Exhibit 99.1
DOLLAR GENERAL REPORTS THIRD QUARTER EARNINGS;
COMMENTS ON 2004 GUIDANCE AND 2005 OPERATING INITIATIVES
GOODLETTSVILLE, Tenn.--(BUSINESS WIRE)--Dec. 1, 2004--Dollar
General Corporation (NYSE:DG) today reported net income for the third
quarter of fiscal 2004 of $71.1 million, or $0.22 per diluted share,
compared to $77.9 million, or $0.23 per diluted share, in the third
quarter of fiscal 2003.
As a reminder, financial results for the third quarter of 2003
were favorably impacted by a $7.8 million pre-tax non-recurring
inventory adjustment, which primarily represented a change in the
Company's estimated provision for inventory shrinkage.
As previously reported, net sales during the third quarter of 2004
increased 11.5 percent to $1.88 billion compared to $1.69 billion in
the third quarter of 2003. The increase resulted primarily from new
store growth and a same-store sales increase of 3.4 percent.
Gross profit during the quarter was $554.0 million, or 29.5
percent of sales, versus $516.9 million, or 30.7 percent of sales, in
the prior year. Sales of highly consumable items, which generally have
lower gross profit rates than the Company's other merchandise
categories, increased as a percentage of total sales mix.
Approximately half of the decrease in the gross profit rate as a
percent to sales resulted from the change in mix of sales and
increased transportation expense, primarily fuel costs. The prior year
favorable inventory adjustment discussed above also contributed to the
decrease in the gross profit rate.
Selling, general and administrative expenses ("SG&A") for the
quarter were $440.0 million, or 23.4 percent of sales, in the current
year, versus $385.6 million, or 22.9 percent of sales, in the prior
year. The increase in SG&A as a percent to sales includes increases as
a percentage of sales in store occupancy costs, including rent and
utilities, fees associated with increased customer usage of debit
cards, and costs of counting physical inventories. In addition, the
Company recorded a $4.5 million charge for additional sales and use
tax accruals, a $3.1 million charge related to the lease expiration
and subsequent purchase of the Company's airplane, and a $2.1 million
charge for disaster losses resulting primarily from hurricane damages.
Partially offsetting these expense increases was a lower accrual for
estimated employee bonus expenses compared with the prior year period.
Last year's higher bonus accrual resulted from the strong
year-over-year financial performance achieved by the Company through
the 39-week period ended October 31, 2003.
Net interest expense was $6.4 million in the current year quarter
compared to $8.0 million in the prior year. The decrease is primarily
attributable to interest capitalized on distribution center
construction projects. The Company had $335.9 million in debt
outstanding at October 29, 2004, compared to $285.7 million at October
31, 2003.
The Company's effective income tax rate was 33.9 % for the current
year quarter, versus 36.9 % last year. Approximately 111 basis points
of the tax rate decrease in the quarter is the result of the
reinstatement of certain federal targeted jobs tax credits retroactive
to December 31, 2003. An additional 173 basis point decline in the tax
rate resulted from adjustments to the accrual for income taxes for
fiscal 2003.
For the 39-week year-to-date period, net income was $210.3 million
in fiscal 2004, or $0.63 per diluted share, compared to $198.2
million, or $0.59 per diluted share, in the comparable prior year
period, an increase of 6.1 percent.
Year-to-date through November 26, 2004, the Company opened 703 new
traditional Dollar General stores and eight Dollar General Markets.
As of November 26, 2004, 6,725 Dollar General stores were equipped
with refrigerated coolers, with over 5,500 stores accepting electronic
benefits transfer (EBT) payments. At the end of the quarter on October
29, there were 6,525 Dollar General stores with refrigerated coolers.
Approximately 5,300 of these stores were accepting EBT payments.
Outlook for 2004 and 2005
Dollar General narrowed its annual earnings expectation for 2004.
The Company now expects net income for the year to be at the low end
of its original guidance, or between $341 million and $350 million.
