarter were $428.9 million, or 23.4 percent of sales, in the current
year, versus $371.0 million, or 22.5 percent of sales, in the prior
year quarter. The increase in SG&A as a percentage to sales is
primarily due to increased rental expense on the Company's leased
facilities, increased costs associated with store physical inventory
counts, increased labor relating to the execution of store layout
changes during the quarter, fees associated with the acceptance of
debit cards, and increased professional fees associated with the
Company's 2004 store work-flow project.
The Company's effective tax rate was 31.5 percent in the current
year quarter versus 36.2 percent in the comparable prior year period.
The current quarter's provision for income taxes reflects an
adjustment of $6.2 million to reduce certain contingent state
income-tax related liabilities, net of the federal income tax effect.
The Company also reduced the interest accrual relating to these
contingent liabilities by $2.0 million. Excluding these adjustments,
the Company's effective tax rate for the second quarter of 2004 would
have been 37.5 percent. This rate is higher than the Company's tax
rate in the prior year period due in part to the expiration of certain
federal jobs tax credits.
For the 26-week year-to-date period, net income was $139.2 million
in fiscal 2004, or $0.42 per diluted share, compared to $120.3
million, or $0.36 per diluted share, in the comparable prior year
period. Excluding the effect of the income tax-related adjustments
described above, net income for the 26-week period would have been
$131.7 million, or $0.39 per diluted share.
Year-to-date net sales increased 11.3 percent, including a
same-store sales increase of 3.1 percent. As a percentage to sales,
gross margin for the year-to-date period has increased to 29.3 percent
in 2004 compared to 28.7 percent in 2003. SG&A expenses have increased
as a percentage to sales to 23.1 percent in 2004 from 22.4 percent in
2003, with the most significant increases relating to increased rental
expense on the Company's leased facilities, increased costs associated
with store physical inventory counts, increased professional fees
associated with the Company's 2004 store work-flow project and
increased expenses resulting from the acceptance of debit cards.
The Company's effective tax rate was 34.4 percent in the current
year-to-date period versus 35.9 percent in the comparable prior year
period. Excluding the adjustments to reduce certain contingent income
tax-related liabilities, the Company's effective tax rate would have
been 37.3 percent. This rate is higher than the Company's tax rate in
the prior year period due in part to the expiration of certain federal
jobs tax credits. The Company estimates that the expiration of these
federal tax credit programs increased its 2004 effective tax rate by
approximately 0.5 percent. The Company estimates that its effective
income tax rate for the remainder of the 2004 fiscal year will be
approximately 37.3 percent.
Through July 30, 2004, the Company has opened 418 Dollar General
stores and two Dollar General Markets and has closed 41 Dollar General
stores. Store openings are on track to meet or exceed the Company's
target of 695 total new stores this year. Year-to-date cash capital
expenditures were $124.8 million.
The Company has repurchased a total of approximately 10.5 million
shares of its common stock to date, including 0.9 million shares
purchased during the second quarter of 2004, with respect to its 12
million share repurchase authorization which expires on March 13,
2005. Year-to-date, the Company has repurchased 9.0 million shares at
a total cost of $169.4 million.
Dollar General also announced today that in addition to cash and
personal checks, substantially all of its stores are now accepting any
bank's debit and check cards via pin entry as well as Discover(R)Card.
In addition, the Company has accelerated the pace of EBT acceptance in
its stores with refrigerated coolers and is currently accepting EBT in
over 3,000 stores.
Non-GAAP Disclosures
This press release and the tables accompanying this release include certain financial information not derived in accordance with generally accepted accounting principles ("GAAP"), including net income, earnings per share, and the Company's effective income tax rate excluding an adjustment resulting from the reduction of certain income tax liabilities and the related interest accruals. Also, the accompanying tables include calculations of return on invested capital and return on assets each of which is calculated using certain financial results that exclude restatement-related items. In addition, return on invested capital may be considered a non-GAAP financial measure. None of this information should be considered a substitute for any measures derived in accordance with GAAP. The reasons why management believes return on capital and return on assets, excluding restatement-related items, are useful to investors, and the additional purposes for which management uses this information are disclosed in the Company's Form 10-K filed with the SEC on March 16, 2004. Management believes that net income, earnings per share, and the effective income tax rate, excluding the income tax-related adjustment, more clearly reflect the Company's actual performance on a comparable and ongoing basis.
