Dollar General Reports Financial Results for Fiscal 2000 And Restated Results for 1999 and 1998

Company Also Reaches Settlement Agreements in Restatement Litigation

GOODLETTSVILLE, Tenn., Jan. 14 /PRNewswire-FirstCall/ -- Dollar General Corporation (NYSE: DG) announced today its audited restated financial statements for its fiscal years ended February 2, 2001 ("2000"), January 28, 2000 ("1999"), and January 29, 1999 ("1998"), and is filing today with the Securities and Exchange Commission its Annual Report on Form 10-K and the proxy statement for its annual meeting to be held on February 20, 2002.

The Company also announced today that it has reached a settlement agreement with the lead plaintiffs in the putative class action and derivative lawsuits that had been filed against the Company following the Company's announcement that it would restate its audited financial statements for 1998 and 1999 and its previously released unaudited financial information for fiscal 2000. As a result of the execution of the settlement agreement relating to the putative class action litigation, the Company has recognized an expense of $162.0 million in the fourth quarter of 2000, which reduced the Company's after tax net income in fiscal 2000 by $99.0 million, or $0.30 per diluted share.

The Company's restated net income and diluted earnings per share for 2000 were $70.6 million and $0.21, respectively, as compared to the $206.0 million and $0.62 previously reported. Excluding the litigation settlement expense, restated net income and diluted earnings per share would have been $169.6 million and $0.51, respectively. In 1999, restated net income and diluted earnings per share were $186.7 million and $0.55, respectively, as compared with the $219.4 million and $0.65 previously reported. In 1998, restated net income and diluted earnings per share were $150.9 million and $0.45, respectively, as compared with the $182.0 million and $0.54 previously reported.

Restatement of Financial Statements

In its April 30, 2001, announcement, based on a preliminary assessment of the accounting issues involved, the Company estimated that the reduction in aggregate earnings as a result of the restatement would be approximately $0.07 per share over the three-year period of 2000, 1999 and 1998. The review completed by the Company of its financial statements ultimately identified a number of accounting issues for restatement in addition to those that formed the basis for the preliminary estimate provided on April 30, 2001. As a result of these additional issues, and following the completion of the Company's review of the issues that had been identified originally, the restatement has resulted in an aggregate effect on diluted earnings per share, excluding the litigation settlement expense, of $0.30 (on a rounded basis) over the three-year period. Over the three-year period, the Company has reduced its diluted earnings per share:

    * by approximately $0.05 to correctly record items impacting cost of goods       sold that were recorded incorrectly and/or that reflect more accurate       estimates;     * by approximately $0.11 to correctly record selling, general and       administrative ("SG&A") expenses that were either incurred but not       accrued, or recorded incorrectly;     * by approximately $0.11 to correctly record additional interest expense       required as a result of restating certain operating leases as capital       leases and financing obligations, and the addition of capital lease and       financing obligation liabilities to the Company' s balance sheets; and       by approximately $0.02 to correct errors in the Company's tax provision. 
Class Action Settlement Agreement

Following the Company's announcement on April 30, 2001, that it would restate its audited financial statements for fiscal 1999 and 1998 and its previously released unaudited financial information for fiscal 2000, more than 20 purported class action lawsuits were filed against the Company and certain current and former officers and directors of the Company, asserting claims under the federal securities laws. These cases were consolidated in federal court in Tennessee, and the court appointed the Florida State Board of Administration and the Teachers' Retirement System of Louisiana as lead plaintiffs under the Private Securities Litigation Reform Act of 1995 (the "Class Action").

The Company has reached a settlement agreement with the lead plaintiffs in the Class Action, pursuant to which the Company has agreed to make a cash payment to the class and to implement certain enhancements to its corporate governance and internal control procedures. The settlement agreement resolves all outstanding shareholder claims brought in the Class Action and is subject to confirmatory discovery by the plaintiffs and to court approval. As a result of the execution of the settlement agreement, the Company has recognized an expense of $162.0 million in the fourth quarter of 2000. The Company expects to receive from its insurers approximately $4.5 million in respect of the class action settlement, which amount has not been accrued in the Company's financial statements.

A number of purported shareholder derivative lawsuits have also been filed in Tennessee state and U.S. federal courts against certain current and former Company directors and officers and Deloitte & Touche LLP, the Company's former independent accountant.