The Company cautioned, however, that its core customer, the low income
consumer, will likely continue to be impacted by the challenging
economic environment, including higher gasoline prices, higher heating
oil costs and unemployment. Lower than expected consumer discretionary
spending during the holiday period may negatively impact the Company's
ability to meet its expected earnings.
For the month ended November 26, 2004, same-store sales increased
3.4 percent. Tomorrow, the Company will release final November sales
in its regular monthly sales release.
Dollar General today also announced that the Company expects to
open approximately 730 new stores, including at least 30 Dollar
General Markets, in fiscal 2005. Some of the Dollar General Markets
will be conversions of traditional stores. The Dollar General Market
is a larger format store that offers an expanded selection of Dollar
General's core mix of merchandise with a broader selection of
refrigerated food items and fresh produce. The Company will continue
its practice of reviewing potential store closings and currently
expects closings in 2005 to be in the range of 60 to 80.
Dollar General plans to open its new distribution center in Union
County, SC, in mid to late 2005. By the end of 2005, the Company plans
to select a location for a ninth distribution center, which is
expected to open in fiscal 2006.
The Company also plans to continue its implementation of the
EZstore initiatives, focused on improving all aspects of store
operations, including material handling and labor scheduling. The
Company plans to complete the implementation of EZstore by the end of
fiscal 2006.
Forward-Looking Information
This press release contains forward-looking information, such as
information regarding the Company's expectation for 2004 net income,
its 2004 and 2005 store growth targets, distribution center site
selection, construction plans and project completion targets, the
timing and anticipated results of operating initiatives, including the
implementation of EZstore, and the possible expected impact on the
fourth quarter of external economic factors. 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. Factors that may result in actual results
differing from such forward-looking information include, but are not
limited to:
-- transportation and distribution delays or interruptions both
domestically and internationally;
-- labor shortages in the trucking industry;
-- the Company's ability to negotiate effectively the cost and
purchase of merchandise;
-- prolonged or repeated price increases of certain raw materials
that could affect vendors' product costs;
-- inventory risks due to shifts in market demand;
-- changes in product mix;
-- interruptions in suppliers' businesses;
-- the inability to execute operating initiatives;
-- costs and potential problems and interruptions associated with
implementation of new or upgraded systems and technology or
with maintenance or adequate support of existing systems;
-- fuel price and interest rate fluctuations;
-- a continued rise in health insurance costs or workers'
compensation costs;
-- a deterioration in general economic conditions whether caused
by acts of war, terrorism or other factors;
-- changes in demand due to unexpected or unusual weather
patterns;
-- seasonality of the Company's business such as a sales
shortfall during the Christmas selling season;
-- unanticipated changes in the federal or state minimum wage or
living wage requirements;
-- changes in federal or state regulations governing the sale of
the Company's products, particularly "over-the-counter"
medications or health products;
-- excessive costs and delays associated with building, opening
and operating new stores;
-- excessive costs and delays associated with building, opening,
expanding or converting new or existing distribution centers;
-- the reputational and financial impact of the Securities and
Exchange Commission ("SEC") inquiry related to the restatement
of certain of the Company's financial statements;
-- results of other legal proceedings and claims;
-- and other risk factors described in the Company's Form 10-K
for the fiscal year ended January 30, 2004, filed with the SEC
on March 16, 2004, and the Company's most recent Quarterly
Report on Form 10-Q.
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.
Earnings Conference Call Information
The Company will host a conference call on Wednesday, December 1,
2004, at 10 a.m. EST 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 can be accessed live
online at www.dollargeneral.com, by clicking on the homepage spotlight
item. A replay of the conference call will be available until 5 p.m.
EST on Wednesday, December 15, online at www.dollargeneral.com under
"Investing," "Conference Calls and Investor Events," or by calling
(334) 323-7226. The replay pass code is 73518650.
