Dollar General 2010 Annual Report Download - page 117

10-K
We intend to redeem some or all of the Senior Notes at the first scheduled call date in July 2011 or
later. We may redeem some or all of the Notes at any time at redemption prices described or set forth in
the indentures. We also may seek, from time to time, to retire some or all of the Notes through cash
purchases on the open market, in privately negotiated transactions or otherwise. Such repurchases, if any,
will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other
factors. The amounts involved may be material. We repurchased $115.0 million aggregate principal
amount of outstanding Senior Notes during 2010. In connection with our initial public offering in 2009,
we redeemed $195.7 million principal amount of outstanding Senior Notes and $205.2 million principal
amount of outstanding Senior Subordinated Notes. We repurchased $44.1 million and $25.0 million of
Senior Subordinated Notes in 2008 and 2007, respectively.
Change of Control. Upon the occurrence of a change of control, which is defined in the indentures,
each holder of the Notes has the right to require us to repurchase some or all of such holder’s Notes at a
purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest,
if any, to the repurchase date.
Covenants. The indentures contain covenants limiting, among other things, our ability and the
ability of our restricted subsidiaries to (subject to certain exceptions):
• incur additional debt, issue disqualified stock or issue certain preferred stock;
• pay dividends and or make certain distributions, investments and other restricted payments;
• create certain liens or encumbrances;
• sell assets;
• enter into transactions with our affiliates;
• allow payments to us by our restricted subsidiaries;
• consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; and
• designate our subsidiaries as unrestricted subsidiaries.
Events of Default. The indentures also provide for events of default which, if any of them occurs,
would permit or require the principal of and accrued interest on the Notes to become or to be declared
due and payable.
Adjusted EBITDA
Under the agreements governing the Credit Facilities and the indentures, certain limitations and
restrictions could arise if we are not able to satisfy and remain in compliance with specified financial ratios.
Management believes the most significant of such ratios is the senior secured incurrence test under the
Credit Facilities. This test measures the ratio of the senior secured debt to Adjusted EBITDA. This ratio
would need to be no greater than 4.25 to 1 to avoid such limitations and restrictions. As of January 28,
2011, this ratio was 1.0 to 1. Senior secured debt is defined as our total debt secured by liens or similar
encumbrances less cash and cash equivalents. EBITDA is defined as income (loss) from continuing
operations before cumulative effect of change in accounting principle plus interest and other financing
costs, net, provision for income taxes, and depreciation and amortization. Adjusted EBITDA is defined as
EBITDA, further adjusted to give effect to adjustments required in calculating this covenant ratio under
our Credit Facilities. EBITDA and Adjusted EBITDA are not presentations made in accordance with
generally accepted accounting principles in the United States (‘‘U.S. GAAP’’), are not measures of financial
performance or condition, liquidity or profitability, and should not be considered as an alternative to (i) net
income, operating income or any other performance measures determined in accordance with U.S. GAAP
or (ii) operating cash flows determined in accordance with U.S. GAAP. Additionally, EBITDA and
Adjusted EBITDA are not intended to be measures of free cash flow for management’s discretionary use,
as they do not consider certain cash requirements such as interest payments, tax payments and debt service
requirements and replacements of fixed assets.
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