Dollar Tree 2008 Annual Report Download - page 41

DOLLAR TREE, INC. • 2008 ANNUAL REPORT 39
Minimum and Contingent Rentals
Rental expense for store and distribution center operating leases (including payments to related parties) included
in the accompanying consolidated statements of operations are as follows:
Year Ended Year Ended Year Ended
January 31, February 2, February 3,
(in millions) 2009 2008 2007
Minimum rentals $323.9 $295.4 $261.8
Contingent rentals (0.3) 1.2 0.9
Non-Operating Facilities
The Company is responsible for payments under leas-
es for certain closed stores. The Company accounts for
abandoned lease facilities in accordance with SFAS
No. 146, Accounting for Costs Associated with Exit or
Disposal Activities. A facility is considered abandoned
on the date that the Company ceases to use it. On this
date, the Company records an expense for the present
value of the total remaining costs for the abandoned
facility reduced by any actual or probable sublease
income. Due to the uncertainty regarding the ultimate
recovery of the future lease and related payments,
the Company recorded charges of $0.6 million, $0.1
million and $0.1 million in 2008, 2007 and 2006,
respectively.
Related Parties
The Company also leases properties for six of its
stores from partnerships owned by related parties. The
total rental payments related to these leases were $0.5
million for each of the years ended January 31, 2009,
February 2, 2008 and February 3, 2007, respectively.
Total future commitments under related party leases
are $0.5 million.
Freight Services
The Company has contracted outbound freight servic-
es from various contract carriers with contracts expir-
ing through February 2013. The total amount of these
commitments is approximately $109.6 million, of
which approximately $86.6 million is committed in
2009, $15.6 million is committed in 2010, $4.4 million
is committed in 2011 and $3.0 million is committed
in 2012.
Technology Assets
The Company has commitments totaling approximately
$3.2 million to purchase store technology assets for its
stores during 2009.
Letters of Credit
In March 2001, the Company entered into a Letter of
Credit Reimbursement and Security Agreement. The
agreement provides $121.5 million for letters of cred-
it. In December 2004, the Company entered into an
additional Letter of Credit Reimbursement and
Security Agreement, which provides $50.0 million for
letters of credit. Letters of credit under both of these
agreements are generally issued for the routine pur-
chase of imported merchandise and approximately
$97.8 million was committed to these letters of credit
at January 31, 2009. As discussed in Note 5, the
Company has $150.0 million of available letters of
credit included in the $550.0 million Unsecured
Credit Agreement (the Agreement) entered into on
February 20, 2008. As of January 31, 2009, there were
no letters of credit committed under the Agreement.
The Company also has approximately $22.5 mil-
lion in stand-by letters of credit that serve as collateral
for its self-insurance programs and expire in fiscal
2009.
Surety Bonds
The Company has issued various surety bonds that
primarily serve as collateral for utility payments at the
Company’s stores. The total amount of the commit-
ment is approximately $4.0 million, which is commit-
ted through various dates through fiscal 2009.
Contingencies
In August of 2006, the Company was served with a
lawsuit filed in federal court in the state of Alabama
by a former store manager. As a collective action, she
claims that she and all other store managers similarly
situated should have been classified as non-exempt
employees under the Fair Labor Standards Act and,
therefore, should have received overtime compensa-
tion and other benefits. The Court preliminarily
allowed nationwide (except for the state of California)
notice to be sent to all store managers employed by
the Company for the three years immediately preced-
ing the filing of the suit. Approximately 770 individu-
als opted in. A second suit was filed in the same
Court, in which the allegations are essentially the
same as those in the first suit. The Court has consoli-
dated the two cases. The Court should decide whether