"Our effective earnings increase of 32.9 percent in 2001 is especially impressive given that it was achieved despite the demands and distractions of our recent restatement process," said Cal Turner, Chairman and CEO. "These results are a reflection of the power of strategy and the power of dedicated employees. Our strategy has great growth opportunity, and we have a Dollar General team committed to demonstrating that."
2001 Fiscal Period
Net sales totaled $5.32 billion for 2001 (52-weeks) compared with $4.55 billion for 2000 (53-weeks), an increase of 17.0 percent. The increase resulted primarily from 540 net new stores and a same-store sales increase of 7.3 percent. During the year, the Company opened 602 new stores, relocated or remodeled 78 stores and closed 62 stores. At year's end, the Company operated 5,540 stores with approximately 37.4 million selling square feet. The average new store opened in 2001 had annualized sales of $785,000 and approximately 6,500 selling square feet, compared to annualized sales of $774,000 and approximately 6,900 selling square feet for new stores opened in 2000.
Gross profit for 2001 was $1.51 billion, or 28.4 percent of net sales, compared with $1.25 billion, or 27.5 percent of net sales in 2000. The improvement in the gross margin rate relates primarily to the $21.5 million effect of a markdown recorded in 2000. The Company also improved its initial margin on inventory purchases in 2001 as compared against 2000. Categories that contributed to this increase included home products, hardware/seasonal, and basic clothing. Transportation costs as a percentage of sales decreased in 2001 as compared to 2000, and inventory shrinkage calculated at the retail value of the inventory, as a percentage of net sales, increased slightly in 2001 compared with 2000.
SG&A expense for 2001 was $1.14 billion compared with $0.93 billion in 2000, an increase of 21.5 percent. As a percentage of net sales, SG&A expense was 21.3 percent compared with 20.5 percent in 2000. The increase in SG&A expense as a percentage of net sales was due in part to $28.4 million in restatement-related expenses in 2001 (there were no such expenses in 2000) and an increase in store labor which was greater than the Company's sales increase of 17.0 percent. The Company invested additional funds in store labor to improve store execution. Excluding restatement-related expenses, SG&A would have been $1.11 billion or 20.8 percent of net sales, an increase of 18.4 percent over 2000.
The Company recorded an expense of $162.0 million in the fourth quarter of 2000 for the proposed settlement of the restatement-related litigation.
In 2001, interest expense was $45.8 million compared with $45.4 million in 2000. The Company's total debt as of February 1, 2002, was $735.1 million compared with $729.8 million as of February 2, 2001.
The Company's effective income tax rates for 2001 and 2000 were 36.7 percent and 35.0 percent, respectively. The lower effective tax rate in 2000 relates to the 38.9 percent marginal tax rate applied against the litigation settlement expense. Excluding the tax impact of the litigation settlement expense, the effective tax rate in 2000 was 37.3 percent.
Net LIFO merchandise inventories increased 11.7 percent to $1.13 billion at February 1, 2002, from $1.01 billion at February 2, 2001. Average retail inventory turn increased to 3.2 turns from 3.0 turns in 2000.
Capital expenditures for 2001 totaled $125.4 million compared with $216.6 million for 2000.
Net income was $97.4 million, or $0.29 per diluted share compared with a loss of $32.2 million, or $0.10 per diluted share, during the fourth quarter of 2000. Excluding restatement-related expenses of $10.1 million in 2001 and the litigation settlement expense that was recognized in 2000, net income increased 55.5 percent to $104.0 million, or $0.31 per diluted share compared with $66.8 million, or $0.20 per diluted share last year.
Total sales for the 13-weeks ended February 1, 2002, increased 10.0 percent to $1.59 billion from $1.44 billion for the 14-week period ended February 2, 2001. For the 13-week calendar period ended February 1, 2002, same-store sales increased 6.5 percent. During the quarter, the Company opened 79 new stores and closed 24 stores.
Gross profit increased 25.4 percent to $475.5 million, or 30.0 percent of net sales, compared with $379.1 million, or 26.3 percent of net sales, in the prior year. The improvement in the gross profit rate is due primarily to the $21.5 million effect of a markdown recorded in 2000. The Company also improved its initial margin on inventory purchases in 2001 as compared against 2000. Improvements in all four merchandise categories contributed to this increase. Lower fuel costs, improved supply chain management and increased utilization of existing distribution facilities enabled the Company to significantly reduce distribution and transportations costs as a percentage of net sales in 2001 as compared to 2000.