About Dollar General
Dollar General is a Fortune 500(R) discount retailer with 7,324
neighborhood stores as of November 26, 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)
October 29, October 31, January 30,
2004 2003 2004
----------- ----------- -----------
(Unaudited) (Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $45,832 $138,470 $398,278
Merchandise inventories 1,558,574 1,373,200 1,157,141
Deferred income taxes 17,305 21,729 30,413
Other current assets 100,523 65,301 66,383
- ----------------------------------------------------------------------
Total current assets 1,722,234 1,598,700 1,652,215
- ----------------------------------------------------------------------
Property and equipment, at cost 1,905,578 1,667,438 1,709,722
Less: accumulated depreciation and
amortization 828,951 687,951 720,498
- ----------------------------------------------------------------------
Net property and equipment 1,076,627 979,487 989,224
- ----------------------------------------------------------------------
Other assets, net 29,156 11,007 11,270
- ----------------------------------------------------------------------
Total assets $2,828,017 $2,589,194 $2,652,709
======================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term
obligations $14,704 $17,295 $16,670
Accounts payable 475,841 440,505 383,791
Accrued expenses and other 336,408 287,724 297,616
Income taxes payable 21,706 14,553 45,725
- ----------------------------------------------------------------------
Total current liabilities 848,659 760,077 743,802
- ----------------------------------------------------------------------
Long-term obligations 321,194 268,357 265,337
Deferred income taxes 80,674 59,100 66,650
Shareholders' equity:
Preferred stock - - -
Common stock 163,785 168,415 168,095
Additional paid-in capital 405,003 363,767 376,930
Retained earnings 1,014,969 975,255 1,037,409
Accumulated other comprehensive
loss (1,009) (1,206) (1,161)
- ----------------------------------------------------------------------
1,582,748 1,506,231 1,581,273
Other shareholders' equity (5,258) (4,571) (4,353)
- ----------------------------------------------------------------------
Total shareholders' equity 1,577,490 1,501,660 1,576,920
- ----------------------------------------------------------------------
Total liabilities and
shareholders' equity $2,828,017 $2,589,194 $2,652,709
======================================================================
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income
(Dollars in thousands, except per share amounts)
(Unaudited)
For the Quarter (13 Weeks) Ended
------------------------------------------
October 29, % of Net October 31, % of Net
2004 Sales 2003 Sales
-------------------- ---------------------
Net sales $1,879,187 100.00% $1,685,346 100.00%
Cost of goods sold 1,325,202 70.52 1,168,449 69.33
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Gross profit 553,985 29.48 516,897 30.67
Selling, general and
administrative 440,029 23.42 385,551 22.88
- ----------------------------------------------------------------------
Operating profit 113,956 6.06 131,346 7.79
Interest expense, net 6,364 0.34 7,976 0.47
- ----------------------------------------------------------------------
Income before taxes on
income 107,592 5.73 123,370 7.32
Provision for taxes on
income 36,466 1.94 45,467 2.70
- ----------------------------------------------------------------------
Net income $71,126 3.78% $77,903 4.62%
======================================================================
Diluted earnings per share $0.22 $0.23
====================================== ============
Weighted average diluted
shares (000s) 330,313 339,238
====================================== ============
Basic earnings per share $0.22 $0.23
====================================== ============
Weighted average basic
shares (000s) 327,844 335,411
====================================== ============
Dividends per share $0.040 $0.035
====================================== ============
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income
(Dollars in thousands, except per share amounts)
(Unaudited)
For the 39 Weeks Ended
--------------------------------------------
October 29, % of Net October 31, % of Net
2004 Sales 2003 Sales
--------------------- ----------------------
Net sales $5,463,389 100.00% $4,905,504 100.00%
Cost of goods sold 3,860,174 70.66 3,463,871 70.61
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Gross profit 1,603,215 29.34 1,441,633 29.39
Selling, general and
administrative 1,266,583 23.18 1,105,493 22.54
- ----------------------------------------------------------------------
Operating profit 336,632 6.16 336,140 6.85
Interest expense, net 16,847 0.31 25,286 0.52
- ----------------------------------------------------------------------
