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 31, 1995
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 shares outstanding at September 8, 1995 was
57,514,191.
2
Dollar General Corporation
Form 10-Q
For the Quarter Ended July 31, 1995
Index
Part I. Financial Information Page No.
Item 1. Financial Statements (unaudited):
Consolidated Statements of
Income for the three months and six
months ended July 31, 1995 and 1994 3
Consolidated Balance Sheets as of
July 31, 1995, January 31, 1995 and
July 31, 1994 4
Consolidated Statements of Cash Flows for
the six months ended July 31, 1995
and 1994 5
Notes to Consolidated Financial
Statements 6-7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 8-10
Part II. Other Information
Item 4. Submission of Matters to a Vote of
Security Holders 11
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
3
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the three months and six months ended July 31, 1995 and 1994
(in thousands except per share amounts)
(unaudited)
Three Months Six Months
1995 1994 1995 1994
Net sales $408,204 $317,323 $751,596 $604,409
Cost of goods sold 294,259 229,615 541,370 436,721
Gross profit 113,945 87,708 10,226 167,688
Selling, general and
administrative expense 83,415 64,636 159,740 128,940
Operating profit 30,530 23,072 50,486 38,748
Interest expense 1,765 647 2,898 1,039
Income before taxes
on income 28,765 22,425 47,588 37,709
Provision for taxes on income 11,074 8,465 18,321 14,235
Net income 17,691 13,960 29,267 23,474
Net income per common share $ .25 $ .20 $ .42 $ .34
Weighted average number of
common shares outstanding 70,312 68,839 70,109 68,643
Cash dividends per common
share as declared $ .05 $ .05 $ .10 $ .10
Adjusted to give retroactive
effect to the five-for-four
stock split distributed on
March 6, 1995 $ .05 $ .04 $ .10 $ .08
The accompanying notes are an integral part of this statement.
4
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of July 31, 1995, January 31, 1995 and July 31, 1994
(in thousands)
ASSETS July 31, January 31, July 31,
1995 1995 1994
Current assets:
Cash and cash equivalents $ 13,971 $ 33,045 $ 26,764
Merchandise inventories 462,642 356,111 332,551
Deferred income taxes 10,925 11,785 10,808
Other current assets 14,101 9,212 10,757
Income taxes 0 0 2,215
Total current assets 501,639 410,153 383,095
Property & equipment, at cost 212,379 187,360 147,779
Less: Accumulated depreciation 72,631 62,108 54,580
139,748 125,252 93,199
Other Assets 5,569 5,463 4,719
$646,956 $540,868 $481,013
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term
debt $ 1,483 $ 1,441 $ 1,303
Short-term borrowings 124,501 29,600 62,000
Accounts payable 93,557 111,675 91,515
Accrued expenses 52,859 61,037 49,418
Income taxes 3,709 5,210 0
Total current liabilities 276,109 208,963 204,236
Long-term debt 3,598 4,767 4,669
Deferred income taxes 3,382 3,382 2,563
Shareholders' equity:
Preferred stock 858 858 0
Common stock 33,971 33,971 27,248
Additional paid-in capital 299,304 283,323 75,372
Retained earnings 229,868 207,436 169,308
564,001 525,588 271,928
Less treasury stock 200,134 201,832 2,383
363,867 323,756 269,545
$646,956 $540,868 $481,013
The accompanying notes are an integral part of this statement.
5
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the six months ended July 31, 1995 and 1994
(in thousands)
(unaudited)
July 31, July 31,
1995 1994
Cash flows from operating activities:
Net income $ 29,267 $ 23,474
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 11,395 7,805
Deferred income taxes 860 ( 1,144)
Change in operating assets and liabilities:
Merchandise inventories (106,531) (72,509)
Accounts payable ( 18,118) 10,475
Accrued expenses ( 8,178) 1,512
Income taxes ( 1,501) ( 652)
Other current assets ( 4,889) ( 2,360)
Other 904 337
Net cash used by operating activities ( 96,791) (33,060)
Cash flows used in investing activities:
Purchase of property & equipment ( 26,902) (23,852)
Cash flows provided by financing activities:
Issuance of short-term borrowings 124,501 52,000
Repayments of short-term borrowings ( 29,600) ( 8,000)
Repayments of long-term debt ( 1,126) ( 1,041)
Payments of cash dividends ( 6,835) ( 5,333)
Proceeds from exercise of stock options 11,338 5,899
Tax benefits from exercise of stock options 6,341 4,786
Net cash provided by financing
activities 104,619 48,313
Net decrease in cash and equivalents ( 19,074) ( 8,601)
Cash and cash equivalents at
beginning of year 33,045 35,365
Cash and cash equivalents at end of period $ 13,971 $ 26,764
The accompanying notes are an integral part of this statement.
6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The accompanying financial statements are presented in accordance with the
requirements of Form 10-Q and consequently do not include all of the disclosures
normally required by generally accepted accounting principles or those normally
made in the Company's Annual Report on Form 10-K. Accordingly, the reader of
the quarterly report on Form 10-Q should refer to the Company's annual report on
Form 10-K for the year ended January 31, 1995 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 six-month periods ended July 31, 1995 and
1994, 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.
