8-K/AOther Events

DOLLAR GENERAL CORP 8-K/A Report (Oct 9, 2001)

Filed October 9, 2001For Securities:DG

Summary

This Form 8-K/A filing by Dollar General Corporation (DG) on October 9, 2001, is an amendment to a prior filing concerning significant changes in its independent auditors. The company initially dismissed Deloitte & Touche LLP on September 14, 2001, and subsequently retained PricewaterhouseCoopers LLP. However, PricewaterhouseCoopers resigned on September 20, 2001, due to an "irreconcilable conflict of interest" that was previously unknown and unrelated to any specific accounting issues discussed with Dollar General. Following these events, Ernst & Young LLP was retained as the new independent accountant on October 5, 2001. Furthermore, the filing discloses that Dollar General intends to restate its financial statements for fiscal years 1998 and 1999, and revise prior unaudited information for fiscal year 2000. This restatement is due to a re-evaluation of the accounting treatment for certain "synthetic lease facilities," which were previously treated as operating leases but will now be accounted for as capital leases. Deloitte, the former auditor, had expressed concerns that it had not received sufficient information to confirm the prior treatment was an error. The company has also acknowledged that Deloitte indicated that certain issues it discovered may have included "illegal acts" and could materially impact previously issued audit reports.

Key Highlights

  • 1Dollar General Corporation has changed its independent auditor three times in a short period: dismissing Deloitte & Touche LLP, seeing PricewaterhouseCoopers LLP resign, and finally retaining Ernst & Young LLP.
  • 2PricewaterhouseCoopers resigned due to an "irreconcilable conflict of interest," a reason not fully disclosed or understood by Dollar General's Audit Committee or Board.
  • 3The company will restate its financial statements for fiscal years 1998 and 1999, and revise unaudited 2000 financial information.
  • 4The restatement is necessitated by a change in accounting treatment for certain synthetic leases, reclassifying them from operating leases to capital leases.
  • 5Deloitte, the former auditor, noted it had not received sufficient information to confirm the previous accounting treatment of synthetic leases was erroneous.
  • 6Deloitte informed the company that issues discovered may involve "illegal acts" and could materially affect the fairness of previously issued audit reports.
  • 7The Audit Committee is investigating these accounting issues with the assistance of outside counsel and Arthur Andersen LLP.

Frequently Asked Questions

Dollar General initially dismissed Deloitte & Touche LLP. They then hired PricewaterhouseCoopers LLP, but this firm resigned shortly after due to an undisclosed "irreconcilable conflict of interest." Subsequently, Dollar General retained Ernst & Young LLP as its new independent auditor.

The company will restate its financial statements for fiscal years 1998 and 1999, and revise prior year 2000 unaudited financial information. This indicates a material correction to previously reported financial performance and position, which could impact investor confidence and financial analysis.

Synthetic leases are a complex financing structure. Dollar General previously treated approximately 400 store leases, distribution centers, and its corporate headquarters under these agreements as operating leases. The company, after consulting with KPMG LLP and PricewaterhouseCoopers LLP, has determined this was an error and will now account for them as capital leases. This reclassification can affect the balance sheet by increasing assets and liabilities.

Deloitte informed Dollar General that certain discovered issues may constitute 'illegal acts' as defined by the Securities Exchange Act of 1934. Deloitte also indicated these issues could materially impact the reliability of its previous audit reports and that it was unable to further investigate due to its dismissal. The Audit Committee is investigating these matters.