Pier 1 2014 Annual Report Download - page 16

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ITEM 1A. RISK FACTORS.
Risks Relating to Liquidity
A disruption in the global credit and equity markets could negatively impact the Company’s
ability to obtain financing on acceptable terms.
In the future, the Company could become dependent on the availability of adequate capital to fund its operations. Disruption in
the global credit and equity markets and future disruptions in the financial markets could negatively affect the Company’s ability to
enter into new financing agreements or obtain funding through the sale of Company securities. A decline in economic conditions
could also result in difficulties for financial institutions and other parties that the Company does business with, which could
potentially affect the Company’s ability to access financing under existing arrangements or to otherwise recover amounts as they
become due under the Company’s contractual agreements. The inability of the Company to obtain financing as needed on
acceptable terms to fund its operations may have a negative impact on the Company’s business and financial results.
Insufficient cash flows from operations could result in the substantial utilization of the
Company’s secured revolving credit facility or similar financing, which may limit the
Company’s ability to conduct certain activities.
The Company maintains a secured revolving credit facility to enable it to issue merchandise and special purpose standby letters
of credit as well as to fund working capital requirements. Borrowings under the secured revolving credit facility are subject to a
borrowing base calculation consisting of a percentage of certain eligible assets of the Company and are subject to advance rates
and commercially reasonable reserves. Substantial utilization of the available borrowing base will result in various restrictions on
the Company, including restrictions on the ability of the Company to repurchase its common stock or pay dividends and an
increase in the lender’s control over the Company’s cash accounts. See Note 4 of the Notes to Consolidated Financial
Statements for additional discussion regarding the Company’s secured revolving credit facility. The Company expects to close a
new $200 million senior secured term loan facility on or about April 30, 2014. Proceeds from the transaction will be used for
general corporate purposes, including working capital needs, capital expenditures, share repurchases and dividends permitted
under the agreement. The senior secured term loan facility will increase the Company’s interest expense and financial leverage.
The senior secured term loan facility is expected to contain a number of affirmative and restrictive covenants that may also limit
the Company’s actions. Significant decreases in cash flows from operations could result in the Company borrowing increased
amounts under its credit facilities to fund operational needs and increased utilization of letters of credit. These could result in the
Company being subject to the above restrictions.
Item 1B. Unresolved Staff Comments.
None.
12 PIER 1 IMPORTS, INC. 2014 Form 10-K