SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
ANNUAL REPORT
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2001
Commission File No.: 1-11421
Dollar General Corporation
401(k) Savings and Retirement Plan
(Full title of plan)
Dollar General Corporation
100 Mission Ridge
Goodlettsville, Tennessee 37072-2170
(Name of issuer of securities held pursuant to the plan
and address of principal executive office)
Report of Independent Auditors
------------------------------
To the Participants and Plan Administrator of
Dollar General Corporation 401(k) Savings and Retirement Plan
We have audited the accompanying statement of net assets available for
benefits of Dollar General Corporation 401(k) Savings and Retirement Plan as of
December 31, 2001, and the related statement of changes in net assets available
for benefits for the year then ended. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the net assets available for benefits of the Plan at
December 31, 2001, and the changes in its net assets available for benefits for
the year then ended, in conformity with accounting principles generally accepted
in the United States.
Our audit was performed for the purpose of forming an opinion on the
financial statements taken as a whole. The accompanying supplemental schedules
of assets (held at end of year) as of December 31, 2001 and reportable
transactions for the year then ended are presented for purposes of additional
analysis and are not a required part of the financial statements but are
supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. These supplemental schedules are the responsibility of the
Plan's management. The supplemental schedules have been subjected to the
auditing procedures applied in our audit of the financial statements and, in our
opinion, are fairly stated in all material respects in relation to the financial
statements taken as a whole.
/s/ Ernst & Young LLP
---------------------
Ernst & Young LLP
Nashville, Tennessee
June 28, 2002
2
Report of Independent Certified Public Accountants
---------------------------------------------------
To the Participants and Plan Administrator of
Dollar General Corporation 401(k) Savings and Retirement Plan
Nashville, Tennessee
We have audited the accompanying statement of net assets available for
benefits of Dollar General Corporation 401(k) Savings and Retirement Plan as of
December 31, 2000. This financial statement is the responsibility of the Plan's
management. Our responsibility is to express an opinion on this financial
statement based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe our audit provides a reasonable
basis for our opinion.
In our opinion, such financial statement presents fairly, in all material
respects, the net assets available for benefits of the Plan at December 31,
2000, in conformity with accounting principles generally accepted in the United
States of America.
/s/ Grant Thornton, LLP
------------------------
Grant Thornton, LLP
Atlanta. Georgia
October 5, 2001
3
Dollar General Corporation
401(k) Savings and Retirement Plan
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
December 31,
----------------------------
2001 2000
----------- -----------
ASSETS
Investments, at fair value:
Dollar General Corporation common stock $28,364,591 $32,984,069
Registered investment companies 35,738,412 30,899,987
Participant notes receivable 1,882,882 1,481,272
Real estate limited partnerships 343,534 383,963
----------- -----------
Total investments 66,329,419 65,749,291
----------- -----------
Receivables:
Employer contributions 5,686,051 5,332,911
Participants' contributions 399,100 478,987
----------- -----------
Total receivables 6,085,151 5,811,898
----------- -----------
Cash 63,837 319,888
----------- -----------
Total Assets 72,478,407 71,881,077
LIABILITIES
Accrued expenses -0- 72,481
----------- -----------
NET ASSETS AVAILABLE FOR BENEFITS $72,478,407 $71,808,596
=========== ===========
The accompanying notes are an integral part of these statements.
4
Dollar General Corporation
401(k) Savings and Retirement Plan
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
Year Ended December 31, 2001
ADDITIONS TO NET ASSETS ATTRIBUTED TO:
Interest income $ 279,381
Contributions:
Employer's 7,692,208
Participants' 5,285,863
Rollover 588,242
------------
Total contributions 13,566,313
------------
Total additions 13,845,694
------------
DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO:
Benefits paid to participants 6,694,311
Net depreciation in fair value of investments 6,341,147
Administrative expenses 140,425
------------
Total deductions 13,175,883
------------
Net increase 669,811
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 71,808,596
------------
End of year $ 72,478,407
============
The accompanying notes are an integral part of these statements.
