GOODLETTSVILLE, Tenn., May 29, 2003 /PRNewswire-FirstCall via COMTEX/ -- Dollar General Corporation (NYSE: DG) today reported that net income for the first quarter of fiscal 2003 increased 31.4 percent to $60.3 million, or $0.18 per diluted share, compared with $45.9 million, or $0.14 per diluted share, in the first quarter of fiscal 2002. The Company incurred approximately $0.3 million and $5.3 million in restatement-related expenses in the first quarters of 2003 and 2002, respectively. Excluding the restatement-related expenses from both years, net income during the current year period increased by 22.8 percent to $60.5 million, or $0.18 per diluted share, as compared against net income of $49.3 million, or $0.15 per diluted share, in the comparable prior year period.
"I am pleased to report the results of our first quarter. These results are the culmination of a lot of hard work over the last two years," said David A. Perdue, chief executive officer. "I am particularly encouraged by some of the systems improvements that have been made, giving us better information, which should help us improve gross margin and inventory management."
Net sales during the first quarter of 2003 were $1.57 billion as compared against $1.39 billion in the first quarter of 2002, an increase of 12.9 percent. The increase resulted primarily from 598 net new stores and a same-store sales increase of 4.2 percent.
Gross profit during the current year period was $451.9 million, or 28.8 percent of sales, versus $380.3 million, or 27.4 percent of sales, during the comparable period in the prior year. The improvement in gross margin is primarily the result of a higher average markup on inventory purchases and, to a lesser extent, a reduction in damaged product markdowns in the current year period. The higher average markup was due to a number of factors, including increased purchases of higher margin merchandise, including seasonal items and housewares, a decrease in the percentage of lower margin items purchased, including paper and home cleaning products, and the shifting of the purchase of certain products from domestic to imported sources. Inventory shrinkage, calculated at the retail value of the inventory, as a percentage of net sales, was approximately 3.1 percent in the first quarters of 2003 and 2002.
Selling, general and administrative expenses ("SG&A") during the current year period were $349.0 million, or 22.2 percent of sales, versus $297.3 million, or 21.4 percent of sales, during the comparable period in the prior year. Excluding the restatement-related expenses noted above, SG&A would have been $348.6 million, or 22.2 percent of sales, in the current year period versus $292.0 million, or 21.0 percent of sales, in the prior year period. The increase in SG&A, excluding restatement-related expenses, is primarily the result of increases in various store-related expenses, including labor, occupancy, repairs and maintenance, and utility costs. The increased store labor costs were incurred in connection with the Company's initiatives to improve store conditions.
Net interest expense during the current year period was $9.4 million versus $10.4 million in the prior year. The Company's effective tax rate was 35.5 percent in the current year period versus 36.7 percent in the comparable prior year period. The decrease in the Company's tax rate in the current year period is primarily the result of a $0.8 million adjustment to state income tax valuation reserves resulting from a tax law change. Absent this adjustment, the Company's tax rate would have been 36.4 percent.
Merchandise inventories at May 2, 2003 increased 5.8 percent over the prior year quarter end, with the increase primarily in spring and summer seasonal merchandise. The Company has made improving its inventory productivity a priority and, as a result, inventory turns on a rolling twelve-month basis increased to 3.9 times versus 3.5 times in the prior twelve-month period.
The Company projects total revenues in 2003 to increase 13 to 15 percent and earnings, excluding restatement-related items, to increase 11 to 15 percent. In 2003, the Company expects same-store sales to increase 4 to 6 percent. In fiscal 2003, the Company anticipates opening a total of approximately 650 new stores in the current 27-state market area, closing 50 to 70 stores, and remodeling or relocating approximately 145 stores.
This release refers to certain historical and future financial information not derived in accordance with generally accepted accounting principles ("GAAP"), such as selling, general and administrative expenses, diluted earnings per share and net income, which exclude the impact of restatement-related items, and the Company's adjusted effective tax rate. The Company believes that this information is useful to investors as it indicates more clearly the Company's comparative year-to-year operating results. The Compensation Committee of the Company's Board of Directors may use this information for compensation purposes to ensure that employees are not inappropriately penalized or rewarded as a result of unusual items affecting the Company's financial statements. Management may also use this information to better understand the Company's underlying operating results. We have included a reconciliation of this information to the most comparable GAAP measures, either in this release or in the accompanying reconciliation tables.
