Exhibit 99.1
7-Eleven, Inc. Posts 10.1% Increase in Total Revenue for 2003
to Record $10.9 Billion
Fourth Quarter Merchandise Sales Total $1.9 Billion, an Increase of 7.1%
And 2003 Merchandise Sales Increase 5.6% to $7.4 Billion
DALLAS, Jan. 29 /PRNewswire-FirstCall/ -- 7-Eleven, Inc. (NYSE: SE), the
largest chain in the convenience retailing industry, today announced that core
earnings, which exclude non-operating items, grew to $6.1 million, or $0.05
per diluted share, for the quarter ended December 31, 2003. This compares to
core earnings of $2.6 million, or $0.02 per diluted share, for the fourth
quarter of 2002. The company achieved higher merchandise and gasoline gross
profit for the quarter. The fourth quarter net loss for 2003 amounted to
($6.1) million, or ($0.05) per diluted share, compared to a net loss of
($11.5) million, or ($0.11) per diluted share, in the same quarter a year ago.
Fourth Quarter 2003 Highlights:
-- Reported core earnings of $6.1 million, or $0.05 per diluted share
-- Achieved increase in total revenue of $214.8 million, or 8.6 percent,
to $2.7 billion
-- Increased total merchandise sales by $123.9 million, or 7.1 percent,
to $1.9 billion
-- Grew quarterly U.S. same-store merchandise sales by 5.2 percent
-- Improved merchandise gross profit by 9.1 percent to $660.3 million
-- Grew total gasoline gallons by 5.6 percent to 539 million; improved
gasoline gross profit to $76.5 million with a 14.2 cent per-gallon
margin
EARNINGS SUMMARY (Unaudited)
($ in millions)
Three Months Ended
December 31,
2002 2003
Net Earnings (Loss) ($11.5) ($6.1)
Adjustments (Net of Tax):
Non-Operating Items:
-- Currency Conversion Loss 1.8 3.1
-- Infrastructure Consolidation and
Other Items, Net 2.3 (1.5)
-- Discontinued Operations (SFAS
No. 144, Impairment/Disposal of
Long-Lived Assets) 10.0 10.6
Core Earnings $2.6 $6.1
Review of Fourth Quarter 2003 Core Earnings
Total revenues for the fourth quarter grew 8.6 percent to $2.7 billion.
Total merchandise sales for the fourth quarter increased 7.1 percent to
$1.9 billion. This growth was driven primarily by a 5.2 percent increase in
U.S. same-store merchandise sales, on top of a 3.6 percent increase in 2002.
Categories that contributed to the merchandise sales increase included fresh
food, beverages, beer and cigarettes. During the quarter, the company changed
its method of reporting prepaid phone card sales from a gross basis to a net
basis. The numbers reported reflect this change in method for all periods
presented.
"The 5.2 percent increase in U.S. same-store merchandise sales in the
fourth quarter reflects the strongest growth we achieved all year. It also
represents our nineteenth consecutive quarterly increase," said Jim Keyes,
president and chief executive officer. "The ongoing implementation of our
strategic initiatives as well as the consistent introduction of new products
continues to fuel our sales growth."
For the fourth quarter, merchandise gross profit grew 9.1 percent to
$660.3 million. Merchandise gross profit margin increased by 65 basis points
to 35.55 percent compared to the prior-year quarter. This increase was
primarily due to changes in product mix and to a lesser extent improvements in
write-offs and shortage.
7-Eleven grew total gasoline gallons 5.6 percent to 539.1 million gallons
for the fourth quarter of 2003. Total gasoline revenues for the quarter were
$832.0 million compared to $742.7 million in the same quarter a year ago. The
12.0 percent increase in gasoline revenues is due to an increase in average
retail gasoline prices year over year, as well as a 4.5 percent increase in
per-store gallon sales. The average retail price of gasoline was $1.54 in the
fourth quarter of 2003, compared to $1.46 in the fourth quarter of 2002.
Gasoline gross profit rose to $76.5 million, an 8.3 percent increase over
the fourth quarter of 2002. Expressed as cents per gallon, the gasoline
margin was 14.2 cents in the fourth quarter of 2003 compared to 13.8 cents in
the fourth quarter of 2002. "We produced another quarter of solid gasoline
results," said Keyes. "Both our volume growth and margin performance were
strong due to the day-to-day management of our gasoline business at each
individual store."
