Dollar Tree 2009 Annual Report Download - page 34

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NOTE 1—SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Description of Business
At฀January฀30,฀2010,฀Dollar฀Tree,฀Inc.฀(the฀Company)฀
owned฀and฀operated฀3,806฀discount฀variety฀retail฀stores.฀
Approximately฀3,650฀of฀these฀stores฀sell฀substantially฀all฀
items฀for฀$1.00฀or฀less.฀Substantially฀all฀of฀the฀remaining฀
stores฀are฀Deal$฀stores฀that฀sell฀items฀for฀$1.00฀or฀less฀
but฀also฀sell฀items฀for฀more฀than฀$1.00.฀The฀Company’s฀
stores฀operate฀under฀the฀names฀of฀Dollar฀Tree,฀Deal$฀
and฀Dollar฀Bills.฀The฀Company’s฀stores฀average฀approxi-
mately฀8,500฀selling฀square฀feet.฀
The฀Company’s฀headquarters฀and฀one฀of฀its฀
distribution centers are located in Chesapeake, Virginia.
The Company also operates distribution centers in
Mississippi,฀Illinois,฀California,฀Pennsylvania,฀Georgia,฀
Oklahoma,฀Utah฀and฀Washington.฀The฀Company’s฀stores฀
are฀located฀in฀all฀48฀contiguous฀states฀and฀the฀District฀
of฀Columbia.฀The฀Company’s฀merchandise฀includes฀
food, household consumables and products, party goods,
health and beauty care, candy, toys, seasonal goods,
stationery and other consumer items. Approximately
40%฀to฀45%฀of฀the฀Company’s฀merchandise฀is฀imported,฀
primarily from China.
Principles of Consolidation
The฀consolidated฀nancial฀statements฀include฀the฀
nancial฀statements฀of฀Dollar฀Tree,฀Inc.,฀and฀its฀wholly฀
owned฀subsidiaries.฀All฀signicant฀intercompany฀balances฀
and transactions have been eliminated in consolidation.
Fiscal Year
The฀Company’s฀scal฀year฀ends฀on฀the฀Saturday฀closest฀
to฀January฀31.฀Any฀reference฀herein฀to฀“2009”฀or฀“Fiscal฀
2009,”฀“2008”฀or฀“Fiscal฀2008,”฀and฀“2007”฀or฀“Fiscal฀
2007,”฀relates฀to฀as฀of฀or฀for฀the฀years฀ended฀January฀
30,฀2010,฀January฀31,฀2009,฀and฀February฀2,฀2008,฀
respectively.
Use of Estimates
The฀preparation฀of฀nancial฀statements฀in฀conformity฀
with U.S. generally accepted accounting principles
requires management to make estimates and assump-
tions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and
liabilities฀at฀the฀date฀of฀the฀consolidated฀nancial฀
statements and the reported amounts of revenues and
expenses during the reporting period. Actual results
could differ from those estimates.
Cash and Cash Equivalents
Cash฀and฀cash฀equivalents฀at฀January฀30,฀2010฀and฀
January฀31,฀2009฀includes฀$506.8฀million฀and฀$336.1฀
million, respectively, of investments primarily in money
market securities which are valued at cost, which
approximates fair value. For purposes of the consoli-
dated statements of cash flows, the Company considers
all highly liquid debt instruments with original maturi-
ties of three months or less to be cash equivalents. The
majority฀of฀payments฀due฀from฀nancial฀institutions฀for฀
the settlement of debit card and credit card transactions
process within three business days, and therefore are
classied฀as฀cash฀and฀cash฀equivalents.฀
Short-Term Investments
The฀Company’s฀short-term฀investments฀at฀January฀30,฀
2010฀were฀$27.8฀million.฀These฀investments฀consisted฀
primarily of government-sponsored municipal bonds.
These฀investments฀were฀classied฀as฀available฀for฀sale฀
and were recorded at fair value, which approximates
cost. The government-sponsored municipal bonds can
be converted into cash on the dates that the interest
rates for these bonds reset, which is typically weekly
or monthly, depending on terms of the underlying
agreement.
Merchandise Inventories
Merchandise inventories at the distribution centers are
stated at the lower of cost or market, determined on
a weighted average cost basis. Cost is assigned to store
inventories using the retail inventory method, deter-
mined on a weighted average cost basis.
Costs directly associated with warehousing and
distribution฀are฀capitalized฀as฀merchandise฀inventories.฀
Total฀warehousing฀and฀distribution฀costs฀capitalized฀
into฀inventory฀amounted฀to฀$27.4฀million฀and฀$26.9฀
million฀at฀January฀30,฀2010฀and฀January฀31,฀2009,฀
respectively.
Property, Plant and Equipment
Property, plant and equipment are stated at cost and
depreciated using the straight-line method over the
estimated useful lives of the respective assets as follows:
Buildings฀ 39฀to฀40฀years
Furniture,฀xtures฀and฀equipment฀ 3฀to฀15฀years
Leasehold improvements and assets held under
capital฀leases฀are฀amortized฀over฀the฀estimated฀useful฀
Notes to Consolidated Financial Statements
32 ฀฀฀DOLLAR฀TREE,฀INC.฀•฀2009฀Annual฀Report