Dollar General 2008 Annual Report Download - page 113

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Executive Officer of Capstone served on the Company’ s Board of Directors until March 2009.
Although neither KKR nor any entity affiliated with KKR owns any of the equity of Capstone,
prior to January 1, 2007 KKR had provided financing to Capstone. The aggregate fees incurred
for Capstone services for the Successor periods ended January 30, 2009 and February 1, 2008
totaled $3.0 million and $1.9 million, respectively.
The Company purchased certain of its 11.857%/12.625% senior subordinated notes held
by Goldman Sachs & Co. in the amount of $25.0 million in January 2008 as further discussed in
Note 6, and paid commissions less than $0.1 million in connection therewith.
12. Capital stock
On November 29, 2006 and September 30, 2005, the Predecessor’ s Board of Directors
authorized the Company to repurchase up to $500 million and up to 10 million shares,
respectively, of the Predecessor’ s outstanding common stock. These authorizations allowed for
purchases in the open market or in privately negotiated transactions from time to time, subject to
market conditions. The objective of these share repurchase initiatives was to enhance shareholder
value by purchasing shares at a price that produced a return on investment that was greater than
the Company’ s cost of capital. Additionally, share repurchases generally were undertaken only if
such purchases resulted in an accretive impact on the Company’ s fully diluted earnings per share
calculation. No purchases were made pursuant to the 2006 authorization, which was terminated
as a result of the Merger. During 2006, the Company purchased approximately 4.5 million shares
of the Predecessor pursuant to the 2005 authorization at a total cost of $79.9 million.
13. Hurricane Katrina insurance settlement
During 2006, the Company settled an insurance claim related to Hurricane Katrina and
received proceeds of $13.0 million representing insurance recoveries for destroyed and damaged
assets, costs incurred and business interruption coverage, which are reflected in results of
operations for 2006 as a reduction of SG&A expenses. The business interruption portion of the
proceeds was approximately $5.8 million. Insurance recoveries related to fixed assets losses are
included in cash flows from investing activities and recoveries related to inventory losses and
business interruption are included in cash flows from operating activities.
14. Segment reporting
The Company manages its business on the basis of one reportable segment. See Note 1
for a brief description of the Company’ s business. As of January 30, 2009, all of the Company’ s
operations were located within the United States with the exception of an immaterial Hong Kong
subsidiary which assists in the importing of certain merchandise that began operations in 2004.
The following net sales data is presented in accordance with SFAS 131, “Disclosures about
Segments of an Enterprise and Related Information.”