Pier 1 2007 Annual Report Download - page 29

outstanding Class A Certificates, and the payment of $28.1 million in retirement benefits primarily by
redeeming investments from a consolidated trust. These cash outflows were partially offset by $144.6 million
($157.6 million less $13.0 million received in connection with the sale of Pier 1 National Bank as described
below) in cash proceeds received from Chase on the sale of the Company’s proprietary credit card receivables
and the add back of certain non-cash charges. These non-cash charges included a $36.4 million impairment of
fixed assets and goodwill and a $24.6 million valuation allowance on deferred tax assets.
During fiscal 2007, investing activities by the Company provided $31.8 million. Collections of principal
on beneficial interest in securitized receivables provided $21.9 million. Proceeds from the sale of The Pier
provided $15.0 million, partially offset by $3.4 million in cash held by The Pier on the date of the sale.
Proceeds from the sale of Pier 1 National Bank provided $13.0 million, partially offset by $2.2 million in cash
held by Pier 1 National Bank on the date of the sale. Capital expenditures were $28.6 million and consisted
primarily of $12.2 million for fixtures and leasehold improvements related to new and existing stores,
$11.4 million for information systems enhancements and home office capital additions, and $5.0 million in
expenditures for the Company’s distribution centers. Fiscal 2008 capital expenditures are projected to be
approximately $13.0 million.
Contributions of $9.7 million were made during fiscal 2007 to the consolidated trusts that have been
established for the purpose of setting aside funds for various retirement obligations. The assets held by the
trusts are classified as restricted investments. The Company sold $25.7 million of these restricted investments
to settle the defined benefit plan obligations of certain retired executive officers of the Company during fiscal
2007. At year end, the trusts had assets of $14.5 million. Of this amount, $6.1 million is invested in money
market funds and is designated for the settlement of lump-sum defined benefit plan obligations, $6.3 million
of which are expected to be settled in the second quarter of fiscal 2008. Life insurance policies with cash
surrender values totaling $6.9 million and money market funds valued at $1.5 million are held in trusts
designated for the satisfaction of obligations related to non-qualified retirement savings plans. Future
contributions to the trusts may be made in the form of cash or other assets such as Company-owned life
insurance policies. See Note 10 of the Notes to Consolidated Financial Statements for additional information
regarding the restricted assets and defined benefit plan obligations.
Fiscal 2007 financing activities used $13.0 million of the Company’s cash. The Company paid dividends
totaling $17.4 million through the second quarter of fiscal 2007. No dividends have been declared since that
time. The Company does not currently anticipate paying cash dividends in fiscal 2008 and its dividend policy
in the near term will depend upon the earnings, financial condition and capital needs of the Company and
other factors deemed relevant by the Company’s Board of Directors. Under the Company’s secured credit
facility, the Company will not be restricted from paying cash dividends unless the availability under the credit
facility is less than 30% of the Company’s calculated borrowing base. All other financing activities provided
net cash of $4.4 million. The Company borrowed and repaid $69.0 million during the fiscal year; $22.0 million
was the greatest amount of cash borrowings outstanding at any one time under the credit facility. As of
March 3, 2007, the Company had no outstanding cash borrowings and approximately $124.0 million in letters
of credit utilized against its secured credit facility. The borrowing base was $239.7 million, of which $83.2
was available for cash borrowings. This facility expires in November 2010.
In June 2004, the Company’s Board of Directors authorized up to $150 million for purchases of its
common stock, replacing the previous authorization. As of April 30, 2007, approximately $107.4 million of
the authorization remains available. During fiscal 2007, the Company did not make any repurchases under this
board-approved program and has no immediate plans to repurchase shares of its outstanding common stock.
The Company’s sources of working capital for fiscal 2007 were cash flows from internally generated
funds, the sale of the Company’s proprietary credit card receivables and credit card operations to Chase, the
sale of the Company’s United Kingdom operations, and bank lines of credit. The Company’s secured credit
facility may limit certain investments, and in some instances, limit the payment of cash dividends and
repurchases of the Company’s common stock. The Company was in compliance with all required debt
covenants at fiscal 2007 year end.
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