Dollar General 2011 Annual Report Download - page 118

10-K
While we have reduced our debt levels since 2007, we continue to have substantial debt that will need to
be repaid or refinanced at or prior to applicable maturity dates which could adversely affect our ability to
raise additional capital to fund our operations and limit our ability to pursue our growth strategy or other
opportunities or to react to changes in the economy or our industry.
At February 3, 2012, we had total outstanding debt (including the current portion of long-term
obligations) of $2.618 billion, including a $1.964 billion senior secured term loan facility which matures
on July 6, 2014, $450.7 million aggregate principal amount of 11.875% / 12.625% senior subordinated
toggle notes due 2017, and borrowings of $184.7 million under our senior secured asset-based revolving
credit facility. We also had an additional $807.9 million available for borrowing under the revolving
credit facility, which was scheduled to mature July 6, 2013, but was amended on March 15, 2012 to
increase the maximum borrowing to $1.2 billion and extend the maturity date to July 6, 2014. This level
of debt and our ability to repay or refinance this debt prior to maturity could have important negative
consequences to our business, including:
• increasing our vulnerability to general economic and industry conditions because our debt
payment obligations may limit our ability to use our cash to respond to or defend against
changes in the industry or the economy;
• requiring a substantial portion of our cash flow from operations to be dedicated to the payment
of principal and interest on our indebtedness, therefore reducing our ability to use our cash flow
to fund our operations, capital expenditures and future business opportunities or pay dividends;
• limiting our ability to pursue our growth strategy;
• placing us at a disadvantage compared to our competitors who are less highly leveraged and may
be better able to use their cash flow to fund competitive responses to changing industry, market
or economic conditions;
• limiting our ability to obtain additional financing for working capital, capital expenditures, debt
service requirements, acquisitions and general corporate or other purposes; and
• increasing the difficulty of our ability to make payments on our outstanding debt.
Our variable rate debt exposes us to interest rate risk which could adversely affect our cash flow.
The borrowings under the term loan facility and the senior secured asset-based revolving credit
facility comprise our credit facilities and bear interest at variable rates. Other debt we incur also could
be variable rate debt. If market interest rates increase, variable rate debt will create higher debt service
requirements, which could adversely affect our cash flow. While we have entered and may in the future
enter into agreements limiting our exposure to higher interest rates, any such agreements may not offer
complete protection from this risk.
Our debt agreements contain restrictions that could limit our flexibility in operating our business.
Our credit facilities and the indentures governing our notes contain various covenants that could
limit our ability to engage in specified types of transactions. These covenants limit our and our
restricted subsidiaries’ ability to, among other things:
• incur additional indebtedness, issue disqualified stock or issue certain preferred stock;
• pay dividends and make certain distributions, investments and other restricted payments;
• create certain liens or encumbrances;
• sell assets;
• enter into transactions with our affiliates;
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