credit suisse first boston june 17, 2003 new york, ny
DESCRIPTION
Dollar General Corporation……. Serving Others. Credit Suisse First Boston June 17, 2003 New York, NY. Serving Others. Jim Hagan Executive Vice President and Chief Financial Officer. Forward-Looking Information and Non-GAAP Disclosures. - PowerPoint PPT PresentationTRANSCRIPT
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A customer-driven distributor of consumable basics
Credit Suisse First BostonJune 17, 2003New York, NY
Dollar General Corporation…….
Serving Others
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A customer-driven distributor of consumable basics
Serving Others
Jim HaganExecutive Vice President and
Chief Financial Officer
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A customer-driven distributor of consumable basics
Forward-Looking Information and
Non-GAAP DisclosuresCertain comments made during this meeting may contain forward-looking information. 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 those described in our most recent Annual Report on Form 10-K and in our Quarterly Report on Form 10-Q for the quarter ended May 2, 2003.
You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of today’s date. The Company disclaims any obligation to publicly update or revise any forward-looking statements made today to reflect events or circumstances occurring after today’s date or to reflect the occurrence of unanticipated events.
We will present certain financial information not derived in accordance with GAAP, such as selling, general and administrative expenses, net income and earnings per share, which exclude the impact of restatement-related items, and our adjusted effective tax rate. The slides used here today, and reproduced on our website located at www.dollargeneral.com, will show the reconciliation of this information to the most comparable GAAP measure. The reasons why management believes this information is useful to investors, and the additional purposes for which management uses this information are disclosed in our Form 10-Q for the quarter ended May 2, 2003, filed with SEC on May 29, 2003.
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A customer-driven distributor of consumable basics
(Dollars in millions except per share amounts)Reconciliation of Non-GAAP
DisclosuresFY 2002 FY 2001 FY 2000
Net income:
As reported $264.9 $207.5 $70.6
Excluding restatement-related items $250.9 $225.5 $169.6
Diluted EPS:
As reported $0.79 $0.62 $0.21
Excluding restatement-related items $0.75 $0.67 $0.51
Weighted average diluted shares outstanding 335.1 335.0 333.9
Restatement-related items:
Litigation settlement and related proceeds $29.5 $ ---- ($162.0)Restatement-related expenses in S,G&A (6.4) (28.4) ----
Net restatement-related items 23.1 (28.4) (162.0)Tax effect of restatement-related items (9.1) 10.4 63.0
Effect of restatement-related itmes on net income $14.0 ($18.0) ($99.0)
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A customer-driven distributor of consumable basics
As of 1/31/03
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A customer-driven distributor of consumable basics
As of 1/31/03
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A customer-driven distributor of consumable basics
Average store 6,700 square feet
SKUsApproximately 4,075
core SKUs
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A customer-driven distributor of consumable basics
• Average customer purchase: $8.50
• Average items per transaction: 5.7
• Average price per item: $1.48
2002 Transaction Data
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A customer-driven distributor of consumable basics
Merchandise categories
2002% of sales
Highly consumable 60.2%
Seasonal 16.3%
Home products 13.3%
Basic clothing 10.2%
100.0%
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A customer-driven distributor of consumable basics
Annual Sales
$4.55 B
$5.32 B
$6.10 B
0
1
2
3
4
5
6
7
FY 2000 FY 2001 FY 2002
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A customer-driven distributor of consumable basics
Net Income
$70.6
$169.6
$207.5$225.5
$264.9$250.9
$0
$50
$100
$150
$200
$250
$300
( $
in m
illi
ons)
FY 2000 FY 2001 FY 2002
As reported Excluding restatement-related items
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A customer-driven distributor of consumable basics
Balance Sheet Highlights
($ in millions) FY 2000 FY 2001 FY 2002
Balance sheet debt $729.8 $735.1 $346.5
Total assets $2,282.5 $2,552.4 $2,333.2
Merchandise inventories $1,012.2 $1,131.0 $1,123.0
Inventory turns 3.25 x 3.46 x 3.84 x
Shareholders' equity $861.8 $1,041.7 $1,288.1
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A customer-driven distributor of consumable basics
1Q Earnings Results(Dollars in millions except per share amounts)
Q1 2003 Q1 2002
Net Income:
As reported $60.3 $45.9
