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# UNITED	STATES

# SECURITIES	AND	EXCHANGE	COMMISSION

# ANNUAL	REPORT	PURSUANT	TO	SECTION	13	OR	15(d)	OF	THE SECURITIES	EXCHANGE	ACT	OF	1934

For	the	fiscal	year	ended	January	29,	2010

# DOLLAR	GENERAL	CORPORATION

(Exact	name	of	registrant	as	specified	in	its	charter)

TENNESSEE

(State	or	other	jurisdiction	of

incorporation	or organization)

(I.R.S.	Employer

Identification	No.)

# 100	MISSION	RIDGE

# GOODLETTSVILLE,	TN	37072

(Address	of	principal	executive	offices,	zip	code)

Registrant's	telephone	number,	including	area	code:	(615)	855-4000

									Securities	registered	pursuant	to	Section	12(b)	of	the	Act:

									Securities	registered	pursuant	to	Section	12(g)	of	the	Act:	None

									Indicate	by	check	mark	if	the	registrant	is	a	well-known	seasoned	issuer,	as	defined	in	Rule	405	of	the	Securities	Act.	Yes	ý				No	o

									Indicate	by	check	mark	if	the	registrant	is	not	required	to	file	reports	pursuant	to	Section	13	or	15(d)	of	the	Act.	Yes	o				No	ý

									Indicate	by	check	mark	whether	the	registrant	(1)	has	filed	all	reports	required	to	be	filed	by	Section	13	or	15(d)	of	the	Securities	Exchange	Act	of	1934	during	the preceding	12	months	(or	for	such	shorter	period	that	the	registrant	was	required	to	file	such	reports),	and	(2)	has	been	subject	to	such	filing	requirements	for	the	past 90	days.	Yes	ý				No	o

									Indicate	by	check	mark	whether	the	registrant	has	submitted	electronically	and	posted	on	its	corporate	Web	site,	if	any,	every	Interactive	Data	File	required	to	be submitted	and	posted	pursuant	to	Rule	405	of	Regulation	S-T	during	the	preceding	12	months	(or	for	such	shorter	period	that	the	registrant	was	required	to	submit	and post	such	files).	Yes	o				No	o

									Indicate	by	check	mark	if	disclosure	of	delinquent	filers	pursuant	to	Item	405	of	Regulation	S-K	is	not	contained	herein,	and	will	not	be	contained,	to	the	best	of registrant's	knowledge,	in	definitive	proxy	or	information	statements	incorporated	by	reference	in	Part	III	of	this	Form	10-K	or	any	amendment	to	this	Form	10-K.				ý

									Indicate	by	check	mark	whether	the	registrant	is	a	large	accelerated	filer,	an	accelerated	filer,	a	non-accelerated	filer,	or	a	smaller	reporting	company.	See	the definitions	of	"large	accelerated	filer,"	"accelerated	filer"	and	"smaller	reporting	company"	in	Rule	12b-2	of	the	Exchange	Act.

Large	accelerated	filer	o

Accelerated	filer	o

Non-accelerated	filer	ý

Smaller	reporting	company	o

(Do	not	check	if	a

smaller	reporting	company)

									Indicate	by	check	mark	whether	the	registrant	is	a	shell	company	(as	defined	in	Rule	12b-2	of	the	Exchange	Act).	Yes	o				No	ý

									The	aggregate	fair	market	value	of	the	registrant's	common	stock	outstanding	and	held	by	non-affiliates	as	of	July	31,	2009	was	$10,484,239,	all	of	which	was owned	by	employees	of	the	registrant	and	not	traded	on	a	public	market	at	that	time.	For	this	purpose,	directors,	executive	officers	and	greater	than	10%	record shareholders	are	considered	the	affiliates	of	the	registrant.

# DOCUMENTS	INCORPORATED	BY	REFERENCE

									Certain	of	the	information	required	in	Part	III	of	this	Form	10-K	is	incorporated	by	reference	to	the	Registrant's	definitive	proxy	statement	to	be	filed	for	the Annual	Meeting	of	Shareholders	to	be	held	on	June	3,	2010.

# INTRODUCTION

# General

								Solely	for	convenience,	our	trademarks	and	tradenames	referred	to	in	this	document	may	appear	without	the	®	or TM 	symbol,	but	such	references	are	not	intended to	indicate,	in	any	way,	that	we	will	not	assert,	to	the	fullest	extent	under	applicable	law,	our	rights	or	the	right	to	these	trademarks	and	tradenames.

# Forward-Looking	Statements

								"Forward-looking	statements"	within	the	meaning	of	the	federal	securities	laws	are	included	throughout	this	report,	particularly	under	the	headings	"Business"	and "Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operations,"	among	others.	You	can	identify	these	statements	because	they	are	not	solely statements	of	historical	fact	or	they	use	words	such	as	"may,"	"will,"	"should,"	"believe,"	"anticipate,"	"project,"	"plan,"	"expect,"	"estimate,"	"objective,"	"forecast," "goal,"	"potential,"	"opportunity,"	"intend,"	"will	likely	result,"	or	"will	continue"	and	similar	expressions	that	concern	our	strategy,	plans,	intentions	or	expectations. For	example,	all	statements	relating	to	our	estimated	and	projected	earnings,	costs,	expenditures,	cash	flows	and	financial	results,	our	plans,	objectives	and	expectations for	future	operations,	growth	or	initiatives,	or	the	expected	outcome	or	impact	of	pending	or	threatened	litigation	are	forward-looking	statements.

								All	forward-looking	statements	are	subject	to	risks	and	uncertainties	that	may	change	at	any	time,	so	our	actual	results	may	differ	materially	from	those	that	we expected.	We	derive	many	of	these	statements	from	our	operating	budgets	and	forecasts,	which	are	based	on	many	detailed	assumptions	that	we	believe	are	reasonable. However,	it	is	very	difficult	to	predict	the	impact	of	known	factors,	and	we	cannot	anticipate	all	factors	that	could	affect	our	actual	results.	Important	factors	that	could cause	actual	results	to	differ	materially	from	the	expectations	expressed	in	our	forward-looking	statements	are	disclosed	under	"Risk	Factors"	in	Part	I,	Item	1A	and elsewhere	in	this	document	(including,	without	limitation,	in	conjunction	with	the	forward-looking	statements	themselves	and	under	the	heading	"Critical	Accounting Policies	and	Estimates").	All	written	and	oral	forward-looking	statements	we	make	in	the	future	are	expressly	qualified	in	their	entirety	by	these	cautionary	statements	as well	as	other	cautionary	statements	that	we	make	from	time	to	time	in	our	other	SEC	filings	and	public	communications.	You	should	evaluate	all	of	our	forward-looking statements	in	the	context	of	these	risks	and	uncertainties.

								The	forward-looking	statements	included	in	this	report	are	made	only	as	of	the	date	hereof.	We	undertake	no	obligation	to	publicly	update	or	revise	any	forward- looking	statement	as	a	result	of	new	information,	future	events	or	otherwise,	except	as	otherwise	required	by	law.

# PART	I

								We	are	the	largest	discount	retailer	in	the	United	States	by	number	of	stores,	with	8,877	stores	located	in	35	states	as	of	February	26,	2010,	primarily	in	the southern,	southwestern,	midwestern	and	eastern	United	States.	We	offer	a	broad	selection	of	merchandise,	including	consumables,	seasonal,	home	products	and	apparel. Our	merchandise	includes	high	quality	national	brands	from	leading	manufacturers,	as	well	as	comparable	quality	private	brand	selections	with	prices	at	substantial discounts	to	national	brands.	We	offer	our	merchandise	at	everyday	low	prices	(typically	$10	or	less)	through	our	convenient	small-box	(approximately	7,100	square feet)	locations.

# Our	History

								J.L.	Turner	founded	our	Company	in	1939	as	J.L.	Turner	and	Son,	Wholesale.	We	were	incorporated	as	a	Kentucky	corporation	under	the	name	J.L.	Turner	& Son,	Inc.	in	1955,	when	we	opened	our	first	Dollar	General	store.	We	changed	our	name	to	Dollar	General	Corporation	in	1968	and	reincorporated	in	1998	as	a Tennessee	corporation.	Our	common	stock	was	publicly	traded	from	1968	until	July	2007,	when	we	merged	with	an	entity	controlled	by	investment	funds	affiliated	with Kohlberg	Kravis	Roberts	&	Co.,	L.P.,	or	KKR.	On	November	13,	2009	our	common	stock	again	became	publicly	traded	upon	our	completion	of	an	initial	public offering	of	39,215,000	shares	of	our	common	stock,	including	22,700,000	newly	issued	shares.	We	are	a	subsidiary	of	Buck	Holdings,	L.P.,	a	Delaware	limited partnership	controlled	by	KKR,	which	beneficially	owns	over	85%	of	our	outstanding	common	stock.

# Our	Business	Model

								Our	long	history	of	profitable	growth	is	founded	on	a	commitment	to	a	relatively	simple	business	model:	providing	a	broad	base	of	customers	with	their	basic everyday	and	household	needs,	supplemented	with	a	variety	of	general	merchandise	items,	at	everyday	low	prices	in	conveniently	located,	small-box	stores.

								Fiscal	year	2009	represented	our	20th	consecutive	year	of	same-store	sales	growth.	This	growth,	regardless	of	economic	conditions,	suggests	that	we	have	a	less cyclical	model	than	most	retailers	and,	we	believe,	is	a	result	of	our	compelling	value	and	convenience	proposition.	Both	customer	traffic	and	average	transaction amount	have	increased	during	2008	and	2009	despite	a	very	difficult	economic	environment,	and	our	research	indicates	that	in	excess	of	95%	of	new	and	existing customers	plan	to	continue	shopping	with	us	after	the	economy	recovers.

								Our	attractive	store	economics,	including	a	relatively	low	initial	investment	and	simple,	low	cost	operating	model,	have	allowed	us	to	grow	our	store	base	to	over 8,800	stores	in	35	states,	and	provides	us	significant	opportunities	to	continue	our	strategy	of	profitable	store	growth.

								Compelling	Value	and	Convenience	Proposition.				Our	ability	to	deliver	highly	competitive	prices	on	national	brand	and	quality	private	brand	products	in convenient	locations	and	our	easy	in	and	out	shopping	format	provide	a	compelling	shopping	experience	and	distinguish	us	from	other	discount,	convenience	and drugstore	retailers.	Our	slogan,	"Save	time.	Save	money.	Every	day!"	summarizes	our	appeal	to	customers.	We	believe	our	ability	to	effectively	deliver	both	value	and convenience	allows	us	to	succeed	in	small	markets	with	limited	shopping	alternatives,	as	well	as	to	profitably	coexist	alongside

larger	retailers	in	more	competitive	markets.	Our	compelling	value	and	convenience	proposition	is	evidenced	by	the	following	attributes	of	our	business	model:

•Convenient	Locations.		Our	stores	are	conveniently	located	in	a	variety	of	rural,	suburban	and	urban	communities,	currently	with	more	than	60%	serving communities	with	populations	of	less	than	20,000.	In	more	densely	populated	areas,	our	small-box	stores	typically	serve	the	closely	surrounding neighborhoods.	The	majority	of	our	customers	live	within	three	to	five	miles,	or	a	10-minute	drive,	of	our	stores.	Our	close	proximity	to	customers	drives customer	loyalty	and	trip	frequency	and	makes	us	an	attractive	alternative	to	large	discount	and	other	large-box	retail	and	grocery	stores	which	are	often located	farther	away.	Our	low	cost	economic	model	enables	us	to	serve	many	areas	with	fewer	than	2,000	households.

•Time-Saving	Shopping	Experience.		We	also	provide	customers	with	a	highly	convenient	shopping	experience.	Our	stores'	smaller	size	allows	us	to	locate parking	near	the	front	entrance	and	offers	quick	store	navigation.	Significant	work	to	upgrade	our	in-store	shopping	experience	and	improve	shopping efficiency	over	the	past	two	years	include	improved	signage	and	product	adjacencies,	better	organized	and	stocked	shelves,	efforts	to	unclutter	aisles	and emphasizing	the	use	of	shopping	carts.	We	attempt	to	adjust	our	store	operating	hours	to	meet	the	needs	of	our	customers.	Our	product	offering	includes most	necessities,	such	as	basic	packaged	and	refrigerated	food	and	dairy	products,	cleaning	supplies,	paper	products,	and	health	and	beauty	care	items,	as well	as	greeting	cards,	party	supplies,	apparel,	housewares,	hardware	and	automotive	supplies,	among	others.	This	broad	offering	allows	our	customers	to fulfill	their	routine	shopping	needs	and	minimizes	their	need	to	shop	elsewhere.

•Everyday	Low	Prices	on	Quality	Merchandise.		Our	research	indicates	that	we	offer	a	price	advantage	over	most	food	and	drug	retailers	and	that	our prices	are	highly	competitive	with	even	the	largest	discount	retailers.	Our	ability	to	offer	everyday	low	prices	on	quality	merchandise	is	supported	by	our low-cost	operating	structure	and	our	strategy	to	maintain	a	limited	number	of	stock	keeping	units	("SKUs")	per	category,	which	we	believe	helps	us maintain	strong	purchasing	power.	In	Dollar	General	stores,	most	items	are	priced	below	$10,	with	approximately	25%	at	$1	or	less.	We	offer	quality national	brands	at	these	everyday	low	prices	in	addition	to	offering	our	own	comparable	quality	private	brands	at	value	prices.

								Attractive	Store	Economics.				The	traditional	Dollar	General	store	size,	design	and	location	requires	minimal	initial	investment	and	low	maintenance	capital expenditures.	Our	typical	locations	involve	a	modest,	no-frills	building	design,	which	helps	keep	our	rental	and	other	fixed	overhead	costs	relatively	low.	When	coupled with	our	new	stores'	ability	to	generally	deliver	positive	cash	flow	in	the	first	year,	this	low	capital	expenditure	requirement	typically	results	in	pay	back	of	capital	in	less than	two	years.	Moreover,	the	financial	performance	of	our	recently-opened	stores	appears	to	be	outpacing	many	of	our	existing	stores,	which	we	believe	is	a	result	of significant	enhancements	in	recent	years	to	our	market	analysis,	real	estate	site	selection,	new	store	approval	processes	and	new	store	marketing	program.

								Our	lean	store	staffing	model	contributes	to	our	relatively	low	operating	costs	and	efficient	store	operations.

								Substantial	Growth	Opportunities.				We	believe	we	have	substantial	growth	opportunities	through	both	improved	profitability	of	existing	stores	and	new	store openings.	We	are	pursuing	a	number	of	initiatives	to	drive	same-store	sales	growth,	increase	gross	margins	and	reduce	operating	costs,	which	should	continue	to	improve the	profitability	of	our	existing	store	base.	In	addition,	we	have	identified	significant	opportunities	to	add	new	stores	in	both	existing	and	new	markets.	We	believe	we have	the	long-term	potential	in	the	U.S.	to	more	than	double	our	existing	store	base	while	maintaining	or	improving	our	return	on	capital.	See	"Our	Growth	Strategy"	for additional	details.

								Experienced	Management	Team.				Our	experienced	senior	management	team	has	an	average	of	25	years	of	retail	experience.	Eight	senior	executives	(Senior	Vice President	or	higher)	with	significant	retail	experience,	in	addition	to	numerous	executives	at	the	Vice	President	level,	have	joined	the	Dollar	General	management	team since	our	2007	merger.	These	executives	are	primarily	in	merchandising,	distribution	and	transportation	functions,	as	well	as	key	support	roles	including	store development,	human	resources,	finance	and	information	technology.	This	expanded	team,	including	veteran	Dollar	General	leaders,	has	demonstrated	strong	leadership capabilities	and	has	made	significant	progress	in	developing	and	implementing	world-class	retailing	processes	at	Dollar	General.

# Our	Growth	Strategy

								We	believe	we	have	the	right	strategy	and	execution	capabilities	to	capitalize	on	the	considerable	growth	opportunities	afforded	by	our	business	model.	We	derive our	growth	from	three	distinct	sources,	including	increasing	store	sales,	expanding	operating	profit	rates	and	growing	our	store	base.

								Increasing	Sales.				We	believe	the	combination	of	our	necessity-driven	product	mix	and	our	attractive	value	proposition,	including	a	well-balanced	merchandising approach,	provide	a	strong	basis	for	increased	sales.	Our	average	sales	per	square	foot	increased	to	$195	in	2009	from	$180	in	2008	and	$165	in	2007.	We	believe	we will	continue	to	have	additional	opportunities	to	increase	our	store	productivity	through	continued	improvements	in	space	utilization,	better	in-stock	positions	and additional	operating	and	merchandising	initiatives,	including:

•New	products	and	categories.		We	have	redefined	our	product	line	review	processes	significantly	over	the	past	two	years,	aiding	our	efforts	to	identify areas	for	new	product	expansion	and	to	more	quickly	identify	and	eliminate	underperforming	items,	resulting	in	substantial	sales	increases.

•Improved	space	utilization.		We	intend	to	continue	to	expand	product	offerings	and	increase	sales	per	square	foot	through	improved	space	utilization, including	increased	shelf	height,	efficient	utilization	of	floor	and	shelf	space	and	improved	product	adjacencies.

•Improved	execution	in	home,	apparel	and	seasonal.		Most	of	our	recent	merchandising	focus	and	changes	have	centered	on	consumables	which	have demonstrated	strong	sales	growth	as	a	result.	Our	current	merchandising	management	team	has	significant	experience	in	basic	consumer	trends, merchandise	presentation,	pricing	and	managing	end-of-season	sell-through	and	has	begun	to	intensify	our	focus	on	the	apparel,	home	and	seasonal categories.

•Improving	store	standards	and	operating	hours.		We	are	continuing	to	define	and	improve	our	store	standards	and	to	adjust	our	store	hours	to	better enhance	our	customers'	experience.	We	believe	that	these	improvements	will	continue	to	increase	customer	traffic	and	average	transaction	amount.

•Expanding	our	loyal	customer	base.		Our	research	indicates	that	over	85%	of	our	customers	have	shopped	at	Dollar	General	for	over	two	years, indicating	that	we	have	a	highly	loyal	customer	base.	In	addition,	our	most	recent	surveys	indicate	that	our	retention	rate	of	new	customers	has	increased significantly	over	the	past	year,	with	approximately	94%	of	these	customers	indicating	that	they	plan	to	continue	shopping	in	our	stores	with	either	the same	or	increased	frequency.	We	believe	that	our	merchandising	and	operating	initiatives	will	result	in	increased	traffic	and	sales	and	will	continue	to drive	growth	in	our	customer	base.

•Remodels	and	Relocations.		We	believe	we	have	significant	opportunities	available	for	our	relocation	and	remodel	programs,	which	will	further	drive sales	growth.

								Expanding	Operating	Profit	Rate.				Another	key	component	of	our	growth	strategy	is	improving	our	operating	profit	rate	through	enhanced	gross	profit	and expense	reduction	initiatives.	Our	financial

results	during	2008	and	2009	reflect	the	favorable	outcome	of	many	of	these	initiatives,	and	we	believe	that	we	can	build	on	our	recent	strong	financial	results	by continuing	to	enhance	these	initiatives	which	include:

•Merchandising.		We	continue	to	improve	the	overall	profitability	of	our	merchandising	decisions.	Our	category	management	processes	have	resulted	in improved	product	selection	and	pricing	decisions,	contributing	to	our	improved	gross	profit	margins.	We	plan	to	expand	our	category	management processes,	with	the	intent	of	positively	impacting	our	overall	sales	and	operating	profit	rates.

•Sourcing.		In	2009,	we	imported	approximately	$629	million	of	goods,	or	8%	of	total	purchases	at	cost.	We	believe	we	have	the	potential	to	directly source	a	larger	portion	of	our	products	at	significant	savings	to	current	costs.	We	are	currently	increasing	our	direct	foreign	sourcing	efforts,	which	we believe	offer	significant	opportunity	for	gross	profit	enhancement	in	the	future.

•Private	brand.		Improving	the	consistency,	quality,	appearance	and	breadth	of	our	private	brand	offerings	has	yielded	increased	penetration	over	the	past two	years,	and	we	intend	to	continue	to	drive	our	private	brand	penetration	going	forward.	Generally,	private	brand	items	have	higher	gross	profit margins	than	similar	national	brand	items.	Our	private	brand	program	complements	our	model	of	offering	customers	nationally	branded	merchandise	at everyday	low	prices.	Since	2007,	we	have	added	approximately	700	net	new	private	brand	items,	predominantly	in	consumables,	increasing	our	total number	of	such	items	to	approximately	1,300	SKUs.	As	a	percentage	of	consumables	sales,	we	increased	private	brand	penetration	from	approximately 17%	in	2007	to	approximately	21%	in	2009.	We	expect	to	expand	on	these	efforts	in	the	future	in	addition	to	greatly	increasing	the	role	of	private	brands in	our	non-consumable	offerings.

•Inventory	shrink	rate	reduction.		The	reduction	in	shrink	rate	since	2007	has	played	a	key	role	in	increasing	our	gross	profit	margin.	The	reduction	is	the result	of	the	focus	and	relentless	efforts	of	our	field	management	team	and	the	introduction	of	improved	indicator	metrics	at	the	stores,	in	conjunction with	improved	hiring	and	training	practices,	and	lower	store	manager	turnover.	We	continue	to	improve	and	automate	our	shrink	indicator	tools,	and	we believe	we	have	opportunity	for	further	shrink	improvement.

•Other	cost	reduction	efforts.		We	continually	look	for	ways	to	improve	our	cost	structure	and	enhance	efficiencies	throughout	the	organization. Significant	current	cost	reduction	efforts	include	implementing	additional	safety	measures	to	further	reduce	workers'	compensation	and	general	liability insurance	costs,	identifying	additional	efficiencies	in	distribution	and	transportation,	labor	productivity	initiatives,	continuing	our	store	rent	reduction work,	implementing	more	energy	management	tools	and	programs,	expanding	our	recycling	efforts	and	improving	employee	retention.

								Growing	Our	Store	Base.				Based	on	a	detailed,	market-by-market	analysis,	we	believe	we	have	significant	potential	to	increase	our	number	of	stores	in	existing and	new	markets.	Our	recent	market	analysis	suggests	there	are	as	many	as	12,000	opportunities,	the	majority	of	which	are	located	in	the	35	states	where	we	currently operate.	Also	included	are	significant	opportunities	to	open	stores	in	new	markets,	most	notably	in	states	on	the	Pacific	coast	and	in	certain	areas	of	the	Northeast.	Based on	the	initial	successes	of	our	2008	and	2009	new	store	openings,	we	have	confidence	in	our	real	estate	disciplines	and	in	our	ability	to	identify,	open	and	operate successful	new	stores.	As	a	result,	we	believe	that	at	least	our	present	level	of	new	store	growth	is	sustainable	for	the	foreseeable	future.	In	addition,	we	also	believe	that in	the	current	real	estate	market	environment	there	may	be	opportunities	to	negotiate	lower	rent	and	construction	costs	and	to	improve	the	overall	quality	of	our	sites	at attractive	rental	rates,	increasing	our	opportunity	to	improve	profitability.

# Our	Merchandise

								We	offer	a	focused	assortment	of	everyday	necessities,	which	drive	frequent	customer	visits,	and	key	items	in	a	broad	range	of	general	merchandise	categories.	Our product	assortment	provides	the	opportunity	for	our	customers	to	address	most	of	their	basic	shopping	needs	with	one	trip.	We	sell	high	quality	national	brands	from leading	manufacturers	such	as	Procter	&	Gamble,	Kimberly	Clark,	Unilever,	Kellogg's,	General	Mills,	Nabisco,	Coca-Cola	and	PepsiCo,	which	are	typically	found	at higher	retail	prices	elsewhere.	Additionally,	our	private	brand	selections	offer	consumers	even	greater	value	with	options	to	purchase	entry	price	point	items	and	national brand	equivalent	products	at	substantial	discounts	to	the	national	brand.

								Our	stores	generally	offer	approximately	10,000	to	12,000	total	SKUs	per	store.	The	number	of	SKUs	in	a	given	store	can	vary	based	upon	the	store's	size, geographic	location,	merchandising	initiatives,	seasonality,	and	other	factors.	Most	of	our	products	are	priced	at	$10	or	less,	with	approximately	25%	at	$1	or	less.

# 								We	separate	our	merchandise	into	the	following	categories:

								Consumables	is	our	largest	category	and	includes	the	following:

•Paper	and	cleaning:		Paper	towels,	bath	tissue,	paper	dinnerware,	trash	and	storage	bags,	laundry	and	other	home	cleaning	supplies.	National manufacturers	and	brands	include	Procter	&	Gamble,	Kimberly	Clark,	Unilever,	Tide,	Clorox,	Hefty	and	others.	Our	private	brands	include	DG	home TM and	Smart	&	Simple TM .

•Food:		Packaged	food	and	perishables.	National	brands	include	Kellogg's,	General	Mills,	Nabisco,	Campbell's	and	others.	Our	private	brand	is	Clover Valley TM .	We	also	carry	quality	regional	brands	of	milk,	eggs	and	other	perishable	items.

•Beverages	and	snacks:		Beverages,	candy	and	snacks.	National	brands	include	Coke,	Pepsi,	Hershey,	Frito-Lay	and	others.	Our	private	brands	include Clover	Valley	and	Sweet	Smiles TM .

•Health	and	beauty:		Health	aids,	over-the-counter	medicines	and	personal	care	products.	National	brands	include	Tylenol,	Prilosec,	Olay,	Covergirl, Johnson	&	Johnson,	Pantene	and	others.	Our	private	brands	include	DG	health TM 	and	DG	body TM .	Additionally,	we	are	the	only	retailer	that	carries	the full	line	of	Rexall-branded	vitamins	and	supplements.

•TM Pet:		Pet	supplies.	National	brands	include	Alpo,	Purina,	Pedigree,	Milkbone	and	others.	Our	private	brands	are	EverPet 	and	EverPet	Basics TM .

								Seasonal:				Seasonal	products	include	decorations,	toys,	batteries,	small	electronics,	greeting	cards,	stationery,	prepaid	cell	phones	and	accessories,	gardening supplies,	hardware,	automotive	and	home	office	supplies.	National	brands	include	Mead	stationery,	Bic	lighters,	Crayola	and	Miracle	Gro	potting	soil.	Our	private brands	are	DG	office TM ,	and	Holiday	Style TM .	Additional	private	brands	include	True	Living	Outdoors TM 	and	True	Living	Kids TM .

								Home	Products:				Home	products	includes	kitchen	supplies,	cookware,	small	appliances,	light	bulbs,	storage	containers,	frames,	candles,	craft	supplies	and	bed	and bath	soft	goods.	National	brands	include	General	Electric	small	appliances	and	Sterilite	storage	containers.	Our	private	brands	include	DG	home	and	True	Living.

								Apparel:				Apparel	includes	casual	everyday	apparel	for	infants,	toddlers,	girls,	boys,	women	and	men,	as	well	as	socks,	underwear,	disposable	diapers,	shoes	and accessories.	Our	private	brands	are	DG	baby TM ,	and	Open	Trails TM .	We	hold	an	exclusive	license	to	Bobbie	Brooks	clothing.	We	also	hold	a	license	to	the	Fisher	Price brand	for	certain	items	of	children's	clothing.

								The	percentage	of	net	sales	of	each	of	our	four	categories	of	merchandise	for	the	periods	indicated	below	was	as	follows:

|  | 2009 | 2008 | 2007 |
| :--- | :--- | :--- | :--- |
| Consumables | 70.8% | 69.3% | 66.5% |
| Seasonal | 14.5% | 14.6% | 15.9% |
| Home\tproducts | 7.4% | 8.2% | 9.2% |
| Apparel | 7.3% | 7.9% | 8.4% |

								Our	home	products	and	seasonal	categories	typically	account	for	the	highest	gross	profit	margins,	and	the	consumables	category	typically	accounts	for	the	lowest gross	profit	margin.

# The	Dollar	General	Store

								The	average	Dollar	General	store	has	approximately	7,100	square	feet	of	selling	space	and	is	typically	operated	by	a	manager,	an	assistant	manager	and	three	or more	sales	clerks.	Approximately	55%	of	our	stores	are	in	freestanding	buildings,	43%	in	strip	shopping	centers	and	2%	are	in	downtown	buildings.	Most	of	our customers	live	within	three	miles,	or	a	10	minute	drive,	of	our	stores.	Our	store	strategy	features	low	initial	capital	expenditures,	limited	maintenance	capital,	low occupancy	and	operating	costs,	and	a	focused	merchandise	offering	within	a	broad	range	of	categories,	allowing	us	to	deliver	low	retail	prices	while	generating	strong cash	flows	and	investment	returns.	A	typical	new	store	in	2009	required	approximately	$230,000	of	equipment,	fixtures	and	initial	inventory,	net	of	payables.

								We	generally	have	not	encountered	difficulty	locating	suitable	store	sites	in	the	past.	Given	the	size	of	the	communities	that	we	are	targeting,	we	believe	that	there is	ample	opportunity	for	new	store	growth	in	existing	and	new	markets.	In	addition,	the	current	real	estate	market	is	providing	an	opportunity	for	us	to	access	higher quality	sites	at	lower	rates	than	in	recent	years.	Also,	we	believe	we	have	significant	opportunities	available	for	our	relocation	and	remodel	programs.	Remodeled	stores require	approximately	$65,000	for	equipment	and	fixtures	while	the	cost	of	relocations	is	approximately	$110,000	for	equipment,	fixtures	and	additional	inventory,	net of	payables.	We	have	increased	the	combined	number	of	remodeled	and	relocated	stores	to	450	in	2009	as	compared	to	404	in	2008	and	300	in	2007.

								Our	recent	store	growth	is	summarized	in	the	following	table:

(a) Includes	275	stores	closed	in	2007	as	a	result	of	certain	strategic	initiatives.

# Our	Customers

								Our	customers	seek	value	and	convenience.	Depending	on	their	financial	situation	and	geographic	proximity,	customers	rely	on	Dollar	General	for	varying	levels	of their	basic	needs,	including	fill-in	shopping,	periodic	routine	trips	to	stock	up	on	household	items,	and	weekly	or	more	frequent	trips	to	meet	most	of	the	customer's essential	needs.	Our	convenient	locations,	time-saving	shopping	experience	and	everyday	low	prices	on	quality	merchandise	make	our	stores	a	compelling	alternative	for purchasing	everyday	needs.	In	the	last	year,	we	have	seen	increases	in	the	annual	number	of	shopping	trips	that	our	existing	customer	makes	to	Dollar	General	as	well	as the	amount	spent	during	each	trip.

In	addition,	we	believe	that	our	value	proposition	is	attracting	customers	from	a	wide	range	of	income	brackets	and	life	stages	and	that	those	customers	are	planning	to continue	shopping	with	us	for	the	foreseeable	future.

								In	2008,	we	engaged	Nielsen	to	assist	us	in	updating	our	proprietary	customer	research	in	an	effort	to	better	understand	our	customers,	their	purchasing	habits	and preferences.	The	results	of	this	study	indicate	that	our	highest	frequency	and	highest	spending	customers,	comprising	approximately	50%	of	our	sales,	are	those	for whom	low	prices	and	value	are	critical	to	their	everyday	shopping	decisions.	In	August	of	2009,	we	updated	this	study	with	a	customer	survey	designed	to	give	us	insight into	recent	changes	in	our	customer	base.	The	results	of	this	survey	indicate	that,	while	the	description	of	our	core	customer	remains	the	same,	our	stores	are	now attracting	customers	who	had	not	shopped	at	our	stores	previously	because	of	their	perception	of	image	or	quality.	In	addition,	the	percentage	of	shoppers	classified	as one-stop	shoppers	has	increased.	We	believe	that	recent	additions	to	our	merchandise	offering,	improvements	to	store	operations	and	expansion	of	operating	hours, along	with	our	consistent	value	proposition,	are	resonating	well	with	our	existing	customers	and	have	been	critical	to	our	success	in	attracting	and	retaining	new customers.	Based	on	additional	proprietary	survey	results,	management	believes	that	in	excess	of	95%	of	our	current	customers	expect	to	shop	our	stores	with	the	same or	greater	frequency	after	the	economy	improves.

								Based	on	Nielsen	Homescan	Panel	estimates	of	Dollar	General	shoppers,	we	estimate	that	only	41%	of	the	population	in	our	trade	areas,	defined	as	the	counties	in which	we	have	stores,	has	shopped	at	Dollar	General	in	the	past	year.	We	believe	that	the	remaining	59%	represents	an	opportunity	to	grow	our	customer	base.	We	are striving	to	continue	to	improve	on	the	quality,	selection	and	pricing	of	our	merchandise	and	upgrade	our	store	standards	in	order	to	attract	and	retain	increasing	numbers and	demographics	of	customers.

# Our	Suppliers

								We	purchase	merchandise	from	a	wide	variety	of	suppliers	and	maintain	direct	buying	relationships	with	many	producers	of	national	brand	name	merchandise,	such as	Procter	&	Gamble,	Kimberly	Clark,	Unilever,	Kellogg's,	General	Mills,	Nabisco,	Coca-Cola	and	PepsiCo.	Despite	our	broad	offering,	we	maintain	only	a	limited number	of	SKUs	per	category,	giving	us	a	pricing	advantage	in	dealing	with	our	suppliers.	Approximately	9%	and	6%	of	our	purchases	in	2009	were	from	our	largest and	second	largest	suppliers,	respectively.	Our	private	brands	rely	upon	a	diversified	supplier	base.	We	directly	imported	approximately	8%	of	our	purchases	at	cost (13%	of	our	purchases	at	retail)	in	2009.	Our	vendor	arrangements	generally	provide	for	payment	for	such	merchandise	in	U.S.	dollars.

								We	have	not	experienced	any	difficulty	in	obtaining	sufficient	quantities	of	core	merchandise	and	believe	that,	if	one	or	more	of	our	current	sources	of	supply became	unavailable,	we	would	be	able	to	obtain	alternative	sources	without	experiencing	a	substantial	disruption	of	our	business.

# Distribution,	Transportation	and	Inventory	Management

								Our	stores	are	supported	by	nine	distribution	centers	located	strategically	throughout	our	geographic	footprint.	Of	these	nine,	we	lease	three	and	own	the	other	six. We	lease	additional	temporary	warehouse	space	as	necessary	to	support	our	distribution	needs.	We	believe	that	our	distribution	network	is	well-positioned	to	support	our planned	growth	for	the	near	future.	Over	the	past	few	years	we	have	made	significant	investments	in	facilities,	technological	improvements	and	upgrades,	and	we continue	to	improve	work	processes,	all	of	which	increase	our	efficiency	and	ability	to	support	our	merchandising	and	operations	initiatives	as	well	as	our	new	store growth.	We	continually	analyze	and	rebalance	the	network	to	ensure	that	it	remains	efficient	and	provides	the	service	our	stores	require.	See	"—Properties"	for additional	information	pertaining	to	our	distribution	centers.

								In	addition,	we	have	actively	sought	to	improve	our	inventory	turns,	and	we	believe	that	there	remains	opportunity	for	improvement.	Initiatives	along	this	front have	included	reducing	excess	inventory	in	stores	and	better	inventory	tracking.	We	turned	our	inventory	approximately	5.3	times	over	the	most	recent	four	quarters

# Seasonality

								Our	business	is	seasonal	to	a	certain	extent.	Generally,	our	highest	sales	volume	occurs	in	the	fourth	quarter,	which	includes	the	Christmas	selling	season,	and	the lowest	occurs	in	the	first	quarter.	In	addition,	our	quarterly	results	can	be	affected	by	the	timing	of	new	store	openings	and	store	closings,	the	amount	of	sales	contributed by	new	and	existing	stores,	as	well	as	the	timing	of	certain	holidays.	We	purchase	substantial	amounts	of	inventory	in	the	third	quarter	and	incur	higher	shipping	costs and	higher	payroll	costs	in	anticipation	of	the	increased	sales	activity	during	the	fourth	quarter.	In	addition,	we	carry	merchandise	during	our	fourth	quarter	that	we	do not	carry	during	the	rest	of	the	year,	such	as	gift	sets,	holiday	decorations,	certain	baking	items,	and	a	broader	assortment	of	toys	and	candy.

								The	following	table	reflects	the	seasonality	of	net	sales,	gross	profit,	and	net	income	(loss)	by	quarter	for	each	of	the	quarters	of	our	three	most	recent	fiscal	years. All	of	the	quarters	reflected	below	are	comprised	of	13	weeks	(see	note	(d)	regarding	results	for	the	second	quarter	of	2007).

| (in	millions) | Quarter | Quarter | Quarter | Quarter |
| :--- | :--- | :--- | :--- | :--- |
| Year\tEnded\tJanuary\t29,\t2010 |  |  |  |  |
| Net\tsales | $2,779.9 | $2,901.9 | $2,928.8 | $3,185.8 |
| Gross\tprofit | 855.4 | 906.0 | 903.1 | 1,025.4 |
| Net\tincome\t(loss)(a) | 83.0 | 93.6 | 75.6 | 87.2 |
| Year\tEnded\tJanuary\t30,\t2009 |  |  |  |  |
| Net\tsales | 2,403.5 | 2,609.4 | 2,598.9 | 2,845.8 |
| Gross\tprofit | 693.1 | 758.0 | 772.3 | 837.7 |
| Net\tincome\t(loss)(b) | 5.9 | 27.7 | (7.3) | 81.9 |
| Year\tEnded\tFebruary\t1,\t2008 |  |  |  |  |
| Net\tsales | 2,275.3 | (d) | 2,312.8 | 2,559.6 |
| Gross\tprofit(c) | 633.1 | (d) | 646.8 | 740.4 |
| Net\tincome\t(loss)(c) | 34.9 | (d) | (33.0) | 55.4 |

(a) Includes	expenses,	net	of	income	taxes,	of	$82.9	million	related	to	our	initial	public	offering	during	the	fourth	quarter	of	2009.

(b) Includes	expenses,	net	of	income	taxes,	of	$37.4	million	related	to	the	settlement	of	a	shareholder	lawsuit	during	the	third	quarter	of	2008.

(c) Reflects	the	impact	of	certain	strategic	real	estate	and	inventory	management	initiatives	during	2007.

(d) Our	2007	merger	with	Buck	Acquisition	Corp.	("BAC"),	an	entity	controlled	by	KKR,	was	completed	during	the	second	quarter	of	2007.	Net sales,	Gross	profit,	and	Net	income	(loss)	were	$1,648.5,	$438.5	and	$(42.9),	respectively,	for	the	Predecessor	period	from	May	5,	2007	to July	6,	2007,	and	were	$699.1,	$184.7	and	$(27.2),	respectively,	for	the	Successor	period	from	March	6,	2007	to	August	3,	2007.	For comparison	purposes,	these	Successor	results	include	the	results	of	operations	for	BAC	for	the	period	prior	to	the	merger	from	March	6,	2007 (its	formation)	through	July	6,	2007	(reflecting	the	change	in	fair	value	of	interest	rate	swaps).

# Our	Competition

								We	operate	in	the	basic	consumer	packaged	goods	market,	which	is	highly	competitive	with	respect	to	price,	store	location,	merchandise	quality,	assortment	and presentation,	in-stock	consistency,	and	customer	service.	We	compete	with	discount	stores	and	with	many	other	retailers,	including	mass	merchandise,	grocery,	drug, convenience,	variety	and	other	specialty	stores.	These	other	retail	companies	operate	stores	in	many	of	the	areas	where	we	operate,	and	many	of	them	engage	in extensive	advertising	and	marketing	efforts.	Our	direct	competitors	include	Family	Dollar,	Dollar	Tree,	Fred's,	99	Cents	Only	and	various	local,	independent	operators as	well	as	Walmart,	Walgreens,	CVS,	Rite	Aid,	Target	and	Costco,	among	others.	Certain	of	our	competitors	have	greater	financial,	distribution,	marketing	and	other resources	than	we	do.

								We	differentiate	ourselves	from	other	forms	of	retailing	by	offering	consistently	low	prices	in	a	convenient,	small-store	format.	We	believe	that	our	prices	are competitive	due	in	part	to	our	low	cost	operating	structure	and	the	relatively	limited	assortment	of	products	offered.	Historically,	we	have	minimized	labor	by	offering fewer	price	points	and	a	reliance	on	simple	merchandise	presentation.	Purchasing	large	volumes	of	merchandise	within	our	focused	assortment	in	each	merchandise category	allows	us	to	keep	our	average	costs	low,	contributing	to	our	ability	to	offer	competitive	everyday	low	prices	to	our	customers.	See	"—Our	Business	Model" above	for	further	discussion	of	our	competitive	situation.

# Our	Employees

								As	of	February	26,	2010,	we	employed	approximately	79,800	full-time	and	part-time	employees,	including	divisional	and	regional	managers,	district	managers, store	managers	and	distribution	center	and	administrative	personnel.	We	have	increasingly	focused	on	recruiting,	training,	motivating	and	retaining	employees,	and	we believe	that	the	quality,	performance	and	morale	of	our	employees	have	increased	as	a	result.	We	currently	are	not	a	party	to	any	collective	bargaining	agreements.

# Our	Trademarks

								We	own	marks	that	are	registered	with	the	United	States	Patent	and	Trademark	Office	and	are	protected	under	applicable	intellectual	property	laws,	including without	limitation	the	trademarks	Dollar	General®,	Dollar	General	Market®,	Clover	Valley®,	DG®,	DG	Guarantee®	and	the	Dollar	General	price	point	designs,	along with	variations	and	formatives	of	these	trademarks	as	well	as	certain	other	trademarks.	We	attempt	to	obtain	registration	of	our	trademarks	whenever	practicable	and	to pursue	vigorously	any	infringement	of	those	marks.	Our	trademark	registrations	have	various	expiration	dates;	however,	assuming	that	the	trademark	registrations	are properly	renewed,	they	have	a	perpetual	duration.

								We	also	hold	licenses	to	use	various	trademarks	owned	by	third	parties,	including	without	limitation	an	exclusive	license	to	the	Bobbie	Brooks	brand	for	clothing through	March	31,	2011,	with	the	option	to	renew	it	on	a	year-to-year	basis,	and	a	license	to	the	Fisher	Price	brand	for	certain	items	of	children's	clothing	through December	31,	2010.

# Available	Information

								Our	Web	site	address	is	www.dollargeneral.com.	We	file	with	or	furnish	to	the	Securities	and	Exchange	Commission	(the	"SEC")	annual	reports	on	Form	10-K, quarterly	reports	on	Form	10-Q,	current	reports	on	Form	8-K,	and	amendments	to	those	reports,	proxy	statements	and	annual	reports	to	shareholders,	and,	from	time	to time,	other	documents.	These	documents	are	available	free	of	charge	to	investors	on	or	through	the	Investor	Information	portion	of	our	Web	site	as	soon	as	reasonably practicable	after	we	electronically	file	them	with	or	furnish	them	to	the	SEC.	In	addition,	the	public	may	read	and	copy	any	of	the	materials	we	file	with	the	SEC	at	the SEC's	Public	Reference	Room	at

100	F	Street,	NE,	Washington	DC	20549.	The	public	may	obtain	information	on	the	operation	of	the	Public	Reference	Room	by	calling	the	SEC	at	1-800-SEC-0330. The	SEC	maintains	an	internet	site	that	contains	reports,	proxy	and	information	statements	and	other	information	regarding	issuers,	such	as	Dollar	General,	that	file electronically	with	the	SEC.	The	address	of	that	Web	site	is	http://www.sec.gov.

# ITEM	1A.				RISK	FACTORS

								Investing	in	our	securities	involves	a	degree	of	risk.	Persons	buying	our	securities	should	carefully	consider	the	risks	described	below	and	the	other	information contained	in	this	report	and	other	filings	that	we	make	from	time	to	time	with	the	SEC,	including	our	consolidated	financial	statements	and	accompanying	notes.	Any	of the	following	risks	could	materially	and	adversely	affect	our	business,	financial	condition	or	results	of	operations.	In	addition,	the	risks	described	below	are	not	the	only risks	we	face.	Our	business,	financial	condition	or	results	of	operations	could	also	be	adversely	affected	by	additional	factors	that	apply	to	all	companies	generally,	as well	as	other	risks	that	are	not	currently	known	to	us	or	that	we	currently	view	to	be	immaterial.	In	any	such	case,	the	trading	price	of	our	securities	could	decline	or	we may	not	be	able	to	make	payments	of	principal	and	interest	on	our	outstanding	debt,	and	you	may	lose	all	or	part	of	your	original	investment.	While	we	attempt	to mitigate	known	risks	to	the	extent	we	believe	to	be	practicable	and	reasonable,	we	can	provide	no	assurance,	and	we	make	no	representation,	that	our	mitigation	efforts will	be	successful.

# 									The	fact	that	we	have	substantial	debt	could	adversely	affect	our	ability	to	raise	additional	capital	to	fund	our	operations	and	limit	our	ability	to	pursue	our growth	strategy	or	to	react	to	changes	in	the	economy	or	our	industry.

								We	have	substantial	debt,	including	a	$1.964	billion	senior	secured	term	loan	facility	which	matures	on	July	6,	2014,	$979.3	million	aggregate	principal	amount	of 10.625%	senior	notes	due	2015	and	$450.7	million	aggregate	principal	amount	of	11.875%	/	12.625%	senior	subordinated	toggle	notes	due	2017.	This	debt	could	have important	negative	consequences	to	our	business,	including:

•increasing	the	difficulty	of	our	ability	to	make	payments	on	our	outstanding	debt;

•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	obtain	additional	financing	for	working	capital,	capital	expenditures,	debt	service	requirements,	acquisitions	and	general	corporate or	other	purposes;

# •limiting	our	ability	to	pursue	our	growth	strategy;	and

•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.

# 									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	of	up	to	$1.031	billion,	subject	to	borrowing	base availability,	which	matures	July	6,	2013,	which,	together	with	the	term	loan	facility,	comprise	our	credit	facilities,	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	may	limit	our	flexibility	in	operating	our	business.

								Our	credit	facilities	and	the	indentures	governing	our	notes	contain	various	covenants	that	may	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;

•limit	the	ability	of	restricted	subsidiaries	to	make	payments	to	us;

•merge,	consolidate,	sell	or	otherwise	dispose	of	all	or	substantially	all	of	our	assets;	and

•designate	our	subsidiaries	as	unrestricted	subsidiaries.

								A	breach	of	any	of	these	covenants	could	result	in	a	default	under	the	agreement	governing	such	indebtedness.	Upon	our	failure	to	maintain	compliance	with	these covenants,	the	lenders	could	elect	to	declare	all	amounts	outstanding	thereunder	to	be	immediately	due	and	payable	and	terminate	all	commitments	to	extend	further credit	thereunder.	If	the	lenders	under	such	indebtedness	accelerate	the	repayment	of	borrowings,	we	cannot	assure	you	that	we	will	have	sufficient	assets	to	repay	those borrowings,	as	well	as	our	other	indebtedness,	including	our	outstanding	notes.	We	have	pledged	a	significant	portion	of	our	assets	as	collateral	under	our	credit facilities.	If	we	were	unable	to	repay	those	amounts,	the	lenders	under	our	credit	facilities	could	proceed	against	the	collateral	granted	to	them	to	secure	that indebtedness.	Additional	borrowings	under	the	senior	secured	asset-based	revolving	credit	facility	will,	if	excess	availability	under	that	facility	is	less	than	a	certain amount,	be	subject	to	the	satisfaction	of	a	specified	financial	ratio.	Accordingly,	our	ability	to	access	the	full	availability	under	our	senior	secured	asset-based	revolving credit	facility	may	be	constrained.	Our	ability	to	meet	this	financial	ratio	can	be	affected	by	events	beyond	our	control,	and	we	cannot	assure	you	that	we	will	meet	this ratio	and	other	covenants.

# 									The	current	recession	and	general	economic	factors	may	adversely	affect	our	financial	performance	and	other	aspects	of	our	business.

								We	believe	that	many	of	our	customers	are	on	fixed	or	low	incomes	and	generally	have	limited	discretionary	spending	dollars.	A	further	slowdown	in	the	economy or	other	economic	conditions	affecting	disposable	consumer	income,	such	as	increased	unemployment	levels,	inflation,	increases	in	fuel	or	other	energy	costs	and interest	rates,	lack	of	available	credit	and	further	erosion	in	consumer	confidence,	may	adversely	affect	our	business	by	reducing	those	customers'	spending	or	by causing	them	to	shift	their	spending	to	products	other	than	those	sold	by	us	or	to	products	sold	by	us	that	are	less	profitable	than	other	product	choices,	all	of	which	could result	in	lower	net	sales,	decreases	in

inventory	turnover,	greater	markdowns	on	inventory,	and	a	reduction	in	profitability	due	to	lower	margins.	Many	of	those	factors,	as	well	as	commodity	rates, transportation	costs,	costs	of	labor,	insurance	and	healthcare,	foreign	exchange	rate	fluctuations,	lease	costs,	changes	in	other	laws	and	regulations	and	other	economic factors,	also	affect	our	cost	of	goods	sold	and	our	selling,	general	and	administrative	expenses,	which	may	adversely	affect	our	sales	or	profitability.	We	have	limited	or no	ability	to	control	such	factors.

								In	addition,	many	of	the	factors	discussed	above,	along	with	current	adverse	global	economic	conditions	and	uncertainties,	the	potential	impact	of	the	current recession,	the	potential	for	additional	failures	or	realignments	of	financial	institutions,	and	the	related	impact	on	available	credit	may	affect	us	and	our	suppliers	and other	business	partners,	landlords,	and	customers	in	an	adverse	manner	including,	but	not	limited	to,	reducing	access	to	liquid	funds	or	credit	(including	through	the	loss of	one	or	more	financial	institutions	that	are	a	part	of	our	revolving	credit	facility),	increasing	the	cost	of	credit,	limiting	our	ability	to	manage	interest	rate	risk, increasing	the	risk	of	bankruptcy	of	our	suppliers,	landlords	or	counterparties	to	or	other	financial	institutions	involved	in	our	credit	facilities	and	our	derivative	and other	contracts,	increasing	the	cost	of	goods	to	us,	and	other	adverse	consequences	which	we	are	unable	to	fully	anticipate.

# 									Our	plans	depend	significantly	on	initiatives	designed	to	increase	sales	and	improve	the	efficiencies,	costs	and	effectiveness	of	our	operations,	and	failure	to achieve	or	sustain	these	plans	could	affect	our	performance	adversely.

								We	have	had,	and	expect	to	continue	to	have,	initiatives	(such	as	those	relating	to	marketing,	merchandising,	promotions,	sourcing,	shrink,	private	brand,	store operations	and	real	estate)	in	various	stages	of	testing,	evaluation,	and	implementation,	upon	which	we	expect	to	rely	to	continue	to	improve	our	results	of	operations	and financial	condition	and	to	achieve	our	financial	plans.	These	initiatives	are	inherently	risky	and	uncertain,	even	when	tested	successfully,	in	their	application	to	our business	in	general.	It	is	possible	that	successful	testing	can	result	partially	from	resources	and	attention	that	cannot	be	duplicated	in	broader	implementation, particularly	in	light	of	the	diverse	geographic	locations	of	our	stores	and	the	fact	that	our	field	management	is	so	decentralized.	Testing	and	general	implementation	also can	be	affected	by	other	risk	factors	described	herein	that	reduce	the	results	expected.	Successful	systemwide	implementation	relies	on	consistency	of	training,	stability of	workforce,	ease	of	execution,	and	the	absence	of	offsetting	factors	that	can	influence	results	adversely.	Failure	to	achieve	successful	implementation	of	our	initiatives or	the	cost	of	these	initiatives	exceeding	management's	estimates	could	adversely	affect	our	results	of	operations	and	financial	condition.

# 									Risks	associated	with	or	faced	by	the	domestic	and	foreign	suppliers	from	whom	our	products	are	sourced	could	adversely	affect	our	financial	performance.

								The	products	we	sell	are	sourced	from	a	wide	variety	of	domestic	and	international	suppliers.	In	fact,	our	largest	supplier	accounted	for	only	9%	of	our	purchases	in 2009,	and	our	next	largest	supplier	accounted	for	approximately	6%	of	such	purchases.	Nonetheless,	if	a	supplier	fails	to	deliver	on	key	commitments,	we	could experience	merchandise	shortages	that	could	lead	to	lost	sales.

								We	directly	imported	approximately	8%	of	our	purchases	(measured	at	cost)	in	2009,	but	many	of	our	domestic	vendors	directly	import	their	products	or components	of	their	products.	Political	and	economic	instability	in	the	countries	in	which	foreign	suppliers	are	located,	the	financial	instability	of	suppliers,	suppliers' failure	to	meet	our	supplier	standards,	issues	with	labor	practices	of	our	suppliers	or	labor	problems	they	may	experience	(such	as	strikes),	the	availability	and	cost	of raw	materials	to	suppliers,	merchandise	quality	or	safety	issues,	currency	exchange	rates,	transport	availability	and	cost,	inflation,	and	other	factors	relating	to	the suppliers	and	the	countries	in	which	they	are	located	or	from	which	they	import	are	beyond	our	control	and	could	have	negative	implications	for	us.	Because	a substantial	amount	of	our	imported	merchandise	comes	from	China,	a	change	in	the	Chinese	currency

or	other	policies	could	negatively	impact	our	merchandise	costs.	In	addition,	the	United	States'	foreign	trade	policies,	tariffs	and	other	impositions	on	imported	goods, trade	sanctions	imposed	on	certain	countries,	the	limitation	on	the	importation	of	certain	types	of	goods	or	of	goods	containing	certain	materials	from	other	countries	and other	factors	relating	to	foreign	trade	are	beyond	our	control.	Disruptions	due	to	labor	stoppages,	strikes	or	slowdowns,	or	other	disruptions	involving	our	vendors	or	the transportation	and	handling	industries	also	may	negatively	affect	our	ability	to	receive	merchandise	and	thus	may	negatively	affect	sales.	These	and	other	factors affecting	our	suppliers	and	our	access	to	products	could	adversely	affect	our	financial	performance.	As	we	increase	our	imports	of	merchandise	from	foreign	vendors, the	risks	associated	with	foreign	imports	will	increase.

# 									Product	liability	and	food	safety	claims	could	adversely	affect	our	business,	reputation	and	financial	performance.

								Despite	our	best	efforts	to	ensure	the	quality	and	safety	of	the	products	we	sell,	we	may	be	subject	to	product	liability	claims	from	customers	or	penalties	from government	agencies	relating	to	products,	including	food	products,	that	are	recalled,	defective	or	otherwise	alleged	to	be	harmful.	Such	claims	may	result	from tampering	by	unauthorized	third	parties,	product	contamination	or	spoilage,	including	the	presence	of	foreign	objects,	substances,	chemicals,	other	agents,	or	residues introduced	during	the	growing,	storage,	handling	and	transportation	phases.	All	of	our	vendors	and	their	products	must	comply	with	applicable	product	and	food	safety laws.	We	generally	seek	contractual	indemnification	and	insurance	coverage	from	our	suppliers.	However,	if	we	do	not	have	adequate	insurance	or	contractual indemnification	available,	such	claims	could	have	a	material	adverse	effect	on	our	business,	financial	condition	and	results	of	operation.	Our	ability	to	obtain indemnification	from	foreign	suppliers	may	be	hindered	by	the	manufacturers'	lack	of	understanding	of	U.S.	product	liability	or	other	laws,	which	may	make	it	more likely	that	we	be	required	to	respond	to	claims	or	complaints	from	customers	as	if	we	were	the	manufacturer	of	the	products.	Even	with	adequate	insurance	and indemnification,	such	claims	could	significantly	damage	our	reputation	and	consumer	confidence	in	our	products.	Our	litigation	expenses	could	increase	as	well,	which also	could	have	a	materially	negative	impact	on	our	results	of	operations	even	if	a	product	liability	claim	is	unsuccessful	or	is	not	fully	pursued.

# 									Our	private	brands	may	not	achieve	or	maintain	broad	market	acceptance	and	increases	the	risks	we	face.

								We	have	substantially	increased	the	number	of	our	private	brand	items,	and	the	program	is	a	sizable	part	of	our	future	growth	plans.	We	believe	that	our	success	in gaining	and	maintaining	broad	market	acceptance	of	our	private	brands	depends	on	many	factors,	including	pricing,	our	costs,	quality	and	customer	perception.	We	may not	achieve	or	maintain	our	expected	sales	for	our	private	brands.	As	a	result,	our	business,	financial	condition	and	results	of	operations	could	be	materially	and adversely	affected.

# 									We	are	subject	to	governmental	regulations,	procedures	and	requirements.	A	significant	change	in,	or	noncompliance	with,	these	regulations	could	have	a material	adverse	effect	on	our	financial	performance.

								Our	business	is	subject	to	numerous	federal,	state	and	local	laws	and	regulations.	We	routinely	incur	costs	in	complying	with	these	regulations.	New	laws	or regulations,	particularly	those	dealing	with	healthcare	reform,	product	safety,	and	labor	and	employment,	among	others,	or	changes	in	existing	laws	and	regulations, particularly	those	governing	the	sale	of	products,	may	result	in	significant	added	expenses	or	may	require	extensive	system	and	operating	changes	that	may	be	difficult	to implement	and/or	could	materially	increase	our	cost	of	doing	business.	In	addition,	such	changes	or	new	laws	may	require	the	write	off	and	disposal	of	existing	product inventory,	resulting	in	significant	adverse	financial	impact	to	us.	Untimely	compliance	or	noncompliance	with	applicable	regulations	or	untimely	or

incomplete	execution	of	a	required	product	recall	can	result	in	the	imposition	of	penalties,	including	loss	of	licenses	or	significant	fines	or	monetary	penalties,	in	addition to	reputational	damage.

# 									Litigation	may	adversely	affect	our	business,	financial	condition	and	results	of	operations.

								Our	business	is	subject	to	the	risk	of	litigation	by	employees,	consumers,	suppliers,	competitors,	shareholders,	government	agencies	or	others	through	private actions,	class	actions,	administrative	proceedings,	regulatory	actions	or	other	litigation.	The	number	of	employment-related	class	actions	filed	each	year	has	continued	to increase,	and	recent	changes	and	proposed	changes	in	Federal	and	state	laws	may	cause	claims	to	rise	even	more.	The	outcome	of	litigation,	particularly	class	action lawsuits,	regulatory	actions	and	intellectual	property	claims,	is	difficult	to	assess	or	quantify.	Plaintiffs	in	these	types	of	lawsuits	may	seek	recovery	of	very	large	or indeterminate	amounts,	and	the	magnitude	of	the	potential	loss	relating	to	these	lawsuits	may	remain	unknown	for	substantial	periods	of	time.	In	addition,	certain	of these	lawsuits,	if	decided	adversely	to	us	or	settled	by	us,	may	result	in	liability	material	to	our	financial	statements	as	a	whole	or	may	negatively	affect	our	operating results	if	changes	to	our	business	operation	are	required.	The	cost	to	defend	future	litigation	may	be	significant.	There	also	may	be	adverse	publicity	associated	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.	See	"Item	3.	Legal	Proceedings"	for	further	details	regarding	certain	of these	pending	matters.