Forward-Looking Information
This press release contains forward-looking information, such as
information regarding the Company's 2004 growth targets, the expected
effective income tax rate for fiscal 2004 and the planned acceptance
of EBT payments. The words "believe," "anticipate," "project," "plan,"
"schedule," "expect," "estimate," "objective," "forecast," "goal,"
"intend," "will likely result," or "will continue" and similar
expressions generally identify forward-looking statements. These
matters involve risks, uncertainties and other factors that may cause
the actual performance of the Company to differ materially from that
expressed or implied by these forward-looking statements. All
forward-looking information should be evaluated in the context of
these risks, uncertainties and other factors. The Company believes the
assumptions underlying these forward-looking statements are
reasonable; however, any of the assumptions could be inaccurate and,
therefore, actual results may differ materially from those projected
by, or implied in, the forward-looking statements. The factors that
may result in actual results differing from such forward-looking
information, include, but are not limited to: delays associated with
building, opening and operating new stores; changes in tax laws, the
Company's tax position or its tax assumptions; potential problems and
interruptions due to implementation of new technology; potential
delays in the installation of refrigerated coolers; the inability to
procure adequate suppliers of refrigerated food items; the inability
to obtain certifications to accept EBT; and other risk factors
discussed from time to time in our SEC filings, including but not
limited to our Annual Report on Form 10-K.
Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date of this
release. Except as may be required by law, the Company disclaims any
obligation to publicly update or revise any forward-looking statements
contained herein to reflect events or circumstances occurring after
the date of this release or to reflect the occurrence of unanticipated
events. Readers are advised, however, to consult any further
disclosures the Company may make on related subjects in its public
disclosures or documents filed with the SEC.
Conference Call
The Company will host a conference call today at 10 a.m. EDT to
discuss the quarter's results. The security code for the conference
call is "Dollar General." If you wish to participate, please call
(334) 260-2280 at least 10 minutes before the conference call is
scheduled to begin. The call will also be broadcast live online at
www.dollargeneral.com. A replay of the conference call will be
available until 5 p.m. EDT on Thursday, September 9, online or by
calling (334) 323-7226. The access code for the replay is 40954 and
the pass code is 86362.
About Dollar General
Dollar General is a Fortune 500(R) discount retailer with 7,079 neighborhood stores as of July 30, 2004. Dollar General stores offer convenience and value to customers by offering consumable basic items that are frequently used and replenished, such as food, snacks, health and beauty aids and cleaning supplies, as well as a selection of basic apparel, housewares and seasonal items at everyday low prices. The Company store support center is located in Goodlettsville, Tennessee. Dollar General's Web site can be reached at www.dollargeneral.com.
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollars in thousands)
July 30, August 1, January 30,
2004 2003 2004
---------- ---------- ----------
(Unaudited) (Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 101,465 $ 102,276 $ 398,278
Merchandise inventories 1,379,543 1,184,709 1,157,141
Deferred income taxes 10,997 22,829 30,413
Other current assets 94,637 57,494 66,383
----------- ----------- ----------
Total current assets 1,586,642 1,367,308 1,652,215
----------- ----------- ----------
Property and equipment, at cost 1,833,447 1,639,164 1,709,722
Less: accumulated depreciation and
amortization 794,401 652,701 720,498
----------- ----------- ----------
Net property and equipment 1,039,046 986,463 989,224
----------- ----------- ----------
Other assets, net 29,317 11,610 11,270
----------- ----------- ----------
Total assets $2,655,005 $2,365,381 $2,652,709
=========== =========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term
obligations $ 15,956 $ 16,957 $ 16,670