The Company and the individual defendants have reached a settlement agreement with counsel to Michael Dixon, Jr., Carolinas Electrical Workers Retirement Fund and Thomas Dewey, the lead plaintiffs in the lead Tennessee state shareholder derivative action. The agreement includes a payment to the Company from a portion of the proceeds of the Company's director and officer liability insurance policies as well as certain corporate governance and internal control enhancements. Pursuant to the terms of such agreement, the Company anticipates that all other shareholder derivative lawsuits, which are currently stayed, will be dismissed with prejudice by the courts in which they are pending. Such agreement is subject to confirmatory discovery and to court approval. If the settlement agreement is approved, the Company expects that it will result in a net payment to the Company, after attorneys' fees payable to the plaintiffs' counsel, of approximately $24.8 million, which amount has not been accrued in the Company's financial statements.

2000 Results of Operations

Net sales totaled $4.55 billion for 2000 compared with $3.89 billion for 1999, an increase of 17.0 percent. The increase resulted primarily from 706 net new stores and a same-store sales increase of 0.9 percent. During the year, the Company opened 758 new stores, relocated or remodeled 237 stores and closed 52 stores.

Gross profit for 2000 was $1.25 billion, or 27.5 percent of sales, compared with $1.09 billion, or 28.1 percent of sales in 1999.

SG&A expense for 2000 was $934.9 million compared with $772.9 million in 1999, an increase of 21.0 percent. As a percentage of sales, SG&A expense was 20.5 percent in 2000 compared with 19.9 percent in 1999.

In 2000, interest expense was $45.4 million compared with $25.9 million in 1999. The increase in interest expense in 2000 resulted from the net addition of $213.6 million in various long-term obligations during 2000, including $200 million of 8 5/8 percent notes, issued in June 2000 to repay outstanding short-term borrowings and for general corporate purposes. The Company's total debt as of February 2, 2001, was $729.8 million compared with $516.2 million as of January 28, 2000, which includes synthetic lease balances of $383.2 million and $413.3 million, respectively.

The effective income tax rates for 2000 and 1999 were 35.0 percent and 36.7 percent, respectively. The reduction in the effective tax rate in 2000 was due to the 38.9 percent marginal tax rate applied against the litigation settlement expense. Excluding the tax impact of the litigation settlement expense, the effective tax rate in 2000 was 37.3 percent.

Net LIFO merchandise inventories increased 6.3 percent to $1.01 billion at February 2, 2001, from $0.95 billion at January 28, 2000.

Capital expenditures for 2000 totaled $216.6 million, compared with $142.1 million for 1999. The Company opened 758 new stores and relocated or remodeled 237 stores at a cost of $112.7 million in 2000, compared with opening 646 new stores and relocating or remodeling 409 stores at a cost of $72.7 million in 1999. The increase in 2000 in store-related capital expenditures was due principally to the construction of approximately 72 Company-owned stores. Distribution-related capital expenditures totaled $49.3 million in 2000, resulting primarily from costs associated with the new distribution centers in Alachua, Florida and Zanesville, Ohio. Capital expenditures during 2001 are projected to be approximately $135 million, and the Company anticipates funding its 2001 capital requirements with cash flows from operations.

Dollar General operates more than 5,550 neighborhood stores in 27 states and operates distribution centers in Florida, Kentucky, Mississippi, Missouri, Ohio, Oklahoma and Virginia.

This press release contains historical and forward-looking information. The words "believe," "anticipate," "project," "plan," "expect," "estimate," "objective," "forecast," "goal," "intend," "will likely result," or " will continue" and similar expressions identify forward looking statements. 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. The factors that may result in actual results differing from such forward-looking information include, but are not limited to: the Company's ability to maintain adequate liquidity through its cash resources and credit facilities, including its ability to refinance or replace such facilities on favorable terms at the maturity thereof; the Company's ability to comply with the terms of the Company's credit facilities (or obtain waivers for non- compliance); general transportation and distribution delays or interruptions; inventory risks due to shifts in market demand; changes in product mix; interruptions in suppliers' businesses; 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; the results of the Company's restatement and audit process; and the impact of the litigation and regulatory proceedings related to the restatement of the Company's financial statements, including the funding of the settlement of such litigation and the risk that the conditions to the effectiveness of such settlements, including the results of the plaintiffs' confirmatory discovery and the approval by the courts, may not be realized.