# 									Failure	to	attract	and	retain	qualified	employees,	particularly	field,	store	and	distribution	center	managers,	and	to	control	labor	costs,	as	well	as	other	labor issues,	could	adversely	affect	our	financial	performance.

								Our	future	growth	and	performance	depends	on	our	ability	to	attract,	retain	and	motivate	qualified	employees,	many	of	whom	are	in	positions	with	historically	high rates	of	turnover	such	as	field	managers	and	distribution	center	managers.	Our	ability	to	meet	our	labor	needs,	while	controlling	our	labor	costs,	is	subject	to	many external	factors,	including	competition	for	and	availability	of	qualified	personnel	in	a	given	market,	unemployment	levels	within	those	markets,	prevailing	wage	rates, minimum	wage	laws,	health	and	other	insurance	costs,	and	changes	in	employment	and	labor	laws	(including	changes	in	the	process	for	our	employees	to	join	a	union) or	other	workplace	regulation	(including	changes	in	entitlement	programs	such	as	health	insurance	and	paid	leave	programs).	To	the	extent	a	significant	portion	of	our employee	base	unionizes,	or	attempts	to	unionize,	our	labor	costs	could	increase.	In	addition,	we	are	evaluating	the	potential	future	impact	of	recently	enacted comprehensive	healthcare	reform	legislation,	which	will	likely	cause	our	healthcare	costs	to	increase.	Our	ability	to	pass	along	labor	costs	to	our	customers	is constrained	by	our	low	price	model.

# 									Our	profitability	may	be	negatively	affected	by	inventory	shrinkage.

								We	are	subject	to	the	risk	of	inventory	loss	and	theft.	We	have	experienced	inventory	shrinkage	in	the	past,	and	we	cannot	assure	you	that	incidences	of	inventory loss	and	theft	will	decrease	in	the	future	or	that	the	measures	we	are	taking	will	effectively	address	the	problem	of	inventory	shrinkage.	Although	some	level	of	inventory shrinkage	is	a	necessary	and	unavoidable	cost	of	doing	business,	if	we	were	to	experience	higher	rates	of	inventory	shrinkage	or	incur	increased	security	costs	to	combat inventory	theft,	our	financial	condition	could	be	affected	adversely.

# 									A	significant	disruption	to	our	distribution	network	or	to	the	timely	receipt	of	inventory	could	adversely	impact	sales	or	increase	our	transportation	costs, which	would	decrease	our	profits.

								We	rely	on	our	ability	to	replenish	depleted	inventory	in	our	stores	through	deliveries	to	our	distribution	centers	from	vendors	and	then	from	the	distribution	centers or	direct	ship	vendors	to	our

stores	by	various	means	of	transportation,	including	shipments	by	sea	and	truck.	Unexpected	delays	in	those	deliveries	or	increases	in	transportation	costs	(including through	increased	fuel	costs)	could	significantly	decrease	our	ability	to	make	sales	and	earn	profits.	In	addition,	labor	shortages	in	the	transportation	industry	or	long- term	disruptions	to	the	national	and	international	transportation	infrastructure	that	lead	to	delays	or	interruptions	of	deliveries	could	negatively	affect	our	business.

# 									Our	cash	flows	from	operations	may	be	negatively	affected	if	we	are	not	successful	in	managing	our	inventory	balances.

								Efficient	inventory	management	is	a	key	component	of	our	business	success	and	profitability.	To	be	successful,	we	must	maintain	sufficient	inventory	levels	to meet	our	customers'	demands	without	allowing	those	levels	to	increase	to	such	an	extent	that	the	costs	to	store	and	hold	the	goods	unduly	impacts	our	financial	results.	If our	buying	decisions	do	not	accurately	predict	customer	trends	or	purchasing	actions,	we	may	have	to	take	unanticipated	markdowns	to	dispose	of	the	excess	inventory, which	also	can	adversely	impact	our	financial	results.	While	our	inventory	turns	have	improved	and	we	continue	to	focus	on	ways	to	reduce	these	risks,	we	cannot	assure you	that	we	will	continue	to	be	efficient	and	successful	in	our	inventory	management.	If	we	are	not	successful	in	managing	our	inventory	balances,	our	cash	flows	from operations	may	be	negatively	affected.

# 									Our	planned	future	growth	will	be	impeded,	which	would	adversely	affect	sales,	if	we	cannot	open	new	stores	on	schedule.

								Our	growth	is	dependent	on	both	increases	in	sales	in	existing	stores	and	the	ability	to	open	profitable	new	stores.	Increases	in	sales	in	existing	stores	are	dependent on	factors	such	as	competition,	merchandise	selection,	store	operations	and	other	factors	discussed	in	these	Risk	Factors.	Our	ability	to	timely	open	new	stores	and	to expand	into	additional	market	areas	depends	in	part	on	the	following	factors:	the	availability	of	attractive	store	locations;	the	absence	of	occupancy	delays;	the	ability	to negotiate	acceptable	lease	terms;	the	ability	to	hire	and	train	new	personnel,	especially	store	managers	in	a	cost	effective	manner;	the	ability	to	identify	customer	demand in	different	geographic	areas;	general	economic	conditions;	and	the	availability	of	sufficient	funds	for	expansion.	In	addition,	many	of	these	factors	affect	our	ability	to successfully	relocate	stores.	Many	of	these	factors	are	beyond	our	control.	In	addition,	our	credit	ratings	combined	with	tighter	lending	practices	have	made	it	more challenging	for	our	real	estate	developers	to	obtain	favorable	loan	terms	and	conditions	for	our	build-to-suit	stores.	These	unfavorable	lending	trends	could	impact	the timing	of	our	store	openings	and	materially	adversely	affect	our	ability	to	open	build-to-suit	stores	in	desirable	locations.

								Delays	or	failures	in	opening	new	stores,	or	achieving	lower	than	expected	sales	in	new	stores,	or	drawing	a	greater	than	expected	proportion	of	sales	in	new	stores from	existing	stores,	could	materially	adversely	affect	our	growth	and/or	profitability.	In	addition,	we	may	not	anticipate	all	of	the	challenges	imposed	by	the	expansion of	our	operations	and,	as	a	result,	may	not	meet	our	targets	for	opening	new	stores,	remodeling	or	relocating	stores	or	expanding	profitably.

								Some	of	our	new	stores	may	be	located	in	areas	where	we	have	little	or	no	meaningful	experience	or	brand	recognition.	Those	markets	may	have	different competitive	conditions,	market	conditions,	consumer	tastes	and	discretionary	spending	patterns	than	our	existing	markets,	which	may	cause	our	new	stores	to	be	less successful	than	stores	in	our	existing	markets.

								Many	of	our	new	stores	will	be	located	in	areas	where	we	have	existing	units.	Although	we	have	experience	in	these	markets,	increasing	the	number	of	locations	in these	markets	may	result	in	inadvertent	over-saturation	of	markets	and	temporarily	or	permanently	divert	customers	and	sales	from	our	existing	stores,	thereby	adversely affecting	our	overall	financial	performance.

# 									Because	our	business	is	seasonal	to	a	certain	extent,	with	the	highest	volume	of	net	sales	during	the	fourth	quarter,	adverse	events	during	the	fourth	quarter could	materially	affect	our	financial	statements	as	a	whole.

								We	generally	recognize	our	highest	volume	of	net	sales	during	the	Christmas	selling	season,	which	occurs	in	the	fourth	quarter	of	our	fiscal	year.	In	anticipation	of this	holiday,	we	purchase	substantial	amounts	of	seasonal	inventory	and	hire	many	temporary	employees.	An	excess	of	seasonal	merchandise	inventory	could	result	if our	net	sales	during	the	Christmas	selling	season	were	to	fall	below	either	seasonal	norms	or	expectations.	If	our	fourth	quarter	sales	results	were	substantially	below expectations,	our	financial	performance	and	operating	results	could	be	adversely	affected	by	unanticipated	markdowns,	especially	in	seasonal	merchandise.	Lower	than anticipated	sales	in	the	Christmas	selling	season	would	also	negatively	affect	our	ability	to	absorb	the	increased	seasonal	labor	costs.

# 									We	face	intense	competition	that	could	limit	our	growth	opportunities	and	adversely	impact	our	financial	performance.

								The	retail	business	is	highly	competitive.	We	operate	in	the	basic	consumer	packaged	goods	market,	which	is	competitive	with	respect	to	price,	store	location, merchandise	quality,	assortment	and	presentation,	in-stock	consistency,	and	customer	service.	This	competitive	environment	subjects	us	to	the	risk	of	adverse	impact	to our	financial	performance	because	of	the	lower	prices,	and	thus	the	lower	margins,	required	to	maintain	our	competitive	position.	Also,	companies	operating	in	the	basic consumer	packaged	goods	market	(due	to	customer	demographics	and	other	factors)	may	have	limited	ability	to	increase	prices	in	response	to	increased	costs	(including, but	not	limited	to,	vendor	price	increases).	This	limitation	may	adversely	affect	our	margins	and	financial	performance.	We	compete	for	customers,	employees,	store sites,	products	and	services	and	in	other	important	aspects	of	our	business	with	many	other	local,	regional	and	national	retailers.	We	compete	with	retailers	operating discount,	mass	merchandise,	outlet,	warehouse	club,	grocery,	drug,	convenience,	variety	and	other	specialty	stores.	Certain	of	our	competitors	have	greater	financial, distribution,	marketing	and	other	resources	than	we	do	and	may	be	able	to	secure	better	arrangements	with	suppliers	than	we	can.	These	other	competitors	compete	in	a variety	of	ways,	including	aggressive	promotional	activities,	merchandise	selection	and	availability,	services	offered	to	customers,	location,	store	hours,	in-store amenities	and	price.	If	we	fail	to	respond	effectively	to	competitive	pressures	and	changes	in	the	retail	markets,	it	could	adversely	affect	our	financial	performance.

								Competition	for	customers	has	intensified	in	recent	years	as	larger	competitors	have	moved	into,	or	increased	their	presence	in,	our	geographic	markets.	We	remain vulnerable	to	the	marketing	power	and	high	level	of	consumer	recognition	of	these	larger	competitors	and	to	the	risk	that	these	competitors	or	others	could	venture	into our	industry	in	a	significant	way.	Generally,	we	expect	an	increase	in	competition.

									Natural	disasters	(whether	or	not	caused	by	climate	change),	unusually	adverse	weather	conditions,	pandemic	outbreaks,	terrorist	acts,	and	global	political events	could	cause	permanent	or	temporary	distribution	center	or	store	closures,	impair	our	ability	to	purchase,	receive	or	replenish	inventory,	or	decrease	customer traffic,	all	of	which	could	result	in	lost	sales	and	otherwise	adversely	affect	our	financial	performance.

								The	occurrence	of	one	or	more	natural	disasters,	such	as	hurricanes,	fires,	floods,	and	earthquakes	(whether	or	not	caused	by	climate	change),	unusually	adverse weather	conditions,	pandemic	outbreaks,	terrorist	acts	or	disruptive	global	political	events,	such	as	civil	unrest	in	countries	in	which	our	suppliers	are	located,	or	similar disruptions	could	adversely	affect	our	operations	and	financial	performance.	To	the	extent	these	events	result	in	the	closure	of	one	or	more	of	our	distribution	centers,	a significant	number	of	stores,	or	our	corporate	headquarters	or	impact	one	or	more	of	our	key	suppliers,	our	operations	and	financial	performance	could	be	materially adversely	affected	through	an	inability	to

make	deliveries	to	our	stores	and	through	lost	sales.	In	addition,	these	events	could	result	in	increases	in	fuel	(or	other	energy)	prices	or	a	fuel	shortage,	delays	in	opening new	stores,	the	temporary	lack	of	an	adequate	work	force	in	a	market,	the	temporary	or	long-term	disruption	in	the	supply	of	products	from	some	local	and	overseas suppliers,	the	temporary	disruption	in	the	transport	of	goods	from	overseas,	delay	in	the	delivery	of	goods	to	our	distribution	centers	or	stores,	the	temporary	reduction	in the	availability	of	products	in	our	stores	and	disruption	to	our	information	systems.	These	events	also	can	have	indirect	consequences	such	as	increases	in	the	costs	of insurance	if	they	result	in	significant	loss	of	property	or	other	insurable	damage.

# 									Material	damage	to,	or	interruptions	to,	our	information	systems	as	a	result	of	external	factors,	staffing	shortages	and	difficulties	in	updating	our	existing software	or	developing	or	implementing	new	software	could	have	a	material	adverse	effect	on	our	business	or	results	of	operations.

								We	depend	on	a	variety	of	information	technology	systems	for	the	efficient	functioning	of	our	business.	Such	systems	are	subject	to	damage	or	interruption	from power	outages,	computer	and	telecommunications	failures,	computer	viruses,	security	breaches	and	natural	disasters.	Damage	or	interruption	to	our	computer	systems may	require	a	significant	investment	to	fix	or	replace	them,	and	we	may	suffer	interruptions	in	our	operations	in	the	interim.	Any	material	interruptions	may	have	a material	adverse	effect	on	our	business	or	results	of	operations.

								We	also	rely	heavily	on	our	information	technology	staff.	If	we	cannot	meet	our	staffing	needs	in	this	area,	we	may	not	be	able	to	fulfill	our	technology	initiatives while	continuing	to	provide	maintenance	on	existing	systems.	We	rely	on	certain	software	vendors	to	maintain	and	periodically	upgrade	many	of	these	systems	so	that they	can	continue	to	support	our	business.	The	software	programs	supporting	many	of	our	systems	were	licensed	to	us	by	independent	software	developers.	The	inability of	these	developers	or	us	to	continue	to	maintain	and	upgrade	these	information	systems	and	software	programs	would	disrupt	or	reduce	the	efficiency	of	our	operations if	we	were	unable	to	convert	to	alternate	systems	in	an	efficient	and	timely	manner.	In	addition,	costs	and	potential	problems	and	interruptions	associated	with	the implementation	of	new	or	upgraded	systems	and	technology	or	with	maintenance	or	adequate	support	of	existing	systems	could	also	disrupt	or	reduce	the	efficiency	of our	operations.

# 									Our	current	insurance	program	may	expose	us	to	unexpected	costs	and	negatively	affect	our	financial	performance.

								Our	insurance	coverage	reflects	deductibles,	self-insured	retentions,	limits	of	liability	and	similar	provisions	that	we	believe	are	prudent	based	on	the	dispersion	of our	operations.	However,	there	are	types	of	losses	we	may	incur	but	against	which	we	cannot	be	insured	or	which	we	believe	are	not	economically	reasonable	to	insure, such	as	losses	due	to	acts	of	war,	employee	and	certain	other	crime	and	some	natural	disasters.	If	we	incur	these	losses	and	they	are	material,	our	business	could	suffer. Certain	material	events	may	result	in	sizable	losses	for	the	insurance	industry	and	adversely	impact	the	availability	of	adequate	insurance	coverage	or	result	in	excessive premium	increases.	To	offset	negative	insurance	market	trends,	we	may	elect	to	self-insure,	accept	higher	deductibles	or	reduce	the	amount	of	coverage	in	response	to these	market	changes.	In	addition,	we	self-insure	a	significant	portion	of	expected	losses	under	our	workers'	compensation,	automobile	liability,	general	liability	and group	health	insurance	programs.	Unanticipated	changes	in	any	applicable	actuarial	assumptions	and	management	estimates	underlying	our	recorded	liabilities	for	these losses,	including	expected	increases	in	medical	and	indemnity	costs,	could	result	in	materially	different	amounts	of	expense	than	expected	under	these	programs,	which could	have	a	material	adverse	effect	on	our	financial	condition	and	results	of	operations.	In	addition,	we	are	evaluating	the	potential	future	impact	of	recently	enacted comprehensive	healthcare	reform	legislation,	which	will	likely	cause	our	healthcare	costs	to	increase.	Although	we	continue	to	maintain	property	insurance	for catastrophic	events,	we	are	effectively

self-insured	for	property	losses	up	to	the	amount	of	our	deductibles.	If	we	experience	a	greater	number	of	these	losses	than	we	anticipate,	our	financial	performance could	be	adversely	affected.

# 									If	we	fail	to	protect	our	brand	name,	competitors	may	adopt	tradenames	that	dilute	the	value	of	our	brand	name.

								We	may	be	unable	or	unwilling	to	strictly	enforce	our	trademark	in	each	jurisdiction	in	which	we	do	business.	Also,	we	may	not	always	be	able	to	successfully enforce	our	trademarks	against	competitors,	or	against	challenges	by	others.	Our	failure	to	successfully	protect	our	trademarks	could	diminish	the	value	and	efficacy	of our	brand	recognition,	and	could	cause	customer	confusion,	which	could,	in	turn,	adversely	affect	our	sales	and	profitability.

# 									Our	success	depends	on	our	executive	officers	and	other	key	personnel.	If	we	lose	key	personnel	or	are	unable	to	hire	additional	qualified	personnel,	our business	may	be	harmed.

								Our	future	success	depends	to	a	significant	degree	on	the	skills,	experience	and	efforts	of	our	executive	officers	and	other	key	personnel.	The	loss	of	the	services	of any	of	our	executive	officers,	particularly	Richard	W.	Dreiling,	our	Chief	Executive	Officer,	could	have	a	material	adverse	effect	on	our	operations.	Our	future	success will	also	depend	on	our	ability	to	attract	and	retain	qualified	personnel	and	a	failure	to	attract	and	retain	new	qualified	personnel	could	have	an	adverse	effect	on	our operations.	We	do	not	currently	maintain	key	person	life	insurance	policies	with	respect	to	our	executive	officers	or	key	personnel.

# 									We	face	risks	related	to	protection	of	customers'	credit	card	data.

								In	connection	with	credit	card	sales,	we	transmit	confidential	credit	card	information.	Third	parties	may	have	the	technology	or	know-how	to	breach	the	security	of this	customer	information,	and	our	security	measures	and	those	of	our	technology	vendors	may	not	effectively	prohibit	others	from	obtaining	improper	access	to	this information.	Any	security	breach	could	expose	us	to	risks	of	data	loss,	litigation	and	liability	and	could	seriously	disrupt	our	operations	and	any	resulting	negative publicity	could	significantly	harm	our	reputation.

									Kohlberg	Kravis	Roberts	&	Co.,	L.P.	("KKR"),	certain	affiliates	of	Goldman,	Sachs	&	Co.	(the	"GS	Investors"),	and	other	equity	co-investors	(collectively,	the "Investors")	have	significant	influence	over	us,	including	control	over	decisions	that	require	the	approval	of	shareholders,	which	could	limit	your	ability	to influence	the	outcome	of	key	transactions,	including	a	change	of	control.

								We	are	controlled	by	the	Investors.	The	Investors	have	an	indirect	interest	in	over	85%	of	our	outstanding	common	stock	through	their	investment	in	Buck Holdings,	L.P.	In	addition,	the	Investors	have	the	ability	to	elect	our	entire	Board	of	Directors.	As	a	result,	the	Investors	have	control	over	our	decisions	to	enter	into	any corporate	transaction	and	the	ability	to	prevent	any	transaction	that	requires	shareholder	approval	regardless	of	whether	others	believe	that	the	transaction	is	in	our	best interests.	As	long	as	the	Investors	continue	to	have	an	indirect	interest	in	a	majority	of	our	outstanding	common	stock,	they	will	have	the	ability	to	control	the	vote	in	any election	of	directors.	In	addition,	pursuant	to	a	shareholders'	agreement	that	we	entered	into	with	Buck	Holdings,	L.P.,	KKR	and	the	GS	Investors,	KKR	has	a	consent right	over	certain	significant	corporate	actions	and	KKR	and	the	GS	Investors	have	certain	rights	to	appoint	directors	to	our	Board	and	its	committees.

								The	Investors	are	also	in	the	business	of	making	investments	in	companies	and	may	from	time	to	time	acquire	and	hold	interests	in	businesses	that	compete	directly or	indirectly	with	us.	The	Investors	may	also	pursue	acquisition	opportunities	that	are	complementary	to	our	business,	and,	as	a	result,	those	acquisition	opportunities may	not	be	available	to	us.	So	long	as	the	Investors,	or	other	funds	controlled	by	or	associated	with	the	Investors,	continue	to	indirectly	own	a	significant	amount	of	our

outstanding	common	stock,	even	if	such	amount	is	less	than	50%,	the	Investors	will	continue	to	be	able	to	strongly	influence	or	effectively	control	our	decisions.	The concentration	of	ownership	may	have	the	effect	of	delaying,	preventing	or	deterring	a	change	of	control	of	our	company,	could	deprive	shareholders	of	an	opportunity	to receive	a	premium	for	their	common	stock	as	part	of	a	sale	of	our	company	and	might	ultimately	affect	the	market	price	of	our	common	stock.

# 									If	we,	the	Investors	or	other	significant	shareholders	sell	shares	of	our	common	stock,	the	market	price	of	our	common	stock	could	decline.

								The	market	price	of	our	common	stock	could	decline	as	a	result	of	sales	of	a	large	number	of	shares	of	common	stock	in	the	market,	or	the	perception	that	such sales	could	occur.	These	sales,	or	the	possibility	that	these	sales	may	occur,	also	might	make	it	more	difficult	for	us	to	issue	equity	securities	in	the	future	at	a	time	and	at a	price	that	we	deem	appropriate.	As	of	January	29,	2010,	we	had	approximately	340.6	million	shares	of	common	stock	outstanding,	of	which	less	than	15%	were	freely tradable	on	the	New	York	Stock	Exchange.

								Pursuant	to	shareholders	agreements,	we	have	granted	the	Investors	the	right	to	cause	us,	in	certain	instances,	at	our	expense,	to	file	registration	statements	under the	Securities	Act	of	1933,	as	amended,	covering	resales	of	our	common	stock	held	by	them	or	to	piggyback	on	a	registration	statement	in	certain	circumstances.	Certain members	of	management	hold	similar	piggyback	registration	rights.	Collectively,	these	shares	represent	approximately	88%	of	our	outstanding	common	stock.	To	the extent	that	such	registration	rights	are	exercised,	the	resulting	sale	of	a	substantial	number	of	shares	of	our	common	stock	into	the	market	could	cause	the	market	price	of our	common	stock	to	decline.	These	shares	also	may	be	sold	pursuant	to	Rule	144	under	the	Securities	Act,	depending	on	their	holding	period	and	subject	to	restrictions in	the	case	of	shares	held	by	persons	deemed	to	be	our	affiliates.

# ITEM	1B.				UNRESOLVED	STAFF	COMMENTS

# ITEM	2.				PROPERTIES

								Most	of	our	stores	are	located	in	leased	premises.	Individual	store	leases	vary	as	to	their	terms,	rental	provisions	and	expiration	dates.	Many	stores	are	subject	to build-to-suit	arrangements	with	landlords,	which	typically	carry	a	primary	lease	term	of	10-15	years	with	multiple	renewal	options.	We	also	have	stores	subject	to shorter-term	leases	(usually	with	initial	or	current	terms	of	three	to	five	years),	and	many	of	these	leases	have	multiple	renewal	options	as	well.	In	recent	years,	an increasing	percentage	of	our	new	stores	have	been	subject	to	build-to-suit	arrangements,	including	approximately	79%	of	our	new	stores	in	2009.

								As	of	February	26,	2010,	we	operated	nine	distribution	centers,	as	described	in	the	following	table:

| Location | Year<br>Opened | Approximate	Square<br>Footage | Approximate	Number<br>of	Stores	Served |
| :--- | :--- | :--- | :--- |
| Scottsville,\tKY | 1959 | 720,000 | 997 |
| Ardmore,\tOK | 1994 | 1,310,000 | 1,364 |
| South\tBoston,\tVA | 1997 | 1,250,000 | 850 |
| Indianola,\tMS | 1998 | 820,000 | 754 |
| Fulton,\tMO | 1999 | 1,150,000 | 1,190 |
| Alachua,\tFL | 2000 | 980,000 | 859 |
| Zanesville,\tOH | 2001 | 1,170,000 | 1,189 |
| Jonesville,\tSC | 2005 | 1,120,000 | 800 |
| Marion,\tIN | 2006 | 1,110,000 | 874 |

								We	lease	the	distribution	centers	located	in	Oklahoma,	Mississippi	and	Missouri	and	own	the	other	six	distribution	centers.	Approximately	7.25	acres	of	the	land	on which	our	Kentucky	distribution	center	is	located	is	subject	to	a	ground	lease.	We	lease	additional	temporary	warehouse	space	as	necessary	to	support	our	distribution needs.

								Our	executive	offices	are	located	in	approximately	302,000	square	feet	of	leased	space	in	Goodlettsville,	Tennessee.

# ITEM	3.				LEGAL	PROCEEDINGS

								The	information	contained	in	Note	9	to	the	consolidated	financial	statements	under	the	heading	"Legal	proceedings"	contained	in	Part	II,	Item	8	of	this	report	is incorporated	herein	by	this	reference.

# EXECUTIVE	OFFICERS	OF	THE	REGISTRANT

								Information	regarding	our	current	executive	officers	as	of	March	29,	2010	is	set	forth	below.	Each	of	our	executive	officers	serves	at	the	discretion	of	our	Board	of Directors	and	is	elected	annually	by	the	Board	to	serve	until	a	successor	is	duly	elected.	There	are	no	familial	relationships	between	any	of	our	directors	or	executive officers.

								Mr.	Dreiling	joined	Dollar	General	in	January	2008	as	Chief	Executive	Officer	and	a	member	of	our	Board.	He	was	appointed	Chairman	of	the	Board	on December	2,	2008.	Prior	to	joining	Dollar	General,	Mr.	Dreiling	served	as	Chief	Executive	Officer,	President	and	a	director	of	Duane	Reade	Holdings,	Inc.	and	Duane Reade	Inc.,	the	largest	drugstore	chain	in	New	York	City,	from	November	2005	until	January	2008	and	as	Chairman	of	the	Board	of	Duane	Reade	from	March	2007 until	January	2008.	Mr.	Dreiling	previously	served	as	Executive	Vice	President—Chief	Operating	Officer	of	Longs	Drug	Stores	Corporation,	an	operator	of	a	chain	of retail	drug	stores	on	the	West	Coast	and	Hawaii,	since	March	2005,	after	having	joined	Longs	in	July	2003	as	Executive	Vice	President	and	Chief	Operations	Officer. From	2000	to	2003,	Mr.	Dreiling	served	as	Executive	Vice	President—Marketing,	Manufacturing	and	Distribution	at	Safeway,	Inc.,	a	food	and	drug	retailer.	Prior	to that,	Mr.	Dreiling	served	from	1998	to	2000	as	President	of	Vons,	a	Southern	California	food	and	drug	division	of	Safeway.

								Mr.	Tehle	joined	Dollar	General	in	June	2004	as	Executive	Vice	President	and	Chief	Financial	Officer.	He	served	from	1997	to	June	2004	as	Executive	Vice President	and	Chief	Financial	Officer	of	Haggar	Corporation,	a	manufacturing,	marketing	and	retail	corporation.	From	1996	to	1997,	he	was	Vice	President	of	Finance for	a	division	of	The	Stanley	Works,	one	of	the	world's	largest	manufacturers	of	tools,	and	from	1993	to	1996,	he	was	Vice	President	and	Chief	Financial	Officer	of	Hat Brands,	Inc.,	a	hat	manufacturer.	Earlier	in	his	career,	Mr.	Tehle	served	in	a	variety	of	financial-related	roles	at	Ryder	System,	Inc.	and	Texas	Instruments.	Mr.	Tehle currently	serves	as	a	director	of	Jack	in	the	Box,	Inc.

								Ms.	Guion	joined	Dollar	General	in	October	2003	as	Executive	Vice	President,	Store	Operations.	She	was	named	Executive	Vice	President,	Store	Operations	and Store	Development	in	February	2005,	and	was	promoted	to	Executive	Vice	President,	Division	President,	Store	Operations	and	Store	Development	in	November	2005. From	2000	until	joining	Dollar	General,	Ms.	Guion	served	as	President	and	Chief	Executive	Officer	of	Duke	and	Long	Distributing	Company,	a	convenience	store	chain operator	and	wholesale	distributor	of	petroleum	products	that	filed	for	bankruptcy	in	November	2000.	Prior	to	that	time,	she	served	as	an	operating	partner	for	Devon Partners	(1999-2000),	where	she	developed	operating	plans	and	assisted	in	the	identification	of	acquisition	targets	in	the	convenience	store	industry,	and	as	President and	Chief	Operating	Officer	of	E-Z	Serve	Corporation	(1997-1998),	an	owner/operator	of	convenience	stores,	mini-marts	and	gas	marts.	From	1987	to	1997,	Ms.	Guion served	as	the	Vice	President	and	General	Manager	of	the	largest	division	(Chesapeake	Division)	of	company-owned	stores	at	7-Eleven,	Inc.,	a	convenience	store	chain. Other	positions	held	by	Ms.	Guion	during	her	tenure	at	7-Eleven	include	District	Manager,	Zone	Manager,	Operations	Manager,	and	Division	Manager	(Midwest Division).

								Mr.	Vasos	joined	Dollar	General	in	December	2008	as	Executive	Vice	President,	Division	President	and	Chief	Merchandising	Officer.	Prior	to	joining	Dollar General,	Mr.	Vasos	served	in	executive	positions	with	Longs	Drug	Stores	Corporation	for	7	years,	including	Executive	Vice	President	and	Chief	Operating	Officer (February	2008	through	November	2008)	and	Senior	Vice	President	and	Chief	Merchandising	Officer	(2001-2008),	where	he	was	responsible	for	all	pharmacy	and front-end	marketing,	merchandising,	procurement,	supply	chain,	advertising,	store	development,	store	layout	and	space	allocation,	and	the	operation	of	three	distribution centers.	He	also	previously	served	in	leadership	positions	at	Phar-Mor	Food	and	Drug	Inc.	and	Eckerd	Drug	Corp.

								Mr.	Flanigan	joined	Dollar	General	as	Senior	Vice	President,	Global	Supply	Chain,	in	May	2008.	He	was	promoted	to	Executive	Vice	President	in	March	2010. He	has	25	years	of	management	experience	in	retail	logistics.	Prior	to	joining	Dollar	General,	he	was	group	vice	president	of	logistics	and	distribution	for	Longs	Drug Stores	Corporation	from	October	2005	to	April	2008.	In	this	role,	he	was	responsible	for	overseeing	warehousing,	inbound	and	outbound	transportation	and	facility maintenance	to	service	over	500	retail	outlets.	From	September	2001	to	October	2005	he	served	as	the	Vice	President	of	Logistics	for	Safeway	Inc.	where	he	oversaw distribution	of	food	products	from

Safeway	distribution	centers	to	all	retail	outlets,	inbound	traffic	and	transportation.	He	also	held	distribution	and	logistics	leadership	positions	at	Vons—a	Safeway company,	Specialized	Distribution	Management	Inc.,	and	Crum	&	Crum	Logistics.

								Ms.	Lanigan	joined	Dollar	General	in	July	2002	as	Vice	President,	General	Counsel	and	Corporate	Secretary.	She	was	promoted	to	Senior	Vice	President	in October	2003	and	to	Executive	Vice	President	in	March	2005.	Prior	to	joining	Dollar	General,	Ms.	Lanigan	served	as	Senior	Vice	President,	General	Counsel	and Secretary	at	Zale	Corporation,	a	specialty	retailer	of	fine	jewelry.	During	her	six	years	with	Zale,	Ms.	Lanigan	held	various	positions,	including	Associate	General Counsel.	Prior	to	that,	she	held	legal	positions	with	both	Turner	Broadcasting	System,	Inc.	and	the	law	firm	of	Troutman	Sanders	LLP.

								Mr.	Ravener	joined	Dollar	General	as	Senior	Vice	President	and	Chief	People	Officer	in	August	2008.	He	was	promoted	to	Executive	Vice	President	in	March 2010.	Prior	to	joining	Dollar	General,	he	served	in	human	resources	executive	roles	with	Starbucks	Coffee	Company	from	September	2005	until	August	2008	as	the Senior	Vice	President	of	U.S.	Partner	Resources	and,	prior	to	that,	as	the	Vice	President,	Partner	Resources—Eastern	Division.	As	the	Senior	Vice	President	of	U.S. Partner	Resources	at	Starbucks,	Mr.	Ravener	oversaw	all	aspects	of	human	resources	activity	for	more	than	10,000	stores.	Prior	to	serving	at	Starbucks,	Mr.	Ravener held	Vice	President	of	Human	Resources	roles	for	The	Home	Depot's	Store	Support	Center	and	a	domestic	field	division	from	April	2003	to	September	2005. Mr.	Ravener	also	served	in	executive	roles	in	both	human	resources	and	operations	at	Footstar,	Inc.	and	roles	of	increasing	leadership	at	PepsiCo.

								Ms.	Elliott	joined	Dollar	General	as	Senior	Vice	President	and	Controller	in	August	2005.	Prior	to	joining	Dollar	General,	she	served	as	Vice	President	and Controller	of	Big	Lots,	Inc.,	a	closeout	retailer,	from	May	2001	to	August	2005.	Overseeing	a	staff	of	140	employees	at	Big	Lots,	she	was	responsible	for	accounting operations,	financial	reporting	and	internal	audit.	Prior	to	serving	at	Big	Lots,	she	served	as	Vice	President	and	Controller	for	Jitney-Jungle	Stores	of	America,	Inc.,	a grocery	retailer,	from	April	1998	to	March	2001.	At	Jitney-Jungle,	Ms.	Elliott	was	responsible	for	the	accounting	operations	and	the	internal	and	external	financial reporting	functions.	Prior	to	serving	at	Jitney-Jungle,	she	practiced	public	accounting	for	12	years,	6	of	which	were	with	Ernst	&	Young	LLP.

# PART	II

# ITEM	5.				MARKET	FOR	REGISTRANT'S	COMMON	EQUITY,	RELATED	STOCKHOLDER	MATTERS	AND	ISSUER	PURCHASES	OF	EQUITY SECURITIES

# Market	Information

								Our	common	stock	is	traded	on	the	New	York	Stock	Exchange	under	the	symbol	"DG."	Prior	to	the	initial	public	offering	of	our	common	stock	("IPO")	on November	13,	2009,	there	was	no	established	public	trading	market	for	our	common	stock	after	our	merger	that	occurred	on	July	6,	2007.	The	range	of	the	high	and	low sales	prices	of	our	common	stock	during	our	fourth	quarter	of	fiscal	2009,	as	reported	in	the	consolidated	transaction	reporting	system,	were	$24.90	(high)	and	$21.75 (low).	Our	stock	price	at	the	close	of	the	market	on	March	22,	2010,	was	$25.01.	There	were	approximately	466	shareholders	of	record	of	our	common	stock	as	of March	22,	2010.

# Dividends

								We	have	not	declared	or	paid	recurring	dividends	since	prior	to	our	2007	merger.	However,	prior	to	our	IPO,	on	September	8,	2009,	our	Board	of	Directors declared	a	special	dividend	on	our	outstanding	common	stock	of	approximately	$239.3	million	in	the	aggregate.	The	special	dividend	was	paid	on	September	11,	2009	to shareholders	of	record	on	September	8,	2009	with	cash	generated	from	operations.	We	have	no	current	plans	to	pay	any	cash	dividends	on	our	common	stock	and instead	may

retain	earnings,	if	any,	for	future	operation	and	expansion	and	debt	repayment.	Any	decision	to	declare	and	pay	dividends	in	the	future	will	be	made	at	the	discretion	of our	Board	of	Directors	and	will	depend	on,	among	other	things,	our	results	of	operations,	cash	requirements,	financial	condition,	contractual	restrictions	and	other factors	that	our	Board	of	Directors	may	deem	relevant.	In	addition,	our	ability	to	pay	dividends	is	limited	by	covenants	in	our	Credit	Facilities	and	in	the	indentures governing	our	outstanding	10.625%	senior	notes	due	2015	(the	"Senior	Notes")	and	11.875%/12.625%	senior	subordinated	toggle	notes	due	2017	(the	"Senior Subordinated	Notes"	and,	collectively	with	the	Senior	Notes,	the	"Notes").	See	"Liquidity	and	Capital	Resources"	in	the	Management's	Discussion	and	Analysis	of Financial	Condition	and	Results	of	Operations	section	of	this	report	for	a	description	of	restrictions	on	our	ability	to	pay	dividends.

# Use	of	Proceeds

								On	November	18,	2009,	we	completed	the	IPO	of	39,215,000	shares	of	our	common	stock	(the	"IPO	Shares").	We	sold	22,700,000	shares	(the	"Company	Shares") at	a	price	to	the	public	of	$21.00	per	share	and	a	selling	shareholder	sold	an	additional	16,515,000	previously	outstanding	shares	(the	"Selling	Shareholder	Shares")	at	a price	to	the	public	of	$21.00	per	share.	The	IPO	Shares	were	registered	under	the	Securities	Act	of	1933,	as	amended,	on	a	registration	statement	on	Form	S-1 (Registration	No.	333-161464).	The	registration	statement	was	declared	effective	by	the	Securities	and	Exchange	Commission	on	November	12,	2009.	Citigroup	Global Markets	Inc.,	Goldman,	Sachs	&	Co.,	KKR	Capital	Markets	LLC,	Merrill	Lynch,	Pierce,	Fenner	&	Smith	Incorporated	and	J.P.	Morgan	Securities	Inc.	served	as	joint book-running	managers	for	the	IPO.

								The	net	proceeds	to	us	from	the	sale	of	the	Company	Shares,	after	deducting	the	underwriting	discount	of	approximately	$27.4	million	and	additional	offering- related	expenses	then	reasonably	estimated	at	$3.3	million,	were	approximately	$446.0	million.	The	offering-related	expenses	include	those	of	the	selling	shareholder which	we	were	required	to	pay	under	the	terms	of	the	registration	rights	agreement.	Of	the	approximately	$27.4	million	of	underwriting	discounts,	approximately $6.0	million	was	provided	to	each	of	(a)	KKR	Capital	Markets	LLC;	(b)	Goldman,	Sachs	&	Co.;	and	(c)	Citigroup	Global	Markets	Inc.	We	used	the	net	proceeds	to	us from	the	sale	of	the	Company	Shares	as	follows:	(1)	$229.6	million	of	the	net	proceeds	was	applied	to	redeem	$205.2	million	in	aggregate	principal	amount	of	our	Senior Subordinated	Notes	at	a	redemption	price	of	111.875%	and	(2)	the	remaining	$216.5	million	of	the	net	proceeds	was	applied	to	redeem	$195.7	million	in	aggregate principal	amount	of	our	Senior	Notes	at	a	redemption	price	of	110.625%.	Each	such	redemption	was	made	pursuant	to	a	provision	of	the	applicable	indenture	that permitted	us	to	redeem	up	to	35%	of	the	aggregate	principal	amount	of	such	Notes	with	the	net	cash	proceeds	of	certain	equity	offerings.	In	each	case,	we	paid	accrued and	unpaid	interest	on	the	Notes	through	the	redemption	date	with	cash	generated	from	operations.	Some	of	the	underwriters	or	their	affiliates	may	have	received	part	of the	proceeds	of	the	offering	by	reason	of	the	redemption	of	Notes	held	by	them.	We	did	not	receive	any	proceeds	from	the	sale	by	the	selling	shareholder	of	the	Selling Shareholder	Shares.

								Affiliates	of	KKR	Capital	Markets	LLC	and	Goldman,	Sachs	&	Co.	each	have	an	indirect	interest	in	more	than	10%	of	our	capital	stock	through	their	investment	in Buck	Holdings,	L.P.	and	Buck	Holdings,	LLC,	its	general	partner	and	a	Delaware	limited	liability	company	controlled	by	investment	funds	affiliated	with	Kohlberg Kravis	Roberts	&	Co.,	L.P.

# Issuer	Purchases	of	Equity	Securities

								The	following	table	contains	information	regarding	purchases	of	our	common	stock	made	during	the	quarter	ended	January	29,	2010	by	or	on	behalf	of	Dollar General	or	any	"affiliated	purchaser,"	as	defined	by	Rule	10b-18(a)(3)	of	the	Securities	Exchange	Act	of	1934:

| Period | Total	Number<br>of	Shares<br>Purchased(a) | Average<br>Price	Paid<br>per	Share | Total	Number<br>of	Shares	Purchased	as<br>Part	of	Publicly<br>Announced	Plans	or<br>Programs | Number	of	Shares<br>that	May	Yet	Be<br>Purchased	Under<br>the	Plans	or<br>Programs |
| :--- | :--- | :--- | :--- | :--- |
| 10/31/09\t-\t11/30/09 | 185,375 | $22.55 | — | — |
| 12/01/09\t-\t12/31/09 | 5,487 | $12.87 | — | — |
| 01/01/10\t-\t01/29/10 | 1,525 | $23.84 | — | — |
| Total | 192,387 | $22.28 | — | — |

(a) Represents	185,375	shares	accepted	in	lieu	of	cash	to	pay	employee	tax	liabilities	upon	lapse	of	restrictions	on	restricted	stock,	5,487	shares repurchased	from	employees	pursuant	to	the	terms	of	management	stockholder's	agreements,	and	1,525	shares	accepted	in	lieu	of	cash	to	pay employee	exercise	price	in	connection	with	stock	options	exercise.

# ITEM	6.				SELECTED	FINANCIAL	DATA

								The	following	table	sets	forth	selected	consolidated	financial	information	of	Dollar	General	Corporation	as	of	the	dates	and	for	the	periods	indicated.	The	selected historical	statement	of	operations	data	and	statement	of	cash	flows	data	for	the	fiscal	years	or	periods,	as	applicable,	ended	January	29,	2010,	January	30,	2009, February	1,	2008	and	July	6,	2007,	and	balance	sheet	data	as	of	January	29,	2010	and	January	30,	2009	have	been	derived	from	our	historical	audited	consolidated financial	statements	included	elsewhere	in	this	report.	The	selected	historical	statement	of	operations	data	and	statement	of	cash	flows	data	for	the	fiscal	years	ended February	2,	2007	and	February	3,	2006	and	balance	sheet	data	as	of	February	1,	2008,	February	2,	2007	and	February	3,	2006	presented	in	this	table	have	been	derived from	audited	consolidated	financial	statements	not	included	in	this	report.

								On	July	6,	2007,	we	completed	a	merger	(the	"Merger")	and,	as	a	result,	we	are	a	subsidiary	of	a	Delaware	limited	partnership	controlled	by	investment	funds affiliated	with	Kohlberg	Kravis	Roberts	&	Co.,	L.P.	As	a	result	of	the	Merger	of	the	Company	and	Buck	Acquisition	Corp.	("BAC"),	the	related	purchase	accounting adjustments,	and	a	new	basis	of	accounting	beginning	on	July	7,	2007,	the	2007	financial	reporting	periods	presented	below	include	the	Predecessor	period	of	the Company	reflecting	22	weeks	of	operating	results	from	February	3,	2007	to	July	6,	2007	and	30	weeks	of	operating	results	for	the	Successor	period,	reflecting	the Merger	from	July	7,	2007	to	February	1,	2008.	BAC's	results	of	operations	for	the	period	from	March	6,	2007	to	July	6,	2007	(prior	to	the	Merger	on	July	6,	2007)	are also	included	in	the	consolidated	financial	statements	for	the	2007	Successor	period	described	above,	as	a	result	of	certain	derivative	financial	instruments	entered	into by	BAC	prior	to	the	Merger.	Other	than	these	financial	instruments,	BAC	had	no	assets,	liabilities,	or	operations	prior	to	the	Merger.	The	2006	and	2005	fiscal	years presented	reflect	the	Predecessor.

								Due	to	the	significance	of	the	Merger	and	related	transactions	that	occurred	in	2007,	the	2009,	2008	and	2007	Successor	financial	information	is	not	comparable	to that	of	the	Predecessor	periods	presented	in	the	accompanying	table.

								The	information	set	forth	below	should	be	read	in	conjunction	with,	and	is	qualified	by	reference	to,	the	Consolidated	Financial	Statements	and	related	notes included	in	Part	II,	Item	8	of	this	report	and	the	Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operations	included	in	Part	II,	Item	7	of this	report.

|  | Successor | Successor | Successor | Predecessor | Predecessor | Predecessor |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Year\tEnded | Year\tEnded | March\t6, | February\t3, | Year\tEnded | Year\tEnded |
| (Amounts\tin\tmillions,\texcluding\tper |  |  | 2007 | 2007 |  |  |
| share\tdata,\tnumber\tof\tstores,\tselling |  |  | through | through |  |  |
| square\tfeet,\tand\tnet\tsales\tper\tsquare | January\t29, | January\t30, | February\t1, | July\t6, | February\t2, | February\t3, |
| foot) | 2010 | 2009 | 2008(1)(2) | 2007(2) | 2007(2) | 2006(3) |
| Statement\tof\tOperations\tData: |  |  |  |  |  |  |
| Net\tsales | $11,796.4 | $10,457.7 | $5,571.5 | $3,923.8 | $9,169.8 | $8,582.2 |
| Cost\tof\tgoods\tsold | 8,106.5 | 7,396.6 | 3,999.6 | 2,852.2 | 6,801.6 | 6,117.4 |
| Gross\tprofit | 3,689.9 | 3,061.1 | 1,571.9 | 1,071.6 | 2,368.2 | 2,464.8 |
| Selling,\tgeneral\tand\tadministrative | 2,736.6 | 2,448.6 | 1,324.5 | 960.9 | 2,119.9 | 1,903.0 |
| Litigation\tsettlement\tand\trelated\tcosts,\tnet | — | 32.0 | — | — | — | — |
| Transaction\tand\trelated\tcosts | — | — | 1.2 | 101.4 | — | — |
| Operating\tprofit | 953.3 | 580.5 | 246.1 | 9.2 | 248.3 | 561.9 |
| Interest\tincome | (0.1) | (3.1) | (3.8) | (5.0) | (7.0) | (9.0) |
| Interest\texpense | 345.7 | 391.9 | 252.9 | 10.3 | 34.9 | 26.2 |
| Other\t(income)\texpense | 55.5 | (2.8) | 3.6 | — | — | — |
| Income\t(loss)\tbefore\tincome\ttaxes | 552.1 | 194.4 | (6.6) | 4.0 | 220.4 | 544.6 |
| Income\ttax\texpense\t(benefit) | 212.7 | 86.2 | (1.8) | 12.0 | 82.4 | 194.5 |
| Net\tincome\t(loss) | $339.4 | $108.2 | $(4.8) | $(8.0) | $137.9 | $350.2 |
| Earnings\tper\tshare—basic | $1.05 | $0.34 | $(0.02) |  |  |  |
| Earnings\tper\tshare—diluted | 1.04 | 0.34 | (0.02) |  |  |  |
| Dividends\tper\tshare | 0.7525 | — | — |  |  |  |
| Statement\tof\tCash\tFlows\tData: |  |  |  |  |  |  |
| Net\tcash\tprovided\tby\t(used\tin): |  |  |  |  |  |  |
| Operating\tactivities | $668.6 | $575.2 | $239.6 | $201.9 | $405.4 | $555.5 |
| Investing\tactivities | (248.0) | (152.6) | (6,848.4) | (66.9) | (282.0) | (264.4) |
| Financing\tactivities | (576.5) | (144.8) | 6,709.0 | 25.3 | (134.7) | (323.3) |
| Total\tcapital\texpenditures | (250.7) | (205.5) | (83.6) | (56.2) | (261.5) | (284.1) |
| Other\tFinancial\tand\tOperating\tData: |  |  |  |  |  |  |
| Same\tstore\tsales\tgrowth(4) | 9.5% | 9.0% | 1.9% | 2.6% | 3.3% | 2.2% |
| Same\tstore\tsales(4) | $11,356.5 | $10,118.5 | $5,264.2 | $3,656.6 | $8,327.2 | $7,555.8 |
| Number\tof\tstores\tincluded\tin\tsame\tstore\tsales\tcalculation | 8,324 | 8,153 | 7,735 | 7,655 | 7,627 | 7,186 |
| Number\tof\tstores\t(at\tperiod\tend) | 8,828 | 8,362 | 8,194 | 8,205 | 8,229 | 7,929 |
| Selling\tsquare\tfeet\t(in\tthousands\tat\tperiod\tend) | 62,494 | 58,803 | 57,376 | 57,379 | 57,299 | 54,753 |
| Net\tsales\tper\tsquare\tfoot(5) | $194.8 | $179.7 | $165.4 | $163.9 | $162.6 | $159.8 |
| Consumables\tsales | 70.8% | 69.3% | 66.4% | 66.7% | 65.7% | 65.3% |
| Seasonal\tsales | 14.5% | 14.6% | 16.3% | 15.4% | 16.4% | 15.7% |
| Home\tproducts\tsales | 7.4% | 8.2% | 9.1% | 9.2% | 10.0% | 10.6% |
| Apparel\tsales | 7.3% | 7.9% | 8.2% | 8.7% | 7.9% | 8.4% |
| Rent\texpense | $428.6 | $389.6 | $214.5 | $150.2 | $343.9 | $312.3 |
| Balance\tSheet\tData\t(at\tperiod\tend): |  |  |  |  |  |  |
| Cash\tand\tcash\tequivalents\tand\tshort-term\tinvestments | $222.1 | $378.0 | $119.8 |  | $219.2 | $209.5 |
| Total\tassets | 8,863.5 | 8,889.2 | 8,656.4 |  | 3,040.5 | 2,980.3 |
| Total\tdebt | 3,403.4 | 4,137.1 | 4,282.0 |  | 270.0 | 278.7 |
| Total\tshareholders'\tequity | 3,390.3 | 2,831.7 | 2,703.9 |  | 1,745.7 | 1,720.8 |

(1) Includes	the	results	of	BAC	for	the	period	prior	to	the	Merger	with	and	into	Dollar	General	Corporation	from	March	6,	2007	(the	date	of	BAC's	formation)	through	July	6,	2007	and	the post-Merger	results	of	Dollar	General	Corporation	for	the	period	from	July	7,	2007	through	February	1,	2008.

(2) Includes	the	effects	of	certain	strategic	merchandising	and	real	estate	initiatives	that	resulted	in	the	closing	of	approximately	460	stores	and	changes	in	the	Company's	inventory management	model	which	resulted	in	greater	inventory	markdowns	than	in	previous	years.

(3) The	fiscal	year	ended	February	3,	2006	was	comprised	of	53	weeks.

(4) Same-store	sales	are	calculated	based	upon	stores	that	were	open	at	least	13	full	fiscal	months	and	remain	open	at	the	end	of	the	reporting	period.	The	Company	excludes	the	sales	in	the 53rd	week	of	a	53-week	year	from	the	same-store	sales	calculation.

(5) Net	sales	per	square	foot	was	calculated	based	on	total	sales	for	the	preceding	12	months	as	of	the	ending	date	of	the	reporting	period	divided	by	the	average	selling	square	footage	during the	period,	including	the	end	of	the	fiscal	year,	the	beginning	of	the	fiscal	year,	and	the	end	of	each	of	the	Company's	three	interim	fiscal	quarters.	For	the	period	from	February	3,	2007 through	July	6,	2007,	average	selling	square	footage	was	calculated	using	the	average	square	footage	as	of	July	6,	2007	and	as	of	the	end	of	each	of	the	four	preceding	quarters.	For	the fiscal	year	ended	February	3,	2006,	net	sales	per	square	foot	was	calculated	based	on	52	weeks'	sales.

# ITEM	7.			MANAGEMENT'S	DISCUSSION	AND	ANALYSIS	OF	FINANCIAL	CONDITION	AND	RESULTS	OF	OPERATIONS

								This	discussion	and	analysis	should	be	read	with,	and	is	qualified	in	its	entirety	by,	the	Consolidated	Financial	Statements	and	the	notes	thereto.	It	also	should	be read	in	conjunction	with	the	Forward-Looking	Statements/Risk	Factors	disclosures	set	forth	in	the	Introduction	and	in	Item	1A	of	this	report,	respectively.

# Executive	Overview

								We	are	the	largest	discount	retailer	in	the	United	States	by	number	of	stores,	with	8,877	stores	located	in	35	states	as	of	February	26,	2010,	primarily	in	the southern,	southwestern,	midwestern	and	eastern	United	States.	We	offer	a	broad	selection	of	merchandise,	including	consumable	products	such	as	food,	paper	and cleaning	products,	health	and	beauty	products	and	pet	supplies,	and	non-consumable	products	such	as	seasonal	merchandise,	home	decor	and	domestics,	and	apparel. Our	merchandise	includes	high	quality	national	brands	from	leading	manufacturers,	as	well	as	comparable	quality	private	brand	selections	with	prices	at	substantial discounts	to	national	brands.	We	offer	our	customers	these	national	brand	and	private	brand	products	at	everyday	low	prices	(typically	$10	or	less)	in	our	convenient small-box	(small	store)	locations.

								On	July	6,	2007,	we	completed	a	merger	and,	as	a	result,	we	are	a	subsidiary	of	Buck	Holdings,	L.P.	("Buck"),	a	Delaware	limited	partnership	controlled	by investment	funds	affiliated	with	Kohlberg	Kravis	Roberts	&	Co.,	L.P.	(collectively,	"KKR").	The	membership	interests	of	Buck	and	Buck	Holdings,	LLC	("Buck	LLC"), the	general	partner	of	Buck,	are	held	by	a	private	investor	group,	including	affiliates	of	each	of	KKR	and	Goldman,	Sachs	&	Co.	and	other	equity	investors	(collectively, the	"Investors")	The	merger	consideration	was	funded	through	the	use	of	our	available	cash,	cash	equity	contributions	from	the	Investors,	equity	contributions	of	certain members	of	our	management	and	certain	debt	financings	discussed	below	under	"Liquidity	and	Capital	Resources."	On	November	13,	2009,	we	completed	an	initial public	offering	of	approximately	39.2	million	shares,	including	22.7	million	newly	issued	shares	and	approximately	16.5	million	outstanding	shares	sold	by	a	selling shareholder.

								The	customers	we	serve	are	value-conscious,	and	Dollar	General	has	always	been	intensely	focused	on	helping	our	customers	make	the	most	of	their	spending dollars.	We	believe	our	convenient	store	format	and	broad	selection	of	high	quality	products	at	compelling	values	have	driven	our	substantial	growth	and	financial success	over	the	years.	Like	other	companies,	over	the	past	two	years,	we	have	been	operating	in	an	environment	with	heightened	economic	challenges	and	uncertainties. Consumers	are	facing	very	high	rates	of	unemployment,	fluctuating	food,	gasoline	and	energy	costs,	rising	medical	costs,	and	a	continued	weakness	in	housing	and credit	markets,	and	the	timetable	for	economic	recovery	is	uncertain.	Nonetheless,	as	a	result	of	our	long-term	mission	of	serving	the	value-conscious	customer,	coupled with	a	vigorous	focus	on	improving	our	operating	and	financial	performance,	our	2009	and	2008	financial	results	were	strong,	and	we	remain	optimistic	with	regard	to executing	our	operating	priorities	in	2010.

								At	the	beginning	of	2008,	we	defined	four	operating	priorities,	which	we	remain	keenly	focused	on	executing.	These	priorities	are:	1)	drive	productive	sales	growth, 2)	increase	our	gross	margins,	3)	leverage	process	improvements	and	information	technology	to	reduce	costs,	and	4)	strengthen	and	expand	Dollar	General's	culture	of serving	others.

								Our	first	priority	is	driving	productive	sales	growth	by	increasing	shopper	frequency	and	transaction	amount	and	maximizing	sales	per	square	foot.	We	have enhanced	our	category	management	processes,	allowing	us	to	continue	expanding	our	consumables	offerings	while	also	improving	profitability,	by	adding	more productive	items	and	eliminating	unproductive	items.	We	are	utilizing	the	space	in	our	stores	more	productively	by	raising	the	height	of	our	merchandise	fixtures	and implementing	more	consistent	space	planning.	In	addition,	we	are	making	significant	progress	in

defining	and	improving	our	store	standards	with	a	goal	of	developing	a	consistent	look	and	feel	across	all	stores.	We	are	targeting	both	new	and	existing	customers	with our	improved	advertising	circulars,	and	over	the	past	two	years	we	have	opportunistically	extended	our	store	hours	for	our	customers'	convenience.	Finally,	we	believe we	have	significant	potential	to	grow	sales	through	new	store	growth	in	both	existing	and	new	markets.	We	opened	500	new	stores	in	fiscal	2009	and	plan	to	open approximately	600	new	stores	in	fiscal	2010.

								Our	second	priority	is	to	increase	gross	profit	through	category	management,	shrink	reduction,	distribution	efficiencies,	an	improved	pricing	model,	the	expansion of	private	brand	offerings	and	increased	foreign	sourcing.	We	made	good	progress	through	each	of	these	initiatives	in	2008	and	2009,	reporting	our	highest	gross	profit rate	in	the	last	25	years	in	2009.	Under	new	leadership,	our	merchandising	team	has	been	successful	in	our	efforts	to	upgrade	our	merchandise	selection	to	better	serve our	customers,	while	managing	our	everyday	low	price	strategy.	We	constantly	review	our	pricing	strategy	and	work	diligently	to	minimize	vendor	cost	increases. Merchandise	cost	increases	subsided	in	2009	after	a	challenging	year	in	2008.	We	are	focused	on	sales	of	private	brand	consumables,	which	generally	have	higher	gross profit	rates	than	national	brands,	while	we	continue	to	offer	a	wide	variety	of	national	brands	to	ensure	an	optimal	mix	of	product	offerings	for	our	customers.	Inventory shrink	declined	again	in	2009	as	we	further	implemented	exception-based	shrink	detection	tools	and	improved	employee	training.	Higher	sales	volumes	and	lower average	fuel	costs,	as	well	as	our	continued	efforts	to	increase	efficiencies,	contributed	to	our	ability	to	leverage	transportation	and	distribution	costs	in	2009.

								Our	third	priority	is	leveraging	process	improvements	and	information	technology	to	reduce	costs.	We	are	committed	as	an	organization	to	extract	costs	that	do	not affect	the	customer	experience.	Examples	of	cost	reduction	initiatives	in	2009	include	the	reduction	of	workers'	compensation	expense	through	a	focus	on	safety,	the improvement	of	energy	management	in	the	stores	through	forward	purchase	contracts	as	well	as	the	installation	of	energy	management	systems	and	increased	preventive maintenance,	and	the	reduction	of	waste	management	costs	through	recycling	of	cardboard.	In	addition,	our	real	estate	team	has	had	success	in	negotiating	lease renewals	which	will	benefit	us	in	2010	and	forward.	We	plan	to	further	our	efforts	on	these	and	other	cost	reduction	initiatives	in	2010.	However,	on	March	23,	2010,	the President	signed	into	law	comprehensive	healthcare	reform	legislation.	This	legislation	is	not	expected	to	have	a	material	effect	on	our	consolidated	financial	statements in	fiscal	2010,	but	its	future	impact	on	our	financial	statements	remains	uncertain.	With	regard	to	information	technology,	we	are	focusing	our	resources	on	improving systems	to	create	greater	efficiencies	in	retail	store	operations	and	merchandising.

