Dollar General 2007 Annual Report Download - page 105
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103
As discussed in Note 2, in the Predecessor period ended July 6, 2007, the Company
recorded transaction and other costs related to the Merger of $56.7 million and share-based
compensation expense related directly to the Merger of $39.4 million as discussed in Note 9. As
discussed in Note 2, in the Successor period ended August 3, 2007, the Company recorded
transaction and other costs related to the Merger of $5.6 million, a loss on debt retirement related
to the Merger of $6.2 million; a contingent loss related to certain DC leases of $8.6 million as
discussed in Note 7; and a gain on certain interest rate swaps discussed in Note 1 of $6.8 million.
In the third quarter of 2007, the Company recorded an additional contingent loss related
to certain DC leases of $3.4 million as discussed in Note 7. As discussed in Note 6, in the fourth
quarter of 2007, the Company recorded a gain on debt retirement of $4.9 million.
As discussed in Note 12, during the first and third quarters of 2006, the Company
received proceeds, net of taxes, of $3.2 million and $5.0 million, respectively, representing
insurance recoveries for destroyed and damaged assets, costs incurred and business interruption
coverage related to Hurricane Katrina, which is reflected in results of operations for these
periods as a reduction of SG&A expenses.
As discussed in Note 3, in the third quarter of 2006, the Company completed a strategic
review of its real estate portfolio and traditional inventory packaway strategy. The review
resulted in plans to close approximately 400 underperforming stores and to eliminate nearly all
packaway merchandise by the close of fiscal 2007. As a result, in the third quarter of 2006, the
Company recorded SG&A charges and a lower of cost or market inventory impairment, which
reduced the Company’ s net income. Also, the change in merchandising strategy resulted in
substantially higher markdowns on inventory in the fourth quarter of 2006 ($179.9 million at
cost) negatively impacting gross profit and net income.
16. Guarantor subsidiaries
Certain of the Company’ s subsidiaries (the “Guarantors”) have fully and unconditionally
guaranteed on a joint and several basis the Company's obligations under certain outstanding debt
obligations. Each of the Guarantors is a direct or indirect wholly-owned subsidiary of the
Company. The following consolidating schedules present condensed financial information on a
combined basis, in thousands.