Pier 1 2011 Annual Report Download - page 55

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
As of February 26, 2011, the Company had a $300,000,000 secured credit facility which would have
matured in May 2012 and was secured by the Company’s eligible merchandise inventory and third-party credit
card receivables. During fiscal 2011, 2010 and 2009, the Company had no cash borrowings under this facility. As
of February 26, 2011, the Company’s borrowing base, as defined by the agreement, was $245,654,000. This
borrowing base calculation was subject to advance rates and commercially reasonable availability reserves. After
excluding the $56,381,000 in utilized letters of credit and bankers’ acceptances from the borrowing base,
$189,274,000 remained available for cash borrowings. Interest on the facility was calculated at LIBOR plus 3.0%
for cash borrowings. The Company paid a fee ranging from 3.0% to 3.5% for standby letters of credit depending
on the average daily availability as defined by the agreement, 1.50% to 1.75% for trade letters of credit and a
commitment fee of 0.50% for any unused amounts. As of February 26, 2011, the fee for standby letters of credit
was 3.00% and 1.50% for trade letters of credit. As of February 26, 2011, the Company utilized approximately
$56,381,000 in letters of credit and bankers’ acceptances against the secured credit facility. Of the outstanding
balance, approximately $3,466,000 related to trade letters of credit and bankers acceptances for merchandise
purchases, $36,950,000 related to standby letters of credit for the Company’s workers’ compensation and general
liability insurance policies, $9,715,000 related to standby letters of credit related to the Company’s industrial
revenue bonds, and $6,250,000 related to other miscellaneous standby letters of credit. If advances under the
facility had resulted in availability of less than $30,000,000, the Company would have been required to comply
with a fixed charge coverage ratio as stated in the agreement. The Company was in compliance with all required
covenants at fiscal 2011 year end. This facility could have limited certain investments and, in some instances,
limited payment of cash dividends and repurchases of the Company’s common stock. Under this credit facility,
the Company was not restricted from paying certain dividends unless fundings on the line resulted in availability
over a specified period of time that was projected to be less than 35% of the lesser of either $300,000,000 or the
calculated borrowing base.
On April 4, 2011, subsequent to year end, the Company amended and restated the $300,000,000 secured
credit facility. The amended and restated facility has a five-year term, an initial line of $300,000,000 and
includes a $100,000,000 accordion feature. It effectively refinances the Company’s existing facility, which would
have expired in May 2012. At the Company’s option, borrowings will bear interest, payable quarterly or, if
earlier, at the end of each interest period, at either (a) the LIBOR plus a spread varying from 175 to 225 basis
points per year, depending on the amount then borrowed under the facility (initially 200 basis points), or (b) the
prime rate plus a spread varying from 75 to 125 basis points per year, depending on the amount then borrowed
under the facility (initially 100 basis points). The facility includes a requirement that the Company maintain
minimum availability equal to the greater of 10% of the line cap, as defined by the facility, or $20,000,000.
Provided that there is no default and no default would occur as a result thereof, the Company may request that the
facility be increased to an amount not to exceed $400,000,000. Under the terms of the facility, the Company
agrees to pay a fee on the unused portion of the facility payable monthly in arrears at a rate of 37.5 basis points
per year. In addition, the Company will pay, when applicable, letter of credit fronting fees and fees on the amount
of letters of credit outstanding.
The Company’s amended and restated credit facility may limit certain investments and, in some
instances, limit payment of cash dividends and repurchases of the Company’s common stock. The Company will
not be restricted from paying certain dividends unless credit extensions on the line result in availability over a
specified period of time that is projected to be less than 20% of the lesser of either $300,000,000 or the calculated
borrowing base, subject to the Company meeting a fixed charge coverage requirement when availability over the
same specified period of time is projected to be less than 50% of the lesser of either $300,000,000 or the
calculated borrowing base.
NOTE 6 – EMPLOYEE BENEFIT PLANS
The Company offers a qualified defined contribution employee retirement plan to all its full- and part-
time personnel who are at least 18 years old and have been employed for a minimum of six months. During fiscal
49