SG&A expenses were $312.6 million, or 19.7 percent of net sales compared with $262.6 million, or 18.2 percent of net sales during the comparable period in the prior year, an increase of 19.0 percent. The increase in SG&A expense as a percentage of net sales was due in part to $10.1 million in restatement- related expenses (there were no such expenses in 2000) and increases in incentive compensation and health insurance expense which were in excess of the Company's sales increase in the quarter of 10.0 percent. Excluding the restatement-related expenses, SG&A would have been $302.5 million, or 19.1 percent of net sales. The Company's financial performance in 2001 resulted in incentive compensation paid to its distribution center, administrative and management personnel. In 2000, the Company did not pay incentive compensation to its distribution center, administrative and management personnel as the Company did not achieve its financial targets as established by the Company's Board of Directors.
The Company projects revenues in 2002 to increase 14 percent to 16 percent and earnings in 2002, excluding restatement-related expenses, to increase 13 percent to 15 percent.
In 2002, the Company expects same-store sales to increase 5 percent to 7 percent. The Company currently anticipates opening approximately 600 new stores, closing 60 to 80 stores, and remodeling or relocating approximately 100 stores.
This year, the Company expects to increase its selection of highly consumable and seasonal merchandise. In addition, the Company intends to expand its assortment of perishable items, such as milk and bread, to more than 1,000 stores. Also, the Company intends to utilize independent inventory services to establish perpetual inventories in all stores by October 2002. The Company believes that its merchandising initiatives, a new merchandising planning system and improved allocation processes supported by perpetual inventories in all stores will increase average retail inventory turn in 2002.
The Company's new store growth plans and improved distribution and transportation processes are based on leveraging of existing resources. The Company does not plan to open a new distribution center this year, making 2002 the first year since 1996 that the Company has not opened a distribution center. This year, the Company expects to complete the three-year installation of new IBM registers in all stores, as well as the installation of a satellite communications network to all of its stores and distribution centers. Supported by more efficient distribution and transportation processes, the Company anticipates that these systems will enable it to reduce its store delivery cycle by at least one day.
The Company intends to continue its investment in store payroll to improve store conditions and to enhance employee training. The Company plans to implement new store controls and invest in a new loss prevention system and new processes to improve inventory shrinkage results in 2002.
The Company currently expects to incur capital expenditures during 2002 of approximately $150 million. In September 2002 the Company's synthetic leases, in the amount of $383 million, will mature and the Company's $175 million revolving credit facility will expire. The Company is currently in the process of arranging financing to replace these facilities and expects to complete this refinancing before the expiration of such facilities. During the second half of 2002, the Company may also have to fund the settlement of the class action litigation in an amount of up to $162 million (which expense was recognized in the fourth quarter of 2000). The Company anticipates that its existing cash balances, cash flow from operations, and borrowings under its existing financing facilities and replacement financing facilities will provide sufficient resources to meet these obligations.
As of February 1, 2002, Dollar General operated 5,540 neighborhood stores in 27 states with distribution centers in Florida, Kentucky, Mississippi, Missouri, Ohio, Oklahoma and Virginia.
In accordance with the interpretations of the staff of the Securities and Exchange Commission and the normal procedures of the Company's auditors, the Company's financial statements for the 2001 fiscal year will not be deemed to have been issued until the Company's Annual Report on Form 10-K is filed, and as a result, the Company's financial statements will necessarily remain subject to adjustment until such filing.
This press release contains historical and forward-looking information. The words "believe," "anticipate," "project," "plan," "expect," "estimate," "objective," "forecast," "goal," "intend," "will likely result," or " will continue" and similar expressions identify forward looking statements. The forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. 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 in the forward-looking statements. The factors that may result in actual results differing from such forward-looking information include, but are not limited to: the Company's ability to maintain adequate liquidity through its cash resources and credit facilities, including its ability to refinance or replace such facilities on favorable terms at the maturity thereof; the Company's ability to comply with the terms of the Company's credit facilities (or obtain waivers for non- compliance); the Company's ability to enter into new credit facilities on terms acceptable to the Company prior to the expiration in September 2002 of the terms of the Company's existing credit facilities, general transportation and distribution delays or interruptions; inventory risks due to shifts in market demand; changes in product mix; interruptions in suppliers' businesses; 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; delays associated with building, opening and operating new stores; and the impact of the litigation and regulatory proceedings related to the restatement of the Company's financial statements, including the funding of the settlement of such litigation and the risk that the conditions to the effectiveness of such settlements, including the results of the plaintiffs' confirmatory discovery and the approval by the courts, may not be realized.
