Dollar Tree 2004 Annual Report Download - page 43

DOLLAR TREE STORES, INC. • 2004 ANNUAL REPORT 39
Minimum and Contingent Rentals
Rental expense for store, distribution center and former corporate headquarters operating leases (including payments to
related parties) included in the accompanying consolidated statements of operations are as follows:
Year Ended Year Ended Month Ended Year Ended
January 29, 2005 January 31, 2004 February 1, 2003 December 31, 2002
Minimum rentals $200,718 $167,127 $12,410 $138,656
Contingent rentals 899 1,229 1 1,277
Technology Assets
The Company has commitments totaling approximately
$5,831 to purchase store technology assets for its stores
during 2005.
Letters of Credit
In March 2001, the Company entered into a Letter of
Credit Reimbursement and Security Agreement. The
agreement provides $125,000 for letters of credit, which
are generally issued for the routine purchase of imported
merchandise. Approximately $88,941 of this agreement
was committed to letters of credit at January 29, 2005.
The Company also has approximately $37,735
in letters of credit that serve as collateral for its high-
deductible insurance programs and expire in fiscal 2005.
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 commitment
is approximately $2,275, which is committed through
various dates through 2008.
Contingencies
The Company was sued in California in 2003 by a former
employee who alleged that employees did not properly
receive sufficient meal period breaks and paid rest periods.
He also alleged other wage and hourly violations. The suit
requests that the California state court certify the case as a
class action. In 2005, the Company was threatened with a
suit by former employees in Oregon who allege that they
did not properly receive sufficient meal period breaks and
paid rest periods. They also allege other wage and hour
violations. The Company anticipates that they will request
the Oregon state court to certify the case as a class action.
Non-Operating Facilities
The Company is responsible for payments under leases
for two former distribution center and certain closed
stores. The leases for the two distribution centers expire
in June 2005 and September 2005. The Company
accounts for abandoned lease facilities in accordance with
SFAS No. 146, Accounting for Costs Associated with Exit
or Disposal Activities. Facilities are considered abandoned
on the date that the Company ceases to use the facility.
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 $1,472, $470 and $364
in 2004, 2003 and 2002, respectively. There was no charge
recorded in the month ended February 1, 2003. The total
accrual for these vacated facilities was $1,472 and $2,171
at January 29, 2005 and January 31, 2004, 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 $484, $469,
$31 and $1,222 for the years ended January 29, 2005 and
January 31, 2004, the month ended February 1, 2003 and
the year ended December 31, 2002, respectively.
Freight Services
The Company has contracted outbound freight services
from various contract carriers with contracts expiring
through January 2007. The total amount of these
commitments is approximately $35,500, of which
approximately $25,500 is committed in 2005 and
$10,000 is committed in 2006.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)