Dollar General 2009 Annual Report Download - page 47

$42.0 million in 2008 compared to pro forma 2007 due to improved overall financial performance and
an increase in professional fees in 2008 of $10.4 million compared to pro forma 2007 primarily
reflecting legal expenses related to shareholder litigation.
Litigation Settlement and Related Costs, Net. The $32.0 million in 2008 represents the settlement
of a class action lawsuit filed in response to our 2007 merger, and includes the $40.0 million settlement
plus related expenses of $2.0 million, net of $10.0 million of insurance proceeds received in the fourth
quarter of 2008.
Transaction and Related Costs. The $1.2 million and $101.4 million of expenses recorded in the
2007 Successor and Predecessor periods reflect $1.2 million and $62.0 million, respectively, of expenses
related to our 2007 merger, such as investment banking and legal fees as well as $39.4 million of
compensation expense in the Predecessor period related to stock options, restricted stock and restricted
stock units which fully vested immediately prior to and as a result of our 2007 merger.
Interest Income. Interest income consists primarily of interest on investments. The decrease in
interest income in 2009 compared to 2008 was the result of reduced investments in interest-bearing
instruments and lower interest rates. The decrease in interest income in 2008 compared to the 2007
periods was a result of lower interest rates, partially offset by higher investments.
Interest Expense. The decrease in interest expense in 2009 compared to 2008 was primarily the
result of lower average outstanding long-term obligations and lower interest rates on our term loan.
The significant increase in interest expense in 2008 and the 2007 Successor period is due to
interest on long-term obligations incurred to finance our 2007 merger. We had outstanding variable-rate
debt of $560 million and $623 million as of January 29, 2010 and January 30, 2009, respectively, after
taking into consideration the impact of interest rate swaps. The remainder of our outstanding
indebtedness at January 29, 2010 and January 30, 2009 was fixed rate debt.
Interest expense in 2008 was less than 2007 pro forma interest expense due to lower borrowing
amounts, specifically on our revolving credit agreement and senior subordinated notes, along with lower
interest rates.
See the detailed discussion under ‘‘Liquidity and Capital Resources’’ regarding indebtedness
incurred to finance our 2007 merger along with subsequent repurchases of various long-term obligations
and the related effect on interest expense in the periods presented.
Other (Income) Expense. In 2009, we recorded charges totaling $55.5 million, which primarily
represents losses on debt retirement totaling $55.3 million, and also includes expense of $0.6 million
related to hedge ineffectiveness on certain of our interest rate swaps.
In 2008, we recorded a gain of $3.8 million resulting from the repurchase of $44.1 million of our
senior subordinated notes, offset by expense of $1.0 million related to hedge ineffectiveness on certain
of our interest rate swaps.
During the 2007 Successor period, we recorded an unrealized loss of $4.1 million related to the
change in the fair value of interest swaps prior to the designation of such swaps as cash flow hedges in
October 2007, offset by earnings of $1.7 million under the contractual provisions of the swap
agreements. Also during the 2007 Successor period, we recorded $6.2 million of expenses related to
consent fees and other costs associated with a tender offer for certain notes payable maturing in June
2010 (‘‘2010 Notes’’). Approximately 99% of the 2010 Notes were retired as a result of the tender
offer. The costs related to the tender of the 2010 Notes were partially offset by a $4.9 million gain in
the 2007 Successor period resulting from the repurchase of $25.0 million of our senior subordinated
notes.
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