Accounts payable 440,485 352,717 383,791
Accrued expenses and other 304,962 255,027 297,616
Income taxes payable 19,466 9,182 45,725
----------- ----------- ----------
Total current liabilities 780,869 633,883 743,802
----------- ----------- ----------
Long-term obligations 259,009 272,420 265,337
Deferred income taxes 76,251 56,933 66,650
Shareholders' equity:
Preferred stock - - -
Common stock 164,191 167,345 168,095
Additional paid-in capital 395,205 331,185 376,930
Retained earnings 985,243 909,114 1,037,409
Accumulated other comprehensive
loss (1,054) (1,266) (1,161)
----------- ----------- ----------
1,543,585 1,406,378 1,581,273
Other shareholders' equity (4,709) (4,233) (4,353)
----------- ----------- ----------
Total shareholders' equity 1,538,876 1,402,145 1,576,920
----------- ----------- ----------
Total liabilities and shareholders'
equity $2,655,005 $2,365,381 $2,652,709
=========== =========== ==========
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DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income
(Dollars in thousands, except per share amounts)
(Unaudited)
For the Quarter (13 Weeks) Ended
---------------------------------------
% of % of
July 30, Net August 1, Net
2004 Sales 2003 Sales
---------- ------- ---------- -------
Net sales $1,836,243 100.00% $1,651,094 100.00%
Cost of goods sold 1,299,263 70.76 1,178,264 71.36
---------- ------- ---------- -------
Gross profit 536,980 29.24 472,830 28.64
Selling, general and
administrative 428,854 23.35 370,987 22.47
---------- ------- ---------- -------
Operating profit 108,126 5.89 101,843 6.17
Interest expense, net 4,041 0.22 7,899 0.48
---------- ------- ---------- -------
Income before taxes on income 104,085 5.67 93,944 5.69
Provision for taxes on income 32,763 1.78 34,008 2.06
---------- ------- ---------- -------
Net income $ 71,322 3.88% $ 59,936 3.63%
========== ======= ========== =======
Diluted earnings per share $ 0.22 $ 0.18
========== ==========
Weighted average diluted
shares (000s) 330,298 336,841
========== ==========
Basic earnings per share $ 0.22 $ 0.18
========== ==========
Weighted average basic shares
(000s) 327,799 333,871
========== ==========
Dividends per share $ 0.040 $ 0.035
========== ==========
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DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income
(Dollars in thousands, except per share amounts)
(Unaudited)
For the 26 Weeks Ended
----------------------------------------
% of % of
July 30, Net August 1, Net
2004 Sales 2003 Sales
---------- ------- ---------- -------
Net sales $3,584,202 100.00% $3,220,158 100.00%
Cost of goods sold 2,534,972 70.73 2,295,422 71.28
---------- ------- ---------- -------
Gross profit 1,049,230 29.27 924,736 28.72
Selling, general and
administrative 826,554 23.06 719,942 22.36
---------- ------- ---------- -------
Operating profit 222,676 6.21 204,794 6.36
Interest expense, net 10,483 0.29 17,310 0.54
---------- ------- ---------- -------
Income before taxes on income 212,193 5.92 187,484 5.82
Provision for taxes on income 73,022 2.04 67,216 2.09
---------- ------- ---------- -------
Net income $ 139,171 3.88% $ 120,268 3.73%
========== ======= ========== =======
Diluted earnings per share $ 0.42 $ 0.36
========== ==========
Weighted average diluted
shares (000s) 333,778 335,719
========== ==========
Basic earnings per share $ 0.42 $ 0.36
========== ==========
Weighted average basic shares
(000s) 330,954 333,557
========== ==========
Dividends per share $ 0.080 $ 0.070
========== ==========
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DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
26 Weeks Ended
--------------------
July 30, August 1,
2004 2003
--------- ---------
Cash flows from operating activities:
Net income $ 139,171 $ 120,268
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 80,697 74,883
Deferred income taxes 29,017 17,657
Tax benefit from stock option exercises 3,684 3,139
Change in operating assets and liabilities:
Merchandise inventories (222,402) (61,678)
Other current assets (28,254) (11,795)
Accounts payable 51,328 9,519
Accrued expenses and other 8,172 15,930
Income taxes (26,295) (57,909)
Other (17,093) 1,756
--------- ---------
Net cash provided by operating activities 18,025 111,770
--------- ---------
Cash flows from investing activities:
Purchase of property and equipment (124,810) (63,979)
Purchase of promissory notes - (49,582)
