Pier 1 2010 Annual Report Download - page 36

(1) As of February 27, 2010, the Company had approximately $98.0 million of outstanding purchase orders, which were primarily related to
merchandise inventory, and included $11.3 million in merchandise letters of credit and bankers’ acceptances. Such orders are generally
cancelable at the discretion of the Company until the order has been shipped. The table above excludes certain executory contracts for
goods and services that tend to be recurring in nature and similar in amount year over year.
(2) The Company’s convertible debt is subject to redemption on February 15, 2011, and the above amounts assume the notes will be repaid
at that time. As of February 27, 2010, if these notes remained outstanding until maturity in 2036, the total interest paid would have been
$26.4 million. See Note 5 of the Notes to Consolidated Financial Statements for further discussion of the Company’s convertible senior
notes.
(3) The Company also has outstanding standby letters of credit totaling $19.4 million related to the Company’s industrial revenue bonds.
This amount is excluded from the table above as it is not incremental to the Company’s total outstanding commitments.
(4) The interest rates on the Company’s industrial revenue bonds are variable and reset weekly. The estimated interest payments included in
the table were calculated based upon the rate in effect at fiscal 2010 year end and exclude fees for the related standby letter of credit
which are included elsewhere in this table.
(5) Represents estimated commitment fees for trade and standby letters of credit, and unused fees on the Company’s $300 million secured
credit facility, which expires in May 2012, calculated based upon balances and rates in effect at fiscal 2010 year end.
(6) Other obligations include the Company’s liability under various unfunded retirement plans. See Note 7 of the Notes to Consolidated
Financial Statements for further discussion of the Company’s employee benefit plans.
(7) Other obligations also include approximately $8.0 million of reserves for uncertain tax positions, including interest and penalties which
have been classified as a current liability. Excluded from this table, but recorded on the Company’s balance sheet, is the noncurrent
portion of reserves for uncertain tax positions of $10.2 million for which the Company is not reasonably able to estimate the timing of
future cash flows.
(8) The above amounts do not include payments that may be due under employment agreement(s) with certain employee(s).
The present value of the Company’s minimum future operating lease commitments discounted at 10%
was $635.1 million at fiscal 2010 year end, compared to $736.4 million at fiscal 2009 year end. As part of the
sale of the Company’s home office building and accompanying land during fiscal 2009, the Company entered
into a lease agreement to rent office space in the building. The lease has a primary term of seven years beginning
on June 9, 2008, with one three-year renewal option and provisions for terminating the lease at the end of the
fifth lease year. The Company plans to fund its lease commitments from cash generated from the operations of
the Company and, if needed, from borrowings on its secured credit facility.
On February 3, 2009, the Company announced that it hired an outside firm to assist in negotiations with
its landlords to achieve rental reductions across its store portfolio. During fiscal 2010, the Company reached, in
principal, rental reduction agreements on approximately 350 stores. Cumulatively, these agreements are expected
to reduce the Company’s reported rental expense by $39.8 million, with approximately $30.0 million of the cash
savings being realized by the end of fiscal 2012. During fiscal 2010, the Company closed 38 locations,
significantly fewer than the original estimate. This reduction in store closures was the direct result of favorable
rent reduction negotiations on those stores. The Company recorded $11.2 million related to store closures
including lease termination expense of $7.7 million, and $3.5 million in fees and other costs associated with
improving its store portfolio. At the end of fiscal 2010, the Company had ceased operations at the Chicago
distribution center and plans to sell the property. If the property is sold, the Company intends to repay the
industrial revenue bonds related to the distribution center with the proceeds from the sale upon receiving
appropriate approvals.
The Company has an umbrella trust, currently consisting of four sub-trusts, which was established for the
purpose of setting aside funds to be used to settle certain benefit plan obligations. Two of the sub-trusts are
restricted to satisfy obligations to certain participants of the Company’s supplemental retirement plans. These
trusts consisted of interest bearing investments of less than $0.1 million at both February 27, 2010 and
February 28, 2009, and were included in other noncurrent assets. The remaining two sub-trusts are restricted to
meet the funding requirements of the Company’s non-qualified deferred compensation plans. These trusts’ assets
consisted of interest bearing investments totaling less than $0.2 million at February 27, 2010 and February 28,
2009, and were included in other noncurrent assets. These trusts also own and are the beneficiaries of life
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