Operating, selling, general and administrative (OSG&A) rose 6.4 percent to
$535.1 million in the fourth quarter of 2003. Expressed as a percent of total
revenue, OSG&A was 19.7 percent. The primary drivers of the year-over-year
increase were higher occupancy expenses, employee benefits, and credit card
processing fees. After normalizing for the higher gasoline revenue due to the
8-cent per-gallon increase in gasoline retail prices year over year, OSG&A for
the fourth quarter of 2003 as a percent of total revenue would have been
20.1 percent or flat with the prior-year quarter.
Summary of Fourth Quarter 2003 Non-Operating Items
The company closed 59 stores during the fourth quarter of 2003. In
accordance with SFAS 144, the company reclassified the after-tax results of
stores closed during the fourth quarter, as well as the results of store
closings since January 1, 2002, to Discontinued Operations for all periods
presented.
The company reported an after-tax, non-cash currency conversion loss of
($3.1) million for the fourth quarter of 2003.
In addition, the company reported a gain in the fourth quarter for
Infrastructure Consolidation and Other Items of $1.5 million after-tax,
compared to an after-tax charge of ($2.3) million in the fourth quarter of
2002.
Review of 2003 Results
Core earnings for 2003 grew 15.6 percent to $88.8 million, or $0.78 per
diluted share, up from $76.8 million, or $0.69 per diluted share, in the prior
year. The company achieved higher merchandise and gasoline gross profit for
the year, which was partially offset by an anticipated after-tax decline of
$0.11 per diluted share from the Seven-Eleven Japan licensing and higher
OSG&A. Net earnings for 2003 were $64.1 million, or $0.58 per diluted share,
compared to $12.8 million, or $0.13 per diluted share, in 2002.
2003 Highlights:
-- Reported core earnings of $88.8 million, an increase of 15.6 percent
-- Achieved increase in total revenue of $997.7 million, or
10.1 percent, to $10.9 billion
-- Increased total merchandise sales by $392.0 million, or 5.6 percent,
to $7.4 billion
-- Grew U.S. same-store merchandise sales by 3.2 percent, following an
increase of 3.1 percent for 2002
-- Improved merchandise gross profit by 5.5 percent to $2.6 billion
-- Increased total gasoline gallons by 6.5 percent to 2.1 billion;
raised gasoline gross profit to $326.3 million with a 15.4 cent
per-gallon margin
-- Reached a global 7-Eleven store count of approximately 25,800 stores
EARNINGS SUMMARY (Unaudited)
($ in millions)
Twelve Months Ended
December 31,
2002 2003
Net Earnings $12.8 $64.1
Adjustments (Net of Tax):
Non-Operating Items:
-- Currency Conversion Loss 9.0 6.8
-- Debt Redemption --- (6.5)
-- Infrastructure Consolidation and
Other Items, Net 6.4 1.1
-- Discontinued Operations (SFAS No. 144,
Impairment/Disposal of Long-Lived Assets) 20.5 13.1
-- Cumulative Effect of Accounting Change (A) 28.1 10.2
Core Earnings $76.8 $88.8
(A) One-time cumulative effect charges of $28.1 million in 2002, or
$(0.25) per diluted share in connection with adoption of SFAS
No. 143 which related to underground storage tanks. The charge in
2003 was $10.2 million, or ($0.08) per share, related to FASB
Interpretation No. 46, 'Variable Interest Entities'.
Review of 2003 Core Earnings
Total revenue increased 10.1 percent to $10.9 billion, driven by strong
growth in merchandise and gasoline sales. Total merchandise sales increased
5.6 percent to $7.4 billion. This increase was driven by a 3.2 percent
increase in U.S. same-store merchandise sales for the year, on top of a
3.1 percent increase in 2002. The fresh food category, a strategic focus of
the company, grew at a double-digit pace. Other categories that contributed
to the yearly increase were beverages, beer and cigarettes.
Merchandise gross profit increased 5.5 percent to $2.6 billion.
Merchandise gross profit margin was 35.54 percent of sales, basically flat
compared to the prior year.