								Our	fourth	priority	is	to	strengthen	and	expand	Dollar	General's	culture	of	serving	others.	For	customers	this	means	helping	them	"Save	time.	Save	money.	Every day!"	by	providing	clean,	well-stocked	stores	with	quality	products	at	low	prices.	For	employees,	this	means	creating	an	environment	that	attracts	and	retains	key employees	throughout	the	organization.	For	the	public,	this	means	giving	back	to	our	store	communities.	For	shareholders,	this	means	meeting	their	expectations	of	an efficiently	and	profitably	run	organization	that	operates	with	compassion	and	integrity.

								For	the	year	ended	January	29,	2010,	our	continued	focus	on	these	four	priorities	resulted	in	improved	financial	performance	over	the	year	ended	January	30,	2009 in	each	of	our	key	financial	metrics,	as	follows.	Basis	points,	as	referred	to	below,	are	equal	to	0.01	percent	of	total	sales.

•Total	sales	in	fiscal	2009	increased	12.8	percent	over	2008.	Sales	in	same-stores	increased	9.5	percent,	following	a	strong	9.0	percent	increase	in	2008. Customer	traffic	and	average	transaction	amount	increased	in	both	2008	and	2009.	Average	sales	per	square	foot	for	all	stores	in	2009	were approximately	$195,	up	from	$180	in	2008.	Sales	increases	of	consumable	products,	up	15.3	percent,	continued	to	outpace	our	more	discretionary categories,	likely	the	result	of	both	our	merchandising	initiatives	and	the	negative	effect	of	the	economy	on	consumer	discretionary	spending.	However, we	are	strongly	encouraged	by	the	12.5	percent	sales	increase	in	our	seasonal	category.

•Gross	profit,	as	a	percentage	of	sales,	was	31.3	percent	in	2009,	an	increase	of	201	basis	points,	over	2008.	A	reduced	LIFO	impact	accounted	for	44 basis	points	of	this	improvement.	The	remainder	of	the	improvement	was	primarily	attributable	to	increased	purchase	markups,	net	of	increased markdowns,	resulting	from	significantly	increased	volume,	which	enabled	us	to	lower	our	average	costs	from	vendors,	and	the	impact	of	our comprehensive	category	management	enhancements,	including	the	expansion	of	our	private	brands.	In	addition,	lower	average	fuel	costs,	improved distribution	efficiencies,	and	continued	inventory	shrink	reduction,	as	a	percent	of	sales,	contributed	to	our	gross	profit	rate	improvement	in	2009.

•SG&A,	as	a	percentage	of	sales,	for	fiscal	2009	was	23.2	percent,	or	21	basis	points	lower	than	in	2008.	SG&A	in	2009	includes	incremental	expenses	of $68.3	million,	or	58	basis	points,	resulting	from	costs	related	to	our	initial	public	offering.	Our	increased	sales	levels	favorably	impacted	the	SG&A percentage,	with	the	most	significant	impact	on	store	occupancy	costs,	including	rent	and	utilities.	We	continued	to	significantly	reduce	our	workers' compensation	expense	through	safety	initiatives	implemented	over	the	last	several	years,	and	we	further	reduced	our	store	energy	usage.	In	addition,	legal expenses	were	lower	in	2009,	primarily	as	a	result	of	legal	costs	related	to	a	shareholder	litigation	settlement	in	2008.

•Interest	expense	decreased	by	$46.2	million	in	2009	to	$345.7	million,	primarily	as	the	result	of	lower	average	outstanding	long-term	obligations	and lower	interest	rates	on	our	term	loan.	Net	proceeds	from	our	initial	public	offering	and	excess	cash	were	utilized	in	our	fiscal	2009	fourth	quarter	to voluntarily	reduce	long-term	obligations	by	$725.9	million.	Other	non-operating	expenses	include	charges	totaling	$55.3	million	resulting	from	these repurchases.	At	the	end	of	fiscal	2009,	our	total	outstanding	long-term	obligations	were	$3.40	billion	compared	to	$4.14	billion	at	the	end	of	fiscal	2008.

•We	reported	net	income	of	$339.4	million,	or	$1.04	per	diluted	share,	for	fiscal	2009.	This	compares	to	net	income	of	$108.2	million,	or	$0.34	per diluted	share,	in	2008.	Charges	resulting	from	the	termination	of	our	sponsor	advisory	agreement,	the	acceleration	of	certain	equity-based	compensation and	the	repurchase	of	long-term	obligations,	related	to	or	resulting	from	our	initial	public	offering,	reduced	2009	net	income	by	$82.9	million,	or	$0.26 per	diluted	share.

•We	generated	approximately	$668.6	million	of	cash	flows	from	operating	activities	in	2009,	an	increase	of	16.2	percent	over	2008.	In	addition	to utilizing	our	cash	to	support	our	capital	expenditures	and	repurchase	long-term	obligations,	we	paid	a	dividend	to	our	shareholders	of	$239.3	million	in September	2009.

•During	2009,	we	opened	500	new	stores,	remodeled	or	relocated	450	stores,	and	closed	34	stores,	resulting	in	a	store	count	of	8,828	on	January	29,	2010. In	addition,	we	made	good	progress	during	the	year	in	our	efforts	to	better	utilize	existing	square	footage	and	to	upgrade	the	appearance	of	our	stores.

								In	2010,	we	plan	to	continue	to	focus	on	these	four	key	operating	priorities.	We	will	continue	to	refine	and	improve	our	store	standards	in	order	to	increase	sales, focusing	on	achieving	a	consistent	look	and	feel	across	the	chain.	We	have	begun	and	will	continue	to	measure	customer	satisfaction	which	will	allow	us	to	identify areas	needing	improvement.	We	expect	to	continue	the	process	of	raising	the	height	of	our	merchandise	fixtures,	allowing	us	to	better	utilize	our	store	square	footage. As	part	of	our	overall	category	management	processes,	we	plan	to	further	expand	our	private	brand	consumables	offerings	and	to	continue	to	upgrade	the	selection, quality	and	presentation	of	our	private	brand	offerings	in	our	apparel,	seasonal	and	home	categories,	and	we	expect	a	greater	impact	on	gross	margin	from	our	foreign sourcing	efforts	in	2010.

								We	now	have	improved	processes	and	tools	in	place	to	assist	us	in	our	ongoing	inventory	shrink	reduction	efforts,	and	we	will	continue	to	increase	our	utilization	of information	supplied	by	these	analytical	and	monitoring	tools	to	improve	on	our	recent	successes.

								With	regard	to	leveraging	information	technology	and	process	improvements	to	reduce	costs,	we	will	continue	to	focus	on	making	improvements	that	benefit	our merchandising	and	operations	efforts,	including	item	profitability	analysis,	merchandise	selection	and	allocation	and	labor	scheduling.	In	2009,	we	completed	the installation	of	back	office	computers	in	all	of	our	stores,	which	we	will	utilize	to	improve	reporting	and	communications	with	the	stores	and,	consequently,	we	believe will	assist	in	improving	store	productivity.	We	also	will	complete	the	rollout	of	a	new	voice	pick	system	in	our	distribution	centers,	allowing	our	distribution	associates to	communicate	with	warehouse	software	systems	using	speech	recognition,	which	we	expect	to	further	improve	our	efficiencies	in	2010.

								Finally,	we	are	very	pleased	with	the	performance	of	our	2009	new	stores,	remodels	and	relocations,	and	in	2010	we	plan	to	increase	our	new	store	openings	to	600 stores	within	the	35	states	in	which	we	currently	operate,	and	to	increase	our	number	of	remodels	or	relocations	to	an	additional	500	stores.	With	regard	to	planned	new store	openings,	our	criteria	are	based	on	numerous	factors	including,	among	other	things,	availability	of	appropriate	sites,	expected	sales,	lease	terms,	population demographics,	competition,	and	the	employment	environment.	We	use	various	real	estate	site	selection	tools	to	determine	target	markets	and	optimum	site	locations within	those	markets.	With	respect	to	store	relocations,	we	begin	to	evaluate	a	store	for	relocation	opportunities	approximately	18	months	prior	to	the	store's	lease expiration	using	the	same	basic	tools	and	criteria	as	those	used	for	new	stores.	Remodels,	which	require	a	much	smaller	investment,	are	determined	based	on	the	need, the	opportunity	for	sales	improvement	at	the	location	and	an	expectation	of	a	desirable	return	on	investment.

								Key	Financial	Metrics.				We	have	identified	the	following	as	our	most	critical	financial	metrics	for	2010:

•Same-store	sales	growth;

•Sales	per	square	foot;

•Gross	profit,	as	a	percentage	of	sales;

•Operating	profit;

# •Inventory	turnover;

# •Cash	flow;

# •Net	income;

# •Earnings	per	share;

•Earnings	before	interest,	income	taxes,	depreciation	and	amortization;	and

•Return	on	invested	capital.

								Readers	should	refer	to	the	detailed	discussion	of	our	operating	results	below	for	additional	comments	on	financial	performance	in	the	current	year	periods	as compared	with	the	prior	year	periods.

# Results	of	Operations

								As	discussed	above,	we	completed	a	merger	transaction	on	July	6,	2007,	and	therefore	the	2007	presentation	includes	the	22-week	Predecessor	period	of	Dollar General	Corporation	through	July	6,	2007,	reflecting	the	historical	basis	of	accounting	prior	to	our	2007	merger,	and	a	30-week	Successor	period,	reflecting	the	impact of	the	business	combination	and	associated	purchase	price	allocation	of	the	merger	of	Dollar	General	Corporation	and	Buck	Acquisition	Corp.	("BAC"),	from	July	7, 2007	to	February	1,	2008.	BAC	was	formed	on	March	6,	2007,	and	its	results	of	operations	prior	to	our	2007	merger,	which	related	solely	to	interest	rate	swaps	entered into	in	anticipation	of	the	merger,	are	included	in	the	2007	Successor	results	of	operations.	Except	for	the	discussion	of	net	sales,	which	were	not	impacted	by	the	2007 merger,	transactions	relating	to	or	resulting	from	the	2007	merger	are	discussed	separately.

								Seasonality.				The	nature	of	our	business	is	seasonal	to	a	certain	extent.	Primarily	because	of	sales	of	holiday-related	merchandise,	sales	in	our	fourth	quarter (November,	December	and	January)	have	historically	been	higher	than	sales	achieved	in	each	of	the	first	three	quarters	of	the	fiscal	year.	Expenses	and,	to	a	greater extent,	operating	profit	vary	by	quarter.	Results	of	a	period	shorter	than	a	full	year	may	not	be	indicative	of	results	expected	for	the	entire	year.	Furthermore,	the	seasonal nature	of	our	business	may	affect	comparisons	between	periods.

								The	following	table	contains	results	of	operations	data	for	fiscal	years	2009	and	2008	and	the	dollar	and	percentage	variances	among	those	years,	as	well	as	the 2007	pro	forma,	Successor	and	Predecessor	periods.

|  | Successor | Successor | Successor | Successor | Successor | Predecessor | Pro	Forma |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| (amounts\tin\tmillions, |  |  | Amount | % |  |  |  |
| except\tper\tshare\tamounts) | 2009 | 2008 | Change | Change | 2007(a) | 2007(b) | 2007 |
| Net\tsales\tby\tcategory: |  |  |  |  |  |  |  |
| Consumables | $8,356.4 | $7,248.4 | $1,108.0 | 15.3%$ | 3,701.7 | $2,615.1 | $6,316.8 |
| %\tof\tnet\tsales | 70.84% | 69.31% |  |  | 66.44% | 66.65% | 66.53% |
| Seasonal | 1,711.5 | 1,521.5 | 190.0 | 12.5 | 908.3 | 604.9 | 1,513.2 |
| %\tof\tnet\tsales | 14.51% | 14.55% |  |  | 16.30% | 15.42% | 15.94% |
| Home\tproducts | 869.8 | 862.2 | 7.5 | 0.9 | 507.0 | 362.7 | 869.8 |
| %\tof\tnet\tsales | 7.37% | 8.24% |  |  | 9.10% | 9.24% | 9.16% |
| Apparel | 858.8 | 825.6 | 33.2 | 4.0 | 454.4 | 341.0 | 795.4 |
| %\tof\tnet\tsales | 7.28% | 7.89% |  |  | 8.16% | 8.69% | 8.38% |
| Net\tsales | $11,796.4 | $10,457.7 | $1,338.7 | 12.8%$ | 5,571.5 | $3,923.8 | $9,495.2 |
| Cost\tof\tgoods\tsold | 8,106.5 | 7,396.6 | 709.9 | 9.6 | 3,999.6 | 2,852.2 | 6,852.5 |
| %\tof\tnet\tsales | 68.72% | 70.73% |  |  | 71.79% | 72.69% | 72.17% |
| Gross\tprofit | 3,689.9 | 3,061.1 | 628.8 | 20.5 | 1,571.9 | 1,071.6 | 2,642.8 |
| %\tof\tnet\tsales | 31.28% | 29.27% |  |  | 28.21% | 27.31% | 27.83% |
| Selling,\tgeneral\tand\tadministrative |  |  |  |  |  |  |  |
| expenses | 2,736.6 | 2,448.6 | 288.0 | 11.8 | 1,324.5 | 960.9 | 2,310.9 |
| %\tof\tnet\tsales | 23.20% | 23.41% |  |  | 23.77% | 24.49% | 24.34% |
| Litigation\tsettlement\tand\trelated\tcosts, |  |  |  |  |  |  |  |
| net | — | 32.0 | (32.0) | — | — | — | — |
| %\tof\tnet\tsales | — | 0.31% |  |  | — | — | — |
| Transaction\tand\trelated\tcosts | — | — | — | — | 1.2 | 101.4 | 1.2 |
| %\tof\tnet\tsales | — | — |  |  | 0.02% | 2.58% | 0.01% |
| Operating\tprofit | 953.3 | 580.5 | 372.8 | 64.2 | 246.1 | 9.2 | 330.6 |
| %\tof\tnet\tsales | 8.08% | 5.55% |  |  | 4.42% | 0.24% | 3.48% |
| Interest\tincome | (0.1) | (3.1) | 2.9 | (95.3) | (3.8) | (5.0) | (8.8) |
| %\tof\tnet\tsales | (0.00)% | (0.03)% |  |  | (0.07)% | (0.13)% | (0.09)% |
| Interest\texpense | 345.7 | 391.9 | (46.2) | (11.8) | 252.9 | 10.3 | 436.7 |
| %\tof\tnet\tsales | 2.93% | 3.75% |  |  | 4.54% | 0.26% | 4.60% |
| Other\t(income)\texpense | 55.5 | (2.8) | 58.3 | — | 3.6 | — | 3.6 |
| %\tof\tnet\tsales | 0.47% | (0.03)% |  |  | 0.07% | — | 0.04% |
| Income\t(loss)\tbefore\tincome\ttaxes | 552.1 | 194.4 | 357.7 | 184.0 | (6.6) | 4.0 | (100.9) |
| %\tof\tnet\tsales | 4.68% | 1.86% |  |  | (0.12)% | 0.10% | (1.06)% |
| Income\ttaxes | 212.7 | 86.2 | 126.5 | 146.7 | (1.8) | 12.0 | (42.9) |
| %\tof\tnet\tsales | 1.80% | 0.82% |  |  | (0.03)% | 0.31% | (0.45)% |
| Net\tincome\t(loss) | $339.4 | $108.2 | $231.3 | 213.8%$ | (4.8) | $(8.0) | $(57.9) |
| %\tof\tnet\tsales | 2.88% | 1.03% |  |  | (0.09)% | (0.20)% | (0.61)% |
| Diluted\tearnings\tper\tshare | $1.04 | $0.34 | $0.70 | 205.9%$ | (0.02) |  |  |

(a) Includes	the	results	of	operations	of	BAC	for	the	period	prior	to	its	merger	with	and	into	Dollar	General	Corporation	from	March	6,	2007	(the date	of	BAC's	formation)	through	July	6,	2007	(reflecting	the	change	in	fair	value	of	interest	rate	swaps),	and	the	post-merger	results	of	Dollar General	Corporation	for	the	period	from	July	7,	2007	through	February	1,	2008.

(b) Includes	the	pre-merger	results	of	Dollar	General	Corporation	for	the	period	from	February	3,	2007	through	July	6,	2007.

								The	following	discussion	of	our	financial	performance	also	includes	supplemental	unaudited	pro	forma	condensed	consolidated	financial	information	for	2007. Because	the	2007	merger	occurred	during	our	2007	second	quarter,	we	believe	this	information	aids	in	the	comparison	between	the	years	presented.	The	pro	forma information	does	not	purport	to	represent	what	our	results	of	operations	would	have	been	had	the	2007	merger	and	related	transactions	actually	occurred	at	the	beginning of	the	year	indicated,	and	they	do	not	purport	to	project	our	results	of	operations	or	financial	condition	for	any	future	period.	See	"Unaudited	Pro	Forma	Condensed Consolidated	Financial	Information"	below.

								Net	Sales.				The	net	sales	increase	in	2009	reflects	a	same-store	sales	increase	of	9.5%	compared	to	2008.	Same-stores	include	stores	that	have	been	open	for 13	months	and	remain	open	at	the	end	of	the	reporting	period.	For	2009,	there	were	8,324	same-stores	which	accounted	for	sales	of	$11.36	billion.	The	remainder	of	the increase	in	sales	in	2009	was	attributable	to	new	stores,	partially	offset	by	sales	from	closed	stores.	The	strong	increase	in	sales	reflects	the	results	of	our	various initiatives	implemented	throughout	2008	and	2009,	including	the	impact	of	improved	store	standards,	the	expansion	of	our	merchandise	offerings,	including	significant enhancements	to	our	convenience	food	and	beverages	and	health	and	beauty	products,	in	addition	to	improved	utilization	of	square	footage,	extended	store	hours	and improved	marketing	efforts.	In	2009,	we	continued	the	transformation	of	our	private	brand	products	as	further	discussed	above	in	the	Executive	Overview.

								The	net	sales	increase	in	2008	reflects	a	same-store	sales	increase	of	9.0%	compared	to	2007.	For	2008,	there	were	8,153	same-stores	which	accounted	for	sales	of $10.12	billion.	There	were	no	purchase	accounting	or	other	adjustments	to	net	sales	as	a	result	of	our	2007	merger,	therefore,	the	2007	net	sales	and	other	amounts presented	related	to	2007	net	sales	are	calculated	using	the	2007	52-week	fiscal	year.	The	remainder	of	the	increase	in	sales	in	2008	was	attributable	to	new	stores, partially	offset	by	sales	from	closed	stores.	The	increase	in	sales	of	consumables	reflects	the	various	initiatives	implemented	in	2008,	including	the	impact	of	improved store	standards,	the	expansion	of	convenience	food	and	beverage	offerings,	improved	utilization	of	square	footage	and	extended	store	hours.	The	majority	of	our merchandising	efforts	in	2008	related	to	the	consumables	category,	including	planogram	resets	and	increased	emphasis	on	private	brand	products.

								Of	our	four	major	merchandise	categories,	the	consumables	category	has	grown	most	significantly	over	the	past	several	years.	Although	this	category	generally	has a	lower	gross	profit	rate	than	the	other	three	categories,	as	discussed	below,	we	were	able	to	increase	our	overall	gross	profit	rate	in	both	2009	and	2008.	Because	of	the impact	of	sales	mix	on	gross	profit,	we	continually	review	our	merchandise	mix	and	strive	to	adjust	it	when	appropriate.	Maintaining	an	appropriate	sales	mix	is	an integral	part	of	achieving	our	gross	profit	and	sales	goals.	Both	the	number	of	customer	transactions	and	average	transaction	amount	increased	in	2009	and	2008,	and	we believe	that	our	stores	have	benefited	to	some	degree	from	attracting	new	customers	who	are	seeking	value	as	a	result	of	the	current	economic	environment.

								Gross	Profit.				The	gross	profit	rate	as	a	percentage	of	sales	was	31.3%	in	2009	compared	to	29.3%	in	2008.	Factors	contributing	to	the	increase	in	the	2009	gross profit	rate	include	increased	markups	resulting	primarily	from	higher	purchase	markups,	partially	offset	by	increased	markdowns.	In	addition,	our	increased	sales volumes	have	contributed	to	our	ability	to	reduce	purchase	costs	from	our	vendors.	Transportation	and	distribution	costs	decreased	for	the	year	driven	by	lower	fuel	costs as	well	as	the	impact	of	cost	reduction	initiatives.	Higher	sales	volumes	and	productivity	initiatives	also	contributed	to	improved	leverage	of	our	distribution	costs.	In addition,	inventory	shrinkage	as	a	percentage	of	sales	declined	in	2009	from	2008,	contributing	to	our	gross	profit	rate	improvement.	Finally,	in	2009,	we	recorded	a LIFO	benefit	of	$2.5	million,	reflecting	a	flattening	of	merchandise	costs	in	2009	further	described	below,	compared	to	a	LIFO	provision	of	$43.9	million	in	2008.

								The	gross	profit	rate	as	a	percentage	of	sales	was	29.3%	in	2008	compared	to	28.2%	in	the	2007	Successor	period,	27.3%	in	the	2007	Predecessor	period,	and 27.8%	for	pro	forma	2007.	Factors	contributing	to	the	increase	in	the	2008	gross	profit	rate	include	a	lower	inventory	shrink	rate;	lower	promotional	markdowns; improved	leverage	on	distribution	and	transportation	costs;	and	improved	markups	related	to	changes	resulting	from	the	outcome	of	pricing	analysis,	our	ability	to	react more	quickly	to	product	cost	changes	and	diligent	vendor	negotiations.	In	January	2009,	we	marked	down	merchandise	as	the	result	of	a	late	2008	change	in	the interpretation	of	the	phthalates	provision	of	the	Consumer	Product	Safety	Improvement	Act	of	2008	resulting	in	a	charge	of	$8.6	million.	Also	in	2008,	we	faced increased	commodity	cost	pressures	mainly	related	to	food	and	pet	products	which	were	driven	by	rising	fruit	and	vegetable	prices	and	freight	costs.	Increases	in petroleum,	resin,	metals,	pulp	and	other	raw	material	commodity	driven	costs	also	resulted	in	multiple	product	cost	increases.	Related	to	these	commodity	cost	increases, we	recorded	a	LIFO	expense	of	$43.9	million	in	2008,	compared	to	the	LIFO	provision	recorded	in	the	2007	Successor	period	of	$6.1	million.

								Selling,	General	and	Administrative	("SG&A")	Expense.				SG&A,	as	a	percentage	of	sales,	was	23.2%	in	2009	compared	to	23.4%	in	2008,	representing	an improvement	of	21	basis	points.	SG&A	in	the	2009	period	included	expenses	related	to	the	completion	of	our	initial	public	offering	totaling	$68.3	million,	or	58	basis points,	including	$58.8	million	relating	to	the	termination	of	an	advisory	agreement	among	us,	KKR	and	Goldman,	Sachs	&	Co.	and	$9.4	million	resulting	from	the acceleration	of	certain	equity	based	compensation.	Our	increased	sales	levels	favorably	impacted	SG&A,	as	a	percentage	of	sales,	with	the	most	significant	impact	on store	occupancy	costs,	including	rent	and	utilities.	Our	cost	of	utilities,	as	a	percentage	of	sales,	was	further	reduced	by	energy	savings	resulting	from	our	store	energy management	initiatives,	including	forward	purchase	contracts,	increased	preventive	maintenance	and	the	installation	of	energy	management	systems	in	substantially	all of	our	new	and	relocated	stores.	In	addition,	we	continued	to	significantly	reduce	our	workers'	compensation	expense	through	safety	initiatives	implemented	over	the	last several	years,	and	legal	expenses	were	lower	in	2009	than	2008,	which	included	expenses	incurred	in	connection	with	a	shareholder	litigation	settlement	in	2008	relating to	our	2007	merger.

								SG&A	expense	as	a	percentage	of	sales	decreased	to	23.4%	in	2008,	compared	to	23.8%	and	24.5%	in	the	2007	Successor	and	Predecessor	periods,	respectively. The	more	significant	items	resulting	in	the	decrease	in	2008	compared	to	the	2007	periods	include:	approximately	$9.0	million	and	$45.0	million	in	the	2007	Successor and	Predecessor	periods,	respectively	(including	$2.4	million	and	$4.1	million,	respectively,	also	included	in	advertising	costs	discussed	below)	related	to	the	closing	of stores	and	changes	in	our	inventory	strategy;	a	$12.0	million	loss	in	the	2007	Successor	period	compared	to	a	$5.0	million	gain	in	2008	relating	to	potential	losses	on distribution	center	leases;	advertising	costs	of	$27.8	million	in	2008	compared	to	$23.6	million	and	$17.3	million	in	the	2007	Successor	and	Predecessor	periods, respectively;	and	decreases	in	workers	compensation	and	other	insurance-related	costs	compared	to	the	2007	periods.	These	decreases	were	partially	offset	by	an	increase in	incentive	compensation	and	related	payroll	taxes	in	2008	compared	to	the	2007	periods	due	to	improved	overall	financial	performance,	increased	amortization	of leasehold	intangibles	capitalized	in	connection	with	the	revaluation	of	assets	at	the	date	of	our	2007	merger,	and	an	increase	in	professional	fees	in	2008	compared	to	the 2007	periods	primarily	reflecting	legal	expenses	related	to	shareholder	litigation.

								SG&A	decreased	to	23.4%	in	2008	compared	to	24.3%	in	pro	forma	2007.	The	more	significant	items	resulting	in	the	decrease	from	the	2007	pro	forma	results include:	$54.0	million	of	costs	in	pro	forma	2007	SG&A	relating	to	the	closing	of	stores	and	the	implementation	of	new	inventory	strategies;	a	$12.0	million	loss	in	the 2007	pro	forma	period	compared	to	a	$5.0	million	gain	in	2008	relating	to	possible	losses	on	distribution	center	leases;	and	decreases	in	workers	compensation	and	other insurance-related	costs	in	2008	of	$10.4	million	compared	to	the	2007	pro	forma	period.	These	decreases	were	partially	offset	by	an	increase	in	incentive	compensation and	related	payroll	taxes	of

$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.

								The	2009	income	tax	rate	is	greater	than	the	expected	U.S.	statutory	tax	rate	of	35%	due	primarily	to	the	inclusion	of	state	income	taxes	in	the	total	effective	tax rate.	The	2009	effective	tax	rate	is	less	than	the	2008	rate	due	principally	to	the	unfavorable	impact	that	the	non-deductible,	merger-related	lawsuit	settlement	had	on	the 2008	rate.	This	reduction	in	the	effective	tax	rate	was	partially	offset	by	a	decrease	in	the	tax	rate	benefit	related	to	federal	jobs	credits.	While	the	total	amount	of	jobs credits	earned	in	2009	was	similar	to	the	amount	earned	in	2008,	the	impact	of	this	benefit	on	the	effective	tax	rate	was	reduced	due	to	the	2009	increase	in	income before	income	taxes.

								The	2008	income	tax	rate	was	greater	than	the	expected	U.S.	statutory	tax	rate	of	35%	principally	due	to	the	non-deductibility	of	the	settlement	and	related expenses	associated	with	the	shareholder	lawsuit	related	to	our	2007	merger.

								The	income	tax	rate	for	the	Successor	period	ended	February	1,	2008	is	a	benefit	of	26.9%.	This	benefit	is	less	than	the	expected	U.S.	statutory	rate	of	35%	due	to the	incurrence	of	state	income	taxes	in	several	of	the	group's	subsidiaries	that	file	their	state	income	tax	returns	on	a	separate	entity	basis	and	the	election	to	include, effective	February	3,	2007,	income	tax	related	interest	and	penalties	in	the	amount	reported	as	income	tax	expense.

								The	income	tax	rate	for	the	Predecessor	period	ended	July	6,	2007	is	an	expense	of	300.2%.	This	expense	is	higher	than	the	expected	U.S.	statutory	rate	of	35%	due principally	to	the	non-deductibility	of	certain	acquisition	related	expenses.

# Off	Balance	Sheet	Arrangements

								We	lease	three	of	our	distribution	centers.	The	entities	involved	in	the	ownership	structure	underlying	these	leases	meet	the	accounting	definition	of	a	Variable Interest	Entity	("VIE").	One	of	these	distribution	centers	has	been	recorded	as	a	financing	obligation	whereby	its	property	and	equipment	are	reflected	in	our consolidated	balance	sheets.	The	land	and	buildings	of	the	other	two	distribution	centers	have	been	recorded	as	operating	leases.	We	are	not	the	primary	beneficiary	of these	VIEs	and,	accordingly,	have	not	included	these	entities	in	our	consolidated	financial	statements.	Other	than	the	foregoing,	we	are	not	party	to	any	off	balance	sheet arrangements.

# Unaudited	Pro	Forma	Condensed	Consolidated	Financial	Information

								The	following	supplemental	unaudited	pro	forma	condensed	consolidated	statement	of	operations	data	has	been	developed	by	applying	pro	forma	adjustments	to our	historical	consolidated	statement	of	operations.	We	were	acquired	on	July	6,	2007	through	a	merger	accounted	for	as	a	reverse	acquisition.	Although	we	continued	as the	same	legal	entity	after	the	merger,	the	accompanying	unaudited	pro	forma	condensed	consolidated	financial	information	is	presented	for	the	Predecessor	and Successor	relating	to	the	periods	preceding	and	succeeding	the	merger,	respectively.	As	a	result	of	the	merger,	we	applied	purchase	accounting	standards	and	a	new	basis of	accounting	effective	July	7,	2007.	The	unaudited	pro	forma	condensed	consolidated	statement	of	operations	for	the	year	ended	February	1,	2008	gives	effect	to	the merger	as	if	it	had	occurred	on	February	3,	2007.	Assumptions	underlying	the	pro	forma	adjustments	are	described	in	the	accompanying	notes,	which	should	be	read	in conjunction	with	this	unaudited	pro	forma	condensed	consolidated	financial	statement.

								The	unaudited	pro	forma	adjustments	are	based	upon	available	information	and	certain	assumptions	that	we	believe	are	reasonable	under	the	circumstances.	The unaudited	pro	forma	condensed	consolidated	financial	information	is	presented	for	supplemental	informational	purposes	only,	although	we	believe	this	information	is useful	in	providing	comparisons	between	years.	The

unaudited	pro	forma	condensed	consolidated	financial	information	does	not	purport	to	represent	what	our	results	of	operations	would	have	been	had	the	2007	merger and	related	transactions	actually	occurred	on	the	date	indicated,	and	they	do	not	purport	to	project	our	results	of	operations	or	financial	condition	for	any	future	period. The	unaudited	pro	forma	condensed	consolidated	statement	of	operations	should	be	read	in	conjunction	with	the	information	contained	in	other	sections	of	this	report including	"Selected	Financial	Data",	our	consolidated	financial	statements	and	related	notes	thereto,	and	other	sections	of	this	Management's	Discussion	and	Analysis	of Financial	Condition	and	Results	of	Operations.	All	pro	forma	adjustments	and	their	underlying	assumptions	are	described	more	fully	in	the	notes	to	our	unaudited	pro forma	condensed	consolidated	statements	of	operations.

|  |  | Fiscal	Year	Ended	February	1,	2008 | Fiscal	Year	Ended	February	1,	2008 |  |
| :--- | :--- | :--- | :--- | :--- |
| (In\tthousands) | Successor | Predecessor | Adjustments | Pro\tForma |
| Net\tsales | $5,571,493 | $3,923,753 | $— | $9,495,246 |
| Cost\tof\tgoods\tsold | 3,999,599 | 2,852,178 | 695(a) | 6,852,472 |
| Gross\tprofit | 1,571,894 | 1,071,575 | (695) | 2,642,774 |
| Selling,\tgeneral\tand\tadministrative | 1,324,508 | 960,930 | 25,461(b) | 2,310,899 |
| Transaction\tand\trelated\tcosts | 1,242 | 101,397 | (101,397)(c) | 1,242 |
| Operating\tprofit | 246,144 | 9,248 | 75,241 | 330,633 |
| Interest\tincome | (3,799) | (5,046) | — | (8,845) |
| Interest\texpense | 252,897 | 10,299 | 173,502(d) | 436,698 |
| Other\t(income)\texpense | 3,639 | — | — | 3,639 |
| Income\t(loss)\tbefore\tincome\ttaxes | (6,593) | 3,995 | (98,261) | (100,859) |
| Income\ttax\texpense\t(benefit) | (1,775) | 11,993 | (53,138)(e) | (42,920) |
| Net\tloss | $(4,818) | $(7,998) | $(45,123) | $(57,939) |

See	notes	to	unaudited	pro	forma	condensed	consolidated	statement	of	operations.

# Notes	to	Unaudited	Pro	Forma	Condensed	Consolidated	Statement	of	Operations

(a) Represents	the	estimated	impact	on	cost	of	goods	sold	of	the	adjustment	to	fair	value	of	the	property	and	equipment	at	our	distribution	centers.

(b) Primarily	represents	depreciation	and	amortization	of	the	fair	value	adjustments	related	to	tangible	and	intangible	long-lived	assets.	Identifiable intangible	assets	with	a	determinable	life	have	been	amortized	on	a	straight-line	basis	in	the	unaudited	pro	forma	consolidated	statement	of operations	over	a	period	ranging	from	2	to	17.5	years.	The	primary	fair	value	adjustments	(on	which	the	pro	forma	adjustments	are	based) impacting	SG&A	expenses	were	to	leasehold	interests	($185	million),	property	and	equipment	($101	million)	and	internally	developed	software ($12	million).	This	adjustment	also	includes	management	fees	that	were	payable	under	a	sponsor	advisory	agreement	subsequent	to	the	closing of	our	2007	merger	and	related	transactions	(at	an	initial	annual	rate	of	$5.0	million	which	was	increased	by	5%	for	each	succeeding	year	until the	termination	of	the	agreement	in	connection	with	our	initial	public	offering	in	November	2009).

(c) Represents	$101.4	million	of	charges	that	are	non-recurring	in	nature	and	directly	attributable	to	our	2007	merger	and	related	transactions.	Such charges	are	comprised	of	$39.4	million	of	stock	compensation	expense	from	the	acceleration	of	unvested	stock	options,	restricted	stock	and restricted	stock	units	as	required	as	a	result	of	the	2007	merger	and	$62.0	million	of	transaction	costs	we	incurred	that	were	expensed	as	one- time	charges	upon	the	close	of	the	merger.	Such	adjustments	do	not	include	any	adjustments	to	reflect	the	effects	of	our	new	stock	based compensation	plan.

(d) Reflects	pro	forma	interest	expense	resulting	from	our	post-merger	capital	structure	as	follows:

(1) The	$1.125	billion	revolving	credit	facility	carries	an	interest	rate	of	3-month	LIBOR	of	5.32%	plus	1.50%	for	tranche	A	loans	and	3- month	LIBOR	of	5.32%	plus	2.25%	for	tranche	A-1	loans.	Reflects	assumed	borrowings	of	$175.0	million	under	tranche	A	and $125.0	million	under	tranche	A-1.	Such	levels	of	borrowings	will	fluctuate	in	future	periods	dependent	upon	short	term	cash	needs. Changes	in	the	levels	of	borrowings	would	impact	interest	expense.

(2) Reflects	interest	on	the	$2.3	billion	term	loan	facility	at	a	rate	of	LIBOR	plus	2.75%.	To	hedge	against	interest	rate	risk,	we	have entered	into	a	swap	agreement	with	respect	to	a	$2.0	billion	notional	amount	for	4.93%.	This	swap	agreement	became	effective	as	a result	of	the	acquisition	on	July	31,	2007	and	will	amortize	on	a	quarterly	basis	until	maturity	at	July	31,	2012.	The	unhedged	portion	of the	facility	is	reflected	at	an	interest	rate	of	LIBOR	of	5.32%	plus	2.75%.

(3) Reflects	interest	on	the	10.625%	senior	notes	and	11.875%/12.625%	senior	subordinated	notes.	Assumes	the	cash	interest	payment option	at	a	rate	of	11.875%	has	been	elected	with	respect	to	all	of	the	senior	subordinated	notes.

(4) Represents	fees	on	balances	of	trade	letters	of	credit	of	$141.2	million	at	0.75%	and	standby	letters	of	credit	of	$40.7	million	at	1.50%.

(5) Represents	commitment	fees	of	0.375%	on	the	$612.1	million	unutilized	balance	of	the	revolving	credit	facility	at	July	6,	2007. Outstanding	letters	of	credit	noted	in	(4)	above	reduce	the	availability	under	the	revolving	credit	facility.

(6) Represents	historical	interest	expense	on	other	existing	indebtedness.

(7) Represents	debt	issuance	costs	associated	with	the	new	bank	facilities	amortized	using	the	effective	interest	method	over	6	years	for	the revolving	facility,	7	years	for	the	term	loan	facility,	8	years	for	the	senior	notes,	10	years	for	the	senior	subordinated	notes	and	8	years for	other	capitalized	debt	issuance	costs.	Also	includes	the	amortization	of	debt	discount	of	the	senior	notes.

(8) Represents	interest	expense	on	long-term	liabilities	which	were	discounted	as	a	result	of	our	2007	merger.

(9) Represents	an	adjustment	to	historical	interest	expense	to	reflect	the	effect	of	the	adoption	of	current	accounting	standards	for	income taxes,	offset	by	capitalized	interest	expense.

(e) Represents	the	tax	effect	of	the	pro	forma	adjustments,	calculated	at	an	effective	rate	of	54.1%	for	the	Predecessor	period	ended	July	6,	2007. The	effective	tax	rate,	a	benefit,	applied	to	the	pro	forma	changes	for	the	Predecessor	period	ended	July	6,	2007,	reflects	the	pro	forma elimination	of	non-deductible	transaction	costs	from	income	before	taxes.

# Effects	of	Inflation

								In	2008,	increased	commodity	cost	pressures	mainly	related	to	food	and	pet	products,	which	were	driven	by	fruit	and	vegetable	prices	and	rising	freight	costs, increased	the	costs	of	certain	products.	Increases	in	petroleum,	resin,	metals,	pulp	and	other	raw	material	commodity	driven	costs	also	resulted	in	multiple	product	cost increases.	We	believe	that	our	ability	to	increase	selling	prices	in	response	to	cost	increases	largely	mitigated	the	effect	of	these	cost	increases	on	our	overall	results	of operations.	These	2008	trends	generally	reversed	or	stabilized	in	2009.	We	believe	that	inflation	and/or	deflation	had	a	minimal	impact	on	our	overall	operations	during 2007.

# Liquidity	and	Capital	Resources

# Current	Financial	Condition	and	Recent	Developments

								During	the	past	three	years,	we	have	generated	an	aggregate	of	approximately	$1.69	billion	in	cash	flows	from	operating	activities.	During	that	period,	we	expanded the	number	of	stores	we	operate	by	599,	or	over	7%,	remodeled	or	relocated	1,154	stores,	or	approximately	13%	of	our	currently	operated	stores,	and	incurred approximately	$596	million	in	capital	expenditures.	We	made	certain	strategic	decisions	which	slowed	our	store	growth	in	2007	and	2008,	but	we	accelerated	store growth	in	2009	and	currently	plan	to	continue	that	strategy	in	2010	and	beyond.

								On	September	8,	2009,	our	Board	of	Directors	declared	a	special	dividend	on	our	outstanding	common	stock	of	approximately	$239.3	million	in	the	aggregate.	The special	dividend	was	paid	on	September	11,	2009	to	shareholders	of	record	on	September	8,	2009	with	cash	generated	from	operations.	Prior	to	our	2007	merger,	we declared	a	quarterly	cash	dividend	in	the	amount	of	$0.05	per	share	payable	on	or	before	April	19,	2007	to	common	shareholders	of	record	on	April	5,	2007.	We	have not	declared	or	paid	recurring	dividends	since	that	date.	We	have	no	current	plans	to	pay	any	cash	dividends	on	our	common	stock	and	instead	may	retain	earnings,	if any,	for	future	operation	and	expansion	and	debt	repayment.	Any	decision	to	declare	and	pay	dividends	in	the	future	will	be	made	at	the	discretion	of	our	Board	of Directors	and	will	depend	on,	among	other	things,	our	results	of	operations,	cash	requirements,	financial	condition,	contractual	restrictions	and	other	factors	that	our Board	of	Directors	may	deem	relevant.	In	addition,	our	ability	to	pay	dividends	is	limited	by	covenants	in	our	Credit	Facilities	and	in	the	indentures	governing	the	Notes as	discussed	in	more	detail	below.

								On	November	18,	2009,	we	completed	the	initial	public	offering	of	our	common	stock.	We	issued	22,700,000	shares	in	the	offering	and	an	existing	shareholder sold	an	additional	16,515,000	outstanding	shares.	Net	proceeds	from	the	offering	of	$446.0	million	were	used	to	redeem	$195.7	million	principal	amount	of	outstanding Senior	Notes	and	$205.2	million	principal	amount	of	outstanding	Senior	Subordinated	Notes.	In	connection	with	the	consummation	of	the	offering,	we	paid	a	transaction fee	of	approximately	$4.8	million	to	KKR	and	Goldman,	Sachs	&	Co.	Although	the	transaction	fee	was	not	paid	from	the	net	proceeds	of	the	offering,	this	amount	was directly	related	to	the	offering	and	was	accounted	for	as	a	cost	of	raising	equity.	In	addition,	we	terminated	our	advisory	agreement	with	such	parties,	resulting	in	the payment	of	a	fee	of	approximately	$58.8	million,	which	was	expensed.	We	also	incurred	other	pre-tax	charges	as	a	result	of	the	offering	and	related	transactions	in	the fourth	quarter	of	2009,	as	discussed	above	under	"Results	of	Operations."

								In	January	2010,	we	voluntarily	prepaid	$325.0	million	principal	amount	of	our	senior	secured	term	loan	facility	("Term	Loan	Facility")	with	cash	generated	from operations.

								At	January	29,	2010,	we	had	total	outstanding	debt	(including	the	current	portion	of	long-term	obligations)	of	$3.40	billion.	We	also	had	an	additional $930.6	million	available	for	borrowing	under	our	senior	secured	asset-based	revolving	credit	facility	("ABL	Facility"	and,	together	with	the	Term	Loan	Facility,	the "Credit	Facilities")	at	that	date.	Our	liquidity	needs	are	significant,	primarily	due	to	our	debt	service	and	other	obligations.	Our	substantial	debt	could	adversely	affect our	ability	to	raise	additional	capital	to	fund	our	operations,	limit	our	ability	to	react	to	changes	in	the	economy	or	our	industry,	expose	us	to	interest	rate	risk	to	the extent	of	our	variable	rate	debt	and	prevent	us	from	meeting	our	obligations	under	our	outstanding	debt	securities.

								Management	believes	our	cash	flow	from	operations	and	existing	cash	balances,	combined	with	availability	under	the	Credit	Facilities	(described	below),	will provide	sufficient	liquidity	to	fund	our	current	obligations,	projected	working	capital	requirements	and	capital	spending	for	a	period	that	includes	the	next	twelve	months and	the	next	several	years.

# Credit	Facilities

								Overview.				We	have	two	senior	secured	credit	facilities	which	provide	financing	of	up	to	$2.995	billion	as	of	January	29,	2010.	The	Credit	Facilities	consist	of	the $1.964	billion	Term	Loan	Facility	and	the	$1.031	billion	ABL	Facility	(of	which	up	to	$350.0	million	is	available	for	letters	of	credit),	subject	to	borrowing	base availability.	The	ABL	Facility	includes	borrowing	capacity	available	for	letters	of	credit	and	for	short-term	borrowings	referred	to	as	swingline	loans.

								The	amount	available	under	the	ABL	Facility	(including	letters	of	credit)	shall	not	exceed	the	sum	of	the	tranche	A	borrowing	base	and	the	tranche	A-1	borrowing base.	The	tranche	A	borrowing	base	equals	the	sum	of	(i)	85%	of	the	net	orderly	liquidation	value	of	all	our	eligible	inventory	and	that	of	each	guarantor	thereunder	and (ii)	90%	of	all	our	accounts	receivable	and	credit/debit	card	receivables	and	that	of	each	guarantor	thereunder,	in	each	case,	subject	to	a	reserve	equal	to	the	principal amount	of	the	2010	Notes	that	remain	outstanding	at	any	time	and	other	customary	reserves	and	eligibility	criteria.	An	additional	10%	of	the	net	orderly	liquidation value	of	all	of	our	eligible	inventory	and	that	of	each	guarantor	thereunder	is	made	available	to	us	in	the	form	of	a	"last	out"	tranche	under	which	we	may	borrow	up	to	a maximum	amount	of	$101.0	million.	Borrowings	under	the	ABL	Facility	will	be	incurred	first	under	the	last	out	tranche,	and	no	borrowings	will	be	permitted	under	any other	tranche	until	the	last	out	tranche	is	fully	utilized.	Repayments	of	the	ABL	Facility	will	be	applied	to	the	last	out	tranche	only	after	all	other	tranches	have	been	fully paid	down.

								Interest	Rates	and	Fees.				Borrowings	under	the	Credit	Facilities	bear	interest	at	a	rate	equal	to	an	applicable	margin	plus,	at	our	option,	either	(a)	LIBOR	or	(b)	a base	rate	(which	is	usually	equal	to	the	prime	rate).	The	applicable	margin	for	borrowings	is	(i)	under	the	Term	Loan	Facility,	2.75%	for	LIBOR	borrowings	and	1.75% for	base-rate	borrowings	(ii)	under	the	ABL	Facility	(except	in	the	last	out	tranche	described	above)	as	of	January	29,	2010	and	January	30,	2009,	1.25%	for	LIBOR borrowings;	0.25%	for	base-rate	borrowings	and	for	any	last	out	borrowings,	2.25%	for	LIBOR	borrowings	and	1.25%	for	base-rate	borrowings.	The	applicable	margins for	borrowings	under	the	ABL	Facility	(except	in	the	case	of	last	out	borrowings)	are	subject	to	adjustment	each	quarter	based	on	average	daily	excess	availability	under the	ABL	Facility.	We	are	also	required	to	pay	a	commitment	fee	to	the	lenders	under	the	ABL	Facility	for	any	unutilized	commitments	at	a	rate	of	0.375%	per	annum. We	also	must	pay	customary	letter	of	credit	fees.	See	Item	7A.	"Quantitative	and	Qualitative	Disclosures	About	Market	Risk"	below	for	a	discussion	of	our	use	of interest	rate	swaps	to	manage	our	interest	rate	risk.

								Prepayments.				The	senior	secured	credit	agreement	for	the	Term	Loan	Facility	requires	us	to	prepay	outstanding	term	loans,	subject	to	certain	exceptions,	with:

•50%	of	our	annual	excess	cash	flow	(as	defined	in	the	credit	agreement)	which	will	be	reduced	to	25%	and	0%	if	we	achieve	and	maintain	a	total	net leverage	ratio	of	6.0	to	1.0	and	5.0	to	1.0,	respectively;

•100%	of	the	net	cash	proceeds	of	all	non-ordinary	course	asset	sales	or	other	dispositions	of	property	in	excess	of	$25.0	million	in	the	aggregate	and subject	to	our	right	to	reinvest	the	proceeds;	and

•100%	of	the	net	cash	proceeds	of	any	incurrence	of	debt,	other	than	proceeds	from	debt	permitted	under	the	senior	secured	credit	agreement.

								The	mandatory	prepayments	discussed	above	will	be	applied	to	the	Term	Loan	Facility	as	directed	by	the	senior	secured	credit	agreement.	Through	January	29, 2010,	no	prepayments	have	been	required	under	the	prepayment	provisions	listed	above.	The	Term	Loan	Facility	can	be	prepaid	in	whole	or	in	part	at	any	time.

								In	addition,	the	senior	secured	credit	agreement	for	the	ABL	Facility	requires	us	to	prepay	the	ABL	Facility,	subject	to	certain	exceptions,	as	follows:

•With	100%	of	the	net	cash	proceeds	of	all	non-ordinary	course	asset	sales	or	other	dispositions	of	revolving	facility	collateral	(as	defined	below)	in	excess of	$1.0	million	in	the	aggregate	and	subject	to	our	right	to	reinvest	the	proceeds;	and

•To	the	extent	such	extensions	of	credit	exceed	the	then	current	borrowing	base	(as	defined	in	the	senior	secured	credit	agreement	for	the	ABL	Facility).

								The	mandatory	prepayments	discussed	above	will	be	applied	to	the	ABL	Facility	as	directed	by	the	senior	secured	credit	agreement	for	the	ABL	Facility.	Through January	29,	2010,	no	prepayments	have	been	required	under	the	prepayment	provisions	listed	above.

								An	event	of	default	under	the	senior	secured	credit	agreements	will	occur	upon	a	change	of	control	as	defined	in	the	senior	secured	credit	agreements	governing	our Credit	Facilities.	Upon	an	event	of	default,	indebtedness	under	the	Credit	Facilities	may	be	accelerated,	in	which	case	we	will	be	required	to	repay	all	outstanding	loans plus	accrued	and	unpaid	interest	and	all	other	amounts	outstanding	under	the	Credit	Facilities.

								Amortization.				Beginning	September	30,	2009,	we	were	required	to	repay	installments	on	the	loans	under	the	Term	Loan	Facility	in	equal	quarterly	principal amounts	in	an	aggregate	amount	per	annum	equal	to	1%	of	the	original	principal	amount.	During	2009,	we	paid	two	such	quarterly	installments	totaling	$11.5	million. Due	to	the	$325.0	million	voluntary	prepayment	of	the	Term	Loan	Facility	discussed	above,	no	further	quarterly	principal	installments	will	be	required	prior	to	maturity of	the	Term	Loan	on	July	6,	2014.	There	is	no	amortization	under	the	ABL	Facility.	The	entire	principal	amounts	(if	any)	outstanding	under	the	ABL	Facility	are	due and	payable	in	full	at	maturity,	on	July	6,	2013,	on	which	day	the	commitments	thereunder	will	terminate.

								Guarantee	and	Security.				All	obligations	under	the	Credit	Facilities	are	unconditionally	guaranteed	by	substantially	all	of	our	existing	and	future	domestic subsidiaries	(excluding	certain	immaterial	subsidiaries	and	certain	subsidiaries	designated	by	us	under	our	senior	secured	credit	agreements	as	"unrestricted subsidiaries"),	referred	to,	collectively,	as	U.S.	Guarantors.

								All	obligations	and	related	guarantees	under	the	Term	Loan	Facility	are	secured	by:

•a	second-priority	security	interest	in	all	existing	and	after-acquired	inventory,	accounts	receivable,	and	other	assets	arising	from	such	inventory	and accounts	receivable,	of	our	company	and	each	U.S.	Guarantor	(the	"Revolving	Facility	Collateral"),	subject	to	certain	exceptions;

•a	first-priority	security	interest	in,	and	mortgages	on,	substantially	all	of	our	and	each	U.S.	Guarantor's	tangible	and	intangible	assets	(other	than	the Revolving	Facility	Collateral);	and

•a	first-priority	pledge	of	100%	of	the	capital	stock	held	by	us,	or	any	of	our	domestic	subsidiaries	that	are	directly	owned	by	us	or	one	of	the	U.S. Guarantors	and	65%	of	the	voting	capital	stock	of	each	of	our	existing	and	future	foreign	subsidiaries	that	are	directly	owned	by	us	or	one	of	the	U.S. Guarantors.

								All	obligations	and	related	guarantees	under	the	ABL	Facility	are	secured	by	the	Revolving	Facility	Collateral,	subject	to	certain	exceptions.

								Certain	Covenants	and	Events	of	Default.				The	senior	secured	credit	agreements	contain	a	number	of	covenants	that,	among	other	things,	restrict,	subject	to	certain exceptions,	our	ability	to:

•incur	additional	indebtedness;

•pay	dividends	and	distributions	or	repurchase	our	capital	stock;

•make	investments	or	acquisitions;

•repay	or	repurchase	subordinated	indebtedness	(including	the	Senior	Subordinated	Notes	discussed	below)	and	the	Senior	Notes	discussed	below;

•amend	material	agreements	governing	our	subordinated	indebtedness	(including	the	Senior	Subordinated	Notes	discussed	below)	or	our	Senior	Notes discussed	below;

# •change	our	lines	of	business.

								The	senior	secured	credit	agreements	also	contain	certain	customary	affirmative	covenants	and	events	of	default.

								At	January	29,	2010,	we	had	no	borrowings,	$85.1	million	of	standby	letters	of	credit,	and	$15.4	million	of	commercial	letters	of	credit,	outstanding	under	our	ABL Facility.

# Senior	Notes	due	2015	and	Senior	Subordinated	Toggle	Notes	due	2017

								Overview.				As	of	January	29,	2010,	we	have	$979.3	million	aggregate	principal	amount	of	10.625%	senior	notes	due	2015	(the	"Senior	Notes")	outstanding (reflected	in	our	consolidated	balance	sheet	net	of	a	$14.8	million	discount),	which	mature	on	July	15,	2015,	pursuant	to	an	indenture	dated	as	of	July	6,	2007	(the "senior	indenture"),	and	$450.7	million	aggregate	principal	amount	of	11.875%/12.625%	senior	subordinated	toggle	notes	due	2017	(the	"Senior	Subordinated	Notes") outstanding,	which	mature	on	July	15,	2017,	pursuant	to	an	indenture	dated	as	of	July	6,	2007	(the	"senior	subordinated	indenture").	The	Senior	Notes	and	the	Senior Subordinated	Notes	are	collectively	referred	to	herein	as	the	"Notes."	The	senior	indenture	and	the	senior	subordinated	indenture	are	collectively	referred	to	herein	as	the "indentures."

								Interest	on	the	Notes	is	payable	on	January	15	and	July	15	of	each	year.	Interest	on	the	Senior	Notes	is	payable	in	cash.	Cash	interest	on	the	Senior	Subordinated Notes	accrues	at	a	rate	of	11.875%	per	annum,	and	PIK	interest	(as	that	term	is	defined	below)	accrues	at	a	rate	of	12.625%	per	annum,	if	applicable.	The	initial	interest payment	on	the	Senior	Subordinated	Notes	was	payable	in	cash.	For	any	interest	period	thereafter	through	July	15,	2011,	we	may	elect	to	pay	interest	on	the	Senior

Subordinated	Notes	(i)	in	cash,	(ii)	by	increasing	the	principal	amount	of	the	Senior	Subordinated	Notes	or	issuing	new	Senior	Subordinated	Notes	("PIK	interest")	or (iii)	by	paying	interest	on	half	of	the	principal	amount	of	the	Senior	Subordinated	Notes	in	cash	interest	and	half	in	PIK	interest.	After	July	15,	2011,	all	interest	on	the Senior	Subordinated	Notes	will	be	payable	in	cash.	Through	January	29,	2010,	all	interest	on	the	Notes	has	been	paid	in	cash.

								The	Notes	are	fully	and	unconditionally	guaranteed	by	each	of	the	existing	and	future	direct	or	indirect	wholly	owned	domestic	subsidiaries	that	guarantee	the obligations	under	our	Credit	Facilities.

								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.	In	addition	to	the	amounts	repurchased in	connection	with	our	initial	public	offering	discussed	above,	we	repurchased	$44.1	million	and	$25.0	million	of	the	Senior	Subordinated	Notes	in	the	fourth	quarters	of 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	on	or	make	certain	distributions	and	other	restricted	payments;

•enter	into	transactions	with	affiliates;

•make	payments	to	us;

•consolidate,	merge,	sell	or	otherwise	dispose	of	all	or	substantially	all	of	our	assets;

								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	29,	2010,	this	ratio	was	1.4	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	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.

								Our	presentation	of	EBITDA	and	Adjusted	EBITDA	has	limitations	as	an	analytical	tool,	and	should	not	be	considered	in	isolation	or	as	a	substitute	for	analysis	of our	results	as	reported	under	U.S.	GAAP.	Because	not	all	companies	use	identical	calculations,	these	presentations	of	EBITDA	and	Adjusted	EBITDA	may	not	be comparable	to	other	similarly	titled	measures	of	other	companies.	We	believe	that	the	presentation	of	EBITDA	and	Adjusted	EBITDA	is	appropriate	to	provide additional	information	about	the	calculation	of	this	financial	ratio	in	the	Credit	Facilities.	Adjusted	EBITDA	is	a	material	component	of	this	ratio.	Specifically,	non- compliance	with	the	senior	secured	indebtedness	ratio	contained	in	our	Credit	Facilities	could	prohibit	us	from	making	investments,	incurring	liens,	making	certain restricted	payments	and	incurring	additional	secured	indebtedness	(other	than	the	additional	funding	provided	for	under	the	senior	secured	credit	agreement	and	pursuant to	specified	exceptions).

								The	calculation	of	Adjusted	EBITDA	under	the	Credit	Facilities	is	as	follows:

|  | January	29, | January	30, |
| :--- | :--- | :--- |
| (in\tmillions) | 2010 | 2009 |
| Net\tincome | $339.4 | $108.2 |
| Add\t(subtract): |  |  |
| Interest\tincome | (0.1) | (3.1) |
| Interest\texpense | 345.6 | 391.9 |
| Depreciation\tand\tamortization | 241.7 | 235.1 |
| Income\ttaxes | 212.7 | 86.2 |
| EBITDA | 1,139.3 | 818.3 |
| Adjustments: |  |  |
| (Gain)\tloss\ton\tdebt\tretirements | 55.3 | (3.8) |
| Loss\ton\thedging\tinstruments | 0.5 | 1.1 |
| Contingent\tgain\ton\tdistribution\tcenter\tleases | — | (5.0) |
| Impact\tof\tmarkdowns\trelated\tto\tinventory\tclearance\tactivities,\tnet\tof |  |  |
| purchase\taccounting\tadjustments | (7.3) | (24.9) |
| Hurricane-related\texpenses\tand\twrite-offs | — | 2.2 |
| Advisory\tand\tconsulting\tfees\tto\taffiliates | 63.5 | 8.6 |
| Non-cash\texpense\tfor\tshare-based\tawards | 18.7 | 10.0 |
| Indirect\tmerger-related\tcosts | 10.6 | 20.7 |
| Litigation\tsettlement\tand\trelated\tcosts,\tnet | — | 32.0 |
| Other\tnon-cash\tcharges\t(including\tLIFO) | 6.6 | 54.7 |
| Total\tAdjustments | 147.9 | 95.6 |
| Adjusted\tEBITDA | $1,287.2 | $913.9 |

# Interest	Rate	Swaps

								We	use	interest	rate	swaps	to	minimize	the	risk	of	adverse	changes	in	interest	rates.	These	swaps	are	intended	to	reduce	risk	by	hedging	an	underlying	economic exposure.	Because	of	high	correlation	between	the	derivative	financial	instrument	and	the	underlying	exposure	being	hedged,	fluctuations	in	the	value	of	the	financial instruments	are	generally	offset	by	reciprocal	changes	in	the	value	of	the	underlying	economic	exposure.	Our	principal	interest	rate	exposure	relates	to	outstanding amounts	under	our	Credit	Facilities.	At	January	29,	2010,	we	had	interest	rate	swaps	with	a	total	notional	amount	of	approximately	$1.42	billion.	For	more	information see	Item	7A	"Quantitative	and	Qualitative	Disclosures	about	Market	Risk"	below.

