SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended January 28, 2000
Commission file number 0-4769
DOLLAR GENERAL CORPORATION
(Exact name of Registrant as Specified in its Charter)
TENNESSEE 61-0502302
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
100 MISSION RIDGE
GOODLETTSVILE, TN 37072
(Address of principal executive offices, zip code)
Registrant's telephone number, including area code: (615) 783-2000
Securities registered pursuant to Section 12(b) of the Act:
Name of the Exchange on
Title of Class which Registered
-------------- ----------------
Common Stock New York Stock Exchange
Series B Junior Participating New York Stock Exchange
Preferred Stock Purchase Rights
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes (X) No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. (X)
Aggregate market value of the voting stock held by non-affiliates of
the Registrant as of April 6, 2000 was $5,656,428,068 based upon the last
reported sale price on such date by the New York Stock Exchange.
The number of shares of common stock outstanding on April 6, 2000 was
263,274,082.
Documents Incorporated by Reference
Document Where Incorporated in Form 10-K
Portions of the Registrant's Proxy Part III
Statement Relating to the
Annual Meeting of Shareholders to
be held on June 5, 2000
<PAGE>
The following text contains references to years 2001, 2000, 1999, 1998
and 1997 which represent fiscal years ending February 1, 2002, February 2, 2001,
January 28, 2000, January 29, 1999, and January 30, 1998, respectively. This
discussion and analysis should be read with, and is qualified in its entirety
by, the consolidated financial statements and the notes thereto.
PART I
ITEM 1. BUSINESS
General
Dollar General Corporation (the "Company" or "Dollar General") is a
discount retailer of quality general merchandise at everyday low prices. Through
conveniently located neighborhood stores, the Company offers a focused
assortment of consumable basic merchandise including health and beauty aids,
packaged food products, cleaning supplies, housewares, stationery, seasonal
goods, basic apparel and domestics. During 1999, hardline and softline
merchandise accounted for 82% and 18% of net sales, respectively. Dollar General
Stores serve primarily low-, middle- and fixed- income families. As of January
28, 2000, the Company operated 4,294 stores located in 24 states, primarily in
the midwestern and southeastern United States.
The Company opened its first Dollar General store in 1955. During the
last five years, the Company has experienced a rapid rate of expansion
increasing its number of stores from 2,059 stores with an estimated 12,726,000
selling square feet at January 31, 1995, to 4,294 stores with an estimated
28,655,000 selling square feet at January 28, 2000. In addition to growth from
new store openings, the Company recorded same-store sales increases in 1997,
1998 and 1999 of 8.4%, 8.3% and 6.4%, respectively. For the years 1995 through
1999, the Company had a compound annual growth rate in net sales and net income
of 21.8% and 24.4%, respectively. In 2000, the Company plans to open
approximately 675-700 new stores. The Company's business is somewhat seasonal in
nature. As a result of the holiday season, the Company's net sales and net
income are slightly higher in the fourth quarter than other quarters.
Business Strategy
Dollar General's mission statement is "A Better Life for Everyone!" To
carry out this mission, the Company has developed a business strategy that
focuses on providing its customers with a focused assortment of consumable basic
merchandise in a convenient, small-store format.
Our Customers. The Company serves the consumable basics needs of
customers primarily in the low- and fixed- income brackets. Specifically,
two-thirds of the Company's customers live in households earning less than
$30,000 a year; nearly half earn less than $20,000. The Company believes that it
is well positioned to meet the consumable basics needs of the increasing number
of households in this group.
Our Stores. Dollar General Stores average 6,700 selling square feet and
are usually located within three to five miles of our customers' homes. This
appeals to the Company's target customers, many of whom prefer the convenience
of a small, neighborhood store. As the discount store industry continues to move
toward larger, "super-center" type stores which are often built outside of
towns, Dollar General's convenient discount store format has become even more
appealing to a wider range of consumers.
Our Merchandise. The Company is committed to offering a focused
assortment of quality, consumable basic merchandise in a number of core
categories such as health and beauty aids, packaged food products, cleaning
supplies, housewares, stationery, seasonal goods, basic apparel and domestics.
By consistently offering a focused assortment of consumable basic merchandise,
the Company encourages customers to shop Dollar General Stores for their
everyday household needs, leading to frequent customer visits. In 1999, the
average customer transaction increased to $8.14 from $8.06 in 1998.
Our Prices. The Company distributes quality, consumable basic
merchandise at everyday low prices. The Company's low-cost operating structure
and focused assortment of merchandise allow it to offer quality merchandise with
compelling value. As part of this strategy, the Company emphasizes even-dollar
price points. The majority of products are
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priced at $10 or less, with nearly 50% of the products priced at $1 or less. The
most expensive items are generally priced at $35.
Our Cost Controls. The Company maintains strict overhead cost controls
and seeks to locate stores in neighborhoods where store rental and operating
costs are low. The Company continues to utilize new technology where it is cost
effective to improve operating efficiencies.
Growth Strategy
Management believes that the Company's future growth will come from a
combination of merchandising initiatives, new store growth and infrastructure
investments.
Merchandising Initiatives. In 1998, the Company introduced a series of
family-oriented basic apparel programs to its stores. These programs include
jeans, khakis, T-shirts and knit shirts for men, women and children at prices of
$10 or less. These programs increase the selection of quality basic apparel
without increasing the square footage allocation of softline merchandise.
Reflecting customer research findings, the Company introduced several new
national brand items in key consumable categories in 1999. In 2000, the Company
plans to expand the selection of store brands and take advantage of opportunity
purchases that reflect its consumable basic strategy. The Company also intends
to utilize new plan-o-gram technology to improve inventory productivity and
retrofit approximately 700 small stores to a more productive prototype. The
Company will continue to evaluate the performance of its consumable categories
and make changes where appropriate. The Company believes these merchandising
initiatives have contributed and will continue to contribute to same-store net
sales increases.
New Store Growth. The Company believes its format is adaptable to towns
and neighborhoods throughout the country. The Company currently serves more than
2,800 communities with populations of fewer than 25,000. According to the Census
Bureau, there are approximately 18,000 such communities in the United States.
The Company will continue to focus on towns and neighborhoods within its current
24-state market area where management believes that the Company has the
potential to significantly expand its store base. By opening new stores in its
existing market area, the Company leverages brand awareness and takes advantage
of operating efficiencies. In addition, the Company expects to explore the
potential for geographic expansion as opportunities present themselves.
Currently, the Company targets an annual new store sales growth rate of at least
14% per year. In 2000, the Company plans to open 675-700 new stores and relocate
an additional 200-250 stores.
Infrastructure Investments. The Company continues to make significant
investments in infrastructure. Management believes that these investments will
enable the Company to aggressively grow its store base and continually improve
its operating margin. The Company realizes significant cost efficiencies by
locating stores in close proximity to its distribution centers ("DCs"). During
1999, the Company completed construction of a new 1.2 million square foot DC in
Fulton, Missouri and completed expansions to its existing DCs in South Boston,
Virginia and Ardmore, Oklahoma. The Company plans to open a 1.0 million square
foot DC in Alachua, Florida in the second half of 2000 and a 1.2 million square
foot DC in Zanesville, Ohio in the first half of 2001. The Company plans to
close its Homerville, Georgia DC in 2000. Most of the stores currently served by
the Homerville, Georgia will ultimately be served by the Alachua, Florida DC.
These changes will bring the Company's total distribution space to approximately
7.9 million square feet in eight facilities by the end of 2001.
<PAGE>
Merchandise
Dollar General Stores offer a focused assortment of quality, consumable
basic merchandise in a number of core categories. In 1999, national brand
merchandise represented more than 50% of net sales an increase from 35% in 1998.
The Company believes that its merchandising strategy generates frequent
repeat customer traffic. The Company is able to offer everyday low prices to its
customers in large part because its buying staff negotiates low purchase prices
from suppliers. The Company purchases its merchandise from a wide variety of
suppliers, with no supplier accounting for more than 6% of the Company's
purchases during 1999.
In order to fulfill the Company's commitment to maintain high in-stock
levels of core merchandise, the Company generally limits its stock keeping units
("SKUs") per store to approximately 3,500 items. The majority of items are
priced at $1 and in increments of $1, with the most expensive items generally
priced at $35. The Company believes even-dollar pricing demonstrates value to
the customer and disciplines its merchants to continually negotiate purchase
prices that conform to a limited number of retail price points. The Company
believes the risk of inventory obsolescence is low because it offers quality,
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consumable basic merchandise. The Company regularly reviews its inventory to
identify aged merchandise and sells it at reduced prices to remove it from
inventory.
Dollar General Stores receive merchandise shipments weekly from Company DCs. See
"Item 2. -- Properties."
The Dollar General Store
The typical Dollar General Store has approximately 6,700 square feet of
selling space and is operated by a manager, an assistant manager and two or more
sales clerks. Approximately 71% of the Dollar General Stores are in communities
with populations of fewer than 25,000 people. As of January 28, 2000, 60% of
stores were located in strip shopping centers, 35% were freestanding buildings
and 5% were in downtown store buildings. The Company generally has not
encountered difficulty locating suitable store sites in the past, and the
Company does not currently anticipate experiencing difficulty in finding
suitable locations.
The Company's recent store growth is summarized in the following table:
Stores at Net
Beginning Stores Stores Store Stores at
Year of Year Opened Closed Increase Year End
---------------------------------------------------------------------
1997 2,734 468 33 435 3,169
1998 3,169 551 33 518 3,687
1999 3,687 646 39 607 4,294
Employees
At March 31, 2000, the Company and its subsidiaries employed
approximately 34,600 full-time and part-time employees, including regional
managers, district managers, store managers, and DC and administrative
personnel, compared with approximately 29,800 employees at March 31, 1999. The
Company believes its relationship with its employees is good.
