Dollar General 2008 Annual Report Download - page 40

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(2) Reflects interest on the $2.3 billion term loan facility at a rate of LIBOR plus 2.75%. To hedge against
interest rate risk, we have entered into a swap agreement with respect to a $2.0 billion notional amount for
4.93%. This swap agreement became effective as a result of the acquisition on July 31, 2007 and will amortize
on a quarterly basis until maturity at July 31, 2012. The unhedged portion of the facility is reflected at an
interest rate of LIBOR of 5.32% plus 2.75%.
(3) Reflects interest on the 10.625% senior notes and 11.875%/12.625% senior subordinated notes. Assumes the
cash interest payment option at a rate of 11.875% has been elected with respect to all of the senior subordinated
notes.
(4) Represents fees on balances of trade letters of credit of $141.2 million at 0.75% and standby letters of credit
of $40.7 million at 1.50%.
(5) Represents commitment fees of 0.375% on the $612.1 million unutilized balance of the revolving credit
facility at July 6, 2007. Outstanding letters of credit noted in (4) above reduce the availability under the
revolving credit facility.
(6) Represents historical interest expense on other existing indebtedness.
(7) Represents debt issuance costs associated with the new bank facilities amortized using the effective interest
method over 6 years for the revolving facility, 7 years for the term loan facility, 8 years for the senior notes, 10
years for the senior subordinated notes and 8 years for other capitalized debt issuance costs. Also includes the
amortization of debt discount of the senior notes.
(8) Represents interest expense on long-term liabilities which were discounted as a result of the Merger.
(9) Represents an adjustment to historical interest expense to reflect the effect of the adoption of current
accounting standards for income taxes, offset by capitalized interest expense.
(e) Represents the tax effect of the pro forma adjustments, calculated at an effective rate of
54.1% for the Predecessor period ended July 6, 2007 and 36.7% for the fiscal year ended
February 2, 2007. The effective tax rate, a benefit, applied to the pro forma changes for the
Predecessor period ended July 6, 2007, reflects the pro forma elimination of non-deductible
transaction costs from income before taxes. The pro forma income tax expense for the year
ended February 2, 2007 has been adjusted to reflect changes required by FIN 48 as if FIN 48 had
been adopted as of the beginning of the year.
Effects of Inflation
In 2008, increased commodity cost pressures mainly related to food and pet products
which have been driven by fruit and vegetable prices and rising freight costs have increased the
costs of certain products. Increases in petroleum, resin, metals, pulp and other raw material
commodity driven costs also resulted in multiple product cost increases. We believe that our
ability to increase selling prices in response to cost increases largely mitigated the effect of these
cost increases on our overall results of operations. We believe that inflation and/or deflation had
a minimal impact on our overall operations during 2007 and 2006.
Liquidity and Capital Resources
Current Financial Condition / Recent Developments. During the past three years, we
have generated an aggregate of approximately $1.4 billion in cash flows from operating