Excluding restatement-related items $60.5 $49.3
Diluted EPS:
As reported $0.18 $0.14
Excluding restatement-related items $0.18 $0.15
Restatement-related items:
Restatement-related expenses in S,G&A $0.3 $5.3Tax effect of restatement-related items 0.1 1.9
Effect of restatement-related itmes on net income $0.2 $3.4
(in millions, except per share amounts)
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A customer-driven distributor of consumable basics
1Q Consolidated Statements of Income
Amount% of Net
Sales Amount% of Net
SalesNet sales $1,569.1 100.0% $1,389.4 100.0%Cost of goods sold 1,117.2 71.2% 1,009.1 72.6%Gross profit 451.9 28.8% 380.3 27.4%Selling, general and administrative expensesOperating profit 102.9 6.6% 83.0 6.0%Interest expense, net 9.4 0.6% 10.4 0.8%Income before taxes on income 93.5 6.0% 72.6 5.2%Provisions for taxes on income 33.2 2.1% 26.6 1.9%Net income $60.3 3.8% $45.9 3.3%
Diluted earnings per share $0.18 $0.14
Q1 2003 Q1 2002
349.0 22.2% 297.3 21.4%
(Dollars in millions except per share amounts)
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A customer-driven distributor of consumable basics
1Q Consolidated Statements of Income(Dollars in millions except per share amounts)
Amount% of Net
Sales Amount% of Net
SalesNet sales $1,569.1 100.0% $1,389.4 100.0%Cost of goods sold 1,117.2 71.2% 1,009.1 72.6%Gross profit 451.9 28.8% 380.3 27.4%Selling, general and administrative expenses 349.0Operating profit 102.9 6.6% 83.0 6.0%Interest expense, net 9.4 0.6% 10.4 0.8%Income before taxes on income 93.5 6.0% 72.6 5.2%Provisions for taxes on income 33.2 2.1% 26.6 1.9%Net income $60.3 3.8% $45.9 3.3%
Diluted earnings per share $0.18 $0.14
May 2, 2003 May 3, 2002
22.2% 297.3 21.4%
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A customer-driven distributor of consumable basics
1Q Consolidated Statements of Income(Dollars in millions except per share amounts)
Amount% of Net
Sales Amount% of Net
SalesNet sales $1,569.1 100.0% $1,389.4 100.0%Cost of goods sold 1,117.2 71.2% 1,009.1 72.6%Gross profit 451.9 28.8% 380.3 27.4%Selling, general and administrative expenses 349.0 22.2% 21.4%Operating profit 102.9 6.6% 83.0 6.0%Interest expense, net 9.4 0.6% 10.4 0.8%Income before taxes on income 93.5 6.0% 72.6 5.2%Provisions for taxes on income 33.2 2.1% 26.6 1.9%Net income $60.3 3.8% $45.9 3.3%
Diluted earnings per share $0.18 $0.14
May 2, 2003 May 3, 2002
297.3
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A customer-driven distributor of consumable basics
1Q Consolidated Statements of Income(Dollars in millions except per share amounts)
Amount% of Net
Sales Amount% of Net
SalesNet sales $1,569.1 100.0% $1,389.4 100.0%Cost of goods sold 1,117.2 71.2% 1,009.1 72.6%Gross profit 451.9 28.8% 380.3 27.4%Selling, general and administrative expenses 349.0Operating profit 102.9 6.6% 83.0 6.0%Interest expense, net 9.4 0.6% 10.4 0.8%Income before taxes on income 93.5 6.0% 72.6 5.2%Provisions for taxes on income 33.2 2.1% 26.6 1.9%Net income $60.3 3.8% $45.9 3.3%
Diluted earnings per share $0.18 $0.14
May 2, 2003 May 3, 2002
22.2% 297.3 21.4%
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A customer-driven distributor of consumable basics
1Q Consolidated Statements of Income(Dollars in millions except per share amounts)
Amount% of Net
Sales Amount% of Net
SalesNet sales $1,569.1 100.0% $1,389.4 100.0%Cost of goods sold 1,117.2 71.2% 1,009.1 72.6%Gross profit 451.9 28.8% 380.3 27.4%Selling, general and administrative expenses 349.0Operating profit 102.9 6.6% 83.0 6.0%Interest expense, net 9.4 0.6% 10.4 0.8%Income before taxes on income 93.5 6.0% 72.6 5.2%Provisions for taxes on income 33.2 2.1% 26.6 1.9%Net income $60.3 3.8% $45.9 3.3%
Diluted earnings per share $0.18 $0.14
May 2, 2003 May 3, 2002
22.2% 297.3 21.4%
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A customer-driven distributor of consumable basics
• Opened 223 new stores, closed 7 stores, • YTD 2003 capital expenditures - $30.1
million• As of May 2, 2003:
• Cash - $75.9 million• Debt - $342.6 million
First Quarter 2003 Cash Flow Highlights
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A customer-driven distributor of consumable basics
• Total inventory of $1.20 billion at May 2, 2003, up 5.8%
• Inventory turns - 3.91x in 2002 vs 3.52x in
2001
Balance Sheet Highlights - Inventory
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A customer-driven distributor of consumable basics
Miscellaneous Topics of Interest
• 12 million share repurchase authorization in March – no shares repurchased as of May 29
• SEC investigation
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A customer-driven distributor of consumable basics
Serving Others
David Perdue
Chairman & Chief Executive Officer
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A customer-driven distributor of consumable basics
2002 Key Accomplishments