Competition
The Company is engaged in a highly competitive business. The Company
competes with discount stores and with many other retailers, including mass
merchandise, grocery, drug, convenience, variety and other specialty stores.
Some of the largest retail companies have stores in some of the areas where the
Company operates. Management believes that the Company competes primarily by
offering quality, consumable basic merchandise at everyday low prices in
convenient neighborhood locations.
4
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Executive Officers of the Company
The Company's executive officers as of April 1, 2000, are:
<TABLE>
<CAPTION>
Executive
Officer
Name Age Position Since
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cal Turner, Jr. 60 Chairman and 1966
Chief Executive Officer
Bob Carpenter 52 President and 1981
Chief Operating Officer
Bruce Ash 51 Vice President, 1999
Information Services
Melissa Buffington 42 Vice President, 1999
Human Resources
Brian Burr 43 Executive Vice President and 1998
Chief Financial Officer
Troy Fellers 58 Vice President, Distribution 1991
Planning and Transportation Development
Tom Hartshorn 49 Senior Vice President, 1992
Logistics and Merchandising
Operations
Bill Knight 48 Vice President, 2000
Store Operations and Store Development
Stonie O'Briant 45 Executive Vice President, 1995
Merchandising
Randy Sanderson 45 Vice President, 1996
Controller
Jeff Sims 49 Vice President, 1999
Distribution
Leigh Stelmach 60 Executive Vice President, 1989
Operations
Bob Warner 50 Vice President, 1998
General Merchandising Manager
Earl Weissert 54 Executive Vice President, 1999
Operations
</TABLE>
All executive officers of the Company serve at the pleasure of the
Board of Directors. Messrs. Turner, Carpenter, Fellers, Hartshorn, O'Briant and
Stelmach have been employed by the Company as executive officers for more than
the past five years.
5
<PAGE>
The following is a brief summary of the business experience of the executive
officers:
Mr. Turner joined the Company in 1965 and was elected President and Chief
Executive Officer in 1977. Mr. Turner has served as Chairman of the Board and
Chief Executive Officer since January 1989.
Mr. Carpenter was named President and Chief Operating Officer in February 2000.
He previously served the Company as Executive Vice President and Chief
Administrative Officer. He joined the Company in 1981 as Vice President,
Administration and General Counsel. From 1987 to 1993, Mr. Carpenter served as
Vice President, Administration, Chief Counsel and Corporate Secretary. Mr.
Carpenter was named Vice President and Chief Administrative Officer in 1993 and
Executive Vice President in 1998.
Mr. Ash joined the Company as Vice President, Information Services in September
1999. Before joining the Company, Mr. Ash served as Senior Vice President of
Systems at Talbot's, a retailing company, for ten years.
Ms. Buffington joined the Company as Vice President, Human Resources in October
1999. Before joining the Company, Ms. Buffington served as Executive Vice
President, Human Resources of First American Corporation, a bank holding
company. Ms. Buffington joined First American in 1993 as Senior Vice President,
Quality Management.
Mr. Burr joined the Company as Executive Vice President in August 1998 and was
promoted to Chief Financial Officer in March 1999. Before joining the Company,
Mr. Burr served as President of Upper Deck Companies, a sports trading card and
memorabilia company. Mr. Burr joined Upper Deck in 1990 and served as Senior
Vice President of Operations before becoming President in 1994.
Mr. Fellers was named Vice President, Distribution in March 1991. He joined the
Company in 1989 as Director of Distribution. Before joining the Company, he was
general manager of distribution for McCrory/TG&Y, a retailing company, where he
held various distribution management positions since 1967.
Mr. Hartshorn was named Senior Vice President, Logistics and Merchandising
Operations in February 2000. He joined the Company as Vice President, Operations
in 1992 and was named Vice President, Merchandising Operations in 1993. Before
joining the Company, he was director of store operations for McCrory/TG&Y, a
retailing company, where he held various management positions in operations
since 1968.
Mr. Knight joined the Company in 1990 and served the Company in various
capacities including Region Manager and Director, Store Operations, prior to
being named Vice President, Store Operations in March 2000. Prior to joining the
Company, Mr. Knight held various operations management positions for Zayre
Corporation, a retailing company.
Mr. O'Briant was named Executive Vice President, Merchandising in February 2000.
Mr. O'Briant joined the Company in 1991 as Hardlines Merchandise Manager, was
named General Merchandise Manager in 1992, Vice President, Merchandising in
1995, and Senior Vice President, Merchandising in 1998. Before joining Dollar
General, Mr. O'Briant had 17 years of service with Fred's, Inc., a discount
retailer, where he served in a number of executive management positions
including Vice President, Hardlines; Vice President, Softlines; and Vice
President, Household Goods.
Mr. Sanderson joined the Company in November 1996 as Vice President, Controller.
Before joining the Company, he served as Vice President and Controller of
Famous-Barr, a division of the May Department Stores Company. During his 23-year
career with the May Department Stores Company, Mr. Sanderson had responsibility
for a variety of financial and accounting functions at both the corporate and
operating division level.
Mr. Sims joined the Company in March 1999 as Vice President, Distribution and
Logistics. Before joining the Company, Mr. Sims served with Hills Department
Stores, a mass merchandising company, in various management positions including
Senior Vice President, Logistics from 1997 to 1999. From 1995 to 1996, Mr. Sims
served as Vice President, Logistics for Thorn Services International, a
rent-to-own services company. From 1992 to 1994, Mr. Sims served as Vice
President, Logistics for Lesco, Inc., a manufacturer and distributor of
industrial products.
Mr. Stelmach joined the Company in 1989 as Vice President, Merchandising/
Operations and was named Executive Vice President, Operations in 1993. Before
joining the Company, Mr. Stelmach was President of Fred's Store in Memphis,
Tennessee for two years, and he was Senior Vice President of Merchandising for
Howard Brothers Discount in Monroe, Louisiana for two years. He was also in
distribution and store operations for Target Stores for 15 years.
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Mr. Warner was named Vice President, General Merchandising Manager in November
1998. Mr. Warner joined the Company in 1989 as a hardware buyer. Mr. Warner has
held various management positions with the Company including Hardlines
Divisional Merchandise Manager, Director of Products and Processes, and General
Merchandise Manager.
Mr. Weissert joined the Company as Executive Vice President, Operations in April
1999. Before joining the Company, Mr. Weissert served as Senior Vice President,
Store Operations/Pharmacy for Zeller's Discount Stores, a mass merchandising
company. Mr. Weissert joined Zeller's Discount Stores as Vice President, Store
Operations in 1997 and was named Senior Vice President in 1998. Mr. Weissert
served with Montgomery Ward, a mass merchandising company, as Regional Vice
President from 1995 to 1996 and as Executive Vice President from 1996 to 1997.
Mr. Weissert also served in various management positions with F&M Distributors,
a discount merchandising company, from 1986 to 1995.
ITEM 2. PROPERTIES
As of January 28, 2000, the Company operated 4,294 retail stores
located in 24 states. The following table sets forth the number of stores
located in each state:
State Number of Stores State Number of Stores
-----------------------------------------------------------------------
Alabama 204 Mississippi 123
Arkansas 151 Missouri 209
Delaware 12 Nebraska 30
Florida 243 North Carolina 217
Georgia 220 Ohio 226
Illinois 203 Oklahoma 192
Indiana 199 Pennsylvania 198
Iowa 90 South Carolina 140
Kansas 103 Tennessee 274
Kentucky 205 Texas 578
Louisiana 146 Virginia 191
Maryland 44 West Virginia 96
Substantially all of the Company's stores are located in leased
premises. Individual store leases vary as to their terms, rental provisions and
expiration dates. In 1999, the Company's aggregate store rental expense was
approximately $128.7 million, or an average of $4.49 per square foot of selling
space. The Company's policy is to negotiate low-cost, short-term leases (usually
three to five years) with multiple renewal options when available. In 1998, the
Company introduced a preferred development program to support continued new
store growth. This program enables the Company to partner with established
development firms to build stores in markets where existing, acceptable retail
space is unavailable.
The Company's DCs serve Dollar General Stores as described in the
following tables:
<PAGE>
As of January 28, 2000
Square Stores
Location Footage Served
- --------------------------------------------------------------------------------
Ardmore, Oklahoma 1,223,000 871
South Boston, Virginia 1,201,000 886
Fulton, Missouri 1,154,000 618
Scottsville, Kentucky 873,000 842
Indianola, Mississippi 826,000 729
Villa Rica, Georgia (a) 400,000 N/A
Homerville, Georgia 503,000 348
- --------------------------------------------------------------------------------
Total 6,180,000 4,294
- --------------------------------------------------------------------------------
(a) Provides the initial stocking of new stores.
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Additional Construction
Planned
Square Scheduled
Location Footage Opening
-----------------------------------------------------------------------
Alachua, Florida 980,000 2000
Zanesville, Ohio 1,200,000 2001
-----------------------------------------------------------------------
Total 2,180,000
-----------------------------------------------------------------------
Planned Closing
-----------------------------------------------------------------------
Square Scheduled
Location Footage Closing
-----------------------------------------------------------------------
Homerville, Georgia 503,000 2000
-----------------------------------------------------------------------
Total capacity after
planned changes 7,857,000
-----------------------------------------------------------------------
The Company owns the DCs located in Scottsville, Kentucky and
Homerville, Georgia. The Company leases the DCs in Ardmore, Oklahoma; South
Boston, Virginia; Indianola, Mississippi; Fulton, Missouri and Villa Rica,
Georgia. The Alachua, Florida, and Zanesville, Ohio DCs will also be leased.