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 undertakes no 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                  AUDITED INCOME STATEMENTS & KEY OPERATIONAL DATA                                      (000's)  

Income Statements For the Year Ended (restated) (restated) February 2 January 28 January 29 2001 2000 1999

Sales $4,550,571 $3,887,964 $3,220,989

Cost of Sales 3,299,668 2,794,466 2,328,470

Gross Margin 1,250,903 1,093,498 892,519

SG&A Expense 934,899 772,928 639,534

Litigation Settlement Expense 162,000 0 0

Operating Income 154,004 320,570 252,985

Interest Expense 45,357 25,873 13,976

Pre-Tax Income 108,647 294,697 239,009

Taxes 38,005 108,024 88,075

Net Income $70,642 $186,673 $150,934

Diluted earnings per share $0.21 $0.55 $0.45

Weighted average diluted shares 333,858 337,904 335,763

KEY OPERATIONAL DATA February 2 January 28 January 29 2001 2000 1999 Sales by Category: Highly Consumable $2,518,052 $1,996,454 $1,364,032 Hardware and Seasonal $706,140 $640,791 $604,485 Basic Clothing $554,117 $482,390 $391,609 Home Products $772,262 $768,329 $860,863 TOTAL SALES $4,550,571 $3,887,964 $3,220,989

DOLLAR GENERAL CORPORATION BALANCE SHEETS ($000's) (Unaudited)

(restated) (restated) February 2 January 28 January 29 2001 2000 1999 Assets Current Assets: Cash and cash equivalents $162,310 $54,742 $27,643 Merchandise inventories 896,235 952,432 793,596 Deferred income taxes 21,514 20,486 15,576 Other current assets 44,868 46,455 31,104 TOTAL CURRENT ASSETS 1,124,927 1,074,115 867,919

Property & equipment, at cost 1,339,554 1,109,376 706,790 Less: Accumulated depreciation and amoritization 366,460 271,987 207,042 Net property and equipment 973,094 837,389 499,748

Merchandise inventories 116,000 0 0 Deferred income taxes 52,708 0 0 Other assets, net 15,733 12,124 8,345

TOTAL ASSETS $2,282,462 $1,923,628 $1,376,012

Liabilities & Shareholders' Equity Current Liabilities Current portion of long-term obligations $9,035 $1,828 $725 Accounts payable 297,262 344,598 266,596 Accrued expenses 214,192 166,290 168,168 Income taxes 17,446 26,991 22,866 TOTAL CURRENT LIABILITIES 537,935 539,707 458,355

Long-Term obligations 720,764 514,362 221,694 Deferred income taxes 0 24,206 21,557 Litigation settlement payable 162,000 0 0 TOTAL LIABILITIES 1,420,699 1,078,275 701,606

Stockholders' Equity: Preferred stock 0 0 858 Common stock 165,646 165,411 164,073 Additional paid-in capital 283,925 229,906 363,212 Retained earnings 414,318 450,036 346,790 Less: Treasury stock 0 0 200,527 Common stock purchased by employee deferred compensation trust 2,126 0 0 TOTAL STOCKHOLDERS' EQUITY 861,763 845,353 674,406

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,282,462 $1,923,628 $1,376,012

DOLLAR GENERAL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (000's) (Unaudited)

For the Year Ended (restated) (restated) February 2 January 28 January 29 2001 2000 1999 Cash flows from operating activities: Net income $70,642 $186,673 $150,934 Adjustments to reconcile net income to net cash provided by (used in) operating activities Depreciation and amortization 111,399 79,707 57,414 Deferred income taxes (77,942) (2,261) (3,889) Tax benefit from stock option exercises 19,018 30,287 32,252 Litigation settlement 162,000 -- -- Change in operating assets and liabilities: Merchandise inventories (59,803) (158,836) (171,239) Other Current Assets 4,650 (15,351) (11,230) Accounts payable (47,336) 78,002 86,623 Accrued expenses and other 39,391 (2,144) 14,931 Income taxes (9,545) 4,125 20,640 Other 3,031 (3,480) (2,745) Net cash provided by (used in) operating activities 215,505 196,722 173,691

Cash flows provided by (used in) investing activities: Purchase of property and equipment (216,584) (142,070) (143,382) Proceeds from sale of property and equipment 97,612 3,051 222 Net cash provided by (used in) investing activities (118,972) (139,019) (143,160)

