Dollar General 2004 Annual Report Download - page 21

Dollar General Corporation 19
As described in Note 8 to the Consolidated Financial
Statements, the Company is involved in a number of legal
actions and claims, some of which could potentially result
in material cash payments. Adverse developments in
those actions could materially and adversely affect the
Company’s liquidity. The Company also has certain
income tax-related contingencies as more fully described
below under “Critical Accounting Policies and Estimates”.
Estimates of these contingent liabilities are included in the
Company’s Consolidated Financial Statements. However,
future negative developments could have a material
adverse effect on the Company’s liquidity. See Notes 5
and 8 to the Consolidated Financial Statements.
On November 30, 2004, the Board of Directors autho-
rized the Company to repurchase up to 10 million
shares of its outstanding common stock in the open
market or in privately negotiated transactions from
time to time subject to market conditions. The objective
of the share repurchase program is to enhance share-
holder value by purchasing shares at a price that
produces a return on investment that is greater than
the Company’s cost of capital. Additionally, share
repurchases will be undertaken only if such purchases
result in an accretive impact on the Company’s fully
diluted earnings per share calculation. This authorization
expires November 30, 2005. During 2004, the Company
purchased approximately 0.5 million shares pursuant to
this authorization at a total cost of $10.9 million.
On March 13, 2003, the Board of Directors authorized
the Company to repurchase up to 12 million shares of its
outstanding common stock, with provisions and objec-
tives similar to the November 30, 2004 authorization
discussed above. This authorization expired March 13,
2005. During 2003, the Company purchased approxi-
mately 1.5 million shares at a total cost of $29.7 million.
During 2004, the Company purchased approximately
10.5 million shares at a total cost of $198.4 million.
As of January 28, 2005, approximately 12.0 million
shares had been purchased, substantially completing
this share repurchase authorization. Share repurchases
in 2004 increased diluted earnings per share by
approximately $0.02.
The following table summarizes the Company’s significant contractual obligations as of January 28, 2005 (in thousands):
Payments Due by Period
Contractual obligations Total < 1 yr 1–3 yrs 3–5 yrs > 5 yrs
Long-term debt(a) $ 200,000 $ — $ — $ — $ 200,000
Capital lease obligations 28,178 12,021 9,502 3,188 3,467
Financing obligations 91,555 1,886 4,628 4,943 80,098
Inventory purchase obligations 98,767 98,767 — — —
Interest(b) 193,822 26,592 50,660 48,720 67,850
Operating leases 1,165,045 251,462 369,636 220,869 323,078
Total contractual cash obligations $ 1,777,367 $ 390,728 $ 434,426 $ 277,720 $ 674,493
(a) As discussed below, represents unsecured notes whose holders have a redemption option in 2005, which could result in the accelerated payment
of all or a portion of these obligations.
(b) Represents obligations for interest payments on long-term debt, capital lease and financing obligations.
The Company has a $250 million revolving credit facility (the “Credit Facility”), which expires in June 2009. As of
January 28, 2005, the Company had no outstanding borrowings and $8.7 million of standby letters of credit outstanding
under the Credit Facility. The standby letters of credit reduce the borrowing capacity of the Credit Facility. The Credit
Facility contains certain financial covenants, all of which the Company was in compliance with at January 28, 2005. See
Note 6 to the Consolidated Financial Statements for further discussion of the Credit Facility.