5
Dollar General Corporation
401(k) Savings and Retirement Plan
NOTES TO FINANCIAL STATEMENTS
December 31, 2001
NOTE A - DESCRIPTION OF PLAN
The following brief description of the Dollar General Corporation 401(k)
Savings and Retirement Plan (the "Plan") provides only general information.
Participants should refer to the Plan agreement for a more complete description
of the Plan's provisions.
1. General
-------
The Plan is a defined contribution plan for all employees of Dollar General
Corporation (the "Employer" or the "Company") who have completed one year of at
least 1,000 hours of service and are age 21 or older. The Plan is subject to the
provisions of the Employee Retirement Income Security Act of 1974 ("ERISA").
2. Contributions
-------------
The Plan allows the participants to make contributions of the participants'
earnings in the form of deferred compensation to a retirement plan before income
taxes are deducted. The contributions are invested, and income earned is not
taxed to the participant until withdrawn from the Plan.
Participants may elect to contribute from 1% to 15% of pre-tax annual
eligible compensation as defined in the Plan, subject to certain limitations
under applicable federal law. Participants may also make rollover contributions
to the Plan. The Employer has the option of matching up to 50% of the first 6%
of eligible compensation contributed by the participants ("Employer Matching
Contribution"). The Employer Matching Contribution is invested as directed by
the participant.
The Employer also has the option to make contributions to the Plan on
behalf of all participants which shall be treated as Qualified Nonelective
Employer Contributions ("QNEC") to the extent such contributions may be used to
meet the nondiscrimination requirements of the Internal Revenue Code (the
"Code"). The Employer may elect to have 25% of the QNEC be made in Company
common stock or used to acquire Company common stock. The remaining QNEC is
invested as directed by the participant. Included in Employer contributions
receivable are $5,686,051 and $5,136,101 related to the QNEC at December 31,
2001 and 2000, respectively.
In addition to the Employer Matching Contribution and QNEC contributions
described above, the Employer may contribute discretionary amounts from time to
time ("Profit Sharing Contribution") as Profit Sharing Contributions. The Profit
Sharing
6
Dollar General Corporation
401(k) Savings and Retirement Plan
NOTES TO FINANCIAL STATEMENTS (continued)
2. Contributions (continued)
-------------------------
Contribution is invested as directed by the participant. Participants must be
employed on the last day of the Plan year to receive a Profit Sharing
Contribution. There was no Profit Sharing Contribution for the 2001 Plan year.
3. Participants' Accounts
----------------------
Each participant's account is credited with the participant's contributions
and withdrawals, as applicable, and allocations of the Employer contributions
and Plan earnings, and is charged with an allocation of administrative expenses.
Allocations are based on participant earnings or account balances, as defined.
The benefit to which a participant is entitled is the benefit that can be
provided from the participant's vested account.
4. Vesting
-------
Participants are immediately vested in their contributions and the QNEC
contribution plus actual earnings thereon. Vesting in all other Employer
contributions and contributions made under the former Dollar General Corporation
Retirement Plan, plus actual earnings thereon, is based on years of credited
service. Participants are 40% vested after 4 years of credited service and 100%
after 5 years of credited service. Participants are 100% vested without regard
to credited service in the event of death, disability, or attainment of
retirement age.
5. Participant Loans
-----------------
Participants in the Plan may borrow from their fund accounts a minimum of
$1,000 up to a maximum equal to the lesser of $50,000 or 50% of their vested
account balance. Loans are secured by 50% of the balance in the participant's
account and only one loan may be outstanding at a time. Loans are secured by the
balance in the participant's account and bear interest at a rate commensurate
with local prevailing rates as determined by the Plan Administrator. Loans must
be repaid within 5 years from the date of the loan unless proceeds are used to
acquire the principal residence of the participant borrower. Principal and
interest are paid ratably through weekly or semi-monthly payroll deductions.