2. Net Income Per Common Share
Net income per common share is based upon the actual weighted average number
of common shares outstanding during each period plus the assumed exercise of
dilutive stock options as follows:
Three Months Six Months
Ended July 31 Ended July 31
Shares (000's)
1995 1994 1995 1994
Actual weighted average number
of common shares outstanding
during the period 57,134 66,329 56,843 66,048
Common Stock Equivalents:
Dilutive effect of stock options
using the "Treasury Stock
Method" 2,455 2,510 2,543 2,595
1,715,742 shares Convertible
Preferred Stock Issued August 22,
1994 10,723 0 10,723 0
Weighted Average Shares 70,312 68,839 70,109 68,643
7
3. Changes in shareholder's equity for the six months ended July 31, 1995 and
1994 were as follows (in thousands except per share amounts):
Additional
Preferred Common Paid-In Retained Treasury
Stock Stock Capital Earnings Stock
Balances, January 31, 1994 $ 0 $ 27,248 $ 65,857 $151,165 $ 3,553
Net income 23,474
Cash dividend, $.10 per ( 5,331)
common share, as
declared
Reissuance of treasury
stock under employee
stock incentive plans 4,729 ( 1,170)
Tax benefit from exercise
of options ______ ________ 4,786 ________ _______
Balances, July 31, 1994 $ 0 $ 27,248 $ 75,372 $169,308 $ 2,383
Balances, January 31, 1995 $ 858 $ 33,971 $283,323 $207,436 $201,832
Net income 29,267
Cash dividend, $.10 per
common share, as
declared ( 5,871)
Cash dividend, $.56 per
preferred share ( 964)
Reissuance of treasury
stock under employee
stock incentive plans 9,640 ( 1,698)
Tax benefit from exercise
Of options ______ _______ 6,341 ________ _______
Balances, July 31, 1995 $ 858 $ 33,971 $299,304 $229,868 $200,134
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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 which ends January 31st. 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. Due to the seasonal nature of the business, current year
periods are most accurately evaluated by comparison to the same periods in prior
years.
Six months ended July 31, 1995 and 1994.
NET SALES. Net sales for the first six months of fiscal 1996 increased
$147.2 million, or 24.35% to $751.6 million from $604.4 million for the
comparable period of fiscal 1995. The increase resulted primarily from 367 net
additional stores being in operation as of July 31, 1995 as compared with the
same prior-year period and an increase of 7.8% in same-store sales. In the
first six months of fiscal 1996, the Company opened 218 stores, closed 17 stores
and ended the period with a total of 2,260 stores. However, the same-store
sales increase for the first six months of fiscal 1996 of 7.8% is down from a
13.4% increase in the comparable six-month period of fiscal 1995.
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
increase is a continued reflection of the success of its everyday low price
strategy and merchandise selection. The reduction in the percentage increase in
same-store sales in the first six months of fiscal 1996 as compared to the
comparable period in fiscal 1995 is primarily the result of constraints in
shipping merchandise to the stores related to the start up of the Ardmore
distribution center. The Company's sales mix further shifted in the first six
months of fiscal 1996 in favor of hardlines, which accounted for 69% of the
sales, compared to softlines' 31% of sales versus 65% and 35%, respectively,
in the first six months of fiscal 1995.
GROSS PROFIT. Gross profit for the first six months of fiscal 1996 was
$210.2 million, or 27.97% of net sales, compared to $167.7 million, or 27.74% of
net sales, for the comparable period in the prior fiscal year. The increase
resulted from higher beginning inventory margins and lower markdowns which more
than offset increased distribution costs related to the start-up of the Ardmore,
Oklahoma distribution center. Shrinkage allowances and LIFO charges were
essentially unchanged from the same period last year. Cost of goods sold is
determined in the first, second and third quarters utilizing estimates of
inventory markdowns, shrinkage and inflation. Adjustment of these estimates
based upon actual results are included in cost of goods sold in the fourth
quarter.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Operating expenses for the
period equaled $159.7 million, or 21.25% of sales, compared with $128.9 million,
or 21.33% of sales, in the same period last year. Operating expenses as a
percentage of sales decreased principally as a result of lower self-insurance
reserves and employee benefit and bonus accruals, which more than offset higher
advertising, rent and depreciation costs.
INTEREST EXPENSE. Interest expense increased 178.9% to $2.9 million for
the first six months of fiscal 1996 from $1.0 million for the comparable prior
year period. The increase resulted primarily from greater average short-term
borrowings as well as higher interest rates. Average short-term borrowings were
$84.9 million and $38.3 million for the respective six-month periods of fiscal
1996 and 1995.
9
Three months ended July 31, 1995 and 1994.
NET SALES. Net sales in the second quarter of fiscal 1996 increased $90.9
million or 28.6%, to $408.2 million from $317.3 million for the same period in
fiscal 1995. The increase resulted from a same-store sales increase of 10.6%
and the operation of more than 367 additional stores.