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 undertakes no 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 INCOME STATEMENTS (in thousands) --- FOR THE FOURTH QUARTER ENDED --- (Unaudited) (Unaudited) February 1, % of February 2, % of 2002 Sales 2001 Sales Sales $1,586,012 100.0% $1,441,714 100.0% Cost of Sales 1,110,490 70.0% 1,062,611 73.7% Gross Margin 475,522 30.0% 379,103 26.3% Selling, General & Administrative Expense 312,634 19.7% 262,638 18.2% Litigation Settlement Expense -- 0.0% 162,000 11.2% Operating Income (Loss) 162,888 10.3% (45,535) -3.2% Interest Expense 10,753 0.7% 9,824 0.7% Pre-Tax Income (Loss) 152,135 9.6% (55,359) -3.8% Taxes 54,690 3.4% (23,203) -1.6% Net Income (Loss) $97,445 6.1% $(32,156) -2.2% Diluted earnings per share $0.29 ($0.10) Weighted average diluted shares 334,625 330,765 --- FOR THE YEAR ENDED --- (Unaudited) February 1, % of February 2, % of 2002 Sales 2001 Sales Sales $5,322,895 100.0% $4,550,571 100.0% Cost of Sales 3,813,483 71.6% 3,299,668 72.5% Gross Margin 1,509,412 28.4% 1,250,903 27.5% Selling, General & Administrative Expense 1,135,801 21.3% 934,899 20.5% Litigation Settlement Expense -- 0.0% 162,000 3.6% Operating Income 373,611 7.0% 154,004 3.4% Interest Expense 45,790 0.9% 45,357 1.0% Pre-Tax Income 327,821 6.2% 108,647 2.4% Taxes 120,308 2.3% 38,005 0.8% Net Income $207,513 3.9% $70,642 1.6% Diluted earnings per share $0.62 $0.21 Weighted average diluted shares 335,017 333,858 For the year ended February 1, 2002, the average customer purchased approximately 5.7 items at total cost of $8.43. (Unaudited) (Unaudited) 4Q YTD Same-store Customer Transactions 6.2% 5.7% Average Customer Purchase $8.91 $8.43 DOLLAR GENERAL CORPORATION Selected Balance Sheet Highlights (in thousands) (Unaudited) February 1, February 2, 2002 2001 (52 weeks) (53 weeks) Cash and cash equivalents $261,525 $162,310 Total Merchandise inventories 1,131,023 1,012,235 Total Assets 2,552,385 2,282,462 Total Long-Term obligations 735,146 729,799 Total Shareholders' Equity 1,041,717 861,763 Sales by Category For the Fourth Quarter Ended (in thousands) (Unaudited) (Unaudited) February 1, February 2, 2002 2001 % Chg (13 weeks) (14 weeks) Highly Consumable $829,771 $751,044 10.5% Hardware and Seasonal 349,350 $276,910 26.2% Basic Clothing 171,351 $179,069 -4.3% Home Products 235,540 $234,691 0.4% TOTAL SALES $1,586,012 $1,441,714 10.0% Sales by Category For the Year Ended (in thousands) (Unaudited) February 1, February 2, 2002 2001 % Chg (52 weeks) (53 weeks) Sales by Category: Highly Consumable $3,085,112 $2,518,052 22.5% Hardware and Seasonal $888,263 $706,140 25.8% Basic Clothing $581,800 $554,117 5.0% Home Products $767,720 $772,263 -0.6% TOTAL SALES $5,322,895 $4,550,571 17.0% New Store Activity For the Year Ended (Unaudited) (Unaudited) February 1, February 2, 2002 2001 Beginning Store Count 5,000 4,294 New Store Openings 602 758 Store Closings 62 52 Net New Stores 540 706 Ending Store Count 5,540 5,000 Total Selling Square Footage 37,414 33,871
SOURCE Dollar General Corporation
CONTACT: investors, Kiley Fleming, CFA, +1-615-855-5525, or media, Andrea Turner, +1-615-855-5209, both of Dollar General Corporation