Harris Teeter 2010 Annual Report Download - page 49

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6. LEASES
The Company leases certain equipment under agreements expiring during the next 5 years. Harris Teeter leases
most of its stores under leases that expire during the next 25 years. It is expected that such leases will be renewed
by exercising options or replaced by leases of other properties. Most store leases provide for additional rentals based
on sales, and certain store facilities are sublet under leases expiring during the next 8 years. Certain leases also
contain rent escalation clauses (step rents) that require additional rental amounts in the later years of the term. Rent
expense for the fiscal years was as follows (in thousands):
2010 2009 2008
Minimum, net of sublease income ....................... $96,232 $95,010 $85,693
Contingent .......................................... 1,692 1,688 1,932
Total .............................................. $97,924 $96,698 $87,625
Future minimum lease commitments (excluding leases assigned – see below) and total minimum sublease
rental income to be received under non-cancelable subleases at October 3, 2010 were as follows (in thousands):
Fiscal Year Operating
Leases Subleases Capital
Leases
2011 ............................................ $ 96,367 $(1,982) $ 10,675
2012 ............................................ 97,854 (1,547) 10,691
2013 ............................................ 97,395 (1,084) 10,705
2014 ............................................ 97,168 (892) 10,742
2015 ............................................ 96,430 (624) 10,731
Later years ....................................... 941,999 (239) 138,837
Total minimum lease obligations (receivables) .......... $1,427,213 $(6,368) 192,381
Amount representing interest .................................................. (97,727)
Present value of net minimum obligation (included with long-term debt) ...............$ 94,654
In connection with the closing of certain store locations, Harris Teeter has assigned leases to several sub-
tenants with recourse. These leases expire over the next 11 years and the future minimum lease payments totaling
$42,395,000 over this period have been assumed by these sub-tenants.
7. LONG-TERM DEBT
On December 20, 2007, the Company and eleven banks entered into a credit agreement that provides for a
five-year revolving credit facility in the aggregate amount of up to $350 million and a non-amortizing term loan
of $100 million due December 20, 2012. The credit agreement also provides for an optional increase of the revolving
credit facility by an additional amount of up to $100 million and two 1-year maturity extension options, both of
which require consent of the lenders. Outstanding borrowings under the credit agreement bear interest at a variable
rate based on a reference to: rates on federal funds transactions with members of the Federal Reserve System or
the prime rate in effect on the interest determination date; the LIBOR Market Index Rate; or, the LIBOR Rate, each
plus an applicable margin. The amount which may be borrowed from time to time and the applicable margin to
the referenced interest rate are each dependent on a leverage factor. The leverage factor is based on a ratio of rent-
adjusted consolidated funded debt divided by earnings before interest, taxes, depreciation, amortization and
operating rents, as set forth in the credit agreement. The more significant of the financial covenants which the
Company must meet during the term of the credit agreement include a maximum leverage ratio and a minimum
fixed charge coverage ratio. As of October 3, 2010, the Company was in compliance with all financial covenants
of the credit agreement. Issued letters of credit reduce the amount available for borrowings under the revolving
credit facility and amounted to $23,662,000 as of October 3, 2010. The Company is charged a variable commitment
fee on the amount available for borrowings, which was $326,338,000 as of October 3, 2010. The commitment fee
rate applied to the net unused balance was 0.09%, per annum for fiscal 2010, and 0.12% for each of 2009 and 2008.
RUDDICK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
44