GROSS PROFIT. Gross profit as a percentage of sales was 27.91% in the
second quarter of fiscal 1996 as compared to 27.64% for the comparable period in
fiscal 1995. This increase was the result of the same factors affecting gross
profit for the six-month period.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and
administrative expense increased $18.8 million or 29.05% in the second quarter
of fiscal 1996 as compared to fiscal 1995. As a percentage of sales, selling,
general and administrative expense increased to 20.43% for the second quarter of
fiscal 1996 from 20.37% for the same period in the previous year. Operating
expenses as a percentage of sales increased principally as a result of higher
advertising, rent, and depreciation costs which were partially offset by lower
self-insurance reserves and employee benefit and bonus accruals.
INTEREST EXPENSE. Interest expense for the second quarter of fiscal 1996
increased 172.8%, to $1.8 million from $0.6 million, from the comparable period
in fiscal 1995 due to greater average borrowings and higher interest rates.
Average short-term borrowings were $102.9 million and $47.4 million for the
respective three-month periods of fiscal 1996 and 1995.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows from operating activities. Cash used in operating activities
totaled $96.8 million during the first six months of fiscal 1996 compared to
$33.1 million in the same period last year. This increased use of cash is
primarily the result of a $106.5 million increase in inventories since fiscal
year end 1995, $34.0 million more than in the same period last year, and an
$18.1 million reduction in trade payables, which is a $28.5 million adjustment
from the same period last year. The increase in merchandise inventories is the
result of operating 367 more stores, stocking the new Ardmore distribution
center, increased imported merchandise in transit, and inventory necessary to
support the back to school season.
Cash flows from investing activities. Cash used for capital expenditures
during the first six months of fiscal 1996 increased $3.0 million to $26.9
million as compared to $23.9 million in the comparable period in 1995. The
current year expenditures result principally from opening 218 new stores this
year versus 115 last year, remodeling and relocating 235 stores this year versus
105 last year, and purchasing additional distribution trailers versus
constructing the Ardmore distribution center last year.
Cash flows from financing activities. The Company's short-term borrowings
during the first six months of fiscal 1996 increased $94.9 million to $124.5
million compared with an increase of $44.0 million to $62.0 million during the
same period of the prior fiscal year. The increase in short-term borrowings is
required to fund the cash used in operating activities and for the capital
expenditures discussed above.
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 $270.0 million at July 31, 1995 ($170.0
million revolving credit/term loan facility plus $100.0 million seasonal lines
of credit). The Company successfully renegotiated an increase in its revolving
credit/term loan facility from $65.0 million to $170.0 million during June 1995.
The Company had no seasonal line of credit borrowings as of July 31, 1995, or
1994. Seasonal working capital and capital expenditure requirements will
10
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
(amounts in thousands):
July 31, January 31, July 31,
1995 1995 1994
Current ratio 1.8x 2.0x 1.9x
Total debt/equity 35.6% 11.1% 25.2%
Long-term debt/equity 1.0% 1.5% 1.7%
Working capital (000) $225,530 $201,190 $178,859
Average daily use of debt:
(fiscal year to date)
Short-term (000) 84,898 51,528 38,315
Long-term (000) 4,932 6,035 6,250
Total (000) 89,830 57,563 44,565
Minimum outstanding
short-term debt
(fiscal year-to-date) $124,501 $116,712 $ 62,000
11
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 5, 1995,
the Stockholders voted upon four proposals. The results of the Stockholders'
vote on each of the proposals are 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
James L. Clayton 47,169,010 98,814
James D. Cockman 47,167,667 100,157
Reginald D. Dickson 47,168,838 98,986
John B. Holland 47,096,317 126,124
Wallace N. Rasmussen 47,160,722 107,102
Cal Turner 47,163,398 104,426
Cal Turner, Jr. 47,094,653 172,390
David M. Wilds 47,174,015 97,809
William S. Wire, II 47,165,863 101,961
Proposal No. 2. Ratification of the 1995 Employee Stock Incentive Plan.
Votes For Votes Against/Abstain
33,781,560 15,905,093
Proposal No. 3. Ratification of the 1995 Outside Directors' Stock Option Plan.
Votes For Votes Against/Abstain
40,875,126 8,811,517
Proposal No. 4. Ratification of Coopers & Lybrand L.L.P. as the Corporation's
Independent Public Accounts.
Votes For Votes Against Abstentions
49,470,903 69,278 146,462
Item 5. Not applicable.
Item 6. Exhibits and reports on Form 8-K
(a) Loan Agreement dated June 14, 1995 by and among Dollar General
Corporation, Dolgencorp, Inc. and NationsBank of North
Carolina, N.A.
(b) No reports on Form 8-K were filed during the quarter
ended July 31, 1995.
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)
Date: September 12, 1995 By:___________________________________
Bob Carpenter, Chief Administrative
Officer, Vice President
and Corporate Secretary