# Fair	Value	Accounting

								We	have	classified	our	interest	rate	swaps,	as	further	discussed	in	Item	7A.	below,	in	Level	2	of	the	fair	value	hierarchy,	as	the	significant	inputs	to	the	overall valuations	are	based	on	market-observable	data	or	information	derived	from	or	corroborated	by	market-observable	data,	including	market-based	inputs	to	models,	model calibration	to	market-clearing	transactions,	broker	or	dealer	quotations,	or	alternative	pricing	sources	with	reasonable	levels	of	price	transparency.	Where	models	are used,	the	selection	of	a	particular	model	to	value	a	derivative	depends	upon	the	contractual	terms	of,	and	specific	risks	inherent	in,	the	instrument	as	well	as	the availability	of	pricing	information	in	the	market.	We	use	similar	models	to	value	similar	instruments.	Valuation	models	require	a	variety	of	inputs,	including	contractual terms,	market	prices,	yield	curves,	credit	curves,	measures	of	volatility,	and	correlations	of	such	inputs.	For	our	derivatives,	all	of	which	trade	in	liquid	markets,	model inputs	can	generally	be	verified	and	model	selection	does	not	involve	significant	management	judgment.

								We	incorporate	credit	valuation	adjustments	to	appropriately	reflect	both	our	own	nonperformance	risk	and	the	respective	counterparty's	nonperformance	risk	in	the fair	value	measurements	of	our	derivatives.	The	credit	valuation	adjustments	are	calculated	by	determining	the	total	expected	exposure	of	the	derivatives	(which incorporates	both	the	current	and	potential	future	exposure)	and	then	applying	each	counterparty's	credit	spread	to	the	applicable	exposure.	For	derivatives	with	two-way exposure,	such	as	interest	rate	swaps,	the	counterparty's	credit	spread	is	applied	to	our	exposure	to	the	counterparty,	and	our	own	credit	spread	is	applied	to	the counterparty's	exposure	to	us,	and	the	net	credit	valuation	adjustment	is	reflected	in	our	derivative	valuations.	The	total	expected	exposure	of	a	derivative	is	derived	using market-observable	inputs,	such	as	yield	curves	and	volatilities.	The	inputs	utilized	for	our	own	credit	spread	are	based	on	implied	spreads	from	our	publicly-traded	debt. For	counterparties	with	publicly	available	credit	information,	the	credit	spreads	over	LIBOR	used	in	the	calculations	represent	implied	credit	default	swap	spreads obtained	from	a	third	party	credit	data	provider.	In	adjusting	the	fair	value	of	our	derivative	contracts	for	the	effect	of	nonperformance	risk,	we	have	considered	the impact	of	netting	and	any	applicable	credit	enhancements,	such	as	collateral	postings,	thresholds,	mutual	puts,	and	guarantees.	Additionally,	we	actively	monitor counterparty	credit	ratings	for	any	significant	changes.

								As	of	January	29,	2010,	the	net	credit	valuation	adjustments	reduced	the	settlement	values	of	our	derivative	liabilities	by	$2.0	million.	Various	factors	impact changes	in	the	credit	valuation	adjustments	over	time,	including	changes	in	the	credit	spreads	of	the	parties	to	the	contracts,	as	well	as	changes	in	market	rates	and volatilities,	which	affect	the	total	expected	exposure	of	the	derivative	instruments.	When	appropriate,	valuations	are	also	adjusted	for	various	factors	such	as	liquidity and	bid/offer	spreads,	which	factors	we	deemed	to	be	immaterial	as	of	January	29,	2010.

# Contractual	Obligations

								The	following	table	summarizes	our	significant	contractual	obligations	and	commercial	commitments	as	of	January	29,	2010	(in	thousands):

(a) Represents	obligations	for	interest	payments	on	long-term	debt	and	capital	lease	obligations,	and	includes	projected	interest	on	variable	rate long-term	debt,	based	upon	2009	year	end	rates.

(b) We	retain	a	significant	portion	of	the	risk	for	our	workers'	compensation,	employee	health	insurance,	general	liability,	property	loss	and automobile	insurance.	As	these	obligations	do	not	have	scheduled	maturities,	these	amounts	represent	undiscounted	estimates	based	upon actuarial	assumptions.	Reserves	for	workers'	compensation	and	general	liability	which	existed	as	of	the	date	of	our	2007	merger	were	discounted in	order	to	arrive	at	estimated	fair	value.	All	other	amounts	are	reflected	on	an	undiscounted	basis	in	our	consolidated	balance	sheets.

(c) Operating	lease	obligations	are	inclusive	of	amounts	included	in	deferred	rent	and	closed	store	obligations	in	our	consolidated	balance	sheets.

(d) Commercial	commitments	include	information	technology	license	and	support	agreements,	supplies,	fixtures,	letters	of	credit	for	import merchandise,	and	other	inventory	purchase	obligations.

(e) Purchase	obligations	include	legally	binding	agreements	for	software	licenses	and	support,	supplies,	fixtures,	and	merchandise	purchases excluding	such	purchases	subject	to	letters	of	credit.

# Other	Considerations

								Our	inventory	balance	represented	approximately	47%	of	our	total	assets	exclusive	of	goodwill	and	other	intangible	assets	as	of	January	29,	2010.	Our	proficiency in	managing	our	inventory	balances	can	have	a	significant	impact	on	our	cash	flows	from	operations	during	a	given	fiscal	year.	As	a	result,	efficient	inventory management	has	been	and	continues	to	be	an	area	of	focus	for	us.

								At	January	29,	2010,	our	South	Carolina-based	wholly	owned	captive	insurance	subsidiary,	Ashley	River	Insurance	Company	("ARIC"),	held	money	market investments	equaling	$20.0	million	which	were	reflected	in	our	consolidated	balance	sheet	as	cash	and	cash	equivalents.	These	investments	were

held	pursuant	to	South	Carolina	regulatory	requirements	to	maintain	certain	asset	balances	which	could	limit	our	ability	to	use	these	assets	for	general	corporate purposes.

								As	described	in	Note	9	to	the	Consolidated	Financial	Statements,	we	are	involved	in	a	number	of	legal	actions	and	claims,	some	of	which	could	potentially	result	in material	cash	payments.	Adverse	developments	in	those	actions	could	materially	and	adversely	affect	our	liquidity.	As	discussed	in	Note	6	we	also	have	certain	income tax-related	contingencies.	Future	negative	developments	could	have	a	material	adverse	effect	on	our	liquidity.

								On	December	10,	2009,	Standard	&	Poor's	upgraded	our	long-term	debt	rating	to	BB-	from	B+	with	a	stable	outlook	and	on	December	17,	2009,	Moody's upgraded	our	long-term	debt	rating	to	B1	from	B2	with	a	stable	outlook.	These	current	ratings	are	considered	non-investment	grade.	Our	current	credit	ratings,	as	well	as future	rating	agency	actions,	could	(1)	impact	our	ability	to	obtain	financings	to	finance	our	operations	on	satisfactory	terms;	(2)	affect	our	financing	costs;	and	(3)	affect our	insurance	premiums	and	collateral	requirements	necessary	for	our	self-insured	programs.

# Cash	flows

								Cash	flows	from	operating	activities.				A	significant	component	of	our	increase	in	cash	flows	from	operating	activities	in	2009	compared	to	2008	was	the	increase in	net	income	due	to	greater	sales,	higher	gross	margins	and	lower	SG&A	expenses	as	a	percentage	of	sales,	as	described	in	more	detail	above	under	"Results	of Operations."	In	addition,	we	experienced	increased	inventory	turns	in	2009	as	compared	to	2008.	Changes	in	inventory	balances	increased	by	7%	in	2009	compared	to	an increase	of	10%	in	2008.	Inventory	levels	in	the	consumables	category	increased	by	$111.4	million,	or	15%,	in	2009	compared	to	an	increase	of	$77.8	million,	or	12%, in	2008.	The	seasonal	category	increased	by	$25.3	million,	or	9%,	in	2009	compared	to	an	increase	of	$20.9	million,	or	8%,	in	2008.	The	home	products	category declined	$9.1	million,	or	6%,	in	2009	compared	to	a	decline	of	$2.6	million,	or	2%,	in	2008.	The	apparel	category	declined	by	$22.9	million,	or	10%,	in	2009	compared to	an	increase	of	$30.2	million,	or	15%,	in	2008.	In	addition,	increased	net	income	in	2009	compared	to	2008	was	a	principal	factor	in	the	increase	in	income	taxes	paid in	2009	compared	to	2008.	Changes	in	Accrued	expenses	and	other	were	affected	in	part	by	the	timing	of	the	payments	related	to	the	Litigation	settlement	and	related costs	discussed	above	under	"Results	of	Operations,"	as	the	insurance	proceeds	of	$10.0	million	were	received	at	the	end	of	2008	while	the	payment	of	the	$40.0	million settlement	occurred	at	the	beginning	of	2009.

								A	significant	component	of	the	change	in	cash	flows	from	operating	activities	in	2008	compared	to	the	2007	periods	was	our	strong	operating	performance	due	to greater	sales,	higher	gross	margins	and	lower	SG&A	expenses	as	a	percentage	of	sales,	partially	offset	by	significantly	higher	interest	expense,	as	described	in	more 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	consumables	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	apparel	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	investing	activities.				Cash	flows	used	in	investing	activities	totaling	$248.0	million	in	2009	were	primarily	related	to	capital	expenditures. Significant	components	of	our	property	and	equipment	purchases	in	2009	included	the	following	approximate	amounts:	$114	million	for	improvements,	upgrades, remodels	and	relocations	of	existing	stores;	$69	million	for	new	stores;	$28	million	for	distribution	and	transportation-related	capital	expenditures;	$24	million	for various	administrative	capital	costs;	and	$11	million	for	information	systems	upgrades	and	technology-related	projects.	During	2009	we	opened	500	new	stores	and remodeled	or	relocated	450	stores.

								Cash	flows	used	in	investing	activities	totaling	$152.6	million	in	2008	were	primarily	related	to	capital	expenditures,	offset	by	sales	of	investments.	Significant components	of	our	property	and	equipment	purchases	in	2008	included	the	following	approximate	amounts:	$149	million	for	improvements,	upgrades,	remodels	and relocations	of	existing	stores;	$22	million	for	new	stores;	$17	million	for	distribution	and	transportation-related	capital	expenditures;	and	$13	million	for	information systems	upgrades	and	technology-related	projects.	During	2008	we	opened	207	new	stores	and	remodeled	or	relocated	404	stores.

								Purchases	and	sales	of	short-term	investments	equal	to	net	sales	of	$51.6	million	in	2008	primarily	reflected	investment	activities	in	our	captive	insurance subsidiary.

								Our	2007	merger,	as	discussed	in	more	detail	above,	required	cash	payments	in	the	2007	Successor	period	of	approximately	$6.7	billion,	net	of	cash	acquired	of $350	million.	Significant	components	of	property	and	equipment	purchases	in	the	2007	Successor	period	included	the	following	approximate	amounts:	$45	million	for improvements,	upgrades,	remodels	and	relocations	of	existing	stores;	$23	million	for	distribution	and	transportation-related	capital	expenditures;	and	$16	million	for new	stores.	During	the	2007	Successor	period,	we	opened	170	new	stores	and	remodeled	or	relocated	235	stores.	Significant	components	of	property	and	equipment purchases	in	the	2007	Predecessor	period	included	the	following	approximate	amounts:	$29	million	for	new	stores;	$15	million	for	improvements,	upgrades,	remodels and	relocations	of	existing	stores;	and	$7	million	for	distribution	and	transportation-related	capital	expenditures.	During	the	2007	Predecessor	period,	we	opened	195 new	stores	and	remodeled	or	relocated	65	stores.

								During	the	2007	Successor	period	we	purchased	a	secured	promissory	note	for	$37.0	million	which	represents	debt	issued	by	a	third-party	entity	from	which	we lease	our	distribution	center	in	Ardmore,	Oklahoma.	Purchases	and	sales	of	short-term	investments,	which	equaled	net	sales	of	$17.6	million	and	$4.4	million	in	the respective	2007	Successor	and	Predecessor	periods,	primarily	reflect	our	investment	activities	in	our	captive	insurance	subsidiary,	and	all	purchases	of	long-term investments	were	related	to	the	captive	insurance	subsidiary.

								Capital	expenditures	during	2010	are	projected	to	be	in	the	range	of	$325-$350	million.	We	anticipate	funding	2010	capital	requirements	with	cash	flows	from operations,	and	if	necessary,	we	also	have	significant	availability	under	our	ABL	Facility.	Significant	components	of	the	2010	capital	plan	include	growth	initiatives, including	leasehold	improvements,	fixtures	and	equipment	for	approximately	600	new	stores;	continued	investment	in	our	existing	store	base	with	plans	for	remodeling and	relocating	approximately	500	stores;	and	additional	investments	in	our	supply	chain	and	information	technology.	We	plan	to	undertake	these	expenditures	in	order	to improve	our	infrastructure	and	increase	our	cash	generated	from	operating	activities.

								Cash	flows	from	financing	activities.				In	2009,	we	had	cash	inflows	from	the	issuance	of	equity	of	$443.8	million	primarily	due	to	our	initial	public	offering	of 22.7	million	shares	of	common	stock.	We	used	the	proceeds	from	the	offering	to	repay	outstanding	Notes	with	a	total	principal	amount	of	$400.9	million,	and	used	cash generated	from	operations	to	repay	$336.5	million	outstanding	principal	amount	on	our	Term	Loan	Facility.	We	had	no	borrowings	or	repayments	under	the	ABL Facility	in	2009.	We	paid	a	dividend	and	related	amounts	totaling	$239.7	million	using	cash	generated	from	operations.

								In	2008,	we	repaid	borrowings	of	$102.5	million	under	our	ABL	Facility	and	as	of	January	30,	2009,	we	had	no	borrowings	under	the	ABL	Facility.	Also	during 2008,	we	repurchased	$44.1	million	of	our	outstanding	Senior	Subordinated	Notes.

								In	the	2007	Successor	period,	to	finance	our	2007	merger,	we	issued	long-term	debt	of	approximately	$4.2	billion	and	issued	common	stock	in	the	amount	of approximately	$2.8	billion	(primarily	relating	to	the	cash	equity	contributions	from	the	Investors);	we	incurred	costs	associated	with	the	issuance	of	merger-related	long- term	debt	of	$87.4	million;	we	completed	a	cash	tender	offer	for	our	2010	Notes	as	discussed	above,	resulting	in	the	valid	tender	of	approximately	99%	of	the	2010 Notes	resulting	in	repayments	of	long-term	debt	and	related	consent	fees	in	the	amount	of	$215.6	million;	and	incurred	borrowings,	net	of	repayments,	under	our	ABL Facility	of	$102.5	million.

								The	borrowings	and	repayments	under	the	revolving	credit	agreements	in	2008	and	the	2007	Successor	period	were	primarily	a	result	of	activity	associated	with periodic	cash	needs.

# Critical	Accounting	Policies	and	Estimates

								The	preparation	of	financial	statements	in	accordance	with	U.S.	GAAP	requires	management	to	make	estimates	and	assumptions	that	affect	reported	amounts	and related	disclosures.	In	addition	to	the	estimates	presented	below,	there	are	other	items	within	our	financial	statements	that	require	estimation,	but	are	not	deemed	critical as	defined	below.	We	believe	these	estimates	are	reasonable	and	appropriate.	However,	if	actual	experience	differs	from	the	assumptions	and	other	considerations	used, the	resulting	changes	could	have	a	material	effect	on	the	financial	statements	taken	as	a	whole.

								Management	believes	the	following	policies	and	estimates	are	critical	because	they	involve	significant	judgments,	assumptions,	and	estimates.	Management	has discussed	the	development	and	selection	of	the	critical	accounting	estimates	with	the	Audit	Committee	of	our	Board	of	Directors,	and	the	Audit	Committee	has	reviewed the	disclosures	presented	below	relating	to	those	policies	and	estimates.

								Merchandise	Inventories.				Merchandise	inventories	are	stated	at	the	lower	of	cost	or	market	with	cost	determined	using	the	retail	last-in,	first-out	("LIFO") method.	Under	our	retail	inventory	method	("RIM"),	the	calculation	of	gross	profit	and	the	resulting	valuation	of	inventories	at	cost	are	computed	by	applying	a calculated	cost-to-retail	inventory	ratio	to	the	retail	value	of	sales	at	a	department	level.	The	RIM	is	an	averaging	method	that	has	been	widely	used	in	the	retail	industry due	to	its	practicality.	Also,	it	is	recognized	that	the	use	of	the	RIM	will	result	in	valuing	inventories	at	the	lower	of	cost	or	market	("LCM")	if	markdowns	are	currently taken	as	a	reduction	of	the	retail	value	of	inventories.

								Inherent	in	the	RIM	calculation	are	certain	significant	management	judgments	and	estimates	including,	among	others,	initial	markups,	markdowns,	and	shrinkage, which	significantly	impact	the	gross	profit	calculation	as	well	as	the	ending	inventory	valuation	at	cost.	These	significant	estimates,	coupled	with	the	fact	that	the	RIM	is an	averaging	process,	can,	under	certain	circumstances,	produce	distorted	cost	figures.	Factors	that	can	lead	to	distortion	in	the	calculation	of	the	inventory	balance include:

•applying	the	RIM	to	a	group	of	products	that	is	not	fairly	uniform	in	terms	of	its	cost	and	selling	price	relationship	and	turnover;

•applying	the	RIM	to	transactions	over	a	period	of	time	that	include	different	rates	of	gross	profit,	such	as	those	relating	to	seasonal	merchandise;

•inaccurate	estimates	of	inventory	shrinkage	between	the	date	of	the	last	physical	inventory	at	a	store	and	the	financial	statement	date;	and

•inaccurate	estimates	of	LCM	and/or	LIFO	reserves.

								Factors	that	reduce	potential	distortion	include	the	use	of	historical	experience	in	estimating	the	shrink	provision	(see	discussion	below)	and	an	annual	LIFO analysis	whereby	all	SKUs	are	considered	in	the	index	formulation.	An	actual	valuation	of	inventory	under	the	LIFO	method	is	made	at	the	end	of	each	year	based	on the	inventory	levels	and	costs	at	that	time.	Accordingly,	interim	LIFO	calculations	are	based	on	management's	estimates	of	expected	year-end	inventory	levels,	sales	for the	year	and	the	expected	rate	of	inflation/deflation	for	the	year	and	are	thus	subject	to	adjustment	in	the	final	year-end	LIFO	inventory	valuation.	We	also	perform interim	inventory	analysis	for	determining	obsolete	inventory.	Our	policy	is	to	write	down	inventory	to	an	LCM	value	based	on	various	management	assumptions including	estimated	markdowns	and	sales	required	to	liquidate	such	inventory	in	future	periods.	Inventory	is	reviewed	on	a	quarterly	basis	and	adjusted	as	appropriate	to reflect	write-downs	determined	to	be	necessary.

								Factors	such	as	slower	inventory	turnover	due	to	changes	in	competitors'	practices,	consumer	preferences,	consumer	spending	and	unseasonable	weather	patterns, among	other	factors,	could	cause	excess	inventory	requiring	greater	than	estimated	markdowns	to	entice	consumer	purchases,	resulting	in	an	unfavorable	impact	on	our consolidated	financial	statements.	Sales	shortfalls	due	to	the	above	factors	could	cause	reduced	purchases	from	vendors	and	associated	vendor	allowances	that	would also	result	in	an	unfavorable	impact	on	our	consolidated	financial	statements.

								We	calculate	our	shrink	provision	based	on	actual	physical	inventory	results	during	the	fiscal	period	and	an	accrual	for	estimated	shrink	occurring	subsequent	to	a physical	inventory	through	the	end	of	the	fiscal	reporting	period.	This	accrual	is	calculated	as	a	percentage	of	sales	at	each	retail	store,	at	a	department	level,	and	is determined	by	dividing	the	book-to-physical	inventory	adjustments	recorded	during	the	previous	twelve	months	by	the	related	sales	for	the	same	period	for	each	store. To	the	extent	that	subsequent	physical	inventories	yield	different	results	than	this	estimated	accrual,	our	effective	shrink	rate	for	a	given	reporting	period	will	include	the impact	of	adjusting	the	estimated	results	to	the	actual	results.	Although	we	perform	physical	inventories	in	virtually	all	of	our	stores	on	an	annual	basis,	the	same	stores do	not	necessarily	get	counted	in	the	same	reporting	periods	from	year	to	year,	which	could	impact	comparability	in	a	given	reporting	period.

								Our	estimates	and	assumptions	related	to	merchandise	inventories	have	generally	been	accurate	in	recent	years	and	we	do	not	currently	anticipate	material	changes in	these	estimates	and	assumptions.

								Goodwill	and	Other	Intangible	Assets.				We	amortize	intangible	assets	over	their	estimated	useful	lives	unless	such	lives	are	deemed	indefinite.	If	impairment indicators	are	noted,	amortizable	intangible	assets	are	tested	for	impairment	based	on	projected	undiscounted	cash	flows,	and,	if	impaired,	written	down	to	fair	value based	on	either	discounted	projected	cash	flows	or	appraised	values.	Future	cash	flow	projections	are	based	on	management's	projections.	Significant	judgments	required in	this	testing	process	may	include	projecting	future	cash	flows,	determining	appropriate	discount	rates	and	other	assumptions.	Projections	are	based	on	management's best	estimates	given	recent	financial	performance,	market	trends,	strategic	plans	and	other	available	information	and	in	recent	years	have	been	materially	accurate. Although	not	currently	anticipated,	changes	in	these	estimates	and	assumptions	could	materially	affect	the	determination	of	fair	value	or	impairment.	Future	indicators	of impairment	could	result	in	an	asset	impairment	charge.

								Under	accounting	standards	for	goodwill	and	other	intangible	assets,	we	are	required	to	test	such	assets	with	indefinite	lives	for	impairment	annually,	or	more frequently	if	impairment	indicators	occur.

The	goodwill	impairment	test	is	a	two-step	process	that	requires	management	to	make	judgments	in	determining	what	assumptions	to	use	in	the	calculation.	The	first	step of	the	process	consists	of	estimating	the	fair	value	of	our	reporting	unit	based	on	valuation	techniques	(including	a	discounted	cash	flow	model	using	revenue	and	profit forecasts)	and	comparing	that	estimated	fair	value	with	the	recorded	carrying	value,	which	includes	goodwill.	If	the	estimated	fair	value	is	less	than	the	carrying	value,	a second	step	is	performed	to	compute	the	amount	of	the	impairment	by	determining	an	"implied	fair	value"	of	goodwill.	The	determination	of	the	implied	fair	value	of goodwill	would	require	us	to	allocate	the	estimated	fair	value	of	our	reporting	unit	to	its	assets	and	liabilities.	Any	unallocated	fair	value	represents	the	implied	fair	value of	goodwill,	which	would	be	compared	to	its	corresponding	carrying	value.

								The	impairment	test	for	indefinite-lived	intangible	assets	consists	of	a	comparison	of	the	fair	value	of	the	intangible	asset	with	its	carrying	amount.	If	the	carrying amount	of	an	indefinite-lived	intangible	asset	exceeds	its	fair	value,	an	impairment	loss	is	recognized	in	an	amount	equal	to	that	excess.

								We	performed	our	annual	impairment	tests	of	goodwill	and	indefinite-lived	intangible	assets	during	the	third	quarter	of	2009	based	on	conditions	as	of	the	end	of our	second	quarter.	The	tests	indicated	that	no	impairment	charge	was	necessary.	We	are	not	currently	projecting	a	decline	in	cash	flows	that	could	be	expected	to	have an	adverse	effect	such	as	a	violation	of	debt	covenants	or	future	impairment	charges.

								Property	and	Equipment.				Property	and	equipment	are	recorded	at	cost.	We	group	our	assets	into	relatively	homogeneous	classes	and	generally	provide	for depreciation	on	a	straight-line	basis	over	the	estimated	average	useful	life	of	each	asset	class,	except	for	leasehold	improvements,	which	are	amortized	over	the	lesser	of the	applicable	lease	term	or	the	estimated	useful	life	of	the	asset.	Certain	store	and	warehouse	fixtures,	when	fully	depreciated,	are	removed	from	the	cost	and	related accumulated	depreciation	and	amortization	accounts.	The	valuation	and	classification	of	these	assets	and	the	assignment	of	depreciable	lives	involves	significant judgments	and	the	use	of	estimates,	which	have	been	materially	accurate	in	recent	years.

								Impairment	of	Long-lived	Assets.				We	review	the	carrying	value	of	all	long-lived	assets	for	impairment	at	least	annually,	and	whenever	events	or	changes	in circumstances	indicate	that	the	carrying	value	of	an	asset	may	not	be	recoverable.	In	accordance	with	accounting	standards	for	impairment	or	disposal	of	long-lived assets,	we	review	for	impairment	stores	open	for	approximately	two	years	or	more	for	which	recent	cash	flows	from	operations	are	negative.	Impairment	results	when the	carrying	value	of	the	assets	exceeds	the	estimated	undiscounted	future	cash	flows	over	the	life	of	the	lease.	Our	estimate	of	undiscounted	future	cash	flows	over	the lease	term	is	based	upon	historical	operations	of	the	stores	and	estimates	of	future	store	profitability	which	encompasses	many	factors	that	are	subject	to	variability	and are	difficult	to	predict.	If	a	long-lived	asset	is	found	to	be	impaired,	the	amount	recognized	for	impairment	is	equal	to	the	difference	between	the	carrying	value	and	the asset's	estimated	fair	value.	The	fair	value	is	estimated	based	primarily	upon	projected	future	cash	flows	(discounted	at	our	credit	adjusted	risk-free	rate)	or	other reasonable	estimates	of	fair	market	value	in	accordance	with	U.S.	GAAP.	During	2009,	2008	and	the	2007	Predecessor	period	we	recorded	pre-tax	impairment	charges of	$5.0	million,	$4.0	million	and	$0.2	million,	respectively,	for	certain	store	assets	that	we	deemed	to	be	impaired.

								Insurance	Liabilities.				We	retain	a	significant	portion	of	the	risk	for	our	workers'	compensation,	employee	health,	property	loss,	automobile	and	general	liability. These	represent	significant	costs	primarily	due	to	the	large	employee	base	and	number	of	stores.	Provisions	are	made	to	these	liabilities	on	an	undiscounted	basis	based on	actual	claim	data	and	estimates	of	incurred	but	not	reported	claims	developed	using	actuarial	methodologies	based	on	historical	claim	trends,	which	have	been	and are	anticipated	to	continue	to	be	materially	accurate.	If	future	claim	trends	deviate	from	recent	historical

patterns,	we	may	be	required	to	record	additional	expenses	or	expense	reductions,	which	could	be	material	to	our	future	financial	results.

								Contingent	Liabilities—Income	Taxes.				Income	tax	reserves	are	determined	using	the	methodology	established	by	accounting	standards	relating	to	uncertainty	in income	taxes.	These	standards	require	companies	to	assess	each	income	tax	position	taken	using	a	two	step	process.	A	determination	is	first	made	as	to	whether	it	is	more likely	than	not	that	the	position	will	be	sustained,	based	upon	the	technical	merits,	upon	examination	by	the	taxing	authorities.	If	the	tax	position	is	expected	to	meet	the more	likely	than	not	criteria,	the	benefit	recorded	for	the	tax	position	equals	the	largest	amount	that	is	greater	than	50%	likely	to	be	realized	upon	ultimate	settlement	of the	respective	tax	position.	Uncertain	tax	positions	require	determinations	and	estimated	liabilities	to	be	made	based	on	provisions	of	the	tax	law	which	may	be	subject	to change	or	varying	interpretation.	If	our	determinations	and	estimates	prove	to	be	inaccurate,	the	resulting	adjustments	could	be	material	to	our	future	financial	results.

								Contingent	Liabilities—Legal	Matters.				We	are	subject	to	legal,	regulatory	and	other	proceedings	and	claims.	We	establish	liabilities	as	appropriate	for	these claims	and	proceedings	based	upon	the	probability	and	estimability	of	losses	and	to	fairly	present,	in	conjunction	with	the	disclosures	of	these	matters	in	our	financial statements	and	SEC	filings,	management's	view	of	our	exposure.	We	review	outstanding	claims	and	proceedings	with	external	counsel	to	assess	probability	and estimates	of	loss.	We	re-evaluate	these	assessments	on	a	quarterly	basis	or	as	new	and	significant	information	becomes	available	to	determine	whether	a	liability	should be	established	or	if	any	existing	liability	should	be	adjusted.	The	actual	cost	of	resolving	a	claim	or	proceeding	ultimately	may	be	substantially	different	than	the	amount of	the	recorded	liability.	In	addition,	because	it	is	not	permissible	under	U.S.	GAAP	to	establish	a	litigation	liability	until	the	loss	is	both	probable	and	estimable,	in	some cases	there	may	be	insufficient	time	to	establish	a	liability	prior	to	the	actual	incurrence	of	the	loss	(upon	verdict	and	judgment	at	trial,	for	example,	or	in	the	case	of	a quickly	negotiated	settlement).

								Lease	Accounting	and	Excess	Facilities.				Many	of	our	stores	are	subject	to	build-to-suit	arrangements	with	landlords,	which	typically	carry	a	primary	lease	term	of 10-15	years	with	multiple	renewal	options.	We	also	have	stores	subject	to	shorter-term	leases	(usually	with	initial	or	current	terms	of	3	to	5	years),	and	many	of	these leases	have	multiple	renewal	options.	As	of	January	29,	2010,	approximately	38%	of	our	stores	had	provisions	for	contingent	rentals	based	upon	a	percentage	of	defined sales	volume.	We	recognize	contingent	rental	expense	when	the	achievement	of	specified	sales	targets	is	considered	probable.	We	recognize	rent	expense	over	the	term of	the	lease.	We	record	minimum	rental	expense	on	a	straight-line	basis	over	the	base,	non-cancelable	lease	term	commencing	on	the	date	that	we	take	physical possession	of	the	property	from	the	landlord,	which	normally	includes	a	period	prior	to	store	opening	to	make	necessary	leasehold	improvements	and	install	store fixtures.	When	a	lease	contains	a	predetermined	fixed	escalation	of	the	minimum	rent,	we	recognize	the	related	rent	expense	on	a	straight-line	basis	and	record	the difference	between	the	recognized	rental	expense	and	the	amounts	payable	under	the	lease	as	deferred	rent.	Tenant	allowances,	to	the	extent	received,	are	recorded	as deferred	incentive	rent	and	amortized	as	a	reduction	to	rent	expense	over	the	term	of	the	lease.	We	reflect	as	a	liability	any	difference	between	the	calculated	expense	and the	amounts	actually	paid.	Improvements	of	leased	properties	are	amortized	over	the	shorter	of	the	life	of	the	applicable	lease	term	or	the	estimated	useful	life	of	the asset.

								For	store	closures	(excluding	those	associated	with	a	business	combination)	where	a	lease	obligation	still	exists,	we	record	the	estimated	future	liability	associated with	the	rental	obligation	on	the	date	the	store	is	closed	in	accordance	with	accounting	standards	for	costs	associated	with	exit	or	disposal	activities.	Based	on	an	overall analysis	of	store	performance	and	expected	trends,	management	periodically	evaluates	the	need	to	close	underperforming	stores.	Liabilities	are	established	at	the	point	of closure	for	the	present	value	of	any	remaining	operating	lease	obligations,	net	of	estimated	sublease

income,	and	at	the	communication	date	for	severance	and	other	exit	costs.	Key	assumptions	in	calculating	the	liability	include	the	timeframe	expected	to	terminate	lease agreements,	estimates	related	to	the	sublease	potential	of	closed	locations,	and	estimation	of	other	related	exit	costs.	Historically,	these	estimates	have	not	been materially	inaccurate;	however,	if	actual	timing	and	potential	termination	costs	or	realization	of	sublease	income	differ	from	our	estimates,	the	resulting	liabilities	could vary	from	recorded	amounts.	These	liabilities	are	reviewed	periodically	and	adjusted	when	necessary.

								Share-Based	Payments.				Our	share-based	stock	option	awards	are	valued	on	an	individual	grant	basis	using	the	Black-Scholes-Merton	closed	form	option	pricing model.	We	believe	that	this	model	fairly	estimates	the	value	of	our	share-based	awards.	The	application	of	this	valuation	model	involves	assumptions	that	are judgmental	and	highly	sensitive	in	the	valuation	of	stock	options,	which	affects	compensation	expense	related	to	these	options.	These	assumptions	include	an	estimate	of the	fair	value	of	our	common	stock,	the	term	that	the	options	are	expected	to	be	outstanding,	an	estimate	of	the	volatility	of	our	stock	price	(which	is	based	on	a	peer group	of	publicly	traded	companies),	applicable	interest	rates	and	the	dividend	yield	of	our	stock.	Our	volatility	estimates	are	based	on	a	peer	group	due	to	the	fact	that our	stock	was	publicly	traded	for	only	a	small	portion	of	our	most	recently	completed	fiscal	year.	Other	factors	involving	judgments	that	affect	the	expensing	of	share- based	payments	include	estimated	forfeiture	rates	of	share-based	awards.	Historically,	these	estimates	have	not	been	materially	inaccurate;	however,	if	our	estimates differ	materially	from	actual	experience,	we	may	be	required	to	record	additional	expense	or	reductions	of	expense,	which	could	be	material	to	our	future	financial results.

								Fair	Value	Measurements.				We	measure	fair	value	of	assets	and	liabilities	in	accordance	with	applicable	accounting	standards,	which	require	that	fair	values	be determined	based	on	the	assumptions	that	market	participants	would	use	in	pricing	the	asset	or	liability.	These	standards	establish	a	fair	value	hierarchy	that	distinguishes between	market	participant	assumptions	based	on	market	data	obtained	from	sources	independent	of	the	reporting	entity	(observable	inputs	that	are	classified	within Levels	1	and	2	of	the	hierarchy)	and	the	reporting	entity's	own	assumptions	about	market	participant	assumptions	(unobservable	inputs	classified	within	Level	3	of	the hierarchy).	Therefore,	Level	3	inputs	are	typically	based	on	an	entity's	own	assumptions,	as	there	is	little,	if	any,	related	market	activity,	and	thus	require	the	use	of significant	judgment	and	estimates.	Currently,	we	have	no	assets	or	liabilities	that	are	valued	based	solely	on	Level	3	inputs.

								Our	fair	value	measurements	are	primarily	associated	with	our	derivative	financial	instruments,	intangible	assets,	property	and	equipment,	and	to	a	lesser	degree	our investments.	The	values	of	our	derivative	financial	instruments	are	determined	using	widely	accepted	valuation	techniques,	including	discounted	cash	flow	analysis	on the	expected	cash	flows	of	each	derivative.	This	analysis	reflects	the	contractual	terms	of	the	derivatives,	including	the	period	to	maturity,	and	uses	observable	market- based	inputs,	including	interest	rate	curves.	The	fair	values	of	interest	rate	swaps	are	determined	using	the	market	standard	methodology	of	netting	the	discounted	future fixed	cash	payments	(or	receipts)	and	the	discounted	expected	variable	cash	receipts	(or	payments).	The	variable	cash	receipts	(or	payments)	are	based	on	an	expectation of	future	interest	rates	(forward	curves)	derived	from	observable	market	interest	rate	curves.	In	recent	years,	these	methodologies	have	produced	materially	accurate valuations.

								Derivative	Financial	Instruments.				We	account	for	our	derivative	instruments	in	accordance	with	accounting	standards	for	derivative	instruments	(including certain	derivative	instruments	embedded	in	other	contracts)	and	hedging	activities,	as	amended	and	interpreted,	which	establish	accounting	and	reporting	requirements for	such	instruments	and	activities.	These	standards	require	that	every	derivative	instrument	be	recorded	in	the	balance	sheet	as	either	an	asset	or	liability	measured	at	its fair	value,	and	that	changes	in	the	derivative's	fair	value	be	recognized	currently	in	earnings	unless	specific	hedge	accounting	criteria	are	met.	See	"Fair	Value Measurements"	above	for	a	discussion	of	derivative	valuations.	Special	accounting	for	qualifying	hedges	allows	a	derivative's	gains	and	losses	to	either	offset	related results	on	the	hedged	item	in	the	statement	of	operations	or	be	accumulated	in	other	comprehensive	income,	and	requires	that	a	company	formally	document,	designate, and	assess	the	effectiveness	of	transactions	that	receive	hedge	accounting.	We	use	derivative	instruments	to	manage	our	exposure	to	changing	interest	rates,	primarily with	interest	rate	swaps.

								In	addition	to	making	valuation	estimates,	we	also	bear	the	risk	that	certain	derivative	instruments	that	have	been	designated	as	hedges	and	currently	meet	the	strict hedge	accounting	requirements	may	not	qualify	in	the	future	as	"highly	effective,"	as	defined,	as	well	as	the	risk	that	hedged	transactions	in	cash	flow	hedging relationships	may	no	longer	be	considered	probable	to	occur.	Further,	new	interpretations	and	guidance	related	to	these	instruments	may	be	issued	in	the	future,	and	we cannot	predict	the	possible	impact	that	such	guidance	may	have	on	our	use	of	derivative	instruments	going	forward.

# Accounting	Standards

								In	June	2009	the	Financial	Accounting	Standards	Board	("FASB")	issued	a	new	accounting	standard	which	established	the	FASB	Accounting	Standards Codification	("ASC")	as	the	source	of	authoritative	U.S.	GAAP	recognized	by	the	FASB	to	be	applied	by	nongovernmental	entities.	Rules	and	interpretive	releases	of the	Securities	and	Exchange	Commission	("SEC")	under	authority	of	federal	securities	laws	are	also	sources	of	authoritative	GAAP	for	SEC	registrants,	including	us.	On September	15,	2009,	the	effective	date	of	this	standard,	the	ASC	superseded	all	then-existing	non-SEC	accounting	and	reporting	standards.	All	other	nongrandfathered non-SEC	accounting	literature	not	included	in	the	ASC	became	nonauthoritative.	The	adoption	of	these	standards	is	not	expected	to	have	a	material	effect	on	our consolidated	financial	statements	in	the	future.

								In	June	2009	the	FASB	issued	a	new	accounting	standard	relating	to	variable	interest	entities.	This	standard	amends	previous	standards	and	requires	an	enterprise	to perform	an	analysis	to	determine	whether	the	enterprise's	variable	interest	or	interests	give	it	a	controlling	financial	interest	in	a	variable	interest	entity,	specifies	updated criteria	for	determining	the	primary	beneficiary,	requires	ongoing	reassessments	of	whether	an	enterprise	is	the	primary	beneficiary	of	a	variable	interest	entity, eliminates	the	quantitative	approach	previously	required	for	determining	the	primary	beneficiary	of	a	variable	interest	entity,	amends	certain	guidance	for	determining whether	an	entity	is	a	variable	interest	entity,	requires	enhanced	disclosures	about	an	enterprise's	involvement	in	a	variable	interest	entity,	and	includes	other	provisions. This	standard	will	be	effective	as	of	the	beginning	of	our	first	interim	and	annual	reporting	periods	that	begin	after	November	15,	2009.	Earlier	application	is	prohibited. The	adoption	of	these	standards	is	not	expected	to	have	a	material	effect	on	our	consolidated	financial	statements	in	the	future.

								During	the	second	quarter	of	2009	we	adopted	the	ASC	Subsequent	Events	Topic.	The	objective	of	this	topic	is	to	establish	general	standards	of	accounting	for	and disclosures	of	events	that	occur	after	the	balance	sheet	date	but	before	financial	statements	are	issued	or	are	available	to	be	issued.	In	particular,	this	topic	sets	forth	the period	after	the	balance	sheet	date	during	which	management	of	a	reporting	entity	should	evaluate	events	or	transactions	that	may	occur	for	potential	recognition	or disclosure	in	the	financial	statements,	the	circumstances	under	which	an	entity	should	recognize	events	or	transactions	occurring	after	the	balance	sheet	date	in	its financial	statements,	and	the	disclosures

that	an	entity	should	make	about	events	or	transactions	that	occurred	after	the	balance	sheet	date.	In	February	2010	minor	modifications	were	made	to	this	guidance.	The future	effects	of	the	adoption	of	these	standards	on	our	consolidated	financial	statements	will	be	dependent	upon	the	materiality	of	future	events	which	cannot	be predicted.

								We	adopted	the	additional	disclosure	provisions	of	the	ASC	Derivatives	and	Hedging	Topic	during	the	first	quarter	of	2009.	These	standards	require	entities	to provide	greater	transparency	through	additional	disclosures	about	how	and	why	an	entity	uses	derivative	instruments,	how	derivative	instruments	and	related	hedged items	are	accounted	for,	and	how	derivative	instruments	and	related	hedged	items	affect	an	entity's	financial	position,	results	of	operations,	and	cash	flows.	The	adoption of	these	standards	is	not	expected	to	have	a	material	effect	on	our	consolidated	financial	statements	in	the	future.

								We	changed	our	accounting	for	fair	value	of	our	nonfinancial	assets	and	liabilities	in	connection	with	the	adoption	of	certain	provisions	of	the	ASC	Fair	Value Measurements	and	Disclosures	Topic	effective	January	31,	2009.	The	effects	of	the	adoption	of	these	standards	on	our	future	consolidated	financial	statements	will	be dependent	upon	the	materiality	of	future	events	which	cannot	be	predicted.

# ITEM	7A.				QUANTITATIVE	AND	QUALITATIVE	DISCLOSURES	ABOUT	MARKET	RISK

# Financial	Risk	Management

								We	are	exposed	to	market	risk	primarily	from	adverse	changes	in	interest	rates,	and	to	a	lesser	degree	commodity	prices.	To	minimize	this	risk,	we	may	periodically use	financial	instruments,	including	derivatives.	As	a	matter	of	policy,	we	do	not	buy	or	sell	financial	instruments	for	speculative	or	trading	purposes	and	all	derivative financial	instrument	transactions	must	be	authorized	and	executed	pursuant	to	approval	by	the	Board	of	Directors.	All	financial	instrument	positions	taken	by	us	are intended	to	be	used	to	reduce	risk	by	hedging	an	underlying	economic	exposure.	Because	of	high	correlation	between	the	derivative	financial	instrument	and	the underlying	exposure	being	hedged,	fluctuations	in	the	value	of	the	financial	instruments	are	generally	offset	by	reciprocal	changes	in	the	value	of	the	underlying economic	exposure.

# Interest	Rate	Risk

								We	manage	our	interest	rate	risk	through	the	strategic	use	of	fixed	and	variable	interest	rate	debt	and,	from	time	to	time,	derivative	financial	instruments.	Our principal	interest	rate	exposure	relates	to	outstanding	amounts	under	our	Credit	Facilities.	As	of	January	29,	2010,	our	Credit	Facilities	provide	for	variable	rate borrowings	of	up	to	$2.995	billion	including	availability	of	$1.031	billion	under	our	ABL	Facility,	subject	to	the	borrowing	base.	In	order	to	mitigate	a	portion	of	the variable	rate	interest	exposure	under	the	Credit	Facilities,	we	entered	into	interest	rate	swaps	which	became	effective	on	July	31,	2007.	Pursuant	to	the	swaps,	we swapped	three	month	LIBOR	rates	for	fixed	interest	rates,	resulting	in	the	payment	of	an	all-in	fixed	rate	of	7.68%	on	an	original	notional	amount	of	$2.0	billion originally	scheduled	to	amortize	on	a	quarterly	basis	until	maturity	at	July	31,	2012.

								In	October	2008,	a	counterparty	to	one	of	our	2007	swap	agreements	defaulted.	We	terminated	this	agreement	and	in	November	2008	we	subsequently	cash	settled the	swap.	As	of	January	29,	2010,	the	notional	amount	under	the	remaining	2007	swaps	is	$793.3	million.

								Effective	February	28,	2008,	we	entered	into	a	$350.0	million	step-down	interest	rate	swap	in	order	to	mitigate	an	additional	portion	of	the	variable	rate	interest exposure	under	the	Credit	Facilities.	Under	the	terms	of	this	agreement	we	swapped	one	month	LIBOR	rates	for	fixed	interest	rates,	resulting	in	the	payment	of	a	fixed rate	of	5.58%	on	a	notional	amount	of	$350.0	million	for	the	first	year	and	$150.0	million	for	the	second	year.	This	contract	expired	on	February	28,	2010.

								Effective	December	31,	2008,	we	entered	into	a	$475.0	million	interest	rate	swap	in	order	to	mitigate	an	additional	portion	of	the	variable	rate	interest	exposure under	the	Credit	Facilities.	This	swap	is	scheduled	to	mature	on	January	31,	2013.	Under	the	terms	of	this	agreement	we	swapped	one	month	LIBOR	rates	for	fixed interest	rates,	resulting	in	the	payment	of	a	fixed	rate	of	5.06%	on	a	notional	amount	of	$475.0	million	through	April	2010,	$400.0	million	from	May	2010	to	October 2011,	and	$300.0	million	to	maturity.

								A	change	in	interest	rates	on	variable	rate	debt	impacts	our	pre-tax	earnings	and	cash	flows;	whereas	a	change	in	interest	rates	on	fixed	rate	debt	impacts	the economic	fair	value	of	debt	but	not	our	pre-tax	earnings	and	cash	flows.	Our	interest	rate	swaps	qualify	for	hedge	accounting	as	cash	flow	hedges.	Therefore,	changes	in market	fluctuations	related	to	the	effective	portion	of	these	cash	flow	hedges	do	not	impact	our	pre-tax	earnings	until	the	accrued	interest	is	recognized	on	the	derivatives and	the	associated	hedged	debt.	Based	on	our	variable	rate	borrowing	levels	and	interest	rate	swaps	outstanding	during	2009	and	2008,	the	annualized	effect	of	a	one percentage	point	change	in	variable	interest	rates	would	have	resulted	in	a	pretax	reduction	of	our	earnings	and	cash	flows	of	approximately	$5.6	million	in	2009	and $6.2	million	in	2008.

								The	conditions	and	uncertainties	in	the	global	credit	markets	have	substantially	increased	the	credit	risk	of	other	counterparties	to	our	swap	agreements.	In	the	event such	counterparties	fail	to	perform	under	our	swap	agreements	and	we	are	unable	to	enter	into	new	swap	agreements	on	terms	favorable	to	us,	our	ability	to	effectively manage	our	interest	rate	risk	may	be	materially	impaired.	We	attempt	to	manage	counterparty	credit	risk	by	periodically	evaluating	the	financial	position	and creditworthiness	of	such	counterparties,	monitoring	the	amount	for	which	we	are	at	risk	with	each	counterparty,	and	where	possible,	dispersing	the	risk	among	multiple counterparties.	There	can	be	no	assurance	that	we	will	manage	or	mitigate	our	counterparty	credit	risk	effectively.

# ITEM	8.				FINANCIAL	STATEMENTS	AND	SUPPLEMENTARY	DATA

# Report	of	Independent	Registered	Public	Accounting	Firm

# To	the	Board	of	Directors	and	Shareholders	of

								We	have	audited	the	accompanying	consolidated	balance	sheets	of	Dollar	General	Corporation	and	subsidiaries	as	of	January	29,	2010	(Successor)	and	January	30, 2009	(Successor),	and	the	related	consolidated	statements	of	operations,	shareholders'	equity,	and	cash	flows	for	the	years	ended	January	29,	2010	(Successor)	and January	30,	2009	(Successor),	and	the	periods	from	March	6,	2007	to	February	1,	2008	(Successor)	and	from	February	3,	2007	to	July	6,	2007	(Predecessor).	These financial	statements	are	the	responsibility	of	the	Company's	management.	Our	responsibility	is	to	express	an	opinion	on	these	financial	statements	based	on	our	audits.

								We	conducted	our	audits	in	accordance	with	the	standards	of	the	Public	Company	Accounting	Oversight	Board	(United	States).	Those	standards	require	that	we plan	and	perform	the	audit	to	obtain	reasonable	assurance	about	whether	the	financial	statements	are	free	of	material	misstatement.	We	were	not	engaged	to	perform	an audit	of	the	Company's	internal	control	over	financial	reporting.	Our	audits	included	consideration	of	internal	control	over	financial	reporting	as	a	basis	for	designing audit	procedures	that	are	appropriate	in	the	circumstances,	but	not	for	the	purpose	of	expressing	an	opinion	on	the	effectiveness	of	the	Company's	internal	control	over financial	reporting.	Accordingly,	we	express	no	such	opinion.	An	audit	also	includes	examining,	on	a	test	basis,	evidence	supporting	the	amounts	and	disclosures	in	the financial	statements,	assessing	the	accounting	principles	used	and	significant	estimates	made	by	management,	and	evaluating	the	overall	financial	statement	presentation. We	believe	that	our	audits	provide	a	reasonable	basis	for	our	opinion.

								In	our	opinion,	the	financial	statements	referred	to	above	present	fairly,	in	all	material	respects,	the	consolidated	financial	position	of	Dollar	General	Corporation and	subsidiaries	at	January	29,	2010	(Successor)	and	January	30,	2009	(Successor),	and	the	consolidated	results	of	their	operations	and	their	cash	flows	for	the	years ended	January	29,	2010	(Successor)	and	January	30,	2009	(Successor),	and	the	periods	from	March	6,	2007	to	February	1,	2008	(Successor)	and	from	February	3,	2007 to	July	6,	2007	(Predecessor),	in	conformity	with	U.S.	generally	accepted	accounting	principles.

								As	discussed	in	Notes	1	and	6	to	the	consolidated	financial	statements,	effective	February	3,	2007,	the	Company	changed	its	method	of	accounting	for	uncertain	tax positions	in	connection	with	new	accounting	literature.

/s/	Ernst	&	Young	LLP

Nashville,	Tennessee

# DOLLAR	GENERAL	CORPORATION	AND	SUBSIDIARIES

# CONSOLIDATED	BALANCE	SHEETS

# (In	thousands,	except	per	share	amounts)

|  | January	29,<br>2010 | January	30,<br>2009 |
| :--- | :--- | :--- |
| ASSETS |  |  |
| Current\tassets: |  |  |
| Cash\tand\tcash\tequivalents | $222,076 | $377,995 |
| Merchandise\tinventories | 1,519,578 | 1,414,955 |
| Income\ttaxes\treceivable | 7,543 | 6,392 |
| Deferred\tincome\ttaxes | — | 4,600 |
| Prepaid\texpenses\tand\tother\tcurrent\tassets | 96,252 | 66,183 |
| Total\tcurrent\tassets | 1,845,449 | 1,870,125 |
| Net\tproperty\tand\tequipment | 1,328,386 | 1,268,960 |
| Goodwill | 4,338,589 | 4,338,589 |
| Intangible\tassets,\tnet | 1,284,283 | 1,325,558 |
| Other\tassets,\tnet | 66,812 | 85,967 |
| Total\tassets | $8,863,519 | $8,889,199 |
| LIABILITIES\tAND\tSHAREHOLDERS'\tEQUITY |  |  |
| Current\tliabilities: |  |  |
| Current\tportion\tof\tlong-term\tobligations | $3,671 | $14,158 |
| Accounts\tpayable | 830,953 | 678,421 |
| Accrued\texpenses\tand\tother | 342,290 | 375,045 |
| Income\ttaxes\tpayable | 4,525 | 7,611 |
| Deferred\tincome\ttaxes\tpayable | 25,061 | — |
| Total\tcurrent\tliabilities | 1,206,500 | 1,075,235 |
| Long-term\tobligations | 3,399,715 | 4,122,956 |
| Deferred\tincome\ttaxes | 546,172 | 556,101 |
| Other\tliabilities | 302,348 | 289,288 |
| Commitments\tand\tcontingencies |  |  |
| Redeemable\tcommon\tstock | 18,486 | 13,924 |
| Shareholders'\tequity: |  |  |
| Preferred\tstock,\t1,000\tshares\tauthorized | — | — |
| and\toutstanding\tat\tJanuary\t29,\t2010\tand\tJanuary\t30,\t2009,\trespectively | 298,013 | 278,114 |
| Additional\tpaid-in\tcapital | 2,923,377 | 2,489,647 |
| Retained\tearnings | 203,075 | 103,364 |
| Accumulated\tother\tcomprehensive\tloss | (34,167) | (39,430) |
| Total\tshareholders'\tequity | 3,390,298 | 2,831,695 |
| Total\tliabilities\tand\tshareholders'\tequity | $8,863,519 | $8,889,199 |

The	accompanying	notes	are	an	integral	part	of	the	consolidated	financial	statements.

# CONSOLIDATED	STATEMENTS	OF	OPERATIONS

|  | Successor | Successor | Successor | Predecessor |
| :--- | :--- | :--- | :--- | :--- |
|  | For\tthe\tYear\tEnded | For\tthe\tYear\tEnded | March\t6,\t2007 | February\t3, |
|  | January\t29,\n2010 | January\t30,\n2009 | through\nFebruary\t1,\n2008(a) | 2007\nthrough\nJuly\t6,\t2007 |
| Net\tsales | $11,796,380 | $10,457,668 | $5,571,493 | $3,923,753 |
| Cost\tof\tgoods\tsold | 8,106,509 | 7,396,571 | 3,999,599 | 2,852,178 |
| Gross\tprofit | 3,689,871 | 3,061,097 | 1,571,894 | 1,071,575 |
| Selling,\tgeneral\tand\tadministrative\texpenses | 2,736,613 | 2,448,611 | 1,324,508 | 960,930 |
| Litigation\tsettlement\tand\trelated\tcosts,\tnet | — | 32,000 | — | — |
| Transaction\tand\trelated\tcosts | — | — | 1,242 | 101,397 |
| Operating\tprofit | 953,258 | 580,486 | 246,144 | 9,248 |
| Interest\tincome | (144) | (3,061) | (3,799) | (5,046) |
| Interest\texpense | 345,744 | 391,932 | 252,897 | 10,299 |
| Other\t(income)\texpense | 55,542 | (2,788) | 3,639 | — |
| Income\t(loss)\tbefore\tincome\ttaxes | 552,116 | 194,403 | (6,593) | 3,995 |
| Income\ttax\texpense\t(benefit) | 212,674 | 86,221 | (1,775) | 11,993 |
| Net\tincome\t(loss) | $339,442 | $108,182 | $(4,818) | $(7,998) |
| Earnings\t(loss)\tper\tshare: |  |  |  |  |
| Basic | $1.05 | $0.34 | $(0.02) |  |
| Diluted | $1.04 | $0.34 | $(0.02) |  |
| Weighted\taverage\tshares: |  |  |  |  |
| Basic | 322,778 | 317,024 | 316,777 |  |
| Diluted | 324,836 | 317,503 | 316,777 |  |

(a) Includes	the	results	of	operations	of	Buck	Acquisition	Corp.	("BAC")	for	the	period	prior	to	its	Merger	with	and	into	Dollar	General	Corporation from	March	6,	2007	(the	date	of	BAC's	formation)	through	July	6,	2007	(reflecting	the	change	in	fair	value	of	interest	rate	swaps),	and	the	post- Merger	results	of	Dollar	General	Corporation	for	the	period	from	July	7,	2007	through	February	1,	2008.	See	Notes	1	and	3.

