Pier 1 2007 Annual Report Download - page 54

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NOTE 7 — LEASE TERMINATION OBLIGATIONS
At times, the Company may terminate leases prior to their expiration when certain stores or storage
facilities are closed or relocated to more favorable locations as deemed necessary by the evaluation of the real
estate portfolio. These decisions are based on lease renewal obligations, relocation space availability, local
market conditions and prospects for future profitability. In connection with these lease terminations, the
Company recorded estimated liabilities in accordance with SFAS No. 146, “Accounting for Costs Associated
with Exit or Disposal Activities.” The estimated liabilities were recorded based upon the Company’s remaining
lease obligations less estimated subtenant rental income. Revisions relate to changes in estimated subtenant
receipts expected on closed facilities. Expenses related to lease termination obligations are included in selling,
general and administrative expenses in the Company’s consolidated statements of operations. The write-off of
fixed assets and associated intangible assets related to store closures was approximately $370,000 and
$1,500,000 in fiscal 2007 and 2006, respectively, and was not material in fiscal 2005. The write-down of
inventory or employee severance costs associated with these closures was not significant in fiscal 2007, or
2006; and, there were no write-downs for inventory or employee severance costs in fiscal 2005. The following
table represents a rollforward of the liability balances for the three fiscal years ended March 3, 2007 (in
thousands):
Lease
Termination
Obligations
Balance at February 28, 2004 ............................................ $1,748
Original charges .................................................... 1,480
Revisions ......................................................... 763
Cash payments ..................................................... (2,516)
Balance at February 26, 2005 ............................................ 1,475
Original charges .................................................... 3,689
Revisions ......................................................... 487
Cash payments ..................................................... (2,792)
Balance at February 25, 2006 ............................................ 2,859
Original charges .................................................... 4,245
Revisions ......................................................... (242)
Cash payments ..................................................... (4,426)
Balance at March 3, 2007 ............................................... $2,436
NOTE 8 — LONG-TERM DEBT AND AVAILABLE CREDIT
Long-term debt is summarized as follows at March 3, 2007 and February 25, 2006 (in thousands):
2007 2006
Industrial revenue bonds ....................................... $ 19,000 $ 19,000
6.375% convertible senior notes .................................. 165,000 165,000
184,000 184,000
Less — portion due within one year ............................... — —
Long-term debt ............................................ $184,000 $184,000
The Company has $19,000,000 in industrial revenue bond loan agreements, which have been outstanding
since 1987. Proceeds were used to construct warehouse/distribution facilities. The loan agreements and related
52
Pier 1 Imports, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)