The Company's executive offices are located in approximately 302,000
square feet of leased space in Goodlettsville, Tennessee.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Company or
any of its subsidiaries is a party, or to which any of their respective
properties is subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to shareholders during the fourth quarter
ended January 28, 2000.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
The Company's common stock is traded on the New York Stock Exchange
under the symbol "DG." The following table sets forth the range of the high and
low sale prices of the Company's common stock during each quarter, together with
dividends as declared and as adjusted, for 1999 and 1998 as reported on the New
York Stock Exchange. Prices have been restated to reflect all common stock
splits. All dividends and prices have been rounded to the nearest cent.
First Second Third Fourth
1999 Quarter Quarter Quarter Quarter
------------------------------------------------------------------------------
High $29.59 $31.25 $32.63 $27.25
Low $19.59 $25.75 $22.88 $20.25
Dividend as declared $.03 $.03 $.03 $.03
Dividend as adjusted $.03 $.03 $.03 $.03
First Second Third Fourth
1998 Quarter Quarter Quarter Quarter
------------------------------------------------------------------------------
High $25.68 $30.24 $26.36 $21.50
Low $18.69 $23.52 $16.00 $17.60
Dividend as declared $.04 $.03 $.03 $.03
Dividend as adjusted $.03 $.03 $.03 $.03
There were approximately 10,000 shareholders of record of the Company's common
stock as of April 3, 2000. The Company has paid cash dividends on its common
stock since 1975. The Board of Directors regularly reviews the Company's
dividend policy to ensure that it is consistent with the Company's earnings
performance, financial condition and need for capital and other relevant
factors. No securities of the Company were sold during 1999 without registration
under the Securities Act of 1933, as amended.
9
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ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
(In thousands, except per share and operating data)
January January January January January
28, 2000 29, 1999 30, 1998 31, 1997 31, 1996
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS:
Net sales $ 3,887,964 $ 3,220,989 $ 2,627,325 $ 2,134,398 $ 1,764,188
Gross profit $ 1,097,791 $ 905,877 $ 742,135 $ 604,795 $ 503,619
Income before taxes on income $ 344,145 $ 280,915 $ 231,779 $ 185,017 $ 141,546
Net income $ 219,427 $ 182,033 $ 144,628 $ 115,100 $ 87,818
Net income as a % of sales 5.6 5.7 5.5 5.4 5.0
- -----------------------------------------------------------------------------------------------------------------------------
PER SHARE RESULTS:
Diluted earnings per share (a) $ 0.81 $ 0.68 $ 0.54 $ 0.43 $ 0.33
- ----------------------------------------------------------------------------------------------------------------------------
Basic earnings per share (a) $ 0.89 $ 0.81 $ 0.64 $ 0.51 $ 0.49
Cash dividends per
share of common stock(a) $ 0.13 $ 0.10 $ 0.08 $ 0.07 $ 0.05
Weighted average diluted
shares (a) 269,570 268,399 267,954 269,082 267,637
FINANCIAL POSITION:
Assets $ 1,450,941 $ 1,211,784 $ 914,838 $ 718,147 $ 679,996
Long-term obligations $ 1,200 $ 786 $ 1,294 $ 2,582 $ 3,278
Shareholders' equity $ 925,921 $ 725,761 $ 583,896 $ 485,529 $ 420,011
Return on average assets % 16.5 17.1 17.7 16.5 14.4
Return on average equity % 26.6 27.8 27.0 25.4 23.6
- -----------------------------------------------------------------------------------------------------------------------------
OPERATING DATA:
Retail stores at end of period 4,294 3,687 3,169 2,734 2,416
Year-end selling square feet (000) 28,655 23,719 20,112 17,480 15,302
Hardlines sales % 82 82 82 75 70
Softlines sales % 18 18 18 25 30
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) As adjusted to give retroactive effect to all common stock splits.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This discussion and analysis contains historical and forward-looking
information. 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 as a result of certain risks and uncertainties, including, but not
limited to, general transportation and distribution delays or interruptions,
inventory risks due to shifts in market demand, changes in product mix,
interruptions in suppliers' business, fuel price and interest rate fluctuations,
<PAGE>
and costs and delays associated with building, opening and operating new
distribution centers ("DCs") and stores. The Company undertakes no obligation to
publicly release any revisions to any forward-looking statements contained
herein to reflect events or circumstances occurring after the date of this
report or to reflect the occurrence of unanticipated events.
The following text contains references to years 2001, 2000, 1999, 1998
and 1997 which represent fiscal years ending February 1, 2002, February 2, 2001,
January 28, 2000, January 29, 1999, and January 30, 1998, respectively. This
discussion and analysis should be read with, and is qualified in its entirety
by, the consolidated financial statements and the notes thereto.
10
<PAGE>
General
During 1999, Dollar General achieved record sales and earnings and
continued its rapid pace of new store openings. From 1995 through 1999, the
Company had a compound annual growth rate of 21.8% in net sales and 24.4% in net
income.
For the twelfth consecutive year, the Company increased its total
number of store units. The Company opened 646 new stores in 1999, compared with
551 in 1998 and 468 in 1997. In 1999, the Company remodeled or relocated 409
stores, compared with 351 in 1998 and 195 in 1997. During the last three years,
the Company has opened, remodeled or relocated 2,620 stores, accounting for
approximately 60% of the total stores as of January 28, 2000. The Company ended
the year with 4,294 stores. In 2000, the Company anticipates opening 675 to 700
new stores and relocating approximately 200 to 250 existing stores. The Company
will continue to focus on opening stores within 200 miles of its DCs.
The 1999 new stores and relocations, net of 39 closed stores, added an
aggregate of approximately 5.0 million selling square feet to the Company's
total sales space, providing the Company with an aggregate of approximately 28.7
million selling square feet at the end of the year. The average store measured
approximately 6,700 selling square feet in 1999 and 6,400 selling square feet in
1998 and 1997.
In 1998, the Company introduced a preferred development program to
support continued new store growth. This program enables the Company to partner
with established development firms to build stores in markets where existing,
acceptable retail space is unavailable. The Company opened 141 new stores
through this program in 1999, compared with 50 new stores in 1998. In 2000, the
Company plans to open approximately 200 preferred development stores. In 1999,
the average size of a new preferred development store increased to approximately
7,700 selling square feet from 6,500 in 1998.
In the second quarter of 1999, the Company completed a 450,000
square-foot expansion of its Ardmore, Oklahoma DC. In the third quarter of 1999,
the Company opened its seventh DC, a 1.2 million square foot facility located in
Fulton, Missouri. This opening was achieved with minimal disruption to the flow
of merchandise to stores. The Company plans to open an eighth DC in Alachua,
Florida in the second half of 2000. Continuing to support its rapidly growing
store base and improving distribution efficiencies, the Company intends to open
its ninth DC in Zanesville, Ohio in the first half of 2001.
During 1999, the Company developed a new DC merchandise replenishment
system, expanded electronic data interchange capabilities and installed a new
transportation management system to improve routing and loading efficiencies. In
2000, the Company will begin the two-year implementation of a new store
technology platform. In the first half of 2000, the Company plans to install
faster, more reliable flatbed scanners in all stores. In the second quarter of
2000, the Company expects to begin a register replacement program for existing
stores. The Company plans to install new registers in approximately 1,700 stores
in 2000 and in all remaining stores in 2001. The Company also plans to establish
a perpetual inventory system in approximately 75% of its stores by year-end .
These upgrades will enable the Company to gather more accurate sales and
inventory information and to expand the utilization of automatic inventory
replenishment. In addition to replacing several administrative legacy systems,
the Company will also upgrade its financial and human resources systems to
improve processes and enhance reporting capabilities.
Results of Operations
Net Sales. Net sales totaled $3.89 billion for 1999, $3.22 billion for
1998 and $2.63 billion for 1997. These totals represent annual increases of
20.7% in 1999, 22.6% in 1998 and 23.1% in 1997. These increases resulted from
607 net new stores and a same-store net sales increase of 6.4% in 1999; 518 net
new stores and a same-store net sales increase of 8.3% in 1998; and 435 net new
stores and a same-store net sales increase of 8.4% in 1997. The increase in
same-store sales for 1999 resulted from continued improvements in the Company's
consumable basic merchandise mix and improved in-stock levels. The same-store
sales increase for 1998 was primarily driven by the addition of 700
faster-turning consumable items to the merchandise mix and refurbishing more
than 2,400 stores to a new prototype reflecting a 65% hardlines/35% softlines
space allocation versus the previous 50%/50% allocation. The Company defines
11
<PAGE>
same-stores as those stores which were opened before the beginning of the prior
fiscal year and which have remained open throughout both the prior and current
fiscal years. In 2000, management anticipates total sales will increase at least
20% and same store sales will increase 5 to 7%.
Gross Profit. Gross profit for 1999 was $1.10 billion compared with
$905.9 million in 1998 and $742.1 million in 1997. Gross profit as a percentage
of net sales was 28.2% for 1999 compared with 28.1% for 1998 and 28.3% for 1997.
The 1999 result includes an increase in distribution expense as a percentage of
net sales, reflecting higher occupancy costs due to operating one additional DC.