Income before taxes on
income 319,785 5.85 310,854 6.34
Provision for taxes on
income 109,488 2.00 112,683 2.30
- ----------------------------------------------------------------------
Net income $210,297 3.85% $198,171 4.04%
======================================================================
Diluted earnings per share $0.63 $0.59
====================================== ===========
Weighted average diluted
shares (000s) 332,623 336,892
====================================== ===========
Basic earnings per share $0.64 $0.59
====================================== ===========
Weighted average basic
shares (000s) 329,917 334,175
====================================== ===========
Dividends per share $0.120 $0.105
====================================== ===========
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
39 Weeks Ended
-----------------------
October 29, October 31,
2004 2003
----------- -----------
Cash flows from operating activities:
Net income $210,297 $198,171
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 122,882 113,114
Deferred income taxes 27,132 20,912
Tax benefit from stock option exercises 5,615 10,780
Change in operating assets and liabilities:
Merchandise inventories (401,433) (250,169)
Other current assets (34,140) (19,602)
Accounts payable 87,233 95,314
Accrued expenses and other 39,987 49,039
Income taxes (24,082) (52,538)
Other (12,610) 1,974
- ----------------------------------------------------------------------
Net cash provided by operating activities 20,881 166,995
- ----------------------------------------------------------------------
Cash flows from investing activities:
Purchase of property and equipment (209,534) (93,035)
Purchase of promissory notes - (49,582)
Proceeds from sale of property and equipment 154 195
- ----------------------------------------------------------------------
Net cash used in investing activities (209,380) (142,422)
- ----------------------------------------------------------------------
Cash flows from financing activities:
Net borrowings under revolving credit
facilities 64,500 -
Repayments of long-term obligations (12,311) (11,808)
Payment of cash dividends (39,564) (35,136)
Proceeds from exercise of stock options 21,125 39,660
Repurchases of common stock (198,362) -
Other financing activities 665 (137)
- ----------------------------------------------------------------------
Net cash used in financing activities (163,947) (7,421)
- ----------------------------------------------------------------------
Net increase (decrease) in cash and cash
equivalents (352,446) 17,152
Cash and cash equivalents, beginning of period 398,278 121,318
- ----------------------------------------------------------------------
Cash and cash equivalents, end of period $45,832 $138,470
======================================================================
Supplemental schedule of noncash investing and
financing activities:
Purchases of property and equipment awaiting
processing for payment, included in accounts
payable $4,817 $3,888
Purchases of property and equipment under
capital lease obligations $1,690 $551
======================================================================
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
Selected Additional Information
(Unaudited)
Net Sales by Category (in thousands)
------------------------------------
13 Weeks Ended 39 Weeks Ended
---------------------------- ----------------------------
October October October October
29, 31, % 29, 31, %
2004 2003 Change 2004 2003 Change
---------- ---------- ------ ---------- ---------- ------
Highly
consumable $1,251,106 $1,076,913 16.2% $3,532,824 $3,094,797 14.2%
Seasonal 258,835 237,365 9.0% 810,166 737,952 9.8%
Home products 203,227 207,570 -2.1% 626,153 614,746 1.9%
Basic
clothing 166,019 163,498 1.5% 494,246 458,009 7.9%
---------- ---------- ------ ---------- ---------- ------
Total sales $1,879,187 $1,685,346 11.5% $5,463,389 $4,905,504 11.4%
========== ========== ====== ========== ========== ======
New Store Activity
------------------
39 Weeks Ended
-----------------------------------
October 29, October 31,
2004 2003
----------- -----------
Beginning store count 6,700 6,113
New store openings 639 601
Store closings 82 61
Net new stores 557 540
Ending store count 7,257 6,653
Total selling square
footage (000's) 49,474 44,998
Customer Transaction Data
-------------------------
13 Weeks Ended 39 Weeks Ended
----------------------- -----------------------
October 29, October 31, October 29, October 31,
2004 2003 2004 2003
----------- ----------- ----------- -----------
Same-store customer
transactions +2.3% +3.4% +2.9% +3.9%
Average customer
purchase
(total stores) $8.49 $8.38 $8.42 $8.37
CONTACT: Dollar General Corporation
Emma Jo Kauffman, 615-855-5525