Proceeds from sale of property and equipment 90 141
--------- ---------
Net cash used in investing activities (124,720) (113,420)
--------- ---------
Cash flows from financing activities:
Repayments of long-term obligations (8,419) (7,979)
Payment of cash dividends (26,448) (23,374)
Proceeds from exercise of stock options 14,285 14,214
Repurchases of common stock (169,391) -
Other financing activities (145) (253)
--------- ---------
Net cash used in financing activities (190,118) (17,392)
--------- ---------
Net decrease in cash and cash equivalents (296,813) (19,042)
Cash and cash equivalents, beginning of period 398,278 121,318
--------- ---------
Cash and cash equivalents, end of period $ 101,465 $ 102,276
========= =========
Supplemental schedule of noncash investing and
financing activities:
Purchases of property and equipment awaiting
processing for payment, included in accounts
payable $ 5,366 $ 1,895
Purchases of property and equipment under
capital lease obligations $ 1,364 $ 427
========= =========
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DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
Selected Additional Information
(Unaudited)
13 Weeks Ended
------------------------------
July 30, August 1, %
2004 2003 Change
----------- ----------- ------
Highly consumable $1,167,324 $1,027,854 13.6%
Seasonal 290,893 263,468 10.4%
Home products 208,153 207,707 0.2%
Basic clothing 169,873 152,065 11.7%
----------- ----------- ------
Total sales $1,836,243 $1,651,094 11.2%
=========== =========== ======
26 Weeks Ended
------------------------------
July 30, August 1, %
2004 2003 Change
----------- ----------- ------
Highly consumable $2,281,718 $2,017,884 13.1%
Seasonal 551,331 500,587 10.1%
Home products 422,926 407,176 3.9%
Basic clothing 328,227 294,511 11.4%
----------- ----------- ------
Total sales $3,584,202 $3,220,158 11.3%
=========== =========== ======
New Store Activity
------------------
26 Weeks Ended
------------------------------
July 30, August 1,
2004 2003
-------------- -------------
Beginning store count 6,700 6,113
New store openings 420 400
Store closings 41 34
Net new stores 379 366
Ending store count 7,079 6,479
Total selling square footage (000's) 48,139 43,796
Customer Transaction Data
--------------------------
13 Weeks Ended 26 Weeks Ended
------------------- ------------------
July 30, August 1, July 30, August 1,
2004 2003 2004 2003
--------- --------- -------- ---------
Same-store customer
transactions + 2.8% + 4.7% + 3.2% + 4.1%
Average customer purchase
(total stores) $8.36 $8.31 $8.38 $8.36
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DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
Non-GAAP Disclosures
Impact of Adjustment to Tax Liabilities
(Dollars in thousands, except per share amounts)
(Unaudited)
% of % of
Net Non-GAAP Net
As Reported Sales Adjustments Disclosure Sales
----------- ------- ----------- ----------- -------
Net Sales $1,836,243 100.00% - $1,836,243 100.00%
Cost of goods sold 1,299,263 70.76 - 1,299,263 70.76
----------- ------- ----------- ----------- -------
Gross profit 536,980 29.24 - 536,980 29.24
Selling, general
and administrative 428,854 23.35 - 428,854 23.35
----------- ------- ----------- ----------- -------
Operating profit 108,126 5.89 - 108,126 5.89
Interest expense,
net 4,041 0.22 1,958 5,999 0.33
----------- ------- ----------- ----------- -------
Income before
taxes on income 104,085 5.67 (1,958) 102,127 5.56
Provisions for
taxes on income(1) 32,763 1.78 5,484 38,247 2.08
----------- ------- ----------- ----------- -------
Net income $71,322 3.88% $(7,442) $63,880 3.48%
=========== ======= =========== =========== =======
Diluted earnings
per share $0.22 $(0.02) $0.19
=========== =========== ===========
Weighted average
diluted shares
(000s) 330,298 330,298 330,298
=========== =========== ===========
Basic earnings per
share $0.22 $(0.02) $0.19
=========== =========== ===========
Weighted average
basic shares
(000s) 327,799 327,799 327,799
=========== =========== ===========
Effective tax rate 31.5% 37.5%
=========== ===========
For the 26 Weeks Ended July 30, 2004
---------------------------------------------------
% of % of
Net Non-GAAP Net
As Reported Sales Adjustments Disclosure Sales
----------- ------- ----------- ----------- -------
Net Sales $3,584,202 100.00% - $3,584,202 100.00%
Cost of goods sold 2,534,972 70.73 - 2,534,972 70.73