This increase was partially offset by lower markdowns and inventory shrinkage,
both as a percentage of net sales. The 1998 result reflects an increase in
inventory shrinkage as a percentage of net sales offset slightly by reduced
distribution expense as a percentage of net sales and higher initial mark-up. In
1999, inventory shrinkage was 2.2% of net sales compared with 2.5% in 1998 and
2.2% in 1997. In 2000, management anticipates gross margin will decrease
slightly reflecting higher DC expense associated with operating an additional DC
and lower initial markup on purchases.
Selling, General and Administrative Expense. Total selling, general and
administrative ("SG&A") expense as a percentage of net sales was 19.3% in 1999,
compared with 19.1% in 1998 and 19.3% in 1997. SG&A expense for 1999 was $748.5
million, compared with $616.6 million in 1998 and $506.6 million in 1997. In
1999, the higher SG&A expense as a percentage of net sales resulted primarily
from higher store labor and rent expense. In 1998, the lower SG&A as a
percentage of net sales resulted primarily from (a) lower advertising costs
through the elimination of the December direct-mail circular and (b) lower
employee incentive compensation offset slightly by an increase in workers'
compensation expense. All other SG&A expense categories as a percentage of net
sales remained relatively flat. In 2000, management anticipates leveraging SG&A
expense as a percentage of net sales resulting in a modest improvement in
operating margin.
Interest Expense. In 1999, interest expense was $5.2 million compared
with $8.3 million in 1998 and $3.8 million in 1997. The decreased interest
expense in 1999 resulted primarily from lower average short-term borrowings as a
result of cash received from sale/leasebacks. The increased interest expense in
1998 resulted primarily from increased short-term borrowings used to finance the
additional inventory required to supply two new DCs and 518 net new stores and
from the timing of the Company's repurchase of common stock. Daily average total
debt outstanding equaled $132.9 million during 1999 compared with $153.2 million
in 1998 and $74.8 million in 1997. Management expects that interest expense as a
percentage of net sales for 2000 will be higher reflecting increased costs
associated with financing greater capital expenditures.
Provision for Taxes on Income. The effective income tax rates for 1999,
1998 and 1997 were 36.2%, 35.2% and 37.6%, respectively. The effective tax rate
decreased between 1997 and 1999 primarily as a result of effective tax planning
strategies. The 1998 effective tax rate also reflects a one-time tax benefit
resulting from the change of state of incorporation to Tennessee from Kentucky.
Management anticipates the effective tax rate for 2000 to be approximately
36.2%.
Net Income. For the fourth consecutive year, the Company increased net
income by more than 20%. In 1999, net income totaled $219.4 million (a 20.5%
increase), compared with $182.0 million (a 25.9% increase) in 1998 and $144.6
million (a 25.6% increase) in 1997. In 2000, management anticipates earnings to
increase at least 20%.
Return on Equity and Assets. The ratio of net income to average
shareholders' equity was 26.6% in 1999, compared with 27.8% in 1998 and 27.0% in
1997. Return on average assets was 16.5% in 1999 compared with 17.1% in 1998 and
17.7% in 1997.
Liquidity and Capital Resources
Working Capital. Working capital increased to $623.2 million in 1999,
compared with $423.8 million in 1998 and $359.0 million in 1997. The ratio of
current assets to current liabilities (current ratio) was 2.3 in 1999, compared
with 1.9 in 1998 and 2.2 in 1997.
Cash Flows from Operating Activities. Net cash provided by operating
activities was $140.4 million in 1999, compared with $218.6 million in 1998 and
$139.1 million in 1997. This decrease in net cash was primarily driven by
decreased accrued expenses as a result of the advances received in 1998 from the
sale/leasebacks of the South Boston, Virginia DC expansion and the Ardmore,
Oklahoma DC. In 1998, the increased cash generated from net income before
12
<PAGE>
depreciation and deferred taxes was offset partially by the increased inventory
levels required to stock the Indianola, Mississippi and Villa Rica, Georgia DCs,
the 518 net new stores and the new basic apparel program.
Cash Flows from Investing Activities. Capital expenditures in 1999
totaled $152.7 million, compared with $140.3 million in 1998 and $107.7 million
in 1997. The Company opened 646 new stores and relocated or remodeled 409 stores
at a cost of $74.4 million in 1999. Capital expenditures for new, relocated and
remodeled stores totaled $61.6 million and $39.4 million during 1998 and 1997,
respectively.
Distribution-related capital expenditures totaled $43.2 million in
1999, resulting primarily from costs associated with the 450,000 square foot
expansion of the Ardmore, Oklahoma DC and the purchase of new delivery trailers.
In 1998, the Company spent $45.9 million, primarily on costs associated with the
484,000 square foot expansion of the South Boston, Virginia DC and the purchase
of new delivery trailers. In 1997, the Company spent $26.2 million, primarily on
costs associated with the expansion of the Scottsville, Kentucky DC and the
purchase of new delivery trailers.
During 1998, the Company entered into agreements to sell and leaseback
the Ardmore, Oklahoma DC (including the expansion) and the expansion of the
South Boston, Virginia DC. The Company received cash advances on these sales
which were included in accrued expenses as of January 29, 1999. During 1999, the
construction of these expansions was completed and the Company recorded the
sales of these properties.
Capital expenditures during 2000 are projected to be approximately
$270-280 million. This includes approximately $202 million for new stores,
remodels and relocations, including $122 million for the construction of
company-owned stores; approximately $18 million for upgrading existing stores to
the new technology platform; and approximately $17 million for transportation
equipment and logistics technology. The Company anticipates funding 2000 capital
expenditures with cash flow from operations, borrowings under existing credit
facilities and potential future financings.
Cash Flows from Financing Activities. Total debt at January 28, 2000
(including current maturities and short-term borrowings) was $2.4 million,
compared with $1.5 million in 1998 and $24.7 million in 1997. Long-term debt at
January 28, 2000 was $1.2 million, compared with $0.8 million for 1998 and $1.3
million for 1997. The average daily short-term debt was $132.9 million in 1999,
compared with $153.2 million in 1998 and $74.8 million in 1997. The Company was
able to pay off all short-term borrowings at year-end with internally generated
funds.
Because of the significant impact of seasonal buying (e.g., spring and
December holiday purchases), the Company's working capital requirements vary
significantly during the year. In 1999, these working capital requirements were
financed by short-term borrowings under the Company's $175 million revolving
credit agreement (the "revolver") and seasonal bank lines of credit totaling
$105 million at January 28, 2000. The Company's maximum outstanding short-term
indebtedness in 1999 was $218.8 million in November 1999, compared with $312.6
million in October 1998. Seasonal bank lines of credit are subject to renewal on
various dates throughout 2000, and the Company currently anticipates that these
agreements will be renewed. Management believes the existing revolver and
seasonal bank lines will be sufficient to fund its working capital requirements
in 2000.
In 1999, the Company repurchased 2,213,400 shares of common stock at an
average cost of $22.93 per share. Under the current authorization from the Board
of Directors, the Company can repurchase approximately 4.0 million additional
shares.
Market Risk
The Company is subject to market risk from exposure to changes in
interest rates based on its financing, investing and cash management activities.
The Company utilizes a credit facility to fund seasonal working capital
requirements which is comprised of variable rate debt. See "Item 7A -
Quantitative and Qualitative Disclosures About Market Risk.".
Effects of Inflation and Changing Prices
The Company believes that inflation and/or deflation had a minimal
impact on its overall operations during 1999, 1998 and 1997. In particular, the
effect of deflation on cost of goods sold has been minimal as reflected by the
small fluctuations in LIFO reserves in 1999, 1998 and 1997.
13
<PAGE>
Accounting Pronouncements
The Company will adopt Statement of Financial Accounting Standards
(SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities,"
for the fiscal year ending February 1, 2002. The Company is in the process of
analyzing the impact of the adoption of this Statement.
Year 2000
To date, the Company has not experienced any major computer system
problems or interruptions of its business related to Year 2000 issues. The
Company's Year 2000 remedial efforts cost approximately $510,000. This expense
excludes the costs of previously planned software implementations and the
salaries of existing employees involved in the Year 2000 remedial efforts. Costs
were expensed when incurred. Although the Company does not anticipate any
material future problems related to Year 2000 issues, there is no guarantee that
such problems will not arise in the future. The Company does, however, maintain
a comprehensive business continuity plan that addresses potential business
interruptions such as the occurrence of unidentified Year 2000 issues.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
With certain instruments entered into for other than trading purposes,
the Company has exposure to market risk for changes in interest rates primarily
related to the company's revolving and seasonal lines of credit and certain
lease obligations. Under these obligations, the Company has cash flow exposure
due to its variable interest rates.
The Company seeks to manage this interest rate risk through the use of
interest rate swaps. In 1999, the Company entered into interest rate swap
agreements totaling $200 million which are scheduled to be in place through
February 2001 at which time, the counterparties have the option to extend the
agreements through 2002. These swap agreements exchange the Company's floating
interest rate exposure to a fixed interest rate. The Company will pay a weighted
average fixed rate of 5.14% on the $200 million notional amount. The fair value
of the interest rate swap agreements was $3.1 million at January 28, 2000. These
swap agreements replaced four interest rate swap agreements totaling $200
million and exchanging floating rate exposure to a fixed interest rate. At
January 29, 1999, the fair market value of the interest rate swap agreements was
($8.9) million.
A 1% change in interest rates would have resulted in a pre-tax expense
fluctuation of approximately $3.6 million and $1.5 million in 1999 and 1998,
respectively. In 2000, the Company does not anticipate this expense fluctuation
to vary materially from the estimated impact on 1999.
