Dollar General 2006 Annual Report Download - page 18

with litigation that could negatively affect customer perception of our business, regardless of
whether the allegations are valid or whether we are ultimately found liable. As a result, litigation
may adversely affect our business, financial condition and results of operations. Please see Note
8 to the consolidated financial statements for further details regarding certain of these pending
matters.
In addition, from time to time third parties may claim that our trademarks or product
offerings infringe upon their proprietary rights. Any such claim, whether or not it has merit,
could be time-consuming and distracting for executive management, result in costly litigation,
cause changes to our private label offerings or delays in introducing new private label offerings,
or require us to enter into royalty or licensing agreements. As a result, any such claim could have
a material adverse effect on our business, results of operations and financial condition.
Our credit facility and other debt instruments place financial and other restrictions on
us. Our debt obligations and financings have certain financial covenants and limits on our ability
to incur additional indebtedness, to sell assets and to make certain payments. The lender’ s
ongoing obligation to extend credit under these financings will depend upon our compliance with
these and other covenants. In addition, we may need to incur additional indebtedness which may
have important consequences, including placing us at a competitive disadvantage compared to
our competitors that may have proportionately less debt, limiting our flexibility in planning for
changes in our business and the industry and making us more vulnerable to economic downturns
and adverse developments in our business.
Our profitability could decline if we substantially exceed our anticipated borrowings
under our amended credit facility. The amount of borrowings under our amended credit facility
may fluctuate materially, particularly given the seasonality of our business, depending on various
factors, including the time of year, our need to acquire merchandise inventory, changes to our
merchandising plans and initiatives, changes to our capital expenditure plans and the occurrence
of other events or transactions that may require funding through the amended credit facility. If
these borrowings under our amended credit facility exceed our anticipated levels, our interest
expense would increase beyond our expectations and a decrease in our profitability could result.
Our annual and quarterly operating results may fluctuate significantly and could fall
below the expectations of securities analysts and investors due to a number of factors, some of
which are beyond our control, resulting in a decline in the price of our securities. Our annual
and quarterly operating results may fluctuate significantly because of several factors, including
those described above. Accordingly, results for any one quarter are not necessarily indicative of
results to be expected for any other quarter or for any year, and revenues and net income for any
particular future period may decrease. In the future, operating results may fall below the
expectations of securities analysts and investors. In that event, the price of our securities could
decrease.
Failure to complete the proposed merger could adversely affect us. On March 11, 2007,
we entered into a merger agreement with affiliates of Kohlberg Kravis Roberts & Co. L.P.
(“KKR”). There is no assurance that the merger agreement and the merger will be approved by
our shareholders or that the other conditions to the completion of the merger will be satisfied.
The current market price of our common stock may reflect a market assumption that the merger
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