7
Dollar General Corporation
401(k) Savings and Retirement Plan
NOTES TO FINANCIAL STATEMENTS (continued)
6. Payments of Benefits
--------------------
On termination of service, a participant may elect to receive either a
lump-sum amount equal to the value of the participant's vested interest in his
or her account, installments over a period not to exceed life expectancy, or
under certain circumstances may purchase an annuity.
7. Forfeited Accounts
------------------
Forfeited balances of terminated participants' nonvested accounts are used
to reduce future contributions of the Company. In 2001, employer contributions
were reduced by $702,399 from forfeited nonvested accounts. The balance of
forfeited nonvested accounts was $1,004,713 and $998,963 at December 31, 2001
and 2000, respectively.
8
Dollar General Corporation
401(k) Savings and Retirement Plan
NOTES TO FINANCIAL STATEMENTS (continued)
8. Administrative Expenses
-----------------------
Participants pay for the costs charged for originating loans. Fees and
expenses associated with the administrative and record keeping services provided
by an external provider are paid by the Plan. The Employer pays all other
expenses.
9
Dollar General Corporation
401(k) Savings and Retirement Plan
NOTES TO FINANCIAL STATEMENTS (continued)
9. Plan Termination
----------------
Although it has not expressed any intent to do so, the Employer has the
right under the Plan to discontinue its contributions at any time and to
terminate the Plan subject to the provisions of ERISA. In the event of Plan
termination, all participant accounts will become fully vested and the assets
will be distributed to participants or their beneficiaries.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Basis of Accounting
-------------------
The financial statements of the Plan are prepared under the accrual method
of accounting.
2. Use of Estimates
----------------
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from these estimates.
3. Investment Valuation and Income Recognition
-------------------------------------------
The Plan's investments are stated at fair value, which equals the quoted
market price on the last business day of the Plan year. The shares of registered
investment companies are valued at quoted market prices which represent the net
asset value of shares held by the Plan at year end. The Dollar General
Corporation common stock is valued at the last reported sales price on the last
business day of the Plan year. Real Estate limited partnership investments are
valued at the appraised values as of the last business day of the Plan year. The
participant loans receivable are valued at their outstanding balances, which
approximate fair value.
Purchases and sales of securities are recorded on a trade date basis.
Dividend income is recorded on the dividend payable date. Interest income is
recorded on the accrual basis.
4. Payment of Benefits
-------------------
Benefits are recorded when paid.
5. Reclassification
----------------
Certain amounts in the prior year financial statements have been
reclassified to conform to the current year presentation.
10
Dollar General Corporation
401(k) Savings and Retirement Plan
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE C - INCOME TAX STATUS
The Plan has received a determination letter from the Internal Revenue
Service dated March 5, 2002, stating that the Plan is qualified under Section
401(a) of the Code and therefore, the related trust is exempt from taxation.
Once qualified, the Plan is required to operate in conformity with the Code to
maintain its qualification. The plan administrator believes the Plan is being
operated in compliance with the applicable requirements of the Code and,
therefore, believes that the Plan, is qualified and the related trust is tax
exempt.
