Pier 1 2014 Annual Report Download - page 48

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
debt agreement. At the Company’s option, borrowings are expected to bear interest, payable quarterly or, if earlier, at the end of
each interest period, at either (a) the LIBOR rate subject to a 1% floor plus 350 basis points per year or (b) the base rate (as
defined in the Term Loan Facility) plus 250 basis points per year.
The Term Loan Facility is expected to include restrictions on the Company’s ability to, among other things, incur or guarantee
additional indebtedness, pay dividends on, or redeem or repurchase capital stock, make certain acquisitions or investments,
materially change the business of the Company, incur or permit to exist certain liens, enter into transactions with affiliates or sell
the Company’s assets to, or merge or consolidate with or into, another company, in each case subject to certain exceptions.
The Company expects that the Term Loan Facility will not require the Company to comply with any financial maintenance
covenants, but is expected to contain certain customary representations and warranties, affirmative covenants and provisions
relating to events of default.
NOTE 5 — EMPLOYEE BENEFIT PLANS
The Company offers a qualified defined contribution employee retirement plan to all of 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 2014, 2013 and 2012, employees
contributing 1% to 5% of their compensation received a matching Company contribution of up to 3%. Company contributions to
the plan were $2,071,000, $2,119,000 and $1,869,000 in fiscal 2014, 2013, and 2012, respectively.
In addition, the Company offers non-qualified deferred compensation plans for the purpose of providing deferred compensation
for certain employees whose benefits under the qualified plan may be limited under Section 401(k) of the Internal Revenue Code.
The Company’s expense for these non-qualified plans was $1,381,000, $1,051,000 and $744,000 for fiscal 2014, 2013 and
2012, respectively. The Company has trusts established for the purpose of setting aside funds to be used to settle certain
obligations of these non-qualified deferred compensation plans, and contributed $3,196,000 and used $758,000 to satisfy a
portion of retirement obligations during fiscal 2014. The Company also contributed $2,773,000 and used $497,000 to satisfy a
portion of retirement obligations during fiscal 2013. As of March 1, 2014 and March 2, 2013, the trusts’ assets included
investments with an aggregate value of $6,673,000 and $3,732,000, respectively. The investments were held primarily in mutual
funds and are classified as noncurrent assets. All investments held in the trusts are valued at fair value using Level 1 Inputs,
which are unadjusted quoted prices in active markets for identical assets or liabilities. The Company has accounted for these
restricted investments as trading securities. The trust assets also consisted of life insurance policies, which were classified as
noncurrent assets, with cash surrender values of $6,728,000 as of March 1, 2014 and $6,556,000 as of March 2, 2013, and
death benefits of $13,127,000 and $13,090,000 as of March 1, 2014 and March 2, 2013, respectively. The trust assets are
restricted and may only be used to satisfy obligations to plan participants. 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. At the discretion of the
Board of Directors such policies could be contributed to these trusts or to the trusts established for the purpose of setting aside
funds to be used to satisfy obligations arising from supplemental retirement plans described below. The cash surrender value of
these unrestricted policies was $18,068,000 at March 1, 2014, and the death benefit was $26,362,000. These cash surrender
values are carried in the Company’s consolidated financial statements in other noncurrent assets.
The Company maintains supplemental retirement plans (the “Plans”) for certain of its executive officers. The Plans provide that
upon death, disability, reaching retirement age or certain termination events, a participant will receive benefits based on highest
compensation, years of service and years of plan participation. The Company recorded expenses related to the Plans of
$4,023,000, $3,423,000 and $2,759,000 in fiscal 2014, 2013 and 2012, respectively.
The Plans are not funded and thus have no plan assets. However, a trust has been established for the purpose of setting aside
funds to be used to settle the defined benefit plan obligations upon retirement or death of certain participants. The trust assets
are consolidated in the Company’s financial statements and consist of interest bearing investments in the amount of $17,000
that are included in other noncurrent assets at both March 1, 2014 and March 2, 2013. These investments are restricted and
may only be used to satisfy retirement obligations to certain participants. The Company has accounted for these restricted
investments as available-for-sale securities. Cash contributions of $0 and $794,000 were made to the trust in fiscal 2014 and
2013, respectively. Any future contributions will be made at the discretion of the Board of Directors. Restricted investments from
the trust were sold to fund retirement benefits of $0 and $794,000 in fiscal 2014 and 2013, respectively. Funds from the trust will
be used to fund or partially fund benefit payments. The Company expects to pay $127,000 during fiscal 2015, $17,503,000
during fiscal 2016, $3,443,000 during fiscal 2017, $127,000 during fiscal 2018, $127,000 during fiscal 2019 and $7,465,000
during fiscal years 2020 through 2024. This schedule of payments assumes that the President and Chief Executive Officer’s (the
“CEO”) balance will be paid at the conclusion of his existing employment agreement, which could be amended or renewed prior
to that date.
44 PIER 1 IMPORTS, INC. 2014 Form 10-K