Dollar General 2007 Annual Report Download - page 4

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PART I
ITEM 1. BUSINESS
General
We are the largest discount retailer in the United States by number of stores, with 8,222
stores located in 35 states, primarily in the southern, southwestern, midwestern and eastern
United States, as of February 29, 2008. We serve a broad customer base and offer a focused
assortment of everyday items, including basic consumable merchandise and other home, apparel
and seasonal products. A majority of our products are priced at $10 or less and approximately
30% of our products are priced at $1 or less.
We offer a compelling value proposition for our customers based on convenient store
locations, easy in and out shopping and quality name brand and private label merchandise at
highly competitive everyday low prices. We believe our combination of value and convenience
distinguishes us from other discount, convenience and drugstore retailers, who typically focus on
either value or convenience. Our business model is focused on strong and sustainable sales
growth, attractive margins and limited maintenance capital expenditure and working capital
needs, which results in significant cash flow from operations (before interest).
We were founded in 1939 as J.L. Turner and Son, Wholesale. We opened our first dollar
store in 1955, when we were first incorporated as a Kentucky corporation under the name J.L.
Turner & Son, Inc. We changed our name to Dollar General Corporation in 1968 and
reincorporated as a Tennessee corporation in 1998.
We have expanded rapidly in recent years, increasing our total number of stores from
5,540 as of February 1, 2002, to 8,229 as of February 2, 2007, an 8.2% compounded annual
growth rate (“CAGR”). Over the same period, we grew our net sales from $5.3 billion to $9.2
billion (11.5% CAGR), driven by growth in number of stores as well as same store sales growth.
In the fourth quarter of fiscal 2006, we announced our plans to slow new store growth in 2007
and to close approximately 400 stores in order to improve our profitability and to enable us to
focus on improving the performance of existing stores. In 2007, we opened 365 new stores and
closed 400 stores. We also relocated or remodeled 300 existing stores. We generated net sales in
2007 of $9.5 billion, an increase of 3.5% over 2006, including a same-store sales increase of
2.1%.
Merger with KKR
On July 6, 2007, we completed a merger (the “Merger”) in which our former
shareholders received $22.00 in cash, or approximately $6.9 billion in total, for each share of our
common stock held. In addition, fees and expenses related to the Merger and the related
financing transactions totaling $102.6 million, principally consisting of investment banking fees,
management fees, legal fees and stock compensation expense ($39.4 million), are reflected in the
2007 results of operations. As a result of the Merger, we are a subsidiary of Buck Holdings, L.P.
(“Parent”), a Delaware limited partnership controlled by investment funds affiliated with