"This was our sixth straight year of same-store sales increases in the
3 to 5 percent range. Our retailer initiative strategy is working to produce
sustainable merchandise sales increases and improvement in gross profit
dollars," said Keyes. "We are pleased with our track record and optimistic
about our ability to continue these trends in 2004."
Gasoline gallons rose 6.5 percent to a record 2.1 billion for the year.
Total gasoline revenues for the year were $3.4 billion, compared to
$2.8 billion in 2002. The 22.2 percent increase in gasoline revenues is due
to the 20-cent increase in gasoline prices year over year, as well as a
4.2 percent increase in per-store gallon sales. The average retail price of
gasoline was $1.59 in 2003, compared to $1.39 in 2002.
Gasoline gross profit rose to $326.3 million, a 28.4 percent increase over
the prior year. Expressed as cents per gallon, the gasoline margin for 2003
was 15.4 cents compared to 12.8 cents in 2002. "Despite the volatility in the
gasoline marketplace in 2003, we achieved our eleventh consecutive year of
gasoline margins at or above the 13-cent per gallon level with a record annual
15.4 cent per gallon result for 2003," said Keyes.
OSG&A increased 5.4 percent to $2.0 billion in 2003. Expressed as a
percent of total revenue, OSG&A was 18.8 percent. The primary drivers of the
year-over-year increase were higher occupancy expenses, employee benefits, and
credit card processing fees. After normalizing for the higher gasoline
revenue due to the 20-cent per gallon increase in gasoline retail prices year
over year, OSG&A for 2003 as a percent of total revenue would have been
19.6 percent or basically flat with the prior year.
Balance Sheet
During 2003, 7-Eleven invested approximately $338 million in capital
expenditures. This level of capital expenditures was in line with the
company's guidance for 2003.
During the third quarter, the company redeemed all of its outstanding
senior subordinated debentures. The principal amount plus accrued interest
was $390 million, with a weighted average interest rate of approximately
4.8 percent. The company refinanced these debentures with a subordinated debt
borrowing from Seven-Eleven Japan at a weighted average interest rate of
approximately 3.4 percent.
Also during the third quarter, the company announced a mandatory
conversion of 100 percent of its outstanding 1998 Convertible Quarterly Income
Debt Securities due 2013 (the "1998 QUIDS") into shares of the company's
common stock. The principal amount of the 1998 QUIDS was $80.0 million, with
an interest rate of 4.5 percent. This was converted into approximately
6.5 million shares of the company's common stock.
The company also adopted FASB Interpretation No. 46, "Consolidation of
Variable Interest Entities," during 2003. This required the company to
consolidate approximately $178 million of real estate leases and the
associated assets onto its balance sheet.
7-Eleven Stores
During 2003, the company opened 95 stores in the U.S. and Canada. As of
December 31, 2003, the company operated 5,784 stores.
Internationally, licensees opened a net 300 stores during the fourth
quarter of 2003 and a net 1,397 stores throughout the year. As of
December 31, 2003, there were approximately 25,800 7-Eleven stores around the
globe.
In January 2004, the company announced that the Ministry of Commerce in
the People's Republic of China had approved the formation of a joint venture
among Seven-Eleven Japan, Co., Ltd., Beijing ShouLian Commercial Group Co.,
Ltd., and China National Sugar & Alcohol Group Corporation. Following the
execution of an area license agreement with 7-Eleven, Inc., the joint venture
will start to develop 7-Eleven stores in Beijing and the surrounding
provinces, with the first stores expected to open in the spring of 2004.
Summary of 2003 Non-Operating Items
During 2003, the company closed 134 stores. In accordance with SFAS 144,
the company reclassified the after-tax results of stores closed during the
year, as well as the results of store closings since January 1, 2002, to
Discontinued Operations for all periods presented. Included in Discontinued
Operations is a $3.3 million after-tax gain from the sale of 12 non-strategic
stores in Wisconsin.
In conjunction with the early retirement of the company's senior
subordinated debentures, 7-Eleven recorded an after-tax gain of $6.5 million.
The company also incurred a ($1.1) million after-tax loss for
Infrastructure Consolidation and Other Costs. This loss included a write-down
of the company's net receivable for the estimated reimbursement of a portion
of its remediation costs in the State of California, partially offset by gains
from life insurance proceeds and changes in infrastructure.