# CONSOLIDATED	STATEMENTS	OF	SHAREHOLDERS'	EQUITY

|  | Common<br>Stock<br>Shares | Common<br>Stock | Additional<br>Paid-in<br>Capital | Retained<br>Earnings<br>(Accumulated<br>Deficit) | Accumulated<br>Other<br>Comprehensive<br>Loss | Other<br>Shareholders'<br>Equity | Total |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Predecessor\tBalances,\tFebruary\t2,\t2007 | 312,436 | $156,218 | $486,145 | $1,103,951 | $(987) | $420 | $1,745,747 |
| Effect\tof\tadoption\tof\taccounting\tstandard\trelated\tto |  |  |  |  |  |  |  |
| uncertainty\tin\tincome\ttaxes | — | — | — | (8,917) | — | — | (8,917) |
| Predecessor\tBalances\tas\tadjusted,\tFebruary\t2,\t2007 | 312,436 | 156,218 | 486,145 | 1,095,034 | (987) | 420 | 1,736,830 |
| Comprehensive\tincome\t(loss): |  |  |  |  |  |  |  |
| \t Net\tloss | — | — | — | (7,998) | — | — | (7,998) |
| Reclassification\tof\tnet\tloss\ton\tderivatives | — | — | — | — | 76 | — | 76 |
| Comprehensive\tloss |  |  |  |  |  |  | (7,922) |
| Cash\tdividends,\t$0.05\tper\tcommon\tshare | — | — | — | (15,710) | — | — | (15,710) |
| Issuance\tof\tcommon\tstock\tunder\tstock\tincentive\tplans | 2,496 | 1,248 | 40,294 | — | — | — | 41,542 |
| Tax\tbenefit\tfrom\tstock\toption\texercises | — | — | 3,927 | — | — | — | 3,927 |
| Share-based\tcompensation\texpense | — | — | 45,458 | — | — | — | 45,458 |
| Vesting\tof\trestricted\tstock\tand\trestricted\tstock\tunits | 126 | 63 | (63) | — | — | — | — |
| Other\tequity\ttransactions | (28) | (13) | (580) | (48) | — | 7 | (634) |
| Elimination\tof\tPredecessor\tequity\tin\tconnection\twith |  |  |  |  |  |  |  |
| Merger\t(see\tNotes\t1\tand\t3) | (315,030) | (157,516) | (575,181) | (1,071,278) | 911 | (427) | (1,803,491) |
| Predecessor\tBalances\tsubsequent\tto\tMerger | — | $— | $— | $— | $— | $— | $— |
| Successor\tcapital\tcontribution,\tnet | 316,591 | $277,018 | $2,476,958 | $— | $— | $— | $2,753,976 |
| Comprehensive\tloss: |  |  |  |  |  |  |  |
| \t Net\tloss | — | — | — | (4,818) | — | — | (4,818) |
| Unrealized\tnet\tloss\ton\thedged\ttransactions,\tnet\tof |  |  |  |  |  |  |  |
| income\ttax\tbenefit\tof\t$29,501 | — | — | — | — | (49,112) | — | (49,112) |
| Comprehensive\tloss |  |  |  |  |  |  | (53,930) |
| Issuance\tof\tcommon\tstock\tunder\tstock\tincentive\tplans | 328 | 287 | (287) | — | — | — | — |
| Issuance\tof\trestricted\tcommon\tstock\tunder\tstock\tincentive |  |  |  |  |  |  |  |
| plans | 509 | 445 | (445) | — | — | — | — |
| Repurchases\tof\tcommon\tstock | (10) | (9) | 9 | — | — | — | — |
| Share-based\tcompensation\texpense | — | — | 3,827 | — | — | — | 3,827 |
| Successor\tBalances,\tFebruary\t1,\t2008 | 317,418 | $277,741 | $2,480,062 | $(4,818) | $(49,112) | $— | $2,703,873 |
| Comprehensive\tincome: |  |  |  |  |  |  |  |
| \t Net\tincome | — | — | — | 108,182 | — | — | 108,182 |
| Unrealized\tnet\tgain\ton\thedged\ttransactions,\tnet\tof |  |  |  |  |  |  |  |
| income\ttax\texpense\tof\t$4,518 | — | — | — | — | 9,682 | — | 9,682 |
| Comprehensive\tincome |  |  |  |  |  |  | 117,864 |
| Issuance\tof\tcommon\tstock\tunder\tstock\tincentive\tplans | 484 | 423 | (423) | — | — | — | — |
| Repurchases\tof\tcommon\tstock | (57) | (50) | 50 | — | — | — | — |
| Share-based\tcompensation\texpense | — | — | 9,958 | — | — | — | 9,958 |
| Successor\tBalances,\tJanuary\t30,\t2009 | 317,845 | $278,114 | $2,489,647 | $103,364 | $(39,430) | $— | $2,831,695 |
| Comprehensive\tincome: |  |  |  |  |  |  |  |
| \t Net\tincome | — | — | — | 339,442 | — | — | 339,442 |
| Unrealized\tnet\tgain\ton\thedged\ttransactions,\tnet\tof |  |  |  |  |  |  |  |
| income\ttax\texpense\tof\t$2,553 | — | — | — | — | 5,263 | — | 5,263 |
| Comprehensive\tincome |  |  |  |  |  |  | 344,705 |
| Issuance\tof\tcommon\tstock | 22,700 | 19,863 | 421,299 | — | — | — | 441,162 |
| Cash\tdividends,\t$0.7525\tper\tcommon\tshare,\tand\trelated |  |  |  |  |  |  |  |
| amounts | — | — | — | (239,731) | — | — | (239,731) |
| Share-based\tcompensation\texpense | — | — | 15,009 | — | — | — | 15,009 |
| Tax\tbenefit\tfrom\tstock\toption\texercises | — | — | 3,072 | — | — | — | 3,072 |
| Issuance\tof\tcommon\tstock\tunder\tstock\tincentive\tplans | 304 | 266 | 2,020 | — | — | — | 2,286 |
| Equity\tsettlements\tunder\tstock\tincentive\tplans | (263) | (230) | (7,670) | — | — | — | (7,900) |
| Successor\tBalances,\tJanuary\t29,\t2010 | 340,586 | $298,013 | $2,923,377 | $203,075 | $(34,167) | $— | $3,390,298 |

# CONSOLIDATED	STATEMENTS	OF	CASH	FLOWS

# (In	thousands)

|  | Successor | Successor | Successor | Predecessor |
| :--- | :--- | :--- | :--- | :--- |
|  | For\tthe\tYear\tEnded | For\tthe\tYear\tEnded | March\t6,\t2007 | February\t3, |
|  | January\t29,\n2010 | January\t30,\n2009 | through\nFebruary\t1,\n2008(a) | 2007\nthrough\nJuly\t6,\t2007 |
| Cash\tflows\tfrom\toperating\tactivities: |  |  |  |  |
| Net\tincome\t(loss) | $339,442 | $108,182 | $(4,818) | $(7,998) |
| Adjustments\tto\treconcile\tnet\tincome\t(loss)\tto\tnet\tcash\tprovided\tby\toperating\tactivities: |  |  |  |  |
| \t Depreciation\tand\tamortization | 256,771 | 247,899 | 150,213 | 83,917 |
| \t Deferred\tincome\ttaxes | 14,860 | 73,434 | 19,551 | (20,874) |
| Tax\tbenefit\tof\tstock\toptions | (5,390) | (950) | — | (3,927) |
| Loss\t(gain)\ton\tdebt\tretirement | 55,265 | (3,818) | 1,249 | — |
| \t Noncash\tshare-based\tcompensation | 17,295 | 9,958 | 3,827 | 45,433 |
| \t Noncash\tinventory\tadjustments\tand\tasset\timpairments | 647 | 50,671 | 6,113 | — |
| \t Other\tnoncash\tgains\tand\tlosses | 7,920 | 6,252 | 4,276 | 5,098 |
| Change\tin\toperating\tassets\tand\tliabilities: |  |  |  |  |
| \t Merchandise\tinventories | (100,248) | (173,014) | 73,356 | 16,424 |
| Prepaid\texpenses\tand\tother\tcurrent\tassets | (7,298) | (598) | 3,739 | (6,184) |
| \t Accounts\tpayable | 106,049 | 140,356 | (41,395) | 34,794 |
| \t Accrued\texpenses\tand\tother\tliabilities | (16,823) | 68,736 | 16,061 | 52,995 |
| Income\ttaxes | 1,153 | 33,986 | 7,348 | 2,809 |
| \t Other | (1,000) | 14,084 | 84 | (541) |
| Net\tcash\tprovided\tby\toperating\tactivities | 668,643 | 575,178 | 239,604 | 201,946 |
| Cash\tflows\tfrom\tinvesting\tactivities: |  |  |  |  |
| Merger,\tnet\tof\tcash\tacquired | — | — | (6,738,391) | — |
| Purchases\tof\tproperty\tand\tequipment | (250,747) | (205,546) | (83,641) | (56,153) |
| Purchases\tof\tshort-term\tinvestments | — | (9,903) | (3,800) | (5,100) |
| Sales\tof\tshort-term\tinvestments | — | 61,547 | 21,445 | 9,505 |
| Purchases\tof\tlong-term\tinvestments | — | — | (44,520) | (15,754) |
| Sale\tand\tinsurance\tproceeds\trelated\tto\tproperty\tand\tequipment | 2,701 | 1,266 | 533 | 620 |
| Net\tcash\tused\tin\tinvesting\tactivities | (248,046) | (152,636) | (6,848,374) | (66,882) |
| Cash\tflows\tfrom\tfinancing\tactivities: |  |  |  |  |
| Issuance\tof\tcommon\tstock | 443,753 | 4,228 | 2,759,540 | — |
| Net\tborrowings\t(repayments)\tunder\trevolving\tcredit\tfacility | — | (102,500) | 102,500 | — |
| Issuance\tof\tlong-term\tobligations | 1,080 | — | 4,176,817 | — |
| Repayments\tof\tlong-term\tobligations | (785,260) | (44,425) | (241,945) | (4,500) |
| Debt\tissuance\tcosts | — | — | (87,392) | — |
| Payment\tof\tcash\tdividends\tand\trelated\tamounts | (239,731) | — | — | (15,710) |
| Proceeds\tfrom\texercise\tof\tstock\toptions | — | — | — | 41,546 |
| Repurchases\tof\tequity | (1,748) | (3,009) | (541) | — |
| Tax\tbenefit\tof\tstock\toptions | 5,390 | 950 | — | 3,927 |
| Net\tcash\tprovided\tby\t(used\tin)\tfinancing\tactivities | (576,516) | (144,756) | 6,708,979 | 25,263 |
| Net\tincrease\t(decrease)\tin\tcash\tand\tcash\tequivalents | (155,919) | 277,786 | 100,209 | 160,327 |
| Cash\tand\tcash\tequivalents,\tbeginning\tof\tperiod | 377,995 | 100,209 | — | 189,288 |
| Cash\tand\tcash\tequivalents,\tend\tof\tperiod | $222,076 | $377,995 | $100,209 | $349,615 |
| Supplemental\tcash\tflow\tinformation: |  |  |  |  |
| Cash\tpaid\t(received)\tfor: |  |  |  |  |
| Interest | $328,433 | $377,022 | $226,738 | $11,246 |
| Income\ttaxes | 187,983 | 7,091 | (30,574) | 26,012 |
| Supplemental\tschedule\tof\tnoncash\tinvesting\tand\tfinancing\tactivities: |  |  |  |  |
| Purchases\tof\tproperty\tand\tequipment\tawaiting\tprocessing\tfor\tpayment,\tincluded\tin\tAccounts\tpayable | $30,393 | $7,474 | $20,449 | $13,544 |
| Purchases\tof\tproperty\tand\tequipment\tunder\tcapital\tlease\tobligations | 50 | 3,806 | 592 | 1,036 |
| Expiration\tof\tequity\trepurchase\trights | — | 2,548 | — | — |
| Exchange\tof\tshares\tand\tstock\toptions\tin\tbusiness\tcombination | — | — | 7,685 | — |

(a) Includes	the	cash	flows	of	Buck	Acquisition	Corp.	("BAC")	for	the	period	prior	to	its	Merger	with	and	into	Dollar	General	Corporation	from	March	6,	2007	(the	date	of	BAC's	formation) through	July	6,	2007	(which	were	zero),	and	the	post-Merger	results	of	Dollar	General	Corporation	for	the	period	from	July	7,	2007	through	February	1,	2008.	See	Notes	1	and	3.

# NOTES	TO	CONSOLIDATED	FINANCIAL	STATEMENTS

# 1.	Basis	of	presentation	and	accounting	policies

# Basis	of	presentation

								These	notes	contain	references	to	the	years	2009	and	2008,	which	represent	fiscal	years	ended	January	29,	2010	and	January	30,	2009,	respectively,	each	of	which were	52-week	accounting	periods.	The	Company	completed	a	merger	transaction	on	July	6,	2007	and	therefore	fiscal	year	2007	includes	separate	presentation	of	the periods	before	and	after	the	merger.	The	Company's	fiscal	year	ends	on	the	Friday	closest	to	January	31.	The	consolidated	financial	statements	include	all	subsidiaries	of the	Company,	except	for	its	not-for-profit	subsidiary	which	the	Company	does	not	control.	Intercompany	transactions	have	been	eliminated.

								Dollar	General	Corporation	(the	"Company")	was	acquired	on	July	6,	2007	through	a	Merger	(as	defined	and	discussed	in	greater	detail	in	Note	3	below)	accounted for	as	a	reverse	acquisition.	Although	the	Company	continued	as	the	same	legal	entity	after	the	Merger,	the	accompanying	consolidated	financial	statements	are presented	for	the	"Predecessor"	and	"Successor"	relating	to	the	periods	preceding	and	succeeding	the	Merger,	respectively.	As	a	result	of	the	Company	applying purchase	accounting	and	a	new	basis	of	accounting	beginning	on	July	7,	2007,	the	financial	reporting	periods	presented	are	as	follows:

•The	presentation	for	2009	and	2008	reflect	the	Successor.

•The	2007	periods	presented	include	the	Predecessor	period	of	the	Company,	reflecting	22	weeks	of	operating	results	from	February	3,	2007	to	July	6, 2007	and	30	weeks	of	operating	results	for	the	Successor	period,	reflecting	the	Merger	of	the	Company	and	Buck	Acquisition	Corp.	("BAC")	from	July	7, 2007	to	February	1,	2008.

•BAC's	results	of	operations	for	the	period	from	its	inception	on	March	6,	2007	to	July	6,	2007	(prior	to	the	Merger	on	July	6,	2007)	are	also	included	in the	consolidated	financial	statements	for	the	Successor	period	described	above	as	a	result	of	certain	derivative	financial	instruments	entered	into	by	BAC prior	to	the	Merger,	as	further	described	in	Note	8.	Other	than	these	financial	instruments,	BAC	had	no	assets,	liabilities,	or	operations	prior	to	the Merger.

								The	consolidated	financial	statements	for	the	Predecessor	periods	have	been	prepared	using	the	Company's	historical	basis	of	accounting.	As	a	result	of	purchase accounting,	the	pre-Merger	and	post-Merger	consolidated	financial	statements	are	not	comparable.

								The	Company	effected	a	reverse	stock	split	effective	October	12,	2009,	of	1	share	for	each	1.75	shares	outstanding	as	of	that	date.	All	share	and	per	share	amounts presented	in	the	consolidated	financial	statements	have	been	adjusted	to	reflect	the	reverse	stock	split.	The	Company	completed	the	initial	public	offering	of	its	common stock	on	November	18,	2009,	as	described	in	more	detail	in	Note	2.

# Business	description

								The	Company	sells	general	merchandise	on	a	retail	basis	through	8,828	stores	(as	of	January	29,	2010)	in	35	states	covering	most	of	the	southern,	southwestern, midwestern	and	eastern	United	States.	The	Company	has	distribution	centers	("DCs")	in	Scottsville,	Kentucky;	Ardmore,	Oklahoma;	South	Boston,	Virginia;	Indianola, Mississippi;	Fulton,	Missouri;	Alachua,	Florida;	Zanesville,	Ohio;	Jonesville,	South	Carolina	and	Marion,	Indiana.

# NOTES	TO	CONSOLIDATED	FINANCIAL	STATEMENTS	(Continued)

# 1.	Basis	of	presentation	and	accounting	policies	(Continued)

								The	Company	purchases	its	merchandise	from	a	wide	variety	of	suppliers.	Approximately	9%	and	6%	of	the	Company's	purchases	in	2009	were	made	from	the Company's	largest	and	second	largest	suppliers,	respectively.

# Cash	and	cash	equivalents

								Cash	and	cash	equivalents	include	highly	liquid	investments	with	insignificant	interest	rate	risk	and	original	maturities	of	three	months	or	less	when	purchased. Such	investments	primarily	consist	of	money	market	funds,	certificates	of	deposit	(which	may	include	foreign	time	deposits),	and	commercial	paper.	The	carrying amounts	of	these	items	are	a	reasonable	estimate	of	their	fair	value	due	to	the	short	maturity	of	these	investments.

								Payments	due	from	banks	for	third-party	credit	card,	debit	card	and	electronic	benefit	transactions	classified	as	cash	and	cash	equivalents	totaled	approximately $23.2	million	and	$16.2	million	at	January	29,	2010	and	January	30,	2009,	respectively.

								The	Company's	cash	management	system	provides	for	daily	investment	of	available	balances	and	the	funding	of	outstanding	checks	when	presented	for	payment. Outstanding	but	unpresented	checks	totaling	approximately	$159.6	million	and	$127.6	million	at	January	29,	2010	and	January	30,	2009,	respectively,	have	been included	in	Accounts	payable	in	the	consolidated	balance	sheets.	Upon	presentation	for	payment,	these	checks	are	funded	through	available	cash	balances	or	the Company's	credit	facilities.

								At	January	29,	2010,	the	Company	had	certain	cash	balances	equal	to	$20.0	million	held	in	accordance	with	certain	insurance-related	regulatory	requirements,	as further	described	below	under	"Insurance	liabilities."

# Investments	in	debt	and	equity	securities

								The	Company	accounts	for	its	investments	in	debt	and	marketable	equity	securities	as	held-to-maturity,	available-for-sale,	or	trading,	depending	on	their classification.	Debt	securities	categorized	as	held-to-maturity	are	stated	at	amortized	cost.	Debt	and	equity	securities	categorized	as	available-for-sale	are	stated	at	fair value,	with	any	unrealized	gains	and	losses,	net	of	deferred	income	taxes,	reported	as	a	component	of	Accumulated	other	comprehensive	loss.	Trading	securities (primarily	mutual	funds	held	pursuant	to	deferred	compensation	and	supplemental	retirement	plans,	as	further	discussed	in	Note	10)	are	stated	at	fair	value,	with	changes in	fair	value	recorded	as	a	component	of	Selling,	general	and	administrative	("SG&A")	expense.

								As	of	January	29,	2010	and	January	30,	2009,	the	Company	had	investments	in	trading	securities	of	$8.8	million	and	$8.7	million,	respectively,	$1.6	million	and $2.1	million	of	which	were	classified	as	Prepaid	expenses	and	other	current	assets,	respectively,	and	$7.2	million	and	$6.6	million	of	which	were	classified	as	Other assets,	net,	respectively,	in	the	consolidated	balance	sheets.	Historical	cost	information	pertaining	to	these	investments	in	mutual	funds	by	participants	in	the	Company's supplemental	retirement	and	compensation	deferral	plans	is	not	readily	available	to	the	Company.

								During	2008,	the	Company's	South	Carolina-based	wholly	owned	captive	insurance	subsidiary,	Ashley	River	Insurance	Company	("ARIC"),	had	investments	in various	debt	securities.	These	investments	were	held	pursuant	to	South	Carolina	regulatory	requirements	to	maintain	certain	asset	balances	related	to	ARIC's	liability and	equity	balances,	which	could	limit	the	Company's	ability	to	use

these	assets	for	general	corporate	purposes.	In	May	2008,	the	state	of	South	Carolina	made	certain	changes	to	these	regulations,	which	in	turn	changed	the	Company's investment	requirements.	As	a	result,	the	Company	reclassified	certain	investments	held	by	ARIC	from	held-to-maturity	to	available-for-sale,	and	ARIC	subsequently liquidated	certain	investments	totaling	$48.6	million	during	2008.

								For	the	years	ended	January	29,	2010,	January	30,	2009,	the	Successor	period	ended	February	1,	2008	and	the	Predecessor	period	ended	July	6,	2007,	gross	realized gains	and	losses	on	the	sales	of	available-for-sale	securities	were	not	material.	The	cost	of	securities	sold	is	based	upon	the	specific	identification	method.

# Merchandise	inventories

								Inventories	are	stated	at	the	lower	of	cost	or	market	with	cost	determined	using	the	retail	last-in,	first-out	("LIFO")	method	as	this	method	results	in	a	better matching	of	costs	and	revenues.	Under	the	Company's	retail	inventory	method	("RIM"),	the	calculation	of	gross	profit	and	the	resulting	valuation	of	inventories	at	cost are	computed	by	applying	a	calculated	cost-to-retail	inventory	ratio	to	the	retail	value	of	sales	at	a	department	level.	Costs	directly	associated	with	warehousing	and distribution	are	capitalized	into	inventory.	The	excess	of	current	cost	over	LIFO	cost	was	approximately	$47.5	million	and	$50.0	million	at	January	29,	2010	and January	30,	2009,	respectively.	Current	cost	is	determined	using	the	RIM	on	a	first-in,	first-out	basis.	Under	the	LIFO	inventory	method,	the	impacts	of	rising	or	falling market	price	changes	increase	or	decrease	cost	of	sales	(the	LIFO	provision	or	benefit).	The	Company	recorded	a	LIFO	benefit	of	$2.5	million	in	2009,	and	LIFO provisions	of	$43.9	million,	$6.1	million	and	zero	during	2008,	and	the	2007	Successor	and	Predecessor	periods,	respectively.

								The	2008	LIFO	provision	was	impacted	by	increased	commodity	costs	related	to	food	and	pet	products	which	were	driven	by	fruit	and	vegetable	prices	and	rising freight	costs.	In	addition,	increases	in	petroleum,	resin,	metals,	pulp	and	other	raw	material	commodity	costs	also	resulted	in	multiple	product	cost	increases.	These trends	generally	stabilized	or	reversed	in	2009.

# Vendor	rebates

								The	Company	accounts	for	all	cash	consideration	received	from	vendors	in	accordance	with	applicable	accounting	standards	pertaining	to	such	arrangements.	Cash consideration	received	from	a	vendor	is	generally	presumed	to	be	a	rebate	or	an	allowance	and	is	accounted	for	as	a	reduction	of	merchandise	purchase	costs	as	earned. However,	certain	specific,	incremental	and	otherwise	qualifying	SG&A	expenses	related	to	the	promotion	or	sale	of	vendor	products	may	be	offset	by	cash	consideration received	from	vendors,	in	accordance	with	arrangements	such	as	cooperative	advertising,	when	earned	for	dollar	amounts	up	to	but	not	exceeding	actual	incremental costs.	The	Company	recognizes	amounts	received	for	cooperative	advertising	on	performance,	"first	showing"	or	distribution,	consistent	with	its	policy	for	advertising expense	in	accordance	with	applicable	accounting	standards	for	reporting	on	advertising	costs.

# Property	and	equipment

								Property	and	equipment	are	recorded	at	cost.	The	Company	provides	for	depreciation	and	amortization	on	a	straight-line	basis	over	the	following	estimated	useful lives:

| Land	improvements | 20 |
| :--- | :--- |
| Buildings | 39\t-\t40 |
| Furniture,\tfixtures\tand\tequipment | 3\t-\t10 |

								Improvements	of	leased	properties	are	amortized	over	the	shorter	of	the	life	of	the	applicable	lease	term	or	the	estimated	useful	life	of	the	asset.

# Impairment	of	long-lived	assets

								When	indicators	of	impairment	are	present,	the	Company	evaluates	the	carrying	value	of	long-lived	assets,	other	than	goodwill,	in	relation	to	the	operating performance	and	future	cash	flows	or	the	appraised	values	of	the	underlying	assets.	In	accordance	with	accounting	standards	for	long-lived	assets,	the	Company	reviews for	impairment	stores	open	more	than	two	years	for	which	current	cash	flows	from	operations	are	negative.	Impairment	results	when	the	carrying	value	of	the	assets exceeds	the	undiscounted	future	cash	flows	over	the	life	of	the	lease.	The	Company's	estimate	of	undiscounted	future	cash	flows	over	the	lease	term	is	based	upon historical	operations	of	the	stores	and	estimates	of	future	store	profitability	which	encompasses	many	factors	that	are	subject	to	variability	and	difficult	to	predict.	If	a long-lived	asset	is	found	to	be	impaired,	the	amount	recognized	for	impairment	is	equal	to	the	difference	between	the	carrying	value	and	the	asset's	estimated	fair	value. The	fair	value	is	estimated	based	primarily	upon	estimated	future	cash	flows	(discounted	at	the	Company's	credit	adjusted	risk-free	rate)	or	other	reasonable	estimates	of fair	market	value.	Assets	to	be	disposed	of	are	adjusted	to	the	fair	value	less	the	cost	to	sell	if	less	than	the	book	value.

								The	Company	recorded	impairment	charges	included	in	SG&A	expense	of	approximately	$5.0	million	in	2009,	$4.0	million	in	2008	and	zero	and	$0.2	million	in the	2007	Successor	and	Predecessor	periods,	respectively,	to	reduce	the	carrying	value	of	certain	of	its	stores'	assets	as	deemed	necessary	based	on	the	Company's evaluation	that	such	amounts	would	not	be	recoverable	primarily	due	to	insufficient	sales	or	excessive	costs	resulting	in	negative	current	and	projected	future	cash	flows at	these	locations.

# Capitalized	interest

								To	assure	that	interest	costs	properly	reflect	only	that	portion	relating	to	current	operations,	interest	on	borrowed	funds	during	the	construction	of	property	and equipment	is	capitalized	where	applicable.	No	interest	costs	were	capitalized	in	2009,	2008	or	the	2007	periods.

# Goodwill	and	other	intangible	assets

								The	Company	amortizes	intangible	assets	over	their	estimated	useful	lives	unless	such	lives	are	deemed	indefinite.	Amortizable	intangible	assets	are	tested	for impairment	when	indicators	of	impairment	are	present,	based	on	undiscounted	cash	flows,	and	if	impaired,	written	down	to	fair	value	based	on	either	discounted	cash flows	or	appraised	values.

								Goodwill	and	intangible	assets	with	indefinite	lives	are	tested	for	impairment	annually	or	more	frequently	if	indicators	of	impairment	are	present	and	written	down to	fair	value	as	required.	No	impairment	of	intangible	assets	has	been	identified	during	any	of	the	periods	presented.

								The	goodwill	impairment	test	is	a	two-step	process	that	requires	management	to	make	judgments	in	determining	what	assumptions	to	use	in	the	calculation.	The first	step	of	the	process	consists	of	estimating	the	fair	value	of	the	Company's	reporting	unit	based	on	valuation	techniques	(including	a	discounted	cash	flow	model	using revenue	and	profit	forecasts)	and	comparing	that	estimated	fair	value	with	the	recorded	carrying	value,	which	includes	goodwill.	If	the	estimated	fair	value	is	less	than the	carrying	value,	a	second	step	is	performed	to	compute	the	amount	of	the	impairment	by	determining	an	"implied	fair	value"	of	goodwill.	The	determination	of	the implied	fair	value	of	goodwill	would	require	the	Company	to	allocate	the	estimated	fair	value	of	its	reporting	unit	to	its	assets	and	liabilities.	Any	unallocated	fair	value would	represent	the	implied	fair	value	of	goodwill,	which	would	be	compared	to	its	corresponding	carrying	value.

# Other	assets

								Other	assets	consist	primarily	of	qualifying	prepaid	expenses,	debt	issuance	costs	which	are	amortized	over	the	life	of	the	related	obligations,	and	utility	and security	deposits.	Such	debt	issuance	costs	increased	substantially	subsequent	to	the	Merger	as	further	discussed	in	Notes	3	and	7.

# Accrued	expenses	and	other	liabilities

								Accrued	expenses	and	other	consist	of	the	following:

| (In	thousands) | January	29,<br>2010 | January	30,<br>2009 |
| :--- | :--- | :--- |
| Compensation\tand\tbenefits | $100,843 | $87,451 |
| Insurance | 65,408 | 65,524 |
| Taxes\t(other\tthan\ttaxes\ton\tincome) | 72,902 | 66,983 |
| Other | 103,137 | 155,087 |
|  | $342,290 | $375,045 |

								Other	accrued	expenses	primarily	include	the	current	portion	of	liabilities	for	legal	settlements,	freight	expense,	contingent	rent	expense,	interest,	electricity,	lease contract	termination	liabilities	for	closed	stores,	common	area	and	other	maintenance	charges,	store	insurance	liabilities	and	income	tax	related	reserves.

# Insurance	liabilities

								The	Company	retains	a	significant	portion	of	risk	for	its	workers'	compensation,	employee	health,	general	liability,	property	and	automobile	claim	exposures. Accordingly,	provisions	are	made	for	the	Company's	estimates	of	such	risks.	The	undiscounted	future	claim	costs	for	the	workers'	compensation,	general	liability,	and health	claim	risks	are	derived	using	actuarial	methods.	To	the	extent	that	subsequent	claim	costs	vary	from	those	estimates,	future	results	of	operations	will	be	affected. Ashley	River	Insurance	Company	(or	ARIC,	as	defined	above),	a	South	Carolina-based	wholly	owned	captive

insurance	subsidiary	of	the	Company,	charges	the	operating	subsidiary	companies	premiums	to	insure	the	retained	workers'	compensation	and	non-property	general liability	exposures.	Pursuant	to	South	Carolina	insurance	regulations,	ARIC	is	required	to	maintain	certain	levels	of	cash	and	cash	equivalents	related	to	its	self	insured exposures.	ARIC	currently	insures	no	unrelated	third-party	risk.

								As	a	result	of	the	Merger,	the	Company	recorded	its	assumed	self-insurance	reserves	as	of	the	Merger	date	at	their	present	value	in	accordance	with	applicable accounting	standards	for	business	combinations,	using	a	discount	rate	of	5.4%.	The	balance	of	the	resulting	discount	was	$7.4	million	and	$11.7	million	at	January	29, 2010	and	January	30,	2009,	respectively.	Other	than	for	reserves	assumed	in	a	business	combination,	the	Company's	policy	is	to	record	self-insurance	reserves	on	an undiscounted	basis.

# Operating	leases	and	related	liabilities

								Rent	expense	is	recognized	over	the	term	of	the	lease.	The	Company	records	minimum	rental	expense	on	a	straight-line	basis	over	the	base,	non-cancelable	lease term	commencing	on	the	date	that	the	Company	takes	physical	possession	of	the	property	from	the	landlord,	which	normally	includes	a	period	prior	to	the	store	opening to	make	necessary	leasehold	improvements	and	install	store	fixtures.	When	a	lease	contains	a	predetermined	fixed	escalation	of	the	minimum	rent,	the	Company recognizes	the	related	rent	expense	on	a	straight-line	basis	and	records	the	difference	between	the	recognized	rental	expense	and	the	amounts	payable	under	the	lease	as deferred	rent.	Tenant	allowances,	to	the	extent	received,	are	recorded	as	deferred	incentive	rent	and	are	amortized	as	a	reduction	to	rent	expense	over	the	term	of	the lease.	Any	difference	between	the	calculated	expense	and	the	amounts	actually	paid	are	reflected	as	a	liability,	with	the	current	portion	in	Accrued	expenses	and	other and	the	long-term	portion	in	Other	liabilities	in	the	consolidated	balance	sheets,	and	totaled	approximately	$14.5	million	and	$7.7	million	at	January	29,	2010	and January	30,	2009,	respectively.

								The	Company	recognizes	contingent	rental	expense	when	the	achievement	of	specified	sales	targets	are	considered	probable,	in	accordance	with	applicable accounting	standards	for	contingent	rent.	The	amount	expensed	but	not	paid	as	of	January	29,	2010	and	January	30,	2009	was	approximately	$10.8	million	and $10.4	million,	respectively,	and	is	included	in	Accrued	expenses	and	other	in	the	consolidated	balance	sheets	(See	Note	9).

								In	the	normal	course	of	business,	based	on	an	overall	analysis	of	store	performance	and	expected	trends,	management	periodically	evaluates	the	need	to	close underperforming	stores.	Generally,	for	store	closures	where	a	lease	obligation	still	exists,	the	Company	records	the	estimated	future	liability	associated	with	the	rental obligation	on	the	date	the	store	is	closed	in	accordance	with	applicable	accounting	standards	for	costs	associated	with	exit	or	disposal	activities.	Key	assumptions	in calculating	the	liability	include	the	timeframe	expected	to	terminate	lease	agreements,	estimates	related	to	the	sublease	potential	of	closed	locations,	and	estimation	of other	related	exit	costs.	Liabilities	are	reviewed	periodically	and	adjusted	when	necessary.	The	current	portion	of	the	closed	store	rent	liability	is	reflected	in	Accrued expenses	and	other	and	the	long-term	portion	in	Other	liabilities	in	the	consolidated	balance	sheets,	and	totaled	approximately	$7.6	million	at	January	29,	2010	and $13.2	million	at	January	30,	2009.

# Other	liabilities

								Non-current	Other	liabilities	consist	of	the	following:

| (In	thousands) | January	29,<br>2010 | January	30,<br>2009 |
| :--- | :--- | :--- |
| Compensation\tand\tbenefits | $12,441 | $8,399 |
| Insurance | 140,633 | 139,410 |
| Income\ttax\trelated\treserves | 68,021 | 47,307 |
| Derivatives | 57,058 | 63,523 |
| Other | 24,195 | 30,649 |
|  | $302,348 | $289,288 |

								Amounts	reflected	as	"other"	in	the	table	above	consist	primarily	of	deferred	rent,	lease	contract	termination	liabilities	for	closed	stores,	leasehold	interests liabilities,	and	rebate	obligations.

								On	February	2,	2008	and	January	31,	2009,	the	Company	adopted	various	components	of	the	accounting	standards	for	fair	value,	which	define	fair	value,	establish a	framework	for	measuring	fair	value,	and	expand	disclosures	about	fair	value	measurements.	These	standards	apply	to	reported	balances	that	are	required	or	permitted to	be	measured	at	fair	value	under	existing	accounting	pronouncements;	accordingly,	the	standard	does	not	require	any	new	fair	value	measurements	of	reported balances.

								Fair	value	is	a	market-based	measurement,	not	an	entity-specific	measurement.	Therefore,	a	fair	value	measurement	should	be	determined	based	on	the assumptions	that	market	participants	would	use	in	pricing	the	asset	or	liability.	As	a	basis	for	considering	market	participant	assumptions	in	fair	value	measurements,	fair value	accounting	standards	establish	a	fair	value	hierarchy	that	distinguishes	between	market	participant	assumptions	based	on	market	data	obtained	from	sources independent	of	the	reporting	entity	(observable	inputs	that	are	classified	within	Levels	1	and	2	of	the	hierarchy)	and	the	reporting	entity's	own	assumptions	about	market participant	assumptions	(unobservable	inputs	classified	within	Level	3	of	the	hierarchy).

								Level	1	inputs	utilize	quoted	prices	(unadjusted)	in	active	markets	for	identical	assets	or	liabilities	that	the	Company	has	the	ability	to	access.	Level	2	inputs	are inputs	other	than	quoted	prices	included	in	Level	1	that	are	directly	or	indirectly	observable	for	the	asset	or	liability.	Level	2	inputs	may	include	quoted	prices	for	similar assets	and	liabilities	in	active	markets,	as	well	as	inputs	that	are	observable	for	the	asset	or	liability	(other	than	quoted	prices),	such	as	interest	rates,	foreign	exchange rates,	and	yield	curves	that	are	observable	at	commonly	quoted	intervals.	Level	3	inputs	are	unobservable	inputs	for	the	asset	or	liability,	which	are	based	on	an	entity's own	assumptions,	as	there	is	little,	if	any,	related	market	activity.	In	instances	where	the	determination	of	the	fair	value	measurement	is	based	on	inputs	from	different levels	of	the	fair	value	hierarchy,	the	level	in	the	fair	value	hierarchy	within	which	the	entire	fair	value	measurement	falls	is	based	on	the	lowest	level	input	that	is significant	to	the	fair	value	measurement	in	its	entirety.	The	Company's	assessment	of	the	significance	of	a	particular	input	to	the

fair	value	measurement	in	its	entirety	requires	judgment	and	considers	factors	specific	to	the	asset	or	liability.

								The	valuation	of	the	Company's	derivative	financial	instruments	is	determined	using	widely	accepted	valuation	techniques,	including	discounted	cash	flow	analysis on	the	expected	cash	flows	of	each	derivative.	This	analysis	reflects	the	contractual	terms	of	the	derivatives,	including	the	period	to	maturity,	and	uses	observable market-based	inputs,	including	interest	rate	curves.	The	fair	values	of	interest	rate	swaps	are	determined	using	the	market	standard	methodology	of	netting	the	discounted future	fixed	cash	payments	(or	receipts)	and	the	discounted	expected	variable	cash	receipts	(or	payments).	The	variable	cash	receipts	(or	payments)	are	based	on	an expectation	of	future	interest	rates	(forward	curves)	derived	from	observable	market	interest	rate	curves.

								The	Company	incorporates	credit	valuation	adjustments	(CVAs)	to	appropriately	reflect	both	its	own	nonperformance	risk	and	the	respective	counterparty's nonperformance	risk	in	the	fair	value	measurements.	In	adjusting	the	fair	value	of	its	derivative	contracts	for	the	effect	of	nonperformance	risk,	the	Company	has considered	the	impact	of	netting	and	any	applicable	credit	enhancements,	such	as	collateral	postings,	thresholds,	mutual	puts,	and	guarantees.

								The	Company	has	determined	that	the	majority	of	the	inputs	used	to	value	its	derivatives	fall	within	Level	2	of	the	fair	value	hierarchy.	However,	the	CVAs associated	with	its	derivatives	utilize	Level	3	inputs,	such	as	estimates	of	current	credit	spreads	to	evaluate	the	likelihood	of	default	by	itself	and	its	counterparties.	As	of January	29,	2010,	the	Company	has	assessed	the	significance	of	the	impact	of	the	CVAs	on	the	overall	valuation	of	its	derivative	positions	and	has	determined	that	the CVAs	are	not	significant	to	the	overall	valuation	of	its	derivatives.	Based	on	the	Company's	review	of	the	CVAs	by	counterparty	portfolio,	the	Company	has	determined that	the	CVAs	are	not	significant	to	the	overall	portfolio	valuations,	as	the	CVAs	are	deemed	to	be	immaterial	in	terms	of	basis	points	and	are	a	very	small	percentage	of the	aggregate	notional	value.	Although	some	of	the	CVAs	as	a	percentage	of	termination	value	appear	to	be	more	significant,	primary	emphasis	was	placed	on	a	review of	the	CVA	in	basis	points	and	the	percentage	of	the	notional	value.	As	a	result,	the	Company	has	determined	that	its	derivative	valuations	in	their	entirety	are	classified in	Level	2	of	the	fair	value	hierarchy.

								The	following	table	presents	the	Company's	assets	and	liabilities	measured	at	fair	value	on	a	recurring	basis	as	of	January	29,	2010,	aggregated	by	the	level	in	the fair	value	hierarchy	within	which	those	measurements	fall.

| (In	thousands) | Markets<br>for	Identical<br>Assets	and<br>Liabilities<br>(Level	1) | Significant<br>Other<br>Observable<br>Inputs<br>(Level	2) | Significant<br>Unobservable<br>Inputs<br>(Level	3) | Balance	at<br>January	29,<br>2010 |
| :--- | :--- | :--- | :--- | :--- |
| Assets: |  |  |  |  |
| Trading\tsecurities(a) | $8,822 | $— | $— | $8,822 |
| Liabilities: |  |  |  |  |
| Long-term\tobligations(b) | 3,519,171 | 24,644 | — | 3,543,815 |
| Derivative\tfinancial\tinstruments(c) | — | 57,058 | — | 57,058 |

(a) Reflected	at	fair	value	in	the	consolidated	balance	sheet	as	Prepaid	expenses	and	other	current	assets	of	$1,617	and	Other	assets,	net	of	$7,205.

(b) Reflected	at	book	value	in	the	consolidated	balance	sheet	as	Current	portion	of	long-term	obligations	of	$3,671	and	Long-term	obligations	of $3,399,715.

(c) Reflected	at	fair	value	in	the	consolidated	balance	sheet	as	noncurrent	Other	liabilities.

								The	carrying	amounts	reflected	in	the	consolidated	balance	sheets	for	cash,	cash	equivalents,	short-term	investments,	receivables	and	payables	approximate	their respective	fair	values.	The	Company	does	not	have	any	fair	value	measurements	using	significant	unobservable	inputs	(Level	3)	as	of	January	29,	2010.

# Derivative	financial	instruments

								The	Company	accounts	for	derivative	financial	instruments	in	accordance	with	accounting	standards	for	derivative	instruments	and	hedging	activities.	All	financial instrument	positions	taken	by	the	Company	are	intended	to	be	used	to	reduce	risk	by	hedging	an	underlying	economic	exposure.

								The	Company	records	all	derivatives	on	the	balance	sheet	at	fair	value.	The	accounting	for	changes	in	the	fair	value	of	derivatives	depends	on	the	intended	use	of the	derivative,	whether	the	Company	has	elected	to	designate	a	derivative	in	a	hedging	relationship	and	apply	hedge	accounting	and	whether	the	hedging	relationship	has satisfied	the	criteria	necessary	to	apply	hedge	accounting.	Derivatives	designated	and	qualifying	as	a	hedge	of	the	exposure	to	changes	in	the	fair	value	of	an	asset, liability,	or	firm	commitment	attributable	to	a	particular	risk,	such	as	interest	rate	risk,	are	considered	fair	value	hedges.	Derivatives	designated	and	qualifying	as	a	hedge of	the	exposure	to	variability	in	expected	future	cash	flows,	or	other	types	of	forecasted	transactions,	are	considered	cash	flow	hedges.	Derivatives	may	also	be designated	as	hedges	of	the	foreign	currency	exposure	of	a	net	investment	in	a	foreign	operation.	Hedge	accounting	generally	provides	for	the	matching	of	the	timing	of gain	or	loss	recognition	on	the	hedging	instrument	with	the	recognition	of	the	changes	in	the	fair	value	of	the	hedged	asset	or	liability	that	are	attributable	to	the	hedged risk	in	a	fair	value	hedge	or	the	earnings	effect	of	the	hedged	forecasted	transactions	in	a	cash	flow	hedge.	The	Company	may	enter

into	derivative	contracts	that	are	intended	to	economically	hedge	a	certain	portion	of	its	risk,	even	though	hedge	accounting	does	not	apply	or	the	Company	elects	not	to apply	the	hedge	accounting	standards.

								The	Company's	derivative	financial	instruments,	in	the	form	of	interest	rate	swaps	at	January	29,	2010,	are	related	to	variable	interest	rate	risk	exposures	associated with	the	Company's	long-term	debt	and	were	entered	into	in	an	attempt	to	manage	that	risk.	The	counterparties	to	the	Company's	derivative	agreements	are	all	major international	financial	institutions.	The	Company	continually	monitors	its	position	and	the	credit	ratings	of	its	counterparties	and	does	not	anticipate	nonperformance	by the	counterparties,	however,	there	can	be	no	assurance	that	such	nonperformance	will	not	occur.

# Revenue	and	gain	recognition

								The	Company	recognizes	retail	sales	in	its	stores	at	the	time	the	customer	takes	possession	of	merchandise.	All	sales	are	net	of	discounts	and	estimated	returns	and are	presented	net	of	taxes	assessed	by	governmental	authorities	that	are	imposed	concurrent	with	those	sales.	The	liability	for	retail	merchandise	returns	is	based	on	the Company's	prior	experience.	The	Company	records	gain	contingencies	when	realized.

								The	Company	recognizes	gift	card	sales	revenue	at	the	time	of	redemption.	The	liability	for	the	gift	cards	is	established	for	the	cash	value	at	the	time	of	purchase. The	liability	for	outstanding	gift	cards	was	approximately	$1.9	million	and	$1.5	million	at	January	29,	2010	and	January	30,	2009,	respectively,	and	is	recorded	in Accrued	expenses	and	other.	Through	January	29,	2010,	the	Company	has	not	recorded	any	breakage	income	related	to	its	gift	card	program.

# Advertising	costs

								Advertising	costs	are	expensed	upon	performance,	"first	showing"	or	distribution,	and	are	reflected	net	of	qualifying	cooperative	advertising	funds	provided	by vendors	in	SG&A	expenses.	Advertising	costs	were	$41.5	million,	$27.8	million,	$23.6	million	and	$17.3	million	in	2009,	2008,	and	the	2007	Successor	and Predecessor	periods,	respectively.	These	costs	primarily	include	promotional	circulars,	targeted	circulars	supporting	new	stores,	television	and	radio	advertising,	in-store signage,	and	costs	associated	with	the	sponsorships	of	certain	automobile	racing	activities.	Vendor	funding	for	cooperative	advertising	offset	reported	expenses	by $9.0	million,	$7.8	million,	$6.6	million	and	$2.0	million	in	2009,	2008,	and	the	2007	Successor	and	Predecessor	periods,	respectively.

# Share-based	payments

								The	Company	recognizes	compensation	expense	for	share-based	compensation	based	on	the	fair	value	of	the	awards	on	the	grant	date.	Forfeitures	are	estimated	at the	time	of	valuation	and	reduce	expense	ratably	over	the	vesting	period.	This	estimate	is	adjusted	periodically	based	on	the	extent	to	which	actual	forfeitures	differ,	or are	expected	to	differ,	from	the	prior	estimate.	The	forfeiture	rate	is	the	estimated	percentage	of	options	granted	that	are	expected	to	be	forfeited	or	canceled	before becoming	fully	vested.	The	Company	bases	this	estimate	on	historical	experience	or	estimates	of	future	trends,	as	applicable.	An	increase	in	the	forfeiture	rate	will decrease	compensation	expense.

								The	fair	value	of	each	option	grant	is	separately	estimated	and	amortized	into	compensation	expense	on	a	straight-line	basis	between	the	applicable	grant	date	and each	vesting	date.	The	Company	has	estimated	the	fair	value	of	all	stock	option	awards	as	of	the	grant	date	by	applying	the	Black-Scholes-Merton	option	pricing valuation	model.	The	application	of	this	valuation	model	involves	assumptions	that	are	judgmental	and	highly	sensitive	in	the	determination	of	compensation	expense.

								The	Company	calculates	compensation	expense	for	nonvested	restricted	stock	and	similar	awards	as	the	difference	between	the	market	price	of	the	underlying	stock on	the	grant	date	and	the	purchase	price,	if	any,	and	recognizes	such	amount	on	a	straight-line	basis	over	the	period	in	which	the	recipient	earns	the	nonvested	restricted stock	and	similar	awards.

# Store	pre-opening	costs

								Pre-opening	costs	related	to	new	store	openings	and	the	construction	periods	are	expensed	as	incurred.

# Income	taxes

								Under	the	accounting	standards	for	income	taxes,	the	asset	and	liability	method	is	used	for	computing	the	future	income	tax	consequences	of	events	that	have	been recognized	in	the	Company's	consolidated	financial	statements	or	income	tax	returns.	Deferred	income	tax	expense	or	benefit	is	the	net	change	during	the	year	in	the Company's	deferred	income	tax	assets	and	liabilities.

								As	discussed	in	Note	6,	effective	February	3,	2007	the	Predecessor	modified	its	method	of	accounting	for	income	taxes	in	connection	with	the	adoption	of	an accounting	standard	pertaining	to	uncertainty	in	income	taxes.	The	adoption	resulted	in	an	$8.9	million	decrease	in	retained	earnings	and	a	reclassification	of	certain amounts	between	deferred	income	taxes	and	other	noncurrent	liabilities	to	conform	to	the	revised	balance	sheet	presentation	requirements.	As	of	the	date	of	adoption, the	total	reserve	for	uncertain	tax	benefits	was	$77.9	million.	This	reserve	excludes	the	federal	income	tax	benefit	for	the	uncertain	tax	positions	related	to	state	income taxes,	which	is	now	included	in	deferred	tax	assets.	As	a	result	of	the	adoption	of	this	standard,	the	reserve	for	interest	expense	related	to	income	taxes	was	increased	to $15.3	million	and	a	reserve	for	potential	penalties	of	$1.9	million	related	to	uncertain	income	tax	positions	was	recorded.	As	of	the	date	of	adoption,	approximately $27.1	million	of	the	reserve	for	uncertain	tax	positions	would	have	impacted	the	Company's	effective	income	tax	rate	subsequently	if	the	Company	were	to	recognize	the tax	benefit	for	these	positions.

								Effective	February	3,	2007,	the	Company	has	elected	to	record	income	tax	related	interest	and	penalties	as	a	component	of	the	provision	for	income	tax	expense.

								Income	tax	reserves	are	determined	using	a	methodology	which	requires	companies	to	assess	each	income	tax	position	taken	using	a	two	step	process.	A determination	is	first	made	as	to	whether	it	is	more	likely	than	not	that	the	position	will	be	sustained,	based	upon	the	technical	merits,	upon	examination	by	the	taxing authorities.	If	the	tax	position	is	expected	to	meet	the	more	likely	than	not	criteria,	the	benefit	recorded	for	the	tax	position	equals	the	largest	amount	that	is	greater	than 50%	likely	to	be	realized	upon	ultimate	settlement	of	the	respective	tax	position.	Uncertain	tax	positions	require	determinations	and	estimated	liabilities	to	be	made based	on	provisions	of	the	tax	law	which	may	be	subject	to	change	or	varying	interpretation.	If	the	Company's	determinations	and	estimates

prove	to	be	inaccurate,	the	resulting	adjustments	could	be	material	to	the	Company's	future	financial	results.

# Management	estimates

								The	preparation	of	financial	statements	and	related	disclosures	in	conformity	with	accounting	principles	generally	accepted	in	the	United	States	requires management	to	make	estimates	and	assumptions	that	affect	the	reported	amounts	of	assets	and	liabilities	and	disclosure	of	contingent	assets	and	liabilities	at	the	date	of the	consolidated	financial	statements	and	the	reported	amounts	of	revenues	and	expenses	during	the	reporting	periods.	Actual	results	could	differ	from	those	estimates.

								In	June	2009	the	Financial	Accounting	Standards	Board	("FASB")	issued	a	new	accounting	standard	which	established	the	FASB	Accounting	Standards Codification	("ASC")	as	the	source	of	authoritative	U.S.	GAAP	recognized	by	the	FASB	to	be	applied	by	nongovernmental	entities.	Rules	and	interpretive	releases	of the	Securities	and	Exchange	Commission	("SEC")	under	authority	of	federal	securities	laws	are	also	sources	of	authoritative	GAAP	for	SEC	registrants,	including	the Company.	On	September	15,	2009,	the	effective	date	of	this	standard,	the	ASC	superseded	all	then-existing	non-SEC	accounting	and	reporting	standards.	All	other nongrandfathered	non-SEC	accounting	literature	not	included	in	the	ASC	became	nonauthoritative.	The	adoption	of	this	statement	did	not	have	a	material	effect	on	the Company's	consolidated	financial	statements.

								In	June	2009	the	FASB	issued	a	new	accounting	standard	relating	to	variable	interest	entities.	This	standard	amends	previous	standards	and	requires	an	enterprise	to perform	an	analysis	to	determine	whether	the	enterprise's	variable	interest	or	interests	give	it	a	controlling	financial	interest	in	a	variable	interest	entity,	specifies	updated criteria	for	determining	the	primary	beneficiary,	requires	ongoing	reassessments	of	whether	an	enterprise	is	the	primary	beneficiary	of	a	variable	interest	entity, eliminates	the	quantitative	approach	previously	required	for	determining	the	primary	beneficiary	of	a	variable	interest	entity,	amends	certain	guidance	for	determining whether	an	entity	is	a	variable	interest	entity,	requires	enhanced	disclosures	about	an	enterprise's	involvement	in	a	variable	interest	entity,	and	includes	other	provisions. This	standard	will	be	effective	as	of	the	beginning	of	the	Company's	first	interim	and	annual	reporting	periods	that	begin	after	November	15,	2009.	Earlier	application	is prohibited.	This	standard	is	not	expected	to	have	a	material	effect	on	the	consolidated	financial	statements.

								During	the	second	quarter	of	2009	the	Company	adopted	the	ASC	Subsequent	Events	Topic.	The	objective	of	this	topic	is	to	establish	general	standards	of accounting	for	and	disclosures	of	events	that	occur	after	the	balance	sheet	date	but	before	financial	statements	are	issued	or	are	available	to	be	issued.	In	particular,	this topic	sets	forth	the	period	after	the	balance	sheet	date	during	which	management	of	a	reporting	entity	should	evaluate	events	or	transactions	that	may	occur	for	potential recognition	or	disclosure	in	the	financial	statements,	the	circumstances	under	which	an	entity	should	recognize	events	or	transactions	occurring	after	the	balance	sheet date	in	its	financial	statements,	and	the	disclosures	that	an	entity	should	make	about	events	or	transactions	that	occurred	after	the	balance	sheet	date.	In	February	2010 minor	modifications	were	made	to	this	guidance.	The	adoption	of	these	standards	has	not	had	a	material	effect	on	the	Company's	consolidated	financial	statements.

								The	Company	adopted	the	additional	disclosure	provisions	of	the	ASC	Derivatives	and	Hedging	Topic	during	the	first	quarter	of	2009	as	discussed	in	Note	8.	These standards	require	entities	to	provide	greater	transparency	through	additional	disclosures	about	how	and	why	an	entity	uses	derivative	instruments,	how	derivative instruments	and	related	hedged	items	are	accounted	for,	and	how	derivative	instruments	and	related	hedged	items	affect	an	entity's	financial	position,	results	of operations,	and	cash	flows.

								The	Company	changed	its	accounting	for	fair	value	of	its	nonfinancial	assets	and	liabilities	in	connection	with	the	adoption	of	certain	provisions	of	the	ASC	Fair Value	Measurements	and	Disclosures	Topic	effective	January	31,	2009.

# Reclassifications

								Certain	reclassifications	of	the	2007	and	2008	amounts	have	been	made	to	conform	to	the	2009	presentation.

# 2.	Initial	public	offering	and	special	dividend

								On	November	18,	2009,	the	Company	completed	the	initial	public	offering	of	its	common	stock.	The	Company	issued	22,700,000	shares	in	the	offering,	and	an existing	shareholder	sold	an	additional	16,515,000	outstanding	shares.	Net	proceeds	to	the	Company	from	the	offering	of	$446.0	million	were	used	to	redeem outstanding	debt,	as	discussed	in	more	detail	in	Note	7	below.	The	Company	paid	a	$4.8	million	transaction	fee	to	Kohlberg	Kravis	Roberts	&	Co.,	L.P.	("KKR")	and Goldman,	Sachs	&	Co.	in	connection	with	the	offering.	Although	this	transaction	fee	was	not	paid	from	the	net	proceeds	of	the	offering,	it	was	directly	related	to	the offering	and	accounted	for	as	a	cost	of	raising	equity.

								Upon	the	completion	of	the	offering,	the	Company	incurred	additional	charges	of	$58.8	million	for	fees	paid	to	terminate	its	advisory	agreement	with	KKR	and Goldman,	Sachs	&	Co.	The	transaction	and	termination	fees	paid	to	such	parties	are	discussed	in	more	detail	in	Note	12	below.	The	Company	also	incurred	charges	of $9.4	million	for	the	accelerated	vesting	of	certain	share-based	awards	as	discussed	in	more	detail	in	Note	11	below.

								On	September	8,	2009,	the	Company's	Board	of	Directors	declared	a	special	dividend	on	the	Company's	outstanding	common	stock	(including	shares	of	restricted stock)	of	$0.7525	per	share,	or	approximately	$239.3	million	in	the	aggregate,	which	was	paid	on	September	11,	2009	to	shareholders	of	record	on	September	8,	2009. The	special	dividend	was	paid	with	cash	generated	from	operations.	Pursuant	to	the	terms	of	the	Company's	stock	option	plans,	holders	of	stock	options	received	either	a pro-rata	adjustment	to	the	terms	of	their	share-based	awards	or	a	cash	payment	(totaling	approximately	$0.5	million	for	all	such	grantees)	in	substitution	for	such adjustment	as	a	result	of	the	dividend.

# 3.	Merger

								On	March	11,	2007,	the	Company	entered	into	an	Agreement	and	Plan	of	Merger	(the	"Merger	Agreement")	with	Buck	Holdings	L.P.,	a	Delaware	limited partnership	("Buck"),	and	BAC,	a	Tennessee	corporation	and	wholly	owned	subsidiary	of	Buck.	Buck	is	and	BAC	was	(prior	to	the	Merger)	controlled	by	investment funds	affiliated	with	KKR.	On	July	6,	2007,	the	transaction	was	consummated	through	a	merger	(the	"Merger")	of	BAC	with	and	into	the	Company.	The	Company survived	the

# 3.	Merger	(Continued)

Merger	as	a	subsidiary	of	Buck.	The	Company's	results	of	operations	after	July	6,	2007	include	the	effects	of	the	Merger.

								The	aggregate	purchase	price	was	approximately	$7.1	billion,	including	direct	costs	of	the	Merger,	and	was	funded	primarily	through	debt	financings	as	described more	fully	below	in	Note	7	and	cash	equity	contributions	from	KKR,	GS	Capital	Partners	VI	Fund,	L.P.	and	affiliated	funds	(affiliates	of	Goldman,	Sachs	&	Co.),	and other	equity	co-investors	(collectively,	the	"Investors"	of	approximately	$2.8	billion	(316.2	million	shares	of	new	common	stock,	$0.875	par	value	per	share,	valued	at $8.75	per	share).	Also	in	connection	with	the	Merger,	certain	of	the	Company's	management	employees	invested	in	and	were	issued	new	shares,	representing	less	than 1%	of	the	outstanding	shares,	in	the	Company.	Pursuant	to	the	terms	of	the	Merger	Agreement,	the	former	holders	of	the	Predecessor's	common	stock,	par	value	$0.50 per	share,	received	$22.00	per	share,	or	approximately	$6.9	billion,	and	all	such	shares	were	acquired	as	a	result	of	the	Merger.

								As	discussed	in	Note	1,	the	Merger	was	accounted	for	as	a	reverse	acquisition	in	accordance	with	applicable	purchase	accounting	provisions.	Because	of	this accounting	treatment,	the	Company's	assets	and	liabilities	have	properly	been	accounted	for	at	their	estimated	fair	values	as	of	the	Merger	date.	The	aggregate	purchase price	has	been	allocated	to	the	tangible	and	intangible	assets	acquired	and	liabilities	assumed	based	upon	an	assessment	of	their	relative	fair	values	as	of	the	Merger	date.

								The	allocation	of	the	purchase	price	is	as	follows	(in	thousands):

								The	purchase	price	allocation	included	approximately	$4.34	billion	of	goodwill,	none	of	which	is	expected	to	be	deductible	for	tax	purposes.	The	goodwill	balance at	January	30,	2009	decreased	$6.3	million	from	the	balance	at	February	1,	2008	due	to	an	adjustment	to	income	tax	contingencies	as	further	discussed	in	Note	6.

								The	purchase	price	allocation	as	of	January	29,	2010	and	January	30,	2009	also	included	approximately	$1.4	billion	of	other	intangible	assets,	as	follows:

| (In	thousands) | Estimated<br>Useful	Life | Amount | Accumulated<br>Amortization | Net |
| :--- | :--- | :--- | :--- | :--- |
| Leasehold\tinterests | 2\tto\t17.5\tyears | $184,168 | $100,793 | $83,375 |
| Internally\tdeveloped\tsoftware | 3\tyears | 12,300 | 10,592 | 1,708 |
|  |  | 196,468 | 111,385 | 85,083 |
| Trade\tnames\tand\ttrademarks | Indefinite | 1,199,200 | — | 1,199,200 |
|  |  | $1,395,668 | $111,385 | $1,284,283 |

|  |  | As	of	January	30,	2009 | As	of	January	30,	2009 |  |
| :--- | :--- | :--- | :--- | :--- |
| (In\tthousands) | Estimated\nUseful\tLife | Amount | Accumulated\nAmortization | Net |
| Leasehold\tinterests | 2\tto\t17.5\tyears | $184,570 | $64,020 | $120,550 |
| Internally\tdeveloped\tsoftware | 3\tyears | 12,300 | 6,492 | 5,808 |
|  |  | 196,870 | 70,512 | 126,358 |
| Trade\tnames\tand\ttrademarks | Indefinite | 1,199,200 | — | 1,199,200 |
|  |  | $1,396,070 | $70,512 | $1,325,558 |

								The	Company	recorded	amortization	expense	related	to	amortizable	intangible	assets	for	2009,	2008	and	the	2007	Successor	period	of	$41.3	million,	$45.0	million and	$26.1	million,	respectively,	($37.2	million,	$40.9	million	and	$23.7	million,	respectively,	of	which	is	included	in	rent	expense).	Expected	future	cash	flows associated	with	the	Company's	intangible	assets	are	not	expected	to	be	materially	affected	by	the	Company's	intent	or	ability	to	renew	or	extend	the	arrangements.

								Fees	and	expenses	related	to	the	Merger	totaled	$102.6	million,	principally	consisting	of	investment	banking	fees,	legal	fees	and	stock	compensation	($39.4	million as	further	discussed	in	Note	11),	and	are	reflected	in	the	2007	results	of	operations.	Capitalized	debt	issuance	costs	as	of	the	Merger	date	of	$87.4	million	for	Merger- related	financing	were	reflected	in	other	long-term	assets	in	the	consolidated	balance	sheet.

								The	following	represents	the	unaudited	pro	forma	results	of	the	Company's	consolidated	operations	as	if	the	Merger	had	occurred	on	February	3,	2007,	after	giving effect	to	certain

adjustments,	including	the	depreciation	and	amortization	of	the	assets	acquired	based	on	their	estimated	fair	values	and	changes	in	interest	expense	resulting	from changes	in	consolidated	debt:

| (In	thousands) | Year	Ended<br>February	1,<br>2008 |
| :--- | :--- |
| Revenue | $9,495,246 |
| Net\tloss | (57,939) |

								The	pro	forma	information	does	not	purport	to	be	indicative	of	what	the	Company's	results	of	operations	would	have	been	if	the	acquisition	had	in	fact	occurred	at the	beginning	of	the	period	presented,	and	is	not	intended	to	be	a	projection	of	the	Company's	future	results	of	operations.

