Dollar General Reports Earnings for the Third Quarter of 2002

GOODLETTSVILLE, Tenn., Nov. 26 /PRNewswire-FirstCall/ -- Dollar General Corporation (NYSE: DG) today reported net income for the third quarter of fiscal 2002 of $68.6 million, or $0.20 per diluted share, an increase of 46.7 percent compared to net income of $46.7 million, or $0.14 per diluted share, in the third quarter of fiscal 2001. In the third quarter of 2002, the Company recorded approximately $24.3 million of net restatement-related pre- tax income, primarily from insurance proceeds. In the third quarter of 2001, the Company incurred restatement-related expenses of $9.3 million. Excluding the restatement-related items from both years, net income during the current year third quarter was $53.2 million, or $0.16 per diluted share, compared to net income of $52.5 million, or $0.16 per diluted share, in the comparable prior year quarter.

Net sales during the third quarter increased 14.4 percent to $1.50 billion compared to $1.31 billion in the third quarter of 2001. The increase resulted primarily from 591 net new stores and a same-store sales increase of 5.2 percent. Gross profit during the quarter was $428.6 million, or 28.6 percent of sales versus $381.2 million, or 29.1 percent of sales during the comparable period in the prior year. Excluding the restatement-related items noted above, selling, general and administrative expenses for the quarter were $334.4 million, or 22.3 percent of sales, in the current year, versus $285.8 million, or 21.8 percent of sales, in the prior year.

Net income for the 39-week year-to-date period was $156.9 million in fiscal 2002, or $0.47 per diluted share, compared to $110.1 million, or $0.33 per diluted share, as of the third quarter of fiscal 2001. Excluding net restatement-related items from both years, year-to-date net income increased 16.5 percent to $141.6 million, or $0.42 per diluted share, in fiscal 2002 compared to net income of $121.5 million, or $0.36 per diluted share, in the comparable prior year period. Year-to-date net sales increased 16.2 percent, including a same-store sales increase of 7.2 percent.

"We have made progress in implementing our operational initiatives to improve store level execution and customer service," said Don Shaffer, Acting CEO, President and COO. "We are particularly pleased with the success of our inventory management initiatives resulting in improved inventory turns to 3.4 times compared to 3.1 times a year ago. These initiatives have also had a significant impact on our improved operating cash flows. However, in the quarter we were unable to achieve the desired leverage on operating expenses and our physical inventory results continue to be unacceptable. Despite the somewhat disappointing results of the third quarter, we are still hopeful that we can achieve the low end of our net income guidance for the year, which was an increase in net income excluding restatement-related items of 13 to 15 percent. To do so, we must have a strong profit performance in December. Given the uncertain retail environment, that strong performance is not assured."

As of November 23, Dollar General had completed its fiscal 2002 store openings with a total of 620 new stores. The Company plans to open 650 stores in fiscal 2003. As of November 1, 2002, Dollar General operated 6,076 neighborhood stores in 27 states with distribution centers in Florida, Kentucky, Mississippi, Missouri, Ohio, Oklahoma and Virginia.

Dollar General will host a conference call today at 5 p.m. EST to discuss the quarter's results. The passcode for the conference call is "Dollar General." If you wish to participate, please call (484) 630-6177 at least 10 minutes before the conference call is scheduled to begin. The call will also be broadcast live online at www.dollargeneral.com. A replay of the call will be available online or by dialing 402-998-1172 until midnight EST Friday, December 6.