Cash flows provided by (used in) financing activities: Issuance of short-term borrowings 220,000 295,324 165,000 Repayments of short-term borrowings (220,000) (295,324) (186,933) Issuance of long-term debt 199,595 22,848 72,257 Repayments of long-term debt (112,276) (7,705) (2,667) Payment of cash dividend (42,237) (33,791) (26,661) Proceeds from exercise of stock options 34,130 38,797 30,727 Repurchase of common stock (62,988) (50,753) (73,236) Purchase of common stock for deferred compensation plan (2,126) 0 0 Settlement of derivative financial instruments (3,063) 0 0 Transfer to ESOP 0 0 755 Net cash provided by (used in) financing activities 11,035 (30,604) (20,758)

Net increase (decrease) in cash and cash equivalents 107,568 27,099 9,773 Cash and cash equivalents beginning of period 54,742 27,643 17,870 Cash and cash equivalents end of period $162,310 $54,742 $27,643

Purchase of property and equipment under capital lease obligation $126,290 $272,233 $120,863 Conversion of preferred stock to common stock $ -- $200,527 $ --

DOLLAR GENERAL CORPORATION EFFECTS OF RESTATEMENT

Year Ended February 2, 2001 As Restated Excluding As Restatement Litigation Previously Related Settlement Reported Adjustments As Restated Expense Net Sales $4,551,511 $(940) $4,550,571 Cost of goods sold 3,293,126 6,542 3,299,668 3,299,668 Gross profit 1,258,385 (7,482) 1,250,903 1,250,903 SG&A Expense 923,760 11,139 934,899 934,899 Litigation settlement expense -- 162,000 162,000 -- Operating profit 334,625 (180,621) 154,004 316,004 Interest Expense 11,508 33,849 45,357 45,357 Income before taxes on income 323,117 (214,470) 108,647 270,647 Provisions for taxes on income 117,098 (79,093) 38,005 100,951 Net income $206,019 $(135,377) $70,642 $169,696

Diluted earnings per share $0.62 ($0.41) $0.21 $0.51 Weighted average diluted shares (000) 333,858 -- 333,858 333,858

Year Ended January 28, 2000 Restatement As Previously Related Reported Adjustments As Restated Net Sales $3,887,964 $ -- $3,887,964 Cost of goods sold 2,790,173 4,293 2,794,466 Gross profit 1,097,791 (4,293) 1,093,498 SG&A Expense 748,489 24,439 772,928 Operating profit 349,302 (28,732) 320,570 Interest Expense 5,157 20,716 25,873 Income before taxes on income 344,145 (49,448) 294,697 Provisions for taxes on income 124,718 (16,694) 108,024 Net income $219,427 $(32,754) $186,673

Diluted earnings per share $0.65 ($0.10) $0.55 Weighted average diluted shares (000) 336,963 941 337,904

Year Ended January 29, 1999 As Restatement Previously Related Reported Adjustments As Restated Net Sales $3,220,989 $ -- $3,220,989 Cost of goods sold 2,315,112 13,358 2,328,470 Gross profit 905,877 (13,358) 892,519 SG&A Expense 616,613 22,921 639,534 Operating profit 289,264 (36,279) 252,985 Interest Expense 8,349 5,627 13,976 Income before taxes on income 280,915 (41,906) 239,009 Provisions for taxes on income 98,882 (10,807) 88,075 Net income $182,033 $(31,099) $150,934

Diluted earnings per share $0.54 ($0.09) $0.45 Weighted average diluted shares (000) 335,498 265 335,763

DOLLAR GENERAL CORPORATION EFFECTS OF RESTATEMENT REDUCTIONS OF DILUTED EARNINGS PER SHARE

Three-Year Feb. 2 Jan. 28 Jan. 29 Cumulative 2001 2000 1999 Cost of Goods Sold ($0.05) ($0.01) ($0.01) ($0.03) SG&A Expense ($0.11) ($0.02) ($0.05) ($0.04) Interest Expense ($0.11) ($0.06) ($0.04) ($0.01) Tax Provision ($0.02) ($0.01) ($0.00) ($0.01) Total Restatement Accounting Adjustments* ($0.30) ($0.11) ($0.10) ($0.09) EPS Impact of Litigation Settlement ($0.30) ($0.30) 0 0 TOTAL ($0.60) ($0.41) ($0.10) ($0.09)

* Totals may not foot due to rounding

SOURCE Dollar General Corporation

CONTACT: investors, Kiley Fleming, CFA, +1-615-855-5525, or media, Andrea Turner, +1-615-855-5209, both of Dollar General Corporation

URL: http://www.dollargeneral.com