As a result of the adoption of FASB Interpretation No. 46, "Consolidation
of Variable Interest Entities," the company recorded a one-time cumulative
effect charge of ($10.2) million after-tax.
The company reported an after-tax, non-cash currency conversion loss for
2003 of ($6.8) million.
2004 Outlook
"As previously disclosed, 7-Eleven expects core earnings per diluted share
for 2004 to be in the range of $0.85 to $0.88, or an expected year-over-year
earnings per share increase of around 11 percent," added Keyes.
The company anticipates that capital expenditures in 2004 will be in the
range of $345 million to $375 million, and expects to open around 100 stores
throughout the U.S. and Canada.
Core Earnings Guidance
The company believes that core earnings, which exclude non-operating
items, are more indicative of the company's operating performance than net
earnings. Certain items that impact net earnings, such as a gain or loss on
foreign currency conversion, are difficult to forecast. Therefore, the
company provides guidance based on core earnings.
Internet Broadcast of Earnings Conference Call and Replay
The fourth quarter 2003 earnings conference call will begin at 9:00 a.m.
Eastern Time on Thursday, January 29, 2004. The call will be available by
Webcast at www.7-Eleven.com or by telephone at 1-800-223-9488 for domestic
callers or 1-785-832-2422 for international callers. The replay of the call
will be available for one week, beginning approximately two hours after the
call concludes. The call may be accessed either through the Investor
Relations section of www.7-Eleven.com or by calling 1-800-945-0804 (domestic
callers) or 1-402-220-0667 (international callers).
About 7-Eleven, Inc.
7-Eleven, Inc. is the premier name and largest chain in the convenience
retailing industry. Headquartered in Dallas, Texas, 7-Eleven, Inc. operates
or franchises approximately 5,800 7-Eleven(R) stores in the United States and
Canada and licenses approximately 20,000 7-Eleven stores in 17 other countries
and U.S. territories throughout the world. During 2003, 7-Eleven stores
worldwide generated total sales of more than $36 billion. Find out more
online at www.7-Eleven.com .
This release, and the accompanying discussion on the earnings conference
call on January 29, 2004, includes certain statements that are considered
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Any statement that is not a statement of
historical fact should be deemed to be a forward-looking statement. Because
these forward-looking statements involve risks and uncertainties, actual
results may differ materially from those expressed or implied by these
forward-looking statements. There can be no assurance that (i) we have
correctly measured or identified all of the factors affecting our business or
the extent of their likely impact; (ii) the publicly available information
with respect to those factors on which our business analysis is based is
complete or accurate; (iii) our analysis is correct; or (iv) our strategy,
which is based in part on this analysis, will be successful. Additional
information about these risks and uncertainties and other matters can be found
in the company's annual report on Form 10-K for the year ended
December 31, 2002, and in its periodic reports on Forms 10-Q and 8-K.
