UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): May 22, 2003
FRED'S, INC.
(Exact Name of Registrant as Specified in Charter)
Commission File Number 00-19288
Tennessee 62-0634010
(State or other jurisdiction (I. R. S. Employer
of incorporation or organization) Identification No.)
4300 New Getwell Road, Memphis, TN 38118
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code
(901) 365-8880
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits:
Exhibit
Number Description
------------- -------------------------------------------------------
99.1 Press release issued by Fred's, Inc., dated May 22, 2003
Item 9. Regulation FD Disclosure.
The information contained in this Item 9 is being furnished pursuant to
"Item 12. Results of Operations and Financial Condition" of Form 8-K in
accordance with SEC Release Nos. 33-8216 and 34-47583.
The information contained in this Current Report on Form 8-K, including the
exhibit attached hereto, is being furnished and shall not be deemed to be
"filed" for the purposes of Section 18 of the Securities and Exchange Act of
1934, as amended, or otherwise subject to the liabilities of that Section.
Furthermore, the information contained in this Current Report on Form 8-K shall
not be deemed to be incorporated by reference into any registration statement or
other document filed pursuant to the Securities Act of 1933, as amended.
On May 22, 2003, Fred's, Inc. issued a press release announcing, among
other things, its quarterly earnings results for the quarter ended May 3, 2003.
A copy of the press release is attached as Exhibit 99.1 to this Current Report
on Form 8-K.
2
SIGNATURE
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.
FRED'S, INC.
(Registrant)
By:/s/Jerry Shore
-------------------------
Jerry A. Shore,
Executive Vice President
and Chief Financial Officer
May 22, 2003
3
INDEX TO EXHIBITS
Exhibit
Number Description
----------- ---------------------------------------------------------------
99.1 Press release issued by Fred's, Inc., dated May 22, 2003
4
Exhibit 99.1
Press Release
[Letterhead]
4300 New Getwell Road, Memphis, Tennessee 38118
Contact: Jerry A. Shore
Executive Vice President and
Chief Financial Officer
(901) 362-3733, Ext. 2217
FRED'S REPORTS FIRST QUARTER NET INCOME UP 25% to $7.9 million
or $0.30 per diluted share
MEMPHIS, Tenn. (May 22, 2003) - Fred's Inc. (NASDAQ/NM: FRED) today reported
record financial results for the first quarter ended May 3, 2003.
Net income for the first quarter of fiscal 2003 increased 25% to $7,857,000
or $0.30 per diluted share from $6,275,000 or $0.24 per diluted share in the
year-earlier period. Retail sales by Company stores for the first quarter
increased 21% and total sales rose 20% to $310,689,000 compared with
$258,427,000 in the same period last year. On a comparable store basis, sales
increased 6.8% for the quarter.
Commenting on the results, Michael J. Hayes, Chief Executive Officer, said,
"We are delighted that Fred's was able to exceed its financial plan for the
first quarter with a 25% increase in earnings per diluted share compared with
the analysts' consensus earnings estimate for a 17% increase. This performance
was even more significant considering the first-quarter startup of our new
distribution center in Dublin, Georgia, and the aggressive plan we have set for
fiscal 2003, which includes most notably the opening of more than 70 stores, of
which we successfully opened 33 in the first quarter versus our target of 30.
"We believe the highlight of the first quarter was the successful opening
of our new distribution center, which greatly extends the Company's reach in the
Southeast," Hayes continued. "While selling, general and administrative expenses
increased somewhat during the quarter, reflecting in part the transition from a
single distribution center for the chain, the on-time, on-budget opening of a
second distribution center represents an important step toward achieving future
operating performance goals."
Fred's gross profit for the first quarter of 2003 was $87,948,000 compared
with $69,425,000 in the same period last year, representing an increase of 27%
for the period. Gross margin for the quarter increased to 28.3% of sales from
26.9% in the year-earlier period, with the change reflecting improved product
mix and lower markdowns.
Selling, general and administrative expenses for the first quarter of 2003
increased to 24.4% of sales versus 23.3% in the first quarter last year. This
increase was attributed to higher distribution costs at the Company's Memphis
distribution center, costs related to the opening of the new distribution
center, as well as higher insurance costs and costs associated with new store
openings.
Operating income for the first quarter of 2003 increased 27% to $11,977,000
from $9,413,000 in the year-earlier period. Operating income for the quarter
improved to 3.9% of sales from 3.6% in the first quarter of 2002.
