Dollar General 2008 Annual Report Download - page 51

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detail above under “Results of Operations.” In addition, we experienced increased inventory
turns and improved merchandise payment terms in 2008 as compared to the 2007 periods.
Accounts payable balances increased by $140.4 million in 2008 compared to a decline of $41.4
million in the 2007 Successor period and an increase of $34.8 million in the 2007 Predecessor
period partially as a result of our implementation of initiatives to aggressively manage our
payables. Also positively affecting cash flows from operations were increases in accrued
expenses and other in 2008, which was primarily attributable to increases in litigation reserves,
incentive bonus accruals, deferred vendor rebates, and property and sales tax accruals. Other
significant components of the change in cash flows from operating activities in 2008 as
compared to 2007 were changes in inventory balances, which increased by 10% in 2008
compared to decreases of approximately 6% and 1% during the 2007 Successor and Predecessor
periods, respectively. Inventory levels in the highly consumable category increased by $77.8
million, or 12%, in 2008 compared to a decline of $90.7 million, or 12%, in the 2007 Successor
period and an increase of $48.8 million, or 7%, in the 2007 Predecessor period. The seasonal
category increased by $20.9 million, or 8%, in 2008 compared to a decline of $24.2 million, or
8%, in the 2007 Successor period and a decline of $38.7 million, or 11%, in the 2007
Predecessor period. The home products category declined by $2.6 million, or 2%, in 2008
compared to an increase of $25.4 million, or 19%, in the 2007 Successor period and a decline of
$15.0 million, or 10%, in the 2007 Predecessor period. The basic clothing category increased by
$30.2 million, or 15%, in 2008 compared to an increase of $10.0 million, or 5%, in the 2007
Successor period and a decline of $11.5 million, or 5%, in the 2007 Predecessor period. In
addition, net income in 2008 compared to the net losses in the 2007 periods discussed above was
a principal factor in the increase in income taxes paid in 2008. Income tax refunds received in
2007 for taxes paid in prior years that did not reoccur in 2008 also contributed to the increase in
income taxes paid during 2008.
Cash flows from operating activities for the 2007 periods were impacted by a net loss of
$4.8 million and $8.0 million in the 2007 Successor and Predecessor periods, respectively,
compared to net income of $137.9 million in 2006, as described in detail under “Results of
Operations” above, including the incurrence of $101.4 million of Transaction and related costs in
the 2007 Predecessor period. Other significant components of the change in cash flows from
operating activities in 2007 as compared to 2006 were changes in inventory balances, which
decreased by approximately 6% and 1% during the 2007 Successor and Predecessor periods,
respectively, compared to a decrease of approximately 3% during 2006. As compared to changes
in inventory levels in the 2007 periods discussed above, in 2006 highly consumable increased
$63.2 million, or 10%; seasonal increased $6.7 million, or 2%; home products decreased $52.5
million, or 25%; and basic clothing decreased $59.5 million, or 21%. In addition to inventory
changes, the net losses in the 2007 periods discussed above were principal factors in the
reduction in income taxes paid in those periods as compared to 2006. Also offsetting the decline
in net income were changes in accrued expenses, particularly in the 2007 Predecessor period as
compared to 2006, which was primarily attributable to income tax related reserves, accruals for
lease liabilities on closed stores and property and sales tax accruals.
Cash flows from investing activities. Cash flows used in investing activities totaling
$152.6 million in 2008 were primarily related to capital expenditures and sales of investments.
Significant components of our property and equipment purchases in 2008 included the following