7-ELEVEN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Shares and dollars in thousands, except per-share data)
(UNAUDITED)
Three Months Year To Date
Ended December 31 Ended December 31
2002 2003 2002 2003
Revenues:
Merchandise sales (A) $1,733,527 $1,857,445 $7,020,500 $7,412,453
Gasoline sales 742,709 832,004 2,760,576 3,372,279
Net sales (A) 2,476,236 2,689,449 9,781,076 10,784,732
Other income 24,248 25,868 102,924 96,984
Total revenues (A) 2,500,484 2,715,317 9,884,000 10,881,716
Costs and expenses:
Merchandise cost of
goods sold (A) 1,128,485 1,197,113 4,524,412 4,777,884
Gasoline cost of
goods sold 672,145 755,552 2,506,421 3,045,989
Total cost of
goods sold 1,800,630 1,952,665 7,030,833 7,823,873
Franchisee gross
profit expense 183,039 201,349 742,848 798,002
Operating, selling,
g&a expenses 503,018 535,086 1,943,170 2,047,543
Interest expense, net 16,262 18,836 64,721 71,318
Total costs and
expenses 2,502,949 2,707,936 9,781,572 10,740,736
Earnings (loss) from
continuing operations
before income tax and
cumulative effect of
accounting change (2,465) 7,381 102,428 140,980
Income tax expense
(benefit) (986) 2,805 40,971 53,572
Earnings (loss) from
continuing operations
before cumulative effect
of accounting change (1,479) 4,576 61,457 87,408
Earnings (loss) on
discontinued operations
(net of tax
expense of $6,679,
$6,523, $13,694 and $8,011) (10,019) (10,643) (20,541) (13,070)
Cumulative effect of
accounting change (net of
tax benefit of $18,759 and
$6,550) --- --- (28,139) (10,244)
Net earnings (loss) $(11,498) $(6,067) $12,777 $64,094
Net earnings per common
share:
Basic
Earnings (loss)
from continuing
operations before
cumulative effect of
accounting change $(.01) $.05 $.59 $.82
Earnings (loss)
on discontinued
operations (.10) (.10) (.20) (.12)
Cumulative effect of
accounting change --- --- (.27) (.10)
Net earnings (loss) $(.11) $(.05) $.12 $.60
Diluted
Earnings (loss)
from continuing
operations before
cumulative effect of
accounting change $(.01) $.04 $.56 $.76
Earnings (loss)
on discontinued
operations (.10) (.09) (.18) (.10)
Cumulative effect of
accounting change --- --- (.25) (.08)
Net earnings (loss) $(.11) $(.05) $.13 $.58
Weighted average shares:
Basic 104,837 111,604 104,827 106,815
Diluted 104,837 114,117 111,470 127,245
Operating stores at end of
period 5,823 5,784
(A) Prior period amounts have been reclassified to conform to the
current year presentation for recording prepaid card sales on a net
basis.
FINANCIAL HIGHLIGHTS
Three Months Ended
% or Unit
($ millions - except per share data) 12/31/02 12/31/03 Change
Earnings
Core Earnings $2.6 $6.1
Conversion Loss (1.8) (3.1)
Debt Redemption --- ---
Infrastructure Consolidation and
Other Items (2.3) 1.5
Discontinued Operations (SFAS No. 144) (10.0) (10.6)
Cumulative Accounting Change (A) --- ---
Net Earnings (Loss) as Reported $(11.5) $(6.1)
Net earnings per diluted share
Core Earnings $.02 $.05
Conversion Loss (.01) (.02)
Debt Redemption --- ---
Infrastructure Consolidation and
Other Items (0.0) .01
Discontinued Operations (SFAS No. 144) (.10) (.09)
Cumulative Accounting Change (A) --- ---
Net Earnings (Loss) as Reported $(.11) $(.05)
Weighted Average Shares
Outstanding (basic in 000's) 104,837 111,604
Weighted Average Shares
Outstanding (diluted in 000's) 104,837 114,117
EBITDA (B) $70.0 $89.4 $19.4
Interest Coverage Ratio (C)
Key Data
Total Revenue (D) $2,500.5 $2,715.3 8.6 %
Merchandise Sales (D) $1,733.5 $1,857.4 7.1 %
U.S. Same-Store Sales Increase (D) 3.6 % 5.2 %
Merchandise Gross Profit $605.0 $660.3 $55.3
Merchandise GP Margin (D) 34.90 % 35.55 % 65 bp
Gasoline Sales $742.7 $832.0 12.0 %
Gasoline Gallons 510.4 539.1 5.6 %
Gasoline Gross Profit $70.6 $76.5 8.3 %
Gasoline CPG 13.8 14.2 0.4
Gasoline GP Margin 9.50 % 9.19 % (31) bp
Average Per Store Day Data Percent
Incr/(Decr)
Merchandise GP Growth per store 3.2 % 7.6 % 4.4
