Dollar Tree 2006 Annual Report Download - page 41

DOLLAR TREE STORES, INC. • 2006 ANNUAL REPORT 39
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
$84.8 million was committed to these letters of credit
at February 3, 2007.
The Company also has approximately $29.4 mil-
lion in stand-by letters of credit that serve as collateral
for its high-deductible insurance programs and expire
in fiscal 2007.
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 $2.1 million, which is
committed through various dates through fiscal 2008.
Contingencies
In 2003, the Company was served with a lawsuit in
a California state court by a former employee who
alleged that employees did not properly receive suffi-
cient meal breaks and paid rest periods, along with
other alleged wage and hourly violations. The suit
requested that the California state court certify the
case as a class action. This suit was dismissed with
prejudice in May 2005, and the dismissal was
appealed. A California appeals court granted the
appeal and the Company’s petition for review to
the California Supreme Court was denied. The case
has been remanded to the trial court’s where it will
likely be consolidated with a companion suit which
had been filed in the same court following the trial
courts earlier dismissal. It is anticipated that the
plaintiff will seek class certification which the
Company will oppose.
In 2005, the Company was served with a lawsuit
by former employees in Oregon who allege that they
did not properly receive sufficient meal breaks and
paid rest periods. They also allege other wage and
hour violations. The plaintiffs requested the Court to
certify classes for their various claims and the presid-
ing judge recently did so with respect to two classes,
one alleging that our Oregon employees, in violation
of that state’s labor laws, were not paid for rest breaks
and the other that upon termination of employment,
employees were not tendered their final pay in a
timely manner. Other claims of the plaintiffs were
dismissed by an earlier Order of the Court and are
being appealed by the plaintiffs. Discovery will ensue
on the certified class issues; no trial is anticipated
before the end of 2007.
In 2006, the Company was served with a lawsuit
by a former employee in a California state court
alleging that she was paid for wages with a check
drawn on a bank which did not have any branches
in the state, an alleged violation of the state’s labor
code; that she was paid less for her work than other
similar employees with the same job title based on
her gender; and that we did not pay her final wages
in a timely manner, also an alleged violation of the
labor code. The plaintiff requested the court to certi-
fy the case as a class action. The Company has been
successful in removing the case from state to the fed-
eral court level. The parties have reached a settlement
and executed an Agreement which will be presented
to the Court for its approval on April 24, 2007. The
estimated settlement amount has been accrued in the
accompanying consolidated financial statements as of
February 3, 2007.
In 2006, the Company was served with a lawsuit
filed in federal court in the state of Alabama by a for-
mer store manager. She claims that she should have
been classified as a non-exempt employee under the
Fair Labor Standards Act and, therefore, should have
received overtime compensation and other benefits.
She filed the case as a collective action on behalf of
herself and all other employees (store managers)
similarly situated. The Company’s motion requesting
that the case be transferred from Alabama to Virginia
was denied. The plaintiff now seeks entry of an Order
allowing nationwide notice be sent to all store man-
agers employed by the Company now or within the
past three years. The Company is contesting entry of
such an Order.
The Company will vigorously defend itself in
these lawsuits. The Company does not believe that
any of these matters will, individually or in the aggre-
gate, have a material adverse effect on its business or
financial condition. The Company cannot give assur-
ance, however, that one or more of these lawsuits will
not have a material adverse effect on its results of
operations for the period in which they are resolved.