Pier 1 2013 Annual Report Download - page 34

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The Company has an umbrella trust, currently consisting of five sub-trusts, which was established for the
purpose of setting aside funds to be used to settle certain benefit plan obligations. Two of the sub-trusts are
restricted to satisfy obligations to certain participants in the Company’s supplemental retirement plans. These
trusts consisted of interest bearing investments of less than $0.1 million at both March 2, 2013 and February 25,
2012, and were included in other noncurrent assets. The remaining three sub-trusts are restricted to meet the
funding requirements of the Company’s non-qualified deferred compensation plans. These trusts’ assets
consisted of investments totaling $3.7 million and $1.2 million at March 2, 2013 and February 25, 2012,
respectively, and were included in other noncurrent assets. The investments were held in money market funds
and mutual funds and are stated at fair value. Some of these trusts also own and are the beneficiaries of life
insurance policies with cash surrender values of approximately $6.6 million at March 2, 2013 and death benefits
of approximately $13.1 million. In addition, the Company owns and is the beneficiary of a number of insurance
policies on the lives of current and former key executives that are unrestricted as to use. The cash surrender value
of these unrestricted policies was approximately $17.6 million at March 2, 2013, and was included in other
noncurrent assets. These policies had a death benefit of approximately $26.0 million at March 2, 2013. At the
discretion of the Board of Directors, contributions of cash or unrestricted life insurance policies could be made to
the trusts.
Sources of Working Capital
The Company’s sources of working capital for fiscal 2013 were primarily from operations. The Company
has a variety of sources for liquidity, which include available cash balances and available lines of credit. The
Company’s current plans for fiscal 2014 include a capital expenditure budget of approximately $75 million, cash
dividends and share repurchases as discussed above. The Company does not presently anticipate any other
significant cash outflows in fiscal 2014 other than those discussed herein or those occurring in the normal course
of business.
The Company’s key drivers of cash flows are sales, management of inventory levels, vendor payment
terms, management of expenses, and capital expenditures. The Company’s focus remains on making
conservative inventory purchases, managing those inventories, and continuing to evolve the Company’s
merchandise offering while at the same time maximizing its revenues, seeking out ways to make its cost base
more efficient and effective and preserving liquidity. While there can be no assurance that the Company will
sustain positive cash flows or profitability over the long-term, given the Company’s cash position and the various
liquidity options available, the Company believes it has sufficient liquidity to fund its obligations, capital
expenditure requirements, cash dividends and share repurchases through fiscal 2014.
OFF-BALANCE SHEET ARRANGEMENTS
Other than the operating leases, letters of credit and purchase obligations discussed above, the Company
has no off-balance sheet arrangements.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of the Company’s consolidated financial statements in accordance with accounting
principles generally accepted in the United States requires the use of estimates that affect the reported value of
assets, liabilities, revenues and expenses. These estimates are based on historical experience and various other
factors that are believed to be reasonable under the circumstances, the results of which form the basis for the
Company’s conclusions. The Company continually evaluates the information used to make these estimates as the
business and the economic environment changes. Historically, actual results have not varied materially from the
Company’s estimates, with the exception of the early retirement of participants in its defined benefit plans, and
income taxes as discussed below. The Company does not currently anticipate a significant change in its
assumptions related to these estimates. Actual results may differ from these estimates under different
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