Pier 1 2011 Annual Report Download - page 52

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 4 – COSTS ASSOCIATED WITH EXIT ACTIVITIES
As part of the ordinary course of business, the Company terminates leases prior to their expiration when
certain stores or distribution center facilities are closed or relocated as deemed necessary by the evaluation of its
real estate portfolio. These decisions are based on store profitability, lease renewal obligations, relocation space
availability, local market conditions and prospects for future profitability. In connection with these lease
terminations, the Company has recorded estimated liabilities to cover the termination costs. At the time of
closure, neither the write-off of fixed assets nor the write-down of inventory related to such stores was material.
Additionally, employee severance costs associated with these closures were not significant. The estimated
liabilities were recorded based upon the Company’s remaining lease obligations less estimated subtenant rental
income. Revisions during the periods presented relate to changes in estimated buyout terms or subtenant receipts
expected on closed facilities. Expenses related to lease termination obligations are included in selling, general
and administrative expenses in the Company’s consolidated statements of operations. The write-off of fixed
assets and associated intangible assets related to Pier 1 Imports store closures was approximately $111,000,
$177,000 and $56,000 in fiscal 2011, 2010 and 2009, respectively. The following table represents a rollforward
of the liability balances for the three fiscal years ended February 26, 2011 (in thousands):
Lease
Termination
Obligations
Balance at March 1, 2008 $ 5,628
Original charges 5,591
Revisions 483
Cash payments (6,704)
Balance at February 28, 2009 4,998
Original charges 4,942
Revisions 2,751
Cash payments (7,790)
Balance at February 27, 2010 4,901
Original charges 154
Revisions 1,445
Cash payments (2,769)
Balance at February 26, 2011 $ 3,731
Included in the table above are lease termination costs related to the closure of all of the Company’s
clearance and Pier 1 Kids stores. These concepts were closed during fiscal 2008 since their aggregate
performance was not in line with the Company’s profitability targets. Lease termination costs associated with
these closures were $260,000, or less than $0.01 per share, during fiscal 2011 and $1,636,000, or $0.02 per share,
during fiscal 2010 and $258,000, or less than $0.01 per share, during fiscal 2009. Cash outflows related to these
lease terminations were $822,000, $1,187,000 and $2,889,000 during fiscal 2011, 2010 and 2009, respectively.
The net write-off of fixed assets, write-down of inventory and employee severance costs associated with these
closures was not material.
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