								Earnings	(loss)	per	share	is	computed	as	follows	(in	thousands	except	per	share	data):

| Successor | Net<br>Income | Weighted	Average<br>Shares | Per	Share<br>Amount |
| :--- | :--- | :--- | :--- |
| Basic\tearnings\tper\tshare | $339,442 | 322,778 | $1.05 |
| Effect\tof\tdilutive\tshare-based\tawards |  | 2,058 |  |
| Diluted\tearnings\tper\tshare | $339,442 | 324,836 | $1.04 |
|  |  | 2008 |  |
|  | Net | Weighted\tAverage | Per\tShare |

|  | March	6,	2007	through	February	1,	2008 | March	6,	2007	through	February	1,	2008 | March	6,	2007	through	February	1,	2008 |
| :--- | :--- | :--- | :--- |
| Successor | Net\nLoss | Weighted\tAverage\nShares | Per\tShare\nAmount |
| Basic\tearnings\t(loss)\tper\tshare | $(4,818) | 316,777 | $(0.02) |
| Effect\tof\tdilutive\tshare-based\tawards |  | — |  |
| Diluted\tearnings\t(loss)\tper\tshare | $(4,818) | 316,777 | $(0.02) |

								Basic	earnings	(loss)	per	share	was	computed	by	dividing	net	income	(loss)	by	the	weighted	average	number	of	shares	of	common	stock	outstanding	during	the year.	Diluted	earnings	(loss)	per	share	was	determined	based	on	the	dilutive	effect	of	share-based	awards	using	the	treasury	stock	method.

								Because	of	the	Merger,	the	Company's	weighted	average	shares	outstanding	for	periods	before	and	after	the	Merger	are	not	comparable,	as	further	discussed	in Note	1.	As	a	result,	earnings	per	share	amounts	for	periods	prior	to	the	Merger	are	not	presented	herein.

# 4.	Earnings	per	share	(Continued)

								Options	to	purchase	shares	of	common	stock	that	were	outstanding	at	the	end	of	the	respective	periods,	but	were	not	included	in	the	computation	of	diluted	earnings (loss)	per	share	because	the	effect	of	exercising	such	options	would	be	antidilutive,	were	0.2	million,	12.1	million	and	12.5	million	in	2009,	2008	and	the	2007 Successor	period,	respectively.

								Property	and	equipment	is	recorded	at	cost	and	summarized	as	follows:

| (In	thousands) | January	29,<br>2010 | January	30,<br>2009 |
| :--- | :--- | :--- |
| Land\tand\tland\timprovements | $137,903 | $137,779 |
| Buildings | 520,867 | 518,933 |
| Leasehold\timprovements | 130,774 | 117,846 |
| Furniture,\tfixtures\tand\tequipment | 992,423 | 781,425 |
| Construction\tin\tprogress | 10,406 | 5,025 |
|  | 1,792,373 | 1,561,008 |
| Less\taccumulated\tdepreciation\tand\tamortization | 463,987 | 292,048 |
| Net\tproperty\tand\tequipment | $1,328,386 | $1,268,960 |

								Depreciation	expense	related	to	property	and	equipment	was	approximately	$201.1	million,	$190.5	million,	$116.9	million,	and	$83.5	million	for	2009,	2008,	and the	2007	Successor	and	Predecessor	periods,	respectively.	Amortization	of	capital	lease	assets	is	included	in	depreciation	expense.

								The	provision	(benefit)	for	income	taxes	consists	of	the	following:

|  | Successor | Successor | Successor | Predecessor |
| :--- | :--- | :--- | :--- | :--- |
| (In\tthousands) | 2009 | 2008 | March\t6,\t2007\nthrough\nFebruary\t1,\t2008 | February\t3,\t2007\nthrough\nJuly\t6,\t2007 |
| Current: |  |  |  |  |
| Federal | $173,027 | $10,489 | $(25,726) | $31,114 |
| Foreign | 1,465 | 1,084 | 409 | 495 |
| State | 21,002 | 1,214 | 4,306 | 1,258 |
|  | 195,494 | 12,787 | (21,011) | 32,867 |
| Deferred: |  |  |  |  |
| Federal | 12,412 | 64,403 | 22,157 | (18,750) |
| Foreign | (49) | (3) | — | — |
| State | 4,817 | 9,034 | (2,921) | (2,124) |
|  | 17,180 | 73,434 | 19,236 | (20,874) |
|  | $212,674 | $86,221 | $(1,775) | $11,993 |

# 6.	Income	taxes	(Continued)

								A	reconciliation	between	actual	income	taxes	and	amounts	computed	by	applying	the	federal	statutory	rate	to	income	before	income	taxes	is	summarized	as follows:

|  | Successor | Successor | Successor | Successor | Successor | Successor | Predecessor | Predecessor |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  |  |  |  | March\t6,\t2007 |  | February\t3,\t2007 |  |
| (Dollars\tin\tthousands) | 2009 | 2009 | 2008 | 2008 | through\nFebruary\t1,\t2008 | through\nFebruary\t1,\t2008 | through\nJuly\t6,\t2007 | through\nJuly\t6,\t2007 |
| U.S.\tfederal\tstatutory\trate\ton\tearnings\tbefore |  |  |  |  |  |  |  |  |
| income\ttaxes | $193,241 | 35.0% | $68,041 | 35.0% | $(2,308) | 35.0% | $1,399 | 35.0% |
| State\tincome\ttaxes,\tnet\tof\tfederal\tincome\ttax |  |  |  |  |  |  |  |  |
| benefit | 18,375 | 3.3 | 5,361 | 2.8 | 904 | (13.7) | (1,135) | (28.4) |
| Jobs\tcredits,\tnet\tof\tfederal\tincome\ttaxes | (8,590) | (1.6) | (9,149) | (4.7) | (3,022) | 45.8 | (2,227) | (55.7) |
| Increase\t(decrease)\tin\tvaluation\tallowances | (1,722) | (0.3) | 3,038 | 1.6 | — | — | 551 | 13.8 |
| Income\ttax\trelated\tinterest\texpense,\tnet\tof |  |  |  |  |  |  |  |  |
| federal\tincome\ttax\tbenefit | 1,289 | 0.2 | (2,015) | (1.0) | 2,738 | (41.5) | (172) | (4.3) |
| Nondeductible\tMerger-related\tlawsuit |  |  |  |  |  |  |  |  |
| settlement | (366) | (0.1) | 18,130 | 9.3 | — | — | — | — |
| Nondeductible\ttransaction\tcosts | — | — | — | — | — | — | 13,501 | 337.9 |
| Other,\tnet | 10,447 | 2.0 | 2,815 | 1.4 | (87) | 1.3 | 76 | 1.9 |
|  | $212,674 | 38.5% | $86,221 | 44.4% | $(1,775) | 26.9% | $11,993 | 300.2% |

								The	2009	effective	tax	rate	is	an	expense	of	38.5%.	This	expense	is	greater	than	the	expected	tax	rate	of	35%	due	primarily	to	the	inclusion	of	state	income	taxes	in the	total	effective	tax	rate.	The	2009	effective	tax	rate	is	less	than	the	2008	rate	of	44.4%	due	principally	to	the	unfavorable	impact	that	the	non-deductible,	merger related	lawsuit	settlement	had	on	the	2008	rate.	This	reduction	in	the	effective	tax	rate	was	partially	offset	by	a	decrease	in	the	tax	rate	benefit	related	to	federal	jobs credits.	While	the	total	amount	of	jobs	credits	earned	in	2009	was	similar	to	the	amount	earned	in	2008,	the	impact	of	this	benefit	on	the	effective	tax	rate	was	reduced due	to	the	2009	increase	in	income	before	tax.

								The	2008	effective	income	tax	rate	is	an	expense	of	44.4%.	This	expense	is	greater	than	the	expected	U.S.	statutory	tax	rate	of	35%	principally	due	to	the	non- deductibility	of	the	settlement	and	related	expenses	associated	with	the	Merger-related	shareholder	lawsuit.

								The	income	tax	rate	for	the	Predecessor	period	ended	July	6,	2007	is	an	expense	of	300.2%.	This	expense	is	higher	than	the	expected	U.S.	statutory	rate	of	35%	due principally	to	the	non-deductibility	of	certain	acquisition	expenses	related	to	the	Merger.

								Deferred	taxes	reflect	the	effects	of	temporary	differences	between	carrying	amounts	of	assets	and	liabilities	for	financial	reporting	purposes	and	the	amounts	used for	income	tax	purposes.	Significant	components	of	the	Company's	deferred	tax	assets	and	liabilities	are	as	follows:

| (In	thousands) | January	29,<br>2010 | January	30,<br>2009 |
| :--- | :--- | :--- |
| Deferred\ttax\tassets: |  |  |
| Deferred\tcompensation\texpense | $7,214 | $5,350 |
| Accrued\texpenses\tand\tother | 4,223 | 4,815 |
| Accrued\trent | 5,329 | 4,830 |
| Accrued\tinsurance | 67,124 | 66,091 |
| Accrued\tbonuses | 26,112 | 23,016 |
| Interest\trate\thedges | 22,249 | 25,327 |
| Tax\tbenefit\tof\tincome\ttax\tand\tinterest\treserves\trelated\tto\tuncertain |  |  |
| tax\tpositions | 9,498 | 11,859 |
| Other | 15,399 | 12,021 |
| State\ttax\tnet\toperating\tloss\tcarryforwards,\tnet\tof\tfederal\ttax | 7,000 | 9,252 |
| State\ttax\tcredit\tcarryforwards,\tnet\tof\tfederal\ttax | 15,696 | 13,545 |
|  | 179,844 | 176,106 |
| Less\tvaluation\tallowances | (8,086) | (9,808) |
| Total\tdeferred\ttax\tassets | 171,758 | 166,298 |
| Deferred\ttax\tliabilities: |  |  |
| Property\tand\tequipment | (177,171) | (156,591) |
| Inventories | (66,002) | (38,901) |
| Trademarks | (435,336) | (431,654) |
| Amortizable\tassets | (31,724) | (47,446) |
| Insurance\trelated\ttax\tmethod\tchange | (30,059) | (42,641) |
| Other | (2,699) | (566) |
| Total\tdeferred\ttax\tliabilities | (742,991) | (717,799) |
| Net\tdeferred\ttax\tliabilities | $(571,233) | $(551,501) |

								Net	deferred	tax	liabilities	are	reflected	separately	on	the	consolidated	balance	sheets	as	current	and	noncurrent	deferred	income	taxes.	The	following	table summarizes	net	deferred	tax	liabilities	as	recorded	in	the	consolidated	balance	sheets:

|  | Successor |  |
| :--- | :--- | :--- |
| (In\tthousands) | January\t29,\n2010 | January\t30,\n2009 |
| Current\tdeferred\tincome\ttax\tassets\t(liabilities),\tnet | $(25,061) | $4,600 |
| Noncurrent\tdeferred\tincome\ttax\tliabilities,\tnet | (546,172) | (556,101) |
| Net\tdeferred\ttax\tliabilities | $(571,233) | $(551,501) |

								The	Company	has	state	net	operating	loss	carryforwards	as	of	January	29,	2010	that	total	approximately	$203.9	million	which	will	expire	in	2017	through	2023. The	Company	also	has	state	tax	credit	carryforwards	of	approximately	$24.1	million	that	will	expire	beginning	in	2010	through	2025.

								The	valuation	allowance	has	been	provided	for	federal	capital	losses	and	state	tax	credit	carryforwards.	The	2009	decrease	of	$1.7	million	was	recorded	as	a reduction	in	income	tax	expense.	The	2008	increase	of	$8.2	million	was	recorded	as	income	tax	expense	of	$3.0	million	and	an	adjustment	to	goodwill	of	$5.2	million. The	full	amount	of	the	change	in	the	valuation	allowance	for	the	2007	Successor	period,	a	decrease	of	$4.2	million,	was	recorded	as	an	adjustment	to	goodwill.	The increase	of	$0.6	million	in	the	Predecessor	period	ended	July	6,	2007	was	included	in	income	tax	expense.	Based	upon	expected	future	income,	management	believes that	it	is	more	likely	than	not	that	the	results	of	operations	will	generate	sufficient	taxable	income	to	realize	the	deferred	tax	assets	after	giving	consideration	to	the valuation	allowance.

								During	2008,	goodwill	recorded	in	connection	with	the	Merger	was	reduced	by	$6.3	million	principally	as	a	result	of	the	favorable	settlement	of	uncertain	income tax	positions	that	existed	at	the	time	of	the	Merger.

								The	Predecessor	adopted	the	provisions	of	accounting	standards	relating	to	uncertain	tax	provisions	effective	February	3,	2007.	The	adoption	resulted	in	an $8.9	million	decrease	in	retained	earnings	and	a	reclassification	of	certain	amounts	between	deferred	income	taxes	and	other	noncurrent	liabilities	to	conform	to	the balance	sheet	presentation	requirements.	As	of	the	date	of	adoption,	the	total	uncertain	tax	benefits	were	$77.9	million.	This	amount	excludes	the	federal	income	tax benefit	for	the	uncertain	tax	positions	related	to	state	income	taxes,	which	is	included	in	deferred	tax	assets.	As	a	result	of	the	adoption,	the	reserve	for	interest	expense related	to	income	taxes	was	increased	to	$15.3	million	and	a	reserve	for	potential	penalties	of	$1.9	million	related	to	uncertain	income	tax	positions	was	recorded.

								Subsequent	to	the	adoption,	the	Company	has	elected	to	record	income	tax	related	interest	and	penalties	as	a	component	of	the	provision	for	income	tax	expense.

								The	Internal	Revenue	Service	("IRS")	is	examining	the	Company's	federal	income	tax	returns	for	fiscal	years	2005	and	2006.	The	2004	and	earlier	years	are	not open	for	examination.	The	2007,	2008	and	2009	fiscal	years,	while	not	currently	under	examination,	are	subject	to	examination	at	the	discretion	of	the	IRS.	The Company	has	various	state	income	tax	examinations	that	are	currently	in	progress.	The	estimated	liability	related	to	these	state	income	tax	examinations	is	included	in the	Company's	reserve	for	uncertain	tax	positions.	Generally,	the	Company's	tax	years	ended	in	2006	and	forward	remain	open	for	examination	by	the	various	state taxing	authorities.

								As	of	January	29,	2010,	accruals	for	uncertain	tax	benefits,	interest	expense	related	to	income	taxes	and	potential	income	tax	penalties	were	$67.6	million, $8.8	million	and	$1.7	million,	respectively,	for	a	total	of	$78.1	million.	Of	this	amount,	$8.5	million	and	$68.0	million	are	reflected	in	current	liabilities	as	Accrued expenses	and	other	and	in	noncurrent	Other	liabilities,	respectively,	in	the	consolidated	balance	sheet	with	the	remaining	$1.6	million	reducing	deferred	tax	assets related	to	net	operating	loss	carry	forwards.

								During	the	fiscal	year	ended	January	29,	2010,	the	Company	included	in	its	consolidated	statement	of	operations	a	net	increase	of	$11.9	million,	$2.3	million	and $0.4	million	related	to	uncertain	tax	benefits,	interest	expense	related	to	income	taxes	and	potential	tax	penalties,	respectively.

								As	of	January	30,	2009,	accruals	for	uncertain	tax	benefits,	interest	expense	related	to	income	taxes	and	potential	income	tax	penalties	were	$59.1	million, $11.3	million	and	$1.5	million,	respectively,	for	a	total	of	$71.9	million.	Of	this	amount,	$20.8	million	and	$47.3	million	are	reflected	in	current	liabilities	as	Accrued expenses	and	other	and	in	noncurrent	Other	liabilities,	respectively,	in	the	consolidated	balance	sheet	with	the	remaining	$3.8	million	reducing	deferred	tax	assets related	to	net	operating	loss	carry	forwards.

								During	the	year	ended	January	30,	2009,	the	Company	included	in	its	consolidated	statement	of	operations	a	net	increase	of	$0.8	million,	a	net	decrease	of $1.0	million	and	a	net	increase	of	$0.3	million	related	to	uncertain	tax	benefits,	interest	expense	related	to	income	taxes	and	potential	tax	penalties,	respectively.	The	net decrease	in	interest	expense	related	to	uncertain	tax	positions	is	due	to	the	reduction	during	2008	in	amounts	previously	accrued	related	to	uncertain	tax	positions.

								The	change,	from	the	date	of	adoption,	through	the	end	of	the	Predecessor	period	ended	July	6,	2007	in	the	uncertain	tax	benefits,	interest	expense	related	to	income taxes	and	potential	income	tax	penalties	that	impacted	the	consolidated	statement	of	operations	was	a	net	increase	of	$10.4	million	and	$0.2	million	and	a	decrease	of $0.4	million,	respectively.	The	change,	from	the	end	of	the	Predecessor	period	ended	July	6,	2007,	through	the	end	of	the	Successor	period	ended	February	1,	2008,	in the	uncertain	tax	benefits	and	interest	expense	related	to	income	taxes	that	impacted	the	consolidated	statement	of	operations	was	a	net	increase	of	$0.2	million	and $4.2	million,	respectively.	There	was	no	change	in	the	reserve	for	potential	income	tax	penalties	during	the	Successor	period	ended	February	1,	2008.

								The	Company	believes	that	it	is	reasonably	possible	that	the	reserve	for	uncertain	tax	positions	may	be	reduced	by	approximately	$36.5	million	in	the	coming twelve	months	principally	as	a	result	of	the	settlement	of	currently	ongoing	income	tax	examinations	and	the	anticipated	filing	of	an	income	tax	accounting	method change	request	that	is	expected	to	resolve	certain	uncertainties	related	to	accounting	methods	employed	by	the	Company.	The	reasonably	possible	change	of $36.5	million	is	included	in	current	liabilities	in	Accrued	expenses	and	other	($7.7	million)	and	in	noncurrent	Other	liabilities	($28.8	million)	in	the	consolidated	balance sheet	as	of	January	29,	2010.	Also,	as	of	January	29,	2010,	approximately	$41.2	million	of	the	uncertain	tax	positions	would	impact	the	Company's	effective	income	tax rate	if	the	Company	were	to	recognize	the	tax	benefit	for	these	positions.

								A	reconciliation	of	the	uncertain	income	tax	positions	from	February	3,	2007	(the	date	of	adoption)	through	January	29,	2010	is	as	follows:

| (In	thousands) |  |
| :--- | :--- |
| Balance\tas\tof\tFebruary\t3,\t2007 | $77,864 |
| Increases—tax\tpositions\ttaken\tin\tthe\tcurrent\tyear | 19,568 |
| Increases—tax\tpositions\ttaken\tin\tprior\tyears | 1,149 |
| Decrease—tax\tpositions\ttaken\tin\tprior\tyears | (9) |
| Statute\texpirations | (185) |
| Settlements | (1,787) |
| Balance\tas\tof\tFebruary\t1,\t2008 | $96,600 |
| Increases—tax\tpositions\ttaken\tin\tthe\tcurrent\tyear | 25,977 |
| Decrease—tax\tpositions\ttaken\tin\tthe\tcurrent\tyear | (2,250) |
| Increases—tax\tpositions\ttaken\tin\tprior\tyears | 3,271 |
| Decrease—tax\tpositions\ttaken\tin\tprior\tyears | (58,607) |
| Statute\texpirations | (1,955) |
| Settlements | (3,979) |
| Balance\tas\tof\tJanuary\t30,\t2009 | $59,057 |
| Increases—tax\tpositions\ttaken\tin\tthe\tcurrent\tyear | 13,701 |
| Increases—tax\tpositions\ttaken\tin\tprior\tyears | 4,039 |
| Decrease—tax\tpositions\ttaken\tin\tprior\tyears | (1,111) |
| Statute\texpirations | — |
| Settlements | (8,050) |

# 7.	Current	and	long-term	obligations

								Current	and	long-term	obligations	consist	of	the	following:

| (In	thousands) | (In	thousands) | (In	thousands) | (In	thousands) |  | January	29,	2010 | January	30,	2009 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Senior\tsecured\tterm\tloan\tfacility | Senior\tsecured\tterm\tloan\tfacility | Senior\tsecured\tterm\tloan\tfacility | Senior\tsecured\tterm\tloan\tfacility | Senior\tsecured\tterm\tloan\tfacility | $1,963,500 | $2,300,000 |
| ABL\tFacility | ABL\tFacility | ABL\tFacility | ABL\tFacility | ABL\tFacility | — | — |
| 10 | 5 | /8%\tSenior\tNotes\tdue\tJuly\t15,\t2015,\tnet\tof\tdiscount\tof | /8%\tSenior\tNotes\tdue\tJuly\t15,\t2015,\tnet\tof\tdiscount\tof | /8%\tSenior\tNotes\tdue\tJuly\t15,\t2015,\tnet\tof\tdiscount\tof |  |  |
|  | $14,788\tand\t$20,033,\trespectively | $14,788\tand\t$20,033,\trespectively | $14,788\tand\t$20,033,\trespectively | $14,788\tand\t$20,033,\trespectively | 964,545 | 1,154,967 |
| 11 | 7 | /8/12 | 5 | /8%\tSenior\tSubordinated\tNotes\tdue\tJuly\t15,\t2017 | 450,697 | 655,891 |
| 5 |  |  |  |  |  |  |
| 8 | /8%\tNotes\tdue\tJune\t15,\t2010 | /8%\tNotes\tdue\tJune\t15,\t2010 | /8%\tNotes\tdue\tJune\t15,\t2010 | /8%\tNotes\tdue\tJune\t15,\t2010 | 1,822 | 1,822 |
| Capital\tlease\tobligations | Capital\tlease\tobligations | Capital\tlease\tobligations | Capital\tlease\tobligations | Capital\tlease\tobligations | 8,327 | 9,939 |
| Tax\tincrement\tfinancing\tdue\tFebruary\t1,\t2035 | Tax\tincrement\tfinancing\tdue\tFebruary\t1,\t2035 | Tax\tincrement\tfinancing\tdue\tFebruary\t1,\t2035 | Tax\tincrement\tfinancing\tdue\tFebruary\t1,\t2035 | Tax\tincrement\tfinancing\tdue\tFebruary\t1,\t2035 | 14,495 | 14,495 |
|  |  |  |  |  | 3,403,386 | 4,137,114 |
| Less:\tcurrent\tportion | Less:\tcurrent\tportion | Less:\tcurrent\tportion | Less:\tcurrent\tportion | Less:\tcurrent\tportion | (3,671) | (14,158) |
| Long-term\tportion | Long-term\tportion | Long-term\tportion | Long-term\tportion | Long-term\tportion | $3,399,715 | $4,122,956 |

								The	Company	entered	into	two	senior	secured	credit	agreements	(the	"Credit	Facilities")	at	the	time	of	the	Merger.	As	of	January	29,	2010,	the	Credit	Facilities provide	total	financing	of	$2.995	billion,	consisting	of	$1.964	billion	in	a	senior	secured	term	loan	facility	("Term	Loan	Facility")	which	matures	on	July	6,	2014,	and	a senior	secured	asset-based	revolving	credit	facility	("ABL	Facility")	of	up	to	$1.031	billion,	subject	to	borrowing	base	availability,	which	matures	on	July	6,	2013.

								The	amount	available	under	the	ABL	Facility	(including	up	to	$350.0	million	for	letters	of	credit)	may	not	exceed	the	borrowing	base	(consisting	of	specified percentages	of	eligible	inventory	and	credit	card	receivables	less	any	applicable	availability	reserves).	The	ABL	Facility	includes	a	$930.0	million	tranche	and	a $101.0	million	("last	out")	tranche.	Repayments	of	the	ABL	Facility	will	be	applied	to	the	$101.0	million	tranche	only	after	all	other	tranches	have	been	fully	paid	down.

								Borrowings	under	the	Credit	Facilities	bear	interest	at	a	rate	equal	to	an	applicable	margin	plus,	at	the	Company's	option,	either	(a)	LIBOR	or	(b)	a	base	rate	(which is	usually	equal	to	the	prime	rate).	The	applicable	margin	for	borrowings	is	(i)	under	the	Term	Loan,	2.75%	for	LIBOR	borrowings	and	1.75%	for	base-rate	borrowings (ii)	under	the	ABL	Facility	(except	in	the	last	out	tranche	described	above)	as	of	January	29,	2010	and	January	30,	2009,	1.25%	for	LIBOR	borrowings	and	0.25%	for base-rate	borrowings	and	for	any	last	out	borrowings,	2.25%	for	LIBOR	borrowings	and	1.25%	for	base-rate	borrowings.	The	applicable	margins	for	borrowings	under the	ABL	Facility	(except	in	the	case	of	last	out	borrowings)	are	subject	to	adjustment	each	quarter	based	on	average	daily	excess	availability	under	the	ABL	Facility.	The interest	rate	for	borrowings	under	the	Term	Loan	Facility	was	3.0%	and	3.4%	(without	giving	effect	to	the	interest	rate	swaps	discussed	in	Note	8)	as	of	January	29,	2010 and	January	30,	2009,	respectively.

								In	addition	to	paying	interest	on	outstanding	principal	under	the	Credit	Facilities,	the	Company	is	required	to	pay	a	commitment	fee	to	the	lenders	under	the	ABL Facility	for	any	unutilized	commitments.	The	commitment	fee	rate	is	0.375%	per	annum.	The	commitment	fee	rate	will	be	reduced	(except	with	regard	to	the	last	out tranche)	to	0.25%	per	annum	at	any	time	that	the

# 7.	Current	and	long-term	obligations	(Continued)

unutilized	commitments	under	the	ABL	Facility	are	equal	to	or	less	than	50%	of	the	aggregate	commitments	under	the	ABL	Facility.	The	Company	also	must	pay customary	letter	of	credit	fees.

								The	senior	secured	credit	agreement	for	the	Term	Loan	Facility	requires	the	Company	to	prepay	outstanding	term	loans,	subject	to	certain	exceptions,	with percentages	of	excess	cash	flow,	proceeds	of	non-ordinary	course	asset	sales	or	dispositions	of	property,	and	proceeds	of	incurrences	of	certain	debt.	In	addition,	the senior	secured	credit	agreement	for	the	ABL	Facility	requires	the	Company	to	prepay	the	ABL	Facility,	subject	to	certain	exceptions,	with	proceeds	of	non-ordinary course	asset	sales	or	dispositions	of	property	and	any	borrowings	in	excess	of	the	then	current	borrowing	base.	The	Term	Loan	Facility	can	be	prepaid	in	whole	or	in	part at	any	time.

								Beginning	September	30,	2009,	the	Company	was	required	to	repay	installments	on	the	loans	under	the	Term	Loan	Facility	in	equal	quarterly	principal	amounts	in an	aggregate	amount	per	annum	equal	to	1%	of	the	total	funded	principal	amount	at	July	6,	2007.	During	2009,	the	Company	paid	two	such	quarterly	installments totaling	$11.5	million.	In	addition,	in	January	2010	the	Company	voluntarily	prepaid	$325	million	of	the	principal	balance	of	the	Term	Loan	Facility,	and	as	a	result,	no further	quarterly	principal	installments	will	be	required	prior	to	maturity	of	the	Term	Loan	Facility	on	July	6,	2014.	The	Company	incurred	a	pretax	loss	of	$4.7	million for	the	write	off	of	debt	issuance	costs	associated	with	this	prepayment.

								All	obligations	under	the	Credit	Facilities	are	unconditionally	guaranteed	by	substantially	all	of	the	Company's	existing	and	future	domestic	subsidiaries	(excluding certain	immaterial	subsidiaries	and	certain	subsidiaries	designated	by	the	Company	under	the	Credit	Facilities	as	"unrestricted	subsidiaries").

								All	obligations	and	guarantees	of	those	obligations	under	the	Term	Loan	Facility	are	secured	by,	subject	to	certain	exceptions,	a	second-priority	security	interest	in all	existing	and	after-acquired	inventory	and	accounts	receivable;	a	first	priority	security	interest	in	substantially	all	of	the	Company's	and	the	guarantors'	tangible	and intangible	assets	(other	than	the	inventory	and	accounts	receivable	collateral);	and	a	first-priority	pledge	of	the	capital	stock	held	by	the	Company.	All	obligations	under the	ABL	Facility	are	secured	by	all	existing	and	after-acquired	inventory	and	accounts	receivable,	subject	to	certain	exceptions.

								The	Credit	Facilities	contain	certain	covenants,	including,	among	other	things,	covenants	that	limit	the	Company's	ability	to	incur	additional	indebtedness,	sell assets,	incur	additional	liens,	pay	dividends,	make	investments	or	acquisitions,	or	repay	certain	indebtedness.

								Under	the	ABL	facility,	for	the	year	ended	January	29,	2010,	the	Company	had	no	borrowings	or	repayments;	for	the	year	ended	January	30,	2009,	the	Company had	no	borrowings	and	repayments	of	$102.5	million;	and	for	the	2007	Successor	period	the	Company	had	borrowings	of	$1.522	billion	and	repayments	of $1.420	billion.	As	of	January	29,	2010	and	January	30,	2009,	respectively,	the	Company	had	no	borrowings,	$85.1	million	and	$83.7	million	of	standby	letters	of	credit, and	$15.4	million	and	$51.0	million	of	commercial	letters	of	credit,	outstanding	under	the	ABL	Facility,	with	excess	availability	under	the	ABL	Facility	of $930.6	million	and	$932.8	million.

senior	subordinated	toggle	notes	due	2017	(the	"Senior	Subordinated	Notes"),	which	mature	on	July	15,	2017,	pursuant	to	an	indenture,	dated	as	of	July	6,	2007	(the "senior	subordinated	indenture").	The	Senior	Notes	and	the	Senior	Subordinated	Notes	are	collectively	referred	to	herein	as	the	"Notes".	The	senior	indenture	and	the senior	subordinated	indenture	are	collectively	referred	to	herein	as	the	"indentures".

								Interest	on	the	Notes	is	payable	on	January	15	and	July	15	of	each	year.	Interest	on	the	Senior	Notes	is	payable	in	cash.	Cash	interest	on	the	Senior	Subordinated Notes	accrues	at	a	rate	of	11.875%	per	annum.	For	certain	interest	periods,	the	Company	may	elect	to	pay	interest	on	the	Senior	Subordinated	Notes	by	increasing	the principal	amount	of	the	Senior	Subordinated	Notes	or	issuing	new	senior	subordinated	notes	("PIK	interest")	at	a	rate	of	12.625%	per	annum.	Through	January	29,	2010, all	interest	on	the	Notes	has	been	paid	in	cash.

								The	Notes	are	fully	and	unconditionally	guaranteed	by	each	of	the	existing	and	future	direct	or	indirect	wholly	owned	domestic	subsidiaries	that	guarantee	the obligations	under	the	Company's	Credit	Facilities.

								The	Company	may	redeem	some	or	all	of	the	Notes	at	any	time	at	redemption	prices	described	or	set	forth	in	the	indentures.	In	addition,	the	holders	of	the	Notes can	require	the	Company	to	redeem	the	Notes	at	101%	of	the	aggregate	principal	amount	outstanding	in	the	event	of	certain	change	in	control	events.	In	connection	with the	Company's	November	2009	initial	public	offering,	as	further	discussed	in	Note	2,	the	Company	repurchased	$195.7	million	of	the	Senior	Notes	and	$205.2	million of	the	Senior	Subordinated	Notes	at	redemption	prices	of	110.625%	and	111.875%,	respectively,	plus	accrued	and	unpaid	interest,	resulting	in	a	pretax	loss	totaling $50.6	million.	In	January	2009	and	January	2008,	the	Company	repurchased	$44.1	million	and	$25.0	million,	respectively,	of	the	Senior	Subordinated	Notes,	resulting in	pretax	gains	of	$3.8	million	and	$4.9	million,	respectively.	Pretax	gains	and	losses	associated	with	the	redemption	of	the	Notes	are	reflected	in	Other	(income) expense	in	the	consolidated	statements	of	operations.

								The	indentures	contain	certain	covenants,	including,	among	other	things,	covenants	that	limit	the	Company's	ability	to	incur	additional	indebtedness,	create	liens, sell	assets,	enter	into	transactions	with	affiliates,	or	consolidate	or	dispose	of	all	of	its	assets.

								On	July	6,	2007,	immediately	after	the	completion	of	the	Merger,	the	Company	completed	a	cash	tender	offer	to	purchase	any	and	all	of	its	$200	million	principal amount	of	8 /8%	Notes	due	June	2010	(the	"2010	Notes").	Approximately	99%	of	the	2010	Notes	were	validly	tendered	and	accepted	for	payment.	The	tender	offer 5 included	a	consent	payment	equal	to	3%	of	the	par	value	of	the	2010	Notes,	and	such	payments	along	with	associated	settlement	costs	totaling	$6.2	million	were	paid and	reflected	as	Other	(income)	expense	in	the	2007	Successor	period	presented.

								The	Company	is	exposed	to	certain	risks	arising	from	both	its	business	operations	and	economic	conditions.	The	Company	principally	manages	its	exposures	to	a wide	variety	of	business	and	operational	risks	through	management	of	its	core	business	activities.	The	Company	manages	economic	risks,	including	interest	rate, liquidity,	and	credit	risk,	primarily	by	managing	the	amount,	sources,	and

# 8.	Derivative	financial	instruments	(Continued)

duration	of	its	debt	funding	and	the	use	of	derivative	financial	instruments.	Specifically,	the	Company	enters	into	derivative	financial	instruments	to	manage	exposures that	arise	from	business	activities	that	result	in	the	receipt	or	payment	of	future	known	and	uncertain	cash	amounts,	the	value	of	which	are	determined	primarily	by interest	rates.	The	Company's	derivative	financial	instruments	are	used	to	manage	differences	in	the	amount,	timing,	and	duration	of	the	Company's	known	or	expected cash	receipts	and	its	known	or	expected	cash	payments	principally	related	to	the	Company's	borrowings.

								In	addition,	the	Company	is	exposed	to	certain	risks	arising	from	uncertainties	of	future	market	values	caused	by	the	fluctuation	in	the	prices	of	commodities.	From time	to	time	the	Company	has	entered	into	derivative	financial	instruments	to	protect	against	future	price	changes	related	to	transportation	costs	associated	with forecasted	distribution	of	inventory.

# Cash	flow	hedges	of	interest	rate	risk

								The	Company's	objectives	in	using	interest	rate	derivatives	are	to	add	stability	to	interest	expense	and	to	manage	its	exposure	to	interest	rate	changes.	To	accomplish this	objective,	the	Company	primarily	uses	interest	rate	swaps	as	part	of	its	interest	rate	risk	management	strategy.	Interest	rate	swaps	designated	as	cash	flow	hedges involve	the	receipt	of	variable-rate	amounts	from	a	counterparty	in	exchange	for	the	Company	making	fixed-rate	payments	over	the	life	of	the	agreements	without exchange	of	the	underlying	notional	amount.

								The	effective	portion	of	changes	in	the	fair	value	of	derivatives	designated	and	that	qualify	as	cash	flow	hedges	is	recorded	in	Accumulated	other	comprehensive income	(loss)	(also	referred	to	as	"OCI")	and	is	subsequently	reclassified	into	earnings	in	the	period	that	the	hedged	forecasted	transaction	affects	earnings.	Subsequent to	the	Merger,	these	transactions	represent	the	only	amounts	reflected	in	Accumulated	other	comprehensive	income	(loss)	in	the	consolidated	statements	of	shareholders' equity.	During	the	year	ended	January	29,	2010,	such	derivatives	were	used	to	hedge	the	variable	cash	flows	associated	with	existing	variable-rate	debt.	The	ineffective portion	of	the	change	in	fair	value	of	the	derivatives	is	recognized	directly	in	earnings.

								As	of	January	29,	2010,	the	Company	had	four	interest	rate	swaps	with	a	combined	notional	value	of	$1.42	billion	that	were	designated	as	cash	flow	hedges	of interest	rate	risk.	Amounts	reported	in	Accumulated	other	comprehensive	loss	related	to	derivatives	will	be	reclassified	to	interest	expense	as	interest	payments	are	made on	the	Company's	variable-rate	debt.	The	Company	terminated	an	interest	rate	swap	in	October	2008	due	to	the	bankruptcy	declaration	of	the	counterparty	bank.	The Company	continues	to	report	the	net	gain	or	loss	related	to	the	discontinued	cash	flow	hedge	in	OCI	and	such	net	gain	or	loss	is	being	reclassified	into	earnings	during the	original	contractual	terms	of	the	swap	agreement	as	the	hedged	interest	payments	are	expected	to	occur	as	forecasted.	During	the	next	52-week	period,	the	Company estimates	that	an	additional	$41.5	million	will	be	reclassified	as	an	increase	to	interest	expense	for	all	of	its	interest	rate	swaps.

# Non-designated	hedges	of	commodity	risk

								Derivatives	not	designated	as	hedges	are	not	speculative	and	are	used	to	manage	the	Company's	exposure	to	commodity	price	risk	but	do	not	meet	strict	hedge accounting	requirements.	In	February	2009,	the	Company	entered	into	a	commodity	hedge	related	to	diesel	fuel	to	limit	its	exposure	to	variability	in	diesel	fuel	prices and	their	effect	on	transportation	costs.	Changes	in	the	fair	value	of

derivatives	not	designated	in	hedging	relationships	are	recorded	directly	in	earnings.	As	of	January	29,	2010,	the	Company	had	no	outstanding	commodity	hedges.

								The	table	below	presents	the	fair	value	of	the	Company's	derivative	financial	instruments	as	well	as	their	classification	on	the	consolidated	balance	sheet	as	of January	29,	2010:

# Tabular	Disclosure	of	Fair	Values	of	Derivative	Instruments

								The	tables	below	present	the	pre-tax	effect	of	the	Company's	derivative	financial	instruments	on	the	consolidated	statement	of	operations	(including	OCI)	for	the year	ended	January	29,	2010:

# Tabular	Disclosure	of	the	Effect	of	Derivative	Instruments	on	the	Consolidated	Statement	of	Operations

# Credit-risk-related	contingent	features

								The	Company	has	agreements	with	all	of	its	interest	rate	swap	counterparties	that	contain	a	provision	providing	that	the	Company	could	be	declared	in	default	on its	derivative	obligations	if	repayment	of	the	underlying	indebtedness	is	accelerated	by	the	lender	due	to	the	Company's	default	on	such	indebtedness.

								As	of	January	29,	2010,	the	fair	value	of	interest	rate	swaps	in	a	net	liability	position,	which	includes	accrued	interest	but	excludes	the	adjustment	for nonperformance	risk	related	to	these	agreements,	was	$59.2	million.	As	of	January	29,	2010,	the	Company	had	not	posted	any	collateral	related	to	these	agreements.	If the	Company	had	breached	any	of	these	provisions	at	January	29,	2010,	it	would	have	been	required	to	settle	its	obligations	under	the	agreements	at	their	termination value	of	$59.2	million.

# 9.	Commitments	and	contingencies

# Leases

								As	of	January	29,	2010,	the	Company	was	committed	under	operating	lease	agreements	for	most	of	its	retail	stores.	Many	of	the	Company's	stores	are	subject	to build-to-suit	arrangements	with	landlords	which	typically	carry	a	primary	lease	term	of	10-15	years	with	multiple	renewal	options.	The	Company	also	has	stores	subject to	shorter-term	leases	(usually	with	initial	or	current	terms	of	three	to	five	years),	and	many	of	these	leases	have	multiple	renewal	options.	Approximately	38%	of	the leased	stores	have	provisions	for	contingent	rentals	based	upon	a	specified	percentage	of	defined	sales	volume.	The	land	and	buildings	of	two	of	the	Company's	DCs	are subject	to	operating	lease	agreements	and	a	third	DC	is	subject	to	a	financing	arrangement.	Certain	leases	contain	restrictive	covenants.	As	of	January	29,	2010,	the Company	is	not	aware	of	any	material	violations	of	such	covenants.

								The	Company	leases	three	of	its	DCs.	The	entities	involved	in	the	ownership	structure	underlying	these	leases	meet	the	accounting	definition	of	a	Variable	Interest Entity	("VIE").	As	discussed	below,	one	of	these	DCs	has	been	recorded	as	a	financing	obligation.	The	land	and	buildings	of	the	other	two	DCs	have	been	recorded	as operating	leases.	The	Company	is	not	the	primary	beneficiary	of	these	VIEs	and,	accordingly,	has	not	included	these	entities	in	its	consolidated	financial	statements.

								In	January	1999,	the	Company	sold	its	DC	located	in	Ardmore,	Oklahoma	for	100%	cash	consideration.	Concurrent	with	the	sale	transaction,	the	Company	leased the	property	back	for	a	period	of	23	years.	The	transaction	was	recorded	as	a	financing	obligation	rather	than	a	sale	as	a	result	of,	among	other	things,	the	lessor's	ability to	put	the	property	back	to	the	Company	under	certain	circumstances.	The	property	and	equipment,	along	with	the	related	lease	obligation	associated	with	this transaction	are	recorded	in	the	consolidated	balance	sheets.	In	August	2007,	the	Company	purchased	a	secured	promissory	note	(the	"Ardmore	Note")	from	an	unrelated third	party	with	a	face	value	of	$34.3	million	at	the	date	of	purchase	which	approximated	the	remaining	financing	obligation.	The	Ardmore	Note	represents	debt	issued by	the	third	party	entity	from	which	the	Company	leases	the	Ardmore	DC	and	therefore	the	Company	holds	the	debt	instrument	pertaining	to	its	lease	financing obligation.	Because	a	legal	right	of	offset	exists,	the	Company	is	accounting	for	the	Ardmore	Note	as	a	reduction	of	its	outstanding	financing	obligation	in	its consolidated	balance	sheets.

# 9.	Commitments	and	contingencies	(Continued)

								Future	minimum	payments	as	of	January	29,	2010	for	capital	and	operating	leases	are	as	follows:

| (In	thousands) | Capital<br>Leases | Operating<br>Leases |
| :--- | :--- | :--- |
| 2010 | $2,295 | $423,813 |
| 2011 | 1,558 | 391,031 |
| 2012 | 1,135 | 342,811 |
| 2013 | 599 | 283,496 |
| 2014 | 602 | 226,189 |
| Thereafter | 5,237 | 657,697 |
| Total\tminimum\tpayments | 11,426 | $2,325,037 |
| Less:\timputed\tinterest | (3,099) |  |
| Present\tvalue\tof\tnet\tminimum\tlease\tpayments | 8,327 |  |
| Less:\tcurrent\tportion,\tnet | (1,849) |  |
| Long-term\tportion | $6,478 |  |

								Capital	leases	were	discounted	at	an	effective	interest	rate	of	approximately	5.7%	at	January	29,	2010.	The	gross	amount	of	property	and	equipment	recorded	under capital	leases	and	financing	obligations	at	both	January	29,	2010	and	at	January	30,	2009,	was	$34.8	million.	Accumulated	depreciation	on	property	and	equipment under	capital	leases	and	financing	obligations	at	January	29,	2010	and	January	30,	2009,	was	$6.9	million	and	$5.3	million,	respectively.

								Rent	expense	under	all	operating	leases	is	as	follows:

|  | Successor | Successor | Successor | Predecessor |
| :--- | :--- | :--- | :--- | :--- |
| (In\tthousands) | 2009 | 2008 | March\t6,\t2007\nthrough\nFebruary\t1,\t2008 | February\t3,\t2007\nthrough\nJuly\t6,\t2007 |
| Minimum\trentals(a) | $407,379 | $370,827 | $205,672 | $143,188 |
| Contingent\trentals | 21,248 | 18,796 | 8,780 | 6,964 |
|  | $428,627 | $389,623 | $214,452 | $150,152 |

(a) Excludes	net	contract	termination	costs	of	$2.5	million,	$2.4	million	and	$19.1	million	for	the	Successor	periods	ended	January	30,	2009	and February	1,	2008	and	the	Predecessor	period	ended	July	6,	2007,	respectively.	These	expenses	were	recorded	in	association	with	the	closing	of stores	associated	with	strategic	initiatives	implemented	primarily	in	2007.	Also	excludes	amortization	of	leasehold	interests	of	$37.2	million, $40.9	million	and	$23.7	million	included	in	rent	expense	for	the	Successor	periods	ended	January	29,	2010,	January	30,	2009	and	February	1, 2008,	respectively.

# Legal	proceedings

								On	August	7,	2006,	a	lawsuit	entitled	Cynthia	Richter,	et	al.	v.	Dolgencorp,	Inc.,	et	al.	was	filed	in	the	United	States	District	Court	for	the	Northern	District	of Alabama	(Case	No.	7:06-cv-01537-LSC)	("Richter")	in	which	the	plaintiff	alleges	that	she	and	other	current	and	former	Dollar	General	store	managers	were	improperly classified	as	exempt	executive	employees	under	the	Fair	Labor	Standards

Act	("FLSA")	and	seeks	to	recover	overtime	pay,	liquidated	damages,	and	attorneys'	fees	and	costs.	On	August	15,	2006,	the	Richter	plaintiff	filed	a	motion	in	which	she asked	the	court	to	certify	a	nationwide	class	of	current	and	former	store	managers.	The	Company	opposed	the	plaintiff's	motion.	On	March	23,	2007,	the	court conditionally	certified	a	nationwide	class.

								On	May	30,	2007,	the	court	stayed	all	proceedings	in	the	case,	including	the	sending	of	a	notice	to	the	class,	to	evaluate,	among	other	things,	certain	appeals pending	in	the	Eleventh	Circuit	involving	claims	similar	to	those	raised	in	this	action.	During	the	stay,	the	statute	of	limitations	was	tolled	for	potential	class	members. The	stay	was	extended	on	several	occasions,	the	last	of	which	expired	on	October	31,	2009.	On	December	2,	2009,	notice	was	mailed	to	over	28,000	current	or	former Dollar	General	store	managers,	and	approximately	3,860	individuals	opted	into	the	lawsuit.

								The	Company	believes	that	its	store	managers	are	and	have	been	properly	classified	as	exempt	employees	under	the	FLSA	and	that	this	action	is	not	appropriate	for collective	action	treatment.	The	Company	intends	to	vigorously	defend	this	action	and	expects	to	ask	the	court	to	decertify	the	class	at	the	conclusion	of	the	discovery period.	However,	at	this	time,	it	is	not	possible	to	predict	whether	the	court	ultimately	will	permit	this	action	to	proceed	collectively,	and	no	assurances	can	be	given	that the	Company	will	be	successful	in	the	defense	on	the	merits	or	otherwise.	If	the	Company	is	not	successful	in	its	efforts	to	defend	this	action,	the	resolution	could	have	a material	adverse	effect	on	the	Company's	financial	statements	as	a	whole.

								On	May	18,	2006,	the	Company	was	served	with	a	lawsuit	entitled	Tammy	Brickey,	Becky	Norman,	Rose	Rochow,	Sandra	Cogswell	and	Melinda	Sappington	v. Dolgencorp,	Inc.	and	Dollar	General	Corporation	(Western	District	of	New	York,	Case	No.	6:06-cv-06084-DGL,	originally	filed	on	February	9,	2006	and	amended	on May	12,	2006	("Brickey")).	The	Brickey	plaintiffs	seek	to	proceed	collectively	under	the	FLSA	and	as	a	class	under	New	York,	Ohio,	Maryland	and	North	Carolina wage	and	hour	statutes	on	behalf	of,	among	others,	assistant	store	managers	who	claim	to	be	owed	wages	(including	overtime	wages)	under	those	statutes.	At	this	time,	it is	not	possible	to	predict	whether	the	court	will	permit	this	action	to	proceed	collectively	or	as	a	class.	However,	the	Company	believes	that	this	action	is	not	appropriate for	either	collective	or	class	treatment	and	that	the	Company's	wage	and	hour	policies	and	practices	comply	with	both	federal	and	state	law.	The	Company	plans	to vigorously	defend	this	action;	however,	no	assurances	can	be	given	that	the	Company	will	be	successful	in	the	defense	on	the	merits	or	otherwise,	and,	if	it	is	not successful,	the	resolution	of	this	action	could	have	a	material	adverse	effect	on	the	Company's	financial	statements	as	a	whole.

								On	March	7,	2006,	a	complaint	was	filed	in	the	United	States	District	Court	for	the	Northern	District	of	Alabama	(Janet	Calvert	v.	Dolgencorp,	Inc.,	Case	No.	2:06- cv-00465-VEH	("Calvert")),	in	which	the	plaintiff,	a	former	store	manager,	alleged	that	she	was	paid	less	than	male	store	managers	because	of	her	sex,	in	violation	of the	Equal	Pay	Act	and	Title	VII	of	the	Civil	Rights	Act	of	1964,	as	amended	("Title	VII").	The	complaint	subsequently	was	amended	to	include	additional	plaintiffs,	who also	allege	to	have	been	paid	less	than	males	because	of	their	sex,	and	to	add	allegations	that	the	Company's	compensation	practices	disparately	impact	females.	Under the	amended	complaint,	Plaintiffs	seek	to	proceed	collectively	under	the	Equal	Pay	Act	and	as	a	class	under	Title	VII,	and	request	back	wages,	injunctive	and declaratory	relief,	liquidated	damages,	punitive	damages	and	attorney's	fees	and	costs.

								On	July	9,	2007,	the	plaintiffs	filed	a	motion	in	which	they	asked	the	court	to	approve	the	issuance	of	notice	to	a	class	of	current	and	former	female	store	managers under	the	Equal	Pay	Act.	The

Company	opposed	plaintiffs'	motion.	On	November	30,	2007,	the	court	conditionally	certified	a	nationwide	class	of	females	under	the	Equal	Pay	Act	who	worked	for Dollar	General	as	store	managers	between	November	30,	2004	and	November	30,	2007.	The	notice	was	issued	on	January	11,	2008,	and	persons	to	whom	the	notice	was sent	were	required	to	opt	into	the	suit	by	March	11,	2008.	Approximately	2,100	individuals	have	opted	into	the	lawsuit.	The	Company	will	have	an	opportunity	at	the close	of	the	discovery	period	to	seek	decertification	of	the	Equal	Pay	Act	class,	and	the	Company	expects	to	file	such	motion.

								The	plaintiffs	have	not	yet	moved	for	class	certification	relating	to	their	Title	VII	claims.	The	Company	expects	such	motion	to	be	filed	within	the	next	few	months and	will	strenuously	oppose	such	a	motion.

								At	this	time,	it	is	not	possible	to	predict	whether	the	court	ultimately	will	permit	the	Calvert	action	to	proceed	collectively	under	the	Equal	Pay	Act	or	as	a	class under	Title	VII.	However,	the	Company	believes	that	the	case	is	not	appropriate	for	class	or	collective	treatment	and	that	its	policies	and	practices	comply	with	the Equal	Pay	Act	and	Title	VII.	The	Company	intends	to	vigorously	defend	the	action;	however,	no	assurances	can	be	given	that	the	Company	will	be	successful	in	the defense	on	the	merits	or	otherwise.	If	the	Company	is	not	successful	in	defending	the	Calvert	action,	its	resolution	could	have	a	material	adverse	effect	on	the	Company's financial	statements	as	a	whole.

								On	July	30,	2008,	the	Company	was	served	with	a	complaint	filed	in	the	District	Court	for	Dallas	County,	Iowa	(Julie	Cox,	et	al.	v.	Dolgencorp,	Inc.,	et	al—Case No.	LACV-034423)	in	which	the	plaintiff,	a	former	store	manager,	alleges	that	the	Company	discriminates	against	pregnant	employees	on	the	basis	of	sex	and	retaliates against	employees	in	violation	of	the	Iowa	Civil	Rights	Act.	Cox	seeks	to	represent	a	class	of	"all	current,	former	and	future	employees	from	the	State	of	Iowa	who	are employed	by	Dollar	General	who	suffered	from,	are	currently	suffering	from	or	in	the	future	may	suffer	from"	alleged	sex/pregnancy	discrimination	and	retaliation	and seeks	declaratory	and	injunctive	relief	as	well	as	equitable,	compensatory	and	punitive	damages	and	attorneys'	fees	and	costs.

								At	this	time,	it	is	not	possible	to	predict	whether	the	court	ultimately	will	permit	the	Cox	action	to	proceed	as	a	class.	However,	the	Company	believes	that	the	case is	not	appropriate	for	class	treatment	and	that	its	policies	and	practices	comply	with	the	Iowa	Civil	Rights	Act.	The	Company	intends	to	vigorously	defend	the	action; however,	no	assurances	can	be	given	that	the	Company	will	be	successful	in	the	defense	on	the	merits	or	otherwise.	If	the	Company	is	not	successful	in	defending	this action,	its	resolution	could	have	a	material	adverse	effect	on	the	Company's	financial	statements	as	a	whole.

								Subsequent	to	the	announcement	of	the	agreement	relating	to	the	Merger,	the	Company	and	its	directors	were	named	in	seven	putative	class	actions	alleging	claims for	breach	of	fiduciary	duty	arising	out	of	the	Company's	proposed	sale	to	investment	funds	affiliated	with	KKR.	Each	of	the	complaints	alleged,	among	other	things, that	the	Company's	directors	engaged	in	"self-dealing"	by	agreeing	to	recommend	the	transaction	to	the	Company's	shareholders	and	that	the	consideration	available	to such	shareholders	in	the	transaction	was	unfairly	low.	On	motion	of	the	plaintiffs,	each	of	these	cases	was	transferred	to	the	Sixth	Circuit	Court	for	Davidson	County, Twentieth	Judicial	District,	at	Nashville.	By	order	dated	April	26,	2007,	the	seven	lawsuits	were	consolidated	in	the	court	under	the	caption,	"In	re:	Dollar	General," Case	No.	07MD-1.	On	June	13,	2007,	the	court	denied	the	Plaintiffs'	motion	for	a	temporary	injunction	to	block	the	shareholder	vote	that	was	then	held	on	June	21, 2007.	On	June	22,	2007,	the	Plaintiffs	filed	their	amended	complaint	making	claims	substantially	similar	to	those

outlined	above.	The	court	on	November	6,	2008	certified	a	class	of	all	persons	who	held	stock	in	the	Company	on	the	date	of	the	Merger.	The	defendants	filed	for summary	judgment.

								On	November	24,	2008,	all	defendants,	including	the	Company,	reached	an	agreement	in	principle	to	settle	this	lawsuit,	subject	to	final	documentation	and	court approval.	The	Company	determined	that	the	agreement	would	be	in	the	best	interest	of	the	Company	to	avoid	costly	and	time	consuming	litigation.	Based	on	the agreement	in	principle,	the	Company	recorded	a	charge	of	approximately	$32.0	million	in	the	third	and	fourth	quarters	of	2008	in	connection	with	the	proposed settlement,	which	was	net	of	insurance	proceeds	of	$10.0	million	which	was	collected	in	the	fourth	quarter	of	2008.	On	February	2,	2009,	the	Company	funded	the $40.0	million	settlement,	and	on	February	11,	2009,	the	court	approved	the	terms	of	the	settlement.

								From	time	to	time,	the	Company	is	a	party	to	various	other	legal	actions	involving	claims	incidental	to	the	conduct	of	its	business,	including	actions	by	employees, consumers,	suppliers,	government	agencies,	or	others	through	private	actions,	class	actions,	administrative	proceedings,	regulatory	actions	or	other	litigation,	including under	federal	and	state	employment	laws	and	wage	and	hour	laws.	The	Company	believes,	based	upon	information	currently	available,	that	such	other	litigation	and claims,	both	individually	and	in	the	aggregate,	will	be	resolved	without	a	material	adverse	effect	on	the	Company's	financial	statements	as	a	whole.	However,	litigation involves	an	element	of	uncertainty.	Future	developments	could	cause	these	actions	or	claims	to	have	a	material	adverse	effect	on	the	Company's	results	of	operations, cash	flows,	or	financial	position.	In	addition,	certain	of	these	lawsuits,	if	decided	adversely	to	the	Company	or	settled	by	the	Company,	may	result	in	liability	material	to the	Company's	financial	position	or	may	negatively	affect	operating	results	if	changes	to	the	Company's	business	operation	are	required.

# Other

								In	August	2008,	the	Consumer	Product	Safety	Improvement	Act	of	2008	was	signed	into	law.	This	law	addresses,	among	other	things,	the	permissible	levels	of	lead and	listed	phthalates	in	certain	products.	The	first	tier	of	new	standards	for	permissible	levels	of	lead	and	phthalates	became	effective	in	February	2009;	the	second	tier became	effective	in	August	2009.	To	ensure	compliance,	the	Company	undertook	a	process	to	identify,	mark	down	and	cease	the	sale	of	any	remaining	inventory	that would	be	impacted	by	the	new	law.	The	impact	of	this	process	was	not	material	to	the	Company's	consolidated	financial	statements.

# 10.	Benefit	plans

								The	Dollar	General	Corporation	401(k)	Savings	and	Retirement	Plan,	which	became	effective	on	January	1,	1998,	is	a	safe	harbor	defined	contribution	plan	and	is subject	to	the	Employee	Retirement	and	Income	Security	Act	("ERISA").

								Participants	are	permitted	to	contribute	between	1%	and	25%	of	their	pre-tax	annual	eligible	compensation	as	defined	in	the	401(k)	plan	document,	subject	to certain	limitations	under	the	Internal	Revenue	Code.	Employees	who	are	over	age	50	are	permitted	to	contribute	additional	amounts	on	a	pre-tax	basis	under	the	catch-up provision	of	the	401(k)	plan	subject	to	Internal	Revenue	Code	limitations.	The	Company	currently	matches	employee	contributions,	including	catch-up	contributions,	at a	rate	of	100%	of	employee	contributions	up	to	5%	of	annual	eligible	salary,	after	an	employee	has	been	employed	for	one	year	and	has	completed	a	minimum	of 1,000	hours	of	service.

# 10.	Benefit	plans	(Continued)

								A	participant's	right	to	claim	a	distribution	of	his	or	her	account	balance	is	dependent	on	ERISA	guidelines	and	Internal	Revenue	Service	regulations.	All	active employees	are	fully	vested	in	all	contributions	to	the	401(k)	plan.	During	2009,	2008,	and	the	2007	Successor	and	Predecessor	periods,	the	Company	expensed approximately	$8.4	million,	$8.0	million,	$4.3	million	and	$3.0	million,	respectively,	for	matching	contributions.	The	Merger	did	not	significantly	impact	the comparability	of	such	expense	amounts	between	periods.