14
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
January 28, 2000 January 29, 1999
---------------- ----------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 58,789 $ 22,294
Merchandise inventories 985,715 811,722
Deferred income taxes 5,995 2,523
Other current assets 45,036 42,378
- -------------------------------------------------------------------------------------------------
Total current assets 1,095,535 878,917
- -------------------------------------------------------------------------------------------------
Property and equipment, at cost:
Land 5,907 5,983
Buildings 32,807 47,687
Furniture, fixtures and equipment 558,823 474,568
- -------------------------------------------------------------------------------------------------
597,537 528,238
Less accumulated depreciation 251,064 201,830
- -------------------------------------------------------------------------------------------------
Net property and equipment 346,473 326,408
- -------------------------------------------------------------------------------------------------
Other assets 8,933 6,459
- -------------------------------------------------------------------------------------------------
Total assets $1,450,941 $1,211,784
=================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 1,233 725
Accounts payable 334,554 257,759
Accrued expenses 121,375 172,825
Income taxes 15,135 23,825
- -------------------------------------------------------------------------------------------------
Total current liabilities 472,297 455,134
- -------------------------------------------------------------------------------------------------
Long-term debt 1,200 786
- -------------------------------------------------------------------------------------------------
Deferred income taxes 51,523 30,103
- -------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Commitments and contingencies
Shareholders' equity:
Preferred stock, stated value $.50 per share:
Shares authorized: 1999 and 1998-10,000,000;
Issued: 1999-0; 1998-1,716,000; 0 858
Common stock, par value $.50 per share:
Shares authorized: 1999 and 1998-500,000,000;
Issued: 1999-264,692,000; 1998-210,242,000 132,346 105,121
Additional paid-in capital 255,581 418,039
Retained earnings 537,994 402,270
- -------------------------------------------------------------------------------------------------
925,921 926,288
Less treasury stock, at cost:
Shares: 1999-0; 1998-32,725,000 0 200,527
- -------------------------------------------------------------------------------------------------
Total shareholders' equity 925,921 725,761
- -------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $1,450,941 $1,211,784
=================================================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
15
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands except per share amounts)
For the years ended
January 28, 2000 January 29, 1999
January 30, 1998
% of % of % of
Net Net Net
Amount Sales Amount Sales Amount Sales
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net sales $3,887,964 100.0% $3,220,989 100.0% $2,627,325 100.0%
Cost of goods sold 2,790,173 71.8 2,315,112 71.9 1,885,190 71.8
- ------------------------------------------------------------------------------------------------------------------------------
Gross profit 1,097,791 28.2 905,877 28.1 742,135 28.3
Selling, general and
administrative 748,489 19.3 616,613 19.1 506,592 19.3
- ------------------------------------------------------------------------------------------------------------------------------
Operating profit 349,302 9.0 289,264 9.0 235,543 9.0
Interest expense 5,157 0.1 8,349 0.3 3,764 0.1
- ------------------------------------------------------------------------------------------------------------------------------
Income before taxes on
income 344,145 8.9 280,915 8.7 231,779 8.8
Provisions for taxes
on income 124,718 3.2 98,882 3.0 87,151 3.3
- ------------------------------------------------------------------------------------------------------------------------------
Net income $ 219,427 5.6% $ 182,033 5.7% $ 144,628 5.5%
==============================================================================================================================
Diluted earnings
per share $0.81 $0.68 $0.54
Weighted average diluted
shares (000) 269,570 268,399 267,954
Basic earnings per share $0.89 $0.81 $0.64
==============================================================================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
16
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the years ended January 28, 2000, January 29,
1999, and January 30, 1998
(Dollars in thousands, except per share amounts)
- -----------------------------------------------------------------------------------------------------------------------
Preferred Common Additional Retained Treasury
Stock Stock Paid-in Capital Earnings Stock Total
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balances, January 31, 1997 $ 858 $ 53,105 $ 329,948 $ 302,145 $(200,527) $485,529
Net income 144,628 144,628
5-for-4 stock split,
September 22, 1997 13,416 (13,416) 0
5-for-4 stock split,
March 23, 1998 16,705 (16,705) 0
Cash dividends,
$0.17 per common share (19,170)
(19,170)
Cash dividends, $1.90 per
preferred share (3,269) (3,269)
Issuance of common stock
under stock
incentive plans
(2,560,000 shares) 1,280 29,566 30,846
Tax benefit from exercise 19,855 19,855
of options
Repurchase of common
stock (1,991,000 shares) (995) (74,128) (75,123)
Transfer to employee
stock ownership plan
(30,000 common shares) 15 585 600
- -----------------------------------------------------------------------------------------------------------------------
Balances, January 30, 1998 $ 858 $ 83,526 $ 379,954 $ 320,085 $(200,527) $583,896
Net income 182,033 182,033
5-for-4 stock split,
September 21, 1998 21,090 (21,090) 0
Cash dividends,
$0.14 per common share (24,114) (24,114)
Cash dividends,
$2.04 per preferred share (3,497) (3,497)
Issuance of common stock
under stock
incentive plans
(2,976,000 shares) 1,488 27,523 29,011
Tax benefit from exercise
of options 30,913 30,913
Repurchase of common
stock (1,997,000 shares) (999) (72,237) (73,236)
Transfer to 401(k) Plan
(32,000 common shares) 16 739 755
- -----------------------------------------------------------------------------------------------------------------------
Balances, January 29, 1999 $ 858 $105,121 $ 418,039 $ 402,270 $(200,527) $725,761
Net income 219,427 219,427
5-for-4 stock split,
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
May 24, 1999 26,573 (26,573) 0
Cash dividends,
$0.13 per common share (32,879) (32,879)
Cash dividends,
$0.69 per preferred share (1,178) (1,178)
Issuance of common stock
under stock
incentive plans
(3,518,000 shares) 1,759 34,027 35,786
Tax benefit from exercise
of options 29,757 29,757
Convert preferred to common
(40,906,000 common shares) (858) (199,669) 200,527 0
Repurchase of common
stock (2,213,000 shares) (1,107) (49,646) (50,753)
- -----------------------------------------------------------------------------------------------------------------------
Balances, January 28, 2000 $ 0 $132,346 $ 255,581 $ 537,994 $ 0 $925,921
=======================================================================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
17
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
For the years ended
--------------------------------------------------
January 28, January 29, January 30,
2000 1999 1998
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $219,427 $182,033 $144,628
Adjustments to reconcile net income to
net cash provided by
operating activities:
Depreciation and amortization 63,944 53,112 38,734
Deferred income taxes 17,948 11,386 14,312
Change in operating assets and liabilities:
Merchandise inventories (173,993) (179,768) (155,851)
Other current assets (2,658) (20,494) (3,640)
Accounts payable 76,795 77,801 76,435
Accrued expenses (51,450) 80,798 21,586
Income taxes (8,690) 11,482 2,341
Other (966) 2,260 574
- --------------------------------------------------------------------------------------------------------------------------
Net cash provided by
operating activities 140,357 218,610 139,119
- --------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchase of property and equipment (152,738) (140,332) (107,700)
Proceeds from sale of property and
equipment 67,221 222 33,811
- --------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (85,517) (140,110) (73,889)
- --------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Issuance of short-term borrowings 218,865 290,647 157,592
Repayments of short-term borrowings (218,865) (312,580) (174,128)
Issuance of long-term debt 3,104 1,240 190
Repayments of long-term debt (2,182) (2,473) (2,058)
Payment of cash dividends (34,057) (27,611) (22,440)
Proceeds from exercise of stock
options 35,786 29,011 30,847
Repurchase of common stock (50,753) (73,236) (75,123)
Tax benefit from stock option
exercises 29,757 30,913 19,855
Other 0 755 600
- --------------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (18,345) (63,334) (64,665)
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Net increase in cash and
cash equivalents 36,495 15,166 565
Cash and cash equivalents, beginning of year 22,294 7,128 6,563
- --------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year $ 58,789 $ 22,294 $ 7,128
==========================================================================================================================
Supplemental cash flow information Cash paid during year for:
Interest $ 7,452 $ 9,275 $ 4,608
Income taxes $ 84,759 $ 46,439 $ 50,831
==========================================================================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
18
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Accounting Policies:
The Company sells general merchandise on a retail basis through 4,294
stores (as of January 28, 2000), located predominantly in small towns
in the midwestern and southeastern United States. The Company has DCs
in Scottsville, Kentucky; Homerville, Georgia; Ardmore, Oklahoma; South
Boston, Virginia; Indianola, Mississippi; Villa Rica, Georgia; Fulton,
Missouri; Alachua, Florida (under development) and Zanesville, Ohio
(under development).
Basis of presentation
The Company's fiscal year ends on the Friday closest to January 31. The
consolidated financial statements include all subsidiaries.
Inter-company transactions have been eliminated. Certain
reclassifications have been made to the 1998 and 1997 financial
statements to agree to the 1999 presentation.
Cash and cash equivalents
Cash and cash equivalents include highly liquid investments with
original maturities of three months or less when purchased.
Inventories
Inventories are stated at cost using the retail last-in, first-out
("LIFO") method which is not in excess of market. The excess of current
cost over LIFO cost was $15.2 million, $15.0 million and $16.4 million
at January 28, 2000, January 29, 1999 and January 30, 1998,
respectively. LIFO reserves increased by $0.2 million in 1999 but
decreased $1.4 million in 1998 and $2.0 million in 1997.
Pre-opening costs
Pre-opening costs for new stores are expensed as incurred.
Property and equipment
Property and equipment are recorded at cost. The Company provides for
depreciation of buildings and equipment on a straight-line basis over
the following estimated useful lives: 40 years for buildings; 3 to 10
years for furniture, fixtures and equipment. Depreciation expense was
$63.4 million, $52.9 million and $38.5 million in 1999, 1998 and 1997,
respectively.
