Dollar General 2004 Annual Report Download - page 50

Download and view the complete annual report

Please find page 50 of the 2004 Dollar General annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 66

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66

48
Notes to Consolidated Financial Statements (continued)
In January 1999 and April 1997, the Company sold its
DCs located in Ardmore, Oklahoma and South Boston,
Virginia, respectively, for 100% cash consideration.
Concurrent with the sale transactions, the Company
leased the properties back for periods of 23 and 25
years, respectively. The transactions have been recorded
as financing obligations rather than sales as a result of,
among other things, the lessor’s ability to put the proper-
ties back to the Company under certain circumstances.
The property and equipment, along with the related lease
obligations, associated with these transactions are
recorded in the consolidated balance sheets.
In May 2003, the Company purchased two secured
promissory notes (the “DC Notes”) from Principal Life
Insurance Company totaling $49.6 million. These DC
Notes represent debt issued by a third party entity from
which the Company leases its DC in South Boston,
Virginia. This existing lease is recorded as a financing
obligation in the consolidated financial statements. The
DC Notes are being accounted for as “held-to-maturity”
debt securities in accordance with the provisions of
SFAS No. 115. However, by acquiring these DC Notes,
the Company is holding the debt instruments pertaining
to its lease financing obligation and, because a legal
right of offset exists, has reflected the acquired DC
Notes as a reduction of its outstanding financing
obligations in its consolidated financial statements in
accordance with the provisions of FASB Interpretation
No. 39, “Offsetting of Amounts Related to Certain
Contracts—An Interpretation of APB Opinion No. 10
and FASB Statement No. 105.” There was no gain or
loss recognized as a result of this transaction.
Future minimum payments as of January 28, 2005, for capital leases, financing obligations and operating leases are
as follows:
(In thousands)
Capital
Leases
Financing
Obligations
Operating
Leases
2005 $ 13,966 $ 9,283 $ 251,462
2006 7,400 9,354 206,635
2007 3,972 9,564 163,001
2008 2,499 9,510 124,567
2009 1,427 8,915 96,302
Thereafter 5,905 136,885 323,078
Total minimum payments 35,169 183,511 $1,165,045
Less: imputed interest (6,991) (91,956)
Present value of net minimum lease payments 28,178 91,555
Less: purchased promissory notes — (48,179)
28,178 43,376
Less: current portion, net (12,021) (839)
Long-term portion $ 16,157 $ 42,537
Capital leases were discounted at an effective interest rate of approximately 8.8% at January 28, 2005. The gross
amount of property and equipment recorded under capital leases and financing obligations at January 28, 2005 and
January 30, 2004, was $183.8 million and $184.4 million, respectively. Accumulated depreciation on property and
equipment under capital leases and financing obligations at January 28, 2005 and January 30, 2004, was $94.5 million
and $81.8 million, respectively.