Dollar Tree 2007 Annual Report Download - page 41

DOLLAR TREE, INC. • 2007 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
February 2, February 3, January 28,
(in millions) 2008 2007 2006
Minimum rentals $295.4 $261.8 $225.8
Contingent rentals 1.2 0.9 0.7
Non-Operating Facilities
The Company is responsible for payments under leas-
es for certain closed stores. The Company was also
responsible for payments under leases for two former
distribution centers whose leases expired 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. 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 $0.1 million, $0.1
million and $0.3 million in 2007, 2006 and 2005,
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 February 2, 2008,
February 3, 2007 and January 28, 2006, respectively.
Total future commitments under related party leases
are $0.9 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 $191.2 million, of
which approximately $85.0 million is committed in
2008, $83.7 million is committed in 2009, $14.5 mil-
lion is committed in 2010, $4.5 million is committed
in 2011 and $3.5 million is committed in 2012.
Technology Assets
The Company has commitments totaling approxi-
mately $5.1 million to purchase store technology
assets for its stores during 2008.
Letters of Credit
In March 2001, the Company entered into a Letter of
Credit Reimbursement and Security Agreement. The
agreement provides $125.0 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
$88.9 million was committed to these letters of credit
at February 2, 2008.
The Company also has approximately $17.3 mil-
lion in stand-by letters of credit that serve as collateral
for its self-insurance programs and expire in fiscal
2008.
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 $2.5 million, which is commit-
ted through various dates through fiscal 2009.
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 hour violations. The suit
requested that the Court certify the case as a class
action. The parties engaged in mediation and reached
an agreement which upon presentation to the Court,
received preliminary approval and the certification of
a settlement class. Notices have been mailed to the
class members and the final fairness hearing is expect-
ed to occur on May 22, 2008. The settlement amount
has been accrued in the accompanying consolidated
balance sheet as of February 2, 2008.
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, and that terminated employees were
not paid in a timely manner. The plaintiffs requested