								The	Company	also	has	a	nonqualified	supplemental	retirement	plan	("SERP")	and	compensation	deferral	plan	("CDP"),	known	as	the	Dollar	General	Corporation CDP/SERP	Plan,	for	a	select	group	of	management	and	highly	compensated	employees.	The	supplemental	retirement	plan	is	a	noncontributory	defined	contribution plan	with	annual	Company	contributions	ranging	from	2%	to	12%	of	base	pay	plus	bonus	depending	upon	age	plus	years	of	service	and	job	grade.	Under	the	CDP, participants	may	defer	up	to	65%	of	base	pay	and	up	to	100%	of	bonus	pay.	An	employee	may	be	designated	for	participation	in	one	or	both	of	the	plans,	according	to the	eligibility	requirements	of	the	plans.	The	Company	matches	base	pay	deferrals	at	a	rate	of	100%	of	base	pay	deferral,	up	to	5%	of	annual	salary,	with	annual	salary offset	by	the	amount	of	match-eligible	salary	in	the	401(k)	plan.	All	participants	are	100%	vested	in	their	CDP	accounts.	The	Company	incurred	compensation	expense for	these	plans	of	approximately	$1.9	million	in	2009,	$1.2	million	in	2008,	$0.3	million	in	the	2007	Successor	period	and	$0.5	million	in	the	2007	Predecessor	period.

								The	CDP/SERP	Plan	assets	are	invested	at	the	option	of	the	participant	in	an	account	that	mirrors	the	performance	of	a	fund	or	funds	selected	by	the	Company's Compensation	Committee	or	its	delegate	(the	"Mutual	Fund	Options")	or,	prior	to	the	Merger,	in	funds	selected	by	the	Company's	Compensation	Committee	or	its delegate	and/or	in	an	account	that	mirrored	the	performance	of	the	Company's	common	stock	(the	"Common	Stock	Option").	Effective	August	2,	2008,	the	deemed	fund options	under	the	CDP/SERP	Plan	were	changed	to	mirror	the	same	fund	options	offered	under	the	401(k)	plan.

								Vested	amounts	are	payable	at	the	time	designated	by	the	plan	upon	the	participant's	termination	of	employment	or	retirement,	except	that	participants	may	elect	to receive	an	in-service	distribution	or	an	"unforeseeable	emergency	hardship"	distribution	of	vested	amounts	credited	to	the	CDP	account.	Account	balances	deemed	to	be invested	in	the	Mutual	Fund	Options	are	payable	in	cash	and,	prior	to	the	Merger,	account	balances	deemed	to	be	invested	in	the	Common	Stock	Option	were	payable	in shares	of	Dollar	General	common	stock	and	cash	in	lieu	of	fractional	shares.

								As	a	result	of	the	Merger,	the	CDP/SERP	Plan	liabilities	as	of	the	Merger	date	were	fully	funded	into	an	irrevocable	rabbi	trust.	All	account	balances	deemed	to	be invested	in	the	Common	Stock	Option	were	liquidated	at	a	value	of	$22.00	per	share	and	the	proceeds	were	transferred	to	an	existing	Mutual	Fund	Option	within	the Plan.

								Asset	balances	in	the	Mutual	Funds	Options	are	stated	at	fair	market	value,	which	is	based	on	quoted	market	prices.	The	current	portion	of	these	balances	is included	in	Prepaid	expenses	and	other	current	assets	and	the	long	term	portion	is	included	in	Other	assets,	net	in	the	consolidated	balance	sheets.	The	deferred compensation	liability	related	to	the	Mutual	Funds	Options	is	recorded	at	the	fair	value	of	the	investment	options	as	chosen	by	the	participants.	The	current	portion	of these	balances	is	included	in	Accrued	expenses	and	other	and	the	long	term	portion	is	included	in	Other	liabilities	in	the	consolidated	balance	sheets.

								The	Company	accounts	for	share-based	payments	in	accordance	with	applicable	accounting	standards.	Under	these	standards,	the	fair	value	of	each	award	is separately	estimated	and	amortized	into	compensation	expense	over	the	service	period.	The	fair	value	of	the	Company's	stock	option	grants	are	estimated	on	the	grant date	using	the	Black-Scholes-Merton	valuation	model.	Forfeitures	are	estimated	at	the	time	of	valuation	and	reduce	expense	ratably	over	the	vesting	period.	The application	of	this	valuation	model	involves	assumptions	that	are	judgmental	and	highly	sensitive	in	the	determination	of	compensation	expense.

								Prior	to	the	Merger,	the	Company	maintained	various	share-based	compensation	programs	which	included	options,	restricted	stock	and	restricted	stock	units.	In connection	with	the	Merger,	the	Company's	outstanding	stock	options,	restricted	stock	and	restricted	stock	units	became	fully	vested	immediately	prior	to	the	closing	of the	Merger	and	were	settled	in	cash,	canceled	or,	in	limited	circumstances,	exchanged	for	new	options	of	the	Company,	as	described	below.	Unless	exchanged	for	new options,	each	option	holder	received	an	amount	in	cash,	without	interest	and	less	applicable	withholding	taxes,	equal	to	$22.00	less	the	exercise	price	of	each	in-the- money	option.	Additionally,	each	restricted	stock	and	restricted	stock	unit	holder	received	$22.00	in	cash,	without	interest	and	less	applicable	withholding	taxes.	Certain stock	options	held	by	Company	management	were	exchanged	for	new	options	to	purchase	common	stock	in	the	Company	(the	"Rollover	Options").	The	exercise	price of	the	Rollover	Options	and	the	number	of	shares	of	Company	common	stock	underlying	the	Rollover	Options	were	adjusted	as	a	result	of	the	Merger.	The	Rollover Options	otherwise	continue	under	the	terms	of	the	equity	plan	under	which	the	original	options	were	issued.

								On	July	6,	2007,	the	Company's	Board	of	Directors	adopted	the	2007	Stock	Incentive	Plan	for	Key	Employees,	which	Plan	was	subsequently	amended	(as	so amended,	the	"Plan").	The	Plan	provides	for	the	granting	of	stock	options,	stock	appreciation	rights,	and	other	stock-based	awards	or	dividend	equivalent	rights	to	key employees,	directors,	consultants	or	other	persons	having	a	service	relationship	with	the	Company,	its	subsidiaries	and	certain	of	its	affiliates.	The	number	of	shares	of Company	common	stock	authorized	for	grant	under	the	Plan	is	31,142,858.	No	more	than	4.5	million	shares	may	be	granted	to	any	one	Plan	participant	in	the	form	of stock	options	and	stock	appreciation	rights	in	any	given	fiscal	year	of	the	Company,	and	no	more	than	1.5	million	shares	may	be	granted	to	any	one	Plan	participant	in the	form	of	other	stock-based	awards	in	any	given	fiscal	year	of	the	Company.	As	of	January	29,	2010,	17,495,729	of	such	shares	are	available	for	future	grants.

								During	2009,	2008	and	the	2007	Successor	period,	the	Company	granted	options	that	vest	solely	upon	the	continued	employment	of	the	recipient	("Time	Options") as	well	as	options	that	vest	upon	the	achievement	of	predetermined	annual	or	cumulative	financial-based	targets	("Performance	Options").	According	to	the	award	terms, 20%	of	each	of	the	Time	Options	and	Performance	Options	generally	vest	annually	over	a	five-year	period,	and	virtually	all	Time	Options	and	Performance	Options granted	through	January	29,	2010	have	been	subject	to	these	terms.	However,	in	late	2009,	the	Company	began	granting	awards	whereby	25%	of	each	of	the	Time Options	and	Performance	Options	generally	vest	annually	over	a	four-year	period.	In	the	event	the	performance	target	is	not	achieved	in	any	given	annual	performance period,	the	Performance	Options	for	that	period	will	subsequently	vest,	if	at	all,	upon	the	achievement	of	a	cumulative	performance	target.	Vesting	of	the	Time	Options and	Performance	Options	is	also	subject	to	acceleration	in	the	event	of	an	earlier	change	in	control	or	certain	public	offerings	of	the	Company's	common	stock.	Each	of these	options,	whether	Time	Options	or	Performance	Options	have	a	contractual	term	of	10	years	and	an	exercise	price	equal	to	the	fair	value	of	the	underlying	common stock	on	the	date	of	grant.

# 11.	Share-based	payments	(Continued)

								Both	the	Time	Options	and	the	Performance	Options	are	subject	to	various	provisions	set	forth	in	a	management	stockholder's	agreement	entered	into	with	each option	holder	by	which	the	Company	may	require	the	employee,	upon	termination,	to	sell	to	the	Company	any	vested	options	or	shares	received	upon	exercise	of	the Time	Options	or	Performance	Options	at	amounts	that	differ	based	upon	the	reason	for	the	termination.	In	particular,	in	the	event	that	the	employee	resigns	"without good	reason"	(as	defined	in	the	management	stockholder's	agreement),	then	any	options	whether	or	not	then	exercisable	are	forfeited	and	any	shares	received	upon	prior exercise	of	such	options	are	callable	at	the	Company's	option	at	an	amount	equal	to	the	lesser	of	fair	value	or	the	amount	paid	for	the	shares	(i.e.,	the	exercise	price).	In such	cases,	because	the	employee	would	not	benefit	in	any	share	appreciation	over	the	exercise	price,	for	accounting	purposes	such	options	are	not	considered	vested until	the	expiration	of	the	Company's	call	option,	which	is	generally	five	years	subsequent	to	the	date	of	grant.	Accordingly,	all	references	to	the	vesting	provisions	or vested	status	of	the	options	discussed	in	this	note	give	effect	to	the	vesting	pursuant	to	these	accounting	provisions	and	may	differ	from	descriptions	of	the	vesting	status of	the	Time	Options	and	Performance	Options	located	elsewhere	in	the	Company's	Annual	Report	on	Form	10-K.	The	Company	records	expense	for	Time	Options	on	a straight-line	basis	over	the	term	of	the	management	stockholder's	agreement	(generally	five	years).

								Each	of	the	Company's	management-owned	shares,	Rollover	Options,	and	vested	new	options	include	certain	provisions	by	which	the	holder	of	such	shares, Rollover	Options,	or	vested	new	options	may	require	the	Company	to	repurchase	such	instruments	in	limited	circumstances.	Specifically,	each	such	instrument	is	subject to	a	put	right	for	a	period	of	365	days	after	termination	due	to	the	death	or	disability	of	the	holder	of	the	instrument	that	occurs	generally	within	five	years	from	the	date of	grant.	In	such	circumstances,	the	holder	of	such	instruments	may	require	the	Company	to	repurchase	any	shares	at	the	fair	market	value	of	such	shares	and	any Rollover	Options	or	vested	new	options	at	a	price	equal	to	the	intrinsic	value	of	such	Rollover	or	vested	new	options.	Because	the	Company	does	not	have	control	over the	circumstances	in	which	it	may	be	required	to	repurchase	the	outstanding	shares	or	Rollover	Options,	such	shares	and	Rollover	Options,	valued	at	$14.4	million	and $4.1	million,	respectively,	at	January	29,	2010,	and	$9.7	million	and	$4.2	million,	respectively,	at	January	30,	2009,	have	been	classified	as	Redeemable	common	stock in	the	accompanying	consolidated	balance	sheets	as	of	these	dates.	The	values	of	these	equity	instruments	are	based	upon	the	fair	value	and	intrinsic	value	of	the underlying	stock	and	Rollover	Options	at	the	date	of	issuance.	Because	redemption	of	such	shares	is	uncertain,	such	shares	are	not	subject	to	re-measurement	until	their redemption	becomes	probable.

								Subsequent	to	the	Merger,	the	Company's	Board	of	Directors	adopted	an	Equity	Appreciation	Rights	Plan,	which	plan	was	later	amended	and	restated	(as	amended and	restated,	the	"Rights	Plan").	The	Rights	Plan	provides	for	the	granting	of	equity	appreciation	rights	to	nonexecutive	managerial	employees.	In	2009,	the	Rights	Plan was	modified	such	that	certain	equity	appreciation	rights	vested	as	a	result	of	the	Company's	initial	public	offering	that	otherwise	would	not	have	vested.	At	January	30, 2009,	571,678	equity	appreciation	rights	were	outstanding.	During	2009,	763,495	equity	appreciation	rights	were	granted,	515,817	of	such	rights,	affecting	775 employees,	vested	in	conjunction	with	the	Company's	initial	public	offering,	18,615	of	such	rights	vested	as	a	result	of	other	provisions	of	the	Rights	Plan,	102,979	of such	rights	were	cancelled	and	697,762	of	such	rights,	with	a	base	price	of	$8.8725,	remain	outstanding	at	January	29,	2010.	These	rights	will	vest	upon	the	occurrence of	certain	stock	offerings,	change	in	control	or	employee	termination	events	as	defined	in	the	Rights	Plan.

								For	the	year	ended	January	29,	2010,	the	fair	value	method	of	accounting	for	share-based	awards	resulted	in	share-based	compensation	expense	(a	component	of SG&A	expenses)	and	a	corresponding	reduction	in	net	income	before	income	taxes	in	the	amount	of	$22.2	million	($13.6	million	net	of	tax)	of	which	$11.7	million ($7.1	million	net	of	tax)	was	related	to	stock	options,	$7.2	million	($4.4	million	net	of	tax)	was	related	to	equity	appreciation	rights	and	$3.3	million	($2.0	million	net	of tax)	was	related	to	restricted	stock	as	discussed	in	more	detail	below.	Of	these	amounts,	$6.9	million	of	the	expense	for	equity	appreciation	rights	and	$2.5	million	of	the expense	for	restricted	stock	was	attributable	to	the	vesting	of	certain	awards	in	conjunction	with	the	Company's	initial	public	offering	discussed	in	Note	2.

								For	the	year	ended	January	30,	2009,	the	Company	recorded	share-based	compensation	expense	and	a	corresponding	reduction	in	net	income	before	income	taxes in	the	amount	of	$10.0	million	($6.1	million	net	of	tax)	of	which	$8.9	million	($5.4	million	net	of	tax)	was	related	to	stock	options	and	$1.1	million	($0.7	million	net	of tax)	was	related	to	restricted	stock.

								The	2007	Successor	statement	of	operations	reflects	share-based	compensation	expense	and	a	corresponding	reduction	of	pre-tax	income	in	the	amount	of $3.8	million	($2.4	million	net	of	tax).	The	Company	recognized	$45.4	million	of	share-based	compensation	expense	in	the	2007	Predecessor	statement	of	operations ($28.5	million	net	of	tax),	including	$6.0	million	of	compensation	expense	prior	to	the	Merger	included	in	SG&A	expenses	comprised	of	$2.3	million	for	stock	options and	$3.7	million	for	restricted	stock	and	restricted	stock	units.	The	remaining	$39.4	million	of	such	expense	related	directly	to	the	Merger	is	reflected	in	Transaction	and related	costs	in	the	consolidated	statement	of	operations	for	the	Predecessor	period	ended	July	6,	2007,	for	the	accelerated	vesting	of	stock	options	($18.7	million)	and restricted	stock	and	restricted	stock	units	($20.7	million).

								The	fair	value	of	each	option	grant	is	separately	estimated	by	applying	the	Black-Scholes-Merton	option	pricing	valuation	model.	The	weighted	average	for	key assumptions	used	in	determining	the	fair	value	of	options	granted	in	the	years	ended	January	29,	2010	and	January	30,	2009,	the	Successor	period	ended	February	1, 2008,	and	the	Predecessor	period	ended	July	6,	2007,	and	a	summary	of	the	methodology	applied	to	develop	each	assumption,	are	as	follows:

|  | Successor | Successor | Successor | Predecessor |
| :--- | :--- | :--- | :--- | :--- |
|  | January\t29,\n2010 | January\t30,\n2009 | February\t1,\n2008 | July\t6,\n2007 |
| Expected\tdividend\tyield | 0% | 0% | 0% | 0.91% |
| Expected\tstock\tprice\tvolatility | 41.2% | 40.2% | 41.9% | 18.5% |
| Weighted\taverage\trisk-free\tinterest\trate | 2.8% | 2.8% | 4.6% | 4.5% |
| Expected\tterm\tof\toptions\t(years) | 7.4 | 7.4 | 7.5 | 5.7 |

								Expected	dividend	yield—This	is	an	estimate	of	the	expected	dividend	yield	on	the	Company's	stock.	Prior	to	the	Merger	this	estimate	was	based	on	historical dividend	payment	trends.	Subsequent	to	the	Merger,	the	Company	is	subject	to	limitations	on	the	payment	of	dividends	under	its	Credit	Facilities	as	further	discussed	in Note	7.	An	increase	in	the	dividend	yield	will	decrease	compensation	expense.

								Expected	stock	price	volatility—This	is	a	measure	of	the	amount	by	which	the	price	of	the	Company's	common	stock	has	fluctuated	or	is	expected	to	fluctuate. Prior	to	the	Merger,	the	Company	used	actual	historical	changes	in	the	market	price	of	the	Company's	common	stock	and	implied

volatility	based	upon	traded	options,	weighted	equally,	to	calculate	the	volatility	assumption,	as	it	was	the	Company's	belief	that	this	methodology	provided	the	best indicator	of	future	volatility.	For	historical	volatility,	the	Company	calculated	daily	market	price	changes	from	the	date	of	grant	over	a	past	period	representative	of	the expected	life	of	the	options	to	determine	volatility.	Subsequent	to	the	Merger	the	expected	volatilities	have	been	based	upon	the	historical	volatilities	of	a	peer	group	of four	companies,	as	the	Company's	common	stock	has	only	been	publicly	traded	for	a	limited	period	of	time.	An	increase	in	the	expected	volatility	will	increase compensation	expense.

								Weighted	average	risk-free	interest	rate—This	is	the	U.S.	Treasury	rate	for	the	week	of	the	grant	having	a	term	approximating	the	expected	life	of	the	option.	An increase	in	the	risk-free	interest	rate	will	increase	compensation	expense.

								Expected	term	of	options—This	is	the	period	of	time	over	which	the	options	granted	are	expected	to	remain	outstanding.	For	pre-Merger	options,	the	Company estimated	expected	term	using	a	computation	based	on	an	assumption	that	outstanding	options	would	be	exercised	approximately	halfway	through	their	contractual	term, taking	into	consideration	such	factors	as	grant	date,	expiration	date,	weighted-average	time-to-vest,	actual	exercises	and	post-vesting	cancellations.	Options	granted	have a	maximum	term	of	10	years.	Due	to	the	limited	historical	data	for	grants	issued	subsequent	to	the	Merger,	the	Company	has	estimated	the	expected	term	as	the	mid- point	between	the	vesting	date	and	the	contractual	term	of	the	option.	An	increase	in	the	expected	term	will	increase	compensation	expense.

								At	January	29,	2010,	617,817	Rollover	Options	were	outstanding,	all	of	which	were	exercisable.	The	aggregate	intrinsic	value	of	these	outstanding	Rollover Options	was	$13.2	million	with	a	weighted	average	remaining	contractual	term	of	5.4	years,	and	a	weighted	average	exercise	price	of	$2.1875.

								During	the	Predecessor	period	from	February	3,	2007	to	July	6,	2007,	the	weighted	average	grant	date	fair	value	of	options	granted	was	$5.37,	and	the	total	intrinsic value	of	stock	options	exercised	was	$10.8	million.

								All	stock	options	granted	prior	to	the	Merger	in	the	Predecessor	period	ended	July	6,	2007	under	the	terms	of	the	Company's	pre-Merger	stock	incentive	plan	were non-qualified	stock	options	issued	at	a	price	equal	to	the	fair	market	value	of	the	Company's	common	stock	on	the	date	of	grant,	were	originally	scheduled	to	vest	ratably over	a	four-year	period,	and	were	to	expire	10	years	following	the	date	of	grant.

								A	summary	of	Time	Options	activity	during	the	Successor	period	ended	January	29,	2010	is	as	follows:

|  | Options<br>Issued | Average<br>Exercise	Price | Remaining<br>Contractual<br>Term	in	Years | Intrinsic<br>Value<br>(in	thousands) |
| :--- | :--- | :--- | :--- | :--- |
| Balance,\tJanuary\t30,\t2009 | 6,021,511 | $8.75 |  |  |
| Granted | 796,758 | 13.25 |  |  |
| Exercised | — | — |  |  |
| Canceled | (695,217) | 8.00 |  |  |
| Balance,\tJanuary\t29,\t2010 | 6,123,052 | $8.68 | 8.1 | $90,675 |
| Vested\tor\texpected\tto\tvest\tat\tJanuary\t29,\t2010 | 5,385,047 | $8.63 | 8.1 | $80,035 |
| Exercisable\tat\tJanuary\t29,\t2010 | 2,237,491 | $7.41 | 8.0 | $32,071 |

								A	summary	of	Performance	Options	activity	during	the	Successor	period	ended	January	29,	2010	is	as	follows:

|  | Options<br>Issued | Average<br>Exercise	Price | Remaining<br>Contractual<br>Term	in	Years | Intrinsic<br>Value<br>(in	thousands) |
| :--- | :--- | :--- | :--- | :--- |
| Balance,\tJanuary\t30,\t2009 | 6,028,082 | $8.75 |  |  |
| Granted | 796,758 | 13.25 |  |  |
| Exercised | (4,545) | 8.00 |  |  |
| Canceled | (568,672) | 8.00 |  |  |
| Balance,\tJanuary\t29,\t2010 | 6,251,623 | $8.67 | 8.1 | $92,667 |
| Vested\tor\texpected\tto\tvest\tat\tJanuary\t29,\t2010 | 5,387,396 | $8.62 | 8.1 | $80,123 |
| Exercisable\tat\tJanuary\t29,\t2010 | 3,113,181 | $8.19 | 7.8 | $47,636 |

								The	total	intrinsic	value	of	all	stock	options	repurchased	by	the	Company	under	terms	of	the	management	stockholders'	agreements	during	2009,	2008	and	the	2007 Successor	period	was	$0.8	million,	$2.5	million	and	$0.5	million,	respectively.

								At	January	29,	2010,	the	total	unrecognized	compensation	cost	related	to	non-vested	stock	options	was	$37.4	million	with	an	expected	weighted	average	expense recognition	period	of	3.3	years.

								The	Company	currently	believes	that	the	performance	targets	related	to	the	unvested	Performance	Options	will	be	achieved.	If	such	goals	are	not	met,	and	there	is no	change	in	control	or	certain	public	offerings	of	the	Company's	common	stock	which	would	result	in	the	acceleration	of	vesting	of	the	Performance	Options,	future compensation	cost	relating	to	unvested	Performance	Options	will	not	be	recognized.

								Through	January	29,	2010,	all	Time	Options	and	Performance	Options	have	been	granted	to	employees.	During	the	fourth	quarter	of	2009,	the	Company	granted 33,051	non-qualified	stock	options	to	members	of	its	Board	of	Directors.	These	options	vest	ratably	on	an	annual	basis	over	a	four	year	period	from	the	date	of	grant.

								In	January	2008,	the	Company	granted	508,572	nonvested	restricted	shares	to	its	Chief	Executive	Officer.	As	a	result	of	the	Company's	initial	public	offering	these shares	vested,	at	a	total	fair	value	equal	to	$11.5	million.	Subsequent	to	the	offering,	the	Company	granted	a	total	of	9,084	restricted	stock	unit	awards	to	members	of	its Board	of	Directors.	For	2009,	2008	and	the	2007	Successor	period,	the	share-based	compensation	expense	related	to	nonvested	shares	before	income	taxes	was $3.3	million	($2.0	million	net	of	tax),	$1.1	million	($0.7	million	net	of	tax)	and	less	than	$0.1	million,	respectively.	At	January	29,	2010,	the	total	compensation	cost related	to	nonvested	restricted	stock	awards	not	yet	recognized	was	approximately	$0.2	million.

								All	nonvested	restricted	stock	and	restricted	stock	unit	awards	granted	in	the	periods	presented	had	a	purchase	price	of	zero.	The	Company	records	compensation expense	on	a	straight-line	basis	over	the	restriction	period	based	on	the	market	price	of	the	underlying	stock	on	the	date	of	grant.	The	nonvested	restricted	stock	unit awards	granted	under	the	plan	to	non-employee	directors	during	2009	are	scheduled	to	vest	in	one-third	increments	at	each	of	the	Company's	three	subsequent	annual shareholder	meetings.	The	nonvested	restricted	stock	and	restricted	stock	unit	awards	granted	under	the	plan	to	employees	during	the	2007	Predecessor	period	were originally	scheduled	to	vest	and	become	payable	ratably	over	a	three-year	period	from	the	respective	grant	dates.	The	nonvested	restricted	stock	unit	awards	granted under	the	plan	to	non-employee	directors	during	the	2007	Predecessor	period	were	originally	scheduled	to	vest	over	a	one-year	period	from	the	respective	grant	dates, but	became	payable	as	a	result	of	the	Merger	as	discussed	above.

# 12.	Related	party	transactions

								Affiliates	of	certain	of	the	Investors	participated	as	(i)	lenders	in	the	Company's	Credit	Facilities	discussed	in	Note	7;	(ii)	initial	purchasers	of	the	Company's	Notes discussed	in	Note	7;	(iii)	counterparties	to	certain	interest	rate	swaps	discussed	in	Note	8	and	(iv)	as	advisors	in	the	Merger.	Certain	fees	were	paid	upon	closing	of	the Merger	to	affiliates	of	certain	of	the	Investors.	These	fees	primarily	included	underwriting	fees,	advisory	fees,	equity	commitment	fees,	syndication	fees,	Merger	and acquisition	fees,	sponsor	fees,	costs	of	raising	equity,	and	out	of	pocket	expenses.	The	aggregate	fees	paid	to	these	related	parties	during	the	Successor	period	ended February	1,	2008	totaled	$134.9	million,	portions	of	which	have	been	capitalized	as	debt	financing	costs	or	as	direct	acquisition	costs.

								The	Company	believes	affiliates	of	KKR	and	Goldman,	Sachs	&	Co.	(among	other	entities)	are	lenders	under,	and	Citicorp	North	America,	Inc.	serves	as administrative	agent	and	collateral	agent	for,	the	Term	Loan	Facility.	The	amount	of	principal	outstanding	under	the	Term	Loan	Facility	from	the	date	of	the	Merger	to September	30,	2009,	was	$2.3	billion.	The	Company	paid	principal	of	$336.5	million	during	the	remainder	of	2009	and	approximately	$74.8	million,	$133.4	million,	and $102.9	million	of	interest	on	the	Term	Loan	Facility	during	2009,	2008,	and	the	2007	Successor	period,	respectively.

# 12.	Related	party	transactions	(Continued)

								Goldman,	Sachs	&	Co.	is	a	counterparty	to	an	amortizing	interest	rate	swap	with	a	notional	amount	of	$396.7	million	and	$433.3	million	as	of	January	29,	2010 and	January	30,	2009,	respectively,	entered	into	in	connection	with	the	Term	Loan	Facility.	The	Company	paid	Goldman,	Sachs	&	Co.	approximately	$17.9	million	and $9.5	million	in	2009	and	2008,	respectively,	and	Goldman,	Sachs	&	Co.	paid	the	Company	$0.8	million	in	the	2007	Successor	period	pursuant	to	the	interest	rate	swap as	further	discussed	in	Note	8.

								The	Company	entered	into	a	sponsor	advisory	agreement,	dated	July	6,	2007,	with	KKR	and	Goldman,	Sachs	&	Co.	pursuant	to	which	those	entities	provided management	and	advisory	services	to	the	Company.	Under	the	terms	of	the	sponsor	advisory	agreement,	among	other	things,	the	Company	was	obliged	to	pay	to	those entities	an	aggregate,	initial	management	fee	of	$5.0	million	annually.	Upon	the	completion	of	the	Company's	initial	public	offering	discussed	in	Note	2,	pursuant	to	the advisory	agreement,	the	Company	paid	a	fee	of	$63.6	million	from	cash	generated	from	operations	to	KKR	and	Goldman,	Sachs	&	Co.,	which	amount	included	a transaction	fee	equal	to	1%,	or	$4.8	million,	of	the	gross	primary	proceeds	from	the	offering	accounted	for	as	a	cost	of	raising	equity	and	a	corresponding	reduction	to Additional	paid-in	capital;	and	approximately	$58.8	million	in	connection	with	its	termination,	which	is	included	in	SG&A	expenses	for	2009.	Including	the	transaction and	termination	fees	discussed	above,	the	total	management	fees	and	other	expenses	incurred	for	the	years	ended	January	29,	2010	and	January	30,	2009	and	the Successor	period	ended	February	1,	2008	totaled	$68.0	million,	$6.6	million	and	$2.9	million,	respectively.	In	addition,	on	July	6,	2007,	the	Company	entered	into	a separate	indemnification	agreement	with	the	parties	to	the	sponsor	advisory	agreement,	pursuant	to	which	the	Company	agreed	to	provide	customary	indemnification	to such	parties	and	their	affiliates.

								From	time	to	time,	the	Company	uses	Capstone	Consulting,	LLC,	a	team	of	executives	who	work	exclusively	with	KKR	portfolio	companies	providing	certain consulting	services.	The	Chief	Executive	Officer	of	Capstone	served	on	the	Company's	Board	of	Directors	until	March	2009.	Although	neither	KKR	nor	any	entity affiliated	with	KKR	owns	any	of	the	equity	of	Capstone,	prior	to	January	1,	2007	KKR	had	provided	financing	to	Capstone.	The	aggregate	fees	incurred	for	Capstone services	for	the	Successor	periods	ended	January	29,	2010,	January	30,	2009	and	February	1,	2008	totaled	$0.2	million,	$3.0	million	and	$1.9	million,	respectively.

								The	Company	purchased	certain	of	its	Senior	Notes	and	Senior	Subordinated	Notes	held	by	Goldman	Sachs	&	Co.	in	the	amount	of	$25.0	million	in	the	2007 Successor	period	as	further	discussed	in	Note	7,	and	paid	commissions	of	less	than	$0.1	million	in	connection	therewith.

								The	Company	entered	into	an	underwriting	agreement	with	KKR	Capital	Markets	(an	affiliate	of	KKR),	Goldman,	Sachs	&	Co.,	Citigroup	Global	Markets	Inc.,	and several	other	entities	to	serve	as	underwriters	in	connection	with	its	initial	public	offering	in	November	2009.	The	Company	provided	underwriting	discounts	of approximately	$27.4	million	pursuant	to	the	underwriting	agreement,	approximately	$6.0	million	of	which	was	provided	to	each	of	(a)	KKR	Capital	Markets; (b)	Goldman,	Sachs	&	Co.;	and	(c)	Citigroup	Global	Markets	Inc.	The	Company	paid	approximately	$3.3	million	in	expenses	related	to	the	initial	public	offering (excluding	underwriting	discounts	and	commissions),	including	the	offering-related	expenses	of	the	selling	shareholder	which	the	Company	was	required	to	pay	under the	terms	of	an	existing	registration	rights	agreement.

# 13.	Segment	reporting

								The	Company	manages	its	business	on	the	basis	of	one	reportable	segment.	See	Note	1	for	a	brief	description	of	the	Company's	business.	As	of	January	29,	2010, all	of	the	Company's	operations	were	located	within	the	United	States	with	the	exception	of	a	Hong	Kong	subsidiary,	and	a	liaison	office	in	India,	the	collective	assets and	revenues	of	which	are	not	material.	The	following	net	sales	data	is	presented	in	accordance	with	accounting	standards	related	to	disclosures	about	segments	of	an enterprise.

|  | Successor | Successor | Successor | Predecessor |
| :--- | :--- | :--- | :--- | :--- |
| (In\tthousands) | 2009 | 2008 | March\t6,\t2007\nthrough\nFebruary\t1,\t2008 | February\t3,\t2007\nthrough\nJuly\t6,\t2007 |
| Classes\tof\tsimilar\tproducts: |  |  |  |  |
| Consumables | $8,356,381 | $7,248,418 | $3,701,724 | $2,615,110 |
| Seasonal | 1,711,471 | 1,521,450 | 908,301 | 604,935 |
| Home\tproducts | 869,772 | 862,226 | 507,027 | 362,725 |
| Apparel | 858,756 | 825,574 | 454,441 | 340,983 |
| Net\tsales | $11,796,380 | $10,457,668 | $5,571,493 | $3,923,753 |

# 14.	Quarterly	financial	data	(unaudited)

								The	following	is	selected	unaudited	quarterly	financial	data	for	the	fiscal	years	ended	January	29,	2010	and	January	30,	2009.	Each	quarterly	period	listed	below was	a	13-week	accounting	period.	The	sum	of	the	four	quarters	for	any	given	year	may	not	equal	annual	totals	due	to	rounding.

| Successor<br>(In	thousands) | First<br>Quarter | Second<br>Quarter | Third<br>Quarter | Fourth<br>Quarter |
| :--- | :--- | :--- | :--- | :--- |
| 2009: |  |  |  |  |
| Net\tsales | $2,779,937 | $2,901,907 | $2,928,751 | $3,185,785 |
| Gross\tprofit | 855,358 | 906,042 | 903,082 | 1,025,389 |
| Operating\tprofit | 224,869 | 233,217 | 216,239 | 278,933 |
| Net\tincome | 83,006 | 93,590 | 75,649 | 87,197 |
| Basic\tearnings\tper\tshare | 0.26 | 0.29 | 0.24 | 0.26 |
| Diluted\tearnings\tper\tshare | 0.26 | 0.29 | 0.24 | 0.26 |

| Successor<br>(In	thousands) | First<br>Quarter | Second<br>Quarter | Third<br>Quarter | Fourth<br>Quarter |
| :--- | :--- | :--- | :--- | :--- |
| 2008: |  |  |  |  |
| Net\tsales | $2,403,498 | $2,609,384 | $2,598,938 | $2,845,848 |
| Gross\tprofit | 693,077 | 758,035 | 772,287 | 837,698 |
| Operating\tprofit | 110,871 | 143,055 | 103,732 | 222,828 |
| Net\tincome\t(loss) | 5,916 | 27,718 | (7,306) | 81,854 |
| Basic\tearnings\t(loss)\tper\tshare | 0.02 | 0.09 | (0.02) | 0.26 |
| Diluted\tearnings\t(loss)\tper\tshare | 0.02 | 0.09 | (0.02) | 0.26 |

								As	discussed	in	Note	12,	in	the	fourth	quarter	of	2009,	the	Company	terminated	an	advisory	agreement	with	KKR	and	Goldman,	Sachs	&	Co.	pursuant	to	which those	entities	provided

# 14.	Quarterly	financial	data	(unaudited)	(Continued)

management	and	advisory	services	to	the	Company,	which	resulted	in	a	pretax	charge	of	approximately	$58.8	million	($46.2	million	net	of	tax,	or	$0.14	per	diluted share),	which	is	included	in	SG&A	expenses.

								As	discussed	in	Note	7,	in	the	fourth	quarter	of	2009,	the	Company	repurchased	$195.7	million	principal	amount	of	its	outstanding	Senior	Notes,	$205.2	million principal	amount	of	its	outstanding	Senior	Subordinated	Notes,	and	repaid	$325.0	million	principal	amount	on	the	Term	Loan	Facility,	resulting	in	a	pretax	loss	of $55.3	million	($33.8	million	net	of	tax,	or	$0.10	per	diluted	share)	which	is	recognized	as	Other	(income)	expense.

								As	discussed	in	Note	11,	in	the	fourth	quarter	of	2009	the	Company	incurred	share-based	compensation	expenses	of	$9.4	million	($5.8	million	net	of	tax,	or	$0.02 per	diluted	share)	for	the	accelerated	vesting	of	certain	share-based	awards	in	conjunction	with	the	Company's	initial	public	offering	which	is	included	in	SG&A expenses.

								As	discussed	in	Note	1,	in	the	second,	third,	and	fourth	quarters	of	2008,	the	Company	recorded	LIFO	provisions	of	$16.0	million	($9.7	million	net	of	tax,	or	$0.03 per	diluted	share),	$15.7	million	($9.6	million	net	of	tax,	or	$0.03	per	diluted	share),	and	$12.1	million	($7.4	million	net	of	tax,	or	$0.02	per	diluted	share),	respectively. These	charges	are	reflected	in	Cost	of	goods	sold.

								As	discussed	in	Note	9,	in	the	third	quarter	of	2008,	based	on	the	agreement	in	principle	to	settle	the	Merger-related	shareholder	litigation,	the	Company	recorded charges	of	approximately	$34.5	million	($37.4	million	net	of	tax,	or	$0.12	per	diluted	share)	in	connection	with	the	proposed	settlement,	which	was	net	of	anticipated insurance	proceeds	of	$7.5	million.	In	the	fourth	quarter	of	2008,	the	Company	received	insurance	proceeds	totaling	$10.0	million,	thus	reducing	the	charges	to $32.0	million	net	of	insurance	proceeds	and	increasing	operating	profit	by	the	incremental	$2.5	million	($1.5	million	net	of	tax,	or	less	than	$0.01	per	diluted	share). These	amounts	are	reflected	as	Litigation	settlement	and	related	costs,	net	in	the	respective	quarters.

								As	discussed	in	Note	7,	in	the	fourth	quarter	of	2008,	the	Company	repurchased	$44.1	million	principal	amount	of	its	outstanding	Senior	Subordinated	Notes resulting	in	a	net	gain	of	$3.8	million	($2.3	million	net	of	tax,	or	$0.01	per	diluted	share)	which	is	recognized	as	Other	(income)	expense.

								As	discussed	in	Note	9,	in	the	fourth	quarter	of	2008,	the	Company	recorded	an	$8.6	million	charge	($5.3	million	net	of	tax,	or	$0.02	per	diluted	share)	included	in Cost	of	goods	sold	related	to	the	markdown	of	certain	products	covered	by	the	Consumer	Products	Safety	Improvement	Act	of	2008.

# 15.	Guarantor	subsidiaries

								Certain	of	the	Company's	subsidiaries	(the	"Guarantors")	have	fully	and	unconditionally	guaranteed	on	a	joint	and	several	basis	the	Company's	obligations	under certain	outstanding	debt	obligations.	Each	of	the	Guarantors	is	a	direct	or	indirect	wholly-owned	subsidiary	of	the	Company.

# 15.	Guarantor	subsidiaries	(Continued)

The	following	consolidating	schedules	present	condensed	financial	information	on	a	combined	basis,	in	thousands.

|  | DOLLAR |  |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  | GENERAL | GUARANTOR | OTHER |  | CONSOLIDATED |
| SUCCESSOR | CORPORATION | SUBSIDIARIES | SUBSIDIARIES | ELIMINATIONS | TOTAL |
| BALANCE\tSHEET: |  |  |  |  |  |
| ASSETS |  |  |  |  |  |
| Current\tassets: |  |  |  |  |  |
| Cash\tand\tcash\tequivalents | $97,620 | $103,001 | $21,455 | $— | $222,076 |
| \t Merchandise\tinventories | — | 1,519,578 | — | — | 1,519,578 |
| Income\ttaxes\treceivable | 9,924 | 1,645 | — | (4,026) | 7,543 |
| Deferred\tincome\ttaxes | 16,066 | — | 3,559 | (19,625) | — |
| Prepaid\texpenses\tand\tother\tcurrent\tassets | 625,157 | 3,040,792 | 704 | (3,570,401) | 96,252 |
| Total\tcurrent\tassets | 748,767 | 4,665,016 | 25,718 | (3,594,052) | 1,845,449 |
| Net\tproperty\tand\tequipment | 99,452 | 1,228,829 | 105 | — | 1,328,386 |
| Goodwill | 4,338,589 | — | — | — | 4,338,589 |
| Intangible\tassets,\tnet | 1,201,223 | 83,060 | — | — | 1,284,283 |
| Deferred\tincome\ttaxes | — | — | 36,405 | (36,405) | — |
| Other\tassets,\tnet | 4,288,270 | 8,920 | 297,757 | (4,528,135) | 66,812 |
| Total\tassets | $10,676,301 | $5,985,825 | $359,985 | $(8,158,592) | $8,863,519 |
| LIABILITIES\tAND\tSHAREHOLDERS'\tEQUITY |  |  |  |  |  |
| Current\tliabilities: |  |  |  |  |  |
| Current\tportion\tof\tlong-term\tobligations | $1,822 | $1,849 | $— | $— | $3,671 |
| Accounts\tpayable | 3,033,723 | 1,311,063 | 46,818 | (3,560,651) | 830,953 |
| Accrued\texpenses\tand\tother | 72,320 | 226,571 | 53,149 | (9,750) | 342,290 |
| Income\ttaxes\tpayable | 4,086 | — | 4,465 | (4,026) | 4,525 |
| Deferred\tincome\ttaxes\tpayable | — | 44,686 | — | (19,625) | 25,061 |
| Total\tcurrent\tliabilities | 3,111,951 | 1,584,169 | 104,432 | (3,594,052) | 1,206,500 |
| Long-term\tobligations | 3,645,820 | 2,689,492 | 13,178 | (2,948,775) | 3,399,715 |
| Deferred\tincome\ttaxes | 394,045 | 188,532 | — | (36,405) | 546,172 |
| Other\tliabilities | 115,701 | 40,065 | 146,582 | — | 302,348 |
| Redeemable\tcommon\tstock | 18,486 | — | — | — | 18,486 |
| Shareholders'\tequity: |  |  |  |  |  |
| Preferred\tstock | — | — | — | — | — |
| Common\tstock | 298,013 | 23,855 | 100 | (23,955) | 298,013 |
| Additional\tpaid-in\tcapital | 2,923,377 | 431,253 | 19,900 | (451,153) | 2,923,377 |
| Retained\tearnings | 203,075 | 1,028,459 | 75,793 | (1,104,252) | 203,075 |
| Accumulated\tother\tcomprehensive\tloss | (34,167) | — | — | — | (34,167) |
| Total\tshareholders'\tequity | 3,390,298 | 1,483,567 | 95,793 | (1,579,360) | 3,390,298 |
| Total\tliabilities\tand\tshareholders'\tequity | $10,676,301 | $5,985,825 | $359,985 | $(8,158,592) | $8,863,519 |

| SUCCESSOR | DOLLAR<br>GENERAL<br>CORPORATION | GUARANTOR<br>SUBSIDIARIES | OTHER<br>SUBSIDIARIES | ELIMINATIONS | CONSOLIDATED<br>TOTAL |
| :--- | :--- | :--- | :--- | :--- | :--- |
| BALANCE\tSHEET: |  |  |  |  |  |
| ASSETS |  |  |  |  |  |
| Current\tassets: |  |  |  |  |  |
| Cash\tand\tcash\tequivalents | $292,637 | $64,404 | $20,954 | $— | $377,995 |
| \t Merchandise\tinventories | — | 1,414,955 | — | — | 1,414,955 |
| Income\ttaxes\treceivable | 50,601 | — | — | (44,209) | 6,392 |
| Deferred\tincome\ttaxes | 5,892 | — | 2,560 | (3,852) | 4,600 |
| Prepaid\texpenses\tand\tother\tcurrent\tassets | 462,572 | 2,016,712 | 5,894 | (2,418,995) | 66,183 |
| Total\tcurrent\tassets | 811,702 | 3,496,071 | 29,408 | (2,467,056) | 1,870,125 |
| Net\tproperty\tand\tequipment | 82,616 | 1,186,125 | 219 | — | 1,268,960 |
| Goodwill | 4,338,589 | — | — | — | 4,338,589 |
| Intangible\tassets,\tnet | 1,205,667 | 119,891 | — | — | 1,325,558 |
| Deferred\tincome\ttaxes | — | — | 3,518 | (3,518) | — |
| Other\tassets,\tnet | 3,384,089 | 130,100 | 280,204 | (3,708,426) | 85,967 |
| Total\tassets | $9,822,663 | $4,932,187 | $313,349 | $(6,179,000) | $8,889,199 |
| LIABILITIES\tAND\tSHAREHOLDERS'\tEQUITY |  |  |  |  |  |
| Current\tliabilities: |  |  |  |  |  |
| Current\tportion\tof\tlong-term\tobligations | $11,500 | $2,658 | $— | $— | $14,158 |
| Accounts\tpayable | 2,007,625 | 1,035,057 | 46,644 | (2,410,905) | 678,421 |
| Accrued\texpenses\tand\tother | 108,504 | 220,142 | 54,489 | (8,090) | 375,045 |
| Income\ttaxes\tpayable | 1,659 | 48,467 | 1,694 | (44,209) | 7,611 |
| Deferred\tincome\ttaxes\tpayable | — | 3,852 | — | (3,852) | — |
| Total\tcurrent\tliabilities | 2,129,288 | 1,310,176 | 102,827 | (2,467,056) | 1,075,235 |
| Long-term\tobligations | 4,346,258 | 2,383,304 | — | (2,606,606) | 4,122,956 |
| Deferred\tincome\ttaxes | 397,570 | 162,049 | — | (3,518) | 556,101 |
| Other\tliabilities | 103,928 | 37,653 | 147,707 | — | 289,288 |
| Redeemable\tcommon\tstock | 13,924 | — | — | — | 13,924 |
| Shareholders'\tequity: |  |  |  |  |  |
| Preferred\tstock | — | — | — | — | — |
| Common\tstock | 278,114 | 23,855 | 100 | (23,955) | 278,114 |
| Additional\tpaid-in\tcapital | 2,489,647 | 553,639 | 19,900 | (573,539) | 2,489,647 |
| Retained\tearnings | 103,364 | 461,511 | 42,815 | (504,326) | 103,364 |
| Accumulated\tother\tcomprehensive\tloss | (39,430) | — | — | — | (39,430) |
| Total\tshareholders'\tequity | 2,831,695 | 1,039,005 | 62,815 | (1,101,820) | 2,831,695 |
| Total\tliabilities\tand\tshareholders'\tequity | $9,822,663 | $4,932,187 | $313,349 | $(6,179,000) | $8,889,199 |

| SUCCESSOR | DOLLAR<br>GENERAL<br>CORPORATION | GUARANTOR<br>SUBSIDIARIES | OTHER<br>SUBSIDIARIES | ELIMINATIONS | CONSOLIDATED<br>TOTAL |
| :--- | :--- | :--- | :--- | :--- | :--- |
| STATEMENTS\tOF\tOPERATIONS: |  |  |  |  |  |
| Net\tsales | $306,036 | $11,796,380 | $91,265 | $(397,301) | $11,796,380 |
| Cost\tof\tgoods\tsold | — | 8,106,509 | — | — | 8,106,509 |
| Gross\tprofit | 306,036 | 3,689,871 | 91,265 | (397,301) | 3,689,871 |
| Selling,\tgeneral\tand\tadministrative |  |  |  |  |  |
| expenses | 337,224 | 2,734,793 | 61,897 | (397,301) | 2,736,613 |
| Operating\tprofit\t(loss) | (31,188) | 955,078 | 29,368 | — | 953,258 |
| Interest\tincome | (52,047) | (10,968) | (19,674) | 82,545 | (144) |
| Interest\texpense | 375,280 | 52,980 | 29 | (82,545) | 345,744 |
| Other\t(income)\texpense | 55,542 | — | — | — | 55,542 |
| Income\t(loss)\tbefore\tincome\ttaxes | (409,963) | 913,066 | 49,013 | — | 552,116 |
| Income\ttax\texpense\t(benefit) | (149,478) | 346,117 | 16,035 | — | 212,674 |
| Equity\tin\tsubsidiaries'\tearnings,\tnet\tof |  |  |  |  |  |
| taxes | 599,927 | — | — | (599,927) | — |
| Net\tincome | $339,442 | $566,949 | $32,978 | $(599,927) | $339,442 |

| SUCCESSOR | DOLLAR<br>GENERAL<br>CORPORATION | GUARANTOR<br>SUBSIDIARIES | OTHER<br>SUBSIDIARIES | ELIMINATIONS | CONSOLIDATED<br>TOTAL |
| :--- | :--- | :--- | :--- | :--- | :--- |
| STATEMENTS\tOF\tOPERATIONS: |  |  |  |  |  |
| Net\tsales | $236,682 | $10,457,668 | $97,917 | $(334,599) | $10,457,668 |
| Cost\tof\tgoods\tsold | — | 7,396,571 | — | — | 7,396,571 |
| Gross\tprofit | 236,682 | 3,061,097 | 97,917 | (334,599) | 3,061,097 |
| Selling,\tgeneral\tand\tadministrative |  |  |  |  |  |
| expenses | 210,665 | 2,499,331 | 73,214 | (334,599) | 2,448,611 |
| Litigation\tsettlement\tand\trelated\tcosts, |  |  |  |  |  |
| net | 32,000 | — | — | — | 32,000 |
| Operating\tprofit\t(loss) | (5,983) | 561,766 | 24,703 | — | 580,486 |
| Interest\tincome | (62,722) | (36,844) | (13,532) | 110,037 | (3,061) |
| Interest\texpense | 427,365 | 74,586 | 18 | (110,037) | 391,932 |
| Other\t(income)\texpense | (2,788) | — | — | — | (2,788) |
| Income\t(loss)\tbefore\tincome\ttaxes | (367,838) | 524,024 | 38,217 | — | 194,403 |
| Income\ttax\texpense\t(benefit) | (115,924) | 190,146 | 11,999 | — | 86,221 |
| Equity\tin\tsubsidiaries'\tearnings,\tnet\tof |  |  |  |  |  |
| taxes | 360,096 | — | — | (360,096) | — |
| Net\tincome | $108,182 | $333,878 | $26,218 | $(360,096) | $108,182 |

| SUCCESSOR | DOLLAR<br>GENERAL<br>CORPORATION | GUARANTOR<br>SUBSIDIARIES | OTHER<br>SUBSIDIARIES | ELIMINATIONS | CONSOLIDATED<br>TOTAL |
| :--- | :--- | :--- | :--- | :--- | :--- |
| STATEMENTS\tOF\tOPERATIONS: |  |  |  |  |  |
| Net\tsales | $96,300 | $5,571,493 | $65,057 | $(161,357) | $5,571,493 |
| Cost\tof\tgoods\tsold | — | 3,999,599 | — | — | 3,999,599 |
| Gross\tprofit | 96,300 | 1,571,894 | 65,057 | (161,357) | 1,571,894 |
| Selling,\tgeneral\tand\tadministrative |  |  |  |  |  |
| expenses | 102,030 | 1,337,311 | 46,524 | (161,357) | 1,324,508 |
| Transaction\tand\trelated\tcosts | 1,242 | — | — | — | 1,242 |
| Operating\tprofit\t(loss) | (6,972) | 234,583 | 18,533 | — | 246,144 |
| Interest\tincome | (58,786) | (23,206) | (8,013) | 86,206 | (3,799) |
| Interest\texpense | 274,104 | 64,991 | 8 | (86,206) | 252,897 |
| Other\t(income)\texpense | 3,639 | — | — | — | 3,639 |
| Income\t(loss)\tbefore\tincome\ttaxes | (225,929) | 192,798 | 26,538 | — | (6,593) |
| Income\ttax\texpense\t(benefit) | (76,881) | 65,166 | 9,940 | — | (1,775) |
| Equity\tin\tsubsidiaries'\tearnings,\tnet\tof |  |  |  |  |  |
| taxes | 144,230 | — | — | (144,230) | — |
| Net\tincome\t(loss) | $(4,818) | $127,632 | $16,598 | $(144,230) | $(4,818) |

| PREDECESSOR | DOLLAR<br>GENERAL<br>CORPORATION | GUARANTOR<br>SUBSIDIARIES | OTHER<br>SUBSIDIARIES | ELIMINATIONS | CONSOLIDATED<br>TOTAL |
| :--- | :--- | :--- | :--- | :--- | :--- |
| STATEMENTS\tOF\tOPERATIONS: |  |  |  |  |  |
| Net\tsales | $76,945 | $3,923,753 | $44,206 | $(121,151) | $3,923,753 |
| Cost\tof\tgoods\tsold | — | 2,852,178 | — | — | 2,852,178 |
| Gross\tprofit | 76,945 | 1,071,575 | 44,206 | (121,151) | 1,071,575 |
| Selling,\tgeneral\tand\tadministrative |  |  |  |  |  |
| expenses | 64,827 | 982,321 | 34,933 | (121,151) | 960,930 |
| Transaction\tand\trelated\tcosts | 101,397 | — | — | — | 101,397 |
| Operating\tprofit\t(loss) | (89,279) | 89,254 | 9,273 | — | 9,248 |
| Interest\tincome | (53,278) | (11,472) | (5,626) | 65,330 | (5,046) |
| Interest\texpense | 19,796 | 55,828 | 5 | (65,330) | 10,299 |
| Income\t(loss)\tbefore\tincome\ttaxes | (55,797) | 44,898 | 14,894 | — | 3,995 |
| Income\ttax\texpense\t(benefit) | (4,814) | 11,924 | 4,883 | — | 11,993 |
| Equity\tin\tsubsidiaries'\tearnings,\tnet\tof |  |  |  |  |  |
| taxes | 42,985 | — | — | (42,985) | — |
| Net\tincome\t(loss) | $(7,998) | $32,974 | $10,011 | $(42,985) | $(7,998) |

| SUCCESSOR | DOLLAR<br>GENERAL<br>CORPORATION | GUARANTOR<br>SUBSIDIARIES | OTHER<br>SUBSIDIARIES | ELIMINATIONS | CONSOLIDATED<br>TOTAL |
| :--- | :--- | :--- | :--- | :--- | :--- |
| STATEMENTS\tOF\tCASH\tFLOWS: |  |  |  |  |  |
| Cash\tflows\tfrom\toperating\tactivities: |  |  |  |  |  |
| Net\tincome | $339,442 | $566,949 | $32,978 | $(599,927) | $339,442 |
| Adjustments\tto\treconcile\tnet\tincome\tto\tnet\tcash |  |  |  |  |  |
| provided\tby\t(used\tin)\toperating\tactivities: |  |  |  |  |  |
| Depreciation\tand\tamortization | 36,541 | 220,048 | 182 | — | 256,771 |
| Deferred\tincome\ttaxes | (18,571) | 67,317 | (33,886) | — | 14,860 |
| Tax\tbenefit\tof\tstock\toptions | (5,390) | — | — | — | (5,390) |
| Loss\ton\tdebt\tretirement | 55,265 | — | — | — | 55,265 |
| Noncash\tshare-based\tcompensation | 17,295 | — | — | — | 17,295 |
| Noncash\tinventory\tadjustments\tand\tasset\timpairments | — | 647 | — | — | 647 |
| Other\tnoncash\tgains\tand\tlosses | 3,221 | 4,699 | — | — | 7,920 |
| Equity\tin\tsubsidiaries'\tearnings,\tnet | (599,927) | — | — | 599,927 | — |
| Change\tin\toperating\tassets\tand\tliabilities: |  |  |  |  |  |
| \t Merchandise\tinventories | — | (100,248) | — | — | (100,248) |
| Prepaid\texpenses\tand\tother\tcurrent\tassets | 2,582 | (10,252) | 372 | — | (7,298) |
| Accounts\tpayable | 26,535 | 79,515 | (1) | — | 106,049 |
| Accrued\texpenses\tand\tother\tliabilities | (24,852) | 10,494 | (2,465) | — | (16,823) |
| Income\ttaxes | 48,494 | (50,112) | 2,771 | — | 1,153 |
| Other | (3,203) | 2,171 | 32 | — | (1,000) |
| Net\tcash\tprovided\tby\t(used\tin)\toperating\tactivities | (122,568) | 791,228 | (17) | — | 668,643 |
| Cash\tflows\tfrom\tinvesting\tactivities: |  |  |  |  |  |
| Purchases\tof\tproperty\tand\tequipment | (34,647) | (216,032) | (68) | — | (250,747) |
| Proceeds\tfrom\tsale\tof\tproperty\tand\tequipment | — | 2,701 | — | — | 2,701 |
| Net\tcash\tused\tin\tinvesting\tactivities | (34,647) | (213,331) | (68) | — | (248,046) |
| Cash\tflows\tfrom\tfinancing\tactivities: |  |  |  |  |  |
| Issuance\tof\tcommon\tstock | 443,753 | — | — | — | 443,753 |
| Issuance\tof\tlong-term\tobligations | — | 1,080 | — | — | 1,080 |
| Repayments\tof\tlong-term\tobligations | (782,518) | (2,742) | — | — | (785,260) |
| Payment\tof\tcash\tdividends\tand\trelated\tamounts | (239,731) | — | — | — | (239,731) |
| Repurchases\tof\tequity | (1,748) | — | — | — | (1,748) |
| Tax\tbenefit\tof\tstock\toptions | 5,390 | — | — | — | 5,390 |
| Changes\tin\tintercompany\tnote\tbalances,\tnet | 537,052 | (537,638) | 586 | — | — |
| Net\tcash\tprovided\tby\t(used\tin)\tfinancing\tactivities | (37,802) | (539,300) | 586 | — | (576,516) |
| Net\tincrease\t(decrease)\tin\tcash\tand\tcash\tequivalents | (195,017) | 38,597 | 501 | — | (155,919) |
| Cash\tand\tcash\tequivalents,\tbeginning\tof\tyear | 292,637 | 64,404 | 20,954 | — | 377,995 |
| Cash\tand\tcash\tequivalents,\tend\tof\tyear | $97,620 | $103,001 | $21,455 | $— | $222,076 |

| SUCCESSOR | DOLLAR<br>GENERAL<br>CORPORATION | GUARANTOR<br>SUBSIDIARIES | OTHER<br>SUBSIDIARIES | ELIMINATIONS | CONSOLIDATED<br>TOTAL |
| :--- | :--- | :--- | :--- | :--- | :--- |
| STATEMENTS\tOF\tCASH\tFLOWS: |  |  |  |  |  |
| Cash\tflows\tfrom\toperating\tactivities: |  |  |  |  |  |
| Net\tincome | $108,182 | $333,878 | $26,218 | $(360,096) | $108,182 |
| Adjustments\tto\treconcile\tnet\tincome\tto\tnet\tcash |  |  |  |  |  |
| provided\tby\t(used\tin)\toperating\tactivities: |  |  |  |  |  |
| Depreciation\tand\tamortization | 34,638 | 213,003 | 258 | — | 247,899 |
| Deferred\tincome\ttaxes | (4,681) | 16,500 | 61,615 | — | 73,434 |
| Tax\tbenefit\tof\tstock\toptions | (950) | — | — | — | (950) |
| Gain\ton\tdebt\tretirement | (3,818) | — | — | — | (3,818) |
| Noncash\tshare-based\tcompensation | 9,958 | — | — | — | 9,958 |
| Noncash\tinventory\tadjustments\tand\tasset\timpairments | — | 50,671 | — | — | 50,671 |
| Other\tnoncash\tgains\tand\tlosses | 714 | 5,538 | — | — | 6,252 |
| Equity\tin\tsubsidiaries'\tearnings,\tnet | (360,096) | — | — | 360,096 | — |
| Change\tin\toperating\tassets\tand\tliabilities: |  |  |  |  |  |
| \t Merchandise\tinventories | — | (173,014) | — | — | (173,014) |
| Prepaid\texpenses\tand\tother\tcurrent\tassets | (2,310) | 3,765 | (2,053) | — | (598) |
| Accounts\tpayable | 18,717 | 121,546 | 93 | — | 140,356 |
| Accrued\texpenses\tand\tother\tliabilities | 11,427 | 46,177 | 11,132 | — | 68,736 |
| Income\ttaxes | 56,596 | (10,797) | (11,813) | — | 33,986 |
| Other | 2,529 | 11,643 | (88) | — | 14,084 |
| Net\tcash\tprovided\tby\t(used\tin)\toperating\tactivities | (129,094) | 618,910 | 85,362 | — | 575,178 |
| Cash\tflows\tfrom\tinvesting\tactivities: |  |  |  |  |  |
| Purchases\tof\tproperty\tand\tequipment | (16,467) | (189,058) | (21) | — | (205,546) |
| Purchases\tof\tshort-term\tinvestments | — | — | (9,903) | — | (9,903) |
| Sales\tof\tshort-term\tinvestments | — | — | 61,547 | — | 61,547 |
| Proceeds\tfrom\tsale\tof\tproperty\tand\tequipment | — | 1,266 | — | — | 1,266 |
| Net\tcash\tprovided\tby\t(used\tin)\tinvesting\tactivities | (16,467) | (187,792) | 51,623 | — | (152,636) |
| Cash\tflows\tfrom\tfinancing\tactivities: |  |  |  |  |  |
| Issuance\tof\tcommon\tstock | 4,228 | — | — | — | 4,228 |
| Net\trepayments\tunder\trevolving\tcredit\tfacility | (102,500) | — | — | — | (102,500) |
| Repayments\tof\tlong-term\tobligations | (40,780) | (3,645) | — | — | (44,425) |
| Repurchases\tof\tequity | (3,009) | — | — | — | (3,009) |
| Tax\tbenefit\tof\tstock\toptions | 950 | — | — | — | 950 |
| Changes\tin\tintercompany\tnote\tbalances,\tnet | 570,989 | (422,448) | (148,541) | — | — |
| Net\tcash\tprovided\tby\t(used\tin)\tfinancing\tactivities | 429,878 | (426,093) | (148,541) | — | (144,756) |
| Net\tincrease\t(decrease)\tin\tcash\tand\tcash\tequivalents | 284,317 | 5,025 | (11,556) | — | 277,786 |
| Cash\tand\tcash\tequivalents,\tbeginning\tof\tyear | 8,320 | 59,379 | 32,510 | — | 100,209 |
| Cash\tand\tcash\tequivalents,\tend\tof\tyear | $292,637 | $64,404 | $20,954 | $— | $377,995 |

