Dollar Tree 2007 Annual Report Download - page 43

151 MILLION 151 MILLION
151 MILLION 151 MILLION
DOLLAR TREE, INC. • 2007 ANNUAL REPORT 41
NOTE 5 – LONG-TERM DEBT
Long-term debt at February 2, 2008 and February 3, 2007 consists of the following:
February 2, February 3,
(in millions) 2008 2007
$450.0 million Unsecured Revolving Credit Facility, interest payable monthly at
LIBOR,plus 0.475%, which was 4.47% at February 2, 2008, principal payable
upon expiration of the facility in March 2009 $250.0 $250.0
Demand Revenue Bonds, interest payable monthly at a variable rate which was
3.38% at February 2, 2008, principal payable on demand, maturing June 2018 18.5 18.8
Total long-term debt 268.5 268.8
Less current portion 18.5 18.8
Long-term debt, excluding current portion $250.0 $250.0
Maturities of long-term debt are as follows: 2008 - $18.5 million and 2009 - $250.0 million.
Unsecured Revolving Credit Facility
In March 2004, the Company entered into a five-year
Unsecured Revolving Credit Facility (the Facility). The
Facility provides for a $450.0 million revolving line of
credit, including up to $50.0 million in available let-
ters of credit, bearing interest at LIBOR, plus 0.475%.
The Facility also bears an annual facilities fee, calculat-
ed as a percentage, as defined, of the amount available
under the line of credit and an annual administrative
fee payable quarterly. The Facility, among other
things, requires the maintenance of certain specified
financial ratios, restricts the payment of certain
distributions and prohibits the incurrence of certain
new indebtedness.
Demand Revenue Bonds
On May 20, 1998, the Company entered into an unse-
cured Loan Agreement with the Mississippi Business
Finance Corporation (MBFC) under which the MBFC
issued Taxable Variable Rate Demand Revenue Bonds
(the Bonds) in an aggregate principal amount of $19.0
million to finance the acquisition, construction, and
installation of land, buildings, machinery and equip-
ment for the Company’s distribution facility in Olive
Branch, Mississippi. The Bonds do not contain a pre-
payment penalty as long as the interest rate remains
variable. The Bonds contain a demand provision and,
therefore, are classified as current liabilities.
Credit Agreement
On February 20, 2008, the Company entered into a
five-year $550.0 million Credit Agreement (the
Agreement). The Agreement provides for a $300.0
million revolving line of credit, including up to $150.0
million in available letters of credit, and a $250.0 mil-
lion term loan. The interest rate on the facility will be
based, at the Company’s option, on a LIBOR rate, plus
a margin, or an alternate base rate, plus a margin. The
revolving line of credit also bears a facilities fee, calcu-
lated as a percentage, as defined, of the amount avail-
able under the line of credit, payable quarterly. The
term loan is due and payable in full at the five year
maturity date of the Agreement. The Agreement also
bears an administrative fee payable annually. The
Agreement, among other things, requires the mainte-
nance of certain specified financial ratios, restricts the
payment of certain distributions and prohibits the
incurrence of certain new indebtedness. The
Company’s March 2004, $450.0 million unsecured
revolving credit facility was terminated concurrent
with entering into the Agreement.
NOTE 6 – DERIVATIVE FINANCIAL INSTRUMENTS
Non-Hedging Derivatives
At February 2, 2008, the Company was party to a
derivative instrument in the form of an interest rate
swap that does not qualify for hedge accounting treat-
ment pursuant to the provisions of SFAS No. 133
because it contains a knock-out provision. The swap
creates the economic equivalent of a fixed rate obliga-
tion by converting the variable-interest rate to a fixed
rate. Under this interest rate swap, the Company pays
interest to a financial institution at a fixed rate, as
defined in the agreement. In exchange, the financial
institution pays the Company at a variable interest
rate, which approximates the floating rate on the vari-
able-rate obligation, excluding the credit spread. The
interest rate on the swap is subject to adjustment
monthly. No payments are made by either party for
months in which the variable-interest rate, as calculat-
ed under the swap agreement, is greater than the
“knock-out rate.” The following table summarizes the
terms of the interest rate swap:
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