Pier 1 2009 Annual Report Download - page 40

balances, available lines of credit and cash surrender value of life insurance policies not restricted as to
use. The Company’s current plans for fiscal 2010 include a capital expenditure budget of approximately
$7.0 million. As discussed above, the Company estimates total charges of approximately $7 million of
cash and non-cash termination charges related to store closures, of which, $4 million will be incurred in
the first quarter of fiscal 2010. The cash portion of these charges will be partially offset by the
liquidation of inventory in the closing stores. In addition, a foreign subsidiary of the Company utilized
$27.4 million to repurchase a portion of the Company’s outstanding Notes during the first quarter of
fiscal 2010 and may continue to seek to retire or purchase the remaining outstanding Notes as
discussed above. The Company does not presently anticipate any other significant cash outflows in
fiscal 2010 other than those occurring in the normal course of business or as discussed herein.
Considering these plans and the other sources of liquidity referred to above, the Company believes it
has sufficient liquidity to fund operational obligations and capital expenditure requirements through
fiscal year 2010.
The Company’s key drivers of cash flows are sales, management of inventory levels, vendor
payment terms, management of expenses, and capital expenditures. The Company’s turnaround plan
includes making conservative inventory purchases, managing those inventories, continuing to make the
Company’s merchandise offering more compelling, and improving the in-store experience. In addition,
the Company will continue to focus on its ongoing mission to maximize its revenues, while seeking out
ways to reduce its cost base, considering refinancing alternatives of its convertible senior notes and
preserving its liquidity. From fiscal 2006 through fiscal 2009, the Company has incurred net losses and
had negative cash flows from operating activities. The end of the difficult economic situation faced by
the United States is not known at this time and consumer confidence and spending could remain
depressed and possibly deteriorate even further. The Company may incur negative operating cash flows
in future periods and a long-term decline in consumer spending could have a material adverse effect on
the Company’s financial condition and ability to generate cash flows from operations. As a result, the
Company may become dependent on the availability of adequate capital to fund its operations, carry
out its turnaround strategy, or refinance existing indebtedness if necessary. Recent disruption in the
global credit and equity markets and future disruptions in the financial markets could adversely affect
the Company’s ability to enter into new financing agreements, refinance the Company’s current
indebtedness, or obtain funding through the issuance of the Company’s securities. Future availability of
financing sources cannot be assured given the current economic environment and the Company’s recent
financial results, and there can be no assurance that the Company will achieve or sustain positive cash
flows or profitability over the long-term.
OFF-BALANCE SHEET ARRANGEMENTS
Other than the operating leases, letters of credit and purchase obligations discussed above, the
Company has no off-balance sheet arrangements.
33