Pier 1 2011 Annual Report Download - page 53

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 5 – LONG-TERM DEBT AND AVAILABLE CREDIT
Long-term debt is summarized as follows at February 26, 2011 and February 27, 2010 (in thousands):
2011 2010
6.375% convertible senior notes due 2036 $ - $ 16,577
Less - debt discount - (142)
- 16,435
Industrial revenue bonds 9,500 19,000
9,500 35,435
Less - current portion - (16,435)
Long-term debt $ 9,500 $ 19,000
The Company has $9,500,000 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. During fiscal 2011, the Company repaid $9,500,000 of industrial
revenue bonds related to the distribution center near Chicago, Illinois with proceeds received from the sale of that
facility earlier in the year. 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 3.8%, 3.2% and 3.5% for
fiscal 2011, 2010 and 2009, respectively.
As of February 26, 2011, the Company had no outstanding convertible debt. A summary of the
Company’s debt transactions during the past two fiscal years is described below.
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. The 6.375% Notes were governed by an Indenture dated February 14, 2006.
The 6.375% Notes paid interest at a rate of 6.375% per year until February 15, 2011. Interest was payable
semiannually in arrears on February 15 and August 15 of each year, and commenced August 15, 2006. The
6.375% Notes were 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 represented an initial conversion price of approximately $15.19 per share representing a 40% conversion
premium at issuance).
During the first quarter of fiscal 2010, a foreign subsidiary of the Company purchased $78,941,000 of the
Company’s outstanding 6.375% Notes in privately negotiated transactions at a purchase price of $27,399,000,
including accrued interest. The Company recognized a gain of $47,811,000 in connection with this transaction.
During August 2009, the $78,941,000 in 6.375% Notes were retired by the Company.
During the second quarter of fiscal 2010, the Company entered into separate privately negotiated
exchange agreements for $64,482,000 of the Company’s outstanding 6.375% Notes retiring these notes. Under
the exchange agreements, the exchanging holders received $61,255,000 in aggregate principal of the Company’s
new 9% convertible senior notes due 2036 (the “9% Notes”). In addition to this exchange, the Company also
purchased $5,000,000 of the outstanding 6.375% Notes for $4,750,000 in cash. The Company recognized a net
gain of $1,843,000 related to these transactions during the second quarter of fiscal 2010.
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