Insurance claims provisions
In 1996, the Company established The Greater Cumberland Insurance
Company, a Vermont-based, wholly-owned subsidiary captive insurance
company. This insurance company charges Dollar General's subsidiary
companies competitive premium rates to insure workers' compensation and
non-property general liability claims risk. The insurance company
currently insures no unrelated third-party risk.
The Company retains a significant portion of the risk for its workers'
compensation, employee health insurance, general liability, property,
and automobile coverages. Accordingly, provisions are made for the
Company's actuarially determined estimates of discounted future claim
costs for such risks. To the extent that subsequent claim costs vary
from those estimates, current earnings are charged or credited.
Derivative financial instruments
On July 16, 1999, the Company replaced its existing interest rate swap
agreements with $200 million in interest rate swap agreements. These
agreements contain provisions to extend the agreements to September
2002, which can be exercised at the option of the counterparties in
February 2001. The Company will pay a weighted average fixed rate of
5.14% on the $200 million notional amount. All outstanding interest
rate swap agreements have been designated as hedges of the Company's
floating rate commitments under operating leases. The Company
recognizes floating rate interest differentials as adjustments to
expense in the period they occur. Gains and losses on terminations of
interest rate swap agreements are deferred and amortized to expense
19
<PAGE>
over the shorter of the original term of the agreements or the
remaining life of the associated outstanding commitment. The
counterparties to these instruments are major financial institutions.
These counterparties expose the Company to credit risk in the event of
non-performance; however, the Company does not anticipate
non-performance by the other parties. The fair value of the Company's
interest rate swap agreements is based on dealer quotes. These values
represent the amounts the Company would receive or pay to terminate the
agreements taking into consideration current interest rates. The fair
value of the interest rate swap agreements was $3.1 million at January
28, 2000. The Company does not hold or issue derivative financial
instruments for trading purposes.
Income taxes
The Company reports income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes." Under SFAS No. 109, the asset and
liability method is used for computing future income tax consequences
of events which have been recognized in the Company's consolidated
financial statements or income tax returns. Deferred income tax expense
or benefit is the change during the year in the Company's deferred
income tax assets and liabilities.
Management estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the consolidated financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Accounting pronouncements
The Company will adopt Statement of Financial Accounting Standards
(SFAS) No. 133, "Accounting for Derivative Instruments and Hedging
Activities," for the fiscal year ending February 1, 2002. The Company
is in the process of analyzing the impact of the adoption of this
Statement.
2. Cash and Short-term Borrowings:
The cash management system provides for daily investment of available
balances and the funding of outstanding checks when presented for
payment. Outstanding but unpresented checks totaling $127.5 million and
$125.3 million at January 28, 2000, and January 29, 1999, respectively,
have been included in accounts payable. Upon presentation for payment,
they will be funded through available cash balances or the Company's
revolving credit agreement (the "revolver").
The Company had seasonal lines of credit with banks totaling $105.0
million at January 28, 2000, and $165.0 million at January 29, 1999.
The lines are subject to periodic review by the lending institutions
which may increase or decrease the amounts available. There were no
borrowings outstanding under these lines of credit at January 28, 2000
and January 29, 1999. The Company also has a $175.0 million revolver
which expires in September 2002. There were no borrowings outstanding
under the revolver at January 28, 2000 and January 29, 1999.
The weighted average interest rates for all short-term borrowings were
5.7% and 5.5% for 1999 and 1998, respectively. The revolver contains
certain restrictive covenants. At January 28, 2000, the Company was in
compliance with all such covenants.
At January 28, 2000, and January 29, 1999, the Company had outstanding
letters of credit totaling $53.6 million and $101.1 million,
respectively.
20
<PAGE>
3. Accrued Expenses:
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
(In thousands) 1999 1998
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Compensation and benefits $ 42,778 $ 34,766
Insurance 32,429 29,069
Taxes (other than taxes on income) 12,473 8,758
Rent 8,046 8,725
Dividends 8,467 6,615
Freight and other 17,182 16,941
Advance on sale/leaseback transactions 0 67,951
- ----------------------------------------------------------------------------------------------------------------------
Total accrued expenses $121,375 $172,825
======================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
4. Income Taxes:
The provisions for income taxes consist of the following:
(In thousands) 1999 1998 1997
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Currently payable:
Federal $105,397 $85,333 $68,177
State 1,373 2,163 4,662
- -------------------------------------------------------------------------------------------------------------------------
Total currently payable 106,770 87,496 72,839
- -------------------------------------------------------------------------------------------------------------------------
Deferred:
Federal 16,752 10,631 13,503
State 1,196 755 809
- -------------------------------------------------------------------------------------------------------------------------
Total deferred 17,948 11,386 14,312
- -------------------------------------------------------------------------------------------------------------------------
Total provision $124,718 $98,882 $87,151
=========================================================================================================================
</TABLE>
Deferred tax expense is recognized for the future tax consequences of
temporary differences between the amounts reported in the Company's
financial statements and the tax basis of its assets and liabilities.
Differences giving rise to the Company's deferred tax assets and
liabilities are as follows:
<PAGE>
<TABLE>
<CAPTION>
1999 1998
(In thousands) Assets Liabilities Assets Liabilities
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Amortization $ 0 $ 1,569 $ 0 $ 673
Inventories 0 2,398 0 4,334
Accrued insurance 2,476 0 1,957 0
Deferred compensation 2,684 0 0 0
Tax method changes 0 8,202 0 0
Property and equipment 0 39,354 0 24,847
Other 835 0 566 249
- ------------------------------------------------------------------------------------------------------------------------
Total deferred taxes $ 5,995 $ 51,523 $2,523 $30,103
========================================================================================================================
</TABLE>
21
<PAGE>
Reconciliation of the federal statutory rate and the effective income tax rate
follows:
<TABLE>
<CAPTION>
1999 1998 1997
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal statutory rate 35.0% 35.0% 35.0%
State income taxes, net of federal
income tax benefit 1.5 0.8 2.7
Tax credits (0.3) (0.2) (0.1)
Other 0.0 (0.4) 0.0
- -----------------------------------------------------------------------------------------------------------------------
Effective income tax rate 36.2% 35.2% 37.6%
=======================================================================================================================
</TABLE>
5. Earnings Per Share:
Amounts are in thousands except per share data, and shares have been
adjusted to give retroactive effect to all common stock splits.
<TABLE>
<CAPTION>
1999
Per-Share
Income Shares Amount
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income $219,427
Less: preferred stock dividends 1,178
- -------------------------------------------------------------------------------------------------------
Basic earnings per share
Income available to common shareholders 218,249 244,019 $0.89
=====
Stock options outstanding 5,098
Convertible preferred stock 1,178 20,453
- -------------------------------------------------------------------------------------------------------
Diluted earnings per share
Income available to common shareholders
plus assumed conversions $219,427 269,570 $0.81
=====
=======================================================================================================
1998
Per-Share
Income Shares Amount
- ------------------------------------------------------------------------------------------------------------------------
Net income $182,033
Less: preferred stock dividends 3,497
- -------------------------------------------------------------------------------------------------------
Basic earnings per share
Income available to common shareholders 178,536 221,057 $0.81
=====
Stock options outstanding 6,436
Convertible preferred stock 3,497 40,906
- -------------------------------------------------------------------------------------------------------
Diluted earnings per share
Income available to common shareholders
plus assumed conversions $182,033 268,399 $0.68
=====
=======================================================================================================
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
1997
Per-Share
Income Shares Amount
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income $144,628
Less: preferred stock dividends 3,269
- -------------------------------------------------------------------------------------------------------
Basic earnings per share
Income available to common shareholders 141,359 220,625 $0.64
=====
Stock options outstanding 6,423
Convertible preferred stock 3,269 40,906
- -------------------------------------------------------------------------------------------------------
Diluted earnings per share
Income available to common shareholders
plus assumed conversions $144,628 267,954 $0.54
=====
=======================================================================================================
</TABLE>
Basic earnings per share was computed by dividing income available to
common shareholders by the weighted average number of shares of common
stock outstanding during the year. Diluted earnings per share was
determined based on the assumption that the convertible preferred stock
was converted upon issuance on August 22, 1994.
6. Commitments and Contingencies:
At January 28, 2000, the Company and certain subsidiaries were
committed for retail store, DC and administrative office space in the
following fiscal years under non-cancelable operating lease agreements
requiring minimum annual rental payments of (in millions): $149.5 in
2000; $129.1 in 2001; $111.1 in 2002; $64.0 in 2003; $50.1 in 2004 and
$181.8 in later fiscal years. Most of these leases include renewal
options for periods ranging from two to five years and provisions for
contingent rentals based upon a percentage of defined sales volume.
Certain leases contain restrictive covenants. At January 28, 2000, the
Company was in compliance with such covenants.
Rent expense under all operating leases was as follows:
(In thousands) 1999 1998 1997
-----------------------------------------------------------------------
Minimum rentals $135,703 $101,235 $71,694
Contingent rentals 13,646 13,658 12,342
-----------------------------------------------------------------------
Total rentals $149,349 $114,893 $84,036
=======================================================================
Included in the leases above, the Company leases its corporate
headquarters, certain DCs and a number of store locations under
operating leases which contain a residual value guarantees of $351.4
<PAGE>
million. Lease payments are based on variable interest rates. The
Company had $285.0 million in facilities at January 28, 2000, and
January 29, 1999, available for the issuance of trade letters of
credit.
