Pier 1 2010 Annual Report Download - page 54

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 5 – LONG-TERM DEBT AND AVAILABLE CREDIT
Long-term debt is summarized as follows at February 27, 2010 and February 28, 2009 (in thousands):
2010 2009
6.375% convertible senior notes due 2036 $ 16,577 $ 165,000
Less - debt discount (142) -
16,435 165,000
Industrial revenue bonds 19,000 19,000
35,435 184,000
Less - current portion (16,435) -
Long-term debt $ 19,000 $ 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
tax-exempt bonds mature in the year 2026. The Company’s interest rates on the loans are based on the bond
interest rates, which are market driven, reset weekly and are similar to other tax-exempt municipal debt issues.
The Company’s weighted average effective interest rate, including standby letter of credit fees, was 3.2%, 3.5%
and 5.2% for fiscal 2010, 2009 and 2008, respectively.
In February 2006, the Company issued $165,000,000 of 6.375% convertible senior notes due 2036 (the
“6.375% Notes”) in a private placement, and subsequently registered the 6.375% Notes with the Securities and
Exchange Commission in June 2006. As described in detail below, only $16,577,000 of the 6.375% Notes
remained outstanding at the end of fiscal 2010. The 6.375% Notes are governed by an Indenture dated
February 14, 2006 (the “Indenture”). The 6.375% Notes bear interest at a rate of 6.375% per year until
February 15, 2011 and at a rate of 6.125% per year thereafter. Interest is payable semiannually in arrears on
February 15 and August 15 of each year, and commenced August 15, 2006. The 6.375% Notes are convertible
into cash and, if applicable, shares of the Company’s common stock based on an initial conversion rate, subject
to adjustments, of 65.8328 shares per $1,000 principal amount of 6.375% Notes (which represents an initial
conversion price of approximately $15.19 per share representing a 40% conversion premium at issuance).
Holders of the 6.375% Notes may convert their 6.375% Notes only under the following circumstances: (1) during
any fiscal quarter (and only during such fiscal quarter) commencing after May 27, 2006, if the last reported sale
price of the Company’s common stock for at least 20 trading days during the period of 30 consecutive trading
days ending on the last trading day of the preceding fiscal quarter is greater than or equal to 130% of the
applicable conversion price on such last trading day; (2) if the Company has called the 6.375% Notes for
redemption; or (3) upon the occurrence of specified corporate transactions. In general, upon conversion of a
6.375% Note, a holder will receive cash equal to the lesser of the principal amount of the 6.375% Note or the
conversion value of the 6.375% Note, plus common stock of the Company for any conversion value in excess of
the principal amount. As of February 27, 2010, the maximum number of shares that could be required to be
issued upon conversion of the 6.375% Notes was 1,091,310 shares. The Company may redeem the 6.375% Notes
at its option on or after February 15, 2011 for cash at 100% of the principal amount plus accrued interest. The
6.375% Notes are fully and unconditionally guaranteed, on a joint and several basis, by all of the Company’s
material domestic consolidated subsidiaries.
The holders of the 6.375% Notes can, at their option, require the Company to purchase all or a portion of
their 6.375% Notes at a repurchase price in cash equal to 100% of the principal amount of the repurchased
6.375% Notes at February 15, 2011, February 15, 2016, February 15, 2021, February 15, 2026 and February 15,
2031, or if a fundamental change occurs. “Fundamental change” is defined in the Indenture and will be deemed
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