Pier 1 2011 Annual Report Download - page 66

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Accordingly, the Company has classified $13,692,000 of the reserve for uncertain tax positions and the related
accrued interest as a non-current liability in the accompanying consolidated balance sheet. The Company does
not expect the resolution of these issues to have a significant effect on the Company’s results of operations or
financial position.
Interest and penalties associated with unrecognized tax benefits are recorded in nonoperating (income)
and expenses and selling, general and administrative expenses, respectively. The Company recorded expenses of
$424,000, $1,245,000 and $1,059,000 related to penalties and interest in fiscal 2011, 2010 and 2009,
respectively. The Company had accrued penalties and interest of $5,062,000 and $7,148,000 at February 26,
2011 and February 27, 2010, respectively.
NOTE 10 – COMMITMENTS AND CONTINGENCIES
Leases – At February 26, 2011, the Company had the following minimum lease commitments and future
subtenant receipts in the years indicated (in thousands):
Fiscal Year
Operating
Leases
Subtenant
Income
2012 $ 211,712 $ 713
2013 183,433 459
2014 144,538 339
2015 94,992 138
2016 50,293 -
Thereafter 44,695 -
Total lease commitments $ 729,663 $ 1,649
Rental expense incurred was $217,988,000, $232,098,000 and $244,776,000, including contingent rentals
of $205,000, $90,000 and $43,000, based upon a percentage of sales, and net of sublease incomes totaling
$272,000, $292,000 and $281,000 in fiscal 2011, 2010 and 2009, respectively.
During fiscal 2009, the Company sold its corporate headquarters building and accompanying land to
Chesapeake Plaza, L.L.C., an affiliate of Chesapeake Energy Corporation. The Company also entered into a lease
agreement to rent office space in the building. The lease has a primary term of seven years which began 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 related gain on the sale of the property was approximately $23,300,000. As of February 26, 2011,
the Company’s remaining deferred gain was $10,843,000, the majority of which is included in other noncurrent
liabilities, and will be recognized over the expected lease term.
Legal matters – There were no significant legal matters in fiscal 2011. During fiscal 2010,the Company
received a $10,000,000 payment as a result of a foreign litigation settlement and recorded a gain in other income
as a result of the settlement. There were no significant legal matters in fiscal 2009.
There are various claims, lawsuits, investigations and pending actions against the Company and its
subsidiaries incident to the operations of its business. The Company considers them to be ordinary and routine in
nature. The Company maintains liability insurance against most of these claims. It is the opinion of management,
after consultation with counsel, that the ultimate resolution of such litigation will not have a material adverse
effect, either individually or in aggregate, on the Company’s financial position, results of operations or liquidity.
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