The Company was involved in litigation, investigations of a routine
nature and various legal matters during 1999, which are being defended
and handled in the ordinary course of business. While the ultimate
results of these matters cannot be determined or predicted, management
believes that they will not have a material adverse affect on the
Company's results of operations or financial position.
7. Employee Benefits:
Through December 31, 1997, the Company had two noncontributory defined
contribution retirement plans covering substantially all full-time
employees. Expense for these plans was approximately $4.9 million in
1997.
Effective January 1, 1998, the Company established a 401(k) savings and
retirement plan that replaced the previous defined contribution plans.
The assets of the defined contribution plans were merged into the new
401(k) plan. All employees who have completed 12 months of service and
reached age 21 are eligible to participate in the plan. Under the plan,
23
<PAGE>
employees can make contributions up to 15% of their annual
compensation. Employee contributions, up to 6% of annual compensation,
are matched by the Company at the rate of $0.50 on the dollar. The
Company also contributes annually to the plan an amount equal to 2% of
each employee's annual compensation. Expense for this plan was
approximately $6.3 million in 1999 and $4.8 million in 1998.
Effective January 1, 1998, the Company also established a supplemental
retirement plan and a compensation deferral plan for highly compensated
employees. The supplemental retirement plan is a noncontributory
defined contribution plan with annual Company contributions ranging
from 2% to 12% of base pay plus bonus depending upon age plus years of
service and salary level. Under the compensation deferral plan
participants may defer up to 50% of base pay and 100% of bonus pay,
reduced by any deferral to the 401(k) plan. Expense for these plans was
approximately $1.0 million in 1999 and $0.4 million in 1998.
8. Capital Stock:
The authorized capital stock of the Company consists of common stock
and preferred stock. In June 1998, the Company increased the authorized
shares of common stock to 500,000,000 shares and the authorized shares
of preferred stock to 10,000,000 shares.
In 1994, the Company exchanged 1,715,742 shares of Series A Convertible
Junior Preferred Stock for the 8,578,710 shares of Dollar General
common stock owned by C.T.S., Inc., a personal holding Company
controlled by members of the Turner family, the founders of Dollar
General. The Series A Convertible Junior Preferred Stock was authorized
by the Board of Directors out of the authorized but unissued preferred
stock approved by the Company's shareholders in 1992. On August 23,
1999, the holders of all of the Company's 1.7 million shares of Series
A Convertible Junior Preferred Stock converted their shares to 40.9
million shares of Dollar General Common Stock in accordance with the
relevant provisions of the Company's charter. Consequently, preferred
stock and treasury stock balances were reduced to zero. This was a
non-cash transaction.
The Company has a Shareholder Rights Plan (the "Plan") under which
Series B Junior Participating Preferred Stock Purchase Rights (the
"Rights") were issued for each outstanding share of common stock. The
Rights were attached to all common stock outstanding as of March 10,
2000, and will be attached to all additional shares of common stock
issued prior to the Plan's expiration on February 28, 2010, or such
earlier termination, if applicable. The Rights entitle the holders to
purchase from the Company one one-hundredth of a share (a "Unit") of
Series B Junior Participating Preferred Stock (the "Preferred Stock"),
no par value, at a purchase price of $100 per Unit, subject to
adjustment. Initially, the Rights will attach to all certificates
representing shares of outstanding Common Stock, and no separate Rights
Certificates will be distributed. The Rights will become exercisable
upon the occurrence of a triggering event as defined in the Plan.
9. Stock Incentive Plans:
The Company has established stock incentive plans under which options
to purchase common stock may be granted to executive officers,
directors and key employees.
<PAGE>
All options granted in 1999, 1998 and 1997, under the 1998 Stock
Incentive Plan, the 1995 Employee Stock Incentive Plan, the 1993
Employee Stock Incentive Plan and the 1995 Outside Directors Stock
Option Plan, were non-qualified stock options issued at a price equal
to the fair market value of the Company's common stock on the date of
grant. Non-qualified options granted under these plans have an
expiration date of no later than ten years following the date of grant
and have a vesting period of no less than one year.
Under the plans, grants are made to key management employees ranging
from executive officers to store managers and assistant store managers,
as well as other employees as prescribed by the Company's Corporate
Governance and Compensation Committee of the Board of Directors. The
number of options granted and vesting schedules are directly linked to
the employee's performance and position within the Company.
The plans also provide for annual grants to non-employee directors
according to a non-discretionary formula. The number of shares granted
is dependent upon current director compensation levels and the market
price of the stock.
24
<PAGE>
The Company applies APB Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations in accounting for its plans.
The exercise price of options awarded under these plans has been equal
to the fair market value of the underlying common stock on the date of
grant. Accordingly, no compensation expense has been recognized for its
stock-based compensation plans. Had compensation cost for the Company's
stock-based compensation plans been determined based on the fair value
at the grant date for awards under these plans consistent with the
methodology prescribed under SFAS No. 123, "Accounting for Stock-Based
Compensation," net income and earnings per share would have been
reduced to the pro forma amounts indicated in the following table.
(Amounts in thousands except per share data) 1999 1998 1997
- --------------------------------------------------------------------------------
Net income - as reported $219,427 $182,033 $144,628
Net income - pro forma $196,869 $166,553 $138,262
- --------------------------------------------------------------------------------
Earnings per share - as reported
Basic $.89 $.81 $.64
Diluted $.81 $.68 $.54
Earnings per share - pro forma
Basic $.80 $.74 $.62
Diluted $.73 $.62 $.52
- --------------------------------------------------------------------------------
Earnings per share have been adjusted to give retroactive effect to all
common stock splits.
The pro forma effects on net income for 1999, 1998 and 1997 are not
representative of the pro forma effect on net income in future years
because they do not take into consideration pro forma compensation
expense related to grants made prior to 1996. The fair value of options
granted during 1999, 1998, and 1997 is $11.55, $9.69, and $6.04,
respectively.
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following
assumptions:
1999 1998 1997
- --------------------------------------------------------------------------------
Expected dividend yield 0.7% 0.7% 0.7%
Expected stock price volatility 48.0% 48.0% 40.0%
Weighted average risk-free interest rate 5.3% 5.5% 6.2%
Expected life of options (years) 4.5 3.0 3.0
- --------------------------------------------------------------------------------
25
<PAGE>
A summary of the balances and activity for all the Company's stock
incentive plans for the last three fiscal years is presented below:
Shares Weighted Average
Under Plans Exercise Price
-----------------------------------------------------------------------
Balance, January 31, 1997 22,391,079 $ 5.63
Granted 5,014,404 14.71
Exercised (6,017,063) 5.10
Canceled (1,324,374) 8.02
-----------------------------------------------------------------------
Balance, January 30, 1998 20,064,046 8.31
Granted 4,940,669 19.70
Exercised (4,573,573) 6.62
Canceled (1,508,614) 13.27
-----------------------------------------------------------------------
Balance, January 29, 1999 18,922,528 11.36
Granted 4,627,834 26.52
Exercised (4,297,405) 8.03
Canceled (1,046,328) 15.47
-----------------------------------------------------------------------
Balance, January 28, 2000 18,206,629 $15.73
=======================================================================
The following table summarizes information about stock options
outstanding at January 28, 2000:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------------------- ----------------------------
Weighted Average Weighted
Range of Number Remaining Weighted Average Number Exercise
Exercise Prices Outstanding Contractual Life Exercise Price Exercisable Price
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 0.62 - $10.00 6,190,984 4.5 $ 5.83 4,689,872 $ 6.46
$10.01 - $20.00 6,684,916 7.7 16.69 4,876,150 16.10
$20.01 - $29.88 5,330,729 9.1 26.03 249,579 23.58
-----------------------------------------------------------------------------------------------------------------
$ 0.62 - $29.88 18,206,629 7.0 $15.73 9,815,601 $11.68
=================================================================================================================
</TABLE>
At January 28, 2000, there were 10,514,504 shares available for
granting of stock options under the Company's stock option plans.
10. SEGMENT REPORTING
The Company manages its business on the basis of one reportable
segment. See Note 1 for a brief description of the Company's business.
As of January 28, 2000, all of the Company's operations were located
within the United States. The following data is presented in accordance
with SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information."
<PAGE>
- --------------------------------------------------------------------------------
(In thousands) 1999 1998 1997
- --------------------------------------------------------------------------------
Classes of similar products:
Net Sales:
Hardlines $3,193,626 $2,627,304 $2,149,528
Softlines 694,338 593,685 477,797
- --------------------------------------------------------------------------------
Total net sales $3,887,964 $3,220,989 $2,627,325
- --------------------------------------------------------------------------------
26
<PAGE>
11. QUARTERLY FINANCIAL DATA (UNAUDITED):
The following is selected unaudited quarterly financial data for the
fiscal years ended January 28, 2000, and January 29, 1999. Amounts are
in thousands except per share data. Per share data has been adjusted
for all common stock splits.
<TABLE>
<CAPTION>
Quarter First Second Third Fourth Year
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1999:
Net sales $844,593 $915,210 $950,419 $1,177,742 $3,887,964
Gross profit 225,947 249,582 277,857 344,405 1,097,791
Net income 36,348 41,615 50,859 90,605 219,427
Diluted earnings
per share $ 0.14 $ 0.15 $ 0.19 $ 0.34 $ 0.81
Basic earnings
per share $ 0.16 $ 0.19 $ 0.19 $ 0.34 $ 0.89
- -------------------------------------------------------------------------------------------------------------------------
1998:
Net sales $705,260 $741,355 $781,389 $992,985 $3,220,989
Gross profit 190,332 205,481 224,734 285,330 905,877
Net income 30,404 33,288 40,338 78,003 182,033
Diluted earnings
per share $ 0.11 $ 0.12 $ 0.15 $ 0.29 $ 0.68
Basic earnings
per share $ 0.13 $ 0.15 $ 0.18 $ 0.35 $ 0.81
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL DISCLOSURE
Not Applicable
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding the Company's directors is incorporated by
reference from the information contained under the captions, "Election of
Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance," in the
Company's Proxy Statement relating to the Annual Meeting of Shareholders to be
held on June 5, 2000. Information regarding the Company's executive officers is
contained in Part I of this Report as required by General Instruction G(3).
