a customer-driven distributor of consumable basics credit suisse first boston june 17, 2003 new...

A customer-driven distributor of consumable basics

Credit Suisse First BostonJune 17, 2003New York, NY

Dollar General Corporation…….

Serving Others


Serving Others

Jim HaganExecutive Vice President and

Chief Financial Officer


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.


(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)


As of 1/31/03


Average store 6,700 square feet

SKUsApproximately 4,075

core SKUs


• Average customer purchase: $8.50

• Average items per transaction: 5.7

• Average price per item: $1.48

2002 Transaction Data


Merchandise categories

2002% of sales

Highly consumable 60.2%

Seasonal 16.3%

Home products 13.3%

Basic clothing 10.2%

100.0%


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


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


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


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)


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)


1Q Consolidated Statements of Income(Dollars in millions except per share amounts)

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%


May 2, 2003 May 3, 2002

22.2% 297.3 21.4%



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%


May 2, 2003 May 3, 2002

297.3



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%


May 2, 2003 May 3, 2002

22.2% 297.3 21.4%


• 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


• 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


Miscellaneous Topics of Interest

• 12 million share repurchase authorization in March – no shares repurchased as of May 29

• SEC investigation


Serving Others

David Perdue

Chairman & Chief Executive Officer


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


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


1. Open 650 new stores

2003 Initiatives



2. Improve store consistency and productivity

2003 Initiatives




3. Reduce shrink

2003 Initiatives


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




3. Reduce shrink

4. Move forward with cooler program

2003 Initiatives




3. Reduce shrink


5. Implement automatic replenishment in up to 2,500 stores

2003 Initiatives


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




3. Reduce shrink


5. Implement automatic replenishment in up to 2,500 stores

6. Test acceptance and impact of credit and debit cards

2003 Initiatives


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


1. Improve consistency of in-store execution

Immediate Focus



2. Increase merchandising productivity

Immediate Focus


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




3. New store development

Immediate Focus





4. Leverage supply chain/IT investments

Immediate Focus





4. Leverage supply chain/IT investments

5. Focus on the customer

Immediate Focus


Credit Suisse First BostonJune 17, 2003New York, NY

Dollar General Corporation…….

Serving Others

a customer-driven distributor of consumable basics credit suisse first boston june 17, 2003 new...

Documents

forwardlooking information

restatementrelated expenses

forwardlooking statements

related items9

related itmes

related proceeds

average items

impact of restatement