Pier 1 2015 Annual Report Download - page 35

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
During fiscal 2014, the Company repurchased approximately 9% of the Company’s common stock outstanding at the beginning
of the year under the Company’s share repurchase programs announced in December 2012 and October 2013. The
Company’s share repurchase program announced in December 2012 was completed on September 30, 2013, with total
repurchases during fiscal 2014 of 4,525,805 shares at a weighted average cost of $22.10 per share for a total cost of $100.0
million. On October 18, 2013, the Company announced a new $200 million share repurchase program. As of March 1, 2014,
the Company had repurchased 5,262,452 shares of its common stock under the October 2013 program at a weighted average
cost of $19.74 per share for a total cost of $103.9 million. In fiscal 2014, the Company had cash outflows of $192.3 million
related to share repurchases. These share repurchases included $203.9 million for shares of common stock repurchased in
fiscal 2014 and excluded $11.6 million for shares of common stock repurchased in fiscal 2014 that settled in fiscal 2015. Shares
repurchased during the period but settled subsequent to the period end are considered non-cash financing activities and are
excluded from the Consolidated Statements of Cash Flows.
Dividends Payable
On April 8, 2015, subsequent to year end, the Company announced a $0.07 per share quarterly cash dividend on the
Company’s outstanding shares of common stock. The $0.07 per share quarterly cash dividend will be paid on May 6, 2015, to
shareholders of record on April 22, 2015.
Contractual Obligations
A summary of the Company’s contractual obligations and other commercial commitments as of February 28, 2015, is listed
below (in thousands):
Amount of Commitment per Period
Total Less Than 1 Year 1to 3 Years 3to 5 Years More Than 5 Years
Operating leases $1,272,768 $239,508 $400,619 $260,550 $372,091
Purchase obligations (1) 210,038 210,038 — — —
Standby letters of credit (2) 26,710 26,710 — — —
Industrial revenue bonds (2) 9,500 — — — 9,500
Interest on industrial revenue bonds (3) 45 4 8 8 25
Interest and related fees on revolving credit facility (4) 2,866 1,245 1,621 — —
Term loan facility 199,000 2,000 4,000 4,000 189,000
Interest and related fees on term loan facility (5) 53,269 8,865 17,460 17,100 9,844
Other obligations (6) (7) 63,184 9,634 2,525 29,479 21,546
Total $1,837,380 $498,004 $426,233 $311,137 $602,006
(1) As of February 28, 2015, the Company had approximately $210.0 million of outstanding purchase orders, which were primarily related to merchandise inventory, and included $1.6 million
in merchandise letters of credit and bankers’ acceptances for such orders. Such orders are generally cancelable at the discretion of the Company until the order has been shipped. The table
above excludes certain executory contracts for goods and services that tend to be recurring in nature and similar in amount year over year.
(2) The Company also has an outstanding standby letter of credit totaling $9.7 million related to the Company’s industrial revenue bonds. This amount is excluded from the table above as it is
not incremental to the Company’s total outstanding commitments.
(3) The interest rates on the Company’s industrial revenue bonds are variable and reset weekly. The estimated interest payments included in the table were calculated based upon the rate in effect
at fiscal 2015 year end and exclude fees for the related standby letter of credit, as these fees are included in interest and related fees on revolving credit facility.
(4) Represents estimated commitment fees for trade and standby letters of credit, and unused balance fees on the Company’s Revolving Credit Facility. Fees are calculated based upon balances
at fiscal 2015 year end and the applicable rates in effect under the terms of the Revolving Credit Facility.
(5) The interest rates on the Company’s Term Loan Facility are variable. The estimated interest payments included in the table were calculated based upon the rate in effect at fiscal 2015 year end.
Currently a principal reduction in the amount of $0.5 million is made on the last day of each calendar quarter, therefore the principal is reduced by $2.0 million annually.
(6) Other obligations include various commitments including the Company’s liability under its unfunded retirement plans. See Note 5 of the Notes to Consolidated Financial Statements for
further discussion of the Company’s employee benefit plans.
(7) Excluded from this table, but recorded on the Company’s balance sheet, is the portion of reserves for uncertain tax positions of $0.5 million for which the Company is not reasonably able to
estimate when or if cash settlement with the respective taxing authority will occur.
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. The trusts’ assets consisted of interest bearing investments
of less than $0.1 million at both February 28, 2015 and March 1, 2014, 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. The trusts’ assets are included in other noncurrent assets and are comprised of investments and life
PIER 1 IMPORTS, INC. 2015 Form 10-K 29