ITEM 11. EXECUTIVE COMPENSATION
Information regarding executive compensation is incorporated by
reference from the information contained under the captions "Executive
Compensation" and "Election of Directors - Compensation of Directors" in the
Company's Proxy Statement relating to the Annual Meeting of Shareholders to be
held on June 5, 2000.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
This information is incorporated by reference from the information
contained under the captions "Security Ownership of Certain Beneficial Owners"
and "Security Ownership by Officers and Directors" in the Company's Proxy
Statement relating to the Annual Meeting of Shareholders to be held on June 5,
2000.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
This information is incorporated by reference from the information
contained under the caption "Transactions with Management and Others" in the
Company's Proxy Statement relating to the Annual Meeting of Shareholders to be
held on June 5, 2000.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) Consolidated Financial Statements: See Item 8.
(2) All schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange
Commission are not required under the related instructions,
are inapplicable or the information is included in the
Consolidated Financial Statements, and therefore, have been
omitted.
(3) Exhibits: See Index to exhibits immediately following the
signature page.
(b) No report on Form 8-K was filed by the Company during the
quarter ended January 28, 2000.
28
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
DOLLAR GENERAL CORPORATION
Date: April 27, 2000 By: /S/ Cal Turner, Jr.
-------------------
CAL TURNER, JR., CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
- ---- ----- ----
<S> <C> <C>
/s/ Cal Turner, Jr. Chairman and April 27, 2000
- -------------------
CAL TURNER, JR. Chief Executive Officer
(Principal Executive Officer)
/s/ Brian Burr Executive Vice President and April 27, 2000
- --------------
BRIAN BURR Chief Financial Officer
(Principal Financial and Accounting Officer)
/s/ Dennis C. Bottorff Director April 27, 2000
- ----------------------
DENNIS C. BOTTORFF
/s/ James L. Clayton Director April 27, 2000
- --------------------
JAMES L. CLAYTON
/s/ Reginald D. Dickson Director April 27, 2000
- -----------------------
REGINALD D. DICKSON
/s/ John B. Holland Director April 27, 2000
- -------------------
JOHN B. HOLLAND
/s/ Barbara M. Knuckles Director April 27, 2000
- -----------------------
BARBARA M. KNUCKLES
/s/ Cal Turner Director April 27, 2000
- --------------
CAL TURNER
/s/ David M. Wilds Director April 27, 2000
- ------------------
DAVID M. WILDS
/s/ William S. Wire, II Director April 27, 2000
- -----------------------
WILLIAM S. WIRE, II
</TABLE>
29
<PAGE>
INDEX TO EXHIBITS
3.1 Restated Charter (incorporated by reference to the Company's
Current Report on Form 8-K filed February 29, 2000).
3.2 Bylaws (incorporated by reference to the Company's Proxy Statement
for the June 1, 1998 Annual Meeting).
4.1 Sections 7, 8, 9, 10 and 12 of the Company's Restated Charter
(included in Exhibit 3.1).
4.2 Rights Agreement dated as of February 29, 2000, between Dollar
General Corporation and Registrar and Transfer Company
(incorporated by reference to the Company's Current Report on Form
8-K filed February 29, 2000).
10.1 Master Agreement, dated as of June 11, 1999, by and among Dollar
General Corporation, Certain Subsidiaries of Dollar General
Corporation, Atlantic Financial Group, Ltd., Three Pillars Funding
Corporation, Certain Financial Institutions Parties Hereto,
SunTrust Bank, Nashville N.A., First Union National Bank, Bank of
American National Trust and Savings Bank, The First National Bank
of Chicago and Wachovia Bank, N.A. and SunTrust Equitable
Securities Corporation (incorporated by reference to the Company's
Amended Quarterly Report for the quarter ended July 30, 1999
on Form 10-Q/A filed April 25, 2000).
10.2 Master Lease Agreement, dated as of June 11, 1999, between
Atlantic Financial Group, Ltd. and Dollar General Corporation and
Certain Subsidiaries of Dollar General Corporation (incorporated
by reference to the Company's Amended Quarterly Report for the
quarter ended July 30, 1999 on Form 10-Q/A filed April 25, 2000).
10.3 Guaranty Agreement dated as of June 11, 1999, by Dollar General
Corporation (incorporated by reference to the Company's Amended
Quarterly Report for the quarter ended July 30, 1999 on Form
10-Q/A filed April 25, 2000).
10.4 Subsidiary Guarantee dated as of June 11, 1999, by Dolgencorp,
Inc., Dolgencorp of Texas, Inc., Dade Lease Management, Inc.,
Dollar General Financial, Inc. and Dollar General Partners
(incorporated by reference to the Company's Amended Quarterly
Report for the quarter ended July 30, on Form 10-Q/A filed
April 25, 2000).
10.5 Credit Agreement dated as of September 2, 1997 by and among Dollar
General Corporation and SunTrust Bank, Nashville, N.A.
(incorporated by reference to the Company's Quarterly Report on
Form 10-Q for the quarter ended October 31, 1997).
10.6 Master Agreement dated as of September 2, 1997 by and among Dollar
General Corporation, Certain Subsidiaries of Dollar General
Corporation, Atlantic Financial Group, Ltd., Certain Financial
Institutions Parties hereto at SunTrust Bank, Nashville, N.A.
(incorporated by reference to the Company's Quarterly Report on
Form 10-Q for the quarter ended October 31, 1997).
10.7 Registration Rights Agreement dated as of August 22, 1994, by and
among Dollar General Corporation, Turner Children Trust dated
January 21, 1980, Cal Turner, Jr., James Stephen Turner, Laura
Turner Dugas and Elizabeth Turner Campbell (incorporated by
reference to the Company's Current Report on Form 8-K dated August
22, 1994).
MANAGEMENT CONTRACT OR COMPENSATORY PLANS
10.9 Dollar General Corporation 1988 Outside Directors' Stock Option
Plan, as amended, (incorporated herein by reference to the
Company's Proxy Statement for the June 3, 1996, Annual Meeting of
Stockholders).
10.10 Dollar General Corporation 1989 Employee Stock Incentive Plan, as
amended (incorporated by reference to the Company's Proxy
Statement for the June 13, 1989, Annual Meeting of Stockholders).
31
<PAGE>
10.11 1993 Employee Stock Incentive Plan (incorporated herein by
reference to the Company's Proxy Statement for the June 7, 1993,
Annual Meeting of Stockholders).
10.12 1993 Outside Directors Stock Option Plan (incorporated herein by
reference to the Company's Proxy Statement for the June 7, 1993,
Annual Meeting of Stockholders).
10.13 1995 Employee Stock Incentive Plan (incorporated herein by
reference to the Company's Proxy Statement for the June 5, 1995,
Annual Meeting of Stockholders).
10.14 1995 Outside Directors Stock Option Plan (incorporated herein by
reference to the Company's Proxy Statement for the June 5, 1995,
Annual Meeting of Stockholders).
10.15 1998 Stock Incentive Plan (incorporated herein by reference to the
Company's Proxy Statement for the June 1, 1998, Annual Meeting of
Shareholders).
10.16 Dollar General Corporation Supplemental Executive Retirement Plan
and Compensation Deferral Plan (incorporated by reference to the
Company's Registration Statement on Form S-8 filed December 21,
1999).
21 Subsidiaries of the Registrant
23 Consent of Deloitte & Touche LLP
27 Financial Data Schedule
EXHIBIT 23
Nashville, Tennessee
February 22, 2000
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
333-51589, 333-51591, 333-00141, 333-09448, 333-65789 and 333-93309 of
Dollar General Corporation on Form S-8 and Registration Statement Nos.
333-50541 and 333-80655 of Dollar General Corporation on Form S-3 of our
report dated February 22, 2000, appearing in this Annual Report on Form 10-K
of Dollar General Corporation for the year ended January 28, 2000.
Nashville, Tennessee
April 27, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> JAN-28-2000 JAN-29-1999
<PERIOD-END> JAN-28-2000 JAN-29-1999
<CASH> 58,789 22,294
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 985,715 811,722
<CURRENT-ASSETS> 1,095,535 878,917
<PP&E> 597,537 528,238
<DEPRECIATION> 251,064 201,830
<TOTAL-ASSETS> 1,450,941 1,211,784
<CURRENT-LIABILITIES> 472,297 455,134
<BONDS> 0 0
<COMMON> 132,346 105,121
0 0
0 858
<OTHER-SE> 793,575 619,782
<TOTAL-LIABILITY-AND-EQUITY> 1,450,941 1,211,784
<SALES> 3,887,964 3,220,989
<TOTAL-REVENUES> 3,887,964 3,220,989
<CGS> 2,790,173 2,315,112
<TOTAL-COSTS> 748,489 616,613
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 5,157 8,349
<INCOME-PRETAX> 344,145 280,915
<INCOME-TAX> 124,718 98,882
<INCOME-CONTINUING> 219,427 182,033
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 219,427 182,033
<EPS-BASIC> 0.89 0.81
<EPS-DILUTED> 0.81 0.68
</TABLE>