• Opened 622 stores • Completed rollout of new registers and
VSAT • Converted Fulton DC to dual sortation• Opened Florida Import Center in Alachua • Implemented the “Seven Habits of a
Highly Effective Dollar General Store”• Reduced excess inventories
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A customer-driven distributor of consumable basics
2002 Key Accomplishments
(Continued)• Completed UPC inventories in all stores• Launched aggressive shrink control program• Installed Arthur merchandising system• Added coolers to 956 stores• Thoroughly tested store auto replenishment
system• Opened 18 training centers
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A customer-driven distributor of consumable basics
1. Open 650 new stores
2003 Initiatives
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A customer-driven distributor of consumable basics
1. Open 650 new stores
2. Improve store consistency and productivity
2003 Initiatives
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A customer-driven distributor of consumable basics
1. Open 650 new stores
2. Improve store consistency and productivity
3. Reduce shrink
2003 Initiatives
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A customer-driven distributor of consumable basics
Inventory Shrink Initiatives
• Asset protection team located in major markets with higher shrink issues
• Internal auditors dedicated to shrink
• Installed 435 closed circuit TV’s
• Installed over 2,100 security alarms
• Shrink tip hotline
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A customer-driven distributor of consumable basics
1. Open 650 new stores
2. Improve store consistency and productivity
3. Reduce shrink
4. Move forward with cooler program
2003 Initiatives
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A customer-driven distributor of consumable basics
1. Open 650 new stores
2. Improve store consistency and productivity
3. Reduce shrink
4. Move forward with cooler program
5. Implement automatic replenishment in up to 2,500 stores
2003 Initiatives
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A customer-driven distributor of consumable basics
Auto Replenishment
• 13% of SKUs in all stores • 100% of core SKUs in 40 stores for over a year
– Better in-stocks – Lower inventory levels
• Currently in over 540 stores • Plan 2,500 by year end
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A customer-driven distributor of consumable basics
1. Open 650 new stores
2. Improve store consistency and productivity
3. Reduce shrink
4. Move forward with cooler program
5. Implement automatic replenishment in up to 2,500 stores
6. Test acceptance and impact of credit and debit cards
2003 Initiatives
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A customer-driven distributor of consumable basics
1. Open 650 new stores2. Improve store consistency and productivity3. Reduce shrink4. Move forward with cooler program5. Implement automatic replenishment in up to
2,500 stores6. Test acceptance and impact of credit and debit
cards7. Locate site for distribution center
2003 Initiatives
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A customer-driven distributor of consumable basics
1. Improve consistency of in-store execution
Immediate Focus
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A customer-driven distributor of consumable basics
1. Improve consistency of in-store execution
2. Increase merchandising productivity
Immediate Focus
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A customer-driven distributor of consumable basics
Arthur Merchandising System
• Single source for merchandising data• Sales and receipts loaded daily from POS
and warehouse system data • 2003 merchandising plan for sales by week
for 550 classes• Analysis and planning by groups of similar
stores • Ability to cluster stores based on sales trends
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A customer-driven distributor of consumable basics
1. Improve consistency of in-store execution
2. Increase merchandising productivity
3. New store development
Immediate Focus
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A customer-driven distributor of consumable basics
1. Improve consistency of in-store execution
2. Increase merchandising productivity
3. New store development
4. Leverage supply chain/IT investments
Immediate Focus
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A customer-driven distributor of consumable basics
1. Improve consistency of in-store execution
2. Increase merchandising productivity
3. New store development
4. Leverage supply chain/IT investments
5. Focus on the customer
Immediate Focus
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A customer-driven distributor of consumable basics
Credit Suisse First BostonJune 17, 2003New York, NY
Dollar General Corporation…….
Serving Others