NOTE D - INVESTMENTS
During 2001, the Plan's investments (including investments purchased, sold
as well as held during the year) appreciated (depreciated) in fair value as
determined by quoted market prices as follows:
Year ended
December 31,
2001
-------------
Registered investment companies $ 148,177
Dollar General Corporation common stock (6,476,895)
Real estate limited partnerships (12,429)
-----------
$(6,341,147)
===========
Investments which represent 5% or more of the Plan's net assets available
for benefits are as follows:
December 31,
Identity of -----------------------------------
Party Involved Description of Assets 2001 2000
-------------- --------------------- --------------- ---------------
Dollar General Corporation Dollar General Corporation
common stock $28,364,591* $32,984,069*
The American Funds Group The Income Fund of America 13,920,305 11,944,395
The American Funds Group Washington Mutual Investors
Fund 7,231,207 6,238,895
The American Funds Group The Cash Management
Trust of America 4,409,642 **
* A portion is not participant-directed
** The value of this investment was less than 5% of net assets at December 31,
2000
11
Dollar General Corporation
401(k) Savings and Retirement Plan
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE E - NONPARTICIPANT-DIRECTED INVESTMENTS
Investments in Dollar General Corporation common stock are made through the
Dollar General Corporation Stock Fund, which is comprised of Dollar General
Corporation common stock and a cash value money-market account held to fund
daily investment transactions. A portion of the investment in the Dollar General
Corporation Stock Fund is not participant-directed. Information about the net
assets and the significant components of the changes in net assets relating to
the Dollar General Corporation Stock Fund is as follows:
December 31,
---------------------------------
2001 2000
----------- -----------
Net assets:
Dollar General Corporation common stock $28,364,591 $32,984,069
The Cash Management Trust
of America 1,010,259 807,149
---------- ----------
$29,374,850 $33,791,218
========== ==========
Year ended
December 31, 2001
-----------------
Changes in Net Assets:
Net depreciation $(6,427,773)
Contributions 5,500,907
Benefits paid to participants (2,837,148)
Administrative expenses (51,921)
Transfers to participant-directed investments (600,433)
-----------
$(4,416,368)
===========
NOTE F - TRANSACTIONS WITH PARTIES-IN-INTEREST
Capital Bank & Trust, the Plan's trustee, serves as the depository for Plan
assets invested in The American Funds Group listing of mutual funds.
Transactions with these funds qualify as party-in-interest transactions. Dollar
General Corporation is the sponsor of the Plan. Transactions in the Dollar
General Corporation Stock Fund qualify as party-in-interest transactions.
Transactions with parties-in-interest include purchases and sales of assets
through Capital Bank & Trust, the Plan's trustee who also serves as the
depositor for the Plan's assets invested in the mutual funds listed by the
American Funds Group.
Additional parties-in-interest transactions include contributions by the
Employer and the Plan's investment in Company stock.
Note G - COMMITMENTS AND CONTINGENCIES
On April 30, 2001, the Company announced that it had become aware of
certain accounting issues that would cause it to restate its audited financial
statements for fiscal years 1999 and 1998, and to restate the unaudited
financial information for fiscal year 2000 that had been previously released by
the Company. The Company subsequently restated such financial statements and
financial information by means of its Form 1O-K for the fiscal year ended
February 2, 2001, which was filed on January 14, 2002.
Following the April 30, 2001, announcement more than 20 purported class
action lawsuits were filed against the Company and certain current and former
officers and directors of the Company, asserting claims under the federal
securities laws. These lawsuits have been consolidated into a single action
pending in the United States District Court for the Middle District of
Tennessee. On July 17, 2001, the court entered an order appointing the Florida
State Board of Administration and the Teachers' Retirement System of Louisiana
as lead plaintiffs and the law firms of Entwistle & Cappucci LLP, Milberg Weiss
Bershad Hynes & Lerach LLP and Grant & Eisenhofer, P.A. as co-lead counsel. On
January 3, 2002, the lead plaintiffs filed an amended consolidated class action
complaint. Among other things, plaintiffs have alleged that the Company and
certain of its current and former officers and directors made misrepresentations
concerning the Company's financial results in the Company's filings with the
Securities and Exchange Commission and in various press releases and other
public statements. The plaintiffs seek damages with interest, costs and such
other relief as the court deems proper.
On January 3, 2002, the Company reached a settlement agreement with the
putative class action plaintiffs, pursuant to which the Company agreed to pay at
least $140 million to such plaintiffs in settlement for their claims and to
implement certain enhancements to its corporate governance and internal control
procedures. Such agreement was subject to confirmatory discovery, to the final
approval of the Company's Board of Directors, and to court approval. Under such
settlement agreement, the plaintiffs had the right, following the completion of
confirmatory discovery, to amend their complaint and to negotiate with the
Company for additional damages, the aggregate amount of all damages to be paid
in settlement of plaintiffs' claims not to exceed $162 million.
