Pier 1 2009 Annual Report Download - page 83

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 11—COMMITMENTS AND CONTINGENCIES
Leases—At February 28, 2009, the Company had the following minimum lease commitments and
future subtenant receipts from continuing operations in the years indicated (in thousands):
Operating Subtenant
Fiscal Year Leases Income
2010 ........................................... $225,496 $ 787
2011 ........................................... 202,259 839
2012 ........................................... 177,640 783
2013 ........................................... 141,379 561
2014 ........................................... 99,542 333
Thereafter ....................................... 90,115 112
Total lease commitments ........................... $936,431 $3,415
Rental expense incurred was $244,776,000, $253,962,000 and $257,255,000, including contingent
rentals of $43,000, $46,000 and $93,000, based upon a percentage of sales, and net of sublease incomes
totaling $281,000, $332,000 and $304,000 in fiscal 2009, 2008 and 2007, respectively.
During fiscal 2009, the Company entered into an agreement to sell its corporate headquarters
building and accompanying land. As part of the transaction, the Company entered into an agreement to
rent office space in the building. See Note 2 of the Notes to Consolidated Financial Statements for further
discussion.
Legal matters—There were no significant legal matters in fiscal 2009. During fiscal 2008, the
Company paid $4,376,000, for the settlement of a class action lawsuit regarding compensation matters,
which was included in selling, general and administrative expenses in fiscal 2007.
There are various claims, lawsuits, investigations and pending actions against the Company and its
subsidiaries incident to the operations of its business. The Company considers them to be ordinary and
routine in nature. The Company maintains liability insurance against most of these claims. It is the
opinion of management, after consultation with counsel, that the ultimate resolution of such litigation
will not have a material adverse effect, either individually or in aggregate, on the Company’s financial
position, results of operations or liquidity.
NOTE 12—DISCONTINUED OPERATIONS
During the fourth quarter of fiscal 2006, the Company’s Board of Directors authorized
management to sell its operations of The Pier with stores located in the United Kingdom and Ireland.
The Company met the criteria of SFAS 144 that allowed it to classify The Pier as held for sale and
present its results of operations as discontinued for all years presented. On March 20, 2006, the
Company sold The Pier to Palli Limited for approximately $15,000,000. Palli Limited is a wholly owned
subsidiary of Lagerinn ehf (‘‘Lagerinn’’), an Iceland corporation owned by Jakup a Dul Jacobsen.
Collectively Lagerinn and Mr. Jacobsen beneficially owned approximately 9.9% of the Company’s
common stock as of the date of the sale. Expenses incurred by the Company in March 2006 related to
The Pier were $407,000, net of taxes, which included an insignificant gain on the sale. The Company
recorded net sales from these discontinued operations of $3,323,000 for fiscal 2007.
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