Dollar Tree 2009 Annual Report Download - page 43

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Notes to Consolidated Financial Statements
Unsecured Credit Agreement
On฀February฀20,฀2008,฀the฀Company฀entered฀into฀
the฀Agreement฀which฀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฀million฀term฀
loan. The interest rate on the facility is 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, calculated as a
percentage,฀as฀dened,฀of฀the฀amount฀available฀under฀
the line of credit, payable quarterly. The term loan
is฀due฀and฀payable฀in฀full฀at฀the฀ve฀year฀maturity฀
date of the Agreement. The Agreement also bears an
administrative fee payable annually. The Agreement,
among other things, requires the maintenance of
certain฀specied฀nancial฀ratios,฀restricts฀the฀payment฀
of certain distributions and prohibits the incurrence of
certain฀new฀indebtedness.฀As฀of฀January฀30,฀2010,฀we฀
had฀the฀$250.0฀million฀term฀loan฀outstanding฀under฀
the Agreement and no amounts outstanding under the
$300.0฀million฀revolving฀line฀of฀credit.฀
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฀nance฀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
prepayment penalty as long as the interest rate remains
variable. The Bonds contain a demand provision and,
therefore,฀are฀classied฀as฀current฀liabilities.
NOTE 6—DERIVATIVE FINANCIAL
INSTRUMENTS
Hedging Derivatives
On฀March฀20,฀2008,฀the฀Company฀entered฀into฀two฀
$75.0฀million฀interest฀rate฀swap฀agreements.฀These฀
interest rate swaps are used to manage the risk associ-
ated with interest rate fluctuations on a portion of the
Company’s฀variable฀rate฀debt.฀Under฀these฀agreements,฀
the฀Company฀pays฀interest฀to฀nancial฀institutions฀
at฀a฀xed฀rate฀of฀2.8%.฀In฀exchange,฀the฀nancial฀
institutions pay the Company at a variable rate, which
equals the variable rate on the debt, excluding the
credit spread. These swaps qualify for hedge accounting
treatment฀and฀expire฀in฀March฀2011.฀The฀fair฀value฀of฀
these฀swaps฀as฀of฀January฀30,฀2010฀was฀a฀liability฀of฀$4.1฀
million.
In฀order฀to฀manage฀uctuations฀in฀cash฀ows฀
resulting from changes in diesel fuel costs, we entered
into fuel derivative contracts with a third party in
the฀fourth฀quarter฀of฀2009฀for฀2.4฀million฀gallons฀of฀
diesel฀fuel,฀or฀approximately฀25%฀of฀our฀fuel฀needs฀
from฀May฀2010฀through฀January฀2011.฀Under฀these฀
contracts,฀we฀pay฀the฀third฀party฀a฀xed฀price฀for฀diesel฀
fuel and receive variable diesel fuel prices at amounts
approximating current diesel fuel costs, thereby creating
the฀economic฀equivalent฀of฀a฀xed-rate฀obligation.฀
These derivative contracts do not qualify for hedge
accounting and therefore all changes in fair value for
these derivatives will be included directly into earnings.
The฀fair฀value฀of฀these฀contracts฀at฀January฀30,฀2010฀was฀
a฀liability฀of฀$0.2฀million.
฀฀฀DOLLAR฀TREE,฀INC.฀•฀2009฀Annual฀Report฀฀฀41