Dollar Tree 2012 Annual Report Download - page 23

Management’s Discussion & Analysis of
Financial Condition and Results of Operations
Forgivable Promissory NoteIn2012,weenteredinto
a promissory note with the state of Connecticut under
whichthestateloanedus$7.0millioninconnectionwith
theCompany’sacquisition,constructionandinstallation
of land, building, machinery and equipment for our
distributionfacilityinWindsor,Connecticut.Ifcertain
performance targets are met, the loan and any accrued
interestwillbeforgiveninscal2017.Iftheperformance
targets are not met, the loan and accrued interest must be
repaidbeginninginscal2017.
Interest on Long-term Borrowings. is amount
represents interest payments on the Credit Agreement,
DemandRevenueBondandForgivablePromissoryNote
usingtheinterestratesforeachatFebruary2,2013.
Commitments
Letters of Credit and Surety Bonds.Weareaparty
to two Letter of Credit Reimbursement and Security
Agreements,onewhichprovides$110.0millionforletters
ofcreditandonewhichprovides$100.0millionforletters
of credit. Letters of credit are generally issued for the
routine purchase of imported merchandise and we had
approximately$147.0millionofpurchasescommitted
undertheselettersofcreditatFebruary2,2013.
Wealsohaveapproximately$12.9millionofletters
of credit outstanding for our self-insurance programs,
$14.5millionoflettersofcreditoutstandingforour
DemandRevenueBonds,and$3.1millionofsurety
bonds outstanding primarily for certain utility payment
obligations at some of our stores.
Technology Assets.Wehavecommitmentstotaling
approximately$10.8milliontoprimarilypurchasestore
technologyassetsforourstoresduring2012.
Telecommunication Contracts.Wehavecontracted
for telecommunication services with contracts expiring
in2017.etotalamountofthesecommitmentsis
approximately$26.9million.
Lease Financing
Operating Lease Obligations. Our operating lease obliga-
tions are primarily for payments under noncancelable
store leases. e commitment includes amounts for leases
thatweresignedpriortoFebruary2,2013forstoresthat
werenotyetopenonFebruary2,2013.
Long-term Borrowings
Credit Agreement.InJune2012,weenteredintoa
ve-year$750.0millionunsecuredCreditAgreement
(theAgreement).eAgreementprovidesfora$750.0
millionrevolvinglineofcredit,includingupto$150.0
million in available letters of credit. e interest rate
on the facility is based, at our option, on a LIBOR rate,
plus a margin, or an alternate base rate, plus a margin.
einterestrateonthefacilitywas1.11%atFebruary
2,2013.e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.
e 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February2,
2013,$250.0millionwasoutstandingunderthe$750.0
million revolving line of credit.
Demand Revenue Bonds.InMay1998,weentered
intoanagreementwiththeMississippiBusinessFinance
Corporationunderwhichitissued$19.0millionofvari-
able-ratedemandrevenuebonds.Weusedtheproceeds
fromthebondstonancetheacquisition,construction
and installation of land, buildings, machinery and
equipment for our distribution facility in Olive Branch,
Mississippi.AtFebruary2,2013,thebalanceoutstanding
onthebondswas$14.3million.esebondsaredueto
befullyrepaidinJune2018.ebondsdonothavea
prepayment penalty as long as the interest rate remains
variable. e bonds contain a demand provision and,
therefore,outstandingamountsareclassiedascurrent
liabilities.Wepayinterestmonthlybasedonavariable
interestrate,whichwas0.23%atFebruary2,2013.
2012AnnualReport21