Gasoline Gallons Sold 7.0 % 4.5 % (2.5)
Gasoline GP Dollars 5.9 % 7.2 % 1.3
Total GP Dollars 3.8 % 7.5 % 3.7
Twelve Months Ended
% or Unit
($ millions - except per share data) 12/31/02 12/31/03 Change
Earnings
Core Earnings $76.8 $88.8
Conversion Loss (9.0) (6.8)
Debt Redemption --- 6.5
Infrastructure Consolidation and
Other Items (6.4) (1.1)
Discontinued Operations (SFAS No. 144) (20.5) (13.1)
Cumulative Accounting Change (A) (28.1) (10.2)
Net Earnings (Loss) as Reported $12.8 $64.1
Net earnings per diluted share
Core Earnings $.69 $.78
Conversion Loss (.07) (.01)
Debt Redemption --- .06
Infrastructure Consolidation and
Other Items (.06) (.01)
Discontinued Operations (SFAS No. 144) (.18) (.10)
Cumulative Accounting Change (A) (.25) (.08)
Net Earnings (Loss) as Reported $.13 $.58
Weighted Average Shares Outstanding
(basic in 000's) 104,827 106,815
Weighted Average Shares Outstanding
(diluted in 000's) 111,470 127,245
EBITDA (B) $413.1 $498.3 $85.2
Interest Coverage Ratio (C) 6.38 6.24
Key Data
Total Revenue (D) $9,884.0 $10,881.7 10.1 %
Merchandise Sales (D) $7,020.5 $7,412.5 5.6 %
U.S. Same-Store Sales Increase (D) 3.1 % 3.2 %
Merchandise Gross Profit $2,496.1 $2,634.6 $138.5
Merchandise GP Margin (D) 35.55 % 35.54 % (1) bp
Gasoline Sales $2,760.6 $3,372.3 22.2 %
Gasoline Gallons 1,987.3 2,117.0 6.5 %
Gasoline Gross Profit $254.2 $326.3 28.4 %
Gasoline CPG 12.8 15.4 2.6
Gasoline GP Margin 9.21 % 9.68 % 47 bp
Average Per Store Day Data Percent
Incr/(Decr)
Merchandise GP Growth per store 4.9 % 3.7 % (1.2)
Gasoline Gallons Sold 4.5 % 4.2 % (0.3)
Gasoline GP Dollars (4.5)% 25.6 % 30.1
Total GP Dollars 2.9 % 8.0 % 5.1
Total Stores (end of period)
U.S. and Canada 5,823 5,784 (39)
Gasoline Stores 2,480 2,457 (23)
Worldwide 24,434 25,796 1,362
Balance Sheet Items (end of period)
Debt $1,415.2 $1,475.3
Convertible Quarterly Income
Debt Securities $380.0 $300.0
Stockholders' Equity $163.5 $340.0
(A) Year-to-date 2002 and 2003 reported net earnings includes the one-
time cumulative effect charges of $(28.1) million and $(10.2)
million, respectively, or $(0.25) and $(.08) per diluted share,
respectively, in connection with the adoption of SFAS No. 143 in
2002 which related to underground gas storage tanks and FIN 46 in
2003 which relates to variable interest entities.
(B) EBITDA defined as earnings before net interest expense, income taxes
(benefit), depreciation and amortization and cumulative accounting
changes.
(C) Interest coverage ratio is based on EBITDA divided by Interest
Expense for the trailing 12 months ending December 2002 and 2003,
respectively.
(D) Prior period amounts have been reclassified to conform to the
current year presentation for recording prepaid card sales on a net
basis. The previously reported U.S. same stores merchandise sales
increase under the gross accounting method for prepaid phone cards
was 4.1% and 3.3% for the quarter and year ending December 31, 2002,
respectively, and the comparable increases under this method were
5.8% and 4.0% for the quarter and year ending December 31, 2003,
respectively. In addition merchandise sales would have been
$1,776.9 million and $7,176.0 million for the quarter and year
ending December 31, 2002, respectively, and $1,923.8 million and
$7,654.7 million for the quarter and year ending December 31, 2003,
respectively, under the gross accounting method for prepaid cards.
Contact Information:
Carole Davidson, CFA Margaret Chabris
Vice President, Investor Relations Media Relations
(214) 828-7021 (214) 828-7345
SOURCE 7-Eleven, Inc.
-0- 01/29/2004
/CONTACT: Carole Davidson, CFA, Vice President, Investor Relations,
+1-214-828-7021, or Margaret Chabris, Media Relations, +1-214-828-7345, both
of 7-Eleven, Inc./
/Web site: http://www.7-eleven.com /
(SE)
CO: 7-Eleven, Inc.
ST: Texas
IN: REA AUT
SU: ERN ERP CCA MAV