The Company will host a conference call on Thursday, May 29, 2003, at 10 a.m., EDT to discuss the quarter's results. The passcode for the conference call is "Dollar General." If you wish to participate, please call (816) 650-0741 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, June 5, online or by calling (402) 220-2491. The access number for the replay is #16900513.
Webcast of Annual Meeting
Dollar General also intends to webcast its Annual Meeting of Shareholders on Monday, June 2, 2003, at 11 a.m., EDT. The webcast will be available live on the Company's Web site at www.dollargeneral.com with a replay available until 5 p.m., EDT on June 9, 2003.
Dollar General is a Fortune 500® discount retailer with 6,329 neighborhood stores in 27 states as of May 2, 2003. Dollar General stores offer convenience and value to customers, by providing consumable basics, items that are frequently used and replenished, such as food, snacks, health and beauty aids and cleaning supplies, as well as an appealing selection of basic apparel, housewares and seasonal items at everyday low prices. The typical Dollar General store has 6,700 square feet of selling space and is located within five miles of its target customers.
This press release contains forward-looking information, including information regarding the Company's future sales and earnings outlook. The words "believe," "anticipate," "project," "plan," "expect," "estimate," "objective," "forecast," "goal," "intend," "will likely result," or "will continue" and similar expressions generally identify forward-looking statements. 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. A number of factors may result in actual results differing from such forward-looking information, including, but not limited to: the Company's ability to maintain adequate liquidity through its cash resources and credit facilities; the Company's ability to comply with the terms of the Company's credit facilities (or obtain waivers for non-compliance); transportation and distribution delays or interruption; our ability to negotiate effectively the cost and purchase of merchandise; inventory risks due to shifts in market demand; changes in product mix; interruptions in suppliers' businesses; costs and potential problems and interruptions associated with implementation of new or upgraded systems and technology; fuel price and interest rate fluctuations; a deterioration in general economic conditions caused by acts of war or terrorism; temporary changes in demand due to weather patterns; seasonality of the Company's business; delays associated with building, opening and operating new stores; the impact of the SEC inquiry related to the restatement of certain of the Company's financial statements; and other risk factors discussed in our SEC filings, including in our most recent 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. 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.
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets (In thousands) May 2, May 3, January 31, 2003 2002 2003 (Unaudited) (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 75,946 $ 287,424 $ 121,318 Merchandise inventories 1,200,701 1,134,449 1,123,031 Deferred income taxes 26,664 80,974 33,860 Other current assets 52,080 85,419 45,699 Total current assets 1,355,391 1,588,266 1,323,908 Property and equipment, at cost 1,606,447 1,507,414 1,577,823 Less accumulated depreciation and amortization 618,336 515,937 584,001 Net property and equipment 988,111 991,477 993,822 Other assets 12,465 8,989 15,423 Total assets $ 2,355,967 $ 2,588,732 $ 2,333,153 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term obligations $ 16,560 $ 395,877 $ 16,209 Accounts payable 357,224 341,134 341,303 Accrued expenses and other 230,288 212,590 239,898 Income taxes payable 36,536 -- 67,091 Litigation settlement payable -- 161,000 -- Total current liabilities 640,608 1,110,601 664,501 Long-term obligations 326,028 336,083 330,337 Deferred income taxes 51,584 53,388 50,247 Total liabilities 1,018,220 1,500,072 1,045,085 Shareholders' equity: Preferred stock -- -- -- Common stock 166,762 166,462 166,670 Additional paid-in capital 314,973 302,200 313,269 Retained earnings 860,879 625,193 812,220 Accumulated other comprehensive loss (1,311) (2,677) (1,349) 1,341,303 1,091,178 1,290,810 Less other shareholders' equity 3,556 2,518 2,742 Total shareholders' equity 1,337,747 1,088,660 1,288,068 Total liabilities and shareholders' equity $ 2,355,967 $ 2,588,732 $ 2,333,153 DOLLAR GENERAL CORPORATION AND SUBSIDIARIES Consolidated Statements of Income (In