Notes to Consolidated Financial Statements

Note 9:
Commitments and Contingencies

Operating Leases

The Company has various noncancellable operating leases, primarily for warehouse buildings, delivery trucks, and computer equipment. Lease expense, net of sublease rentals of $1,148,000, $1,350,000, and $952,000 for the year ended January 30, 1999, the eleven months ended January 31, 1998, and the year ended March 1, 1997 was $59,323,000, $37,858,000 and $31,000,000, respectively.

Future minimum lease payments are as follows:

The leases generally are for periods of three to ten years and provide for renewals of one month to five years at the Company's option. In addition to the above amounts, future minimum lease payments for the discontinued same-day delivery business are approximately $27,236,000 in fiscal 1999 and $55,761,000 for periods thereafter.

The Company has entered into agreements for the sale and leaseback of certain buildings and has accounted for such transactions as operating leases in accordance with SFAS No. 98 "Accounting for Leases." As of January 30, 1999 and January 31, 1998, facilities with book values totaling $14,329,000 and $17,096,000, respectively have been removed from the balance sheet, and gains realized on the sale transactions totaling $93,000 and $2,569,000, respectively have been deferred and are being amortized to income as rent expense adjustments over the lease terms. The average annual net lease payments, over the lives of the leases that expire between 2013 and 2014, are $1,573,000. The Company has purchase and lease renewal options at projected future fair market values under the agreements.

Capital Leases

The Company is the lessee of certain furniture and equipment under capital leases expiring in various years through 2009. Included in furniture and equipment at January 30, 1999 is $22,678,000 of assets under capital leases and related accumulated depreciation of $9,793,000. Future minimum lease payments required under these capital leases are as follows:

Contingencies

In the normal course of business, the Company is subject to certain legal proceedings. In the opinion of management, the outcome of such litigation will not have a material adverse effect on the Company's financial position or operating results. The Company resolved the dispute with a former shareholder of a company acquired by the Company in fiscal 1996.