This press release contains forward-looking information, including but not limited to information regarding annual earnings guidance. The words "believe," "anticipate," "project," "plan," "expect," "estimate," "objective," forecast," "goal," "intend," "will likely result," or "will continue" and similar expressions generally identify forward-looking statements. The Company believes the assumptions underlying these forward-looking statements are reasonable; however, any of the assumptions could be inaccurate, and therefore, actual results may differ materially from those projected by, or implied in, the forward-looking statements. A number of factors may result in actual results differing from such forward-looking information including, but not limited to: the Company's ability to maintain adequate liquidity through its cash resources and credit facilities; the Company's ability to comply with the terms of the Company's credit facilities (or obtain waivers for non- compliance); transportation and distribution delays or interruptions, including, but not limited to, the impact of the recent management lockout of the west coast dockworkers and any ongoing work slowdown on the economy and on the Company's ability to receive inventory; inventory risks due to shifts in market demand; changes in product mix; interruptions in suppliers' businesses; costs and potential problems and interruptions associated with implementation of new or upgraded systems and technology; fuel price and interest rate fluctuations; a deterioration in general economic conditions caused by acts of war or terrorism; temporary changes in demand due to weather patterns; delays associated with building, opening and operating new stores; and the impact of the SEC inquiry related to the restatement of certain of the Company's financial statements.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this release. The Company disclaims any obligation to publicly update or revise any forward-looking statements contained herein to reflect events or circumstances occurring after the date of this release or to reflect the occurrence of unanticipated events.

                 DOLLAR GENERAL CORPORATION AND SUBSIDIARIES                        Selected Additional Information  

Sales by Category (in thousands) (Unaudited)



                          Quarter Ended                39 Weeks Ended                   November 1, November 2,  %    November 1, November 2,   %                                          Change                        Change                       2002      2001                2002      2001     Highly      consumable     $959,873   $796,271   21 %  $2,703,617 $2,255,342    20 %     Hardware and      seasonal        196,213    185,028    6 %     627,303    538,913    16 %     Basic clothing   154,366    148,617    4 %     443,287    410,448     8 %     Home products    187,250    179,209    5 %     566,634    532,180     7 %  

Total sales $1,497,702 $1,309,125 14 % $4,340,841 $3,736,883 16 %

New Store Activity for the 39 Weeks Ended (Unaudited)



                                     39 Weeks Ended         39 Weeks Ended                                     November 1, 2002       November 2, 2001  

Beginning store count 5,540 5,000 New store openings 575 523 Store closings 39 38 Net new stores 536 485 Ending store count 6,076 5,485 Total selling square footage (000's) 41,011 37,136

Customer Transaction Data (Unaudited)



                                   Quarter Ended          39 Weeks Ended                               November 1, November 2, November 1, November 2,                                   2002        2001        2002       2001     Same-store customer      transactions                   6.5 %      7.0 %       6.2 %      5.5 %     Average customer      transaction                  $8.31      $8.35       $8.33      $8.25  

DOLLAR GENERAL CORPORATION AND SUBSIDIARIES Condensed Consolidated Balance Sheets (In thousands)



                                          November 1, February 1, November 2,                                                 2002       2002       2001                                              (Unaudited)          (Unaudited)  

ASSETS Current assets: Cash and cash equivalents $37,101 $261,525 $74,819 Merchandise inventories 1,249,120 1,131,023 1,133,215 Deferred income taxes 43,095 105,091 90,307 Other current assets 61,077 58,408 48,600

Total current assets 1,390,393 1,556,047 1,346,941

Property and equipment, at cost 1,581,427 1,473,693 1,454,268 Less accumulated depreciation and amortization 581,162 484,778 456,478

Net property and equipment 1,000,265 988,915 997,790

Merchandise inventories -- -- 116,000 Other assets 20,506 7,423 8,535

Total assets $2,411,164 $2,552,385 $2,469,266

LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term obligations $15,834 $395,675 $391,089 Accounts payable 410,426 322,463 381,843 Accrued expenses and other 246,815 253,413 223,508 Income Taxes -- -- 10,492 Litigation settlement payable 200 162,000 162,000

Total current liabilities 673,275 1,133,551 1,168,932

Long-term obligations 502,498 339,470 347,174 Deferred income taxes 45,040 37,646 --

Shareholders' equity: Preferred stock -- -- -- Common stock 166,691 166,359 166,302 Additional paid-in capital 313,023 301,848 300,622 Retained earnings 714,800 579,265 492,473 Accumulated other comprehensive loss (1,382) (3,228) (3,552)

1,193,132 1,044,244 955,845 Less other shareholders' equity 2,781 2,526 2,685

Total shareholders' equity 1,190,351 1,041,718 953,160

Total liabilities and shareholders' equity $2,411,164 $2,552,385 $2,469,266

DOLLAR GENERAL CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Income (Unaudited) (Amounts in thousands except per share amounts)