thousands, except per share amounts) (Unaudited) 13 Weeks Ended May 2, % of Net May 3, % of Net 2003 Sales 2002 Sales Net sales $ 1,569,064 100.0% $ 1,389,412 100.0% Cost of goods sold 1,117,158 71.2 1,009,120 72.6 Gross profit 451,906 28.8 380,292 27.4 Selling, general and administrative expenses 348,955 22.2 297,304 21.4 Operating profit 102,951 6.6 82,988 6.0 Interest expense, net 9,411 0.6 10,432 0.8 Income before income taxes 93,540 6.0 72,556 5.2 Provision for taxes on income 33,208 2.1 26,628 1.9 Net income $ 60,332 3.8% $ 45,928 3.3% Diluted earnings per share $ 0.18 $ 0.14 Diluted shares outstanding 334,597 334,834 Dividends per share $ 0.035 $ 0.032 DOLLAR GENERAL CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows (In thousands) (Unaudited) 13 Weeks Ended May 2, May 3, 2003 2002 Cash flows from operating activities: Net income $ 60,332 $ 45,928 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 36,756 32,004 Deferred income taxes 8,500 39,859 Tax benefit from stock option exercises 224 689 Change in operating assets and liabilities: Merchandise inventories (77,670) (3,426) Other current assets (6,381) 1,500 Accounts payable 15,921 18,671 Accrued expenses and other (9,198) (19,775) Income taxes (30,555) (39,464) Other 1,763 (1,166) Net cash provided by (used in) operating activities (308) 74,820 Cash flows from investing activities: Purchase of property and equipment (30,129) (34,812) Proceeds from sale of property and equipment 66 58 Net cash used in investing activities (30,063) (34,754) Cash flows from financing activities: Repayments of long-term obligations (4,086) (3,196) Payment of cash dividends (11,673) (10,646) Proceeds from exercise of stock options 694 1,374 Other financing activities 64 (1,699) Net cash used in financing activities (15,001) (14,167) Net increase (decrease) in cash and cash equivalents (45,372) 25,899 Cash and cash equivalents, beginning of period 121,318 261,525 Cash and cash equivalents, end of period $ 75,946 $ 287,424 Supplemental schedule of noncash investing and financing activities: Purchase of property and equipment under capital lease obligations $ 117 $ -- DOLLAR GENERAL CORPORATION AND SUBSIDIARIES Reconciliation of Non-GAAP Disclosures (In thousands, except per share amounts) (Unaudited) 13 Weeks Ended May 2, 2003 May 3, 2002 Net Income and Earnings Per Share Net income in accordance with GAAP $ 60,332 $ 45,928 Restatement-related expenses in SG&A 329 5,319 Tax effect of restatement-related expenses (120) (1,952) Total restatement-related items, net of tax 209 3,367 Net income, excluding restatement-related items $ 60,541 $ 49,295 Weighted average diluted shares outstanding 334,597 334,834 Diluted earnings per share, excluding restatement-related items $ 0.18 $ 0.15 Selling, General and Administrative Expenses SG&A in accordance with GAAP $348,955 $297,304 Less restatement-related expenses 329 5,319 SG&A, excluding restatement-related expenses $348,626 $291,985 SG&A, excluding restatement-related expenses % to sales 22.2% 21.0% Guidance Range Fiscal Fiscal Fiscal 2002 2003 2003 Annual Outlook Net income in accordance with GAAP $ 264,946 $ 276,585 $ 288,585 Restatement-related items: Litigation settlement and related proceeds (29,541) -- -- Restatement-related items in SG&A 6,395 1,500 1,500 (23,146) 1,500 1,500 Tax effect 9,073 (585) (585) Total restatement-related items, net of tax (14,073) 915 915 Net income, excluding restatement-related items $ 250,873 $ 277,500 $ 289,500 % increase over 2002, excluding restatement-related items 11% 15% Weighted average diluted shares outstanding 335,050 Net income per share, excluding restatement-related items $ 0.75 DOLLAR GENERAL CORPORATION AND SUBSIDIARIES Selected Additional Information Sales by Category (in thousands) (Unaudited) 13 Weeks Ended May 2, 2003 May 3, 2002 % Change Highly consumable $ 990,030 $ 851,236 16.3% Seasonal 237,119 204,763 15.8% Home products 199,469 191,112 4.4% Basic clothing 142,446 142,301 0.1% Total sales $ 1,569,064 $ 1,389,412 12.9% New Store Activity (Unaudited) 13 Weeks Ended May 2, 2003 May 3, 2002 Beginning store count 6,113 5,540 New store openings 223 200 Store closings 7 9 Net new stores 216 191 Ending store count 6,329 5,731 Total selling square footage (000's) 42,761 38,640 Customer Transaction Data (Unaudited) 13 Weeks Ended May 2, May 3, 2003 2002 Same-store customer transactions +3.5% +5.5% Average customer transaction amount $8.42 $8.31
SOURCE Dollar General Corporation
Investor - Emma Jo Kauffman, +1-615-855-5525, Media - Andrea Ewin Turner, +1-615-855-5209, both of Dollar General Corporation