Income before income taxes for the first quarter of 2003 increased 25% to
$11,880,000 from $9,487,000 in the year-earlier period, with the improvement
reflecting both the increase in sales for the quarter and the Company's higher
gross margin. Income before income taxes was 3.8% of sales in the first quarter
of 2003 versus 3.6% in the first quarter of 2002.
Fred's Inc. operates 473 discount general merchandise stores, including 26
franchised Fred's stores in the southeastern United States. For more information
about the Company, visit Fred's website on the Internet at www.fredsinc.com. A
public, listen-only simulcast and replay of Fred's first quarter conference call
may be accessed at the Company's web site or at www.companyboardroom.com. The
simulcast will begin at approximately 10:00 a.m. Eastern Time today and a replay
of the call will be available beginning at approximately noon Eastern Time and
will run until June 22, 2003.
Comments in this news release that are not historical facts are
forward-looking statements that involve risks and uncertainties which could
cause actual results to differ materially from those projected in the
forward-looking statements. These risks and uncertainties include, but are not
limited to, general economic trends, changes in consumer demand or purchase
patterns, delays or interruptions in the flow of merchandise between the
Company's distribution center and its stores or between the Company's suppliers
and same, a disruption in the Company's data processing services, costs and
delays in acquiring or developing new store sites, and other contingencies
discussed in the Company's Securities and Exchange Commission filings. Fred's
undertakes no obligation to release revisions to these forward-looking
statements to reflect events or circumstances after the date hereof or to
reflect the occurrence of unforeseen events, except as required to be reported
under the rules and regulations of the Securities and Exchange Commission.
FRED'S INC.
Unaudited Financial Highlights
(in thousands, except per share amounts)
13 Weeks 13 Weeks
Ended Ended
May 3, May 4, Percent
2003 2002 Change
---------- ---------- ---------
Net sales $310,689 $258,427 20.2%
Operating income $ 11,977 $ 9,413 27.2%
Net income $ 7,857 $ 6,275 25.2%
Net income per share:
Basic $ 0.31 $ 0.25 24%
Diluted $ 0.30 $ 0.24 25%
Average shares outstanding:
Basic 25,637 25,358
Diluted 26,292 26,105
FRED'S INC.
Unaudited Financial Highlights
(in thousands, except per share amounts)
13 Weeks 13 Weeks
Ended Ended
May 3, % of May 4, % of
2003 Total 2002 Total
----------- --------- ----------- ---------
Net sales $ 310,689 100.0% $ 258,427 100.0%
Cost of goods sold 222,741 71.7% 189,002 73.1%
----------- --------- ----------- ---------
Gross profit 87,948 28.3% 69,425 26.9%
Selling, general and administrative expenses 75,971 24.4% 60,012 23.3%
----------- --------- ----------- ---------
Operating income 11,977 3.9% 9,413 3.6%
Interest (income)/expense, net 97 0.1% (74) 0.0%
----------- --------- ---------- ---------
Income before income taxes 11,880 3.8% 9,487 3.6%
Provision for income taxes 4,023 1.3% 3,212 1.2%
----------- --------- ----------- ---------
Net income $ 7,857 2.5% $ 6,275 2.4%
=========== ========= =========== =========
Net income per share:
Basic $ 0.31 $ 0.25
=========== ===========
Diluted $ 0.30 $ 0.24
=========== ===========
Weighted average shares outstanding:
Basic 25,637 25,358
=========== ===========
Diluted 26,292 26,105
=========== ===========
FRED'S INC.
Unaudited Balance Sheet
(in thousands)
May 3, May 4,
2003 2002
---------- ---------
ASSETS:
Cash and cash equivalents $ 7,277 $ 19,424
Inventories 212,480 169,675
Receivables and other current assets 20,646 19,938
Current deferred income tax benefit 0 1,316
--------- ---------
Total current assets 240,403 210,353
Property and equipment, net 120,665 84,183
Other noncurrent assets 4,745 4,652
--------- ---------
Total assets $ 365,813 $ 299,188
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Accounts payable $ 71,028 $ 48,048
Current portion of indebtedness 36 563
Current portion of capital lease obligation 676 667
Accrued expenses 15,100 13,941
Current deferred tax liability 10,895 0
Income taxes 2,735 2,914
--------- ---------
Total current liabilities 100,470 66,133
Indebtedness 104 0
Deferred tax liability 1,503 696
Capital lease obligations 2,239 1,030
Other noncurrent liabilities 2,555 2,155
--------- ---------
Total liabilities 106,871 70,014
Shareholders' equity 258,942 229,174
--------- ---------
Total liabilities and shareholders' equity $ 365,813 $ 299,188
========= =========