Dollar General 2003 Annual Report Download - page 23

in an efficient and timely manner. In addition, costs and potential problems and interruptions associated with the implementation
of new or upgraded systems and technology could also disrupt or reduce the efficiency of the Company’s operations.
The Company is subject to interest rate 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 may utilize its Credit Facility to fund working cap-
ital requirements, which is comprised of variable rate debt. See "Quantitative and Qualitative Disclosures About Market Risk."
The Company is dependent upon the smooth functioning of its distribution network and upon the capacity of its DCs. The
Company relies upon the ability to replenish depleted inventory through deliveries to its DCs from vendors, and from the DCs to its
stores by various means of transportation, including shipments by air, sea and truck on the roads and highways of the United States.
The "driver hours of service" regulations adopted by the Federal Motor Carriers Safety Administration, which became effective
January 4, 2004, could negatively impact transportation costs. In addition, long-term disruptions to the national and international
transportation infrastructure that lead to delays or interruptions of service would adversely affect the Company’s business.
Similarly, delays in or interruptions in or caused by the expansion of DCs or the conversions of DCs to dual sortation would adverse-
ly affect the Company’s business. Moreover, to facilitate its expected growth, the Company will need additional DCs in the coming
years. If the Company were unable to locate sites for the new DCs or were unable to achieve functionality of the new DCs in the
time frame expected, the Company’s ability to achieve the expected growth could be inhibited.
Construction and expansion projects relating to the Company’s DCs entail risks which could cause delays and cost overruns, such
as: shortages of materials; shortages of skilled labor or work stoppages; unforeseen construction scheduling, engineering, envi-
ronmental or geological problems; weather interference; fires or other casualty losses; and unanticipated cost increases. The com-
pletion dates and anticipated costs of these projects could differ significantly from initial expectations for construction-related or
other reasons. The Company cannot guarantee that any project will be completed on time or within established budgets.
The Company’s success depends to a significant extent upon the abilities of its senior management team and the performance
of its employees. The loss of services of key members of the Company’s senior management team or of certain other key employ-
ees could negatively impact the Company’s business. In addition, future performance will depend upon the Company’s ability to
attract, retain and motivate qualified employees to keep pace with its expansion schedule. The inability to do so may limit the
Company’s ability to effectively penetrate new market areas. Also, the Company experienced several senior management changes
in 2003. Significant difficulties in transitioning under new management could negatively impact the Company’s business.
If the Company cannot open new stores on schedule, its growth will be impeded. Delays in store openings could adversely affect
the Company’s future operations by slowing new store growth, which may in turn reduce its revenue growth. The Company’s abil-
ity to timely open new stores and to expand into additional states will depend in part on the following factors: the availability of
attractive store locations; the ability to negotiate favorable lease terms; the ability to hire and train new personnel, especially store
managers; the ability to identify customer demand in different geographic areas; general economic conditions; and the availability
of sufficient funds for expansion. Many of these factors are beyond the Company’s control.
The inability to execute operating initiatives could impact the Company’s operating results. The Company is undertaking a sig-
nificant number of operating initiatives in 2004 that have the potential to be disruptive in the short term if they are not implement-
ed effectively. Ineffective implementation or execution of some or all of these initiatives could negatively impact the Company’s
operating results.
Rising insurance costs could negatively impact profitability. The costs of insurance (workers’ compensation insurance, general
liability insurance, health insurance, property insurance and directors’ and officers’ liability insurance) have risen in recent years.
If such increases continue, they could have a negative impact on the Company’s profitability.
Readers are cautioned not to place undue reliance on forward-looking statements made herein, since the statements speak only
as of the date of this document. Except as may be required by law, 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 report
or to reflect the occurrence of unanticipated events. Readers are advised, however, to consult any further disclosures the
Company may make on related subjects in its documents filed with or furnished to the SEC or in its other public disclosures.
M D & A
21