On April 1, 2002, following the completion of such confirmatory discovery,
the Company and the putative class action plaintiffs amended their settlement
agreement and the plaintiffs filed a second amended complaint, purporting to
name as plaintiffs a class of persons who purchased or otherwise made an
investment decision regarding the Company's securities and related derivative
securities between March 5, 1997 and January 14, 2002. Pursuant to the amended
settlement agreement, the Company has agreed to pay $162 million to such
plaintiffs in settlement for their claims and to implement certain enhancements
to its corporate governance and internal control procedures. Such amended
agreement was approved by the court on May 24, 2002.
As a member of the plaintiff class, and provided that all rights to appeal
such settlement agreement have expired and that no appeals have been filed, the
Plan expects that this agreement will result in a net payment to the Plan after
attorneys' fees, of approximately $1.4 million, which has not been accrued in
the Plan's financial statements.
12
Dollar General Corporation
401(k) Savings and Retirement Plan
EIN: 61-0202302 Plan: 002
SCHEDULE OF ASSETS (HELD AT END OF YEAR)
Schedule H, Line 4i
December 31, 2001
(a) (b) (c) (d) (e)
Description of Investment including
Identity of Issue, Borrower, Maturity Date, Rate of Interest, Current
Lessor, or Similar Party Collateral, Par or Maturity Value Cost Value
---- ---------------------------- ----------------------------------- -------- -------------
* Dollar General Corporation Dollar General Corporation
common stock $34,079,444 $28,364,591
* The American Funds Group The Income Fund of America ** 13,920,305
* The American Funds Group Washington Mutual Investors Fund ** 7,231,207
* The American Funds Group The Cash Management Trust of America ** 4,409,642
* The American Funds Group New Perspective Fund ** 3,188,233
* The American Funds Group The Bond Fund of America ** 2,779,494
* The American Funds Group SMALLCAP World Fund ** 2,444,251
* The American Funds Group The Growth Fund of America ** 1,277,868
* The American Funds Group The New Economy Fund ** 487,412
Participant notes receivable Interest rates ranging from ** 1,882,882
5% to 9.5% and maturity dates ranging
from 2002 to 2031
Related estate limited partnerships:
Interchange City Associates, Ltd. 15.5 units ** 219,325
Liquidity Fund Tax Exempt 15 units ** 1,686
North Creek Associates 400 units ** 113,200
Realty FD 85-1 200 units ** 9,323
--------------------------------
$34,079,444 $66,329,419
=========== ===========
* Party-in-interest
** Cost omitted for participant directed investments
13
Dollar General Corporation
401(k) Savings and Retirement Plan
EIN: 61-0202302 Plan: 002
SCHEDULE OF REPORTABLE TRANSACTIONS
Schedule H, Line 4j
Year Ended December 31, 2001
(h) Current value
of asset on (i) Net gain
(a) Identity of (c) Purchase (d) Selling (g) Cost of transaction or
party involved (b) Description of asset price price asset date (loss)
-----------------------------------------------------------------------------------------------------------------------------------
Category (iii) - Series of
transactions in excess of 5%
Dollar General Corporation Stock Fund $6,458,712 $ -- $6,458,712 $6,458,712 $ --
$ -- $4,447,307 $4,819,311 $4,447,307 $ (372,004)
There were no category (i), (ii) or (iv) reportable transactions during 2001.
Columns (e) and (f) have not been presented as this information is not
applicable.
14
The following is a complete listing of Exhibits filed or incorporated by
reference as part of this annual report:
EXHIBITS
Exhibit Description
------- ------------
23.1 Consent of Independent Auditors
23.2 Consent of Independent Auditors
15
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Administrator of the Dollar General Corporation 401(k) Savings and Retirement
Plan has duly caused this Annual Report to be signed on its behalf by the
undersigned hereunto duly authorized.
DOLLAR GENERAL CORPORATION
401(k) SAVINGS AND RETIREMENT PLAN
Date: July 3, 2002
By: /s/ Melissa J. Buffington
--------------------------------
Name: Melissa J. Buffington
Title: Chief Administrative Officer,
Dollar General Corporation
16