Dollar General is a US department store chain headquartered in Goodlettsville, Tennessee. The company employed around 143,000 people in 16,278 stores in early 2020. The company was founded in 1939 by Cal Turner in Scottsville, Kentucky.
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.
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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) <TABLE> <CAPTION> Three Months Six Months 1995 1994 1995 1994 <S> <C> <C> <C> <C> 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 </TABLE> 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) <TABLE> <CAPTION> ASSETS July 31, January 31, July 31, 1995 1995 1994 <S> <C> <C> <C> 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 </TABLE> 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) <TABLE> <CAPTION> July 31, July 31, 1995 1994 <S> <C> <C> 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 </TABLE> 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: <TABLE> <CAPTION> Three Months Six Months Ended July 31 Ended July 31 Shares (000's) 1995 1994 1995 1994 <S> <C> <C> <C> <C> 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 </TABLE>
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): <TABLE> <CAPTION> Additional Preferred Common Paid-In Retained Treasury Stock Stock Capital Earnings Stock <S> <C> <C> <C> <C> <C> 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 </TABLE>
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): <TABLE> <CAPTION> July 31, January 31, July 31, 1995 1995 1994 <S> <C> <C> <C> 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 </TABLE>
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: <TABLE> <CAPTION> Nominee Votes For Votes Withheld <S> <C> <C> 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 </TABLE> 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