----------- ------- ----------- ----------- -------
Gross profit 1,049,230 29.27 - 1,049,230 29.27
Selling, general
and administrative 826,554 23.06 - 826,554 23.06
----------- ------- ----------- ----------- -------
Operating profit 222,676 6.21 - 222,676 6.21
Interest expense,
net 10,483 0.29 1,958 12,441 0.35
----------- ------- ----------- ----------- -------
Income before
taxes on income 212,193 5.92 (1,958) 210,235 5.87
Provisions for
taxes on income(1) 73,022 2.04 5,484 78,506 2.19
----------- ------- ----------- ----------- -------
Net income $139,171 3.88% $(7,442) $131,729 3.68%
=========== ======= =========== =========== =======
Diluted earnings
per share $0.42 $(0.02) $0.39
=========== =========== ===========
Weighted average
diluted shares
(000s) 333,778 333,778 333,778
=========== =========== ===========
Basic earnings per
share $0.42 $(0.02) $0.40
=========== =========== ===========
Weighted average
basic shares
(000s) 330,954 330,954 330,954
=========== =========== ===========
Effective tax rate 34.4% 37.3%
=========== ===========
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(1) Adjustment to provision for taxes on income includes a $6,232 adjustment to tax liabilities, which is partially offset by the income tax effect of the related interest adjustment of $748.
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
Non-GAAP Disclosures
Return on Invested Capital (a)
(Unaudited)
For the four
quarters ended
----------------------
July 30, August 1,
($ in thousands) 2004 2003
---------- ----------
Net income $ 319,903 $ 296,924
Add:
Interest expense, net 24,676 38,180
Rent expense 267,978 232,451
Tax effect of interest and rent (107,070) (96,937)
---------- ----------
Interest and rent, net of tax 185,584 173,694
---------- ----------
Return, net of tax $ 505,487 $ 470,618
---------- ----------
Restatement-related items:
Penalty and litigation settlement proceeds 10,000 (25,041)
Restatement-related items in SG&A 668 2,141
Tax effect (274) 8,986
---------- ----------
Restatement-related items, net of tax 10,394 (13,914)
---------- ----------
Return excluding restatement-related items $ 515,881 $ 456,704
---------- ----------
Average Invested Capital:
Average long-term obligations (b) $ 282,100 $ 403,736
Shareholders' equity (c) 1,501,537 1,269,933
Average rent x 8 (d) 2,001,716 1,721,236
---------- ----------
Invested capital $3,785,353 $3,394,905
---------- ----------
Return on invested capital 13.4% 13.9%
========== ==========
Return on invested capital, excluding
restatement-
related items 13.6% 13.5%
========== ==========
|
(a) The Company believes that the most directly comparable ratio
calculated solely using GAAP measures is the ratio of net income
to the sum of average long-term obligations, including current
portion, and average shareholders' equity. This ratio was 17.9%
and 17.7% for the rolling four quarters ended July 30, 2004 and
August 1, 2003, respectively.
(b) Average long-term obligations is equal to the average long-term
obligations, including current portion, measured at the end of
each of the last five fiscal quarters.
(c) Average shareholders' equity is equal to the average shareholders'
equity measured at the end of each of the last five fiscal
quarters.
(d) Average rent expense is computed using a rolling two-year period.
Average rent expense is multiplied by a factor of eight to
capitalize operating leases in the determination of pretax
invested capital. This is a conventional methodology utilized by
credit rating agencies and investment bankers.
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
Non-GAAP Disclosures
Return on Assets
(Unaudited)
For the four
quarters ended
-----------------------
July 30, August 1,
($ in thousands) 2004 2003
---------- ----------
Net income $ 319,903 $ 296,924
Restatement-related items, net of tax 10,394 (13,914)
---------- ----------
Net income, excluding restatement-related
items $ 330,297 $ 283,010
---------- ----------
Average assets (a) $2,587,212 $2,346,179
---------- ----------
Return on assets 12.4% 12.7%
========== ==========
Return on assets, excluding restatement-
related items 12.8% 12.1%
========== ==========
|
(a) Average assets is equal to the average total assets measured at the end of each of the last five fiscal quarters.
CONTACT: Dollar General Corporation, Goodlettsville Emma Jo Kauffman, 615-855-5525 www.dollargeneral.com