13 Weeks Ended



                                November 1,  % of      November 2,    % of                                    2002     Net Sales      2001     Net Sales  

Net sales $1,497,702 100.0 % $1,309,125 100.0 % Cost of goods sold 1,069,119 71.4 927,944 70.9

Gross profit 428,583 28.6 381,181 29.1 Selling, general and administrative expenses 335,152 22.4 295,103 22.5 Litigation settlement and related proceeds (25,041) (1.7) -- --

Operating profit 118,472 7.9 86,078 6.6 Interest expense, net 11,537 0.8 11,480 0.9

Income before income taxes 106,935 7.1 74,598 5.7 Provision for income taxes 38,365 2.6 27,861 2.1

Net income $68,570 4.6 % $46,737 3.6 %

Earnings per share: Basic $0.21 $0.14

Diluted $0.20 $0.14

Weighted average shares: Basic 333,227 332,491

Diluted 334,970 334,857

Dividends per share $.032 $.032

DOLLAR GENERAL CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Income (Unaudited) (Amounts in thousands except per share amounts)



                                               39 Weeks Ended                              November 1,    % of Net   November 2,   % of Net                                  2002         Sales       2001         Sales     Net sales                $4,340,841       100.0 % $3,736,883       100.0 %     Cost of goods sold        3,144,539        72.4    2,702,994        72.3  

Gross profit 1,196,302 27.6 1,033,889 27.7 Selling, general and administrative expense 946,123 21.8 823,162 22.0 Litigation settlement and related proceeds (29,541) (0.7) -- --

Operating profit 279,720 6.4 210,727 5.7

Interest expense, net 33,306 0.8 35,037 1.0

Income before income taxes 246,414 5.7 175,690 4.7 Provision for taxes on income 89,554 2.1 65,620 1.8

Net income $ 156,860 3.6 % $ 110,070 2.9 %

Earnings per share: Basic $ 0.47 $ 0.33

Diluted $ 0.47 $ 0.33

Weighted average shares: Basic 332,986 332,136

Diluted 335,180 335,148

Dividends per share $ .096 $ .096

DOLLAR GENERAL CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (Unaudited) (In thousands)



                                                          39 Weeks Ended                                                       November 1,  November 2,                                                           2002        2001     Cash flows from operating activities:      Net income                                       $ 156,860    $ 110,070      Adjustments to reconcile net income to net      cash provided by operating activities:       Depreciation and amortization                     102,302       92,104       Deferred income taxes                              68,424       (5,795)       Tax benefit from stock option exercises             2,278        5,243       Litigation settlement                            (161,800)          --       Change in operating assets and liabilities:        Merchandise inventories                         (118,097)    (236,980)        Other current assets                              (2,774)      (3,732)        Accounts payable                                  87,963       84,581        Accrued expenses and other                         6,968       (1,195)        Other                                            (14,124)      (2,549)  

Net cash provided by operating activities 128,000 41,747

Cash flows from investing activities: Purchase of property and equipment (104,727) (100,184) Proceeds from sale of property and equipment 379 230

Net cash used in investing activities (104,348) (99,954)

Cash flows from financing activities: Net borrowings under revolving credit facilities 168,400 -- Repayments of long-term obligations (393,378) (8,925) Payments of cash dividends (31,972) (31,910) Proceeds from exercise of stock options 4,844 11,557 Other financing activities 4,030 (6)

Net cash used in financing activities (248,076) (29,284)

Net decrease in cash and cash equivalents (224,424) (87,491) Cash and cash equivalents, beginning of period 261,525 162,310

Cash and cash equivalents, end of period $ 37,101 $ 74,819

Supplemental schedule of noncash investing and financing activities - Purchase of property and equipment under capital lease obligations $ 8,134 $ 17,393

SOURCE Dollar General Corporation

/CONTACT: investors, Emma Jo Kauffman, +1-615-855-5525, or media, Andrea Ewin Turner, +1-615-855-5209, both of Dollar General Corporation/