Pier 1 2010 Annual Report Download - page 34

In fiscal 2009, the Company recorded an operating loss of $120.6 million compared to an operating loss
of $88.1 million for fiscal 2008.
As a result of the Company’s valuation allowance against all deferred tax assets, the Company did not
record a federal tax benefit on its operating loss and only minimal state and foreign tax provisions were recorded
on results for fiscal 2009. Net deferred tax assets of $181.0 million were fully reserved at year end through the
valuation allowance.
Net Loss
Net loss in fiscal 2009 was $129.3 million, or $1.45 per share, compared to a net loss of $96.0 million, or
$1.09 per share for fiscal 2008.
LIQUIDITY AND CAPITAL RESOURCES
The Company’s cash and cash equivalents totaled $187.9 million at the end of fiscal 2010, an increase of
$32.1 million from the fiscal 2009 year-end balance of $155.8 million. During fiscal 2010, the Company reduced
its outstanding long-term debt obligations by $148.6 million through the utilization of $49.8 million in cash. This
was accomplished through the privately negotiated purchase and exchange of almost all of the Company’s
6.375% Notes during the first half of the fiscal year which was followed by the voluntary conversion of the
Company’s newly issued 9% Notes into slightly less than 24.5 million shares of the Company’s common stock
during the third quarter. The $49.8 million of cash was comprised of $31.6 million for the purchases of the
6.375% Notes, $13.8 million for the payment of the make-whole interest on the 9% Notes at the time of
voluntary conversion and $4.4 million for the payment of debt issuance costs. See Note 5 of the Notes to
Consolidated Financial Statements for further discussion reduction in the Company’s long-term debt obligations.
Operating activities provided $70.6 million of cash, which included the receipt of a $55.9 million tax
refund relating to changes in tax laws that occurred during the third quarter. Cash provided by the Company’s net
income was partially offset by changes in various working capital accounts and $13.8 million in make-whole
interest paid on the 9% Notes at the time of voluntary conversion as discussed above.
Inventory levels at the end of fiscal 2010 were $313.5 million, a decrease of $2.8 million, or 0.9%, from
the end of fiscal 2009. Inventory per retail square foot at the end of fiscal 2010 was $38 compared to $37 at fiscal
2009 year-end. The Company continues to focus on managing inventory levels and closely monitoring
merchandise purchases to keep inventory in line with consumer demand. Inventory levels at the end of fiscal
2011 are expected to be approximately the same as the end of fiscal 2010.
During fiscal 2010, the Company’s investing activities used $2.8 million. Proceeds from the sale of
restricted investments used primarily for the payment of defined benefit obligations provided $3.9 million,
partially offset by contributions of $3.7 million to purchase similar restricted investments. The Company
collected $1.5 million of a note receivable related to the fiscal 2007 sale of its credit card operations. Proceeds
from the disposition of properties provided $0.7 million. Capital expenditures for fiscal 2010 were $5.2 million,
consisting primarily of $2.4 million for fixtures, equipment and leasehold improvements for stores, $2.2 million
for information systems enhancements and $0.6 million related to the Company’s distribution centers.
Financing activities for fiscal 2010 used a net $35.7 million, primarily as a result of the use of $31.6
million to purchase and subsequently retire a significant portion of the 6.375% Notes and debt issuance costs of
$4.4 million as discussed above.
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