Off-balance sheet arrangements
Merchandise held by way of consignment
Signet held $138.0 million of consignment inventory at January 29, 2011 (January 30, 2010: $134.6 million) which is not recorded on the balance sheet. The principal terms of the consignment agreements, which can generally be terminated by either side, are such that Signet can return any, or all of, the inventory to the relevant supplier without financial or commercial penalty.
Contingent property liabilities
At January 29, 2011, approximately 103 UK property leases had been assigned by Signet to third parties (and remained unexpired and occupied by assignees at that date) and approximately 30 additional properties were sub-let at that date. Should the assignees or sub-tenants fail to fulfill any obligations in respect of those leases or any other leases which have at any other time been assigned or sub-let, Signet or one of its UK subsidiaries may be liable for those defaults. The number of such claims arising to date has been small, and the liability, which is charged to the income statement as it arises, has not been material.
Contractual obligations
A summary of operating lease obligations is set out below. These primarily relate to minimum payments due under store lease arrangements. The majority of the store operating leases provide for the payment of base rentals plus real estate taxes, insurance, common area maintenance fees and merchant association dues. Additional information regarding Signet’s operating leases is available in Item 2, and Note 21, included in Item 8.
Long term debt obligations comprise borrowings with an original maturity of greater than one year. Purchase obligations comprise contracts entered into for the forward purchase of gold and US dollars with an original maturity of greater than one year. These contracts are taken out to manage market risks. It is expected that operating commitments will be funded from future operating cash flows and no additional facilities will be required to meet these obligations.
Contractual obligations as of January 29, 2011
| Less than One Year $million | Between one and three years $million | Between three and five years $million | More than five years $million | Total $million | |
|---|---|---|---|---|---|
| Long term debt obligations(1) | - | - | - | - | - |
| Operating lease obligations(2) | 277.0 | 487.7 | 393.3 | 945.9 | 2,103.9 |
| Purchase obligations | 17.6 | - | - | - | 17.6 |
| Capital commitments | 7.8 | - | - | - | 7.8 |
| Commitment fee payments | 2.1 | 3.2 | - | - | 5.3 |
| Creditors falling due after one year | - | - | - | 9.0 | 9.0 |
| Current Income tax | 38.6 | - | - | - | 38.6 |
| Total | 343.1 | 490.9 | 393.3 | 954.9 | 2,182.2 |
(1) As of January 29, 2011, Signet had no long-term indebtedness. On November 26, 2010, Signet prepaid the outstanding balance on the US Private Placement Notes.
(2) Operating lease obligations relate to minimum payments due under store lease arrangements. Most store operating leases require payment of real estate taxes, insurance and common area maintenance fees. Real estate taxes, insurance and common area maintenance fees were approximately 34% of base rentals for Fiscal 2011. These are not included in the table above. Some operating leases also require additional payments based on a percentage of sales.
Not included in the table above are obligations under employment agreements (including pensions) and ordinary course purchase orders for merchandise.