| SUCCESSOR | DOLLAR<br>GENERAL<br>CORPORATION | GUARANTOR<br>SUBSIDIARIES | OTHER<br>SUBSIDIARIES | ELIMINATIONS | CONSOLIDATED<br>TOTAL |
| :--- | :--- | :--- | :--- | :--- | :--- |
| STATEMENTS\tOF\tCASH\tFLOWS: |  |  |  |  |  |
| Cash\tflows\tfrom\toperating\tactivities: |  |  |  |  |  |
| Net\tincome\t(loss) | $(4,818) | $127,632 | $16,598 | $(144,230) | $(4,818) |
| Adjustments\tto\treconcile\tnet\tincome\t(loss)\tto\tnet\tcash |  |  |  |  |  |
| provided\tby\t(used\tin)\toperating\tactivities: |  |  |  |  |  |
| Depreciation\tand\tamortization | 21,634 | 128,431 | 148 | — | 150,213 |
| Deferred\tincome\ttaxes | (2,120) | 20,208 | 1,463 | — | 19,551 |
| Loss\ton\tdebt\tretirement | 1,249 | — | — | — | 1,249 |
| Noncash\tshare-based\tcompensation | 3,827 | — | — | — | 3,827 |
| Noncash\tinventory\tadjustments\tand\tasset |  |  |  |  |  |
| impairments | — | 6,113 | — | — | 6,113 |
| Other\tnoncash\tgains\tand\tlosses | 3,705 | 571 | — | — | 4,276 |
| Equity\tin\tsubsidiaries'\tearnings,\tnet | (144,230) | — | — | 144,230 | — |
| Change\tin\toperating\tassets\tand\tliabilities: |  |  |  |  |  |
| \t Merchandise\tinventories | — | 73,356 | — | — | 73,356 |
| Prepaid\texpenses\tand\tother\tcurrent\tassets | (1,120) | 4,783 | 76 | — | 3,739 |
| Accounts\tpayable | (40,745) | 12,428 | (13,078) | — | (41,395) |
| Accrued\texpenses\tand\tother\tliabilities | (7,456) | 6,418 | 17,099 | — | 16,061 |
| Income\ttaxes | (45,416) | 44,829 | 7,935 | — | 7,348 |
| Other | (3,169) | 3,675 | (422) | — | 84 |
| Net\tcash\tprovided\tby\t(used\tin)\toperating\tactivities | (218,659) | 428,444 | 29,819 | — | 239,604 |
| Cash\tflows\tfrom\tinvesting\tactivities: |  |  |  |  |  |
| Merger,\tnet\tof\tcash\tacquired | (5,649,182) | (1,129,953) | 40,744 | — | (6,738,391) |
| Purchases\tof\tproperty\tand\tequipment | (1,617) | (82,003) | (21) | — | (83,641) |
| Purchases\tof\tshort-term\tinvestments | — | — | (3,800) | — | (3,800) |
| Sales\tof\tshort-term\tinvestments | — | — | 21,445 | — | 21,445 |
| Purchases\tof\tlong-term\tinvestments | — | (37,047) | (7,473) | — | (44,520) |
| Proceeds\tfrom\tsale\tof\tproperty\tand\tequipment | — | 533 | — | — | 533 |
| Net\tcash\tprovided\tby\t(used\tin)\tinvesting\tactivities | (5,650,799) | (1,248,470) | 50,895 | — | (6,848,374) |
| Cash\tflows\tfrom\tfinancing\tactivities: |  |  |  |  |  |
| Issuance\tof\tcommon\tstock | 2,759,540 | — | — | — | 2,759,540 |
| Net\tborrowings\t(repayments)\tunder\trevolving\tcredit |  |  |  |  |  |
| facility | 102,500 | — | — | — | 102,500 |
| Issuance\tof\tlong-term\tobligations | 4,176,817 | — | — | — | 4,176,817 |
| Repayments\tof\tlong-term\tobligations | (236,084) | (5,861) | — | — | (241,945) |
| Debt\tissuance\tcosts | (87,392) | — | — | — | (87,392) |
| Repurchases\tof\tequity | (541) | — | — | — | (541) |
| Changes\tin\tintercompany\tnote\tbalances,\tnet | (837,062) | 885,266 | (48,204) | — | — |
| Net\tcash\tprovided\tby\t(used\tin)\tfinancing\tactivities | 5,877,778 | 879,405 | (48,204) | — | 6,708,979 |
| Net\tincrease\tin\tcash\tand\tcash\tequivalents | 8,320 | 59,379 | 32,510 | — | 100,209 |
| Cash\tand\tcash\tequivalents,\tbeginning\tof\tperiod | — | — | — | — | — |
| Cash\tand\tcash\tequivalents,\tend\tof\tyear | $8,320 | $59,379 | $32,510 | $— | $100,209 |

| PREDECESSOR | DOLLAR<br>GENERAL<br>CORPORATION | GUARANTOR<br>SUBSIDIARIES | OTHER<br>SUBSIDIARIES | ELIMINATIONS | CONSOLIDATED<br>TOTAL |
| :--- | :--- | :--- | :--- | :--- | :--- |
| STATEMENTS\tOF\tCASH\tFLOWS: |  |  |  |  |  |
| Cash\tflows\tfrom\toperating\tactivities: |  |  |  |  |  |
| Net\tincome\t(loss) | $(7,998) | $32,974 | $10,011 | $(42,985) | $(7,998) |
| Adjustments\tto\treconcile\tnet\tincome\t(loss)\tto\tnet\tcash |  |  |  |  |  |
| provided\tby\toperating\tactivities: |  |  |  |  |  |
| Depreciation\tand\tamortization | 9,051 | 74,770 | 96 | — | 83,917 |
| Deferred\tincome\ttaxes | (7,982) | (9,194) | (3,698) | — | (20,874) |
| Tax\tbenefit\tof\tstock\toptions | (3,927) | — | — | — | (3,927) |
| Noncash\tshare-based\tcompensation | 45,433 | — | — | — | 45,433 |
| Other\tnoncash\tgains\tand\tlosses | — | 5,098 | — | — | 5,098 |
| Equity\tin\tsubsidiaries'\tearnings,\tnet | (42,985) | — | — | 42,985 | — |
| Change\tin\toperating\tassets\tand\tliabilities: |  |  |  |  |  |
| \t Merchandise\tinventories | — | 16,424 | — | — | 16,424 |
| Prepaid\texpenses\tand\tother\tcurrent\tassets | 5,758 | (11,762) | (180) | — | (6,184) |
| Accounts\tpayable | 44,909 | (23,103) | 12,988 | — | 34,794 |
| Accrued\texpenses\tand\tother\tliabilities | 7,897 | 36,021 | 9,077 | — | 52,995 |
| Income\ttaxes | (24,998) | 31,741 | (3,934) | — | 2,809 |
| Other | 21 | (372) | (190) | — | (541) |
| Net\tcash\tprovided\tby\toperating\tactivities | 25,179 | 152,597 | 24,170 | — | 201,946 |
| Cash\tflows\tfrom\tinvesting\tactivities: |  |  |  |  |  |
| Purchases\tof\tproperty\tand\tequipment | (5,321) | (50,737) | (95) | — | (56,153) |
| Purchases\tof\tshort-term\tinvestments | — | — | (5,100) | — | (5,100) |
| Sales\tof\tshort-term\tinvestments | — | — | 9,505 | — | 9,505 |
| Purchases\tof\tlong-term\tinvestments | — | — | (15,754) | — | (15,754) |
| Sale\tand\tinsurance\tproceeds\trelated\tto\tproperty\tand |  |  |  |  |  |
| equipment | — | 620 | — | — | 620 |
| Net\tcash\tused\tin\tinvesting\tactivities | (5,321) | (50,117) | (11,444) | — | (66,882) |
| Cash\tflows\tfrom\tfinancing\tactivities: |  |  |  |  |  |
| Repayments\tof\tlong-term\tobligations | (148) | (4,352) | — | — | (4,500) |
| Payment\tof\tcash\tdividends | (15,710) | — | — | — | (15,710) |
| Proceeds\tfrom\texercise\tof\tstock\toptions | 41,546 | — | — | — | 41,546 |
| Tax\tbenefit\tof\tstock\toptions | 3,927 | — | — | — | 3,927 |
| Changes\tin\tintercompany\tnote\tbalances,\tnet | 75,840 | (86,988) | 11,148 | — | — |
| Net\tcash\tprovided\tby\t(used\tin)\tfinancing\tactivities | 105,455 | (91,340) | 11,148 | — | 25,263 |
| Net\tincrease\tin\tcash\tand\tcash\tequivalents | 125,313 | 11,140 | 23,874 | — | 160,327 |
| Cash\tand\tcash\tequivalents,\tbeginning\tof\tyear | 114,310 | 58,107 | 16,871 | — | 189,288 |
| Cash\tand\tcash\tequivalents,\tend\tof\tperiod | $239,623 | $69,247 | $40,745 | $— | $349,615 |

# ITEM	9.				CHANGES	IN	AND	DISAGREEMENTS	WITH	ACCOUNTANTS	ON	ACCOUNTING	AND	FINANCIAL	DISCLOSURE

# ITEM	9A(T).				CONTROLS	AND	PROCEDURES

								(a)				Disclosure	Controls	and	Procedures.				Under	the	supervision	and	with	the	participation	of	our	management,	including	our	principal	executive	officer	and principal	financial	officer,	we	conducted	an	evaluation	of	our	disclosure	controls	and	procedures,	as	such	term	is	defined	under	Rule	13a-15(e)	or	15d-15(e)	promulgated under	the	Securities	Exchange	Act	of	1934,	as	amended	(the	"Exchange	Act").	Based	on	this	evaluation,	our	principal	executive	officer	and	our	principal	financial officer	concluded	that	our	disclosure	controls	and	procedures	were	effective	as	of	the	end	of	the	period	covered	by	this	report.

								(b)				Management's	Annual	Report	on	Internal	Control	Over	Financial	Reporting.				Our	management	prepared	and	is	responsible	for	the	consolidated	financial statements	and	all	related	financial	information	contained	in	this	report.	This	responsibility	includes	establishing	and	maintaining	adequate	internal	control	over	financial reporting	as	defined	in	Rule	13a-15(f)	or	15d-15(f)	under	the	Exchange	Act.	Our	internal	control	over	financial	reporting	is	designed	to	provide	reasonable	assurance regarding	the	reliability	of	financial	reporting	and	the	preparation	of	financial	statements	for	external	purposes	in	accordance	with	United	States	generally	accepted accounting	principles.

								To	comply	with	the	requirements	of	Section	404	of	the	Sarbanes-Oxley	Act	of	2002,	management	designed	and	implemented	a	structured	and	comprehensive assessment	process	to	evaluate	its	internal	control	over	financial	reporting.	Such	assessment	was	based	on	criteria	established	in	Internal	Control—Integrated Framework	issued	by	the	Committee	of	Sponsoring	Organizations	of	the	Treadway	Commission.	Because	of	its	inherent	limitations,	a	system	of	internal	control	over financial	reporting	can	provide	only	reasonable	assurance	and	may	not	prevent	or	detect	misstatements.	Management	regularly	monitors	our	internal	control	over financial	reporting,	and	actions	are	taken	to	correct	any	deficiencies	as	they	are	identified.	Based	on	its	assessment,	management	has	concluded	that	our	internal	control over	financial	reporting	is	effective	as	of	January	29,	2010.

								This	annual	report	does	not	include	an	attestation	report	of	Ernst	&	Young	LLP	regarding	internal	control	over	financial	reporting.	Management's	report	was	not subject	to	attestation	by	Ernst	&	Young	LLP	pursuant	to	temporary	rules	of	the	Securities	and	Exchange	Commission	that	permit	us	to	provide	only	management's	report in	this	annual	report.

								(c)				Changes	in	Internal	Control	Over	Financial	Reporting.				There	have	been	no	changes	during	the	quarter	ended	January	29,	2010	in	our	internal	control	over financial	reporting	(as	defined	in	Exchange	Act	Rule	13a-15(f))	that	have	materially	affected,	or	are	reasonably	likely	to	materially	affect,	our	internal	control	over financial	reporting.

# ITEM	9B.				OTHER	INFORMATION

# PART	III

# ITEM	10.				DIRECTORS,	EXECUTIVE	OFFICERS	AND	CORPORATE	GOVERNANCE

								(a)				Information	Regarding	Directors	and	Executive	Officers.				The	information	required	by	this	Item	10	regarding	our	directors	and	director	nominees	is contained	under	the	captions	"—Who	are	the	nominees	this	year,"	"—What	are	the	backgrounds	of	this	year's	nominees,"	"—Are	there	any	familial	relationships between	any	of	the	nominees"	and	"—How	are	directors	identified	and	nominated,"	all

under	"Proposal	1:	Election	of	Directors,"	as	well	as	"Corporate	Governance—Does	the	Board	have	standing	Audit,	Compensation,	and	Nominating	Committees,"	all	in our	definitive	Proxy	Statement	to	be	filed	for	our	2010	Annual	Meeting	of	Shareholders	to	be	held	on	June	3,	2010	(the	"2010	Proxy	Statement"),	which	information under	such	captions	is	incorporated	herein	by	reference.	Information	required	by	this	Item	10	regarding	our	executive	officers	is	contained	in	Part	I	of	this	Form	10-K under	the	caption	"Executive	Officers	of	the	Registrant,"	which	information	under	such	caption	is	incorporated	herein	by	reference.

								(b)				Compliance	with	Section	16(a)	of	the	Exchange	Act.				Information	required	by	this	Item	10	regarding	compliance	with	Section	16(a)	of	the	Exchange	Act	is contained	under	the	caption	"Section	16(a)	Beneficial	Ownership	Reporting	Compliance"	in	the	2010	Proxy	Statement,	which	information	under	such	caption	is incorporated	herein	by	reference.

								(c)				Code	of	Business	Conduct	and	Ethics.				We	have	adopted	a	Code	of	Business	Conduct	and	Ethics	that	applies	to	all	of	our	employees,	officers	and	Board members.	This	Code	is	posted	on	our	Internet	website	at	www.dollargeneral.com.	If	we	choose	to	no	longer	post	such	Code,	we	will	provide	a	free	copy	to	any	person upon	written	request	to	Dollar	General	Corporation,	c/o	Investor	Relations	Department,	100	Mission	Ridge,	Goodlettsville,	TN	37072.	We	intend	to	provide	any required	disclosure	of	an	amendment	to	or	waiver	from	the	Code	of	Business	Conduct	and	Ethics	that	applies	to	our	principal	executive	officer,	principal	financial officer,	principal	accounting	officer	or	controller,	or	persons	performing	similar	functions,	on	our	Internet	website	located	at	www.dollargeneral.com	promptly following	the	amendment	or	waiver.	We	may	elect	to	disclose	any	such	amendment	or	waiver	in	a	report	on	Form	8-K	filed	with	the	SEC	either	in	addition	to	or	in	lieu of	the	website	disclosure.	The	information	contained	on	or	connected	to	our	Internet	website	is	not	incorporated	by	reference	into	this	Form	10-K	and	should	not	be considered	part	of	this	or	any	other	report	that	we	file	with	or	furnish	to	the	SEC.

								(d)				Procedures	for	Shareholders	to	Nominate	Directors.				Information	required	by	this	Item	10	regarding	material	changes	to	the	procedures	by	which shareholders	may	recommend	nominees	to	our	Board	of	Directors	is	contained	under	the	captions	"—How	are	directors	identified	and	nominated,"	"—How	are nominees	evaluated;	what	are	the	minimum	qualifications"	and	"—Can	shareholders	nominate	directors,"	all	under	"Proposal	1:	Election	of	Directors"	in	the	2010	Proxy Statement,	which	information	under	such	captions	is	incorporated	herein	by	reference.

								(e)				Audit	Committee	Information.				Information	required	by	this	Item	10	regarding	our	audit	committee	and	our	audit	committee	financial	expert	is	contained under	the	captions	"Corporate	Governance—Does	the	Board	have	standing	Audit,	Compensation	and	Nominating	Committees"	and	"—Does	Dollar	General	have	an audit	committee	financial	expert	serving	on	its	Audit	Committee"	in	the	2010	Proxy	Statement,	which	information	under	such	captions	is	incorporated	herein	by reference.

# ITEM	11.				EXECUTIVE	COMPENSATION

								The	information	required	by	this	Item	11	regarding	director	and	executive	officer	compensation,	including	the	Compensation	Committee	Report,	the	risks	arising from	our	compensation	policies	and	practices	for	employees,	and	compensation	committee	interlocks	and	insider	participation	is	contained	under	the	captions	"Director Compensation"	and	"Executive	Compensation"	in	the	2010	Proxy	Statement,	which	information	under	such	captions	is	incorporated	herein	by	reference.

# ITEM	12.				SECURITY	OWNERSHIP	OF	CERTAIN	BENEFICIAL	OWNERS	AND	MANAGEMENT	AND	RELATED	STOCKHOLDER	MATTERS

								(a)				Equity	Compensation	Plan	Information.				The	following	table	sets	forth	information	about	securities	authorized	for	issuance	under	our	compensation	plans (including	individual	compensation	arrangements)	as	of	January	29,	2010:

| Plan	category | Number	of	securities<br>to	be	issued	upon<br>exercise	of<br>outstanding	options,<br>warrants	and	rights<br>(a) | Weighted-average<br>exercise	price	of<br>outstanding	options,<br>warrants	and	rights<br>(b) | issuance	under<br>equity	compensation<br>plans	(excluding<br>securities	reflected<br>in	column	(a))<br>(c) |
| :--- | :--- | :--- | :--- |
| Equity\tcompensation\tplans\tapproved\tby\tsecurity\tholders(1) | 13,034,627 | $8.14 | 17,495,729 |
| Equity\tcompensation\tplans\tnot\tapproved\tby\tsecurity\tholders | — | — | — |
| Total(1) | 13,034,627 | $8.14 | 17,495,729 |

(1) Column	(a)	consists	of	shares	of	common	stock	issuable	upon	exercise	of	outstanding	options	and	upon	vesting	and	payment	of	restricted	stock units	under	the	2007	Stock	Incentive	Plan	and	shares	of	common	stock	issuable	upon	exercise	of	outstanding	options	under	the	1998	Stock Incentive	Plan.	Restricted	stock	units	are	settled	for	shares	of	Dollar	General	common	stock	on	a	one-for-one	basis	and	have	no	exercise	price. Accordingly,	those	units	have	been	excluded	for	purposes	of	computing	the	weighted-average	exercise	price	in	column	(b).	Column	(c)	consists of	shares	reserved	for	issuance	pursuant	to	the	2007	Stock	Incentive	Plan,	whether	in	the	form	of	stock,	restricted	stock,	restricted	stock	units,	or other	stock-based	awards	or	upon	the	exercise	of	an	option	or	right.	While	certain	options	remain	outstanding	under	the	1998	Stock	Incentive Plan,	no	future	awards	may	be	granted	thereunder.

								(b)				Other	Information.				The	information	required	by	this	Item	12	regarding	security	ownership	of	certain	beneficial	owners	and	our	management	is	contained under	the	caption	"Security	Ownership"	in	the	2010	Proxy	Statement,	which	information	under	such	caption	is	incorporated	herein	by	reference.

# ITEM	13.				CERTAIN	RELATIONSHIPS	AND	RELATED	TRANSACTIONS,	AND	DIRECTOR	INDEPENDENCE

								The	information	required	by	this	Item	13	regarding	certain	relationships	and	related	transactions	is	contained	under	the	caption	"Transactions	with	Management and	Others"	in	the	2010	Proxy	Statement,	which	information	under	such	caption	is	incorporated	herein	by	reference.

								The	information	required	by	this	Item	13	regarding	director	independence	is	contained	under	the	caption	"Director	Independence"	in	the	2010	Proxy	Statement, which	information	under	such	caption	is	incorporated	herein	by	reference.

# ITEM	14.				PRINCIPAL	ACCOUNTING	FEES	AND	SERVICES

								The	information	required	by	this	Item	14	regarding	fees	we	paid	to	our	principal	accountant	and	the	pre-approval	policies	and	procedures	established	by	the	Audit Committee	of	our	Board	of	Directors	is	contained	under	the	caption	"Fees	Paid	to	Auditors"	in	the	2010	Proxy	Statement,	which	information	under	such	caption	is incorporated	herein	by	reference.

# PART	IV

# ITEM	15.				EXHIBITS	AND	FINANCIAL	STATEMENT	SCHEDULES

# (a) Report	of	Independent	Registered	Public	Accounting	Firm

(b) All	schedules	for	which	provision	is	made	in	the	applicable	accounting	regulations	of	the	SEC	are	not	required under	the	related	instructions,	are	inapplicable	or	the	information	is	included	in	the	Consolidated	Financial Statements	and,	therefore,	have	been	omitted.

(c) Exhibits:	See	Exhibit	Index	immediately	following	the	signature	pages	hereto,	which	Exhibit	Index	is incorporated	by	reference	as	if	fully	set	forth	herein.

# SIGNATURES

								Pursuant	to	the	requirements	of	Section	13	or	15(d)	of	the	Securities	Exchange	Act	of	1934,	the	registrant	has	duly	caused	this	report	to	be	signed	on	its	behalf	by the	undersigned,	thereunto	duly	authorized.

								We,	the	undersigned	directors	and	officers	of	the	registrant,	hereby	severally	constitute	Richard	W.	Dreiling	and	David	M.	Tehle,	and	each	of	them	singly,	our	true and	lawful	attorneys	with	full	power	to	them	and	each	of	them	to	sign	for	us,	and	in	our	names	in	the	capacities	indicated	below,	any	and	all	amendments	to	this	Annual Report	on	Form	10-K	filed	with	the	Securities	and	Exchange	Commission.

								Pursuant	to	the	requirements	of	the	Securities	Exchange	Act	of	1934,	this	report	has	been	signed	below	by	the	following	persons	on	behalf	of	the	registrant	and	in the	capacities	and	on	the	dates	indicated.

# EXHIBIT	INDEX

2.1 Agreement	and	Plan	of	Merger,	dated	as	of	March	11,	2007,	by	and	among	Buck	Holdings,	L.P.,	Buck	Acquisition	Corp., and	Dollar	General	Corporation	(incorporated	by	reference	to	Exhibit	2.1	to	Dollar	General	Corporation's	Current	Report	on Form	8-K	dated	March	11,	2007,	filed	with	the	SEC	on	March	12,	2007	(file	no.	001-11421))

3.1 Amended	and	Restated	Charter	of	Dollar	General	Corporation	(incorporated	by	reference	to	Exhibit	3.1	to	Dollar	General Corporation's	Current	Report	on	Form	8-K	dated	November	18,	2009,	filed	with	the	SEC	on	November	18,	2009	(file no.	001-11421))

3.2 Amended	and	Restated	Bylaws	of	Dollar	General	Corporation	(incorporated	by	reference	to	Exhibit	3.2	to	Dollar	General Corporation's	Current	Report	on	Form	8-K	dated	November	18,	2009,	filed	with	the	SEC	on	November	18,	2009	(file no.	001-11421))

4.1 Form	of	Stock	Certificate	for	Common	Stock	(incorporated	by	reference	to	Exhibit	4.1	to	Dollar	General	Corporation's Registration	Statement	on	Form	S-1	(file	no.	333-161464))

4.2 Shareholders'	Agreement	of	Dollar	General	Corporation,	dated	as	of	November	9,	2009	(incorporated	by	reference	to Exhibit	4.1	to	Dollar	General	Corporation's	Current	Report	on	Form	8-K	dated	November	18,	2009,	filed	with	the	SEC	on November	18,	2009	(file	no.	001-11421))

4.3 Indenture,	dated	as	of	June	21,	2000,	by	and	among	Dollar	General	Corporation,	the	guarantors	named	therein,	as	guarantors, and	Wachovia	Bank,	National	Association	(formerly	known	as	First	Union	National	Bank),	as	trustee	(incorporated	by reference	to	Exhibit	4.1	to	Dollar	General	Corporation's	Registration	Statement	on	Form	S-4	(file	no.	333-42704))

4.4 First	Supplemental	Indenture,	dated	as	of	July	28,	2000,	by	and	among	Dollar	General	Corporation,	the	guarantors	named therein,	as	guarantors,	and	Wachovia	Bank,	National	Association	(formerly	known	as	First	Union	National	Bank),	as	trustee (incorporated	by	reference	to	Exhibit	4.4	to	Dollar	General	Corporation's	Annual	Report	on	Form	10-K	for	the	fiscal	year ended	January	31,	2003,	filed	with	the	SEC	on	March	19,	2003	(file	no.	001-11421))

4.5 Second	Supplemental	Indenture,	dated	as	of	June	18,	2001,	by	and	among	Dollar	General	Corporation,	the	guarantors	named therein,	as	guarantors,	and	Wachovia	Bank,	National	Association	(formerly	known	as	First	Union	National	Bank),	as	trustee (incorporated	by	reference	to	Exhibit	4.5	to	Dollar	General	Corporation's	Annual	Report	on	Form	10-K	for	the	fiscal	year ended	January	31,	2003,	filed	with	the	SEC	on	March	19,	2003	(file	no.	001-11421))

4.6 Third	Supplemental	Indenture,	dated	as	of	June	20,	2002,	by	and	among	Dollar	General	Corporation,	the	guarantors	named therein,	as	guarantors,	and	Wachovia	Bank,	National	Association	(formerly	known	as	First	Union	National	Bank),	as	trustee (incorporated	by	reference	to	Exhibit	4.6	to	Dollar	General	Corporation's	Annual	Report	on	Form	10-K	for	the	fiscal	year ended	January	31,	2003,	filed	with	the	SEC	on	March	19,	2003	(file	no.	001-11421))

4.7 Fourth	Supplemental	Indenture,	dated	as	of	December	11,	2002,	by	and	among	Dollar	General	Corporation,	the	guarantors named	therein,	as	guarantors,	and	Wachovia	Bank,	National	Association	(formerly	known	as	First	Union	National	Bank),	as trustee	(incorporated	by	reference	to	Exhibit	4.7	to	Dollar	General	Corporation's	Annual	Report	on	Form	10-K	for	the	fiscal year	ended	January	31,	2003,	filed	with	the	SEC	on	March	19,	2003	(file	no.	001-11421))

4.8 Fifth	Supplemental	Indenture,	dated	as	of	May	23,	2003,	by	and	among	Dollar	General	Corporation,	the	guarantors	named therein,	as	guarantors,	and	Wachovia	Bank,	National	Association	(formerly	known	as	First	Union	National	Bank),	as	trustee (incorporated	by	reference	to	Exhibit	4.1	to	Dollar	General	Corporation's	Quarterly	Report	on	Form	10-Q	for	the	quarter ended	August	1,	2003,	filed	with	the	SEC	on	August	29,	2003	(file	no.	001-11421))

4.9 Sixth	Supplemental	Indenture,	dated	as	of	July	15,	2003,	by	and	among	Dollar	General	Corporation,	the	guarantors	named therein,	as	guarantors,	and	Wachovia	Bank,	National	Association	(formerly	known	as	First	Union	National	Bank),	as	trustee (incorporated	by	reference	to	Exhibit	4.2	to	Dollar	General	Corporation's	Quarterly	Report	on	Form	10-Q	for	the	quarter ended	August	1,	2003,	filed	with	the	SEC	on	August	29,	2003	(file	no.	001-11421))

4.10 Seventh	Supplemental	Indenture,	dated	as	of	May	23,	2005,	by	and	among	Dollar	General	Corporation,	the	guarantors	named therein,	as	guarantors,	and	Wachovia	Bank,	National	Association	(formerly	known	as	First	Union	National	Bank),	as	trustee (incorporated	by	reference	to	Exhibit	4.1	to	Dollar	General	Corporation's	Quarterly	Report	on	Form	10-Q	for	the	quarter ended	July	29,	2005,	filed	with	the	SEC	on	August	25,	2005	(file	no.	001-11421))

4.11 Eighth	Supplemental	Indenture,	dated	as	of	July	27,	2005,	by	and	among	Dollar	General	Corporation,	the	guarantors	named therein,	as	guarantors,	and	Wachovia	Bank,	National	Association	(formerly	known	as	First	Union	National	Bank),	as	trustee (incorporated	by	reference	to	Exhibit	4.2	to	Dollar	General	Corporation's	Quarterly	Report	on	Form	10-Q	for	the	quarter ended	July	29,	2005,	filed	with	the	SEC	on	August	25,	2005	(file	no.	001-11421))

4.12 Ninth	Supplemental	Indenture,	dated	as	of	August	30,	2006,	by	and	among	Dollar	General	Corporation,	the	guarantors named	therein,	as	guarantors,	and	U.S.	Bank	National	Association	(successor	to	Wachovia	Bank,	National	Association),	as trustee	(incorporated	by	reference	to	Exhibit	4.2	to	Dollar	General	Corporation's	Quarterly	Report	on	Form	10-Q	for	the quarter	ended	November	3,	2006,	filed	with	the	SEC	on	December	12,	2006	(file	no.	001-11421))

4.13 Tenth	Supplemental	Indenture,	dated	as	of	July	6,	2007,	by	and	among	Dollar	General	Corporation,	the	guarantors	named therein,	as	guarantors,	and	U.S.	Bank	National	Association	(successor	to	Wachovia	Bank,	National	Association),	as	trustee (incorporated	by	reference	to	Exhibit	4.1	to	Dollar	General	Corporation's	Current	Report	on	Form	8-K	dated	July	6,	2007, filed	with	the	SEC	on	July	12,	2007	(file	no.	001-11421))

4.14 Senior	Indenture,	dated	July	6,	2007,	among	Buck	Acquisition	Corp.,	Dollar	General	Corporation,	the	guarantors	named therein	and	U.S.	Bank	National	Association	(the	successor	trustee),	as	trustee	(incorporated	by	reference	to	Exhibit	4.8	to Dollar	General	Corporation's	Current	Report	on	Form	8-K	dated	July	6,	2007,	filed	with	the	SEC	on	July	12,	2007	(file no.	001-11421))

4.17 Second	Supplemental	Indenture	to	the	Senior	Indenture,	dated	as	of	December	31,	2007,	between	Retail	Risk Solutions,	LLC,	the	Guaranteeing	Subsidiary,	and	U.S.	Bank	National	Association	(the	successor	trustee),	as	trustee (incorporated	by	reference	to	Exhibit	4.32	to	Dollar	General	Corporation's	Registration	Statement	on	Form	S-4	(file	no.	333- 148320))

4.18 Third	Supplemental	Indenture	to	the	Senior	Indenture,	dated	as	of	March	23,	2009,	between	the	Guaranteeing	Subsidiaries referenced	therein	and	U.S.	Bank	National	Association,	as	trustee	(incorporated	by	reference	to	Exhibit	4.17	to	Dollar General	Corporation's	Registration	Statement	on	Form	S-1	(file	no.	333-158281))

4.19 Instrument	of	Resignation,	Appointment	and	Acceptance,	effective	as	of	February	25,	2009,	by	and	among	Dollar	General Corporation,	Wells	Fargo	Bank,	National	Association,	and	U.S.	Bank	National	Association	(incorporated	by	reference	to Exhibit	99	to	Dollar	General	Corporation's	Current	Report	on	Form	8-K	dated	February	25,	2009,	filed	with	the	SEC	on February	25,	2009	(file	no.	001-11421))

4.23 Second	Supplemental	Indenture	to	the	Senior	Subordinated	Indenture,	dated	as	of	December	31,	2007,	between	Retail	Risk Solutions,	LLC,	the	Guaranteeing	Subsidiary,	and	U.S.	Bank	National	Association	(the	successor	trustee),	as	trustee (incorporated	by	reference	to	Exhibit	4.33	to	Dollar	General	Corporation's	Registration	Statement	on	Form	S-4	(file	no.	333- 148320))

4.24 Third	Supplemental	Indenture	to	the	Senior	Subordinated	Indenture,	dated	as	of	March	23,	2009,	between	the	Guaranteeing Subsidiaries	referenced	therein	and	U.S.	Bank	National	Association,	as	trustee	(incorporated	by	reference	to	Exhibit	4.23	to Dollar	General	Corporation's	Registration	Statement	on	Form	S-1	(file	no.	333-158281))

4.25 Registration	Rights	Agreement,	dated	July	6,	2007,	among	Buck	Acquisition	Corp.,	Dollar	General	Corporation,	the guarantors	named	therein	and	the	initial	purchasers	named	therein	(incorporated	by	reference	to	Exhibit	4.10	to	Dollar General	Corporation's	Current	Report	on	Form	8-K	dated	July	6,	2007,	filed	with	the	SEC	on	July	12,	2007	(file	no.	001- 11421))

4.26 Registration	Rights	Agreement,	dated	July	6,	2007,	among	Buck	Holdings,	L.P.,	Buck	Holdings,	LLC,	Dollar	General Corporation	and	Shareholders	named	therein	(incorporated	by	reference	to	Exhibit	4.18	to	Dollar	General	Corporation's Registration	Statement	on	Form	S-4	(file	no.	333-148320))

4.27 Credit	Agreement,	dated	as	of	July	6,	2007,	among	Dollar	General	Corporation,	as	Borrower,	Citicorp	North	America,	Inc., as	Administrative	Agent,	and	the	other	lending	institutions	from	time	to	time	party	thereto	(incorporated	by	reference	to Exhibit	4.2	to	Dollar	General	Corporation's	Current	Report	on	Form	8-K	dated	July	6,	2007,	filed	with	the	SEC	on	July	12, 2007	(file	no.	001-11421))

4.28 Guarantee	to	the	Credit	Agreement,	dated	as	of	July	6,	2007,	among	certain	domestic	subsidiaries	of	Dollar	General Corporation,	as	Guarantors	and	Citicorp	North	America,	Inc.,	as	Collateral	Agent	(incorporated	by	reference	to	Exhibit	4.3	to Dollar	General	Corporation's	Current	Report	on	Form	8-K	dated	July	6,	2007,	filed	with	the	SEC	on	July	12,	2007	(file no.	001-11421))

4.29 Supplement	No.1,	dated	as	of	September	11,	2007,	to	the	Guarantee	to	the	Credit	Agreement,	between	DC	Financial,	LLC,	as New	Guarantor,	and	Citicorp	North	America,	Inc.,	as	Collateral	Agent	(incorporated	by	reference	to	Exhibit	4.23	to	Dollar General	Corporation's	Registration	Statement	on	Form	S-4	(file	no.	333-148320))

4.30 Supplement	No.	2,	dated	as	of	December	31,	2007,	to	the	Guarantee	to	the	Credit	Agreement,	between	Retail	Risk Solutions,	LLC,	as	New	Guarantor,	and	Citicorp	North	America,	Inc.,	as	Collateral	Agent	(incorporated	by	reference	to Exhibit	4.34	to	Dollar	General	Corporation's	Registration	Statement	on	Form	S-4	(file	no.	333-148320))

4.31 Supplement	No.	3,	dated	as	of	March	23,	2009,	to	the	Guarantee	to	the	Credit	Agreement,	between	the	New	Guarantors referenced	therein	and	Citicorp	North	America,	Inc.,	as	Collateral	Agent	(incorporated	by	reference	to	Exhibit	4.30	to	Dollar General	Corporation's	Registration	Statement	on	Form	S-1	(file	no.	333-158281))

4.32 Security	Agreement,	dated	as	of	July	6,	2007,	among	Dollar	General	Corporation	and	certain	domestic	subsidiaries	of	Dollar General	Corporation,	as	Grantors,	and	Citicorp	North	America,	Inc.,	as	Collateral	Agent	(incorporated	by	reference	to Exhibit	4.4	to	Dollar	General	Corporation's	Current	Report	on	Form	8-K	dated	July	6,	2007,	filed	with	the	SEC	on	July	12, 2007	(file	no.	001-11421))

4.33 Supplement	No.1,	dated	as	of	September	11,	2007,	to	the	Security	Agreement,	between	DC	Financial,	LLC,	as	New	Grantor, and	Citicorp	North	America,	Inc.,	as	Collateral	Agent	(incorporated	by	reference	to	Exhibit	4.25	to	Dollar	General Corporation's	Registration	Statement	on	Form	S-4	(file	no.	333-148320))

4.34 Supplement	No.	2,	dated	as	of	December	31,	2007,	to	the	Security	Agreement,	between	Retail	Risk	Solutions,	LLC,	as	New Grantor,	and	Citicorp	North	America,	Inc.,	as	Collateral	Agent	(incorporated	by	reference	to	Exhibit	4.35	to	Dollar	General Corporation's	Registration	Statement	on	Form	S-4	(file	no.	333-148320))

4.35 Supplement	No.	3,	dated	as	of	March	23,	2009,	to	the	Security	Agreement,	between	the	New	Grantors	referenced	therein	and Citicorp	North	America,	Inc.,	as	Collateral	Agent	(incorporated	by	reference	to	Exhibit	4.34	to	Dollar	General	Corporation's Registration	Statement	on	Form	S-1	(file	no.	333-158281))

4.36 Pledge	Agreement,	dated	as	of	July	6,	2007,	among	Dollar	General	Corporation	and	certain	domestic	subsidiaries	of	Dollar General	Corporation,	as	Pledgors,	and	Citicorp	North	America,	Inc.,	as	Collateral	Agent	(incorporated	by	reference	to Exhibit	4.5	to	Dollar	General	Corporation's	Current	Report	on	Form	8-K	dated	July	6,	2007,	filed	with	the	SEC	on	July	12, 2007	(file	no.	001-11421))

4.37 Supplement	No.1,	dated	as	of	September	11,	2007,	to	the	Pledge	Agreement,	between	DC	Financial,	LLC,	as	Additional Pledgor,	and	Citicorp	North	America,	Inc.,	as	Collateral	Agent	(incorporated	by	reference	to	Exhibit	4.27	to	Dollar	General Corporation's	Registration	Statement	on	Form	S-4	(file	no.	333-148320))

4.38 Supplement	No.	2,	dated	as	of	December	31,	2007,	to	the	Pledge	Agreement,	between	Retail	Risk	Solutions,	LLC,	as Additional	Pledgor,	and	Citicorp	North	America,	Inc.,	as	Collateral	Agent	(incorporated	by	reference	to	Exhibit	4.36	to Dollar	General	Corporation's	Registration	Statement	on	Form	S-4	(file	no.	333-148320))

4.39 Supplement	No.	3,	dated	as	of	March	23,	2009,	to	the	Pledge	Agreement,	between	the	Additional	Pledgors	referenced	therein and	Citicorp	North	America,	Inc.,	as	Collateral	Agent	(incorporated	by	reference	to	Exhibit	4.38	to	Dollar	General Corporation's	Registration	Statement	on	Form	S-1	(file	no.	333-158281))

4.40 ABL	Credit	Agreement,	dated	as	of	July	6,	2007,	among	Dollar	General	Corporation,	as	Parent	Borrower,	certain	domestic subsidiaries	of	Dollar	General	Corporation,	as	Subsidiary	Borrowers,	The	CIT	Group/Business	Credit	Inc.,	as	ABL Administrative	Agent,	and	the	other	lending	institutions	from	time	to	time	party	thereto	(incorporated	by	reference	to Exhibit	4.6	to	Dollar	General	Corporation's	Current	Report	on	Form	8-K	dated	July	6,	2007,	filed	with	the	SEC	on	July	12, 2007	(file	no.	001-11421))

4.41 Appointment	of	Successor	Agent	and	Amendment	No.	1	to	the	ABL	Credit	Agreement	entered	into	as	of	July	31,	2009,	by and	among	The	CIT	Group/Business	Credit,	Inc.,	Wells	Fargo	Retail	Finance,	LLC,	Dollar	General	Corporation	and	the Subsidiary	Borrowers	and	the	Lenders	signatory	thereto	(incorporated	by	reference	to	Exhibit	99	to	Dollar	General Corporation's	Current	Report	on	Form	8-K	dated	July	31,	2009,	filed	with	the	SEC	on	August	4,	2009	(file	no.	001-11421))

4.42 Guarantee,	dated	as	of	September	11,	2007,	to	the	ABL	Credit	Agreement,	between	DC	Financial,	LLC	and	The	CIT Group/Business	Credit	Inc.,	as	ABL	Collateral	Agent	(incorporated	by	reference	to	Exhibit	4.29	to	Dollar	General Corporation's	Registration	Statement	on	Form	S-4	(file	no.	333-148320))

4.43 Supplement	No.	1,	dated	as	of	December	31,	2007,	to	the	Guarantee	to	the	ABL	Credit	Agreement,	between	Retail	Risk Solutions,	LLC,	as	New	Guarantor,	and	The	CIT	Group/Business	Credit	Inc.,	as	ABL	Collateral	Agent	(incorporated	by reference	to	Exhibit	4.37	to	Dollar	General	Corporation's	Registration	Statement	on	Form	S-4	(file	no.	333-148320))

4.44 Supplement	No.	2,	dated	as	of	March	23,	2009,	to	the	Guarantee	to	the	ABL	Credit	Agreement,	between	the	New	Guarantors referenced	therein	and	The	CIT	Group/Business	Credit	Inc.,	as	ABL	Collateral	Agent	(incorporated	by	reference	to Exhibit	4.42	to	Dollar	General	Corporation's	Registration	Statement	on	Form	S-1	(file	no.	333-158281))

4.45 ABL	Security	Agreement,	dated	as	of	July	6,	2007,	among	Dollar	General	Corporation,	as	Parent	Borrower,	certain	domestic subsidiaries	of	Dollar	General	Corporation,	as	Subsidiary	Borrowers,	collectively	the	Grantors,	and	The	CIT	Group/Business Credit	Inc.,	as	ABL	Collateral	Agent	(incorporated	by	reference	to	Exhibit	4.7	to	Dollar	General	Corporation's	Current Report	on	Form	8-K	dated	July	6,	2007,	filed	with	the	SEC	on	July	12,	2007	(file	no.	001-11421))

4.46 Supplement	No.	1,	dated	as	of	September	11,	2007,	to	the	ABL	Security	Agreement,	between	DC	Financial,	LLC,	as	New Grantor,	and	The	CIT	Group/Business	Credit	Inc.,	as	ABL	Collateral	Agent	(incorporated	by	reference	to	Exhibit	4.31	to Dollar	General	Corporation's	Registration	Statement	on	Form	S-4	(file	no.	333-148320))

4.47 Supplement	No.	2,	dated	as	of	December	31,	2007,	to	the	ABL	Security	Agreement,	between	Retail	Risk	Solutions,	LLC,	as New	Grantor,	and	The	CIT	Group/Business	Credit	Inc.,	as	ABL	Collateral	Agent	(incorporated	by	reference	to	Exhibit	4.38 to	Dollar	General	Corporation's	Registration	Statement	on	Form	S-4	(file	no.	333-148320))

4.48 Supplement	No.	3,	dated	as	of	March	23,	2009,	to	the	ABL	Security	Agreement,	between	the	New	Grantors	referenced therein	and	The	CIT	Group/Business	Credit	Inc.,	as	ABL	Collateral	Agent	(incorporated	by	reference	to	Exhibit	4.46	to Dollar	General	Corporation's	Registration	Statement	on	Form	S-1	(file	no.	333-158281))

10.1 Amended	and	Restated	2007	Stock	Incentive	Plan	for	Key	Employees	of	Dollar	General	Corporation	and	its	affiliates	(as approved	by	shareholders	on	October	23,	2009)	((incorporated	by	reference	to	Exhibit	10.1	to	Dollar	General	Corporation's Registration	Statement	on	Form	S-1	(file	no.	333-161464))*

10.2 Form	of	Stock	Option	Agreement	between	Dollar	General	Corporation	and	officers	of	Dollar	General	Corporation	granting stock	options	pursuant	to	the	2007	Stock	Incentive	Plan	(incorporated	by	reference	to	Exhibit	10.2	to	Dollar	General Corporation's	Registration	Statement	on	Form	S-4	(file	no.	333-148320))*

10.3 Form	of	Option	Rollover	Agreement	between	Dollar	General	Corporation	and	officers	of	Dollar	General	Corporation (incorporated	by	reference	to	Exhibit	10.3	to	Dollar	General	Corporation's	Registration	Statement	on	Form	S-4	(file	no.	333- 148320))*

10.4 Form	of	Management	Stockholder's	Agreement	among	Dollar	General	Corporation,	Buck	Holdings,	L.P.	and	officers	of Dollar	General	Corporation	(incorporated	by	reference	to	Exhibit	10.4	to	Dollar	General	Corporation's	Registration	Statement on	Form	S-4	(file	no.	333-148320))*

10.5 Amendment	to	Management	Stockholder's	Agreement	among	Dollar	General	Corporation,	Buck	Holdings,	L.P.	and	key employees	of	Dollar	General	Corporation	(July	2007	grant	group)	(incorporated	by	reference	to	Exhibit	10.2	to	Dollar General	Corporation's	Quarterly	Report	on	Form	10-Q	for	the	fiscal	quarter	ended	October	30,	2009,	filed	with	the	SEC	on December	12,	2009	(file	no.	001-11421))*

10.6 Amendment	to	Management	Stockholder's	Agreement	among	Dollar	General	Corporation,	Buck	Holdings,	L.P.	and	key employees	of	Dollar	General	Corporation	(post-July	2007	grant	group)	(incorporated	by	reference	to	Exhibit	10.3	to	Dollar General	Corporation's	Quarterly	Report	on	Form	10-Q	for	the	fiscal	quarter	ended	October	30,	2009,	filed	with	the	SEC	on December	12,	2009	(file	no.	001-11421))*

10.7 Form	of	Sale	Participation	Agreement	between	Buck	Holdings,	L.P.	and	certain	officer-level	employees,	dated	July	6,	2007 (incorporated	by	reference	to	Exhibit	10.5	to	Dollar	General	Corporation's	Registration	Statement	on	Form	S-4	(file	no.	333- 148320))*

10.8 Form	of	Director	Restricted	Stock	Unit	Award	Agreement	in	connection	with	restricted	stock	unit	grants	made	to	outside directors	pursuant	to	the	Company's	Amended	and	Restated	2007	Stock	Incentive	Plan	(incorporated	by	reference	to Exhibit	10.15	to	Dollar	General	Corporation's	Registration	Statement	on	Form	S-1	(file	no.	333-161464))

10.9 Form	of	Director	Stock	Option	Agreement	in	connection	with	option	grants	made	to	outside	directors	pursuant	to	the Company's	Amended	and	Restated	2007	Stock	Incentive	Plan	(incorporated	by	reference	to	Exhibit	10.16	to	Dollar	General Corporation's	Registration	Statement	on	Form	S-1	(file	no.	333-161464))

10.11 Amendment	to	Dollar	General	Corporation	1998	Stock	Incentive	Plan,	effective	November	28,	2006	(incorporated	by reference	to	Exhibit	10.8	to	Dollar	General	Corporation's	Annual	Report	on	Form	10-K	for	the	fiscal	year	ended	February	2, 2007,	filed	with	the	SEC	on	March	29,	2007	(file	no.	001-11421))*

10.15 Second	Amendment	to	the	Dollar	General	Corporation	CDP/SERP	Plan	(as	amended	and	restated	effective	December	31, 2007),	dated	as	of	June	3,	2008	(incorporated	by	reference	to	Exhibit	10.6	to	Dollar	General	Corporation's	Quarterly	Report on	Form	10-Q	for	the	quarter	ended	August	1,	2008,	filed	with	the	SEC	on	September	3,	2008	(file	no.	001-11421))*

10.16 Amended	and	Restated	Dollar	General	Corporation	Annual	Incentive	Plan	(incorporated	by	reference	to	Exhibit	10.14	to Dollar	General	Corporation's	Registration	Statement	on	Form	S-1	(file	no.	333-161464))	*

10.17 Dollar	General	Corporation	2009	Teamshare	Bonus	Program	for	Named	Executive	Officers	(incorporated	by	reference	to Exhibit	10.14	to	Dollar	General	Corporation's	Registration	Statement	on	Form	S-1	(file	no.	333-158281))*

10.18 Summary	of	Dollar	General	Corporation	Life	Insurance	Program	as	Applicable	to	Executive	Officers	(incorporated	by reference	to	Exhibit	10.19	to	Dollar	General	Corporation's	Annual	Report	on	Form	10-K	for	the	fiscal	year	ended	February	2, 2007,	filed	with	the	SEC	on	March	29,	2007)	(file	no.	001-11421))*

10.23 Stock	Option	Agreement,	dated	as	of	January	21,	2008,	between	Dollar	General	Corporation	and	Richard	Dreiling (incorporated	by	reference	to	Exhibit	10.29	to	Dollar	General	Corporation's	Registration	Statement	on	Form	S-4	(file no.	333-148320))*

10.24 Restricted	Stock	Award	Agreement,	effective	as	of	January	21,	2008,	between	Dollar	General	Corporation	and	Richard Dreiling	(incorporated	by	reference	to	Exhibit	10.32	to	Dollar	General	Corporation's	Registration	Statement	on	Form	S-4	(file no.	333-148320))*

10.25 Management	Stockholder's	Agreement,	dated	as	of	January	21,	2008,	among	Dollar	General	Corporation,	Buck Holdings,	L.P.	and	Richard	Dreiling	(incorporated	by	reference	to	Exhibit	10.30	to	Dollar	General	Corporation's	Registration Statement	on	Form	S-4	(file	no.	333-148320))*

10.26 Sale	Participation	Agreement,	dated	January	21,	2008,	between	Buck	Holdings,	L.P.	and	Richard	Dreiling	(incorporated	by reference	to	Exhibit	10.31	to	Dollar	General	Corporation's	Registration	Statement	on	Form	S-4	(file	no.	333-148320))*

10.27 Employment	Agreement,	dated	July	6,	2007,	by	and	between	Dollar	General	Corporation	and	David	L.	Beré	(incorporated	by reference	to	Exhibit	10.1	to	Dollar	General	Corporation's	Current	Report	on	Form	8-K	dated	July	6,	2007,	filed	with	the	SEC on	July	12,	2007	(file	no.	001-11421))*

10.29 Notice	of	Initiation	of	Transition	Period	under	Employment	Agreement,	dated	January	8,	2008,	by	Dollar	General Corporation	to	David	Beré	(incorporated	by	reference	to	Exhibit	10.34	to	Dollar	General	Corporation's	Registration Statement	on	Form	S-4	(file	no.	333-148320))*

10.30 Letter	Agreement	dated	April	9,	2008	between	Dollar	General	Corporation	and	David	L.	Beré	(incorporated	by	reference	to Exhibit	99.1	to	Dollar	General	Corporation's	Current	Report	on	Form	8-K	dated	April	9,	2008,	filed	with	the	SEC	on April	10,	2008	(file	no.	001-11421))*

10.31 Amendment	to	Employment	Agreement,	dated	December	17,	2008,	between	Dollar	General	Corporation	and	David	L.	Beré (incorporated	by	reference	to	Exhibit	10.28	to	Dollar	General	Corporation's	Annual	Report	on	Form	10-K	for	the	fiscal	year ended	January	30,	2009,	filed	with	the	SEC	on	March	24,	2009	(file	no.	001-11421))*

10.32 Separation	Agreement,	dated	as	of	January	11,	2010,	between	David	L.	Bere	and	Dollar	General	Corporation	(incorporated by	reference	to	Exhibit	99	to	Dollar	General	Corporation's	Current	Report	on	Form	8-K	dated	January	11,	2010,	filed	with	the SEC	on	January	13,	2010	(file	no.	001-11421))*

10.34 Employment	Agreement	effective	April	1,	2009,	by	and	between	Dollar	General	Corporation	and	Kathleen	R.	Guion (incorporated	by	reference	to	Exhibit	99.2	to	Dollar	General	Corporation's	Current	Report	on	Form	8-K	dated	March	30, 2009,	filed	with	the	SEC	on	April	3,	2009	(file	no.	001-11421))*

10.35 Employment	Agreement,	dated	December	1,	2008,	between	Dollar	General	Corporation	and	Todd	Vasos	(incorporated	by reference	to	Exhibit	10.35	to	Dollar	General	Corporation's	Annual	Report	on	Form	10-K	for	the	fiscal	year	ended	January	30, 2009,	filed	with	the	SEC	on	March	24,	2009	(file	no.	001-11421))*

10.36 Stock	Option	Agreement,	dated	December	19,	2008,	between	Dollar	General	Corporation	and	Todd	Vasos	(incorporated	by reference	to	Exhibit	10.36	to	Dollar	General	Corporation's	Annual	Report	on	Form	10-K	for	the	fiscal	year	ended	January	30, 2009,	filed	with	the	SEC	on	March	24,	2009	(file	no.	001-11421))*

10.37 Management	Stockholder's	Agreement,	dated	December	19,	2008,	among	Dollar	General	Corporation,	Buck	Holdings,	L.P., and	Todd	Vasos	(incorporated	by	reference	to	Exhibit	10.37	to	Dollar	General	Corporation's	Annual	Report	on	Form	10-K for	the	fiscal	year	ended	January	30,	2009,	filed	with	the	SEC	on	March	24,	2009	(file	no.	001-11421))*

10.38 Sale	Participation	Agreement,	effective	December	19,	2008,	between	Buck	Holdings,	L.P.	and	Todd	Vasos	(incorporated	by reference	to	Exhibit	10.38	to	Dollar	General	Corporation's	Annual	Report	on	Form	10-K	for	the	fiscal	year	ended	January	30, 2009,	filed	with	the	SEC	on	March	24,	2009	(file	no.	001-11421))*

10.39 Monitoring	Fee	Letter	Agreement,	dated	July	6,	2007,	among	Buck	Holdings,	L.P.,	Dollar	General	Corporation,	Kohlberg Kravis	Roberts	&	Co	L.P.,	and	Goldman,	Sachs	&	Co.	(incorporated	by	reference	to	Exhibit	10.25	to	Dollar	General Corporation's	Registration	Statement	on	Form	S-4	(file	no.	333-148320))

10.40 Indemnification	Agreement,	dated	July	6,	2007,	among	Buck	Holdings,	L.P.,	Dollar	General	Corporation,	Kohlberg	Kravis Roberts	&	Co	L.P.,	and	Goldman,	Sachs	&	Co.	(incorporated	by	reference	to	Exhibit	10.26	to	Dollar	General	Corporation's Registration	Statement	on	Form	S-4	(file	no.	333-148320))

10.41 Purchase	Letter	Agreement,	dated	August	15,	2007,	between	Principal	Life	Insurance	Company	and	DC	Financial,	LLC (incorporated	by	reference	to	Exhibit	10.27	to	Dollar	General	Corporation's	Registration	Statement	on	Form	S-4	(file no.	333-148320))

10.42 Indemnification	Priority	and	Information	Sharing	Agreement,	dated	as	of	June	30,	2009,	among	Kohlberg	Kravis Roberts	&	Co.	L.P.,	the	funds	named	therein	and	Dollar	General	Corporation	(incorporated	by	reference	to	Exhibit	10.42	to Dollar	General	Corporation's	Registration	Statement	on	Form	S-1	(file	no.	333-161464))

21 List	of	Subsidiaries	of	Dollar	General	Corporation

23 Consent	of	Independent	Registered	Public	Accounting	Firm

24 Powers	of	Attorney	(included	as	part	of	the	signature	pages	hereto)

31 Certifications	of	CEO	and	CFO	under	Exchange	Act	Rule	13a-14(a)

Management	Contract	or	Compensatory	Plan

# QuickLinks

ITEM	1.	BUSINESS

DOLLAR	GENERAL	CORPORATION	AND	SUBSIDIARIES	CONSOLIDATED	BALANCE	SHEETS	(In	thousands,	except	per	share	amounts)

DOLLAR	GENERAL	CORPORATION	AND	SUBSIDIARIES	CONSOLIDATED	STATEMENTS	OF	OPERATIONS	(In	thousands,	except	per	share	amounts)

DOLLAR	GENERAL	CORPORATION	AND	SUBSIDIARIES	CONSOLIDATED	STATEMENTS	OF	SHAREHOLDERS'	EQUITY	(In	thousands	except	per	share amounts)

DOLLAR	GENERAL	CORPORATION	AND	SUBSIDIARIES	CONSOLIDATED	STATEMENTS	OF	CASH	FLOWS	(In	thousands)

DOLLAR	GENERAL	CORPORATION	AND	SUBSIDIARIES	NOTES	TO	CONSOLIDATED	FINANCIAL	STATEMENTS

Tabular	Disclosure	of	the	Effect	of	Derivative	Instruments	on	the	Consolidated	Statement	of	Operations	For	the	year	ended	January	29,	2010

ITEM	12.	SECURITY	OWNERSHIP	OF	CERTAIN	BENEFICIAL	OWNERS	AND	MANAGEMENT	AND	RELATED	STOCKHOLDER	MATTERS ITEM	13.	CERTAIN	RELATIONSHIPS	AND	RELATED	TRANSACTIONS,	AND	DIRECTOR	INDEPENDENCE

SIGNATURES EXHIBIT	INDEX



Question: what is the yearly depreciation rate for land improvements?
Calculation:   years_of_service = 20
 depreciation_rate = 100 / years_of_service 
Answer: 5%